UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF ALABAMA
|COMMODITY FUTURES TRADING COMMISSION,||)||CIVIL ACTION NO. 00-T-547-S|
|MICHAEL JAMES KONKEL, individually and d/b/a||)|
|ICE CAPITAL MANAGEMENT, INC.,||)|
|AD ASTRA, INC., and||)|
|THE INSCAPE FUNDS||)|
CONSENT ORDER OF PRELIMINARY INJUNCTION
AND OTHER EQUITABLE RELIEF
Upon the consent of Defendant Michael James Konkel ("Konkel") in this action for a permanent injunction and other relief filed by plaintiff Commodity Futures Trading Commission ("CFTC" or "Commission"), with no intention of waiving by defendant Konkel of his Fifth Amendment privilege against self-incrimination, and without admitting or denying any of the allegations of the Complaint, and solely for the purpose of this Consent Order of Preliminary Injunction and Other Equitable Relief ("Consent Order"), defendant Konkel:
1. Admits that he has been served with the Complaint, Summons and Statutory Ex Parte Restraining Order in this action., admits the jurisdiction of this Court over himself and over the subject matter of this action, and admits that venue lies properly with this Court;
2. Consents to the entry of this Consent Order, and acknowledges that he has consulted counsel before agreeing to this Consent Order, affirms that no promises, coercion, or threat of any kind whatsoever have been made by the Commission, or by any representative of the Commission, and confirms that he enters into this Consent Order freely, knowingly, and willfully;
3. Waives the right to a hearing on the merits of the issues covered in this Order, and appeal from the entry of this Order;
4. Affirms that he shall cooperate with the Commission to locate all assets of defendant and to provide an accounting of all assets of defendant, as required herein and in this Court's May 1, 2000 Statutory Ex Parte Restraining Order Freezing Assets, Preserving Books and Records, and Allowing Commission Staff Access to Books and Records ("Statutory Restraining Order");
5. Agrees that the Statutory Restraining Order shall remain in full force and effect pendente lite, except as expressly modified herein by this Consent Order to provide for defendant Konkel's reasonable and necessary living expenses and legal fees and expenses, or by further order of this Court;
6. Consents to the continued jurisdiction of this Court for the purpose of enforcing the terms and conditions of this Order, and for all other relevant purposes; and
7. Acknowledges and affirms, without waiving any defense he may have to such action, that the entry of this Consent Order does not in any way limit the rights of the Commission to seek further statutory and equitable relief from the Court as requested in the Commission's Complaint, including, but not limited to, permanent injunctive relief, disgorgement, restitution, the payment of pre-judgment and post-judgment interest, a civil monetary penalty, and the appointment of a receiver.
The Court makes the following findings of fact and conclusions of law:
A. Jurisdiction over the parties and over the subject matter of this complaint is proper pursuant to Section 6c of the Act, 7 U.S.C. § 13a-1 (1994);
B. Venue lies properly within this District pursuant to Section 6c(e) of the Act, 7 U.S.C. § 13a-1(e) (1994).
IT IS HEREBY ORDERED that defendant Konkel, along with any officer, agent, servant, employee and attorney, or person in active concert or participation with him who receives actual notice of this Order by personal service or otherwise, is enjoined and restrained, pending a final determination of this action, from directly or indirectly:
1. violating Section 4b(a)(i) - (iii), 7 U.S.C. § 6b(a)(i)-(iii), by, in or in connection with any order to make, or the making of any contract of sale of any commodity for future delivery (including but not limited to foreign currencies), made, or to be made, for or on behalf of any other person if such contract for future delivery is or may be used for (A) hedging any transaction in interstate commerce in such commodity or the products or byproducts thereof, or (B) determining the price basis of any transaction in interstate commerce in such commodity, or (C) delivering any such commodity sold, shipped, or received in interstate commerce for the fulfillment thereof-
(a) cheating or defrauding or attempting to cheat or defraud other persons;
(b) willfully making or causing to be made to other persons false reports or statements thereof, or willfully entering or causing to be entered for other persons false reports thereof; or
(c) willfully deceiving or attempting to deceive other persons;
2. violating Section 4o(1) of the Act, 7 U.S.C. § 6o(1), by acting as a commodity pool operator, and by use of the mails or other instrumentalities of interstate commerce, directly or indirectly, employing devices, schemes or artifices to defraud customers, or engaging in transactions, practices, or a course of business conduct which operate as a fraud or deceit upon customers;
3. violating Section 4.41(a) of the Regulations, 17 C.F.R. § 4.41(a) (1999), by advertising in a manner which: (a) employs a device, scheme or artifice to defraud participants or clients or prospective participants or clients; or (b) involves any transaction, practice or course of business which operates as a fraud or deceit upon participants or clients or prospective participants or clients;
4. violating Section 4m(1) of the Act, 7 U.S.C. § 6m(1), by acting as a commodity pool operator without being registered with the Commission;
5. violating Section 4.22 of the Regulations, 17 C.F.R. § 4.22, by failing to distribute to each pool participant an Account Statement and Annual Report setting forth the information contained in Section 4.22 of the Regulations, 17 C.F.R. § 4.22;
6. violating Section 4.20(c) of the Regulations, 17 C.F.R. § 4.20(c), by commingling the property of pool participants with his property; and
7. violating Section 4.21(a) of the Regulations, 17 C.F.R. § 4.21(a), by failing to deliver or cause to be delivered to any prospective participant a Disclosure Document for the pool setting forth the information contained in Section 4.24 of the Regulations, 17 C.F.R. § 4.24, or violating Section 4.21(b) of the Regulations, 17 C.F.R. § 4.21(b), by failing to receive from the prospective participant a signed acknowledgement stating that the prospective participant received a Disclosure Document for the pool.
IT IS FURTHER ORDERED that the May 1, 2000 Statutory Restraining Order entered by this Court shall remain in full force and effect pendente lite, except as expressly modified herein by Part V of this Order, which provides for defendant Konkel's reasonable and necessary living expenses and legal fees and expenses, or by further order of this Court.
IT IS FURTHER ORDERED that defendant Konkel shall file with this Court and serve upon plaintiff Commission an accounting or other statement under oath of all assets, whether located within or outside of the territorial United States or held in Konkel's name or in which he has or has had any direct or indirect beneficial interest from January 1, 1996 to the present, stating:
A. The location and disposition of each asset and the name of the institution, account number, and location of each account with any financial institution or brokerage firm;
B. The names, addresses, and telephone numbers of all persons and entities who entrusted funds with defendant Konkel or any entity controlled by defendant Konkel, for the purpose, in whole or in part, of investing in commodity futures or options contracts, and, for each investor, the dates and amounts of their investments and withdrawals;
C. All commodity futures or options trades made with investor funds during the period January 1, 1996 to the date of this Consent Order; and
D. All information identifying every transaction during the period January 1, 1996, to the date of this Consent Order, in which any funds of other assets of any kind, or the interest or accrual on such funds, obtained from investors in the matters alleged in the Complaint in this action, were received, transferred, invested, or otherwise disposed of or expended.
Such accounting or other statement under oath shall be filed within thirty (30) calendar days after the entry of this Consent Order.
IT IS FURTHER ORDERED that subject to the conditions set forth below, defendant Konkel is entitled to reasonable and necessary living expenses in an amount not to exceed $3500 per month, which amount is based upon an affidavit of current income and expenses executed by defendant Konkel and attached hereto. Further, within 10 days of the entry of this Consent Order, defendant Konkel shall file with this Court and serve upon plaintiff Commission an accounting or other statement under oath, detailing defendant Konkel's reasonable and necessary living expenses, fully substantiated by all relevant financial documentation.
Defendant Konkel is also entitled, subject to the conditions set forth below, to pay an amount not to exceed $2,500 per month for reasonable and necessary legal fees and expenses incurred in the defense of this matter. Konkel shall provide promptly to the plaintiff Commission substantiation and documentation of any legal fees and expenses paid, in the form of a detailed billing.
Plaintiff Commission shall have the right to object to the payment of funds for living expenses and/or legal fees and expenses. Notice of any such objection by plaintiff Commission shall be made in writing setting forth the reasons for the objection. The Notice of Objection shall be served upon Konkel's counsel of record. In the event plaintiff Commission and defendant Konkel are unable to agree as to the amount of reasonable and necessary living expenses and/or attorney's fees and expenses, such disputes shall be submitted to this Court for resolution.
Any funds defendant Konkel shall utilize to pay for living expenses or legal fees and expenses as provided for herein shall be derived solely from defendant Konkel's current income arising out of his business activities that are wholly unrelated to the commodities or commodity futures or options industries, and detailed in the affidavit of income and expenses attached. If the source and/or amount of defendant Konkel's current income changes in any material way, Konkel shall promptly provide a supplemental accounting of such income to the plaintiff Commission.
Defendant Konkel shall be permitted to continue in effect any current withholdings from his gross pay for income taxes, social security, and Medicare, provided that he shall submit documentation of such withholdings to plaintiff Commission. To the extent that defendant Konkel's net monthly income after the above-referenced permitted withholdings exceeds the aggregate amount of $6,000, such excess shall be deposited into an interest-bearing account pending further order of this Court. Defendant Konkel shall promptly make available to plaintiff Commission representatives upon request account statements and any other relevant documents relating to such account. No withdrawals shall be made from such account except upon leave of Court (or upon agreement of plaintiff Commission). Any funds for reasonable and necessary living expenses or legal fees and expenses that defendant Konkel may wish to draw upon from any other sources other than as provided for expressly herein may only be procured by application to this Court.
IT IS FURTHER ORDERED that this Consent Order shall be binding upon defendant Konkel, along with any of his officers, agents, servants, employees, attorneys, and upon those persons acting in active concert or participation with him who receive actual notice of this
Consent Order by personal service or otherwise (including service by facsimile transmission).
APPROVED AND SO ORDERED.
|Dated: July 10, 2000||_______________________|
|Myron H. Thompson|
|UNITED STATES DISTRICT JUDGE|
|Michael J. Konkel, Defendant|
|Reviewed and approved by:|
|Thomas G. Halloran, Esq.|
|The Schroeder Group, S.C.|
|Attorney for Defendant, Michael J. Konkel|
|Peter M. Haas, Esq.|
|Attorney for Plaintiff, Commodity Futures Trading Commission|