In the Matter of Robert Dobbins, et al.
Case No. 04-cv-00605-D (N.D. Tex.)
On March 23, 2004, the Commission filed a Complaint in this action against J. Robert Dobbins ("Dobbins"), Dobbins Capital Corp., Dobbins Offshore Capital, LLC, Dobbins Partners, L.P., and Dobbins Offshore, Ltd. (collectively, the "Defendants"), alleging that, from January 2000 through March 2004, Dobbins engaged in a scheme to defraud investors in two unregistered hedge funds: Dobbins Partners, L.P. and Dobbins Offshore, Ltd. (collectively, the "Dobbins Hedge Funds"). The Complaint included Tracey Dobbins as a relief defendant. According to the Complaint, which was amended on May 24, 2004, Dobbins, who managed the Dobbins Hedge Funds through two investment advisers, Dobbins Capital Corp. and Dobbins Offshore Capital, LLC (collectively, the "Investment Advisers"), raised at least $50 million from over 50 investors through false statements arbitrarily overvaluing Dobbins Hedge Funds' holdings, thereby inflating the Dobbins Hedge Funds' performance. See Complaint.
On January 13, 2005, upon the Commission's Notice of Dismissal, the Court dismissed the relief defendant claims against Tracey Dobbins. On July 12, 2005, the Court entered a final judgment as to Dobbins (the "Final Judgment") requiring, in relevant part, Dobbins to pay $6,000,000 in disgorgement and prejudgment interest, and a civil penalty of $150,000. In the Final Judgment, the Court also appointed the Receiver to marshal, liquidate, distribute, and if appropriate, dissolve certain property, and dismissed the claims against the Investment Advisers and Dobbins Offshore Ltd. without prejudice. See Dobbins's Final Judgment. Also on July 12, 2005, the Court granted default judgment against Dobbins Partners, L.P., conveying that entity to the Receiver for purposes of liquidation, dissolution, and distribution. See Dobbins Partners, L.P.'s Default Judgment.
On March 13, 2009, the Receiver filed a motion to approve a plan of distribution of assets (the "Plan") in order to make an interim cash distribution of $2,000,000.00 to harmed investors. See the Receiver's Motion and the Receiver's Plan. On May 11, 2009, the Court issued an order approving the Plan and the interim distribution. See the Court's Order. Subsequent to the initial distribution, the Receiver made three more distributions pursuant to the Receiver's Plan. Over the course of the Receivership, the Receiver distributed approximately $3.1 million to thirty-seven harmed investors. On February 8, 2013, the Court issued an order discharging the Receiver. See the Court's Order.
In December 2016, upon learning of additional assets available to satisfy the Final Judgment, the Commission applied to the Court for an Order directing the turnover of the additional funds to the Commission, pending the Commission's determination as to the feasibility of further distribution to the Aggrieved Parties. On January 6, 2017, the Court granted the Commission's application and entered an Order directing that all future funds collected be sent to the Commission, to be held until further Order of this Court (the "Fund"). See the Court's Order.
On November 9, 2017, upon the Motion of the Commission, the Court entered an order that appointed Miller Kaplan Arase LLP as the Tax Administrator to fulfill the tax obligations of the Fund.
On November 30, 2017, the Commission filed a motion to appoint Catherine E. Pappas, a Commission employee, as the Distribution Agent to oversee the administration and distribution of the Distribution Fund and to approve a plan of distribution, together with the distribution plan (“Plan”). See the Commission’s Motion and Plan.
The Plan provides that the Distribution Fund, less the Administrative Costs, will be distributed in accordance with the previously approved methodology in the Receiver’s Plan, including the Receiver’s calculation of net out-of-pocket loss. As described and calculated in connection with the Receiver’s Plan, each Located Aggrieved Party will share in the distribution based upon their net out-of-pocket loss as a percentage of the total out-of-pocket losses of all of the Located Aggrieved Parties. Schedule 1, attached to the Plan, includes the net loss, percentage of aggregate loss, and proposed distribution that each Aggrieved Party may receive in this distribution if all Aggrieved Parties are located.
On January 9, 2018, the Court entered an order approving the Plan and appointing Catherine E. Pappas, an SEC employee, as the Distribution Agent of the Fund. See the Court’s Order.
Pursuant to the Plan, beginning in February 2018, the Distribution Agent disbursed $142,731.71 to the 29 Located Aggrieved Parties. The Distribution Agent monitored the status of all payments issued, resulting in the distribution of all $142,731.71 to the intended recipients.
On August 29, 2019, the Commission filed a motion for an order approving the final accounting, discharging the Distribution Agent, and related relief. See the Commission's Motion.
The distribution in this case was closed on September 23, 2019, when the Court granted the Commission's motion and entered an order approving the final accounting, discharging the Distribution Agent, and ordering any funds returned to the Distribution Fund in the future to be transferred to the U.S. Treasury. See the Court's Order.