Perkins v. Haines - Reply Brief

8/3/2019 Perkins v. Haines - Reply Brief

1/40

UNITED STATES COURT OF APPEALSFOR THE ELEVENTH CIRCUIT

_____________________________________________________________

NO. 10-10683-BB

_________________________________________

WILLIAM F. PERKINS, PLAN TRUSTEE FOR INTERNATIONALMANAGEMENT ASSOCIATES, LLC

Appellant,

v.

AENA Y. HAINES, ET AL

Appellees._________________________________________

ON DIRECT APPEAL FROM THE UNITED STATES BANKRUPTCY COURTFOR THE NORTHERN DISTRICT OF GEORGIA, ATLANTA DIVISION___________________________________________________________

REPLY BRIEF OF APPELLANT WILLIAM F. PERKINS, PLAN TRUSTEE

FOR INTERNATIONAL MANAGEMENT ASSOCIATES, LLC

____________________________________________________________

Colin M. BernardinoGeorgia Bar No. 054879KILPATRICK STOCKTON, LLP1100 Peachtree Street, Suite 2800Atlanta, Georgia 30309Tel: (404) 815-6500Fax: (404) 815-6555

Mark S. KaufmanGeorgia Bar No. 409194Bryan E. BatesGeorgia Bar No. 140856MCKENNA LONG & ALDRIDGE LLP303 Peachtree Street, N.E., Suite 5300Atlanta, Georgia 30308Tel: (404) 527-4000

Fax: (404) 527-4198

Case: 10-10683 Date Filed: 08/02/2010 Page: 1 of 40


2/40

TABLE OF CONTENTS

Page

-i-

TABLE OF CONTENTS...........................................................................................i

TABLE OF CITATIONS ....................................................................................... iii

ARGUMENT AND CITATIONS OF AUTHORITY .............................................1

I. This case is governed by operation of law, rather than notions

of fairness..........................................................................................1

A. Surprisingly, the SEC has weighed in on this case for the

first time, pronouncing what it has determined to be the

fair result.................................................................................3

B. This Court should reject the Investor Defendants

additional extraneous arguments as either whollyunavailing or not properly before the Court ..............................7

II. The Investor Defendants and the SEC fail to demonstrate why

historically decided Ponzi scheme case law should be extended

to afford redeeming equity holders the same treatment as

distributions to debt holders ...............................................................12

A. This Court should refuse to follow the Ninth Circuits

ruling inIn re AFI Holding, Inc. because that court relied

on inapposite precedent, wholly failing to analyze

fundamental legal considerations that bear on the

assertion of fraud claims by equity holders .............................16

III. Section 510(b) of the Bankruptcy Code mandates that fraud-

based rescission claims of equity holders be subordinated to the

claims or interests of similarly situated equity holders; thus, the

principles of Section 510(b), read together with Sections

1123(a)(4) and 1129(b)(1), prohibit defrauded equity holders

who assert fraud-based rescission claims from receiving better

treatment than similarly situated equity holders .................................... 19

A. The history of the enactment of Section 510(b) of the

Bankruptcy Code indicates that Congress clearly

mandated that equity holders cannot utilize fraud claims

to elevate their positions to be equal to general creditors

nor even ahead of similarly situated equity holders ................22



3/40

TABLE OF CONTENTS

(continued)

Page

-ii-

B. The application of contemporary principles of Section

510(b) of the Bankruptcy Code to the facts at bar showsthat the Investor Defendants clearly are prohibited from

receiving better treatment than their similarly situated

equity holder peers, based on the assertion of fraud

claims .......................................................................................25

CONCLUSION.......................................................................................................28

CERTIFICATE OF COMPLIANCE......................................................................30



4/40

-iii-

TABLE OF CITATIONS

Page(s)CASES

Ashoff v. City of Ukiah,

130 F.3d 409 (9th Cir. 1997) ................................................................................7

Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc.,

467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984).....................................6, 7

Eby v. Ashley,

1 F.2d 971 (4th Cir. 1924) ...............................................................14, 15, 16, 19

In re AFI Holding, Inc.,

525 F.3d 700 (9th Cir. 2008) ............................................................16, 17, 18, 19

In re Geneva Steel Co.,

281 F.3d 1173 (10th Cir. 2002) ..........................................................................22

In reGranite Partners,

208 B.R. 332 (Bankr. S.D.N.Y. 1997)................................................................18

In re Terry Mfg. Co., Inc.,2007 WL 274319 (Bankr. M.D. Ala. 2007) .................................................18, 19

In re United Energy Corp.,

944 F.2d 589 (9th Cir. 1991) ........................................................................16, 17

Jezarian v. Raichle

(In re Stirling Homex Corp.), 579 F.2d 206 (2d Cir. 1978) .........................23, 24

Newton National Bank v. Newbegin,

74 F. 135 (8th Cir. 1896) ....................................................................................21

Oppenheimer v. Harriman Nat'l Bank & Trust Co.,

301 U.S. 206, 57 S.Ct. 719, 81 L.Ed. 1042 (1937).............................................22



5/40

TABLE OF CITATIONS

(continued)

Page

-iv-

Perkins v. Smith, Gambrell & Russell, LLP et al,

United States District Court for the Northern District of Georgia, CivilAction No. 1:08-CV-2673-JEC ............................................................................9

Scholes v. Lehmann,

56 F.3d 750 (7th Cir 1995) .................................................................................26

Skidmore v. Swift & Co.,

323 U.S. 134, 65 S.Ct. 161, 89 L.Ed. 124 (1944).................................................7

STATUTES

11 U.S.C. 510(b) ............................................................................................passim

11 U.S.C. 1123(a)(4).......................................................................................19, 27

11 U.S.C. 1129(b)(1).......................................................................................19, 27

OTHER AUTHORITIES

H.R.Rep.No.95-595, 95th Cong., 1st Sess. (1977)............................................23, 24



6/40

-1-

Appellant William F. Perkins, Plan Trustee (the Trustee) for the

substantively consolidated post-confirmation debtor (the Debtor or Debtors, or

generally IMA), with the advice of the Plan Committee (the Committee),1 by

and through undersigned counsel, and submits this consolidated reply to the briefs

filed by appellees/defendants (the Investor Defendants) and the Securities and

Exchange Commission (the SEC).

ARGUMENT AND CITATIONS OF AUTHORITY

I. This case is governed by operation of law, rather than notions offairness.

The Investor Defendants miscast the basis of the Trustees position, arguing

disingenuously that the result urged by the Trustee and the Committee in this

appeal is premised on principles of fairness. Joint Appellee Brief

(Jt.App.Brf.), Pgs 39-41. Fairness is not the basis of the Trustees claims;

indeed, in his opening brief, the Trustee explicitly disclaimed any notion that the

fairness of requiring an equal sharing of the financial pain among all victims of

IMAs fraud warranted the relief sought. Trustees Appellant Brief (Tr.Brf.),

Pgs 11-12. To the contrary, after the Trustee observed the moral dilemma of

having to choose between a result that leaves the defrauded investor where you

1 Counsel for the Committee has prepared this brief. By agreement with theTrustee, Committee counsel will take the lead role in arguing the matters raisedherein.



7/40

-2-

find them as opposed to an approach that seeks to ratably equalize losses among

similarly situated defrauded victims, the Trustee made it explicitly clear that his

pursuit of the avoidance claims in the case was not being justified on some notion

of fairness, but rather because that result is what the law requires: namely,

because IMA investors acquired equity interests in IMA as opposed to claims

against it, none were entitled to receive, as the Investor Defendants did,

distributions greater than the value of his or her ratable share of the enterprise at

the time those distributions were received in exchange for the return of their equity

interests. Id.

While the Bankruptcy Court observed that the fairer result among Ponzi

scheme investors might be to put them all in the same place and assure a ratable

distribution of the Ponzi enterprises assets to them [Doc 38, Pg 13], others can

perhaps as persuasively urge that leaving recovering investors alone is an equal or

even stronger moral imperative. Resolving this case on which virtue should reign

supreme is problematic here, where no answer, grounded on whats the right thing

to do, is inherently correct. Instead, and thankfully so, courts can look to legal

doctrines to guide the outcome and avoid the moral choice that is inherent in a

fairness based analysis. Thus, as the Trustee readily concedes, where investors

make a debtbased investment in what is later found to be a fraudulent enterprise,

even though that enterprise induced the investment with actual fraud and despite



8/40

-3-

the fact that every investment transaction it conducted was with its intent to delay,

hinder and defraud, investors are legally permitted to keep what they recover from

the enterprise before the fraud was discovered. That result is so because their

recovery is deemed for value since what they received was in satisfaction of an

antecedent debt -- a claim that is protected from avoidance under Sections 548(c)

and (d) of the Bankruptcy Code and correlative state law (assuming the recovering

investor acted in good faith, and outside the applicable preference period).

Whether that result is viewed as fair to other equally defrauded investors who

had not recovered a dime is not the issue; it is what well-established law requires.

Conversely, in an equity investment scenario where the right conferred is an

interestin an enterprise, the proper legal result is directly opposite to one where the

investment gave rise to a claimagainstit; but here, again, the resolution should not

be premised on it being the fairer result, but rather on what long-standing legal

principles mandate.

A. Surprisingly, the SEC has weighed in on this case for the firsttime, pronouncing what it has determined to be the fair result.

In its amicus brief, the SEC actually attempts to ground its support for the

Investor Defendants position based on its views of what is fair, concluding that

the disruption caused by the Trustees pursuit of claims against innocent investors

who have gotten back money invested goes too far. SEC.Brf., Pg 20.

Conceding that there is arguably some merit in making pro rata distributions



9/40

-4-

among equally defrauded equity investors, the SEC nevertheless concludes that

this consideration is outweighed by the hardship that would be inflicted on

individual investors forced to return principal payments received in good faith.

Id. at 21. It is one thing for the Investor Defendants to strenuously urge their

biased notions of what is fair as a defense, though their assessment is anything

but objective. It is much more disconcerting, though, for the SEC, the

governmental body whose fundamental purpose is to properly police, regulate and

assure the integrity of our investment market place, to choose sides on whether the

hardship that might be inflicted on investors forced to return principal recoveries is

entitled to greater dignity than protecting, through the ratable distribution concept,

the plight of other innocent victims, no less defrauded, who were fully invested

when the fraudulent scheme came to light. While the SEC purports to rest its

conclusion on long-standing judicial precedent that innocent victims who recover

their investments before a Ponzi scheme collapses not be required to disgorge the

return of recovered principal, that precedent was developed in debt claim

investment cases. While correct in the debtclaim context, it must be cabined to

that circumstance, and not, as the SEC attempts, expanded on fairness notions to

the equity investment context where legal doctrines developed over hundreds of

years require a different result.



10/40

-5-

Even more curious than its decision to opine about what it thinks is a

fairer result is the SECs branding as illusory the Trustees distinction between

debt and equity investments and how they are to be treated under the law.

SEC.Brf., Pg 21. While the SEC concedes at the outset that the answer to the

question posed in this case is important and will have a significant impact on

the treatment of investors defrauded in Ponzi schemes purporting to offer equity

investments [id. at 2], the Commission fails to directly address any of the

arguments advanced by the Trustee to premise the equity versus debt

distinction, with no discussion of 11 U.S.C. 510(b) and correlative judicial

authorities that make manifestly clear that fraud-based tort claims arising from

what initially was an equity investment are entitled to recovery from the fraudulent

enterprise on no basis superior to that of all other similarly situated equity

investors. Id. at 2. This parity in treatment among interest holders principle,

clear in both statutory and judicial authorities, is utterly ignored by the SEC.

For the SEC, the governmentally-appointed watchdog whose purpose it is to

ensure disciplined markets, full and accurate disclosures and the protection of the

investor public, to assail as illusory the Trustees position that signed equity

based investment documents mean nothing and that such investors should be

treated the same as if they loaned money to the fraudulent enterprise would appear

to be totally contrary to the SECs purpose. Contrary to providing predictability



11/40

-6-

and bolstering confidence in the publics right to rely upon documents they signed

as the most salient guidepost for measuring their rights, the SECs reasoning seems

antithetical to those goals. Logically extended, its position renders written

agreements an unworthy substitute for what one judge might think from time to

time appears the moral or right thing to do. Nothing could be more destabilizing to

our financial markets.

The SEC endorses the reasoning that merely because the IMA investors

were lured into their investments by fraud, the documents they signed -- which put

all such investors on an equal footing should the enterprise fail for any reason --

should be totally disregarded, thereby fundamentally emasculating the contractual

understanding that such risks were to be equally shared among all equity holders.

True, a fraud claim arises in favor of every deceived investor as of the date they

were deceived, but for multiple reasons the justification for permitting some to

recover on a basis superior to other similarly situated defrauded investors cannot

be premised on the fraud, and the failure to see that distinction is the fundamental

flaw in the SECs reasoning.2

2 In any event, the SECs positions should be afforded no special deference bythis Court. Generally, courts defer to determinations of a governmental agencywhere the agency offers a reasonable interpretation of a legal issue under astatutory framework in which Congress explicitly or implicitly delegated authorityto the agency. See Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). Such deference is not extended

(footnote continued on next page)



12/40

-7-

B. This Court should reject the Investor Defendants additionalextraneous arguments as either wholly unavailing or not properly

before the Court.

Aside from miscasting the Trustees position as being based on fairness, the

Investor Defendants other arguments not devoted to the for value inquiry -- the

sole issue before this Court -- are likewise unavailing. As to the Investor

Defendants strained statute of limitations analogy [Jt.App.Brf., Pgs 38-40], while,

as in every field of law, statutes of limitations may bar some claims but not others,

the fact that a limitations period may bar the Trustee from the pursuit of certain

investors has no relevance to whether well-established rules of law, rather than

personal views of what is fair, ought to govern whether a line is drawn or a

distinction is made between holders of debt and equity. There are, indeed,

(footnote continued from previous page)

to agency positions that are wholly unsupported by regulations, rulings, or

administrative practice. Ashoff v. City of Ukiah, 130 F.3d 409, 411 (9th Cir.1997). The United States Court of Appeals for the Second Circuit, in In re NewTimes Securities Services, Inc., reasoned that the SECs interpretation of provisionsof the Securities Investor Protection Act was entitled to no special deference underChevron because the SEC had never previously proffered its interpretation in arule, regulation or other form. 371 F.3d 68, 81-82 (2nd Cir. 2004). Accordingly,the Second Circuit deemed the SECs positions worthy only of non-controllingconsideration, and only to the extent that that the court deemed its arguments to bepersuasive. Id. at 83, 87; see alsoSkidmore v. Swift & Co., 323 U.S. 134, 65 S.Ct.

161, 89 L.Ed. 124 (1944). Because (i) the SECs positions asserted herein are notbased on a conferral of authority by Congress, (ii) the SEC has no special claim toexpertise regarding the issues at stake in this appeal, (iii) the SEC has not assertedany interpretations based on rules or regulations that are within its area ofexpertise, and (iv) the SECs arguments simply are not persuasive, this Courtshould give no deference to the SECs arguments.



13/40

-8-

winners and losers irrespective of which view this Court adopts on the legal

question presented; but that fact, or the consequence that a statute of limitations

defense might alter the result for some, does not mean that this Court should not

premise who wins or loses other than by applying sound legal analyses and

rigorously adhering to statutes and well-developed legal principles that govern the

treatment of equity investors inter se.3

The Investor Defendants also attempt to buttress the correctness of the

Bankruptcy Courts decision to not permit recovery of principal paid by IMA to

the Investor Defendants on the notion that the costs of such litigation will likely

exceed the recoveries. Jt.App.Brf, Pgs 40-41. This contention rests on nothing

more than pure conjecture. Without any evidence to support their contention, the

Investor Defendants boldly assert that the Trustees pursuit of the claims at bar will

actually cause a dilution of estate assets, presumptively because the

administrative costs of pursuit of the claims will be significant and because in

3 Moreover, the Investor Defendants try to make much more of their statute oflimitations argument that in fact exists. Quick to find something purportedlyarbitrary about the Trustees line-drawing distinction between debt and equity, theInvestor Defendants offer the alleged statute of limitations inequity as illustrative

of arbitrariness without advising this Court that the Bankruptcy Court, in a decisionrendered on April 9, 2010, found that the statute of limitations otherwise applicableto the subject avoidance claims in this case was tolled until the fraudulent nature ofIMAs scheme became public. See Perkins v. TBC Capital, Inc. et al, UnitedStates Bankruptcy Court for the Northern District of Georgia, Case No. 08-06623-PWB, Docket Entry No. 23.



14/40

-9-

many instances [the Investor Defendants] may be incapable of paying funds back

to the Estate because they do not have the resources to do so. Id. Needless to say,

the Trustee conducted his own cost-benefit analysis before commencing suit and

concluded that pursuit of the claims at issue here made financial sense. Indeed,

determinations were made about which recovering investors to sue based on the

cost of such litigation as compared to the amounts sought to be recovered. Investor

Defendants, who obviously have reasons to see the calculus differently, have no

standing to raise the administrative cost argument as a defense, and that is

especially so where their contention rests entirely on rank speculation regarding the

non-collectability of judgments against some of the Investor Defendants.

Aside from whether the Investor Defendants can pay judgments rendered

against them, the pursuit of the claims at bar is vitally important to assuring

appropriate future distributions to those who presently sit empty handed.4 The

Trustee notes that many of the Investor Defendants have recovered some, but not

all, of the amount they invested, and thus stand to further recover from the estate.

4 Contrary to the Investor Defendants contentions, the Trustee is pursing

meaningful additional recoveries for the estate beyond the claims asserted againstthe Investor Defendants. See, e.g., Perkins v. Smith, Gambrell & Russell, LLP etal, United States District Court for the Northern District of Georgia, Civil ActionNo. 1:08-CV-2673-JEC, Docket Entry No. 91 (denying defendants motion forsummary judgment on estates legal malpractice claim against IMAs pre-petitionlaw firm).



15/40

-10-

Hence, on what basis such partially recovering investors should share in future

distributions is raised by this appeal as well. If the Trustee prevails on the theory

that those who recovered all or a portion of their equity investment in IMA must

disgorge those recoveries to create a level playing field among all of the Ponzi

scheme victims, then apart from whether all the Investor Defendants have the

ability pay the judgments against them, those that recovered in part, but still hold

claims, would, at a minimum, not be entitled to receive any further distributions

until all injured investors had recovered the same percentage of their investment.

Conversely, if the Trustee fails in pursuit of the avoidance claims sub judice, any

distributions made to the Investor Defendants would be ratable to the amount they

still claim.5

The Investor Defendants also attempt to re-raise to this Court the res

judicata and estoppel arguments that were presented to, and were explicitly

rejected by, the Bankruptcy Court below. Jt.App.Brf., Pgs 41-47. The Investor

Defendants argue that the Trustees formal acknowledgement in the Plan and

Disclosure Statement of the now-known fraud claims of all of IMAs defrauded

5

Thus, if Able and Baker each invested $500,000 in IMA, and Baker hadrecovered $300,000 of his investment before IMAs fraudulent scheme hadbecome public, unless this Court adopts the Trustees equality of treatment theoryhere asserted, both Baker and Able would share in any distributions ratably fromthe first dollar now or hereafter distributed, even though Baker had alreadyrecovered 3/5 of his investment.



16/40

-11-

investors should bar the Trustee from seeking to avoid transfers made to the

Investor Defendants on the basis that they received disproportionate distributions

in respect of their equity interests in IMA. Id. The Investor Defendants estoppel

and res judicata defenses to the avoidance actions sub judice are meritless. First,

those defenses are not before this Court because only the for value defense was

certified for immediate review. Second, the mere fact that the Plan and Disclosure

Statement provided that all deceived investors were to be treated as tort claimants

did not waive the Trustees right to pursue the avoidance actions. As previously

observed, the fact that defrauded IMA investors held tort claims, though

unarticulated, arising from the date they were deceived into making their IMA

investment, begs the question whether those who were fortunate to receive

distributions from IMA can defeat avoidance actions to recover those distributions.

Contrary to the Investor Defendants contentions, the Disclosure Statement made

the Trustees intention to pursue such avoidance actions explicit, and finding

nothing in the Plan unclear, the Bankruptcy Court agreed. Doc 37, Pgs 84, 88.

Finally, in a separate brief filled by Investor Defendants James, Nathaniel

and Simone Bronner (the Bronners), the Bronners argue that, if the Court deems

IMAs investors to be solely equity holders, the Trustees fraudulent transfer

claims would be precluded because the Trustee would be unable to satisfy certain

elements of his prima facie case for avoidance claims against the Investor



17/40

-12-

Defendants. The Bankruptcy Court did not treat the Bronners arguments in its

Order because, for purposes of its consideration of the value issue, both in the

Bankruptcy Court below and for purposes of its certification for immediate appeal,

the Bankruptcy Court assumed that the Trustee had established his prima facie

case. Doc 37, Pg 77. Hence, the issues raised by the Bronners are not properly

before this Court, and should be disregarded. To the extent that this Court wishes

to even consider the Bronners arguments, the Trustee refers the Court to the

Trustees extensive treatment of this topic in his reply briefing to the Bankruptcy

Court below. Doc 31, Pgs 17-26. Certainly, the Bronners will have an opportunity

to address these arguments to the Bankruptcy Court on remand, at such time as the

Bankruptcy Court affirmatively considers the issue of whether the Trustee can

establish, as he fully anticipates the overwhelming evidence will support, hisprima

facie case.

II. The Investor Defendants and the SEC fail to demonstrate why

historically decided Ponzi scheme case law should be extended to afford

redeeming equity holders the same treatment as distributions to debt

holders.

The Investor Defendants and the SEC predictably focus on the line of

judicial reasoning developed in the fraudulent investment scheme context holding

that defrauded investors who recover investments from a fraudulent enterprise

prior to the frauds discovery are entitled to retain all of what they recovered up to

the full amount of the principal they invested, based on a legal fiction whereby



18/40

-13-

payments made to the schemes victims in respect of their principal investments

can be retroactively recharacterized as having been paid to satisfy unasserted, and

then unknown, fraudulent inducement claims that arose when each investor

initially invested in the scheme. The Trustee fully acknowledged the existence of

this line of judicial reasoning in his opening brief, and, in fact, does not contest the

appropriate application of such reasoning in factual circumstances where defrauded

investors initial investments were in the nature of debt claims from the outset.

However, where, as here, the defrauded investors initial investments were in the

nature of equity interests, the application of such reasoning inappropriately

operates to retroactively recharacterize distributions affirmatively made in respect

of equity interests into transfers in respect of debt claims. By this retroactive

recharacterization process, the transfers made to the Investor Defendants in

satisfaction of their previously unasserted and unarticulated fraud claims, totally

circumvents the extensive litigation process required to prove a fraud claim,

wholly disregards requisite notice requirements to other affected interest holders,

and violates the principles of Section 510(b) of the Bankruptcy Code, discussed

infra, that prohibit the assertion of fraud claims by equity holders to elevate their

distribution status.

The Investor Defendants and the SEC argue that the distinction between

being an investor creditor as opposed to an investor interest holder is irrelevant to



19/40

-14-

the value exchange analysis in the avoidance context, because the mere existence

of a potential fraud claim (though unarticulated) should be sufficient to make an

equity investor into a creditor claimant investor. The Investor Defendants and the

SEC compare the facts of the instant case to those found inEby v. Ashley, and in a

line of cases following Eby, and argue that this Court should afford the Investor

Defendants the same protections provided to defrauded investors by theEby court

and those courts that have followed its reasoning. Eby v. Ashley, 1 F.2d 971 (4th

Cir. 1924), cert. denied, 266 U.S. 631, 45 S.Ct. 197, 69 L.Ed. 478 (1925). While

all fraudulent investment scheme cases share common themes and symmetries

among them, the facts of the case at bar clearly differ from Eby and its progeny,

and create a meaningful distinction that should preventEbys reasoning from being

extended to this case.

As set forth in the Trustees opening brief, the investors in the Eby scheme

unquestionably held, from the outset, claims against the fraudulent scheme, based

on the debt nature of their investments. In reasoning that the transfers to those

defrauded investors satisfied their fraudulent inducement claims, the Eby court

merely acknowledged the existence of an alternate and distinct basis for a debt

claim against that scheme -- one based on the initial nature of the investment that

gave rise to the investors right of repayment from the outset, and the other on

account of the defrauded investors fraudulent inducement claim (what the Trustee



20/40

-15-

denominates Claim2 in his opening brief). The Trustee has never contested the

analysis inEby and its progeny that a potential fraudulent inducement claim arose

at the time each defrauded investor made his investment into the scheme, and does

not contest the analysis undertaken by cases that have appropriately applied the

Claim2 concept where there are two separate and distinct bases for debt claims

against the Ponzi entity -- i.e., where the investments made by those defrauded

gave rise to contractual debt claims from the outset.6 However, neither the Eby

court nor the vast majority of courts that adopted its reasoning in any way involved

the transmutation of what was originally an equity interestinto a fraud-based debt

claim. Accordingly, for the reasons set forth herein and in the Trustees opening

brief, this Court should deem inapposite the analysis from Eby and its debt-

investment case progeny.

6 As set forth in the Trustees opening brief, the Trustee does not contest theapplication of the Claim2 analysis in debt cases because, aside from the assertedfraud, the investor, with limited exceptions, had a right to be preferred over otherinvestors. Whereas the claim of a holder of a legitimate debt against an enterprise

may properly be paid prior to and in preference over other similarly situated debtholders, outside some statutory preference period, and provided that the investorhas acted in good faith, by contrast, state and bankruptcy law clearly mandatethat payments in excess of the value of an investors ratable interest in theenterprise are prohibited, thereby assuring the equality of treatment among allequity holders. See Tr.Brf., Pgs 31-36.



21/40

-16-

A. This Court should refuse to follow the Ninth Circuits ruling inIn re AFI Holding, Inc. because that court relied on inapposite

precedent, wholly failing to analyze fundamental legal

considerations that bear on the assertion of fraud claims by equity

holders.

Only one court in theEby line has addressed an equity investment structure

similar to that before this Court. In his opening brief, the Trustee extensively

addressed the decision inIn re AFI Holding, Inc., 525 F.3d 700 (9th Cir. 2008), in

which the United States Court of Appeals for the Ninth Circuit extended Ebys

Claim2

reasoning to factual circumstances where the investors were equity interest

holders, not debt claimants, in the fraudulent enterprise. Id. at 708-09; Tr.Brf., Pgs

36-50. In reaching its conclusion that distributions in respect of equity interests

may be retroactively deemed to be in satisfaction of unasserted, unarticulated fraud

claims, the AFIcourt relied almost exclusively on the reasoning of a prior Ninth

Circuit case,In re United Energy Corp., 944 F.2d 589 (9th Cir. 1991). Id. United

Energy undeniably involved factual circumstances where the investors were debt

claimants from the outset; thus, United Energy no more supported

recharacterization of a transfer in respect of an original equity interest into a

transfer in respect of a debtclaim than didEby. See id.

The AFI court, however, completely disregarded that critical fact, and

simply extended the Claim2 reasoning to its equity investment facts. Id. at 708.

AFIs total reliance on United Energy was misplaced, and by improperly relying on



22/40

-17-

United Energy without any critical analysis of the fact that United Energy was a

Claim2 case, the AFI court wholly failed to conduct any reasoned analysis

regarding the fundamental legal issues that should be addressed in connection with

any attempt to transmute the character of a distribution in respect of an equity

investment into a distribution in respect of a debt claim. Specifically, the AFI

court completely missed applicable fundamental legal considerations, as raised by

the Trustee both to this Court and to the Bankruptcy Court below, that absolutely

should have shaped its analysis, such as (i) the propriety of retroactive

transmutation of equity interests into debt claims without any prior articulation of

such claims, (ii) due process concerns in light of claims being fully recognized and

deemed satisfied without any prior notice to other equity investors at the time the

claims were deemed satisfied and paid, (iii) the uniform state law proscription of

disproportionate distributions to equity holders, and (iv) the operation of

Bankruptcy Code provisions mandating equality in treatment among similarly

situated parties, and precluding equity holders from obtaining superior treatment

by asserting fraud claims. Essentially, theAFIcourt just sought to harmonize two

prior Ninth Circuit cases, neither of which was on all fours with its facts, and

merely parroted the reasoning from the United Energy debt-investment case

without any analysis of whether the result should be the same where the case at bar

concerned the rights ofequity interest holders. Therefore, this Court should give



23/40

-18-

no persuasive weight to the Ninth Circuits ruling in AFI, and recognize that the

specific matters and arguments before this Court essentially are of first impression.

In contrast to AFI, the United States Bankruptcy Court for the Middle

District of Alabama, inIn re Terry Mfg. Co., Inc., 2007 WL 274319 (Bankr. M.D.

Ala. 2007), recognized that fundamental distinctions exist between equity interests

and debt claims, and concluded that such distinctions do not permit courts to

simply transmute a distribution in respect of an equity interest into a distribution in

respect of a debt claim. Id. at *6-7. The Investor Defendants and the SEC argue

that Terry is inapposite because it did not involve a fraudulent scheme from its

inception. This argument is wholly without merit, because there is no distinction

between an inceptive fraud claim and one that arises at some later point in time in

the context of an equity holder seeking to retroactively transmute his interest into a

claim. See In re Granite Partners, 208 B.R. 332 (Bankr. S.D.N.Y. 1997)

(reasoning that subordination under Section 510(b) properly applies to later arising

fraud claims as well as inceptive fraud claims). In either case, the defrauded equity

holders seek to assert, later in time, a previously unarticulated fraud claim as a

basis for protecting prior distributions affirmatively made in exchange for an

equity position. Unlike AFI, the Terry court appropriately considered the impact

of patent fundamental distinctions that exist between the rights of equity holders

and debt holders, particularly the impact of those distinctions where defrauded



24/40

-19-

equity holders seek to assert fraud claims to elevate their distribution status. Terry

at *6-7. In light of such distinctions, the Terry court appropriately refused to

convert equity interests into debt claims by retroactively recognizing and deeming

satisfied previously unasserted fraud claims. Id. No court in Ebys line, and

specifically AFI, ever undertook any such reasoned analysis as did the court in

Terry. Consistent with Terry, and consistent with the Trustees arguments herein,

the Trustee respectfully requests that this Court consider and apply the wealth of

legal principles that bear on the matters before this Court, beyond the inapposite

rulings ofEby and its progeny.

III. Section 510(b) of the Bankruptcy Code mandates that fraud-based

rescission claims of equity holders be subordinated to the claims or

interests of similarly situated equity holders; thus, the principles of

Section 510(b), read together with Sections 1123(a)(4) and 1129(b)(1),

prohibit defrauded equity holders who assert fraud-based rescission

claims from receiving better treatment than similarly situated equity

holders.

In addition to the Trustees arguments asserted herein and in his opening

brief, Section 510(b) of the Bankruptcy Code provides an incremental and

independent basis for this Court to reject the arguments of the Investor Defendants

and the SEC that the Investor Defendants previously unasserted fraud claims can

now be retroactively recognized and deemed satisfied through the Debtors

bankruptcy cases. The Investor Defendants have now asserted for the very first

time, during the pendency of the Debtors bankruptcy case, fraudulent inducement



25/40

-20-

claims against the Debtors arising from their purchase of equity interests in the

Debtors. No Investor Defendant claims that he or she ever asserted a fraudulent

inducement claim against a Debtor at the time of the distributions that the Investor

Defendant received from the Debtors.7 Both the Investor Defendants and the SEC

go to great length to explain how the Bankruptcy Codes expansive definition of

the term claim should encompass the Investor Defendants newly asserted

fraudulent inducement claims against the Debtors. Jt.App.Brf., Pgs 15-17;

SEC.Brf, Pgs 11-12. This is a red herring argument because the Trustee has never

contested that all of IMAs defrauded investors had potential fraudulent

inducement claims against the Debtors arising from the date that each of IMAs

investors were defrauded by Kirk Wright.8 The Trustee asserts that the proper

treatment of the now recognized fraud claims ofallof IMAs defrauded investors,

including those asserted by the Investor Defendants, must be governed by

applicable provisions and policies of the Bankruptcy Code and consistent judicial

interpretations thereof. Given that the Investor Defendants and the SEC rely so

7 Had any Investor Defendant previously asserted a fraud claim, suchassertion would destroy the Investor Defendants ability to establish good faithreceipt of the distribution. See Tr.Brf., Pgs 55-57.

8 Both in the Plan and the accompanying Disclosure Statement, the Trusteereferred to the defrauded IMA equity investors as holders of Investor TortClaims because the Trustee acknowledged that they should be, and he expectedthat they would be, treated as tort claimants once their fraud claims were allowedin a public judicial forum.



26/40

-21-

heavily on the Bankruptcy Code to support the existence of the Investor

Defendants fraud claims against the Debtors, certainly they cannot deny that the

other provisions of the Bankruptcy Code should govern the treatment of the very

claims that the Bankruptcy Code provides.

As discussed further below, for well over a century, courts have considered

attempts by equity holders to improve their distribution position relative both to

general creditors and to other similarly situated equity holders through the

assertion of fraud claims against the failed enterprise in which they invested. But

as the United States Court of Appeals for the Eighth Circuit as long ago as 1896

warned, When a corporation becomes bankrupt, the temptation to lay aside the

garb of a shareholder, on one pretense or another, and to assume the role of a

creditor, is very strong, and all attempts of that kind should be viewed with

suspicion. Newton National Bank v. Newbegin, 74 F. 135, 140 (8th Cir. 1896).

The Eighth Circuits warning foreshadowed contemporary judicial and statutory

recognition of the need to proscribe retroactive conversions from equity to debt.

Since 1896, the judicial treatment of equity holder fraud claims has evolved

such that today, and for more than thirty years, a fraud-based claim of an equity

holder is given no better treatment than what that investor would receive in respect

of his equity interest in the fraudulent enterprise. Not only have judicial authorities



27/40

-22-

adopted this approach, but when Congress enacted the 1978 Bankruptcy Code, it

made this result abundantly clear.

A. The history of the enactment of Section 510(b) of the BankruptcyCode indicates that Congress clearly mandated that equity

holders cannot utilize fraud claims to elevate their positions to be

equal to general creditors nor even ahead of similarly situated

equity holders.

Section 510(b) of the Bankruptcy Code mandates that an equity holders

fraud-based rescission claim must be subordinated to claims or interests that are

senior or equal to the equity holders underlying equity position, such that an

equity holders fraud-based rescission claim cannot be used to elevate his

distribution position over that of his similarly situated equity holder peers. 11

U.S.C. 510(b). Prior to the enactment of Section 510(b) in 1978, the law had not

always been so clear. As chronicled by the United States Court of Appeals for the

Tenth Circuit in In re Geneva Steel Co., 281 F.3d 1173 (10th Cir. 2002), courts

struggled for over a century to determine the appropriate treatment of fraud claims

asserted by equity holders in a failed enterprise. Id. at 1175-76. Prior to 1900,

courts generally reasoned, like contemporary courts, that equity investors could not

utilize fraud claims to elevate their distribution position. Id. at 1176. By the

1930s, however, equity investors were generally permitted to rescind their equity

purchases, and be treated equal with, or even superior to, creditor claims. Id.; see

also Oppenheimer v. Harriman Nat'l Bank & Trust Co., 301 U.S. 206, 215, 57



28/40

-23-

S.Ct. 719, 81 L.Ed. 1042 (1937). Over forty years later, with the enactment of the

sweeping Bankruptcy Reform Act of 1978, Congress clearly mandated that the law

no longer support defrauded equity holders efforts to utilize their fraud claims to

elevate their distribution status, and enacted Section 510 of the Bankruptcy Code to

expressly provide both that equity holders fraud claims must be subordinated to

creditor claims, and, as is critical to this case, that equity holders fraud claims

cannot be afforded more favorable treatment than the claims or interests of

similarly situated equity holders.

Contemporaneously with Congressional consideration of the proposed

language of Section 510, but shortly before its enactment, the United States Court

of Appeals for the Second Circuit, in the bankruptcy case ofJezarian v. Raichle (In

re Stirling Homex Corp.), 579 F.2d 206, 213 (2d Cir. 1978), considered whether

claims of defrauded equity holders should be subordinated to creditor claims under

the Bankruptcy Act.9Id. at 208. The Second Circuit expressly considered both the

proposed language of Section 510, as well as the House Report on the proposed

bill. Id. at 214-15; H.R.Rep.No.95-595, 95th Cong., 1st Sess. (1977). While not

controlling authority, the court found the reasoning behind the proposed bill

persuasive, and ruled that the subordination of equity fraud claims to general

9The Bankruptcy Act preceded, and was substantially overhauled by, the

Bankruptcy Reform Act of 1978, as codified, the Bankruptcy Code.



29/40

-24-

creditor claims similarly was required by the standards of the Bankruptcy Act. Id.

at 215.

With the enactment of Section 510(b) of the Bankruptcy Code, and the

contemporaneous ruling by the Second Circuit in Stirling, both current statutory

provisions as well as judicial authorities clearly establish that fraud claims of

equity holders no longer provide any basis for a defrauded equity holder to elevate

his right to distributions to be equal to that of general creditors or even to any

priority higher than that of similarly situated equity holders, whether or not they

were likewise victims of fraud.

This Court should reject the Investor Defendants attempts to minimize the

importance of the principles behind Section 510(b) to the facts at bar. The Investor

Defendants mistakenly try to limit the principles of Section 510(b) to only preclude

attempts by defrauded equity holders to elevate their positions above creditor

claims. Jt.App.Brf., Pg 37. While Section 510(b) certainly proscribes defrauded

equity holders from asserting fraud claims to elevate their position relative to

general creditors, it also explicitly prohibits efforts by defrauded equity holders to

elevate their position relative to other similarly situated defrauded equity holders.

The Investor Defendants either miss or ignore this critical feature of Section



30/40

-25-

510(b), and their attempt to mischaracterize the import of that feature is quite

telling and necessitates additional discussion.10

B. The application of contemporary principles of Section 510(b) ofthe Bankruptcy Code to the facts at bar shows that the Investor

Defendants clearly are prohibited from receiving better treatment

than their similarly situated equity holder peers, based on the

assertion of fraud claims.

Just like defrauded equity investors before them, the Investor Defendants

seek to use their fraudulent inducement claims to secure superior treatment over

their similarly situated equity holder peers. The Investor Defendants seek to

distance themselves from that impression by calling themselves the Defrauded

Investors, so as to suggest (i) that they are somehow representative of all of the

investors defrauded by the IMA scheme, and (ii) that no other group of defrauded

investors exists relative to whom the Investor Defendants seek to get ahead. In

fact, the Investor Defendants are just those investors who were fortunate enough to

receive material distributions from the Debtors prior to the discovery of the fraud.

There exists a much larger body of defrauded IMA investors who received little or

10 The Investor Defendants devote merely one short paragraph to address the

Trustees arguments under Section 510(b). Jt.App.Brf., Pg 37. The SEC fails toaddress the Trustees Section 510(b) arguments at all. As set forth in the Trusteesopening brief, the Bankruptcy Court, too, mistakenly only considered the import ofSection 510(b) with respect to its application to the absolute priority rule (creditorsbefore equity), failing to consider its impact on the inter se relationship amongequity holders. Doc 38, Pg 12; Tr.Brf, Pgs 44-45.



31/40

-26-

no distributions from the scheme, people whose investments effectively funded the

distributions received by the Investor Defendants. It is this body of similarly

defrauded investors over whom the Investor Defendants undeniably seek

materially better treatment, on the basis that their now-asserted fraud claims should

be retroactively recognized and satisfied as of the time of their distributions from

the Debtors.

The Trustee consistently has acknowledged that all of the defrauded

investors in the IMA scheme have potential tort claims that arose at the time each

investor invested in the Debtors, assuming the investors good faith; claims that

may now be formally validated. See Scholes v. Lehmann, 56 F.3d 750 (7th Cir

1995) (recognizing that unknowingly defrauded limited-partner investors were

potential tort creditors, and that their claims made the enterprise insolvent at all

times relevant to transfers). Both in the Plan and the accompanying Disclosure

Statement, the Trustee referred to all of the defrauded IMA equity investors as

holders of Investor Tort Claims because the Trustee acknowledged that they

should be, and he expected that they would be, treated as tort claimants once their

fraud claims were recognized in an open judicial forum of the Bankruptcy Court.

It is precisely this scenario for which Section 510(b) of the Bankruptcy Code was

created -- to govern the interrelationship among similarly defrauded equity holders

in a failed enterprise, and proscribe the assertion of fraud-based rescission claims



32/40

-27-

as a means to elevate an equity holders position over that of other similarly

situated equity holders.

Notwithstanding the clear directives of Section 510(b), the Investor

Defendants ask this Court to treat their fraud claims materially better than the fraud

claims of their similarly defrauded peers. They ask this Court to retroactively

deem their just-now-asserted claims to have been asserted and satisfied at an

earlier point in time; by contrast, they ask this Court to treat the fraud claims of

their similarly situated defrauded equity peers like traditional bankruptcy claims,

subject to pro rata distribution of estate assets. Accordingly, the Investor

Defendants seek a result where the recognition of their fraud claims results in them

receiving satisfaction of their claims (or a portion thereof) ahead of similarly

situated equity holders who are now asserting the same claims at the same time.

Put simply, Section 510(b) and the principles behind it do not permit this result.

The Investor Defendants argue that the operation of Section 510(b) should

apply only to the priority of prospective distributions to be made by the IMA estate

on allowed claims. Sections 510(b), 1123(a)(4) and 1129(b)(1), read together,

clearly evidence the Congressional mandate that similarly situated parties cannot

be subject to unfairly discriminatory treatment, and require that (i) similarly

situated parties receive the same treatment, and (ii) defrauded equity holders not be

permitted to elevate their status over similarly situated parties. The legal principles



33/40

-28-

undergirding the enactment of these bankruptcy provisions flowed from equitable

considerations regarding the appropriate division of assets of a failed enterprise.

Such principles should apply irrespective of whether the issue is payment of future

distributions or payments made by the estate prior to the frauds discovery, and

should be given no less respect when applied to fraudulent conveyance claims of

the estate as distinct from distributions to be made by the estate. To cabin the

import of Section 510(b) only to prospective estate distributions would

countenance a result whereby some equity holders receive distributions ahead of

other equity holders, which result violates the essential principles of Section

510(b). Accordingly, Section 510(b) critically bears on the analysis of the matters

before this Court, and provides a significant incremental basis to reject the attempts

by the Investor Defendants to elevate their distribution status relative to their

defrauded IMA investor peers.

CONCLUSION

The Trustee respectfully requests that this Court reverse the Bankruptcy

Courts decision, and remand the case for further proceedings consistent with this

Courts opinion.



34/40

-29-

Respectfully submitted this 2nd day of August, 2010.

MCKENNA LONG & ALDRIDGE LLP

/s/ Bryan E. BatesMark S. KaufmanGeorgia Bar No. 409194Bryan E. BatesGeorgia Bar No. 140856303 Peachtree Street, Suite 5300Atlanta, Georgia 30308

404-527-4000 (phone)404-527-4198 (fax)

Attorneys for the Plan Committee

Submitted through and with the approval of:

KILPATRICK STOCKTON, LLP

/s/ Colin M. BernardinoColin M. BernardinoGeorgia Bar No. 0548791100 Peachtree Street, Suite 2800Atlanta, Georgia 30309Tel: (404) 815-6500Fax: (404) 815-6555

Attorneys for William F. Perkins, Plan Trustee



35/40

-30-

CERTIFICATE OF COMPLIANCE

I certify that this brief complies with the type-volume limitation set forth in

Fed.R.App.P.32(a)(7)(B)(ii) because this brief contains 6,980 words.

MCKENNA LONG & ALDRIDGE LLP

/s/ Bryan E. BatesMark S. KaufmanGeorgia Bar No. 409194Bryan E. BatesGeorgia Bar No. 140856303 Peachtree Street, N.E., Suite 5300Atlanta, Georgia 30308Tel: (404) 527-4000Fax: (404) 527-4198

Attorneys for the Plan Committee



36/40

CERTIFICATE OF SERVICE

I hereby certify that on the 2nd day of August, 2010, I caused to be served a

true and correct copy of the foregoing REPLY BRIEF OF APPELLANT

WILLIAM F. PERKINS, PLAN TRUSTEE FOR INTERNATIONAL

MANAGEMENT ASSOCIATES, LLC via First Class US mail postage prepaid

to the parties listed below.

Service 08/02/2010

James E. Dearing, Jr. PC

Counsel for Alyce and Janis Ware

Suite 560

730 Peachtree St. NEAtlanta, GA 30308

Paul M Spizzirri, Esq.Bernadine H Layne, Esq.

Counsel for Clays

Spizzirri Law Offices

Midtown Proscenium Center1170 Peachtree Street NE, Suite 1200

Atlanta, GA 30309

Michael F. Holbein, Esq.

Counsel for Manuel F. Mair

Arnall Golden Gregory LLP

Suite 2100171 17th Street, NW

Atlanta, GA 30363

David W. Cranshaw, Esq.

Counsel for Joseph P. ThorntonMorris, Manning & Martin, L.L.P.

1600 Atlanta Financial Center

3343 Peachtree Road, N.E.

Atlanta, GA 30326

Charles H. Louis1308 East Gloria Switch

Lafayette, LA 70507

Rodney Williams-Cochrane

199 Buffalo Avenue

Apt. # 3

Brooklyn, NY 11213-3206

Marco D. Colemanc/o Michael V. Coleman, Esq.

Sharon M. Lewonski, Esq.

Epstein, Becker & Green, P.C.

945 East Paces Ferry Road, Suite 2700Atlanta, Georgia 30326

Jonathan H Fain, Esq.Counsel for X-Spurts Investment et al.,

David Laird, et al.; George Curtis, et al.

Jonathan H. Fain and Assoc., PC

3555 Eaglerock DriveAtlanta, GA 30340

Ibrahim Abdur-Rabbani567 West End Place

Atlanta, GA 30310

Ivy Anderson147-14 229th Street

Springfield, NY 11413

Erroll J. Bailey6 Wieuca Trace

Atlanta, GA 30342

Central Georgia Anesthesia

Services, PCDr. Sanjiwan Tarabadkar

840 Pine Street, Suite 770

Macon, GA 31201

James Braxton

Jo Ann Braxton Davis

Craig Davis

c/o Jerry A. Daniels, LLC33 South Clayton Street, Suite 301

Lawrenceville, GA 30045

Joan Edwards

4720 LaBranchHouston, TX, 77004

David & Deborah H. LairdGeorge Russell Curtis, et al.

c/o Timothy W. Mungovan, Esq.

Nixon Peabody LLP

100 Summer StreetBoston, MA 02110

Nathaniel, Simone & James Bronner

c/o Robert J. Mottern, Esq.

Investment Law Group of Gillett, Mottern

1230 Peachtree Street NE, Ste. 2445Atlanta, GA 30346

Cheryl Edwards

29 Avenida Fiori St.

Henderson, NV 89011



37/40

Delmena Bryan183-26 Arcade Avenue

St. Albans, NY 11412

TBC Capital, Inc., J. Shelton, J. Shelton, III,

K. Burks & Cornell Shelton

c/o Angela R. Fox, Esq.Thomas M. Byrne, Esq.

Sutherland Asbill & Brennan LLP

999 Peachtree St, NE

Atlanta, Georgia 30309-3996

Theodore BurnettSuite 918

8540 South Sepulceda Boulevard

Los Angeles, CA 90045

Theodore Paris

220 Northwest 12th Street

Delray Beach, FL 33444

Elayne R. Rossi Revocable Trust

c/o , Elayne R. Rossi, Trustee

700 South Ute AvenueAspen, CO 81611

Eric Curtright

c/o Lee A. Frison, Jr.

Promenade II, Suite 19001230 Peachtree Street

Atlanta GA, 30309

Booker T. Seymour4260 Wieuca Overlook

Atlanta, GA 30342

Laura Pinkney3996 Degan Blvd.


Terrence J. Edwards285 Centennial Park Drive

No. 1006

Atlanta, GA 30313

Cara Flint

1870 Crestridge Place

Atlanta, GA 30345

Blaine E. Bishop

3117 West Addison Drive

Alpharetta, GA 30022

William J. Gallassero

1222 Anse Broussard Highway

Breaux Bridge, LA 70517

Keenan P. Gistc/o Edward F. Danowitz, Esq.

Danowitz & Associates, P.C.

300 Galleria Parkway, Suite 960

Atlanta, GA 30339

Paul DeRobbio1019 Delaware Street

Huntington Beach, CA 92648

Duvall & Claude Hall400 Diplomate Parkway, Apt. 611

Hallandale, FL 99009

Joseph and Lydia Gardner

9783 Midship WayBuilding 202 # 202West Palm Beach, FL 33411

Erinn F. Harley-Lewis520 West 43rd Street

New York, NY 10036

Karen Thompkins

550 Peachtree SreetSuite 1275Atlanta, GA 30308

Glenn M. HerbertVocational Rehabilitation Services of Lafayette

222-B Rue DeJean

Lafayette, LA 70508

Akil Kenneth Secret, Esq.Counsel for Joyce Wright

Suite 204

4153-B Flat Shoals Parkway

Decatur, GA 30034

Bruce A. and Cynthia Hines5970 Riverwood Drive NW

Atlanta, GA 30328

Gregory and Lawrence Hooper

c/o Sblend A. Sblendorio, Esq.

Catosha L. Woods, Esq.Hoge Fenton Jones & Appel, Inc.6155 Stoneridge Drive, Ste. 200

Pleasanton, CA 94588

Melvin Bishop

313 West Smithfield DriveDolomite, AL 35061

Thomas Barrett

Registered Agent for International

Medical Systems, LLC7889 Ancon Drive

Fayetville, NC 28304

Linda C. Jackson300 Commons Gate Court

Roswell, GA 30075

Mt. Nebo Baptist Life Center, Inc.c/o Gregory T. Bailey, Esq.

571 Culberson Street

Atlanta, GA 30310

George L. Jeter

1704 Lake Cove Way

Atlanta, GA 30331



38/40

Suzanne Mair6466 West Sample Road

Coral Springs, FL 33065

John & Roxanne Maughanc/o Robert H. McDonnell, Esq.

260 Peachtree Street

Suite 2200

Atlanta, GA 30303

William McDade

c/o Mark G. Trigg, Esq.

Greenberg Traurig LLPSuite 400 The Forum

3290 Northside Parkway

Atlanta, GA 30327

Thomas P. McManners

805 Clemont Drive, NE

Atlanta, GA 30306

Hyacinth Miller

54 Randolph Place

South Orange, NJ 07079

Joseph Moore

c/o Kevin M. Farmer, Esq.

Farmer, Hiers, Bushnell & Drye LLC990 Hammond Drive, Suite 200B

Atlanta, GA 30338

Michelle Peoples-Wisneski

David Wisneski

c/o Christopher D. PhillipsLamberth Cifelli Stokes Ellis & Nason, PA

3342 Peachtree Road, NE Ste. 550

Atlanta, GA 30326

Valerie Peoples3320 Hagger Way

East Point, GA 30344

Paul DeRobbio1161 Montana Avenue

Apt. 103


Roland Pinkney

370 Prestmoor Place

Atlanta, GA 30331

Mustafa Qudsi

135 Caillouet Place

Lafayette, LA 70501-7807

Fred C. & Sherri D. Redfern

600 Whitney Ranch Drive

Henderson, NV 89014

James Eric Reese6542 Shenandoah Avenue


Stephen Regan, Sr.1061 Weeping Willow Drive


Anthony Ricciardi901 Donelle Ave

Las Vegas, NV, 89123

Star 6 Investments, Ltd.c/o Ben Chang Wang, Registered Agent

3331 Colbert Avenue


Algernon O. SteeleMarcia G. Riley

320 West Berwicke Common

Atlanta, GA 30342

Ernest Whonder4 Cypress Lane

Cortland, NY 10567

Takeo Spikes5005 Heatherwood Court

Roswell, GA 30075

Kheisha Friday6031 Hitt Lake Court

Stone Mountain, GA 30087

Bruce & Renee Withers18700 Kuhlman Road

Bend, OR 97701

Cheryl Worthy-Pickett

2129 Briarlake DriveAtlanta, GA 30345

William T. Perkins

c/o Rodney L. Eason, Esq.

The Eason Law Firm6150 Old National Highway, Suite 200

College Park, GA 30349-4367

Charles I. Pollack & William R. Lester, Esqs.

Counsel for Atlanta Perinatal, Page,

Bootstaylor, Grone, Dorsey, Andrews, PageSegal, Fryer, Shuster & Lester, P.C.

1050 Crown Pointe Parkway, Suite 410

Atlanta, GA 30338

Erich G. Randolph & DeCarlo, Amanda Eskridge &Laverne Jones

c/o Kevin A. Stine, Esq.Joshua N. Tropper

Baker Donelson

Monarch Plaza, Suite 16003414 Peachtree Road, N.E.

Atlanta, GA 30326

Edwana Adams

2607 Willow Grove Road, NW

Acworth, GA 30101

Mario & Charisse Brossard

7714 13th St. NW

Washington, DC 20012



39/40

Frederick T. WorkOne Baltimore Place

Suite 400

Atlanta, GA 30308

Carol Pinkney13521 Brandy Oaks Drive

Chesterfield, VA 23832

Roger O'Neal Family TrustRoger O'Neal, Trustee

c/o GTO Development, LLC

2301 Rosecrans Avenue

El Segundo, CA 90245

Stephen Atwater

2510 Sugarloaf Club Drive

Duluth, GA 30097

Marcus Bishop

c/o Max C. Pope, Jr. Esq.

1929 Third Avenue North, Suite 700Birmingham, AL 35203

AENA HAINES

c/o ARYEH D. SCHWARTZSCHWARTZ LAW FIRM, P.L.L.C.201 N. Central Avenue

33rd FloorPHOENIX, AZ 85004

Annette K. Bondc/o James K. Knight, Jr.

401 Atlanta Street

Marietta, GA 30060

William J. GallasseroPO Box 1443


Jessie & Joyce Champagnec/o Thomas D. Brumbaugh, Esq.

Champagne & Brumbaugh

P.O. Box 3764Lafayette, LA 70502

David and Joni Robison

9100 Eagle Hills Drive

Las Vegas, NV 89134

Robert L. Edwards, III

1350 Audubon Estates SW

Atlanta, GA 30311

John & Roxanne Maughan

c/o Robert H. McDonnell, Esq.

260 Peachtree Street, Suite 2200Atlanta, GA 30303

Keeling Hall7653 NW 122nd Drive

Parkland, FL 33076

Valerie July

c/o Kaaren Anderson Robinson

Kaaren Anderson Robinson, P.C.P. O. Box 1835

Lithia Springs, GA 30122

Horace Noble5555 West Desert Inn Road

Las Vegas, NV 89146

Craig A. & Carole Wilson

c/o Herbert C. Broadfoot, Esq.Ragsdale Beals Seigler Patterson & Gray

229 Peachtree Street, NE2400 International Tower, Peachtree Center

Atlanta, GA 30303

Evelyn Hall7653 Northwest 122nd Drive

Parkland, FL 33076

Martin D. Jeffries

c/o Heather D. Brownn, Esq.Mark A. Kelley, Esq.Kitchens Kelley Gaynes, P.C.

Eleven Piedmont Center,Suite 900Atlanta, Georgia 30305

Todd Perman

848 Greenwood Avenue

Atlanta, GA 30306

Dr. Lloyd Geddes

345 Boulevard NE

Atlanta, GA 30312

Jenny Lynn Perman

4565 Fitzpatrick Way

Norcross, GA 30092-1002

Dr. Lloyd Geddes

465 Winn Way

Ste 231Decatur, Georgia 30030

Dr. Lloyd Geddes

511 Peachtree Street, N.E.Atlanta, GA 30308

David M. Becker, Esq., Mark D. Cahn, Esq.

Jacob H. Stillman, Esq., Katharine B.

Gresham, Esq.

Morgan Bradylyons, Esq.Securities and Exchange Commission

100 F St. NE

Washington, DC 20549-8030

Clarence and Valerie July

c/o Kaaren Anderson Robinson

Kaaren Anderson Robinson, P.C.

P. O. Box 1835Lithia Springs, GA 30122



40/40

This 2nd day of August, 2010.

KILPATRICK STOCKTON, LLP

/s/ Colin M. Bernardino

Colin M. Bernardino

Georgia Bar No. 054879

1100 Peachtree Street, Suite 2800

Atlanta, Georgia 30309

Tel: (404) 815-6500

Fax: (404) 815-6555

Attorneys for William F. Perkins, Plan Trustee


Perkins v. Haines - Reply Brief

Documents

Transcript of Perkins v. Haines - Reply Brief