Robert Morgan SEC Settlement Letter (122733)
Robert Morgan SEC Settlement Letter (122733)
By ECF
This joint venture transaction involved the sale of equity in more than 90 properties owned in whole
or in part by Morgan and his companies, the majority of which had never received loans or advances
from either the Notes Funds or Morgan Acquisitions. (See Ex. C at 2, 23–28; Affiliate Borrowers
Accounting at 4–5, Dkt. No. 88.) As a result of these transactions, which closed less than six
months after the Commission filed this action, the Receiver sought and received the Court’s
approval to return all investor principal—more than $63 million—to investors in the Notes Funds
and Morgan Acquisitions earlier this year. (See Decision and Order at 1–2, Dkt. No. 82.) The
Receiver’s motion to return an additional $3.3 million to investors remains pending. (See Motion for
an Order Authorizing Certain Distributions and a Settlement of Claims, Dkt. Nos. 117–119.)
Pursuant to the Receiver Order, the Receiver prepared and filed an accounting of any
transfers for the direct or indirect benefit of Morgan by the entities that received loans or advances
from the Notes Funds or Morgan Acquisitions (together, the “Affiliate Borrowers”). (Receiver
Order at 4; Affiliate Borrowers Accounting at 1.) Following a review of “general ledgers, accounts
payable files, journal entries, bank account statements, acquisition contracts, select emails, and
capital and loan account details,” the Receiver and his professionals identified certain payments of
management and other fees to Morgan’s management companies in the ordinary course by the
Affiliate Borrowers but did not identify any direct payments to Morgan himself. (Affiliate
Borrowers Accounting at 1, 4–5, 7.)
The Commission and Morgan have now agreed to a settlement, the terms of which are
reflected in the Proposed Judgment. The Proposed Judgment is fair and reasonable and in the
public interest. See, e.g., SEC v. Citigroup Global Markets, Inc., 752 F.3d 285 (2d Cir. 2014) (setting out
standard for reviewing proposed consent judgments in government enforcement actions). The
Proposed Judgment would permanently enjoin Morgan from further violating the Securities Act and
Exchange Act provisions the Commission’s Complaint alleges he violated, but it would not order
Morgan to pay disgorgement or a civil penalty. With respect to the Fund Manager and Morgan
Acquisitions, the Commission will file notices of voluntary dismissal without, prejudice pursuant to
Federal Rule of Civil Procedure 41(a)(1)(A)(i), following the conclusion of the receivership.1
If the Court approves the Proposed Judgment, the Commission respectfully requests that
the Court docket the executed Judgment with the enclosed consent attached.
Respectfully submitted,
/s/ Lee A. Greenwood
Lee A. Greenwood
Senior Trial Counsel
Encls.
cc: All counsel of record by ECF
1
See, e.g., General Foods Corp. v. Jay V. Zimmerman Co., No. 86 CIV. 2697 (KMW), 1990 WL
115714, at *2 & n.2 (S.D.N.Y. Aug. 7, 1990) (“The weight of authority holds that, pursuant to Fed.
R. Civ. P. 41(a)(1), a plaintiff may dismiss its claims against less than all defendants in a multi-
defendant case.”) (citing cases and explaining the Second Circuit’s later “reject[ion]” of its contrary
conclusion in Harvey Aluminum, Inc. v. American Cyanamid Co., 203 F.2d 105, 108 (2d Cir. 1953));
Greenwood Group, LLC v. Brooklands, Inc., No. 15-CV-851 (EAW), 2016 WL 3828685, at *2–3
(W.D.N.Y. July 12, 2016).
Case 1:19-cv-00661-EAW Document 130-1 Filed 09/15/20 Page 1 of 3
v.
Defendants.
The Securities and Exchange Commission having filed a Complaint and Defendant
Robert C. Morgan having entered a general appearance; consented to the Court’s jurisdiction
over Defendant and the subject matter of this action; consented to entry of this Final Judgment
without admitting or denying the allegations of the Complaint (except as to personal and subject
matter jurisdiction); waived findings of fact and conclusions of law; and waived any right to
I.
permanently restrained and enjoined from violating, directly or indirectly, Section 10(b) of the
Securities Exchange Act of 1934 [15 U.S.C. § 78j(b)] and Rule 10b-5 promulgated thereunder
[17 C.F.R. § 240.10b-5], by using any means or instrumentality of interstate commerce, or of the
mails, or of any facility of any national securities exchange, in connection with the purchase or
(b) to make any untrue statement of a material fact or to omit to state a material fact
necessary in order to make the statements made, in the light of the circumstances
(c) to engage in any act, practice, or course of business which operates or would
Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraph also binds the following who
receive actual notice of this Final Judgment by personal service or otherwise: (a) Defendant’s
officers, agents, servants, employees, and attorneys; and (b) other persons in active concert or
II.
is permanently restrained and enjoined from violating Section 17(a) of the Securities Act of 1933
[15 U.S.C. § 77q(a)] in the offer or sale of any security by the use of any means or instruments of
indirectly:
(b) to obtain money or property by means of any untrue statement of a material fact
made, in light of the circumstances under which they were made, not misleading;
or
2
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Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraph also binds the following who
receive actual notice of this Final Judgment by personal service or otherwise: (a) Defendant’s
officers, agents, servants, employees, and attorneys; and (b) other persons in active concert or
III.
shall retain jurisdiction of this matter for the purposes of enforcing the terms of this Final
Judgment.
IV.
There being no just reason for delay, pursuant to Rule 54(b) of the Federal Rules of Civil
Procedure, the Clerk is ordered to enter this Final Judgment forthwith and without further notice.
____________________________________
HON. ELIZABETH A. WOLFORD
United States District Judge
3
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