Federal Court in Atlanta Concludes that Reports and Fee Petitions by SEC Receiver Were Unnecessarily and Unfairly Disparaging of SEC Defendants

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The Law Firm of Gregory Bartko, LLC announced today that hearings conducted by the United States District Court, Northern District of Georgia on February 12, 2009 in a civil enforcement action filed in October, 2008 by the U.S. Securities and Exchange Commission, resulted in an rare, but long overdue rebuke of practices routinely conducted by the SEC and its receivers in civil enforcement actions.

The Law Firm of Gregory Bartko, LLC announced today that hearings conducted by the United States District Court, Northern District of Georgia on February 12, 2009 in a civil enforcement action filed in October, 2008 by the U.S. Securities and Exchange Commission, resulted in an rare, but long overdue rebuke of practices routinely conducted by the SEC and its receivers in civil enforcement actions.

U.S. District Judge Beverly Martin spent three hours of the Court’s schedule hearing oral arguments on 11 pending motions in the case of Securities Exchange Commission v. Mikula, et al., Case No. 1:08-CV-03097-BBM. In this case, the SEC has alleged, but not established, that one of the defendants, Nations Warranty Group, Inc. unlawfully raised investment capital through the unregistered issuance of over 100 short-term promissory notes; and that the notes were sold on the basis of fraud. The SEC’s allegations were particularly troublesome to the 25 note purchasers who attended the hearing and who traveled to Atlanta from all parts of the U.S. to do so. Judge Martin, allowing some of the note purchasers to address the Court was advised that each and every note purchaser attending the hearing did so to support Nations Warranty Group, Inc. and its management. Many were angry that the SEC Receiver has since shut down the Nations Warranty business.

Although Gregory Bartko, Esq., securities counsel for two of the defendants in the case, said that it is not very common in SEC enforcement proceedings for the SEC and a receiver nominated by the SEC to come under such criticism, in this particular case, Mr. Bartko said it was long overdue and in his opinion, warranted. Of the 11 motions addressed by Judge Martin, the defendants were granted relief modifying the Court’s preliminary injunction to allow Mr. Mikula to carry on one of his other, unrelated businesses and to secure the return of funds initially frozen at the request of the SEC. Perhaps most enlightening during the hearing was the Court’s ruling on a request brought by one of the defendants, John Craddock, that the Receiver’s Interim Report and Interim Fee Petition should have several negative, conclusory remarks and other pejorative statements about the defendants stricken from the Receiver’s papers.

Judge Martin made no ruling on the Receiver’s request for approximately $80,000 in compensation for less than one month’s work at the time of his appointment, preferring instead to review the papers more carefully and issue a written opinion at a later date. Mr. Bartko had filed objections to those fees on behalf of his clients.

The Law Office of Gregory Bartko, LLC has a team of experienced securities lawyers (transactional and litigation) that concentrate a portion of their law practice to the representation of “Middle Market” sized companies and their management, officers or directors—in all phases and aspects of securities regulatory inquiries, investigations or civil enforcement proceedings that may be brought by the SEC Division of Enforcement or other self-regulatory organizations like FINRA (formerly the NASD). The Firm is well aware of the staggering impact and costs associated with defending securities-related inquiries and litigation, so the Firm has brought together a team of securities lawyers that know how to resolve and defend these regulatory matters, without the need to expend enormous amounts of legal fees which large, full service law firms often do. The Bartko Team believes that in today’s difficult economic times, when the SEC and other securities regulators are becoming more—not less active in enforcement proceedings, “highly competent, boutique legal counsel” is the prudent course.

Contact:
Law Office of Gregory Bartko, LLC
404-238-0550
E-fax 866-342-4092
http://www.secenforcementdefense.com
http://www.securitieslawcounsel.com

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