Judge Rules In Favor Of Dyer Motion, Against Brennan Request In Investment Scheme Case

  • Sunday, March 26, 2017

Federal Judge Travis McDonough has ruled in favor of a motion by Doug Dyer and against a motion by James Brennan. The SEC filed a civil action against the pair, saying they had carried out an investment scheme.

Authorities said they will likely face criminal charges.

Dyer had sought to be able to use the proceeds of a personal loan to pay an attorney in the criminal case.

Brennan sought permission to be able to sell furnishings from his house, which is in foreclosure.

Here is the ruling of Judge McDonough:

Dyer Motion

Defendant Dyer’s motion for judicial approval (Doc. 145) requests that funds acquired through a personal loan from a non-party to this action, which has already been approved by the Court, be permitted to be freed from the asset freeze in order to pay attorney fees in a pending federal criminal investigation here in the Eastern District of Tennessee and which purportedly stems from the same allegations as in this action. (Doc. 145, at 1.) Plaintiff opposes the motion and re-argues its original opposition to the Court’s approval of the loan as well the decision to approve the document being filed under seal. (Doc. 148, at 2–3.) The Court also interprets Plaintiff’s response (Doc. 148) as an objection to the Magistrate Judge’s Order permitting the document to be filed under seal (Doc. 132). The Court finds Plaintiff’s response and objection to the Magistrate Judge’s Order without merit. As to Plaintiff’s objection to the Magistrate Judge’s Order regarding the document being filed under seal, the Court has repeatedly addressed this issue with the parties. Out of concern for the protection of the privacy interests of non-parties to this action, the Court has repeatedly (both in Court and in telephonic hearings and conferences with the parties) discussed that it has decided to permit Defendants to seek to file such declarations from nonparties who have agreed to provide personal loans to them under seal. See, e.g., Brown & Williamson Tobacco Corp. v. FTC, 710 F.2d 1165, 1179 (6th Cir. 1983) (discussing that some content-based exceptions, including the privacy interests of third parties, may outweigh the public right to access). Despite this, rather than honoring the Court’s decision on the matter and the purpose behind that decision, Plaintiff continues to oppose the Court’s rulings and to argue semantics. Plaintiff would clearly have the Court not only freeze all Defendants’ assets, which the Court has already deemed appropriate, but would also wish to have the Court absolutely bar Defendants from receiving personal loans from non-parties in this action, even if those funds are received for the purpose of having legal representation in criminal investigations or proceedings. There is no good reason to take such an approach. Plaintiff’s objection (Doc. 148) is OVERRULED, and Defendant Dyer’s motion for judicial approval (Doc. 145) is GRANTED. Defendant Dyer is granted limited relief from the Freeze Order to the extent that he may use the funds loaned to him by a non-party (Doc. 133) to pay attorneys’ fees related to a criminal investigation, which is reportedly occurring. 

Brennan Motion

B. Motion for “Release of Funds” Defendant Brennan’s motion states that he seeks partial relief from the Freeze Order so that he may sell assets, such as household furnishings, and have the proceeds of the sale of those items held by the Court for distribution as it deems best. (Doc. 147.) Defendant Brennan represents that time is of the essence in relation to the sale of these assets because his home is in foreclosure and the household items would be sold for a greater premium while he is still living in the home. (Id.) Plaintiff opposes the requested relief on several grounds. (Doc. 149.) Particularly, Plaintiff asserts that Defendant Brennan’s requests are (1) “contrary to the terms of the Court’s “Order Granting Preliminary Injunction, Continuing Asset Freeze, and Granting Other Relief” as well as the carve-out provision that enables Defendants to seek limited forms of relief on an individual basis, “(2) will negatively impact the victims of his fraudulent conduct, (3) involve unspecified assets and unsupported allegations, (4) will require the Court to” determine the terms of the distribution prior to resolving this case, (5) involve assets that were presumably obtained during Defendant’s fraudulent conduct, and (6) implicate the interests of Defendant Carole Johnston Brennan without her consent. (Doc. 149, at 4.) The Court agrees. Despite Defendant Brennan’s representations, the Court is not inclined to grant the requested relief. At a minimum, the Court has been provided far too little substantiation of the details regarding the requested relief and, even more importantly, without intense dedication of judicial resources, such a situation would create far too many opportunities to dissipate any future proceeds from the fraudulent activity which may later be found to be owed to the alleged victims. Defendant Brennan essentially asks this Court to act as a Bankruptcy Court. For many obvious reasons, the United States Bankruptcy Court is much better suited and equipped for such an exercise. Accordingly, Defendant Brennan’s motion for “release of funds” (Doc. 147) is DENIED.  

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