On January 16, Judge Nowlin issued a Final Judgment reiterating the terms of the December 2 Final Judgment Order. On January 20, in federal bankruptcy court, LPHI filed for protection under Chapter 11 of the federal bankruptcy law. I wrote about these and related developments in seven items beginning with No. 75 posted December 10. Here I discuss two new developments: a setback for Pardo and Peden in the district court, and the appointment of an unsecured creditors' committee in the bankruptcy court. (See SEC v. LPHI, U.S. District Court, Western District of Texas, No. 1:12-cv-33, and In re LPHI, U.S. Bankruptcy Court, Northern District of Texas, No. 15-40289.)
The Magistrate Judge's Order
Pardo and Peden are preparing an appeal of Judge Nowlin's January 16 Final Judgment to the U.S. Court of Appeals for the Fifth Circuit. Normally they would have to post bonds in the full amount of the penalties to obtain a stay pending appeal. They filed separate motions to allow posting of much less security to obtain a stay. I did not write earlier about the motions because they were not available. Presumably they were sealed (and are still sealed) because they contain personal financial information.
On February 2, U.S. Magistrate Judge Andrew W. Austin of the district court issued an Order. He denied both motions.
According to the Order, Pardo said he could not post a $6 million bond because it exceeds "his alleged net worth of $1,585,885." He proposed alternate security of $50,000 cash and a pledge of 100 percent of his stock in LPHI. He submitted a "conclusory declaration" about his financial condition and no "verified financial or accounting statements." He "did not bother to appear" at the January 21 hearing to provide testimony or be cross-examined. The Order mentions his 2014 salary of more than $600,000, his real estate of more than $1 million, his four airplanes (including two luxury jets), and his automobiles worth $369,000 (including a Mercedes that retails at more than $220,000). He did not mention any interest in the off-shore family trust that received millions in dividends from LPHI in recent years. Thus he "has offered to post as security less than one-quarter of the value of one of his cars."
Peden said his net worth is $377,607. He proposed alternate security of $10,000 cash and a pledge of 100 percent of his LPHI stock. He "does not appear to own as many gaudy luxury items as Pardo, and thus his request is not as audacious as Pardo's." However, he submitted an "unaudited conclusory declaration" about his financial condition and no "verified financial or accounting statements." He was not present at the January 21 hearing to present testimony.
The Creditors' Committee
On January 30, in the bankruptcy court, U.S. Trustee William T. Neary filed a notice about the appointment of a three-person "Official Unsecured Creditors' Committee" of LPHI. The names, addresses, and telephone numbers of the committee members are:
Bert Scalzo
2917 Elmridge Drive
Flower Mound, TX 75022
(469) 693-3300
Glenda Pirie
128 PR 4831
Newark, TX 76071
(817) 489-2334
Adriana Atchley
235 Zachary Walk
Murphy, TX 75094
(972) 423-7146
On January 30, the clerk of the bankruptcy court filed a notice about the case. The notice indicates that a meeting of creditors is set for March 20 at 9:30 a.m. in the Fritz G. Lanham Federal Building, 819 Taylor Street, Room 7A24, Fort Worth, TX 76102. The notice also indicates that the deadline to file a proof of claim is June 18. The bankruptcy court clerk's office address and telephone number are 501 West Tenth Street, Fort Worth, TX 76102, (817) 333-6000.
General Observations
I am not certain what happens now. Judge Nowlin's January 16 Judgment requires Pardo and Peden to pay the penalties within 30 days of the Judgment. I think that means the deadline is Monday, February 16, because February 15 falls on Sunday.
I am offering a complimentary 11-page PDF consisting of three documents: (1) Magistrate Judge Austin's 5-page February 2 Order denying the motions filed by Pardo and Peden; (2) U.S. Trustee Neary's 3-page notice about the appointment of the official unsecured creditors' committee; and (3) the bankruptcy court clerk's 3-page notice about the case. Send an e-mail to jmbelth@gmail.com and ask for the SEC-LPHI February 4 package.