Howard Capital and OE Capital
On February 14, 2017, the Securities and Exchange Commission filed suit against Patrick O. Howard, Howard Capital Holdings, LLC and Optimal Economic Capital Partners, LLC, as Civil Action No. 3:17-cv-00420-L in the United States District Court for the Northern District of Texas, Dallas Division.
On that date, The Honorable Sam Lindsey entered his Order Appointing Receiver over the Defendants in the action, appointing W. Craig Stokley as Receiver. As a result, the Receiver has taken possession of the operations of OE Capital. Information related to the Receivership relevant to Investors and Creditors is available on this site
Update Feb. 16, 2018: “Dear Investors: As you may be aware, one of the assets of the Receivership Estate is the inventory of TU Flow bottles. The Receiver is currently soliciting bids for the inventory. If you are aware of any potentially interested parties, please forward the attached bid package to them and/or forward their information so that we can include them in this process. We appreciate your assistance in this regard. Download Bid Package”
- Allegations by SEC
- Procedural History
- Initial Action by Receiver
- Case Filings
- How to Make a Claim
- Contact
- Receiver Communications
By its Complaint, the SEC alleged as follows:
1. Since February 2015, Howard Capital and OE Capital, which are owned and controlled by Howard, raised more than thirteen million dollars by selling securities in the form of membership units (“Units”) in three Texas limited liability companies: (1) Insured Liquidity Partners CFG I, LLC (“CFG I”), (2) Insured Liquidity Partners CFG II, LLC (“CFG II”), and (3) OE Capital Ventures, LLC (“OE Fund”) (collectively, the “Funds”). Howard operated each company as an investment fund. He offered and sold Units in the funds personally and through sales agents he employed at OE Capital. He also retained two other firms—C4 Benefits Group, Inc. (“C4 Benefits”), and Trajan Income, Inc. (“Trajan Income”)—paying them a 5% commission to sell the Units.
2. Howard used offering proceeds to fund a radio-advertising campaign to attract investors. The advertisements, along with numerous written offering materials, contained representations that investors would earn a 12% annual return at a minimum. The Funds purportedly generated this return over a three-year investment period by investing in third-party portfolio companies in exchange of a share of the companies’ revenue. Howard Capital, OE Capital, Howard, C4 Benefits, and Trajan Income and sales agents they employed offered and sold the Units in investment seminars, in personal meetings and by telephone and email.
3. In reality, the Receivership Defendants issued investors phony account statements showing returns, which in fact did not exist, and they disseminated written offering materials containing numerous untrue and misleading statements as to material facts, including the following:
a. That investors would receive a minimum return of 12%, paid quarterly. In reality, quarterly cash payments to investors were mostly Ponzi payments—taken from other investors’ contributions.
b. That the Funds achieved average growth of 20%. In reality, the Funds have earned just $33,334 since inception, a growth rate of only 0.25%.
c. That, for CFG II, “the Company is backing the minimum preferred yield and principal with insurance based assets.” In reality, CFG II never purchased any such insurance-based assets.
d. That the OE Fund would pay no sales commissions. In reality, OE Fund paid at least $175,000 in sales commissions.
e. That Howard was a Registered Investment Adviser (“RIA”). In reality Howard was never an RIA.
f. Shortly after the first fund’s inception in early 2015, CFG I’s private-placement memorandum (“PPM”) represented that it would invest 89% of the offering proceeds in third-party companies. In reality, CFG I raised $833,993, but it invested only $50,000 in one portfolio company. Howard used the remaining proceeds to pay himself and expenses unrelated to CFG I’s stated objectives.
The Receiver reviewed the allegations by the SEC and the evidence presented. Based on the evidence presented by the SEC and his own independent analysis which included, among other things, interviews of Howard and OE Capital personnel, and review of agreements and records of OE Capital, the Receiver determined that there was no meaningful basis to contest liability, and it was in the best interest of the Investors and the Receivership Entities to agree to the SEC’s proposed interlocutory judgment and permanent injunction as opposed to incurring expenses in a futile effort to defend the case. Accordingly, the Order and Final Judgment were entered against the Receivership Entities on March 7, 2017 (Dkt. 34 and 36, respectively).
During the first week of the Receivership, the Receiver took the following initial actions:
(1) Immediately confirmed that all financial institutions known to hold any Receivership Assets were notified and the assets held with those institutions were frozen;
(2) Once the financial institution holds were in place, took physical possession of the premises where the Receivership Defendants headquarters were located at 1700 Pacific Avenue in Dallas, Texas, by notifying building management of the Orders, and having the locks changed to the office and U.S. mail boxes;
(3) Accompanied the process server hired by the SEC to serve the Orders and made introductions to the Receivership Defendants’ staff;
(4) Conducted initial interviews of the Receivership Defendants’ entire management team; and
(5) Conducted meetings with and interviews of OE Capital employees to determine the scope, job responsibilities and daily job functions of the employees.
Additional action by the Receiver is identified in the Receiver’s Initial Status Report (Dkt. 40).
1 Consent to Proceed before a US Magistrate Judge-201702241112
3 Certificate of Interested Parties, Disclosure Statement-201702241115
4 Plaintiff’s Ex Parte Motion to Seal-201702241116
5 Motion for Preliminary Injunction-201702141117
6 Brief in Support of Motion for Prelim Inj. Ex Parte TRO, etc.-201702141123
7 Barbara Gunn Certification-201702141125
8-1 Appendix in Support of P’s Emergency Ex Parte Motion for TRO etc.-201702141442
8-2 Appendix in Support of P’s Emergency Ex Parte Motion for TRO etc.-201702141444
8-3 Appendix in Support of P’s Emergency Ex Parte Motion for TRO etc.-201702241448
8-4 Appendix in Support of P’s Emergency Ex Parte Motion for TRO etc.-201702141452
8-5 Appendix in Support of P’s Emergency Ex Parte Motion for TRO etc.-201702141453
8-6 Appendix in Support of P’s Emergency Ex Parte Motion for TRO etc.-201702141454
8-7 Appendix in Support of P’s Emergency Ex Parte Motion for TRO etc.-201702241455
9 Summons Issued for Patrick Howard-201702141108
10 Order Appointing Receiver-201702151004
13 Plaintiff’s Notice of Status-201702151109
15 Offier’s Return for Howard Capital Partners LLC
16 Officer’s Return for Optimal Economics Capital Partners
17 SEC’s Unopposed Mtn to Enter Agreed Interlocutory Judgment Against Defendant Patrick O. Howard
17-1 Exhibit A to SEC’s Unopposed Mtn re Patrick O. Howard
17-2 Exhibit B to SEC’s Unopposed Mtn re Patrick O. Howard
17-3 SEC’s Proposed Order pertaining to Unopposed Mnt re Patrick O. Howard
18 Jt Mtn to Enter Agreed Interlocutory Judgments against HCH and OE Capital
19 Order Cancelling Hearing-201702241110
20 Notice of Appearance for KJS-201702281112
21 Receiver’s Unopposed Motion to Allow Initial Payments rel Employee Wages-201702281114
21-1 Proposed Order Granting Motion-201703171114
22 Notice of Appearance of Rachel Riley as counsel for Patrick O. Howard
23 Notice of Appearance of Barrett Howell as counsel for Patrick O. Howard
24 Summons Returned Executed as to Patrick O. Howard
26 Conformed Order Granting Mtn to Allow Initial Payments by Receiver
27 – 1 Exhibit A to Unopposed Mtn for Judgment
27 – 2 Exhibit B to Unopposed Mtn for Judgment
27 Unopposed Mtn for Judgment to Enter Agreed Final Judgment
28 – 1 Exhibit A to Jt Mtn for Judgment of Per Inj re HCH and OE Capital
28 – 2 Exhbit B to Jt Mtn for Judgment of Per Inj re HCH and OC Capital
28 – 3 Exhbit C to Jt Mtn for Judgment of Per Inj re HCH and OC Capital
28 – 4 Exhbit D to Jt Mtn for Judgment of Per Inj re HCH and OC Capital
28 Jt Mtn for Judgment of Per Inj against HCH and OE Capital
29 Application for Admissmion Pro Hac Vice
30 WCS and KJS NOA for Howard Capital and OE Capital
31 Notice of Appearance of Rachel Riley for Bezanson on behalf of POH
33 Order Granting SEC’s Unopposed Mtn to Enter Final Judgment of PI
34 Order Granting Jt Mtn to Enter Final Judgment of Perm Inj
35 Final Judgment Against Patrick O. Howard
36 Final Judgment of Perem Inj against OE Capital Partners
37 Final Judgment of Perm Inj against HCH
38 Unopposed Mtn to Modify and Clarify Order Appt Receiver
39 Conformed Order Modifying and Clarifying Order Appointing Receiver
40 Receiver’s Initial Status Report-201703161510
40-1 Receiver’s Initial Status Report Exhibit A-201703161512
40-2 Receiver’s Initial Status Report Exhibit B-201703161514
40-3 Receiver’s Initial Status Report Exhibit C-201703161514
42 – Brandon McCarth Notice of Appearance for Patrick O. Howard
44 Unopposed Motion to Approve WHRZT Inc’s Offer
44-1 Exhibit A to Unopposed Motion to Approve WHRZT Inc.’s Offer
45 Conformed Order Approving WHRZT, Inc.’s Offer
46 Receiver’s Unopposed Motion to Approve Lease Termination
46-1 Exhibit A to Unopposed Motion to Approve Lease Termination
47 Conformed Order Approving Lease Termination
48 Conformed Order Granting Mtn to Enter Agreed Interlocutory Judgment
50 Conformed Order Granting Jtn Mtn to Enter Agreed Interlocutory Judgments
51 Judgment as to Defendant Oe Capital
52 Judgment as to Defendant Howard Capital Holdings
56 Motion to Show Cause-201704191659
57 Brief in Support of Motion to Show Cause-201704191658
58 Appendix in Support of Brief in Support of Motion to Show Cause-201704191657
59 Order on Receiver’s Motion to Show Cause
60 Receiver’s Quarterly Status Report
60-1 Exhibit A to Receiver’s Quarterly Status Report
61 Affidavit of Service on Christine Horne
62 Notice of Appearance of Counsel for Christine Horne
63 Receiver’s Unopposed Motion to Retain Mario Dolan-201705120917
64 Unopposed Motion for Authority
64-1 Exhibit A to Unopposed Motion to Show Authority
65 Receiver’s Quarterly Fee Application
65-1 Exhbit A-1 to Receiver’s Quarterly Fee Application
65-2 Exhibit A-2 to Receiver’s Quarterly Fee Application
65-3 Exhibit A-3 to Receiver’s Quarterly Fee Application
65-4 Exhibit A-4 to Receiver’s Quarterly Fee Application
65-5 Exhibit A-5 to Receiver’s Quarterly Fee Application
65-6 Exhibit A-6 to Receiver’s Quarterly Fee Application
65-7 Exhibit A-7 to Receiver’s Quarterly Fee Application
66 – Soblinskas’s Motion to Expediate Discovery
67 Affidavit of Service on Ronald D. Scherer
68 Response and Objection to Motino to Show Cause filed by Horne
69 Patrick O. Howard’s Response and Objection to Motion for Order to Show Cause
70 James Bell’s Agreed Moton to Withdraw as Attonry for Soblinskas
71 Motion to Extend Time for Soblinskas to File Written Brief
72 Notice of Appearance for Ramon de Jesus Rodriguez re Soblinskas
72-1 Proposed Order73 Motion to Withdraw Movant’s Mtn for Expedited Discovery
74 Soblinskas Affidavit of Service
75 Order Granting Mtn to Withdraw Mtn to Expedite
76 Order Granting James Bell’s Withdrawal as Attorney
79 Order Granting Motion for Authority
80 Order Granting Motion to Retain Mario Dolan
81 Receiver’s Omnibus Resp In Supp of Show Cause
82 Appendix to Receiver’s Omnubus Response-201706050847
83 Motion to Resolve Court’s Order to Show Cause re Soblinskas
84 Order Granting Joint Motion to Resolve Show Cause Order re Soblinskas
85 Howard’s Motion to Strike Receiver’s Resp-201706091628
85-1 Proposed Order Granting Howard’s Motion to Strike Receiver’s Resp-201706091629
86 Supplemental Document to First Mtn to Strike Receiver’s Omnibus Resp
87-Horne Supp Resp in Opp to Motion to Show Cause
87-1 Ex A Affidavit of Christine Horne
88 Order Granting Receiver’s Quarterly Fee Application
89 Receiver’s Motion to Pay Accounting and Web Design Prof.
90 Defendant Howard’s Motion for Expedited Discovery-201706161951
90-1 Proposed Order Granting D’s Motion for Expedited Discovery-201706161950
91 Howard’s Motion to Seal Response, Obj and Appendix
92 Resp & Obj to Howard’s motion for expediated discovery
93 Appendix in Support of Response & Obj
94 Reply Brief of Patrick O. Howard
95 Appendix in Support of Reply Brief filed by Patrick O. Howard
96 Receiver’s Second Quarterly Status Report-201708011233
97 Q2 Receiver’s Fee Application
97-1 – Exhibit A-1 to Q2 Fee App
97-2 – Exhibit A-2 to Q2 Fee App
97-3 – Exhibit A-3 to Q2 Fee App
97-4 – Exhibit A-4 to Q2 Fee App
97- 5 – Exhibit A-5 to Q2 Fee App
97-6 – Exhibit A-6 to Q2 Fee App
98 Q3 Receiver’s Status Report
98-1 Exhibit A to Q3 Receiver’s Status Report
98-2 Exhibit B to Q3 Receiver’s Status Report
98-3 Exhibit C to Q3 Receiver’s Status Report
98-4 Exhibit D to Q3 Receiver’s Status Report
99 – Receiver’s Third Quarterly Fee Application
100 Unopposed Motion for Authority to Dispose of Certain Receivership Property
100-1 Exhibit A to Unopposed Motion
100-2 Exhibit B to Unopposed Motion
100-3 Exhibit C to Unopposed Motion
101 Conformed Order Granting Motion for Authority to Dispose of Certain Receivership Property
102 Order Granting [98] Mtn Authorization to Pay Accounting and Web Design
103 Memorandum Opinion and Order re Mtn for Order to Show Cause
104 Supplemental Order re Memorandum Opinion and Order
105 Receiver’s Fourth Quarterly Status Report
105-1 Exhibit A to Receiver’s Q4 Status Report
106 Order Placing Sherer on Notice
107 Notice of Receiver’s Intent to Dispose of Certain Receivership Property
108 Notice of Service on Ronald Scherer re Order
108-1 Scherer Confirmation of Service
109 Receiver’s Unopposed Motion to Retain Reid Collins & Tsai LLP as Special Litigation Counsel
110 Exhibit B to Receiver’s Unopposed Motion
111-1 Exhibit A to 2018 Q1 Quarterly Report
112- Motion to Withdraw as Counsel for Defendant Patrick O. Howard
112-1 Proposed Order on Motion to Withdraw as Counsel for Patrick O. Howard
113 Conformed Order Granting Motion to Withdraw as Counsel for Howard
114 Mail returned as undeliverable to Patrick O Howard re Order on Mtn to Withdraw
115 Order Granting Receiver Motion to Retain Reid Collins & Tsai LLP as Special Litigation Counsel
116 Conformed Order Granting Receiver’s Mtn to Retain Reid Collins & Tsai LLP
117 Eric D. Madden Notice of Appearance
118 David Thomas Notice of Appearance
119 FM Receiver’s Fee Application (Oct2017 to May2018)
120 Receiver’s Second Quarter 2018 Report
121 Order Granting in Part and Denying in Part Mtn for Authorization to Pay Fees
122 Returned Mail to Patrick O. Howard
123 Status Report by Receiver for Third and Fourth Quarter
123-1 Exhibit A to Status Report
123-2 Exhibit B to Status Report
126 Order Transferring Case to Judge Ada Brown
127 Receiver’s Unopposed Motion to Approve proposed settlement and payment of fees
128 – Restricted Document – Order Sealing Unopposed Mtn-201911190856
Docket Text- Sealed Order Granting Sealed and or ex Parte Motion-201912170829
130 Order Granting Receiver’s Unopposed Mtn to Settle with Former Counsel
The Receiver will provide claim forms for creditors and investors to make claims in the Receivership after determining and seeking collection of the assets of the Receivership Defendants if and when appropriate. Please check this page frequently related to the status of the claims process.
RECEIVER
W. CRAIG STOKLEY
8115 Preston Road, Suite 600
Dallas, Texas 75225
Telephone: (214) 888-3112
Facsimile: (214) 888-3109
cstokley@palterlaw.com
RECEIVER’S COUNSEL
KIMBERLY SIMS
8115 Preston Road, Suite 600
Dallas, Texas 75225
Telephone: (214) 888-3106
Facsimile: (214) 888-3109
ksims@palterlaw.com
Your K1s have been mailed to you for the tax years 2015 and 2016 at your address on file with OE Capital. If you do not receive the K1, please contact the Receiver’s counsel, Kimberly Sims, ksims@palterlaw.com or 214.888.3106.