| * * * * * * * * * * * * * * * * * *
WATERFORD LOAN * * * * * * * * * * * * * * * * * * |
* * * * * * * * * * * |
CONSENT ORDER DOCKET NO. CF-11-7719-S |
I. PRELIMINARY STATEMENT
WHEREAS, the Banking Commissioner (“Commissioner”) is charged with the administration of Chapter 672a of the General Statutes of Connecticut, the Connecticut Uniform Securities Act (“Act”), and Sections 36b-31-2 to 36b-31-33, inclusive, of the Regulations of Connecticut State Agencies promulgated under the Act (“Regulations”);
WHEREAS, the Commissioner, through the Securities and Business Investments Division of the Department of Banking (“Department”), conducted an investigation pursuant to Section 36b-26(a) of the Act into the activities of Respondent to determine if it had violated, was violating or was about to violate provisions of the Act or Regulations;
WHEREAS, Respondent is a Utah limited liability company whose sole manager and member is Travis L. Wright (“Wright”);
WHEREAS, on March 4, 2011, the Commissioner, acting pursuant to Section 36b-27 of the Act, issued an Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (collectively “Notice”) against Respondent, which Notice is incorporated by reference herein;
WHEREAS, Respondent requested a hearing on the matters alleged in the Notice (“Hearing”);
WHEREAS, Section 36b-31(a) of the Act provides, in relevant part, that “[t]he commissioner may from time to time make . . . such . . . orders as are necessary to carry out the provisions of sections 36b-2 to 36b-34, inclusive”;
WHEREAS, Section 36b-31(b) of the Act provides, in relevant part, that “[n]o . . . order may be made . . . unless the commissioner finds that the action is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of sections 36b-2 to 36b-34, inclusive”;
WHEREAS, an administrative proceeding initiated under Section 36b-27 of the Act would constitute a “contested case” within the meaning of Section 4-166(2) of the General Statutes of Connecticut;
WHEREAS, Section 36b-27(f) of the Act, provides, in relevant part, that “[a]ny time after the issuance of an order or notice provided for in subsection (a) . . . or subdivision (1) of subsection (d) of this section, the commissioner may accept an agreement by any respondent named in such order or notice to enter into a written consent order in lieu of an adjudicative hearing”;
WHEREAS, Section 4-177(c) of the General Statutes of Connecticut and Section 36a-1-55(a) of the Regulations of Connecticut State Agencies provide that a contested case may be resolved by consent order, unless precluded by law;
WHEREAS, Respondent and the Commissioner now desire to resolve the matters alleged in the Notice without the need for further administrative proceedings;
WHEREAS, the issuance of this Consent Order is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of the Act;
WHEREAS, Respondent agrees that the Notice may be used in construing the terms of this Consent Order, and agrees to the language in this Consent Order;
WHEREAS, on May 3, 2011, the Securities and Exchange Commission (“SEC”) obtained a final judgment by consent against Wright, permanently enjoining him from future violations of Sections 17(a), 5(a) and 5(c) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder (SEC v. Travis L. Wright, D. Utah, Civil Action Number 2:10-cv-00602-CW-PMW). The associated complaint had alleged that Wright carried out an offering fraud in which he raised nearly $145 million from approximately 175 investors. Wright sold these investors promissory notes issued by Respondent that were purportedly secured by a lien on a trust that held all the assets of Respondent;
WHEREAS, on December 30, 2010, Wright was charged with felony mail fraud in violation of 18 U.S.C. § 1341, which matter remains pending (United States of America v. Travis L. Wright, D. Utah, Case Number 2:10-cr-01141-CW-1);
WHEREAS, Respondent and its affiliate Waterford Funding, LLC are currently under the supervision of a Chapter 11 trustee and their assets are being liquidated for the benefit of creditors (In re: Waterford Funding LLC and Waterford Loan Fund, LLC, Case Number 09-22584 (D. Utah));
WHEREAS, the Commissioner has determined that no fine will be imposed upon Respondent based on the fact that Respondent’s and Wright’s assets are being liquidated for the benefit of creditors and that Wright is awaiting trial in federal district court on charges of mail fraud;
AND WHEREAS, Respondent specifically assures the Commissioner that none of the violations alleged in the Notice or this Consent Order shall occur in the future.
II. CONSENT TO WAIVER OF PROCEDURAL RIGHTS
WHEREAS, Respondent, through its execution of this Consent Order, voluntarily waives the following rights:
| 1. | To be afforded notice and an opportunity for a hearing within the meaning of Section 36b-27 of the Act and Section 4-177(a) of the General Statutes of Connecticut; |
| 2. | To present evidence and argument and to otherwise avail itself of Section 36b-27 of the Act and Section 4-177c(a) of the General Statutes of Connecticut; |
| 3. | To present its position in a hearing in which it is represented by counsel; |
| 4. | To have a written record of the hearing made and a written decision issued by a hearing officer; and |
| 5. | To seek judicial review of, or otherwise challenge or contest, the matters described herein, including the validity of this Consent Order. |
III. ACKNOWLEDGEMENT OF THE COMMISSIONER'S ALLEGATIONS
WHEREAS, Respondent, through its execution of this Consent Order, acknowledges the following allegations of the Commissioner, without admitting or denying them:
| 1. | Respondent offered and sold securities to at least one Connecticut investor on at least three occasions, which securities were not registered in Connecticut under the Act. The offer and sale of such securities absent registration constitutes a violation of Section 36b-16 of the Act; and |
| 2. | Respondent employed an unregistered agent of issuer in this state on at least three occasions in violation of Section 36b-6(b) of the Act. |
WHEREAS, the Commissioner would have the authority to enter findings of fact and conclusions of law after granting Respondent an opportunity for a hearing;
AND WHEREAS, Respondent acknowledges the possible consequences of an administrative hearing and voluntarily agrees to consent to the entry of the sanctions described below.
IV. CONSENT TO ENTRY OF SANCTIONS
WHEREAS, Respondent, through its execution of this Consent Order, consents to the Commissioner’s entry of a Consent Order imposing the following sanctions:
| Respondent, its representatives, agents, employees, affiliates, assigns, or successors in interest shall cease and desist from engaging in conduct constituting or which would constitute a violation of the Act or any regulation or order under the Act, either directly or through any person, organization or other device. |
V. CONSENT ORDER
NOW THEREFORE,
the Commissioner enters the following:| 1. | The Sanctions set forth above be and are hereby entered; |
| 2. | Entry of this Consent Order by the Commissioner is without prejudice to the right of the Commissioner to take enforcement action against Respondent based upon a violation of this Consent Order or the matters underlying its entry, if the Commissioner determines that compliance with the terms herein is not being observed; and |
| 3. | This Consent Order shall become final when entered. |
| So ordered at Hartford, Connecticut | _______/s/_________ | |
| this 10th day of November 2011. | Howard F. Pitkin | |
| Banking Commissioner |
CONSENT TO ENTRY OF ORDER
I, Gil A. Miller, as duly appointed Chapter 11 trustee for the consolidated estate of Waterford Funding, LLC and Water Loan Fund, state on behalf of Waterford Loan Fund, LLC, that I have read the foregoing Consent Order; that I know and fully understand its contents; that I am authorized to execute this Consent Order on behalf of Waterford Loan Fund, LLC; that Waterford Loan Fund, LLC, agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Waterford Loan Fund, LLC consents to the entry of this Consent Order.
| Waterford Loan Fund, LLC | |
| By: | ___/s/________________ |
| Gil A. Miller | |
| Chapter 11 trustee |
State of: Utah
County of: Salt Lake
On this the 28th day of October 2011, before me, Gil Miller [sic], the undersigned officer, personally appeared Gil A. Miller, who acknowledged himself to be the duly appointed Chapter 11 trustee of Waterford Loan Fund, LLC, a limited liability company, and that he, as such Chapter 11 trustee, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the limited liability company by himself as Chapter 11 trustee.
In witness whereof I hereunto set my hand.
_____/s/________________________
Raani Erekson
Notary Public
Date Commission Expires: 9-15-2015