Securities And Exchange Commission v. Sethi Petroleum Llc et al

MOTION for Summary Judgment Plaintiff's Motion for Summary Judgment As To Sameer Sethi and Brief In Support

E.D. Tex.September 14, 2016

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS SHERMAN DIVISION SECURITIES AND EXCHANGE COMMISSION, § § Plaintiff, § § v. § § Case No.: 4:15-CV-00338-ALM SETHI PETROLEUM, LLC and § SAMEER P. SETHI, § § Defendants § § ________________________________________________§ PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT AS TO SAMEER SETHI AND BRIEF IN SUPPORT DATED: September 14, 2016 Respectfully submitted, Matthew J. Gulde Illinois Bar No. 6272325 Jessica B. Magee Texas Bar No. 24037757 SECURITIES AND EXCHANGE COMMISSION Burnett Plaza, Suite 1900 801 Cherry Street, Unit #18 Fort Worth, TX 76102-6882 (817) 978-1410 (MJG) (817) 978-4927 (fax) guldem@sec.gov ATTORNEYS FOR PLAINTIFF SECURITIES AND EXCHANGE COMMISSION Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 1 of 37 PageID #: 3155 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page i TABLE OF CONTENTS TABLE OF CONTENTS ........................................................................................................... i-ii TABLE OF AUTHORITIES .................................................................................................. iii-vi I. INTRODUCTION AND SUMMARY OF THE CASE ..................................................1 II. STATEMENTS OF ISSUES TO BE DECIDED ............................................................2 III. SUMMARY JUDGMENT STANDARD .........................................................................3 IV. STATEMENT OF UNDISPUTED MATERIAL FACTS ..............................................3 A. Structure of Sameer’s NDDF Investment Program .................................................4 B. Sethi and Sethi Petroleum used fraudulent misstatements and omissions to solicit funds for the NDDF .................................................................................................6 1. Misstatements about Defendants’ history and experience ...........................6 2. False claims of partnership with major companies ......................................8 3. False claims about size of NDDF’s interest in wells ...................................8 4. False and unfounded representations about NDDF returns .........................9 5. Sethi’s personal instructions to “boiler room” sales staff to mislead potential investors ......................................................................................10 C. Misused investor funds ..........................................................................................11 D. This Litigation ........................................................................................................12 V. ARGUMENT AND AUTHORITIES .............................................................................14 A. The Court Should Draw a Negative Inference Against Sameer Based on His Continued Refusal to Testify .................................................................................14 B. The Court Should Find That the Interests in Supposed Joint Venture Units Sameer Offered and Sold Were Investment Contract Securities ........................................15 1. The First Williamson Factor is Present as a Matter of Law Because Investors Had No Real Power Over Their Investment ..............................16 Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 2 of 37 PageID #: 3156 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page ii 2. The Second Williamson Factor is Present as a Matter of Law, Because Investors Were Inexperienced in Oil and Gas Business ............................19 3. The Third Williamson Factor is Present as a Matter of Law ...........................21 C. The Commission is Entitled to Summary Judgment on Its Fraud Claims .............22 1. Elements of Securities Fraud ...........................................................................22 2. Sameer Violated the Anti-Fraud Provisions of the Federal Securities Laws ..........................................................................................23 a. Sameer used the Mails and Instrumentalities of Interstate Commerce ......................................................................................24 b. Sameer Engaged in the Offer, Purchase and Sale of Securities .....24 c. Sameer Made Material Mispresentations To Investors .................24 d. Sameer Conducted a Fraudulent Scheme ......................................26 e. Sameer Acted with a High Degree of Scienter ..............................27 f. Sameer is Liable as a Control Person for Sethi Petroleum’s Violations of the Antifraud Provisions of the Securities Laws......28 g. Sameer also Violated Securities Laws Through the Actions of Others .............................................................................................29 VI. CONCLUSION……… ....................................................................................................30 Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 3 of 37 PageID #: 3157 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page iii TABLE OF AUTHORITIES FEDERAL CASES Aaron v. SEC, 446 U.S. 680 (1980) .........................................................................................23, 24, 27 Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128 (1972) .....................................................................................................26 Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) .......................................................................................................3 Anderson v. McGrath, 2013 WL 1249154 (D. Ariz. Mar. 26, 2013) ...............................................................29 Bailey v. J.W.K. Properties, Inc., 904 F.2d 918 (4th Cir. 1990) .......................................................................................22 Basic Inc. v. Levinson, 485 U.S. 224 (1988) .....................................................................................................25 Broad v. Rockwell International Corp., 642 F.2d 929 (5th Cir. 1981) .......................................................................................27 Celotex Corp. v. Catrett, 477 U.S. 317 (1986) .......................................................................................................3 In re Enron Corp. Sec., Derivative & ERISA Litigation, 235 F. Supp. 2d 549 (S.D. Tex. 2002) .........................................................................28 Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976) .....................................................................................................27 Forsyth v. Barr, 19 F.3d 1527 (5th Cir. 1994) .........................................................................................3 G.A. Thompson & Co., Inc. v. Partridge, 636 F.2d 945 (5th Cir. 1981) .......................................................................................28 Grippo v. Perazzo, 357 F.3d 1218 (11th Cir. 2004) ...................................................................................27 Hinojosa v. Butler, 547 F.3d 285 (5th Cir. 2008) .......................................................................................14 Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 4 of 37 PageID #: 3158 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page iv Koch v. Hankins, 928 F.2d 1471 (9th Cir. 1991) ...............................................................................17, 22 Koehler v. Pulvers, 614 F. Supp. 829 (S.D. Cal. 1985) ...............................................................................25 Long v. Shultz Cattle Co., 881 F.2d 129 (5th Cir. 1989) .................................................................................16, 18 Marine Bank v. Weaver, 455 U.S. 551 (1982) .....................................................................................................19 Maritan v. Birmingham Properties, 875 F.2d 1451 (10th Cir. 1989) ...................................................................................16 Reves v. Ernst & Young, 494 U.S. 56 (1990) .......................................................................................................19 SEC v. C.M. Joiner, 320 U.S. 344 (1943) ...............................................................................................17, 19 SEC v. Continental Wireless Cable Television, Inc., 110 F.3d 69 (9th Cir. 1997) .........................................................................................18 SEC v. Daifotis, 874 F. Supp. 2d 870 (N.D. Cal. 2012) .........................................................................29 SEC v. Gann, 565 F.3d 932 (5th Cir. 2009) .......................................................................................23 SEC v. Glenn W. Turner Enterprises, Inc., 474 F.2d 476 (9th Cir. 1973) .......................................................................................15 SEC v. Hopper, 2006 WL 778640 (S.D. Tex. Mar. 24 2006) ................................................................23 SEC v. Merchant Capital, LLC, 483 F.3d 747 (11th Cir. 2007) ...................................................................18, 20, 21, 22 SEC v. Rana Research, Inc., 8 F.3d 1358 (9th Cir. 1993) .........................................................................................23 SEC v. Schooler, 2014 WL 1660651 (S.D. Cal. Apr. 25, 2014) ..................................................16, 19, 20 Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 5 of 37 PageID #: 3159 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page v SEC v. Seghers, 298 F. Appx. 319 (5th Cir. 2008).................................................................................23 SEC v. Shields, 744 F.3d 633 (10th Cir. 2014) ...................................................................16, 17, 18, 20 SEC v. W.J. Howey Co., 328 U.S. 293 (1946) ...............................................................................................15, 16 SEC v. Zandford, 535 U.S. 813 (2002) .........................................................................................25, 26, 27 Steadman v. SEC, 603 F.2d 1126 (5th Cir 1979) ......................................................................................24 TSC Industrial, Inc. v. Northway, Inc., 426 U.S. 438 (1976) .....................................................................................................25 United Housing Foundation, Inc. v. Forman, 421 U.S. 837 (1975) .....................................................................................................16 United States v. Leonard, 529 F.3d 83 (2d Cir. 2008).....................................................................................18, 20 Williamson v. Tucker, 645 F.2d 404 (5th Cir. 1981) .....................................................................15, 16, 19, 21 FEDERAL STATUTES Section 2(a)(1) of the Securities Act of 1933, [15 U.S.C. § 77b(a)(1)] ................................................................................................15 Section 17(a) of the Securities Act of 1933, [15 U.S.C. § 77q(a)] .........................................................................................22, 23, 24 Section 17(a)(1) of the Securities Act of 1933, [15 U.S.C. § 77q(a)(1)] ..........................................................................................24, 26 Section 17(a)(2) of the Securities Act of 1933, [15 U.S.C. § 77q(a)(2)] ..........................................................................................24, 27 Section 17(a)(3) of the Securities Act of 1933, [15 U.S.C. § 77q(a)(3)] ....................................................................................24, 26, 27 Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 6 of 37 PageID #: 3160 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page vi Section 3(a)(10) of the Exchange Act of 1934, [15 U.S.C. § 78c(a)(10)] ..............................................................................................15 Section 10(b) of the Exchange Act of 1934, [15 U.S.C. § 78j] ..........................................................................................................24 Section 10(b) of the Exchange Act of 1934, [15 U.S.C. § 78j(b)] .............................................................................22, 23, 24, 25, 26 Section 20(a) of the Exchange Act of 1934, [15 U.S.C. § 78t(a)]......................................................................................................23 Section 20(b) of the Exchange Act of 1934, [15 U.S.C. § 78t(b)] .....................................................................................................23 Rule 10b-5 of the Exchange Act of 1934, [17 C.F.R. § 240.10b-5] .............................................................................22, 23, 24, 25 Rule 10b-5(a) of the Exchange Act of 1934, [17 C.F.R. § 240.10b-5(a)]...........................................................................................26 Rule 10b-5(c) of the Exchange Act of 1934, [17 C.F.R. § 240.10b-5(c)]..........................................................................................26 Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 7 of 37 PageID #: 3161 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 1 Pursuant to FED. R. CIV. P. 56, Plaintiff Securities and Exchange Commission (“Plaintiff” or “Commission”) files this Motion for Summary Judgment, and in support thereof, respectfully shows as follows: I. INTRODUCTION AND SUMMARY OF THE CASE Between at least January 2014 and the filing of this action on May 14, 2015 [Dkt. 1], Sameer P. Sethi (“Sameer”) and his company, Sethi Petroleum, LLC (“Sethi Petroleum”), carried on a fraudulent scheme and made materially false and misleading statements and omissions to potential and actual investors in order to offer and sell securities in the Sethi-North Dakota Drilling Fund-LVIII Joint Venture (“NDDF”), an oil and gas investment program. Using a private placement memorandum (“PPM”) and Executive Summary which were full of fraudulent and misleading statements and selling through a cold-call boiler room in which Sameer personally instructed sales staff to lie to potential investors, Defendants raised more than $4 million from approximately 90 investors located in 28 states. In NDDF offering documents, Sethi Petroleum’s website, and other communications with investors, Defendants, among other things: • falsely represented that 70% of their investment funds would be used to acquire, drill, and complete 20 oil and gas wells, of which NDDF would own approximately 62.5% “net working interest;” • falsely represented that investors could expect annual returns as high as 30-60% or more; • falsely represented to investors that Sethi Petroleum was partnered with “major oil and gas companies” such as Continental Resources, Exxon Mobil, Hess Corporation, and ConocoPhillips; • falsely represented Sethi’s business experience; and • inadequately disclosed Sethi’s history of criminal incarceration and state regulatory disciplinary actions against Sethi and Sethi Petroleum. Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 8 of 37 PageID #: 3162 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 2 Instead of using NDDF investors’ funds to acquire interests in oil and gas wells in the expected proportions, Sameer, personally and through Sethi Petroleum, used the vast majority of investors’ funds in a manner inconsistent with their representations to investors. Sameer’s actions violated the antifraud provisions of the federal securities laws including Section 17(a) of the Securities Act of 1933 (“Securities Act”), Sections, 10(b), 20(a), and 20(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder. Because the evidence amply establishes Sameer’s fraud, and because there exists no material fact in dispute concerning his violations, the Commission is entitled to summary judgment on all claims. II. STATEMENT OF ISSUES TO BE DECIDED Pursuant to L.R. 56(a), Plaintiff submits this summary of each claim or defense as to which summary judgment is sought against Sameer. The Commission asks the Court to find that there is no genuine issue of material fact and that the Commission is entitled to judgment as a matter of law as to the following: 1. Sameer Sethi’s repeated refusal to testify when called as a witness in this action warrants a negative inference that, had he testified truthfully, his testimony would have established his violations of the federal securities laws as alleged in the Complaint. [Dkt. 1]. 2. The “joint venture units” Defendants offered and sold to members of the general public nationwide were investment contracts, and therefore, securities. 3. Sameer Sethi committed securities fraud in violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Section 17(a) of the Securities Act, both as a control person of Sethi Petroleum and acting through other persons or entities in violation of Sections 20(a) and (b) of the Exchange Act. Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 9 of 37 PageID #: 3163 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 3 III. SUMMARY JUDGMENT STANDARD Summary judgment, “upon all or any part of [a] claim,” is appropriate where there is no genuine dispute as to any material fact regarding that portion of the claim. Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The SEC, as the movant, bears the initial burden of identifying the evidence that demonstrates the absence of any material fact. See Celotex, 477 U.S. at 323. Once that burden is met, the defendants cannot rest on mere denials, conclusory statements, or evidence that is merely colorable or not significantly probative to defeat the motion. Celotex Corp., 477 U.S. at 324; Forsyth v. Barr, 19 F.3d 1527, 1533 (5th Cir. 1994) (“Needless to say, unsubstantiated assertions are not competent summary judgment evidence.”). Instead, they must submit significant probative evidence to show that material, triable issues of fact remain. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986) . “The mere scintilla of evidence in support of the [nonmoving party’s] position will be insufficient.” Liberty Lobby, 477 U.S. at 252. In short, the Court must enter summary judgment if, under the governing law, there is only one reasonable conclusion. Anderson, 477 U.S. at 250. IV. STATEMENT OF UNDISPUTED MATERIAL FACTS In accordance with L.R. CV-56(a), the Commission contends that the following facts are undisputed: Sameer is a 34 year old man living in Murphy, Texas. In 2004, he was convicted of aggravated assault in 2004 in Collin County and sentenced to four years in prison. [App. at 3, 106, 114].1 Following an unsuccessful appeal, he served two-and-a-half years in prison between June 2006 and January 2009. [App. at 3, 111, 114]. Sethi Petroleum is the successor in interest 1 This Motion for Summary Judgment and Brief in Support incorporates, without refiling, the Appendix filed in support of the Commission’s Motion for Temporary Restraining Order (Dkt. 4-2). For clarity, additional Appendix materials, attached to this Motion, will begin at page App. 722, supplementing the TRO’s 721-page Appendix. Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 10 of 37 PageID #: 3164 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 4 to a company that Sethi started in 2003, Sameer P. Financial Group, Inc. [App. at 2, 89-104]. Sameer and his father, contemnor Praveen Sethi, operated this company through several name changes until it reached its current incarnation as Sethi Petroleum, LLC in July 2012. Id. Sameer was the sole managing member and president of Sethi Petroleum, and managed and otherwise directed the company’s business from at least November 2011 through this Court’s appointment of a Receiver over it. [App. at 3, 18, 99]. On May 21, 2006, the Pennsylvania Securities Commission ordered a Sethi Petroleum predecessor, Sethi Oil & Gas, Inc. (“Sethi O&G”), and contemnor Praveen Sethi (“Praveen”) to cease and desist from offering and selling unregistered securities in that state, concluding that Sethi O&G and Praveen Sethi solicited an unaccredited investor to purchase unregistered securities that were marketed as joint venture interests. [App. at 3, 118]. In 2009, Sameer and Sethi O&G agreed to cease and desist from selling unregistered securities in the State of Colorado after the Colorado Securities Commission sued them. [App. at 4, 137]. In 2010, Sameer admitted that he and his company had violated Colorado’s cease and desist order after which a state district court permanently enjoined Sameer and Sethi Oil & Gas, Inc. from engaging in unregistered and fraudulent offerings in Colorado. [App. at 4, 140-152]. A. Structure of Sameer’s NDDF Investment Program At least as early as January 2014, Sameer and his company Sethi Petroleum began offering investors positions in NDDF, a purported “joint venture” that offered investors returns from two sources: oil-and-gas revenues and tax benefits from oil-and-gas exploration and production activities. [App. at 20].2 Among materials promoting the investment, Defendants created a private placement memorandum (“PPM”) and an Executive Summary for the NDDF 2 On March 17, 2014, Sameer filed a Form D with the Commission, claiming that Sethi Petroleum’s NDDF offering was an exempt offering of securities under Rule 506(c) of Regulation D. [App. at 5, 188-92]. Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 11 of 37 PageID #: 3165 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 5 program (collectively, the “Offering Documents”) and provided them to potential investors in the program using the United States mails.3 [App. at 20, 197]. In the Offering Documents, Sethi Petroleum claimed that it intended to raise $10 million to exploit its exclusive rights to purchase mineral interests and to participate in oil and gas development on 200,000 acres in the Williston Basin of North Dakota, South Dakota, and Montana. [App. at 6, 22, 200]. The PPM stated that 70% of investor funds would be used for the acquisition, drilling, and completion of the wells and that the remaining 30% of funds would be spent on legal, engineering, syndication, administration, and management expenses. [App. at 41]. Sethi Petroleum marketed NDDF interests through a 20-person sales staff using pitch scripts, purchased lead lists, and cold calls. [App. at 714]. The company compensated its sales staff with bi-weekly draws and an additional 12-15% commission on sales. Id. Sameer Sethi regularly visited Sethi Petroleum’s boiler room to provide sales tips and directions on statements to make to potential investors. Id. NDDF investors were required to sign NDDF’s joint venture agreement (“JVA”) appointing Sethi Petroleum as managing venturer. [App. at 65-88]. The JVA purported to give investors control of NDDF’s affairs and operations, but empowered Sethi Petroleum – led by Sameer Sethi – to manage the venture’s day-to-day operations. Id. Among the powers granted to Sethi Petroleum were “sole and absolute discretion” to distribute NDDF profits to investors; authority to execute oil and gas operating agreements; power to take and hold title to NDDF’s property; and authority to hire all professionals on NDDF’s behalf, including engineers, geologists and appraisers. Id. According to the JVA, certain significant actions – such as 3 As established during the August 1, 2016 contempt hearing, the NDDF PPM was substantially similar to the PPM Sameer later caused to be distributed by Cambrian Resources, LLC. [See, e.g., Dkt. 161, Plaintiff’s Closing Brief]. Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 12 of 37 PageID #: 3166 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 6 acquiring oil and gas interests or removing the managing venturer – required the majority vote of investors. Id. In reality, Sethi and Sethi Petroleum did not allow NDDF investors to consult or vote on any matter in connection with NDDF. [App. at 699]. NDDF investors did not receive ballots and were not provided access to Sethi Petroleum’s books and records or the books and records of NDDF. Id. Further, NDDF investors were never provided a list of other NDDF investors and relied solely on Sethi Petroleum to manage their investment in NDDF. Id. After his appointment, the Sethi Petroleum receiver, Marcus Helt, reviewed thousands of documents in the receivership estate and found no evidence of Sethi Petroleum ever organizing an investor vote or soliciting input of any kind from investors. [Declaration of Marcus Helt (“Helt Decl.”), App. 000724]. B. Sethi and Sethi Petroleum used fraudulent misstatements and omissions to solicit funds for the NDDF In the Offering Documents and elsewhere, Sameer and Sethi Petroleum misrepresented their history and experience, the scope of the NDDF investment, the identities of Sethi Petroleum’s partners, the use of investors’ funds, and historical and expected returns, among other things. Indeed, after conducting his investigation, the Sethi Petroleum receiver concluded that “the entire Sethi Enterprise was a sham,” based on commingling of funds, lack of corporate formalities, the company’s undisclosed insolvency, and misleading use of funds. [App. at 722- 24]. 1. Misstatements about Defendants’ history and experience The Offering Documents misrepresented and omitted the criminal and regulatory history described above. First, the PPM claims, “Sameer Sethi has managed the Company since it was founded.” [App. at 42]. Since the company was founded in 2003, this claim misrepresented the Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 13 of 37 PageID #: 3167 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 7 fact that Sameer was in prison for aggravated assault between July 2006 and January 2009 and unavailable to manage his company. [App. at 3, 106, 111, 114]. The Offering Documents disclosed Sethi’s criminal history obliquely on the final page of the 40-page PPM, saying “[a] certain control person of the Managing Venturer was previously indicted for aggravated assault more than twelve years ago.” The Offering Documents disclosed neither Sethi’s conviction nor his years behind bars during which he did not manage Sethi Petroleum’s day-to-day operations. [App. at 13, 64]. The Offering documents took a similarly misleading tack in disclosing Sethi Petroleum’s regulatory history. Again buried in the final pages of the PPM, the Defendants stated, “[a] certain control person of the Managing Venturer has previously been alleged of violating the registration requirements in connection with marketing investments in oil and gas ventures in the states of Colorado and Pennsylvania. These matters were settled with minimal litigation.” [App. at 14, 63-64]. The PPM did not disclose the cease-and-desist orders; Colorado’s separate civil action, in which Sethi O&G and Sameer were charged with securities fraud and ultimately admitted to violating Colorado’s cease-and-desist order; that accusations were leveled by state securities regulators and not private parties; that state regulators targeted Sethi O&G; or that Defendants agreed to resolve all allegations through settlements. Id., [App. at 137, 140-152]. Sameer and his company also claimed that he “started out in banking and later became a registered representative of FINRA.” In fact, Sameer was never registered with FINRA. [App. at 42]. While he worked for a broker-dealer from January 2000 to October 2001, he was never a registered representative. [App. at 12-13, 493-496]. Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 14 of 37 PageID #: 3168 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 8 2. False claims of partnership with major companies Sameer’s Offering Documents claimed that NDDF’s wells would be “operated by publicly traded and/or major oil and gas companies” such as Continental Resources, Exxon Mobil, Hess Corporation, and ConocoPhillips. [App. at 6, 22, 205]. They repeated this particular claim in many different venues, including interviews, Sethi Petroleum’s cold-call script for selling NDDF to investors, Sethi Petroleum’s website, a craigslist.org posting by the company, and Sameer’s LinkedIn page. [App. at 10, 11, 469, 479-489]. In reality, in July 2014, Sethi Petroleum began negotiating the purchase of working interests with Irish Oil & Gas, Inc. (“Irish Oil & Gas”), a private oil and gas company located in North Dakota. [App. at 265]. 3. False claims about size of NDDF’s interest in wells The PPM stated that NDDF investors’ funds would be used to purchase approximately 62.5% net working interest in at least 20 wells. [e.g., App. at 22]. In reality, in August 2014, the NDDF acquired from Irish Oil & Gas in exchange for $900,000, fractional working interests ranging from 0.15% to 2.5% in only eight or nine wells. [App. at 269-309, App. 723]. The operators of the acquired wells were Crescent Point Energy U.S. Corp., Oxy USA Inc., and Slawson Exploration Co., not the “major oil and gas companies” they had touted. Id. Of those wells, only six produced oil or gas. [App. at 8-9]. The well drilling permits for two of the wells were voluntarily cancelled by their operators in December 2014 and January 2015, respectively. [App. at 313, 355]. The remaining wells produced a combined total of 9,147 barrels of oil in January 2015; 13,995 barrels of oil in February 2015; and 12,357 barrels of oil in March 2015, far less than the million-barrels-per-month Defendants claimed. [App. at 8-9, 384- 394]; infra Section E. Since appointment of the receiver in this case, all of the wells associated with Sethi Petroleum (not just NDDF) produced total proceeds of $2,489.85. [App. at 723]. Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 15 of 37 PageID #: 3169 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 9 On September 4, 2014, Sethi Petroleum filed a lawsuit in NDDF’s name against Irish Oil & Gas to rescind the purchase of working interests in the wells – NDDF’s only oil and gas asset. [App. at 9, 396]. In the Amended Complaint, Sethi Petroleum claims NDDF’s wells are only producing four barrels of oil a day and it will take ten to twelve years for the NDDF to recoup the $900,000 it paid for the working interests, not to mention the more than $4 million Defendants took from investors. [App. at 459]. Defendants have never revised their sanguine predictions, or disclosed the existence of this lawsuit to NDDF investors, or that more than $40,000 their investment funds have been used to pay legal fees to pursue the litigation. [App. at 10]. 4. False and unfounded representations about NDDF returns When soliciting investors, even after suing Irish Oil, Sameer and Sethi Petroleum claimed that investors could expect average returns of at least 30% per year. [App. at 6, 716]. Sameer personally directed his sales staff to tell prospective investors they could expect annual investment returns ranging from 30% to 60%. [App. at 716]. The Offering Documents contained variations of this claim. For instance, a table in the Executive Summary presents scenarios resulting in annual returns ranging from 32% to 254%, assuming each NDDF well produces 7,250 to 58,000 a barrels of oil a month. [App. at 217]. Defendants also utilized a FAQ document, shared with at least one investor in February 2014, indicating that NDDF investors could recoup their entire investment and realize a 100% profit within a year. [App. at 491, 705]. Also, Sethi Petroleum solicited investors to participate in the NDDF offering through a January 2015 Craigslist posting that claimed existing investors had already realized average returns of 30% to 50% per year – a patent falsity. [App. at 12, 481]. Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 16 of 37 PageID #: 3170 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 10 These representations were false and, even if viewed as projections, were unfounded. Sethi Petroleum did not acquire interests in any wells for NDDF until August 2014, months after launching the program and first raising investor funds. [App. at 8, 269-309]. Even then, Sethi Petroleum acquired only tiny fractional interests in just eight or nine wells, and the monthly production rates of five of the six producing wells were much lower than the figures Sethi Petroleum used in its projections and statements of historical production. [App. at 8-9, 310-311, 384-394, 716, 723]. At these low participation levels and monthly production rates, NDDF wells (1) had not produced what Sameer said they had produced; and (2) were incapable of generating sufficient production to provide the returns Sethi Petroleum promised to investors. This was borne out by investors’ actual experience and the receiver’s investigation. Investors interviewed in connection with the Commission’s underlying investigation have each received only a single distribution, in amounts ranging from approximately $30 to $230. [App. at 12, 697]. The receiver found that Sethi “spent virtually the entire $13 million” raised across all of his projects, and that the receivership estate is left with mineral interests that, to date, the receiver has not been able to sell. [App. at 723-24]. 5. Sethi’s personal instructions to “boiler room” sales staff to mislead potential investors Sameer regularly visited Sethi Petroleum’s sales staff to provide sales tips. [App. at 716]. By late 2014, Sethi was explicitly directing his salespeople to tell prospective investors that (1) NDDF had already purchased interests in 12 profitable wells, which were producing a total of one million barrels of oil per month; (2) new investors would immediately begin receiving revenue checks from the wells; (3) the remaining eight wells would be drilled by the end of 2014; and (4) investors could expect 30% to 60% returns on investment per year. [App. at 716]. As Sameer knew at the time, each of these claims was false. Indeed, by that time, and Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 17 of 37 PageID #: 3171 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 11 unbeknownst to investors, Defendants had already caused NDDF to sue for rescission of the purchase of its only working interests. [App. at 9-10, 395-468]. C. Misused investor funds Only $900,000 of NDDF investors’ funds went to the purchase of oil and gas interests. [App. at 641, 675, 694]. Defendants used the majority of the NDDF investors’ remaining funds on items not reasonably related to the NDDF project, including payments to insiders, related entities, and salesmen; cash withdrawals; and home theater and liquor expenses; among other things.4 [App. at 642, 677-694]. This use of funds stands in stark contrast to the representations of the PPM, which stated that 70% of investor funds will be used for the acquisition, drilling, and completion of the wells. [App. at 40-41]. In reality, Defendants used less than 24% of investors’ funds for those purposes, siphoning larger amounts to themselves, their salesmen, and Sethi Petroleum’s parent company. [App. at 643, 696]. This jibes with the receiver’s findings across all of Sethi’s offerings, which show that Sethi spent only about $3 million of the $13 million he raised on actually purchasing mineral assets. [App. at 723]. On January 9, 2014, Sameer opened NDDF’s bank account at Bank of America (“BofA”). [App. at 639-640]. Sameer and Praveen were authorized signers on the account. [App. at 640, 662-670]. From January 28, 2014 through March 9, 2015, Sameer used the NDDF account to raise over $4 million from 90 investors in 28 states across the country – including, but not limited to, Texas, New York, California and Florida. [App. at 641]. BofA records indicate that NDDF received funds from investors in the form of checks and wire transfers. Id. From February 6, 2014 through March 31, 2015, Sameer and Praveen moved $3.15 million of investor funds to the Sethi Petroleum’s general account in more than 80 account transfers. Id. 4 Though Defendants’ commingling of funds, including unrelated funds being added to the NDDF account, makes the process of tracking NDDF investors’ funds difficult, it is clear that the representations in the PPM do not come close to describing how Defendants actually used investors’ money. [App. at 643]. Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 18 of 37 PageID #: 3172 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 12 Defendants commingled NDDF investors’ money with Sethi Petroleum funds and other investors’ funds. [App. at 641]. By commingling investors’ funds, Defendants acted without regard for the PPM, which stated that “there will be no commingling of funds between the Venture and Sethi Petroleum or any Affiliate thereof other than as may temporarily occur during the payment of bills and/or distributions by Sethi Petroleum on behalf of the Venture.” [App. at 641-42]. D. This Litigation On May 14, 2015, the Court granted the Commission’s emergency ex parte request and issued a temporary restraining order, asset freeze, and other injunctive relief (the “TRO”) against Sethi Petroleum, LLC (“Sethi Petroleum”) and Sameer (Dkt. #11). The Court also appointed a receiver over Sethi Petroleum (Dkt. #12). On May 26, 2015, the Court issued an Agreed Order Granting Preliminary Injunction, Asset Freeze, and Other Relief (the “Preliminary Injunction”) (Dkt. #23). On June 22, 2016, the Commission filed an Emergency Motion for Show Cause Hearing to Hold [Sameer] and Others in Contempt. [Dkt. 138] In that Motion, the Commission requested that the Court order Sameer, Praveen, and John Weber (“Weber”) to show cause why they were not in contempt of the Court’s orders in connection with their renewed efforts to offer and sell securities – oil and gas interests – through Cambrian Resources. [Dkt. 139]. After receiving the parties’ briefing and an extensive hearing at which evidence was presented by all parties in interest, the Court held Sameer, Praveen, and Weber in contempt. [Dkt. 169] When called to testify at the August 1, 2016 contempt hearing, Sameer exercised his Fifth Amendment rights to almost all of the questions that were asked of him, and the Court exercised its discretion to infer Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 19 of 37 PageID #: 3173 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 13 from Sameer’s repeated refusal to testify that, had he testified truthfully, his testimony would have supported the claims against him. [Dkt. 169, p. 7]. This Court previously rejected Sameer’s claim that working interests in oil and gas operations are not securities when it correctly held that fractional, undivided interests in oil, gas, or other mineral rights are securities. [Dkt. 50, p. 4] The Court also denied Sameer’s First Amended Motion for Judgment on the Pleadings Pursuant to Federal Rules of Civil Procedure 12(c) and 9(b), finding that the Commission adequately pleaded claims involving Defendants’ offers and sales of securities. [Dkt. 127]. The Court found by clear and convincing evidence that, through Cambrian, Sameer utilized his skills in selling securities. [Dkt. 179, p. 14]. In addition, former Sethi Petroleum employee John Weber has admitted that he attempted to change “Sethi Petroleum’s joint venture agreement, so that the interest that Cambrian was selling would not be a security.” [Dkt. 169, p. 11]. Weber performed legal research, and then altered the Sethi Petroleum documents as a result of that research, in an attempt to ensure that the interests Cambrian was selling did not fit the legal definition of a security. [Dkt. 169, pp. 14-17]. Sameer was noticed, and appeared, for a sworn deposition in this case on December 4, 2015. [Helt Decl., App. 724, 725, et seq.]. Throughout the deposition, Sameer was given an opportunity to answer questions concerning his formation and operation of Sethi Petroleum and his knowing deception and misappropriation of investor funds, but in every instance he invoked his Fifth Amendment rights. For instance, he refused to answer the following questions: • You exercised control over the entity known as Sethi Operating Company, correct? • You exercised control over the entity known as Sethi Oil & Gas, Inc., correct? • You made decisions, Mr. Sethi, on how funds invested by investors into a joint venture was spent, correct? Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 20 of 37 PageID #: 3174 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 14 • You were a signatory on every bank account owned by Sethi Petroleum, Sethi Financial Group and each of the joint ventures, correct? • Sethi Petroleum and Sethi Financial Group, Inc. are two entities that are treated functionally as one entity, correct? • You often withdrew sums of cash in excess of $10,000 from bank accounts owned by Sethi Petroleum and Sethi Financial Group, Inc., correct? • Often, that cash was then deposited into your personal checking account, correct? [App. at 739, 744-45, 752]. In addition, Sameer executed a declaration on April 7, 2016 in which he confirmed his assertion of the privilege against self-incrimination under the Fifth Amendment to the United States Constitution and declined to testify, and stated that he would, and will, continue to decline to testify concerning all of the matters set forth in the Commission’s Complaint in this case. [Declaration of Matthew J. Gulde (“Gulde Decl.”), App. 803-04]. V. ARGUMENT AND AUTHORITIES A. The Court Should Draw a Negative Inference Against Sameer Based on His Continued Refusal to Testify. Sameer has repeatedly refused to testify throughout this action, including during the Receiver’s deposition, in response to the Commission’s notice of deposition, and at hearings where he was called as a witness. [App. 805-807] In the Fifth Circuit, courts may draw an adverse inference from a defendant’s refusal to testify in a civil case. See Hinojosa v. Butler, 547 F.3d 285, 295 (5th Cir. 2008). Sameer’s refusal to testify, and his repeated assertion of the Fifth Amendment while called as a witness in this matter, warrant an inference that, had he testified truthfully, his testimony would have established that he in fact Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 21 of 37 PageID #: 3175 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 15 controlled Sethi Petroleum and all of its employees and related entities, and that he conducted the fraudulent offer, issuance, and sale of Sethi Petroleum securities in violation of the federal securities laws. B. The Court Should Find That The Interests in Supposed Joint Venture Units Sameer Offered and Sold Were Investment Contract Securities.5 Sections 2(a)(1) of the Securities Act and 3(a)(10) of the Exchange Act define “securities” to include “investment contracts.” 15 U.S.C. §§ 77b(a)(1) & 78c(a)(10). An investment contract exists where: (1) individuals are led to invest money; (2) in a common enterprise; and (3) with the expectation that they would earn a profit solely6 through the efforts of the promoter or of someone other than themselves. SEC v. W.J. Howey Co., 328 U.S. 293, 298–99 (1946). In Williamson v. Tucker, the Fifth Circuit established a test to indicate whether investors in a purported general partnership or joint venture expected to depend on the efforts of others, thus satisfying the third Howey element. Under Williamson, an investment contract exists if one of the following three factors is present: (1) an agreement among the parties leaves so little power in the hands of the partner or venturer that the arrangement in fact distributes power as would a limited partnership; or (2) the partner or venturer is so inexperienced and unknowledgeable in business affairs that he is incapable of intelligently exercising his partnership or venture powers; or (3) the partner or venturer is so dependent on some unique entrepreneurial or managerial ability of the promoter or manager that he cannot replace the manager of the enterprise or otherwise exercise meaningful partnership or venture powers. 645 5 The Commission incorporates in this motion the arguments and authorities presented in its Response to Defendant Sameer P. Sethi’s First Amended Motion for Judgment on the Pleadings. [Dkt. 119]. 6 Courts do not take the word “solely” literally and have found the third element of the Howie test satisfied even when the investor must expend quite a bit of effort. See, e.g., SEC v. Glenn W. Turner Enterprises, Inc., 474 F.2d 476 (9th Cir. 1973). Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 22 of 37 PageID #: 3176 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 16 F.2d at 424. These factors are not exhaustive. Id. at 424 n. 15. Although “[t]he test stated in Williamson . . . refers to the investor’s experience in “business affairs,” without referring to specialized knowledge, the Fifth Circuit has “made clear that the knowledge inquiry must be tied to the nature of the underlying venture.” Long v. Shultz Cattle Co., 881 F.2d 129, 134 n. 3 (5th Cir. 1989) (noting that “any holding to the contrary would be inconsistent with Howey itself”). In evaluating whether an interest is a security, “form should be disregarded for substance,” and courts should analyze the “economic reality underlying a transaction, and not [focus] on the name appended thereto.” United Housing Found., Inc. v. Forman, 421 U.S. 837, 848–49 (1975). When the substance of a joint venture or general partnership interest demonstrates that the interest is actually a security, a court should not hesitate to grant summary judgment for the SEC on this issue. See, e.g., SEC v. Schooler, 2014 WL 1660651, at *12 (S.D. Cal. Apr. 25, 2014) (granting summary judgment for the SEC on the first Williamson factor under analogous facts). Although all three Williamson factors are present in this case, the SEC need only prevail on one Williamson factor as a matter of law in order to be entitled to summary judgment. See id. at *10 (granting summary judgment for the SEC on the first Williamson factor and concluding, as a matter of law, that the “general partnership units” offered in that case were securities). 1. The First Williamson Factor is Present as a Matter of Law Because Investors Had No Real Power Over Their Investment. The first Williamson factor is established because Sethi’s investors did not have any real power over their investment.7 [App. at 65-88]. The JVA gave Sethi Petroleum the power to 7 Post-investment conduct is relevant to the intent of the parties at the time the agreement was signed. Shields, 744 F.3d at 646; Merchant Capital, 483 F.3d at 756 (using evidence of how the partnership “actually operated to answer the question of how control was allocated at the outset”); Maritan v. Birmingham Props., 875 F.2d 1451, 1458-59 (10th Cir. 1989) (stating that “intent becomes clear from the relationship which the parties accepted [after the investment is made]”). In addition to the partnership agreement and the actual operations of the enterprise, courts Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 23 of 37 PageID #: 3177 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 17 manage the day-to-day operations of NDDF. Id. Sethi Petroleum had “sole and absolute discretion” to distribute NDDF profits to investors; authority to execute oil and gas operating agreements; power to take and hold title to NDDF’s property; and authority to hire all professionals on NDDF’s behalf, including engineers, geologists and appraisers. Id. The well- drilling that the JVA specified would be carried out by operators chosen only by Sethi, and was the “string on which [the investors’] beads were strung.” SEC v. C.M. Joiner, 320 U.S. 344, 348 (1943); see also Shields, 744 F.3d at 646-47. While certain significant actions – such as acquiring oil and gas interests or removing the managing venturer – purportedly required the majority vote of investors, such voting rights were imaginary. Id. In reality, Sethi and Sethi Petroleum did not allow NDDF investors to consult or vote on any matter in connection with NDDF. [App. at 699]. NDDF investors did not receive ballots and were not provided access to Sethi Petroleum’s books and records or the books and records of NDDF. Id. Further, NDDF investors were never provided a list of other NDDF investors and relied solely on Sethi Petroleum to manage their investment in NDDF. Id. Clearly, the investors had no access to essential information that would have permitted them to meaningfully exercise any managerial powers they might have had. The receiver’s findings confirm this: Sethi never conducted an investor vote or sought investor input of any kind – not just on the NDDF investment – but across all Sethi offerings. [App. at 724]. Not knowing the identity of the other investors made it impossible to coordinate or communicate about the JV. Further, not having access to Sethi Petroleum books and records, investors had no information that would enable them to exert meaningful powers over their also may look to “other documents structuring the investment, to promotional materials, to oral representations made by the promoters at the time of the investment, and to the practical possibility of the investors exercising the powers they possessed pursuant to the partnership agreements” to determine the investors’ degree of control over the investment. Koch v. Hankins, 928 F.2d 1471, 1478 (9th Cir. 1991). Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 24 of 37 PageID #: 3178 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 18 investments. Even if the investors had a technical legal right to the information, which in practice they did not, “[a]ccess to information does not necessarily protect an investor from complete dependence on a third party where, as here, that same third party is the sole source of information and advice regarding the underlying venture and the investor does not have the expertise necessary to make the essential management decisions himself.” Long v. Shultz Cattle Co., 881 F.2d 129, 135-36 (5th Cir. 1989); see also Merchant Capital, 483 F.3d at 761. Moreover, Sethi Petroleum’s offer and sales efforts were broad and indiscriminate, using purchased lead lists and targeting thousands of potential investors across the country via unsolicited sales calls and craigslist postings with little or no experience in the oil and gas industry further demonstrates that the voting rights were illusory or a sham. [App. 11, 714, 715]; See, e.g., Shields, 744 F.3d at 647; Merchant Capital, 483 F.3d at 758 (explaining that votes are illusory when the promoter controls the information and does not give sufficient information for the partners to make meaningful decisions). Finally, it is undisputed that at the time of investment, Sethi Petroleum commingled NDDF investors’ money with Sethi Petroleum funds and other investors’ funds. [App. at 641- 42, 722-23]. With no access to Sethi Petroleum’s books and records, and thus no way of knowing that so-called partnership funds were simply poured into Sethi Petroleum’s general fund, NDDF investors had no real control over their investment. The powers supposedly conferred on the investors through the JV Agreements were “hollow and illusory.” See United States v. Leonard, 529 F.3d 83, 90 (2d Cir. 2008) (affirming jury finding that LLC interests were securities, since managerial rights contained in LLC formation documents were “hollow and illusory,” as those rights did not accrue until the LLCs were “fully organized”); see also SEC v. Continental Wireless Cable Television, Inc., 110 F.3d 69 (9th Cir. 1997) (unpublished) Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 25 of 37 PageID #: 3179 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 19 (affirming conclusion that general partnership interests were securities “due to the sole control of the promoters . . . over investors’ funds prior to the first partnership meeting”). As a matter of law, therefore, the first Williamson factor – lack of legal power – is undisputedly present here. Therefore, summary judgment is proper. See Schooler, 2014 WL 1660651 at *10. 2. The Second Williamson Factor is Present as a Matter of Law, Because Investors Were Inexperienced in Oil and Gas Business. The second Williamson factor is also established in this case because the investors were inexperienced in the business of oil and gas and lacked the expertise to intelligently exercise any managerial power that may have under the contracts. As the Supreme Court has explained, an important factor in determining whether a transaction is an investment contract is “the plan of distribution,” meaning whether the interests at issue are “offered and sold to a broad segment of the public.” SEC v. C.M. Joiner, 320 U.S. 344, 353 (1943); see Reves v. Ernst & Young, 494 U.S. 56, 68 (1990) (relying on Joiner). When investments are offered to a large number of potential investors, this fact weighs heavily in favor of a finding that the investments are securities. See Reves, 494 U.S. at 68; accord Marine Bank v. Weaver, 455 U.S. 551, 559-560 (1982); Joiner, 320 U.S. at 352. Here, defendants used indiscriminate and broad-reaching solicitation efforts to offer and sell the JV interests, such as making unsolicited phone calls from purchased lists of names. Consistent with these Supreme Court decisions, the Williamson court noted that a “scheme which sells investments to inexperienced and unknowledgeable members of the general public cannot escape the reach of the securities laws merely by labeling itself a general partnership.” Williamson, 645 F.2d at 423 (emphasis added). The Second Circuit agreed with “the Fifth Circuit in finding that investors may be so lacking in requisite expertise, so numerous, or so dispersed, that they become utterly dependent on centralized management counteracting a Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 26 of 37 PageID #: 3180 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 20 legal right of control.” Leonard, 529 F.3d at 88-91 (emphasis added). Similarly, the Tenth Circuit held that allegations that a promoter “marketed oil and gas interests nationwide to investors with little, if any, experience in the oil and gas industry by means of over 400 cold calls a day” supports the conclusion that the second Williamson factor was satisfied. SEC v. Shields, 2014 WL 685369, at *10 (10th Cir. Feb. 24, 2014); see also Merchant Capital, 483 F.3d at 758 (recognizing that geographic dispersal and lack of preexisting relationships and face-to-face contact limited partners’ ability to exercise their powers); Schooler, 2014 WL 1660651 at *10 (concluding that broad solicitation is a fact to consider under the second Williamson factor). Here, the sheer breadth of defendants’ indiscriminate solicitation of investors shows that the second Williamson factor is present. There are approximately 90 investors in NDDF and they are scattered throughout 28 states. [App. 641]. Sethi Petroleum solicited these investors via unsolicited phone calls. The vast number and dispersal of investors “left them particularly dependent on centralized management” of their investments by defendants. Leonard, 529 F.3d at 90 (looking to number and geographic dispersion of investors to evaluate their experience and expertise under Williamson’s second factor). This left the varied and scattered group of investors, with virtually no ability to coordinate or communicate, as they must, in order to try and manage their investments. Given the scattershot method in which these investors were solicited and their lack of industry knowledge [App. 698, 716] at the time of the investment, it is clear that investors did not have the necessary experience in oil and gas to manage the JVs, even if they had the power to do so. Thus, the second Williamson factor is satisfied, and summary judgment on this issue is proper. See Shields, 2014 WL 685369, at *10. Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 27 of 37 PageID #: 3181 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 21 3. The Third Williamson Factor is Present as a Matter of Law. Under the third Williamson factor, a dependency relationship exists when the investors rely “on the managing partner’s unusual experience and ability in running that particular business.” Williamson, 645 F.2d at 423. As noted in Williamson, even a partner knowledgeable in the particular investment “may be left with no meaningful option when there is no reasonable replacement for the investment’s manager.” Id. In such a situation, “a legal right of control would have little value if partners were forced to rely on the manager’s unique abilities.” Id.; see also Merchant Capital, 483 F.3d at 763 (“The third factor provides that, even if the arrangement gives the partners some practical control, the instrument is an investment contract if the investors have no realistic alternative to the manager.”). In this case, the undisputed facts demonstrate that Sameer and his company structured and operated the NDDF investment leaving investors completely dependent on the company’s supposed entrepreneurial and managerial abilities, and without any reasonable alternative management option. Sethi Petroleum’s cold-call sales regime was built around touting the company’s established relationships with major players in the oil and gas industry – companies like Hess, Conoco Phillips, Exxon Mobil, and Continental Resources. [See, e.g., App. at 6, 10, 22, 39, 204-05, 716]. If the NDDF investors sought to depose Sameer and Sethi Petroleum as managing venture of the NDDF project, they would forego these purported relationships and the “unusual experience and ability” that Sethi Petroleum touted during the NDDF offering. [See, e.g., App. at 42-44, 206, 214]. Additionally, if NDDF investors somehow wrestled power away from Sethi Petroleum, they would have found so-called partnership funds hopelessly commingled with the company’s own funds and those of other joint ventures. [App. at 641-42]. Merchant Capital held that Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 28 of 37 PageID #: 3182 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 22 Williamson’s third factor was present on similar facts. In that case, funds from investors in several purportedly separate partnerships were pooled by Merchant Capital, the managing partner for all the partnerships, and used to purchase assets held by a third-party. Merchant Capital, 483 F.3d at 764. Under Merchant Capital’s agreement with the third party, Merchant Capital could request return of the assets, but the individual partnerships “had no contractual right to demand the return of the [assets].” Thus, even if an individual partnership managed to replace Merchant, it would find that its assets were tied up in fractional share form in [assets held by the third party].” Id. Because of this pooling of funds, “Merchant effectively had permanent control over each partnership’s assets” and the partnerships lacked “any realistic alternative to management by Merchant.” Id.8 There is no genuine issue of fact as to whether NDDF investors were dependent on Sethi Petroleum’s touted experience and ability. Indeed, there is no genuine question as to the application of any of the Williamson factors in this case. The NDDF offering was, without question, the offer and sale of a security under the laws of the United States. C. The Commission Is Entitled To Summary Judgment On Its Fraud Claims. Similarly, there is no genuine question of material fact as to the fraud claims presented against Sameer Sethi. 1. Elements of Securities Fraud Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a), prohibits fraud in the offer or sale of securities, and Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5, prohibit fraud in connection with the purchase or sale of any 8 Other courts have held that investors were granted only illusory control over an investment where the enterprise was run by pooling investors’ interests so that an individual investor had no control over the operation as a whole, even if he had some control over a subsidiary portion. See e.g., Koch, 928 F.2d at 1478, 1480; Bailey v. J.W.K. Props., Inc., 904 F.2d 918, 924-25 (4th Cir. 1990). Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 29 of 37 PageID #: 3183 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 23 security. To establish a prima facie case under Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act, and Rule 10b-5, the SEC must prove by a preponderance of the evidence: (1) a material misrepresentation, omission of material fact, or other fraudulent device; (2) in connection with the purchase, offer, or sale of a security; (3) with the requisite mental state. Aaron v. SEC, 446 U.S. 680, 695 (1980); SEC v. Gann, 565 F. 3d 932, 936 (5th Cir. 2009); SEC v. Seghers, 298 F. App’x 319, 328 (5th Cir. 2008). Violations of Section 17(a)(1), Section 10(b), and Rule 10b-5 require a showing of scienter. Aaron, 446 U.S. at 697. Violations of Sections 17(a)(2) and (a)(3) require, at most, a showing of negligence.9 See SEC v. Hopper, 2006 WL 778640 at *9 (S.D. Tex. Mar. 24 2006). If the Court finds that Sethi Petroleum’s JV units were securities, the second element has been satisfied: the statements were “in connection” with the offer, purchase, or sale of securities.10 Therefore, for this motion, the Commission need only establish that Sameer – directly, indirectly, as a control person under Exchange Act Section 20(a), or through another person or entity under Exchange Act Section 20(b) – made material misrepresentations or omissions, or used a fraudulent device, and acted with the requisite mental state. 2. Sameer Violated the Anti-Fraud Provisions of the Federal Securities Laws Defendants have violated Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)], Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)], and Rule 10b-5 [17 CFR § 240.10b-5] thereunder. Additionally, Defendant Sethi has violated 20(b) of the Exchange Act [15 U.S.C. § 78t(b)] and is liable, as a control person under Section 20(a) of the Exchange Act thereunder [15 U.S.C. § 78t(a) 9 The Supreme Court has never addressed whether negligence is necessary to prove a violation of Sections 17(a)(2) and (a)(3). In fact, the Court has suggested that, at least under Section 17(a)(3), the focus is only on the “effect of particular conduct on members of the investing public, rather than upon the culpability of the person responsible” for the conduct. Aaron, 446 U.S. at 696-97. 10 The “in connection with” requirement “is met if the fraud alleged ‘somehow touches upon’ or has ‘some nexus’ with ‘any securities transaction.’” SEC v. Rana Research, Inc., 8 F.3d 1358, 1362 (9th Cir. 1993). Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 30 of 37 PageID #: 3184 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 24 and (b)], for Sethi Petroleum’s primary violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. These statutes collectively prohibit both fraudulent statements and omissions and fraudulent schemes relating to the offer, purchase, or sale of securities through use of, among other things, the mails and instrumentalities of interstate commerce. Section 17(a)(1) of the Securities Act [15 U.S.C. § 77q(a)(1) ] and Section 10(b) of the Exchange Act [15 U.S.C. § 78j] and Rule 10b-5 [17 CFR § 240.10b-5] thereunder, require a finding of scienter to establish a violation; however, Sections 17(a)(2) and (3) of the Securities Act [15 U.S.C. § 77q(a)(2)-(3)] do not. Aaron v. SEC, 446 U.S. 680, 697 (1980); see also Steadman v. SEC, 603 F.2d 1126, 1133-34 (5th Cir 1979), aff’d, 450 U.S. 91 (1981). As discussed more fully below, Defendants violated these provisions by making false statements and conducting a fraudulent scheme. a. Sameer used the Mails and Instrumentalities of Interstate Commerce. To violate the anti-fraud provisions, the misstatements or scheme must use, among other things, the mails or instrumentalities of interstate commerce. Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)], Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)], and Rule 10b-5 [17 CFR § 240.10b-5] thereunder. Here, Defendants used the mails, telephonic communications, and electronic mail to solicit investors through material misrepresentations and omissions. [e.g., App. at 697-701, 707-13, 714-20]. b. Sameer Engaged in the Offer, Purchase and Sale of Securities. The “joint venture” interests offered and sold by Defendants are securities as discussed above in Section V(B), infra. c. Sameer Made Material Misrepresentations To Investors. Section 17(a)(2) of the Securities Act [15 U.S.C. § 77q(a)] makes it unlawful for any person, in the offer or sale of a security, by the use of any means or instruments of transportation or communication in interstate commerce or by use of the mails, directly or indirectly, to obtain money Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 31 of 37 PageID #: 3185 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 25 or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. Similarly, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5(b) [17 CFR § 240.10b-5(b)] thereunder make it unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange, in connection with the purchase or sale of a security, to, among other things, make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading in connection with the purchase or sale of any security. The “in connection with” requirement of Section 10(b) and Rule 10b-5 is satisfied if the fraud touches upon a securities transaction. See SEC v. Zandford, 535 U.S. 813, 819-20 (2002). Sethi and Sethi Petroleum solicited investors by making a number of materially false and misleading statements about the NDDF. The facts misrepresented to, and withheld from, investors in this case are material.11 As seen in the Statement of Undisputed Facts, Sethi’s material misrepresentations include: (i) falsely describing Sethi’s criminal history; (ii) falsely describing Sethi’s and Sethi Petroleum’s regulatory history; (iii) falsely claiming partnerships with major oil companies; (iv) misrepresenting the scope of the NDDF venture; (v) misrepresenting expected returns; and (vi) stating that investors funds would be used in accordance with the Operating Documents when, in reality, those funds were diverted for 11 Information is material if there is a substantial likelihood that disclosure of the misstated or omitted fact would have significantly altered the “total mix” of information to be considered by a reasonable investor. Basic Inc. v. Levinson, 485 U.S. 224, 231-32 (1988) (quoting TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976)). See also, Koehler v. Pulvers, 614 F. Supp. 829, 842 (S.D. Cal. 1985) (finding omissions and misrepresentations about “the use of investor funds” material). Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 32 of 37 PageID #: 3186 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 26 purposes not disclosed to investors. A reasonable investor would have considered all of these misrepresentations to be important in investment deliberations. d. Sameer Conducted a Fraudulent Scheme In addition to their fraudulent statements, Sethi and Sethi Petroleum also conducted a fraudulent scheme. Sections 17(a)(1) and (3) of the Securities Act [15 U.S.C. § 77q(a)(1), (3)] make it unlawful for any person, in the offer or sale of a security, by the use of any means or instruments of transportation or communication in interstate commerce or by use of the mails, directly or indirectly, to, among other things, employ any device, scheme, or artifice to defraud, or to engage in any transaction, practice or course of business which operates or would operate as a fraud or deceit upon the purchaser. Similarly, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5(a) and (c) [17 CFR § 240.10b-5(a), (c)] thereunder make it unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate comer or of the mails, or of any facility of any national securities exchange, in connection with the purchase or sale of a security, to, among other things, employ any device, scheme, or artifice to defraud, or to engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person. The “in connection with” requirement of Section 10(b) and Rule 10b-5 is satisfied if the fraud touches upon a securities transaction. See Zandford, 535 U.S. at 819-20. In Zandford, addressing a fraudulent scheme under Rule 10b-5(a) and a fraudulent course of business under Rule 10b-5(c), the high Court concluded: “[i]ndeed, each time respondent ‘exercised his power of disposition (of his customers’ securities) for his own benefit,’ that conduct, ‘without more,’ was a fraud.” Zandford, 535 U.S. at 815; see also Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128, 152 (1972) (noting that while Rule 10b-5(b) targets false statements or omissions, paragraphs (a) and (c) “are not so restricted”). Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 33 of 37 PageID #: 3187 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 27 To persuade investors to invest in NDDF, Defendants engaged in a practice and course of business of making untrue statements of material facts and material omissions, including those described in detail above. They also engaged in a practice and course of business of immediately misappropriating NDDF investor funds. [App. at 641-645, 722-24]. Instead of acquiring working interests in wells operated by major companies, Defendants spent the majority of invested funds on sales commissions, Sethi Petroleum overhead, and withdrawals by Sethi Petroleum, Sameer Sethi, and Praveen Sethi. Id. For perspective, Sethi Petroleum used more than twice as many investor funds for marketing and payroll expenses ($2.14 million) as in the drilling and completion of NDDF wells ($900,000). [App. at 641-642]. Though they had only raised $4 million of the $10 million they anticipated, Defendants had already overspent budgeted amounts for non-drilling expenses by a wide margin. Id. These fraudulent practices demonstrate that the proposed defendants were engaged in an overall scheme to defraud. See Zandford, 535 U.S. at 819-21; Grippo v. Perazzo, 357 F.3d 1218, 1223 (11th Cir. 2004). e. Sameer Acted with a High Degree of Scienter To establish violations of the antifraud provisions, the SEC must also establish that Defendants acted with scienter. Aaron v. SEC, 446 U.S. 680, 691 (1980). There is, however, no scienter requirement for actions under Sections 17(a)(2) and (3) of the Securities Act [15 U.S.C. § 77q(a)(2), (3)]. Scienter is the “mental state embracing intent to deceive, manipulate or defraud.” Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 (1976). And in the Fifth Circuit, scienter may be established by showing that the defendants acted intentionally or with severe recklessness. See Broad v. Rockwell Int’l Corp., 642 F. 2d 929 (5th Cir.) en banc, cert. denied 454 U.S. 965 (1981). Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 34 of 37 PageID #: 3188 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 28 Here, Defendants acted with scienter as they intentionally defrauded investors. Defendants knew that the oral and written misstatements they made to investors regarding their investments were false at the time they made them. Defendants also knew that they were misusing investor funds. [App. at 641-642, 722-24]. Even after misappropriating the funds, Defendants continued to solicit investment in NDDF, knowing that the representations therein did not match their history of misappropriation. [App. at 193, 714-20]. These facts demonstrate scienter in the extreme. Later, as if to eliminate any doubt about his intention to deceive, Sameer and his associates established Cambrian Resources, LLC the day after the Court entered its Preliminary Injunction barring him from offering securities. (Dkt. 169, p. 14). This Court has already determined, by clear and convincing evidence, that Sameer “hatched and executed” the scheme to establish Cambrian for the purpose of evading the Court’s order. (Id.). f. Sameer Is Liable as a Control Person for Sethi Petroleum’s Violations of the Antifraud Provisions of the Securities Laws To establish joint and several liability as a control person under Section 20(a) of the Exchange Act, a plaintiff must show an underlying violation and a person’s control over the violating entity. To establish the “control” prong, a plaintiff need only show that the alleged control person possessed “the power to control [the primary violator], not the exercise of the power to control.” In re Enron Corp. Sec., Derivative & ERISA Litig., 235 F. Supp. 2d 549, 595 (S.D. Tex. 2002) (citing G.A. Thompson & Co., Inc. v. Partridge, 636 F.2d 945, 958). In this case, as described above, there is no question that Sethi Petroleum and Sethi violated the antifraud provisions of the federal securities laws. Sameer Sethi was Sethi Petroleum’s President and sole Managing Member. [App. at 3, 18, 99]. Sethi created, owned, and managed the company from at least November 7, 2011 to May 2015, and controlled its operations. Id. Therefore, in addition to principal liability, Sethi is also jointly and severally liable for his Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 35 of 37 PageID #: 3189 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 29 company’s violations because he possessed the power to control Sethi Petroleum at all relevant times. Id. g. Sameer also Violated Securities Laws Through the Actions of Others Section 20(b) of the Exchange Act makes it unlawful for any person to violate the antifraud provisions of the federal securities laws “through or by means of another person.” As described above, Sethi directed his sales staff to provide information that he knew to be false. [App. at 714-20]. In late 2014, Sethi was directing his salespeople to tell prospective investors that (1) NDDF had already purchased interests in 12 profitable wells, which were producing a total of 1 million barrels of oil per month; (2) new investors would immediately begin receiving revenue checks from the wells; (3) the remaining 8 wells would be drilled by the end of 2014; and (4) investors could expect 30% to 60% returns on investment per year. [App. at 716]. As Sethi knew at the time, each of these claims was false. Sethi therefore knowingly and intentionally violated the securities laws and did so directly and indirectly through his sales staff. See SEC v. Daifotis, 874 F. Supp. 2d 870, 881 (N.D. Cal. 2012) (defendant was maker under Janus of misstatements communicated to public by financial consultants, when defendant made the misstatements internally to financial consultants with the “intent or reasonable expectation” that they be relayed to the investing public); Anderson v. McGrath, No. CV–11–01175, 2013 WL 1249154, at *7 (D. Ariz. Mar. 26, 2013) (holding that a plaintiff sufficiently pleaded that a defendant was the maker of a statement under Janus, even though the statement was communicated from the defendant to the plaintiff by a third-party broker, when the statement was made with the intent that it be repeated to investors). Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 36 of 37 PageID #: 3190 SEC v. Sethi Petroleum, et al. Motion for Summary Judgment – Page 30 VI. CONCLUSION For the foregoing reasons, the Court should grant the Commission’s motion for summary judgment as to Sameer Sethi, and grant it such other relief as it may be entitled. DATED: September 14, 2016 Respectfully submitted, /s/Matthew J. Gulde Matthew J. Gulde Illinois Bar No. 6272325 Jessica B. Magee Texas Bar No. 24037757 SECURITIES AND EXCHANGE COMMISSION Burnett Plaza, Suite 1900 801 Cherry Street, Unit #18 Fort Worth, TX 76102-6882 (817) 978-1410 (MJG) (817) 978-4927 (fax) guldem@sec.gov ATTORNEYS FOR PLAINTIFF SECURITIES AND EXCHANGE COMMISSION CERTIFICATE OF SERVICE On September 14, 2016, I electronically submitted the foregoing document with the Clerk of the Court for the U.S. District Court, Eastern District of Texas, using the electronic case filing system of the Court. /s/ Matthew J. Gulde Matthew J. Gulde Case 4:15-cv-00338-ALM Document 195 Filed 09/14/16 Page 37 of 37 PageID #: 3191 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS SHERMAN DIVISION SECURITIES AND EXCHANGE COMMISSION, § § Plaintiff, § § v. § Case No.: 4:15-CV-00388-ALM § SETHI PETROLEUM, LLC and § SAMEER P. SETHI, § § Defendants. § ________________________________________________ APPENDIX IN SUPPORT OF PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT AS TO SAMEER SETHI AND BRIEF IN SUPPORT The Securities and Exchange Commission incorporates by reference the appendix submitted in support of its Motion for Temporary Restraining Order, Docket No. 4-2, and now submits the attached appendix in support of its Motion for Summary Judgment as to Sameer Sethi and Brief in Support. Appendix pagination is consecutive to the previously filed appendix. The appendix contains: Description Appendix Citation Declaration of Marcus Helt App.000722 - 000724 Exhibit A – Sameer Sethi’s Deposition Transcript- December 4, 2015 App.000725 - 000802 Declaration of Matthew J. Gulde App. 000803 – 000804 Exhibit A – Sameer Sethi’s Declaration App. 000805 - 000807 Dated: September 14, 2016 Respectfully Submitted, /s/ Matthew J. Gulde Matthew J. Gulde Illinois Bar No. 6272325 Jessica B. Magee Texas Bar No. 24037757 SECURITIES AND EXCHANGE COMMISSION Burnett Plaza, Suite 1900 Case 4:15-cv-00338-ALM Document 195-1 Filed 09/14/16 Page 1 of 2 PageID #: 3192 SEC v. Sethi Petroleum, LLC, et al. Page 2 of 2 Motion for Summary Judgment - Appendix Index 801 Cherry Street, Unit #18 Fort Worth, TX 76102-6882 (817) 978-1410 (817) 978-4927 (fax) guldem@sec.gov ATTORNEYS FOR PLAINTFF SECURITIES AND EXCHANGE COMMISSION CERTIFICATE OF SERVICE On September 14, 2016, I electronically submitted the foregoing document with the Clerk of the Court for the U.S. District Court, Eastern District of Texas, using the electronic case filing system of the Court. /s/ Matthew J. Gulde Matthew J. Gulde Case 4:15-cv-00338-ALM Document 195-1 Filed 09/14/16 Page 2 of 2 PageID #: 3193 APP000722 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 1 of 86 PageID #: 3194 APP000723 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 2 of 86 PageID #: 3195 APP000724 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 3 of 86 PageID #: 3196 Sameer P. Sethi 1 DepoTexas, Inc. 1 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS 2 SHERMAN DIVISION 3 SECURITIES AND EXCHANGE * COMMISSION, * 4 * Plaintiff, * 5 * v. * Case No. 4:15-cv-338 6 * Judge Mazzant SETHI PETROLEUM, LLC and * 7 SAMEER P. SETHI, * * 8 Defendants. * 9 10 ************************************************************** ORAL DEPOSITION OF SAMEER P. SETHI 11 ************************************************************** 12 13 14 15 16 ANSWERS AND DEPOSITION OF SAMEER P. SETHI, 17 produced as a witness at the instance of the Receiver, 18 taken in the above-styled and -numbered cause on the 19 4th day of December, 2015, A.D., beginning at 20 10:11 a.m., before Terri Garcia, a Certified Shorthand 21 Reporter in and for the State of Texas, in the offices 22 of Anderson Tobin, PLLC, located at 13355 Noel Road, 23 Suite 1900, Dallas, Texas, in accordance with the 24 Federal Rules of Civil Procedure and the agreements 25 hereinafter set forth. EXHIBIT A APP000725 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 4 of 86 PageID #: 3197 Sameer P. Sethi 2 DepoTexas, Inc. 1 A P P E A R A N C E S 2 FOR THE RECEIVER, MARCUS HELT: 3 MR. MICHAEL S. HAYNES MR. EVAN R. BAKER 4 MR. MATTHEW PYEATT Gardere, Wynne, Sewell, LLP 5 1601 Elm Street, Suite 3000 Dallas, Texas 75201 6 (214) 999-3000 (214) 999-4667 (Fax) 7 FOR THE DEFENDANT, SAMEER P. SETHI: 8 MR. KENDAL B. REED 9 Anderson Tobin, PLLC 13355 Noel Road, Suite 1900 10 Dallas, Texas 75240 (972) 788-3778 11 (972) 789-1606 (Fax) 12 FOR PRAVEEN SETHI AND SHAHNAZ SETHI: 13 MR. RAFAEL C. RODRIGUEZ Gruber, Hurst, Elrod, Johansen, Hail, Shank 14 1445 Ross Avenue, Suite 2500 Dallas, Texas 75202 15 (214) 855-6809 (214) 855-6808 (Fax) 16 17 18 19 20 21 22 23 24 25 APP000726 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 5 of 86 PageID #: 3198 Sameer P. Sethi 3 DepoTexas, Inc. 1 I N D E X 2 Appearances . . . . . . . . . . . . . . . . . . Page 2 3 Exhibit Index . . . . . . . . . . . . . . . . . Page 4 4 Stipulations . . . . . . . . . . . . . . . . . Page 6 5 Examination by Mr. Haynes . . . . . . . . . . . Page 6 6 Signature and Corrections . . . . . . . . . . . Page 76 7 Reporter Certificate . . . . . . . . . . . . . Page 77 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 APP000727 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 6 of 86 PageID #: 3199 Sameer P. Sethi 4 DepoTexas, Inc. 1 E X H I B I T L I S T Page Page 2 No. Description Mrk'd Ident. 3 1 Joint Ventures/Contemplated 10 10 Joint Ventures 4 2 Affidavit of Bank of America 12 12 5 Bank Officer and/or Custodian of Records 6 3 2012 U.S. Individual Tax 13 13 7 Return for Sameer Sethi 8 4 2012 U.S. Individual Tax 21 21 Return for Praveen Sethi 9 and Shahnaz Sethi 10 5 Certified Copy of Limited 27 27 Liability Company Resolutions 11 Opening and Maintaining Deposit Accounts and Services 12 6 10/8/14 Withdrawal Slip 28 29 13 for $25,000 14 7 American National Bank of 28 29 Texas Statement of Account 15 Sameer P. Sethi 16 8 3/3/15 Withdrawal Slip 30 30 for $45,000 17 9 Bank of America statement 30 31 18 for Sethi Financial Group, Inc. 19 10 1/21/15 Withdrawal Slip 33 34 for $27,000 20 11 American National Bank of 33 34 21 Texas Statement of Account Sameer P. Sethi 22 12 American Express Statement 33 34 23 13 12/10/14 Withdrawal Slip 39 39 24 for $20,000 25 APP000728 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 7 of 86 PageID #: 3200 Sameer P. Sethi 5 DepoTexas, Inc. 1 14 American National Bank of 39 39 Texas Statement of Account 2 Sameer P. Sethi 3 15 American National Bank of 39 40 Texas Statement of Account 4 Praveen Sethi, Shahnaz Sethi 5 16 23 February 2015 43 43 Interoffice Memorandum to 6 Sameer Sethi from Michael R. Davis; 7 Weekly Status Update 8 17 8 September 2014 47 47 Interoffice Memorandum to 9 Sameer Sethi from Michael R. Davis; 10 Weekly Status Update 11 18 Commission Structure for 49 49 the Internal 9th floor on the 12 Bakken Patriot 5-8 13 19 Sethi Oil & Gas, Inc. Punch Bar 51 51 14 20 16 February 2015 57 57 Interoffice Memorandum to 15 Sameer Sethi from Michael R. Davis; 16 Re: Operational Review 17 21 Bakken Patriot 3 & 4 Joint 58 59 Venture Executive Summary 18 19 20 21 22 23 24 25 APP000729 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 8 of 86 PageID #: 3201 Sameer P. Sethi 6 DepoTexas, Inc. 1 P R O C E E D I N G S 2 THE REPORTER: Did y'all want to put any 3 agreements on the record before I swear in the witness? 4 MR. HAYNES: I don't have any. Do you 5 have any? 6 MR. REED: As far as agreements, no. 7 But I do, you know, like we discussed through e-mail, 8 my intention here is -- and Sameer's intention here is 9 to exercise his Fifth Amendment right, given the 10 possibility of criminal charges that can result from 11 the allegations that are in the SEC's complaint. 12 MR. HAYNES: Understood. 13 Okay. I have nothing else if you want 14 to swear the witness in. 15 SAMEER P. SETHI, 16 having been first duly sworn, testified as follows: 17 EXAMINATION 18 BY MR. HAYNES: 19 Q. Mr. Sethi, my name is Michael Haynes. I 20 represent Marcus Helt, who is the Court-appointed 21 Receiver over you and Sethi Petroleum. You're familiar 22 with Mr. Helt, correct? 23 A. Per the advise of my counsel, I'm exercising 24 my Fifth Amendment right to not answer the question. 25 MR. HAYNES: That he knows Mr. Helt? APP000730 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 9 of 86 PageID #: 3202 Sameer P. Sethi 7 DepoTexas, Inc. 1 MR. REED: I've told you that's going to 2 be his answer. 3 MR. HAYNES: Okay. 4 Q. (BY MR. HAYNES) I'm going to ask you some 5 questions today. Your answers will be given under 6 oath, which means that it has the same effect as if you 7 were testifying before a judge or a jury. For the 8 assistance of the court reporter, it's important that 9 we do not talk over one another. So I'm going to do my 10 best to allow you to finish speaking before I ask a 11 question, and I ask that you allow me to finish asking 12 a question before you respond. 13 Because this deposition is being 14 transcribed, it is important that answer every question 15 with an audible answer and not simply shake or nod your 16 head. If at any time you do not understand a question, 17 please tell me and I will attempt to rephrase my 18 question. If you do answer a question, however, I'm 19 going to assume that you understood the question. 20 If at any time you need a break, please 21 feel free to ask me and we can take a break. 22 Can you please state your full name for 23 the record. 24 A. Sameer Praveen Sethi. 25 Q. Is there any reason today why you would not APP000731 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 10 of 86 PageID #: 3203 Sameer P. Sethi 8 DepoTexas, Inc. 1 be able to answer my questions honestly and completely? 2 A. Per the advise of my counsel, I will be 3 exercising my Fifth Amendment right and not answer 4 that. 5 Q. Are you currently taking any medications that 6 would impact your ability to recall facts or answer any 7 questions? 8 A. Per the advice of my counsel, I will be 9 exercising my Fifth Amendment right and not answer 10 that. 11 Q. Throughout the course of asking these 12 questions, your counsel or other counsel may raise 13 objections or your counsel may give you instructions, 14 for example, to plead the Fifth Amendment right. Just 15 want to make clear that they can raise objections or 16 instruct you whether or not to answer or whether or not 17 to plead the Fifth Amendment right. They cannot give 18 you an answer for any question. 19 Are you currently employed? 20 A. Per the advice of my counsel, I will be 21 exercising my Fifth Amendment right. 22 MR. HAYNES: To speed it along, do you 23 want to just stipulate that he says Fifth Amendment and 24 it'll be an exact recitation of that, that statement 25 that Mr. Sameer just said? APP000732 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 11 of 86 PageID #: 3204 Sameer P. Sethi 9 DepoTexas, Inc. 1 MR. REED: He can answer. 2 MR. HAYNES: Okay. 3 Q. (BY MR. HAYNES) What is your current 4 occupation? 5 A. Per the advice of the my counsel, I will be 6 exercising my Fifth Amendment right. 7 Q. Since the appointment of the Receiver, you 8 have earned income, correct? 9 A. Per the advice of my counsel, I will be 10 exercising my Fifth Amendment right. 11 Q. Since the appointment of the Receiver, you 12 have not reported any of those earnings to the 13 Receiver, correct? 14 A. Per the advice of my counsel, I will be 15 exercising my Fifth Amendment right. 16 Q. I noticed earlier when you gave the court 17 reporter your identification that you had a wallet. Do 18 you have any cash or debit cards in that wallet? 19 A. Per the advice of my counsel, I will be 20 exercising my Fifth Amendment right. 21 Q. Would any of that cash -- strike that. 22 That cash would be income to you since 23 the appointment of the Receiver, correct? 24 A. Per the advice of my counsel, I will be 25 exercising my Fifth Amendment right. APP000733 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 12 of 86 PageID #: 3205 Sameer P. Sethi 10 DepoTexas, Inc. 1 Q. Any bank accounts associated with the debit 2 cards or credit cards in your wallet would contain 3 income to you since the appointment of the Receiver, 4 correct? 5 A. Per the advice of my counsel, I will be 6 exercising my Fifth Amendment right. 7 Q. I'm going to hand you what I'd like to mark 8 as Exhibit 1. 9 (Exhibit No. 1 was marked.) 10 Q. (BY MR. HAYNES) At the top of Exhibit 1 is a 11 heading that says Joint Ventures - Contemplated Joint 12 Ventures, and there are 13 bullet point entries under 13 that heading. Throughout the course of this 14 deposition, I will refer to joint ventures. I'm 15 providing you this list of those entities so that 16 throughout the course of the deposition, when I refer 17 to joint ventures, I am referring to any or all of 18 these entities. 19 MR. REED: Is this a list you prepared 20 or is this something in the documents from the 21 corporation? 22 MR. HAYNES: This is a list that we 23 prepared from documents that we found at Sethi 24 Petroleum's headquarters. 25 MR. REED: Okay. So this is something APP000734 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 13 of 86 PageID #: 3206 Sameer P. Sethi 11 DepoTexas, Inc. 1 y'all prepared as a summary? 2 MR. HAYNES: Correct. 3 MR. REED: Okay. 4 MR. HAYNES: Correct. 5 MR. BAKER: It's also part of the 6 Receivership estate. 7 MR. HAYNES: Yes, it was -- correction. 8 This was also included in the motion to clarify what is 9 under the Receivership order that the Receiver filed, 10 this was attached and -- 11 MR. REED: Okay. 12 MR. HAYNES: -- the Court's order says 13 that these are all Receivership entities that are 14 listed on this. 15 MR. REED: Okay. 16 MR. HAYNES: On the Exhibit 1. 17 Q. (BY MR. HAYNES) Mr. Sethi, you are the 18 former CEO of Sethi Petroleum, correct? 19 A. Per the advice of my counsel, I will be 20 exercising my Fifth Amendment right. 21 Q. You were paid a regular salary by Sethi 22 Petroleum, correct? 23 A. Per the advice of my counsel, I will be 24 exercising my Fifth Amendment right. 25 Q. And you are the sole owner of Sethi Petroleum APP000735 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 14 of 86 PageID #: 3207 Sameer P. Sethi 12 DepoTexas, Inc. 1 LLC, correct? 2 A. Per the advice of my counsel, I will be 3 exercising my Fifth Amendment right. 4 Q. You are the former CEO of Sethi Financial 5 Group, Inc., correct? 6 A. Per the advice of my counsel, I will be 7 exercising my Fifth Amendment right. 8 Q. And you have been paid a salary by Sethi 9 Financial Group, Inc., correct? 10 MR. REED: Per the advice of my counsel, 11 I will be exercising my Fifth Amendment right. 12 (Exhibit No. 2 was marked.) 13 Q. (BY MR. HAYNES) I'm handing you Exhibit 2. 14 This is a printout that was produced to the Receiver by 15 Bank of America in response to a subpoena that the 16 Receiver issued for a credit card in the name of Sethi 17 Financial Group, Inc. and Sameer Sethi, individually. 18 On page -- on Page 5 of that document, it says 19 Applicant Detail Record. Name, Sameer Sethi. This is 20 your application for a credit card, correct? 21 A. Per the advice of my counsel, I will be 22 exercising my Fifth Amendment right. 23 Q. On the last page of this exhibit, about 10 24 lines down it says application received time stamp, 25 January 5th, 2010. That means you applied for this APP000736 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 15 of 86 PageID #: 3208 Sameer P. Sethi 13 DepoTexas, Inc. 1 credit card in January 2010, correct? 2 A. Per the advice of my counsel, I will be 3 exercising my Fifth Amendment right. 4 Q. Middle of the page, staying on that same 5 page, it says first cardholder, primary guarantor; 6 first name, Sameer; last name, Sethi; again, indicating 7 that this was your application for a credit card, 8 correct? 9 A. Per the advice of my counsel, I will be 10 exercising my Fifth Amendment right. 11 Q. A few lines down, it says your annual salary 12 is $280,000. Did you make $280,000 as of January 5th, 13 2010 per year? 14 A. Per the advice of my counsel, I will be 15 exercising my Fifth Amendment right. 16 Q. As of January 5th, 2010, you did not have an 17 annual salary of $280,000 per year, correct? 18 A. Per the advice of my counsel, I will be 19 exercising my Fifth Amendment right. 20 (Exhibit No. 3 was marked.) 21 Q. (BY MR. HAYNES) I'm handing you Exhibit 3. 22 I've handed you a tax return that is a federal tax 23 return for you, personally, for tax year 2012. The 24 name on the top says Sameer Sethi. Is that your Social 25 Security number next to it? APP000737 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 16 of 86 PageID #: 3209 Sameer P. Sethi 14 DepoTexas, Inc. 1 A. Per the advice of my counsel, I will be 2 exercising my Fifth Amendment right. 3 Q. So this is your tax return, correct? 4 A. Per the advice of my counsel, I will be 5 exercising my Fifth Amendment right. 6 Q. On Page 7 of this exhibit, this is a 7 Schedule C for Sameer Sethi, and it says the name of 8 the business where income is earned is from Sethi 9 Financial Group, correct? 10 A. Per the advice of my counsel, I will be 11 exercising my Fifth Amendment right. 12 Q. This evidences that you were claiming to the 13 IRS that you received income from Sethi Financial 14 Group, Inc., correct? 15 A. Per the advice of my counsel, I'm exercising 16 my Fifth Amendment right. 17 Q. On Page 18 of the tax return -- 18 MR. REED: Sorry. What page did you 19 say? 20 MR. HAYNES: 18, 1-8. 21 MR. REED: They're numbered or... 22 MR. BAKER: No, you've just got to 23 count. 24 MR. HAYNES: It is towards the back. It 25 says Auto Expesne Work Sheet at the top. APP000738 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 17 of 86 PageID #: 3210 Sameer P. Sethi 15 DepoTexas, Inc. 1 Q. (BY MR. HAYNES) On this 2012 federal tax 2 return, you assert that you drove 63,450 miles for 2012 3 on business, correct? 4 A. Per the advice of my counsel, I'm exercising 5 my Fifth Amendment right. 6 Q. You didn't really drive 63,450 miles on 7 business in 2012, did you? 8 A. Per the advice of my counsel, I'm exercising 9 my Fifth Amendment right. 10 Q. On the first page of that Exhibit 3, it says 11 that your adjusted gross income was $40,283 for tax 12 year 2012. You had adjusted gross income of more than 13 $40,283 in tax year 2012, correct? 14 A. Per the advice of my counsel, I'm exercising 15 my Fifth Amendment right. 16 Q. You exercised control over the entity known 17 as Sethi Operating Company, correct? 18 A. Per the advice of my counsel, I'm exercising 19 my Fifth Amendment right. 20 Q. You exercised control over the entity known 21 as Sethi Oil & Gas, Inc., correct? 22 A. Per the advice of my counsel, I'm exercising 23 my Fifth Amendment right. 24 Q. You were a decision-maker for each of the 25 joint ventures, again, those entities being listed on APP000739 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 18 of 86 PageID #: 3211 Sameer P. Sethi 16 DepoTexas, Inc. 1 Exhibit 1, correct? 2 MR. REED: Just a minute. I'm going to 3 go ahead and object. We're getting way outside of the 4 scope of the Receiver's ability that's given in the 5 Receivership order. Now, I've kind of been lenient as 6 we've been going through this, knowing that he's taking 7 the Fifth Amendment right here. But as to the ability 8 to ask questions under the authority given to the 9 Receiver under the order, this -- these questions are 10 way outside that -- that -- that authority at this 11 point. 12 MR. HAYNES: I disagree but your 13 objection's noted. 14 MR. RODRIGUEZ: Also, dovetailing on 15 that objection, I'll make an objection. My name's 16 Rafael Rodriguez. I'm appearing on behalf of 17 Mr. Praveen Sethi, who is a nonparty movant in this 18 case against Sameer Sethi and Sethi Petroleum. 19 I'm objecting on the basis that the 20 questions that are -- have been asked since I have 21 appeared here today are outside the scope of the 22 limited discovery that was permitted by the Court as it 23 relates to Praveen Sethi's Motion to Unfreeze Assets 24 and Shahnaz Sethi's Motion to Unfreeze Assets. 25 MR. HAYNES: This deposition is not APP000740 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 19 of 86 PageID #: 3212 Sameer P. Sethi 17 DepoTexas, Inc. 1 specific to that motion. 2 MR. REED: I'm -- 3 MR. RODRIGUEZ: Object. 4 MR. REED: Go ahead. 5 MR. RODRIGUEZ: Thank you very much for 6 that, Michael. Then I'm objecting to any of the 7 testimony that's elicited here today being used against 8 my client or at the hearing related to my clients, 9 Praveen Sethi and Shahnaz Sethi's Motion to Unfreeze 10 Assets. 11 MR. HAYNES: Noted. 12 MR. REED: Michael, I mean, before -- I 13 mean, because at this point, I'm not seeing a -- a 14 logical, other than harassment here, of how these 15 questions fit within the -- the powers given to the 16 Receiver to conduct this deposition. Unless you can 17 tell me otherwise, we may need to stop this and seek 18 the Court's guidance then. 19 MR. HAYNES: The Receiver has broad 20 powers to investigate the assets, liabilities and 21 transactions that occurred prior to the appointment of 22 the Receiver. Each of these questions are aimed at 23 either dealing with Praveen Sethi's Motion to Unfreeze 24 Assets or general investigation of assets, liabilities 25 and historical transactions of Sethi Petroleum or the APP000741 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 20 of 86 PageID #: 3213 Sameer P. Sethi 18 DepoTexas, Inc. 1 related entities. 2 MR. REED: Asking him whether a control 3 person or what doesn't have anything to do with 4 investigating the liabilities, assets of the 5 Receivership or state of those entities, does it? 6 MR. HAYNES: Yes, I believe it does. 7 MR. REED: And how so? 8 MR. HAYNES: I just believe it does. 9 I'm not going to get into a debate with you. If you 10 want to take it to the judge, we can. But I'm going to 11 ask my questions. If he wants to take -- 12 MR. REED: Other than it just seems to 13 be here for harassment otherwise. I'm mean, if you're 14 going to ask about questions that fall within this 15 authority here, then, you know, we can, you know, have 16 him assert his Fifth Amendment right. If you're just 17 here to harass him and ask him questions that fall 18 outside, which clearly "are you a control person" and 19 whatnot that you just asked fall outside of that 20 ability, then we're going to need to stop this and take 21 this before the judge. 22 MR. HAYNES: Each of those entities are 23 Receivership entities. You're saying that the Receiver 24 of a Recevership entity is not able to ask questions 25 about whether Sameer Sethi was a control person of APP000742 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 21 of 86 PageID #: 3214 Sameer P. Sethi 19 DepoTexas, Inc. 1 those entities? 2 MR. REED: Yes. 3 MR. HAYNES: That's your position? 4 MR. REED: Well, if you're going to ask 5 if he -- if information about accounts, deposits, 6 testimony about the accounts, properties, liabilities, 7 then I'm -- we're all ears. 8 MR. RODRIGUEZ: Additionally, Michael, 9 you just said that this -- the testimony you're trying 10 to get here today relates to the Motions to Unfreeze 11 Assets. And I just made an objection saying that the 12 questions you're asking here today, I'm objecting to 13 the basis or the fact that they don't relate to the 14 Motions to Unfreeze Assets. And just let me make sure 15 that I'm clear. Your response was that this deposition 16 is not about those Motions to Unfreeze Assets. 17 MR. HAYNES: No. My response is, this 18 deposition is not solely about those. 19 MR. RODRIGUEZ: So it -- so you do 20 intend to take this deposition also for the purposes or 21 as it relates to the Motions to Unfreeze Assets? 22 MR. HAYNES: Correct. 23 MR. RODRIGUEZ: Okay. 24 MR. HAYNES: I disagree. I think it's 25 all covered under the Receivership order and the APP000743 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 22 of 86 PageID #: 3215 Sameer P. Sethi 20 DepoTexas, Inc. 1 Receiver's power to investigate what happened. If you 2 want to say that we can't go forward, we can take that 3 to the judge. Otherwise, I'm going to ask my 4 questions. And if he wants to take the Fifth Amendment 5 right -- 6 MR. REED: I'm going to instruct him not 7 to answer those questions that are outside of the 8 Receivership order. 9 MR. HAYNES: Understood. But we'll go 10 through each specific one, and I want you to note your 11 objection and instruct on each specific question. 12 MR. REED: Okay. 13 MR. HAYNES: Where were we? 14 Q. (BY MR. HAYNES) You made decisions, 15 Mr. Sethi, on how funds invested by investors into a 16 joint venture was spent, correct? 17 A. Per the advice of my counsel, I'm exercising 18 my Fifth Amendment right. 19 Q. You were a signatory on every bank account 20 owned by Sethi Petroleum, Sethi Financial Group and 21 each of the joint venture, correct? 22 A. Per the advice of my counsel, I am exercising 23 my Fifth Amendment right. 24 Q. Sethi Petroleum and Sethi Financial Group, 25 Inc. are two entities that are treated functionally as APP000744 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 23 of 86 PageID #: 3216 Sameer P. Sethi 21 DepoTexas, Inc. 1 one entity, correct? 2 A. Per the advice of my counsel, I'm exercising 3 my Fifth Amendment right. 4 Q. Praveen Sethi is your father, correct? 5 A. Per the advice of my counsel, I'm exercising 6 my Fifth Amendment right. 7 Q. Praveen Sethi is the former CEO of Sethi 8 Financial Group, Inc., correct? 9 A. Per the advice of my counsel, I'm exercising 10 my Fifth Amendment right. 11 Q. Praveen Sethi drew a salary from Sethi 12 Financial Group, Inc., correct? 13 A. Per the advice of my counsel, I'm exercising 14 my Fifth Amendment right. 15 (Exhibit No. 4 was marked.) 16 Q. (BY MR. HAYNES) I'm handing you Exhibit 4. 17 I've handed you a tax return that is a federal tax 18 return for Praveen Sethi personally for tax year 2012. 19 On Page 10, Schedule C -- 20 MR. RODRIGUEZ: Is there a page -- 21 what's your page reference? 22 MR. HAYNES: Schedule C, Profit or Loss 23 from Business. 24 Q. (BY MR. HAYNES) -- this states that Praveen 25 Sethi received income from Sethi Financial Group, Inc. APP000745 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 24 of 86 PageID #: 3217 Sameer P. Sethi 22 DepoTexas, Inc. 1 in tax year 2012, correct? 2 MR. RODRIGUEZ: Hold on, Michael, just 3 to make sure. My Schedule C has Shahnaz Sethi's name 4 up here. 5 MR. HAYNES: Count 10. It should be 6 highlighted. 7 MR. RODRIGUEZ: Got it. 8 Q. (BY MR. HAYNES) I'll re-ask -- restate the 9 question. This Schedule C, Profit or Loss from 10 Business, shows that Praveen Sethi received income from 11 Sethi Financial Group, Inc. in 2012, correct? 12 A. Per the advice of my counsel, I'm exercising 13 my Fifth Amendment right. 14 MR. RODRIGUEZ: Object to foundation. 15 Q. (BY MR. HAYNES) On the next page, Part 4, 16 this states that Praveen Sethi drove 43,400 miles on 17 business for Sethi Financial Group, Inc., correct? 18 MR. RODRIGUEZ: Object to foundation. 19 MR. REED: Objection, calls for 20 speculation. 21 Q. (BY MR. HAYNES) Did you instruct Praveen 22 Sethi to drive 43,400 miles on business? 23 MR. RODRIGUEZ: Objection; outside the 24 scope of the discovery related -- as it relates to 25 Praveen Sethi and Shahnaz Sethi's Motion to Unfreeze APP000746 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 25 of 86 PageID #: 3218 Sameer P. Sethi 23 DepoTexas, Inc. 1 Assets. 2 MR. REED: And I'll object to that. The 3 question is outside the Receiver's authority under 4 the -- the order dated May 14th, 2015. 5 Q. (BY MR. HAYNES) On the first page of the 6 exhibit, it also shows that for tax year 2012, Praveen 7 Sethi's total adjusted gross income for the year was 8 $48,078? 9 MR. RODRIGUEZ: Object -- 10 Q. (BY MR. HAYNES) -- correct? 11 MR. RODRIGUEZ: Objection, lacks 12 foundation. 13 MR. HAYNES: Please let me finish my 14 question before you assert your objection. 15 MR. RODRIGUEZ: Sorry about that, 16 Michael. 17 Q. (BY MR. HAYNES) Praveen Sethi is an officer 18 or director of Sethi Petroleum, LLC, correct? 19 A. Per the advice of my counsel, I'm exercising 20 my Fifth Amendment right. 21 Q. Praveen Sethi is an officer or director of 22 Sethi Financial Group, Inc., correct? 23 MR. RODRIGUEZ: Objection to outside the 24 scope of the discovery as it relates to Praveen and 25 Shahnaz Sethi's Motion to Unfreeze Assets. APP000747 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 26 of 86 PageID #: 3219 Sameer P. Sethi 24 DepoTexas, Inc. 1 Q. (BY MR. HAYNES) Praveen Sethi has authority 2 to make decisions for Sethi Petroleum, LLC, correct? 3 MR. RODRIGUEZ: Same objection, outside 4 the scope of the discovery -- limited discovery as it 5 relates to Praveen and Shahnaz Sethi's Motion to 6 Unfreeze Assets. 7 MR. REED: And I'll object that the 8 question's outside the Receiver's authority under the 9 Court's May 14th, 2015 order. 10 Q. (BY MR. HAYNES) Praveen Sethi has authority 11 to make decisions for Sethi Financial Group, Inc., 12 correct? 13 MR. RODRIGUEZ: Same objection I just 14 lodged. 15 MR. REED: Object that the question's 16 outside the Court's authority under the May 14th, 2015 17 order -- I mean, the Receiver's authority. Sorry. 18 MR. RODRIGUEZ: Hey, Michael, are you 19 okay if I say "Objection; outside the scope of 20 discovery", that we have an understanding that means 21 outside the scope of the Court's order as it relates to 22 Praveen and Shahnaz Sethi's Motion to Unfreeze Assets? 23 MR. HAYNES: Yes. 24 MR. RODRIGUEZ: Okay. Thank you. 25 MR. HAYNES: You objected, but he didn't APP000748 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 27 of 86 PageID #: 3220 Sameer P. Sethi 25 DepoTexas, Inc. 1 answer. 2 MR. REED: I'm sorry? 3 MR. HAYNES: You objected but he didn't 4 answer. 5 MR. REED: To which question? I'm 6 sorry. 7 MR. HAYNES: That Praveen Sethi has 8 authority to make decisions for Sethi Financial Group, 9 Inc. 10 MR. RODRIGUEZ: Objection; outside the 11 scope of discovery. 12 A. Per the advice of my counsel, I am exercising 13 my Fifth Amendment right. 14 MR. HAYNES: I don't know that I got an 15 ans- -- I know I got the two objections, but you can 16 relodge them when I reask this question. 17 Q. (BY MR. HAYNES) Praveen Sethi has authority 18 to make decisions for Sethi Petroleum, LLC? 19 MR. RODRIGUEZ: Objection; outside the 20 scope of discovery. 21 MR. REED: I object that it's outside 22 the Receiver's grant of authority under the May 14th, 23 2015 Court's order. 24 A. Per the advice of my counsel, I'm exercising 25 my Fifth Amendment right. APP000749 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 28 of 86 PageID #: 3221 Sameer P. Sethi 26 DepoTexas, Inc. 1 Q. (BY MR. HAYNES) Praveen Sethi has made 2 decisions on behalf of Sethi Petroleum, such as how to 3 spend money, correct? 4 A. Per the advice of my counsel, I'm exercising 5 my Fifth Amendment right. 6 MR. RODRIGUEZ: Objection; lacks 7 foundation; and objection; outside the scope of 8 discovery. 9 MR. HAYNES: Yeah, on foundation, I 10 don't know that you get to object on foundation. 11 You're not defending the deposition. You get to object 12 on scope. 13 MR. RODRIGUEZ: Well, I can object to 14 foundation. Yeah, I think I can. 15 MR. HAYNES: Okay. 16 MR. RODRIGUEZ: I don't think he has the 17 requisite foundation to answer the question, or you 18 haven't established it through the deposition 19 testimony, and so I'm making my objection. 20 MR. HAYNES: Okay. 21 Q. (BY MR. HAYNES) Praveen Sethi has made 22 decisions on behalf of Sethi Petroleum such as whether 23 and how to settle litigation against Sethi Petroleum, 24 correct? 25 MR. RODRIGUEZ: Objection; outside the APP000750 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 29 of 86 PageID #: 3222 Sameer P. Sethi 27 DepoTexas, Inc. 1 scope of discovery. 2 A. Per the advice of my counsel, I am exercising 3 my Fifth Amendment right. 4 Q. Praveen Sethi was paid a regular salary by 5 Sethi Petroleum, correct? 6 A. Per the advice of my counsel, I'm exercising 7 my Fifth Amendment right. 8 Q. You were paid a regular salary by Sethi 9 Petroleum, correct? 10 A. Per the advice of my counsel, I'm exercising 11 my Fifth Amendment right. 12 Q. You had authority to withdraw funds from bank 13 accounts owned by Sethi Petroleum, LLC, correct? 14 A. Per the advice of my counsel, I'm exercising 15 my Fifth Amendment right. 16 Q. Praveen Sethi had authority to withdraw funds 17 from bank accounts owned by Sethi Petroleum, LLC, 18 correct? 19 A. Per the advice of my counsel, I'm exercising 20 my Fifth Amendment right. 21 (Exhibit No. 5 was marked.) 22 Q. (BY MR. HAYNES) I'm handing you Exhibit 5. 23 Exhibit 5 is a copy of a signature card for a bank 24 account at Bank of America owned by Sethi Petroleum, 25 LLC that was produced to the Receiver in response to a APP000751 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 30 of 86 PageID #: 3223 Sameer P. Sethi 28 DepoTexas, Inc. 1 subpoena served on Bank of America, LLC. The first 2 page of this signature card indicates that Praveen 3 Sethi is a coowner of the bank account owned by Sethi 4 Petroleum, LLC, correct? 5 A. Per the advice of my counsel, I'm exercising 6 my Fifth Amendment right. 7 Q. Praveen Sethi also had authority to withdraw 8 money from bank accounts owned by joint ventures, 9 correct? 10 A. Per the advice of my counsel, I will be 11 exercising my Fifth Amendment right. 12 Q. You often withdrew sums of cash in excess of 13 $10,000 from bank accounts owned by Sethi Petroleum and 14 Sethi Financial Group, Inc., correct? 15 MR. REED: Per the advice of my counsel, 16 I'm exercising my Fifth Amendment right. 17 Q. (BY MR. HAYNES) Often, that cash was then 18 deposited into your personal checking account, correct? 19 A. Per the advice of my counsel, I'm exercising 20 my Fifth Amendment right. 21 (Exhibit Nos. 6 and 7 were marked.) 22 MR. RODRIGUEZ: Which is going to be 6? 23 MR. HAYNES: 6 is going to be the one on 24 top that -- 25 MR. RODRIGUEZ: Yeah. Can you just APP000752 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 31 of 86 PageID #: 3224 Sameer P. Sethi 29 DepoTexas, Inc. 1 identify it for the record somehow? 2 MR. HAYNES: This is a copy of a 3 checking account withdrawal slip from Bank of America 4 that was produced to the Receiver in response to a 5 subpoena served on Bank of America. 6 Exhibit 7 is a bank statement from 7 American National Bank of Texas that was produced to 8 the Receiver in response to a subpoena served by the 9 receiver on American National Bank. 10 Q. (BY MR. HAYNES) Mr. Sethi, on Exhibit 6, 11 this indicates that on October 8th, 2014, you withdrew 12 $25,000 of cash from account ending 7259, correct -- 13 I'm sorry -- no, 5759, correct? 14 A. Per the advice of my counsel, I'm exercising 15 my Fifth Amendment right. 16 Q. Exhibit 7 reflects that on the next day, 17 October 9th of 2014, you deposited $25,000 of cash into 18 your personal checking account at American National 19 Bank, correct? 20 A. Per the advice of my counsel, I will be 21 exercising my Fifth Amendment right. 22 Q. Praveen Sethi regularly withdrew sums of cash 23 in excess of $10,000 from bank accounts owned by Sethi 24 Petroleum, correct? 25 MR. REED: Objection; calls for APP000753 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 32 of 86 PageID #: 3225 Sameer P. Sethi 30 DepoTexas, Inc. 1 speculation. 2 MR. RODRIGUEZ: Objection; lacks 3 foundation; calls for speculation. 4 A. Per the advice of my counsel, I'm exercising 5 my Fifth Amendment right. 6 Q. (BY MR. HAYNES) You were aware that Sethi -- 7 Praveen Sethi regularly withdrew sums of cash in excess 8 of $10,000 from bank accounts owned by Sethi Petroleum, 9 correct? 10 A. Per the advice of my counsel, I'm exercising 11 my Fifth Amendment right. 12 Q. Sometimes that cash withdrawn by Praveen 13 Sethi was used to make a payment on credit cards owned 14 by you, personally, correct? 15 MR. RODRIGUEZ: Objection; lacks 16 foundation; calls for speculation. 17 A. Per the advice of my counsel, I'm exercising 18 my Fifth Amendment right. 19 (Exhibit Nos. 8 and 9 were marked.) 20 Q. (BY MR. HAYNES) Exhibit 8 is a copy of a 21 withdrawal slip produced to the Receiver by Bank of 22 America in response to a subpoena served by the 23 Receiver on Bank of America. Exhibit 8 indicates that 24 on -- or evidences that on March 3rd, 2015, Praveen 25 Sethi withdrew $45,000 from account ending 5759, APP000754 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 33 of 86 PageID #: 3226 Sameer P. Sethi 31 DepoTexas, Inc. 1 correct? 2 MR. RODRIGUEZ: Objection; lacks 3 foundation; calls for speculation. Also, Michael, 4 whose account is this? 5 MR. HAYNES: Sethi Petroleum, LLC. 6 MR. REED: Same objections. 7 A. Per the advice of my counsel, I am exercising 8 my Fifth Amendment right. 9 Q. (BY MR. HAYNES) Exhibit 9 is a copy of a 10 statement from Bank of America pulled off of Bank of 11 America's website using a login we found at corporate 12 headquarters. It indicates it is a credit card in the 13 name of Sethi Financial Group, Inc. and Sameer Sethi 14 individually. On Page 4 of that exhibit, it indicates 15 on March 3rd, 2015, the same day that $45,000 was 16 withdrawn by Praveen Sethi, $45,000 was paid on this 17 credit card at the Texas Banking Center. 18 MR. RODRIGUEZ: Objection, assumes facts 19 not evidence; calls for speculation. 20 MR. REED: Same objections. 21 A. Per the advice of my counsel, I am exercising 22 my Fifth Amendment right. 23 Q. (BY MR. HAYNES) The charges for this credit 24 card -- let me strike that. 25 Are you aware of this credit card? APP000755 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 34 of 86 PageID #: 3227 Sameer P. Sethi 32 DepoTexas, Inc. 1 A. Per the advice of my counsel, I'm exercising 2 my Fifth Amendment right. 3 Q. This is a credit card that you regularly used 4 to charge personal expenses, correct? 5 A. Per the advice of my counsel, I'm exercising 6 my Fifth Amendment right. 7 Q. You had a card issued in your name associated 8 with this account, correct? 9 A. Per the advice of my counsel, I'm exercising 10 my Fifth Amendment right. 11 Q. Looking at this credit card statement, there 12 are charges here that are not business charges, 13 correct? 14 MR. RODRIGUEZ: Objection; lacks 15 foundation; calls for speculation. 16 A. Per the advice of my counsel, I'm exercising 17 my Fifth Amendment right. 18 Q. (BY MR. HAYNES) You made these charges on 19 this card, correct? 20 A. Per the advice of my counsel, I'm exercising 21 my Fifth Amendment right. 22 Q. Looking at Page 5, I've highlighted a 23 transaction for Nordstrom Rack, $1,284.60. That was 24 not a business expense, was it? 25 MR. RODRIGUEZ: Objection; lacks APP000756 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 35 of 86 PageID #: 3228 Sameer P. Sethi 33 DepoTexas, Inc. 1 foundation; calls for speculation. 2 A. Per the advice of my counsel, I'm exercising 3 my Fifth Amendment right. 4 Q. (BY MR. HAYNES) On Page 6, I've highlighted 5 another transaction to Condom Sense of Dallas for 6 $68.09. That was not a business transaction, correct? 7 MR. RODRIGUEZ: Objection -- objection; 8 lacks foundation; calls for speculation. Also, it's 9 harassing, I think, Michael. 10 MR. REED: Same objections. 11 MR. RODRIGUEZ: There's a lot of other 12 transactions you could have highlighted here. 13 A. Per the advice of my counsel, I'm exercising 14 my Fifth Amendment right. 15 Q. (BY MR. HAYNES) Other times that Praveen 16 Sethi withdrew cash, he deposited that cash into your 17 personal checking account, correct? 18 MR. RODRIGUEZ: Objection; assumes facts 19 not in evidence; lacks foundation; calls for 20 speculation. 21 MR. REED: Same objections. 22 A. Per the advice of my counsel, I am exercising 23 my Fifth Amendment right. 24 (Exhibit Nos. 10-12 were marked.) 25 Q. (BY MR. HAYNES) I'm handing you Exhibits 10 APP000757 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 36 of 86 PageID #: 3229 Sameer P. Sethi 34 DepoTexas, Inc. 1 and 11. The top one is 10, the next one is 11, the 2 next one is 12. So, for the record, Exhibit 10 is a 3 copy of a withdrawal slip produced to the Receiver by 4 Bank of America in response to a subpoena issued by the 5 Receiver to Bank of America. 6 This is a copy of the withdrawal slip 7 for account number 5759 owned by Sethi Petroleum, LLC. 8 Exhibit 11 is a statement of a bank account checking 9 account owned by Sameer Sethi that was produced to the 10 Receiver by American National Bank in reponse to a 11 subpoena issued on American National Bank by the 12 Receiver. 13 Exhibit 12 is a copy of an American 14 Express credit card statement in the name of Sameer P. 15 Sethi that was produced to the Receiver in response to 16 a subpoena issued by the Receiver to American Express. 17 Re-ask the question. Some of the times 18 that Praveen Sethi withdrew cash from Sethi Petroleum, 19 LLC's checking account, he deposited that money into 20 your personal checking account, correct? 21 MR. RODRIGUEZ: Objection; assumes facts 22 not evidence; lacks foundation; calls for speculation. 23 MR. REED: Same -- same objections. And 24 I believe this question's been asked before. 25 MR. HAYNES: It has. APP000758 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 37 of 86 PageID #: 3230 Sameer P. Sethi 35 DepoTexas, Inc. 1 MR. REED: So you're asking the same 2 question again? 3 MR. HAYNES: I'm laying foundation. 4 MR. REED: To get the same answer again? 5 MR. HAYNES: Correct. 6 MR. REED: Object to harassment and 7 asking the same question over and over again. 8 A. Per the advice of my counsel, I'm exercising 9 my Fifth Amendment right. 10 Q. (BY MR. HAYNES) Mr. Sethi, Exhibit 10 11 indicates that on January 21st, 2015, Praveen Sethi 12 withdrew 27,000 from Sethi Petroleum's LLC's bank 13 account, correct? 14 MR. RODRIGUEZ: Objection; calls for 15 speculation; lacks foundation. 16 MR. REED: Same objections. 17 A. Per the advice of my counsel, I'm exercising 18 my Fifth Amendment right. 19 Q. (BY MR. HAYNES) Looking at Exhibit 11, it 20 shows that on two days later, on January 23rd, a cash 21 deposit in the same amount, $27,000, was deposited into 22 your personal checking account, correct? 23 MR. REED: Objection; calls for 24 speculation. 25 A. Per the advice of my counsel, I'm exercising APP000759 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 38 of 86 PageID #: 3231 Sameer P. Sethi 36 DepoTexas, Inc. 1 my Fifth Amendment right. 2 Q. (BY MR. HAYNES) This statement indicates 3 that a large part of the balance of that account was 4 used to pay an American Express credit card in the 5 amount of $15,592.12, correct? 6 MR. RODRIGUEZ: Objection; vague. And 7 objection; calls for speculation. 8 MR. REED: Same objections. 9 A. Per the advice of my counsel, I'm exercising 10 my Fifth Amendment right. 11 Q. (BY MR. HAYNES) So if we look at Exhibit 12 12 on Page 3, I've highlighted, it shows a payment coming 13 from -- or I'm sorry. Strike that. Let me start 14 over. 15 On Page 3 of Exhibit 12, it reflects a 16 payment on your credit card in the exact same amount, 17 which is $15,522.12, correct? 18 MR. RODRIGUEZ: Objection; assumes facts 19 not in evidence; calls for speculation. 20 MR. REED: Same objections. 21 A. Per the advice of my counsel, I'm exercising 22 my Fifth Amendment right. 23 Q. (BY MR. HAYNES) Looking at the charges that 24 were made on that card, I've highlighted various 25 transaction such as Molly Maid of DFW on Page 3, APP000760 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 39 of 86 PageID #: 3232 Sameer P. Sethi 37 DepoTexas, Inc. 1 Cavender Boot on Page 4, Sheplers on Page 4, Sheplers 2 on Page 4, CVS Pharmacy on Page 4, Cavender's on Page 3 4. Those are not business expenses, correct? 4 A. Per the advice of my counsel, I'm exercising 5 my Fifth Amendment right. 6 MR. RODRIGUEZ: Objection; lacks 7 foundation. 8 MR. HAYNES: Can we take a break? 9 MR. REED: Yeah, sure. 10 (Break was taken from 10:53 a.m. 11 to 11:03 a.m.) 12 MR. HAYNES: In the interest of time and 13 speeding this along, Mr. Rodriguez, I was informed by 14 my esteemed colleague that local rule CV-30 in the 15 Eastern District of Texas limits objections during an 16 oral deposition to "objection, leading"; "objection, 17 form" and no other objections. 18 MR. RODRIGUEZ: Awesome. 19 MR. HAYNES: So this'll go a lot 20 smoother and faster -- 21 MR. RODRIGUEZ: Yeah, absolutely. 22 MR. HAYNES: -- if you'll limit your 23 objections to that, please. 24 MR. RODRIGUEZ: Great. 25 MR. HAYNES: Okay. APP000761 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 40 of 86 PageID #: 3233 Sameer P. Sethi 38 DepoTexas, Inc. 1 MR. RODRIGUEZ: As long as -- as long -- 2 are we on the record? As long as we can agree that 3 when I object to form, that includes my objection that 4 some of the questions you're asking are outside the 5 scope of the discovery as it relates to the Motions to 6 Unfreeze Assets. If not, I'm going to continue to make 7 that objection. 8 MR. HAYNES: I don't know if that's a 9 valid objection. 10 MR. RODRIGUEZ: Well, it doesn't matter 11 if you know it or not. I'm just saying, do you agree 12 that my objection to form covers that or not? And if 13 not, then I have to make the objection. 14 MR. HAYNES: I will stipulate that you 15 saying it includes you also making that objection. 16 MR. RODRIGUEZ: Yeah, that's all I'm 17 saying. 18 MR. HAYNES: I'm not stipulating that 19 it's a valid objection. 20 MR. RODRIGUEZ: Yeah. We can have that 21 agreement. So when I object to form, it includes my 22 objection that the question that you're asking is 23 outside the scope of discovery as it relates to the 24 Court's order related to Praveen Sethi and Shahnaz 25 Sethi's Motion to Unfreeze Assets. APP000762 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 41 of 86 PageID #: 3234 Sameer P. Sethi 39 DepoTexas, Inc. 1 MR. HAYNES: Okay. 2 MR. RODRIGUEZ: Agreed? You agree on 3 that? 4 MR. HAYNES: Agreed. 5 Q. (BY MR. HAYNES) Okay. I'm handing you 6 exhibit -- 7 MR. RODRIGUEZ: And just for the record, 8 I was -- I was unaware of that local rule, so my 9 apologies, Michael, to you. I was not aware of that 10 rule. 11 MR. BAKER: Kendal, you're not getting 12 away. You made the objections, too. I'm just 13 kidding. It's my last day. 14 (Exhibit Nos. 13-15 were marked.) 15 Q. (BY MR. HAYNES) I'm handing you Exhibits 13, 16 14 and 15. Exhibit 13 is a copy of a withdrawal slip 17 from a bank account owned by Sethi Petroleum, LLC at 18 Bank of America that was produced to the Receiver by 19 Bank of America in response to a subpoena served by the 20 Receiver on Bank of America. 21 Exhibit 14 is a checking account 22 statement in the name of Sameer P. Sethi produced to 23 the Receiver by American National Bank in response to a 24 subpoena issued by the Receiver to American National 25 Bank. APP000763 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 42 of 86 PageID #: 3235 Sameer P. Sethi 40 DepoTexas, Inc. 1 Exhibit 15 is a checking account in the 2 name of Praveen Sethi produced to the Receiver by 3 American National Bank in response to a subpoena issued 4 by the Receiver to American National Bank. 5 Mr. Sethi, occasionally or -- strike 6 that. 7 Mr. Sethi, many times, Praveen Sethi 8 withdrew cash from Sethi Petroleum, LLC's bank accounts 9 and deposited it into accounts owned by each of you and 10 Praveen Sethi, correct? 11 MR. RODRIGUEZ: Objection, form. 12 MR. REED: Objection, form. 13 A. Per the advice of my counsel, I'm exercising 14 my Fifth Amendment right. 15 Q. (BY MR. HAYNES) Looking at Exhibit 13, this 16 evidences that on December 10th, 2014, Praveen Sethi 17 withdrew $20,000 from Sethi Petroleum, LLC bank account 18 5759, correct? 19 MR. RODRIGUEZ: Objection, form. 20 MR. REED: Objection, form. 21 A. Per the advice of my counsel, I'm exercising 22 my Fifth Amendment right. 23 Q. (BY MR. HAYNES) Looking at Exhibit 14 and 15 24 simultaneously, this indicates Exhibit 14, on the next 25 day, December 11th, $10,000 was deposited into the bank APP000764 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 43 of 86 PageID #: 3236 Sameer P. Sethi 41 DepoTexas, Inc. 1 account of Sameer P. Sethi, correct? 2 MR. RODRIGUEZ: Objection, form. 3 MR. REED: Objection, form. 4 A. Per the advice of my counsel, I'm exercising 5 my Fifth Amendment right. 6 Q. (BY MR. HAYNES) And on Exhibit 15, that same 7 day, December 11th, $10,000 was deposited into the 8 personal account of Praveen Sethi, correct? 9 MR. RODRIGUEZ: Objection, form. 10 MR. REED: Objection, form. 11 A. Per the advice of my counsel, I'm exercising 12 my Fifth Amendment right. 13 Q. (BY MR. HAYNES) Praveen Sethi regularly 14 moved money from bank accounts owned by Sethi Petroleum 15 and Sethi Financial Group, Inc. to bank accounts owned 16 by Praveen Sethi, individually, correct? 17 MR. RODRIGUEZ: Objection, form. 18 MR. REED: Objection, form. 19 A. Per the advice of my counsel, I'm exercising 20 my Fifth Amendment right. 21 Q. (BY MR. HAYNES) You're aware of how Praveen 22 Sethi spent the money that was moved to his personal 23 accounts, correct? 24 MR. RODRIGUEZ: Objection, form. 25 MR. REED: Objection, form. APP000765 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 44 of 86 PageID #: 3237 Sameer P. Sethi 42 DepoTexas, Inc. 1 A. Per the advice of my counsel, I'm exercising 2 my Fifth Amendment right. 3 Q. (BY MR. HAYNES) The money that Praveen Sethi 4 moved to his personal checking account was used to 5 acquire personal property and real estate, correct? 6 MR. RODRIGUEZ: Objection, form. 7 MR. REED: Objection, form. 8 A. Per the advice of my counsel, I'm exercising 9 my Fifth Amendment right. 10 Q. (BY MR. HAYNES) Praveen Sethi has withdrawn 11 funds from bank accounts owned by Sethi Petroleum, LLC 12 and Sethi Financial Group, Inc. to pay personal credit 13 cards owned by Praveen Sethi and Shahnaz Sethi, 14 correct? 15 MR. RODRIGUEZ: Objection, form. 16 MR. REED: Objection, form. 17 A. Per the advice of my counsel, I'm exercising 18 my Fifth Amendment right. 19 Q. (BY MR. HAYNES) Money is -- was frequently 20 moved from bank accounts owned by joint ventures to 21 bank accounts owned by Sethi Petroleum or Sethi 22 Financial Group, Inc., correct? 23 MR. RODRIGUEZ: Objection, form. 24 MR. REED: Objection, form. 25 A. Per the advice of my counsel, I'm exercising APP000766 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 45 of 86 PageID #: 3238 Sameer P. Sethi 43 DepoTexas, Inc. 1 my Fifth Amendment right. 2 (Exhibit No. 16 was marked.) 3 Q. (BY MR. HAYNES) I'm handing you Exhibit 16. 4 This is an Interoffice Memorandum found at corporate 5 headquarter's records from Michael Davis to Sameer 6 Sethi dated February -- sorry -- February 23rd, 2015. 7 You're familiar with Michael Davis, correct? 8 A. Per the advice of my counsel, I'm exercising 9 my Fifth Amendment right. 10 Q. (BY MR. HAYNES) On February 23rd, 2015, 11 Michael Davis was the CFO of Sethi Petroleum and Sethi 12 Financial Group, Inc., correct? 13 A. Per the advice of my counsel, I'm exercising 14 my Fifth Amendment right. 15 MR. RODRIGUEZ: Objection, form. 16 Q. (BY MR. HAYNES) This memorandum that is 17 Exhibit 16 was a Weekly Status Update from Michael 18 Davis to you informing you of the status of various 19 items related to Sethi Petroleum, LLC and Sethi 20 Financial, Group, Inc. correct? 21 MR. REED: Objection, form. 22 MR. RODRIGUEZ: Objection, form. 23 A. Per the advice of my counsel, I'm exercising 24 my Fifth Amendment right. 25 Q. (BY MR. HAYNES) Looking at Page 3 of APP000767 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 46 of 86 PageID #: 3239 Sameer P. Sethi 44 DepoTexas, Inc. 1 Exhibit 16, I've highlighted a statement in here that 2 says "Cash situation. I have moved money from RW and 3 S12 to cover payroll." Do you see that statement? 4 A. Per the advice of my counsel, I'm exercising 5 my Fifth Amendment right. 6 Q. RW stands for Ragle White and S12 stands for 7 Sam 1 & 2, the joint ventures, correct? 8 MR. REED: Objection, form. 9 MR. RODRIGUEZ: Objection, form. 10 A. Per the advice of my counsel, I'm exercising 11 my Fifth Amendment right. 12 Q. (BY MR. HAYNES) Money is frequently moved 13 from a bank account owned by one joint venture to a 14 bank account owned by another joint venture, correct? 15 MR. REED: Objection, form. 16 MR. RODRIGUEZ: Objection, form. 17 A. Per the advice of my counsel, I'm exercising 18 my Fifth Amendment right. 19 Q. (BY MR. HAYNES) Sethi Petroleum and Sethi 20 Financial Group, Inc. did not maintain any records of 21 intercompany transfers between bank accounts owned by 22 any of Sethi Petroleum, Sethi Financial Group, Inc. or 23 any joint venture, correct? 24 MR. REED: Objection, form. 25 MR. RODRIGUEZ: Objection, form. APP000768 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 47 of 86 PageID #: 3240 Sameer P. Sethi 45 DepoTexas, Inc. 1 A. Per the advice of my counsel, I'm exercising 2 my Fifth Amendment right. 3 Q. (BY MR. HAYNES) The personal home of Praveen 4 Sethi is or was used as corporate headquarters for 5 Sethi Petroleum, LLC, correct? 6 MR. REED: Objection, form. 7 MR. RODRIGUEZ: Objection, form. 8 A. Per the advice of my counsel, I'm exercising 9 my Fifth Amendment right. 10 Q. (BY MR. HAYNES) The personal home of Praveen 11 Sethi is or was used as corporate headquarters for 12 Sethi Financial Group, Inc., correct? 13 MR. RODRIGUEZ: Objection, form. 14 MR. REED: Objection, form. 15 A. Per the advice of my counsel, I'm exercising 16 my Fifth Amendment right. 17 Q. (BY MR. HAYNES) The personal home of 18 Sethi -- I'm sorry -- of Praveen Sethi is or was used 19 as corporate headquarters for many of the joint 20 ventures, correct? 21 MR. RODRIGUEZ: Objection, form. 22 MR. REED: Objection, form. 23 A. Per the advice of my counsel, I'm exercising 24 my Fifth Amendment right. 25 Q. (BY MR. HAYNES) Approximately $13 million of APP000769 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 48 of 86 PageID #: 3241 Sameer P. Sethi 46 DepoTexas, Inc. 1 investor money has been raised by Sethi Petroleum or 2 Sethi Financial Group, Inc., correct? 3 MR. REED: Objection, form. 4 MR. RODRIGUEZ: Objection, form. 5 A. Per the advice of my counsel, I'm exercising 6 my Fifth Amendment right. 7 Q. (BY MR. HAYNES) Less than $3 million of that 8 investor money was actually spent on the acquisition of 9 mineral interests, correct? 10 MR. RODRIGUEZ: Objection, form. 11 MR. REED: Objection, form. 12 A. Per the advice of my counsel, I'm exercising 13 my Fifth Amendment right. 14 Q. (BY MR. HAYNES) Less than one million 15 dollars of investor money has actually been returned to 16 investors, correct? 17 MR. REED: Objection, form. 18 MR. RODRIGUEZ: Objection, form. 19 A. Per the advice of my counsel, I'm exercising 20 my Fifth Amendment right. 21 Q. (BY MR. HAYNES) Less than one million 22 dollars of revenue has been received by Sethi Petroleum 23 or Sethi Financial Group, Inc. attributable to mineral 24 interests that have been acquired, correct? 25 MR. REED: Objection, form. APP000770 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 49 of 86 PageID #: 3242 Sameer P. Sethi 47 DepoTexas, Inc. 1 MR. RODRIGUEZ: Objection, form. 2 A. Per the advice of my counsel, I'm exercising 3 my Fifth Amendment right. 4 Q. (BY MR. HAYNES) Approximately $2 million of 5 investor money was used to pay personal credit cards of 6 Praveen Sethi, Shahnaz Sethi and Sameer P. Sethi, 7 correct? 8 MR. REED: Objection, form. 9 MR. RODRIGUEZ: Objection, form. 10 A. Per the advice of my counsel, I'm exercising 11 my Fifth Amendment right. 12 (Exhibit No. 17 was marked.) 13 Q. (BY MR. HAYNES) I'm handing you Exhibit 17. 14 This is an Internal Memorandum from Michael Davis to 15 you dated September 8th, 2014, correct? 16 MR. RODRIGUEZ: Objection, form. 17 MR. REED: Objection, form. 18 A. Per the advice of my counsel, I'm exercising 19 my Fifth Amendment right. 20 Q. (BY MR. HAYNES) On Page 1, there is a 21 statement from Michael Davis to you, asking, quote, 22 "Was the 37,000 that was pulled from BoA NDDF for the 23 AMEX bill? If so, not to sound like Ahmad, we have to 24 stop moving money like that, it will get us into 25 trouble eventually," end quote. Correct? APP000771 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 50 of 86 PageID #: 3243 Sameer P. Sethi 48 DepoTexas, Inc. 1 MR. RODRIGUEZ: Objection, form. 2 MR. REED: Objection, form. 3 A. Per the advice of my counsel, I'm exercising 4 my Fifth Amendment right. 5 Q. (BY MR. HAYNES) In that statement, BoA 6 stands for Bank of America, correct? 7 MR. REED: Objection, form. 8 MR. RODRIGUEZ: Objection, form. 9 A. Per the advice of my counsel, I'm exercising 10 my Fifth Amendment right. 11 Q. (BY MR. HAYNES) And you understand NDDF in 12 that statement stands for North Dakota Drilling Fund, 13 correct? 14 MR. REED: Objection, form. 15 MR. RODRIGUEZ: Objection, form. 16 A. Per the advice of my counsel, I'm exercising 17 my Fifth Amendment right. 18 Q. (BY MR. HAYNES) Approximately $4 million of 19 investor money has been spent on salaries of employees 20 of Sethi Petroleum or Sethi Financial Group, Inc., 21 correct? 22 MR. RODRIGUEZ: Objection, form. 23 MR. REED: Objection, form. 24 A. Per the advice of my counsel, I'm exercising 25 my Fifth Amendment right. APP000772 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 51 of 86 PageID #: 3244 Sameer P. Sethi 49 DepoTexas, Inc. 1 Q. (BY MR. HAYNES) Those salaries included 2 telephone marketers employed by Sethi Petroleum or 3 Sethi Financial Group, Inc. who are responsible for 4 soliciting investments from third-party investors, 5 correct? 6 MR. REED: Objection, form. 7 MR. RODRIGUEZ: Objection, form. 8 A. Per the advice of my counsel, I'm exercising 9 my Fifth Amendment right. 10 (Exhibit No. 18 was marked.) 11 Q. (BY MR. HAYNES) I'm handing you Exhibit 18. 12 The telemarketers employed by Sethi Petroleum or Sethi 13 Financial Group, Inc. were paid a commission of between 14 12 and 15 percent on all investor money raised, 15 correct? 16 MR. RODRIGUEZ: Objection, form. 17 MR. REED: Objection, form. 18 A. Per the advice of my counsel, I'm exercising 19 my Fifth Amendment right. 20 Q. (BY MR. HAYNES) This Exhibit 18 is a 21 commission structure for the Bakken Patriot 5-8 signed 22 by you, correct? 23 MR. RODRIGUEZ: Objection, form. 24 MR. REED: Objection, form. 25 A. Per the advice of my counsel, I'm exercising APP000773 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 52 of 86 PageID #: 3245 Sameer P. Sethi 50 DepoTexas, Inc. 1 my Fifth Amendment right. 2 Q. (BY MR. HAYNES) And this Exhibit 18 reflects 3 that the countersigned party would be compensated a 4 minimum of 12-percent commission for all dollars 5 raised, correct? 6 MR. RODRIGUEZ: Objection, form. 7 MR. REED: Objection, form. 8 A. Per the advice of my counsel, I'm exercising 9 my Fifth Amendment right. 10 Q. (BY MR. HAYNES) The minimum 12-percent 11 commission paid to telephone marketers was in addition 12 to their regular hourly wages, correct? 13 MR. RODRIGUEZ: Objection, form. 14 MR. REED: Objection, form. 15 A. Per the advice of my counsel, I'm exercising 16 my Fifth Amendment right. 17 Q. (BY MR. HAYNES) Less than 20 percent of 18 total investor money raised by Sethi Petroleum or Sethi 19 Financial, Group, Inc. was actually spent in the 20 acquisition of mineral interests, correct? 21 MR. RODRIGUEZ: Objection, form. 22 MR. REED: Objection, form. And object, 23 it's outside the scope of the Receivership's order 24 dated May 14, 2015. 25 A. Per the advice of my counsel, I'm exercising APP000774 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 53 of 86 PageID #: 3246 Sameer P. Sethi 51 DepoTexas, Inc. 1 my Fifth Amendment right. 2 Q. (BY MR. HAYNES) You provided a script to the 3 telemarketing employees to use during their sales 4 calls, correct? 5 MR. RODRIGUEZ: Objection, form. 6 MR. REED: I'm going to object. This is 7 outside the scope of the May 14, 2015 Receivership 8 powers granted by the Court. Instruct the client not 9 to answer. 10 MR. HAYNES: So you're instructing not 11 to answer? 12 MR. REED: Yes. 13 MR. HAYNES: Okay. 14 (Exhibit No. 19 was marked.) 15 Q. (BY MR. HAYNES) I'm handing you Exhibit 19. 16 This is a document -- I will represent to you, this is 17 a document we found in your office with what appears to 18 be telephone scripts. I have tabbed a page that is 13 19 pages in and highlighted. I've highlighted the part 20 that says quote, "Because of current market conditions, 21 our investors are seeing over 40 percent incredible 22 returns and are capitalizing on some tax benefits," 23 correct? 24 MR. RODRIGUEZ: Objection, form. 25 MR. REED: Objection that this APP000775 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 54 of 86 PageID #: 3247 Sameer P. Sethi 52 DepoTexas, Inc. 1 questioning, this whole line of questioning is outside 2 of the Receivership's powers granted in the 3 May 14, 2015 order that only gives the Receiver power 4 to ask as to the accounts, properties, liabilities or 5 employees of the Receivership estate. Therefore, I'm 6 instructing the witness not to answer the question or 7 any questions in this line of questioning. 8 MR. HAYNES: Okay. 9 Q. (BY MR. HAYNES) The other two highlighted 10 parts on page -- that same page under C, and on the 11 next page, A, did you give those instructions to the 12 telemarketing employees of Sethi Petroleum, Inc. or 13 Sethi Financial Group, Inc. 14 MR. RODRIGUEZ: Object. Sorry. Sethi 15 Petroleum. 16 Q. (BY MR. HAYNES) Strike that. Sethi 17 Petroleum. I'm sorry. I got the wrong word. Let me 18 rephrase that question. On that page and the next 19 page, which would be Page, I believe, 13 and 14, C and 20 D -- or C and A that are highlighted, did you give the 21 telemarketing employees of Sethi Petroleum, LLC or 22 Sethi Financial Group, Inc. instructions to make these 23 representations to investors? 24 MR. RODRIGUEZ: Objection, form. 25 MR. REED: Objection, form. And I APP000776 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 55 of 86 PageID #: 3248 Sameer P. Sethi 53 DepoTexas, Inc. 1 object that this line of questioning is harassing and 2 outside the scope of the Receivership's powers granted 3 under the May 14, 2015 order and instruct the witness 4 not to answer. 5 Q. (BY MR. HAYNES) Not only were there written 6 instructions, but you also specifically instructed 7 sales personnel orally to represent to investors that 8 they would receive at least a 40 percent return on 9 their investment, correct? 10 MR. REED: Objection, form. 11 MR. REED: How many of these do we have, 12 Michael? Do we just need to, I mean, stop the 13 deposition here because this is getting harassing. 14 It's outside the scope of the Receivership order. 15 Unless you can show me how it fits within that, this is 16 just getting to the point of harassment. 17 MR. HAYNES: Any claims that Sethi 18 Petroleum, LLC may have against Sameer Sethi is an 19 asset of the Receivership estate. We are entitled to 20 investigate assets of the Receivership estate. 21 MR. REED: I think that's an overly 22 broad reading of this order, and it's a harassing line 23 of questioning. You're here to ask about the accounts, 24 properties, liabilities. And as it was represented to 25 me when you started this whole request for his APP000777 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 56 of 86 PageID #: 3249 Sameer P. Sethi 54 DepoTexas, Inc. 1 deposition was in line for the freeze -- the unfreeze 2 motions by Praveen and his wife. We've gone way 3 outside of that at this point. 4 MR. HAYNES: Let me see how many I've 5 got here left. These all relate to the operations. 6 I've got about five more questions on the assets and I 7 have -- well, I'll just ask my questions and if at some 8 point you decide you want to take it to the judge, we 9 can. 10 MR. REED: Well, if you've got questions 11 about assets but not about representations made or as 12 to instructions made here, then -- then we're not going 13 to do those. But if you've got questions about assets 14 that fall within the scope of this order, then we can 15 do those. 16 MR. HAYNES: I think they all do. I'm 17 going to ask my questions. If you want to shut it 18 down, you can. 19 MR. REED: Okay. 20 MR. HAYNES: And we'll decide where to 21 go from there. 22 MR. REED: Okay. 23 Q. (BY MR. HAYNES) No Sethi entity has acquired 24 any mineral interests since August of 2014, correct? 25 MR. RODRIGUEZ: Objection, form. APP000778 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 57 of 86 PageID #: 3250 Sameer P. Sethi 55 DepoTexas, Inc. 1 A. Per the advice of my counsel, I'm exercising 2 my Fifth Amendment right. 3 Q. (BY MR. HAYNES) Yet, approximately $1.5 4 million has been raised from investors since that last 5 acquisition in August of 2014, correct? 6 MR. RODRIGUEZ: Objection, form. 7 MR. REED: Objection, form. 8 A. Per the advice of my counsel, I'm exercising 9 my Fifth Amendment right. 10 Q. (BY MR. HAYNES) At the time the Receiver was 11 appointed, Sethi Petroleum, Inc., Sethi Financial 12 Group, Inc. and all of the joint ventures combined had 13 less than $100,000 in cash, correct? 14 MR. RODRIGUEZ: Objection, form. 15 MR. REED: Objection, form. 16 A. Per the advice of my counsel, I'm exercising 17 my Fifth Amendment right. 18 Q. (BY MR. HAYNES) That means 100 percent of 19 the investor money in excess of that $100,000 was spent 20 on something other than the acquisition of mineral 21 interests, correct? 22 MR. RODRIGUEZ: Objection, form. 23 MR. REED: Objection, form. 24 A. Per the advice of my counsel, I'm exercising 25 my Fifth Amendment right. APP000779 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 58 of 86 PageID #: 3251 Sameer P. Sethi 56 DepoTexas, Inc. 1 Q. (BY MR. HAYNES) In fact, other than that 2 approximately $100,000, 100 percent of the investor 3 money received since the last acquisition of mineral 4 interests was spent on operating expenses and transfers 5 to insiders, correct? 6 MR. REED: Objection, form. 7 MR. RODRIGUEZ: Objection, form. 8 A. Per the advice of my counsel, I'm exercising 9 my Fifth Amendment right. 10 Q. (BY MR. HAYNES) Employees of Sethi Petroleum 11 or Sethi Financial Group, Inc. solicited money from the 12 investors with knowledge that those investors would not 13 be paid back, correct? 14 MR. REED: Objection, form. 15 MR. RODRIGUEZ: Objection, form. 16 A. Per the advice of my counsel, I'm exercising 17 my Fifth Amendment right. 18 Q. (BY MR. HAYNES) Employees of Sethi 19 Petroleum, LLC or Sethi Financial Group, Inc., 20 solicited money from investors with actual intent to 21 defraud those investors out of their money, correct? 22 MR. REED: Objection, form. 23 MR. RODRIGUEZ: Objection, form. 24 A. Per the advice of my counsel, I'm exercising 25 my Fifth Amendment right. APP000780 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 59 of 86 PageID #: 3252 Sameer P. Sethi 57 DepoTexas, Inc. 1 (Exhibit No. 20 was marked.) 2 Q. (BY MR. HAYNES) I'm handing you Exhibit 20. 3 This is an Interoffice Memorandum from Michael Davis to 4 you, dated February 16, 2015. Direct your attention to 5 Page 2. Well, first, do you recall receiving this 6 memo? 7 A. Per the advice of my counsel, I'm exercising 8 my Fifth Amendment right. 9 Q. (BY MR. HAYNES) This memo is regarding, 10 quote, "Operational Review," close quote, correct? 11 MR. REED: Objection, form. 12 MR. RODRIGUEZ: Objection, form. 13 A. Per the advice of my counsel, I'm exercising 14 my Fifth Amendment right. 15 Q. (BY MR. HAYNES) Direct your attention to 16 Page 2, the highlighted portion that reads, quote, 17 "Diane is good for now" close quote. Do you 18 understand Diane to be the investor relations person 19 employed by Sethi Petroleum, LLC? 20 MR. RODRIGUEZ: Objection, form. 21 A. Per the advice of my counsel, I am exercising 22 my Fifth Amendment right. 23 Q. (BY MR. HAYNES) Continuing with that 24 statement, it says, quote "She, for the most part, will 25 say what we need said, but will not lie to the APP000781 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 60 of 86 PageID #: 3253 Sameer P. Sethi 58 DepoTexas, Inc. 1 investors. She feels very uncomfortable with not being 2 completely transparent, so I would agree that we would 3 limit what information Diane is made aware of." 4 Do you see that statement? 5 A. Per the advice of my counsel, I'm exercising 6 my Fifth Amendment right. 7 Q. (BY MR. HAYNES) Did you understand that 8 statement to mean that Sethi Petroleum, LLC was 9 intentionally withholding information from investors? 10 MR. RODRIGUEZ: Objection, form. 11 MR. REED: Objection, form. 12 A. Per the advice of my counsel, I'm exercising 13 my Fifth Amendment right. 14 Q. (BY MR. HAYNES) At the time money was 15 solicited from investors, prospective investors were 16 told that at least 75 percent of their investment would 17 be spent on the acquisition of mineral interests, 18 correct? 19 MR. RODRIGUEZ: Objection, form. 20 MR. REED: Objection, form. I also 21 object that this question's outside the scope of the 22 Recevership's granted authority in the May 14, 2015 23 order and instruct the witness not to answer. 24 (Exhibit No. 21 was marked.) 25 Q. (BY MR. HAYNES) I'm handing you Exhibit 21. APP000782 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 61 of 86 PageID #: 3254 Sameer P. Sethi 59 DepoTexas, Inc. 1 On Page 41 -- I'll show you my copy. 2 MR. REED: Which page? 3 MR. HAYNES: It's highlighted. About 4 halfway through the packet. 5 MR. RODRIGUEZ: Is there any other kind 6 of other identification at the bottom we can refer to? 7 Is there a Bates label? 8 MR. HAYNES: Bates label 014006. 9 Q. (BY MR. HAYNES) Mr. Sethi, I've handed you 10 the Offering Memorandum from Bakken Patriot 3 & 4 Joint 11 Venture. On Page 41 which is Bates labeled at the 12 bottom ending in 014006, under the heading "Use of 13 Proceeds", it states that "The venture will use the 14 initial joint venture capitalization proceeds for 15 initial operations, which include acquisition of an 16 interest in each of the prospect wells for the benefit 17 of the venture, payment of the venture's cost to drill 18 or reenter test, and if warranted, to complete each of 19 the prospect wells in one potentially productive zone. 20 Payment of all organizational costs relating to the 21 formation of the venture and payment of a one-time 22 management fee to the managing venturer," correct? 23 MR. RODRIGUEZ: Objection, form. 24 MR. REED: Objection, form. I also 25 object that it's outside the scope of the May 14, 2015 APP000783 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 62 of 86 PageID #: 3255 Sameer P. Sethi 60 DepoTexas, Inc. 1 Receivership order. 2 Q. (BY MR. HAYNES) On the next page that ends 3 Bates label 014007, under the heading of Compensation 4 of Managing Venturer, it states, "We will receive a 5 one-time management fee in an amount equal to 20 6 percent of the aggregate amount contributed by the 7 venturers for the purchase of units less any applicable 8 placement agent fees," correct? 9 MR. RODRIGUEZ: Objection, form. 10 MR. REED: Objection, form. 11 A. Per the advice of my counsel, I am exercising 12 my Fifth Amendment right. 13 Q. (BY MR. HAYNES) That Offering Memorandum 14 indicates that investors were told as to that joint 15 venture only 20 percent of their investment would be 16 used on something other than the acquisition of mineral 17 interests, correct? 18 MR. RODRIGUEZ: Objection, form. 19 MR. REED: Objection, form. I also 20 object that it's outside the scope of the May 14, 2015 21 Receivership order. And I'll instruct the witness not 22 to answer. 23 Q. (BY MR. HAYNES) Money from investors that 24 went to Sethi Petroleum, Sethi Financial Group or any 25 of the joint ventures was transferred to Sambina APP000784 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 63 of 86 PageID #: 3256 Sameer P. Sethi 61 DepoTexas, Inc. 1 Properties, Sambina Brookview Center, Sambina Homes and 2 Sambina Trust, correct? 3 MR. RODRIGUEZ: Objection, form. 4 MR. REED: Objection, form. 5 A. Per the advice of my counsel, I am exercising 6 my Fifth Amendment right. 7 Q. (BY MR. HAYNES) Sambina Properties, Sambina 8 Brookview Center, Sambina Homes and Sambina Trust are 9 each entities that are owned and controlled by Praveen 10 Sethi, correct? 11 MR. RODRIGUEZ: Objection, form. 12 MR. REED: Objection, form. 13 A. Per the advice of my counsel, I am exercising 14 my Fifth Amendment right. 15 Q. (BY MR. HAYNES) Transfers from Sethi 16 Petroleum, LLC, Sethi Financial Group, Inc. or a joint 17 venture to those entities, those Sambina entities, were 18 not arm's length transactions, correct? 19 MR. RODRIGUEZ: Objection, form. 20 MR. REED: Objection, form. 21 A. Per the advice of my counsel, I am exercising 22 my Fifth Amendment right. 23 Q. (BY MR. HAYNES) The Sambina entities are 24 insiders of Sethi Petroleum, LLC, Sethi Financial, 25 Group, Inc. and the joint ventures, correct? APP000785 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 64 of 86 PageID #: 3257 Sameer P. Sethi 62 DepoTexas, Inc. 1 MR. RODRIGUEZ: Objection, form. 2 MR. REED: Objection, form. 3 A. Per the advice of my counsel, I am exercising 4 my Fifth Amendment right. 5 Q. (BY MR. HAYNES) The Sambina entities did not 6 provide value to Sethi Financial Group, Inc., Sethi 7 Petroleum, LLC or the joint ventures in exchange for 8 those transfers, correct? 9 MR. RODRIGUEZ: Objection, form. 10 MR. REED: Objection, form. 11 A. Per the advice of my counsel, I'm exercising 12 my Fifth Amendment right. 13 Q. (BY MR. HAYNES) The funds of Sethi 14 Petroleum, Sethi Financial Group, Inc., Sethi Oil & Gas 15 Company, Sethi Operating Company and each of the joint 16 ventures were all commingled, correct? 17 MR. REED: Objection, form. 18 MR. RODRIGUEZ: Objection, form. 19 A. Per the advice of my counsel, I'm exercising 20 my Fifth Amendment right. 21 Q. (BY MR. HAYNES) None of Sethi Petroleum, 22 Sethi Financial Group, Inc., Sethi Oil & Gas Company, 23 Sethi Operating Company or any of the joint ventures 24 were treated as separate companies, correct? 25 MR. RODRIGUEZ: Objection, form. APP000786 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 65 of 86 PageID #: 3258 Sameer P. Sethi 63 DepoTexas, Inc. 1 MR. REED: Objection, form. 2 A. Per the advice of my counsel, I'm exercising 3 my Fifth Amendment right. 4 Q. (BY MR. HAYNES) Sethi Petroleum, Sethi 5 Financial Group, Inc., Sethi Oil & Gas Company, Sethi 6 Operating Company and all of the joint ventures were 7 treated as one company or one enterprise, correct? 8 MR. REED: Objection, form. 9 MR. RODRIGUEZ: Objection, form. 10 A. Per the advice of my counsel, I'm exercising 11 my Fifth Amendment right. 12 Q. (BY MR. HAYNES) That consolidated enterprise 13 does not and has not ever earned enough revenue from 14 the acquisition of mineral interests to pay operating 15 expenses of the enterprise, correct? 16 MR. RODRIGUEZ: Objection, form. 17 MR. REED: Objection, form. 18 A. Per the advice of my counsel, I'm exercising 19 my Fifth Amendment right. 20 Q. (BY MR. HAYNES) That enterprise is and 21 always was insolvent, correct? 22 MR. RODRIGUEZ: Objection, form. 23 MR. REED: Objection, form. 24 A. Per the advice of my counsel, I'm exercising 25 my Fifth Amendment right. APP000787 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 66 of 86 PageID #: 3259 Sameer P. Sethi 64 DepoTexas, Inc. 1 Q. (BY MR. HAYNES) The sum of that enterprise's 2 debts has always been greater than the sum of all of 3 the enterprise's assets at a fair valuation, correct? 4 MR. REED: Objection, form. 5 MR. RODRIGUEZ: Objection, form. 6 A. Per the advice of my counsel, I'm exercising 7 my Fifth Amendment rights. 8 Q. (BY MR. HAYNES) That enterprise was not 9 paying its debts as they became due, correct? 10 MR. RODRIGUEZ: Objection, form. 11 MR. REED: Objection, form. 12 A. Per the advice of my counsel, I'm exercising 13 my Fifth Amendment rights. 14 Q. (BY MR. HAYNES) The enterprise has never 15 earned enough revenue from its owned mineral interests 16 to pay operating expenses of the enterprise, correct? 17 MR. RODRIGUEZ: Objection, form. 18 MR. REED: Objection, form. 19 A. Per the advice of my counsel, I'm exercising 20 my Fifth Amendment right. 21 Q. (BY MR. HAYNES) The only way to keep the 22 enterprise operational was by raising new money from 23 investors, correct? 24 MR. RODRIGUEZ: Objection, form. 25 MR. REED: Objection, form. APP000788 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 67 of 86 PageID #: 3260 Sameer P. Sethi 65 DepoTexas, Inc. 1 A. Per the advice of my counsel, I'm exercising 2 my Fifth Amendment right. 3 MR. HAYNES: Last page. 4 Q. (BY MR. HAYNES) Purchases that were made on 5 the various personal credit cards of you or Praveen or 6 Shahnaz Sethi were not for Sethi Petroleum 7 business-related transactions, correct? 8 MR. RODRIGUEZ: Objection, form. 9 MR. REED: Objection, form. 10 A. Per the advice of my counsel, I'm exercising 11 my Fifth Amendment right. 12 Q. (BY MR. HAYNES) Are you familiar with an 13 entity named Cambrian Resources? 14 A. Per the advice of my counsel, I'm exercising 15 my Fifth Amendment right. 16 Q. Cambrian Resources is an entity that is 17 the -- in the same line of business as Sethi Petroleum 18 was in, correct? 19 MR. RODRIGUEZ: Objection, form. 20 MR. REED: Objection, form. 21 A. Per the advice of my counsel, I'm exercising 22 my Fifth Amendment right. 23 Q. (BY MR. HAYNES) You are affiliated with 24 Cambrian Resources, correct? 25 MR. RODRIGUEZ: Objection, form. APP000789 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 68 of 86 PageID #: 3261 Sameer P. Sethi 66 DepoTexas, Inc. 1 MR. REED: Objection, form. 2 A. Per the advice of my counsel, I'm exercising 3 my Fifth Amendment right. 4 Q. (BY MR. HAYNES) You have received income 5 from Cambrian Resources, correct? 6 MR. REED: Objection, form. 7 MR. RODRIGUEZ: Objection, form. 8 A. Per the advice of my counsel, I'm exercising 9 my Fifth Amendment right. 10 MR. RODRIGUEZ: What's the spelling of 11 the... 12 MR. HAYNES: C-A-M-B-R-I-A-N. 13 Q. (BY MR. HAYNES) Cambrian Resources is 14 engaged in solicitation of investments for purposes of 15 investing in mineral interests, correct? 16 MR. RODRIGUEZ: Objection, form. 17 MR. REED: Objection, form. 18 A. Per the advice of my counsel, I'm exercising 19 my Fifth Amendment right. 20 Q. (BY MR. HAYNES) Cambrian Resources is owned 21 or controlled by persons that were affiliated with 22 Sethi Petroleum, correct? 23 MR. RODRIGUEZ: Objection, form. 24 MR. REED: Objection, form. 25 A. Per the advice of my counsel, I'm exercising APP000790 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 69 of 86 PageID #: 3262 Sameer P. Sethi 67 DepoTexas, Inc. 1 my Fifth Amendment right. 2 Q. (BY MR. HAYNES) Since May 2015, you have 3 solicited employees to work on behalf of Cambrian 4 Resources, correct? 5 MR. RODRIGUEZ: Objection, form. 6 MR. REED: Objection, form. 7 A. Per the advice of my counsel, I'm exercising 8 my Fifth Amendment right. 9 Q. (BY MR. HAYNES) Since May 2015, you have 10 solicited salespersons to work on behalf of Cambrian 11 Resources, correct? 12 MR. REED: Objection, form. 13 MR. RODRIGUEZ: Objection, form. 14 A. Per the -- per the advice of my counsel, I'm 15 exercising my Fifth Amendment right. 16 Q. (BY MR. HAYNES) Since May 2015, you have 17 participated in the issuance, purchase, offer or sell 18 of a security, correct? 19 MR. REED: Objection, form. 20 MR. RODRIGUEZ: Objection, form. I 21 object that this line of questioning's outside the 22 May 14, 2015 Receivership order. Instruct the client 23 not to answer. 24 Q. (BY MR. HAYNES) Since May 2015, you have 25 participated in the issuance, purchase, offer or sale APP000791 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 70 of 86 PageID #: 3263 Sameer P. Sethi 68 DepoTexas, Inc. 1 of an interest in a joint venture, correct? 2 MR. RODRIGUEZ: Objection, form. 3 MR. REED: Object, form. And object 4 that the question's outside the scope of the Receiver's 5 powers under the May 14, 2015 order appointing Receiver 6 and instruct the witness not to answer. 7 Q. (BY MR. HAYNES) Since May of 2014, have you 8 made any untrue statement of a material fact in order 9 to raise money? 10 MR. RODRIGUEZ: Objection, form. 11 MR. REED: Objection, form. 12 A. Per the advice of my counsel, I'm exercising 13 my Fifth Amendment right. 14 Q. (BY MR. HAYNES) Have you used Sethi 15 Petroleum or any related entities to obtain money or 16 credit by false pretenses, false representations or 17 material false statements? 18 MR. RODRIGUEZ: Objection, form. 19 A. Per the advice of my counsel, I'm exercising 20 my Fifth Amendment right. 21 Q. (BY MR. HAYNES) You have committed fraud 22 while acting in a fiduciary capacity, correct? 23 MR. RODRIGUEZ: Objection, form. 24 MR. REED: Objection, form. And I 25 object that that question falls outside the scope of APP000792 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 71 of 86 PageID #: 3264 Sameer P. Sethi 69 DepoTexas, Inc. 1 the Receivership's authority under the -- the 2 Receiver's authority under the May 14th, 2015 3 Receivership order and instruct the witness not to 4 answer. 5 Q. (BY MR. HAYNES) Have you ever committed 6 fraud while acting in a fiduciary capacity? 7 MR. REED: Objection, form. 8 MR. RODRIGUEZ: Objection, form. 9 A. Per the advice of my counsel, I'm exercising 10 my Fifth Amendment right. 11 Q. (BY MR. HAYNES) Have you ever used Sethi 12 Petroleum to embezzle funds? 13 MR. RODRIGUEZ: Objection, form. 14 MR. REED: Objection, form. 15 A. Per the advice of my counsel, I'm exercising 16 my Fifth Amendment right -- Fifth Amendment right. 17 Q. (BY MR. HAYNES) Do you believe your actions 18 to have caused willful injury to investors of Sethi 19 Petroleum? 20 MR. RODRIGUEZ: Objection, form. 21 MR. REED: Objection, form. 22 A. Per the advice of my counsel, I'm exercising 23 my Fifth Amendment right. 24 Q. (BY MR. HAYNES) Do you know John Webber? 25 MR. RODRIGUEZ: Objection, form. APP000793 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 72 of 86 PageID #: 3265 Sameer P. Sethi 70 DepoTexas, Inc. 1 A. Per the advice of my counsel, I'm exercising 2 my Fifth Amendment right. 3 Q. (BY MR. HAYNES) Have you communicated with 4 John Webber about Sethi Petroleum since the appointment 5 of the Receiver? 6 MR. RODRIGUEZ: Objection, form. 7 MR. REED: Objection, form. 8 A. Per the advice of my counsel, I'm exercising 9 my Fifth Amendment right. 10 Q. (BY MR. HAYNES) Have you communicated with 11 John Webber about anything since the appointment of the 12 Receiver? 13 MR. RODRIGUEZ: Objection, form. 14 A. Per the advice of my counsel, I'm exercising 15 my Fifth Amendment right. 16 MR. HAYNES: Okay. Let's take a quick 17 break, see if there's any follow-up questions and we 18 should be done in about 10 minutes. 19 MR. REED: Okay. 20 (Break was taken from 11:44 a.m. 21 to 11:55 a.m.) 22 Q. (BY MR. HAYNES) Just a handful of follow-up 23 questions and we'll conclude. 24 Mr. Sethi, are you familiar with the 25 Motion to Unfreeze Funds in Bank Accounts that was APP000794 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 73 of 86 PageID #: 3266 Sameer P. Sethi 71 DepoTexas, Inc. 1 filed by Praveen and Shahnaz Sethi. 2 MR. REED: Objection, form. 3 A. Per the advice of my counsel, I'm exercising 4 my Fifth Amendment rights. 5 Q. (BY MR. HAYNES) The money in those accounts 6 is traceable to the Receivership estate, correct? 7 MR. RODRIGUEZ: Objection, form. 8 MR. REED: Objection, form. 9 A. Per the advice of my counsel, I'm exercising 10 my Fifth Amendment right. 11 Q. (BY MR. HAYNES) Since May of 2015, you have 12 told prospective employees of Cambrian Resources that 13 you've settled with the SEC, correct? 14 MR. REED: Objection form. 15 MR. RODRIGUEZ: Objection, form. 16 A. Per the advice of my counsel, I am taking my 17 Fifth Amendment right. 18 Q. (BY MR. HAYNES) You are doing today for 19 Cambrian Resources what you previously did for Sethi 20 Petroleum, correct? 21 MR. RODRIGUEZ: Objection, form. 22 MR. REED: Objection, form; and object 23 that that question's outside the scope of the 24 Receivership's powers in the May 14, 2015 Receivership 25 order and instruct the witness not to answer. APP000795 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 74 of 86 PageID #: 3267 Sameer P. Sethi 72 DepoTexas, Inc. 1 Q. (BY MR. HAYNES) You have told, since May 2 2015, prospective sellers of mineral interests that you 3 have millions of dollars to invest in mineral 4 interests, correct? 5 MR. RODRIGUEZ: Objection, form. 6 MR. REED: Objection, form. 7 A. Per my counsel's advice, I am exercising my 8 Fifth Amendment right. 9 Q. (BY MR. HAYNES) You are an officer or 10 principal of Cambrian Resources, correct? 11 MR. RODRIGUEZ: Objection, form. 12 MR. REED: Objection, form. 13 A. Per my counsel's advice, I'm taking my Fifth 14 Amendment right. 15 MR. HAYNES: Pass the witness. 16 MR. REED: We'll reserve. 17 MR. HAYNES: Okay. Thank you. 18 (Off the record at 12:03 p.m.) 19 MR. HAYNES: Okay. We are back on the 20 record. Just want to announce an agreement, see if I 21 can get an agreement between counsel for Mr. Sethi and 22 counsel for Praveen and Shahnaz Sethi. 23 Some of the exhibits that we shared with 24 you contain personally-identifiable information of your 25 clients. For example, Praveen and Shahnaz, it would APP000796 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 75 of 86 PageID #: 3268 Sameer P. Sethi 73 DepoTexas, Inc. 1 have their address and their Social Security number on 2 that tax return. It would have Sameer's personal 3 address and -- and social security number on his tax 4 return. 5 And we just want the agreement of all 6 the parties, we are going to keep that confidential and 7 not share it with anybody but you. We will not publish 8 it, and it'll all be redacted to the extent the 9 transcript goes before the Court and want your 10 agreement that you will also keep that confidential. 11 MR. REED: That's fine with me. 12 MR. RODRIGUEZ: You -- I'm totally in 13 agreement with you keeping it confidential. When you 14 say for me to keep my client's information 15 confidential -- 16 MR. HAYNES: Well, to the extent -- 17 MR. RODRIGUEZ: -- why do you -- why do 18 you need that agreement from me? 19 MR. HAYNES: To the extent you have 20 Sameer's Social Security number in there, I don't want 21 you to disclose it to somebody, other than -- you know, 22 I mean, you guys. 23 MR. REED: Other than our own client? 24 MR. HAYNES: Yeah, other than your own 25 clients and -- APP000797 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 76 of 86 PageID #: 3269 Sameer P. Sethi 74 DepoTexas, Inc. 1 MR. RODRIGUEZ: Absolutely agreeable 2 with that. 3 MR. HAYNES: -- you guys obviously 4 communicate with each other and your clients 5 communicate with each other. I just don't want it 6 getting out to somebody else. 7 MR. RODRIGUEZ: The public. 8 MR. HAYNES: To the public, correct. 9 MR. PYEATT: Do we want to agree about 10 all the discovery that we produced as well, 'cause, I 11 mean, all this is in there. 12 MR. HAYNES: That would be -- 13 MR. RODRIGUEZ: The discovery, it's not 14 going to be -- 15 MR. HAYNES: There's -- 16 MR. RODRIGUEZ: If you and I want to 17 agree that for -- for any of my clients' personal 18 information, such as his date of birth, Social 19 Security, address -- home address, any address, that 20 that will be redacted or kept confidential in any 21 hearings that we have or anything that is going to be a 22 public record, I -- I would like that agreement. 23 MR. HAYNES: Yes. 24 MR. RODRIGUEZ: Okay. 25 MR. HAYNES: And it would apply also APP000798 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 77 of 86 PageID #: 3270 Sameer P. Sethi 75 DepoTexas, Inc. 1 because we did share with Mr. Reed, Sameer's counsel, 2 that he got a copy of that, so he will be keeping it 3 confidential as well, obviously. We all -- none of us 4 want their personally-identifiable information getting 5 out into the -- into the public sphere. Everybody's 6 agreed? 7 MR. RODRIGUEZ: Agreed. 8 MR. REED: That's fine, yeah. 9 MR. HAYNES: Okay. Thank you. We can 10 go off the record. 11 (End of proceedings at 12:08 p.m.) 12 13 14 15 16 17 18 19 20 21 22 23 24 25 APP000799 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 78 of 86 PageID #: 3271 Sameer P. Sethi 76 DepoTexas, Inc. 1 CORRECTIONS AND SIGNATURE 2 PAGE/LINE CORRECTION REASON FOR CHANGE 3 _____________________________________________________________ 4 _____________________________________________________________ 5 _____________________________________________________________ 6 _____________________________________________________________ 7 _____________________________________________________________ 8 _____________________________________________________________ 9 _____________________________________________________________ 10 _____________________________________________________________ 11 _____________________________________________________________ 12 _____________________________________________________________ 13 _____________________________________________________________ 14 _____________________________________________________________ 15 I, SAMEER P. SETHI, have read the foregoing deposition and hereby affix my signature that same is 16 true and correct except as noted herein. 17 18 ________________________ SAMEER P. SETHI 19 CA# 4:15-cv-338 20 STATE OF _________ ) Subscribed and sworn to before me by the said 21 witness, SAMEER P. SETHI, on this the _____ day of ________________, 2015. 22 23 ________________________ NOTARY PUBLIC IN AND FOR 24 THE STATE OF ___________ 25 My Commission Expires: ________________ APP000800 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 79 of 86 PageID #: 3272 Sameer P. Sethi 77 DepoTexas, Inc. 1 STATE OF TEXAS ) 2 I, Terri Garcia, a Certified Shorthand Reporter in 3 and for the State of Texas, do hereby certify that, 4 pursuant to the agreement hereinbefore set forth, there 5 came before me on the 4th day of December, A.D., 2015, 6 at 10:11 a.m., at the offices of Anderson Tobin, PLLC, 7 located at 13355 Noel Road, Suite 1900, in the City of 8 Dallas, State of Texas, the following named person, to 9 wit: SAMEER P. SETHI, who was by me duly cautioned and 10 sworn to testify the truth, the whole truth and nothing 11 but the truth, of his knowledge touching and concerning 12 the matters in controversy in this cause; and that he 13 was thereupon carefully examined upon his oath, and his 14 examination was reduced to writing under my 15 supervision; that the deposition is a true record of 16 the testimony given by the witness, same to be sworn to 17 and subscribed by said witness before any Notary 18 Public, pursuant to the agreement of the parties. 19 I further certify that I am neither attorney or 20 counsel for, nor related to or employed by, any of the 21 parties to the action in which this deposition is 22 taken, and further that I am not a relative or employee 23 of any attorney or counsel employed by the parties 24 hereto, or financially interested in the action. 25 I further certify that, before completion of the APP000801 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 80 of 86 PageID #: 3273 Sameer P. Sethi 78 DepoTexas, Inc. 1 deposition, the Deponent __XX___, and/or the 2 Plaintiff/Defendant __XX___, did ___XX__ did not ____ 3 request to review the transcript. 4 In witness whereof, I have hereunto set my hand 5 and affixed my seal this 9th day of December, A.D., 6 2015. 7 8 ______________________________ TERRI GARCIA, Texas CSR 6581 9 Expiration Date: 12/31/16 DepoTexas 10 Firm Reg. No. 459 6500 Greenville Avenue, Suite 445 11 Dallas, Texas 75206 (214) 373-4977 12 13 Taxable Cost: $_______________ 14 15 16 17 18 19 20 21 22 23 24 25 APP000802 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 81 of 86 PageID #: 3274 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS SHERMAN DIVISION SECURITIES AND EXCHANGE COMMISSION, § § Plaintiff, § § v. § Case No.: 4:15-cv-00338 § SETHI PETROLEUM, LLC and § SAMEERP.SETHI, § § Defendants. § DECLARATION OF MATTHEW J. GULDE I, Matthew J. Guide, do hereby declare under penalty ofperjury, in accordance with 28 U.S.C. §1746, that the following is true and correct, and further that this declaration is made on my personal knowledge and that I am competent to testify as to the matters stated herein: 1. I am a resident ofFort Worth, Texas. 2. I am employed as Senior Trial Counsel for the Securities and Exchange Commission ("SEC") in its Fort Worth Regional Office. 3. I have served as lead trial counsel for the SEC in the above captioned matter since the case was filed in May 2015. 4. On March 23, 2016,1 noticed the deposition of Sameer Sethi ("Sameer") for April 11, 2016. 5. After indicating that he would assert his Fifth Amendment rights, and in lieu of sitting for a deposition, Sameer signed a declaration stating that he would assert his privilege against self-incrimination in response to any questions about himself and Sethi Petroleum. APP000803 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 82 of 86 PageID #: 3275 6. A true and correct copy of Sameer's April 7, 2016 declaration is attached hereto as Exhibit A. SIGNED this 14th day of September, 2016 at Fort Worth, Texas. SEC v. Sethi Petroleum, LLC Declaration of Matthew J. Guide ffhew J. Guide 2 of 2 APP000804 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 83 of 86 PageID #: 3276 UN重T龍城SずAT盤§ D嘉S丁接着CT COU楓ず EÅST脇難N厳重STR霊C富O輝TEXÅS S櫨闘職MÅN戴喜V重S重ON 拙CU融饗で職S AN聯瑠ⅩC轍ANG鵬COMM喜SS喜ON, P霊貧王皿鮭雌 S瞬T厳重P圏T捜OしEUM,重しC紬d SA削脇瀞R P. SET瑠重, 職e耗競d盆血書s. 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S蛮hi 〆弼h A朋enあ鰭ni Decla肋io職か巌meer P.鹿祝園函鮭　鵡蹴鞠鮒櫨礁沌親心O猟欝笥認諾欝Qs 　Ap用05.亀01∴7 APP000807 Case 4:15-cv-00338-ALM Document 195-2 Filed 09/14/16 Page 86 of 86 PageID #: 3279 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF TEXAS SHERMAN DIVISION SECURITIES AND EXCHANGE COMMISSION, § § Plaintiff, § § v. § Case No.: 4:15-cv-00338 § SETHI PETROLEUM, LLC and § SAMEER P. SETHI, § § Defendants. § ________________________________________________ ORDER GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT AS TO SAMEER SETHI The Court has considered Plaintiff Securities and Exchange Commission’s Motion for Summary Judgment as to Defendant Sameer Sethi and Brief in Support. IT IS THEREFORE ORDERED that Plaintiff’s Motion for Summary Judgment as to Defendant Sameer Sethi is GRANTED. Case 4:15-cv-00338-ALM Document 195-3 Filed 09/14/16 Page 1 of 1 PageID #: 3280