Motion to Enforce Litigant's Rights and Other Relief

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CHRIS CI-IRISTIE

Governor

KIM GUADAGNO

Lt. Governor

State of New JerseyOFFICE OF THE ATTORNEY GENERAI.

DEPARTMENT OF LAW AND PUBLIC SAFETY

DIVISION OF LAW

PO Box 45029

Newark, NJ 07101

December 16, 2016

Clerk, Chancery DivisionNew Jersey Superior CourtMonmouth CountyHall of RecordsOne East Main StreetFreehold, New Jersey 07728

CHRISTOPHER S. PORRINO

Attorney General

MICHELLE L. MILLER

Acting Director

~ VDl~~l: 16 2016

MONMOUTH VICINAGECHANCERY DIVISION X01

Re: Porrino v. Falci, et al.

Docket No.: MON-C-160-14

Motion to Enforce Litigant's Rights and Other Relief

Return Date: January 6, 2017

Dear Sir or Madam:

Enclosed for filing please find an original and two (2) copies of the following documents:

1. Notice of Motion to Enforce Litigant's Rights under R. 1:10-3, and other Relief;

2. Certification of Rudolph G. Bassman in Support of Plaintiff's Motion to Enforce

Litigant's Rights under R. 1:10-3, and other Relief, and accompanying exhibits;

3. Certification of Deputy Attorney General Isabella T. Stempler in Support of

Plaintiff s Motion Enforce Litigant's Rights under R. 1:10-3, and other Relief, and

accompanying exhibits;

4. Brief;5. Proposed Order; and

6. Certification of Service.

Please stamp a copy of each document "filed" and return one copy to the messenger.

may-*~ * *,~~T

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'~_I ~!r~

124 Halsey Streeter TELEPHONE: (973 C~48-3070 •Fax: (973) 648-3956

New Jersey Is An Equal Opportunity Employer •Printed on Recycled Paper and Recyclable

Thank you for your attention to this matter.

Respectfully yours,

CHRISTOPHER S. PORRINO

December 16, 2016

ATTORNEY GENERAL OF NEW JERSEY Attorney for Plaintiff

Enclosures cc: All Defendants and Nominal Defendants on the attached service list w/encl.

Laura H. Poser, Chief of the Bureau of Securities (via e-mail w/encl.) Amy Kopelton, Deputy Chief of the Bureau of Securities (via e-mail w/encl.) Rudolph G. Bassman, Chief of Enforcement for the Bureau of Securities (via e-mail w/encl.) Victoria A. Manning, Deputy Attorney General/Section Chief (via e-mail w/encl.) Isabella T. Stempler, Deputy Attorney General (via e-mail w/encl.)

Vincent P. Falci 212 Taylor Lane Middletown, NJ 07748

Donna Falci 212 Taylor Lane Middletown, NJ 07748

Vincent N. Falci 1612 Rosewood Drive

SERVICE LIST PORRINO v. FALCI, ET AL. DOCKET NO. MON-C-160-14

Wall Township, New Jersey 07719

Saber Funds, LLC c/o Vincent P. Falci, registered agent 212 Taylor Lane Middletown, NJ 07748

Saber Asset Management, LLC c/o Vincent P. Falci, registered agent 212 Taylor Lane Middletown, NJ 07748

Saber Funds Distributors, LLC c/o Vincent P. Falci, as managing member 212 Taylor Lane Middletown, NJ 07748

BWX Fund, LLC c/o Vincent P. Falci, registered agent 212 Taylor Lane Middletown, NJ 07748

Fixed Term Government Fund, LLC c/o Vincent P. Falci, registered agent 212 Taylor Lane Middletown, NJ 07748

December 16, 2016

MSI Fund I, LLC c/o Vincent P. Falci, as managing member of Saber Asset Management, LLC, as managing member of MSI Fund I, LLC 212 Taylor Lane Middletown, NJ 07748

MSI Equity Fund II, LLC c/o Vincent P. Falci, registered agent 212 Taylor Lane Middletown, NJ 07748

Preferred Income Portfolio I, LLC c/o Vincent P. Falci, registered agent 212 Taylor Lane Middletown, NJ 07748

Hallus Realty Group, LLC c/o Vincent P. Falci, registered agent 212 Taylor Lane Middletown, NJ 07748

Phoenix Equities, LLC c/o Vincent P. Falci, registered agent 212 Taylor Lane Middletown, NJ 07748

December 16, 2016

CHRISTOPHER S. PORRINO ATTORNEY GENERAL OF NEW JERSEY Division of Law 124 Halsey Street, 5th Floor P.O. Box 45029 Newark, New Jersey 07101 Attorney for Plaintiff

By: Victoria A. Manning (Attorney Id. # 006371991) Isabella T. Stempler (Attorney Id. # 032642001) Elisabeth E. Juterbock (Attorney Id. #019032013) Deputy Attorneys General (973) 648-3070

CHRISTOPHER S. PORRINO, 1

Attorney General ofNew Jersey, on behalfofLAURA H. POSNER, Chief of the New Jersey Bureau of Securities,

Plaintiff,

V.

VINCENT PETER F ALCI, individually and d/b/a Saber Fixed Income Series, LLC, and d/b/a Saber Equity Income Series, LLC, as a Managing Member of Saber Funds LLC, and Saber Asset Management, LLC;

SABER FUNDS, LLC, a New Jersey limited liability company;

SABER ASSET MANAGEMENT, LLC, a New Jersey limited liability company;

SUPERIOR COURT OF NEW JERSEY CHANCERY DIVISION: GENERAL EQUITY MONMOUTH COUNTY DOCKET NO. MON-C-160-14

Civil Action

i NOTICE OF MOTION TO ENFORCE i LITIGANT'S RIGHTS UNDER 'R. 1:10-3, AND OTHER RELIEF

1 This matter was commenced by former Acting Attorney General John J. Hoffman on behalf of the Chief of the New Jersey Bureau of Securities, Laura H. Posner. In accordance with R. 4:34-4, the caption is revised to reflect the current Attorney General, Christopher S. Porrino.

SABER FUNDS DISTRIBUTORS, LLC, a Delaware series limited liability company;

FIXED TERM GOVERNMENT FUND, LLC,

a New Jersey limited liability company;

MSI FUND I, LLC, a Delaware limited liability company;

MSI EQUITY FUND II, LLC, a New Jersey limited liability company;

BWX FUND, LLC, a New Jersey limited liability company; and

PREFFERRED INCOME PORTFOLIO I, LLC,

and

a New Jersey limited liability company,

Defendants,

PHOENIX EQUITIES, LLC, a New Jersey limited liability company;

HALLUS REALTY GROUP, LLC, a New Jersey limited liability company; and

DONNA F ALCI, individually; and VINCENT N. F ALCI, individually,

Nominal Defendants.

TO: ALL DEFENDANTS AND NOMINAL DEFENDANTS ON ATTACHED LIST

PLEASE TAKE NOTICE that on January 6, 2017, Christopher S. Porrino, Attorney

General of New Jersey, on behalf of Laura H. Posner, Chief of the New Jersey Bureau of

2

Securities, will move before the Honorable Patricia Del Bueno Cleary, P.J. Ch., Superior Court

ofNew Jersey, Monmouth County, Hall of Records, One East Main Street, Freehold, New Jersey

07728, for entry of an Order: (1) enforcing the September 18, 2015 Consent Order and Final

Judgment as to all Defendants and Nominal Defendants under R. 1:10-3 against all Defendants

and Nominal Defendants; (2) amending the judgment amount to $2,035,511.23 against Nominal

Defendant Hallus Realty Group, LLC under the Consent Order and Final Judgment as to all

Defendants and Nominal Defendants entered by the Court on September 18, 2015 in this matter;

(3) replacing the September 18,2015 Consent Order and Final Judgment as to all Defendants and

Nominal Defendants, which contains a confidential personal identifier with a redacted version

pursuant to R. 1 :38-7(g)(l ); and ( 4) such other relief as the Court may deem just, equitable, and

proper.

PLEASE TAKE FURTHER NOTICE that in support of this motion, Plaintiff will rely

on the accompanying brief, the Certification of Chief of Investigations Rudolph G. Bassman and

exhibits attached thereto, and the Certification of Deputy Attorney General Isabella T. Stempler

and exhibits attached thereto. A proposed form of Order is submitted herewith.

PLEASE TAKE FURTHER NOTICE that Plaintiff respectfully requests oral

argument.

Dated: December 16, 2016

CHRISTOPHER S. PORRINO ATTORNEY GENERAL OF NEW JERSEY Counsel for Plaintiff

By:

3

001)

SERVICE LIST

Vincent P. Falci 212 Taylor Lane Middletown, NJ 07748

Donna Falci 212 Taylor Lane Middletown, NJ 07748

Vincent N. Falci 1612 Rosewood Drive Wall Township, New Jersey 07719

Saber Funds, LLC c/o Vincent P. Falci, registered agent 212 Taylor Lane Middletown, NJ 07748

Saber Asset Management, LLC c/o Vincent P. Falci, registered agent 212 Taylor Lane Middletown, NJ 07748

Saber Funds Distributors, LLC c/o Vincent P. Falci, as managing member 212 Taylor Lane Middletown, NJ 07748

BWX Fund, LLC c/o Vincent P. Falci, registered agent 212 Taylor Lane Middletown, NJ 07748

Fixed Term Government Fund, LLC c/o Vincent P. Falci, registered agent 212 Taylor Lane Middletown, NJ 07748

MSI Fund I, LLC c/o Vincent P. Falci, as managing member of Saber Asset Management, LLC, as managing member of MSI Fund I, LLC 212 Taylor Lane Middletown, NJ 07748

4

MSI Equity Fund II, LLC c/o Vincent P. Falci, registered agent 212 Taylor Lane Middletown, NJ 07748

Preferred Income Portfolio I, LLC c/o Vincent P. Falci, registered agent 212 Taylor Lane Middletown, NJ 07748

Hallus Realty Group, LLC c/o Vincent P. Falci, registered agent 212 Taylor Lane Middletown, NJ 07748

Phoenix Equities, LLC c/o Vincent P. Falci, registered agent 212 Taylor Lane Middletown, NJ 07748

5



Plaintiff,

v.

VINCENT PETER F ALCI, et al.,

Defendants.


BRIEF IN SUPPORT OF PLAINTIFF'S MOTION TO ENFORCE LITIGANT'S RIGHTS UNDER R. 1:10-3 AGAINST ALL DEFENDANTS AND NOMINAL DEFENDANTS,

AND OTHER RELIEF

CHRISTOPHER S. PORRINO ATTORNEY GENERAL OF NEW JERSEY Division of Law, 5th Floor 124 Halsey Street P.O. Box 45029 Newark, New Jersey 07101 (973) 648-3070 Attorney for Plaintiff

Victoria A. Manning, Deputy Attorney General (NJ Attorney ID No. 006371991)

Isabella T. Stempler, Deputy Attorney General (NJ Attorney ID No. 032642001)

Elisabeth Juterbock, Deputy Attorney General (NJ Attorney ID No. 019032013) On the Brief

1 This matter was commenced by former Acting Attorney General John J. Hoffman on behalf of the Chief of the New Jersey Bureau of Securities, Laura H. Posner. In accordance with R. 4:34-4, the caption is revised to reflect the current Attorney General, Christopher S. Parrino.

TABLE OF CONTENTS

Page No.

PRELIMINARY STATEMENT .................................................................................................... 1

FACTUAL AND PROCEDURAL HISTORY .............................................................................. 4

A. The Underlying Unlawful Conduct ....................................................................................... 4

B. Falci Continues to Violate the Consent Order and Securities Law ....................................... 7

1. Failure to pay restitution and disgorgement.. ................................................................... 9

2. Failure to Pay Penalties .................................................................................................... 9

3. Failure to Provide Copies of the Consent Order .............................................................. 9

4. Failure to Pay Surplus Rental Income .............................................................................. 9

5. Failure to Maintain Life Insurance Policy ...................................................................... 10

6. Failure to Dissolve Entities ............................................................................................ 10

7. Failure to Provide Tax Returns ...................................................................................... 11

C. Falci, Jr. Continues to Violate the Consent Order and Securities Law ................................ 11

D. Donna Falci Continues to Violate the Consent Order ......................................................... 12

E. The Vicor Complaint and USAO Complaint.. ..................................................................... 13

F. This Court Retains Jurisdiction over the Matter, and Action is Appropriate ....................... 14

ARGUMENT ................................................................................................................................ 15

THE COURT MUST ORDER DEFENDANTS AND NOMINAL

DEFENDANTS TO COMPLY WITH THE CONSENT ORDER

THAT THEY HAVE BEEN VIOLATING ........................................................................... 15

A. Falci's Post-Judgment Conduct Violates This Court's Permanent Injunction

Because He Continues to Violate the Securities Law ...................................................... 16

B. Defendants and Nominal Defendants Failed to Comply with Numerous Other

Provisions in the Consent Order. ....................................................................................... 21

C. The Court Must Grant Plaintiffs Motion and Order Defendants and Nominal

Defendants To Comply with the Consent Order and upon Proof of Further

Non-Compliance Issue a Bench Warrant.. ....................................................................... 23

CONCLUSION ............................................................................................................................. 30

11

TABLE OF AUTHORITY

Cases

Abbott v. Burke, 206 N.J. 332, (2011) ........................... ." .............................................................. 15

Affiliated Ute Citizens ofUtah v. United States, 406 U.S. 128, (1972) ....................................... 18

Anyanwu v. Anyanwu, 339 N.J. Super. 278, (App. Div.), cert. den., 170 N.J. 388 (2001 ) .................................................................................................. 24

Basic Inc. v. Levinson, 485 U.S. 224, (1988) .............................................................................. 18

Board ofEduc., Twp. ofMiddletown v. Middletown Tp. Educ. Ass'n, 352 N.J. Super. 501, (Ch. Div. 2001) ...................................................................... 15, 21, 23, 24

Cola v. Packer, 156 N.J. Super. 77 (App. Div. 1977) ................................................................... 17

Cola v, Terzano, 129 N.J. Super. 47, (Law Div. 1974) ............................................................... 17

Commodity Futures Trading Comm'n v. American Metal Exch. Corp., 775 F.~ 767, (D.N.J. 1991) ............................................................................................... 20

D' Atria v. D' Atria, 242 N.J. Super. 392, (Ch. Div. 1990) ............................................................ 15

Greer v. New Jersey Bureau of Securities, 288 N.J. Super. 69, (App. Div. 1996) ........................................................................................................................ 21

Higgins v. New Jersey Bureau of Sec., 100 N.J. Super. 266, (App. Div. 1968) ........................................................................................................................ 17

IMO M. Rimson & Co., Inc., et al., 1997 WL 73280, at *4 (SEC Release) (February 21, 1997) ................................................................................................................... 19

Manns v. Skolnik, 666 N.E.2d 1236, (Ind. Ct. App. 1996) ......................................................... 18

Mayflower Sec. Co. v. Bureau of Sec., 64 N.J. 85, (1973) ........................................................... 20

Milgram v. Fred J. Miller, Eric Riedman, et al., Docket No. C-331-06, at 15 (Ch. Div. Jan. 7, 2008) (J. Contillo) .................................................................................. 17

Pierce v. Pierce, 122 N.J. Super. 359 (App. Div. 1973) ............................................................... 24

SEC v. Better Life Club of Am., 995 F. Supp. 167, 176-77 (D. D.C. 1998) ............................... 18

SEC v. Chester Holdings, Ltd., 41 F. Supp. 2d 505, (D.N.J. 1999) ............................................. 18

lll

SEC v. Haligiannis, 470 F. Supp.2d 373 (S.D.N.Y. 2007) ........................................................... 18

SEC v. TLC Inv. & Trade Co., 179 F. Supp.2d 1149, (C.D. Cal. 2001) ...................................... 18

State v. Russell, 119 N.J. Super. 344, (App. Div. 1972) ....................................................... 16, 17

State v. Shama Resources L.P., 127 Idaho 267, (Idaho 1995) ..................................................... 19

Statutes

N.J.S.A. 49:3-47 .............................................................................................................................. 1 N.J.S.A. 49:3-49(b) ................................................................................................................. 19,25 N.J.S.A. 49:3-49(c) ........................................... : ........................................................................... 25 N.J.S.A. 49:3-49(g) ....................................................................................................................... 25 N.J.S.A. 49:3-52 .......................................................................................................... 16, 17, 18, 25 N.J.S.A. 49:3-52(a)- (d) ........................................................................................................... 6, 25 N.J.S.A. 49:3-52(b) and (c) ........................................................................................... 6, 17, 20, 26 N.J.S.A. 49:3-52(c) ....................................................................................................................... 20 N.J.S.A. 49:3-56 ............................................................................................................................ 20 N.J.S.A. 49:3-56(a) ....................................................................................................... 6, 16, 20, 26 N.J.S.A. 49:3-56 (a) and (h) .......................................................................................................... 16 N.J.S.A. 49:3-56(h) and (c) ....................................................................................................... 6, 26 N.J.S.A. 49:3-60 .................................................................................................................. 6, 16, 26 N.J.S.A. 49:3-70.1 ......................................................................................................................... 26

Rules

R. 1:10-3 .......................................................................................................... 1, 3, 4, 15, 21, 22,24

IV

PRELIMINARY STATEMENT

Defendant Vincent Peter Falci ("Falci") and his co-defendant entities2 (collectively,

"Defendants") have continued to perpetrate a securities fraud upon the investing public for over

ten years. Although this Court ordered Defendants to cease engaging in their unlawful conduct

on September 18, 2015, Defendants have shockingly continued their fraud in brazen defiance of

this Court's Order. Accordingly, Plaintiff, the Chief ("Bureau Chief') of the New Jersey Bureau

of Securities ("Bureau"), respectfully moves under R. 1: 1 0-3 to enforce the terms of the

settlement in this securities fraud regulatory enforcement action.

By way of background, starting in 2006, Falci and his co-Defendant entities violated the

New Jersey Uniform Securities Law (1997), N.J.S.A. 49:3-47 et seq. ("Securities Law") and

defrauded 152 investors out of more than $6.7 million through the sale of unregistered securities

in which material facts regarding the true use of the investment proceeds were either

misrepresented to, or hidden from, the investors. (Certification of Chief of Investigations

Rudolph G. Bassman in Support of Plaintiffs Motion to Enforce Litigant's Rights under R. 1: 1 0-

3, and Other Relief ("Bassman Cert."), Exhibit ("Exh.") 2.) Falci and nominal defendants

Phoenix Equities, LLC, Hallus Realty Group, LLC, Vincent N. Falci ("Falci, Jr.") and Donna

Falci (collectively, "Nominal Defendants") were unjustly emiched as a result of Defendants'

unlawful conduct. Ibid.

Plaintiff filed suit against Defendants in 2014 based on their fraud. (Bassman Cert. ~ 6,

Exh. 1.) The case was ultimately resolved upon the Court's entry of the Consent Order and Final

2 Defendants include Falci individually, and doing business as Saber Fixed Income Series, LLC and Saber Equity Income Series, LLC, and as managing member of Saber Funds, LLC and Saber Asset Management, LLC; and Saber Funds, LLC, Saber Asset Management, LLC, Saber Funds Distributors, LLC, Fixed Term Government Fund, LLC, MSI Fund I, LLC, MSI Equity Fund II, LLC, BWX Fund, LLC, and Preferred Income Portfolio I, LLC.

1

Judgment as to All Defendants and Nominal Defendants ("Consent Order") on September 18,

2015. (Bassman Cert. ~ 7, Exh. 2.) The Consent Order required Defendants to cease perpetrating

their fraud on the investors, ordered the payment of $6,742,697.57 restitution and disgorgement

of wrongfully obtained funds, and assessed $800,000 in civil monetary penalties. (Bassman Cert.

~ 8, Exh. 2, ~~ 62, 64.)

However, as set forth in the accompanying certifications, Defendants and Nominal

Defendants have continued to perpetrate their fraud and failed to comply with virtually any of

the terms of the Consent Order. Specifically, Falci, Falci, Jr., and Donna Falci have collectively

violated the Consent Order by: (1) failing to make both the first installment payment of

$471,988.82 for restitution/disgorgement, and the $50,750 installment payment toward the

$800,000 assessed in civil monetary penalties, both of which were due on or before August 31,

2016 as set forth in ~~ 62, 65; (2) ignoring the permanent injunction by accepting new

investments and continuing to mislead investors through various payments and account

statements as set forth in~ 55; (3) failing to furnish investors with copies of the Consent Order as

they were required to do as set forth in ~ 84(a); (4) failing to provide the Plaintiff with any

surplus rental income generated from their income properties as set forth in~ 73(a); (5) failing to

make payments for a life insurance policy that provided security for their obligations in the event

Falci passed away as set forth in ~ 73(b); (6) refusing to provide proof showing that certain

Defendant entities were dissolved as set forth in ~ 75; (7) failing to provide a copy of filed

federal and state tax returns as set forth in ~ 77; and (8) neglecting to sign the documents

necessary to create a mortgage lien on certain real property in favor of the State ofNew Jersey as

set forth in~ 73(c). (Bassman Cert. ~~ 10-39.) As a result ofthis willful refusal to comply with

2

Defendants' obligations under the Consent Order, New Jersey investors continue to suffer harm.

Ibid.

In addition to the conclusive evidence that the Consent Order was repeatedly violated,

Defendants Falci, Falci, Jr., and Saber Funds Distributors, LLC, have continued to perpetuate

securities fraud. Specifically, Defendants Falci, Falci, Jr., and Saber Funds Distributors, LLC

were recently sued in New Jersey Superior Court, Morris County by Vicor Tax Receivables, LP

("Vicor"), an investment fund that Falci launched in 2012. (Certification of Deputy Attorney

General Isabella T. Stempler in Support of Plaintiffs Motion to Enforce Litigant's Rights under

R. 1:10-3, and Other Relief ("Stempler Cert."), Exh. 12.) In the complaint dated September 22,

2016 (the "Vicor Complaint"), Vicor alleges that Falci perpetrated yet another fraud. Ibid.

According to the Vicor Complaint, Falci controlled Vicor, embezzled and misused investment

funds, and created various false records to cover it up. Ibid. If these allegations are true, this

conduct would constitute further violations of the Consent Order in this case. However, this

Court need not adjudicate the allegations in the Vicor case to grant the relief being sought here.

The facts established through the accompanying Certifications-without more-provide

conclusive evidence that the Defendants have flagrantly violated this Court's Order and that the

relief being sought is warranted.

Further on December 16, 2016, the United States Attorney's Office for the District of

New Jersey filed a Criminal Complaint on behalf of the U.S. Postal Inspection Service against

Falci, in the United States District Court, District of New Jersey, Mag. No. 16-6188. Falci is

charged with two counts of wire fraud and one count of securities fraud ("USAO Complaint").

(Stempler Cert., Exh. 14.) The USAO's Complaint alleges that from in or about 2008 through

May 2016, F alci defrauded investors of millions, concealed losses and falsely reported that his

3

funds had positive returns. Ibid. Further, the USAO's Complaint alleges that Falci operated a

Ponzi scheme by paying the Saber Funds investors with Vicor's investors' funds. And, that Falci

used funds for personal gains and ultimately to repay the restitution owed under the Consent

Order. Ibid.

In order to protect the investing public, the Bureau brings this motion to enforce

Defendants' and Nominal Defendants' compliance with the Consent Order. The fact that Falci,

along with his wife, Nominal Defendant Donna Falci, his son, Nominal Defendant Falci, Jr., and

the entities under Falci's control, have made no effort to fulfill their obligations under the

Consent Order is inexcusable. By failing to satisfy even the most basic requirements of the

Consent Order, Defendants and Nominal Defendants.have deliberately ignored the Order of this

Court and caused further harm to the investor victims.

A Court Order is just that. It is not merely a suggestion to be followed at will. The Court

should not countenance Defendants' failure to abide by the Consent Order. Accordingly,

Plaintiff respectfully submits that this Court grant its motion under R. 1:10-3.

FACTUAL AND PROCEDURAL HISTORY

A. The Underlying Unlawful Conduct

This securities regulatory enforcement action was brought by Plaintiff on September 18,

2014 because of Defendants' violations of the antifraud and registration provisions of the

Securities Law. (Bassman Cert. ~ 6, Exh. 1.) Falci, a former fire chief with Monmouth County,

directly and indirectly through his companies, raised over $6.7 million from 152 New Jersey

investors ("Saber Funds Investors") through the offer and sale of unregistered securities in a

fraudulent manner. (Bassman Cert., Exh. 2, ~~ 1, 52-54.) The defrauded Saber Funds Investors

included present and retired police officers, as well as public service organizations such as fire

4

companies and police benevolent associations. (Bassman Cert., Exh. 2, ~ 1.) Falci and the

Nominal Defendants were unjustly enriched with the investor funds raised from the fraudulent

sale of the unregistered securities because they diverted them to their own use and treated the

money as their own. (Bassman Cert., Exh. 2 ~~ 33-48, 54.)

Specifically, Falci and the Defendant entities, through Falci, made materially false and

misleading statements, and omitted to disclose material information to the Saber Funds Investors

in connection with the offer and sale of the securities. (Bassman Cert., Exh. 2, ~ 23.) Falci

represented that the investment objective of the Defendant entities was to seek interest income by

investing primarily in tax lien certificates. (Bassman Cert., Exh. 2, ~~ 23-32.) In reality, only

3% of the total assets under Falci's management were actually invested in tax lien

certificates. (Bassman Cert., Exh. 2, ~ 32.) Instead, the remainder of the Saber Funds Investors'

funds were used for day-trading by Falci and Falci, Jr., and for the purchase of at least seven

New Jersey residential properties by Falci and Donna Falci. (Bassman Cert., Exh. 2 ~~ 37-39.)

None of these facts regarding the intended use ofthe proceeds were disclosed to the Saber Funds

Investors. (Bassman Cert., Exh. 2 ~ 49.) In addition, Falci told the Saber Funds Investors, in

written materials, that investments in the Defendant entities yielded a 7.24% rate of return,

without disclosing that the rate of return was derived from a purely hypothetical model of his

strategy. (Bassman Cert., Exh. 2, ~~ 23-24.) Falci also failed to tell the Saber Funds Investors

that neither he nor the securities he sold were registered with the Bureau. (Bassman Cert., Exh. 2,

~~ 4, 48.) In addition to the over $3.5 million, which was used for the purchase at least seven

New Jersey residential properties by Falci and Donna Falci and day-trading by Falci and Falci,

Jr., Falci, Donna Falci, and Falci Jr. received approximately $1,113,000 from the Defendant

entities and the Nominal Defendant entities, all of which were under Falci's control. (Bassman

5

Cert., Exh. 2, ~~ 34-36.) ·

Based upon these facts, the Consent Order concluded that Falci and the Defendant

entities, through Falci: (a) sold unregistered securities in violation of N.J.S.A. 49:3-60, which

requires securities sold in this State to be registered unless they are exempt from registration or

are federally covered securities; and (b) violated two of the antifraud provisions, N.J.S.A. 49:3-

52 (b) and (c), in connection with the offer and sale of the securities. The Bureau Chief also

concluded that: (a) Falci acted as an unregistered agent, in violation of N.J.S.A. 49:3-56(a),

which requires those who sell securities to be registered unless exempt; (b) the entity Defendants

employed an unregistered agent-Falci-in violation of N.J.S.A. 49:3-56(h); and (c) the

Nominal Defendants and Falci were unjustly enriched by the Defendants' unlawful conduct.

(Bassman Cert. ~ 7, Exh. 2, ~~52-54.)

In its Consent Order, this Court permanently restrained a:nd enjoined Falci, the Defendant

entities, and Nominal Defendants Hallus Realty Group, LLC and Phoenix Equities, LLC from,

among other things:

i) violating the Securities Law, including its anti-fraud provisions, N.J.S.A. 49:3-52(a)

(d);

ii) engaging in the securities business in New Jersey in any capacity;

iii) issuing, offering for sale or selling, offering to purchase or purchasing, distributing,

promoting, advertising, soliciting, negotiating, advancing the sale of and/or

promoting securities, or advising regarding the sale of any securities, in any manner

to, from or within New Jersey;

iv) engaging in the conduct described in the Complaint; and

6

v) acting as an officer and/or director of an issuer, or from supervising employees of an

issuer with respect to the offer and/or sale of any security or investment decisions of

the fund or from owning or controlling a majority interest in any issuer that offers

and/or sells any security, including but not limited to Pantheon Tax Receivables, L.P.

("Pantheon"), Vidon Capital Partners, LLC ("Vidon"), and Saber Opportunity Income

Fund, L.P. ("SOIF").

(Bassman Cert., Exh. 2, ~55.)

B. Falci Continues to Violate the Consent Order and Securities Law

Despite the permanent injunction and restraints placed upon him by this Court, Falci has

continued to engage in securities transactions over the past year. In doing so he has flouted the

Consent Order and violated the Securities Law by: (l) accepting new Sabe.r Funds Investor funds

when he was expressly enjoined from doing so; (2) providing Saber Funds Investors with false

and misleading account statements; and (3) instead of making restitution payments to the Bureau

-where they could be distributed to all investors pursuant to an equitable formula-bypassing

the Bureau by making selective payments to certain cherry-picked investors, to the detriment of

the remaining investors who have received nothing. (Bassman Cert. ~~ 14-18.) Specifically:

1. in November 2015, over two months after entry of the Consent Order, Falci made a

$100,000 payment as a return of a principal investment to Saber Funds Investor JV,

from a Vi don Capital Partners, LLC bank account, instead of providing these funds to

the Bureau for distribution to all Saber Funds Investors; (Bassman Cert. ~ 15, Exh. 4.)

n. on December 23, 2015, approximately three months after the entry of the Consent

Order, Falci accepted investment funds from an existing Saber Funds Investor, PZ,

payable to Saber Funds, LLC; (Bassman Cert. ~ 14, Exh. 3.)

7

iii. in March 2016, just over five months after the entry of the Consent Order, Falci paid

MS, another Saber Funds Investor, $10,000 of her $12,000 principal investment,

again without paying these funds to the Bureau for distribution to all Saber Funds

Investors; (Bassman Cert. ,-r 15, Exh. 4.)

IV. after the entry of the Consent Order, Falci made "interest" payments to certain Saber

Funds Investors, some on a monthly basis and others at different times, when he had

been enjoined by the Consent Order from controlling the distribution and movement

of funds; and (Bassman Cert. ,-r 16, Exh. 5.)

v. Falci provided Saber Funds Investors with account statements on September 30,

2015, December 31, 2015, and March 31, 2016, showing the purported value of

accumulated interest on their investments. (Bassman Cert. ,-r17, Exh. 6.) Yet, there

was no investment generating the returns that Falci and the Defendant entities,

through Falci, led the Saber Funds Investors to believe were generated because the

"account statements" were merely bookkeeping entries. (Bassman Cert. ,-r,-r 15-17,

Exh. 6.)

Each of these actions was in violation of this Court's permanent injunction and the

Securities Law.3

3 It should be noted that if the allegations set forth in Vicor Complaint are true, Falci's conduct would constitute a further violation of the Consent Order. Specifically, Falci was permanently enjoined and restrained from, among other things, "managing or exercising control over investments and assets including, but not limited to, any finances 'for any issuer." (Bassman Cert., Exh. 2, ~ 58.) As alleged in the Vicor Complaint, Falci maintained complete control over Vicar's general partner, until at least October 1, 2015, thirteen days after they entered in to the Consent Order with Plaintiff and this Court. (Stempler Cert. ~ 17, Exh. 12, ~ 41.) Following the transfer of his majority membership on October 1, 2015, Falci maintained signatory power over several of the general partner's accounts. (Stempler Cert. ~ 17, Exh. 12, ~~ 44-52.) Falci 's control over the management of Vicor, an issuer, through his role in its general partner was in direct violation of this Court's

8

Defendants and Nominal Defendants have also violated their obligations to make certain

payments, and perform certain actions, under the Consent Order. To date they have performed

virtually none of these obligations, as set forth below:

1. Failure to pay restitution and disgorgement - Under the Consent Order, Defendants

and Nominal Defendants are jointly and severally liable, in whole or in part, to pay

$6,742,697.57 for restitution/disgorgement to the Bureau over five years. (Bassman Cert. ~ 8,

Exh. 2, ~ 62.) The first payment of $4 71,988.82 was due to the Bureau on or before August 31,

2016. (Bassman Cert. ~ 10.) To date, no Defendant or Nominal Defendant has paid a penny of

this amount. (Bassman Cert. ~ 11.)

2. Failure to Pay Penalties - Under ~ 65 of the Consent Order, Defendants were also

assessed $800,000 in civil monetary penalties for their numerous violations of the Securities

Law, which is to be paid to the Bureau in six annual installments. (Bassman Cert. ~8, Exh. 2, ~~

64-65.) The second installment of $50,750 was due on August 31, 2016. Falci failed to make

this payment. (Bassman Cert. ~~ 12-13.)

3. Failure to Provide Copies of the Consent Order- Under~ 84(a) of the Consent Order,

Falci also agreed and was ordered to provide a copy of the Consent Order to all current and

future investors of Defendants, other Falci entities, and any issuer for which Falci is a consultant,

by September 28, 2015, and obtain a signed acknowledgment from each investor confirming

receipt of the Consent Order. (Bassman Cert. ~ 19; Exh. 2, ~ 84.) Falci has failed to perform

these tasks. (Bassman Cert. ~~ 19-21; Stempler Cert., Exhs. 3, 5, 7.)

4. Failure to Pay Surplus Rental Income - Additionally, under ~ 73 of the Consent Order,

Defendants and Nominal Defendants agreed to provide Plaintiff with collateral and/or additional

injunction against him from controlling an issuer of securities. However, this Court need not adjudicate the allegations in the Vicar case to grant the relief being sought here.

9

sources of funds for the monetary judgment. Under ~ 73(a), Defendants and Nominal

Defendants were ordered to pay the Plaintiff any surplus rental income generated after payment

of the monthly carrying costs of insurance, monthly mortgage payments, and maintenance and

repairs, if any, from the five residential properties owned by Falci, Donna Falci, and Hallus

Realty Group. (Bassman Cert. ~ 32, Exh. 2, ~73(a).) To date, Plaintiff has not received any of

the promised surplus rental income generated from the Five Residential Properties. (Bassman

Cert. ~ 33.)

5. Failure to Maintain Life Insurance Policy - Similarly, as obligated by~ 73(b), Falci

and Donna Falci assigned the benefit of the $3 million life insurance policy to Plaintiff as

collateral for the Defendants and Nominal Defendants' obligations under the Consent Order.

(Bassman Cert. ~ 22, Exh. 2, ~ 73.) Pursuant to the terms of the assignment, Falci and Donna

Falci agreed and were ordered to make all required payments on the life insurance policy until

the restitution/disgorgement and civil monetary penalties are paid in full. (Bassman Cert. ~ 23.)

They have failed to do so. (Bassman Cert. ~~ 24-30.) Their payments for January 2016 through

April 2016 were late. (Bassman Cert. ~~ 24-27, Exhs. 8, 9.) Their May and June 2016 invoices

were not paid at all, resulting in a lapse of coverage, despite Falci's promise during a June 9,

2016 conference call with the Bureau's Chief of Investigations Rudolph G. Bassman and counsel

for Plaintiff ("June 9, 2016 Conference Call") to make these payments. (Bassman Cert. ~~ 28-

30, Exhs. 10, 11.) To date, the life insurance policy has not been reinstated. (Bassman Cert. ~

31.)

6. Failure to Dissolve Entities - Under ~ 75 of the Consent Order, Falci was required to

dissolve Saber Asset Management, LLC, Saber Funds Distributors, LLC, BWX Fund, LLC,

Fixed Term Government Fund, LLC, MSI Fund I, LLC, MSI Equity Fund II, LLC, and Preferred

10

Income Portfolio I, LLC within ninety days of entry of the Consent Order. (Bassman Cert. ~ 34;

Exh. 2, ~ 75.) In a June 9, 2016 letter sent by Plaintiffs counsel to Falci, Falci was requested to

provide documentation evidencing: (a) each entity's current status; (b) whether each entity's

financial accounts were open or closed; and (c) if open, to provide a list of the names of the

signatories on the financial accounts, the present balance of the accounts, and the most current

account statements. (Stempler Cert. ~ 16, Exh. 11.) To date, Falci has failed to provide Plaintiff

with any of the requested documentation. (Bassman Cert. ~ 35.) As of October 25, 2016, BWX

Fund, LLC, Fixed Term Government Fund, LLC, MSI Equity Fund II, LLC, Saber Asset

Management, LLC and Preferred Income Portfolio, LLC were all active and in good standing in

the State ofNew Jersey through December 13, 2016. (Bassman Cert. ~ 36.)

7. Failure to Provide Tax Returns- Finally, under~ 77 of the Consent Order, Defendants

and Nominal Defendants were ordered to provide the Bureau with a copy of their filed federal

and state tax returns within ten days of filing, every year until all the restitution/disgorgement

and civil monetary penalties are paid. (Bassman Cert. ~ 37; Exh. 2, ~ 77.) During the June 9,

2016 Conference Call, Falci claimed that Defendants and Nominal Defendants applied for an

extension to file their 2015 federal and state tax returns. (Bassman Cert. ~ 38.) To date, Falci has

not provided Plaintiff with any documentation regarding the status of these tax filings. (Bassman

Cert. ~ 39.)

And Falci's compliance with~ 61 of the Consent Order is unclear. It required him to

transfer and dilute his majority interest to minority interests, or transfer his entire interest in all

(i) issuers; (ii) managing members of issuers; and (iii) general partners and other control persons

or entities of issuers including, but not limited to, SOIF, Vidon and Pantheon.

C. Falci, Jr. Continues to Violate the Consent Order and Securities Law

Like his father, Falci, Jr. has failed to fulfill all of his other obligations in the Consent

11

Order. Falci, Jr. neglected to make the scheduled disgorgement payment that was due to Plaintiff

on August 31, 2016. (Bassman Cert. ~~ 10-11.) Similarly, he has not supplied the Plaintiff with

a copy of his federal or state tax returns as required by ~ 77 of the Consent Order, nor has he

provided the Plaintiff with an explanation as to why he failed to complete this small

administrative task. (Bassman Cert. ~ 39.) Each failure to fulfill the aforementioned obligations

is a violation of the Consent Order.

Also, if the allegations in the Vi cor Complaint are true, Falci, Jr., will have also violated the

permanent injunction placed against him by maintaining a controlling role in the activities ofVicor's

general partner since entry ofthe Consent Order. (Stempler Cert. ~ 17, Exh. 12, ~ 41.) Falci, Jr. was

permanently enjoined and restrained from: (1) acting as an officer and/or director of an issuer; (2)

directly or indirectly supervising employees of an issuer; and (3) controlling any issuer that offers

and/or sells any security. (Bassman Cert., Exh. 2, ~ 60.) He was similarly permanently enjoined and

restrained from acting as a proxy for any Defendants for any of the enjoined conduct set forth in the

Consent Order. (Bassman Cert., Exh. 2, ~59.)

Both Falci and Falci, Jr. maintained complete control over Vidon until at least October 1,

2015, thirteen days after they entered in to the Consent Order. (Stempler Cert. ~ 17, Exh. 12, ~~ 44-

52.) Following the transfer of his majority membership on October 1, 2015, Falci maintained

signatory power over several of the general partner's accounts. Ibid. Falci and Falci, Jr.'s control

over the management of Vicor, an issuer, through their roles in its general partner Vidon were in

direct violation of this Court's injunction against them controlling an issuer of securities. Again, this

Court need not adjudicate the allegations in the Vi cor case to grant the relief being sought here.

D. Donna Falci Continues to Violate the Consent Order

Like her husband and son, Donna Falci has refused to comply with any of the obligations

she willingly undertook when she entered into the Consent Order with Plaintiff and this Court.

12

She did not pay any of the disgorgement money, for which she was jointly and severally liable to

Plaintiff, on the agreed upon date of August 31, 2016. (Bassman Cert. ~~ 10-11.) Nor has she

provided Plaintiff with any of the surplus rental income generated by the Falci family's Five

Residential Properties. (Bassman Cert. ~ 33.) As noted above, Donna Falci has likewise failed to

make payments to the life insurance policy that she and her husband agreed to maintain as a

source of collateral for the Consent Order. (Bassman Cert. ~~ 22-31.) Finally, Dorina Falci has

yet to provide Plaintiff with a copy of her federal and state tax filings as required by ~ 77 of the

Consent Order. (Bassman Cert. ~~ 37-39.) Each failure to fulfill the aforementioned obligations

is a violation ofthe Consent Order.

E. The Vicor Complaint and USAO Complaint

On September 29, 2016, counsel for Plaintiff received a courtesy copy of the

aforementioned Vicor Complaint. (Stempler Cert. ~ 17, Exh. 12.) Vicor is an investment fund

that was launched by Falci in 2012 (previously Pantheon) to receive a return by investing in tax

lien certificates; (Stempler Cert. ~ 17, Exh. 12, ~ 2.) At the time ofVicor's formation, Falci was

the managing and controlling member of the general partner of Vi cor. (Stempler Cert. ~ 17, Exh.

12, ~ 2.) Together with Falci, Jr., Falci owned 100% of the membership interests in the general

partner for approximately three years, during which Falci had total control over Vicor. Ibid. As

set forth further in the Vi cor Complaint, Falci transferred control in the general partner of Vicor

to Clifford "Corky" Andrews and Robert Gartner on October 1, 2015, following this Court's

entry of the Consent Order. (Stempler Cert. ~ 17, Exh. 12, ~ 41.) After this transfer, Messrs.

Andrews and Gartner allege they discovered extensive fraud perpetrated by Falci and Falci, Jr.,

in which they stole over $10 million of investor funds through a series of fraudulent and sham

transactions, as well as bogus accounting entries. (Stempler Cert. ~ 17, Exh. 12, ~~ 44-99.)

Among other things, the Vicar Complaint alleges that both Falci and Falci, Jr. continued to

13

exercise financial control over Vicor's general partner well after the entry of this Court's

permanent injunction prohibiting them from doing just that. (Stempler Cert. ~ 17, Exh. 12, ~~

90-99.)

The United States Attorney's Office for the District of New Jersey charged Falci by

criminal complaint with two counts of wire fraud and one count of securities fraud ("USAO

Complaint"). (Stempler Cert., Exh. 14.) The USAO's Complaint alleges that from in or around

2008 through May 2016 Falci defrauded investors of millions, concealed losses and falsely

reported that his funds had positive returns. Ibid. Further, the USAO's Complaint alleges that

Falci operated a Ponzi scheme by paying the Saber Funds investors with Vicor's investors'

funds. And, that Falci used funds for personal gains and ultimately to repay the restitution owed

under the Consent Order. Ibid.

F. This Court Retains Jurisdiction over the Matter, and Action is Appropriate

This Court retained jurisdiction to enforce, modify, or otherwise hear an. application

arising from the terms of this Consent Order. (Bassman Cert., Exh. 2, ~ 91.) Under~~ 79 and 80

ofthe Consent Order, Defendants and Nominal Defendants agreed that upon the occurrence of a

"Triggering Event," Plaintiff can: (a) declare to Defendants and Nominal Defendants that the

unpaid portion of the Defendants' and Nominal Defendants' Final Judgment is immediately due

and payable;· and/or (b) take any action permitted by law ("Triggering Event"). (Bassman Cert.,

Exh. 2, ~~ 79-80.) A Triggering Event includes any violation or breach of the Consent Order by

Defendants or Nominal Defendants. (Bassman Cert., Exh. 2, ~ 80.) At least six Triggering

Events have occurred here. See supra, Part Bat pp. 6-12. Accordingly, the Bureau Chief moves

for this Court to employ its retained jurisdiction and enforce the Consent Order.

14

ARGUMENT

THE COURT MUST ORDER DEFENDANTS AND NOMINAL DEFENDANTS TO COMPLY WITH THE CONSENT ORDER THAT THEY HAVE BEEN VIOLATING

Plaintiff seeks relief in aid of litigant's rights under R. 1 : 1 0-3 due to Defendants' and

Nominal Defendants' repeated, unjustified failure to comply with the Consent Order. A motion

under R. 1:10-3 is predicated upon the violation of a Court Order, and "provide[s] a mechanism

... to afford relief to a litigant who has not received what a Court Order or Judgment entitles the

litigant to receive." D'Atria v. D'Atria, 242 N.J. Super. 392,407 (Ch. Div. 1990). The purpose

of the relief is to compel the violating party's compliance. Abbott v. Burke, 206 N.J. 332, 371

(2011). In reviewing a motion brought under R. 1:10-3, this Court should consider Defendants'

and Nominal Defendants' failure to comply with the Consent Order and any resulting harm, and

examine whether they had the "capacity to comply with the court order," but were instead

"willingly contumacious." Board of Educ., Twp. of Middletown v. Middletown Tp. Educ. Ass'n,

352 N.J. Super. 501, 511 (Ch. Div. 2001). Instances in which a non-party to an action suffers

harm caused by a defendant's recalcitrance are of great public importance. Ibid.

There is little question that Falci, the Defendant entities, through Falci, and Falci Jr.'s

actions, are precisely the type of conduct the Securities Law, the Consent Order, and R. 1:10-3

are intended to prevent. They have not changed their behavior since the Consent Order was

entered over one year ago. (Bassman Cert. ~~ 10-39.) Rather, Falci, the Defendant entities,

through Falci, and Falci, Jr. continue to engage in unlawful securities transactions while

simultaneously violating the terms of the Consent Order and putting the investing public at risk.

Ibid. Their recalcitrant behavior in failing to comply with the Consent Order is a "willingly

contumacious" refusal to act without justification. The risk of future harm to investors at the

15

hands of Falci, the Defendant entities, through Falci and Falci Jr. is undeniably significant in

view of their refusal to comply with the Consent Order to date.

A. Falci's Post-Judgment Conduct Violates This Court's Permanent Injunction Because He Continues to Violate the Securities Law.

By violating the Securities Law, Falci has failed to abide by this Court's permanent

injunction. (Bassman Cert., Exh. 2, ~55( a).) Since the entry of the <:;onsent Order, Falci has

continued to engage in securities transactions and failed to disclose that: (i) he is not registered to

sell securities in the State of New Jersey; and (ii) is permanently enjoined from engaging in

securities transactions. (Bassman Cert., Exh. 2, ~ 55.) For example, Falci omitted to disclose

this material fact to Saber Funds Investor PZ when he accepted at least one new investment in

Saber Funds, LLC from PZ in December 2015, and when he made payments of principal to

Saber Funds Investors JV and MS in November 2015 and April 2016, respectively. (Bassman

Cert. ~14-18.)

By accepting new investments, making payments of principal to Saber Funds Investors,

and failing to provide Saber Funds Investors with a copy of the Consent Order by September 28,

2015, Falci violated the antifraud provisions of the Securities Law contained within N.J.S.A.

49:3-52. (Bassman Cert. ~~ 14-18, Exh. 2, ~~ 55(a) and 84(a).) Furthermore, by accepting new

investment funds, Falci and Saber Funds LLC, through Falci, violated N.J.S.A. 49:3-56(a) and

(h), which require agents and broker-dealers to be registered with the Bureau, as well as N.J.S.A.

49:3-60 of the Securities Law, which requires registration of securities with the Bureau.

(Bassman Cert. ~ 14, Exh. 2, ~ 55(b) and (c).)

It has been long recognized by New Jersey courts that the securities business is a

"sensitive, highly and peculiarly specialized field of activity," in which there exists great

potential to abuse investors and cause significant financial injury to the public. State v. Russell,

16

119 N.J. Super. 344, 351 (App. Div. 1972); see also Cola v. Terzano, 129 N.J. Super. 47, 53

(Law Div. 1974) (stating that "[t]he sale of corporate stock and securities is a sophisticated

business which requires regulation in the public interest"), aff'd sub nom, Cola v. Packer, 156

N.J. Super. 77 (App. Div. 1977); Higgins v. New Jersey Bureau of Sec., 100 N.J. Super. 266,

271-72 (App. Div. 1968) (noting that "it is in the public interest to require those who deal in

[securities] as a business to meet high standards"). The potential for abuse and serious financial

injury to the public necessitates that any person selling securities be charged with the knowledge

of, and compliance with, the Securities Law. Russell, supra, 119 N.J. Super. at 351. The

Securities Law is intended to foster comprehensive investor protection by maintaining and

assuring high standards of ethics and fair dealing in the offer, purchase, and sale of securities.

See Cola, supra, 129 N.J. Super. at 53 (citing Higgins, supra, 100 N.J. Super. at 271-72). Here,

the facts show that Falci has again violated the Securities Law.

The antifraud provisions of the Securities Law state, in pertinent part:

It shall be unlawful for any person, in connection with the offer, sale, or purchase of any security, directly or indirectly[:]

(a) To employ any device, scheme, or artifice to defraud;

(b) To make ariy untrue statement of a material fact or to omit to state a material fact necessary in order to make the statement made, in light of the circumstances under which they are made, not misleading;

(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person ....

rn:.J.S.A 49:3-52.]

Neither intent nor scienter is required to prove a violation of the antifraud provisions in

the Securities Law, N.J.S.A. 49:3-52(b) and (c). Milgram v. Fred J. Miller, Eric Riedman, et al.,

Docket No. C-331-06, at 15 (Ch. Div. Jan. 7, 2008) (J. Contillo) ("The Bureau Chief [does] not

17

need to demonstrate that the defendants intended to deceive the investor, only that the defendants

misrepresented or omitted a material fact in connection with a securities transaction.") (Stempler

Cert., Exh. 13); see also Manns v. Skolnik, 666 N.E.2d 1236, 1249-50 (Ind. Ct. App. 1996)

(holding, under a provision identical to N.J.S.A. 49:3-52, that a violation hinges on where

"material information is either misrepresented or omitted [and] ... a violation occurs irrespective

of the individual's intent to defraud").

The information that Falci and the Defendant entities, through Falci, withheld and falsely

represented to Saber Funds Investors since the entry of the Consent Order is material because a

reasonable investor would consider it important ·in making an investment decision. See

Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128, 153-54 (1972); see also Basic

Inc. v. Levinson, 485 U.S. 224, 240 (1988) ("[m]ateriality depends on the significance the

reasonable investor would place on the withheld or misrepresented information"). For example,

misrepresenting how investor funds would be used is a material misrepresentation. See SEC v.

Better Life Club of Am., 995 F. Supp. 167, 176-77 (D. D.C. 1998) (stating that a pyramid

scheme "was itself a broad misrepresentation on the grandest scale"); SEC v. TLC Inv. & Trade

Co., 179 F. Supp.2d 1149, 1153 (C.D. Cal. 2001) ("There is no dispute that reasonable investors

would have considered it important in making an investment decision that . . . their money was

being used in various improper schemes, including race horses and paying returns of other

investors .... "). In addition, misstating the profitability or financial condition of the issuer is

also a material misrepresentation or omission. See SEC v. Haligiannis, 470 F. Supp.2d 373

(S.D.N.Y. 2007) (holding that false statements about the performance of hedge fund, which

falsely inflated the fund's assets and perfonnance, were material misstatements); SEC v. Chester

Holdings, Ltd., 41 F. Supp. 2d 505, 522 (D.N.J. 1999) (finding that an average investor would

18

find overstatements regarding financial condition material). Failing to disclose or omitting that

one is not registered to offer or sell securities is a material misstatement. See IMO M. Rimson &

Co., Inc., et al., 1997 WL 73280, at *4 (SEC Release) (February 21, 1997) (finding the failure to

disclose unregistered broker-dealer was a material misrepresentation and omission in the offer or

sale of securities); State v. Shama Resources L.P., 127 Idaho 267, 272-73 (Idaho 1995) (finding

the failure to disclose broker-dealer was unregistered was a misrepresentation of facts that were

material to the investors because such information, were it available, may have altered the

investor's decision to invest).

By failing to provide Saber Funds Investors with a copy of the Consent Order, Falci

omitted material information that would have altered a reasonable investor's decision to invest in

the Defendant entities. (Bassman Cert., Exh. 2, ~84(a).) Rather than sending out the Consent

Order as ordered by the Court, Falci instead perpetuated his cycle of deceit and continued to send

Saber Funds Investors false quarterly "account statements" purporting to show the value and

accumulated interest on their investments. (Bassman Cert. ~ 17, Exh. 6.) In reality, there was no

investment generating the returns that Falci and the Defendant entities, through Falci, led the

Saber Funds Investors to believe were generated because the "account statements" were merely

bookkeeping entries. Falci also omitted to disclose the material facts regarding this Court's

Consent Order and injunction to Saber Funds Investor PZ when Falci and Saber Funds LLC

accepted new investment money in December 2015, as well as when he made payments of

principal to Saber Funds Investors JV and MS in November 2015 and April 2016, respectively.

(Bassman Cert. ~~ 14-15; Exh. 2, ~55.)

Falci has shown no respect for the agreement he willingly made with Plaintiff and this

Court. Indeed, his material misstatements and omissions have given the investing public the

19

misimpression that the Defendant entities are still viable, functioning businesses, and that the

money invested with them is producing income sufficient to make the purported interest

payments and return of principal. Falci's efforts to hold onto a veil of legitimacy without

justification or remorse fly in the face of this Court's order and violate the antifraud provisions of

the Securities Law, N.J.S.A. 49:3-52 (b) and N.J.S.A. 49:3-52(c).

Falci also continues to violate the registration requirements of the Securities Law by

acting as an,unregistered agent. As clearly stated in the N.J.S.A. 49:3-56(a), it is "unlawful for

any person to act as a[ n] . . . agent ... in this State unless that person is registered or exempt

from registration under [the Securities Law]." See also Mayflower Sec. Co. v. Bureau of Sec., 64

N.J. 85, 89 (1973) (noting that under N.J.S.A. 49:3-56 it is "unlawful for any person to act as a

broker-dealer or agent in this state· unless he is so registered"). N.J.S.A. 49:3-49(b) defines

"agent" as "any individual other than a broker-dealer, who represents a broker-dealer or issuer in

effecting or attempting to effect purchases or sales of securities." See Commodity Futures

Trading Comm'n v. American Metal Exch. Corp., 775 F. Supp. 767, 782 (D.N.J. 1991), affd in

part, vacated in part on other grounds, 991 F .2d 71 (3d Cir. 1993) ("Put simply, a violation of

Section 49:3-56 is established by demonstrating that an unregistered person engaged in the

business of effecting or attempting to effect transactions in securities for the account of others or

for his own account.").

Though Falci was once registered with the Bureau to sell securities, he has not been

registered since 2002. (Bassman Cert., Exh. 2, ~ 4.) None of the Defendant or Nominal

Defendant entities have ever been registered to sell securities with the Bureau. (Bassman Cert.,

Exh. 2, ~~ 5-22.) Similarly, none of the Defendant or Nominal Defendant entities have ever

qualified for an exemption from registration with the Bureau. (Bassman Cert., Exh. 2, ~ 10.)

20

Despite this Court's permanent injunction against Falci, he continues to present himself

to the investing public as the agent of a legally operable securities business. As noted above, he

has not only accepted new investments in Saber Funds, but he has also made payments of

principal and purported interest to Saber Funds Investors and sent quarterly account statements

to numerous investors since entry of the Consent Order. (Bassman Cert. ~~ 14-17.) Each time he

accepted a payment, made a payment, or sent a quarterly account statement to a Saber Funds

Investor since September 18, 2015, Falci violated the permanent injunction placed against him in

the Consent Order and violated the registration provisions of the Securities Law.

B. Defendants and Nominal Defendants Failed to Comply with Numerous Other Provisions in the Consent Order.

Falci, the Defendants entities, through Falci, Falci Jr., Donna Falci and the Nominal

Defendant entities are able to comply with the Consent Order, but have opted instead to be

"willingly contumacious" of the agreement they entered into with Plaintiff and the Court. See

Board of Educ., Twp. of Middletown v. Middletown Tp. Educ. Ass'n, 352 N.J. Super. 501, 511

(Ch. Div. 2001). Neither Falci, the Defend(jllt entities, through Falci, Falci Jr., Donna Falci nor

the Nominal Defendant entities lack the capacity to follow the terms of the Consent Order, as

envisioned by New Jersey Courts when carving out an exception to R. 1:10-3. See, M:., Greer v.

New Jersey Bureau of Securities, 288 N.J. Super. 69, 86 (App. Div. 1996).

Falci and other Defendants and Nominal Defendants disregarded numerous terms of the

Consent Order that they were capable of fulfilling.

First, Falci was capable of providing copies of the Consent Order to current and former

Saber Funds Investors as required by ~ 84 of the Order. Instead of doing so, Falci merely

acknowledged his obligation to Plaintiff and counsel, and explained that he had passed the

responsibility on to someone else. (Bassman Cert. ~ 20.) To date, the Bureau has not received

21

copies of any signed acknowledgements by investors confirming receipt of the Consent Order,

and, since September 28, 2015, eight investors have advised the Bureau that did not receive a

copy of the Consent Order. (Bassman Cert. ~ 21.) Further Falci's failure to provide copies of

the Consent Order to current and former Saber Funds Investors perpetuated his cycle of deceit

because the Consent Order would have disclosed material information that would have altered a

reasonable investor's. See supra, Argument, Part B.

Second, Falci and Donna Falci failed to make the required payments on the premiums of

Life Insurance Policy, as set forth in ~ 73(b) of the Consent Order. (Bassman Cert. ~~ 22-31.)

Neither Falci nor Donna Falci has supplied the Plaintiff with a valid explanation for why they

were incapable of making the May and June 2016 life insurance payments, despite continued

reminders to do so from the Plaintiff. Ibid.

Third, Falci was capable of dissolving each of the Saber Broker-Dealers and Saber

Investment Funds, with the exception of Saber Funds, LLC, as required by~ 75 of the Consent

Order. (Bassman Cert. ~~ 34-36.) When the Plaintiff discovered that Falci failed to dissolve the

New Jersey entities, Falci provided no explanation as to why he was unable to complete this task.

Ibid.

Fourth, Falci, the Defendant entities, through Falci, Falci Jr., Donna Falci and the

Nominal Defendant entities displayed a similar lack of follow-through when they failed to

provide Plaintiff with a copy of all 2015 federal and state tax returns for Defendants and

Nominal Defendants, as required by ~ 77 of the Consent Order. (Bassman Cert. ~~ 37-39.)

Though Falci explained to the Plaintiff during the June 9, 2016 Conference Call that he had

applied for an extension to file the tax returns, he did not provide Plaintiff with documentation of

any such extension. Ibid.

22

Fifth, Falci, the Defendant entities, through Falci, Falci Jr., Donna Falci and the Nominal

Defendant entities also failed to make the required restitution/disgorgement payments as set forth

in ~ 62 of the Consent Order. (Bassman Cert. ~~1 0-13.) Neither Falci, the Defendant entities,

through Falci, Falci Jr., Donna Falci nor the Nominal Defendant entities provided Plaintiff with a

valid explanation for why they were incapable of making the first restitution/disgorgement

payment. They did not even seek any adjustment to the payment schedule. The same holds true

for the second payment installment of the civil monetary penalties.

In sum, Falci, the Defendant entities, through Falci, Falci Jr., Donna Falci and the

Nominal Defendant entities have blatantly and repeatedly disregarded the terms of the Consent

Order that they willingly entered into with the Court and Plaintiff. Their actions have

demonstrated that they are more than capable of complying with the Consent Order, but that they

have opted not to do so out of recalcitrance, without reasonable excuse orjustification. As such,

Defendants' and Nominal Defendants' disregard for the terms of the Consent Order is precisely

the type of compunctious behavior R. 1: 1 0-3 is meant to remedy.

C. The Court Must Grant Plaintiff's Motion and Order Defendants and Nominal Defendants To Comply with the Consent Order and Upon Proof of Further Non-Compliance Issue a Bench Warrant

While monetary penalties are the more usual method by which the court attempts to

compel compliance, incarceration may be ordered as to the initial penalty where "the sting of

monetary penalties appears inadequate." See Sylvia B. Pressler, Current N.J. Rules, comment

4.4.2 on R. 1:10-3 (2016); Bd. ofEduc., Twp. ofMiddletown v. Middletown Twp. Educ. Ass'n,

352 N.J. Super. 501, 509-511 (Ch. Div. 2001).

In determining whether incarceration is warranted, the Court should balance "its coercive

powers with care and mercy without losing sight of the continuing harm done to the victims of

23

defendants' contumacious conduct." Middletown Bd. ofEduc., 352 N.J. Super. at 510.

In Middletown, the court ordered incarceration for public employees who were striking

in violation of an injunction, stating that:

This suit and the enforcement of the injunction are of great public importance. This court should not, therefore, experiment as to which method is the ideal nor need the court gently and slowly approach the point of true coercion. There is no time for that. The irreparable injury being caused by defendants' failure to comply is the polestar; caution over the degree of coercion is not a luxury which can be afforded here.

[352 N.J. Super. at 511.]

In ordering incarceration, the Court found that, "[ e ]xperience demonstrates that

incarceration will more quickly generate compliance." I d. As R. 1:10-3 is coercive rather than

punitive in nature, confinement may not be of a specific duration. See Pierce v. Pierce, 122 N.J.

Super. 359 (App. Div. 1973) . In Pierce, the Appellate Division reversed the trial court's ~rder

which imposed a thirty-day jail sentence, holding that the terms must be related to the

continuance of the noncompliance. Id. at 360-361. In so doing, the Pierce court noted that "[i]t

has been said in such a situation that the key to the jail is in the prisoner's pocket, that key being

compliance with the order." Id. at 360.

Incarceration requires periodic review to determine if the coercive purpose has failed.

However, the passage of time alone is insufficient to demonstrate that the coercive aspects of

confinement have failed. See Anyanwu v. Anyanwu, 339 N.J. Super. 278, 289-291 (App. Div.),

cert. den., 170 N.J. 388 (2001).

As set forth above, Defendants and Nominal Defendants have violated the Consent Order

by: (1) failing to make both the first installment payment of $471,988.82 for

restitution/disgorgement, and the $50,750 installment payment toward the $800,000 assessed in

civil monetary penalties, both of which were due on or before August 31, 20 16; (2) ignoring the

24

permanent injunction by accepting new investments and continuing to mislead Saber Funds

Investors through various payments and account statements; (3) failing to furnish Saber Funds

Investors with copies of the Consent Order; ( 4) failing to provide the Plaintiff with any surplus

rental income generated from their income properties; (5) failing to make payments for a life

insurance policy that provided security for their obligations in the event Falci passed away; (6)

refusing to provide proof showing that certain Defendant entities were dissolved; (7) failing to

provide a copy of filed federal and state tax returns; and (8) neglecting to sign the documents

necessary to create a mortgage lien on certain real property in favor of the State ofNew Jersey.

(Bassman Cert. ~~ 10-39.) Clearly, the Consent Order entered by this Court has had no impact

on Defendants. In fact, Defendants seem to be operating "business as usual," employing the

same methods of misrepresentation and deception. Ibid. This can only be construed as a bold

attempt to avoid the Consent Order altogether.

Consequently, Plaintiff seeks an Order that provides for the following:

1. Requiring defendants Vincent Peter Falci (individually and d/b/a Saber Fixed Income Series,

LLC and d/b/a Saber Equity Income Series, LLC, collectively referred to as "Vincent Peter

Falci" in this Order), Saber Funds, LLC, Saber Asset Management, LLC, Saber Funds

Distributors, LLC, BWX Fund, LLC, Fixed Term Government Fund, LLC, MSI Fund I,

LLC, MSI Equity Fund II, LLC, and Preferred Income Portfolio I, LLC, and nominal

defendants Hallus Realty Group, LLC, Phoenix Equities, LLC, Donna Falci and Vincent N.

Falci to comply with the Consent Order as read together with the Order.

2. Accelerating payment of the unpaid portion of the final judgment entered against all

defendants and nominal defendants as immediately due and payable, in the following

amounts:

25

a. $7,542,697.57 against defendants Vincent Peter Falci, Saber Funds, LLC, Saber Asset

Management, LLC, Saber Funds Distributors, LLC, BWX Fund, LLC, Fixed Term

Government Fund, LLC, MSI Fund I, LLC, MSI Equity Fund II, LLC, and Preferred

Income Portfolio I, LLC, for violations of N.J.S.A. 49:3-52(b), N.J.S.A. 49:3-52(c),

N.J.S.A. 49:3-56(a), N.J.S.A. 49:3-56(h) and N.J.S.A. 49:3-60, constituting

$6,742,697.57 in restitution and $800,000.00 as civil monetary penalties pursuant to

N.J.S.A. 49:3-70.1 ("Defendants' Final Judgment") less $75,000 previously paid by

defendant Vincent Peter Falci towards the penalties;

b. $2,890,553.54 against nominal defendant Vincent N. Falci as disgorgement;

c. $2,108,524.32 against nominal defendant Donna Falci as disgorgement;

d. $2,035,511.23 against nominal defendant Hallus Realty Group, LLC as

disgorgement; and

e. $514,176A9 against nominal defendant Phoenix Equities, LLC as disgorgement.

3. Order that the permanent injunction and restraints against defendants Vincent Peter Falci,

Saber Funds, LLC, Saber Asset Management, LLC, Saber Funds Distributors, LLC, BWX

Fund, LLC, Fixed Term Government Fund, LLC, MSI Fund I, LLC, MSI Equity Fund II,

LLC, and Preferred Income Portfolio I, LLC, and nominal defendants Hallus Realty Group,

LLC, Phoenix Equities, LLC, Donna Falci and Vincent N. Falci, in the Consent Order remain

in full force and effect.

4. Requiring defendant Vincent Peter Falci and nominal defendant Donna Falci to:

'

a. within five ( 5) business days of receipt of the signed Order, take all action required

by ReliaStar Life Insurance Company (the "Insurer") to reinstate life insurance policy

26

# ADXXXX3517 ("Life Insurance Policy") including, but not limited to, executing

all documents required by the Insurer and to comply with 73(b) of the Consent Order;

b. provide Plaintiff with documents demonstrating that the Life Insurance Policy has

been reinstated, and a complete copy of the reinstated Life Insurance Policy under its

present or new policy number, within five (5) business days of receipt of any of such

documents;

c. make timely premium payments to keep the Life Insurance Policy in force;

d. take such other action in a timely manner as the Insurer may require to keep the Life

Insurance Policy in force; and

e. provide Plaintiff with documents evidencing compliance with this paragraph within

five (5) business days of such actions.

5. Requiring defendant Vincent Peter Falci to provide Plaintiff with all documentation

evidencing his transfer of and dilution of his majority interest to minority interests, or

transfer of his entire interest in all (i) issuers; (ii) managing members of issuers; and (iii)

general partners and other control persons or entities of issuers including, but not limited to,

SOIF, Vidon and Pantheon, as required under 61 of the Consent Order.

6. Requiring defendants Vincent Peter Falci, Saber Funds, LLC, Saber Asset Management,

LLC, Saber Funds Distributors, LLC, BWX Fund, LLC, Fixed Term Government Fund,

LLC, MSI Fund I, LLC, MSI Equity Fund II, LLC, and Preferred Income Portfolio I, LLC,

and nominal defendants Hallus Realty Group, LLC, Phoenix Equities, LLC, Donna Falci and

Vincent N. Falci shall comply with 73(a) of the Consent Order, including providing Plaintiff

with a copy of the documents required to be maintained, for the period ending December 31,

2015.

27





Vincent N. Falci to comply with 73(a) of the Consent Order, including providing Plaintiff

with a copy of the documents required to be maintained, for the period ending December 31,

2016, no later than January 31, 2017.





Vincent N. Falci shall execute and return to Plaintiff a Department of the Treasury Internal

Revenue Service Form 4506 "Request for Copy of Tax Return" and/or such other documents

as Plaintiff may request for copies of state and federal tax returns, for any tax year until all of

the restitution/disgorgement and civil monetary penalty payments are made by the defendants

and nominal defendants.

9. Requiring defendant Falci shall provide Plaintiff's counsel with documents demonstrating

that Saber Asset Management, LLC, Saber Funds Distributors, LLC, BWX Fund, LLC,

Fixed Term Government Fund, LLC, MSI Fund I, LLC, MSI Equity Fund II, LLC, and

Preferred Income Portfolio, LLC have been dissolved.

10. Requiring defendants Falci, Saber Funds, LLC, Saber Asset Management, LLC, Saber Funds


LLC, MSI Equity Fund II, LLC, and Preferred Income Portfolio I, LLC, Saber Fixed Income

28

Series, LLC, and Saber Equity Income Series, LLC and nominal defendants Hallus Realty

Group, LLC, Phoenix Equities, LLC, Donna Falci and Vincent N. Falci shall execute and

return all documents as may be requested by Plaintiff to fulfill all of the defendants and

nominal defendants' obligations set forth in the Consent Order.

11. Allowing Plaintiff to apply to this Court for a bench warrant to be issued to defendants

Vincent Peter Falci, nominal defendant Donna Falci and/or nominal defendant Vincent N.

Falci, with sufficient proof of failure to comply with the Consent Order and/or this Order,

except for failure to pay the judgments in whole or in part. Such application may include the

failure by any of the entity defendants - Saber Funds, LLC, Saber Asset Management, LLC,

Saber Funds Distributors, LLC, BWX Fund, LLC, Fixed Term Government Fund, LLC, MSI

Fund I, LLC, MSI Equity Fund II, LLC, and Preferred Income Portfolio I, LLC - and/or

nominal defendants Hallus Realty Group, LLC, Phoenix Equities, LLC.

29

CONCLUSION

For all the reasons set forth above, Plaintiff respectfully requests that the Court employ

its retained jurisdiction and order Defendants and Nominal Defendants to comply with the

Consent Order's terms under R. 1:10-3.

Dated: /J U / !i_t:. I 7 I

Respectfully submitted,

CHRISTOPHER S. PORRINO ATTORNEY GE RAL OF NEW JERSEY

By:

30

Victoria A. Mann· g Deputy Attorney General NJ Attorney ID No. 006371991

sabella T. Ste ple Deputy Attorney General NJ Attorney ID No. 032642001

E~-------Deputy Attorney General NJ Attorney ID No. 019032013


By: Victoria A. Manning (Attorney I d. # 0063 71991) Isabella T. Stempler (Attorney Id. # 032642001) Elisabeth E. Juterbock (Attorney Id. # 019032013) Deputy Attorneys General (973) 648-3070



Plaintiff,

V.




SABER FUNDS DISTRIBUTORS, LLC,


Civil Action

CERTIFICATION OF CHIEF OF INVESTIGATIONS RUDOLPH G. BASSMAN IN SUPPORT OF PLAINTIFF'S MOTION TO ENFORCE LITIGANT'S RIGHTS UNDER R. 1:10-3, AND OTHER RELIEF

1 This action was commenced by Acting Attorney General John J. Hoffman on behalf of the Chief of the

New Jersey Bureau of Securities, Laura H. Posner. In accordance with R. 4:34-4, the caption has been revised to reflect the present Attorney General ofNew Jersey, Christopher S. Parrino.

a Delaware series limited liability company;






PREFERRED INCOME PORTFOLIO I, LLC,

and


Defendants,


HALLUS REALTY GROUP, LLC, a New Jersey ljmited liability company; and

DONNA F ALCI, individually; and VINCENT N. FALCI, individually,

Nominal Defendants.

RUDOLPH G. BASSMAN, of full age, certifies as follows:

1. I make this Certification in support of Plaintiffs motion to enforce litigant's rights under

the Consent Order and Final Judgment as to all Defendants and Nominal Defendants

("Consent Order") entered by the Court on September 18, 2015.

2. I am fully familiar with the facts set forth in this Certification.

2

3. I am the Chief of Investigations with the New Jersey Bureau of Securities (the "Bureau"),

and have been employed by the Bureau since November 2000. As the Chief of

Investigations, I supervise and conduct inquiries into and investigations of possible

violations of the New Jersey Uniform ~ecurities Law (1997), N.J.S.A. 49:3-47 et seq. !

("Securities Law"). Prior to my employ~ent with the Bureau, I was employed as a Police

Officer in Roselle, New Jersey, and retired as a Captain after twenty-five years of service.

4. The Bureau commenced an investigation into the activities of defendants Vincent Peter

Falci ("Falci"), individually, and doing business as Saber Fixed Income Series, LLC and

Saber Equity Income Series, LLC, and as managing member of Saber Funds, LLC and

Saber Asset Management, LLC; and Saber Funds, LLC, Saber Asset Management, LLC,

Saber Funds Distributors, LLC, Fixed Term Government Fund, LLC, MSI Fund I, LLC,

MSI Equity Fund II, LLC, BWX Fund, LLC, and Preferred Income Portfolio I, LLC,

(collectively, "Defendants"), and nominal defendants Phoenix Equities, LLC, Hallus Realty

Group, LLC, Donna Falci and Vincent N. Falci (collectively, "Nominal Defendants")

because of possible violations of the Securities Law, i.e., the sale of unregistered securities

by unregistered agents and broker-dealers, and securities fraud.

5. The Bureau's investigation included issuing subpoenas, as well as reviewing and analyzing

bank records and documents from investors, third parties, and Falci involving Defendants

Saber Funds, LLC, Saber Asset Management, LLC, and Saber Funds Distributors, LLC

(collectively, "Saber Broker-Dealers"), and BWX Fund, LLC, Fixed Term Government

Fund, LLC, MSI Fund I, LLC, MSI Equity Fund II, LLC, Preferred Income Portfolio I,

LLC, the unformed entities Saber Fixed Income Series, LLC, and Saber Equity Income

3

Series, LLC (collectively, "Saber Investment Funds"). I also conducted interviews and

took the first day ofFalci's investigative deposition.

6. On September 18, 2014, a Complaint was filed in this Court on behalf of the Bureau Chief

against the Defendants and Nominal Defendants alleging violations of the antifraud and

registration provisions of the Securities Law by Defendants. On the same day, the Bureau

Chief issued a Summary Order against the Defendants revoking registration exemptions,

which Defendants contested. Attached as Exhibit 1 is a true copy of the Complaint.

7. A year later, this litigation was settled by the Consent Order entered by this Court on

September 18, 2015. The administrative proceeding was separately settled. Attached as

Exhibit 2 is a true copy of the Consent Order entered by this Court.

8. Under the Consent Order, final judgment was entered against the Defendants, jointly and

severally, in the amount of $7,542,697.57, consisting of $6,742,697.57 in restitution and

$800,000.00 in civil monetary penalties. Final judgment was entered against the Nominal

Defendants as follows:

a. Vincent N. Falci in the amount of$2,890,553.54 as disgorgement;

b. Donna Falci in the amount of $2,108,524.32 as disgorgement;

c. Hall us Realty Group, LLC in the amount of $2,108,524.32 as disgorgement2;

and

d. Phoenix Equities, LLC in the amount of $514,176.49 as disgorgement.

See Exhibit 2, ~~ 66-70.

9. Under ~ 62 of the Consent Order, Defendants and Nominal Defendants agreed to pay

restitution and/or disgorgement to the Bureau in five annual payments, beginning on

2 Paragraph 69 of the Consent Order has a typographical error where it incorrectly states that the judgment against

Nominal Defendant Hall us Realty is in the amount of $2, I 08.524.32. The correct amount of disgorgement owed by Hallus Realty is $2,035,511.23. This motion seeks to correct this error.

4

August 31, 2016. The Bureau is responsible for distribution of the restitution/disgorgement

payments to investors, under~ 63 of the Consent Order. See Exhibit 2, ~~ 62-63.

Defendants Failed to Make the Scheduled Restitution/Disgorgement and Civil Monetary Penalty Payments Due August 31, 2016

10. Defendants and Nominal Defendants were required to make a restitution payment to the

Bureau on or before August 31,2016 in the amount of$471,988.82. See Exhibit 2, ~ 62.

11. The Bureau has not received any money for restitution/disgorgement from the Defendants or

Nominal Defendants.

12. Defendants were required to make a civil monetary penalty payment to the Bureau on or

before August 31,2016 in the amount of$50,750.00. See Exhibit 2, ~ 65.

13. The Bureau has not received the August 31, 2016 civil monetary penalty payment from the

Defendants.

New Investments After September 18,2015

14. After entry of the Consent Order, I learned that Falci accepted $6,500 in investor funds

from Saber Investment Funds investor PZ by a check payable to Saber Funds, LLC, dated

December 23, 2015. Attached as Exhibit 3 is a true copy of the check from the records of

Saber Investment Funds investor PZ.

Return of Principal and "Interest" to Investors After September 18, 2015

15. After entry of the Consent Order on September 18, 2015, I learned that Falci paid Saber

Investment Funds investor JV his principal investment of$100,000 in November 2015, and

Saber Investment Funds investor MS her principal investment of $10,000 in March 2016.

Attached as Exhibit 4 are true copies of the wire transfer provided from Saber Investment

Funds investor JV' s records, and the account withdrawal request provided from Saber

Investment Funds investor MS 's records.

5

16. I also learned that Falci made "interest" payments to certain investors after the entry of the

Consent Order. Some of the "interest" payments were made on a monthly basis. Attached

as Exhibit 5 is a true copy of documents from the records of Saber Investment Funds

investors SF and AFIRD showing the "interest" payments made to them by Falci.

17. Falci also provided investors with account statements showing the purported value of their

investments as of December 31, 2015, three months after the Consent Order was signed.

Attached as Exhibit 6 is a true copy of the account statements from the records of Saber

Investment Funds investors RS, A V, CV and N, DR and KR, DN and CN, and ML and

PP.

18. On June 9, 2016, I spoke with Falci by telephone about various matters (the "June 9, 2016

Conference Call"). Deputy Attorneys General Victoria A. Manning and Isabella T.

Stempler were also present on this call. During the call, Falci admitted that since the

Consent Order was enter~d he has made a payment of $100,000 to one Saber Investment

Funds investor, as well as monthly payments to other Saber Investment Funds investors.

He claimed the source of his funds for these payments was from the money he earned from

Pantheon Tax Receivables, L.P.

Failure to Provide Investors with Copy of the Consent Order

19. Under~~ 84(a) and (b) of the Consent Order, Falci agreed and was ordered to provide a

copy of the Consent Order to all current and future investors of the Defendants, Saber

Opportunity Income Fund, L.P, Vidon Capital LLC, and Pantheon Tax Receivables, L.P .,

within ten days of entry of the Consent Order, i.e., September 28, 2015. The Consent

Order also required that each investor sign an acknowledgement confirming receipt of a

copy of the Consent Order.

6

---------------------------- ----------

20. As described in Deputy Attorney General Stempler's Certification accompanying this

motion ("Stempler Cert."), on February 5, 2016, February 18, 2016, and again on April 19,

2016, she sent e-mails to then counsel for the Defendants and Nominal Defendants,

requesting production of copies of acknowledgements signed by the investors confirming

receipt of the Consent Order. See Stempler Cert., Exhibits ("Exhs.") 3, 5 and 7,

respectively. During the June 9, 2016 Conference Call, we requested that Falci produce

copies of the signed investor acknowledgments. Falci claimed that Mr. Clifford "Corky"

Andrews was supposed to send the copies of the Consent Order to investors, but Falci did

not know if Mr. Andrews sent all investors copies of the Consent Order as they were no

longer working together. Falci said that he would send copies of the Consent Order to

investors.

21. To date, the Bureau has not received copies of any signed acknowledgements by investors

confirming receipt of the Consent Order, and, since September 28, 2015, eight investors

have specifically advised me they did not receive a copy of the Consent Order.

Failure to Make Life Insurance Policy Payments

22. Under ~ 73 of the Consent Order, the Defendants and Nominal Defendants agreed to

provide Plaintiff with collateral and/or additional sources of funds for the monetary

judgment. Paragraph 73(b) describes how Falci was owner and the insured of a $3 million

life insurance policy issued by ReliaStar Life Insurance Company (the "Insurer") policy #

AI111111111!1 ("Life Insurance Policy") that named Saber Funds, LLC as the beneficiary.

Falci owns a 51% interest in this entity and his wife, Donna Falci, owns a 49% interest.

As part of the settlement, Falci signed an Assignment of Life Insurance Policy as Collateral

("Life Insurance Assignment") for the benefit of the Bureau. Paragraph 5 of the Life

7

Insurance Assignment states that the "[a]ssignee is under no obligation to pay any premium

... on the policy .... " Attached as Exhibit 7 is a true copy of the Life Insurance

Assignment.

23. Under ~ 73(b) of the Consent Order, Falci and his wife, Donna Falci, agreed and were

ordered to make all required payments on the Life Insurance Policy until the

restitution/disgorgement and civil monetary penalties are paid in full.

24. On or about February 4, 2016, the Bureau received a "Late Payment Reminder Notice"

from the Insurer, notifying the Bureau as assignee that payment of the January and

February 2016 premiums for the Life Insurance Policy had not been paid. Attached as

Exhibit 8 is a true copy of the "February Late Payment Reminder Notice."

25. I believed at the time that this premium was subsequently paid by or on behalf of Falci and

Donna Falci because the Bureau did not receive any further notices from the Insurer

regarding these premium payments.

26. On or about April 4, 2016, the Bureau received another "Late Payment Reminder Notice"

from the Insurer, notifying the Bureau as assignee that payment of the March and April

2016 premiums for the Life Insurance Policy had not been paid. Attached as Exhibit 9 is a

true copy of the "April Late Payment Reminder Notice."

27. I believed at the time that this premium was subsequently paid by or on behalf of Falci and

Donna Falci because the Bureau did not receive any further notices from the Insurer

regarding these premium payments.

28. On or about June 6, 2016, the Bureau received another "Late Payment Reminder Notice"

from the Insurer, notifying the Bureau as assignee that payment ofthe May and June 2016

8

premiums for the Life Insurance Policy had not been paid. Attached as Exhibit 10 is a true

copy of the "June Late Payment Reminder Notice."

29. During the June 9, 2016 Conference Call, Falci said that he did not make the Life Insurance

Policy premium payment due t<:> the Insurer, but would do so.

30. On or about July 11,2016, the Bureau received a "Notice of Lapse oflnsurance Coverage"

from the Insurer because it did not receive the necessary premiums that were required to

keep the Life Insurance Policy active. Attached as Exhibit 11 is a true copy of the "Notice

of Lapse of Insurance Coverage."

31. The Bureau has not received notice that the Life Insurance Policy has been reinstated by

Falci or Donna Falci.

Failure to Provide the Plaintiff with Surplus Rental Income

32. As an additional source of collateral under~ 73(a) of the Consent Order, Defendants and

Nominal Defendants agreed to pay the Bureau any surplus rental income generated after

the payment of the monthly carrying costs of insurance, monthly mortgage payments, and

maintenance and repairs, if any, from the following five residential properties: (1) 60

Baldwin A venue, Middletown, New Jersey, Block 209/Lot 20; (2) 2 Grace A venue,

Middletown, New Jersey, Block 231/Lot 9; (3) 165 Lohsen Avenue, Middletown, New

Jersey, Block 289/Lot 15; (4) 318 East Coventry Court, #lOOE, Lakewood, New Jersey,

Block 1248/Lot 318.05; and (5) 1612 Rosewood Drive, Wall, New Jersey, Block 57/Lot 19

(the "Five Residential Properties").

33. To date, the Bureau has not received any of the promised surplus rental income generated

from the Five Residential Properties.

9

Failure to Provide Proof of Dissolution of Entities

34. Under , 75 of the Consent Order, Falci agreed and was ordered to dissolve each of the

Saber Broker-Dealers and Saber Investment Funds, except for Saber Funds, LLC, within

ninety days of the entry of the Consent Order.

35. In a June 9, 2016 letter from Deputy Attorney General Stempler to Falci, Falci was asked

to provide documentation and information regarding dissolution of the entities, specifically:

(a) each entity's current status; (b) whether each entity's financial accounts were open or

closed; (c) if open, a list of the names of the signatories on the financial accounts and the

present balance of the accounts; and (d) the most current account statements. To date, Falci

has failed to provide the Bureau with any of the requested documentation. See Stempler

Cert., Exh. 11.

36. As of October 25, 2016, BWX Fund, LLC, Fixed Term Government Fund, LLC, MSI

Equity Fund II, LLC, Saber Asset Management, LLC and Preferred Income Portfolio, LLC

were all active and in good standing in the State of New Jersey through December 31,

2016.

Failure to Provide Copy of Filed State and Federal Tax Returns

37. Under, 77 of the Consent Order, Defendants and Nominal Defendants agreed and were

ordered to provide the Bureau with a copy of their filed federal and state tax returns within

ten days of filing, until all the restitution/disgorgement and civil monetary penalties are

paid.

38. During the June 9, 2016 Conference Call, Falci said that Defendants and Nominal

Defendants applied for an extension to file their federal and state tax returns.

10

39. To date, Defendants and Nominal Defendants have not provided the Bureau with any

documentation demonstrating that Defendants applied for an extension to file their federal

and state tax returns.

I hereby certify that the foregoing statements made by me are true. I am aware that if any

of the foregoing statements made by me are willfully false, I am subject to punishment.

Dated: II (H , 2016

11

- --- - --

~~__::__ -=~-- -;_ ;~ ~-- ....

Exhibit 1

"---~-- -----~ - •. - ------- ,__- ::~::..-

JOHN J. HOFFMAN ACTING ATTORNEY GENERAL OF NEW JERSEY Division of Law 124 Halsey Street, 5th Floor P.O. Box 45029 Newark, New Jersey 07101 Attorney for Plaintiff

I I

f r~. -~ .,... ,...,

By: Isabella T. Stempler (Attorney Id. #032642001)-' · · Deputy Attorney General (973) 648-3070

JOHN J. HOFFMAN, Acting Attorney General ofNew Jersey, on behalfofLAURA H. POSNER, Chief of the New Jersey Bureau of Securities,

Plaintiff,

V.

VINCENT PETER FALCI, individually and d/b/a Saber Fixed Income Series, LLC, and d/b/a Saber Equity Income Series, LLC, as a Managing Member of Saber Funds LLC, and Saber Asset Management, LLC;


SABER ASSET MANAGEMENT, LLC, a New Jersey limited liability

company; SABER FUNDS DISTRIBUTORS, LLC,



a New Jersey limited liability -----

· SUPERIOR COURT OF NEW JERSEY CHANCERY DIVISION: GENERAL EQUITY MONMOUTH COUNTY DOCKET NO. MON-C- I (o 0 _.I~

Civil Action

COMPLAINT

company; MSI FUND I, LLC,

a Delaware limited liability company;

MSI EQUITY FUND II, LLC, a New Jersey limited liability

company; BWXFUND, LLC,

a New Jersey limited liability company; and


and


Defendants,




Nominal Defendants.

John J. Hoffman, Acting Attorney General ofNew Jersey, on behalf of Plaintiff Laura H.

Posner, Chief of the New Jersey Bureau of Securities ("Bureau Chief" or "Plaintiff''), having

offices at 153 Halsey Street, Newark, New Jersey, by way of Complaint against the above-

named Defendants and Nominal Defendants, says:

SUMMARY

1. This case anses from the fraudulent sale of $5.4 million in unregistered securities by

defendant Vincent P. Falci ("Falci"), an unregistered agent, and the business entities he

controlled, including broker-dealer defendants Saber Funds, LLC ("Saber Funds"), Saber

2

<-o __ :.-:.

Asset Management, LLC ("SAM"), Saber Funds Distributors, LLC ("SFD") (broker-dealer

entities collectively referred to as "Saber Broker-Dealers"), and issuer defendants Saber

Fixed Income Series, LLC ("Saber Fixed Income"), Saber Equity Income Series, LLC

("Saber Equity"), BWX Fund, LLC ("BWX"), Fixed Tenn Government Fund, LLC

("FTGF"), MSI Fund I, LLC ("MSI Fund I"), MSI Equity Fund II, LLC ("MSJ Equity

Fund II"), and Preferred Income Portfolio I, LLC ("PIP") (issuer entities collectively

referred to as the "Saber Investment Funds").

2. From January 2006 through at least December 2009 ("Relevant Time Period"), defendant

Falci, a former Middletown, New Jersey, fire chief, through the Saber Broker-Dealers and

Saber Investment Funds, fraudulently raised over $5.4 million from the sale of unregistered

securities in the form of interests in limited liability companies and investment contracts

from approximately 182 investors. The investors included, among others, public servant

organizations such as fire companies and police benevolent associations throughout

Monmouth County.

3. Defendants Falci, the Saber Broker-Dealers and the securities issued by the Saber

Investment Funds were not registered with the New Jersey Bureau of Securities

("Bureau").

4. In order to orchestrate the scheme, defendants Falci, the Saber Broker-Dealers, and the

Saber Investment Funds, through Falci, misrepresented to investors that investor money

would be invested primarily in tax lien certificates, and that such investments historically

yielded certain positive investment results for year 2005.

5. In addition, defendants Falci, the Saber Broker-Dealer and the Saber Investment Funds,

through Falci, failed to disclose to investors that, rather than use investor funds for tax lien

3

- .-- - ~ - ,_.,_ -~ ..

certificates, investor funds were used to, among other things, purchase several residences

for defendant Falci and his wife, nominal defendant Donna Falci, conduct day-trading by

defendant Falci and his son, nominal defendant Vincent N. Falci; and make loans totaling

$185,000.00 to a company owned by defendant Falci's best friend.

6. By this conduct, defendants Falci, the Saber Broker-Dealers and the Saber Investment

Funds violated the New Jersey Uniform Securities Law (1997) N.J.S.A. 49:3-47 et seq.

("Securities Law"). The nominal defendants, Hall us Realty Group, LLC ("Hallus Realty"),

Phoenix Equities, LLC ("Phoenix Equities") and Falci's wife and son, benefitted from the

use of investor funds without having a legitimate claim to such funds, and equity demands

that such funds be disgorged from those who were or may have been unjustly enriched.

JURISDICTION AND VENUE

7. The Bureau is a state regulatory agency charged with the administration and enforcement

ofthe SeGurities Law.

8. Plaintiff brings this action against defendants Falci, the Saber Broker-Dealers and the Saber

Investment Funds pursuant to the Securities Law for violations of:

a. N.J.S.A. 49:3-52(b) (making materially false and misleading statements or omitting

facts necessary to make the statements made not misleading);

b. N,J.S.A. 49:3-52(c) (engaging in any act or practice, or course of business which

would operate as a fraud or deceit upon any person in connection with the offer, sale

or purchase of securities);

c. N .J.S.A. 49:3-56(a) (acting as an unregistered agent);

d. N.J.S.A. 49:3-56(a) (acting as an unregistered broker-dealer);

e. N.J.S.A. 49:3-56(h) (employing an unregistered agent); and

4

f. N.J.S.A. 49:3-60 (selling unregistered securities).

9. Plaintiff also brings this action against defendants Falci, the Saber Broker-Dealers, the

Saber Investment Funds and nominal defendants Hallus Realty, Phoenix Equities, Donna

Falci and Vincent N. Falci seeking:

a. a finding that defendants Falci, the Saber Broker-Dealers and the Saber Investment

Funds engaged in the acts and practices alleged in the Complaint;

b. a ruling that such acts and practices constitute violations of the Securities Law;

c. a permanent injunction against defendants Falci, the Saber Broker-Dealers and the

Saber Investment Funds from violating the Securities Law, among other injunctive

relief;

d. an assessment of civil monetary penalties against defendants Falci, the Saber Broker

Dealers and the Saber Investment Funds for each violation of the Securities Law;

e. restitution and/or disgorgement from defendants Falci, the Saber Broker-Dealers and

the Saber Investment Funds and nominal defendants Hallus Realty, Phoenix Equities,

Donna Falci and Vincent N. Falci of all profits and/or funds gained through violations

of the Securities Law; and

f. the option of rescission for each purchaser of securities issued by the Saber

Investment Funds.

10. Jurisdiction is proper over defendants and nominal defendants pursuant to N.J.S.A. 49:3-51

for violations of the Securities Law that are subject of this Complaint because each

violation originated from this State.

11. Venue is proper pursuant to R. 4:3-2(a) because it lies where the cause of action arose.

5

PARTIES

12. The Bureau Chief is the principal executive of the Bureau.

13. Defendant Falci is a resident of Middletown, New Jersey. He is the husband of nominal

defendant Donna Falci and father of nominal defendant Vincent N. Falci. Defendant Falci

created, operated and exclusively controlled and continues to control defendants Saber

Broker-Dealers, Saber Investment Funds and nominal defendants Hall us Realty and

Phoenix Equities. Defendant Falci 's role and responsibilities at defendant Saber Broker

Dealers, Saber Investment Funds and nominal defendant Hallus Realty included, among

other things: (a) handling the day-to-day management of all the entities; (b) handling all

investment decisions of all the Saber Investment Funds; and (c) controlling the finances of

all the entities. Defendant Falci was registered with the Bureau to sell securities from 1992

through 2002. However, during the Relevant Time Period, Falci was neither registered

with the Bureau in any capacity nor exempt from registration.

14. Defendant SAM is a New Jersey limited liability company, formed on or about June 3,

2002. During the Relevant Time Period, defendant SAM was located in Middletown, Nevv .

Jersey. Defendant SAM's members are defendant Falci, who holds a 51% ownership

interest, and his wife, nominal Donna Falci, who holds a 49% ownership interest.

Defendant SAM is the managing member and investment manager for defendants MSI

Fund I, FTGF and BWX. Defendant SAM has never been registered with the Bureau in

any capacity.

15. Defendant Saber Funds is a New Jersey limited liability company, formed on or about

December 30, 2005. During the Relevant Time Period, defendant Saber Funds was located

in Middletown, New Jersey. Defendant Saber Fund's members are defendant Falci, who

6

holds a 51% ownership interest, and his wife, nominal Donna Falci, who holds a 49%

ownership interest. Defendant Saber Funds is the managing member and investment

manager for defendants MSI Equity Fund II, Saber Equity and Saber Fixed Income.

Defendant Saber Funds has never been registered with the Bureau in any capacity.

16. Defendant SFD is a Delaware series limited liability company, formed on or about March

13, 2009. During the Relevant Time Period, defendant SFD was located in Middletown,

New Jersey. The Certificate of Formation for defendant SFD is the sole certificate on

record for this series limited liability company. Defendant SFD's managing director is

defendant Falci. Defendant SFD has never been registered with the Bureau in any

capacity.

17. Defendant MSI Fund I is a Delaware limited liability company, formed on January 4, 2006.

During the Relevant Time Period, defendant MSI Fund I was located in Middletown, New

Jersey. From approximately January 15, 2006 through approximately March 16, 2006,

defendants Falci and MSI Fund I, through Falci, issued, offered and sold securities in the

form of limited liability interests ("MSI Fund I Securities") using a "confidential private

placement memorandum" ("MSI Fund I PPM") to at least fifteen (15) investors, fourteen

(14) of whom resided in New Jersey. The MSI Fund I Securities were not registered with

the Bureau.

18. Defendant FTGF is a New Jersey limited liability company, formed on March 30, 2006.

During the Relevant Time Period, defendant FTGF was located in Middletown, New

Jersey. From approximately April 6, 2006 through at least February 19, 2009, defendants

Falci and FTGF, through Faler, issued, offered and sold securities in the form of limited

liability interests ("FTGF Securities") using a "confidential private placement

7

memorandum" ("FTGF PPM") to at least seventy-six (76) investors, sixty-five (65) of

whom resided in New Jersey. The FTGF Securities were not registered with the Bureau.

19. Although defendant Falci sought an exemption from registration of the securities offered

by MSI Fund I and FTGF by filing with the SEC a Notice of Sale of Securities Pursuant to

Regulation D Section 4(6), and/or Uniform Limited Offering Exemption fom1 for each

fund, the requirements for exemption were not met.

20. Defendant MSI Equity Fund II is a New Jersey limited liability company, fmmed on or

about September 17, 2008. During the Relevant Time Period, defendant MSI Equity Fund

II was located in Middletown, New Jersey. Since on or around September 17, 2008,

defendants Falci and MSI Equity Fund II, through Falci, issued, offered and sold securities

in the form of limited liability interests ("MSI Equity Fund II Securities") to at least

twenty-six (26) investors, twenty-one (21) of whom resided in New Jersey. The MSI

Equity Fund II Securities were not registered with the Bureau.

21. Defendant Saber Fixed Income is an unformed business association operated by defendant

Falci. During the Relevant Time Period, Saber Fixed Income was located in Middletown,

New Jersey. Beginning in or around June 2009, defendant Falci doing business as Saber

Fixed Income issued, offered and sold securities in the purported form of limited liability

interests ("Saber Fixed Income Securities") using a private placement memorandum

("Saber Fixed Income PPM") to at least four( 4) investors, three (3) of whom resided in

New Jersey. The Saber Fixed Income Securities were not registered with the Bureau.

22. Defendant Saber Equity is an unformed business association operated by defendant Falci.

During the Relevant Time Period, Saber Equity was located in Middletown, New Jersey.

Beginning in or around March 2009, defendant Falci doing business as Saber Equity

8

issued, offered and sold securities m the purported form .of limited liability interests

("Saber Equity Securities") using a private placement memorandum ("Saber Equity PPM")

to at least thirteen (13) investors, twelve (12) of whom resided in New Jersey. The Saber

Equity Securities were not registered with the Bureau.

23. Defendant BWX is a New Jersey limited liability company, formed on or about March 30,

2006. During the Relevant Time Period, defendant BWX was located in Middletown, New

Jersey. Defendants Falci and BWX, through Falci, issued, offered and sold securities

purportedly in the torm of limited liability interests ("BWX Securities") to at least twenty

two (22) investors, fifteen (1 5) of whom resided in New Jersey. The BWX Securities were

not registered with the Bureau.

24. Defendant PIP is a New Jersey limited liability company formed, on or about June 3, 2002.

During the Relevant Time Period, defendant PIP was located in MiddletO\vn, New Jersey.

Defendants Falci and PIP, through Falci, issued, offered and sold securities in the form of

limited liability units ("PIP Securities") using a "confidential private offering

memorandum" ("PIP PPM") dated December 31, 2004 to at least twenty-six (26) investors,

sixteen (16) of whom resided in New Jersey. The PIP Securities were not registered with

the Bureau.

25. Nominal defendant Hal! us Realty is a New Jersey limited liability company, formed on or.

about December 30, 2005. During the Relevant Time Period, nominal defendant Hallus

Realty was located in Middletown, New Jersey. Nominal defendant Hallus Realty's

members are defendants Saber Funds, which holds a seventy-five percent (75%) ownership

interest and nominal defendant Vincent N. Falci, who holds a twenty-five percent (25%)

ownership interest. Hallus Realty's purported business is real estate investment.

9

----- -

26. Nominal defendant Phoenix Equities is a New Jersey limited liability company, f01med on

or about February 20, 2007. During the Relevant Time Period, nominal defendant Phoenix

Equities was located in Middletown, New Jersey. Nominal defendant Phoenix Equities'

members are Falci, who holds a 50% ownership interest, and his son, nominal defendant

Vincent N. Falci, who holds a 50% mvnership interest. Nominal defendant Phoenix

Equities was formed by Falci and his son, nominal defendant Vincent N. Falci, to use for

day-trading.

27. Nominal defendant Donna Falci JS an individual who, at all relevant times, resided in

Middletown, New Jersey. Nominal defendant Donna Falci is manied to defendant Falci.

During the Relevant Time Period, nominal defendant Donna Falci held membership

interests in: (a) SAM; and (b) Saber Funds. She has never been registered with the Bureau

in any capacity.

28. Nominal defendant Vincent N. Falci is an individual who, at all relevant times, resided in

New Jersey. Nominal defendant Vincent N. Falci is defendant Falci's son. During the

Relevant Time Period, nominal defendant Vincent N. Falci held membership interests in:

(a) Hall us Realty and (b) Phoenix Equities.

29. At all relevant times defendants Saber Broker-Dealers, Saber Investment Funds, and

nominal defendants Hallus Realty and Phoenix Equities were controlled by defendant

Falci.

FACTUAL BACKGROUND

30. During the Relevant Time Period, defendants Falci, the Saber Broker-Dealers and the

Saber Investment Funds, through Falci, raised approximately $5.4 million from the

fraudulent offer and sale of MSI Fund I Securities, FTGF Securities, MSI Equity Fund II

10

Securities, Saber Fixed Income Securities, Saber Equity Securities, BWX Securities and

PIP Securities (collectively the "Saber Investment Funds Securities").

31. The Saber Investment Funds Securities were sold to approximately 182 investors, 156 of

whom were located in New Jersey.

32. The Saber Investment Funds Securities were not registered with the Bureau, not federally

covered nor exempt from registration.

A. Representations to Saber Investment Funds Investors in Written Promotional Material

33. During the Relevant Time Period, defendants Falci, the Saber Broker-Dealers and the Saber

Investment Funds, through Falci, misrepresented to prospective and actual investors in

written promotional materials, that: (i) their money would be invested primarily in tax lien

ce1iificates; and (ii) such investments historically yielded certain positive investment results

in 2005.

34. All of the written promotional material provided to the Saber Investment Funds investors

falsely represented that their money would be invested primarily in tax lien certificates. In

reality, Saber Investment Funds' financial documents demonstrated that Saber Investment

Funds' investments in tax lien certificates never exceeded 3% of the total assets under

management.

35. All of the written promotional materials provided to Saber Investment Funds investors falsely

represented the 2005 rate of return as 7.24%. In fact, defendant Falci admitted that the 2005

rate of return was derived from a purely hypothetical model of his strategy.

B. Representations to Saber Funds Defendants Investors on the Web site

36. During the Relevant Time Period, defendants Falci and Saber Funds, through Falci, falsely

represented to prospective and actual investors on their web site that:

1 I

a. the model portfolio allocations would be eighty percent (80%) municipal tax

certificates, fifteen percent ( 15%) hedged ETFs (exchange traded funds) and five

percent (5%) cash or cash equivalents;

b. "[tJhe focus in our Tax Certificate strategy allowed this portfolio to maintain a solid

foundation and desirable returns while its smaller Cash or Cash Equivalent portion

further minimized risk to the portfolio;" and

c. MSI Fund I had a rate of return of 7.24% for 2005.

37. These representations \Vere false. Defendant MSI Fund I was neither created nor operational

until January 2006, well after the time period when the defendants claimed they were

receiving a 7.24% rate. of return. Nor could the rate of return be attributed to FTGF, MSI

Equity Fund II, Saber Equity, Saber Fixed Income or BWX because they were neither

created nor operational in 2005.

38. Similarly, Saber Investment Funds' financial documents demonstrate that investments in tax

lien cet1ificates never exceeded 3% of the total assets under management.

C. Representations to Saber Investment Funds Investors in the PPMs

39. In connection with the offer and sale of securities, defendant Falci provided investors with a

MSI Fund I PPM, FTGF PPM, Saber Fixed Income PPM, Saber Equity PPM and/or PIP

PPM (collectively, the "PPMs").

40. Defendant Falci provided investors of BWX Securities and MSI Equity II Securities with a

MSI Fund I PPM.

41. Defendant Falci drafted the PIP PPM, the FTGF PPM, the Saber Fixed Income PPM and the

Saber Equity PPM.

12

42. Defendant Falci was heavily involved in the drafting of the MSI Fund I PPM by providing

information relating to the purpose and strategy of the fund and some of its components to

· his attorney, who drafted the MSI Fund I PPM. Falci ultimately approved the language and

representations in the MSI Fund I PPM.

43. Defendants MSI Fund I, Saber Fixed Income and Saber Equity Income represented to

investors in the MSI Fund I PPM, Saber Fixed Income PPM and Saber Equity PPM,

respectively, that: (a) the investment objective was to seek interest income by investing

"primarily" in tax lien certificates and other fixed income instruments; (b) the funds

contemplated investing most of their capital in tax lien certificates; (c) the ftmd could invest

in other securities and interests in real property; and (d) the fund would buy and sell

securities deemed by defendant Falci to be equity equivalents and that the fund could engage

in trading which included, but was not limited to: selling securities short; purch<;1sing and

selling stock options and other derivatives; and buying securities on margin, among others.

44. Defendant FTGF represented to investors in the FTGF PPM that: (a) the investment objective

was to "seek interest by investing in ta)<: lien certificates and other fixed income instruments;"

(b) the fund contemplated investing most of its capital in tax lien certificates; (c) the fund

could invest in other securities and interests in real property; and (d) the fund \Vould buy and

sell securities deemed by defendant Falci to be equity equivalents and that the fund may

engage in trading including, but not limited to, selling securities short, purchasing and selling

stock options and other derivatives, and buying securities on margin, among others.

45. The representations to investors that defendants MSI Fund I, Saber Fixed Income, Saber

Equity and FTGF would invest primarily in tax lien certificates were false because Saber

13

Investment Funds' financial documents demonstrate that investments in tax lien certificates

never exceeded 3% of the total assets under management.

D. Representations to Saber Investment Funds Investors in the \Vritten Annual Update

46. In or around December 2008, defendant SFD, through Falci, provided a written update to

investors which falsely represented the percentage of fund allocations in tax lien certificates

(as ninety percent (90%) for the fixed income funds and eighty-five percent (85%) in the

equities funds). In reality, less than 3% of total assets under management were actually

invested in tax lien certificates as demonstrated by Saber Investment Funds' financial

documents.

E. Misuse of Investor Funds

4 7. Investor funds were used for purposes other than those disclosed to investors. At least

$4,000,000.00 of investor funds was misused by defendants Falci, the Saber Investment

Funds and the Saber Broker-Dealers by, among other things: (i) an improper and

undisclosed transfer of approximately $3,000,000.00 to nominal defendant Hallus Realty;

(ii) an improper and undisclosed transfer of $554,000.00 to nominal defendant Phoenix

Equities for defendant Falci and nominal defendant Vincent N. Falci's day-trading; (iii) an

improper and undisclosed loan, in the aggregate, of $185,000 to a company owned by

defendant Falci's best friend; and (iv) improper and undisclosed payments of

approximately $34 7,000 to nominal defendants Donna Falci and Vincent N. Falci.

Defendant Falci controlled the finances for defendants the Saber Broker-Dealers, the Saber

Investment Funds, and nominal defendants Hall us Realty and Phoenix Equities.

14

48. Payments totaling approximately $700,000.00 were made to defendant Falci from

defendants the Saber Broker-Dealers the Saber Investment Funds and nominal defendants '

Hallus Realty and Phoenix Equities.

49. Payments totaling approximately $73,000.00 were made to nominal defendant Donna Falci

from defendants the Saber Broker-Dealers, the Saber Investment Funds and nominal

defendants Hallus Realty and Phoenix Equities.

SO. Payments totaling approximately $340,000.00 were made to nominal defendant Vincent N.

Falci from defendants the Saber Broker-Dealers, the Saber Investment Funds and nominal

defendants Hallus Realty and Phoenix Equities. Of the payments made to nominal

defendant Vincent N. Falci, $274,000.00 was from defendant SAM, of which he was not a

member.

51. During the Relevant Time Period, defendant Falci made numerous and unexplained

transfers of funds between defendants the Saber Broker-Dealers, the Saber Investment

Funds and nominal defendants Hallus Realty and Phoenix Equities.

52. During the Relevant Time Period, defendant Falci transferred approximately $554,000 of

MSI Fund I and FTGF investor money to nominal defendant Phoenix Equities, which was

used for personal day-trading by Falci and his son, nominal defendant Vincent N. Falci.

53. During the Relevant Time Period, defendant Falci transferred approximately $3 million to

nominal defendant Hallus Realty from defendants MSI Fund I, FTGF, BWX, PIP and SFD.

54. The funds transfeiTed to nominal defendant Hallus Realty were used by defendant Falci to

purchase at least five (5) New Jersey residential properties which at the outset were deeded

to defendant Falci and/or nominal defendant Donna Falci. Nominal defendant Hallus

Realty, tlu·ough Falci, manages the five (5) residential properties.

15

55. The five (5) residential properties are encumbered with mortgage loans and leased to

residential tenants.

56. One residential property was leased to nominal defendant Vincent N. Falci.

57. Defendant Falci, without disclosure to the Saber Investment Funds investors, haphazardly

transferred millions of dollars between defendants the Saber Broker-Dealers and the Saber

Investment Funds rather than invest it in tax liens certificates as represented in the PPMs.

According to defendant Falci, investor money raised by the Saber Investment Funds was

deposited into one of the Saber Broker-Dealers banl< accounts where it was pooled with

other investor funds and, then transferred by defendant Falci to what he and the Saber '

Investment Funds were investing at that time, e.g., to buy tax liens certificates, securities or

transferred to Hallus Realty, which bought properties in Falci or his wife's name. The

chart below illustrates the transfer of money:

16

I .

L

58. Defendant Falci caused MSI Ftmd I, FTGF and BWX to issue PIK Notes to nominal

defendants Hallus Realty and Phoenix Equities for purported "lines of credit."

59. Defendant Falci established the terms of and entered into the PIK Notes on behalf of all the

entities on both sides of the transaction.

60. Defendants Falci, the Saber Broker-Dealers and the Saber Investment Funds, through Falci

omitted to disclose to investors that he caused MSI Fund I, FTGF, and BWX to issue PIK

Notes to nominal defendants Hallus Realty and Phoenix Equities and that Falci, on behalf

of all the entities, negotiated the terms of the PIK Notes.

17

61. Defendant Falci caused defendant Saber Funds to enter into three (3) promissory notes

totaling $185,000.00, loaning money to a company owned by an investor of SAM, whom

Falci described as his best friend. Falci, the Saber Broker-Dealers and the Saber Investment

Funds, through Falci, omitted to disclose to investors Falci's professional and personal

relationship with the owner of said company.

62. Investors had no control over how their funds would be used.

63. Defendants Falci, the Saber Investment Funds, through Falci and/or the Saber Broker-

Dealers, through Falci omitted material facts to investors, including, among other things,

that:

a. Defendant Falci was not registered with the Bureau to sell securities;

b. MSI Fund I Securities were neither registered with the Bureau nor exempt from state

or federal registration;

c. FTGF Securities were neither registered with the Bureau nor exempt from state or

federal registration;

d. MSI Equity Fund II Securities were neither registered with the Bureau nor exempt

from state or federal registration;

e. PIP Securities were neither registered with the Bureau nor exempt from state or


f. BWX Securities were neither registered with the Bureau nor exempt from state or


g. Saber Fixed Income and Saber Equity Income were not fom1ed as limited liability

companies and therefore the investors did not purchase securities in the form of

limited liability company interests;

18

h. Defendant SAM was not registered with the Bureau in any capacity;

1. Defendant Saber Funds was not registered with the Bureau in any capacity;

J. Defendant SFD was not registered with the Bureau in any capacity;

k. Investor funds were not invested in tax lien certificates to the extent represented;

l. Defendant Falci controlled of all the entities to which investor funds were transferred;

m. Certain investor funds would be transferred to nominal defendant I-Iallus Realty, a

company controlled by defendant Falci, to purchase several residences, which were

deeded at the outset to defendant Falci or his wife, nominal defendant Dmma Falci;

n. Certain investor funds were transferred to nominal defendant Phoenix Equities for

day-trading by defendant Falci and his son, nominal defendant Vincent N. Falci;

o. Defendant Falci caused defendants MSI Fund I, BWX and FTGF to enter into the

PIK Notes with nominal defendants Hallus Realty and Phoenix Equities with

defendant Falci individually and acting on behalf of all the parties to the PIK Notes,

on behalf of all the entities, negotiated the terms of the PIK Notes;

p. Defendant Falci caused defendant Saber Funds to enter into tlu·ee (3) promissory

notes in the aggregate amount of $185,000.00 loaning money to a company owned by

an investor of SAM, which Falci described as his best friend; and

q. Defendant Falci failed to form certain limited liability companies in which he was

selling limited liability interests.

19

COUNT I

MAKING UNTRUE STATEMENTS OF MATERIAL FACT AND OMITTING TO STATE MATERIAL FACTS NECESSARY IN ORDER TO MAKE THE e.

STATEMENTS MADE, IN THE LIGHT OF THE CIRCUMSTANCES UNDER \VHICH THEY WERE MADE, NOT MISLEADING IN VIOLATION OF N.J.S.A.

49:3-52(b) (As to Defendants Falci, Saber Fund, SAM, SFD, FTGF, MSI Fund I, MSI Equity

Fund II, Saber Fixed Income, Saber Equity, B\VX and PIP)

64. Plaintiff repeats the allegations in the preceding paragraphs as if fully set forth herein.

65. Defendants Falci, Saber Funds, SAM, SFD, FTGF, MSI Fund I, MSI Equity Fund II, Saber

Fixed Income, Saber Equity, BWX and PIP, individually and/or tlrrough their officers,

directors, employees, agents, attorneys, successors, subsidiaries directly and/or indirectly,

made materially false and misleading sta:tements and/or omitted material facts necessary in

order to make the statements made, in the light of the circumstances under which they were

m~de, not misleading, to investors in connection with the offer and sale of securities.

66. Among the materially false and misleading statements made by Defendants were that

investor funds would be invested primarily in tax lien certificates and that such investments

historically yielded certain positive investment results for year 2005.

67. Among the omitted facts not disclosed to investors were:

a. Defendant Falci was not registered with the Bureau to sell securities;







20





g. Saber Fixed Income and Saber Equity Income were not fonned as limited liability

companies and therefore the investors did not purchase securities in the fonn of


h. Defendant SAM was not registered with the Bureau in any capacity;

1. Defendant Saber Funds was not registered with the Bureau in any capacity;

J. Defendant SFD was not registered with the Bureau in any capacity;


1. Defendant Falci controlled all of the entities to which investor funds were transferred;

m. Certain investor funds "vould be transferred to nominal defendant I-Iallus Realty, a

company controlled by defendant Falci, to purchase several residences, which vvere

deeded at the outset to defendant Falci or his wife, nominal defendant Dorma Falci;


day-trading by defendant Falci and his son, nominal defendant Vincent N. Falci;

o. Defendant Falci caused defendants MSI Fund I, BWX and FTGF to enter into the

PIK Notes with nominal defendants Hallus Realty and Phoenix Equities with

defendant Falci individually and acting on behalf of all the parties to the PIK Notes,

on behalf of all the entities;

21

p. Defendant Falci caused defendant Saber Funds to enter into three (3) promissory

notes in the aggregate amount of $185,000.00, loaning money to a company owned

by an investor of SAM, which Falci described as his best friend; and

q. Defendant Falci failed to form certain limited liability companies in which he was

selling limited liability interests.

68. Each omission of a material fact and each materially false or misleading statement is a

violation ofN.J.S.A. 49:3-52(b).

69. Each violation of N.J.S.A. 49:3-52(b) by each defendant upon each investor is a separate

violation of the Securities Law and is cause for the imposition of a civil monetary penalty

for each separate violation purst1ant to N.J.S.A. 49:3-70.1.

COUNT II

ENGAGING IN ANY ACT OR PRACTICE WHICH WOULD OPERA TEAS A FRAUD OR DECEIT UPON ANY PERSON IN VIOLATION OF N.J.S.A. 49:3-52(c)

(As to Defendants Falci, Saber Fund, SAM, SFD, FTGF, MSI Fund I, MSI Equity Fund II, Saber Fixed Income, Sab~r Equity Income, BWX and PIP)

70. Plaintiff repeats the allegations in the preceding paragraphs as iffully set forth herein.


Fixed Income, Saber Equity, BWX and PIP, through Falci, engaged in an act, practice and

course of business that operated as a fraud and/or deceit upon the investors and others, in

violation ofN.J.S.A. 49:3~52(c) by, among other things:

a. The offer and sale of Saber Investment Funds Securities through the use of false and

misleading statements and omissions; and

b. Use of investor funds to enrich or otherwise benefit defendant Falci and the nominal

defendants.

22

72. Each violation of N.J.S.A. 49:3-52(c) by each defendant upon each investor is a separate

violation of the Securities Law and is cause for the imposition of a civil monetary penalty

for each separate violation pursuant toN .J.S.A. 49:3-70.1.

COUNT III

ACTING AS AN AGENT WITHOUT REGISTRATION IN VIOLATION OF N.J.S.A. 49:3-56(a)

(As to Defendant Falci)


74. Defendant Falci represented defendants FTGF, MSI Fund I, MSI Equity Fund II, Saber

Fixed Income, Saber Equity, BWX, PIP, SAM, Saber Funds and SFD in effecting or

attempting to effect transactions in securities from or in New Jersey and, thus, acted as an

agent, as defined in section 49:3-49(b) of the Securities Law, without being registered with

the Bureau to sell the securities.

75. Defendant Falci violated N.J.S.A. 49:3-56(a), which provides that, among other things,

only persons registered with the Bureau may lawfully act as agents.

76. Each sale to investors constitutes a separate violation of N.J.S.A. 49:3-56(a) and is cause

for the imposition of a civil monetary penalty for each separate violation pursuant to

N.J.S.A. 49:3-70.1.

COUNT IV

ACTING AS A BROKER-DEALER WITHOUT REGISTRATION IN VIOLATION OF N.J.S.A. 49:3-56(a)

(As to Defendants SAM, Saber Funds and SFD)


78. Defendants SAM, Saber Funds, and SFD effected or attempted to effect transactions in

securities from or in New Jersey and, thus, acted as a broker-dealer, as defined in section

23

49:3-49(c) of the Securities Law, without being registered with the Bureau to sell the

securities.

79. Defendants SAM, Saber Funds, and SFD violated N.J.S.A. 49:3-56(a), which provides that,

among other things, only persons registered with the Bureau may lawfully act as broker-

dealers.

80. Each sale to investors constitutes a separate violation of N.J.S.A. 49:3-56(a) and is cause

for the imposition of a civil monetary penalty for each separat~ violation pursuant to

N.J.S.A. 49:3-70.1.

COUNTV

EMPLOYING UNREGISTERED AGENTS IN VIOLATION OF N.J.S.A. 49:3-56(h) (As to Defendants FTGF, MSI Fund I, MSI Equity Fund II, Saber Fixed Income,

Saber Equity Income, BWX, PIP, SAM, Saber Funds and SFD)


82. Defendants Saber Funds, SAM, SFD, FTGF, MSI Fund I, MSI Equity Fund II, Saber Fixed

Income, Saber Equity, BWX and PIP employed defendant Falci to act as an agent in

effecting or attempting to effect transactions in securities from or in New Jersey.

83. Defendant Falci acted as an agent for defendants Saber Funds, SAM, SFD, FTGF, MSI

Fund I, MSI Equity Fund II, Saber Fixed Income, Saber Equity, BWX and PIP as defined

in N.J.S.A. 49:3-49(b), without being registered as an agent with the Bureau.

84. Defendants Saber Funds, SAM, SFD, FTGF, MSI Fund I, MSI Equity Fund II, Saber Fixed

Income, Saber Equity, BWX and PIP's conduct constituted employing an agent who was

not registered with the Bureau to sell securities in violation ofN.J.S.A. 49:3-56(h).

24

85. Each sale to investors is a separate violation of N.J.S.A. 49:3-56(h) and is cause for the

imposition of a civil monetary penalty for each separate violation pursuant to N.J.S.A.

49:3-70.1.

COUNT VI

SELLING UNREGISTERED SECURITIES IN VIOLATION OF N.J.S.A. 49:3-60 (As to Defendants Falci, Sabe1· Funds, SAM, SFD, FTGF, MSI Fund I, MSI Equity Fund

II, Saber Fixed Income, Saber Equity, BvVX and PIP)

86. Plain tifT repeats the allegations in the preceding paragraphs as if more fully set forth herein.


Fixed Income, Saber Equity, BWX and PIP offered and sold securities in the form of

limited liability interests that were neither registered with the Bureau, nor "federally

covered," nor exempt from registration.

88. The securities were required to be registered with the Bureau pursuant to N.J.S.A. 49:3-60.

89. Each otTer and sale of unregistered securities by each of the defendants constitutes a

separate violation of N.J.S.A. 49:3-60 and is cause for the imposition of a civil monetary

penalty for each separate violation pursuant to N.J.S.A. 49:3-70.1.

COUNT VII

UNJUST ENRICHMENT (As to Nominal Defendants Hallus Realty, Phoenix Equities, Donna Falci and Vincent

N. Falci)

90. Plaintiff repeats the allegations set forth in the preceding paragraphs as if fully set forth

herein.

91. Defendants FTGF, MSI Fund I, MSI Equity Fund II, Saber Fixed Income, Saber Equity,

BWX and PIP through Falci, directly and indirectly, transferred investor funds to nominal

25

defendants Hallus Realty, Phoenix Equities, Donna Falci and Vincent N. Falci, who were

or may have been unjustly enriched with the investor funds, to which they had no legal

right.

92. As such, nominal defendants Hallus Realty, Phoenix Equities, Donna Falci and Vincent N.

Falci were or may have been unjustly enriched at the expense of the investors.

93. Each unauthorized transfer of commingled investor funds from defendants FTGF, MSI

Fund I, MSI Equity Fund II, Saber Fixed Income, Saber Equity, BWX and PIP is cause for.

judgment requiring disgorgement of the funds.

26

PRAYER FOR RELIEF

WHEREFORE, Plaintiff respectfully requests the entry of a judgment pursuant to

N.J.S.A. 49:3-47~~:

A. Finding that Defendants engaged in the acts and practices alleged above;

B. Ruling that such acts and practices constitute violations of the Securities Law;

C. Enjoining Defendants from violating the Securities Law in any manner;

D. Enjoining Defendants from engaging in the securities business in New Jersey in

any capacity including, but not limited to, acting as a broker-dealer, investment

adviser, investment adviser representative, agent or otherwise;

E. Enjoining the issuance, sale, offer for sale, purchase, offer to purchase,

promotion, negotiation, solicitation, advertisement or distribution from or within

New Jersey of any securities to or from New Jersey, by or on behalf of

defendants, their officers, directors, employees, agents, brokers, partners,

stockholders, attorneys, successors, subsidiaries and affiliates;

F. Affording each purchaser of securities issued by or on behalf of defendants, the

option of rescinding such purchase and obtaining a refund of monies paid, plus

interest and expenses incident to effecting the purchase and rescission;

G. Affording each purchaser of securities issued by or on behalf of defendants, the

option of receiving restitution of losses incuned on disposition of the securities,

plus interest and expenses incident to effecting the purchase and restitution;

H. Assessing civil monetary penalties against defendants, for each violation of the

Securities Law in accordance with N.J.S.A. 49:3-70.1;

I. Requiring defendants to pay restitution and disgorge all profits and/or funds

gained through violations of the Securities Law;

27

J. Requiring the nominal defendants to disgorge all funds obtained through the

Defendants' violations of the Securities Law; and

K. Affording Plaintiff and affected third parties any additional relief the court may

deem just and equitable.

By:

JOI-IN J. HOFFMAN ACTING ATTORNEY GENERAL OF NEW JERSEY Counsel for Plaintiff

~ .

Ysabella T. Stem ler (Attorney Id. #032642001) Deputy Attorney .General

28

RULE 4:5-1 CERTIFICATION

Pursuant to Rule 4:5-1, the undersigned certifies that the matter in controversy may be

the subject of the following action other than this one:

The New Jersey Bureau of Securities will issue a Summary Order against Vincent P.

Falci, Saber Funds, LLC, Saber Asset Management, LLC, Saber Funds Distributors, LLC, Fixed

Tenn Govemment Fund, LLC, MSI Fund I, LLC, MSI Equity Fund II, LLC, BWX Fund, LLC

and Preferred Income Portfolio I, LLC pursuant to its administrative powers under the New

Jersey Uniform Securities Law (1997) N.J.S.A. 49:3-47 et seg.

I further certify that the matter in controversy in this action is not the subject of any

action pending in any court or in a pending arbitration proceeding in this State, nor is any other

action or arbitration proceeding contemplated.

I certify that confidential personal identifiers have been redacted from documents now

submitted to the court, and will be redacted from all documents submitted in the future in

accordance with Rule 1:38-7(b).

I certify that the foregoing statements made by me are true. I am aware that if any of

those statements are willfully false, I am subject to punishment.

Dated: q jra /lf

JOHN J. HOFFMAN ACTING ATTORNEY GENERAL OF NEW JERSEY Counsel for Plaintiff

By:

29

DESIGNATION OF TRIAL COUNSEL

Deputy Attorney General Isabella T. Stempler is hereby designated as trial counsel for

this matter.

Dated: q I I e /JY

JOHN J. HOFFMAN ACTING ATTORNEY GENERAL OF NEW JERSEY Counsel for Plaintiff

By:

30

·-- ----- -· - - -- - ~~---

Exhibit 2

• . .. C.' JOHN J. HOFFMAN ACTING ATTORNEY GENERAL OF NEW JERSEY Division of Law 124 Halsey Street, 5th Floor P.O. Box 45029 Newark, New Jersey 07101 Attorney for Plaintiff

By: Victoria A Manning (Attorney Id. # 006371991) '~ . Isabella T. Stempler (Attorney Id. # 032642001) Deputy Attorney General Pfl.1LRI-CIA-D-EL-B-UE-NO:-:C:-:-:LE:7.AR:::,:Y,~P.J.Ch. (973) 648-3070

JOHN J. HOFFMAN, Acting Attorney General ofNew Jersey, on behalfofLAURA H. POSNER, Chief of the New Jersey Bureau of Securities,

Plaintiff,

V.



Sl\BER ASSET MAL"TAGEMENT, LLC, a New Jersey limited liability company;

SABER FUNDS DISTRIBUTORS, LLC, a Delaware series limited liability

company; FIXED TEIUv1 GOVERt"JMENT FlJND, LLC,


Civil Action

CONSENT ORDER AND FINAL JUDGMENT AS TO ALL DEFENDANTS AND NOMINAL DEFENDANTS

.....

c· a New Jersey limited liability company;



company; BWXFUND, LLC,



and


Defendants,


HALL US REALTY GROUP, LLC, a New Jersey limited liability company; and


Nominal Defendants.

C'

THIS MATTER was brought before the Court by John J. Hoffman, Acting Attorney

General of New Jersey ("Attorney General"), on behalf of Laura H. Posner, Chief of the New

Jersey Bureau of Securities ("Bureau Chief" or "Plaintiff') alleging violations of the New Jersey

Uniform Securities Law (1997), N.J.S.A. 49:3-47 et ~("Securities Law"). Plaintiff, through

counsel (Victoria A. Manning and Isabella T. Stempler, Deputy Attorneys General, appearing),

defendants Vincent Peter Falci, individually, and doing business as Saber Fixed Income Series,

LLC and Saber Equity Income Series, LLC, and as managing member of Saber Funds, LLC and

2

c c--Saber Asset Management, LLC (collectively, "Falci"), Saber Funds, LLC ("Saber Funds"), Saber

Asset Management, LLC ('"S.Ai\1"), Saber Funds Distributors, LLC C"SFD"), BWX Fund, LLC

('"BWX"), Fixed Terni Government Fund, LLC ("FTGF"), MSI Fund I, LLC C'MSI Fund I"),

MSI Equity Fund II, LLC ("MSI Equity Fund II"), and Preferred Income Portfolio I, LLC

('"PIP") (collectively with Falci, "Defendants"), and nominal defendants Hallus Realty Group,

LLC ("Hallus Realty"), Phoenix Equities, LLC ('"Phoenix Equities"), Donna Falci and Vincent

N_ Falci (collectively, "'Nominal Defendants"), through counsel (Peter B. Bennett, Esq. and

Christopher J. Marino, Esq. of Giordano, Halleran & Ciesla, P.C.) have agreed to resolve the

issues in controversy set forth in the Complaint filed in this matter on the terms set forth in this

Consent Order and Final Judgment ("Consent Order"), which terms have, with the consent of

Plaintiff, Defendants and Nominal Defendants, been reviewed and approved by the Honorable

Patricia Del Bueno Cleary, P.J. Ch. The Bureau Chief makes the following findings of fact and

conclusions of law:

FINDINGS OF FACT

1. From January 2006 through at least December 2009 (Relevant Time Period"), Falci, a

former Middletown, New Jersey fire chief, and the Defendants through Falci fraudulently

raised over $6.7 million from the sale of unregistered securities in the fonn of interests in

limited liability companies and investment contracts from approximately 182 investors of

whom 152 reside in New Jersey. The investors include, among others, present and retired

police officers, and public servant organizations, such as fire companies and police

benevolent associations, throughout Monmouth County.

c 2. Falci, a resident of Middletown, New Jersey, created, operated and exclusively controlled

and continues to control Defendants Saber Funds, SAM, SFD (collectively, "Saber Broker

Dealers"), BWX, FTGF, MSI Fund I, MSI Equity Fund II, PIP, the unformed entities Saber

Fixed Income Series, LLC ("Saber Fixed Income") and Saber Equity Income Series, LLC

("Saber Equity") (collectively "Saber Investment Funds"), and nominal defendants Hall us

Realty and Phoenix Equities.

3. During the Relevant Time Period, Falci's role and responsibilities at defendant Saber

Broker-Dealers, Saber Investment Funds and nominal defendant Hallus Realty included,

among other things: (a) handling the day-to-day management of all the entities; (b) making

all investment decisions for the Saber Investment Funds; and (c) controlling the fmances of

the Saber Broker-Dealers, Saber Investment Funds, Hallus Realty and Phoenix Equities.

4. Falci was registered with the Bureau to sell securities from 1992 through 2002. However,

during the Relevant Time Period, Falci was neither registered with the Bureau in any

capacity nor exempt from registration.


2002, located in Middletown, New Jersey. SAM's only members were and continue to be

Falci, who holds a fifty-one percent (51%) ownership interest, and his wife, nominal

defendant Donna Falci, who holds a forty-nine percent (49%) ownership interest. SAt\1 is

the managing member and investment manager for MSI Fund I, FTGF and BWX. SAM

has never been registered with the Bureau in any capacity.

6. Saber Funds is a New Jersey limited liability company, formed on or about December 30,

2005, located in Middletown, New Jersey. Saber Fund's only members were and continue

to be F alci, who holds a fifty-one percent (51%) o-vvnership interest, and Donna F alci who

4

c holds a forty-nine percent (49%) ownership interest. Saber Funds is the managing member

and investment manager for MSI Equity Fund II, Saber Equity and Saber Fixed Income.

Saber Funds has never been registered with the Bureau in any capacity.

7. SFD is a Delaware series limited liability company, formed on or about March 13, 2009,

and located in Middletown, New Jersey. SFD's managing director is defendant Falci. SFD


8. MSI Fund I is a Delaware limited liability company, formed on January 4, 2006, located in

Middletown, New Jersey. From approximately January 15, 2006 through approximately

Nfmch 16, 2006, Falci and MSI Fund I, through Falci, issued, offered and sold securities in

the form of limited liability interests ("MSI Fund I Securities") using a "confidential

private placement memorandum" ("MSI Fund I PPM") to at least fifteen investors. The

MSI Fund I Securities were not registered with the Bureau.

9. FTGF is a New Jersey limited liability company, formed on March 30, 2006, located in

Middletown, New Jersey. From approximately April 6, 2006 through at least February 19,

2009, Falci and FTGF, through Falci, issued, offered and sold securities in the form of

limited liability interests ("FTGF Securities") using a "confidential private placement

memorandum" ("FTGF PPM") to at least seventy-six investors. The FTGF Securities were




Regulation D Section 4(6), and/or Uniform Limited Offering Exemption form ("Rule 506

Filing"), the requirements for exemption were not met. Specifically, prior to the MSI Fund

I and FTGF Rule 506 Filings, there were at least thirty sales of the MSI Fund I Securities to

s

c fifteen investors and there were at least 175 sales of the FTGF Securities to seventy-six

investors.

11. MSI Equity Fund II is a New Jersey limited liability comp~y, formed on or about

September 17, 2008, located in Middletown, New Jersey. Since on or around September

17, 2008, Falci and MSI Equity Fund II, through· Falci, issued, offered and sold securities

in the form of limited liability interests ("MSI Equity Fund II Securities") to at le~

twenty-six investors. The MSI Equity Fund II Securities were not registered with the

Bureau.

12. Saber Fixed Income is an unformed. business association operated by Faici, located in

Middletown, New Jersey. Beginning in or around June 2009, Falci doing business as Saber

Fixed Income, issued, o~fered and sold securities in the purported form of limited liability


("Saber Fixed Income PPM") to at least four investors. The Saber Fixed Income Securities

were not registered with the Bureau.

13. Saber Equity is an unformed business association operated by Falci, located in

Middletown, New Jersey. Beginning in or around March 2009, Falci, doing business as

Saber Equity, issued, offered and sold securities in the purported form of limited liability

interests ("Saber Equity Securities") using a private placement memorandum ("Saber

Equity PPM") to at least thirteen investors. The Saber Equity Securities were not

registered with the Bureau.

14. BWX is a New Jersey limited liability company, formed on or about March 30, 2006,

located in Middletown, New Jersey. Falci and BWX, through Falci, issued, offered and

sold securities purportedly in the form of limited liability interests ("BWX Securities") to at

6

c c least twenty-two investors. The BWX Securities were not registered with the Bureau.

15. PIP is a New Jersey limited liability company formed on or about June 3, 2002, located in

Middletown, New Jersey. Defendants Falci and PIP, through Falci, issued, offered and

sold securities in the form of limited liability units ('"PIP Securities") using a "confidential

private offering memorandum" ("PIP PPM") dated December 31, 2004, to at least twenty.:.

six investors. The PIP Securities were not registered with the Bureau.

16. Nominal defendant Hallus Realty is a New Jersey limited liability company, formed on or

about December 30, 2005, located in Middletown, New Jersey. Hallus Realty's only

members are Saber Funds, which holds a seventy-five percent (75%) ownership interest

and nominal defendant Vincent N. Falci, who holds a twenty-five percent (25%) ownership

interest.

17. Nominal defendant Phoenix Equities is a New Jersey limited liability company, formed on

or about February 20, 2007, located in Middletown, New Jersey. Phoenix Equities' only

members are Falci, who holds a fifty percent (50%) ownership interest, and his son,

nominal defendant Vincent N. Falci, who holds a fifty percent (50%) ownership interest.

Phoenix Equities was formed by Falci and nominal defendant Vincent N. Falci, to use for

day-trading.

18. Nominal defendant Donna Falci, a resident of Middletown, New Jersey, is defendant

Falci's wife: During the Relevant Time Period, nominal defendant Donna Falci held

membership interests in: (a) SAl\1; and (b) Saber Funds. She has never been registered

with the Bureau in any capacity, and is not exempt from registration.

19. Nominal defendant Vincent N. Falci, a New Jersey resident, is defendant Falci's son.

During the Relevant Time Period, nominal defendant Vincent N. Falci held membership

7

c interests in: (a) Hallus Realty; and (b) Phoenix Equities.


Saber Investment Funds, through Falci, raised $6,742,697.57 from the fraudulent offer and

sale of MSI Fund I Securities, FTGF Securities, MSI Equity Fund II Securities, Saber

Fixed Income Securities, Saber Equity Securities, BWX Securities and PIP Securities

(collectively the "Saber Investment Funds Securities").

21. The Saber Investment Funds Securities were sold to 182 investors, 152 of whom were

located in New Jersey.

22. The Saber Investment Funds Securities were neither registered with the Bureau, nor

federally covered, nor exempt from registration.

23. Defendants Falci, the Saber Broker-Dealers through Falci, and the Saber Investment Funds

through Falci, made materially false and/or misleading statements to the Saber Investment

Fund investors including that:

(i) their money would be invested primarily in tax lien certificates; and

(ii) in 2005, such investments yielded a 7.24% rate of return.

24. In reality, Saber Investment Funds' financial documents demonstrated that Saber Investment

Funds' investments in tax lien certificates never exceeded three percent (3%) of the total

assets under management, and the 2005 rate of return for MSI Fund I was purely hypothetical

as the MSI Fund I did not even exist in 2005.

Representations to Saber Investment Funds Investors in the PPMs

25. In connection with the offer and sale of securities, Falci provided investors with a MSI Fund

I PPM, FTGF PPM, Saber Fixed Income PPM, Saber Equity PPM and/or PIP PPM

(collectively, the "PPMs").

8

c c 26. Investors in the B\VX Securities and MSI Equity II Securities were given a MSI Fund I PPM

by Falci.

27. Falci drafted the PIP PPM, the FTGF ·PPM, the Saber Fixed Income PPM and the Saber

Equity PPM.

28. Falci was heavily involved in the drafting of the MSI Fund I PPM by providing information

relating to the purpose and strategy of the fund and some of its components to his attorney,

who drafted the MSI Fund I PPM. Falci then approved the language and representations in

the MSI Fund I PPM.

29. Falci and MSI Fund I, Saber Fixed Income and Saber Equity Income, through Falci,

represented to investors in the MSI Fund I PPM, Saber Fixed Income PPM and Saber Equity

PPM, respectively, that: (a) the investment objective was to seek interest income by investing


contemplated investing most of their capital in tax lien certificates; (c) the fund could invest



in trading that included, but was not limited to: selling securities short; purchasing and

selling stock options and other derivatives; and buying securities on margin.

30. Falci and FTGF, through Falci, represented to investors in the FTGF PPM that: (a) the

investment objective was to "seek interest by investing in tax lien certificates and other fixed

income instruments;" (b) the fund contemplated investing most of its capital in tax lien

certificates; (c) the fund could invest in other securities and interests in real property; and (d)

the fund would buy and sell securities deemed by defendant Falci to be equity equivalents

9

c c and that the fund may engage in trading including, but not limited to, selling securities short,

_purchasing and selling stock options and other derivatives, and buying securities on margin.

31. The representations to investors that defendants MSI Fund I, Saber Fixed Income, Saber

Equity and FTGF would invest "primarily" in tax lien certificates were false because Saber

Investment Funds' financial documents demonstrate that their investments in tax lien

certificates never exceeded three percent (3%) of the total assets under management. .

Representations to Saber Investment Funds Investors in the Written Annual Update

32. In or around December 2008, SFD, through Falci, provided a written update to Saber

Investment Funds investors that falsely represented the percentage of fund allocations in tax

lien certificates. Specifically the written update falsely stated that, ninety percent (90%) of

the fixed income funds and eighty-five percent (85%) of the equities funds were allocated to

tax lien certificates. In reality, Saber Investment Funds' fmancial documents make clear that

less than three percent (3%) of total assets tmder management were actually invested in tax

lien certificates.

Misuse of Investor Funds

33. Investor funds were used for purposes other than those disclosed to investors. Falci

controlled the finances for the Saber Broker-Dealers, the Saber Investment Funds, and

nominal defendants Hallus Realty and Phoenix Equities.

34. Payments totaling approximately $700,000.00 were made to Falci from the Saber Broker

Dealers, the Saber Investment Funds and nominal defendants Hallus Realty and Phoenix

Equities.

10

c 35. Payments totaling approximately $73,000.00 were made to nominal defendant Donna Falci

from the Saber Broker-Dealers, the Saber Investment Funds and nominal defendants Hallus


36. Payments totaling approximately $340,000.00 were made to nominal defendant Vincent N.

Falci from the Saber Broker-Dealers, the Saber Investment Funds and nominal defendants

Hall us Realty and Phoenix Equities. Of the payments made to nominal defendant Vincent

N. Falci, $274,000.00 was from SAM, of which he was not a member.

37. Falci transferred approximately $554,000 of MSI Fund I and FTGF investor money to

nominal defendant Phoenix Equities, which was used for personal day-trading by Falci and

nominal defendant Vincent N. Falci.

38. Falci transferred approximately $3,000,000 to nominal defendant Hallus Realty from

defendants MSI Fund I, FTGF, BWX, PIP and SFD.

39. The funds transferred to nominal defendant Hallus Realty were used by Falci to purchase at

least seven New Jersey residential properties, which at the outset were deeded to defendant

Falci and/or nominal defendant Donna Falci. At least two of the residential properties were

sold, leaving title to the remaining five residential properties (the "Five Residential

Properties") currently held by:

a. Vincent P. Falci (lD%) and Hallus Realty (90%), 60 BaldVvin Avenue, Middletown,

New Jersey, Block 209/Lot 20;

b. Vincent P. Falci (10%) and Hallus Realty (90%), 2 Grace Avenue, Middletown, New

Jersey, Block 231/Lot 9;

c. Donna Falci (10%) and Hallus Realty (90%), 165 Lohsen Avenue, Middletown, New


11

c d. Vincent P. Falci, 318 East Coventry Court, #lOOE, Lakewood, New Jersey, Block

1248/Lot 318.05; and

e. Vincent Falci, 1612 Rosewood Drive, Wall, New Jersey, Block 57/Lot 19.

40. Nominal defendant Hallus Realty, through Falci, manages the Five Residential Properties.

41. Title to the Five Residential Properties are encumbered with mortgage loans and leased to

residential tenants. The tenant at 1612 Rosewood Drive is nominal defendant Vincent N.

Falci.

42. In addition, Falci, without disclosure to the Saber Investment Funds investors, transferred

mmions of dollars between defendants the Saber Broker-Dealers and the Saber Investment

Funds rather than invest them in tax liens certificates as represented in the PPMs. Investor

money raised by Falci and the Saber Investment Funds through Falci, was deposited into

one of the Saber Broker-Dealers bank accounts where it was pooled with other investor

funds and, then transferred by Falci to what he and the Saber Investment Funds were

investing in at that time, ~' to buy tax liens certificates, securities or transferred to Hallus

Realty, which purchased the Five Residential Properties and a sixth residential property

that has since been sold, in Falci's or his wife's name.

43. Falci caused MSI Fund I, FTGF and BWX to issue PIK Notes to nominal defendants

Hallus Realty and Phoenix Equities for purported "lines of credit."

44. Falci established the terms of and entered into the PIK Notes on behalf of all the entities on

both sides of the transaction.

45. Falci, the Saber Broker-Dealers and the Saber Investment Funds, tln·ough Falci omitted to

disclose to investors that he caused MSI Fund I, FTGF, and BWX to issue PIK Notes to

12

c nominal defendants Hallus Realty and Phoenix Equities and that Falci, on behalf of all the

entities, negotiated the terms of the PIK Notes.

46. Falci caused Saber Funds to enter into three promissory notes that, in total, loaned

$185,000.00 to a company owned by a SAM investor, whom Falci described as his best

friend. Falci, the Saber Broker-Dealers and the Saber Investment Funds, through Falci,

omitted to disclose to investors Falci's professional and personal relationship with the

owner of said company.

4 7. Investors had no control over how their funds would be used.

48. Falci, the Saber Investment Funds, through Falci and/or the Saber Broker-Dealers, through

Falci omitted material facts to investors, including, among other things, that:

a. Falci was not registered with the Bureau to sell securities;









f. B\VX Securities were neither registered with the Bureau nor exempt from state or


13

c g. Saber Fixed Income and Saber Equity Income were not formed as limited liability

companies and, therefore, the investors did not purchase securities in the form of


h. SAM was not registered with the Bureau in any capacity;

1. Saber Funds was not registered with the Bureau in any capacity;

J. SFD was not registered with the Bureau in any capacity;


1. Falci controlled of all the entities to which investor funds were transferred;

m. Certain investor funds would be transferred to nominal defendant Hallus Realty, a

company controlled by defendant Falci, to purchase the residential properties, which

were deeded at the outset to defendant Falci or nominal defendant Donna Falci;


day-n·ading by Falci and nominal defendant Vincent N. Falci;

o. Falci caused defendants MSI Fund I, BWX and FTGF to enter into the PIK Notes

with nominal defendants Hallus Realty and Phoenix Equities. Falci individually and

acting on behalf of all the parties to the PIK Notes, and on behalf of all the entities,

negotiated the terms of the PIK Notes

p. Falci caused Saber Funds to enter into three promissory notes as a lender in the

aggregate amount of $185,000.00 to a company owned by a SAM investor, which

Falci described as his best friend; and

q. Falci failed to form certain limited liability companies in which he was selling limited

liability interests.

14

c c Falci's New Business Entities

49. In or around 2010, Defendant Falci formed Saber Opportunity Income Fund, L.P.

("SOIF"), a Delaware limited partnership, which offered and sold securities in the form of

limited partnership interests ("SOIF Securities"). SFD is SO IF's general partner.

50. In or around 2012, Falci formed Pantheon Tax Receivables, L.P. ("Pantheon"), a Delaware

limited partnership, which offers and sells securities in the form of limited partnership

interests ("Pantheon Securities"). Vidon Capital Partners, LLC (Vidon") is Pantheon's

general partner and manager. Falci is the managing member of and holds a 60% interest in

Vidon. Nominal Defendant Vincent N. Falci owns a 40% interest in Vidon. Vidon

receives 2% per annum of Pantheon's assets under management and a performance fee of

30% of its profits as the managing member. Falci and Vincent N. Falci receive a financial

benefit from their interests in Vidon.

51. SOIF is an active entity, but its assets were invested by Falci in the Pantheon Securities.

CONCLUSIONS OF LAW

52. The Saber Broker-Dealers through Falci, and Saber Investment Ftmds through Falci,

violated the antifraud provisions of the Securities Law, specifically, N.J.S.A 49:3-52(b)

and (c), sold unregistered securities in the form of limited liability interests and investment

contracts, in violation ofN.J.S.A 49:3-60, and employed unregistered agents, in violation

ofNJ.S.A. 49:3-56(h).

53. Falci violated the antifraud provisions of the Securities Law, specifically, N.J.S.A. 49:3-

52(b) and (c), sold unregistered securities in the form of limited liability interests and

investment contracts, in violation of N.J.S.A. 49:3-60, and acted as an agent vvithout

registration, in violation ofN.J.S.A. 49:3-56(a).

15

c c 54. Falci and Nominal Defendants were unjustly enriched by the Defendants' violations of the

Securities Law.

THEREFORE, based on the Bureau Chief's foregoing findings of facts and conclusions

of law, it is on this ~~ day of~~2015, ORDERED AJ\TD AGREED

THAT:

PElliv~ENTINJUNCTION

55. Defendants Vincent Peter Falci, Saber Funds, LLC, Saber Asset Management, LLC, Saber

Funds Distributors, LLC, Saber Investment Funds, BWX Fund, LLC, Fixed Term


Income Portfolio I, LLC and nominal defendants Hallus Realty Group, LLC and Phoenix

Equities, LLC, individually and by or through any person, corporation, business entity,

agent, employee, broker, partner, officer, director, attorneys-in-fact, stockholder, and/or

any other person who is directly or indirectly under their control or direction, are

PER1\1ANENTL Y ENJOINED AND RESTRAINED from directly or indirectly:

a. , violating the Securities Law, including its anti-fraud provisions, N.J.S.A. 49:3-52(a)-

(d);

b. engaging in the securities business in New Jersey in any capacity including, but not

limited to, an agent as defmed in N.J.S.A. 49:3-49(b), a broker-dealer as defmed in

N.J.S.A. 49:3-49(c), an investment adviser as defined in N.J.S.A. 49:3-49(g), and an

investment adviser representative as defined in N,lS.A. 48:3-49(s);

c. issuing, offering for sale or selling, offering to purchase or purchasing, distributing,

promoting, advertising, soliciting, negotiating, advancing the sale of and/or

promoting securities, or advising regarding the sale of any securities, in any manner

16

c c to, from or within New Jersey, including for or on behalf of Pantheon, Vidon and/or

SOIF, except that defendant Falci may buy or sell securities for his own accounts

through registered broker-dealers and Falci may acquire an interest in Pantheon or an

entity that may be formed to invest in tax lien certificates in connection with actions

to be taken to comply with~~ 55( e) and 61;

d. engaging in the conduct described in the Complaint; and

e. acting as an officer and/or director of an issuer, or from supervising employees of an



and/or sells any security, including, but not limited to, Pantheon, Vidon and SOIF;

56. Defendant Vincent Peter Falci is permanently enjoined and restrained from applying to the

Bureau to be a broker-dealer, an agent, investment adviser, or investment adviser

representative as defined by the Securities Law.

57. Defendant Vincent Peter Falci is permanently enjoined and restrained from recommending

the purchase and/or sale of any investment including, but not limited to, tax lien

certificates, to an issuer unless the issuer retains the ultimate authority and responsibility to

approve and exercises that authority to approve the recommendation in writing.

58. Defendant Vincent Peter Falci is permanently enjoined and restrained from:

a. Raising any capital in any form for any: (i) issuer; (ii) managing member of any

issuer; and (iii) general partner or other controlling person or entity, of any issuer

including, but not limited to, SOIF, Vidon and Pantheon;

b. Managing or exercising control over investments and assets including, but not limited

to, any finances for any: (i) issuer; (ii) managing member of any issuer; and (iii)

17

c general partner or other· control person or entity, of any issuer including, but not

limited to, SOIF, Vidon and Pantheon; and

c. Engaging in any investor relations and/or communications for or on behalf of any: (i)

issuer; (ii) managing member of any issuer; and (iii) general partner of any issuer

including, but not limited to, SOIF, Vidon and Pantheon.

59. Nominal Defendant Vincent N. Falci is permanently enjoined and restrained from acting as

a proxy for any of the Defendants as to any of the enjoined conduct set forth in this

Consent Order.

60. Nominal Defendant Vincent N. Falci is permanently enjoined and restrained from the

following conduct:

a. Acting as an officer and/or director of an issuer;

b. Directly or indirectly supervising employees of an issuer; and

c. Controlling any issuer that offers and/or sells any security.

61. Upon entry of this Consent Order, Defendant Falci shall be and remain in compliance with

this Consent Order and shall immediately transfer control of and dilute his majority

interests to minority interests, or transfer his entire interests in all: (i) issuers; (ii) managing

members of issuers; and (iii) general partners and other control persons or entities, of

issuers including, but not limited to, SOIF, Vidon and Pantheon.

RESTITUTION/DISGORGEMENT


Funds Distributors, LLC, BWX Fund, LLC, Fixed Term Government Fund, LLC, MSI

Fund I, LLC, MSI Equity Fund II, LLC, and Preferred Income Portfolio I, LLC are jointly

and severally liable to Plaintiff for restitution in the amount of $6,742,697.57 for the

18

c c investors who purchased the limited liability interests and/or investment contracts.

Nominal Defendant Donna Falci shall disgorge $2,1 08,524.32, pursuant to N.J.S.A. 49:3-

69(a). Nominal Defendant Vincent N. Falci shall disgorge $2,890,553.54, pursuant to

N.J.S.A. 49:3-69(a). Nominal Defendant Hallus Realty Group, LLC shall disgorge

$2,035,511.23, pursuant to N.J.S.A. 49:3-69(a). The $2,035,511.23 of disgorgement owed

by Nominal Defendant Hallus Realty Group, LLC is included within both the

$2,108,524.32 of disgorgement owed by Nominal Defendant Donna Falci and the

$2,890,553.54 of disgorgement owed by Nominal Defendant Vincent N. Falci. The

$2,035,511.23 of disgorgement owed by Nominal Defendant Hallus Realty Group, LLC is

jointly and severally owed by Defendants Vincent Peter Falci, Saber Funds, LLC, Saber

Asset Management, LLC, Saber Funds Distributors, LLC, BWX Fund, LLC, Fixed Term

Government Ftmd, LLC, MSI Fund I, LLC, MSI Equity Fund II, LLC, and Preferred

Income Portfolio I, LLC, and Nominal Defendants Donna Falci and Vincent N. Falci.

Nominal Defendant Phoenix Equities shall disgorge $514,176.49, pursuant to N.J.S.A.

49:3-69(a), which is jointly and severally owed by Defendants Vincent Peter Falci, Saber

Funds, LLC, Saber Asset Management, LLC, Saber Funds Distributors, LLC, BWX Fund,

LLC, Fixed Term Government Fund, LLC, MSI Fund I, LLC, MSI Equity Fund II, LLC,

and Preferred Income Portfolio I, LLC, and Nominal Defendant Vincent N. Falci. The

restitutiorJdisgorgement shall be paid to Plaintiff over five years as follows:

a. $471,988.82 (seven percent (7%) of the $6,742,697.57) on or before August 31, 2016; b. $876,550.67 (thirteen percent (13%) of the $6,742,697.57) on or before August 31,

2017; c. $1,483,393.47 (twenty-two percent (22%) ofthe $6,742,697.57) on or before August

31,2018; d. $1,887,955.33 (twenty-eight percent (28%) of the $6,742,697.57) on or before August

31,2019;and

19

c c e. $2,022,809.28 (thirty percent (30%) of the $6,742,697.57) on or before August 31,

2020.

63. The Bureau shall distribute the restitution/disgorgement payments to the investors and the

Bureau Chief will determine, in her sole discretion, when such distributions will be made to

investors.

CIVIL MONETARY PENAL TIES

64. A civil monetary penalty may be imposed on Defendants Vincent Peter Falci, Saber


LLC, Fixed Term Government Fund, LLC, MSI Fund I, LLC, MSI Equity Fund II, LLC,

and Preferred Income Portfolio I, LLC pursuant to N.J.S.A. 49:3-70.1 for each violation of

the antifraud and registration provisions of the Securities Law of not more than $10,000

for the first violation and not more than $20,000 for a second and each subsequent

violation. In view of the specific facts of this case including, but not limited to, the

permanent injunction agreed to by Defendants set forth above, the representations made

by the Defendants through Vincent Peter Falci to Plaintiff through the date of entry of this

Consent Order made orally and/or writing and/or in documentation regarding the

Defendants' and Nominal Defendants' financial status, all of which are material to

Plaintiff in entering into this Consent Order and assessing the civil monetary penalties, the

civil monetary penalties are reduced. Defendants Vincent Peter Falci, Saber Funds, LLC,

Saber Asset Management, LLC, Saber Funds Distributors, LLC, B\VX Fund, LLC, Fixed

Term Government Fund, LLC, MSI Fund I, LLC, MSI Equity Fund II, LLC, and

Preferred Income Portfolio I, LLC are jointly and severally assessed civil monetary

penalties pursuant to N.J.S.A. 49:3-70.1 in the amount of $800,000.00 for violations of

20

c N.J.S.A. 49:3-52(b), N.J.S.A. 49:3-52(c), N.J.S.A. 49:3-56(a), N.J.S.A. 49:3-56(h) and

N.J.S.A. 49:3-60, which is remedial and not punitive in nature.

65. The civil monetary penalties shall be paid in the same proportion as the

restitution/disgorgement payments set forth in ~ 62, unless accelerated pursuant to this

Consent Order, as follows:

a. $75,000.00 within 120 days of entry of this Consent Order; b. $50,7 50.00 on or before August 31, 20 16; c. $94,250.00 on or before August 31, 2017; d. $159,500.00 on or before August 31, 2018; e. $203,000.00 on or before August 31, 2019; and f. $217,500.00 on or before September 15, 2020.

The penalty payments shall be deposited into the Securities Enforcement Fund, pursuant to

NJ.S.A. 49:3-66.1. Payment shall be made in accordance with the provisions in this

Consent Order.

FINAL JUDGMENT

66. Final judgment in the amount of $7,542,697.57 is entered against defendants Vincent Peter

Falci, Saber Ftmds, LLC, Saber Asset Management, LLC, Saber Funds Distributors, LLC,

BW:X Fund, LLC, Fixed Term Government Fund, LLC, MSI Ftmd I, LLC, MSI Equity

Fund II, LLC, and Preferred Income Portfolio I, LLC, for violations ofN.J.S.A. 49:3-52(b),

N.J.S.A. 49:3-52(c), N.J.S.A. 49:3-56(a), N.J.S.A. 49:3-56(h) and N.J.S.A. 49:3-60,

constituting $6,742,697.57 in restitution and $800,000.00 as civil monetary penalties

pursuant to N.J.S.A. 49:3-70.1 ("Defendants' Final Judgment").

67. Final judgment is entered against Nominal Defendant Vincent N. Falci in the amount of

$2,890,553.54 as disgorgement in accordance with~ 62.

68. Final Judgment is entered against Nominal Defendant Donna Falci in the amount of

$2,108,524.32 as disgorgement in accordance with~ 62.

21

c c 69. Final Judgment is entered against Nominal Defendant Hallus Realty Group, LLC in the

amount of$2,108,524.32 as disgorgement in accordance with~ 62.

70. Final Judgment is entered against Nominal Defendant Phoenix Equities in the amount of

$514,176.49 as disgorgement in accordance with~ 62.

ADDITIONAL PROVISIONS

71. In the event that: (i) Defendants and Nominal Defendants make each of the

restitution/disgorgement payments and the civil monetary penalties payments set forth in~~

62 and 65 above, to the Bureau in a timely manner; and (ii) a Triggering Event does not

occur as set forth in ~ 80, then $217,500.00 of the civil monetary penalties due on

September 15, 2020 will be considered suspended and not collected by the Bureau.

72. All payments shall be made by certified check, bank check or an attorney trust account

check payable to the "State of New Jersey, Bureau of Securities," and delivered to the

Bureau of Securities, 153 Halsey Street, 6th Floor, Newark, NJ 07102, to the attention of

the Bureau Chief.

73. As collateral and/or an additional source of funds to be used to satisfy the Defendants'

Final Judgment and Nominal Defendants' Final Judgment, the Defendants and Nominal

Defendants represent to Plaintiff and agree to perform the following:

a. Defendants and Nominal Defendants shall pay to the Bureau in annual installments

any surplus rental income generated from the Five Residential Properties, after

payment of the monthly carrying costs of insurance, monthly mortgage payments,

maintenance and repairs, if any. Defendants and Nominal Defendants shall maintain

all relevant documentation including, but not limited to, leases, backup documents,

invoices, mortgage documents, evidencing the rental income and carrying costs, and

22

(

c shall provide a copy of same to the Bureau vvithiri ten days of a request by the

Bureau;

b. Vincent Peter Faki is the insured and owner of a life insurance policy \vith a Three

Million ($3,000,000) DoLlar de~,.tn benefit issued by Reliastar Life Insurance

Company (the "Insurer") on June 22, 2012, policy number AD ••• (the "Life

Insurance Policy"). The ben.::ficiary of the Life Insurance Policy is Saber Funds LLC.

Vincent Peter Falci owns a fifty percent (51%) interest in Saber Funds LLC and

Donna Falci owns a :forty-nine percent ('E>o/c) interest in Saber Funds LLC. Vincent

Peter Falci, individually, and a!) a member of Saber Funds LLC, and Donna Falci,

individually, and as a member of Saber Funds LLC shall continue to make all

required payments on the Life Insurance Policy until all the restitutionldisgorgement

and civil monetary penalty payments an~ paid as set forth in ,, 62, 65 and 71.

Vincent Peter Faki, individually, and as a member of Saber Funds LLC, and Donna

Falci, individually, and as a member cf Saber .FLmds LLC, at their own costs and

expense, shall take such steps as are required by the Insurer to assign, transfer and set

over to the "State of New Jersey, l3ureau of Securities" the Life Insurance Policy and

all claims, options, privileges, rights, titles <md interest therein within ten days of

entry of this Consent Order. Vincent Peter Falci represents to Plaintiff that there are

no loans or other liabilities on the Life bsurance Policy that would reduce the death

benefit. Neither Donna Falci, Saber Funds LLC nor any beneficiary shall assert any

rights to the death benefit upon the death of Vincent Peter Falci. Plaintiff shall apply

the death benefit toward the balanc<:: of the final judgment owed under this Consent

... ,....,

.~ . .J

c c Order. In the event the balance owed to pay the final judgment is less than the death

benefit, then Plaintiff shall turnover the difference to the beneficiary; and

c. Defendants and Nominal Defendants shall, at their sole cost and expense, take all

necessary action to cause a mortgage lien to be drafted and recorded in favor of the

"State of New Jersey" on the Five Residential Properties and 212 Taylor Lane,

Middletown, New Jersey, Block 600/Lot 32. Such action shall include, but is not

limited to, the following:

1. Giordano, Halleran & Ciesla, P.C. ("GHC") will order title reports on each of

the properties to identify all recorded liens and encumbrances, and provide

Plaintiff with a copy of the title reports;

n. The title company will file Notice of Settlement in applicable counties;

m. GHC will prepare mortgages in a form satisfactory to the Bureau naming the

"State ofNew Jersey" as the secured party;

IV. Promptly following the entry of the Consent Order, GHC will record the

mortgages with the Office of the County Clerk of Monmouth County and

Ocean County, as applicable, and shall provide proof of recording to Plaintiff.

This Consent Order shall be attached as an exhibit to each mortgage. Once all

the restitution/disgorgement and civil monetary penalty payments are paid as

set forth in~~ 62, 65 and 71, the State of New Jersey shall provide Defendant

Falci with documentation sufficient to discharge the lien. Defendants and

Nominal Defendants shall be responsible for all costs and fees associated with

the discharge of the lien;

24

" (~

v. GHC will issue a legal opinion to the Bureau stating that each mortgage (i) is

valid, binding and enforceable against the mortgagor, (ii) is in proper form for

recording in the office of the clerk of the county in which the real estate is

located, and (iii) upon execution and delivery, shall be effective to create a

valid lien against the real property described therein.

74. Defendant Falci and the Saber Broker-Dealers and Saber Investment Ftmds through Falci,

and the N aminal Defendants shall sign within fifteen business days all documents as may

be requested by their counsel and/or Plaintiff to fulfill all of the obligations of Defendant

Falci and the Saber Broker-Dealers and Saber Investment Funds, and the Nominal

Defendants set forth in this Consent Order.

75. Defendant Falci shall dissolve each of the Saber Broker-Dealers and Saber Investment

Funds within ninety days of entry of this Consent Order, except for Saber Funds, LLC.

76. In the related administrative action, IMO Vincent Peter Falci. et al., OAL Docket #13248-

2014N BOS, the Bureau Chief entered a Summary Order on September 18, 2014

("September 18, 2014 OAL Summary Order"). This Consent Order is subject to

Defendants withdrawing their answers to the September 18, 2014 OAL Summary Order

within ten (1 0) days of entry of this Consent Order and acknowledging that they do not

contest the relief sought by the Bureau Chief. The September 18, 2014 OAL Summary

Order will thereafter become a final order.

77. Defendants and Nominal Defendants shall provide the Bureau with a copy of their filed

federal and state tax returns for each year within ten days of filing until all the

restitution/disgorgement and civil monetary penalty payments are made as set forth in ~~

62, 65 and 71.

25

.C 78. Defendants shall not represent or imply that any act or practice hereinafter used or engaged

in by Defendants or Nominal Defendants has been required or approved, in whole or part,

by the State ofNew Jersey, the Attorney General ofNew Jersey, the Division of Law, the

Bureau or any New Jersey agencies, agents, employees or subdivisions.

79. Upon any Triggering Event defined in ,!80, the Bureau and/or Bureau Chief may:

a. declare to Defendants and Nominal Defendants that the tmpaid portion of the

Defendants' Final Judgment and Nominal Defendcfuts' Final Judgment immediately

due and payable; and/or

b. take any action permitted by law.

80. A "Triggering Event" is defmed to include the following circumstances:

a. A violation or breach of this Consent Order by Defendants and Nominal Defendants;

b. Defendants' and Nominal Defendants' failure to make timely

restitution!disgorgement payments as set forth in~ 62;

c. The failure of Falci, Saber Funds LLC and/or Donna Falci, to timely make all

required payments on the Life Insurance Policy;

d. Defendants' and Nominal Defendants' failure to submit filed yearly federal and state

tax returns as set forth in ~ 77;

e. Defendants' failure to make timely payments of the civil monetary penalties as set

forth in ~ 65; and/ or

f. The discovery by the Bureau Chief of the falsity of any material representations made

by the Defendants and Nominal Defendants as set forth in~ 64.

81. Defendants and Nominal Defendants transferring of assets of any kind between each other

and/or any entity they control, directly or indirectly, shall be deemed a prima facie

26

c c fraudulent transfer under New Jersey's Uniform Fraudulent Transfer Act, N.J.S.A. 25:2-20

et seq. and common law.

82. In the event the Bureau and/or Bureau Chief choose, at their sole discretion, to assert rights

under this Consent Order, Defendants and Nominal Defendants shall not assert any

defenses based on jurisdiction, lack of standing, statutes of limitations, or statutes of

repose, all of which defenses are hereby waived.

83. Any person with actual or constructive notice of this Consent Order who aids, abets,

counsels, commands or instructs any person or entity to perform any act prohibited by this.

Consent Order shall be subject to any and all actions available at law and in equity to the

Bureau Chief.

84. Within ten days of entry of this Consent Order, Falci shall provide a copy of this Consent

Order to:

a. Current and future investors of the Defendants, SOIF, Vidon, Pantheon and any issuer

who employs Defendant Falci or for whom Defendant Falci provides consulting

services, compensated or uncompensated. Each investor shall be required to sign an

acknowledgement confirming receipt of this Consent Order and such

acknowledgments shall be available to the Bureau within three days upon written

request to Falci; and

b. Current and future officers, directors, managers, supervisors, and/or partners of any

issuer and general partner of an issuer who employs Defendant Falci or for whom

Defendant Falci provides consulting services, compensated or uncompensated. Each

such person shall be required to sign an acknowledgement confirming receipt of this

27

c c Consent Order and such acknowledgments shall be made available to the Bureau

within three days upon written request to Falci.

85. This Consent Order constitutes the entire agreement between Plaintiff, Defendants and •

Nominal Defendants with respect to this litigation. This Consent Order is a complete and

exclusive statement of the terms of the agreement among the Parties with respect to its

subject matter and shall bind Defendants and Nominal Defendants, and their officers,

directors, members, partners, agents, employees, successors, parent entity, subsidiaries,

affiliates, assigns, executors and administrators. Nothing in this Consent Order shall be

construed to limit or affect any position that the Bureau and/or Bureau Chief may take in

any future or pending action not specifically encompassed herein.

86. Nothing in this Consent Order shall in any manner be construed to limit or affect the rights

of any persons, other than the Bureau Chief, as it pertains to the allegations in the

Complaint, who may have a claim against Defendants and/or Nominal Defendants.

87. Defendants and Nominal Defendants represent that an authorized representative of each has

signed this Consent Order with full knowledge, tmderstanding and acceptance of its terms

and this person has done so with authority to legally bind the respective party.

88. This Consent Order may be signed in counterparts, each of which shall be deemed an

original.

89. The terms and conditions of this Consent Order may be modified only with the written

consent of the parties.

90. If any portion of this Consent Order is held invalid or unenforceable by operation of law or

court order, the remaining terms of this Consent Order shall remain in full force and effect.

28

c c· 91. This Court retains jurisdiction to enforce, modifY or otherwise hear any application arising

from the terms of this Consent Order.

92. Defendants and Nominal Defendants waive any right to appeal this Consent Order.

93. Defendants and Nominal Defendants represent that they have had a full and complete

opportunity to consult with counsel before signing this Consent Order.

94. Defendants and N orninal Defendants hereby consent to the jurisdiction of the Bureau.

95. Defendants and Nominal Defendants waive any right to assert any defenses or to raise any

challenge that they otherwise may have to the terms of this Consent Order.

29

J c Consent to the F orrn, Content and Entry of this Consent Order and Final Judgment:

GIORDANO, HALLERAN & CIESLA 125 Half Mile Road~ Suite 300 Red Bank, NJ 07701

BY:~ Peter B. Bennett, Esq. (Attorney Id. #6en;.e7t<f<l\) Attorneys for defendants and nominal defendants

c

Dated: ~ -1 ~- 1 s-

Vincent P. Falci, Saber Funds, LLC, Saber Asset Management, LLC, Saber Funds Distributors, LLC, BWX Fund, LLC, Fixed Term Government Fund, LLC, MSI Fund I, LLC, MSI Equity Fund II, LLC, Preferred Income Portfolio I, LLC, Hallus Realty Group, LLC, Phoenix Equities, LLC, Donna Falci and Vincent N. Falci

Consent to the Form, Content and Entry of this Consent Order and Final Judgment:

&~~idumly ~d~/a Saber Fixed Income Series, LLC and Saber Equity Income Series, LLC


Saber Funds, LLC

By•X::r£.lt2 Managing Member

30

(] - -Dated: )'-(~ -('\

)


Saber Asset Management, LLC

By: -----\--~-'--l.......c£----~--'--1£_. ·-Vincent Peter Falci Managing Member


Saber Funds Distributor, LLC

By:~V mcent Peter Falc1

Managing Member


V_ince:qtt;P 6Zter F. alci T1tle: 'f1 /:

~+Y~--------------------


MSI FUND I, LLC

By:~L-~~~y___:__-·-V_incent f)tej- Falci 1l1tle: r=t-~~

31

c

Dated: 9-/ .. ,C"" ( J

Dated: 7-ff --/J

Dated: ?--/ _(.-(/

(} / r Dated: y - ( ~ --( J

)

Consent to the F orrn, Content and Entry of this Consent Order and Final Judgment:

B\VX Fund, LLC

By: -~--tt---~---\----2'-------"--~-c. -Vincent ~e~r Falci Title: Q{jr1


MSI Equity Fund II, LLC

By:£~1--P Vincerte~r Falci Title:\Yt


Preferred Income Portfolio I, LLC

By £rfV Title: _:_________~

Consent to the Form, Content and Entry ofthis Consent Order and Final Judgment:

Hallus Realty Group, LLC

ByL~itJ Vince~t E ~~~ Falci Title: (f/l ----------------

32

Dated: C ( [: ( -1-

Dated:9-f l-IT

Dated: {]-rs __ p--

c c Consent to the Form, Content and Entry of this Consent Order and Final Judgment:

Phoenix Equities, LLC

By:~~kf mcent !. rFak1

Title: ~

Dated: (j-(_; -:-r~


~,In~ Dated:


~=·=~ny ________ _ Dated: '1/15'/J 5

33

c Consent to the Form, Content and Entry of this Consent Order and Final Judgment:

JOHN J. H;OFFMAN ACTING ATTORNEY GENERAL OF NEW JERSEY

Dated: W t;J/ S-

34

- -----·

.:.~ ...:_ :_:_-_ .:~. _:_-_.~_j-._;._ -· -~--;!.--- .;;.

Exhibit 3

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Exhibit 4

Wire Transfer Security Admin tlelp Logoff WireXchangeQ!)

Diego Escamilla 05113/16 01 :55 PM

.J D .l Ponce _ e Jeon r:I·JJFl~i\1. Bi\NK

Incoming \Virc Detail General information

Wire Sequence Number

Amount $100,000.00

, Wire Status: Posted

i OFAC Status: OFAC Passed

I Sending Financial Institution: WELLS FARGO SF

Receiving Financial Institution PONCE DE LEON FSB

Business Function Code: CTP 1000

i IMAD:

• OMAD:

Audit Trail·

Uploaded: 11/10/15 12:19 PM

- -"" - ~

Released: 11/10115 12 32 PM by Caridad Rodriguez

Posted to Core: 11110/15 12:33 PM by System

. ·Originator information

• Originator: V!DON CAPITAl. PARTNERS, LLC

· Originator Identifier: D••••••• j Originator Address: i 715 H~GHWAY 35 STE 101 '

MIDDLETOWN, NJ 07748·-·l868

Electronic Mail:

Ponce De Leon WebMaster

Core System Information

Debit Account G/L"''···

Credit Account:

Wire Fee:

i Released:

:Updated:

Savings••• $10.00- Wire I

Caridad Rodri~

11/10/15 12:H

' i Reference Number: 12:33:28.60 0.

Beneficiary Information

Beneficiary:

Beneficiary Identifier:

Beneficiary Address:

¥263! II Reference for Beneficiary.l&••s•

Originator to B~neficiary. DISTRlt

. Fedwire I Settlement Information

Sender Reference:

Format Version I Test Production C

: MSG Status lndicator I Duplication

• Fed Acceptance Date I Time:

Acceptance App! !D:

. --~----"

WITHDRAWAL OF INVESTMENT REQUEST (form to be used if an investor seeks a full or partial withdrawal)

Return the completed Withdrawal Request by mail or courier original to:

Saber Funds, LLC 1715 Highway 35 Suite 101 Middletown, NJ 07748

Please retain a copy of this document. Provided your request is accepted, a countersigned copy will be returned to you address on record.

The undersigned (the "Investor") hereby confirms that all of the representations, warranties, and agreements made in the Investor's original account application apply to this withdrawal request as if they were made on the date hereof (except to the extent otherwise indicated in an attachment to this document). The Investor represents and warrants that the person signing this request is an authorized representative of the existing member of the Fund.

1. NAME AND ADDRESS OF INVESTOR

Complete legal name of the person or entity under which the investment in the Fund is recorded.

2. AMOUNT OF REQUESTED WITHDRAWAL

P'~ase {'H.:"~ ~00t tf .. ? acr:>?~~~:-t::g of a ~~,-:~~df'2l.va~ request ls subject to the various exclusions, limitations and exceptions, many of which are in the discretion of the General Partners.

3. DATE OF REQUESTED WITHDRAWAL

o'-·' /~ {)(){}. ~

7 US$.

'. 4. NAME AND TITLE OF SIGNATORY

Please print the name and title of the person authorized to sign for this account

5. NAME AND TITLE OF CO-SIGNATORY, IF APPLICABLE

P!ease print the name and title of the person required to co-sign for this account, if any.

6. ACCEPTANCE BY FUND By: Saber Funds Distributors, LLC

By:

Name:

Title;.

Date Signed: __

Name:

Title:----------

Signature:

Name:

Title:--------

Signature:

r--·-····

I_ _ ______ ,_j Dated: _________ _

--• •- :~•~v _>____ -- ~---=--·;<-e :~:;. =--~- ~·_-___;,.=::;_- ::..--~:"--:

Exhibit 5

Saber Funds, LLC 1715 Highway 35 Suite 101

One Arin Park Middletown, NJ 077 48-1868

Account Number: 5 5 I I 0 f Account Type: -:::~ •• It Account Registration:~ or S-F······ Joint Owner: ~F-

-; Date Transaction

0710112015 Opening Bslsnce of Fixed Term Gov Fund 07/0212015 Redemption $300.00 of series 111112015 Maturity 0710212015 Redemption $300.00 of series 111112015 Maturity 0713112015 Redemption $300.00 of series 111112015 Maturity 0713112015 Redemption $300.00 of series 111112015 Maturity 08131/2015 Redemption $300.00 of series 111112015 Maturity 08/3112015 Redemption $300.00 of series 111112015 Maturity 09/30/2015 Interest $1,915.55 credited to series 111112015 Maturity 1010112015 Redemption $300.00 of series 111112015 Maturity 10101/2015 Redemption $300.00 of series 111112015 Maturity 1110212015 Redemption $300.00 of series 111112015 Maturity 1110212015 Redemption $300.00 of series 111112015 Maturity 1210112015 Redemption $300.00 of series 111112015 Maturity 12101/2015 Redemption $300.00 of series 1/1112015 Maturity 1213112015 Interest $1,918.49 credited to series 111112015 Maturity

Capital Preservation Funds, Year To Date

Fixed Term Gov

Capit81 Appreciation Funds, Year To Date

\For information regarding your account, contact VINCENT P -::ALCI at 732-706-0645

Page 1

i Statement

Your represent'ltive: Vincent P falci

www.saberfunds.com

R;:~te Units Unit Total Units Value

80,618.570 300.000 1.00 80,318.570 300.000 1.00 80,018.570 300.000 1.00 79,718.570 300.000 1.00 79,418.570 300.000 1.00 79,118.570 300.000 1.00 78,818.570

1,915.5_50 1.00 80,734.120 300.000· 1.00 80,434.120 300.000 1.00 80,134.120 300.000 1.00 79,834.120 300.000 1.00 79,534.120 300.000 1.00 79,234.120 300.000 1.00 78,934.120

1,918.490 1.00 80,852.610

Accrued Interest Bonus '

$7,656.88 $0.00

Opening NAV Current NAV

Total Value $80,852.61

- ---- ;-- -- . ~ -- --- ~: .. ~__ :...:.__.:_ .. ~----; __ -.,.. ---, ----;- .

/

Exhibit 6


One Arin Park · Middletown, NJ 077 48-1868

Account Number: SRS S Account Type: IRA Account Registration: IRA FBO R .. S,_

Date Transaction

0110112016 Opening Balance of MSI I Fund 0313112016 Interest $645.75 credited to series 112412012 Maturity

Capital PreseJVation Funds, Year To Date

MSII

C8pltal Appreciation Funds, Year To Date

For lnfonnatlon regarding your account, contact VINCENT P FALCI at 732~706-0645

Page 1

I

Statement

Your representative: Vincent P Falci

www.saberfunds.com

Rate Units Unit Total Units Value

65,536.140 645.750 1.00 66,181.890

Accrued Interest Bonus

$645.75 $0.00



unds,LLC SaberF 1715 Highw

OneArin Middletown,

ay 35 Suite 101 Park

NJ 077 48-1868

Account Number: STB Account Type: IRA Account Registration: IRA F soT-. a..

Date Transaction

ofMSIIFund 0110112016 Opening Balance 03/3112016 Interest $67.76 ere dlted to series 112412012 Maturity

Capital Preservation Funds, Ye arTo Date '

MS/1

Capital Appreciation Funds, Ye arTo Date

.

For lnfonnation regarding FALCI at 732-706-G645

your account, contact VINCENT P

Page1

Statement


www.saberfunds.com

I Rate Units Unit Total Units

Value

6,876.650 67.760 1.00 6,944.410


$67.76 $0.00

OpeningNAV CurrentNAV




Account Number: SHS Account Type: Custodial Account Registration:R .. S-CIF H ... ~

Date Transaction

0110112016 Opening Balance of Saber Opportunity Income Fund


Capital Appreciation Funds, Year To Date

Saber Opportunity Income

For .information regarding your account, contact VINCENT P · FALCI at 732-706-0645

Page 1

Statement


www.saberfunds.com


10,619.469


OpeningNAV CurrentNAV

$1.65 $1.86


Saber Funds, LLC ~-::; i5 P...ig..hv;.;.y 35 Suite 101

One .-\.f~.n Park

-~ -. .;._ -.:·::# 7 a

------------Date--_ Transaction.

0710112015 Opening Balance of MSII Fund 09/3012015 Interest $4,199.33 credited to series $11312013 Maturity 1213112015 Interest $4,285.86 credited to series 611312013 Maturity

Date Transaction

0710112015 Opening Balance ofFixedTerm Gov Fund 09/30/2015 Interest $3,225.15 credited to series 611312014 Maturity 1213112015 Interest $3,295.46 credited to series 611312014 Maturity


MSII Fixed Term Gov


-

For information regarding your account, contact VINCENT P. FALCI at 732-706-0645

Page 1

Statement

Your representative: Yincent P. Falci

·.\ "'.'.-~;-.sst>erfunds.com

Rate Units-- Unit-- Total Units Value

203,8()7.710 4,199.330 1.00 208,007.040 4,285.860 1.00 -·- 212,292;900

-·

Rate Units Unit Total Units

I Value ·.· ..

1~7,931.6()() -

3,225;150 1.00• 151-,156.750 · .. 3,295.460 1;00 154,452.210

:

-

Accrued Interest Bonus_

$16,631.24 $0.00 $12,765.93 $0.00


Total Value $366,745~11

Saber Funds, I.1LC 1715 Highway 35 Suite 101


Account Number: SJV.~li••• Account Type: Individual Account Registration:J_V._. ••

;rn ;

Date Transaction

0710112015 Opening Balance of MS/1 Fund 0913012015 Interest $2,261.69 credited to series 1211312012 Maturity 09/30/2015 Interest $2,167.84 credited to series 611312015 Maturity 0913012015 Interest $1,636.12 credited to series 3/13/2012 Maturity 0913012015 Interest $1,974.84 credited to series 611312014 Maturity 09/3012015 Interest $1,227.85 credited to series 711312013 Maturity 1111012015 Redemption $30;940.61 of series 6/13/2015Maturity 1111012015 Redemption•$34,271.30 ofseries 1211312012 Maturity 1111012015 Redemption $28,306.67 of series 611312014.Maturity 1111012015 Redemption $6,481.12 of series 711312013 Maturity 12131/2015 Interest $1,660.16 credited to series 311312012 Maturity 12131/2015 Interest $1,806.52 credited to series 6/1312015 Maturity 1213112015 Interest $1; 652;06 cm,ditcd to series 6113/2014 Maturity 1213112015 lnterast$1, 178.62 credited to series 7!1S/ZD-13·Maturity 1213112015 Interest $1,992.52 credited to series 1211312012 Maturity

...

.•...


MS/1


For Information regarding your account, contact VINCENT P. FALCI at 732-706·0645

Page 1

Statement

Your representative: Vincent P. Falci

www.saberfunds,com

Rate Units unit Total Units Value

484,755.690 2,261.690 1.00 487,017.380 2,167.840 1.00 489,185.220 1,636.120 1.00 490,82.1 ;3.40 1,974.840 1.00 492,796.180 .·.

1,227.850 .1.00 494,024.030 30,940.610 1.00 4~3,0~3.,421)

.•. 34,'271 ;300 1.00 !G~&~I~~··~ I .· .28,306.670 1~00

6,481;120·· 1.00 .• ...... :·

. 394,024i33(). :·.·· 1,660.160 1;;00 395,684.49o•' [. 1,806.520 1.00 397,491.010 1,652.060 1.00 399,143.070 1,178.620 too 400,321.690. 1,S92.520 1.00 402;314.210 .. · -

·.. '·· .··

·~ Accrued Interest Bonus

$35,555~62 $0.00 I· .. ··.• ·.·.•.••·· .• ···• ·. \ .... •. . ..

OpeningNAV

.··.

Total Value $402,314.21 . ..

L

(

·Saber Funds, LLC 17·15 Highway 35 Suite 101

One Arin Park Middletown, NJ 07748-1868

Account Number: SCV Account Type: Individual Account Registration: IRA FBO C-V~

Date Transactior1

0710112015 Opening Balance of MSII Fund ·.

09/3012015 Interest $5,450.73 credited to series 4/112008 Maturity 1213112015 Interest $5,546.43 credited to series 41112008 Maturity


MSII



Page 1

Statement


w.vw.saberfunds;com

Rate Ur:Hs Unit Total Units Value

310,455. 73() 5,450.730 1.00 315,906.460 5,546.430 1.00 321,452.890 , ..

Accrued ·Interest Bemus

$21,618.09 $0.00t ,·.

.... ·,'·.,. .·, > ..... ,, ••. ,.· .. ··•· ,·.,·

Opening NAV CurrentNAV

Total Value $321,452.89 ·.

(


One Arin Park Middletown, NJ 07748-1868 ·

Account Number: SCV--1111 Account Type: Individual Account Registration:~ Ylb••

uate I

1 ran:>actio11

07/0112015 Opening Balance of MS/1 Fund 09130/2015 Interest $898.58 credited to series 111812012 Maturity 12131/2015 Interest $913.18 credited to series 111812012 Maturity


MS/1



Page 1

Statement


www.saberfunds.com

I Kote Units Unit fntal Units Value

53,120.430 898.580 1.00 54,019.010 913.780 1.00 54,932.790


$3,711.01 $0.00


Total Value $541932.79

(



Account Number: SMN*U••• AccountType: Custodial Account Registration: D. N.-a C/F T .. fl"-1' ....

1: Date Transaction

0710112015 Op~ning Balance of MS/1 Fund 0913012015 lnterest$39.95 credited to series 1213112005 Maturity 1213112015 Interest $40.25 credited to series 1213112005 Maturity


MS/1



Page 1

Statement


www.saberfimds.com


5,386.770 39.950 1.00 5,426.720 40.250 1.00 5,466.970


$155.54 $407.42





Account Number: SMN?iMW••• Account Type: Custodial Account Registration: D. N ..... C/F C'-1•1-•N 0

Date Transaction

0710112015 Opening Balance of MS/1 Fund 09/3012015 Interest $150.66 credited to series 1213112005 Maturity 1213112015 Interest $151.78 credited to series 1213112005 Maturity


MSII

Capital Appre¢i~tion Funds,YearTo Date

For information regarding your account, contact VINCENT P. FALCI at 732-706...0645

Page 1

Statement


www.saberfunds.com

.... Rate Units Unit .. Total Units Value

20,312;470 150.660 1.00 20,463.130 151.780 1.00 20,614.910

Accrued ·Interest Bonus

$586.54 $1,536.30

Opening NAV Curr~ntNAV




Account Number: SMN AccountType: Custodial AccountRegistration:D. N ... C/F rv-.. ~

Date Transaction

0710112015 Opening Balance of MS/1 Fund 08126/2015 Redemption $2,000.00 of series 12/3112005 Maturity 09/3012015 Interest $81.04 credited to series 1213112005 Maturity 1213112015 Interest $72.45 credited to series 1213112005 Maturity


MS/1



Page 1

Statement


www.saberfunds.com

Rate Units Unit Total Units Va1ue

11,687.010 2,000.000 1.00 9,687.010

81.040 1.00 9,768.050 72.450 1,00 9,840.500


$313.31 $1,286.56





Account Number: SMN••• AccountType: Custodial Account Registration:D. N ... C/F ...._,..., ••

n.._N ...

I' I I : Date Transaction

07/0112015 Opening Balance of MSI I Fund 09130/201~ Interest $164.04 credited to series 12131/2005 Maturity 12131/2015 Interest $165.26 credited to series 12131/2005 Maturity

' '


MSI/

Capital Appreclation Funds, Year To Date

For information regarding your account, contact VINCENT P. FALCI at 732:.706-0645

Page 1

(

Statement


www.saberfunds.com


22,116.860 164.040 1.00 22,280.900 165.260 1.00 22,446.160


$638.63 $1,672.77

Opening NAV CurrentNAV

Total Value $22~446.16

.. . Saber Funds, LLC

1715 Highway 35 Suite 101 One Arin Park

Middletown, NJ 077 48-1868

Account Number: SMN••• AccountType: JTWROS AccountRegistration:D~ ""-' ... C ... N ... JTWROS Joint Owner: ~ N

Date Transaction

0710112015 OpMlngBalance of MS/1 Fund 0913012015 Interest $13.13 credited to series 1213112006 Maturity 1213112015 Interest $13.23 credited to series 1213112006 Maturity


MSJI

Capit~i:Appteciation Funds, Year To Date


Page1

(

Statement


www.saberfunds,com


1,770.030 13.130 1.00 1,783.160 13.230 1.00 1,796.390


$51.11 $133.87

Opening NAV CutrentNAV




Account Number: SMNI-•••• Account Type: IRA Account Registration: IRA FBO D'-illltN ...

pI I

Date Transaction

0710112015 Opening Balance of MSI/ Fund 09130/2015 Interest $2,978.38 credited to series 1213112010 Maturity 09130/2015 Interest $420.24 credited to series 12131/2006 Maturity 0913012015 Interest $324.81 credited to series 81512008 Maturity 1213112015 lt?terest $42~.89 credited to series 1213112006 Maturity 1213112015 Interest $328.80 credited to series 81512008 Maturity 12/3,112015 Interest $3,022.15 credited to series 121$11201 o Maturity

Capitai Preservatidn:f:oncls, Year To Date

MSI/


Page 1

Statement


www.saberfunds.com


.267,035.490 2,978.380 1~00 270,013.870

420.240 1100 270,434.11() 324.810 1.00 270,758.920 424,89() 1.00 271,183.810 ' 328.800 1.00 271;512.610

3,022.150 1.00 274,534.760


$14,762 •. 55 $1,959.44

Opening. NAV CurrentNAV


(

SaberFunds 1715 Highway 35 • Suite 101 • Middletown, NJ 07748 • 800-318-9778

January 14, 2016

R ...

2Li,i£ diJ us

RE: Saber Opportunity Income Sub Fund

Activity

Opening Balance Contribution Withdrawal

Net Proflt/(Loss) Allocation

Statement of Partner's Capital Account

Account Value- December 31,2015

For information please contact us at 732-706-0645 Ext 100

$60,921.54 0.00 0.00

$60,921.54

$ 1,332.07

$62,253.61

(

·~"! StroNg Fottmltllionfor the Puturr:"

NAVDate Fund Account Partner Address

2015-11-30

Holdings Valuation

uso Class B

Total USC

Statement of Changes by Currency

usc Beginning Net Value

Suljscriptlons

Redemptions Transfers

Distributions

Total Investor Activity for the period

Adjusted Beginning Net Value

Income (loss) for the period

Total USC

Note:

Saber Opportunity Income Fund, LP

TxniD

or

Net Value

Month To Date

173,517.92

$ 173,517.92

172,633.03

172,633.03 884.89

173.517.92

The numbers presented are prepared by Vlcor (formerly Pantheon) Tax Receivables, LP and have not been verified by Tower Fund Services LLC.

Recipients:

~======~CustFBO~~IRA.NC#-::::::::::: I Cust FBO DtlllfA ~RA, A/C# ~

For more Info or any inquiries please contact Klnjal Amln

Tel: Email: •••••••••

c/o Tower Fund Services 26 Broad Street Suite 4, Red Bank, NJ, 07701. United States Tel: 732-704-7297 Email: [email protected] Web: www.towerfundservices.com

Page 1 of1

Dec jJ 15 09:52a Patricia and Michael


One Arin Park Middletown, NJ 07748-1868

Account Number: SMI Account Type: J1WROS Account Regi$\ration:M. E.-~ S. P-. Joint Owner: ~ S. ~

...... t-. 7 ?H

Dale Transaction

Ul/0112815 Openlflg Ba/8nce of MSJI Fund U7110/2015 Interest $127.17 credtt.ed to series 71812015 Maturity 0711012015 Redemption $69,19~.36 of series 71812015 Maturity 0913012015 Interest $358A4 crtsdlted to series 1211912tHS Maturity

Capital PreseJVation Funds, Year To Date

MSI/

Capltal Appreciation Funds, Year To Date

For lnfonnation regarding your account. contact VINCENT P. FALCI at 732-706-0645

Page1

732-671-4696 p.2

Statement \ Your representative:

! Vmcent P. Falci

www.saberfimds.com I I I

Ral.e Units Unit Total Units Value

84,163.190 127.170 1.00 84,290.360

69,192.360 1.00 15,098.000 358.440 1.00 15.4[Sg.440


$3.459.49 $0.CO


I

Total Value

Exhibit 7

ASSIGNMENT OF LIFE INSURANCE POLICY AS COLLATERAL GZI RellaStar Life Insurance Company, Minneapolis, MN 0 RellaStar Life Insurance' Company of New York. Woodbury, NY 0 Security Life of Denver Insurance Company, Denver, CO 0 Voya Insurance and -Annuity Company, Des Moines. lA 0 Midwestern United Life Insurance Company, Fort Wayne, IN A member of the Voya family of companies Customer Service: 2000 21st Ave. NW, Minot, ND 58703

NOTICE: No assignment shall be recognized by the Insurer unless and untO It Is filed at Customer Service. The Insurer shall not be held responsible for the validity of any assignment.

ASSIGNOR & ASSIGNEE INFORMATION (Please print Owner/Assignor and Assignee Information. For multiple owners, additional space Is provided on page 2.)

Owner/Assignor Name Vincent P. Fa lei

Address 212 Taylor Lane

City Middletown · State_N_J ___ ZIP 07748

Policy Number ~!!!!!!!!!~~-------Insured Name _v_i_n_c_e_n_t_P_._F_a_l_c_~_· -----------------____ o_f_N_e_w_J_e_r_s_e...::y;__B_u_r_e_a_u_o_f:_:S:_e:_c:_u....:r::..:i_t:_i_e_s:__ _________ Birth Date--------

SSNITIN --------- Phone ( 973 504-3600

Address 153 Halsey Street, Suite 6

City Newark State NJ ZIP 07102

For value received, the undersigned Asslgnor(s) hereby assign, transfer. and set over to the Assignee and to the executors, administrators, successors, and assigns of Assignee, the above po!lcy and all dalms, options, privileges, rights, titles, and Interest therein, subject to all the terms and conditions of the policy and any outstanding liens which the Insurer may have against the policy. Assignors jointly and severally agree, and Assignee by the acceptance of this agreement agrees:

1. This assignment Is made and the policy is held as collateral security for any and all liabilities of the Assignors, or any of them, to the Assignee, enher now existing or that may hereafter arise between any of the Assignors and Assignee (all of which liabllnles are herein called "liabilities").

2. Without limiting the scope of this assignment, Assignee shall have the sole right to: (a) collect the net proceeds of the policy from Insurer when it becomes a claim by death or maturity. (b) surrender the policy and receive the surrender value. (c) obtain loans or advances on the policy from Insurer. (d) collect all distributions or shares of surplus, dividends, deposits, and additions to the policy existing now or that are hereafter made or

apportioned, and to exercise all options contained In the policy with respect thereto, provided that unless and until Assignee specifically notifies Insurer In wrftlng to the contrary, the distributions or shares of surplus, diVidends, deposits, and additions shall continue on the plan In force at the time ofthls assignment.

(e) exercise non-forfeiture provisions. 3. The following rights, so long as the policy Is not surrendered, are reserved to Assignor and are excluded from this assignment:

(a) the right to collect from Insurer any disability benefits payable in cash that do not reduce the amount of Insurance. (b) the right to designate and change the beneficiary. (c) the right to elect an optional mode of settlement

4. Assignee agrees: (a) that any balance of sums received from Insurer remaining after payment of the then existing liabilities, matured or not, shall be paid by Assignee to

the persons entitled thereto under the terms of the policy had this assignment not been executed. (b) not to exercise either the right to surrender the policy or (except for the purpose of paying premiums) the right to obtain policy loans from

Insurer. until there has been a default in payment of any of the liabilities or a failure to pay any premium when due, nor until 20 days after Assignee shall have mailed by first-class mall, to Assignors at the addresses last known to Assignee, notice of Intention to exercise such right

(c) upon Assignor's request, to forward without reasonable delay to Insurer the policy for endorsement of any designation or change of beneficiary or any election of an optional mode of settlement

5. Assignee shall be under no obligation to pay any premium. or principal or Interest of any loans or advances on the policy whether or not obtained by Assignee, or any other charges on the policy, but any such amounts paid by Assignee from Assignee's own funds shall become part of the Liabilities, shall be effective Immediately, and shall draw Interest at a rate fixed by Assignee from time to Ume.

Page 1 of 2 -Incomplete without all pages. Order #131455 09/01/2014

6. The exercise of any right, option, priVIlege, or power given herein to Assignee shall be at the option of the Assignee, and [except as restricted by Item 4 (b)] the Assignee may exercise any such right, option, prM!ege, or power without notlce to, or assent by, or affecting the liability of, or releasing any in1erest hereby assigned by Assignors, or any of them.

7. Assignee may take or releese other security, may release any party primarily or secondarily liable for any of the Liabilities or may_gren1 extensions. renewals, or Indulgences With respect to the Liabilities. Assignee may apply to the liabilities In such order as Assignee shall determine, the proceeds of the policy hereby assigned or any amount received on account of the policy by the exercise of any right permitted under this assignment, without resorting or regard to other secu rlty.

B. Insurer Is authorized to recognize Assignee's claims to rights hereunder wlthoul investigating the reason for any action taken by Assignee, the vaUdlty or amount of the Uabilitles, the existence of any default, the giVIng of any notice required under Item 4{b) or otherwise, or the application to be made by Assignee of any amounts paid to Assignee. The sole signature of Assignee shall be sufficient for the exercise of any rights under the policy assigned hereby and the sole receipt of the Assignee for arry sums received shall be a full discharge and release of Insurer to the extent thereof. Checks for any of the Slll11S payable under the policy and assigned herein, may be drawn to the exclusiVe order of Assignee If, when, and in such amounts as may be requested by Assignee.

9. Assignors warrent and represent that no proceedings In bankruptcy are pending against any of them and that none of their property is subject to any assignment for the benefit of creditors.

10. In the event of conflict between this Assignment and the note or other evidence of the Liabilities, with respect to the policy or rights of collateral security In the po!fcy, the provisions of this assignment shall prevail.

Question 11 Is required with Variable Universal Life policies only. Falling to provide this Information will result in a delay In processing.

11. This election applies to the right to: (a) transfer policy values among the available Investment divisions; (b) change contributionallocatlons; and {c) make changes to Instructions, Initiate, or cease participation In the Dollar Cost Averaging and Automatic Rebalancing programs. !f Assignee Is selected, the Assignee and Assignor must complete and return a Third Party Telephone Transfer Authorization (Order #131454) to Insurer.

0 Owner/Assignor may direct policy Investment decisions without Assignee consent.

0 Assignee may direct policy investment dedslons without Owner/Assignor consent.

'd represents that he/she has authority to bind the entity.)

~Owner/Assignor Signature ----=~----'l--.1-L:.::.__::__:_ _____________ Date----------

Owner/Assignor Title• (if the ow!sJ =armershlp or corporation)

~Assignee Signature ~ -/1 tJ.-.1-1/teA/ . Date II· d '1-1 5 Assignee Title• (If the owner Is a trust, partnership or corporation) B~ ~ t{ A/eM; &RC!j ~ ~ /etu,nf,"e f ~Irrevocable Beneficiary Signature (if any) ____________________ Date----------

~Witness Signature (only required with beneficial}' signature)-------------- Date---------

'If the owner is a l!ust, psrlnershlp or (tlrptJJilUon. lhe signature and IItie of the trustee. partn<.>r. corporate representative or autho!lzed corpora!e r"flresentai/Ve are tequlred.

For polities with multiple owners, provide additional owner information and signatures below.

Owner/Assignor Name (please prlnt)----------------------------------Address ________________________________________ _

CitY-------------------------- State ___ ZIP----------

~Owner/Assignor Signature-------------------------Date----------

Owner/Assignor Name (please print) _________________________________ _

Address _________________________________________________ ___

CitY------------------------- State ZIP ________ _

~ Owner/Assignor Signature---------------------------Date----------

CUSTOMER SERVICE USE ONLY

Filed By-------------------------------Date----------

Page 2 of 2 - Incomplete without a !I pages. Order #131455 09/01/2014

-~

- - -------": ~-,--~-- '~~,.-, !!_

Exhibit 8

ReliaStar Life Insurance Company Customer Service PO Box 5044 Minot, ND 58702-5044

LATE PAYMENT REMINDER NOTICE Assignee Copy

January 29, 2016 Monthly Due Date

01!28/2016

02/28/2016

Premium Due

002922 1fi\b FEB -Ll A\\: \1 STATE OF NJ BUREAU OF SECURITIES 153 Halsey St Ste 6 Newark NJ 07102-2807

RE: Policy# 4l •••• on Vincent P Falci

Total Due

$2,172.46

$2,172.46

$4,344.92

Your policy needs immediate attention! Your insurance coverage is in danger of lapsing as your required premium is past due. Your policy is now in a Grace Period ending March 04, 2016. If you have already mailed your pa}ment, thank you.

If you have not already mailed your payment please know that to keep your policy in good standing ReliaStar Life Insurance Company must receive payment of$2,172.46 by the end of the Grace Period. Please Note: As of February 28, 2016 your next premium of $2,172.46 will also become due. To avoid receiving a subsequent Late Payment Reminder Notice please remit the Total Due of $4,344.92 by February 28, 2016.

We have enclosed an envelope for your convenience in remitting your payment.

Important Notice: If payment of your required premium is not received by the end of the Grace Period, your coverage may lapse, depending on the terms of your policy. If coverage lapses, the policy and all payments thereon will become forfeited and void, except as to the right, if any, to a surrender value, paid-up policy, or extended term insurance, as provided in your policy. Please refer to your policy for additional information regarding coverage, lapse, grace period, and policy provisions.

The Company does not accept premium payments or loan repayments using money orders for amounts over $5,000 and may reject payments made by Cashier's Checks, Bank Drafts, and Treasurer's Checks. Additionally, premiums paid more frequently than annually result in higher total annual premiums for the same coverage which is described in more detail in your policy.

Thank You,

Questions? Call: 800-654-5375. Keep this section for your records. Please return the section below with payment.

CC: EFINANCIAL LLC Vincent P Falci

ReliaStar Life Insurance Company

STATE OF NJ BUREAU OF SECURITIES 153 Halsey St Ste 6 Newark, NJ 07102-2807

RE: Policy # ••••• on Vincent P Falci

Late Payment Reminder Notice Total Due $4,344.92 Due Date : 01/28/2016

Please include the policy number on your check and make it payable to ReliaStar Life Insurance Company.

r J If your address has changed, please check this box and complete the form on the back of this coupon.

124747474747111438384441404238442016012800000004344921

20007 9/1!20 15

Exhibit 9

voy~ ReliaStar Life Insurance Company Customer Service PO Box 5044 Minot, ND 58702-5044


March 29,2016 f~ECEf\/f_l1 BIJ.,- .. , a~._,... .. l"t :.' i, ,_ '---;· i,

Monthly ... t\ .. , 'J ( > -....~.M <.j

Due Date

03/28/2016

Premium Due

002501 ZOih APR -L! A II: 35 STATE OF NJ BUREAU OF SECURITIES 153 Halsey St Ste 6 Newark NJ 07102-2807

RE: Policy# ••••• on Vincent P Falci

04/28/2016

Total Due

$2,172.46

$2,172.46

$4,344.92

Your policy needs immediate attention! Your insurance coverage is in danger of lapsing as your required premium is past due. Your policy is now in a Grace Period ending May 03, 2016. If you have already mailed your payment, thank you.

If you have not already mailed your payment please know that to keep your policy in good standing ReliaStar Life Insurance Company must receive payment of $2, I 72.46 by the end of the Grace Period. Please Note: As of April 28, 2016 your next premium of $2,172.46 will also become due. To avoid receiving a subsequent Late Payment Reminder Notice please remit the Total Due of$4,344.92 by April28, 2016.




Thank You,



vo ReliaStar Life Insurance Company

STATE OF NJ BUREAU OF SECURITIES 15 3 Halsey St Ste 6 Newark, NJ 07102-2807

RE: Policy# --on Vincent P Falci



~1 If your address has changed, please check this box and complete the form on the back of this coupon.

124747474747111438384441404238442016032800000004344923

20007 9ilJ20 15

Exhibit 10

vo ReliaStar Life Insurance Company Customer Service PO Box 5044 Minot, ND 58702-5044


May 31, 2016 . RECEIVED

BUREAU OF SECUHiTIFS Monthly Due Date

05/28/2016

Premium Due

007129 STATE OF NJ BUREAU OF SECURITIES 153 Halsey St Ste 6 Newark NJ 07102-2807

ZOlb JUN -b A Jl: IS

RE: Policy # ••••• on Vincent P Falci

06/28/2016

Total Due

$2,172.46

$2,172.46

$4,344.92

Your policy needs immediate attention! Your insurance coverage is in danger oflapsing as your required premium is past due. Your policy is now in a Grace Period ending July 03, 2016. If you have already mailed your payment, thank you.

If you have not already mailed your payment please know that to keep your policy in good standing ReliaStar Life Insurance Company must receive payment of $2,172.46 by the end of the Grace Period. Please Note: As of June 28, 2016 your next premium of $2,172.46 will also become due. To avoid receiving a subsequent Late Payment Reminder Notice please remit the Total Due of$4,344.92 by June 28, 2016.




Thank You,



v ReliaStar Life Insurance Company

STATE OF NJ BUREAU OF SECURITIES 153 Halsey St Ste 6 Newark, NJ 07102-2807

RE: Policy# ••••• on Vincent P Falci


Please include the policy number on your check and make it payable to RetiaStar Life Insurance Company.

c If your address has changed, please check this box and complete the form on the back of this coupon.

124747474747111438384441404238442016052800000004344925

20007 9/1/2015

-· -~ ,__ "':"' ~ ·~·""~,.....,.·

Exhibit 11

I

I

20009

voy~~-ReliaStar Life Insurance Company Customer Service PO Box 5044 Minot, ND 58702-5044

July 5, 2016


Rc: Policy#: ··-Owner: Vincent P Falci

Dear Mr. Falci:

ZO!h JUL I I A !0: 2 2

Insured: Vincent P Falci

NOTICE OF LAPSE OF INSURANCE COVERAGE

We have not received the necessary premiums that are required to keep the policy listed above active. Because no payment has been received, the policy has lapsed without value effective July 3, 20 I 6 and the valuable coverage it provided has terminated.

Your Policy does have options for reinstatement. Please refer to your copy of the policy contract regarding the terms for reinstatement, then contact your agent or the Customer Service during our business hours of Monday- Friday, 8:00a.m. to 6:00p.m. CST.

Sincerely,

Voya Life Policyowner Services

cc: EFINANCIAL LLC

Questions? Call: 800-654-5375 Fax: 877-788-6305

Insurance products are issued by ReliaStar Life Insurance Company, a member of the Voya ,, family of companies. Ill


By: Victoria A. Manning (Attorney ld. # 006371991) Isabella T. Stempler (Attorney Id. # 032642001) Elisabeth E. Juterbock (Attorney ld. # 019032013) Deputy Attorney General (973) 648-3070


Attorney General ofNew Jersey, on behalf of LAURA H. POSNER, Chief of the New Jersey Bureau of Securities, ·

Plaintiff,

v.



SABER ASSET MANAGEMENT, LLC, a New Jersey limited liability

company;


Civil Action

CERTIFICATION OF DEPUTY ATTORNEY GENERAL ISABELLA T. STEMPLER IN SUPPORT OF PLAINTIFF'S MOTION TO ENFORCE LITIGANT'S RIGHTS UNDER R. 1:10-3, AND OTHER RELIEF


2. I submit this Certification in support of Plaintiffs motion for an Order: (1) enforcing the

September 18, 2015 Consent Order and Final Judgment as to all Defendants and Nominal

Defendants ("Consent Order") under R. 1 : 1 0-3 against all defendants and nominal

defendants; (2) amending the judgment amount against nominal defendant Hallus Realty

Group, LLC ("Hallus Realty") stated in~ 69 the Consent Order to $2,035,511.23; and (3)

replacing the Consent Order, which contains a confidential personal identifier on page 23,

with a redacted version pursuant toR. 1:38-7(g)(1). Attached as Exhibit ("Exh.") 1 is a true

copy of the Consent Order with the redaction on page 23 and proposed amendment in~ 69.

Amendment of Judgment Amount Against Nominal Defendant Hallus Realty and Replacement of the Consent Order with a Redacted Version

3. On September 18, 2014, Plaintiff commenced this action against defendants Vincent Peter

Falci ("Falci"), individually, and doing business as Saber Fixed Income Series, LLC and

Saber Equity Income Series, LLC, and as managing member of Saber Funds, LLC and Saber

Asset Management, LLC; and Saber Funds, LLC, Saber Asset Management, LLC, Saber

Funds Distributors, LLC, BWX Fund, LLC, Fixed Term Government Fund, LLC, MSI Fund

I, LLC, MSI Equity Fund II, LLC and Preferred Income Portfolio I, LLC (collectively

"Defendants"), and nominal defendants Hallus Realty, Phoenix Equities, LLC, Donna Falci

and Vincent N. Falci (collectively "Nominal Defendants") alleging violations of the New

Jersey Uniform Securities Law (1997), N.J.S.A. 49:3-47 et seq. ("Securities Law").

4. On September 18, 2015, the Court entered the Consent Order, which resolved this action.

5. It was subsequently noticed that~ 69 of the Consent Order had a typographical error where it

incorrectly stated that the judgment against Nominal Defendant Hallus Realty was in the

amount of $2,108,524.32. The correct amount of disgorgement owed by Hallus Realty is

$2,035,511.23, which is referenced and intended to be consistent with ~ 62 of the Consent

3

Order. It was also subsequently noticed that ~ 73(b) of the Consent Order contains a life

insurance policy number, which is a confidential personal identifier under R. 1 :38-7(a).

6. By this motion, Plaintiff seeks to correct the error as to amount of the judgment entered

against Hallus Realty and replace the Consent Order with a redacted version pursuant to R.

1:38-7(g)(l).

Defendants and Nominal Defendants' Failure to Comply with the Consent Order

7. Under~ 73 of the Consent Order, the Defendants and Nominal Defendants agreed to provide

Plaintiff with collateral and/or additional sources of funds for the monetary judgment.

Paragraph 73(b) describes how Falci was owner and the insured of a $3 million life insurance

policy that named Saber Funds, LLC as the beneficiary, of which Falci's ownership interest

was 51% and Donna Falci's ownership interest was 49%. As part of the settlement, Falci

signed an Assignment of Life Insurance Policy as Collateral for the benefit of the Bureau.

Around, July 11, 2016, the Bureau received a "Notice of Lapse oflnsurance Coverage" from

Voya Financial, ReliaStar Life Insurance Company (the "Insurer"). On July 15, 2016,

Deputy Attorney General Victoria A. Manning and I spoke with Voya Financial. We asked

what steps would be needed to be taken by Falci to reinstate the life insurance policy. We

were told that Falci would have to complete a reinstatement form, Application for Policy

Change or Reinstatement with Evidence of Insurability ("Application for Reinstatement"),

which would be faxed to us and sent to Falci. Attached as Exh. 2 is. a true copy of the

Application for Reinstatement that was faxed to us.

8. Attached as Exh. 3 is a true copy of an e-mail dated February 5, 2016 that I sent to Philip D.

Forlenza, Esq., then counsel to Defendants and Nominal Defendants.

4

9. Attached as Exh. 4 is a true copy of an e-mail dated February 8, 2016 that I received from

Philip D. Forlenza, Esq., then counsel to Defendants and Nominal Defendants.

10. Attached as Exh. 5 is a true copy of an e-mail dated February 18,2016 that I sent to Philip D.


11. Attached as Exh. 6 is a true copy of an e-mail dated February 18, 2016 that I received from

Philip D. Forlenza, Esq., then counsel to Defendants and Nominal Defendants.

12. Attached as Exh. 7 is a true copy of an e-mail dated April 5, 2016 that I sent to Philip D.


13. Attached as Exh. 8 is a true copy of an e-mail dated AprilS, 2016 that I received from Philip

D. Forlenza, Esq., then counsel to Defendants and Nominal Defendants.

14. Attached as Exh. 9 is a true copy of an e-mail dated April 19, 2016 that I sent to Philip D.


15. Attached as Exh. 10 is a true copy of an e-mail dated April 21, 2016 that I received from

Philip D. Forlenza, Esq., advising me that he was no longer counsel to Defendants and

Nominal Defendants.

16. Attached as Exh. 11 is a true copy of an e-mail dated June 9, 2016 that I sent to Falci. The

e-mail attached a copy of a letter dated June 9, 2016 from me to all Defendants and Nominal

Defendants.

17. On September 22, 2016, Vicor Tax Receivables, LP filed a complaint against Falci, Vincent

N. Falci ("Falci, Jr."), and Saber Funds Distributors, LLC in Morris County Superior Court

(the "Vicor Complaint"). A courtesy copy of the Vicor Complaint was provided to the

Division of Law by Lowenstein Sandler, LLP, counsel for plaintiff in that action. Attached

as Exh. 12 is a true copy of the copy of the Vicor Complaint.

5

18. Attached as Exh, 13 is a true copy of an unpublished opinion for Milgram v. Fred J. Miller,

Eric Riedman, etal., Docket No. BER-C-331-06 (Ch. Div. Jan. 7, 2008) (J. Contillo).

19. Attached as Exh. 14 is a true copy of the Criminal Complaint filed on December 16, 2016, on

behalf of the U.S. Postal Inspection Service against Falci, in the United States District Court,

District ofNew Jersey, Mag. No. 16-6188.

I certify that the foregoing statements made by me are true. I am aware that if any of the

foregoing statements made by me are willfully false, I am subject to punishment.

~.Q~U I~aT.Ste~~ Deputy Attorney General State ofNew Jersey Attorney Id. #032642001

Date: December 16, 2016

6

EXHIBIT 1

~";·

x<:

(~ /'

(

JOHN J. HOFFMAN ACTING ATrORNEY GEN'D1AL OF NEW JERSFY Division of Law :i.24 Halsey Street, 5th Floor P.O. Box 45029 Newark, New Jersey 07101 Attorney for Plaintiff

By: Victoria A. Manning (Attorney kL # 006371991') Isabella T Stempler (Attorney I d. # 032642001) Deputy Attomey General (973) 648-3070

·--------~----··--·~---·-·- .. JOfiN J. HOFFMAN, Acting Attorney General ofNew Jersey, on behalf of LAURA. H. POSNER, Chief ofthe New Jersey Bureau of Securities,

Plaintiff,

v.

VINCENT PETER FALCI, individually and d/b/a Saber Fixed Income Series, LLC, a.nd d/b/a Saber Equity Income Series, LLC, as (\. Managing Member of Saber Funds LLC, and Saber Asset Management, LLC;

SABER FUNDS, .C, a New Jersey limited liability company;

SABER ASSET MANAGEMENT, a New Jersey limited liability

company; SABER FUNDS DISTRtBOTORS, LLC,


FIXED TERM GOVERNMENT

}.L~-' --.. ~-·--~~ .. --.. -~. ________ ............ ~-----

SUPF·:RIOR COURT OF NEW JERSEY CHANCERY DIVISION: GENERAL EQUITY MONMOUTH COUNTY DOCKET NO. MON-C-160-14

Civil Action

C:ONSE:NT ORDER AND FINAL JUDGMENT AS TO ALL DEFE!<iDANTS AND NOMINAL

---~-·-~New Jersey~IT;:;ft~ctiiability- ·

company; MSI FUND I, LLC,

a Delaware limited liability company;

MSI EQUirY FUND II, LLC, a New Jersey limited liability

company; BWX FUND, LLC,


PREFFERRED INCOME PORTFOLIO 1, LLC,

and


Defendants,



DONNA FALCI, individually; and VINCENT N. F ALCI, individually,

Nominal DefendanTs,

·'

.

.

THIS MATTER was brought before the Cortrt by Johr1 J. Hoffman, Acting Attorney

General of Ne;,v Jersey ("Attorney General"), on behalf Laura H. Posner, Chief of the New

("Sccmities I aw''). Plaintiff, through

counsel (Victoria A Matming and Isabella T. S'~c~npler, Deputy Attorneys General, appearing),

defendants Vincent PeterFak;, i.ndividmdly and business as Saber Fixed Income Series,

LLC and Saber Equity Income Series, LLC, and as managing member of Saber Funds, LLC a11d

2

c Saber Asset Management, LLC (collectively, "Falci"), Saber Funds, LLC ("Saber Funds"), Saber

Asset Management, LLC ("SAM"), Sabe' Funds Distributors, ("SFD"), B WX Fund, LLC

("BWX"), Fixed Tenn Govemment Fund, LLC C'FTGF"), MSI Fund l, LLC ("MSI Fund I"),

MSI Equity Ftmd II, LLC ("MSI Equity Fund II"), and Preferred Income Portfolio I, LLC

("PIP") (collectively with Falci, "Defendants"), and nominal defenda.11ts Hallus Realty Group,

LLC ("Hallus Realty"), Phoenix Equities, L:.X: ('"Phoenix Equities''), Donna Falci and Vincent

N. Falci (coUectively, "Nominal Defendants"), through counsel (Peter B. Be:r..nett, Esq. and . .


issues in controversy set forth in the Complaint filed in this matter on the tenns set forth in this

Consent Order and Final Judgment ("Consent Order"), which tem1s have, with the consent of

Plaintiff, Defendants and Nominal Defend~mts, been reviewed and approved by the Honorable

Patricia Dei Bueno Cleary, P J t~h. The .ijureau Chief makes the following findings of fact and

conclusions of law:

1. From January 2006 through at least f.Jer:embcr 2009 ("Relevant Time Period"), Falci, a

former Middletown, New Jersey fire chic£ and the Defendants through Falci fraudulently

raised over $6.7 million from the sale oC unregistered securities in the form. of interests in

limited liability companies and investment eontracts from approximately 182 investors of

whom 152 reside in New Je1sey. The investors include, among others, present and retired

police officers, and public servarrc organizations, such as fire companies and police

benevolent associations, thJoughout Monmzmr.h County.

c 2. F alci, a resident of Middletov-v:n, New Jersey, created, operated and exclusively controlled

and continues to control Defendants Sab,;r Funds, Sf\.M, Sl:.'D (collectively, "Saber Broker

Dealers"), BWX, fTGF, MSI Fund I, MSI Equity .Fund H, PIP, the unformed entities Saber

Fixed Income Series, LLC ("Saber rixcd Income") and Saber Equity Income Series, LLC

("Saber Equity'') (collectively "S<;ber Investment Funds"), and nominal defendants Hallus


3. During tho Relevant Time Period, fak: 's 10k awl responsibilities at defendant Saber

Broker-Dealers, Saber Investment Funds nnd norrinal defendant Hailus Realty included,

among other things: (a) har:tdling the day-to-day management of all the entities; (b) making

aU investment decisions for the Saber Investment Funds; and (c) controlling the finances of

the Saber Broker-Dealers. Saber Investment Funds, Hallus Realty and Phoenix Equities.

4. Falci was registered with the Bur~;;au to sdl securities ti:om 1992 through 2002. However,

during the Relevant Tirne Period, Fa'ci was neither registered with the Bureau in any

capacity nor exempt from regi::;tra1ion.

5. Def{~ndant S,'\M is a New Jersey li:-nited 'iabJiity company, formed on or about June 3,

2002, located in Middletovn1, New Jersey. SAM's only members were and continue to be

Falci, who holds a fi:fty-one percent (51<%) ownership interest, and his wife, nominal

defendant Dolllia Falci, who holds a forty-nine percent (49%) ownership interest SAM is

the managing member and invest.~.'11cnt n1anager for MSI FtU1d I, FTGF and BWX. SAM

has never been registered with the Bur..::au in :my capacity.

6. Saber Funds is a New Jersey lirni·ced' compnny, fo:med on or about December 30,

2005, located in Middletuwn, New Jersey. Saber Fund's only members were and continue

to he Faki, who holds a flfty .. or:.c percent (51 . ownership interest, and Donna Falci who

c holds a forty-nine percent (49%) owncrshlp interest. Saber Funds is the managing member

and investment manager for MSI Equity Fund U, Saber Equity and Saber Fixed Income.

Saber Funds has never been registered with the Bureau in any capacity.

7. SFD is a Delawan~ series limited liability company, formed on or about March 13, 2009,

. and located in rvfiddletown, New Jersey. managing director is defendant Falci. SFD

has never bee:n registered with the Bureau in any capacity.


Middletown, New Jersey. From approximatdy January. 15, 2006 through approximately

March 16, 2006, Faki and MSI fund I, through Fa!ci, issued, offered and sold securities in

the form of limited liability interest::; Fund I Securities") using a "confidential

private placement memorandum" ("MSl Fund I PPM") to at least fifteen investors. The

MSI Fund I Securities were not registered with the )3ureau.

9. FTGF is a New Jersey limited liability con:qxmy, formed on March 30, 2006, located in

Middletown, New Jersey. Prom approximately April 6, 2006 through at least February 19,

2009, Faici and FTGF, through Falci, issued, offered and sold securities in the form of

limited liability interests ("FTOF Securities") nsing a "conl:ldential private placement

memorandum" («FTGF PPM") to at least seventy-six investors. The FTGF Securities were


10. Although defendant Falcl sought an exemption from registration of the securities offered

by MS:t Fund I and FTGF by filing the a Notice of of Securities Pursuant to


p·1· ") .~-. · " · · o ·n 'l · h • .,s·1· F d ~ 1 mg , ~..ue reqUirements ror cxernptwn were~ not met .)peer 1C8l. y, pnor tot e 1Vi •... un

I and FTGF Rule 506 Filings, there were at least thirry sales of the MSI Fund I Securities to

fifteen investors and there were at least 75 sales of the FTGF Securities to seventy-six

investors.

11. MSI Equity Fund is a Ne·w Jersey limited liabilitj company, formed on or about

September 17, 2008, located in Middletown, :'-le\v Jersey. Since on or around September

17, 2008, Falci and MSI Equity Fund through Falci, issued, offered and sold securities

in the form of limited liability interests ("i\AS1 Equity fund II Securities") to at least

twenty-six investors. The MSI Equity Fnnd U Securitie:s w~::n~ not registered with the

Bureau.

12. Saber Fixed Income is an unformed business association operated by Falci, located in

Middletown, New Jersey. Begim1ing in or [;round June 2009, Faki doing business as Saber

Fixed Income, issued, offered and sold securities in the p1.1lported torm of limited liability

interests («Saber l'·'ixed Income Securities") using a private placement memorandum

("Saber Fixed Income PPM") to at least f()ur investors. 'fhe Saber Fixed Income Securities

\Vcrc not registered with the Bureau.

13. Saber Equity is an unformed business association ope:rated by Falci, located in

Middletown, New Jersey. Beginning in or aronnd March 2009, Falci, doing business as


interests ("Saber Equity Securities") using a private placement memorandum ("Saber

Equity PPM") to at least thirteen invc;stors. The Saber Equity Securities were not


14. BWX is a New Jersey limited liubilitv corn.pany, formed on or about March 30, 2006,

located in Middletown, New Jersey. Falci and BW'X, through Falci, issued, offered and

sold securities purportedly in the fonn limited liability interests ("BWX Securities") to at

6

least twenty-nvo investors. '.lhe BVlX Securities were not registered with the Bureau.

15. PIP is a New Jersey limited liability compaJlY formed on or about June 3, 2002,. located in

Middletovvn, New Jersey. Defendants Falr.i Md PIP. through Falci, issued, offered and

sold securities in the forrn of limited liability units ("PIP Sectrrities") using a "confidential

private offering mernorandum" ("PIP PPM') dated December 31, 2004, to at least twenty-

six investors. The PIP Seeuiities were not registt;red with the Bureau.

16. Nominal defendant Hallus Realty is a New .Jersey limikd liability company, formed on or

about Decembe: 30, 2005 .. located in Middletown, New Jersey. Hallus Realty's only


and nominal defendant Vincent N. Faki, whu ~10lds a twenty .. five percent (25%) o-vvnership

interest.

17. Nominal defendant Phoenix .!~quities is n New Jersey limited liability company, formed on


mernbers are Falci, who holds a fifty penxnt (50%) mvnershlp interest, and his son,

nominal defendant Vincent N. Falci, who holds a fifty percent (50%) ovmership interest.


day-trading.

18. Nominal defendant Donna Falci, a residem of Middletown, New Jersey, is defendant

Falci's wife. During the Relevant p,;;iod, nominal defendant Donna Falci held

membership interests in: (a) SArv1; and Funds. She has never been registered

with the Bureau in any capacity, a;td is not -:;xcLlpt fi:om registration.

19. Nominal defendant VinGent N. , a rk\v Jersey resident, is defendant Falci's son.

During the Rekv<mt ·nmc Period, nommBJ (itJen(1zmt Vincent N Falci held membership

interests in: (a) Hallus Realty; and (b) Phoenix Equities

20. During the Releva11t Time Period, defendants Falci, the Saber Broker-Dealers and the

Saber Investment Ftmds, through Falci, raised $6,742,697.57 from the fraudulent offer and

sale of MSI Fund I Securities, FTGF Securities, MSI Equity Fw1d II Securities, Saber

Fixed :ncome Securities, Saber Equity Securities, BWX Securities and PIP Securities

(collectively the ·'Saber lnvcs:ment Funds SG.;;u:rities").

21. The Saber Investment Fnnds Securiti·cs were sold to 182 investors, 152 of whom were


The Saber Investment Funds SecuriLles were ndthc:r registered. with the Bureau, nor

f(::dera!ly covered, nor exempt fron1 registration.

23. Defendants Falci, the Saber Broker-Denk:rs through 1-'alci, and the Saber Investment Funds

through Falci, mad';; mate;:ially fdse :md/or misleading statements to the Saber I:avestment


(i) their money would be invested primarily in tax lien certificates; and

(ii) in 2005, such investments yielded ;;l 724t;.;) rate of return.

Funds' investments m tax den ctrtificares n:~ver exceeded three percent (3%) of the total

assets under management, and the 2005 ralc return for MSI Fund I was purely hypothetical

as the MSI Fund I did not even

?5. In c01mection with the offer 1:md sale sccurit\c:;, Fa!ci prov1ded investors with a MSI Fund

I PPM, PTGF PPM, Saber Fixed Income PP1YI, Saber Equity PPM and/or PIP PPM


26. Investors in the BWX Securities and rvfSI Equity Il Secor.ities were given a MSI Fund I PPM

by Falci.

27. Fal.ci drafted the PIP PPM, the FTGF PP~vl, the Saber Fixed Income PPM and the Saber

Equity PPM.

28. Falci was heavily involved in the drafting of the MSI hmcl I PPM by providing infonnation


who dra..fted the MSI Fund I PPM. Falei then approved the language and representations in

the MSI Fund I PPM.


represented to investors in the MSI Fund J PP!'vL Saber Fixed Income PPM and Saber Equity

PPM, respectively, that: (a) the investment objective v;as to seek interest income by investing

'"primarily" in t:.lx lien certiJ:i.cates and other fixed tJ1comc instruments; (b) the funds

contemplated investing most of their capital in ta.x. lien cenifi.cates; (c) the fund could invest




selling stock options and other derivatives; nnd buying securities on margin.

30. Falci and FTG}', through Falci, represented lo investors in the FTGF PPM that (a) the

investment objective was to "seek imerest by mvesting in tax lien certificates and other fixed

income instmments;" (b) the fund contemplated invesjng must of its capital in tax lien

certificates; (c) the fu.nd could inw;st in other and i.nteresls in real property; and (d)

the fund would buy and sell securities deemed by defendant Fa!ci to be equity equivalents

9

and that the fund may engage in trading including, but not limited to, selling securities short,

purchasing and selling stock options and other derivatives, and buying securities on margin.

31. The representations to investors that defemhmts MSI Fund I, Saber Fixed Income, Saber

Equity and FTGF would invest "pnmarily'' in tax lien certificates were false because Saber

Investment Funds' financial documents dernonstrate that their investments in tax lien

certificates never exceeded three percent(~%) of the total assets under management. .

!{.?presentations to Saber lnv~§.!l~~eut f~'un~!§:__Ip\·cstors in t~f)Vritten .A~nual Update


Investment Funds investors that fc:lsely represented the percentage of fund allocations in tax


the fixed income funds and eighty-five percent (85%) of lt.e equities funds were allocated to

tax lien certificates. In realhy, Saber Investment Funds' t1nancial documents make clear that

less than three percent (3%) of total assets undc1· management were actually invested in ta.'<

lien certificates.

Misuse of lnve;<;tor Funds

33. Investor funds were used tor purposes other than those disclosed to investors. Falci

controlled the finan.ces f()r the Saber Brokc1-Dealers, the Saber Investment Funds, and

nomina: defendants Ha1lus ':Zealty and Phoenix Equiries.

34. Payments totaling approximately S700,000.00 v1crc made to Falci from the Saber Broker

Dealers, the Saber Investmem. Funds a1:u non:inal detemiants Hallus Realty and Phoenix

Equities.

10

35. Payments totaling approximately :)73,000.00 were made to nominal defendant Donna Falci

from the Saber Brokcr-Deakrs, the Saber Investment Funds ~md nominal defendants Hallus

Realty and Phoenix Equi1ies.


Faici from the Sabe1 Broker-Dealers, the Saber Investment Funds and nominal defendants

Hallus Realty and Phoenix Equities. Of the pay.ments made to nominal defendant Vincent

N. Falci, $274,000.00 was from SAM, ofvvhich he was not a member.

37. Falci transferred approximately $554,000 MSI Fund i and FTGF investor money to

nominal defendant Phoenix Equities, vvhich was used for personal day-trading by Falci and

nominal defendant Vincent N. Faki.

38. Falci transferred approximately $3Ji00,000 to nornimoi defendant HaHus Realty fi:om

defendants MSI Fund f, , B\VX, PIP nnd SFD.

39. The funds transferred to nomina· defendant Hallus Realty were used by Falci to purchase at


Falci and/or nominal defend~mt Donna Falci. At least two ofthe residential properties were

sold, leaving title to the remaining five residential p1·operties (the "Five Residential


a. Vincent P. Falci (lO%) and Tiallus Realty (90%~), 60 Baldwin Avenue, Middleto~,

New Jersey, Block 209/LoL 20;

b. Vincent F Falci (lOz>o) (::>0%), ·~Grace Avenue, Middletown, New

Jersey, Block :231/Lot 9

c. Don:'l.a Falci (10%} and HaHus Realty (90'%), 165 Lohsen Avenue, Middletovvn, New

Je;.·sey, Block 289/Lot 15,

c·· d. Vincent}) Falci, 318 East Coventry Comt, #WOE, Lakewood, New Jersey, Block

1248/Lot 318.05; and

e Vincent Falci., 1612 Rosewood Drive, vvall, New Jersey, Block 57/Lqt 19.

40. Nominal defendant Hailus Realty, throu.gh Ffcki, rnanages the Five Residential Properties.

41. Title to the Five Residential P;·operties are '~ncumbered with mortgage loans and leased to

residential tenari"G. The tenant at ! 612 Rosewood Drive is nominal defendant Vincent N.

Falci.

42. In addition, Falci, without disclosure to the Saber Investment Funds investors, transfened

millions of dollars between defendants the Sajcr Broker-Dealers and the Saber Investment

Ftmds rathe · tl1an invest them ia tax liens certificatr~s as n~presented in the PPMs. Investor

money raised by Falci and the Saber Investment Funds through Fa.ld, was deposited into

one of the Saber Bro.ker-Dealers bank acceounts where it was pooled with other investor

funds and, then transferred by Faki to v,rhat he a.nd the Saber Investment Funds were

investing in a:t tlmt time, ~g.,_, to bny tax liens .:ertifJ.c.ates, securities or transferred to Hall us

Realty, which purchased the Five Rcside;ntw.l Properties and a sixth residential property

th~.t has since been sold, ir Falci' s or v:iJ'c':S name.

43. Falci caused MSI Fund I, FTGF 0-:1d HWX to is:;ue PIK Notes to nominal defendants

Hanus Realty and Phoeni:< Equities fer purJJOrtcd ''lines of credit"

44. Falci established the terms of:.md ;::ntered into PIK Notes on behalf of all the entities on


45. Falci, the Saber Broker-Dealers and t1K: :nvestment Funds, through Falci omitted to

disclose to investors that he caused f\md I, fTGF, and BWX to issue PIK Notes to

L

nominal defendants Hn.llus Realty and Phoenix Equities and that Falci, on behalf of all the

entities, negotiated the k~nns of the PIK Notes.

46. Falci caused Saber Funds to erJer into three promissory notes that in total, loaned

$185,000.00 to a comp~my owned by a SAlvi investor, whorn Falci described as his best

friend. Falci, the Saber Broker-Dei11ers and the Saber Investment Funds, &..rough Falci,

omitted to disclose to investors Falci 's professional and personal relationship with the

O\vner of said company.


48. Falci, the Saber Investment Funds, through F:dd and/or the Saber Broker-Dealers, through

Falci omitted material facts to investors. includmg, among othe,- things, that:

a. Faici was not registered with the Burc~a:J t:1 sell securities;

b. MSl Fund l Securities were neither with the Bureau nor exempt from state

or federal registration:

c. FTGF Securities were neither registered \Vith the Bureau nor exempt from state or


d. MSl Equity Ptmd II Securities were neither registered with the Bureau nor exempt

from state or federal registration:

e. PIP Securities were neither registered \Vlth the Bureau nor exempt from state or


f. BWX Securities were ne1.the,· ,:vith the Bureau nor exempt from state or


l3

g. Saber Fixed Income and Saber Equity Income were not formed as limited liability





j. SFD was not registered with the Bureau m any capacity;

k. Investor funds were not inwsl;;d in tax lien certificaks to the extent represented;

L Falci controlled of all the entities to which ir:vestor funds were transferred~


con:1pany controlled by defend.:u1t r:,,Jc:, to purchase the residential properties, which


n. Certain jnvestor funds were transferred to nominal defendant Phoenix Equities for

day-trading by Faki and nomin<•J det{;ndant Vincent N. ?alc:i;

o. Falci caused defendants MSI Fund B 'VVX and FI'GF to enter into the PIK Notes

with nominal dc:fendants Hallus Rerslty and Phoenix Equities. Falci individually and

acting on behalf of all the parties tc the PIK Notes, and on behalf of all the entities,

negotiated the tent.ls of th~ PIK Notes

p. Falci caused Saber Funds LO enter into three promissory notes as a lender in the

aggregate amount $185,000.00 to a company ovvned by a SAM investor, which

FzJci described as l:lis best

q. Falci failed to form ecrtain limited liability companies in which he was selling limited


c ££!:lei's Nevt' Business Entitle§.


(«SOIF"), a Delaware limited partnership, \Vhich offertd a11d sold securities in the form of

limited partnership interests ("SOIF Securities"). SFD is SOIF's general partner.

50.ln or around 2012, Fa.lci formed Pantheon Tax Receivables, L.P. ("Pantheon"), a Delaware

limited partnership, which offers and sells seeurities in form of limited partnership

interests ("Pantheon Securities"). Vidon Capital .Partners, LLC (Vidon") is Pantheon's


Vidon. Nominal Defendant Vincent N .. Falci owns a 40% interest in Vidon. Vidon

receives 2% per a.•1rnm1 of Pa1.itheon's assets under management and a perfonnat'1.ce fee of



51. SOIF is an active entity, but its asscrs were invested by Faki in the Pantheon Securities.

52. The Saber Broker-Dealers thronsh Faki, and Saber Investment Funds through Falci,

violated the antifraud provisions of the Secnrlti.es aw, specitkall.y, N.J.S.A. 49:3-52(b)

and (c), sold unregistered securities in the fonn of limited liability interests and investment

contracts, in violation ofB..:.L}.i\"" 49:3-60, :1nd employed unregistered agents, in violation

ofN.J~~~A. 49:3-56(h).

53. Falci violated the antifraud provisions th.c Securities Ut\V, specifically, NJ.S .. f,.. 49:3-

52(b) and (c), sold unregistered securitks m form of limited liability interests and

investment contracts, in violation of N,-1 tl9:3-60, and acted as an agent without

regist.mtion, in violation oft:LJ S.A. 49:3-56(a).

15

c 54. Falci <md Nominal Defendants were unjustly enriched by the Defendants' violations of the

Securities Law.

THEREFORE, based on the Bureau Chiefs foregoing fmdings of facts and conclusions

iCX of law, it is on this I ~.:. . d<1y of ~~fl:':9~_.,1015, ORDERED AND AGREED

THAT:


Funds Distributors, .LLC, Saber Investment .~'unds, BWX Fund, LLC, Fixed Tem1

Govcnunent Fund, LLC, MSI Fund 1, LLC, !\1Sl Equity Fund II, LLC, and Preferred


Equiiies, LLC, individually and by or through any person, corporation, business entity,

agent, employee, broker, partner, officer, director, attorneys-in-fact, stockholder, andlor

any other person who is directly or indirectly unde, their control or direction, are

PERlvfANENTLY ENJOINED AND RES.'.'.R.AINED from directly or indirectly:

a. violating the Securities L:1w, including it~; anti-fraud provisions, NJ.S.A..:. 49:3-52(a) -

(d);


li.rnited to, an agent as defined in }'-lJ.S.J\. 49:3·-49(b), a broker-dealer as defmed in

tL.LS.A. 49:3-49(c), an investment adviser as defined in NJ.S,.-tL 49:3..49(g), and an

c. issuing, offering for sale or scBing, to purchase or purchasing, distributing,

promoting, advertising, soliciting, nq;'oliating, advancing the sale of and/or

promoting securities, or advising rcgardi:1g the sale of any securities, in any manner

16

c to, from or within New Jersey, including for or on behalf of Pantheon, Vidon andfor

SOIF, except that defendant Falci may buy or sell securiti0s for his own accounts

through registered broker-dealers and rnay acquire an interest in Pantheon or an

entity that may be: forrned to invest in tax hen certificates in connection with actions

to be taken to comply with 55(e) <md 61;

d. engaging in the conduct describeJ in the Complaint; and

e. acting as an officei· and/or dir<::ctor of an issuer, or fron.1 supervising employees of an


the fund or from owning or contml1ing a majority· interest in any issuer that offers

and/or seHs a.ryy seeurity, including, but not limited to, Pantheon, Vidon and SOIF;

56. Defendant Vincent Peter Faki is permanently enjoined and restrain.cd from applying to the

Bureau to be a broker-dea.ler, an agent, i.nvr~stment adviser. or investment adviser

representative as defined by the Securities L:1w.

57. Defendant Vincent Peter Falc11s permancmly .::;njoined and restrained from recommending

the purchase and/or sale of :my investm.ent including, but not limited to, tax lien

certificates, to an issuer unless the isstler retains the ultimate authority and responsibility to

approve and exercises that a:uthority to "'"'~~~"" the recommendation in writing.

58. Defendant Vincent Peter Falci is permanently snjoined and restrained from:

a. Raising any capit31 in any fonT! for any: (i) issuer; (ii) managing member of any

issuer; and (iii) genera5. pRrlner or controlling person or entity, of any issuer


b. Managing or exercising contw.l over inv,_;stmen:ts and assets including, but not limited

to, any finances for any: (i) issuer 1nanaging member of any issuer; and (iii)

17

general partner or other control person or entity, of any issuer including, but not

limited to, son:, Vi don and Pantheon; and


issuer; (ii) managing member any issuer; and (iii) general partner of any issuer


59 Nominal ~)efendant Vincent N. Falci is permanently enjoined and restrained from acting as

a proxy for any of the Defendants as to any of the enjoined conduct set forth in this

Consent Order.

60. Nominal Defendant Vincent N. f<'alci is permanently enjoined and restrained from the

following conduct:

a. Acting as an officer ~md/or direcwr of an issuer;

b. Directly or indirectly supervising employees an issuer; and

c. Controlling any issuer that ot1ers D.ndior sells any security.

61. Upon entry of this Consent Order, Jefenda.nt Ff'lci shall be and rernain in compliance with



members of issuers; ~:md (iii) general )trtners and other control persons or entities, of

issuers including, but not limited ro, SOli, Vidon and Pantheon

62. Defendants Vincent Peter Falci, Saber Funes, LLC. Saber A..sset Management, LLC, Saber


Ftmd I, LLC, MSI Equity Fund Il, ~.LC, Prefened \nco me Portfolio I, LLC are jointly

and severally liable to Plaintiff Jiw n::stitution in the amou11t of $6,742,697.57 for the

investors who purchased the limited liability interests and/or investment contracts.

Nominal Defendant Donna Faki shall disgorge 108,524.32, pursuant to N.J.S.A 49:3-


N.J.S.A. 49:3-69(a). Nominal Ddl:n<.kmt Ilalh.1s Realty Group, LLC shall disgorge

$2,035,511.23, pursUc'1rrt to NJ.S.A. 49:3-69(E). The $2,035,511.23 of disgorgement owed

by Nominal Defendant Hailus Realty Uroup, LLC is included within both the

$2,108,52LJ2 of disgorgement owed by Nominal Defendant Donna Falci and the


$2,035,511.23 of disgorgcmcnt owed by Nominrd Detendant Hallus Realty Group, LLC is

jointly and severally owed by Defcndmd:> Vincent Peter Faki, Saber Funds, LLC, Saber

Asset Management, LLC, Saber :Fnnds Distributors, LLC,, BWX Fund, LLC, Fixed Term

Government Fund, LLC, MSI Fund l, LiL, MSI Equity Fund II, LLC, and Preferred

Income Portfolio I, LLC, and Nominal Defendants Donna falci and Vincent N. Falci.

Nominal Defendant Phoenix Equities shall disgorge $514,176.49, pursuant to 'tL,J,S . .l1~

49:3-69(a), which is jointly and severally owed by Def~ndants Vincent Peter Falci, Saber

Funds, LLC, Saber Asset 1V1anagcment, LLC, Sab0r Frmds Distributors .. LLC, BWX Fund,

LLC, Fixed Term. Government Fund, L .. C, !lA Sf Fund l, LLC, l:v!Si Equity Ftmd II, LLC,

and Prefencd Income Pcrtfolio I, L: .. c, and Nominat Defendant Vincent N. Falci. The

restitution/disgorgement shall be to Plaintiff over five years as follows:

a. $471,988.82 (seven pereent (7~/,l) ofthe $6,742,697,57) on or before August 3 , 2016; b. $876,550.67 (thirteen percent (1 ofth.e :£6, 74:2,69'/.57) on or before August 31,

2017; c, $1,483,393.47 (twenty-two percent of the $6,742,697 .57) on or before August

31,2018; d. $1,887,955.33 (twenty~eight perc:~m of the :1)6,742,697.57) on or before Augw;t

31,2019;and

t9

e. $2,022,809.28 (thirty percent (30%) ofthc $6,742,697.57) on or before August 31, 2020.

63. The Bureau shall distribute the rtstitutionJdisgorgemenL payments to the investors and the


investors.

CIVIL MONICfARY :PKNA.LTI~§

64. A civil monetary p~-:nalty may be impo.::cc' on Defendants Vincent Peter Falci, Saber

Funds, LLC, Saber Asset Managemem, LT.C, Saber Funds Distributors, LLC, BWX Fund,

LLC, Fixed Term Government Fund, LLC, M:Sl f\mcl L. LLC, MSI Equity Fund U, LLC,

and Preferred Income Portfolio I, LLC pm·o'"Lu:tnt toN LSI\c, 49:3-70.1 for each violation of

the antifraud and registration provisions <Jf the Securities Law of not more than $10,000

for the first violation and not more tlum $20,000 for a second and each subsequent

violation. In view of the speci:tic f~lcts of this case including, but not ljmited to, the

pe1manent injunction agreed to by Defendants s~.:t forth above, the representations made

by the Defendants through Vincent Falci to PlaintiiT through the date of entry of this

Consent Order made orally and/or writms and/m in documentation regarding the

Defendants' an.d Nominal Defendamts' financial status, all of wrich are material to

Plaintifi in entering into this Cons":.nt O:·r:,,;r· and ;;;ssessiug the civil monetary penalties, the

civil monetary penalties d.re reduced. D.;:h::adu1is Vincent Peter Falci, Saber Funds, LLC,

Sabe~r Asset Managemen'., LLC Sabe; t; Distributors, LLC, BWX Fund .. LLC, Fixed

Tenn Government }~?und, LLC. MSI L'und LLC lviSl Equity Fund II, LLC, and

Preferred Income Portfolio I, LLC arc jointly and scv(:rally assessed civil monetary

penaltie~ pursuant to .tiJ:..~A. 49:3-70. in the amount of $800,000.00 for violations of

/{i

N.J.~A .. 49:3~52(b), :t::!J)I. 49:3-52(c), 49:3~56(a), N.J.S.A. 49:3-56(h) and

N.J.S.~A, 49:3-60, which is remedia; <md not punitive in nature.

65. '':'he civil monetary penalties shall paid in the same proportion as the

restitution/disgorgement payments set forth in il 62, unless accelerated pursuant to this

Consent Order, as foHows:

a. $75,000.00 wit.bJn 120 days of entry of this Consent Order; b. $50,750.00 on or before August J 1, 2016; c. $94,250.00 on or before August 31,201 7; d. $159,500.00 on or before August 3 , 2018·, e. $203,000.00 on or before August 31, '?.0 19; and f. $217,500.00 on or before September 15, 70?.0.

The penalty payments shall be deposited into the Securities Enforcement Fund, pursuant to

N..: 2'> A. 49:3-66. 1 . Payment sbaH b~; in_ accordance with the provisions in this

Consent OrdeL

66. Final judgment in the amount of $7.542,697.5 7 is entered against defendants Vincent Peter

Falci, Saber Funds, LLC, Saber Asset Ylanagcment., LLC, Saber Funds Distributors, LLC,

BWX Fund, LLC, Fixed Term Govemrncnt Fund, LLC, MSI Fund I, LLC, MSI Equity

Fund Il, LLC, and Preferred Incomt: PmtCtl!io !, LLC, for violations of:NJ.S.A 49:3-52(b),

t-U.S.A. 49:3,52(c), N.J:.S .. J\ :t9:3-56(a), ii,.LS.A. 4~Y3-56(h) and NJ.S.A 49:3-60,

constituting $6,74?,697.57 in restitutiun $800,000.00 as civil monetary penalties

pursuant to NJ_l).~_,_ 49:3-70.1 ("Defendants' Judgment").

67. Final judgment is entered ag2inst Nomi:1al Defendant Vincent N. Falci in the amount of

$2,890,553.54 as disgorg,;rnent in accordance -vvith 1! 62.

68. Final Judgment is c:ntered against N;Yninal 'Jefendant D01ma Falci in the amount of

$2,108,524.32 as disgorgement in i:lCCOJC<cnc<~ with ~i6:L

21

I

69. Final Judgment is entered against Nominal Defendant Hallus Realty Group, LLC in the

amount of $2,035,511.23 as disgorgement in accordance with~ 62.


$514,176.49 as disgorgement in accordance with~ 62.



restitution/disgorgement payments and the civil monetary penalties payments set forth in~~


occur as set forth in ~ 80, then $217,500.00 of the civil monetary penalties due on





the Bureau Chief.










22

-. c

shall provide a copy of same to the Burezu within ten days of a request by the

Bureau;

b. Vincent Peter Faki is the insured and owner of a life insurance policy with a Three

Million ($3,000,000) DoLlar de~:th benefit issued by Reliastar Life Insurance

Company (the «Insttter") on June ~8, 2012, policy number AD •• (the "Life

Insurance Policy"). The beneficiary of the Life Insurance Policy is Saber Funds LLC.

Vincent Peter Falci owns a fifty percent (51%) interest in Saber Ftmds LLC and

Donna Falci owns a forty-nine percent (49%) interest in Saber Funds LLC. Vincent

Peter Falci, individually, and a:; a member of Saber Funds LLC, and Donna Falci,



and civil monetary penalty paymenb an~ paid as set forth in 11 62, 65 and 71.

Vincent Peter Falci, individually, and as a membe.r of Saber Funds LLC, and Donna

Falci, individually, and as a member of Saber .Funds LLC, at their own costs and

expense, shall take such steps as are reqnir~d by the Insurer to assign, transfer and set

ovel' to the "State of New Jersey, Bureau of Securitiel:l" the Life Insurance Policy and

all claims, options, privileges, rights, titles and interest therein within ten days of

entzy of this Consent Order. Vincent Peter Falci represents to Plaintiffthat there are

no loans or other liabilities on H1e Life Insurance Policy that would reduce the death



the death benefit toward the balance of the :final judgment owed under this Consent

Order. In the event the balance ocved to pay the :i1nal judgment is less than the death



necessary action to cause a mortgage lien to be draited and recorded in favor of the

«state of New Je;:sey" on the Five Rcsiclenti<d Properties and 212 Taylor Lane,

Middletovvn, New Jersey, Block 600/Lo:: 3?. Sucb action sha!J include, but is not


i. Giord<:ino. Halleran &. Ciesla, P.C. ("GHC") will order title reports on each of

the properties to idemify all recorded liens and encumbrances, and provide

Plaintiffvvith a copy ofthe tU,;; reports;

ii. The title company wiD fik Notice~ of Settlement in applicable counties;

iii. GHC will prepare mortgag~~s in :1 form satisfactory to the Bureau naming the


iv. Promptly following the

mortgages with the Office

of the Consent Order, GHC will record the

th,:; County Clerk of Monmouth County and

Ocea\1 County, as applicabic, and shall prov:de proof of recording to Plaintiff.

This Consem Order shalllw attached as an txhibit to each mortgage. Once all

the restin1tion/d.isgorgen1cnt and

set forth in 62, 65 and 7 1, tht

falci with documentwion

monetary penalty payments are paid as

of New Jersey shall provide Defendant

to disclmrgc the lien. Defendants and

Nomina; Defendar1ts :>ln::Jl rc~ponsible for all costs ~d fees associated with

the discbu·ge of the lien:

?.4

v. G.HC will issue a legal opinion to the Bureau stating that each mortgage (i) is

valid, binding and cnforccatlk against the mortgagor, (ii) is in proper form for

recording in the office of the dcrk of the county in which the real estate is

located, <md (iii) upon execution :'md ddivery, shall be effective to create a


74. Defendant Falci and the Saber Broker-Dealers and Saber Investment Funds through Falci,

and the Nominal Defendants shall sign >Vithin fifteen business days all documents as may

be requested by their counse .. and/or Plmntiff to fulfill all of the obligations of Defendant

Falci and the Saber Broker-Dealers awl Saber Investment Funds, and the Nominal'

Defendants set forth in this Consent Ord~~r.

75. Defendant Falci shall dissolve each of the S<:.ber Broker" Dealers and Saber Investment


76. In the related administrative action, JMCLYJD};t~lXLl:~~..:_fa!ci, et al., OAL Docket #13248-

2014N .BOS, the Bureau Chief entered ::. Snmm<:ry Order on September 18, 2014

("September 18, 2014 OAL Summary Order"). This Consent Order is subject to

Defendants withdrawing their answers to the S::pternber 18, 4 OAL Summary Order

within ten (10) days of entry of this C:onsent Order and acknowledging that they de not

contest the relief sought by the Bmcau Chief ·-.~he September 18, 2014 OAL Swnmary


77, Defendants and Nomina' Defend::,nts provide the Bureau with a copy of their filed

federai and state tax retums each yedr within kn days of filing 1.mtil all the

restitutionldisgorgement a<'1d civil monetary perdlty payments 'are made as set forth in ,,1 62,65 and 71.

25

.... -(

78. Defendants shall not represent or trnply that ;_u1y act or practice hereii1after used or engaged

in by Defendants or Nominal Defend~mts ha~: been required or approved, in whole or part,

by the State of New Jersey, the Attorney of New Jersey, the Division of Law, the

Bureau or any New Jersey agencies, , ,::;mployecs or subdivisions,

79. Upon any Triggering Event defincc. in ,!80, thi;'; BuTeau andior Bureau Chief may:

a. declare to Defendants and NorrJma1 Defendants that the unpaid portion of the

Defendfu."1ts' Final JUdgment and Nornmal Defendants' Final Judgment immediately

due and payabl<;; <mdior

b. take any action pennitted by law.

80. A "Triggering Evenf' is defined to include the following circumstances:

a. A violation or breach of this CO:i::.ent Onb· by Defendants and Nominal Defendants;

b. Defendants' and Nomina: Dercndants' failure to make timely

restitution/disgorgement payrn~ms as sz;: t~1rth in ,I 62;

c. The failure of Fald, Saber Fands LLC~ und/or Donna Falci, to timely make all

required payments on the Life In~mt"mcc Policy;

d. Defendants' and Nominal Defendants' !ure to submit filed yearly federal and state

tax retums as set forth in ~1 77;

':;. Defendants' failure to payrnents of the civiJ monetary penalties as set

~ rth. '[6'- d1 :to m i ); an~:or

t: 111c discovery by the Burt>:m Ch · falsity of any material representations made

by the Defendants and Nomimd Ddendants as set forth in 1f 64.

8J. Detenda;"1ts and Nominal Dcfe,Kbnt; tnu1Sfe:Ting of assets of any kind between each other

and/or any entity they controi, dircc.t.ly or indirectly, shalJ be deemed a prima facie

fraudulent transfer under New Jersey's Uniform Fr::tudulent '1\ansfer Act, N.J.S.A. 25:2-20



u..nder this Consent Order, Defendants and Norninal Defendants shall not assert any

defenses based on jurisdiction, lack standing, statutes of limitations, or statutes of


83 . .Any person with actual or construc.i:ive notice of this Consent Order who aids, abets,

cmmsels, corrumtnds or instructs any person or entity to perform ~my act prohibited by this


Bureau Chief.

84. Within ten days of entry of this Consent Onkx, Falci sh<~ll provide a copy of this Consent

Order to:

a. Current tmd future investors of the Defendants, SOIF, Vidon, Pantheon and any issuer

who employs Defendant Falci or f(x '>Vhom Deft~ndant Falci provides consulting

services, compensated or tmcor:npem;atecl. Eaeh investor shall be required to sign an

acknowledgement coniinning receipt of this Consent Order and such

acknowledgments shall be table to the Bureau within three days upon written

request to Fslci: and

b. Current and future officers, dir;;>..:tors, .rmtnagers, supervisors, and!or partners of any

emnlovs Defendant Falci or for whom " "

Defendant Falci provides corsulting compensated o~· uncompensated. Each

such person shall be required to <Ll acknowledgement confinning receipt of this

7

Consent Order and such ackno-vvledgments shall be made available to the Bureau


85. This Consent Order constitutes the agreement between Plaintiff, Defendants and ....... {.:

No:ninal Defendants with respect w this litJ.g;;tion. This Consent Order is a complete and

exclusive statement of the terms of the agreement am.ong the Parties with respect to its

subject matter and shall bind Defendants and Nominal Defendants, and thdr officers,



construed to limit or sffect any position that the Bureau and/or Bureau Chief may take in

any future or pending action not specifically e;ncompassed herein,

86. Nothing in this Consent Order shaD in any manner be construed to limit or affect the rights

of any persons, other than the )3ureau c:hief, as it pertains to the allegations b the

Complaint, who may have a claim against DefendRnts and/or Nominal Defendants.


signed this Consent Order with full knowlEdge, understanding and acceptance of its terms


88. This Consent Order may be signed 111 counterparts, each of which shall be deemed an

original.

89, The tem1s and conditions of this Consent Order nwy be modified only with the written


90. If any portion of this Consem Order is held invalid or unenforceable by operation of Iaw or

court o:·der, iJ1e remaining terms of this ConscnL Orck::r shaH remain in full force and effect.

---------------------------------

.i

91. This Court retains jurisdiction w enforct>. modify or otherwise hear any application arising


92. Defendants and Nom.inal Defendants waive any right to appeal this Consent Order.

93 Defenda11ts and Nominal Defendants 1epresent that they have had a full and complete

opport1-mity to consult with counsel before signing this Consent Order.

94. Defendants and Nominal Defendants 1ercby consent to the jurisdiction of the Bureau.

95. Defendants and Nominat Defendants waive any right to assert any defenses or to raise any

challenge that they otherwise m.ay have w the ter.rns of this Consent Order.

)

Consent to the Form, Content and Entry of this Consent Order and Final Judgm,:nL

GIORDANO, HALLERAN & CIESLA 125 Half Mile Roadi Suite 300 Red Bank, NJ 01701

BY: Peter B. Bermett, Esq. (Attorney IJ. :' ce<;, ;:::,-? 1 ct 'l. \) Attorneys for defendants :md nomiual ckfcudants

Dated: q ·--/ $~ ts-

Vincent P Falci, Saber Funds, LLC, Saber r-\ssct Management, LLC, Saber Funds Distributors, LLC, BWX Fund, LLC, Fixed Term Govemment Fund, LLC, MSI Fund I, LLC, MSl Equity Fund H, L.U~, Preferred Jncome Portfolio I, LLC, Hallus Realty Group, LLC, Phoenix Equities, LLC, Dcnma Fald and Vincent N. Falci

Consent to the Fmm, Content and Entry of tl:lis Consent Order and Final J1.:dgmen1:

Consent to the Form, Content and Entry of this Consent Order and Fin~d Juclga;,cnt:

30

Consent to the F onn, Content and Entry of this Consent Order and Final Judgrnem:

Saber Asset Management, Li,C

By: ·~(/ ·· -:C.,2YL, Vincent Peter Falci Managing Member

Consent to the Form, Content and Entry of this Consent Order and Fiiu.l Judgment:

Saber Funds Distributor, I LC

Consent to the Fo1m, Content and Entry of this Consent Order <md Final Judgn1eat

Fixed Tenn Govenm1ent Fund, LLC /'

I / , .. } By:~~ '"~- :·,/ /~\{'· ---··

Vinceff'~t" Fa .. lei Title: ~· ............................. .

Consent to the Form, Content and Entry of this Consent OrdLr m1d Fina1. Jndgmeni::

MSI FUND L L:"(

By:

Dated: 9-(. . .( / /;J

Dated: P-/ .:(, (/'"

(l / ,-Dated: y - ( _\ --( J

Consent to the Form, Content and Entry of this Consent Order and Final Judgmen!

BWX Flmd, LLC

Consent to the Fon:n., Content and Entry of this Consent Order and Final ;


By \-~~- (~ .. -·

· · ·~ii~~:r,r~r;~'alc: ________ _ Dated: \2 ( r: ( ~--

Consent to the Fom1, Content and Entry of this Consent Order and Final


By: Dated: 9~ tr~ 1 T

Consent to the Form, Content and Entry of this Consent Orde1: and Final

Ha!lus Realty Group, LC

Dated: ~( .rj;;-

\.v,

("' r-<'

\ .. ...

Consent to the F onn, Content and Entry of this Consent Order and ;:;inal Judgrncnt.:

Phoenix Equities, LLC / ...... , ,.-,

/ / 'j '( .-----~.;- J'• By: "· . ' .. l •i ' ...

1 /.incent ~~~z;r Falci

T1tle: ........ ... ~:::- .. ~ ........ .

Dated: ~ -(_;-_(:;--

Consent to the Form, Content and Entry of this Consent9rder and Final Judgrnent:

/ 1 //~--/ / / //'

~J~:><;~~--·:_ ;':~~:,_,!::'-.. , ~::_-·-·-··----·--·---! 5onna Falci, Individually

Dated:

Consent to the Forn1, Content and Entry of this Consent Order and Final .Jud?)1lCnl:

Dated: (Ill .'7/; s· I ..

Consent to the Fonn, Content and Entry of this Consent Order and Finalludgment

JOHN J. I-~OFF:tvLW Ae,_'lNG ATTORNEY GENERAl.. OF NEW JERSEY Counsel for Pl;~nti:ff

' I , _/ ,.,/ I ""'. i //,_..-! / / i! J:'ir"' ;/

By: /;1 /I /Y /;:f \'• ' '"' /."''

\1 1ctoria !)?~~!annlng (Attom;:y ld. +" 0063 71991) Attorney for Plaintiff

Dated: W~;/s---

EXHIBIT 2

Fax Server 7/15/2016 2:02:29 PM PAGE 1/013

Fax cover sheet

F•NANCtAL

To: Victoria

Fax: 19736483956 Phone:

From: Fax: Phone:

Date and time oftransmission: Friday, July 15, 2016 2:01:48 PM Number of pages Including this cover sheet: 13

NOTES:

Fax server

NOTICE: The information contained in this facsimile transmission is confidential and intended only for the use of the intended particular recipient(s). It may also contain attorney work product and/or be protected by the attorney-client privilege or other

privileges. Delivery to someone other than the intended recipient(s) shall not be deemed to waive any privilege. If you are not the intended recipient, you are hereby notified that any disclosure, reproduction, distribution or other use of this communication, in

whole or in part, is strictly prohibited. If you have received this transmission in error, please notify the sender by reply facsimile and delete this communication without copying or disclosing it.

Fax Server 7/15/2016 2:02:29 PM PAGE 2/013 Fax Server

r.!eliaS!tar Ufe Insurance Compl'.llny, Minneapolis, MN Security life of Denver Insurance Company, Denver, CO Voya lnsuramce and Annuity Company, Des Moines, tA MidweG"tem United life Insurance Company, Fort Wayne, IN

Application for Policy Change C)r Reinstaternent with Evidence of lr1surability

RIETIREMEiNT !INVESTMENTS I fNSIJ~AtiCE


Good Order Checklist (To avoid a delay in processing, please verify that all required sections are complete.}

0 The request type was completed in Part 1- A. If a policy change was requested, appropriate details were completed In Question 3. 0 Amount of premium Is specified to Increase or decrease premium amounts In conjunction with your Change In Coverage. 0 Addition or Removal of Riders have been detailed in Part 1- A.

0 ChUdren's Insurance Rider: Reinstatement of a polrcy with a Children's Insurance Rider requires completion of Part 1- A quest10n 2, lncluding the chart and Medical Detiarations

question 17.

To add a Children's Insurance Rider to your po!lcy, complete t~e Chlidren's lndfvlduai Insurance Rider App!lcatlon. 0 If an Other Insured Rider Is ~eing added to an existing poi icy, or ;f the poi ley lapsed wit~ an Other Insured Rider, the Other Insured Rider Information

Is comp!eted.

0 A signed In-Force Illustration Is Included with t'le Application refleCting the Change In Coverage and any premium changes.

0 Required personal Information for the Primary Insured has been completed.

0 Mai<e sure for a "No" answer to Part J. B. or Part~ C. questions 6, t'le Questionnaire Is completed and submitted with the Appllcatron. 0 Persona! History Information have been completed and detailed t'loroughly, where appllcable. 0 Make sure for any "Yes" answer to Part I· E. questions, ali applicab!e Questronna!res are completed and submitted with the Application. If you need

to obtain copies of the Questionnaires, piease contact Customer Service at Bn-88&.5050.

0 The ·s;g~ed Ar and "Date• fleids have been completed aiong wlth appropriate signatures in Part 1-l Authorfzatlon and Acknowledgement

0 Medir.ai Declarat!ons including personai physician information and condition details have been completed and detailed thoroughly, where applicable. 0 An Authorization for Release of Healih-ReiatE>d lnformat!on has been submitted lor each lnsured/Ott1er Insured with the application.

0 Co pres of Appendices A and 8 have been glven to the Insured. 0 A copy of this Application has been proY!ded to the Owner and/or Prlmary Insured.

Reminders: Do not use pencil or correctfon fluid.

Do not waive any of our requirements or any !nformatlon t'lat we request You do not have the authorlty to make or modify contracts. Do not promise or imply that we will provide Insurance.

Do ~ot accept arrt payment with this appllcati'on.

Mall or fax all completed materials to Customer Service Mail to: Customer Servlce, PO Box 5011, Minot. NO, 58702-5011 Overnight Mail: Customer Service, 2000 21st Ave NW, Minot. NO, 58703 Fax to: (877) 788-3151; Attn: Customer Service

----------·--------·--------------------------·--------·---- ----· For UltlmAssure policy owners, only the following questions are to be completed In order to apply for reinstatement of )'OW' policy: 0 Part I . A: 0Jestions 1 & 2. 0 Part I · B: Questions 1·8. 0 Part I· D: Ail questions. 0 Part 1- E: OuestJon 7. 0 Part 1- G: Ail questions.

0 Part I· J: Ail s!gnature requirements.

0 Part II- Medlcal Dec!aratlons: Ciuestlons \ 14a-e, 16a and the signature requirements. 0 Authorization for Release of Heaith-Reiated Information: All spaces and signatures.

--------------------... ----..... ______ .. ________ _ Notice for policy owners with the Chronic lllne$5 Actelerated Death Beneflt Rider: Certain changes to your policy or rlders may terminate t'le Chronic Illness Accelerated Death Benefit R!der iRlderj. For example, loans, partial wlthdrawa5, death benefit option changes. coverage increases and decreases. and benefit payments on any other accelerated death benefit rider under tile same policy

may terminate Rider oeneflts. Please refer to the Rider for detailed Information and contact your producer with questions about your pol~

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Fax Server 7/15/2016 2:02:29 PM PAGE

APPLICATION FOR POLICY CHANGE OR REINSTATEMENT WITH EVIDENCE OF INSURABILITY

8 RellaStar Life Insurance Company Security Life of Denver Insurance Company

D Voyalnsurance and Annuity Company D M"Kiwestem United Life lnswance Company Members of the Voya'" family of companies ("the Companyj

4/013 Fax Server

Customer SeiVice: PO Box 5011, Minot. ND. 58702-5011 ~~~~· lllilllill-0115111101111-,P,IGIIDil'JliiJGIIre;II'.>IWOII!i_IID_OII_GIIII'JIIIIIIIilill5l"ll'.lllll!l'.l!lllll!lllllOII!III-Iiii!I5W,t,l5llllllil&------

pARf I· A. REQUEST FOR CHANGE (Policy Number is required for all requests. Select appropriate request type and provide details.)

l. Policy Number-------------------------------------

2. 0 REINSTATEMENT REQUEST (No other policy changes are permitt~1 for reinstatement requests.)

a. lf t,ere Is a Children's Insurance Rider on your existing policy, complete the chart beiow for each chlid.

~--------.....r-·----; ----4---- ---)--·---- ________ _J____ t---3 i 1 l i : ---1 !

t~==~==~=~~~:~=:~ ... .i ....... :~=.t=~==t~~~~~--· -~~ ..... ., ...... L ..... -... ·-··--····· .. .i..····-=-~:=~~J .. ~===-.l.. .... =-----·-· 3. D POLICY CHANGE REQUEST (Complete appropriate details in question a. -g. below.)

a. Increase or Decrease Base Face Amount from $, _________ _ to$, ___________ _

b. Premium Class Change frorr. to __ _

c. Change in Premium Amount~------------------------------

t1. Subsequent Premium Payment Frequency: 0 Annually 0 Semi-Annua:ty 00uarteriy 0 Monthly (A;·aJIBb/e With electronic funds transfer.} e. Removal ota Rider _________________________________ _

f. Addition of a Rider------------------ Amount :L-------------If adding il Children's Insurance Rider. complete the Children's Individual Insurance Rider Application.

g. Other Insured R!der Information

~-- _----n ~ 11--=-r-.. -~~ ::El ~-1~-=-cL~·OM:~r~·ru»'·L 4. Other Requests/instructions _______ . ___________________________ _

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PART 1- B. PRIMARY INSURED INFORMATION

t First Name------------ Ml ____ Last Name------,--------------

2. Birth Date----- SSN -------- Birth State/Country--------- Gender: 0 M 0 F

3. Residence Address (PO Boxes are not permitled.) ---------------:---------------City ______________________ State ___ ZIP _______ _


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4. Daytlme Phone 1-' ---1-------~------- Evenlng Phone l

5. Best Time to Cali------------------Email---------------------

6. Are you a U.S. Citizen? -(if "No,· complete the Foreign Travel and Residence Questionnaire.). ..... OYes 0No

7. OccupatiOtl/Duties

8. Do you currently use or have you ever used tobacco or nice line products in any form? (e.g., cigarettes, cigars, pipes, c11ewiilg tobacco, nicotine gum. or niwtt:,e patchesj. . . . . . . . . . . . . . . . . . . . . ......................••.... 0 Yes 0 No

If "Yes," Indicate Type-------- Amount & Frequency---------- Month/Year last Used----

9. Driver's Uce~se Number------------------- 10. Driver's Ucense State .. ----------(If you do not !Tave a dri~-er's license, then provide government photo 10 number, iss-uer ,:md expiration date.}

11. Name on Driver's License (if different than above)----------------------------ilill!ID!il!llliDD!l5!1~-JooliiHlli'.l!ifi~'DilllrwwJii!l!l~llllllllOw.tfilillllli!l!lllllillltlllll-illilllv.illllll!lil!iliflGI;IillllfillllllV..Gr;wo>II'Jillilllv.iiHYH.ow.iDW..uct~~llllO".>Iillliltlililllm--P

PART I - C. OTHER INSURED INFORMATION (Complete this section only If applicable.)

1. First Nam~ Ml Last Name-------------------

2. Bl rth Date SSN_ _______ Birth State/Country-----------~ Gender: 0 t.t 0 F

3. Residence Address {PO Boxes are not permitted.) _____________ .. _____ _

City----------------------------------------- State _____ ZIP.

4. Daytime Phone !-i · Evening Phone (--JI---------------

5. Best Time to Cali---------------- Email ___________________ _

6. Are you a U.S. Citizen? (If "No." complete the Foreign Tr~vel and ResideiiCe Questionnaire.) . ...............••. : .... DYes D No

7. Occupation/Duties----------------------------------------

8. Do you currentiy use or have you ever used tobacco or nicotine products in any form? {e.g., cigarettes, cigars, pipes, chewing tobacco, nicotint> gum. or nicotine patches) • . . • • • . . . • . • • . . . • • • . • • . . . . • . . • • . . • • • • • • • • • • • . . • ; • • • • • . • 0 Yes. 0 No

if "Yes," indicate Type--------- Amount & Frequency---------- Month/Year Last Used----

9. Driver's License Nt;mber ------------------- 10. Driver's License State---------

(If you do not hal'e a driver's license, the11 provide government p,~oto 10 number, issuer and explraiion date.)

11. Name on Driver's license (if different than above)---------·-----.-----------------'-tlrPJ5G!i5!mm~unwJ¥..au!lflG55!RURiti!Rl5UtiU5W.Ri!RitUW'.O.W.i'.PJW~m!itP.P.itirJii!ftiU'!Smi51~5b~url5noo~nmitill~oouNUU!iliiRMP.altitl!itl!i5G&lJ!JU5005D!inW~

PART I· D. OWNERfTRUST/CORPORATION INFORMATION

I. Full Name of Owner/Trust/Corporation (30 character limit}----------------------------

2. Owner Phone( ___ ) ______________ Owner SSNITIN ----'----------·

3. Owner Address (PO Boxes are not pemrilted.) ____ ·----------------------------City _________________________ State ____ ZlP _________ _

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PART 1- E. PERSONAL HISTORY (Questions 1-7 must be completed for all Insureds age 16 and up.)

1. Are you, or have you entered Into a written agreement to become a member of the armed forces, Including Primary Insured Other Insured

the Reserves? (If "Yes," complete the Military Questionnaire.} ........ _ ......... _ .......... DYes 0 No DYes DNo 2. Do you Intend to travel or reside outside the United States or Canada in the r.ext two years? (If "Yes,· complete

the Foreign Travel and Residence Questionllaire.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 Yes D No DYes 0 No 3. Have you In the iast flve years made or do you antlcipote In the next two years making flight$ in an aircraft OTHER

t11an as a passenger on a scheduled airline? (If ·'Yes,· complere t.'le A~·iation Questionnaire.) ............ 0 Yes 0 No DYes QNo 4. Do you partldpote hi hang-gilding, soar!ng, sky-diving, ballooning, skin or scuba dlvfng, mountain climbing, .

competitive skiing, or rodeos? (If "Ye.s,' complete the appropriate qttestionnaire.} ............ , ..... 0 Yes 0 No 0 Yes 0 No 5. Do you race, test or stunt drive automobiles, motorcyc:es, motor boats. or jet powered vehicles, or do you use or race

snowmobiles, dirt bikes or dune buggies? (It "Yes,· complete Mocatlons and Professional Sports Questionnaire.} .. 0 Yes 0 No 0 Yes 0 No ica11s967s·········· ......................................................................... 'P;;ge·2-ols·~ .. iru:o;:;;pieie;;u;o~i-~ii'ii'ii9e5:· ............................................................ _ .... _ord;·li!i9s75"09/0ii20i4


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PART I · E. PERSONAL HISTORY (Contintled) PJ'Imary Insured i Other lnswed

: I

DYes ONo I I I

I DYes 0No

6. Elrcept for traffic vlolatlons. have you been convrcted In a cr!mlna! proceeding or been the subJect of a pending criminal proceeding? ..•....•.......••..•............•.••.........•••... D Yes D No

7. Have you ln the last f:ve years had any motor veh!c!e accidents, alcohol or drug related convictions. or ot~er moving violations wh!le operating a motor vehicle? .•.•.•.•.....••.•.•...•.......••... D Yes D No

fF~~~_;.j~~~~~:~~~:-~-~;~~~~~;~;~~~~=-~~~:~~~~:I:~--~~~:~:~~~::: .. ~-~~===~----~~!~~~=: .............. -~===~----··-~ l ' ' ' '

~t=====-r··· -====- -·--1 ~- I

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PART 1- F. FINANCIAL DETAILS

tis the poilcy ln accordance with your insurance objectives and your anticipated f:nanclal needs? ...............•... 0 Yes D No 2. Do you believe you Mve the flnancia: ablilty to continue making premium payments on this policy? . . . . . . . . . . . . . . . .. 0 Yes D No 3. Have you or your company ever cJec\ared bankruptcy? (If ·\'es, ·provide details, type and date discharged.). . . . . . . . . . . ... 0 Yes D No

,..---·--··---· ..... - ...... -.. ~--------.... -~-------... ---~---------....-------~

1

1 i ~ Annual Interest and l l . .. . ! 1

4. ! Annual Earned Income ; Other Income j Total Assets j TotallJabJiitles ! Total Net Worth r .. r ............ ~ ................ w ........ 'l ................................................................. .;: .............................................................. '<! ................................................................ oi ............................................................... -.: ............................................................ ..

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PART I - G. IN FORCE/REPLACEMENT INFORMATION (Questions 1-3 must be completed for each Insured/Other Insured/Proposed Insureds.)

Primary Insured Other Insured

1. Do yoJ curre11tiy have life insurance iniorce or .;~ppiied for? (If "Yes·~ provide details below. Complete state Yes No Yes No

requlrt:d replacement form to; Model Replacement Regulation States DNn:) 0 0 0 0

l-··-··-~!."!!.~~!·-=1-J'~-~~;:~d-~.!!~~-~T. ----~~~-~~~ .... [ ... '?.~!:!~~~!~ .. --··· I ' ' '

, .......................................................................... , .. -... -....................... -...........•... i·······-···--·······-··t-·····-···-··-··--t···---······-·············-··· r ................................................................................................... r ....................................................................................... l .......................................... "!" ................................ t ................................................... . !... ............ ., .............................................................................................. ..I. ........... .,. ..................... ., ..................................................... .L .............................................. L ................................ J ........................................................ ..

2. Are you considering using funds from your existing poi!cies or contracts to pay premiums due on this poiicy or.contract? {If "Ye.s~ complete state required replacement form and pro1·Jde details be/ow.)

3. Are you considering dlscontlnuing making premium payments, surrendering, forfeiting, assigning to the Insurer, or oti1eiWise terminating your existing policy or contract? {If "Yes~ complete state required replacement form anci ptovide details below.)

4. For any "Yes· answer to questions 2·3, provide details regarding the pollri~'S being replaced in lhe chart below.

Primary Insured Yes No

0 0

0 D

Other Insured Yes No

0 0

D D

E-~=~~~~-=:~=r=:.=~~~::=::.F~~~=:=~:: ·=-~-~-~---~-:~----:~~--~ I ~ i ' i I t······························································-·············· ........................................ ·-··········;················································-···················--·-·-···-···························r····························-~· ................................... ··-············--~-----··-· .. ··-·····-····

1----·-----------·-·--·-L_____ _ __ j_ ________ . _____ j icei1'159675 .. -···-.................... ,. .............................................................. i>a;;;; .. 3 .. at5·:t;;c:o-,:;;;;,;;;~ih;;-;;;·;u-;;&!ies:·· ....... -·-..................................... -........... o,'de;l1sss7s ... oo'i0ii2014


--~~~~· ~~ PART I • H. NOTES (Use this space to provide any additional details to questions answrm~d throughout !he application: Please under~and. that if you provide the Company with information on this page it will be considered part of your Application for Policy Change or Remstatemenl With Ev1dence of lnsuraol/fry. Jf you need additional space, please attach a separate piece of paper to the application.)

------------------, I"Secti~n l ·Q-~estion r Details

l I , ...................... ~~ , ........................................................................................................... . ..................... ... ! ............................... r ........................................................................................................................................... .

I~- -l-- -l- ~-------- ------- ---- --·----· -· -- ----~---. ' ! ~

! i ' . --·---·---~-

lt-·---r--·-----r···-·-----------·-----·-··---·-·----~-.. ·----·

..... - .. - .. -l ........ ._._ .... _L ___ .. _____ ...... - ... - ......... -.......... ___ ... ____ , ________ ........ _ ....... _. ____________ .... __ 11010----~~~-b'J--.ili---·· .... PART I • I. VOYIJ(S POLICY ON STRANGER-oWNED OR STRANGER-ORIGINATED LIFE INSURANCE (STOll)

The Company, along w!th other Voya Life Compan:es strongly opposes arrangements designed to obtain life Insurance for the benefit of a third party (a "stranger) that has no insurable Interest In the 1nsured. A person generally has an Insurable Interest In the life of an insured where the person has a continued Interest In the survival of the insured. We believe this posit; on supports the best Interests of our policy owners, as stranger-owned or stranger-originated !lfe msurance transactions ("STOLl") will lead to hlgi'ter costs for consumers and undermine the concept oi Insurable interest a core element of the life insurance business. The Company wli! seek to termrnate the Insurance coverage under any contract determined to be STOll or where material misrepresentation has occurred regarding t1e facts presented to the Company for underwriting the appl!cation. Attempts to defraud the Company may result in additional legal action.

The Company does not sell life Insurance !n the following circumstance:

• If, at the time of sale or conversion. t'le appilcant'owner has an intent. pian. arrangement or understanding w!th a t,ird party that wiil resu~ directly or tndlrecty ln the sale, assignment. settlement or other transfer to an Investor, such as a ilfe settlement company, or any other party with no Insurable Interest In t'le Hfe oft~e Insured who purchases the pol!cy for lnvest'lleflt purposes;

• If, at the time of sa!e or conversion, the appllcant'owner has an Intent. pian or arrangement to transfer an ownership interest or beneficial Interest In an entity that wlll own the policy to a life settlement company or any ot'ler party wrt'l no insurable Interest In the lrfe oft~e Insured;

• If, in connection with the .sale, the appHcant'owner and/or tfJe Insured Is offered any compensatloil, reward or benefit. or other Inducement to purchase or assist In the purchase t'le polfcy, Including, but not llm!ted to, cash payments, property such as a life Insurance deat~ tle~eflt for "free• or at "no cost" or any other benefit of any kind;

• Where a sales conceot. design, marketing plan, marketing material or other program that nas not been disclosed to the Company ls used In connection wrth the saie Qnciudlng, but not limited to, any nontraditional premium flnance program, such as "non-recourse" lending arrangement where the lender's sole collateral for t'le premium loan Is limited to the values <11 the poilcy ltse!f);

• Where t'le producer and/or applicant knows, or has reason to know, that the source of funds for premium paymerrts under a policy has not been disclosed to the Company Qnciud!ng, but not limited to. any arrangement to pay for premiums under the policy through a loan t~rough a premium flnanclng arrangement or other third party funding): or

• In any other circumstance determined by the Company, In Its sole discretion, to tie inconsistent with our poi!c!es on STOll. Insurable interest or mlsrepresentatio n.

The activities described above are considered "prohibited conduct".

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PART I • J. AUTHORIZATION AND ACKNOWLEDGEMENT

Incontestability. If the poilcy change, conversion, or addition requires new evidence of insurabillty, the policy date for the purpose of t'le lncontestabiilty and suicide provlslons shall be the date of this appilcatlon. Where no new ev1dence Is required, the po\lcy date of the ortgl~a\ poilcy wl\1 be the pol!cy date for the purposes of t~e lncontestablilty and suicide provisions. If the poilcy Is reinstated, t'le poi!cy date for the purpose of lncontestabl!lty shall be the date ofth!s appilcatlon.

Verification. By signing this form. I acknowledge that I have read t'tls appllcat'on and I agree wtt~ the statements In this application and declare that ai! questions have been trut1fuiiy answered to the best of my knowledge and belle{ The Company may seek to rescind the life insurance coverage if It determines t'lat any question was not answered truthfully. This appl!cation consists of all pages of the Application, appendices, and supplemental questionnaires. ~ wlil be the basts for any policy change or reinstatement approved and no Information w!H be considered to have been given 'ey me to the Company or authorized by me unless it is stated herein. The producer does not have the aut~ortty-unless permitted by law-to waive the answer to any question in t'te app!lcat!on. to accept risk or pass on lnsurabillty, to. make or alter any contract. or to waive any of t1e Company's rights or

requirements. No cha1ge In the amount. ciassiflcat!on, age at Issue, Insurance olan, or benefits shown on this application will be effective unle5s both the Company and I agree In writing. I understand that by slgn!ng this appllcatlon,l am applying for life lnsurance coverage lssued by the Company.

No new insurance or policy change requested above Onciudlng a relnstatemen~shaii be lnforce until: (a) any required payment for the reQuest ls paid In full, and (b) the request Is approved by the Companywhlie the facts and health condition ofthose to be insured remain the same as represented in this applrcatton. Even lf the Company accepts paymern made with this app\\catlon, it may decllne the request. The Company may require addltlonal evidence of insurability before approving this request

By my signature on the next page, I affirmatively warrant and represent that 1 have not engaged In any prohibited conduct described in Section Iabove in connedlon with this application for Insurance.

Statements of Understanding. I understand that this authorization w!l! be valid for 24 months from the date of signature on this appncation. I have the right to receive a copy of t'lls authorization, and a photocopy wlli be as valid as the original. I glve my permission to the Company and other

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PART I · J. AUTHORIZATION AND ACKNOWLEDGEMENT (Continued)

insurance companies af!iliated with the company to ~o!lect medical record informatlon and consumer or Investigative consumer reports about me and rTr>f minor chlidren for the purposes descrlbed In this appl!cat!on. I authorlze any organization or medica!ly related fac!!lty to release to the Company or its authorized representatives ai\ requeste\J information about me and any minor children who are to be insured. I give my permission to the Company to send any :nformatlon obtained to MIB, Inc., reinsurers. t'le producer who solicited my appl!cat!on and h1s or her pnnc1pals, employees .or contractors who process transactions regarding Insurance coverage for which I have applied.

I acknowledge receipt of the foliowlng disclosures and not1ces: Notice Regard:ng Consumer Reports. Notice Regarding MIB, Inc., and Notice Regarding Coi!ectlon of information and Information Practices. I certify, under penalty of perjury, that my Social Security Number/tax identfflcatlon number is shown and is correct and that I am not subject to back-up withholding.

If an Investigative consumer report Is prepared, I request to be interviewed. 0 Yes (If ."No," leave the checkbox blank.)

Interview lnformaUon: Daytime phone flUmber: (__)1 ____ _

ContaLt me between the hours of __ a.rn./p.m. and __ . _ a.rnlj>.m .

By signing below I acknowledge and agree that any policy Issued in relation tD this application (the "Polley, shall be subject to the following Govtrnlng Law and Jurtsclk:tkm provisions:

Governing law. The Polley shall be governed ln all respects, Including valldlty, lnicrprctaUon and effect, without regard to principles of conOlcts of law, by the iaws of t'le state In which It Is deJrvered, which shall. oe deemed to be the state In which this Application is executed as shown below.

Jurtsdlctlon. Any dispute, cialm, demand, controversy, action or proceeding, however characterized, relating to, ar!s!ng under, In connection wtth, or incident to t'le Polley or sale of the Polley rAction or Proceedlng1 shali be flied and heard rn the state or federal courts located In the state In which the Polley ts dellvered. The state and federal courts located tn t1e state !n whtch the Polley ts dellvered shail have jurisdiction over the parties to the !\don or Proceeding.

All completed materials must be sent to Customer Service at: 2000 21st Ave. NW, Minot, ND 58703

This application wlli be attached to and become part of the policy.

........................................................................................................................................................................................ -.......................................... -..................................................................................................... -............................ ...

I understand and agree that any person who knowingly provides false, Incomplete or misleading Information to an Insurance company for the purpose af deii'audlng or attempting to defraud tile COJl1)8ny commltl a fraudulent lnaurance act, whk:h Is a crime, and may be subject to almlnal and civil JJIIIIalties and denial of Insurance .,_neflts. Penalties may Include imprisonment and/or fines.

Owner Signed at {city/state) __________________________ Date---------

~Owner S:gnature (it' other !!Jan the Insured)-----------------------------

Owner/Trustee Name {Please print.!----------------------------------

~ Insured Signature (if age 15 or older) ____________________ Date---------

~ Otr.er 11\Sured Signature------------------------ Date ________ _

~ Pa;entorGuardian Signature ______________________ Date---------

(if the Owner. Primaty Insured or lhe Other Insured is a minor)

Assignee Name (Please print.!------------------------------------

~Assignee Signature if( applicable) _____________________ Date ________ _

By signing below I acknowledge that I have not engaged In prohibited conduct as descrlbeclln Section I, "Voya's Polley on Stranger-Owned or

Stranger-Originated Ufe Insurance (STOll),- nor am I aware of 1udl conduct by the applicant.

~ W;iting Agent/Registered Rep. SignaiL~re -------------------Date---------

Writing Agent State Lie. Number ---------·--·------ Writing AgentiRegl;tered Rep. Nl!mber

AgentiReglstered Reo. Name------------------------

Agent State Lie. Number--------------- Agent/Registered Rep. Number-------------

Endorsed oy Date Effective Date-------icC11"i59675'"'""""""""""········· ...................................................... P'ijQii"5'or5":·1ncii;:;;Pi;!e'~()~('~iili'ag;;S":···· ................................................... -... o;c;;#159675"'0910ii20i4

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APPLICATION FOR POLICY CHANGE OR REINSTATEMENT WITH EVIDENCE OF INSURABILITY PART II - MEDICAL DECLARATIONS D RellaStar Life Insurance Company 0 Security Life of Denver Insurance Company D Voya Insurance and Annuity Company 0 Mldwestem United Life Insurance Company Members of the Voya"' family of companies ("the Company"} Customer Service: PO Box 5011, Minot NO, 58702-5011

'Medk;l~ratlo-;;;;;,-;;·i,; co.;,'Pietect ;;;;;ii&;.ureds and su;;,ittect with"U;Appllcatlon-for ~jkv Change or Rel-;;;;t~-;;t;th ~ ~Insurability. -----·-··---~-.. ---------···--· ·----·-------

Primary Insured Name--------------- Po!icy Number ________________ _ "r'""""''""'·...,"""""'".,"""""'"''""' .. '"""" .. ·"""'"" .... ''"' .. ·""''""'"' .. , ...... ., ... .,,.,,.,,., .. ,,..,,..,,,._.,.,..,.,.,.,..,,,.,..,,,.,,,., ... .,,..,..,.,._,..,.,.,.,.,,l.,.,,,..,.,.,.,,,.,.,..,.,.,.,.,,,.,.,,,.,.,,..,..,.,.,,,,..., ... .,., .. , .. ,,.., ... .,., .. .,,,.-,,. .. ,..,_.,.,,,.,..,.,.,._..., .... .,.,.,...,.,.,...,..,.,.,.,,,...,..,.,.,.,.,,..,_,,..,....,,

PrlmaJY Insured

1. Height _______ Welghr. _______ . Loss or gain in pounds during tl1e last year---------

2. Personal Physician Na:ne ----·---------·------·-----··----------- PhysiCiiin Phone L-l1--------3. Physician Address--------------- Qty ---------State ___ ZIP ___ _

4. Date last seen by Physician-----,---- 5. Reason for Consultation-------------------

6. Results of Consultation _________________ _:__ _______________ _

·-------------~-----Other Insured

7. Height------- Weight-------- Loss or gain in pounds during tile last year ________ _

8. Personal Physician Name Physician Phone L-1--------

9. Physician Address--------------- Qty ·---State ___ ZIP ___ _

10. Date last seen by physician·----·---·----- 11. Rea~on for Consultation --------

12. Resu!ts of Consuitation ----------------------------------.... ~ ................................................... -........................................................ _ ................ ~ ........................................................... _ ................................ -.................................................................................................................................. .

13. In the past 10 years, have you ever been treated for or been diagnosed ily a memoer of t~e medical profession Primary or heaith practitioner rnealth care provlderj as having: Insured a. Dizziness. se!zures, convulsions, headache, para\ysls. stroke, TIA. or a mental or nervous disorder, Including

anxiety or depression? •••........•................••.......•..•....•••. DYes D No b. Shortness of breat'l, persistent hoarseness or cough, asthma. emphysema, tuberculosis. or chrontc reSpiratory disorder? 0 Yes D No c. Chest pain, palpitations, high biood pressure, heart murmur, heart attack. or other disorder of the heart or

blood vessels? . . . . . . • . . . • . • . . . . . • • . . . • • . . . • . . • • • . . . • . . . . . . . • • . . . . . . D Yes D No d. Jaundice, Intestinal bleeding, ulcer, hepatitis, colitis, or other disorder of the stomach, Intestine, !rver, pancreas,

or gall bladder? ..•....•.....•......•.......•...............••....... DYes 0 No e. Sugar, albumin, or blood In urine, sex~aliy transmitted disease, nephritis, stone, or other disorder of the

kidneys, bladder, breasts, prostate, or reproduCtive organs? ...•...••...••..•........... DYes D No f. Diabetes, thyroid, or other endocrt,,e disorder? ..•.........................•...... DYes D No g. O!sor.der of the skin o; !ymph g!ands, arthritis, or any disorder of t~e muscles, Joints, nerves or bones? ..... DYes D No n.Anem1a or any other disorder of tne blood? ..........•..........•.....•.......... DYes D No l. A positive HIV test AIDS (Acquired lmmunodefldency Syndrome), or any other disease or disorder of the

Immune system? .............•....•......•..............•........... DYes D No 14. Have you:

a. Had any operatlon(s) in the pastS years? .....•................•................ DYes D No b. In the past 5 year.; been ad'lised to have operation(s), treatments, or diagnostic lests that have not yet been performeo

(excluding Hrltesting)' ............•...........•.................•.......•.•.... DYes D No c. Had an e!edrocard!ogram, x-ray, or other diagnostic test in the past 5 years (excluding HIVt~,g)? ....... DYes D No d. In t~e past 5 years been conflned for observation, care, or treatment In a hospital or other health care facility? .• O Yes O No e. In the past 5 years. been treated, exam1ned or advised by a member of the medical profession not aiready

Identified. for any reason Including routine physical examination? .........•............... D Yes D No

I Other

Insured

I DYes 0No ) DYes DNo

DYes DNo

DYes DNa

DYes DNo DYes ONo DYes DNo DYes DNo

~ DYes DNo

) DYes DNo

1 DYes ONo DYes ONo DYes ONo

DYes DNo ica1i5994a··-----.. ·---................................................................................................ ~~ .. ii·:·p:;;;;;-~tr·----·---------· .. ·--------------·-····-----··---·--o;-de.:-;159675--ooitiii20i4


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MEDICAL DECLARATIONS (Continued) Primary Other

15. Have you: Insured Insured

a. Sought or been advised by a health care provider to seek acMce or treatment for the use of alcohol or drugs? {If "Yes: complete Alcohol U5age or Drug Use Questionnaire.) . ........................... 0 Yes 0 No

b. Ever been diagnosed by a healtiJ care provider as having a tumor, pre-cancerous ieslon or cancer? .. , .••. 0 Yes 0 No 16. Are you:

a. Presen~y taking any medlcatlon(s). including non-prescrlptlontover the counter medication or supplements? (If "Yes.· provide nf!me. dosage, frequency and reason in question !8.) , ...•........••....... 0 Yes 0 No

b. Currently using or have you ever used Ecstasy, marijuana, cocaine. amphetamines, barbiturates. hailuclnogenlc · agents, n~rcolics, or any other drug except as legally pre5cribed by a 11ealth care provider? (if "}'es, • complete Drug Use Questionnaire.) ............................................... 0 Yes 0 No

Complete question 17 only for Reinstatement of a policy containing e Children's Insurance Rider: 17. Has any chlld covered under this Rider:

DYes 0No DYes 0No

DYes 0No

DYes 0No

a. In the past 10 years been treated for or diagnosed by a health care provider with heart dlsease,llver disease. mental, nervous or developments! disorder. a positive HIV test. diabetes. cancer. or any blood disorder? .............•.•....••.•.•. 0 Yes 0 No

b. In the past 5 years been advised by a hea!t~ care provider to have operation(s), treatments or diagnostic tests that have not yet been performed (exduding HN testing)? 0 Yes 0 No

18. For any "Yes· answer to questions 13-17 pi ease record Inform at! on in chart below. r···-~·--··-T·-··--··--·-····-To;;;-;ii;;;;u;;.;;·r··--·-·-r---·····--·-

auesucn ~ Person + CondltlonJDlagnosls ! Conditionffreatment Physician Name _j Physician Address --····-·-··r·-·-·-·· .. ·-·-·-···-·--, ---·--·----------~-----.. - _ .. -.---·----· r·----------~

r=~t.:= .. :::~:.:~:=::.r.:=:=.:::==:=::t.==::~=~==~:=t=-=:===~=~~----···-r:.-~----····-··-:·-·-··--t···--···-·r·-··--·--1

=t ... ' ==t==1 - -- -- J ~ I . ,

~:::==-1=.::.=~1=.:=~-:=.:=:.L=::=r:.:=.:=~~=~~-===:.:_j r~;~;~;·:~;;~~~;;;;:t;::-;·:;:~~=r;=;~~ ~~:==~:J=~~=====~t=~===t=-=t==±~=±--=j ............... ~ ...... -.................................................................................................................................................................................................................................................. -....................................................... _ ................................ . I have read the statements above and affirm that they are complete and true to the best of my knowledge and belief.

Signed at (city, srat.e) ___________________________________ _

~Primary Insured Signatul'e (if age 15 or oiderl----...,-------------Date---------

~ O!her Insured Signature _______________________ Date ________ _

~ Parent or Guardian Signature {jfthe Primary Insured is a minor)------------Date---------"lccii15994o'""·· .. -................................................................................................................. p;; .. it:: .. p;;;;2·-or;-· ....................................... ,.,. ...................... _ ................ o;:Ci;;;59675""09i0t"";'-20i4

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AUTHORIZATION FOR RELEASE OF HEALTH-RELATED INFORMATION (HJPAA compliant) lll!l!l!lllliW!IIIIIG!l!l!lll!l!ll!ll!lll!lli!IIIIP.III~!Illli!lllllt!l!lllllllli~IIIHJIIII!liJ!IIIIIillMIII!Ili!RIIIIIII!I!I!I!IIIIII!IU!IIIIIII!l!l!III!IIIRI!IIIIIIIIIII!IIIIIiiP.P.IIlllllllllllll

PROPOSED INSURED INFORMATION

Proposed lnsurediPatient Name (Please print.!-------------------------------

Blrt~ Date __ _ --------- SSNi\TIN

Proposed lnsLired/P~tientAodress ----------------------------------

City------------------------ State ________ ZIP ___ _ -.alllll!l!lii!III!II:!Hmll!lll!i!lli!IGIIS!l!IQl!lll!l!ll--llllll---lll!ll!!llllllll'!lllli!W..tl!ll'olllili!ISil!lll!l!l!l!UIIIIlllllll!ll_o!ISI_

AUTHORIZATION INFORMATION

This will authorize:---------------------------- (Physician. Clintcor Hospital Name)

to release medica! information to ~ile Life Insurance Agent!AgencyiCnrrier(s)).

Authorized Life Insurance Carrler(s): Re!laStar Life Insurance Company, ReiiaStar llfe Insurance Company of New York and Security Life of Denver Insurance Company

The information to be released or disclosed for the purpose of a ilfe insurance application Includes any and all healt~-related Information and medical records, 1.1cluding chemical dependency/drug or alcohol abuse treatment records. pathoiogy reports, radiology reports and films, and lab reports, within the

-~~~:-~-~-~~-t~~~-~-?!~~~~~~-P!.~~~-~~--~-~~!!!~~: ..................................................................................... -................................ . The purpose of this authorization !s to assist In the evaluaCon and placement of my app!icat!on for life insurance. I ailtl1ortze aey organlzat!on,lnsurance company or medically related facility to release to the life Insurance Carrier named above any and all records and Information regarding me, the proposed Insured, and any minor children who are to be Insured according to t'le terms of this authorization. This Includes records and lnformat!on regarding diagnosis, testing, treatment. and prognosis of my physical or menta: cond1tlon. Some examples of the type of informatron to be released incl;~de, but are not limited to, facts about my: ~) mental and physical hea~h; (2) alcohol/drug abuse treatment; (3) pharmacy prescriptions or prescription records; (4) HIV testing and treatment (except where prohibited by law): (5) sexually transmitted diseases; (6) Slck!e Ceil testing and treatment; (7) laboratory test resu~s: (8) other Insurance coverage; (9) hazardous activities: (10) character, (11) general reputation; V2) mode of living; ~3) finances: V4) occupation; and V5l other personal traits.

I author1ze any health plan, physician, health care professional, hosplta!. clln!c, :aboratory, pharmacy, pharmacy benefit manager, medical facility, or health care provider that has provided payment, treatment or services to me or on my behalf (•my providers") within the past 10 years (unless otherwise provided by state law) to disclose my ent!re medical record and any other protected health Information concerning me to the life Insurance Agent/Agency/Carrier(s) named above and its agents, employees, representatives and the insurance carrier(s) listed on th:s authorlzat!on. This includes Information on t~e diagnosis or treatment of Human lmmunodetlc!ency Virus (HIV) lnfectfon and sexua!iy transmitted diseases. This also Includes Information on the diagnosis and treatment of mental ll!ness and the use of alcohol, drugs, and tobacco, but excludes psychotherapy notes. I aut'lor!ze MIB, Inc. to glve to the Life Insurance Carrier(s) named above, or Its reinsurers. any records or knowledge of me or my health.

~ my signature beiM, I acknowledge that any agreements 1 have made to restrict rrry protected hea~h information do not apply to t11is authorization. !Instruct any physician, hea~h care professional, hosp!tai, clinic, medicalfac111ty, or other healti-t care provider to release and disclose my entire medlcai record v.4thout restr1ct!on.

Protected health information is to be disclosed under t1rs authorization so that the Life Insurance Agent/Agency/Carrler(s} may provfde the Information to t'le listed car(;er(s) so that they may: ~ underwnte my application for coverage and make elig1bil!ty, risk rating, poiicy issuance and enroliment determinations; 2) obtaln reinsurance; 3) admln!ster ciaims and determlne or fulfill responsibility for coverage and provision of benefits; 4} administer coverage: and 5) conduct other iegaily permissible activities that relate to any coverage 1 have or have applied for with the Ufe Insurance Agent/Agency/Carrie1s).

l give my permission to t"le Life Insurance Carrier named above to send any Information obtained to MIB, Inc. or Its reinsurers.

This authorization shall remain 1n force for 24 months foliowlng the date of rrr-t signature oelow, and a copy of this authorization is as valid as the original. I understand t~at I have t~e right to revoke this authorlzatlon In writing, at any t!me, by sending a written request for revocation to the Life Insurance Agent/Agency/Carrier(s) named al>ave at the following address: Attention: Privacy Official, 2000 21st Ave. NW, Minot, ND 58702

I understand that a revocation !s not effe~tive to t11e extent that any of my providers has reiied on this auL~orizalion or to the extent that the Insurance carrler(s) has a legal right to contest a claim under an Insurance po!!cy or to contest the pol!cy itself. I understand that arry !nformatlon t~at is disclosed pursuant to this aut1orlzatlon may be re-d!sc\osed and no longer covered by federal rules governing privacy and conlldentiallty of health Information. Any re-d!sciosure continues to be covered by any appl!cable state privacy !aws, state insurance privacy rules and by the security standards of the listed carr!e1s}.

l understand that my providers may not refuse to provide treatment or payment for heait'l care services if I refuse to sign this authorization. I further understand that If! refuse to sign this authorization to release my complete medical record, the insurance carrler(s) may not be a~!e to process my Applfcat!on or, If coverage has been Issued, may not be able to make any benefit payments. 1 acknowledge t1at 1 have received a copy ofthls authorization • ............... '"'"''" ........................................................................... "'•'' .. ·"""""'"'"'"""' .... ~ ..... ., .................. , ............................................................ ~ ....................................................................................... , ........... ., ........................................................... "'.'''""

~ Proposed lflsured/Patient or Personal Representatrve Signature-------------------- Date--------

Description of Persona! Representative's Aut/lority or Relationship to Patient (Please prtnt.J-----------------------------

................................................................ _ .. !~.~.Qf..~~ .. ~!!:!Q~~TIQ.~.'.!!~.~-~!.~~~-!Q..TI!~.!!!9.~.Q~m.!~~~!gl: .......................... -............ -.. ·---· 128274-08104/2015 Appendix A Order #159675 09101/2014

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IMPORTANT NOTICES

0 RellaStar Life Insurance Company

B Security Ufe of Denver Insurance Company Voya Insurance and Annuity Company

0 Midwestern United Ufe Insurance Company Members of ihe VO}'B~ family of companies ("the Company")

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§ FiNAHCIAt"'

·~~~~~~~~~~~~MM~~~~~~MMMMMM~~~~~Mm~~

CONSUMER PRIVACY NOTICE

Notice Regarding Consumer Reports

Insurance companies commonly ask an outside source to verify and add to the Information g:Ven In an appi!catlon. The agency that makes the report will

be one that Is discreet and impartial. If you w!sh, t~e Company ("we") wlll send you the name, address, and phone number of any agency we ask to prepare

a consumer report about you. You can request thatt'le agency inteNiewyou. This may be Indicated on the authorization form.

Consumer reports are used to help us decide if you are e:lgib!e for t'le Insurance for which you have applied The report deals wlt'l your mode of living.

charactei, general reputation, and such' personal items as your health, job. and finances. It may Include Information on the following: your marital status,

past and present employment record, Job duties, driving record, avocatrons. health history, use of alcohol and drugs, and hazardous sports activities. The

agency may get information In these ways: from public records or by contacting you, members of your family, business associates and employers. flnanclai

sources, and friends or others you know. This lnfor,matlon will not be used to determine your sexual orientation. If t~e report affects your appilcatlon as

requested, we wlil notify you and provide you with the name ,and address of the report!ng 1lrm.

We use the report only to be sure t'tat each a;~pllcation Is evaluated on a fair basis. We wlll not reveal any of the Information we obtain to your frlends or

associates. We may reveal the Information we obtain to ot'ler companies or entitles aftlilated with t'te Company unless you request otherwise.

The Information may be kept by the consumer reporting agency. It may aiso later be g1Ven to others who have a legrtrmate need for these reports. It w!li be

given on!y to the extent permitted by these laws: the Federal Fair Credit Report!ng Act as amended by the Consumer Credlt Reporting Reform Act of1996;

your state's Fair Credit Reporting Act. rf any; and your state's Insurance Information and Privacy Protect! on Act. if any. The agency will give you a copy of the

report if you ask for one and p;ovrde the proper ldentJ'flcat!on.

Natice hgarding MIB,Inc.

(Medical Information Bureau)

We wm treat t'le information regarding your lnsurablllty as confldentla!. We and our reinsurers may, however, make a brief report to the Medical Information

Bureau (MIB), Inc. MIB Is a nonprofit membership organization of life Insurance companies. It operates an informational exchange bureau on behalf of its

members. If you apply to another MIB member company for l!fe, health, or disablllty Insurance, or a dalm for benefits Is submitted to such a company, MIB,

upon reQuest. will supply that company wlt'l any lnformatron it may have In Its file.

Upon receipt of a reQuest from you, MIB wli! arrange disclosure of any information It may have In your flie. If you question the accuracy of t~e information In

t'lat fl!e, you may contact MIB and seek a correction In accordance with t'le procedures set forth In the federal Fair Credit Reporting AcL Tile malilng address

ofMIB's infolmaticn office is 50 Braint'ee Hi!!, Suite 400, Braintree, Massschusetts 02184-8734. The phone nurnber is (866) 692-6901 and the fax number ls

(866) 346-3642. The MIB web s!te address !s www.mib.com.

THIS PAGE MUST BE GIVEN TO THE INSURED. 15994; ............................................................................................................... - ........ A~'di;·s·:·p;;:ge·i·'Oi2 .......................... _ .................................................... o;(ie;: .. ;;59675-09i0il20i4


~-~~~~-~-CONSUMER PRIVACY NOTICE (Continued)

We and our reinsurers may also release information ln our files to other insurance companies to whom you may apply for ilfe, hea!tn, or disability Insurance

or to whom a claim far benefits may be submitted.

Federal Regulations -42CfR Part 2

Your medical records, lnciudlng any alcohol or drug abuse information. may be protected by Federal Regulations· 42CFR Part 2. If information Is protected

by federal or state law, you may revoke this authorization at any time oy malllrtg a written request to the Company. A written request. however, will not apply

to any !nformat!on collected before the date that we receive your request

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IMPORTANT INFORMATION

To help the governmenttlgntthe funding for terrorism and money-laundering actiVIties, federal law requires ali tlnanclal Institutions to obtain, verify, and record

information t'lat !dentltles each person who opens an account When you apply for llfe Insurance, we will ask for your name, address, birth date, and other

information that w!il a!Jow us to Identify you. We may also ask to see your drive~s license or other identifying documents.

If you wish to have a more detailed expianatron of our information practrces. piease write to:

Customer Service

Life Polley Owner Services, PO Box 5011

Minot, ND. 58702-5011

ll!lll!l!l!l!l!lii!IIIIP.II'_,~I!l!l-i!lll!l!lllllrol!!l!l!llm!i!llililllllill!ll~illllll!i!i!Wdlll!111!l!l!t!llll2112-ll'•i-i!illl!ll!l!IM!l!l!al5!!!1!l!ilillllll!i!l!Uill!lii!SIII'olll--lllllll!l!lll!llilll! ACKNO~EDGEMENTS

Notice Regarding Collection of Information and Information Practices

In order to evaluate your app\\cation for ilfe Insurance, we must collect Information about you and any minor chlldren who are to be insured. The type of

information that we may coliect Includes, but is not ilmited to. the following: any medlcai information regarding the diagnosis, treatment and prognosis of

any physical or mental condltlon: prescription drug records and related Information; any non-medlcallnformatlon about you or your minor ch!idren who are

to be insured. Some of that :nformatlon wili come from you. Some will come from other sources.

The sources that we may contact for information include, but are not Hmited to, the following: physlcJans, medical practrtfoners, hospitals. cllnlcs, medlcaliy

related facll!t!es,insurance or re!nsur!ng companies, Medical 11format!on Bureau rMIB"),Inc., any consumer reporting agenc!es, and anyot'ler organizations.

That Information and any information co!lected oy us later may, !n certain circumstances, be dlsc!osed to third parties without your specitlc permission.

You have a right to access and correct t'le Information collected about you. This right does not extend to Information t~at relates to a dalm or cfvfi or criminal

proceeding. You have the right to receive, In writing, the reasons for any adverse underwriting decrsrons.

Insured/Owner: By signing S«tlon 1 on the Application for Polley Change or Reinstatement with Evidence of lnsursb/1/ty, the Insured

acknowledges receipt of these notices.

Producer: By signing Section Jon the Appliution for PoHcy Change or Reinstatement with Evidence of Insurability, the producers acknowfedge

that a copy of these nottces have been provided.

THIS PAGE MUST BE GIVEN TO THE INSURED. 159941"' ..................................................................................................... :;;,~;:;;;b;8::·p;;g·;·2·or·2-..................................................................... o;;;;:;;,s9675""09i0ii20i4

EXHIBIT 3

Isabella Stempler

From: Isabella Stempler Sent: To:

Friday, February 05, 2016 2:16 PM 'Philip D. Forlenza'

Cc: Subject:

Victoria Manning Hoffman v. Falci

Attachments: Notice from Life Insurance.pdf

Phil,

As we discussed today, the Bureau of Securities (''Bureau'') received a "Late Payment Reminder Notice" from Voya, ReliaStm· Life Insurance Company seeking payment of the January and February 2016 premiums for policy # AD • (copy attached). These premimns are past due. Under paragraph 73(b) of the September 18,2015 Consent Order and Final Judgment as to all Defendants and Nominal Defendants ("Consent Order"), Mr. Falci agreed to and has been ordered by Judge Cleary to make aE required payments on this life insurance policy until the restitution!disgorgement and civil monetary penalties are paid in full. Please note that failure to timely make all the required payments on the lite insurance policy is considered a "Triggering Event'? under paragraph 80. Under paragraphs 79(a) and (b) of the Consent Order, the Bureau and/or Bureau Chief may declare the full amount of the judgment due and take any action permitted by law. Please immediately provide us with documentation demonstrating that Mr. Falci's payments to the insmer are current.

Also, as briefly discussed today, Saber Opportunity l.nc.ome Fund investor D-R .. advised, among other things, that he did. not receive a copy of the Consent Order from Mr. Falci but rather obtained a copy from the Internet. Accordingly, pursuant to paragraph 84(a) of the Consent Order, the Bureau hereby requests a copy of the acknowledgments and acco!npanying communications to the cun-ent investors of the defendants, Saber Opportunity Income Fund, LP, Vidon Capital Pa1·tners. LLC and Pantheon Tax Receivables, L.P.

This communication shall not be construed as a waiver of any rights that the Bureau and Bmeau Chief may have under the Consent Order and by law.

Thank you in advance for ym.u· cooperation.

Isabella T Stempler Deputy Attorney General NJ Office of the Attorney General Department of Law and Public Safety Division of Law Securities Fraud Section 124 Halsey Street, 5th Floor Newark, New Jersey 07 1 0 I

Tel: 973-648-3070 Fax: 973..()48-3956

Email: lsabella.Stempler@do~~$Utte.ni .us

1

-~- _.·:~.

~,·,.. •.;..r.J·"t<>.·.

ReliaStar Life Insurance Company Customer Service PO Box 5044 Minot, ND 58702-5044

LATE.PAYMENT REMINDER NOTICE Assignee Copy

January 29, 2016 Monthly Due Date

01!28i2016

02I28i2016

Premium Due

002922 Ifilh FEB -LI J\. IJ: 11 STATE OF NJ BUREAU OF SECURITIES 153 Halsey St Ste 6 Newark NJ 07102-2807

RE: Policy # AD••IFI on Vincent P Falci

Total l>ue

$2,172.46

$2,172.46

$4,344.92

Your policy needs immediate atlention! Your lnsurance coverage is in danger of lapsing as your required pretnium is past due. Your policy is now in a Grace Period ending March 04, 2016. If you have already mailed your payment, thank you.

If you have not already mailed your payment please know that to keep your policy in good standing ReliaStar Life Insurance Company must receive payment l>f$2,172.46 by the end of the Grace Period. Please Note: As of February 28, 2016 your next premium of $2,172.46 will also become due. To avoid receiving a subsequent Late Payment Reminder Notice please remit the Total Due of$4,344.92 by February 28, 2016.


Important Notice: If pa,>'lllent of your required premium is not received by the end of the Grace Period, your coverage may lapse, depending on the terms of your policy. If coverage lapses, the policy and all payments thereon will become forfeited and void, except as to the right, if any, to a surrender value. paid-up policy. or extended term insurance, as provided in your policy. Please refer to your policy for additional information regarding coverage. lapse, grace period, and policy provisions.


Thank You,



ReliaStar Life Insurance Company

STATE OF NJ BUREAU OF SECURITIES 153 Halsey St Ste 6 Newark, NJ 07 J 02-2807

RE: Policy# ADI··· .. on Vincent P Falci

Late Payment Reminder Notice Total Due $4,344.92 Due Date ; Oli28/2016


f J If your address has changed, please check this box and complete the form on the back of this coupon.

12~7474747~7111438384441404238442016012800000004344921

20007 9! 1120 I 5

EXHIBIT 4

Isabella Stempler

From: Sent: To: Cc: Subject: Attachments:

isabella:

Philip D. Forlenza <[email protected]> Monday, February 08, 2016 1:37 PM Isabella Stempler Victoria Manning RE: Hoffman v. Falci Insurance Payment Receipt-2221717 -vl.PDF

(

Attached please find a confirmation from the insurer regarding payment of premium for January and February. Proof of dissemination of Consent Order is being assembled.

Giordano Halleran Ciesla

Philip D. Forlenza, Esq. website 1 biography 1 vcard Shareholder www.ghclaw.com www.njcorporatelaw.com Direct Dial: (732) 219-5483 • F: (732) 224-6599 125 Half Mite Roacl • Suite 300 • Red Sank. NJ 07701-6777

From: Isabella Stem pier [mailto:[email protected]~nj.us] Sent: Friday, February 05, 2016 2:16 PM To: Philip D. Forlenza <[email protected]> Cc: Victoria Manning <[email protected]> . Subject: Hoffman v. Falci ·

Phil,

As we discussed today. the Bureau ofSecurities ("Bureau") received a ·'Late Payment Reminder Notice'' from Voya, ReliaStar Life lnsurance Company seeking payme11t of the January and February 2016 premiums for policy# AD (copy attached). These premiums are past due. Ui1der paragraph 73(b) of the September 18~ 2015 Consent Order and Final Judgment as to all Defendants and Nominal Defendants ("Consent Order''), Mr. Falci agreed to and has been ordered by Judge Cleary to make all required payments on this life insurance policy until the restitutionldisgorgement and civil monetary penalties are paid in full. Please note that failure to timelx make all the required payments on the life insnrance policy is considered a "'Triggering Event'~ under paragraph 80. Under paragraphs 79(a) and (b) of the Consent Order, the Bureau and/or Bureau Chief may declare the full amount of the judgment due and take any action permitted by law. Please immediately provide us with docmnentation demonstrating that Mr. Falci's payments to the insurer are current.

Also, as briefly discussed today. Saber Opportunity Income Fund investor D .... R •advised, among other things, tha~ he did not receive a copy of the Consent Order from Mr. Falci but rather obtained a copy from the Internet. Accordingly, pursuant to paragraph 84(a) of the Consent Order, the Bureau hereby requests a copy of the acknowledgments m1d accompanying communications to the current investors of the defendants, Saber Opportunity Income Fund, LP, Vidon Capital Partners, LLC and Pantheon Tax Receivables, L.P.

This communication shall not be construed as a waiver of any rights that the Bureau and Bureau Chief may have under the Consent Order and by law.

Thank you in advance for your cooperation. .

1

(

Isabella T Stempler Deputy Attorney General NJ Office of the Attorney General Department of Law and Public Safety Division ofLaw Securities Fraud Section 124 Halsey Street, 5th Floor Newark, New Jersey 071 01

Tel: 973-648-3070 Fax: 973-648-3956

Email: l§.~he!@,[email protected]

CONFIDENTIALITY NOTICE The information contained in this communication from the Office ofthe New Jersey Attorney General is privileged and confidential and is intended for the sole use of the persons or entities who are the addressees. If you are not an intended recipient of this e-mail, the dissemination, distribution, copying or use ofthe infonnation it contains is strictly prohibited. lfyou have received this communication in error, please immediately contact the Office of the Attorney General at (609) 292-4925 to arrange for the return of this information. ---------~.~---·-· - --~-·----·----------·

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To: pforlenzai({\ghclaw.com Remove this sender from my allow list

From: isabella.stempler(iildol.lps.state.nj.us

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Life Self Service Page 1 of 1

LIFE CUSTOMER SERVICE

Pending Requests Term- AD11743517 ReUaStar llfGinsuranca Company

1M fol!owlnq lfMSaeliol1$ have belln requastad for thio policy wiNn lho laSI 30 eaienthlr deya, The Trnckirlg H ropco,.,nts tho number given Ill tile time lila ""'Uf>8> was oullmllled on Ullo we~>sas. If submlt19<1 by mal, fax or otll)( mEIIhod, !his flekl will oo bfri. Please ftllolv 1 business d"'J for any Request Type marked C'.ornplt>led to bo ..,Reeled in yOUi' f'<lll<:y.

Statu• · E•llmatod ComploUol>

Pond<>g :Q2111n016.

For further lnfonnatlon, please CM!ael Y0tJ1 Agent or Cuotomer Sorvlco

Source Tracklng « 'WE8 ·Sbi>f9oto21l6140obb59160d!!a3010.131

e 2014 Veya Semca.t Con'4>anv. All dglll& raO<lMid. Voya ll'ld 1114 V"'iQ loso e<o<eQistomd ftodomma of Voya Services eo.n~.

https://www.voyalifecustomcrservice.com/elifeweblpendingrequests.aetion;jsessionid=F04S.;~···· 2/8/2016

EXHIBIT 5

Isabella Stempler


Hi Phil,

(

Isabella Stempler Thursday, February 18, 2016 9:51 AM 'Philip D. Forlenza' Victoria Manning RE: Hoffman v. Falci A ~aber statement.pdf

(

Yesterday, ChiefB~tssman and r had a telephone conference with!\--(~. an investor in Saber Funds. He advised, among other things. that he did not receive a copy of the Consent Order from Mr. Falci but rather obtained a copy from the [ntcrnct. Please advise, as to the status of providing the Bureau \lVith copic.~ of the acknmvledgmcnts and accompanying communications to the current inve!itors of the defendants, Saber Opportunity Income Fund, LP. Vidon Capital Partners, LLC and Pantheon Tax Receivables, L.P. a.<; required under paragraph 84(a) of the Consent Order.

Also Mr. c-.. is not included on the restitution schedule, which was provided to the Bureau. Mr. Calvo provided the Bureau with a copy of his .June 2015 Saber Funtls acc.ount statement, which is attached. Please let · us know why he is no! on the restitution schedule. Thank you.

lsubella

From: Philip D. Forlenza [mailto:[email protected]] Sent: Monday, February 08, 2016 1:37 PM To: Isabella Stempler Cc: Victoria Manning Subject: RE: Hoffman v. Falci

Isabella: Attached please find a confirmation from the insurer regarding payment of premium for January and February. Proof of disseminati~n of Consent Order is being assembled.

Giordano Halleran Ciesla ··.·.

Philip D. Forlenza; Esq. website 1 biography I vcard Shareholder www.ghclaw.com www.njcorporarelaw.com Direct Oiaf: (732)219-5483 • F: (732) 224-6599 125 Half Mile Road ·Suite 300 ·Red Bank. NJ 07701-6777

From: Isabella Stempler (mailto:[email protected]] Sent: Friday, February 05, 2016 2:16 PM To: Philip D. Forlenza <[email protected]> Cc~ Victoria Manning <[email protected]> Subject: Hoffman v. Fa lei

Phil,

As we discussed today, the Bureau of Securities ("Bureau") received a "'Late Payment Reminder Notice" from Voya, ReliaStar Life Insurance Company seeking payment of the January and February 2016 premiums for policy# AD (copy attached). These premiums are past due. Under paragraph 73(b) o~the September 18, 2015 Consent Order and Final Judgment as to all Defendants and Nominal Defendants ("Consent Order"), Mr. Falci agreed to and has been ordered by Judge Cleary to make all required payments on this life insurance policy until the restitutionldisgorgement and civil monetary penalties are paid in full. Please note that failure to timely make all the required payments on the life insurance policy is considered a "Triggering Event" under paragraph 80. Under paragraphs 79(a) and (b) of the Consent Order, the Bureau and/or Bureau Chief may declare the full amount of the judgment due and take any action permitted by law. Please immediately provide us with documentation demonstrating that Mr. Falci's payments to the insurer are current.

Also, as briefly discussed today, Saber Opportunity Income Fund investor D-R 9 advised, among other things, that he did not receive a copy of the Consent Order from Mr. Falci but rather obtained a copy from the Internet. Accordingly, pursuant to paragraph 84(a) of the Consent Order, the Bureau hereby requests a copy of the acknowledgments and accompanying communications to the current investors of the defendants. Saber Opportunity Income Fund, LP, Vidon Capital Partners. LLC and Pantheon Tax Receivables, L.P.


Thank you in advance for your cooperation.

Isabella T Stempler Deputy Attorney General NJ Office of the Attorney General Department of Law and Public Safety Division ofLaw Securities Fraud Section 124 Halsey Street, Sth Floor Newark, New Jersey 07101

Tel: 973-648-3070 Fax: 973-648-3956

CONFIDENTIALITY NOTICE The information contained in this communication from the Office of the New Jersey Attorney General is privileged and confidential and is intended for the sole use of the persons or entities who arc the addressees. If you are not an intended recipient of this e-mail, the dissemination, distribution, copying or use of the information it contains is strictly prohibited. If you have received this communication in error, please immediately contact the Office of the Attorney General at (609) 292-4925 to arrange for the return of this information.

T otnl Control Panel

To: [email protected] From: isabelh1.§[email protected]$.state.nLus

Remove this sender lrQm my allow list

Yvu received this message because lhe sender is on your allow list.

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EXHIBIT 6

(

Isabella Stempler

From: Sent: To: Cc: Subject:

Isabella:

Philip D. Forlenza <[email protected]> Thursday, February 18, 2016 9:57 AM Isabella Stempler Victoria Manning RE: Hoffman v. Falci

I was advised by my client yesterday that he expects to have evidence of delivery of the consent order shortly. He was recently hospitalized for a few days but is now out.

I will inquire as to why Mr. ~s not listed on the restitution schedule. ln the past, it is usually because the account was in a different name.

Giordano Halleran :, Ciesla

Philip D. Forlenza. Esq. website 1 biography 1 vcard Shareholder www.ghclaw.com www. njcorporatelaw.com Direct Dial: (732) 219-5483 • F: (732) 224-6599 125 Hair Mile Road • Suite 300 · Red Bank. NJ 07701-6777

From: Isabella Stempler [mailto:[email protected]] Sent: Thursday, February 18, 2016 9:52AM To: Philip D. Forlenza <[email protected]> Cc: Victoria Manning <[email protected]> Subject: RE: Hoffman v. Falci

Hi PhiL

Y csterday. Chief Bassman and I had a telephone conference with A~ C'A, an investor in Sab<..'1' Funds. lie ad vised, among o1her things. that he did not receive a copy of the Consent Order from Mr. Falc.i but rather obtained a copy from the lntl!rncl. Please advise. as to the status of providing the Bureau 'vvith copies of the acknovv'lcdgmcnts and accompanying communications Lo the current investors of the defendants, Saber Opportunity Income Fund. LP, Vidon Capital Partners, LLC' and Pantheon Tax Receivables, L.P. as required under paragraph !{4(a) of the Consent Order.

·Atso Mr. c.-is not included on the restitution schedule. which was provided to the Bureau. Mr. Calvo provided the Bureau with a copy of his June 2015 Saber Funds account statement. which is attached. Please let us know why he is not on the restitution schedule. Thank yon.

Isabella

From: Philip D. Forlenza [mailto:[email protected]] Sent: Monday, February 08, 2016 1:37 PP1 To: Isabella Stempler Cc: Victoria Manning Subject: RE: Hoffman v. Falci

Isabella:

(

Attached please find a confirmation from the insurer regarding payment of premium for January and February.

Proof of dissemination of Consent Order is being assemb:ed.

Giordano Halleran Ciesla

Philip D. Forlenza. Esq. woosite 1 biography 1 vcard Shareholder www.ghclaw.com www.njcorporatelaw.com Direct Dial: (732) 219-5483 · F: (732) 224-6599 125 Half Mile Road· Suite 300 ·Red Bank, NJ 07701-6777

From: Isabella Stempler [maiito:[email protected] Sent: Friday, February 05, 2016 2:16 PM To: Philip D. Forlenza <[email protected]> Cc: Victoria Manning <[email protected],us> Subject: Hoffman v. Falci

Phil.

As we discussed today. the Bureau of Securities ("Bureau") received a "Late Payment Reminder Notice" from Voya, ReliaStar Life Insurance Company seeking payment of the January and February 2016 premiums tor policy# AD j (copy attached). These premiums are past due. Under paragraph 73(b) of the September 18, ·20 15 Consent Order and Final Judgment as to all Defendants and Nominal Defendants ("Consent

. Order"), Mr. Falci agreed to and has been ordered by Judge Cleary to make all required payments on this life insurance policy until the restitutionldisgorgement and civil monetary penalties are paid in fulL Please note that failure to timely make all the required payments on the life insurance policy is considered a "T1iggering Event'" w1der paragraph 80. Under paragraphs 79(a) and (b) of the Consent Order,.the Burenu and/or Bureau Chief may declare the full amount of the judgment due and take any action pennitted by law. Please immediately provide us with documentation dcmonstrati11g that Mr. Fa lei's payments to the insurer are current.

Also, as briefly discussed today, Saber Opportunity Income Fund investor D ... ~ advised, among other things, that he did not receive a copy of the Consent Order from Mr. Falci but rather obtained a copy from the Internet. Accordingly, pursuant to pm·agraph 84(a) of the Consent Order, the Bureau hereby requests a copy of the acknowledgments and accompanying comtmmications to the current investors of the defendants, Saber Opportunity Income Fund, LP, Vidon Capital Partners, LLC and Pantheon Tax Receivables, L.P.


Thank you in advance for your cooperatio.n.

Isabella T Stempler Deputy Attorney General NJ Office of the Attorney General Depat1ment of Law and Public Safety Division of Law Securities Fraud Section 124 Halsey Street, 5th Floor Newark, New Jersey 07101

Tel: 973-648-3070 Fax: 973-648-3956

Email: [email protected] 2

CONFIDENTIALJTY NOTICE The information contained in this communication from the Office of the New · Jersey Attorney General is privileged and confidential and is intended for the sole use of the persons or entities who are the addressees. If you are not an intended recipient of this e~mail, the dissemination, distribution, copying or use ofthe information it contains is strictly prohibited. If you have received this com..'llunication in error, please immediately contact the Office of the Attorney General at (609) 2924925 to arrange for the return of this information.

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To: pforlenza@ghclaw.£_OJJ) From: [email protected]

Remove this sender from my al.low list

You received this message because the sender is on your allow list.

CONFIDENTIALITY NOTICE The information contained in this communication from the Office of the New Jersey Attorney General is privileged and confidential and is intended for the sole use of the persons or entities who are the addressees. If you are not an intended recipient ofthis e-mail, the dissemination, distribution) copying or use of the information it contains is strictly prohibited. If you have received this communication in error, pleaSe immediately contact the Office of the Attorney General at (609) 292~4925 to arrange for the return ofthis information. '

-·--··---·------·---------------------------Total Controll'and

To: pfs;rlcnza(a)ghclaw.com

From: isabe!la.stempler(ci)dol.lt>s.state.ni.us

Remove this sender from my allow list

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EXHIBIT 7

Isabella Stempler

From: rsabella Stempler Sent: To:

Tuesday, Apri! 05, 2016 10:31 AM 'Philip D. Forlenza'

Cc: Victoria Manning Subject: Hoffman v. Falci Attachments: Notice from life Insurance April 2016.pdf

Phil,

The Bureau of Securities ("Bureau") received a «Late Payment Reminder Notice" from Voya, ReliaStar Life Insurance Company seeking payment of the March and April 2016 premiums for policy # AD 1 Q copy attached). These premiums are past due. Under paragraph 73(b) of the September 18,2015 Consent Order and Final Judgment as to all Defendants and Nominal Defendants ("Consent Order"), Mr. Falci agreed to and has been ordered by Judge Cleary to make all required payments on this life insurance policy until the restitutionldisgorgement and civil monetary penalties are paid in fhH. Please note that failure to timely make all the required payments on the life insurance poi icy is considered a "Triggering Event" under paragraph 80. Under paragraphs 79(a) and (b) of the Consent Order, the Bureau and/or Bureau Chief may declare the full amount of the judgment due and take any action pennitted by law. Please immediately provide us with documentation demonstrating that Mr. Falci's payments to the insurer are current.

This comtmmication shall n<.lt be constmed as a waiver of any rights that the Bureau and Bureau Chief may have w1der the Consent Order tmd by law.


Isabella T Stempler Deputy Attorney General NJ Office of the Attorney General Department of Law and Public Safety

. Division of Law Securities Fraud Section 124 Halsey Street, 5th Floor Newark, New Jersey 071 0 l

Tel: 973-648-3070 Fax: 973-648-3956

Email: [email protected]

1

(

r I r-- ···----.-··· ... "' .. .,.

vov.~: ReliaStar Life Insurance Company Customer Service

(

PO Box5044 Minot, ND 58702-5044


March 29, 2016

Due Date Monthlv Premium Due

002501 7.0ib APR -lt A II: 35 STATE OF NJ BUREAU OF SECURITIES 153 Halsey St Ste 6 Newark NJ 07102-2807

RE: Policy# AD··· on Vincent P Falci

03/28/2016

04/28/2016

Total Due

$2,!72.46

$2,172.46

$4,344.92

Your policy needs immediate at!ention! Your insurance coverage is in danger of lapsing as your required premium is past due. Your policy is now in a Grace Period ending May 03, 2016. If you have already mailed your payment, thank you.

If you have not already mailed your payment please know that to keep your policy in good standing ReliaStar Life Insurance Company must receive payment of $2,172.46 by the end of the Grace Period. Please Note: A:> of April 28, 2016 your next premium of $2,172.46 will also become due. To avoid receiving a subsequent Late Payment Reminder Notice please remit the Total Due of$4,344.92 by April 28, 2016.


Important Notice: If payment of your required premium is not received by the end of the Grace Period, your coverage may .lapse, depending on the terms of your policy. If coverage lapse.s, the policy and all payments thereon will become forfeited and void, except as to the right, if any, to a surrender value, paid-up policy, or extended term insurance, as provided in your policy. Please refer to your policy for additional information regarding coverage, lapse .. grace period, and policy provisions.


Thank You,


CC: EFINANCJAL LLC Vincent P Falci

RcliaStar Life Insurance Company

STATE OF NJ BUREAU OF SECURlTIES 153 Halsey St Ste 6 Newark, NJ 07102-2&07

RE: Policy# AD··· on Vincent P Falci

Late Payment Reminder Notice Total Due : $4,344.92 Due Date : 03/2812016


i l If your address has changed, please check this box and complete the fonn on the back of this coupon.

20007 9!1 120 J 5

·EXHIBIT 8

Isabella Stempler

From: Sent: To: Cc:

Subject:

:sabella:

(

Philip D. Forlenza <[email protected]> Tuesday, April 05, 2016 10:50 AM Isabella Stempler Victoria Manning RE: Hoffman v. Fald

I am advised that payment was mailed on March 26, 2016 in advance of the March 28, 2016 due date. Proof of payment will be forthcoming. The April premium is not yet due.

~d;~~· i Halleran,

I~:~~~',, LT.,

Philip D. Forlenza, Esq. website 1 biography j vcard Shareholder www.ghclaw.com www.njcorporatelaw.com :J Direct Dial: (732} 219-5483 • F: (732) 224-$599

125 !ialf Mile Road · Suite 300 · Red Bank. N~-~~~~~77

From: Isabella Stempler [mailto:[email protected]] Sent: Tuesday, April 05, 2016 10:31 AM To: Philip D. Forlenza <[email protected]> Cc: Victoria Manning <[email protected]> Subject: Hoffman v. Fa lei

Phil,

The Bureau of Securities ("Bureau") received a "Late Payment Reminder Notice" from Voya, ReliaStar Life Insurance Company seeking payment of the March and Apri12016 premiums for policy# AD • (copy attached). These premituns are past due. Under paragraph 73(b) ·of the September 18, 2015 Consent Order and Final Judgment as to all Defendants and Nominal Defendants ("Consent Order"), Mr. Falci agreed to and has been ordered by Judge Cleary to make all required payments on this life insurance policy until the restitution/disgorgement and civil monetary penalties are paid in full. Please note that failure to timely make aU the required payments on the liie insurance policy is considered a ••Triggering Event" w1der paragraph 80. Under paragraphs 79(a) and (b) of the Consent Order, the Bureau and/or Bureau Chief may declare the full amount of the judgment due and take any action permitted by law. Please immediately provide us with documentation. demonstrating that Mr. Fald's payments to the insurer are cutTent,

This communication shall not oo construed as a waiver of any rights that the Bureau and Bureau Chief may have under the Consent Order and by law.


Isabella T Stempler Deputy Attorney General NJ Office of the Attorney General Department of Law and Public Safety Division of Law •

1

Securities Fraud Section · 124 Halsey Street, 5th Floor Newark, New Jersey 0710 l

Tel: 973-648-3070 Fax: 973-648-3956

Email: lsabella.Stemp!er@_.Agj,Jp~,state.nj.us

(

CONFIDENTIALITY NOTICE The information contained in this communication from the Office of the New Jersey Attorney General is privileged and confidential and is intended for the sole use of the persons or entities who are the addressees. If you are not an intend9d recipient of this e-mail, the dissemination, distribution, copying or use of the information it contains is strictly prohibited. If you have received this communication in error, please immediately contact the Office of the Attorney General at (609) 292-4925 to arrange for the return of t~is information.

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To: pforien7.a0lghclaw,com Remove this sender from my allow list From: isahclla.stempler\Cildol.lps.state.nj.u,s


EXHIBIT 9

Isabella Stempler

From: Isabella Stempler Sent: To:

Tuesday, Aprill9, 2016 1:08 PM 'Philip D. Forlenza'

Cc: Victoria Manning Subject: RE: Hoffman v. Falci

Hi Phil,

Pknse advise on the status as to tl1e following two items:

• Providing the Bureau with copies of the acknowledgments and accompanying c-otmuunications to the current investors of the defendants, Saber Opportunity Income Fund. LP. Vi don Capital Partners, LLC and Pantheon Tax Receivables, L.P. as required ·under paragraph 84(a) of the Consent Order; and

• Documentation demonstrating that Mr. Fald's payments to the insurer are current.

Thank you!

Isabella

From: Philip D. Forlenza [mailto:[email protected];QDJ] Sent: Tuesday, April 05, 2016 10:50 AM To: Isabella Stempler Cc: Victoria Manning Subject: RE: Hoffman v. Falci

Isabella: I am advised that payment was mailed on March 26, 2016 in advance of the March 28, 2016 due date. Proof of payment will be forthcoming. The April premium is not yet due.

Giordano Halleran ~~,

Ciesla

Philip D. Forlenza, Esq. website 1 biography 1 vcard Shareholder www.ghclaw.com www. njcorporatelaw.com Direct Dial: (732) 219-5483 • F: (732) 224-6599 125 Half Mile Road· Suite 300 ·Red Bank, NJ 07701-6777

From: Isabella Stempler (mailto:[email protected]]2s.state,nj.us) Sent: Tuesday, April 05, 2016 10:31 AM To: Philip D. Forlenza <[email protected]> Cc: Victoria Manning <[email protected]> Subject: Hoffman v. Falci

PhiJ,

The Bureau of Securities (''Bureau'') received a "Late Payment Reminder Notice" from Voya, ReliaStar Life Insurance Company seeking payment of the March and April 2016 premiums for policy# attached). These premiums are past due. Under paragraph 73(b) of the September i8, 2015 Consent Order and

1

Final Judgment as to all Defendants and Nominal Defendants ("Consent Order"), Mr. Falci agreed to and has been ordered by Tudge Cleary to make all required payments on this life insurance policy until the restitution/disgorgement and civil monetary penalties are paid in full. Please note th~t failure to timely make all the required payments on the life insurance policy is considered a "Triggering Event" under paragraph 80. Under paragraphs 79(a) and (b) of the Consent Order, the Bureau and/or Bureau Chief may declare the full amount of the judgment due and take any action permitted by law. Please immediately provide us with documentation demonstrating that Mr. Falci's payments to the insurer are current.

This communication ~hall not be construed as a vraiver of any rights timt the Bureau and Bureau Chief may have under the Consent Order and by !aw.

'Dmnk you in advance for your cooperation.

Isabella T Stempler Deputy Attorney General NJ Office of the Attorney General Department of Law and Public Safety Division of Law Securities Fraud Section 124 Halsey Street, 5th Floor Newark, New Jersey 07101

Tel: 973-648-3070 Fax: 973-648-3956

CONFIDENTIALITY NOTICE The information contained in this communication from the Office of the New Jersey Attorney General is privileged and confidential and. is intended for the sole use of the persons or entities who are the addressees. If you are not an intended recipient of this e-mail, the dissemination, distribution, copying or use of the infonnation it contains is strictly prohibited. If you have received this communication in error, please immediately contact the Office .of the Attorney General at (609) 292-4925 to arrange for the return of this information.

Total Control Pllncl

To: pforlem·.a@ghcla~.._\m.m From: isabella.§tc.m.Qjs:r~qlJp.§.state.nj.vs


You received this message because the .render Is on your allow list.

2

EXHIBIT 10

Isabella Stempler

From: Sent: To: Cc: Subject:

Isabella:

Philip D. Forlenza < [email protected] >

Thursday, April 21, 2016 10:09 AM Isabella Stempler Victoria Manning; Peter B. Bennett RE: Hoffman v. Falci

(

Effective yesterday afternoon, we have terminated our relationship with Mr. Fa lei. We understand that he is in the process of engaging new counsel. If we learn of the identity of the new counsel, we will provide that information to you.

Giordano Halleran .. Ciesla

Philip D. Forlenza. Esq. website 1 biography 1 vcard Shareholder www.ghclaw.com www.njcorporatelaw.corn Direct Dial: (732)219-5483 · F: {732) 224-6599 125 Half Mile Road · Suite 300 · Red Bank, NJ 07701-6777

From: Isabella Stempler [mailto:[email protected]] Sent: Tuesday, April19, 2016 1:08 PM To: Philip D. Forlenza <[email protected]> Cc: Victoria Manning <[email protected]> Subject: RE: Hoffman v. Falci

Hi Phil.

Please advise on the ~latus as to the f()Jiowing two items:

• Providing lhc Bureau with copies of the acknowledgments and accompanying communications to the current investors of the defendants, Saber Opportunity Income Fund, LP, Vidon Capital Partners, LLC and Pantheon Tax Receivables, L.P. as required under paragraph 84(a) ofthe Consent Order; and

• Documentation demonstrating that Mr. falci ·s payments to the insurer arc cunent.

Thank you!

Isabella

From: Philip D. Forlenza [mai!to;£[email protected]] Sent: Tuesday, April 05, 2016 10:50 AM To: Isabella Stempler Cc: Victoria Manning Subject: RE: Hoffman v. Falci

Isabella: l am advised that payment w~ mailed on March 26, 2016 in advance of the March 28, 2016 due date. Proof of payment will be forthcoming. The April premium is not yet due.

Giordano Philip D. Forlenza. Esq. website I biography I vcard

1

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From: Isabella Stempler [mallto:[email protected]] Sent: Tuesday, April 05, 2016 10:31 AM To: Philip D. Forlenza <[email protected]>

Cc: Victoria Manning <Victoria.Manning@doi .lps.statf.'!~DlldP Subject: Hoffman v. Falci

Phil,

The Bureau of Securities ("Bureau") received a "Late Payment Reminder Notice" from Voya, ReliaStar Life Insurance Company seeking payment of the r..:1arch and April2016 premiums for policy# ADS (copy attached). These premiums are past due. Under paragraph 73(b) of the September 18,2015 Consent Order and Final Judgment as to all Defendants and Nominal Defendants (''Consent Order''), Mr. Falci agreed to and has been ordered by Judge Cleary to make all required payments on this lite insurance policy until the restitution/disgorgement and civil monetary penalties are paid in fulL Please note that failure to timely make all the required payments on the life insurance policy is considered a ''Triggering Event" under paragraph 80. Under paragraphs 79(a) and (b) ofthc Consent Order, the Bureau and/or Bureau Chief may declare the full

·amount of the judgment due and take any action permitted by law. Please immediately provide us with documentation demonstrating that Mr. F<1lci's payments to the insurer are current.

This communication shall not be constmed as a waiver of any rights that the Bureau·and Bureau Chief may have under the Consent Order and by law


Isabella T Stem pier Deputy Attorney General NJ Office ofthe Attorney General Department of Law and Public Safety Division of Law Securities Fraud Section i 24 Halsey Street, 5th Floor Newark, New Jersey 07101

Tel: 973-648-3070 Fax: 973-648-3956

CONFIDENTIALITY NOTICE The information contained in this communication from the Office of the New Jersey Attorney General is privileged and confidential and is intended foi the sole use of the petsons or entities who are the addressees. If you are not an intended recipient of this e-mail, the dissemination, distribution, CQpying or use of the information it contains is strictly prohibited._Ifyou have received this communication in error, please immediately contact the Office of the Attorney General at (609) 292-4925 to arrange for the return of this information. -

(

Totnl Control PM~I

To: nforlenzaftllghclaw.com

From: [email protected].,.!ilil~.ni.\!$

Remove this sender from my allow Ust


CONFIDENTIALITY NOTICE The information contained in this communication from the Office of the New Jersey Attorney General is privileged and confidential and is intended for the sole use of the persons or entities who are the addressees. If you are not an intended recipient of this e-mail, the dissemination, distribution, copying or use of the information it contains is strictly prohibited. If you have recdved this communication in error, please immediately contact the Office of the Attorney General at (609) 292-4925 to arrange for the return ofthis information.

Tota! Crmtrol l'nnc.l

To: pforlenza(iilghclaw.com

From: isabclla.stemplen(il<iol.lps.statc.rj.us



EXHIBIT 11

Isabella Stempler


Dear Mr. Falci,

Isabella Stempler Thursday, June 09, 2016 10:49 AM '[email protected]'

Victoria Manning; Rudolph Bassman Hoffman v. Falci 06 09 16 Ltr to Defendants and Nominal Defendants. pdf

Please see the attached letter, which is also being sent to you by overnight mail. Thank you.

Isabella

Isabe.lla T Stempler Deputy Attorney General NJ Office of the Attorney General Department of Law and Public Safety Division of Law Securities Fraud Section 124 Halsey Street, 5th Floor Newark, New Jersey 07101

Tel: 973-648-3070 Fax: 973-648-3956

Email: [email protected]

CHRIS CHRISTIE Governor

KIM GUADAGNO Lt. Gouernor

State of New Jersey OFFICE OF THEA'I"'''RNBY GENERAL

DEPARTMENT OF LAw AND PUBLIC SA~"ETY DIVISION OF LAW

] 24 HALsEY STREET

POBox 45029 NEWARK, NJ 07102

June 9, 2016

BY OVERNIGHT MAIL To: Vincent P. Falci (by email and overnight mail)

Saber Funds, LLC Saber Asset Management, LLC Saber Funds Distributors, LLC BWX Fund, LLC Fixed Term Government Fund, LLC MSI Fund I, LLC MSI Equity Fund ll, LLC Preferred Income Portfolio I, LLC Donna Falci Vincent N. Falci HaHus Realty Group, LLC Phoenix Equities, LLC

Re: Hoffman v. Falci, et al. Docket No.: MON-C-160-14

Dear all:

ROBI·~RT LOUGY AcliltR Attorney General

MICHELLE: L. Mli,Ll<;lt Acting Director

As you know, I am counsel to the New Jersey Bureau of Securities ("Bureau"). On September 1 8, 2015, the Court entered a Consent Order and Final Judgment as to all Defendants and Nominal Defendants ("Consent Order"). I have enclosed a copy of the Consent Order for your convenience.

First, the Bureau received a "Late Payment Reminder Notice" from Voya, ReliaStar Life In.surance Company seeking payment of the· May and June 2016 premiums for policy # AD! [ £ (copy attached). These premiums are past due. Under paragraph 73(b) of the Consent Order, Mr. Falci agreed to and has been ordered by the Honorable Patricia Del Bueno Cleary, P.J. Ch., to make all required payments on this life insurance policy until the restitution/disgorgement and civil monetary penalties are paid in thll. Please note that failure to timely make all the required payments on the life insurance policy is considered a "Triggering Event" under paragraph 80. Under paragraphs 79(a) and (b) of the Consent Order, the Bureau and/or Bureau Chtcf may declare the lull amount of the JUdgment due and take any act10n

,, • > ,- " "" ' , •• - -- • ' ~

124 Haleey Stroot, Newat-k. New .Jersey O'i 102 • T~:u:t·uo:-;t:: (ll7:1) (;4lHH02 • F' AX: (!}7!1) Ci,11l-:llla6

New .Jersey!:; Au Equal Opportlmily F.mployer • Prill I('(/ Qll U<!c,w:ltd l'ofX"I' unci Uec:yc:/({b/t>

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June 9, 2016 Page2

permitted by law. Please immediately provide the documentation demonstrating that the payments to the insurer are current.

Second, under paragraph 77 of the Consent Order, all Defendants and Nominal Defendants agreed to provide the Bureau with a copy of their filed federal and state tax returns within ten days of filing until all the restitution/disgorgcment and civil monetary penalties are paid. Please note that failure to submit filed yearly federal and state tax r<:tums is considered a "Triggering Event" under paragraph 80. Under paragraphs 79(a) and (b) of the Consent Order, the Bureau and/or Bureau Chief may declare the full amount of the judgment due and take any action permitted by law. Please immediately provide copies of all the Defendants and Nominal Defendants' filed 2015 federal and state tax returns. Copies of 1099s issued for tax year 2015 should also be provided.

Third, under paragraph 84, within ten days of entry of the Consent Order, Mr. Fa)ci was required to provide a copy of the Consent Order to the current investors of the Defendants, Saber Opportunity Income Fund, LP, Vidon Capital Partners, LLC and Pantheon Tax Receivables, L.P. Each investor was required to sign an acknowledgment confirming receipt of the Consent Order. On February 18,2016 and on Aprill9, 2016, the Bureau requested that Mr. Falci produce copies of the signed investor acknowledgments. To date, Mr. Falci has failed to do so. Accordingly, please immediately provide copies of the signed investor acknowledgments.

Fourth, also under paragraph 84, within ten days of entry oftheConsent Order, Mr. Falci was required to provide a copy of the Consent Order to current and future officers, directors, managers, supervisors and/or partners of any issuer and general partner of an issuer who employs Mr. Falci or for whom Mr. Falci provides consulting services compensated or uncompensated. Each person was required to sign an acknowledgment confirming receipt of the Consent Order. Pursuant to paragraph 84(b), the Bureau requests that Mr. Falci produce copies of the signed acknowledgments.

Fifth, under paragraph 75, Mr. Falci was required to dissolve Saber Asset Management, LLC, Saber Funds Distributors, LLC, BWX Fund, LLC, Fixed Term Government Fund, LLC, MSJ Fund I, LLC, MSI Equity Fund II, LLC, and Preferred Income Portfolio I, LLC within 90 days of entry of the Consent Order. Accordingly, please provide the following information and/or documents:

I. The operational status of Saber Funds LLC, Saber Asset Management, LLC, Saber Funds Distributors, LLC, BWX Fund, LLC, Fixed Term Government Fund, LLC, MSl Fund I, LLC, MSI Equity Fund II, LLC, Preferred Income Portfolio I, LLC and nominal defendants Hallus Realty Group, LLC and Phoenix Equities LLC;

a. Include documentatjon evidencing: i. their status;

ii. whether their financial accounts are open or closed~ iii. if open, state the names of the signatories on. the financial accounts, the

balance as of the day you respond to this letter, and provide a copy of the most currenl account statement.

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June 9, 2016 Pl\lge3

2. The names and addresses of all current officers. directors, employees and consultants of Saber Funds, LLC Saber Asset Management, LLC, Saber Funds Distributors, LLC, BWX Fund, LLC, Fixed Term Government Fund, LLC, MSI Fund I, LLC, MSI Equity Fund II, LLC, Preferred Income Portfolio I, LLC and nominal defendants HaHus Realty Group, LLC and Phoenix Equities, LLC;

a. their job title; b. who they report to; c. their job responsibilities; d. their compensation type, amount, and frequency of payment; e. their work schedules; and f. their job locations, e.g., physical address.

Sixth, under the Consent Order, Defendants are required to pay restitution to the Bureau over a five year period, as set forth in paragraph 62. And, the Bureau will be responsible for the distribution of restitution to investors as set forth in paragraph 63, rather than Defendants making restitution payments to individual investors. Accordingly, please provide the Bureau with the following information and/or documents:

1. The names and addresses of all persons who were paid money for interest and/or principal on their investments with Defendants, including any persons not listed in the restitution schedule that was previously provided to the Bureau. For all persons, include:

a. the amounts paid; b. when paid; c. how paid, e.g., wire, check, cash, bank check, etc.; d. the payor's bank name; e. the payor's name, e.g., name on the account; t: the account number; and g. source of the funds used by the payor to make the payments.

2. The names and addresses of all persons who were paid in kind for interest and/or principal on their investments with Defendants, including any persons not list in the restitution schedule that was previously provided to the Bureau. For those persons, include:

a. the amounts paid; b. when paid; c. how paid, e.g., wire, check, cash, bank check. etc.; d. the payor's bank name; c. the payor's name, e.g., name on the account; f. the account number; and g. source of the funds used by the payor to make the payments.

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June9, 2016 Page4

Seventh~ under paragraph 58 of the Consent Order, Mr. Falci is permanently enjoined and restrained from, among other things: (i) raising capital in any fonn; (ii) managing or exercising control over investments and assets including, but not limited to, any finances; and (iii) engaging in any investor relations and/communication for including, but not limited to, Saber Opportunity Income Fund, LP, Pantheon Tax Receivables, LP and Vidon Capital Partners, LLC. Accordingly, the Bureau requests the following information and/or documents:

1. The names and addresses of all current officers, directors, managing members, general partners and/orcontrol persons of Saber Opportunity Income Fund, LP, Pantheon Tax Receivables, LP and Vidon Capital Partners, LLC.

Last, paragraph 81 of the Cuuseut Ord~r. provides that Defendants and. Nominal Defendants transfer of assets of any kind between each other and/or any entity they control, directly or indirectly, shall be deemed a prima facie fraudulenttransfer under New Jersey's Uniform Fraudulent Transfer Act, N.J.S.A. 25:2-20 et seq; and common law. Accordingly, the Bureau requests information and/or documents relating to any funds each Defendant and/or Nominal Defendant received since September 18, 2015 related in any way to the Defendants and Nominal Defendants.

En cis. cc:

Thank you in advance for your anticipated cooperation in this matter.

Sincerely yours,

ROBERT LOUGY ACTING ATTORNEY GENERALOF NEW JERSEY

By: ~~~~£._.·· . ..:;...,····~-DeputyAttomey General

Laura H. Posner, Chief, New Jersey Bureau ofSeci.lritie$ (w/o encl. vi~e1nail) · Amy G. Kop!eton, Deputy Bureau Chief, New Jersey Bureau ofSecurities{w/o encl. via email)

Rudolph G. Bassman, Chief of Enforcement, New Jersey Bureau of Secur·ities (w/o encl. via email) Victoria A. Manning, DAG/Section Chief (w/o encl. via email) Joshua I. Sherman, DAG/ Asst Section Chief (w/o encl. via email)

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•> FINANt;IA1.

ReJiaStar Life Insurance Company Customer Service POBox 5044 Minot, ND 58702-5044

LATE PAYMENT REMINDI~R NOTICE Assignee Copy

May 31,2016 ___ HECEIVEIJ

8UKt.O.U OF SEcur.:''l':·.;:; . t ' i t '~ ~.~

Due Date Monthly Pt·cmimn Due


lOlL JUN -b A ll= li3

RE: Policy# AD- on Vincent P Falci

05/28/2016

06/28/2016

Total Due

$2,172.46

$2,172.46

$4,344.92

Your policy needs immediate attention! Your insurance coverage is in danger of lapsing as your required premium is past due. Your policy is now in a Grace Period ending lt!!y 03, 2016. If you have already mai!t:U ymu payment, Lhank you.

If you have not already mailed your payment please know that to keep your policy in good standing ReliaStar Life Insurance Company must receive payment of $2,172.46 by the end of the Grace Period. Please Note: As ofJune 28, 2016 your next premium of $2,172.46 will also become due. To avoid receiving a subsequent Late Payment Reminder Notice please remit the Total Due of $4,344.92 by June 28, 2016.

We have enclosed an enveloPe for your convenience in remitting your payment.

Important Notice: If payment of your required premium is not received by the end of the Grace Period, your coverage may lapse, depending on the terms of your policy. If coverage lapses, the policy and all payments thereon wi11 become forfeited and void, except as to the right, if any, to a surrender value, paid-up policy, or extended term insuran~. as provided in your policy. Please refer to your policy for additional information regarding coverage, lapse, grace period, and policy provisions.

The Company does not accept premium payments or loan repayments using money orders for amounts over $5,000 and may reject payments made by Cashier's Checks, Bank Drafts, and Treasurer's Checks. Additionally, premiums paid more frequently than annually result in higher total annual premiums fur the same coverage which is described in more detail in your policy.

Thank You,

Questions? Call: 800-654-537~. Keep this section for your records. Please return the section below with payment.


vo RellaStar Life Insurance Company

STATE OF NJ BUREAU OF SECURITIES 1 53 Halsey Sl Ste 6 Newark, NJ 07102-2807

RE: Policy# AD,WM•Ia on Vincent P Falci

Late Payment Reminder Notice Total Due : $4,344.92 Due Date ; 05/28/2016


o If your address has changed, please check this box and complete the fo~m on the back of this ooupon.

1247474747~7111438381.flli.J1401.f23844201b0

20007 9/112015

(

c·· JOHN J. HOFFMAN ACTING ATTORNEY GENERAL OF NEW JERSEY Division of Law 124 Halsey Street, 5th Floor P.O. Box 45029 Newark, New Jersey 07101 Attorney for Plaintiff

By: Victoria A. Manning (Attorney Id. # 006371991) Isabella T. Stempler (Attorney Id. # 032642001) Deputy Attorney General (973) 648~3070

JOHN J. HOFFMAN, Acting Attorney General ofNew Jersey, on behalf of LAURA H. POSNER, Chief of the New Jersey Bureau of Securities,

Plaintiff,

V.

VINCENT PETER F ALCI, individually and d/b/a Saber Fixed Income Series, LLC, and d/b/a Saber Equity Income Series,LLC, as a Managing Membet of Saber Funds LLC, and Saber Asset Management, LLC;



SABER FUNDS DISTRIBUTORS, LLC, a Delaware series limited liability

company; FIXED TERM GOVERNMENT FlJND, LLC,

SUPERIOR COURT OF NEW JERSEY CHANCERY DIVISION: GE:N"ERAL EQUITY MONMOUTH COUNTY DOCKET NO. MON~C-160-14

Civil Action

CONSENT OIIDERAND FINAL JUDGMENT 'AS TO ALL DEFENDANTS AND NOMINAL DEFENDANTS

-···-··········--·--:-::--~--:-:--:----=-""'~..,..,-----,


MSI FOND I, LLC, a Delaware limited liability company;





and


Defendants,


HALLUS REALTY GROUP, LLC, a New Jersey limited liability cornpany;and ·

DONNA F ALCI, individmlly; and VINCENTN. FALCl, individually,

Nominal Defendants.

c·

THIS MATTER was brought before the Court by John J. Hoffman, Acting Attorney


Jersey Bureau of Securities ("Bureau Chief" or "Plaintiff') alleging violations ofthe New Jersey

Uniform Securities Law (1997), N.J.S.A. 49:3-47 et seg . .("Securities Law''). Plaintiff, through

counsel (Victoria A. Manning and Isabella T. Sternpler, Deputy Attorneys General, appearing),

defendants Vincent Peter Falci, individually, and doing business as Saber Fixed Income Series,

LLC and Saber Equity Income Series_, LLC, and as managing member of Saber Funds, LLC and.

2

,.... (

c Saber Asset Management, LLC (collectively, ''Falci"), Sa.ber Funds, LLC ("Saber Funds''), Saber

Asset Management, LLC ("SAM"), Saber Funds Distributors, LLC ("SFD''), BWX Fund, LLC

{"BWX"), Fixed Term Government Fund, LLC ("FTGF"), MSI Fund I, LLC ("MSI Fund I"),

MSI Equity Fund II, LLC ("MSI Equity Fund II"), and PrefelTed Income Portfolio I, LLC

("PIP") (collectively with Falci, "Defendants"), and nominal defendants Hallus Realty Group,

LLC ("Hallus Realty"). Phoenix Equities, LLC ("Phoenix Equities"), Donna Falci and Vincent

N. Falci (collectively, ''Nominal Defendants"), through counsel (Peter B. Bennett, Esq. and


issues in controversy set forth in the Complaint filed in this matter on the terms set forth in this

Consent Order and Final Judgment ("Consent Order'"), which terms have, with the consent of

Plaintiff: Defendants and Nominal Defendants, been reviewed and approved by the Honorable

Patricia Del Bueno Cleary, P.J. Ch. The Bureau Chief makes the following findings offa:ct and

conclusions of law:

FINDINGS OF FACT

1. From January 2006 through at least December 2009.·(~'Relevant Time •Period''), Falci, ·a

former Middletown, New Jersey fire chief, and the Defendants through ralci fraudulently

raised over $6.7 million from the sale of unregistered securities in the form of interests in

limited liability companies and investment co~tracts • from approximately 182 investors· of

whom 152 reside in New Jersey. The investors inclUde, among others, present and retired

police officers, . and public servant organizations, such as fire companies and police

benevolent associations, throughout Monmouth County.

3

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c c 2. Falci, a resident of Middletown, New Jersey, created, operated and exclusively controlled

and continues to control Defendants Saber Funds, SAM, SFD (collectively, .. Saber Broker

Dealers"), BWX, FTGF, MSI Fund I, MSI Equity Fund II, PIP, the unformed entities Saber

Fixed Income Series, LLC ("Saber Fixed Income") and Saber Equity Income Series, LLC

("Saber Equity") (collectively «Saber Investment Funds"), and nominal defendants Hallus


3. During the Relevant Time Period, Falci's role and responsibilities at defendant Saber

Broker-Dealers, Saber Investment Funds and nominal defendant Hall us Realty included,

among other things: (a) handling the day-to-day management of all the entities; (b) making

all investment decisions for the Saber Investment Funds; and (c) controlling the finances of

the Saber Broker-Dealers, Saber Investment Funds, Hallus Realty and Phoenix Equities.

4. Falci was registered with the Bureau to sell securities from 1992 through 2002. However,

during the Relevant Time Period, Falci was neither registered with the Bureau in any

capacity nor exempt from registration.


2002, located in Middletown, New Jersey. SAM's only members were and continue to be

Falci, who holds a fifty-one percent (51%) ownership interest, and his wife, nominal

defendant Donna Falci, who holds a forty-nine percent (49%) ownership interest. SAM is

the managing member and investment manager for MSI Fund I. FTGF and BWX. SAM


6. Saber Funds is a New Jersey limited liability company, formed on or about December 30,

2005, located in Middleto ... vn, New Jersey. Saber Fund's only members were and continue

to be Falci, who holds a fifty-one percent (51%) ownership interest. and Donna Falci who

4

(

c c· holds a forty-nine percent (49%) ownership interest. Saber Funds is the managing member

and investment manager for MSI Equity Fund II, Saber Equity and Saber Fixed Income.

Saber Ftu1ds has never been registered With the Bureau in any capacity.


and located in Middletown, New Jersey. SFD's managing director is defendant Falci. SFD

has never been r~gistered with the Bureau in any capacity.


Middletown, New Jersey. From approximately January 15, 2006 through approximately

March 16, 2006, Falci and MSI Fund I, through Falci, issued, offered and sold securities in

the fonn of limited liability interests ("MSI Fund I Securities") using a ·~confidential

private placement memorandtun" ("MSI Fund I PPM") to at least fifteen investors. The

MSI Fund I Securities were not registered with the Bureau .

. 9. FTGF is a New Jersey limited liability company, formed on March 30, 2006, located in

Middletown, New Jersey. From approximately April6, 2006 through at least February 19,

2009, Falci and FTGF, through Falci, issued, offered and sold securities in the fonn of

limited liability interests ("FTGF Securities") using a "confidential private placement

memorandum, ("FTGF PPM") to at least seventy-six investors. The FTGF Securities were





Filing"), the requirements for exemption were not met. Specifically. prior to the MSI Fund

I and FfGF RUle 506 Filings~ there were at least thirty sales of the MSI Fund 1 Securities to

5

(

c fifteen investors and there were at least 175 sales of the FTGF Securities to seventy-six

investors.

11. MSI Equity Fund II is a New Jersey limited liability company, formed on or about

September 17, 2008, located in Middletown, New Jersey. Since on or around September

17, 2008, Falci and MSI Equity Fund IT, through Falci, issued, offered and sold securities

in the form of limited liability interests ("MSI Equity Fund II Securities") to at l~

twenty-six investors. The MSI Equity Fund II Securities were not registered with the

Bureau.



Fixed Income, issued, offered and sold securities in the purported form of limited liability


("Saber Fixed Income PPM") to at least four investors. The Saber Fixed Income Securities



Middletown, New Jersey. Beginning in or around March 2009, Falci, doing business as

Saber Equity, issued, offered and sold securities in the purported fonn of limited liability

interests ('(Saber Equity Securities") using a private placement memorandum ("Saber

Equity PPM") to at least thirteen investors. The Saber Equity Securities were not


14. BWX is a New Jersey limited liability company~ formed on or about March 30. 2006,

located in Middleto\Vll, New Jersey. Falci and BWX, through Falci, issued, offered and

sold securities pUipOrtedly in the fonn of limited liability interests ("BWX Securities'') to at

6

~ ...

c c least twenty-two investors. The BWX Securities were not registered with the Bureau.

15. PIP is a New Jersey limited liability company formed on or about June 3, 2002, located in

Middletown, New Jersey. Defendants Falci and PIP, through Falci, issued, offered and

sold securities in the form of limited liability units ("PIP Securities") using a "confidential

private offering memorandum" ("PIP PPM") dated December 31, 2004, to at least tvJenty-



about December 30, 2005, located in Middletown, New Jersey. Hallus Realty's only


and nominal defendant Vincent N. Falci, who holds a twenty-five percent (25%) ownership

interest.


or about February 20, 2007. located in Middletown) New Jersey. Phoenix Equities' only

members are Falci, who holds a fifty percent (50%) ownership interest, and his son,

nominal defendant Vincent N. Falci, who holds a fifty percent (50%) ownership interest.

Phoenix Equities was formed by Falci and nominal defendant Vincent N. Falci. to use for

day-trading.

18. Nominal defendant Donna Falci, a resident of Middletown~ New Jersey, is defendant

Falci's wife. During the Relevant Time Period, nominal defendant Donna Falci held ·

membership interests in: (a) SAM; and (b) Saber Funds. She has nev~r been registered

with the Bureau in any capacity, and is not exempt from registration.

19. Nominal defendant Vincent N. Falci, a New Jersey resident, is defendant Falci's son.

During the Relevant Time Period. nominal defendant Vincent N. Falci held membership

7

c interests in: (a) Hallus Realty; and (b) Phoenix Equities.


Saber Investment Funds, through Falci, raised $6,742,697.57 from the fraudulent offer and

sale of MSI Fund I Securities, FTGF Securities, MSI Equity Fund II Securities, Saber

Fixed Income Securities, Saber Equity Securities, BWX Securities and PIP Securities

(collectively the "Saber Investment Funds Securities").

2 L The Saber Investment Funds Securities were sold to 182 investors, 152 of whom were


22. The Saber Investment Funds Securities were neither registered with the Bureau, nor

federally covered, nor exempt from registration.

23. Defendants Falci, the Saber Broker-Dealers through Falci, and the Saber Investment Funds

through Falci, made materially false and/or misleading statements to the Saber Investment


(i) theit money would be invested primarily in tax lien certificates; and


24. In reality, Saber Investment Funds' financial docUinents demonstrated that Saber Investment

Funds' investments in tax lien certificates never exceeded three percent (3%) of the total

assets under management, and the 2005 rate of return for MSI Fund I was purely hypothetical

as the MSI Fund I did not even exist in 2005.

Representations to Saber Investment Funds Investors in the PPMs

25. In connection with the offer and sale of securities, Falci provided investors with a MSI Fund

I PPM, FTGF PPM, Saber Fixed Income PPM, Saber Equity PPM and/or PIP PPM


8

c c 26. Investors in the BWX Securities and MSI Equity II Securities were given a MSI Fund I PPM

by Falci.

27. Falci drafted the PIP PPM, the FTGF PPM, the Saber Fixed Income PPM and the Saber

Equity PPM.

28. Falci was heavily involved in the drafting of the MSI Fund I PPM by providing information



the MSI Fund I PPM.


represented to investors in the MSI Fund I PPM, Saber Fixed Income PPM and Saber Equity

PPM, respectively, that: (a) the investment objective was to seek interest income by investing


contemplated investing most oftheir capital in tax lien certificates; (c) the fund could invest



in trading that included, but was. not limited to: selling securities short; purchasing and


30. Falci and FTGF, through Falci, represented to investors in the FTGF PPM that: (a) the


income instruments;" (b) the fund contemplated investing most of its capital in tax lien

certificates; (c) the fund could invest in other securities and interests in real property; and (d)

the fund would buy and sell securities deemed by defendant Falci to be equity equivalents

9

c c· and that the fund may engage in trading including, but not iimited to, selling securities short,


31. The representations to investors that defendants MSI Ftmd I, Saber Fixed Income, Saber

Equity and FTGF would invest "primarily" in tax lien certificates were false because Saber

Investment Funds' financial documents demonstrate that their investments in tax lien


Representations to Saber Investment Funds Investors in the Written Annual Update


Investment Funds investors that falsely represented the percentage of fund allocations in tax


the fixed income fu11ds and eighty-five percent (85%) of the equities funds were allocated to

ta.x lien certificates. In reality, Saber Investment Funds' financial documents make clear that

less than three percent (3%) of total assets tmder management were actually invested in tax

lien certificates.

Misuse of Investor Funds

33. Investor funds· were used for purposes other than those disclosed to investors. Falci

controlled the finances for the Saber Broker-Dealers, the Saber Investment Funds, and

riominal defendants Hallus Realty and ·Phoenix Equities.

34. Payments totaling approximately $700,0QO.OO were made to Falci from the Saber Broker

Dealers, the Saber Investment Funds and nominal defendants Hallus Realty and Phoenix

Equities.

10

(

c 35. Payments totaling approximately $73,000.00 were. made to nominal defendant Donna Falci

from the Saber Broker-Dealers, the Saber Investment Funds and nominal defendants Hallus



Falci from the Saber Broker-Dealers, the Saber Investment Funds and nominal defendants

Hall us Realty and Phoenix Equities. Of the payments made to nominal defendant Vincent


37. Falci transferred approximately $554,000 of MSI Fund I and FTGF investor money to

nominal defendant Phoenix Equities, which was used for personal day-trading by Falci and

nominal defendant Vincent N. Falci.

38. Falci transferred approximately $3,000,000 to nominal defendant Halius Realty from

defendants MSI Fund I, FTGF, BWX, PIP and SFD.

39. The ftmds transferred to nominal defendant Hallus Realty were used by Falci to purchase at


Falci and/or nominal defendant Donna Falci. At least two of the residential properties were

sold, leaving title to the remaining five residential properties (the "Five Residential I


a. Vincent P. Falci (10%) and Hallus Realty (90%), 60 Baldwin Avenue, Middletown,


b. Vincent P. Falci (10%) and Hallus Realty (90%), 2 Grace Avenue, Middletown, New


c. Donna Falci (10%) and Hallus Realty (90%), 165 Lohsen Avenue, Middletown, New

Jersey. Block 289/Lot 15;

11

(

c d. Vincent P. Falci, 318 East Coventry Court, #lOOE, Lakewood, New Jersey, Block

1248/Lot 318.05; and

e. Vincent Falci, 1612 Rosewood Drive, Wall, New Jersey, Block 57/Lot 19.

40. Nominal defendant Hallus Realty, through Falci, manages the Five Residential. Properties.

41. Title to the Five Residential Properties are encumbered with mortgage loans and leased to

residential tenants. The tenant at 1612 Rosewood Drive is nominal defenda.nt Vincent N.

Falci.

42. In addition, Falci, wit11out disclosure to the Saber Investment Funds investors, transferred

millions of dollars between defendants the Saber Broker-Dealers and the Saber Investment


money raised by Falci and the Saber Investment Funds through Falci, was deposited into

one of the Saber Broker-Dealers bank accounts where it was pooled with other investor

funds and, then transferred by Falci to what he and the Saber Investment Funds were

investing in at that time, ~. to buy tax liens certificates, securities or transferred to Hallus.

Realty, which purchased the Five Residential Properties and a sixth residential property

that has since been sold, in Falci's or his wife's name.

43. Falci caused MSI Fund I, FTGF and BWX to issue PIK Notes to nominal defendants

Hall us Realty and Phoenix Equities for purported "lines of credit."

44. Falci established the terms of and entered into the PIK Notes on behalf of all the entities on


45. Falci, the Saber Broker-Dealers and the Saber Investment Funds, through Falci omitted to

disclose to investors that he caused MSI Fund I, FTGF, and BWX: to issue PIK. Notes to

(

nominal defendants Hallus Realty and Phoertix Equities and that Falci, on behalf of all the

entities, negotiated the terms of the PIK Notes.

46. Falci caused Saber Ftmds to enter into three promissory notes that, in total, loaned

$185,000.00 to a company owned by a SAM investor, whom Falci described as his best

friend. Falci, the Saber Broker-Dealers and the Saber Investment Funds, through Falci,


ovvner of said company.



Falci omitted material facts to investors, including, among other things, that:

a. Falci was not registered with the Bureau to sell securities;





d. MSI Equity Fund IT Securities were neither registered with the Bureau nor exempt






13

c·. g. Saber Fixed Income and Saber Equity Income were not formed as limited liability




i. Saber Funds was not registered with the Bureau in any capacity;

J. SFD was not registered with the Bureau in any capacity;


1. Falci controlled of all the entities to which investor funds were transferred;


company controlled by defendant Falci, to purchase the residential properties, which



day-trading by Falci and nominal defendant Vincent N. Falci;

o. Falci caused defendants MSI Fund I, BWX and FTGF to enter into the PIK Notes


acting on behalf of all the parties to the PIK Notes, and on behalf of all the entities,

negotiated the terms of the PIK Notes

p. Falci caused Saber Funds to enter into three promissory notes as a lender in the

aggregate amount of $185,000.00 to a company owned by a SAM investor, which

Falci described as his best fiiend; and



14

c c Falci>s New Business Entities


("SOIF"), a Delaware limited protnership, which offered and sold securities in the form of

limited partnership interests ("SOIF Securities"). SFD is SOIF's general partner.

50. In or around 2012, Falci formed Pantheon Tax Receivables, L.P. ("Pantheon"), a Delaware

limited partnership, which offers a11d sells securities in the form of limited partnership

·interests ("Pantheon Securities"). Vidon Capital Partners, LLC (Vidon'') is Pantheon's


Vidon. Nominal Defendant Vincent N. Falci owns a 4.0% interest in Vidon. Vidon

receives 2% per annum of Pantheon's assets under management·and a performance fee of



51: SOIF is an active entity, but its assets were invested by Falci in the Pantheon .Securities.

CONCLUSIONS OF LAW

52. The Saber Broker-Dealers through Falci, and Saber Investment Funds through Falci,

violated the antifraud provisions of the Securities Law, specifically, N.J.S.A. 49:3-52(b)

and (c), sold unregistered securities in the form of limited liability interests and investment

contracts, in violation ofN.J.S.A. 49:3-60, and employed unregistered agents, in violation

ofN.J.S.A. 49:3-56(h).

53. Falci violated the antifraud provisions of the Securities Law, specifically, N.J.S.A. 49:3-

52(b) and (c), sold unregistered securities in the form of limited liability interests and

investment contracts, in violation of N.J.S.A. 49:3-60, and acted as an agent without

registration, m violation ofN.J.S.A. 49:3-56(a).

15

c 54. Falci and Nominal Defendants were unjustly enriched by the Defendants' violations of the

Securities Law.

THEREFORE, based on the Bureau Chiefs foregoing fmdings of facts and conclusions

of law, it is on this I r day of ~~2015, ORDERED AND AGREED

THAT:

PERl\1ANENT INJUNCTION


Funds Distributors, LLC, Saber Investment Funds, BWX Fund, LLC, Fixed Term




agent, employee, broker, partner, officer, director, attorneys-in-fact, stockholder, and/or

any other person who is directly or indirectly under their control or direction, are

PERMANENTLY ENJOINED AND RESTRAINED from directly or indirectly:

a violating the Securities Law, including its anti-fraud provisions. N.J.S.A. 49:3-52(a) -

(d);


limited to, an. agent as defmed in N.J.S.A. 49:3~49(b), a broker-dealer as defmed in

N.J.S.A. 49:3-49(c), an investment adviser as defmed in N.J.S.A. 49:3-49(g), and an

investment adviser representative as defined in N.J.S.A. 48:3-49(s);

c. issuing, offering for sale or selling, offering to purchase or purchasing, distributing,

promoting, advertising, soliciting, negotiating. advancing the sale of and/or

promoting securities, or advising regarding the sale of any secuntJ.es, many manner

16

(

c c to, from or within New Jersey, including for or on behalf of Pantheon, Vidon and/or


through registered broker-dealers and Falci may acquire an interest in Pantheon or an

entity that may be formed to invest in tax lien certificates in connection with actions

to be taken to comply with ~,I 55( e) and 61;

d. engaging in the conduct described in the Complaint; and






Bureau to be a broker-dealer, an agent, investment adviser, or investment adviser

representative as defined by .the Securities Law.

57. Defendant Vincent Peter Falci is permanently enjoined and restrained from recommending




58. Defendant Vincent Peter Falci is permanently enjoined and restrained from:

·a. Raising any capital in any form for any: (i) issuer; (ii) managing member of any

issuer; and (iii) general partner or other controlling person or entity, of any issuer


b. Managing or exercising control over investments and assets including, but not limited

to, any finances for any: (i) issuer; (H) managing member of any Issuer; and (m)

17

(

general partner or other control person or entity. of any issuer including, but not





59. Nominal Defendant Vincent N. Falci is permanently enjoined and restrained from acting as

a proxy tor any of the Defendants as to any of the enjoined conduct set forth in this

Consent Order.

60. Nominal Defendant Vincent N. Falci is permanently enjoined and restrained from the

following conduct:

a. Acting as an officer and/or director of an issuer;


c. Controlling any issuer that offers and/or sells any security.

61. Upon entry of this Consent Order, Defendant Falci shall be and remain in compliance with



members of issuers; and (iii) general partners and other control persons or entities. of

issuers including, but not limited to, SOIF, Vidon and Pantheon.

RESTITUTION/DISGORGEMENT



Fund I, LLC, MSI Equity Fund II, LLC, and Preferred Income Portfolio I, ILC are jointly

and severally liable to Plaintiff fOI restitution in the amount of $6,742,697.57 for the

(

c c investors who purchased the limited liability interests and/or investment contracts.

Nominal Defendant Dollila Falci shall disgorge $2,108,524.32, pursuant to N.J.S.A. 49:3-

69(a). Nominal Defendant Vincent N. Falci shall disgorge $2,890,553.54, pUrsuant to

N.J.S.A. 49:3-69(a). Nominal Defendant Hallus Realty Group, LLC shall disgorge

$2,035,511.23, pw-suant to NJ.S.A. 49:3-69(a). The $2,035,511.23 of disgorgement owed




$2,035,511.23 of disgorgement owed by Nominal Defendant Hallus Realty Group, LLC is

jointly and severally owed by Defendants Vincent Peter Falci, Saber Funds, LLC, Saber



Income Portfolio I, LLC, and Nominal Defendants Donna Falci and Vincent N. Falci.

Nominal Defendant Phoenix Equities shall disgorge $514,176.49, pursuant to N.J.S.A.

49:3-69(a), which is jointly and severally owed by Defendants Vincent Peter Falci, Saber

Funds, LLC, Saber Asset Management, LLC, Saber Funds Distributors, LLC, BW:X Fund,

LLC, Fixed Term Government Fund, LLC, MSI Fund l, LLC, MSI Equity Fund II, LLC,

and Preferred Income Portfolio I, LLC, and Nominal Defendant Vincent N. Falci. The

restitution/disgorgement shall be paid to Plaintiff over five years as follows:

a. $471,988.82 (seven percent (7%) of the $6,742,697.57) on or before August 31, 2016; b. $876,550.67 (thirteen percent (13%) of the $6,742,697.57) on or before August 31,

2017;

c. $1,483,393.47 (twenty-two percent (22%) of the $6,742,697.57) on or before August 31, 2018;

d. $1,887,955.33 (twenty-eight percent (28%) of the $6~742,697.57) on or before August 31,2019;and

19

(.

c c e. $2,022,809.28 (thirty percent (30%) of the $6,742,697.57) on or before August 31,

2020.

63. The Bureau shall distribute the restitution!disgorgement payments to the investors and the


investors.

CIVIL MONETARY PENALTIES

64. A civil monetary penalty may be imposed on Defendants Vincent Peter Falci, Saber


LLC, Fixed Term GoveJ.nment Fund, LLC, MSI Fund I, LLC, MSI Equity Fund II, LLC,

and Prefen-ed Income Pm1folio I, LLC pursuant to N .J .S.A. 49:3-70.1 for each violation of

the antifraud and registration provisions of the Securities Law of not more than $1 0,000

for the first violation and not more than $20,000 for a second and each subsequent

violation. In view of the specific facts of this case including. but not limited to, the


by the Defendants through Vincent Peter Falci to Plaintiff through the date of entry of this


Defendants' and Nominal Defendants' financial status, all of which are material to

Plaintiff in entering into this Consent Order and assessing the civil monetary penalties, the

civil monetary penalties are reduced. Defendants Vincent Peter Falci, Saber Funds, LLC,

Saber Asset Management, LLC, Saber Funds Distributors, LLC, BWX Fund, LLC, Fixed

Term Government Fund, LLC, MSI Fund r, LLC, MSI Equity Fl:ID-d II, LLC, and

PrefetTed Income Portfolio I, LLC are jointly and severally assessed civil monetary

penalties pursuant to N.J.S.A. 49:3-70.1 in the amount of $800,000.00 for violations of

20

(

c c N.J.S.A. 49:3-52(b), N.J.S.A. 49:3-52(c), N.J.S.A. 49:3-56(a}, N.J.S.A. 49:3-56(h) and

N.J.S.A. 49:3-60, which is remedial and not punitive in nature.

65. The civil monetary penalties shall be paid in the same proportion as the

restitution/disgorgement payments set forth in 1 62, unless accelerated pursuant to this


a. $75,000.00 within 120 days of entry of this Consent Order; b. $50,750.00 on or before August 31, 2016; c. $94,250.00 on or before August 31, 2017; d. $159,500.00 on or before August .11, ?.Ol8; e. $203,000.00 on or before August 31, 2019; and f. $217,500.00 on or before September 15,2020.

The penalty payments shall be deposited into the Securities Enforcement Ftmd, pursuant to

N.J.S.A. 49:3-66.1. Payment shall be made in accordance with the provisions in this

Consent Order.

FINAL JUDGMENT


Falci, Saber Funds, LLC, Saber Asset Management, LLC, Saber Funds Distributors, LLC,

BW:X Fund, LLC, Fixed Term Government Fund, LLC, MSI Fund I, LLC, MSI Equity

Fund II, LLC, and Preferred Income Portfolio I, LLC, for violations ofN.J.S.A. 49:3-52(b),

N.J.S.A. 49:3-52(c), N.J.S.A. 49:3-56(a), N.J.S.A. 49:3-56(h) and N.J.S.A. 49:3-60,

constituting $6,742,697.57 in restitution and $800,000.00 as civil monetary penalties

pursuant to N.J.S.A. 49:3-70.1 ( .. Defendants' Final Judgment").

67. Final judgment is entered against Nominal Defendant. Vincent N. Falci in the amount of

$2,890,553.54 as disgorgement in accordance with 162.

68. Final Judgment is entered against Nominal Defendant Donna Falci in the amount of

$2,108,524.32 as disgorgement in accordance with 162.

21

69. Final Judgment is entered against Nominal Defendant Hall us Realty Group, LLC in the

amount of $2,1 08,524.32 as disgorgement in accordance with , 62.


$514,176.49 as disgorgement in accordance with 162.



restitutionldisgorgement payments and the civil monetary penalties payments set forth in 11


occur as set forth in 1 80, then $217,500.00 of the civil monetary penalties due on

September 15,2020 will be considered suspended and not collected by the Bureau.




the Bureau Chief.



Defendants represent to Plaintiff and agree to perfonn the following:

a. J?efendants and Nominal Defendants shall pay to the Bureau in annual installments




all relevant documentation inc! udi.ng, but not limited to, leases, backup documents,


22

c shall provide a copy of same to the Bureau within ten days of a request· by the

Bureau;

b. Vincent Peter Faki is the insured and owner of a life insurance policy with a 'Three

Million ($3,000,000) Dollar deatll benet1t issued by Reliastar Life Insurance

Company (the "Insurer") on June ?.8, 2012, policy number AD •••• (the "Life


Vincent Peter Falci owns a :fifty percent (51%) interest in Saber Funds LLC and


Peter Falci, individually, and a:-; a member of Saber Funds LLC, and Donna Falci,

individually, and as a member ot Saber Funds LLC shall continue to make all


and civil monetary penalty paymenb are paid as set forth in 11 62, 65 and 71.

Vincent Peter Falci, individually, and as a member of Saber Funds LLC, and Donna

Falci, individually, a_11d as a member of Saber hmds LLC, at their own costs and

expense, shall take such steps as are reqnirccl by the Insurer to assign, transfer and set

over to the "State of New Jersey, Bureau of Securities" the Life Insurance Policy and


entry of this Consent Order. Vincent Peter Falci represents to Plaintiffthat there are

no loans or other liabilities on the Life Insurance Policy that would reduce the death



the death benefit toward the balance of the final judgment owed under this Consent

(

c Order. In the event the balance o:wed to pay the fmal judgment is less than the death





Middletown, New Jersey, Block 600/Lot 32. Such action shall include, but is not


1. Giordano, Halleran & Ciesla, P.C. ("GHC") will order title reports on each of

the properties to identify all recorded liens and encumbrances, and provide

Plaintiff with a copy of the title reports;

ii. The title company will file Notice of Settlement in applicable counties;

iii. GHC will prepare mortgages in a form satisfactory to the Bureau naming the


iv. Promptly following the entry of the Consent Order, GHC will record the

mortgages with the Office of the County Clerk of Monmouth Cotmty and


This Consent Order shall be attached as an exhibit to each mortgage. Once all

the restitutionldisgorgement and civil monetary penalty payments are paid as

set forth in 1162, 65 and 71, the State ofNew Jersey shall provide Defendant

Falci with documentation sufficient to discharge the lien. Defendants and

Nominal Defendants shall be responsible for all costs and fees associated with

the discharge of the lien;

24

c~·



recording in the office of the clerk of the county in which the real estate is

located, and (iii) upon execution and delivery, shall be effective to create a


74. Defendant Falci and the Saber Broker-Dealers and Saber Investment Funds through Falci,

and the Nominal Defendants shall sign within fifteen business days all documents as may

be requested by their counsel and/or Plaintiff to fulfill all of the obligations of Defendant

Falci and the Saber Broker-Dealers and Saber Investment Funds, and the Nominal


75. Defendant Falci shall dissolve each of the Saber Broker-Dealers and Saber Inv~stment


76. In the related administrative action, IMO Vincent Peter Falci. et al., OAL Docket #13248-

2014N BOS, the Bureau Chief entered a Summary Order on September 18, 2014

("September. 18, 2014 OAL Summary Order"). This Consent Order is subject to

Defendants withdrawing their answers to the September 18, 2014 OAL Summary Order

within ten (1 0) days of entry of this Consent Order and acknowledging that they do not

contest the relief sought by the Bureau Chief. The September 18, 2014 OAL Summary


77. Defendants and Nominal Defendants shall provide the Bureau with a copy of their filed

federal and state tax returns for each year within ten days of filing until all the

restitutionldisgorgement and civil monetary penalty payments are made as set forth in ,, ·

25

(

(~

78. Defendants shall not represent or imply that any act or practice hereinafter used or engaged

in by Defendants or Nominal Defendants has been required or approved) in whole or part,

by the State ofNew Jersey, the Attorney General ofNewJersey, the Division ofLaw, the

Bureau or any New Jersey agencies, agents, employees or subdivisions.

79. Upon any Triggering Event defined in 1{80, the Bureau and/or Bureau Chief may:

a. declare to Defendants and Nominal Defendants that the unpaid portion of the

Defendants' Final Judgment and Nominal Defendant<>' Final Judgment immediately

due and payable; andlor

b. take any action pennitted by law.

80. A .. Triggering Event" is defined to include the following circumstances:

a. A violation or breach of this Consent Order by Defendants and Nominal Defendants;

b. Defendants' and Nominal Defendants' failure to make timely

restitutionldisgorgement payments as set forth in 1 62;

c. The failure of Falci, Saber Funds LLC and/or Donna Falci, to timely make all

required payments on the Life ln.'lurance Policy;

d. Defendants' and Nominal Defendants' failure to submit filed yearly federal and state

tax returns as set forth in 1 77;

e. Defendants' failure to make timely payments of the civil monetary penalties as set

forth in 1 65; and/or

f. Ihe discovery by the Bureau Chief of the falsity of any material representations made

by the Defendants and Nominal Defendants as set forth in 1 64.

81. Defendants and Nominal Defendants transferring of assets of any kind between each other

and/or any entity they control, directly or indirectly, shall be deemed a prima facie

26

c .... c fi·audulent transfer under New Jersey's UnifolJU Fraudulent Transfer Act, N.J.S.A. 25:2-20




defenses based on jurisdiction, lack of standing, statutes of limitations, or statutes of


83. Any person with actual or constructive notice of this Consent Order who aids, abets,

counsels, commands or instructs any person or entity to perform any act prohibited by this

Consent Order shall be subject t.o any and all actions available at law and in equity to the

Bureau Chief.

84. Within ten days of entry of this Consent Order, Falci shall provide a copy of this Consent

Order to:

a. Current and future investors of the Defendants, SOIF, Vidon, Pantheon and any issuer

who employs Defendant Falci or for whom Defendant Falci provides consulting


acknowledgement confinning receipt of this Consent Order and sue~


request to Falci; and

b. Current and future officers, directors, managers, supervisors, and/or partners of any

issuer and general partner of an issuer who employs Defendant Falci or for whom

Defendant Falci provides consulting services, compensated or uncompensated. Each

such person shall be required to sign an acknowledgement confirming receipt of this

27

c c· Consent Order and such acknowledgments shall be made available to the Bureau


85. This Consent Order constitutes the entire agreement between Plaintiff, Defendants and •

Nominal Defendants with respect to this litigation. This Consent Order is a complete and

exclusive statement of the terms of the agreement among the Parties with respect to its

subject matter and shall bind Defendants and Nominal Defendants, and their officers,



construed to limit or· affect any position that the Bureau and/or Bureau Chief may take in

any future or pending action not specifically encompassed herein.

86. Nothing in this Consent Order shall in any manner be construed to limit or affect the rights

of any persons, other than the Bureau Chief, as it pertains to the allegations in the

Complaint, who may have a claim against Defendants and/or Nominal Defendants.


signed this Consent Order with full knowledge, understanding and acceptance of its terms



original.

89. The terms and conditions of this Consent Order may be modified only with the written


90. If any portion of this Consent Order is held invalid or unenforceable by operation of law or

court order, the remaining terms of this Consent Order shall remain in full force and effect

28

, ' ' ' ~ ' ' ' . .· . .\ ' . -~ . " «w.;..'"-•~--.----"1'·•--~0<, .. ,...,_A_,_...__,,,,.,.,~ .. ----~--·-"'-~"'"'"""'"""'-"~--···•-· ... ~·-~~"""o <

I c c 91. This Court retains jurisdiction to enforce, modify or otherwise hear any application arising

from the terms of this Consent Ord.er.


93. Defendants and Nominal Defendants represent that they have had a full and complete

opportunity to consult with counsel before signing this Consent Order.

94. Defendants and Nominal Defendants hereby consent to the jurisdiction of the Bureau.



29

) c Consent to the Form, (',ontent and Entry of this Consent Order and Final Judgment:

GIORDANO, HALLERAN & CIESLA 125 HalfMile Road1 Suite 300 Red Bank, NJ 07701

Peter B. Bennett, Esq. (Attorney Id. #~;lt::J~C.71<tK\) Attorneys for defendants and nominal defendants

Dated: ~ -1 ~~ l s-

Vincent P. Falci, Saber Funds, LLC, Saber Asset Management, LLC, Saber Funds Distributors, LLC, BWX Fund, LLC, Fixed Term Govenunent Fund, LLC, MSI Fund I; LLC, MSI Equity Fund II, LLC, Preferred fucome Portfolio I, LLC, Hallus Realty Group, LLC, Phoenix Equities, LLC, Donna Falci and Vincent N. Falci


Vin,c nt Peter Falci, Individually and d/b/a Saber Fixed Income Series, LLC and Saber Equity Income Series, LLC

Consent to the Fonn, Content and Entry of this Consent Order and Final Judgment:

Saber Funds, LLC

By:~~J£ ~Peter Falci Managing Member

30

Dated: 9-(~--(\

j c Consent to the Form, Content and Entry of this Consent Order and Final Judgment:

Saber Asset Management, LLC

By: y-~~{-----::-:--r---.__,_--::--t

Vincent Peter Falci Managing Member


Saber Funds Distributor~ LLC

By:~---/1/ ~eterFalci

Managing Member



MSI FUND l, LLC

By:~~~ -vincent fiZFalci

Title:_ ~

31

(

Dated: 9--/ .. C "'I J'

Dated: J-rf *'JJ

Dated: p...-;.r.,~

11 / ,---Dated: i' --/1··{ J

)

(


BWX Fund, LLC

By:~?£2f-P....;;..._ .... ___ _ J1tle: nVt.. .



By:~ r/~-----'--Vince!Y.e}er Falci Title: .Q lO"\


Preferred Income Portfolio I,. LLC

By:~~jf&£ Tjtle: ·.· '


Dated:(: ([:I d_..

(

c c Consent to the Form, Content and Entry of this Consent Order and Final Judgment:

Dated: ~-(;-:.(::;-

Consent to the Form, Content

and Entry of this Consen.e».n. t .. · rder and Final Judgment:

~---. Dated: nna Falci, Individually

Consent to the F onn, Content and Entry of this Consent Order and Final Judgment:

33

c Consent to the Form, Content and Entry of this Consent Order and Final Judgment:

JOHN J. JiOFF:t-.1AN ACTING ATIORNEY GENERAL OF NEW JERSEY Counsejfor Plf in tiff

! _...,.----., I · r-.r~

By: -- \ i~-u&(Alli)ffiey I d.# 006371991) Attorney for Plaintiff

34

EXHIBIT 12

Zachary D. Rosenbaum- (Bar LD. 053771994) Frank T.M. Catalina - (Bar I.D. 022952009) LOWENSTEIN SANDLER LLP Attorneys At Law 65 Livingston A venue Roseland, New Jersey 07068 973.597.2500 Attorneys for Plaintiff

Vicor Tax Receivables, LP

RECEIVED &: FILED SUPERIOR COURT

Zfilb SEP 72 A II:~~,

M JRRIS COUtHY ' ' \/ :: f' ~~ ; I r- I ON I,.. I ' ' ... 1../ l I .J I

SUPERIOR COURT OF NEW JERSEY LAW DIVISION: MORRIS COUNTY

VlCOR TAX RECEIVABLES, LP,

Plaintiff,

DOCKET NO.: L- t1 I 1 (Q ~ ( C,o

vs.

VINCENT P. FALCI, VINCENTN. FALCI, AND SABER FUNDS DISTRIBUTORS, LLC,

Defendants.

CIVIL ACTION

COMPLAINT

Plaintiff, Vicor Tax Receivables, LP, ffkJa Pantheon Tax Receivables, LP

("Vicor" or the "Fund"), by and through its attorneys Lowenstein Sandler LLP, by way of

Complaint against Defendants Vincent P. Falci ("Falci"}, Vincent N. Falci ("Falci, Jr.''),

and Saber Funds Distributors, LLC ("Saber Distributors") says:

NATURE OF THE ACTION

1. This is an action by Vicor for damages and to recover investment

funds stolen from it by Falci and his web of companies, agents, and co-conspirators

(together, the "Falci Enterprise").

2. Vicor is an investment fund that was launched by Falci in 2012 to

earn a return through investing in tax lien certificates. At the time, Falci was the

managing and controlling member ofVidon Capital Partners, LLC ("Vidon"), the general

partner of Vicor. Falci's son, Falci, Jr., held the remaining minority membership interest

in Vidon. As such, Falci and Falci, Jr., owned 100% of the membership interests in

Vidon and Falci had total control of Vicor's investment strategies and decisions at aU

times relevant to this action.

3. Falci attracted investors, in part, by touting his experience as an

investment advisor and, in particular, his experience with investing in tax liens. As the

offering and marketing materials Falci distributed to potential Vicor investors described,

Falci had founded and operated a group of investment funds known as the Saber Funds in

2005 that purportedly invested primarily in tax liens. What the offering and marketing

materials failed to inform prospective investors, however, was that Falci had been the

target of a New Jersey Bureau of Securities investigation relating to his involvement with

the Saber Funds.

4. That investigation would ultimately result in the Attorney

General's Office filing a civil suit against Falci, his family members, and his web of

companies in September 2014 for, among other things, selling unregistered securities and

misleading Saber Funds investors as to how their funds would be invested. In September

2015, Falci entered into a consent judgment with the State requiring Falci to, among other

things, relinquish control ofVidon and to pay approximately $6.7 million in restitution to

Saber Funds investors and $800,000 in penalties to the State.

5. Following Falci's transfer of control to Vidon's new principals,

Vidon discovered an extensive fraud perpetrated by the Falci Enterprise whereby Falci

embezzled millions of dollars from Vicor and covered his tracks by falsifying records,

including the creation of fictitious tax liens, routing payments through various entities to

conceal the final destination of the funds, and falsely booking certain transfers on Vicar's

balance sheet to conceal the fact that Falci had depleted the Fund's assets. Upon

infonnation and belief, a significant portion of the embezzled funds was transferred to

Saber Distributors, an entity owned and controlled by Falci and, it appears, ultimately

paid out to Saber Funds investors.

6. According to available infonnation, Falci and the Falci Enterprise

misappropriated funds and/or fabricated investment gains totaling more than $10 million.

However, the full extent of the scheme has not yet been revealed, as Falci has impeded

Vidon's new principals from obtaining Vidon's and Vicar's current bank account

records, as well as their postal mail and electronic communications.

7. To effect this illicit scheme, the Falci Enterprise engaged in wide-

spread racketeering activity in violation ofN.J.S.A. §§ 2C:41-2(c) and (d) and 2C:41-4.

8. Vicar seeks in this suit the return of all money stolen from it,

disgorgement from Falci of management and performance fees Falci received, which

were based on grossly inaccurate representations as to Vicar's assets, together with treble

and/or punitive damages, plus attorneys' fees and costs.

THE PARTIES

9. Plaintiff Vicor is a Delaware Limited Partnership with a business

address at 16 Oliver Street, Chatham, NJ 07928. Vicar was formerly known as Pantheon

Tax Receivables, LP, and changed its name to Vicar Tax Receivables, LP, on or about

February 12,2015.

10. Defendant Vincent P. Falci is an individual residing in

Middletown, New Jersey.

11. Defendant Vincent N. Falci is an individual residing in Wall

Township, New Jersey.

12. Defendant Saber Distributors is a Delaware limited liability

company with a business address of 1715 Highway 35, Suite 101, Middletown, NJ

07748. Falci, on information and belief, is Saber Distributors' managing director.

I. BACKGROUND

13. Vicor is an investment fund formed by Falci to invest in property

tax lien certificates issued by state and local taxing authorities throughout the United

States. Vicor is managed by its general partner, Vidon, and the investors in the Fund are

Vicor's limited partners, as well as equity holders in a Vicor "sub-fund".

14. At Vidon's inception, in or around August 2011, until on or about

October 1, 2015, Vidon was controlled by Falci, who owned a 60% interest in Vidon, and

Falci, Jr., who owned a 40% interest in Vidon.

15. Tax liens are issued by local taxing authorities and sold to the

public when property owners fail to pay property taxes. Generally, the tax lien purchaser

pays the outstanding tax liability and obtains a first priority lien against the property. If

the property owner, or other interested party, does not pay the tax lien holder the back

taxes plus interest after a certain amount of time, as set by statute, the tax lien holder can

foreclose upon the property.

16. Vicor was launched in January 2012. However, Falci began

seeking investors in Vicor as early as September 2011. A September 2011 Confidential

Private Offering Memorandum (the "Offering Memorandum") provided to potential

investors described, among other things, Vicar's structure and investment strategy.

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17. The Offering Memorandum explained that "[t]he Fund's strategy

will be to acquire tax lien certificates which will have a high likelihood of redemption

and an attractive lien to value ratio. To make this assessment, the principals of the

General Partner conduct extensive due diligence with respect to the payment history of

the property securing the lien." The Offering Memorandum identified Falci as the

"managing member and principal" of the General Partner, Vidon.

18. As was also explained in the Offering Memorandum, Vicor formed

various Special Purpose Entities ("SPEs") domiciled in each of the states where Vicor

was purchasing tax liens for the purpose of purchasing the liens. The SPEs are single-

member LLCs with Vicor as the sole member for each. · The names of the SPEs are

Apollo, Vulcan, Saturn, Vesta, Ceres, Neptune, Juno, and Janus.

19. On or about December 14, 2011, Vicor retained Apex Fund

Services (US), Inc. ("Apex") to act as a third-party administrator for Vicor. The terms of

Apex's retention as administrator were set forth in a December 14, 2011, Administrator,

Registrar and Transfer Agent Agreement (the "Apex Administrator Agreement").

20. Pursuant to the terms of the Apex Administrator Agreement,

Apex's duties as third-party administrator included, among other things:

a) At Vidon's direction, to make and receive payments to and from Vi cor's bank accounts;

b) Determining management and performance fees and the net asset value ("NA V") of the Fund;

c) Assisting Vidon in "lias[ing] with the Fund's banks, brokers and custodians" and "check[ing] the accuracy and reasonableness of confirmations" relating to fund transfers and expenses;

d) Tracking and administering Fund subscriptions and redemptions;

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e) "[KJeeping the accounts and records of the Fund" and preparing and providing to investors statements, checks, and other documents Vidon is required to provide;

t) Preparing monthly and annual financial statements for the Fund in accordance with generally accepted accounting principles;

g) Maintaining a register of investors; and

h) Providing Vicor accounting records on a monthly basis showing the value of the investors' investments.

21. In a marketing presentation (the "Investor Presentation") created

and distributed to potential investors by Falci, Falci represented that Apex would control

all of the funds invested in Vicor, placing those funds beyond the reach of Falci.

Specifically, the Investor Presentation represented that Vicor's holding account, where

"initial subscription capital" was held, and its operating account, which was funded with

investor capital and a Capital One line of credit (the "LOC"), were both "exclusively

controlled by Apex." Thus, according to the Investor Presentation, "[Vicor] never has

access to investor funds."

22. In an October 2011 email, Apex Managing Director Vincent

Sarullo stated that 4'bank accounts are set up for the funds with Apex having ALL control

over monies. The fund managers ONLY make the lien acquisitions .... Essentially, the

fund managers never touch the monies." Several initial Vicor investors were shown and·

relied upon this email.

23. In or about January 2012, Vicor, several of the SPEs, and Capital

One, National Association, entered into a Custodial Agreement (the "Custodial

Agreement") whereby Apex agreed to, among other things, hold certain tax liens

purchased by the SPEs, which tax liens served as collateral for the LOC, as custodian.

Apex also agreed to gather and maintain 4'all material information concerning the

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purchase of such Tax Lien and infonnation about the property securing the Tax Lien and

each Tax Debtor" and to provide such information to Vicar and Capital One.

24. In raising investment capital for the Fund, Falci touted his

experience both in the field of investment management generally, and with regard to

investing in tax liens in particular. Falci also highlighted his affiliation with a group of

investment funds known as the Saber Funds.

25. The Offering Memorandum included a biography of Falci, which

highlighted his role as "Managing Director and founder of Saber Funds." It read, "[i]n

the early 2000's, Mr. Falci brought his passion for protecting and growing his clients'

assets to new heights with the creation of Saber Funds. His knowledge as a financial

advisor became invaluable as he developed a company that functioned on a solitary

principle that[] great returns need not be achieved at great risk. With this guiding tenet,

Saber Funds became a forerunner in the alternative investment world of tax lien

certificates."

26. The Investor Presentation contained similar biographical

infonnation about Falci and his background. It touted Falci's "15 years investment

management experience" and "1 0 years tax lien acquisition experience." The

presentation claimed that Falci was a "tax Hen consultant for investment advisory firms"

and noted that he "founded Saber Funds LLC in 2005."

27. Neither the Offering Memorandum nor the Investor Presentation

disclosed the fact that Falci and Falci, Jr., were being investigated by the New Jersey

Bureau of Securities regarding their involvement with and operation of the Saber Funds.

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28. Following the Fund's January 2012 launch, Vicar continued to

admit new investors over the course of the next several years. ·

29. Vicar's audited financial statements, prepared by Cowan, Gunteski

& Co., P.A., at year-end 2012,2013, and 2014 reflected investors' capital of$3,456,017,

$7,960,323, and $17,546,515 respectively. By the fall of2015, the Fund had a purported

NA V of approximately $20 million, although a significant portion of that total consisted

of fabricated assets and falsified gains. As it turns out, a substantial portion of the capital

invested in Vicar was stolen by Falci and/or the Falci Enterprise and diverted to, among

others, Saber Distributors, which in tum, on information and belief, distributed stolen

funds to Saber Funds' investors whom Falci would ultimately admit to defrauding.

II. THE SABER FUNDS CONSENT JUDGMENT

30. As Falci had touted in the materials he used to market Vicor to

potential investors, Falci founded Saber Funds, LLC (''Saber Funds"), along with various

affiliated entities, in 2005.

31. On or about September 18, 2014, the New Jersey Attorney

General, Bureau of Securities, brought a civil lawsuit (the "NJ-AG Action") against

Falci, Saber Funds, Saber Distributors, several other affiliated funds and entities (the

"Saber-Affiliated Entities")1, and, nominally, against Falci, Jr., and Falci's wife, Donna

Falci.

32. The NJ-AG Action included claims against Falci for violating New

Jersey securities laws by, among other things, making false and misleading statements to

Saber Funds investors in connection with their purchase of securities, defrauding Saber

1 The "Saber-Affiliated Entities" are Saber Asset Management, LLC, Fixed Term Government Fund, LLC, MSI Fund 1, LLC, MSI Equity Fund II, LLC, BWX Fund, LLC, and Preferred Income Portfolio I, LLC.

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Funds investors, acting as an agent without registration, and selling unregistered

securities.

33. In addition to fraudulently raising funds through the sale of

unregistered securities, the NJ-AG Action alleged that Falci misled investors as to how

the funds would be used, and instead diverted the funds to his own benefit. In particular,

the NJ-AG Action alleged that Falci "misrepresented to investors that investor money

would be invested primarily in tax lien certificates ... " and that "investor funds were used

to, among other things, purchase several residences for defendant Falci and his wife, ...

conduct day-trading by defendant Falci and his son, . . . and make loans totaling

$185,000.00 to a company owned by defendant Falci's best friend."

34. The NJ-AG Action sought (1) to provide Saber Funds investors

with the option to have their investments refunded, (2) disgorgement by the defendants,

(3) civil penalties, and (4) an injunction preventing Falci, along with the other defendants,

from "engaging in the securities business in New Jersey in any capacity" and from

selling, offering to sell, or promoting any securities from or within New Jersey.

35. On September 18, 2015, the Superior Court ofNew Jersey entered

a Consent Order and Final Judgment as to All Defendants and Nominal Defendants in the

NJ-AG Action (the \\Consent Judgment").

36. The Consent Judgment contained detailed findings of fact, which

Falci and his co-defendants admitted to by executing the Consent Judgment and agreeing

to its entry, including findings that:

a) "From January 2006 through at least December 2009, Falci ... fraudulently raised over $6.7 million from the sale of unregistered securities in the form of interests in limited

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liability companies and investment contracts from approximately 182 investors .... "

b) "Falci ... created, operated and exclusively controlled and continues to control" Saber Funds, Saber Distributors, and the Saber-Affiliated Entities.

c) Falci handled the day-to-day management of, made all investment decisions for, and controlled the finances of Saber Funds, Saber Distributors, and the Saber-Affiliated Entities.

d) Falci, Saber Funds, Saber Distributors, and certain of the Saber-Affiliated Entities "made materially false and/or misleading statements" to Saber investors "including that: (i) their money would be invested primarily in tax lien certificates; and (ii) in 2005, such investments yielded a 7.24% rate of return." In fact, no more than 3% of the total assets under management of Saber's investment funds were invested in tax lien certificates at any given time and the referenced returns were purely hypothetical.

e) Prospective investors in the Saber-Affiliated Entities were provided with private placement memoranda (the "Saber PPMs") setting forth the purposes and strategies of the various funds. Falci either drafted himself or was "heavily involved in drafting" the various Saber PPMs.

f) The Saber PPMs represented that the investment objective of the funds was to seek interest income primarily through investing in tax lien certificates and other fixed income instruments, and that "the funds contemplated investing most oftheir capital in tax lien certificates .... "

g) Saber Distributors, through Falci, falsely represented to Saber investors in an annual written update in or around December 2008 that 85%-90% of funds were invested in tax lien certificates when, in. fact, that number was never above 3%.

h) Falci transferred more than $1 million in investor funds to himself, Falci, Jr., and his wife, and transferred approximately $554,000 to Phoenix Equities, an entity Falci controlled, which Falci and Falci, Jr., used for personal day trading.

i) Falci transferred approximately $3 million in investor funds to Hallus Realty, an entity he controls, which was subsequently used to purchase at least seven properties, which were initially deeded in Falci's and/or his wife's names.

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j) At the time the Consent Judgment was entered, two of the properties purchased with Saber investor funds had been sold and five were stilJ owned by the Falcis and/or Hallus Realty. Each of the five were encumbered by mortgage loans and leased to residential tenants, including one that was leased to Falci.

k) Falci caused certain of the Saber-Affiliated Entities to extend lines of credit to Phoenix Equities and Hallus Realty, and Falci caused Saber Funds to loan $185,000 to a company owned by an individual Falci referred to as his "best friend." These loans were not disclosed to investors.

37. The Consent Judgment also contained conclusions of law,

including that Falci, Saber Funds, and Saber Distributors (a) "violated the antifraud

provisions of the [New Jersey] Securities Law," (b) "sold unregistered securities in the

form of limited liability company interests and investment contracts," and (c) "acted as an

agent without registration, in violation of'' New Jersey securities laws.

38. The Consent Judgment permanently enjoined (the "Injunction")

Falci from "engaging in the securities business in New Jersey in any capacity, from

selling, offering for sale, or promoting any securities," and from "acting as an officer

and/or director if an issuer ... or from owning or controlling a majority interest in any

issuer that offers and/or sells any security." The Injunction also expressly barred Falci

from raising capital, managing. or exercising control over investments and assets, and

engaging in investor communications for or on behalf ofVidon and Vicar.

39. In addition to the Injunction, final judgment was entered against

Falci, Saber Funds, Saber Distributors, and certain of the Saber-Affiliated Entities in the

amount of $7,542,697.57, representing $6,742,697.57 in restitution and $800,000.00 in

civil monetary penalties. The Consent Judgment requires that payment of the final

judgment amount be made directly to the New Jersey Bureau of Securities according to a

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schedule set forth in the Consent Judgment, with the initial payment on August 31, 2016,

subsequent payments on August 31 through 2019, and a final payment on September 15,

2020. On infonnation and belief, Falci failed to pay the first installment due on August

31,2016.

III. FALCI RELINQUISHES CONTROL OF VIDON AND APEX RESIGNS

40. Because the Injunction expressly prohibited Falci from managing

Vidon and/or Vicar, Falci was required to relinquish control of Vidon after entry of the

Consent Judgment.

41. In order to do so, Falci and Falci, Jr., who were the only members

of Vidon at that time, entered into a Membership Interest Purchase Agreement (the

"MIPA"), dated October I, 2015, whereby Clifford Andrews ("Andrews") obtained a

40% membership interest in Vidon and Robert Gartner ("Gartner") acquired a 30%

membership interest in Vidon. Pursuant to the MIPA, Falci retained a 20% interest, and

Falci, Jr., retained a 10% interest in Vidon.

42. Following the entry of the Consent Judgment, Apex notified Vidon

of its intent to tenninate the Apex Administrator Agreement and the Custodial Agreement

and to no longer serve as administrator or custodian for Vidon and Vicor.

43. On or about October l, 2015, Vidon retained Tower Fund

Services, LLC ("Tower") as Vicar's fund administrator, replacing Apex. Tower was

subsequently retained as custodian, replacing Apex, on December 18, 2015.

IV. ANDREWS AND GARTNER DISCOVER FALCI'S THEFT AND FRAUD

44. After Andrews and Gartner acquired their membership interests in

Vidon, and Tower took over for Apex as administrator and custodian, infonnation began

to emerge regarding Vicar's finances and balance sheet.

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45. For example, shortly after taking over for Apex., Tower identified a

large line-item listed as an asset on Vicar's balance sheet entitled Investments in

Advance account ( .. IIA Account"). The IIA Account is a way of reflecting monies that

have been designated for imminent investment, such as funds deposited with a local

taxing authority in advance of an upcoming tax. lien certificate sale, or recently purchased

assets that have not yet been added to Vicar's inventory management system.

46. The initial balance sheet provided to Tower by Apex. listed IIA

Accounts in ex. cess of $3 million.

47. Tower quickly requested that Falci explain why the IIA Account

figures were so large and where the IIA Account assets were located.

48. Falci failed to provide a satisfactory explanation to Tower

regarding the IIA Accounts. Falci also has failed to produce backup for other balance

sheet items to Tower. As a result, Tower has not provided Vicor investors with an NAV

report, which is typically provided on a monthly basis, since March 2016, when it

provided anNA V for January 2016.

49. During the first quarter of 2016, certain Vi cor investors expressed

a desire to redeem the invested funds and establish two separate tax lien investment funds

- one to be established by Andrews and Gartner, and another to be established by certain

other Vicor investors.

50. On March 23, 2016, Andrews and Gartner, on behalf of Vidon,

sent a letter to Vicor investors explaining that Vidon had determined it was in Vicar's

interests to dissolve the Fund and liquidate and distribute its assets to investors. The

letter explained that the Fund's dissolution would take an estimated 30-60 days.

' Investors were given the option of (I) accepting a direct distribution from the Fund, (2)

directing their interest in Vicor to be transferred to a tax lien fund to be established by

Andrews and Gartner, or (3) directing their interest to be transferred to a tax lien fund to

be established by certain other Vicor investors.

51. Leading up to that letter, Andrews and Gartner had met with Falci

repeatedly to discuss Vidon's and Vicar's operations and finances. As set forth more

fully below, Andrews and Gartner have since learned that Falci lied to them. Falci also

stonewalled their attempts to gain access to Vidon's records.

52. Following Vidon's decision to dissolve the Fund, and despite

Falci's obstruction, Andrews and Gartner were able to uncover extensive misconduct and

misappropriation of monies perpetrated by the Falci Enterprise through the records to

which they were able to gain access as well as the review of publicly available

infonnation.

A. Overpayments From Vicor to Vidon

53. As a result of Falci's failure to cooperate with and provide

infonnation to Andrews and Gartner, Vidon cannot currently access the records of its

own (now closed) bank accounts at Wells Fargo, though it does have access to Vicar's

accounts dating back to January 1, 2015.

54. Falci transferred Vidon's and Vicar's accounts from Sovereign

Bank to Wells Fargo on or about January I, 2015 to, upon information and belief, avoid

certain restrictions upon his ability to access the funds in the accounts which were in

place with the Sovereign Bank accounts. Following the transfer of control of Vidon to

Andrews and Gartner, Vidon has been able to access only a portion of Vidon's and

Vicar's account records from the pre-January 1, 2015 Sovereign Bank accounts.

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55. Nonetheless, a review of Vicor's records from its Wells Fargo

accounts from February 2, 2015 until approximately April 13, 2016 has revealed that

Falci directed at least $1.8 million in overpayments to Vidon above and beyond even the

most conservative estimate of funds to which Vidon would have been entitled over the

same period. While, again, Vidon does not have access to its account records with Wells

Fargo, it appears that Falci and/or the Falci Enterprise moved such money out ofVidon's

accounts to advance their illicit scheme.

56. For example, Vicor's Wells Fargo bank statements from February

2, 2015 until April 13, 2016 show transfers from Vicor to Vidon totaling $2,994,283.

These transfers were all initiated by or at the direction ofFalci.

57. Vidon would be entitled to reimbursement of bona fide expenses

paid on the Fund's behalf as well as to a monthly servicing fee and, if applicable, a

performance fee as set forth in Vicar's Limited Partnership Agreement. However,

Vidon's bonafide reimbursable expenses for the period February 2, 2015 until April 13,

2016 were no more than $213,042.60, and most likely significantly less.

58. Over the same period, the maximum combined service fee and

performance fee due to Vidon would have been $934,509.69. Because the servicing fee

and performance fee due to Vi don are percentages of the total assets under management

and the Fund's investment gains respectively, both fees rely on an accurate calculation of

the Fund's assets and performance. Because Falci's theft and fraud have resulted in

overstated financial statements, this figure for fees is grossly overstated. Vidon and

Vicor are unable to determine the actual fees that were due to Vidon over this period,

however, because of Falci's efforts to conceal his actions.

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59. Per the above, the maximum in fees and reimbursements to which

Vidon could have been entitled over this period would have been $1,147,552.29,

although the actual amount is much lower.

60. Thus, of the $2,994,283 in transfers outlined above, Falci

transferred at least $1.8 million to Vidon, to which it was not entitled, from February 2,

2015 through April13, 2016 alone and Falci then depleted Vidon ofthose monies.

61. The Vidon accounts to which Falci made these improper transfers

are now closed and emptied of aU funds. None of the improperly transferred funds have

been recovered by Vidon or Vicor.

B. · Transfers to HRG Asset Recovery·

62. From August 13, 2015 through June 2016, Vicar made payments

totaling $759,005 to an entity known as HRG Asset Recovery, LLC ("HRG"). All of the

payments were initiated by or at the direction of Falci.

-63. When asked about HRG by Andrews and Gartner, Falci falsely

told Andrews and Gartner that HRG was owned by Vicor's lien agent in Georgia, Philip

Cope ("Cope"). Falci falsely claimed that the transfers were made to HRG in order to

purchase redeemable deeds2 in Georgia for Vicor.

64. In fact, as the subsequent investigation revealed, HRG is a

Delaware limited liability company solely owned by Falci.

2 For purposes of this Complaint, "redeemable deeds" are functionally equivalent to tax

liens in that they are sold at auction to obtain payment of outstanding property taxes and the property owners may redeem the instruments by paying the back taxes plus a penalty to the holder.

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65. In April 2016, Andrews and Gartner located a copy of HRG's

Certificate of Formation on a server owned and maintained by Vidon. By May 2016,

however, the Certificate of Formation had been deleted from the server by Falci.

66. As set forth below, many of the Georgia redeemable deeds

reflected in Vicar's books are fictitious.

67. Upon information and belief, Falci established HRG to divert

Vicar assets as purported payments for fictitious redeemable deeds in Georgia and, after

making such payments to HRG, converted the transferred funds to his own use.

C. Fictitious Georgia Redeemable Deeds

68. Vidon's investigation has revealed that 41 redeemable deeds

included on Vicar's balance sheet, with a total value of $2,710,449, are fictitious (the

"Fictitious Deeds").

69. In reviewing Vicar's books as part of the investigation, Vidon

requested and received from Cope, Vicar's lien agent in Georgia, a list of all of the

Georgia redeemable deeds held by Vicor.

70. The list of Georgia redeemable deeds provided by Cope contained

41 fewer redeemable deeds than were reflected on Vicar's balance sheet.

71. After confirming that Cope had no record of Vicar's ownership of

the Fictitious Deeds, Gartner contacted local officials in Georgia and reviewed public

property records to confirm that Vicar did not own redeemable deeds on the properties

for which the Fictitious Deeds were purportedly sold. Gartner's contacts with local

officials coupled with review of public records confirmed that the Fictitious Deeds were,

in fact, fabricated.

72. All of the Fictitious Deeds were entered into Vicor's lien tracking

database, called VADAR, by Falci. Falci's falsification of the Fictitious Deeds has

resulted in the material misstatement of assets on Vicor' s balance sheet.

73. In particular, Vicor's balance sheet falsely reflects that Vicor

purchased the Fictitious Deeds for $2,227,189, that those deeds have accrued $453,645 in

interest and penalties, and that $29,615 in expenses were allocated to the Fictitious

Deeds. The actual value of the Fictitious Deeds is zero.

D. Diversion of Funds Through Coleman Realty Group to Vidon and Saber Distributors

74. Falci has diverted at least $1,794,940 through an account used to

transfer funds to Vicor's Georgia lien agent, Coleman Realty Group, Inc. ("CRG"), to

both Vidon and Saber Distributors.

75. The CRG account has been used to effectuate purchases of liens

and payments ofbona.fide expenses on Vicar's behalf.

76. However, a review of the limited records currently available to

Vidon has revealed that Falci repeatedly transferred excess funds to the CRG account

under the guise of purchasing liens and then transferred those excess funds back to Vidon

and Saber Distributors, which were controlled by Falci.

77. As an example of one such transaction, on March 6, 2015, CRG

received a transfer of $250,000 from Vicor and, that same day, transferred $250,0.00 to

Saber Distributors, an entity that played no role in Vicor's tax lien investments.

78. As set forth above, Falci diverted nearly $1.8 million in Vicar's

funds to entities he controlled through the CRG account.

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E. The IIA Account

79. Vicar's balance sheet currently reflects a $3.9 million balance in

the IIA Account which, as set forth above, should only reflect temporary balances of

funds designated for imminent investment or recently-acquired investments that have not

yet been booked in Vicar's inventory management system.

80. Despite repeated requests from both Tower and Vidon, Falci has

failed to account for the $3.9 million IIA Account balance.

81. Upon information and belief, Falci used the IIA Account as a

means of hiding funds that he misappropriated from Vi cor.

82. Upon information and belief, all or substantially all of the liA

Account balance reflects funds that Falci has misappropriated from Vicor under the guise

of purchasing tax liens or paying other legitimate expenses.

83. By booking the misappropriated money as an asset in the IIA

Account, Falci was able to make it appear as though there was no loss in the value of the

Fund.

84. Because the funds reflected in the IIA Account were, upon

information and belief, transferred to entities controlled by Falci, the $3.9 million

recorded as being in the IIA Account should not be reflected as an actual asset on Vicor's

balance sheet.

F. Diversion of Funds to Saber Distributors to Reimburse Saber Funds· Investors

85. Upon information and belief, Falci has used miltions of dollars in

funds he misappropriated from Vicor to repay the Saber Funds investors.

86. As set forth above, a portion of the funds diverted through the

CRG account were transferred directly to Saber Distributors.

87. In addition, upon infonnation and belief, monies that Falci initially

trwtsferred either to himself, to Vidon, or to other members of the Falci Enterprise, were

subsequently transferred by Falci to Saber Distributors and ultimately distributed to Saber

Funds investors.

88. Despite the fact that Saber Distributors had little cash or liquid

assets, a review of records available to Vidon in its investigation has revealed that Saber

Distributors has distributed as much as $5 million or more to Saber Funds investors since

approximately the middle of2015.

89. As Saber Distributors is owned and controlled by Falci, Saber

Distributors received the funds misappropriated through Falci's various schemes, with

the knowledge that the funds rightly belonged to Vicor and its investors.

V. FALCI'S ACTIONS CONTINUE TO HARM VICOR'S INVESTORS

90. On May 23, 2016, after Vidon's investigation revealed Falci's theft

of millions of dollars from Vi cor, and his fabrications that resulted in a misstated balance

sheet, Andrews and Gartner passed a resolution expelling both Falci and Falci, Jr., from

membership in Vidon.

91. In early May 2016, Falci had turned over signatory authority for

the Fund's four bank accounts at Wells Fargo to Andrews and Gartner.

92. Falci has refused, however, to turn over authority for Vidon 's now4

closed Wells Fargo and Sovereign Bank accounts.

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93. Without the approval of Falci, who is the only individual listed as

having signatory authority as to the Vidon Wells Fargo accounts, Wells Fargo has refused

to make Vidon's own banking records available to Vidon.

94. Despite providing numerous assurances to Andrews and Gartner

that he would consent to transferring control over the Vidon Wells Fargo accounts to

Andrews and Gartner, Falci has failed to do so and instead, on information and belief, has

instructed Wells Fargo not to tum over any records to Vidon at the request of Andrews

and/or Gartner.

95. Vidon's banking records are essential to Vidon's administration of

the Fund. For example, without the information contained in the Vidon banking records,

Vidon cannot restate the Fund's NAVs and determine which bills were legitimately paid

by Falci through Vidon and which were not. This is also preventing Vidon from

obtaining audits for 2015 and 2016, and from providing investors with restated IRS Form

Kls.

96. Falci also allowed the U.S. Postal Service to improperly deliver

Vicor's mail to Falci for approximately three months following his expulsion from

Vidon. Falci has not turned over any of the mail he improperly received.

97. The diversion of the Fund's mail and refusal to tum it over is

causing ongoing harm to the Fund and its investors. Numerous time-sensitive notices are

routinely sent to Vicor via mail, such as notices of taxes or fees due on liens, bankruptcy

filings, and other time-sensitive legal notices. It is essential that Vicor receive such

notices on a timely basis, and failure to do so will result in further financial losses to the

Fund and its investors.

-21-

98. Falci has also failed and refused to sign over access to the

vicortaxliens.com domain name. Falci is the administrator of this domain and has the

password. Therefore, Vidon has no access to the Fund's historic emails.

99. Without access to the vicortaxliens.com domain, essential

infonnation needed for Vidon's management of the Fund remains hidden. Falci's

blocking of the Fund's access to this infonnation continues to hann and damage the Fund

and its investors.

FIRST COUNT (Breach of Fiduciary Duty Against Falci and Falci, Jr.)

I 00. Plaintiff repeats and re-al leges each and every allegation contained

in the above paragraphs as if fully set forth herein.

101. As the managing member of Vicar's general partner, Falci owed

Vicor fiduciary duties.

I 02. As a member and officer of Vicar's general partner, Falci, Jr.,

owed Vicor fiduciary duties.

103. Falci breached and is continuing to breach his fiduciary duties to

Vicor by, among other things:

a) Misappropriating Vicar's funds and diverting them to Falci's own use and/or diverting them to people and/or entities controlled by Falci for FaJcPs benefit;

b) Falsifying entries in Vicar's books and records;

c) Disseminating false infonnation regarding Vicor's assets and financial condition to Vi cor's limited partners;

d) Impeding Vidon's efforts to investigate FaJci's malfeasance; and

e) Continuing to impede Vidon's access to its and Vicor's mail, records, and Vicar's internet domain.

-22-

104. Upon information and belief, Falci, Jr., breached his fiduciary

duties to Vicor by, among other things, assisting, aiding, and abetting Falci in

misappropriating funds, falsifying records, and in impeding efforts to uncover such

activities.

I 05. As a result of Falci's and Falci, Jr.'s, breaches of their fiduciary

duties to Vicor, Vicor has suffered and is continuing to suffer damages including the loss

of funds rightly belonging to it and the payment of excessive service and performance

fees to Falci.

SECOND COUNT (Violation of the Uniform Fraudulent Transfers Act N.J.S.A. § 25:2-20, et seq.

Against Falci and Saber Distributors)

I 06. Plaintiff repeats and re-alleges each and every allegation contained


107. The New Jersey Uniform Fraudulent Transfers Act ("UFTA")

prohibits transfers made by a debtor "(w]ith actual intent to hinder, delay, or defraud any

creditor," including future creditors whose claims have not yet accrued at the time of the

transfer. N.J.S.A. § 25:2-25(a}.

l 08. Falci is a debtor to Vicor pursuant to the UFT A because Vicor has

a claim against Falci arising from his theft ofVicor's funds.

109. As set forth above, Falci transferred millionS of dollars belonging

to Vicor to Saber Distributors.

110. Falci transferred these funds to Saber Distributors with the intent to

hinder Vicor's ability to obtain the return of the funds and with the intent to defraud

Vi cor out of the transferred funds.

111. Pursuant to the UFTA, Vicor is entitled to the return of all funds

fraudulently transferred by Falci to Saber Distributors.

THIRD COUNT (Conversion as to All Defendants)

112. Plaintiff repeats and re-alleges each and every allegation contained


113. As set forth above, Falci and Saber Distributors willfully

misappropriated and deprived Vicor of several mitlion dollars rightfully belonging to

Vicor by, among other things:

a) Causing Vicor to transfer at least $1.8 million to Vidon in excess of amounts due and· owing to Vidon for Falci's and Saber Distributors' benefit;

b) Causing Vicor to transfer $759,005 to HRG, an entity owned and controlled by Falci, for Falci's and Saber Distributors' benefit;

c) Transferring approximately $1.8 million to the CRG account under the guise of purchasing tax liens and instead diverting those funds to the Vidon and/or Saber Distributors accounts for Falci's and/or Saber Distributors' benefit;

d) Diverting Vicor funds to Falci and/or Saber Distributors and hiding the diversions by booking $3.9 million in the IIA Account item on Vicar's balance sheet.

114. Both Falci and Saber Distributors have illegally converted and

exercised dominion over the funds that Falci stole from Vicar, as has Falci Jr. who, upon

information and belief, was paid with monies misappropriated from the Fund.

115. Vicor has been damaged by the defendants' theft of its funds.

FOURTH COUNT (Fraudulent Concealment Against Falci)



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117. As the managing member of Vicor's general partner, Falci owed

Vicor fiduciary duties.

118. As set forth above, Falci misappropriated Vicar's funds over the

course of several years by transferring funds to entities owned and controlled by Falci.

things:

119. Falci concealed his misappropriation of funds by, among other

a) Concealing and lying about his ownership of HRG;

b) Falsifying the Fictitious Deeds and entering them into Vicar's records management systems;

c) Routing certain transfers to himself or to entities controlled by him through CRG under the guise of purchasing tax liens;

d) Booking certain transfers to himself or to entities controlled by him under the IIA Account on Vicar's balance sheet; and

e) Impeding Vidon's access to books and records essential to investigating the nature and extent of his theft.

120. The fact that Falci was misappropriating Vicar's funds, and the

facts relating to how Falci was concealing his theft, were at all relevant times material.

121. Falci's concealment of these facts has damaged Vicor by, among

other things, depriving it of funds belonging to it, preventing it from stopping Falci's

theft, and causing excessive service and performance fees to be paid to Falci.

FIFTH COUNT (Unjust Enrichment Against All Defendants)



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123. Pursuant to Vicor's limited partnership agreement, Vidon was paid

a service fee calculated based on the total Vicor assets under management and a

performance fee based on the Fund's perfonnance.

124. As the managing member and a majority owner of Vidon at all

relevant times, service and performance fees paid to Vidon were passed through to Falci.

125. As a member of Vidon at all relevant times, service and

performance fees paid to Vidon were passed through to Falci, Jr.

126. Due to Falci's misappropriation and concealment thereof, the

service fees and perfonnance fees passed through to Falci and Falci, Jr. were unearned

and grossly excessive.

127. It would be unjust for Falci and Falci, Jr. to be allowed to retain the

unearned and grossly excessive fees.

128. In addition, Falci, Saber Distributors, and, upon information and

belief, Falci, Jr.; have received monies misappropriated by Falci, and it would be unjust

to allow them to retain the misappropriated funds.

129. Vicor has suffered damage as a result of Falci's misappropriation

of funds ultimately received by Falci, Falci, Jr., and Saber Distributors, and as a result of

the depletion of its funds to pay the unearned and grossly excessive management fees

passed through to Falci and Falci, Jr.

FIFfHCOUNT (Violation ofN.J.S.A. §§ 2C:41-2(c) and (d) and 2C:41-4 as to All Defendants)



131. This is a claim for violation of the NJ-RICO statute, N.J.S.A. §§

2C:41-2(c) and (d) and 2C:41-4.

132. Defendants violated the NJ-RICO statute by conducting, and by

conspiring among themselves and with others to conduct, the affairs of an enterprise

through a pattern of racketeering activity in violation ofN.J.S.A. 2C:41-2(c) and (d).

133. Specifically, defendants engaged in systematic, intentional acts of

theft and falsification of records, along with other criminally deceptive conduct, through

an enterprise comprised of entities and individuals described above and below to

comprise the Falci Enterprise, including but not limited to Falci, Falci, Jr., HRG, Saber

Funds, Saber Distributors, and the Saber-Affiliated Entities, working together to enrich

the enterprise at the expense of Vicor. Vicor was injured as a direct result of defendants'

conduct of the Falci Enterprise through a pattern of racketeering activity.

The Enterprise

134. The Falci Enterprise was an enterprise within the meaning of

N.J.S.A. § 2C:4l-l(c). It consisted of a number of individuals and business entities

working in tandem to enrich themselves at Vicor's expense, including the following:

a) Defendant Falci orchestrated and executed the scheme, with the assistance of the other members of the Falci Enterprise, by embezzling funds from Vicor, falsifying records to conceal the embezzlement, and conspiring with, directing and utilizing the other Falci Enterprise members to assist in the scheme to embezzle Vicor funds and conceal the embezzlement.

b) Defendant Saber Distributors conspired with Falci and accepted and concealed the funds embezzled from Vicor, distributing those funds to investors in the Saber Funds and the Saber-Affiliated Entities in order to avoid negative consequences for both Falci and Saber Distributors that could result from failure to abide by the tenns of the Consent Judgment.

-27-

c) Non-party HRG accepted embezzled Vicar funds and conspired with and assisted Falci in concealing the embezzled funds and their ultimate disposition.

d) Defendant Falci, Jr., upon information and belief, conspired with and assisted Falci, as a 40% member in Vidon, in embezzling funds from Vicar and concealing the embezzled funds in order to gain a monetary benefit and in order to avoid negative consequences that could result from failure to abide by the tenns of the Consent Judgment.

e) Saber Funds and the Saber-Affiliated Entities, admitted to violating antifraud provisions of the New Jersey Uniform Securities Law, and, upon information and belief, conspired with other members of the Falci Enterprise to receive funds stolen from Vicor and to distribute those funds to Saber Funds investors.

f) Upon information and belief, additional unknown individuals and entities conspired with and assisted in conducting the affairs of the Falci Enterprise members set forth ab.ove.

135. The members of the Falci Enterprise shared the common purpose

of obtaining large-scale pecuniary gain through securities fraud, through the

embezzlement of funds from Vicar, and through the concealment of that embezzlement.

136. The Falci Enterprise was a sustained, well-developed operation

organized for the purpose of defrauding investors, stealing from Vicor, and concealing

that theft so that Vicar and its investors could not put an end to the theft. Each member of

the Falci Enterprise played a distinct role in facilitating either the theft ofVicor funds, the

concealment ofthat theft, or both.

The Racketeering Activity

137. Defendants conducted the affairs of the Fald Enterprise through a

pattern of racketeering activity within the meaning ofN.J.S.A. § 2C:41-l(a) and (d). In

particular, in conducting the affairs of the Falci Enterprise, the Defendants committed,

-28-

among other things, the following predicate acts of racketeering activity on numerous

instances:

a) Falci repeatedly committed acts of theft against Vicar in violation of, among other statutes, N.J.S.A § 2C:20-2 and 3(a) by unlawfully exercising control over Vicar's property with the intent to deprive Vicar of its money. As set forth above, Falci has made numerous transfers of Vicar's funds to himself or to people or entities controlled by Falci for the purpose of stealing the funds.

b) Falci repeatedly committed theft by deception, in violation of N.J.S.A. § 2C:20-4 by creating a false impression as to the value of the assets held by Vicor, resulting in his being paid improper and excessive service and performance fees calculated based upon Vi cor's falsified records.

c) Falci and Saber Distributors, along with the Saber-Affiliated Entities, violated the antifraud provisions of the New Jersey Uniform Securities Law, N.J.S.A. § 49:3-52(b) and (c), as they admitted in the Consent Judgment, by making false representations to Saber Funds investors in connection with the sale of securities.

d) Saber Distributors repeatedly violated N.J.S.A. § 2C:20-7(a) by knowingly receiving Vicar's stolen money. As set forth above, on numerous and repeated occasions, funds stolen from Vicor were transferred to Saber Distributors, an entity controlled by Falci and which, therefore, had knowledge that the funds were stolen. As set forth above, Falci, Jr., upon information and belief, also received funds stolen from Vicar.

e) Falci repeatedly violated N.J.S.A. 2C:21-4(a) by falsifying records with the intent to deceive Vicor and/or its investors as to the Vicar's financial condition and to conceal the Falci Enterprise's theft of Vicar's funds. In particular, and as described above, Falci did this by, among other things, (i) falsifying 41 redeemable deeds and falsely recording them as assets held by Vicar, and (ii) falsely booking $3.9 million under IIA Account on Vicar's balance sheet when, in fact, those funds were embezzled by Falci with the assistance of the Falci Enterprise.

t) Falci violated the antifraud provisions of the New Jersey Unifonn Securities Law, N.J.S.A. § 49:3-52(b), by making untrue statements of material fact in connection the sale of interests in Vicar. In particular, the Investor Presentation Falci distributed to potential Vicar investors wrongly stated that Vicar's holding and operating accounts were .. exclusively controlled" by Apex and that

-29-

"[Vicor] never has access to investor funds." In reality Falci was able at all times to access and misappropriate investor funds.

138. As set forth at length above, defendants committed each of the

above predicate acts on numerous occasions. As such, defendants' actions constituted a

pattern of racketeering activity pursuant to NJ-RICO.

Proximate Cause and Damages

139. Vicor has been damaged by Defendants' conduct in operating the

Falci Enterprise. Vicor has been deprived of millions of dollars by defendants' theft and

concealment of Vicar's funds. In addition, the extent ofVicor's damages was increased

by the defendants' concealment of their scheme both through the falsification of records

and through other means.

140. Pursuant to N.J.S.A. § 2C:41-4(c) Vicor is entitled to recover three

times the amount of its damages that have resulted from defendants' violation of the NJ-

RICO statute. Vicor is also entitled to recover attorneys' fees incurred in this action,

costs of investigation, and costs of litigation.

WHEREFORE, Vicor demands judgment against Falci, Falci, Jr., and

Saber Distributors awarding:

a) Compensatory damages in an amount to be determined at trial;

b) Treble damages;

c) Punitive damages in an amount to be determined at trial;

d) Pre-judgment and post-judgment interest;

e) Reasonable attorneys' fees and costs of suit; and

f) Such other relief as the Court deems just and proper.

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DESIGNATION OF TRIAL COUNSEL

Pursuant to R. 4:5-l(c), Plaintiff hereby designates Zachary D.

Rosenbaum as trial counsel.

JURY TRIAL DEMANDED

Plaintiffhereby demands a trial by jury on all issues triable by jury.

LOWENSTEIN SANDLER LLP Attorneys for Plaintiff Vicor Tax Receivables LP

By:~um' Dated: September 21, 2016

CERTIFICATION

The undersigned hereby certifies that pursuant to R. 4:5-1 that the matter

in controversy is not the subject of any other pending or contemplated action of any court

or the subject of any pending or contemplated arbitration proceeding. Further, the

undersigned knows of no other person who should be joined as a party to this action.

I hereby certify that the foregoing statements made by me are true. l am

aware that if any of the above statements made by me are willfully false, I am subject to

punishment.

Dated: September 21, 2016

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CERTIFICATION OF COMPLIANCE WITH R. 1:38-7(b)

I certify that confidential personal identifiers have been redacted from

documents now submitted to the court, and will be redacted from all documents

submitted in the future in accordance with Rule I :38-7(b).

I hereby certify that the foregoing statements made by me are true. I am

awate that if any of the above statements made by me are willfully false, I am subject to

punislunent.

Dated: September 21, 2016

-32-

EXHIBIT 13

--· SUPERIOR COURT OF NEW JERSEY

ROBERT P. CONTILLO JUDGE, GENERAL EQUITY

BERGEN COUNTY JUSTICE CENTER HACKENSACK. NJ 07601

201-527-2615

Samuel Scott Cornish,/ Deputy Attorney General Office of Attorney General

. Division of Law 124 Halsey Street P. 0. Box 45029 Newark, NJ 07102

William Z. Shulman, Esq. 115 River Road Edgewater, NJ 07020

January 7, 2008

Re: Anne Milgram, Acting Attorney General ofNew Jersey, on behalf ofFrankJin L. Widmann, Chief of the New Jersey Bureau of Securities v. Fred J. Miller, Eric Riedman, et als.

Docket No. C-331-06

: Decision After Hearing

CotUlsel:

fl LED JAN- 7 2008

lobed I! Conllo.W:.

This matter was heard by the Court, ·sitting without a jury, on October 29, 30 and 31,

2007. The Court reserved decision.

I. BACKGROUND AND PROCEDURAL ffiSTORY

By Verified Complaint filed September 13, 2006, the plaintiff New Jersey Attorney

General, on behalf of the Chief of the New Jersey Bureau of Securities, asserted five counts of

securities law violations against the various individual and corporate defendants, seeking a

judgment of joint and severed liability for those securities law violations, for disgorgement,

imposition of civil monetary penalties, and injunctive relief.

Venue was changed from Essex County to Bergen County by Order dated September 14,

2006. (Harriet F. Klein, J.S.C.).

Service on the defendants of the Summons and Complaint was accomplished by late

September, 2006.

An Answer on behalf of "Defendants" was filed on November 21, 2006, by attorney

William Z. Shulman, Esq., denying the allegations of securities law violations, and asserting

various affirmative defenses including statute oflimitations, estoppel and laches.

A Case Management Conference was conducted on January 25, 2007, yielding a Case

Management Order of that same date. Discovery deadlines were established, and an October 29,

2007 trial date established.

By Letter Order dated March 15, 2007, it was determined that attorney William Z.

Shulman, Esq. represented in this acti(}n all defendants except defendant Eric Riedman,

individually.

By Consent Order dated April 2, 2007, the Court implemented certain agreed upon

modifications to the discovery deadlines set forth in the Case Management Order of January 25,

2007, preserving, however, the trial date of October 29, 2007.

By Order dated May 25, 2007, the Court denied the defendants' application to dismiss the

Verified Complaint by reason of the statute of limitations, and denied as well the defense request

for an additional 300 days of discovery, and an adjournment of the trial date. By accompanying

Order of the same date, the Court granted the plaintiff's motion to compel discovery responses.

By third Order of May 25, 2007, the Court struck as inapplicable the defendants' two year statute

of limitations defense (N.J.S.A. 49:3-71).

On August 13, 2007, the Court entered an Order suppressing and striking defendants'

Answers and affirmative defenses, for failure to provide discovery in accordance with the

requirements ofthe Case Management Order.

At the commencement of the hearing, the State dismissed all claims as against d~fendant

Strathmore Venture I, LLC, a New Jersey Limited Liability Company.

By Order dated October 26,2007, the Court made the following rulings:

1. Plaintiff need only prove the defendants' liability under a prima facie standard.

2. On the issue of liability, the defendants' participation at the proof hearing would be

limited to objecting on competency grounds only.

2

•

3. At the proof hearing, the defendants were precluded from submitting any proofs,

evidence, or testimony on the issue of damages, but would be permitted to cross

examine Plaintiffs witnesses and object on competency grounds.

4. The Court made no ruling on plaintiff's request for a negative inference against the

defendants on the issue of damages due to the· defendants' failure to provide

discovery, but determined to rule on the issue during or after the proof hearing, if

necessary.

The Attorney General presented the testimony of Rudolf Bassman, Supervising

Investigator of the New Jersey Bureau of Securities. In addition, the Attorney General called

Joseph Colatruglio, accountant to defendants Affiliated Capital Partners and Commercial Traders

Capital during the years 1999 through 200 I, and John J. Rawlings and Seymour Rubin,

individual investors who incurred losses in their investments with de(endants. Defendant Eric

Riedman, pro se, elected not to participate at the hearing.

II. FINDINGS OF FACT

The Court finds that the proofs of the Attorney General clearly and convincingly

establish a plethora of securities laws violations by these defendants. On the issue of the extent

of damages, plaintiff was hampered in its proofs somewhat by the defendants' serious discovery

violations, particularly on the question of the amounts currently owed to each investor. I find

that this withheld information and documentation was in the possession of the defendants Miller

and Riedman, and that, in quantifying the restitution amount, the plaintiff is entitled tQ the

inferences argued for at. the hearing, under Douglas v. Harris, 35 N.J. 207 (1961) and

Interchemical Com. v. Uncas Printing & Finishing Co., 39 N.J. Super. 318 (App. Div. 1956).

During the period of 1996 to 2003, Miller and Riedman created, operated, and sold

unregistered securities issued by Affiliated Capital Partners, LLC, Traders Resources Capital,

LLC, Traders Commercial Capital, LLC, M&R Financing, L.P ., M&R Capital Partners, LLC,

Environmental Tech, LLC, Target Energy Partners, LLC, SciMark II, Inc., and Environmental

Financing Partners, LLC ("EFP") (the "Miller!Riedman Entities'') from an office in Englewood

3

Cliffs, New Jersey. SciMark II, Inc. ("SciMark II") was an entity that Riedman controlled,

without Miller's involvement. The Miller/Riedman Entities purportedly engaged in day-trading,

health-care consulting, real estate investment, oil-and-gas speculation, and non-hazardous waste

facilities development.

Both Miller and Riedman directly solicited investors for all Miller/Riedman Entities. For

sales of SciMark II Securities, only Riedman was involved. With respect to transactions with

only one solicitor (Miller or Riedman), either Miller or Riedman signed and provided the

investor with the underlying note, investment agreement, subscription agreement, or loan

agreement.

Miller created and provided Riedman with the offering materials, including private

placement memoranda, used to sell the securities issued by the Miller/Riedman Entities. After

each sale, Miller received and deposited investors' funds in the Miller!Riedman Entities' bank

accounts, for which he alone possessed signatory authority.

Once investors' fimds were in the Miller/Riedman Entities' bank accounts, Miller and

Riedman misappropriated the fimds among the Miller/Riedman Entities and diverted them to

themselves. In many instances, Miller and Riedman diverted funds to their personal entities -

for Riedman, Capstone Energy Corp. ("Capstone") and for Miller, Commercial Tech, LLC

("Commercial Tech") - which served no legitimate business purpose and were used to protect

their "assets against judgments and creditors."

Although the defendants were offering and selling the securities issued by the

Miller!Riedman Entities from an office in New Jersey, they failed to comply with the registration

requirements of the Securities Law. Specifically, none of the securities issued by the

Miller/Riedman Entities were registered with the Bureau; and neither Miller nor Riedman were

registered with the Bureau as agents licensed to sell the securities issued by the Miller/Riedman

Entities.

Most of the defendants' investors lost all of their investment.

II. THE DAY-TRADING ENTITIES

The Bureau Chief established through operating agreements, private placement

memoranda, bank account records, and the defendants' admissions that Miller and Riedman

operated the following entities from the Englewood Cliffs office, which all purportedly earned

income in connection with day-trading: Affiliated Capital Partners, LLC ("ACP"), Gener~l

4

Capital Partners, LLC (''GCP"), Traders Resources Capital, LLC ("TRC"), Traders Commercial

Capital, LLC (''TCC"), and M&R Capital Partners ("M&R Capital") (collectively, the "Day~

Trading Entities").

Miller and Riedman disregarded the corporate, partnership, and limited liability company

forms of the Day-Trading Entities by misappropriating and commingling their funds through

purported inter-company loans that violated the entities' operating agreements and squarely

contradicted the representations made to. investors. In certain instances, Miller and Riedman

ceased operating one Day-Trading Entity and, then "rolled" it into a new Day-Trading Entity

with the same purposes.

A. M&R Capital, Affiliated Capital Partners, and General Capital Partners

The first day-trading entity, M&R Capital, was created by Miller and Riedman in

January 1997, purportedly to earn income ''through investing in all types of publicly traded

securities ... utilizing electronic execution systems." In their Answer, the defendants admit that

from March 1997 to January 1998, Miller and Riedman raised at least $75,000.00 from five

investors by selling M&R Capital ownership units, which, based on representations in the M&R

PPM, promised investors a percentage ofM&R Capital's profit.

The M&R PPM, the key fund-raising document, stated that "substantially all" of"

investors' funds would be invested with day tiaders. However, plaintiff's proofs establish that

Miller and ruedman diverted at least $40,500.00 of M&R Capital's funds to Riedman. As

Riedman admitted, some of the $40,500.00 was a "finder's fee" for locating M&R Capital's

investors, which squarely contradicts the M&R PPM's promise that: "[n]o placement . fee

[would) be paid by [M&R Capital] to any person in connection with the offer and sale of the

interest." The remaining funds of M&R Capital were used to purchase day-trading equipment,

which, unknown to investors ofM&R Capital, was misappropriated to ACP.

In early 1998, Miller and Riedman abandoned M&R Capital and began operating ACP

from the Englewood Cliffs office, which, like M&R Capital, purportedly earned income from

day-trading, but, unlike M&R Capital, also earned commissions on the day-traders' trading

activity.

From early 1998 to 2000, Miller and Riedman raised at least $1 million from selling

promissory notes, which promised to pay interest of 12% per year, and membership interests

issued by ACP. In selling ACP's promissory notes and membership interests, Miller and

5

Riedman provided investors with letters, introductions, and operating agreements, but did not

provide detailed private placement memoranda. ACP's offering materials were void of basic

material information, including the risks of investing in ACP and the entity's operating history.

By March 2002, ACP was abandoned and Miller created GCP to operate from the

Englewood Cliffs office with the same business purpose, using the infrastructure and equipment

purchased by ACP and M&R Capital. When asked about the relationship between M&R Capital

and ACP, Miller claimed that it was ·~rolled into ACP," meaning, he claimed, that M&R

Capital's investors "end[ed] up with an ownership interest in (ACP]." Miller admits he created

GCP to avoid the "baggage of ACP, creditors, stuff like that."

By 2003, as Miller admits, ACP, GCP, and M&R Capital had been "rolled" together and

deemed "failed businesses." The entities' investors lost their investments.

B. Traders Commercial Capital

TCC, the final Day-Trading Entity, which Miller and Riedman created in May

1999 and supposedly still. generate incomes, operated from the Englewood Cliff office and, like

ACP, purportedly loaned funds to day-traders in exchange for a share of profits.

From 1999 to 2000, TCC, through Miller and Riedman, raised at least $300,000.00 from

. fourteen investors by selling unregistered promissory notes issued by TCC, which promised a

rate of return and included a convertible equity interest in TCC. In 2000, TCC, through Miller

and Riedman, issued and began selling unregistered membership interests, which promised

. investors a share.ofTCC's profits. Most of the initial TCC promissory notes holders converted

their unpaid principal into TCC membership interests.

In total, from 1999 to 2002, TCC raised at least $1,690,907.61 by selling TCC

membership interests in 43 transactions.

The tee Private Placement Memoranda, which Miller and Riedman provided to

potential investors and pre-existing TCC promissory note holders, falsely stated that over ninety

percent of investors' funds would be invested with day traders. Rather than investing with day

traders, as demonstrated by TCC's financial statements and bank account records, during 2001

and 2002, more than half ofTCC'~ funds were misappropriated to other Miller/Riedman Entities,

including ACP. At the proof hearing, the defendants' accountant testified that it was Miller and

Riedman that provided the characterization for the inter-company exchanges.

6

In addition to misappropriating $527,260.73 to ACP, bank account records demonstrate

that TCC misappropriated: $125,000.00 to GCP; $21,920.00 to M&R Capital, which no longer

operated; and $28,000.00 to Target Energy Partners, an entity involved with non-hazardous

waste disposal that had no business relationship with TCC - other than being controlled by

Miller and Riedman.

In addition to misappropriating funds, admissions of Miller and Riedman establish their

diversion ofTCC's funds to themselves in violation ofthe TCC Private Placement Memoranda.

Riedman admits he was compensated for raising funds for TCC, which was prohibited under

TCC's Private Placement Memoranda. Miller admits he received at least $150,000.00 in

management, fees from 1999 to 200 I, which violates the TCC Private Placement Memoranda's

prohibition on management-fee payments before $1.8 million was raised.

As the plaintiffs' Transaction Summary and the evidence Wtderlying it demonstrates, the TCC

investors lost their investments.

III. M&R FINANCING

In October 1996, Miller and Riedman created M&R Financing supposedly to acquire a

financing company and, by April 1998, had raised at least $573,800.00 through 29 transactions

by selling equity interests and promissory notes issued by M&R Financing that promised

investors a 12% rate of return and an ownership interest in the entity.

Miller and Riedman never caused M&R Financing to purchase the financing company

and misappropriated its assets to the Day· Trading Entities. Specifically, from M&R Financing's

bank account, Miller and Riedman misappropriated: $37,700.00 to M&R Capital, a Day-Trading

Entity; $98,900.00 to ACP, a Day-Trading Entity; and $61,200.00 to Target Energy Partners.-

Additionally, Miller and Riedman diverted at least $157,800.00 to Riedman and

$11,000.00 to Miller, through transfers to Commercial Tech, his personal entity. After

misappropriating and diverting its assets, Miller and Riedman "rolled" M&R Capital into ACP.

IV. SCIMARK II, INC.

In 1996, Riedman purchased SciMark, a healthcare consulting company, for_$15,000.00,

renamed the corporation .. SciMark IT," incorporated it under the laws of New Jersey, and

relocated it the Englewood Cliffs Office. From 1996 to 2000, SciMark II, through Riedman,

raised $378,000;00 by selling promissory notes, which promised a 12% rate of return, and shares

of stock issued by SciMark II (the "SciMark II Securities'').

7

•

As established by his bank account records, Riedman diverted $220,650.00 from SciMark

II to himself, rather than using the investors' funds for business purposes, as he represented.

Additionally, as established through letters, financial statements, and a Notice of Capitalization

provided to investors, SciMark II, through Riedman, failed to disclose the risks of investing in

SciMark II and misrepresented SciMark II's value.

V. THE TEXAS NON-HAZARDOUS WASTE FACILITY VENTURES

Defendants admit that, from 1996 to 2000, Miller and Riedman operated EFP, an entity

that loaned funds to Crossroads Environmental Corp. ("Crossroads"), a Texas corporation owned

by third parties that possessed a permit from a Texas regulatory body to operate a non-hazardous

waste disposal facility. Under its agreement with Crossroads, EFP was entitled to Crossroads'

stock and profits in exchange for lending it funds. Miller and Riedman raised at least .

$723,000.00 through 31 transactions for EFP by Loan Agreements, which included notes paying

interest at 12% per year and net profit interests ofEFP.

None of the investors in EFP have been paid back.

VI .. SUMMARY OF TRANSACTIONS FOR WHICH THE BUREAU ClflEF SEEKS

RELIEF.

The Miller/Riedman Entities, through Miller and Riedman, raised $4,096,907.61 by

selling unregistered investment agreements, profit interests, membership interests, loan

agreements, membership interests, and notes in vjolation ofthe Securities Law, $3,373,907.61 of

· which was obtained through fraudulent misrepresentations regarding, among other things, the

intended use ·of the investors' funds. (PlOA, Investor Matrix; P69-P228, Investment

-Agreel?ents, Loan Agreements, Notes, Subscription A~eements.) The following chart (the

"Transaction Summary"), created by plaintiff, summarizes the total number of actionable

transactions, sales, and ·losses in connection with the sale of the securities issued by each

Miller/Riedman Entity:

8

•

~.-~~-.~~.., ---~- '" - r -,. --~- - --.- --r· ·~·-::- .... - .. ·~.:.·._.;]~· :· ~:,:~·;·. -- ·~ ; :·.~-:~ -~;-:-"-:.--~.--~-- -- . ';:··--~- , ' ~ ' ' l j I • ~ - ' r: ,: .. I • I f. ( l.' I . '[.I ~- l" ' I~ • I ' '. t ' l f I ' .-- '·

~~~ ~- __ ·_ _ _ ~ f i l:.o·~' :.~_! :;_• C•a ~-~J_·_Jlt. l;,t~- ~- ~· .;-:': :~~-~ ;~;:J< l ~1~'- ~~ ·l ~ /.:, ~-,. <,~ =: <~ ~, :.b~ L~'_:~ ~~ ,~~~;=~~~-.~ :· : ~- ~ ·1!~- ::~~-, ':~; 1{l~-J~~~f i~~~;~ ' ._ . J'r · :,~~-_r:- l :·~~: Affiliated Capital Partners, LLC 41 $773,200.00 $30,085.96 $743,114.04

Environmental Financing Partners, LLC 31 $723,000.00 $26,415.00 $696,585.00

M&R Capital Partners, LLC 2 $8,000.00 $- $8,000.00

M&R Financing, LP 29 $573,800.00 $307.38 $573,492.62

SciMark II, Inc. 15 $378,000.00 $975.00 $377,025.00

Traders Commercial Capital, LLC and Traders Resource

Capital, LLC 43 $1,640,907.61 $429,558.89 $1,211,348.72

Total 161 $4,096 907.61 $487.,342.23 $3,609,565.38

III. CONCLUSIONS OF LAW

I. DEFENDANTS ARE LIABLE. FOR VIOLATING THE SECURITIES LAW'S REGISTRATION AND ANTI-FRAUD PROVISIONS.

A. The Securities Issued by the Miller!Riedman Entities Are "Securities" Subject to the Anti-Fraud and Registration Provisions of the Securities Law.

· The securities issued by the Miller/Riedman entities were "securities," which are defined

under the Securities Law to include, among other things, any "note; stock; . . . debenture;

evidence of indebtedness; certification of interest or participation in any profit.sharing

agreement. including; but not limited to, certification of interest or participation in real or

personal property ... [or] investment contract." N.J.S.A. 49:3-49(m). The securities issued by

the Miller/Riedman Entities that were not labeled "securities," an infrequent occurrence because

most were, are securities in the fonn of: (1) "investment contracts," as established by SEC v.

W.J. Howey Co., 328 U.S. 293 (l-946); and/or (2) "notes," as established by Reves v. Ernst &

Young, 494 U.S. 56 (1990).

To establish that the securities are "investment contract'' under the Howey test, the

Bureau Chief had to demonstrate that investors: (1) invested money; (2) in a common enterprise

(meaning their fortunes were linked to the defendants and other investors); (3) with an

expectation of profits to be derived from the efforts of others. Howey, 328 U.S. at 299. The

common enterprise element of the Howey test is satisfied if investors• funds are pooled together

and their investments' success are bound. See SEC v. Infinity Group Co., 212 F.3d 180, 187-91

(3d Cir. 2000) (finding a common enterprise where investors' funds were pooled and investors

r~ived fixed returns); See SEC v. SO Ltd., 265 F.3d 42,51 (lstCir. 2001) (stating that ••ponzi

9

..

the Howey test, whether investors expect profits from the efforts of others, required the Bureau

Chief to show that investors expected profits and relied on the efforts of Miller, Riedman, and

any others in control of the Miller/Riedman Entities. See SEC Rei. No. 4877, 32 FR 11705

(.1967) (st.ating that by offering "investors the opportunity to .share in the profits of real estate

syndications or similar ventures, particularly when there is no active participation in the

management and· operation of the scheme [by] the investors, the promoters are . . . .offering a

• security"').

The notes issued by the Miller/Riedman Securities are presumptively securities. Reves,

494 U.S. at 65 (1990) (holding that a "note is presumed to be a 'security"'). The defendants

would have had to rebut the presumption based on the following factors: (I) the parties'

motivations, particularly whether the buyer was motivated by returns; (2) the plan of distribution

of the notes, including the duration of the offerings and number of investors; (3) the public's

reasonable understanding of whether the notes were securities; and ( 4) the existence of another

governmental entity that has regulatory authority over.the note. Reves, supr~ 494 U.S. at 68-69;

Deal v. Asset Management Group, No. 92-C-187, 1992 U.S. Dist. LEXIS 13011, at *9-10 (N.D.

Ill. Aug. 28, 1992). If the notes-are purchased for investment purposes, as they were here, they

are securities. See SEC v. Diversified Industries, Inc., 465 F. Supp. 104 (D.D.C. 1979); Pollack

v. Laidlaw Holdings. Inc., 27 F.3d 808, 812-13 (2nd Cir. 1994).

The Miller!Riedman Entities are "securities" using, among other things, subscription

agreements, investment agreements, loan agreements, and notes. Specifically, it was established

at the hearing that:

I. · M&R Capital Issued and Sold Securities in the Form of Ownership Units: The M&R Capital ownership interests were labeled "securities" in the offering materials. Not only did the offering materials label them securities, but the M&R Capital ownership units are investment contracts under Howey because they promise investors a percentage of M&R Capital's profits based on the efforts of Miller and Riedman.

2. Affiliated Capital Partners Issued and Sold Securities in the Form of Notes and Membership Interest: The ACP membership interests, usually transferred pursuant to an· Investment Agreement, entitled an investor to an equity interest and a percentage of ACP's income, and the ACP notes, usually transferred under an Agreement and Note, promised the investor a rate of return (usually 12%) and a percentage of ACP's revenues .. Both the membership interests and notes are investment agreement under Howey; under Reves, the ACP notes are also securities in the form of notes.

10

3. Traders Commercial Capital Issued and Sold Securities in the Form of Notes and Membership Interests: The TCC promissory notes were securities in the form of investment contracts under Howey and notes under Reves because they, among other things, promised a rate of return based on the efforts of TCC's managing member, TRC, which Miller and Riedman controlled. TCC's membership interests promised investors an equity interest in TCC and a share of TCC 's profits. Not only did TCC's Private Placement Memoranda admit that the membership interests were securities, but the membership interests are investment contracts under Howey because they promise investors a percentage of TCC's profits based on the efforts ofTRC.

4. M&R Financing Issued and Sold Securities In the Form of Equity Interests and Notes: M&R Financing issued and sold equity interests and promissory notes that were securities, as stated in the underlying M&R Pre-Funding Agreement, and as investment contracts under Howey because they promised investors a 12% rate of return and an ownership interest in M&R Financing.

5. Environmental Financing Partners Issued and Sold Securities in the Fonn of Notes and Net Profit Interests Pursuant to the Terms of Loan Agreements:· The EFP Loan Agreement were securities in the form of investment contracts under Howey and notes under Reves because they promised to pay interest and a percentage of EFP' s profits based solely on the efforts of those involved with the Crossroads venture.

6. SciMark II, Inc. Issued and Sold Securities in the Form of Stock and Promissory Notes: The stock issued by SciMark II are securities on their face, see N.J.S.A. 49:3-49(m), and the promissory notes, which promised a 12% rate of return, were securities in the fonn of notes under Reves.

B. Defendants Violated the Securities Law's Registration Provisions.

None of the securities issued by the Miller/Riedman Entities were registered with the

Bureau and neither Miller nor Riedman were registered as "agents," as defined by the Securities

Law, to sell the securities. (Trial Tr. 10/29/2007 56:4-59: 1; P29, Eric Riedman Record from the

Central Registration Depository; P30, Fred Miller Record from the Central Registration

Depository.) Accordingly, the following three registration provisions of the Securities Law were

violated in connection with all securities transactions on the Transaction Summary: (1) N.J.S.A.

49:3-60 (selling unregistered securities); (2) N.J.S.A. 49:3-56(a) (acting as an unregistered

agent); and (3) N.J.S.A. 49:3-56(h) (employing unregistered agents).

l. Defendants Violated N.J.S.A. 49:3-60 By Selling the Unregistered Securities Issued by the Miller/Riedman Entities.

11

Because none of the securities issued by the Miller/Riedman Entities were registered with

the Bureau, in connection with each transaction, N.J.S.A. 49:3-60 imposes liability on the issuer

(i.e., the issuing Miller/Riedman Entity) and any "seller." ld. (stating it is "unlawful for any

security to be offered or sold in this State unless ... [t]he security is registered"). To establish a

defendant is liable as a "seller" under N.J.S.A. 49:3-60, the Bureau Chief must demonstrate (1)

direct solicitation of an investor or (2) that the defendant's participation in the securities

transaction was more than "de minimus" and a but-for cause of the transaction. See SEC v.

Rogers, 790 F .2d 1450, 1456-7 (9th Cir. 1986)( setting forth the so-called Rogers standard for

sellers' liability); Cola, 129 N.J. Super. at 57-59 (holding that sellers' liability ·extends to

"contribution or knowledgeable assistance in the distribution of unregistered securities") (citation

omitted); Hoffer v. State, 776 P.2d 963, 965-66 (Wash. 1989) (holding that definition of "seller"

includes those that provide "substantial contribution"); Young v. Kwock, 474 P.2d 285, 287-88

(Haw. 1970) (holding under Hawaii's securities law that seller includes "not merely the salesmen

who induced the purchase but all officers, directors, and agents who in any way contributed to

the disposition of the securities") (emphasis in original); In re American Microtel. Inc., Ariz.

Corp. Comm. No. S-2876-1, 1992 Ariz. Sec. LEXIS 111, at *24-25 (Dec. 9, 1992) (ruling that

sellers' liability exists if the defendant's participation is a "but for" cause ·and more than de

minimis).

In Geiger v. SEC, the court found that the defendant was liable as a seller despite the fact

that he did not participate in the ''ultimate sale of the shares" to investors. 363 F.3d 481, 487-89

(D.C. Cir. 2004). In ruling for the SEC, the court held that a defendant that assists in "finding

the buyer, negotiating the terms, [and] facilitating the []sale cannot escape liability by avoiding

direct involvement in the final act." Id. at 487.

Control persons, such as officers, partners, and chairmen, who directly and indirectly

participate in securities transactions through supervisory or other duties, are liable as sellers of

unregistered securities. See N.J .S.A. 49:3-69 (authorizing Bureau Chief to institute claims

agrunst any "person [who] has, or indirectly or directly controls another person who has"

violated the Securities Law); See Abrams v. Ohio Casualty Ins. Co., 322 KJ. Super. 330 (App.

Div. 1999) (stating that control person liability under the Securities Law is guided by federal

law, which imposes liability on those who actively participate in management); ~EC v. Hughes

Capital Corp., Civ. ActionNo. 88~5238 (WGB), 1993 U.S. Dist. LEXIS 21283, at *39 (D.N.J.

12

1993) (stating rule that "person who 'controls' a seller or offeror of unregistered securities can be

liable for registration violations"); Cola, 129 N.J. Super. at 59 (finding that officer were liable

because they "were aware of potential violations of [Securities Law] and yet failed to effectively

comply"). For instance, officers that never directly interact with investors are liable as sellers if

their duties include meeting with fund raisers and reviewing strategies, or if they merely execute

the documents necessary to effectuate the securities transaction. See American Microtel, 1992

Ariz. Sec. LEXIS 111, at *24-25; see also Young v. Kwock, 474 P.2d at 288 (holding officer

liable as a seller because she ''signed the [securities] in her capacity as treasurer").

Miller and Riedman are both liable under N.J.S.A. 49:3-60 for all transactions on the

Transaction Stunmary for directly soliciting the investor and/or for participating in each

transaction. 1 Both Miller and Riedman directly solicited the investor in connection with most

transactions and, as control persons of the Miller/Riedman Entities, both signed and provided the

investor with the underlying note, investment agreement, subscription agreement, or loan

agreement in all transactions.

Miller's own admissions establish him as a seller in all transactions because he created

and pravided Riedman with the documents, including private placement memoranda, used to sell

the securities. Finally, as he admits; Miller received and deposited investors' funds in the

Miller/Riedman Entities' bank accounts, for which he had signatory authority.

2. Miller and Riedman Violated N.J.S.A. · 49:3-56(a) By Acting as Unregistered Agents in Connection With Each Sale of a Security Issued by a Miller!Riedman Entity.

The Bureau Chief established that Miller and Riedman violated N.J.S.A. 49:3-56(a) by

acting as "agents" of the Miller!Riedman Entities without registering with the Bureau. An agent,

as defined in N.J.S.A. 49:3-49(b), includes 11any individual other than a broker-dealer who

represents a broker-dealer or issuer in effecting or attempting to effect purchases or sale[s] of

securities." Id. (emphasis added). While the definition of agent includes those that directly·

solicit investors - undisputed conduct of both Miller and Riedman - it also includes those that

merely "assist" in effecting a securities. trallsaction. See CIT Seaside Investment, L.P. v.

Hammet, 868 F.Supp. 836, 836, 844 (D. South Car. 1994) (holding that under South Carolina's

state securities law agent "covers persons who assist directly in offering securities"); Johnson v.

1 For sales of SciMark II Securities. only Riedman and SciMark II are liable under N.J.S:A. 49:3-60.

13

Colip, 658 N.E.2d 575, (Ind. 1995) (stating that, under Indian's securities law, "effecting"

includes "actively assisting" and, when communicating with investors, actions or omissions that

make "it more likely than not that the investor would purchase the securities").

In addition to the above conduct-focused analysis, an individual is also an agent if they

are compensated~. with a commission or finder's fees) for their efforts in connection with a

. securities transaction, regardless of their conduct's significance. See JosEPH C. LONG, BLUE SKY

LAw § 8:32 (2006) (citing In re SES Funding Corp., Conn. Dep't Banking Int. Op. 1992 WL

579240 (June 15, 1992)). See also In re Equinox Ventures. Inc., Colo. Sec. Div. Int. Op. 97-11-

385, 1996 Colo. Sec. No.-Act. LEXIS 13, at *2-4 (Aug. 5, 1996) (existing shareholders that

referred investors must be registered as representatives of broker-dealers if they received finders

fee); Cal. Corp. Comm'r Inter. Opinion, No. PL-133, 1970 Cal. Sec. LEXIS 4, at *2 (Dec. 30,

1970) (stating that payment of any finders' fee makes individual an "agent").

In this case, Miller and Riedman acted as unregistered agents of the Miller/Riedman

Entities by directly offering and selling securities. Additionally, they actively participated in all

securities transactions by receiving investors' funds, providing each other with information and

documents, and signing investment agreements, loan agreements, and subscription agreements,

and notes of the issuing Miller/Riedman Entity. Finally, they both received compensation for

locating investors in the form of funds or interests in the issuing Miller/Riedman Entity.

Thus, Miller and Riedman violated N.J.S.A. 49:3-56(a) in connection with each

transaction on the Transaction Summary, except those related to SciMark II, for which only

Riedman was an unregistered agent.

3. The Miller/Riedman Entities and SciMark II Employed Unregistered Agents in Violation ofN.J.S.A. 49:3-56(h).

N.J.S.A. 49:3-56(h) provides, in pertinent part, that "[i]t shall be Wllawful for any ...

issuer to employ an agent in this State unless the agent is registered." As explained above,

Miller and Riedman failed to register with the Bureau as agents of the Miller!Ried.man Entities or

SciMark II (which Riedman alone should have registered as a agent of) in effecting or attempting

to effect the sale of the securities to, from, or within New Jersey. (Trial Tr. 10/29/2007 56:4·

59:1; P29, Eric Riedman Record from the Central Registration Depository; P30, Fred Miller

Record from the Central Registration Depository.) Thus, by employing Miller and Riedman as

agents and compensating them with commissions and ownership interests, the Miller!Riedman

14

. Entities violated N.J.S.A. 49:3-56(h) in connection with each securities transaction on the

Transaction Summary.

II. MILLER, RIEDMAN, TRADERS COMMERCIAL CAPITAL, AFFILIATED CAPITAL PARTNERS, TRADERS RESOURCES CAPITAL, SCIMARK II, M&R FINANCING, AND M&R CAPITAL PARTNERS VIOLATED N.J.S.A. 49:3-52 BY MISREPRESENTING AND OMIITING MATERIAL FACTS IN CONNECTION WITH THE SALE OF SECURITIES

N.J.S.A. 49:3-52, entitled "Offer, sale or purchase; prohibitions" provides, in pertinent

part, that:

It shall be unlawful for any person, in connection with the offer, sale, or purchase of any security, directly or indirectly ·

(a) To employ any device, scheme or artifice to defraud; (b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading; (c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person ....

At the proof hearing, to prove a violation of N.J.S.A. 49;3-52(b) and (c), the Bureau

Chief did not need to demonstrate that the defendants intended to deceive the investor, only that

the defendants misrepresented or omitted a material fact in connection with a securities

transaction. Farmer v. N.J. Affordable Homes Com. et al., Docket No. C-408-99, at 6-7 (Ch.

Div. Feb. 22, 2002) (J. Levy). See Manns v. Skolnick, 666 N.E2d 1236, 1249-50 (Ind. Ct. App.

1996) (holding under a provision identical to N.J.S.A. 49:3-52 that a violation hinges on where

"material information is either misrepresented or omitted [and] ... a violation occurs irrespective

of the individual's intent to defraud''). See also Aaron v. SEC, 446 U.S. 680, 695-97 (1980)

(holding that there is no intent requirement under 15 U.S.C. § 77q(a)).

Material information is the type of information a reasonable investor might have

considered important in making his or her investment decision. Affiliated Ute Citizens of Utah

v. United States, 406 U.S. 128, 153~54, 92 S.Ct. 1456, 1472, 31 L. Ed.2d 741 (1972); see also

Basic Inc.. v. Levinson, 485 U.S. 224, 240, 108 S.Ct. 978, 988, 99 L. Ed.2d 194 (1988)

. 15

("[m]ateriality depends on the significance the reasonable investor would place on the withheld

or misrepresented information").

A. The Day-Trading Entities and M&R Financing, through Miller and Riedman, Violated N.J.S.A. 49:3-52 by Disregarding The Entities' Supposed Separate Fonns and Misrepresenting and Omitting Other Material Information to Investors.

Bank account records establish that Miller and Riedman misappropriated and

commingled the Day-Trading Entities and M&R Financing's funds and abused the entities'

corporate forms by, among other things, abandoning one Day-Trading Entity and, "rolling" it

into a new entity with the same purposes. While all the Day-Trading Entities and M&R

Financing, through Miller and Riedman, violated N.J.S.A. 49:3-52 by commingling funds and

abusing their corporate forms, each made additional and unique material misrepresentations and

omissions.

I. M&R Capital Partners

In selling the M&R Capital ownership units, Miller and Riedman made numerous

misrepresentations and omissions of material fact in violation of N.J.S.A. 49:3-52 by:

• falsely stating in the M&R PPM that "substantially all" of investors' funds would be invested with day traders, but diverting at least $40,500.00 from M&R Capital to Riedman and using the remaining investors' funds to purchase day-trading equipment;

• falsely stating that "[nJo placement fee [would] be paid by [M&R Capital] to any person in connection with the offer and sale of the interest,'' but then, as Riedman admitted, paying Riedman for locating investors, and

• falsely stating investors' funds would he returned if a minimum offering amount of$150,000.00 was not raised for M&R Capital, hut not returning investors' funds when the minimum amount was not reached.

2. Affiliated Capital Partners

In selling ACP's promissory notes and membership interests- which both promised

investors a return and a percentage ofACP's profits-· Miller and Riedman provided investors

with letters, introductions, and operating agreements. Investors were not provided with a private

placement memorandum. In violation ofN.J.S.A. 49:3-52 none. of the written materials provided

to ACP's investors disclosed:

16

• the specific risks of investing in ACP through the promissory notes or membership interests;

• the failure ofM&R Capital;

• that M&R Capital was "roll[ed]" into ACP;

• the poor operating history of ACP, including that ACP reported significant losses in 1998 and 1 999;

• that Miller would create GCP to serve the same purpose as ACP from the same office and appropriate ACP's assets to GCP, and

• that M&R Capital would be rolled into ACP, ACP would then be rolled into GCP, and then both GCP and ACP would be treated as failed businesses.

3. Traders Commercial Capital

In offering and selling TCC promissory notes and membership interests, Miller and

Riedman provided investors with private placement memoranda, which misrepresented and

omitted material facts in violation ofN.J.S.A. 49:3-52 by:

• falsely stating that over ninety percent of investors' funds would be invested with day traders, when, in truth, less than half was invested with day-traders and more than half was misappropriated · to · other Miller/Riedman Entities;

• failing to disclose that more than half of TCC' s funds, in 2001, would be misappropriated to ACP;

• · failing to disclose that TCC would misappropriate at least $28,000.00 to Target Energy Partners, a unrelated non-hazardous waste disposal facility venture operated by the defendants; ·

• failing to disclose that TCC would misappropriate at least $125,000.00 to GCP;

• falsely stating that no commissions would be paid to principals of TCC for raising funds, but then paying Riedman commissions, and

• falsely stating that management fees would not be paid to TRC or Miller until $1.8 million was raised through the sale of TCC membership interests, but then paying at least $150,000.00 in management fees before raising $1.8 million.

17

4. M&R Financing, L.P.

In selling the promissory notes and equity interests issued by M&R Financing, Miller and

Riedman provided investors with Pre-Funding Investment Agreement that misrepresented and

omitted material facts in violation ofN.J.S.A. 49:3~52 by:

• falsely stating that investors' funds would purchase a financing company, when, instead, Miller and Riedman misappropriated investors' funds to other MillerfRiedman Entities, including $37,700.00 to M&R Capital, $98,900.00 to ACP, and $61,200.00 to Target Energy Partners;

• failing to disclose that at least $157,800.00 would be diverted to Riedman;

• failing to disclose that at least $11 ,000.00 would be provided to Miller through his personal entity, Commercial Tech, and

• failing to disclose that M&R Financing would never purchase a financing company and would be rolled into ACP, a day-trading entity.

B. SciMark II, Inc., Through Riedman, Misrepresented The Value of SciMark II and Failed to Disclose the Diversion of Funds to Riedman.

In selling the SciMark II Securities, Riedman provided investors with letters, financial

statements, and a Notice of Capitalization, but did not provide private placement memoranda or

brochures. SciMark II, through Riedman, misrepresented and omitted material facts by:

• failing to disclose the risks of investing in Sci Mark II;

• falsely stating that SciMark ll was worth $500,000.00, while failing to disclose that SciMark II reported significant losses in 1997 and 1998; and

• failing to disclose that $220,650.00 would be diverted from SciMark II to Riedman.

III. THE DAY~TRADING ENTITIES AND M&R FfNANCING ARE JOINTLY AND SEVERALLY LIABLE.

"A court of equity is always concerned with substance and not merely form, and thus, it

will go behind the corporate form where necessary to do justice." Walensky v. Royce Int'l. Inc.,

264 N.J. Super. 276, 282 (App. Div. 1993). In operating the Day-Trading Entities and M&R

Financing, Miller and Riedrn.an ignored their supposed separate fonns by misappropriating their

funds and abandoning one entity for a replacement entity that created to perform the same

business purpose from the same location. For the following reasons, the Day-Trading Entities

18

and M&R Financing are all jointly and severally liable for their collective judgment under alter

ego and veil piercing theories. Furthermore, and alternatively, even ifTCC is the only remaining

entity, TCC is liable for the judgment against the other Day-Trading Entities and M&R

Financing as their successor.

A. · The Day-Trading Entities and M&R Financing were Operated As a Single Entity. Veil piercing allows the court to impose liability on affiliated or interlocking companies

whose supposed separateness is used for fraud, or if acknowledging them as separate causes

injustice. Stochastic Decisions. Inc. v. DiDomenico, 236 N.J. Super. 388, 395 (1989)

(explaining that "most courts liave been willing to pierce the corporate veil in the parent

subsidiary context, given the ease with which individual owners have altered their organization

and closely held assets, there appears. no reason to limit the application of the rule"); Karo

Marketing Cmp. Inc .. v. Playdrome, 331 N.J. Super. 430 (2000). In the Stochastic decision, the

Court explained that common liability for affiliated entities arises:

(a) when there is active and direct participation by the representatives of one corporation, apparently exercising some of pervasive control, in

· the activities of another and there is some fraudulent or injurious consequence of the inter-corporate relationship, or ...

(b) when there is a confused intermingling of activity of two or more corporations engaged in a common enterprise with substantial disregard of the separate nature of the corporate entities, or serious ambiguity about the .manner and capacity in which the various corporations and their respective representatives are acting.

Stochastic, 236 N.J. Super. at 394, citing, My Bread Baking Co. v. Cumberland Farms. Inc., 233

N.E.2d 748 (Mass. 1968).

The Day-Trading Entities and M&R Financing were operated from the same location, the

Englewood Cliffs office, and controlled by the same individuals, Miller and Riedman. The Day

Trading Entities were ·all involved with day-trading and had interlocking purpose8; for instance,

ACP supposedly earned income from TCC's day-traders, which operated from ACP's office.

Miller and Riedman misappropriated and commingled the Day-Trading Entities and

M&R Financing's funds without regard to the entities' specific business purpose or separate

existence. In addition to misappropriating and commingling funds, Miller and Riedman would

often cease operating one Day-Trading. Entity and, then "roll" it into a new Day-Trading Entity

19

with the same purposes. Similarly, despite its unrelated business purpose, Miller and Riedman

rolled M&R Financing into ACP.

The Day-Trading Entities were operated as a single entity and should share responsibility

for their collective liability in this case.

B. TCC is the Successor of the Day-Trading Entities and M&R Financing.

If, arguendo, the Day-Trading Entities and M&R Financing no longer exist, TCC is still

liable for their liabilities as their successor under the "de facto merger'' and "mere continuation"

doctrines. See Walensky, 264 N.J. Super. at 284; Glynwed, Inc, v. Plastimatic, Inc., 869 F.Supp.

265, 271 (D.N.J. 1994); Ricciardello v. J.W. Gant & Co .. 717 F.Supp. 56, 57 (D.Conn. 1989).

The considerations for successor liability are: (I) continuity of management, personnel, physical

location, assets, and general business operations; (2) cessation of business and dissolution of

predecessor as soon as legally possible; (3) assumption of liabilities by successor ordinarily

necessary for continuation of predecessor's business; and (4) continuity of ownership and

shareholders. Glynwed, 869 F.Supp. at 275, 276.

Under New Jersey law, "while no one factor is dispositive, the intent of the contracting

parties is especially important." Woodrick v. Jack J. Burke Real Estate. Inc .. 3~6 N.J. Super. 61,

74 (App. Div. 1997). In Woodrick, the Court held that "a mere continuation may be found

where the facts show that the intent was f-or the successor to assume all the benefits and burdens

of the predecessor's business, with the successor becoming a 'new hat' for the predecessor." Id.

at 306 (emphasis added).

Here, the defendants' admissions establish that ACP, GCP, M&R Capital, and M&R

Financing were "rolled, into one entity. In explaining the impact of a ''roll over," Miller

admitted that he .. can't just sit here and talk about where TCC is today and where these GCP

people are and the ACP people," and explained that the debt ~f the preexisting entity "will be

taken on by the surviving entity."

At his deposition, before claiming that GCP and TCC are distinct, Miller admitted

that TCC was. intended to be the successor of and would pay the losses of the Day-Trading

Entities' investors:

Q. What happened to those individuals that loaned money to [ACP]?

A. I said that we started to talk. I said that Eric [wanted] to make sure that there was a successor in TCC, that somehow these people would be made

20

whole, and there are many methods and ways of making them whole. That's all I'm saying.

(P7, Miller 7/26/2007 Dep. Tr. 68:14-25 (emphasis added).) Miller also admitted that:

(W]hat we've done is we've take those investors that have not been paid back ... Eric gave me a list lost of the people ... and they are part of the group, along with TCC and a recipient of these assets that TCC has created. . . . Those people will be the recipients of the benefit of what TCC is doing.

(P7, Miller 7/26/2007 Dep. Tr. 68:16-21, 69:3-16~ 70:4-9.) Thus, Miller's admission establishes

their intention for the surviving Miller/Riedman Entity, TCC, to be liable for the non-existent

entities' violations of the Securities Law, as explained in the Woodrick decision. ·

IV. RESTITUTION.

The defendants' violation of any of the Securities Law's provisions in connection with

the sale of the Miller/Riedman Entities Securities entitles the Bureau to recover restitution for the

investor's losses from that sale. See N.J.S.A. 49:3-69(a)(2) (authorizing restitution upon finding

of"any act constituting a violation of any provision" of the Securities Law).

A The Bureau Chief Established Investors' Losses Through Defendants' Admissions and the Investor Matrix.

The Plaintiffs Transaction Summary summarizes the totals amount invested and lost in

connection with the Miller!Riedman Entities based on competent and relevant proofs, including

bank account records, investment agreements, loan agreements, notes, subscription agreements,

and investors' disclosures regarding the amount paid back. (PlOA, Investor Matrix; P69-P228,

Investment Agreements, Loan Agreements, Notes, Subscription Agreements.) The defendants'

admissions in their Answer, at depositions, and in documents corroborate the investment totals

on the Transaction Swnmary, and in three instances, the admissions· establish a higher amount: .

21

~~:"Jv;;~;:-'X~i.~r.r..·tt~~ r.~ · ·" '# ~..,.~~r(!o';"i~f~~rr-t~.77'"""-'-p~.,..,.. ·~~G~ff",n ~~-7?"'~-{4fl.:---': .. {':1fr· ~.•:1 ~~J"1'1"4:." -:~~~-:;:-~~·~~~~F ·""·~7;1,. ~ ·;r~~

l '.. ': ' ,' ' < .. ~" ,· ·:,: .~:~. -~!,,:i ;' ' .. · • <': ' :. : .~' :£~.,!.;(~::·,, ~~<;: :·' ;~,:~.·.:. ·,:)·:~;' :"' .• : Affiliated Capital Partners $1 ,000,000.002 $773,200.00

Environmental Financine Partners $800,000.003 $723,000.00

M&R Capital Partners $7s,ooo.o<t $8,000.00

M&R Financing - $573,800.00

SciMark li $160,000.005 $378,000.00 Traders Commercial CapitaVTraders

Resource Capital $1,355,300.006 $1,640,907.61

The TransactiOn Summary, derived from the Bureau's Investor Matnx, mcludes all the

available information (which was limited because the defendants refused to provide discovery)

regarding the amount investors received as returns. (PlOA, lnvestor Matrix.) The Investor

Matrix's conclusion regarding the $3,609,565.38 of losses incurred by the investors of the

Miller/Riedman Entities is corroborated by the defendants' admissions.

For EFP, Miller admitted that the investors lost all ~ftheir investments.

With respect to ACP, M&R Capital, and M&R Financing, Miller admitted they were all

"rolled" into a single "failed business" and that, as of July 2007, the investors were still not

"whole." During his July 2007 deposition, Miller admitted the investors in ACP, M&R Capital,

and M&R Financing, and TCC, had not been paid back:

[S]omehow these people would be made whole and there are many methods and ways of making them whole ... We've abandoned the entlt[ies], but not the investors .. ·. we have a plan that is going to work ... I think we're going to make a lot of friends. If we don't make friends, they get there money back, who cares.

Finally, for SciMark II, Riedman admitted that he was unable to purchase the stock of

SciMark II back from investors.

A negative inference is afforded plaintiff on the current state of indebtedness to investors,

for the reasons discussed earlier in this Decision.

Accordingly, the Court will order the defendants to pay $3,609,565.38 m

restitution.

z (Answer ~1 48-49; Miller 3/5/2003 Dep. Tr. 79:23-25; 81:6-10.) 3 (Miller 3/5/2003 Dep. Tr. 125:24-25; Miller 7/26/2007 Dep. Tr. 22:13-16.) 4 (Answer 1 34.) 5 (Riedman 712412007 Dep. Tr. 168:21-25.) 6 (P42, Document Production ofTCC Accountant, Joseph Co1atruglio, Dated April13, 2002, at BOS 1623.) At the proofhearing the defendants' accountant stated that the "unit purchases" on TCC's records was a "group of individuals that apparently contributed some money based on a unit purchase.'' (TriaJ Tr. 10/30/2007 133;14-19.)

22

A Judgment accompanies this Decision.

Cc: Eric Riedman (w/encl) 617 West End Avenue Apartment SA New York, New York I 0024

26

B. Summary of Plaintiff's Claim for Restitution.

As sellers and control people, Miller and Riedman are jointly and severally liable for the

$3,232,540.387 in investors' losses from the sale of the securities issued by the Miller/Riedman

Entities. See N.J.S.A. 49:3-69(a)(2) (stating that restitution may be obtained from "any person

who has engaged in any act constituting a violation of any provision" of the Securities Law).

Riedman is singularly liable for the $3 77,025.00 ~n investors' losses from the sale of Sci Mark II

Securities, increasing his total restitution liability to $3,609,565.38.

Each entity is liable for the investors' losses from the. sale of the security it issued,

as stated in the Transaction Summary.

Finally, as stated above, Affiliated Capital Partners, LLC, Traders Resources

Capital, LLC, Traders Commercial Capital, LLC, General Capital Partners, LLC, M&R

Financing, L.P., and M&R Capital Partners, LLC- which were operated as one entity through

the commingling of funds - are all jointly and severally liable for the total losses caused from

the sale of all securities issued and sold by each entity: i.e., $2,535,955.38.

V. CIVIL MONETARY PENAL TIES

Under N .J .S.A 49:3w 70.1 : .

[a)ny person who violates any of the provisions of this act [the Securities Law] ... shall be liable for the first violation to a penalty of not more than $10,000; for a second violation to a penalty of not more than $20,000 and for each subsequent violation to a penalty of not more than $20,000 per violation. One or more violations may occur at the same time or be part of the same conduct or pattern of conduct. ..

Id. Civil monetary penalties are "within the sound discretion of the triaJ judge" and "must be

large enough so as not to be a mere cost of doing business." State Department of Environmental

Protection v. Lewis, 215 N.J. Super. 564, 574w75 (App. Div. 1987)(discussing the

appropriateness of penalties in a civil enforcement matter brought by the State Department of

Environmental Protection).

For each violation of the Securities Law, the defendants could be assessed a penalty of

$10,000 for the first violation and $20,000 for each subsequent violation pursuant to N.J.S.A.

7 This is calculated by subtracting the amount of losses caused by SciMark II, Riedman's sole responsibility, from

the total restitution amount. ·

. 23

49:3-70.1. Id. (stating that "[oJne or more violations may occur at the same time or be part of

the same conduct or pattern of conduct").

Here, the damages caused by the defendants' misconduct was severe - i.e., at least

$3,609,565.38 in losses to investors throughout the United States. (PlOA, Investor Matrix.)

Also relevant, is the duration of the defendants' misconduct in this case, which spanned back to

at least early 1996. (P2, Answer.)

For Miller and Riedman, their negative regulatory history due to pre-existing securities

law violations is also relevant to their civil monetary penalties. Miller admitted that, in the

1970s, he was barred from the securities industry by the SEC. Riedrnan was terminated from a

broker-dealer in 1994 for violating the firm's policies; and in 2001, the NASD barred him from

their association for diverting a customers funds to his bank account. Finally, the New

Hampshire Bureau of Securities cited both Riedman and Miller for violating their registration

and anti-fraud provisions.

In light of the number of victims, amount of time that the defendants violated the

Securities Law, and, in the case of Miller and Riedman, their previous violations of state and

federal securities laws, the Court will impose civil monetary penalties as follows:

a. $2,000,000.00 against Defendant Fred Miller based on his violations of NJ.S.A. 49:3-56(a) {acting as an agent without registration), N.J.S.A. 49:3-60 (selling unregistered securities), and N.J.S;A. 49:3-52 in connection with each of the one hundred forty six (146) securities transactions, which equals (438) violations;

b. $1,000,000.00 against Defendant Eric Riedman based on his violations of N.J.S.A. 49:3-56(a) (acting as an agent without registration), N.J.S.A. 49:3-60 (selling unregistered securities), and N.J.S.A. 49:3-52 in connection with each· of the one hundred sixty one (161) securities transactions, which equals (483) violations;

c. $500,000.00 against Defendant Affiliated Capital Partners, LLC based on its violations of N.J.S.A. 49:3-56(h) (employing unr~gistered agents), N.J.S.A. 49:3-60 (selling unregistered securities), and N.J.S.A. 49:3-52 in connection with each of the forty one ( 41) securities transactions, which equals (123) violations; · ·

d. $500,00t>.OO against Defendants Traders Resources Capital, LLC and Traders Commercial Capital, LLC based on their violations of N.J.S.A. 49:3-56(h) (employing unregistered agents), N.J.S.A. 49:3-60 (selling

24

unregistered securities), and N.J.S.A. 49:3-52 in connection with each of the forty three (43) securities transactions, which equals (129) violations;

e. $125,000.00 against Defendant M&R Financing, L.P. based on its violations of N.J.S.A. 49:3-56(h) (employing unregistered agents), N.J.S.A. 49:3-60 (selling unregistered securities), and N.J.S.A. 49:3-52 in connection with each of the twenty nine (29) securities transactions, which equals (87) violations;

f. $25,000.00 against Defendant M&R Capital Partners, LLC based on its violations of N.J.S.A. 49:3-56(h) (employing unregistered agents), N.J.S.A. 49:3-60 (selling unregistered securities), and N.J.S.A. 49:3-52 in connection with each of the two (2) securities transactions, which equals (6) violations;

g. $100,000.00 against Defendant Environmental Financing Partners, LLC based on its violations of N.J.S.A. 49:3-56(h) (employing unregistered agent~), N.J.S.A. 49:l-60 (selling unregistered se.curities), and N.J.S.A. 49:3-52 in connection with each of the (31) securities transactions, which equals (93) violations; and '

h. $100,000.00 against Defendant SciMark II, Inc based on its violation of N.J.S.A. 49:3-56(h) (employing unregistered agents), N.J.S.A. 49:3-60 (selling unregistered -securities), and N.J.S.A. 49:3-52 in connection with each of the fifteen (15) securities transactions, which equals (45) violations.

VI. . DEFENDANTS ARE PERMANENTLY ENJOINED FROM VIOLATING THE SECURITIES LAWS.

Finally, because of the nature and extent of Defendants' violations of the Securities

Laws, and the resulting damages inflicting upon nwnerous individuals. the Court shall enter an

order permanently enjoining future violations of the Securities Law, as well as any action in

· furtherance of such violations. See NfS.A. 49:3-69(a)(2)(authorizing entry of permanent.

injunction "upon proper showing").

25

EXHIBIT 14

< '

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY

UNITED STATES OF AMERICA Hon. Steven C. Mannion

v. Mag. No. 16-6188

VINCENT P. FALCI CRIMINAL COMPLAINT

I, Justyna Ramotowski, being duly sworn, state the following is true and correct to the best of my knowledge and belief:

SEE ATTACHMENT A

I further state that I am a Postal Inspector of the United States Postal Inspection Service, and that this Complaint is based on the following facts:

SEE ATTACHMENT B

continued on the attached pages and made a part hereof.

Sworn to before me, and subscribed in my presence

~ December li), 2016 at Newark, New Jersey

HONORABLE STEVEN C. MANNION UNITED STATES MAGISTRATE JUDGE

Justyna R otowski, Postal Inspector U.S. Postal Inspection Service

Signature of Judicial Officer

ATTACHMENT A

Counts 1 and 2 (Wire Fraud)

From at least as early as in or about 2008 through in or about May 2016, in the District of New Jersey and elsewhere, defendant

VINCENT P. FALCI

knowingly and intentionally devised and intended to devise a scheme and artifice to defraud, and to obtain money and property by means of materially false and fraudulent pretenses, representations, and promises, and, for the purpose of executing and attempting to execute such scheme and artifice, did transmit and cause to be transmitted by means of wire, radio, and television communication in interstate commerce the following writings, signs, signals, and sounds, each constituting a separate count of this Complaint:

Count Approximate Date Description

1 March 26, 2015 Wire transfer of approximately $225,000 from account ending in 2317 to account ending in 2325

2 August 13, 2015 Wire transfer of approximately $292,250 from account ending in 2275 to accountending in 6507

In violation of Title 18, United States Code, Section 1343 and Section 2.

1

Count 3 (Securities Fraud)

From at least as early as in or about 2008 through in or about May 2016, in the District of New Jersey and elsewhere, the defendant

VINCENT P. FALCI

knowingly and willfully, directly and indirectly, by use of the mails and other means and instrumentalities of interstate commerce, did use and employ, in connection with the purchase and sale of securities, manipulative and deceptive devices and contrivances by: (a) employing devices, schemes, and artifices to defraud; (b) making untrue statements of material fact and omitting to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; ; and (c) engaging in acts, practices, and courses of business which operated as a fraud and deceit upon persons, namely, that defendant Falci falsified investment returns in funds he managed that purported to invest in tax liens to induce investors and prospective investors to purchase interests in the funds.

In violation of Title 15, United States Code, Sections 78j(b) and 78ff, and Title 17, Code of Federal Regulations, Section 240.10b-5; and Title 18, United States Code, Section 2.

1

ATTACHMENT B

I, Justyna Ramotowski, a Postal Inspector with the U.S. Postal Inspection Service, having conducted an investigation and discussed this matter with other law enforcement officers who have participated in this investigation, have knowledge of the following facts. Because this Complaint is being submitted for the limited purpose of establishing probable cause, I have not included each and every fact known to me concerning this investigation. Rather, I have set forth only the facts which I believe are necessary to establish probable cause. Unless specifically indicated, all conversations ahd statements described in this affidavit are related in substance and in part.

BACKGROUND

1. At all times relevant to this Complaint:

a. Vincent P. Falci ("Falci") was a resident of Middletown, New Jersey, and controlled a number of purported investment funds and management companies.

b. Bank-1 was a "financial institution," as defined in Title 18, United States Code, Section 20. Bank-1 was headquartered in California, but did business worldwide.

c. The "Saber Funds" were a collection of investment funds Falci created and operated from beginning as early as the late 1990s or early 2000s. The Saber Funds included a variety of entities, such as Saber Fixed Income, Saber Equity, MSI-1, Saber Opportunity Funds, and Hallus Realty Group, and were managed by Falci from an office in Middletown, New Jersey.

d. Vicar Tax Receivables, LLP (the "Vicar Fund") was an investment fund Falci managed from approximately 2012 to approximately May 2016. 1 Falci managed the Vicar Fund through his management entity, Vidon Capital Partners, LLC ("Vidon"), from an office in Middletown, New Jersey. Falci represented to investors that the Vicar Fund invested in tax liens.2

1 Vicar Tax Receivables, LLP was previously named Pantheon Tax Receivables, LLP, but its name was changed in or about 2015. References to the "Vicar Fund" include all predecessor entities.

2 Tax liens are liens levied on properties by local governments when the property taxes are unpaid. In some states, local governments sell the right to future tax payments to third parties.

1

THE SCHEME TO DEFRAUD

2. From at least in or about 2008 until in or about May 2016, Falci defrauded investors of millions of do!lars through various· funds he controlled by falsely representing that he would safely and soundly invest their money through various investment funds he controlled. Falci touted his investment skill and experience, and falsely reported to current and prospective investors that his funds were growing year after year. In reality, Falci operated a Ponzi scheme. Falci concealed losses from investors, falsely reporting that the funds were beating the market every year. Based on these misrepresentations, investors (new and old) continued to entrust additional investments to Falci and to leave money they had previously invested under his control. When investors wanted to make withdrawals of funds, Falci used newly invested money to make the redemptions. When his original scheme to defraud investors in the Saber Funds fell apart, Falci continued perpetrating his scheme on investors in the Vicar Fund. He eventually used the funds he had misappropriated for his own personal gain and ultimately to repay a more than $6 million restitution order entered against him by the New Jersey Bureau of Securities in connection with his fraudulent scheme to fleece investors in the Saber Funds. All told, Falci's fraudulent scheme resulted in losses of approximately at least $5.3 million.

The Saber Funds

. 3. Falci began soliciting money in the late 1990s for investment funds he operated. He created a number of entities - both incorporated and unincorporated- and eventually came to operate them under the name Saber Funds. Many of the initial investors in the Saber Funds were associates, friends, and family members of Falci.

4. On or about September 18, 2015, Falci admitted to having violated New Jersey securities law. Specifically, on that date, a consent order was entered in the Superior Court of New Jersey, Monmouth County, resolving claims brought by the Attorney General of New Jersey on behalf of the Chief of the New Jersey Bureau of Securities against Falci and the Saber Funds for violations of New Jersey securities law (the "NJ Order''). In the NJ Order, Falci admitted that he misled investors about the Saber Funds' investments. Falci repeatedly. told investors that most of the fund was investing conservatively in tax lien certificates. For instance, in a written update he sent to investors in or about 2008, he falsely claimed that more than 85% of assets were invested tax liens. But in the NJ Order, Falci admitted that tax liens never exceeded 3% of assets under management.

5. In reality, Falci diverted money to himself and to riskier investments that were often money losers.

2

a. In the NJ Order, Falci admitted that between 2006 and 2009, he paid himself and his family over $1 million from the Saber Funds.

b. Falci also transferred substantial sums to brokerage accounts that were used for day trading and other trades. In the NJ Order, Falci admitted that from 2006 to 2009 alone, he used approximately $554,000 to fund day-trading by himself and his son. Much of this money was lost.

c. Falci transferred approximately $3,000,000 from the Saber Funds to another entity he controlled, and used the money to buy and rehab at least seven residential properties in or about 2006 and 2007. Due to a subsequent real estate market downturn, most of these property investments also lost money.

d. Falci also admitted that he lent $185,000 of investor money to a company owned by his best friend.

6. Despite the substantial losses in the Saber Funds, Falci falsely told investors and prospective investors that the funds had positive returns year after year and that the funds were beating market indexes every year. For instance, in a letter to investors, dated December 19, 2008, Falci falsely claimed that the Saber Funds' assets were invested in 85% to 90% tax liens, that the "various funds performances once again handily beat the indices," and that the funds' model made it "virtually impossible for us not to generate positive returns year after year." In another letter to investors, dated October 21, 2011, Falci falsely claimed that the "Saber Funds' portfolio models continue to perform well," that the Saber Funds were beating "other investment choices," and that the strategy had "virtually eliminated the possibility of negative returns."

7. Falci also continued to send Saber Fund investors quarterly and annual statements showing that their investments were growing steadily over time. Federal investigators have reviewed statements provided to investors that showed the Saber Funds growing every quarter from 2008 through 2015, even while, in reality, the Saber Funds lost a substantial portion of the funds invested.

8. In reliance on these false assurances that their investments were growing, investors continued to leave their money invested with Falci, and, in some cases, to invest additional funds with Falci and his Saber Funds. When investors in the Saber Funds requested redemptions of their investments and the fund lacked the assets to repay them, Falci used money he solicited from subsequent investors to repay them. ·

3

9. The NJ Order ultimately required Falci to repay investors in the Saber Funds the balance of their investments that had not yet been redeemed: $6,742,697.57. The investigation indicates that repaying Saber Funds investors was a motivating force behind Falci's continuation of his scheme to defraud through the Vicor Fund, as set out below.

The Vicor Fund

10. In or about 2012, Falci created the Vicor Fund and Vidon. Falci represented to investors that the Vicor Fund would invest in tax liens. Vidon was the management entity for the Vicor Fund. At that time, Falci transferred most of the assets remaining in the Saber Funds to the Vicor Fund. Falci remained the principal owner and manager of Vidon and the Vicor Fund through in or about $eptember 2015, and retained control over Vidon and the Vicor Fund until in or about May 2016.

11. The NJ Order required that Falci divest himself of controlling interest in all funds and management entities - including the Vicor Fund and Vidon. As a result, in or about September 2015, Falci was forced to bring partners into Vidon who took a majority stake in Vidon. But even after divesting himself of his majority interest in Vidon, Falci remained the manager of Vidon and the Vicor Fund. Falci retained control over all the bank accounts associated with the Saber Funds, the Vicor Fund, and Vidon until shortly before his ouster from the Vicor Fund and Vidon in or about May 2016.

12. Law enforcement has conducted various witness interviews in connection with this case. Those interviews have revealed that, within a few months of September 2015, the new partners in Vidon noticed what appeared to be several accounting irregularities and unexplained transactions. In response to inquiries from his new partners, Falci claimed that these accounting irregularities could be cleared up once he had a chance to find the proper documentation. But Falci failed to provide any explanation. Upon further investigation, the Vidon partners discovered additional transactions in which Falci transferred funds from the Vicor Fund to his own control. As a result of what they discovered, and Falci's inability to explain the transfers, the new partners expelled Falci from Vidon in or about May 2016.

13. Federal investigators have obtained bank records for bank accounts Falci controlled in the names of various entities, including the Saber Funds and the Vicor Fund. Over the past several years, Falci appears to have controlled more than 60 different bank accounts at approximately four financial institutions (although many of these accounts are now closed). This includes approximately 27 different bank accounts at Bank-1 on which Falci was a signatory, and which were open for at least part of 2015 and 2016. These accounts at Bank-1 appear to have been the primary accounts of Falci

4

and the various entities he controlled from approximately January 2015 onward.

14. Based on witness interviews and a review of bank records from Bank-1 for the period from approximately January 2015 through approximately May 2016, federal investigators have identified three methods Falci used to steal money from the Vicor Fund:

a. First, Falci siphoned money out of the Vicor Fund through transfers to two bank accounts at Bank-1 that were intended to be used for the legitimate purpose of transferring money to the Vicor Fund's agent in Georgia (the "Georgia Accounts"). The Vicor Fund made legitimate investments in tax liens in Georgia, and Falci made some transfers to the Georgia Accounts that were legitimately used by the fund's agent in Georgia to buy investments in Georgia. But Falci also repeatedly transferred money to the Georgia Accounts from the Vicor Fund, and then immediately transferred those funds to another bank account he controlled (such as an account in the name ofVidon or the Saber Funds). Using this method, Falci. stole over $1.7 million dollars from the Vicor Fund through the Georgia Accounts.

b. Second, Falci created a shell company- HRG Asset Recovery ("HRG")- and diverted over $700,000 to a bank account in the name of HRG. The name of the shell company was designed to make it appear as if it had a legitimate business relationship with the Vicor Fund. When asked by his partners and investors what the transfers to HRG were for, Falci lied and claimed that they were for tax lien investments in Georgia and that Vicor's agent in Georgia controlled HRG. In reality, Falci retained complete control over HRG Asset Recovery and the funds he transferred there were diverted for Falci's personal use.

c. Third, Falci transferred over $2.9 million directly from the Vicor Fund to Vidon at a time when he controlled the bank accounts for both entities. These transfers were far in excess of any management fees that Falci was entitled to collect.3

3 Moreover, Falci's reported compensation for managing the Vicor Fund was also substantially inflated by this fraud. Falci's compensation was supposed to be based on an "operating fee" (a percentage of the funds under management), and an "incentive fee" (a percentage of the fund's return above a certain target threshold). Based on the numbers Falci reported to investors, in 2015 Falci was entitled to an operating fee of roughly $400,000 and an incentive fee of roughly $400,000. But Falci's numbers were false. In reality, the fund had a negative rate of return because of Falci's theft. Moreover, it is reasonable to expect that the funds under management would have been virtually zero had investors known the truth.

5

15. A substantial portion of these stolen funds were diverted to Falci personally. Between approximately January 2015 and May 2016, Falci distributed over $500,000 to himself and members of his family.

16. Falci also used the stolen funds to repay investors seeking redemptions. Investors in the Saber Funds had begun to request redemptions at an accelerated rate after the investigation by the New Jersey Bureau of Securities became public in or about September 2014. These investors had been falsely assured by Falci that their original investments were safe and had grown steadily over the years. In order to pay these investors the gains he had promised, Falci stole from the funds under his control.

17. Most of the money stolen by Falci was ultimately transferred to · bank accounts in the name of Saber Funds Distributors (the "Saber Funds Accounts"). These were bank accounts at Bank-1 that were under Falci's control. An analysis of the Saber Funds Accounts showed that they appeared to be the primary bank accounts for making and receiving payments on behalf of the Saber Funds.

18. The analysis of the Saber Funds Accounts also showed that between approximately January 2015 and May 2016, Falci paid out over $4.5 million from the bank accounts. The substantial majority of these payments went to individuals that have been identified as investors in the Saber Funds. Most of this money was stolen from the Vicor Fund, although a small percentage came from additional investments made into the Saber Funds. This analysis showed that Falci did not generally keep a significant balance in the Saber Funds Accounts, but instead usually paid out the fraudulently transferred funds in a matter of days.

19. Examples of these fraudulent transfers include the following:

a. On or about March 26, 2015, Falci transferred approximately $250,000 from Pantheon account ending in 2275 ("Pantheon 2275") to Georgia Account ending in 6867 ("Georgia Account 6867"), and then transferred $250,000 from Georgia Account 6867 to Vidon account ending in 2317 ("Vidon 2317"). On that same day, Falci transferred approximately $225,000 from Vidon 2317 to Saber Funds Account ending in 2325 ("Saber Funds 2325"). Between approximately March 26, 2015 to March 30, 2015, over $200,000 was paid out from Saber Funds 2325 to Saber Funds investors. ·

b. On or about August 13, 2015, Falci transferred approximately $292,250 from Pantheon account ending in 2275 to HRG Asset Recovery account ending in 6507 ("HRG 6507"), and then transferred approximately $225,000 from HRG 6507 to Vidon 2317. On or about August 18, 2016, Falci transferred an additional approximately $45,000 from Pantheon 2275 to HRG 6507, and then transferred approximately $72,000 from HRG 6507 to Vidon

6

2317. Between on or about August 13 to 18, Falci made approximately five transfers from Vidon 2317 to Saber Funds 2325:

8/13/2015 8/17/2015 8/18/2015 8/18/2015 8/18/2015 Total

$60,000 $25,000 $125,000 $44,000 $31,000 $285,000

Between in or about August 18 to 24, 2015, Falci made over $250,000 in payments from Saber Funds 2325 to Saber Funds investors.

c. On or about December 16, 2015, Falci transferred approximately $70,000 from Pantheon 2275 to HRG 6507. On the same day, Falci then transferred approximately $70,000 from HRG 6507 to Saber Funds Account ending in 2387 ("Saber Funds 2387"). The next day, a Saber Funds investor deposited a check for approximately $75,000 written from the Saber Funds 2387.

7


By: Victoria A. Manning (Attorney Id. # 006371991) Isabella T. Stempler (Attorney Id. # 032642001) Elisabeth E. Juterbock (Attorney Id. # 019032013) Deputy Attorneys General (973) 648-3070

----------------------~-------CHRISTOPHER S. PORRINO, 1

Attorney General ofNew Jersey, on behalfofLAURA H. POSNER, Chief ofthe New Jersey Bureau of Securities,

Plaintiff,

v.




SABER FUNDS DISTRIBUTORS, LLC,


Civil Action

ORDER: (1) AMENDING THE JUDGMENT

AMOUNT AGAINST NOMINAL DEFENDANT HALLUS REALTY;

(2) REPLACING THE SEPTEMBER 18, 2015 CONSENT ORDER AND FINAL JUDGMENT AS TO ALL DEFENDANTS AND NOMINAL DEFENDANTS WITH A REDACTED VERSION; AND

(3) ENFORCING LITIGANT'S RIGHTS UNDER R. 1:10-3.








PREFERRED INCOME PORTFOLIO I, LLC,

and


Defendants,



DONNA F ALCI, individually; and VINCENTN. FALCI, individually,

Nominal Defendants.

THIS MATTER was brought before the Court by Christopher S. Porrino, the Attorney


Jersey Bureau of Securities ("Bureau Chief' or "Plaintiff'), for an Order: (1) enforcing the

September 18, 2015 Consent Order and Final Judgment as to all Defendants and Nominal

Defendants ("Consent Order") under R. 1: 10-3 against all defendants and nominal defendants;

2

(2) amending the judgment amount against nominal defendant Hallus Realty Group, LLC stated

in~ 69 the Consent Order to $2,035,511.23; (3) replacing the Consent Order, which contains a

confidential personal identifier on page 23, with a redacted version pursuant to R. 1 :38-7(g)(1 );

and ( 4) such other relief as the Court deems just, equitable, and proper. The Court having

considered the papers submitted in support thereof, and proper notice having been given to all

defendants and nominal defendants, and for good cause shown for the relief sought herein, and

the Court finding that Plaintiff is entitled to relief under R. 1: 10-3 against the defendants and

nominal defendants to enforce the Consent Order below,

IT IS on this __ day of ______ , 2017, ORDERED:

Amendment of Judgment Amount Against Nominal Defendant Hallus Realty and Replacement of the Consent Order with a Redacted Version

1. Plaintiffs motion requesting replacement of the Consent Order, specifically page 23,

with a redacted version in the form attached as Exhibit A to this Order, is granted.

2. Plaintiffs motion to amend the amount of the judgment entered against nominal

defendant Hallus Realty Group, LLC in~ 69 in the Consent Order to $2,035,511.23 as

disgorgement, is granted, and such amendment shall be reflected as appears in the

redacted version of the Consent Order in the form attached as Exhibit A.

3. Plaintiff shall submit the redacted and amended version of the Consent Order to the

Chancery Clerk of this Court within three (3) business days of receipt of this signed

Order. The Chancery Clerk is directed to replace the original unredacted Consent Order

with the redacted and corrected version as appears in attached Exhibit A. 2

2 References to the Consent Order in ~~ 4 to the end of this Order refer to the redacted and corrected version of the Consent Order in the form attached as Exhibit A.

3

Motion to Enforce Litigant's Rights

4. Plaintiffs motion to enforce litigant's rights under R. 1:10-3 is granted.

5. Defendants Vincent Peter Falci (individually and d/b/a Saber Fixed Income Series, LLC

and d/b/a Saber Equity Income Series, LLC, collectively referred to as "Vincent Peter

Falci" in this Order), Saber Funds, LLC, Saber Asset Management, LLC, Saber Funds



defendants Hallus Realty Group, LLC, Phoenix Equities, LLC, Donna Falci and Vincent

N. Falci shall comply with the Consent Order as read together with this Order.

6. Payment of the unpaid portion of the final judgment entered against all defendants and

nominal defendants is accelerated and immediately due and payable, in the following

amounts:

a. $7,542,697.57 against defendants Vincent Peter Falci, Saber Funds, LLC, Saber

Asset Management,. LLC, Saber Funds Distributors, LLC, BWX Fund, LLC,

Fixed Term Government Fund, LLC, MSI Fund I, LLC, MSI Equity Fund II,

LLC, and Preferred Income Portfolio I, LLC, for violations of N.J.S.A. 49:3-

52(b), N.J.S.A. 49:3-52(c), N.J.S.A. 49:3-56(a), N.J.S.A. 49:3-56(h) and N.J.S.A.

49:3-60, constituting $6,742,697.57 in restitution and $800,000.00 as civil

monetary penalties pursuant to N.J.S.A. 49:3-70.1 ("Defendants' Final

Judgment") less $75,000 previously paid by defendant Vincent Peter Falci

towards the penalties;

b. $2,890,553.54 against nominal defendant Vincent N. Falci as disgorgement;

c. $2,108,524.32 against nominal defendant Donna Falci as disgorgement;

4

d. $2,035,511.23 against nominal defendant Hallus Realty Group, LLC as

disgorgement; and

e. $514,176.49 against nominal defendant Phoenix Equities, LLC as disgorgement.

7. The payout schedule for payment of the restitution/disgorgement in ~ 62 and civil

monetary penalties in~ 65 are superseded by~ 6 in this Order.

8. The permanent injunction and restraints ordered against defendants Vincent Peter Falci,

Saber Funds, LLC, Saber Asset Management, LLC, Saber Funds Distributors, LLC,

BWX Fund, LLC, Fixed Term Government Fund, LLC, MSI Fund I, LLC, MSI Equity

Fund II, LLC, and Preferred Income Portfolio I, LLC, and nominal defendants Hallus

Realty Group, LLC, Phoenix Equities, LLC, Donna Falci and Vincent N. Falci, in the

Consent Order shall remain in full force and effect.

9. Defendant Vincent Peter Falci and nominal defendant Donna Falci shall:

a. within five (5) business days of receipt of this signed Order, take all action

required by ReliaStar Life Insurance Company (the "Insurer") to reinstate life

insurance policy # ADXXXX3517 ("Life Insurance Policy") including, but not

limited to, executing all documents required by the Insurer and to comply with ~

73(b) ofthe Consent Order;

b. provide Plaintiff with documents demonstrating that the Life Insurance Policy has

been reinstated, and a complete copy of the reinstated Life Insurance Policy under

its present or new policy number, within five (5) business days of receipt of any

of such documents;

c. make timely premium payments to keep the Life Insurance Policy in force;

5

d. take such other action in a timely manner as the Insurer may require to keep the

Life Insurance Policy in force; and

e. Provide Plaintiff with documents evidencing compliance with this paragraph

within five (5) business days of such actions.

10. Plaintiff may provide a copy of the Consent Order and this Order to the Insurer, with a

copy of such communication with the Insurer to be provided to defendant Vincent Peter

Falci and nominal defendant Donna Falci.

11. Within five (5) business days of the receipt of this signed Order, defendant Vincent Peter

Falci shall provide Plaintiff with all documentation evidencing his transfer of and dilution

of his majority interest to minority interests, or transfer of his entire interest in all (i)

issuers; (ii) managing members of issuers; and (iii) general partners and other control

persons or entities of issuers including, but not limited to, SOIF, Vidon and Pantheon, as

required under~ 61 of the Consent Order.

12. Within five (5) business days of the receipt of this signed Order, defendants Vincent

Peter Falci, Saber Funds, LLC, Saber Asset 'Management, LLC, Saber Funds



defendants Hallus Realty Group, LLC, Phoenix Equities, LLC, Donna Falci and Vincent

N. Falci shall comply with~ 73(a) of the Consent Order, including providing Plaintiff

with a copy of the documents required to be maintained, for the period ending December

31, 2015.

13. Defendants Vincent Peter Falci, Saber Funds, LLC, Saber Asset Management, LLC,

Saber Funds Distributors, LLC, BWX Fund, LLC, Fixed Term Government Fund, LLC,

6

MSI Fund I, LLC, MSI Equity Fund II, LLC, and Preferred Income Portfolio I, LLC, and

nominal defendants Hallus Realty Group, LLC, Phoenix Equities, LLC, Donna Falci and

Vincent N. Falci shall comply with ~ 73(a) of the Consent Order, including providing

Plaintiff with a copy of the documents required to be maintained, for the period ending

December 31, 2016, no later than January 31, 2017.

14. Within five (5) business days of Plaintiffs request, defendants Vincent Peter Falci, Saber

Funds, LLC, Saber Asset Management, LLC, Saber Funds Distributors, LLC, BWX

Fund, LLC, Fixed Term Government Fund, LLC, MSI Fund I, LLC, MSI Equity Fund II,

LLC, and Preferred Income Portfolio I, LLC, and nominal defendants Hallus Realty

Group, LLC, Phoenix Equities, LLC, Donna Falci and Vincent N. Falci shall execute and

return to Plaintiff a Department of the Treasury Internal Revenue Service Form 4506

"Request for Copy of Tax Return" and/or such other documents as Plaintiff may request

for copies of state and federal tax returns, for any tax year until all of the

restitution/disgorgement and civil monetary penalty payments are made by the defendants

and nominal defendants.

15. Within five (5) business days of the receipt of this signed Order, defendant Falci shall

provide Plaintiffs counsel with documents demonstrating that Saber Asset Management,


LLC, MSI Fund I, LLC, MSI Equity Fund II, LLC, and Preferred Income Portfolio, LLC

have been dissolved.

16. Within five (5) days of receipt of the signed Order, defendants Falci, Saber Funds, LLC,

Saber Asset Management, LLC, Saber Funds Distributors, LLC, BWX Fund, LLC, Fixed

Term Government Fund, LLC, MSI Fund I, LLC, MSI Equity Fund II, LLC, and

7

Preferred Income Portfolio I, LLC, Saber Fixed Income Series, LLC, and Saber Equity

Income Series, LLC and nominal defendants Hallus Realty Group, LLC, Phoenix

Equities, LLC, Donna Falci and Vincent N. Falci shall execute and return all documents

as may be requested by Plaintiff to fulfill all of the defendants and nominal defendants'

obligations set forth in the Consent Order.

17. Plaintiff may apply to this Court for a bench warrant to be issued to defendants Vincent

Peter Falci, nominal defendant Donna Falci and/or nominal defendant Vincent N. Falci,

with sufficient proof of failure to comply with the Consent Order and/or this Order,

except for failure to pay the judgments in whole or in part. Such application may include

the failure by any of the entity defendants - Saber Funds, LLC, Saber Asset Management,


LLC, MSI Fund I, LLC, MSI Equity Fund· II, LLC, and Preferred Income Portfolio I,

LLC - and/or nominal defendants Hallus Realty Group, LLC, Phoenix Equities, LLC.

18. Plaintiff shall serve a copy of this signed Order upon defendants Falci, Saber Funds,

LLC, Saber Asset Management, LLC, Saber Funds Distributors, LLC, BWX Fund, LLC,

Fixed Term Government Fund, LLC, MSI Fund I, LLC, MSI Equity Fund II, LLC, and

Preferred Income Portfolio I, LLC, Saber Fixed Income Series, LLC, and Saber Equity

Income Series, LLC and nominal defendants Hallus Realty Group, LLC, Phoenix

Equities, LLC, Donna Falci and Vincent N. Falci within seven (7) days of Plaintiffs

counsel's receipt of same.

Honorable Patricia Del Bueno Cleary, P.J. Ch. _Opposed

_ Unopposed ·

8

EXHIBIT A

JOHN J. HOFFMAN ACTING ATIORNEY GENC::J<.AL OF NEW JERSFY

. Division of Law i.24 Halsey Street, 5th Floor P.O. Box 45029 Newark, New Jersey 07101 Attorney for Plaintiff

By: VictoriaA. Manning (Attorney Id. # 006371991) Isabella T Stempler (Attomey Id. # 032642001) Deputy Attorney General (973) 648-3070

JOl-IN J. HOFFMAN, Acting Attorney General ofNew Jersey, on behalf of LAURA H. POSNER, Chief of the New Jersey Bureau of Securities,

Plaintiff,

v.

VINCENT PETERFALCI, individually and d/b/a Saber Fixed Income Series, LLC, and d/b/a Saber Equity Income Series, LLC, as ~l.

Managing Member of Saber Funds LLC, and Saber Asset Management, LLC :,


S/'iliER ASSET MAc"'AGEMENT, LLC:, a. New Jersey limited liabllrty company;

SABER FUNDS DISTRlBOTORS, LLC, a Delaware series limited liability company;

FIXED TERM GOVERNMENT' FCND

SUPERIOR COURT Of NEW JERSEY CHANCERY DIVISION: GENERAL EQUITY MONMOUTH COUNTY DOCKET NO. MON-C-160-14

. .. ' Civil Action

CONSENT ORDER AND FINAL JlJDGMENT AS TO ALL DEFENDANTS AND NOMINAL Df.i:FFNDANTS

_],L:~-'-----··----------·----- -----·-----·-----

---"·-a New Jersey li~t~d liabili~t .. company;


MSl EQUITY FUND II, LLC, a New Jersey limited liability



PREFFERRED INCOME PORTFOLIO 1, LLC,

and


Defendants,

PHOENIX EQUITIES., LLC, a New Jersey limited liability company;


DONNA FALCI, individually; and VINCENT N. FALCI, individually,

Nominal Defendants.

THIS MA'rTER was brought before the Court by Jolm J. Hoffman, Acting Attorney

General of New Jersey ("Attorney General"), on behalf Laura H. Posner, Chief of the New

Jersey Bureau of Securities ("Bureau Chief' or "Plaintiff") alkgmg violations of the New Jersey

Uniform Securities La"\V (1997), N.JS .. 6_ 4~V:-r7 5j: g~ ("Sccmities Law"). Plaintiff, through

counsel (Victoria A. Ma1ming 211d lsc.beUa T. ST-.:rnpJe~·, Deputy Attomeys General, appearing),

defendants Vincent Peter Falci, individu1ily and business as Saber Fixed Income Series,

LLC and Saber Equity Income Series, LLC, and ;;;.s m;:maging member of Saber Funds, LLC ru"'J.d

c Saber Asset Management, LLC (collectivf;:ly, "Falci"), Saber Funds, LLC ("Sal:)er Funds"), Saber

Asset Management, LLC ("SAM"), Saber f<'unds Distributors, LLC ('•SFD"), BWX Fund, LLC

("BW:X"), Fixed Term Government Fund, LLC ("FTGF"), MSI Fund I, LLC ("MSI Fund I"),

MSI Equity Ftmd II, LLC {"MSI Equity Fund H"), and Preferred Income Portfolio I, ;JLC

e'PIP") (collectively with Fi:>Jci, "Defendants"), and nominal defenda..llts Hallus Realty Group,

LLC ("Hallus Realty''), Phoenix Equities, LLC ("Phoenix Equities"), Donna Falci and Vincent

N. Falci (collectively, "Nominal Defendants"), through counsel (Peter B. Bem1ett, Esq. and . .

Christopher J. Marino, Esq. of GiordfuJ.O, Halleran & Ciesla, P.C.) have agreed to resolve the

issues in controversy set forth in the Complaint tiled in this matte1 on the terms set forth in tris

Consent Order and Final Judgment ("Consent Order"), which terms have, with the consent of

Plaintiff, Defendant'> and Nominal Defendants, be-en reviewed and approved by the Honorable

Patricia Dei Bueno Cieary, P J Ch. The I:\urca1..1 Chief makes the following findings o_f fact and

conclusions of law:

1. From January 2006 through at least December 2009 ("Relevant Time Period"), Falci, a

former Middletown, New Jersey fire chie.E and the Defendants through Falci fraudulently

raised over $6.7 million from the sale oC tmrcgistered securities in the form of interests in

limited liability compa:nies and investment contracts from approximately 182 investors of

whom 152 reside in New Jersey. The investors include, among others, present and retired

police officers, and public servarn orgctnizations, such as firf~ companies and police

benevolent associations, thJoughout :tvlenrnouth County.

2. Falci, a resident oLMiddletown, 1'-icvv Jersey, created, operated 1'tnd exclusively controlled

and continues to control Defendants Sab<;r Funds, SAM, SFD (coilectively, "Saber Broker

Dealers''), BWX, FTCF, MSI Fund I, MSI Equity Fund II, PIP, the unformed entities Saber

Fixed Income Series, LLC ("Saber :Fixed Incorne") a...-·1d Saber Equity Income Series, LLC

("Saber Equity") (collectively "S~.;ber bveMinent Funds"), and nominal defendants Hallus


3. During tho Relevant Time Period, fak:'s 1010 awl rc~ponsibililies at defendant Saber

Broker-Dealers, Sabef Investment Funds and nmrinal dett-mdant Ha.llus Realty included,

among other things: (a) handling the day-w-day management of all the entities; (b) making

aU investment decisions for the Saber bvcstmcnt funds; and (c) controlling the finances of

the Saber Broker-Dealers. Saber Investment Funds, Hallus Realty and Phoenix Equities.

4. Falci was registered with the Bureau to sd~ securit~es ti:om 1992 through 2002. However,

during the Relevant Tixne Period, Fu:ci was ndthcr registered with the Bureau in any

capacity nor exempt fron1 registra~ion.

5. Defendant SAM is a New Jersey >imiteG 'iabiEty company, formed on or about June 3,

2002, located in Middletov·m, New Jersey SAM's only m.embers were and continue to be

Falci, who holds a fifty-one percent (:51%) 0\:vnership interest, and his wife, nominal

defendant Donna Falci, who holds a forty-nine percent (49%) ownership interest. SAM is

the managing member and investment rnrmager Ior MSI Fund I, FTGF and BWX. SAM

has never been registered with the hurc:au in :my capacity.

6. Saber Funds is a New Jersey limited ·iability ccmp:::my, fo:rned on or about December 30,

2005, located in Middletown, Ne\v J0rsey. Sah:r Fund's only members were and continue

to be Falci, who holds a fifty·OJ'.c percent (51. ownership interest, and Donna Falci who

(~

holds a forty-nine percent (49%) o-vvncr.';lnp interest. Saber Funds is the managing member

and investment manager for MSI Equity Fund U, Saber Equity and Saber Fixed Income.

Saber Funds has never been registered ·with the Bureau in any capacity.


· and located in Middletown, Nev; Jersey. SFD's managing director is defendant Falci. SFD

has never bee!l registered with the .Bureau in any capacity.


Middletown, New Jersey. From approxin1ately Janumy. 15, 2006 through approximate:ly

March 16, 2006, Falci and MSI Fund I, through Falci, issued, offered and sold securities in

the form of limited liability interests ("MSI Ftmd I Securities") using a "confidential

private placement memorandum" Cf.ASI Fund I PPM") to at least fifteen investors. The

MSl Fund I Securities \Vere not regisTered with the Bureau.

9. FTGF is a New Jersey limited liability compzmy, formed on March 30, 2006, located in

Middletown, New Jersey. From approximately April 6, 2006 through at least Febmary 19,

2009, Falci a.nd FTGF, through Falci, issued, offered and sold securities in the form of

limited liability interests ("FTGF Securities") using a "conlidential private placement

memorandum" («FTGF PPM") to at least seventy-six investors. The FTGF Securities were



by MSl Fund I and FTGF by filing with the SEC a Notice of Sale of Securities Pursuant to

Regulation D Section 4(6), and/or Uniform Limited Oftering Exemption form ("Rule 506

"''1' ") •t.. • ,. ·. S 'fi '1 . h MS" F d .n mg , ... ue reqmrements ror cxernpuon vvcT,·~ not mer. , ~;ecr JCEH y, pnor tot e. "J . un

I and FTGF Rule 506 Filings, there were at. least thirty sales of the MSI Fund I Securities to

::i

fifteen investors and there were at least 1·75 sales of the FTGF Securities to seventy-six

investors.

11. MSI Equity Fund E is a New Jersey limited liability company, formed on or about

September 17, 2008, located in Middletown, Ne'YV Jersey. Since on or around September

17, 2008, Falci and MSI Equity Fund H, through Falci, issued, offered and sold securities

in the form of limited liability inu~rests ("tvf.Sl Equity Fund II Securities") to at least

twenty-six investors. The MSI Equity Fund H Secudtie~ wtn~ not registered with the

Bureau.



Fixed Income, issued, of:fered and soid securities in the purported form of limited liability


("Saber Fixed Income PPM") to at least tour investors. The Saber Fixed Income Securities



Middletown, New Jersey. Beginning in or aronnd March 2009, Falci, doing business as


interest~ ("Saber Equity Securitic:s'') using ;,;. private placement memorandmn ("Saber

Equity PPM") to at kast thirteen inv;;;stors. The Saber Equity Secmities were not


14. B\VX is a l'·kw Jersey limited .lw.bility company, 1~.:mned on or about March 30, 2006,

located in Middletown, New Jersey Falci and BWX, through Falci, issued, offered and

sold securities purported]:' in the fom1 ,Jr'limitcd l.iabiJity .interests ("BWX Securitjes") to at

c· least twcnty-nvo investors. The BW-:'\: Securities w<;re not registered with the Bureau.

15. PIP is a New Jersey limited liability company forrncd on or about June 3, 2002, lo~ated in

Middleto\vn, New Jersey. Defendants Falci m1d PfP; through Falci, issued, offered and

sold securities in the form of limited liability units ("PIP Secmities") using a "confidential

private offering mernorandum" ("'PIP PPM'} dated December 31, 2004, to at least twenty-



about Decembe: 30, :W05, located in Middletown, New Jersey. Hallus Realty's only

members are Saber Funds, which holds a sevenv;-five percent (75%) ownership interest

and nominal defendant Vincent K Falci, who holds a twenty-five percent (25%) ovlnership

interest



members are Falci, who holds a fifty percent (50t%) owne1ship interest, and his son,

nominal defendant Vincent N. Falci, who holds a fifty percent (50%) ovvnership interest.


day-trading.

18. Nominal defendant Donna Falci, a resident of Middletown, New Jersey, is defendant

Falci's wife. During the Relevant Time P,;tiod, nominal defendant Donna Falci held

membership interests \n: (<l) SAM; and (b) SLbe;: J\mds. She has never been registered

with the Bureau in any capacity, and i:; not c::ernpt from registration.

19 Nominal defend::.nt Vincent N. Filki, a l'·kw Jersev residc.nt, is defendant Falci' s son.

During the Relevant Time Period" nommal c<Jendant Vincent N FaJci held membership

interests in: (a) Hallus Realty; Jnd (b) Phoenix Equities.

·20. During the Relevart Tirnt: Peliod, defendants .Falci, the Saber Broker-Dealers and the

Saber Investment Fm1ds, through Falci, raised $6,742,697.57 from the fraudulent offer and

sale of MSI Fund I Securities, FTGF Securities, MSI Equity Fm1d II Securities, Saber

Fixed Income Securities, Saber Equity ·Securities, BWX Securities and PIP Securities

(collectively the ''Saber Ynvcstment Funds Sc.;;uritics").

21. The Saber Investment Fund:> Securities were sold to 182 investors, 152 of whom were


22. The Saber Investment Funds Securities Vv'Cr·e ncithc.r registered . with the Bureau, nor

t"fxlerally covered, nor exempt from registration.

23. Defendants Falci, the Saber Broker·Dealers through Falci, and the Saber Investment Funds

through Falci, mad1;; materially ffdse ~~.nd/or misleading statements to the Saber Investment

Fund investors inc.luding that:

(i) their money would be invested primarHy in tax lien certificates; and


24. In reality, Saber Investment Funds' financial documents demonstrated that Saber Investment

Funds' investments m tax lien certificates never exceeded three percent (3%) of the total

assets 1mder management, and the 2005 rde of return tor MSI Fund I was purely hypothetical

as the MSI Fund I did not even exist in WOS.

fu.J2t&\i3J:l.tations to _Sabel· bv':':'J.llnen:f Ii:~nds l~:ys:§tors in the PPMs

?5. In connection with the offer and sak of securiti<:s, Falci prov1ded investors with a MSI Fund

1 PPM, fTGF PPM, Saber Fixed ;ucome PPM, Saber Equity PPM and/or PIP PPM

(collectively, f1e "PPMs'').

c 26. Investors in the BWX Securities and MSI Equity ll Securities w<!re given a MSI Fund I PPM

by Falci,

27. Falci drafted the PIP PPM, the FTGF PPtvJ, the Saber Fixed Income PPM and the Saber

Equity PPM,

28. Falci was heavily involved in the drafting of the MSJ F1md I PPM by providing infonnation



the MSI Fund I PPM.

29. Falci and MSI Fund l, Saber Fixed Income :omd Saber Equity Income, through Falci,

represented to investors in the MSI Fund J PPM, Saber Fixed Income PPM and Saber Equity

PPM, respectively, that: (a) the investment objective v;as to seek interest income by investing

'"primarily" in tax lien certificates and other tixed income instruments; (b) the funds

contemplated investing most of their c::rpita1 in tax. lien certificates; (c) the f1md could invest

in other securities and interests In real property; <md (d) the fund would buy and sell




30. Falci and FTGF, through Falci, reprcsmted lo investors in the FTGF PPM that: (a) the


income instnJments;" (b) the fund contern.})latcd investing most of its capital in tax lien

certificates; (c) the fund could invest in other secmii.ies and interes:s in real property; and (d)

the fund would buy and sell securities deerned by defendant Faki to be equity equivalents

9

and that the fnnd may engage in trading including, but not limited to, selling securities short,


31. The representations to investors that defeud~mts MSI Fund I, Saber Fixed Income, Saber

Equjty and FTGF would invest "primarily''' in tax lien certificates were false because Saber

Investment Funds' financial docurnents demonstrate that their investments in tax lien


Rgnresentations to Saber lnve_§j!!!~Pti~'un~g:Jgvcstors in thc __ Written Annual Upda!~

32. In or around December 2008, SFD, through Falci, provided a vvritten update to Saber

Investment Funds investors that falsely represented the percentage of ftmd allocations in tax


the fixed income funds and eighty-'five percent (85%) of the equities funds were allocated to

tax lien ce11i:ficates. In reality, Saber Innstment Funds' financial documents make clear that

less than three percent (3%) of total assets under management were actually invested in ta'<.

lien certificates.

Misuse of lnvestor Funds

33. Investor funds were used tor purposes other than those disclosed to investors. Falci

controlled the finances for the Saber Brokca·-Dealcrs, the Saber Investment Funds, and

nomina; defendants Ha!lw; Realty and Phoenix Equities.

34. Payments totaling approximately S700,000.00 vtcre made to Falci from the Saber Broker-

Dealers, the Saber Investment Funds nominal de£t.::ndmts Hallus Rez.Jty and Phoenix

Equities.

(

35. Payments totaling approxunately :.:)73,000.00 were; made to nominal defendant Donna Falci

from the Saber Broker-Dealers, the Saber Investment Funds ~md nominal defendants Hallus



Falci from the Saber Broker-Dealers, the SP..ber Investment Funds and nominal defendants

Ballns Realty and Phoenix Equities. Of the payments made to nominal defendant Vincent


37. Falci transferred apprcximateiy $554,000 of MSI Fund f and FTGF investor money to

nominal defendant Phoenix Equities, vvhich was used for personal day-trading by Falci and

nominal defendant Vincent N. Faki.

38. Falci transferred approximately $3,000,000 to nomin<'l defendant HaHus Realty from

defendants MSI Fund L T7TGF, B WX, PIP nne\ SFD.

39. The funds transferred to nomina:i defendant Hallus Realty were used by Falci to purchase at


Falci a.nd/or nominal defendant Donna Falci. At least two of the residential properties were

sold, leaving title to the remaining five r(;sidential properties (the "Five Residential


a, Vincent F. Falci (I Ol);;l) and Hallus Realty (90°/o), 60 Baldwin Avenue, Middleto":'TT,


b. Vincent f_ Falci (10'>,) mtd IJzd.lus f~.e<ilt:- (90%1), ) Grace Avenue, Middletown, New

Jer:::ey, Block 431/Lot 9;

c. DonTl.a Falci (10%) and Hallus Realty (90';/iJ), 165 Lohsen Avenue, Middletovvn, New

Jersey. Block 289/Cot 15,

I: J.'

c·· d. Vincent P Falci, 318 East Coventry Court, #100E, Lakewood, New Jersey, Block

1248iLot 318.05; and

e Vincent Falci, 161:2 Rosewood Drive, \Vall, New Jersey, Block 57/Lot 19.

40. Nominal defendant Hallus Realty, through F:'!.ki, manages the Five Residential Properties.

41. Title to the Five Residential Properties are '~l'lGumbered with mortgage loans and leased to

residential tenaxits. The tenant at ! 612 Rosewood Drive is nominal defendant Vincent N.

Falci.

42. In addition, Falci, without disclosure to the Saber Investment Funds investors, transferred

millions of dollars between defendants the Saber Broker-Dealers and the Saber Investment


money raised by Falci and the Saber Investment Funds through Fa.lci, was deposited into

one of the Saber Broker-Dealers bank accc·unts where it was pooled with other investor

funds and, then transferred by Faki to what he and the Saber Investment Funds were

investing in a:t that time, f.:.&, to buy tax liens Getiific.ates, securities or transferred to Hall us

Realty, whlch purchased the Five Resiclcnhal Properties and a sixth residential property

thztt has since been sold, ir. Falci's or bh wife'" nztn;e.

43. Falci caused MSI Fund I, FTGF <nd B\VX to issue PIK Notes to nominal defendants

Hallus Realty and Phoenix Equities for purported ''lines of credit"

44. Falci established the terms of and ;::ntered into d1c PIK Noles on behalf of all the entities on


45. Falci, the Saber Broker-Dealers and the SaLcx :;nv;;;;stment Funds, through Falci omitted to

disclose to investors that he caused 0ASI F\md I, f TGF, and BWX to jssue PJ.K Notes to

nominal defendants Ha1lus Realty and Phoenix :r.:quities and that Falci, on behalf of all the

entities, negotiated the terms ofihe P]}~:. Notes.

46. Falci caused Saber Funds to enter into three promissory notes that. in total, loaned

$185,000.00 to a company owned by a S/-\_;vi investor, whom Falci described as his best

friend. Falci, the Saber Broker-Dealers and the Saber Investment Funds, &..rough Falci,


owner of said company.



Falci omitted material facts to investors. including, among other things. that:

a. Falci was not regisTered with the .Bureau to sell securities;

b. MSI Fund l Secmities were neither rqrist.::rcd with the Bttreau nor exempt from sU,te

or federal registration:

c. FTGF Securities were neither registered \.vith the Bureau nor exempt from state or


d. MSI Equity Ftmd II Securities were neither registered with the Bureau nor exempt

from state or fede:: al registration;

e. PIP Securities \Vere neither registered with the Bureau nor exempt from state or


t BWX Securities were neither regisLc.F:~d \Vith tht' Bureau nor exempt from state or


i3

c:~

g. Saber Fixed Income and Saber Equity Income were not formed as limited liability



h. SAJ.\1 was not registered with the Bureau in any capacity,


J. SFD was not registered with the Bureau many capacity;

k. Investor funds were not inwsted in tax lien certificatt~s to the extent represented;

L Falci controlled of all the entities to which inW:',stor ftmcls were transferred~


company controlled by defendm1t Faki, to purchase the residential properties, which

were deeded at the outset to defendant .FaJci or nominal defenda'!"J.t Donna Falci;


day-trading by Falci and nominal dc.tendant Vincent N. Falc.i;

o. Falci caused defendants MSI Fund l, B WX and FTGF to enter into the PIK Notes


acting on behalf of all the parties tc the PIK Notes, and on behalf of all the entities,

negotiated the tenns of the PIK Notes

p. Falci caused Saber Flmds lo enter into ihrec pronnssory notes as a lender in the

aggregate amount of $185,000.00 to <1 cmnpany ovvned by a SAM investor, which

Falci described as his best fi"i(~nd; and



c jl'alci's Nev: Bu.'Liuess Entitle~

49. In or arotmd 2010, Defendant Falci formed Sabe;· Opportunity Income Fund, LP.

('"SOIF"), a Delaware limited. partnership, which offered ~md sold securities in the form of

limited partners...~ip interests ("SOlF Securities"). SFD is SOIF's general partner.

50. In or arotmd 2012, Falci formed Pantheon T::1x Receivables, LP. ("Pantheon"), a Delaware

limited partnership, which otTers and sells securities in the form of limited partnership

interests ("Pant.h.eon Securities"). Vidon Capital ')artJ.crs, LLC (Vidon") is Pantheon's

general partner and manager. Falci is the: m<.maging member of and holds a 60% interest in

Vidon. Nominal Defendant Vincent N .. Fa1ci owns a 40% interest in Vidon. Vidon

. receives 2% per annum of Paritheon's assets under management and a performance fee of



5 L SOIF is an active entity, but its assets were invested by Falei jn the Pantheon Secnrities.

§ONCLU$IONS OF LAW

52. The Saber Broker-De<llers through Falci, and Saber Investment Funds through Falci,

violated the antifraud provisions of the Secnrlties Law, specifically, N.J.S.A. 49:3-52(b)

and (c), sold unregistered securities in the fonn of limited liability interests and investment

contracts, in violation of N_J..S.A"' 49:3-60, and employee! unregistered agents, in violation

ofN.J.s_ib 49:3-56(h).

53. Falci violated the a11tifraud provisions of the Securities Lnv, specifically, N .J.S,.!b 49:3-

52(b) and (c), sold unregistered secmjties in tbe form of limited liability interests and

investment cont.r<:tcts, in violation of N,J,S,t\, !9:3--60, <::...'1d acted as an agent without

registration, in violation of}'Lf S.A 49:3-56(a).

c 54. Falci and Nominal Defendants were unjustly enriched by the Defendants' violations of the

Securities Law.

THEREFORE, based on the Bureau Chief:.; foregoing "findings of facts and conclusions

of law, it is on this j r . day of,_ {'~~~{}f:!:y/2015, ORDERED AND AGREED

THAl':

55. Defendant<> Vincent Peter Falci, Saber Funds, LLC, Saber Asset Management, LLC, Saber

Funds Distributors, LLC, Saber Jnvestm.:.nt Junds, · BWX Fund, LLC, Fixed Term

Government Fund, LLC, MSI Fund I, LLC, MSl Equity fund II, LLC, and Preferred

Income Portfolio I, LLC and nominal clcfencbnts Hallus Realty Group, LLC and Phoenix


agent, employee, broker, partner, officer, director, attomeys-in-fact; stockholder, andlor

any other person who is directly or indirectly unde;: their control or direction, are

PERMANENTLY ENJOINED AND RES-CRAJNED from directly or indirectly:

a. violating the Securities Law, includinr; ib anti-fraud provisions, NJ.S.A. 49:3-52(a) ··

(d);


limited to, an agent as deUnecl in J~J.S,.;\. 49:3--49(b), a broker-dealer as defmed in

£:/.J.S.A. 49:3-49(t.:), an 1nvestment adviser as defined in lj.lS,_&_ 49:JA9(g), and an

investment adviser representative c1S detined in .\.:LLS,f\ 48:3-49(s);

c. issuing, offering for sale or scllinf, of!irinz, to purchase or purchasing, distributing,

promoting, advertising, soliciting, nq:otiating, advancing the sale of and/or

promoting securities, or advising r;;;g~trd.ing the sale of any securities, in any manner

16

c to, from or within New Jersey, mcluding for or on behalf of Pantheon, Vidon and! or


through registered broker-dealers c:.nd. Falc\ may acquire an interest in Pantheon or an

entity that may be fom1ed to invest in ta,v.: lien certificates i.n connection with actions

to be taken to comply with 55(e) ::md 61;

d. engaging in the conduct deseribeJ in lhc Complaint; and



the fund or from owning or controlling a major.ity interest in any issuer that offers



Bureau to be a broker-dealer, an egent, investment adviser, or investment adviser

representative as defined hy the Securities Lrw.

57. Defendant Vincent Peter Falci is pennanemly 2njoined and restrained :5:om recommending




58. Ddendant Vincent Peter Faici is permanently enjoined and restrained from:

a. Raising any capital in any fonTl tor any: (i) issuer; (ii) managing member of any

issuer; and (iii) general partner or othc~r controlling person or entity, of any issuer

including, but not limited to, SOIF, Vidcn and Pantheon;

b. Managing or exercising contro.l ove:r invc:stmcnts and assets including, but not limited

to, any finances for any: (i) is:cuec m;c;naging member of any issuer; and (iii)

1 7

general partner or other control person or entity, of any issuer including, but not


c. Engaging in any investor reh:tions and/or communications for or on behalf of ?.ny: (i)


including, but not limited to, SOIF, Vi don and Pairtheon:

59. Nominal :Jefendant Vincent N. Falci is permanently enjoined and restrained from acting as

a proxy for any of the Defendants as to G.ny of the enjoined conduct set forth in this

Consent Order.

60. Nominal Defendant Vincen: N. Falci 1s permanently enjoined and restrained from the

following conduct:

a. Acting as an officer ~md/or director of an issuer;


c. Controlling any issuer that of:rers and/or sells any security.

61. Upon entry of this Consent Order, :)efend;mt F aki shall be and remain in compliance with

this Consent Order and shaH immedi;-ttely transfer control of and dilute his majority

interests to minority interests, or transfe1 his entire interests in all: (i) issuers; (ii) managing

members of issuers; ~md (iii) general )'trtner:~ and other control persons or entities, of

issuers including, but not limited IO, son; Vidon and Pantheon.

62. Defendants Vincent Peter Falci, ::,aber h.mcs, ·cLC. Saber Asset Management, LLC, Saber

Funds Distributors, LLC. BWX Fund. LLC, Fixed Tenn Government Fund, LLC, MSI

Fund Ij LLC, MSI Equity Fund II, ; .. LC, :md Prefen-ed Ineome Portfolio I, LLC are jointly

and severally liable to P1.aintiti tor :esritution in the <m10LU1t of $6,742,697.57 for the

8

investors who purchased the limited liability interests and/or investment contracts.

Nominal Defendant Donna Falci shall disgorge $2,108,524.32, pursuant to N.J.S.A. 49:3-


N.J.S.A. 49:3-69(a). Nominal Defcnd~:;:nt Hallus Realty Group, LLC shall disgorge

$2,035,511 .23, purslk'1nt to NJ.S.A. 49:3-69(a). The $2,035,511.23 of disgorgement owed




$2,035,511.23 of disgorgcmcnt owed by Nominal Defendant Hallus Realty Group, LLC is

jointly and severally owed by Defendant~ Vincent Peter Falci, Saber Funds, LLC, Saber


Govemment Fund, LLC, MSI Fund I, LiL, MSI Equity Fund II, LLC, and Preferred

Income Portfolio I, LLC, and Nominal Defendants Donna Palci and Vincent N. Falci.

Nominal Defendant Phoenix Equities shall disgorge $514,176.49, pursuant to N_,IS,l1~

49:3-69(a), which is jointly and severally m~>cci by Defendants Vincent Peter Falci, Saber

Funds, LLC, Saber Asset Manngcmenl, LLC, Saber Ftmds Distributors LLC, B\VX Fund,

LLC, Fixed Tenn Government Fund, L'.,C, MSI fund I, LLC, MSI Equity Fund II, LLC,

and Preferred Income Portfolio I, L'J.', and Nominal Defendant Vincent N. Falci. The

restitution/disgorgement shall be paid to Plaintiff over five years as follows:

a. $471,988.82 (seven percent (l'~<l) of the $6,742,697.57) on or before August 3't, 2.016; b. $876,550.67 (thirteen percent (13%) of the $6,742,69"/.57) on or before August 31,

2017; c. $1,483,393.47 (twenty-twc pt. cent V2(\;,) of the $6,742,697 .57) on or before August

31,2018; d. $1,887,955.33 (twer:ty-eight perc::m (:).8%) of the $6,742,697.57) on or before August

31,2019;and

'C i j

e. $2,022,809.28 (thirty percent (30%) of the $6,742,697.57) on or before August 31, 2020.

63. The Bure-au shall distribute the restitntion/disgorgement payments !o the investors and the

Bureau Chief will detenniue, in her sole discretion, when such distributions will be made to

investors.

CIVIL MONETARY PENI\LTIE~

64. A civil monetary penalty may b::: imposed on Defendants Vincent Peter Falci, Saber

Funds, LLC, Saber Asset Managemem, LLC, Saber Funds Distributors, LLC, BWX Fund,

LLC, Fixed Term Govemment Fund, LLC, i'vtSJ Fund I, LLC, MSI Equity Fund II, LLC,

and Preferred Income Portfolio I, LLC pursuant to N,_LS.A. 49:3-70.1 for each violation of

the antifraud and registration provisions of the Securities Law of not more than $10,000

for t.,_e first violation and n.ot more than $20,000 for a second and each subsequent

violation. In view of the speci:fic facts ,of this case including, but not limited to, the


by the Defendants through Vincent Pe:rer Falci to Plaintiff through the date of entry of this


Defendants, 1.md Nominal Defend~mts' financial status, all of wbch are material to

Plaintiff in entering into this Conse.Jl( lbler and assessing the civil monetary penalties, the

civil monetary penalties are reduced. D~kndtmls Vincent Peter Falci, Saber Funds, LLC,

Saber Asset Management, LT ,C Saber Funds Distributors, LLC, BWX Fund, LLC, Fixed

Term Govemment ,.:''und, LLC. 1\JSI ,::und I, LLC; MSl Equity Fund Il, LLC, and

Preferred Inccmc Portfolio I, LLC arc jointly and sew~rally assessed civil monetary

penalties pursuant to NJ.~_}\ 49:2-70.1 in the anwtmt of $800,000.00 for violations of

NJ.S"'.A. 49:3-60, which is remedial and not punitive in nature.

65. ~he civil rnonetary penalties shall be. paid in the same proportion as the

restitutionldisgorgement payments set forth in 'i! 62, unless accelerated pursuant to this


a. $75,000.00 witbjn 120 days of entry of this Consent Order; b. $50,750.00 on or betore August 31, 20 16; c. $94,250.00 on or before August 31, 2017; d. $159,500.00 on or before August 31, 2018; e. $203,000.00 on or before August 31, 20 19; and f. $217,500.00 on or before September 15, 20?.0.

The penalty payments shall be depositecllnto the Secmities Enforcement Fund, pursuant to

N.J . .S A. 49:3-66. 1 . Payment shall b.::; n:lade in accordance with the provisions in this

Consent Order.


Falci, Saber Funds, LLC, Saber Asset :'vbnagcment, LLC, Saber Funds Distributors, LLC,

BWX Fund, LLC, Fixed Term Govemrncnt FunC., LLC, MSI Fund 1, LLC, MSI Equity

Fund II, LLC, and Preferred Income Portfolio I, LLC, for violations ofl':l'J.S.A. 49:3-52(b),

}U.S.f\., 49:3·52(c), N.J~.S,.,.A. :i9:3-56(a), .tl)S.A. 49:3-56(h) and N.-L_S.A. 49:3-60,

constituting $6,74?.,697.57 in restitution and $800,000.00 as civil monetary per:alties

Pursuant t·o N 1 S A .19·"' 70 l ("Y"'ef~ J.., t·~' "'Zi1'·'; J1l'1rrJnei'+") < -~~·-·-.:. •.•.. )- • .1 . ..1 \--DCd1 > . '«' . <.>., 1 '" •

67. Final judgment is entered against Nomhzu )Jefcndant Vincent N. Falci in the amount of

$2,890,553.54 as disgorg~rnent in accordance with ,162.

68. Final Judgment is entered against N,Yninal ~)efendant Do1ma Faki in tl1e amount of

21

69. Final Judgment is entered against Nominal Defendant Hallus Realty Group, LLC in the

amount of$2,035,511.23 as disgorgement in accordance with ,-r 62.

70. Fi~al Judgment is entered against Nominal Defendant Phoenix Equities in the amount of

$514,176.49 as disgorgement in accordance with ,-r 62.



restitution/disgorgement payments and the civil monetary penalties payments set forth in ,-r,-r


occur as set forth in ,-r 80, then $217,500.00 of the civil monetary penalties due on




Bureau of Securities, 153 Halsey Street, 61h Floor, Newark, NJ 07102, to the attention of

the Bureau Chief.










22

c shall provide a copy of same to the Bureau ;,vithin ten days of a request by the

Bureau;

b. Vincent Peter Faki is the insured and owner of a life insurance policy with a Three

Million ($3,000,000) DoLlar des.th benefit issued by Reliastar Life Insurance

Company (the "Insurer") on June 18, 2012, policy number AD ••• (the "Life


Vincent Peter Falci owns a fifty percent (51%) interest in Saber Ftmds LLC and


Peter Falci, individually, and a:; a member of Saber Funds LLC, and Donna Falci,



and civil monetary penalty payments are paid as sel forth in 1'll 62, 65 and 71.

Vincent Peter Falci, individually, aod as a member of Saber Funds LLC, and Donna

Falci, jndividually, and as a member of Saber .Funds LLC, at their own costs and

expense, shall take such steps as are reqniP;Xl by the Insurer to assign, transfer and set

over to the "State of New Jersey, Bureau of Securities" the Life Insurance Policy and


entry of this Consent Order. Vincent Peter Falci represents to Plaintiff that there are

no loans or other liabilities on the Life Insurance Policy that would reduce the death

benefit. Neither Donna Falci, Suber Funds LLC nor any beneficiary shall assert any


the death benefit toward the balance of ihe final judgme-nt owed under this Consent

Order. In the event the balance owed to pay the fmal judgment is less than the death


c. Defendants and Nominal Defendants shalJ, at their sole cost and expense, take all



Middletown, New Jersey, Block 600/L.oi: 32. Such action shall include, but is not


1. Giordano, Halleran&. Ciesla, P.C. ("GHC") will order title reports on each of

the properties to identify a!J recorded Liens and encumbrances, and provide

Plaintiff with a. copy ofthe tiJe report;:;;

u. The title company will fik Notice of Settlem<':rr; in applicable counties;

iii. GHC will prepare mortgag~s: in a form satisfl:1ctory to the Bureau naming the


iv, Promptly following the entry of the Consent Order, GHC will record the

mortgages with the Office of th'::: County Clerk of Monmouth Cmmty and


This Consent Order slcall hs attached as an exhibit to each mortgage. Once all

the restit1.1tion/disgorgen1cnt and civil monetary penalty payments are paid as

set forth in~~ 62, 65 and 71. the S:.::\\.8 of New Jersey shall provide Defendant

Falci with documentmion '.LrtTir,:: ;:;r: to discl mrg~; the lien. Defendants and

Nominal Defenda.c1ts shall h~ rs;;ponsible fm all costs ~d fees associated with

the discharge of the lien:



recording L'1 the office of the clerk of the Gounty in which the real estate is

located, aild (iii) upon execuLion r.nd delivery, shall be effective to create a


74. Defendant Falci and the Saber Broker··D.:::alers tmd Saber Investm.ent Funds through Falci,

and the Nominal Defendants shall sign within fifteen business days all documents as may

be requested by their counsc:. cmdJor Plaintiff to fulfill all of the obligations of Defendant

Falci and the Saber Broker-Dealers aml Saber Investment Funds, and the Nominal'


75. Defendant Falci shall dissolve each of the Saber Broker··Dealers and Saber Investment


76. In the related administrative action, L.:vfCLY.iDSSTJ_Peter FalcL et al., OAL Docket #13248-

2014N BOS, the Bureau Chief entered ;: Summary Order on September 18, 2014

("September 18, 2014 OAL Summary Onkr"). This Consent Order is subject to

Defendants withdrawing their answers to the September 18, 20 4 OAL Summary Order

within ten (1 0) days of entry of this Consent Order and acknowledging that they dt; not

contest the relief sought by the Bureau Ch\d. ·~he September 18, 2014 OAL Swmnary


77. Defendants and Nomina: Defend:ln\s shaD lmrvidc the Bmeau with a copy of their flled

federal and state tax retums foJ. eadl y<>.lr within kn days of filing until all the

restitutionldisgorgement and civil monetary penalty paym,2nts ·JJe made as set forth in ,~l

62, 65 and 71.

78. Defendants shall not represent or irnply that any act or practice hereinafter used or engaged

in by Defendants or Nominal Defembnts ha.:: been require(: or approved, in whole or part,

by the State ofNew Jersey, the Attorney Creneral of New Jersey, the Division of Law, the

Bureau or any New Jersey agencies, agents. ,_;;rnployecs or subdivisions.

79. Upon any Triggc1ing Event defined in '\!80, the Bureau and/or Bureau Chief may:

a. declare to DeJendants and Nomind Defendants that the unpaid portion of the

Defenda.11ts' Final Judgment and Non:nnal Defendants' Final Judgment immediately

due and payable; rmd/or

b. take any action pe1mitted by law.

80. A "Triggering Evenf' is detined to include the !:allowing circumstances:

a. A violation or breach of this Co:·1s-cnt Ord.{-:c by Defendants and 1';!ominal Defendants;

b. Defendants' and Nomina! failure to make timely

restitution/disgorgement payments as sc: t~>rth in ~1 1 62;

c. The failure of Falci, Saber Fu.nds LLC D-11d/or Donna Falci, to timely make all

required payments on the Life lnsm~mcc Policy;

d. Defendants' and Nominal Ddi_'ndants t~tilurc to submit filed yearly federal and state

tax returns as set forth in ll 77;

e. Defendants' :railure to make tnndy payments of the civil monetary penalties as set

forth in ,l65; and/or

t: The. discovery by the Bureau Ch · falsity of any material representations made

by the Defendants. and Nor:nin.:c:! D::"("ndants as set forth in ,I 64.

8.1. Defendants and Nominal Dcfe1clante> ttJ.mf::::orinf of assets of any kind between each other

and/or any entity they control diJ\:crly or indirectly, shall be deemed a prima jt1cie

fraudulent transfer under New Jers\=fs Uniform Fraudulent Tnms:[er Act, ;N'.J.S.A. 25:2-20


82. In the event the Bmeau and/or Bureau Chief choose, at their sole discretion, to assert rights


defenses based on jurisdiction, lc:ck of scanding, statutes of liroitation..s, or statutes of


83. ArJ.y person with actual or constructive notice of this Consent Order who aids, abets,

counsels, commands or instructs any peson or entity to perform any act prohibited by this


Bmeau Chief.

84. Within ten days of entry of this Consent Orckr, Fi.llci sh<~ll provide a copy of this Consent

Order to:

a. Current and fhtme investors of the Defendants, SOIF, Vi don, Pantheon and any issuer

who employs Defendant Falci or f,)r \.Vhom Defendant Falci provides consulting


acknowledgement continuing receipt of this Consent Order and such


request to Fa lei; and

b. Current and future officers, dir,;:~tors, managers, supervisors, andfor partners of any

issuer and gene:·a.l partner o:f :.:m is:>'h> who employs Defendant Falci or for whom

Defendant Falci provides coJ:s1..dting sen ices, compensated or uncompensated. Each

such person shall be: required l.o sgn i!i\ a.cknowkdgernent con:fi1ming receipt of this

)7

Consent Order and such acknowled;p.nents shall be made available to the Bureau

within three days upon written. request to Falci.

85. This Consent Order constitutes the entire agreGment between Plaintiff, Defendants and '# <

Nominal Defendants with respec.t ro this litigation. This Consent Order is a complete and

exclusive statement of the terms of the agreement a.n:ong the Pa,.<ties with respect to its

subject matter and shall bind Detbdants and Nominal Defendants, and th<eir officers,


affiliates, assigns, executors and admi.nistrators. Nothing in this Consent Order shall be

construed to limit or a:f:Iect any position that !be Bureau and/or Bureau Chief may take in

any future or pending action not spccitical.ly encompassed herein.

86. Nothing in this Consent Order sh0.\l in any manner be construed to limit or affect the rights

of any persons, other than the Bureau Chief, a~ it pertains to the allegations in the

Complaint, who may have a claim against Ddendants and/or Nominal Defendants.

87. Defendants and Nominal Defendants rcprest,nt that an auth.orized representative of each has

signed this Consent Order with full knowledge, understanding and acceptance of its terms



original.

89. The tem1s and conditions of this Consent Order may be modified only with the written


90. If any portion of this Consent Orckr 1s held i nval.id or unenforceable by operation of law or

court o~·der, !l1e remaining t;:;rms of lhs Cons<:nL Order shall remain in full force and effect.

9l. This Court retains jurisdiction to entorce, modify or otherwise hear any application arising



93. Defendants and Nominal Defendants represent that th.;;y have had a full and complete

opporhmity to consult with counsel before signing this Consent Order.

94. Defendants and Nominal Defendants hereby consent to the jmisdktion of the Bureau.



)


GIORDANO, I-IALLERAN & CIESLA 125 Half Mile Roadi Suite 3 00 Red Bank, NJ 07701

BY: Peter R Bennett, Esq. (Attorney IJ. i'6El~c::,-7 tC(b.\)

Attorneys for defendants and nomiual ddcnd.ants Vincent P Falci, Saber Funds, LLC, Sabe,· A~sd. Management, LLC, Saber Funds Distributors, LLC, BWX Fund, LLC, Fixed Term Government Fund, LLC, MSI Fund I, LLC, MSl Equity Fund H, L' .. C, Preferred income Portfolio I, LLC, Hallus Realty Group, LLC, Phoeni.x Equities, LLC, Donna Falci and Vincent N. Falci


/.... /r r'') / .. ·1

"(. ~ ~~-I·/: ·- ':\"''"' ........................ -·····--.. ·-·-----·--· .. . Vin~ent Peter Falci, Individually and d/b/a Saber Fixed Income Series, LLC <:md Saber Equity Income Series, LLC

Consent to the Fonn, Content and Entry of this Consent Order and FimJ Judgment:

Saber Funds, LLC

~ ///,·. -~ ,l '~ /

Ry· '~( ·t_,-~ -~\ , - . -\--------- ... I I -

Vincent Peter Faki Managing Member

30

f) -- ____..., Dated: )'-(~ _.('\

)

Consent to the Fonn, Content and Entry of this Consent Order and Final JudgrneiL

Saber Asset Management, LZ,C

/.I /'•••• •• c•- .. ~~\ ! /.'

By:-·--· ''$/ ,.·-( ___ j{~.~ Vincent Peter Falci Managing Member

Consent to the Form, Content and Entry of this Consent Order and Fiml Judgrncn1:

Saber Fu.Tlds Distributor, LLC

. "~· /----_ // ') J By. ~ . ~j 2(: ~"-·

$ncent .Peter Falci Managing Member

Consent to the F01m, Content and Ently of this Consent Order and Final Judgme:c1L

Consent to the Form, Content and Entry of this Consent Order an.d Fina' Judgment:

By:

/) j/

Dated: 9 -/.-J-"'I ,J'"'

Dated: P-/ .(" (/

t1 / r Dated: 'l' --(.j ~( J

Consent to the Form, Content and Entry of this Consent Order and Final Judgment

BWX Ftmd, LLC

Consent to the Fonn, Content and Entry of this Consent Order and Final -~ uclgment:

MSI Equity Fund 11, LLC

s.,f:-(~ y . .. •. ........ . ... ·················- -·-· ............ ····-···--------·--· .. Dated: C ( [: ( -1~

Vince1,<\ ,{_ 'e~x Falci· Title:_L M ------

Consent to the Form, Content ::md Entry of this Consent Order and Final .iudgment:


By: Datect:9-(r·tT

Consent to the Form, Content and Entry of this Consent Orde:: and Final Judgment:

Ha!lus Realty Group, LLC

Dated: ()_(J~/7

c··

Consent to the f onn, Content and Entry of this Consent Order and :t7inal Judgment:

Phoenix Equities, LLC /'

/ ~- ..

By: "-,// ;~ -~ '!-{:· ' ~:incent ~F;:r Falci Title: ;'7 A"" ~' ~>\_C .. JJ~~~----~ ~-~ v-


•. ···1 ./) . / / //

I / ~ /_.. (.'

/~~.-/~--·· ~(_::_ .. ~_?{_ .. ~~<:~·--=·-----·---·--!Janna Falci, Individually


c

Dated: 9 -(_;-.., (T

Dated:

Dated: c1//)/J \_ .. I _ _..)

Consent to the Fonn, Content and Entry ofthis Consent Order and Final Judgrnent:

JOI-JN J. I-~OFFM.W ACr:ING ATfOR~'EYGENER.l.\.L OF NEW JERSEY Counsel for PI1~ntiff

/ I ,.·-}//··· ~ ..... , I I./ jy ~':,.

By: I 1 /( ,iY /.}'~

\)'kt~l.T~ 1\?(~i~ng (Attorney ld. :; 0063 71991) Attorney for Plaintiff

By: ~-~;;:.<f)'~(~~l~i~::·:.L~(:J:·,->>:' ' ~-~· "" / Isabella T. St·{mder (Attorney··u. H- Oj.LoL:£001) · Attomey for Plaintiff

I

Dated: 0 t( / s··

Motion to Enforce Litigant's Rights and Other Relief

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Transcript of Motion to Enforce Litigant's Rights and Other Relief