The SEC has filed its Opposition to a February 15th Motion from Sanderley Rodrigues de Vascolcelos for “Release from Custody and to Approve a Payment Plan” or to schedule an Evidentiary Hearing. This opposition begins like this:
Rodrigues now attempts to obtain release from custody for civil contempt by arguing that: 1) he should be released because he has adequately demonstrated his inability to pay back the dissipated funds as required by this Court’s December 21, 2015 order and instead should be allowed to implement a payment plan; and 2) he should be allowed to use other frozen funds to replace the funds that he already dissipated. Neither of these arguments is availing. Instead, at minimum, this Court should require an evidentiary hearing wherein he demonstrates his inability to obtain funds where he would be subject to cross-examination. If this Court does order his release, the Commission respectfully requests that any payment plan ordered as a condition of the release require him to pay more than 20% of money earned from any business development course, book or other endeavor.
The SEC goes on to state that Rodrigues has not proven that he has an inability to comply with the Court’s Order, or to use it as an affirmative defense. Instead, they say, Rodrigues only provided a cursory declaration saying the accounting he provided was adequate, and believes the SEC’s own status report was evidence that this accounting adequately demonstrates his inability to pay. But, the information the SEC has was “unsworn information” regarding Rodrigues’ domestic holdings, but lacked information about his international holdings which are outside the asset freeze. The SEC did not push for a sworn accounting in the hopes that the involved parties could resolve the issue.
The Commission’s decision not to push for a sworn accounting, however, does not relieve Rodrigues’ burden to provide to this Court detailed sworn evidence that he has an inability to pay and thereby excuse his failure to purge his contempt. Rodrigues seeks to avoid this requirement by suggesting that he must not have the ability to comply because he is still in jail, which is evidence enough that he cannot purge his contempt.
Yet, Rodrigues has only been in jail for 27 days. He has cited no case that supports that less than a month in jail is sufficient evidence that he has no ability to comply with a court order without other evidence.
Thus, at minimum the Commission requests an evidentiary hearing at which Rodrigues, under oath provide evidence that he has an inability to comply with this Court’s order and that he be subject to cross-examination to test the veracity of his claim.
And, the SEC is not going along with Rodrigues’ suggestion that he is allowed to use Frozen Assets to pay of the contempt. I have uploaded the full document onto the Files Website.
Adding to their arguments, there is a Declaration filed by Mark Albers, a forensic accountant in the Boston Office of the SEC, part of which states this:
I was asked to review certain documents, including bank statements, bank transaction documents, and bank wire transfer records concerning personal and business accounts under the control of Rodrigues, as well as bank accounts belonging to defendants TelexFree, Inc. and TelexFree, LLC (collectively “TelexFree”). Members of the Commission’s accounting staff working under my supervision assisted with the review of these documents.
The bank records reflect that, from October 2012 through April 2014, business or personal accounts under the control of Rodrigues likely received more than $1.51 million from TelexFree or its investors.
And, it gets even better:
Based on our communications with Mr. Rodrigues, it is our understanding that he had no other source of income during this time period other than TelexFree-related activity.
There was an additional $3.92 million in cash deposits made into Mr. Rodrigues’ personal and business accounts over this time period. Assuming all of those deposits were related to TelexFree, the total amount of Mr. Rodrigues’ earnings from Telexfree could be as high as $5.44 million.
And there you have it. It is a poetic equivalent to “Water, water everywhere and nary a drop to drink”.