ATLANTA:4897600.1

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF GEORGIA

ATLANTA DIVISION U.S. COMMODITY FUTURES TRADING COMMISSION,

Plaintiff, v. Cornerstone Capital Management, LLC and Joseph T. Profit II

Defendants.

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CASE NO. 07-CV-0274 Story

BRIEF IN SUPPORT OF MOTION TO SHOW CAUSE

I. INTRODUCTION

Plaintiff Commodity Futures Trading Commission (the "Commission" or

“Plaintiff”), by Lael E. Campbell, and Court-Appointed Receiver S. Gregory

Hayes (the “Receiver”), by Henry F. Sewell, Jr., submit this memorandum of law

in support of their Joint Motion To Show Cause (“Show Cause Motion”) as to

Joseph T. Profit (“Profit”) a named Defendant herein and as to Felix Maye

(“Maye”) as president, co-founder, agent, and employee of Defendant Cornerstone

Capital Management, LLC (“Cornerstone”). The Show Cause Motion requests that

this Court require Defendant Profit and Mr. Maye to show cause why they are not

in contempt of the Court’s January 31, 2007, Ex Parte Statutory Restraining Order

To Freeze Assets, Preserve Books and Records, Authorize Expedited Discovery

and Appoint a Temporary Receiver (“SRO”), and why the Court should not issue

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and order of contempt, immediate compliance and sanctions against Defendant

Profit and Maye.

As more fully described below, after being served with the SRO, Defendant

Profit has continued to engage in a game of deception and concealment with the

Commission and Receiver. Similar to his conduct prior to the entry of the SRO,

Profit is continuing his pattern of disclosing material information only after

authorities learn of it from other sources. While under oath or otherwise, Profit has

concealed assets and documents of the Defendants, including bank and trading

accounts, and a Cornerstone entity in Switzerland that has been conducting

business after the entry of the SRO. In addition to withholding material

information from the Commission and Receiver, Profit has failed to provide the

accounting required under Part III of the SRO.

After the entry of the SRO Maye has continued to conduct business on

behalf of Defendant Cornerstone and has violated the asset freeze provisions of the

SRO by actually or attempting to pledge, assign, encumber, and/or transfer assets

of the Defendants. Maye is also concealing his whereabouts, has failed to comply

with a deposition subpoena and has failed to comply with the SRO provisions

requiring cooperation with the Receiver and the Commission. The Commission

and Receiver are fearful that absent the relief requested in their Motion, Defendant

Profit and Maye will continue concealing and/or disposing of assets and

documents, particularly those held outside of the United States, and will continue

violate the SRO’s cooperation provisions.

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II. THE STATUTORY RESTRAINING ORDER

On January 31, 2007, this Court issued an SRO pursuant to Section 6c of the

Commodity Exchange Act, as amended (“Act”), 7 U.S.C. § 13a-1. On February 7,

2007 the Court Entered a Consent Order of Preliminary Injunction, which, among

other things, continued the full force and effect of the SRO pending further order

of the Court. Defendant Profit was served with the SRO on January 31, 2007. As

a named Defendant Profit is subject to the SRO and is required to comply with the

SRO. A. PROVISIONS OF THE SRO THAT WERE VIOLATED

1. Part I: Asset Freeze

In addition to freezing certain assets of the defendants, Part I of the SRO

specifically provided that each Defendant is prohibited from directly or indirectly:

transferring, selling, alienating, liquidating, encumbering, pledging, leasing, loaning, assigning, concealing, dissipating, converting, withdrawing, or otherwise disposing of any assets, wherever located, including assets held by or on behalf of the defendants within or outside the United States, and including both existing assets and assets acquired after the effective date of this Order.1

1 Pursuant to the terms of the SRO, “assets” means: any legal or equitable interest in, right to, claim to, or control over, either directly or indirectly, any real or personal property, including but not limited to chattels, goods, instruments, equipment, fixtures, general intangibles, effects, leaseholds, mail or other deliveries, inventory, checks, notes, accounts, credits, receivables, lines of credit, contracts, insurance policies, and all cash, located at the following bank accounts: 1) Bank of America, Accounts 07015-01028 and 07970-09989; 2) Wells Fargo, Account 1013679566; 3) and Citibank Accounts 200113892 and 200304830, and any other account owned by, controlled by or held for the benefit of the Defendants.

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2. Part III: Mandatory Accounting To ensure the enforceability of the freeze on the Defendants’ assets, and to

facilitate the marshalling of assets, Part III of the SRO mandated that within thirty

business days following service of the order, defendants were to provide the

Commission and the Receiver a full accounting of all funds, documents, and assets

both within and outside of the United States that are held by them, for their benefit,

or under their direct or indirect control; transfer such funds, documents, and assets

to the United States; provide the Commission and the Receiver access to all

records of the Defendants held by financial institutions located both within and

outside the United States; and provide the Commission and Receiver with a

complete customer list, including, without limitation, the names, addresses and

telephone numbers of all persons who transferred funds to the Defendants from

October 1, 2004 to the present.

3. Part IV: Cooperation with the Receiver

Part IV of the SRO sets forth provisions relating to the appointment of the

Receiver. Section C of Part IV of the SRO provides that upon service of the SRO,

the Defendants and any other person or entity served with a copy of the SRO, shall

immediately or within such time as permitted by the Receiver in writing, deliver

over to the Receiver:

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a. Possession and custody of all funds, property, and other assets, owned beneficially or otherwise, wherever situated, of the Defendants, including but not limited to those of Cornerstone Capital Management LLC, Cornerstone Capital Management, Inc., Cornerstone Icon Fund, Ltd., Cornerstone Icon Fund, LP, and Cornerstone Brokerage Services, Inc.;

b. Possession and custody of documents of the Defendants, including

but not limited to, all books and records of accounts, all financial and accounting records, balance sheets, income statements, bank records (including monthly statements, canceled checks, records of wire transfers, and check registers), client lists, title documents and other papers;

c. Possession and custody of all precious metals, other commodities,

funds, and other assets being held by or on behalf of the Defendants or on behalf of the Defendants’ customers, clients, pool participants or investors;

d. All keys, computer passwords, entry codes, and combinations to

locks necessary to gain or to secure access to any of the assets or documents of the Defendants, including but not limited to, access to the Defendants’ residential and business premises, means of communication, accounts, computer systems, or other property; and

e. Information identifying the accounts, employees, properties or other

assets or obligations of the Defendants.

Section D of Part IV of the SRO provides that:

The Defendants and all other persons or entities served with a copy of this order shall cooperate fully with and assist the Receiver. This cooperation and assistance shall include, but not be limited to, providing any information to the Receiver that the Receiver deems necessary to exercising the authority…

B. MAYE IS REQUIRED TO COMPLY WITH THE SRO

The SRO provides that “Defendants” means:

ATLANTA:4897600.1 6

Cornerstone Capital Management, LLC (“Cornerstone”) and Joseph T. Profit II (“Profit”), and any person insofar as he or she is acting in the capacity of an officer, agent, servant, employee, or attorney of Cornerstone or Profit, and any person who receives actual notice of this Order by personal service or otherwise insofar as he or she is acting in concert or participation with Cornerstone or Profit.

Maye is president, co-founder, agent, and employee of Defendant Cornerstone

Capital Management LLC (“Cornerstone”) who was served with the SRO on

January 31, 2007. See Affidavit of Yong Kim at Paragraphs 7-15. Despite being

served with the Order and clearly having knowledge of the Order, Maye has

continued to hold himself out as the President of Cornerstone and has continued to

attempt to conduct business on behalf of Cornerstone. See Affidavit of James

Begnaud at Paragraphs 7-9; Exhibits G-J. Maye falls within the definition of the

Defendants and is therefore subject to the SRO and is required to comply with the

SRO. III. VIOLATIONS OF THE SRO

A. VIOLATIONS OF DEFENDANT PROFIT

Defendant Profit has violated Parts I, III, and IV of the SRO. Profit has

violated Part I of the SRO by concealing assets of the Defendants, including assets

held by a Cornerstone entity in Switzerland established by the Defendants. Profit

has violated Part III of the SRO by failing to provide to the Commission or the

Receiver the required accounting of all assets wherever located, failing to provide

the Commission and Receiver a full customer list, and failing to repatriate all

assets of the Defendants to the United States. Profit has violated Part IV of the

ATLANTA:4897600.1 7

SRO by concealing and/or withholding material information and documents from

the Receiver and for his general lack of cooperation with the Receiver.

1. Profit’s concealment of transfers of funds to family

On February 6, 2007 Defendant Profit was deposed pursuant to Part VII of

the SRO. During the deposition, on two separate occasions, in response to

questions by Henry F. Sewell, Jr. (“Sewell”), Counsel to the Receiver, regarding

transfers assets subject to the SRO, Profit testified that he could not recall ever

transferring assets to any member of his family. See Deposition of Joseph T. Profit

II at 29, 111. Despite Profit’s testimony under oath, subsequent to the deposition

the Commission and Receiver learned that only weeks prior to the deposition,

Profit had written a counter check dated December 19, 2006, in the amount of

$76,000, payable to the Capital Solutions Corporation. See Affidavit of James

Begnaud at Paragraph 3, Exhibits A and B. The check was endorsed by Profit’s

father, Joseph T. Profit Sr. and deposited into the Capital Solution Corporation

account for which Profit Sr. asserts signatory authority. Id. This concealment of

material information relating to transfers of assets to family members is a violation

of and the cooperation provisions of Part IV of the SRO. Because these assets may

be subject to the SRO, by concealing these assets, Profit violated the asset freeze

provisions of Part I of the SRO.

2. Profit’s concealment of at least two additional accounts

ATLANTA:4897600.1 8

At the February 6, 2007 deposition, in response to questions by the Receiver

and Commission in regards to the location of assets and documents, Defendant

Profit testified that, “[T]he location of the assets have been given. That’s all I

know at this point.” See Deposition of Joseph T. Profit II at 202. Lael E. Campbell

(“Campbell”), counsel to Plaintiff Commission, asked Profit specifically, “[A]re

there any accounts anywhere else that may exist, but aren’t funded…?”. Profit

testified in response, “[N]ot that I am aware of.” See Deposition of Joseph T.

Profit II at 62. Campbell asked Profit again, “[J]ust to be clear, you’ve testified

today as to all the accounts that you know of that are under your control?” Profit’s

answer under oath was, “Yes.” See Deposition of Joseph T. Profit II at 104. Later

in the Deposition Sewell asked Profit, “If Cornerstone Capital Management, LLC

ever had 20.5 million dollars in assets, you have identified all the banks and

brokerage firms to us where that money would have been deposited; is that

correct?” Profit’s answer was, “Yes.” See Deposition of Joseph T. Profit II at 104.

Subsequent to the deposition the Commission and Receiver learned that

Profit had transferred Cornerstone funds to an account with Advanced Currency

Markets, SA of Switzerland (“ACM”). See Affidavit of James Begnaud at

Paragraph 4; Exhibit C. Profit has essentially admitted that he has control over the

ACM account because he has provided the Receiver a copy of a letter authorizing

the repatriation of assets held in these accounts. See Affidavit of James Begnaud at

ATLANTA:4897600.1 9

Paragraph 5; Exhibit D. Of course, as has been Profit’s modus operandi, he has

identified these additional assets only after the Commission and Receiver

discovered them from other sources. Even then, however, he has failed to

promptly respond to the Receiver’s requests to sign letters authorizing these banks

to cooperate with the Receiver and, as of the filing of this Motion, has failed to

turn over the original signed copies of these letters despite several requests from

the Receiver. See Affidavit of James Begnaud at Paragraph 5. The failure of Mr.

Profit to turn over originals of the letters has particularly hindered the Receiver’s

efforts to reclaim funds apparently held at ACM which is a Swiss entity. Id.

Profit’s flagrant concealment of assets held overseas cuts to the heart of the

Receiver’s duty under the SRO to locate and marshall the assets, has caused the

Receiver unnecessary trouble and expense and is an egregious violation of the

asset freeze directives of Part I of the SRO, and the cooperation directives of Part

IV of the SRO. Indeed, Profit’s actions beg the question of whether other,

undisclosed accounts exist and demonstrates the need for court involvement in this

matter.

3. Profit’s Concealment of both a foreign entity and a foreign bank account related to this entity.

After Defendant Profit’s February 6 deposition, the Receiver took custody

and control of Defendant Cornerstone’s email accounts. These accounts included

emails which had been sent and received by Messrs. Profit and Maye. Included

ATLANTA:4897600.1 10

within Messrs. Profit’s and Maye’s emails were communications relating to an

entity called Cornerstone Capital Group AG (“Cornerstone AG”) and a Swiss

lawyer named Karl Dobler.2 See Affidavit of James Begnaud at Paragraph 7.

The Receiver accordingly immediately contacted Mr. Dobler who

subsequently advised the Receiver that Defendant Profit and Mr. Maye were co-

founders and co-owners of this entity. Mr. Dobler has also advised the Receiver

that he cannot divulge further information regarding this entity pending

authorization from Messrs. Profit and Maye, but did confirm that any bank

accounts held by him or under his control had been frozen. Letters from Mr.

Dobler to counsel for the Receiver dated February 23 and March 6 are attached

hereto as Exhibit “A”.

Among the communications ultimately retrieved from Defendant Profit’s

and Mr. Maye’s email inbox were a series of letters from Mr. Dobler to Defendant

Profit and/or Mr. Maye. The first letter, dated February 9, almost ten days after the

SRO had been served upon Messrs. Profit and Maye, advises that “all elements” to

set up Cornerstone AG are now in the hands of Swiss lawyers including

confirmation from UBS (a Swiss Bank) concerning the “capital payment”. Mr.

2 The Receiver and Commission have obtained records (once again from third parties, not the defendants) documenting a private jet trip to Switzerland in January 2007 attended by both Profit and Maye. The purpose of the trip was apparently to establish a business and banking presence for the Defendants in Switzerland.See Affidavit of James Begnaud at Paragraph 6; Exhibit F.

ATLANTA:4897600.1 11

Dobler goes on to state that he will continue to work towards establishing this

company. Just as with the ACM account referenced above, Mr. Profit failed to

disclose the existence of this entity and of the capital payment to the Receiver. In

fact, the letter indicates that Defendant Profit was attempting to establish this entity

in direct violation of the SRO and after promising the Receiver that he would fully

cooperate with the Receiver.

The next two letters in Exhibit “B” are identical letters dated February 13

and 14 and addressed to Defendant Profit and Mr. Maye, respectively. These

letters reference a phone conversation which took place on or about February 13

after Mr. Dobler was first notified of the existence of the Receivership. In the

letters, Mr. Dobler states that the “founding procedure” for Cornerstone AG has

been “frozen”. Even after being advised of this by Mr. Dobler, Defendant Profit

still failed to advise the Receiver of the Swiss entity or of the capital payment

referred to in Mr. Dobler’s February 9 letter.

Finally, in the fourth letter which is dated February 20, Mr. Dobler wrote to

Mr. Profit to “again” confirm that the “founding procedure” had been “frozen”.

The letter expressly states that the “consignation account” must remain “blocked”.

Although not expressly stated, it is clear that Mr. Profit had again contacted Mr.

Dobler for the purpose of seeking a release of the funds held in the “consignation

account”, but that Mr. Dobler properly refused this request. The Receiver believes

ATLANTA:4897600.1 12

that if he had not discovered the emails relating to this matter and promptly

notified Mr. Dobler of the SRO, that Defendant Profit may well have been able to

take control of the “consignation account” without the Receiver ever knowing

about it.

Although Mr. Profit ultimately, and belatedly, signed a letter to Mr. Dobler

authorizing the release of information relating to this account, Defendant Profit has

never turned over any of his records relating to this matter to the Receiver nor has

he even attempted to explain why he did not disclose this account. As of the filing

of this Motion, the Receiver still does not even know the balance of this account

and the failure of both Defendant Profit and of Mr. Maye to cooperate with the

Receiver in this matter have resulted in substantial additional delay and expense.

Defendant Profit’s attempt to continue the establishment of Cornerstone AG after

the entry of the SRO coupled with the concealment of Cornerstone AG and of the

“consignation account” from the Commission and Receiver is another flagrant

violation of the of the asset freeze directives of Part I of the SRO and cooperation

provisions of Part IV of the SRO.

4. Profit’s Concealment of an additional Cornerstone Website

Documents obtained by the Commission and Receiver pursuant to the SRO

indicate that after the entry of the SRO the Defendants established a new website at

www.cornertonecapital-group.com. See Affidavit of James Begnaud at Paragraphs

ATLANTA:4897600.1 13

9 and 11; Exhibits I, J and L. The website shows a purported Swiss business

address. Profit did not disclose this website at his deposition, even though he was

asked to specifically identify any websites where information regarding

Cornerstone was published. See Deposition of Joseph T. Profit II at 194-195, 222-

223. Profit also did not disclose the existence of a business address in Switzerland

in his deposition, even though he was questioned about other Cornerstone offices

outside of the United States. See Deposition of Joseph T. Profit II at 38. Profit has

provided no documents or other information regarding the website or the business

address in Switzerland. The establishment of a new website after the SRO was

entered, and Profit’s failure to disclose the website and any documents relating to

the website, the purported address in Switzerland, and the business of the

Defendants in Switzerland is another violation of the cooperation provisions of

Part IV of the SRO.

5. Profit’s Concealment of a Manhattan Apartment Leased by the Defendants and used by Profit and Maye

At the February 6, 2007 deposition Defendant Profit was asked to identify

all real estate owned or leased by the Defendants. See Deposition of Joseph T.

Profit II at 23, 38. Profit identified his home address, a known office address on

42nd Street in New York City, and another office suite used by the defendants at

300 Park Avenue, New York, New York. Profit testified that these were all the

addresses leased and/or owned by the Defendants. See Deposition of Joseph T.

ATLANTA:4897600.1 14

Profit II at 23, 38. Subsequent to the deposition the Receiver learned that

Defendants leased an apartment on the upper east side of Manhattan, and that both

Profit and Maye had used the apartment as residence. See Affidavit of James

Begnaud at Paragraph 10; Exhibits K. The Receiver also learned that Cornerstone

funds were used to pay the rent on this apartment. Id. The Defendants have not

disclosed this lease or provided the Receiver or Commission any documents

relating to it. This concealment of an additional leased apartment in New York

City is material in that assets subject to the SRO may be encumbered by the lease

agreement, and documents and assets may exist at the location. By failing to

identify this apartment while being questioned under oath or otherwise, Profit

violated the asset freeze directives of Part I of the SRO, and the cooperation

directives of Part IV of the SRO.

6. Profit has Failed to Provide the Mandatory Accounting and Customer List, and has Failed to Repatriate Assets

In violation of the specific directives of Part III of the SRO, within thirty

business days following service of the SRO, Profit has failed to provide the

Commission and the Receiver a full accounting of all funds, documents, and assets

both within and outside of the United States that are held by them, for their benefit,

or under their direct or indirect control; transfer such funds, documents, and assets

to the United States; and provide the Commission and Receiver with a complete

customer list, including, without limitation, the names, addresses and telephone

ATLANTA:4897600.1 15

numbers of all persons who transferred funds to the Defendants from October 1,

2004 to the present. By failing to identify customers and assets, and repatriate

assets held abroad, Profit is undermining the Receiver and the Commission’s core

obligations under the SRO.

7. Additional Failures to Cooperate

At the February 6, 2007 deposition of Defendant Profit, Sewell and

Campbell requested that Profit not make representations to clients about the status

of the case and restitution and to immediately refer all client inquiries to the

Receiver. Sewell and Campbell were especially concerned about investor claims

that Profit had made promises of full restitution. Campbell and Sewell emphasized

to Profit that promises of restitution and continued interaction with clients can

undermine the Receiver’s duties under the Order. See Deposition of Joseph T.

Profit II at 210-211. Under oath Profit vehemently denied ever making promises

of restitution to clients and agreed that he would refer future client inquiries to the

Receiver without making representations regarding the case and restitution. See

Deposition of Joseph T. Profit II at 210-211. Despite this assurance by Profit, the

Receiver and the Commission learned that after the date of the deposition, Profit

had made representations to at least one Cornerstone client that he would make full

restitution and even promised to return funds to that investor. See Affidavit of

Henry F. Sewell at Paragraph 8.

ATLANTA:4897600.1 16

Profit displayed a frustrating general lack of cooperation at the February 6,

2007 deposition. For example, in response to basic background questions

regarding his history of income Profit testified that he could not even remember his

most recent employer. See Deposition of Joseph T. Profit II at 18. Commission

registration records show that as recently as March 2005 Profit had been registered

for more than a year as an Associated Person with American Derivatives

Corporation, a registered Introducing Broker.3 See Affidavit of Yong Kim at

Paragraph 7. Profit has also refused to answer any questions relating to the

identity, location and involvement of Maye. Profit’s lack of cooperation has

hindered the Receiver and Commission’s ability to accomplish their duties under

the SRO, has caused the Receiver unnecessary trouble and expense and is a

violation of the cooperation provisions of Part IV of the SRO.

B. VIOLATIONS BY MAYE ACTING AS PRESIDENT, CO-FOUNDER, AGENT, AND EMPLOYEE OF DEFENDANT CORNERSTONE

Maye has violated the asset freeze provisions of Part I of the SRO by

continuing to conduct business on behalf of Defendant Cornerstone, and

concealing, pledging, assigning, encumbering, and/or transferring assets of the

Defendants after being served with the SRO. Maye has also violated the

3 American Derivatives is a defendant in a 2005 Commission action alleging fraud that is pending before this Court. See CFTC v. American Derivatives Corp., 1:05-cv-02492 (Story).

ATLANTA:4897600.1 17

cooperation provisions of Part IV of the SRO by concealing his whereabouts and

failing to appear at a deposition under Part VII of the SRO.

1. Maye Continues to Conduct Cornerstone Business

Documents obtained by the Commission and Receiver pursuant to the SRO

indicate that Maye has continued to conduct business on behalf of Cornerstone.

Documents show that on February 10, 2007, Maye signed an agreement on behalf

of Cornerstone AG, relating to the acquisition of gold dust for refinement by the

Royal Canadian Mint. See Affidavit of James Begnaud at Paragraph 7; Exhibit G.

According to the agreement Cornerstone “shall obtain a letter of credit or bank

guarantee from an acceptable financial institution…”. Id. In a separate

“Consultants Fee Agreement” Cornerstone retained business finance consulting

services on an exclusive basis to assist with the gold-dust transaction. The

agreement provides that the consultants will receive one-third of the net fees that

Cornerstone receives from the Royal Canadian Mint. The “Consultants Fee

Agreement” is dated February 12, 2007, and is signed by Maye as “President &

Director of Global Business Development, Cornerstone Capital Group, AG.” Id..

Through the actions of its agent Maye, who engaged in this business transaction

after the entry of the SRO, Defendant Cornerstone has or has attempted to pledge,

assign, encumber, and/or transferr assets subject to the SRO in direct violation of

the asset freeze provisions of Part I of the SRO.

The continued conduct of business on behalf of Cornerstone appears to not

be limited to the gold dust transaction. An email from Maye dated February 21,

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2007, references a potential transaction involving copper by which Defendant

Profit and Maye were hoping to obtain fees. See Affidavit of James Begnaud at

Paragraph 8; Exhibit H. In an email dated February 11, 2007, which appears to

relate to yet another potential transaction involving Cornerstone, Maye provides

the new web address for Cornerstone (www.cornerstonecapital-group.com). See

Affidavit of James Begnaud at Paragraph 11; Exhibit L. Due to the lack of

cooperation of both Profit and Maye, the Receiver and the Commission know little

about these transactions and other transactions the Defendants may be engaging in.

2. Maye has Failed to Cooperate

Maye has not made himself available to the Receiver or the Commission and

has provided no information relating to the Defendant’s post-SRO transactions and

his involvement with the Defendants in general. On February 14, 2007, the

Receiver, by his counsel, contacted Maye to discuss the SRO and to obtain

information. During the brief conversation Maye indicated that he had to go but

would contact the Receiver shortly via his attorney. The Receiver reminded Maye

of his obligations under the SRO, and requested a contact address. Maye provided

an Ohio address, and indicated to the Receiver that he resided there. Despite

repeated attempts to contact him, Maye has failed to timely contact the Receiver,

has failed to turn over records and information to the Receiver and has generally

sought to evade the Receiver. See Affidavit of Henry F. Sewell, Jr. at Paragraphs

2-3.

Moreover, the Receiver served Maye a Notice of Deposition pursuant to Part

VII of the SRO by mailing a copy of the Notice to the address Maye identified as

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his residence. See Affidavit of Henry F. Sewell, Jr. at Paragraphs 4-7. Maye failed

to attend the scheduled deposition. See Deposition Transcript attached hereto as

Exhibit “C”. Maye has not provided the Receiver or the Commission any

documents or other information pursuant to the SRO. By concealing his

whereabouts, and not providing valuable information relating to the location of

assets and documents of the Defendants, Maye has violated the cooperation

directives of Part IV of the SRO.

IV. ARGUMENT

A. The Commission Has Established A Prima Facie Case Of Civil Contempt

Civil contempt is an action designed to obtain compliance with a court order

or to compensate for damages sustained as a result of noncompliance. See

Shillitani v. U.S., 384 U.S. 364, 370, 16 L. Ed. 2d 622, 86 S. Ct. 1531, 1535

(1966); McComb v. Jacksonville Paper Co., 336 U.S. 187, 69 S. Ct. 497, 93 L. Ed.

599 (1948). In a civil contempt proceeding, the party petitioning the court for

contempt must prove by clear and convincing evidence that the respondent violated

a prior court order. See Vertex Distrib. Inc. v. Falcon Foam Plastics, 689 F.2d

885, 889 (9th Cir. 1982); Matter of Battaglia, 653 F.2d 419, 422 (9th Cir. 1981).

Unlike criminal contempt proceedings, the party petitioning the court for civil

contempt does not have to establish that the respondent intended to violate, or

willfully violated, the order. See McComb, 336 U.S. at 191; N.L.R.B. v.

Ironworkers Local 433, 169 F.3d 1217, 1222 (9th Cir. 1999). Here, the

ATLANTA:4897600.1 20

Commission has established, by clear and convincing evidence, a prima facie case

of civil contempt.

Section III of the SRO requires the Defendants to (1) provide an accurate

accounting of foreign assets and (2) transfer such assets to the United States.

Failure to make a court-ordered accounting is a proper basis for a civil contempt

order. SEC v. Bankers Alliance Corp., 881 F. Supp. 673, 678-79 (D.D.C. 1995)

(imposing civil contempt sanctions that included fines and incarceration against the

defendants for failing to provide an accounting of assets pursuant to a preliminary

injunction order); CFTC v. Skorupskas, 605 F. Supp. 923, 945 (E.D. Mich. 1985)

(incarceration contingent on failure to identify offshore bank accounts within

prescribed time). Failure to repatriate funds as required by court order is a proper

basis for a civil contempt order. FTC v. Affordable Media, 179 F.3d 1228, 1239

(9th Cir. 1999)(affirming order of civil contempt for failure to comply with a

preliminary injunction requiring repatriation of trust assets); FTC v. World Wide

Factors, Ltd., 882 F.2d 344, 346 (9th Cir. 1989) (affirming an injunction ordering a

defendant to transfer foreign funds to an institution within the district of Nevada).

Defendants have failed to provide an accounting of assets, including assets that

were transferred offshore, and failed to repatriate assets back to the United States

and are therefore in contempt of court.

Section I of the SRO prohibits the Defendants from concealing, pledging,

assigning, encumbering, transferring, withdrawing or otherwise disposing of

assets, including those held outside the U.S. Since this Court entered the SRO,

Defendant Profit has violated Part I of the SRO by concealing assets of the

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Defendants, including assets held by a Cornerstone entity in Switzerland

established by the Defendants. Profit has also concealed the existence of

Cornerstone AG in Switzerland, apartments rented by the Defendants in

Manhattan, and assets of the Defendants that were transferred to Profit’s father.

Maye, acting in his capacity as president, co-founder, agent, and employee of

Defendant Cornerstone has violated Part I of the SRO by continuing to conduct

business on behalf of Defendant Cornerstone, and concealing, pledging, assigning,

encumbering, and/or transferring assets of the Defendants. Profit and Maye are

therefore in contempt of court. See Skorupskas, 605 F. Supp. at 944 (continuing to

operate fraudulent scheme and failing to disclose to Receiver location of funds

constitutes contempt of SRO). See SEC v. Princeton Econ. Int’l. Ltd., 152 F.Supp.

2d. 456 (S.D.N.Y. 2001) (Defendant found in contempt for failing to produce or

provide whereabouts of assets subject to freeze order).

Section IV of the SRO requires the Defendants to deliver to the Receiver

possession and custody of all assets and documents of the Defendants, and

cooperate fully with and assist the Receiver. Defendant Profit and Maye have

failed to cooperate fully with and assist the Receiver. Defendant Profit has

provided no information relating to Cornerstone AG in Switzerland, overseas

accounts held by the Defendants, apartments rented by the Defendants in

Manhattan, a new website which references a Swiss address for Cornerstone, and

assets of the Defendants that were transferred to Profit’s father. Defendant Profit

has shown a general lack of cooperation with the Receiver, and continues to

disclose material information only after authorities learn of it from other sources.

ATLANTA:4897600.1 22

Maye has not provided any information relating to the location of assets and

documents of the Defendants, is concealing his whereabouts, and failed to appear

at a deposition pursuant to Part VII of the SRO. See Skorupskas, 605 F. Supp. at

944 (failing to disclose to Receiver location of funds constitutes contempt of SRO).

See CFTC v. Armstrong, 284 F.3d 404 (2nd Cir. 2002) and SEC v. Princeton Econ.

Int’l. Ltd., 152 F.Supp. 2d. at 459 (Defendant found in contempt for failing to turn

over corporate assets to court-appointed temporary receiver).

In addition to failing to cooperate with the Receiver by concealing assets and

documents, Defendant Profit has also violated Part IV of the SRO by failing to

deliver all assets and documents of the Defendants to the Receiver’s possession

and custody, most notably assets held by Cornerstone AG of Switzerland and

assets held in foreign bank accounts. See Id. (Court imposed coercive confinement

for failing to turn over corporate assets to court-appointed temporary receiver). Cf.

CFTC v. Wellington Precious Metals, Inc. et al., No. 85-3565-CIV-ATKINS (S.D.

Fla. Mar. 14, 1990), aff'd, 950 F.2d 1525 (11th Cir. 1992), cert. denied, 113 S. Ct.

66 (1992) (Court imposed contempt sanctions for failure to comply with order

directing that funds be transferred to a receiver).

B. The Burden Lies With Defendant Profit and Maye To Excuse Their Noncompliance With This Court's Orders

It is well-settled that once a prima facie case of civil contempt has been

shown, as here, the burden shifts to the contemnor to produce evidence excusing

his violation of a court order. See United States v. Rylander, 460 U.S. 752, 756,

103 S. Ct. 1548, 75 L. Ed. 2d 521 (1983); Affordable Media, 179 F.3d at 1239;

ATLANTA:4897600.1 23

Battaglia, 653 F.2d 419 at 422. Where the respondent fails to put forth a sufficient

defense, the court may grant whatever remedial relief it deems necessary to effect

compliance with its order. See McComb, 336 U.S. at 193; Battaglia, 653 F.2d at

422. The contemnor’s burden is substantial, however, and cannot be met with

mere assertions of inability to comply. See Rylander, 103 S.Ct. at 1552. Rather,

the contemnor must present evidence that shows “categorically and in detail” the

reason for the inability to comply. Affordable Media, 179 F.3d at 1241.

Plaintiff has provided clear and convincing evidence that Profit and Maye

violated this Court’s Statutory Restraining Order. The burden now lies with them

to prove that they are unable to comply. Absent a sufficient showing to justify

noncompliance, Defendant Profit and Maye should be found in contempt of this

Court's SRO.

C. Compensatory And Coercive Sanctions Are Appropriate

This Court has authority to impose both compensatory and coercive

sanctions against Defendant Profit and Maye for their violations of the SRO.

Courts have inherent power to use civil contempt to coerce compliance with a

court order. See Bankers Alliance Corp., 881 F. Supp. at 678-79; 18 U.S.C. §

401(3) (2001). That power includes imposing fines, conditional incarceration, and

compensating a party for losses sustained as a result of another's non-compliance.

See Hicks v. Feiock, 485 U.S. 624, 631-632, 99 L. Ed. 721, 731-732, 108 S. Ct.

1423, 1429-30 (1988); Rylander, 460 U.S. at 761; McComb, 336 U.S. at 191;

United States v. United Mine Workers, 330 U.S. 258, 67 S. Ct. 677, 91 L. Ed. 884

(1947). Compensation may include not only damages resulting directly from the

ATLANTA:4897600.1 24

contemptuous conduct, but also expenses incurred in prosecuting a civil contempt

action, including reasonable attorney's fees. Perry v. O'Donnell, 759 F.2d 702,

704-05 (9th Cir. 1985) (a court may award attorney's fees and expenses to the

prevailing party in civil contempt actions without a showing of willfulness); Sizzler

Family Steak Houses v. Western Sizzlin Steak House, Inc., 793 F.2d 1529, 1534

(11th Cir. 1986) (compensation awarded, including costs and attorney’s fees, and

prospective fines ordered); CFTC v. Premex, Inc., 655 F.2d 779, 785-786 (7th Cir.

1984) (award of attorneys fees and costs to CFTC in contempt proceeding).

Defendant Profit and Maye’s failure to comply with the provisions of the

SRO frustrates the Commission and Receiver’s efforts to account for funds and

eventually return funds to customers who were fraudulently induced to participate

in the Defendants' unlawful scheme. Further, the failure of Defendant Profit and of

Mr. Maye to comply with the SRO has caused the Receiver to incur additional

expenses in conducting his investigation in this case. Plaintiff respectfully requests

that this Court find Defendant Profit and Maye in contempt of the SRO, direct

them to comply with the SRO and sanction them in a manner that will ensure their

prompt and complete compliance. Plaintiff also requests the Court direct

Defendant Profit and Maye to pay attorney’s fees and expenses incurred by the

Commission in connection with its attempts to obtain required documents and in

connection with this proceeding.

V. CONCLUSION

For the foregoing reasons, Plaintiff respectfully requests that the Court

require Defendant Profit and Maye to Show Cause why they are not in contempt of

ATLANTA:4897600.1 25

this Court’s SRO and why this Court should not (1) issue an order of contempt, (2)

require Defendant Profit and Maye to comply immediately with this Court's SRO,

and (3) sanction Defendant Profit and Maye with costs, attorney’s fees, and fines

and/or with incarceration of Defendant Profit and/or Maye for contempt of court.

Respectfully submitted, s/ Lael Campbell Lael Campbell (Pro Hac Vice) John Dunfee (Pro Hac Vice) 1155 21st Street, N.W. Washington, D.C. 20581 202-418-5366 (Campbell) 202-418-5396 (Dunfee) 202-418-5531 (Fax) Attorneys for Plaintiff Commodity Futures Trading Commission

McKenna Long & Aldridge LLP s/ Henry F. Sewell, Jr.Henry F. Sewell, Jr. Georgia Bar No. 636265 Counsel to Court-Appointed Receiver S. Gregory Hays 303 Peachtree Street, NE Suite 5300 Atlanta, GA 30308 404.527.8120 404.527.4198 (fax) Dated: April 3, 2007