Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Securities and Exchange Commission v. the Nutmeg Group

February 26, 2013

SECURITIES AND EXCHANGE COMMISSION
v.
THE NUTMEG GROUP, LLC ET AL



Order Form (01/2005)

Name of Assigned Judge Sitting Judge if Other or Magistrate Judge Sharon Johnson Coleman than Assigned Judge Jeffrey Gilbert

CASE TITLE

DOCKET ENTRY TEXT

Motion hearing held on 2/26/13 on Plaintiff's Motion for An Extension of Time to Answer or Supplement Interrogatory Answers [DE#617]. For the reasons explained in the Statement below, the Court sua sponte reconsiders and modifies its ruling on 2/18/13 [DE#611] to the limited extent that Defendant's Motion to Compel a further response to Interrogatory No. 1 [DE#553] is now denied, and Plaintiff no longer is required to supplement its answer to Interrogatory No. 1. Therefore, Plaintiff's Motion for An Extension of Time to Answer or Supplement Interrogatory Answers [DE#617] is denied as moot. This case is set for a status hearing on 3/28/13 at 10:45 a.m. See Statement for further details.

O[ For further details see text below.] Notices mailed by Judicial staff.

STATEMENT

On January 18, 2013, the Court granted Defendant Randall Goulding's Motion to Compel Further Responses to Interrogatories [DE#553] as to Defendant's Interrogatory No. 1. See [DE#611]. Plaintiff objected to Defendant's motion on the ground that it had answered Interrogatory No. 1 to the best of its knowledge, information and belief, and that no more was required by the Federal Rules of Civil Procedure. The Court ordered Plaintiff to amend or supplement its answer to that Interrogatory on or before February 18, 2013.

In his Interrogatory No. 1, Defendant asked Plaintiff to provide more factual detail to support the bare allegation in paragraph 88 of Plaintiff's amended complaint that Defendants The Nutmeg Group LLC ("Nutmeg") and Randall Goulding owed investors in Nutmeg's Funds more than $2.3 million "as a result of overstatement of management and performance fees, improper distributions to investors, improperly allocation [sic] of investment costs, improper allocation of investment proceeds, improper calculation of partnership profits, Randall Goulding's use of investor funds for his own personal investments, and improper related party transactions." [DE#314], at ¶ 88. Interrogatory No. 1 required Plaintiff to "fully detail and explain the bases" for the contention that Randall Goulding and/or Nutmeg owed more than $2.3 million to Nutmeg Fund investors by breaking down the $2.3 million into the categories Plaintiff identified in paragraph 88 of its amended complaint.

In its answer to Defendant's Interrogatory No. 1, Plaintiff stated that the basis for its allegation in paragraph 88 of the amended complaint was a report prepared by Mari Reidy of Crowe Horwath dated November 16, 2010 [DE#261] that ostensibly contained the information sought by the Interrogatory. Plaintiff said it had no information in its possession to answer Interrogatory No. 1 other than what Ms. Reidy said in her report. Specifically, in answering Defendant's Interrogatory No. 1, Plaintiff said, "To the extent that any of the information requested in Interrogatory No. 1 is not fully described in Crowe Horwath's November 16, 2010 report, the Commission [Plaintiff] does not have additional information to provide to the defendant at this time." [DE#578-1], at 4.

Crowe Horwath, an accounting firm, was appointed by the Court on 4/28/09 [DE#38]. "The primary focus of Crowe Horwath's work was to trace the flow of funds into and out of Nutmeg and its Funds from the time of their formation and to determine whether the investors' monies were properly applied to the investments, whether or not payments to third parties were properly made and whether the amounts paid to Nutmeg by the Funds for advisory services were properly calculated and paid." Receiver's Motion to Discharge Crowe Horwath From Further Duties As Accountant [DE#264], at ¶ 5. The Court capped Crowe Horwath's fees and costs at $150,000 in its order of appointment [DE#38], but it appears that Crowe Horwath ultimately was paid almost $318,000 for its work [DE##264, 269]. The Court discharged Crowe Horwath at the request of the Receiver on 12/16/10 [DE#269]. The Receiver filed Crowe Horwath's final report -- the report dated November 16, 2010 that Plaintiff referenced in its response to Defendant's Interrogatory No. 1 -- on December 8, 2010, just before Crowe Horwath was discharged from this case[DE#161].

During the hearing on January 18, 2013 on Defendant Randall Goulding's Motion to Compel Further Responses to Interrogatories [DE#553], the Court expressed its view that the Crowe Horwath report did not fully answer Defendant's Interrogatory No. 1. Plaintiff did not seriously dispute that characterization of the Crowe Horwath report or, by implication, its answer to the Interrogatory. Instead, Plaintiff objected to Defendant's Motion to Compel [DE#553] on the ground that Plaintiff had answered the Interrogatory to the best of its knowledge and ability with the information it had in its possession, custody or control, and no more was required under Rule 33 of the Federal Rules of Civil Procedure. Plaintiff also argued that Defendants had the opportunity to depose Crowe Horwath's Mari Reidy about her report in early 2012, including specifically with respect to the $2.3 million referenced in paragraph 88 of Plaintiff's amended complaint that Plaintiff is seeking to disgorge from Nutmeg and Defendant in this case.

Although Defendant Randall Goulding did depose Ms. Reidy, that deposition, in the words of Plaintiff's counsel, "was a lost opportunity" because Defendant, proceeding pro se by that time, did not adequately examine Ms. Reidy about her report. Defendant says that he did ask Ms. Reidy questions designed to parse the $2.3 million disgorgement claim into its component parts but Ms. Reidy could not answer those questions. The Court has not reviewed or been provided with a copy of Ms. Reidy's deposition transcript so it does not know whether Plaintiff or Defendant has the better part of the argument as to what happened at Ms. Reidy's deposition.

Plaintiff also apparently did not take the opportunity to ask Ms. Reidy any questions about her report at her deposition. Plaintiff, however, explains that decision by saying that Ms. Reidy's deposition was convened at Defendant's request and, although Crowe Horwath had by that time been discharged as a court-appointed accountant in this case, Plaintiff assumed it would be able to call Ms. Reidy as a witness at trial if it needed to do so by subpoena or otherwise. Defendant confirmed during the hearing on Plaintiff's Motion to Extend on 2/26/13 that he asked for Ms. Reidy's deposition and he compensated her for her time at that deposition.

In any event, although Plaintiff opposed Defendant's Motion to Compel [DE#553] it to further answer Interrogatory No. 1 for the reasons summarized above, its counsel also stated during the January 18, 2013 hearing on Defendant's Motion that Plaintiff was willing to supplement voluntarily its answer to Defendant's Interrogatory No. 1 if it needed to do so to preserve its ability to call Ms. Reidy as a trial witness on its disgorgement claim. Plaintiff, however, said, if it was going to do that, it would need time to speak with Ms. Reidy and obtain the information necessary to supplement its answer to Interrogatory No. 1. The Court took the Plaintiff up on its offer. However, rather than deny Defendant's Motion to Compel on the ground that Plaintiff technically had fulfilled its responsibility to answer Interrogatory No. 1 to the best of its ability based upon information in its possession, custody and control, and simply wait for Plaintiff to supplement its answer to the Interrogatory should it choose to do so in the future, the Court ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.