UNITED STATES' REQUEST TO EXTEND THE DEADLINE TO SUBMIT A JOINT STATUS REPORT FROM JUNE 12, 2019 TO AUGUST 12, 2019

JOHN A. MENDEZ, District Judge.

The United States submits the following Request to Extend the Deadline to file a Joint Status Report from June 12, 2019 to August 12, 2019.

Introduction

On February 8, 2019, the United States filed a forfeiture complaint in rem against twenty-five real properties ("In Rem Defendants") connected to fraud and money laundering crimes in the Eastern District of California and other areas. All known potential claimants to the In Rem Defendants were served in a manner consistent with Dusenbery v. United States, 534 U.S. 161, 168 (2002) and the applicable statutory authority. Furthermore, public notice on the official internet government forfeiture site, www.forfeiture.gov, began on February 26, 2019, and ran for thirty consecutive days, as required by Rule G(4)(a)(iv)(C) of Supplemental Rules for Forfeiture Actions. See Dkt. 4. A Declaration of Publication was filed on April 11, 2019, which set forth, among other items, that publication on the government's forfeiture website was complete on March 27, 2019. Dkt 36. Additionally, the United States has posted copies of the complaint on many of the properties and filed the restraint of a lis pendens against each of the In Rem Defendants. See Dkt. 5-35.

The United States has also lodged the complaint on the bankruptcy docket for DC Solar's parent company, In re Double Jump Inc., Case 19-bk-50102, a bankruptcy case filed in Reno, Nevada after the United States executed federal search and seizure warrants at DC Solar's business and other locations in California associated with the company and its founders. The United States' application for a restraining order, Dkt. 42, describes the United States' law enforcement action, the subsequent Reno bankruptcy filings, the February 2019 oral argument on the issue of leveraging the In Rem Defendants for DC Solar's reorganization efforts, the conversion from a Chapter 11 bankruptcy case to a Chapter 7, and recent litigation involving the Chapter 7 bankruptcy trustee.

Good Cause

The United States has provided notice to all potential claimants pursuant to law. Specifically, the defendant properties are collectively owned by five California LLCs, Dora Dog Properties, LLC, Dog Blue Properties, LLC, Brandy Boy Properties, LLC, 140 Mason Circle, LLC, and Park Road, LLC. The government served copies of the complaint documents on the above LLCs through their registered agent for service of process, as listed on the California Secretary of State's website. Further, the government served copies of the complaint on the principals of each respective LLC, Jeffrey and Paulette Carpoff. Lastly, the government has provided notice of this action to the lienholders who are identified on chain-of-title documents and may have a security interest in the defendant properties.

Three parties have so far appeared in the case. First, the only parties who have asserted an ownership interest, Jeff and Paulette Carpoff, filed claims as to each property, but have since agreed to forfeit their interests and signed stipulations for final judgments of forfeiture. See Dkt. 42-3. Second, two banks filed claims concerning outstanding loans as relates to two In Rem Defendants (4901 Park Road and 140 Mason Circle) currently being sold by the U.S. Marshals Service, as discussed below. Third, a construction company recently filed a timely claim associated with labor/materials supplied in connection with improvements at three of the In Rem Defendants.

Several potential tax equity investor-victims and the Chapter 7 bankruptcy trustees have requested extensions of time to file claims in this case. The United States granted each request, initially giving each party to June 1, 2019 to enter the case. Following the restraining orders entered on May 16, 2019, those individuals/entities requested brief extensions to July 14, 2019 to file their claims. The United States granted each request, therefore they currently have until July 14, 2019 to file a claim in this case.

Lastly, this morning the United States spoke to a lawyer for a construction company who may have a security interest in one of the In Rem Defendants. According to counsel, that property is in default and the company is reviewing potential options concerning its security interest. The United States has agreed to extend the company's deadline to enter the case to July 1, 2019.

To allow the above individuals, entities and trustees sufficient time to file a claim, the United States seeks to continue the deadline to file a Joint Status Report to August 12, 2019 (or to another date the Court deems appropriate).

Accordingly, there is good cause to extend the deadline to file a joint status report in this case from June 12, 2019 to August 12, 2019, or to a date the Court deems appropriate.

U.S. Marshalls Efforts to Manage and Sell In Rem Defendants 4901 Park Road and 140 Mason Circle

As explained in the United States' application for a restraining order, 4901 Park Road and 140 Mason Circle were purchased using a combination of alleged fraud proceeds and millions of dollars in bank loans, the latter which went into default status some months ago. To preserve the availability equity, the United States requested and this Court ordered, the U.S. Marshals to maintain and sell each property, and the U.S. Marshals started those efforts in earnest immediately following the entry of the sale order in May 2019.

Particularly, the U.S. Marshals have secured each property, changed the locks and alarm codes, entered occupancy agreements with existing tenants, and taken other actions to ensure the properties are safe and properly monitored by professional custodians. The U.S. Marshals have also obtained appraisals and title reports for each property, designated a point person for any property issues that arise from tenants and/or other interested parties, and engaged an experienced commercial broker to market and sell the properties. The broker listed the properties for sale on May 24, 2019 and reports significant interest from local and institutional buyers, with over 18,000 online views for each property. The broker has received at least three offers to purchase each property and expects to receive additional, competitive offers prior to the June 11th "call for offers" deadline and in the subsequent "best and final" round. The broker reports that the strength of offers has exceeded expectations and the final numbers likely will surpass each property's appraised value by hundreds of thousands of dollars.

ORDER

Pursuant to the United States' request and good cause appearing, the Court makes the following order:

The deadline to file a Joint Status Report currently due on June 12, 2019 is extended to August 12, 2019.

IT IS SO ORDERED.