October 19, 2016
The Receiver has not provided regular updates, partially because there have been no major events to discuss and partially because we have not wanted to spend scarce Receivership assets on administrative costs. There have been some developments, however, that we would like to share.
Neither Robert Gavin nor Daniel Hogan defended the claims of fraud brought by the Securities and Exchange Commission. The SEC sought default judgments against them and the Court entered those judgments. The judgments confirm that Gavin and Hogan committed securities fraud in obtaining investor money for the purported purpose of constructing man-camps, but instead diverted large portions of the investor funds to their personal use and investments.
The prognosis for recovery has changed little since our last update. The assets held within the Receivership have very little value when compared against the approximately $60 million contributed by investors and the approximately $5.5 million claimed by creditors of the Receivership entities. We expect any ultimate recovery by investors and creditors to be only an extremely small percentage of their investments or claims.
We previously reported a class action initiated against the Pearce & Durick law firm on behalf of investors. Investors should have been contacted directly by class action counsel about a settlement that provided them with a recovery of a small portion of their NDD investment. In addition, the Receivership account recovered approximately $440,000 from that same settlement.
The Receiver has entered into a Purchase Agreement to sell the Receivership assets located at the Great American Lodge Watford West site to Scotty D. Fain, Sr. The assets consist primarily of modular housing units, which Fain will remove from the site. Under the terms of the Purchase Agreement, Fain will pay a net purchase price of $1,385,325.00 over a period of 18 months.
This agreement was the result of negotiations with two potential purchasers and is consistent with the appraisal we obtained for the assets being sold. We had hoped to sell the property in place as a going concern, but found that was not feasible given the weakened oil market in western North Dakota, the drastically declining need for man-camp-type housing units in North Dakota and Montana, and local government resistance to such facilities.
Yesterday, the Receiver filed with the Court a Motion to Authorize and Confirm Sale of Property Located at GAL Watford West. Copies of the Motion and Memorandum in Support and other supporting documents are available under the Court Filings tab. If the Court approves the sale, the Receiver and Fain will complete the transaction as soon as possible.
We are continuing efforts to market the assets at the Culbertson site and to resolve claims of major non-investor creditors who claim a secured position in some Receivership assets. The Receiver does not believe such allegedly secured positions have the same status in an equity receivership, such as this one, that they might have in other circumstances and is working to achieve resolutions that fairly address the rights of creditors and investors alike.
The Receivership currently holds approximately $650,000 in cash. Though the Receiver has been providing services for over 17 months and has incurred costs and fees of approximately $465,000, the Receiver has not sought Court approval for payment of those fees, wishing to preserve sufficient cash to maintain Receivership assets while they were being marketed. We expect in the near future to seek Court approval to pay a portion of the outstanding expenses and fees.
February 5, 2016
In the eight months since his appointment, the Receiver has extensively investigated the available assets of the receivership entities. Unfortunately, the identified assets are far less than the amount contributed by investors. Large amounts of the invested funds appear to have been used by the principals of NDD for purposes other than those represented to investors and most of those misdirected investments have little if any current value. The Receiver is working to realize whatever value there may be, but this will not provide a significant source of recovery for investors or creditors.
The Receiver has had an appraisal made of the Great American Lodge – Watford City West facility and has been marketing that property. He recently entered into a letter of intent to sell the facility and is working to come to terms on a purchase agreement. Any such agreement will be subject to the approval of the court. Though the facility has value, the net recovery from a sale will be only a very small percentage of the approximately $60 million contributed by investors.
Because of the lack of assets, and particularly of liquid assets, the Receiver has had to be selective in determining what expenses to incur and which assets merit the greatest investment. Priority has been given to preserving the Watford City West facility. The Receiver has not as yet sought payment for any of his or his attorneys’ fees and expenses. He anticipates seeking court approval of those fees and expenses shortly, but will balance payment of any approved fees and expenses with maintaining funds to meet Receivership operating expenses.
The Receiver previously reported a class action initiated against the Pearce & Durick law firm on behalf of investors. Those claims are not controlled by the Receiver; however, the Receiver believes NDD also has claims against the law firm. The Receiver has been participating in settlement discussions with plaintiffs’ counsel and counsel for the law firm, its partners, and its insurer. Most of any settlement would be received by the investors after deduction of plaintiffs’ class counsel’s fees and the costs of the litigation. Any settlement funds directed to the Receiver on behalf of NDD would be used to meet Receivership expenses, and in particular to maintain the Watford City West facility until it can be sold, with the hope that there will then be additional funds available to investors and creditors. Unfortunately, the total amount of any settlement, whether paid to the investors through plaintiffs’ counsel or to NDD, through the Receiver, will be quite small in comparison to the total contributed by investors. This is because the assets available from the law firm, its partners, and its insurers are only a fraction of the investor loss. Any settlement of the class action will require court approval.
June 26, 2015
The Receiver filed his First Status Report today. A copy is available under the Court Filings tab.
A group of investors of North Dakota Developments, LLC filed a proposed class action complaint on behalf of themselves and all other investors against Pearce & Durick and Jonathan P. Sanstead. A copy of the complaint is available under the Court Filings tab.
June 19, 2015
The Receiver's initial report to the Court will be filed by June 26, 2015. A copy of that report will be posted under the Court Filings tab.
May 18, 2015
Preliminary Injunction issued against Defendants. Receiver Hansen appointed. (A copy is available under the Court Filings tab.)
May 5, 2015
Complaint filed by SEC against North Dakota Developments, LLC, Robert Gavin, and Daniel Hogan. (A copy is available under the Court Filings tab.)
Temporary Restraining Order issued against Defendants. (A copy is available under the Court Filings tab.).
The Receiver has not provided regular updates, partially because there have been no major events to discuss and partially because we have not wanted to spend scarce Receivership assets on administrative costs. There have been some developments, however, that we would like to share.
Neither Robert Gavin nor Daniel Hogan defended the claims of fraud brought by the Securities and Exchange Commission. The SEC sought default judgments against them and the Court entered those judgments. The judgments confirm that Gavin and Hogan committed securities fraud in obtaining investor money for the purported purpose of constructing man-camps, but instead diverted large portions of the investor funds to their personal use and investments.
The prognosis for recovery has changed little since our last update. The assets held within the Receivership have very little value when compared against the approximately $60 million contributed by investors and the approximately $5.5 million claimed by creditors of the Receivership entities. We expect any ultimate recovery by investors and creditors to be only an extremely small percentage of their investments or claims.
We previously reported a class action initiated against the Pearce & Durick law firm on behalf of investors. Investors should have been contacted directly by class action counsel about a settlement that provided them with a recovery of a small portion of their NDD investment. In addition, the Receivership account recovered approximately $440,000 from that same settlement.
The Receiver has entered into a Purchase Agreement to sell the Receivership assets located at the Great American Lodge Watford West site to Scotty D. Fain, Sr. The assets consist primarily of modular housing units, which Fain will remove from the site. Under the terms of the Purchase Agreement, Fain will pay a net purchase price of $1,385,325.00 over a period of 18 months.
This agreement was the result of negotiations with two potential purchasers and is consistent with the appraisal we obtained for the assets being sold. We had hoped to sell the property in place as a going concern, but found that was not feasible given the weakened oil market in western North Dakota, the drastically declining need for man-camp-type housing units in North Dakota and Montana, and local government resistance to such facilities.
Yesterday, the Receiver filed with the Court a Motion to Authorize and Confirm Sale of Property Located at GAL Watford West. Copies of the Motion and Memorandum in Support and other supporting documents are available under the Court Filings tab. If the Court approves the sale, the Receiver and Fain will complete the transaction as soon as possible.
We are continuing efforts to market the assets at the Culbertson site and to resolve claims of major non-investor creditors who claim a secured position in some Receivership assets. The Receiver does not believe such allegedly secured positions have the same status in an equity receivership, such as this one, that they might have in other circumstances and is working to achieve resolutions that fairly address the rights of creditors and investors alike.
The Receivership currently holds approximately $650,000 in cash. Though the Receiver has been providing services for over 17 months and has incurred costs and fees of approximately $465,000, the Receiver has not sought Court approval for payment of those fees, wishing to preserve sufficient cash to maintain Receivership assets while they were being marketed. We expect in the near future to seek Court approval to pay a portion of the outstanding expenses and fees.
February 5, 2016
In the eight months since his appointment, the Receiver has extensively investigated the available assets of the receivership entities. Unfortunately, the identified assets are far less than the amount contributed by investors. Large amounts of the invested funds appear to have been used by the principals of NDD for purposes other than those represented to investors and most of those misdirected investments have little if any current value. The Receiver is working to realize whatever value there may be, but this will not provide a significant source of recovery for investors or creditors.
The Receiver has had an appraisal made of the Great American Lodge – Watford City West facility and has been marketing that property. He recently entered into a letter of intent to sell the facility and is working to come to terms on a purchase agreement. Any such agreement will be subject to the approval of the court. Though the facility has value, the net recovery from a sale will be only a very small percentage of the approximately $60 million contributed by investors.
Because of the lack of assets, and particularly of liquid assets, the Receiver has had to be selective in determining what expenses to incur and which assets merit the greatest investment. Priority has been given to preserving the Watford City West facility. The Receiver has not as yet sought payment for any of his or his attorneys’ fees and expenses. He anticipates seeking court approval of those fees and expenses shortly, but will balance payment of any approved fees and expenses with maintaining funds to meet Receivership operating expenses.
The Receiver previously reported a class action initiated against the Pearce & Durick law firm on behalf of investors. Those claims are not controlled by the Receiver; however, the Receiver believes NDD also has claims against the law firm. The Receiver has been participating in settlement discussions with plaintiffs’ counsel and counsel for the law firm, its partners, and its insurer. Most of any settlement would be received by the investors after deduction of plaintiffs’ class counsel’s fees and the costs of the litigation. Any settlement funds directed to the Receiver on behalf of NDD would be used to meet Receivership expenses, and in particular to maintain the Watford City West facility until it can be sold, with the hope that there will then be additional funds available to investors and creditors. Unfortunately, the total amount of any settlement, whether paid to the investors through plaintiffs’ counsel or to NDD, through the Receiver, will be quite small in comparison to the total contributed by investors. This is because the assets available from the law firm, its partners, and its insurers are only a fraction of the investor loss. Any settlement of the class action will require court approval.
June 26, 2015
The Receiver filed his First Status Report today. A copy is available under the Court Filings tab.
A group of investors of North Dakota Developments, LLC filed a proposed class action complaint on behalf of themselves and all other investors against Pearce & Durick and Jonathan P. Sanstead. A copy of the complaint is available under the Court Filings tab.
June 19, 2015
The Receiver's initial report to the Court will be filed by June 26, 2015. A copy of that report will be posted under the Court Filings tab.
May 18, 2015
Preliminary Injunction issued against Defendants. Receiver Hansen appointed. (A copy is available under the Court Filings tab.)
May 5, 2015
Complaint filed by SEC against North Dakota Developments, LLC, Robert Gavin, and Daniel Hogan. (A copy is available under the Court Filings tab.)
Temporary Restraining Order issued against Defendants. (A copy is available under the Court Filings tab.).