TelexFree: Civil Case Stayed, but Sann Rodrigues in Civil Contempt of Court Order

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Rodrigues

newtelexfreelogoBack in August of 2015, the SEC filed a Motion to find Sann Rodrigues in Civil Contempt (1:14-cv-11858 Mass.) for repeated violations of the Temporary Restraining Order, Order Freezing Assets, and Order for Other Equitable Relief entered as to all defendants on April 14, 2014. After this filing, we have many documents filed by both the Plaintiff and Sanderley Rodrigues; many of Rodrigues’ filings were seemingly fabricated, like his inability to speak English even after he made several Youtube videos in English and his repeated insistence that he cannot provide the Ordered accounting without incriminating himself.

Judge Nathaniel Gorton has responded to this matter of Civil Contempt and has issued his “Memorandum and Order”:

This lawsuit has been stayed pending the resolution of a parallel criminal proceeding brought by the U.S. Department of Justice against two of Rodrigues’s co-defendants (U.S. v. Wanzeler, 14-cr-40028-TSH). Despite the stay, two orders currently remain in place against Rodrigues freezing his assets and requiring him to provide the SEC with a full accounting of his assets and transactions. On August 12, 2015 the SEC filed a motion to hold Rodrigues in contempt (Docket No. 313), claiming that Rodrigues has yet to comply with either order.

In its motion to hold Rodrigues in contempt, the SEC alleges that Rodrigues has violated the temporary restraining order and preliminary injunction in numerous ways, including: 1) conducting financial transactions through several shell companies, 2) withdrawing money from his personal accounts, 3) using an online payment service provider to conduct transactions with assets from accounts subject to the freeze, 4) opening new accounts at different banks and conducting
transactions through those accounts, 5) selling and purchasing luxury automobiles and 6) transferring real estate to a shell company.

The SEC alleges that Rodrigues was able to conduct those transactions in spite of the freeze because he had also violated the Court order requiring him to provide an accounting of all of his assets. That order required defendant to disclose to the SEC all bank accounts and other assets that were subject to his direct or indirect control as of the date of the original asset freeze. As a result of Rodrigues’s failure to comply with the accounting order, the SEC alleges, it was unaware of many of his assets and was unable to notify the custodial institutions.

On April 16, 2014, a Temporary Restraining Order was issued and required all defendants to submit an accounting identifying all assets or transfers larger than $500. Rodrigues failed to submit such information. The May 8th Preliminary Injunction reiterated this requirement and Rodrigues once again failed to submit the required accounting.

More than one year later, this Court entered the June 10, 2015 Order (“Order to Provide Accounting”) (Docket No. 304) . That order required Rodrigues to submit the original accounting, provide a list of current assets and describe all transactions over $500 that he had conducted since the TRO was entered. Rodrigues finally submitted an accounting on July 30, 2015.

While Rodrigues did provide “an accounting”, the SEC maintained the information he provided was “deficient in several ways”. The SEC somehow obtained the required information “through other means and therefore no longer seeks an order to have Rodrigues provide this information”.

Judge Gorton then addressed the Contempt Motion:

The Court may hold a party in civil contempt if the movant has shown that (1) the party to be held in contempt had notice of the violated order, (2) the order is clear and unambiguous, (3) the party to be held in contempt had the ability to comply with the order and (4) the party to be held in contempt actually violated the order. The moving party must prove these four points by clear and convincing evidence.

In this case, Rodrigues was notified of each of the orders entered against him. Those orders contained detailed and specific language as to the assets that were frozen and the information that Rodrigues was to provide in his accounting. The orders require defendant to leave untouched accounts under his direct or indirect control and to provide information on accounts under his control. The SEC has also provided numerous exhibits of documentary and testimonial evidence demonstrating specifically how defendant violated the orders.

Rodrigues tried to raise several arguments, disputing that he had actual notice of the orders, the first prong of defense. He also asserted that he was unable to comply with these orders because to do so he would have to waive his Fifth Amendment Rights against self-incrimination.

He further contends that if the Court were to hold him in contempt, he would be unable to purge the contempt without waiving his Fifth Amendment right.

Judge Gorton then eviscerates Rodrigues’ absurd arguments with this:

First, he asserts that the TRO and preliminary injunction are very complex and thus he was unable to understand them. Consequently, he avers, he was left without notice of the orders and therefore unable to comply with them. Second, defendant explains that he was unable to understand the orders due to his limited comprehension of English. Finally, he declares that he did not have assistance of counsel to aid him in understanding the orders until the deadlines for compliance with both the TRO and the preliminary injunction had passed, as evidenced by the fact that his counsel did not enter an appearance until June 13, 2014.

His arguments are unconvincing. Rodrigues was subject to a very similar temporary restraining order and preliminary injunction in a 2006 civil enforcement action also brought by the SEC. Thus, however complex were the requirements of the orders in this case, they were not unfamiliar. Furthermore, the fact that Rodrigues assented to the Order to Provide Accountings and Carve-Out demonstrates that he had sufficient notice. As to the language barrier, the SEC submitted an affidavit of a bank manager who frequently interacted with Rodrigues stating that Rodrigues speaks fluent English. It also submitted videos of Rodrigues speaking English.

While Rodrigues did not retain counsel until after the temporary restraining order and preliminary injunction had been entered/ he was represented at the time he consented to the Order to Provide Accountings. Thereafter, it took him more than 13 months to file his first response and even then he did not restore all of the assets removed in violation of the asset freeze. Thus, lack of  representation does not suffice as an excuse for his lack of compliance.

In a supplemental memorandum submitted to the Court, Rodrigues has also argued that he did not have actual notice of the April 23, 2014 and April 25, 2014 extensions of the TRO. Because the Court, at a hearing held on October 16, 2015, made a finding of fact that Rodrigues had actual notice of those extensions, that argument will be discredited here.

Judge Gorton next addresses the Fifth Amendment Privilege argument (I skipped the case law references and went straight to the decision): {emphasis added}

Finally, by signing the Order to Provide Accountings, defendant waived his Fifth Amendment privilege against production with respect to certain potentially incriminating asset information. Because defendant has already agreed to disclose that information, he may not raise a Fifth Amendment
defense against such disclosure through different means. Thus, defendant has also waived his Fifth Amendment privilege with respect to the restoration of assets dissipated in violation of the TRO and the May 8, 2014 Preliminary Injunction. By restoring such assets, Rodrigues would reveal only the same information that would have been revealed by the accounting
which he agreed to provide.

Although the Order to Provide Accountings did not address Rodrigues’s separate obligation related to the asset freeze, his consent to provide the information in the accounting waived his Fifth Amendment privilege with respect to that information regardless of the means through which it is disclosed. It is therefore iiranaterial that the SEC no longer requests that the
Court hold defendant in contempt for his failure to provide an accounting. Ordering Rodrigues to purge his contempt of the asset freeze by restoring dissipated assets will not force him to divulge protected information because he has already waived his right to protection under the Fifth Amendment with respect to that information.

The Court finds that the legal standard for civil contempt has been met and that defendant is not entitled to assert a Fifth Amendment privilege in support of his noncompliance with existing orders.

ORDER
In accordance with the foregoing, plaintiff’s motion to hold defendant Sanderley Rodrigues de Vasconcelos in contempt (Docket No. 313) is ALLOWED. Sanctions will, however, be held in abeyance for the time being.

Defendant shall, on or before January 15, 2016, restore all funds and other assets transferred or disposed of in violation of the asset freeze as follows:

(a) restore the following funds that he dissipated either through removing cash from accounts or selling cars:

(i) $211,473   withdrawn from JP Morgan account XXXX7958,
(ii) $ 21,600 withdrawn from BMO Harris accounts for SMA Logistics and ZVX Investment,
(iii) $ 22,200 received with respect to the sale of the 2007 Mercedes Benz CLS and
(iv) $ 79,700 received with respect to the sale of the Ferrari F340;
$334,973 Total; and

(b) with respect to the wrongfully transferred properties in West Palm Beach, Florida at 1103 18th Street 1, 1014 17th Street and 711 Division Ave., defendant shall either obtain the reconveyance of those properties, remit funds equal to the market value thereof or provide the Court with a detailed plan as to how he will otherwise cure his contempt in relation to the transfer of those properties.

In default of full compliance with the provisions of sub-paragraphs (a) and (b) hereof, defendant’s bail will be revoked and he will be incarcerated for contempt of orders of this Court.

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