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RESOLUTION TRUST CORP. v. FEFFER

July 10, 1992

RESOLUTION TRUST CORPORATION, Petitioner,
v.
RALPH FEFFER, JR., et al., Respondents.



The opinion of the court was delivered by: JOYCE HENS GREEN

 On May 7, 1992, the Resolution Trust Corporation ("RTC") petitioned the Court for expedited summary enforcement of eight subpoenas duces tecum served upon Ralph Feffer, Jr., Robert Amos, Leonard Goldman, Edward Janos, Gregory Janos, Lincoln J. Ragsdale, John Schroeder, and Milan Srnka, former directors and officers of Sun State Savings and Loan Association ("Sun State"), a failed savings association. The subpoenas seek eighteen categories of personal, financial documents: personal state and federal tax returns for the years 1987-1990; state and federal tax returns in any corporation in which respondent has more than a 5% ownership interest for the years 1987-1990; bank books, bank statements of accounts on any account on which respondent's name appears for the years 1987 to the present; all statements relating to ownership of an interest or shares in any mutual fund or bond fund for the period from 1988 to present; all statements of account regarding any participation in or ownership of an individual retirement account, 401 K, annuity, or any retirement benefit plan of any sort of which respondent is a beneficiary; a copy of all certificates of deposit with any bank, credit union, or financial institution on which respondent's name appears; all life insurance policies that have been enforced at any time during the period of 1987 to the present, wherein respondent is the named insured; registration and/or title to any automobiles, trucks, mobile homes, boats, or airplanes on which respondent's name appears as the owner; all stock certificates in any publicly traded company in which respondent possesses an ownership interest; all stock certificates in any "closed" or private corporation in which respondent has an ownership interest; all mortgage statements relating to the ownership of real property in which respondent has an interest; all contracts for the purchase or sale of real property, entered into since January 1, 1987; all bonds, debentures, treasury bills, or notes in which respondent has an interest; all employment contracts since January 1, 1988 to which respondent has been a party; all partnership agreements in any partnership in which respondent is a limited, general, or special partner; all trust instruments in any trust in which respondent is either the grantor or possesses a beneficial interest; and "all records of any sort relating to [respondent's] association or employment with American Holding Company, American Federal Savings & Loan Association, American Service Corporation, American Service Corporation Investment, Inc., including memoranda, correspondence, reports, loan files, notes, and any other documents that relate in any way to the business of those entities."

 Following an oral hearing on June 4, 1992, the Court issued a Memorandum Opinion and Order, denying RTC's petition for summary enforcement. Specifically, the Court could not find "that the agency has been granted the authority to conduct an investigation of respondents' financial status solely to determine the cost-effectiveness of bringing a claim." Memorandum Opinion and Order, dated June 4, 1992, at 7-8.

 The Court is now in receipt of RTC's motion for reconsideration. In particular, RTC argues, "The Court incorrectly concluded that the RTC's purpose in seeking respondents' financial information was 'solely to determine the cost-effectiveness of bringing a claim,' and failed adequately to consider the RTC's arguments that the financial information is being subpoenaed to determine whether respondents had improperly transferred assets and whether to avoid such transfers and seek asset freezes." Memorandum of Points and Authorities in Support of Motion of Resolution Trust Corporation for Reconsideration ("RTC's Motion"), at 3 (citation omitted) (emphasis in original). For the following reasons, RTC's motion shall be granted in part.

 I. DISCUSSION

 In issuing its June 4, 1992 Opinion, the Court accepted the unrebutted representation of respondents' counsel that RTC had never before accused their clients of improperly transferring assets. As W. Scott Bales, one of the counsel for respondents, stated at the oral hearing, "I was shocked when Mr. Topinka told you that one of the rationales for their investigation is this possibility of seeking to set aside transfers of property, because that's something that's never been suggested by the RTC in any of its communications to counsel for respondents." Transcript of Show Cause Hearing ("Tr."), dated June 4, 1992, at 15. Similarly, David L. White, also counsel for respondents, explained, "Again, we've been told that the lawsuit will be brought for negligence and things of that sort. It is not an allegation of fraud. There has never ever been a claim that these people inappropriately transferred assets; no suggestion that there will be any effort to create a freeze. Nothing to that." Tr., at 22.

 In reaching its June 4, 1992 decision, the Court was also impressed that counsel for RTC never countered the respondents' claims that the agency had never before alleged the wrongful transfer of assets. Rather, in rebuttal, RTC's counsel only emphasized that "[the governing statutory provisions] give this agency unique powers, and particularly give this agency the duty to bring cost-effective litigation" and that "we need to understand their financial position, we need to understand that financial position before the 14th, when a complaint would have to be filed." Tr., at 25, 26.

 The recent representations of RTC and supporting documentation alter the complexion of RTC's motion for summary enforcement. According to the affidavit of Peter A. Metters, which is attached to RTC's motion for reconsideration:

 Affidavit of Peter A. Metters ("Metters Aff."), attached as Exhibit ("Exh.") B to RTC's Motion, at PP 8-9.

 It is undisputed that the RTC is given express authority to avoid improper asset transfers and to seek asset freezes pursuant to 12 U.S.C. §§ 1821(d)(17(A), 1821(d)(18). The agency's broad subpoena power may be used to carry out this authority by gathering information to determine whether any such transfers have occurred. In addition, the RTC's initial Order of Investigation states that the investigation was initiated to determine whether certain persons or entities "may be liable" as a result of their actions as officers and directors, and such language could encompass subpoenas for financial information to discover whether there have been any improper asset transfers. *fn1" As even respondents' counsel conceded at the show cause hearing on June 4, 1992, "There is nothing in the RTC's own regulations that would authorize it to get this kind of information, especially in a case where they have made no assertion or no showing that there is some need for prejudgment discovery of assets because they think there has been fraud or an improper diversion of funds. That would present a different situation, I would admit." Tr., at 17-18. *fn2"

 Nonetheless, it does not appear that the subpoenas issued in this case need be enforced in their entirety to fulfill RTC's stated goal. In an effort to protect, albeit minimally, the privacy interests of the individual respondents, respondents are directed to produce the documents that comply with the subpoenas, which shall be revised as follows:

 (a) Personal State and Federal tax returns for the years 1988, 1989, and 1990.

 (b) State and Federal tax returns in any corporation in which respondents have more than a 5% ownership interest for ...


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