was available for the receivables it purchased. (Plaintiff's ex. D, Goff dep. at 164; ex. B, Hope dep. at 52 & 105-06; ex. A, Vinson dep. at 2.) In fact, Current included a group of fictitious receivables among the assets it listed in its accounting. (Hunter dec. at para. 9.) Finally, Current extended loans to companies owned in whole or part by its own officers. (Plaintiff's ex. B, Hope dep. at 77.) The overall picture indicates that Current engaged in few transactions that were both arms-length and secure.
Current probably will not be able to restore its business if it is not permitted to resume purchasing medical accounts receivable. It will lose the goodwill of the companies whose receivables it purchases and who rely on it to provide cash for their day-to-day operations. Nevertheless, there does not appear to be any low-risk portion of Current's business for it to resume. Even if the monitoring agent could limit Current to "safe" transactions, a role that would be extremely time-consuming, its business is not lucrative enough to warrant the risk of further depleting its assets. On balance, the Court concludes that the likelihood of a final judgment against Current and the need to preserve its assets to satisfy such a judgment outweigh the likely harm to Current from continuing the asset freeze.
With regard to the additional requested relief, the Court declines to authorize Current to make interest payments to the holders of its debt securities. Such payments would provide some return to its investors, but they would reduce the assets ultimately available to satisfy a judgment in this case.
Preserving Current's assets until this action is resolved will ensure that similarly situated investors are treated equally. In addition, the Court will not authorize reimbursement of Current's officers for expenses incurred prior to the entry of the TRO. The parties dispute the nature of the requested expenses. Current refers to charges in connection with responding to the SEC's subpoena, while the disbursement agent refers to lease payments for a Mercedes-Benz and life insurance premiums. The officers may renew their request for reimbursement when they can demonstrate that the expenses are properly chargeable to Current.
An additional factor indicates that appointing a receiver is appropriate at this time. Since the entry of the TRO, Current has not taken action to preserve its assets or to collect amounts owed to it. Current has not collected outstanding accounts receivable. (Plaintiff's ex. B, Wogan dec. at 3.) In some instances, the health care providers whose receivables Current purchased have indicated that they cannot pay the amount due unless Current purchases new accounts receivable to provide cash for operating expenses. Current concedes that it has not taken action against the health care providers, but argues that it has hoped to maintain the clients' goodwill in the event the Court permitted it to resume business.
There are also note payments due in Current's favor, which it has not taken steps to collect or to secure. Therefore, appointing a receiver with the authority to collect Current's outstanding receivables and note payments is necessary to preserve Current's rights against its debtors.
The SEC requests that the Court now grant the receiver the authority to liquidate Current and to declare bankruptcy. It would be premature at this stage to confer such broad powers. The existing freeze on Current's assets is sufficient to preserve them for future remedies. The further step of liquidating Current's assets or declaring bankruptcy is not necessary to protect Current's investors nor are such drastic measures appropriate prior to the entry of final judgment. The SEC may renew its motion to encompass such relief if necessary in the future.
Current has history of fast and loose business. That history is particularly disturbing because it involved substantial amounts of money provided by public investors -- money for which Current appears unable to account. Permitting Current to resume operations in the face of the SEC's overwhelming evidence of misguided (if not fraudulent) practices would be reckless.
The appointment of a receiver is necessary to collect outstanding accounts receivable and notes in Current's favor. In the hope that the parties can agree upon an individual to serve as receiver, the Court will allow seven days within which to submit a joint recommendation. If no agreement can be reached, each side may propose two names. The Court will select a receiver from the proposed candidates or will name its own choice. An order appointing the receiver, specifying his or her authority, and providing for payment, will follow. Accordingly, it hereby is
ORDERED, that Current's motion to modify the TRO and for other relief is denied. It hereby further is
ORDERED, that the SEC's motion for appointment of a receiver is granted. Within seven days of the date of this Order, if agreement is achievable the SEC and Current shall submit a joint recommendation of a person to serve as receiver. If the parties cannot agree to the appointee, each shall propose two individuals within the same period.
Stanley S. Harris
United States District Judge
Date: FEB 9 1992