United Development Funding Ii, Lp, A

CAUSE NO. CC-17-06253-C

UNITED DEVELOPMENT § IN THE COUNTY COURT FUNDING, L.P., A DELAWARE § LIMITED PARTNERSHIP; UNITED § DEVELOPMENT FUNDING II, L.P., § A DELAWARE LIMITED § PARTNERSHIP; UNITED § DEVELOPMENT FUNDING III, L.P., § A DELAWARE LIMITED § PARTNERSHIP; UNITED § DEVELOPMENT FUNDING IV, A § MARYLAND REAL ESTATE § INVESTMENT TRUST; UNITED § DEVELOPMENT FUNDING INCOME § FUND V, A MARYLAND REAL § ESTATE INVESTMENT TRUST § UNITED MORTGAGE TRUST, A § MARYLAND REAL ESTATE § INVESTMENT TRUST; UNITED § EVELOPMENT FUNDING LAND § OPPORTUNITY FUND, L.P., A § DELAWARE LIMITED § PARTNERSHIP; UNITED § DEVELOPMENT FUNDING LAND § OPPORTUNITY FUND INVESTORS, § L.L.C., A DELAWARE LIMITED § LIABILITY COMPANY; § § Plaintiffs, § § v. § AT LAW NO. 3 § J. KYLE BASS; HAYMAN CAPITAL § MANAGEMENT, L.P.; HAYMAN § OFFSHORE MANAGEMENT, INC.; § HAYMAN CAPITAL MASTER FUND, § L.P.; HAYMAN CAPITAL PARTNERS, § L.P., HAYMAN CAPITAL OFFSHORE § PARTNERS, L.P.; HAYMAN § INVESTMENTS, LLC; § § Defendants. § DALLAS COUNTY, TEXAS

RESPONSE TO PLAINTIFFS’ MOTION FOR ADMISSION PRO HAC VICE FOR IAN EDWARD BROWNING and MOTION TO REVOKE THE PRO HAC VICE ADMISSIONS FOR ALL OF THE LUBIN, OLSON & NIEWIADOMSKI, LLP ATTORNEYS PAGE 1 OF 26 DEFENDANTS’ RESPONSE TO PLAINTIFFS’ MOTION FOR ADMISSION PRO HAC VICE FOR IAN EDWARD BROWNING and MOTION TO REVOKE THE PRO HAC VICE ADMISSIONS FOR ALL OF THE LUBIN, OLSON & NIEWIADOMSKI, LLP ATTORNEYS ELLEN A. CIRANGLE AND KYLE A. WITHERS

TO THE HONORABLE JUDGE OF SAID COURT:

COME NOW, Defendants J. Kyle Bass, Hayman Capital Management, L.P.,

Hayman Offshore Management, Inc., Hayman Capital Master Fund, L.P., Hayman

Capital Partners, L.P., Hayman Capital Offshore Partners, L.P., and Hayman

Investments, LLC, (“Defendants”) and file this, their Response to Plaintiffs’ Motion for

Admission Pro Hac Vice for Ian Edward Browning and Motion to Revoke the Pro Hac

Vice Admissions for all of the Lubin Olson & Niewiadomski, LLP Attorneys Ellen A.

Cirangle, Jonathan Sommer and Kyle A. Withers, to state their oppositions to admission pro hac vice of attorney Ian Edward Browning and move for the revocation of the Pro Hac

Vice Admission of the other Lubin Olson & Niewiadomski, LLP Attorneys in this case and, for cause, would respectfully show unto the Court as follows:

I. INTRODUCTION

Defendants oppose Mr. Browning’s admission and move to revoke the pro hac vice admission of all of the other aforesaid attorneys from the firm of Lubin Olson &

Niewiadomski, LLP (sometimes referred to as “Lubin”). The attorneys associated with

Lubin, Olson & Niewiadomski, LLP have failed to abide by their duties to this Court and the candor expected of an attorney appearing in the State of Texas and therefore, should be denied admission. Defendants ask the Court to revoke the pro hac vice admission of all of the Plaintiffs’ attorneys associated with Lubin, Olson & Niewiadomski, LLP.

Participation in Texas Proceeding by a Non-Resident Attorney,” mandates that the non- resident attorney declare that he/she is familiar with the State Bar Act, the State Bar

Rules, and the Texas Disciplinary Rules of Professional Conduct governing the conduct of members of the Bar, and will at all times abide by and comply with the same so long as such Texas proceeding is pending. Rule 19(d) allows the court to deny a pro hac motion for good cause. Rule 19(e) further grants the Court the power to revoke the non-resident attorney’s permission to participate in the Texas proceedings if the attorney is found to have engaged in professional misconduct.

Plaintiffs filed this business disparagement lawsuit on November 28, 2017, alleging

that the Defendants committed grievous harm by reporting problems with the

Plaintiffs’ business practices to the investing public. As will be shown, many of these

public comments addressed issues arising from the work of the Plaintiffs’ auditor,

Whitley Penn, and the circumstances under which Whitley Penn resigned as the

auditor for the Plaintiffs. These same issues were also the subject of an SEC

investigation into the Plaintiffs’ business practices. The Defendants filed a Motion to

Dismiss Under the TCPA on January 26, 2018 (the “Anti-SLAPP Motion”), seeking to

dismiss this lawsuit on the basis that it was an effort to silence scrutiny and public

comment regarding dangerous financial practices by UDF, a derelict publicly-traded

business. The Plaintiffs’ opposition to the Anti-SLAPP Motion required the Plaintiffs

and their lawyers to conceal and misrepresent multiple government and regulatory

investigations into the same business practices that the Defendants identified and

disclosed to the public.

RESPONSE TO PLAINTIFFS’ MOTION FOR ADMISSION PRO HAC VICE FOR IAN EDWARD BROWNING and MOTION TO REVOKE THE PRO HAC VICE ADMISSIONS FOR ALL OF THE LUBIN, OLSON & NIEWIADOMSKI, LLP ATTORNEYS PAGE 3 OF 26 This Motion to Revoke the pro hac vice admissions is based upon the false and misleading statements made by Ellen Cirangle, lead counsel for the Plaintiffs, at the hearing for the Anti-SLAPP Motion on May 21, 2018. Cirangle’s misleading comments focused on two primary topics: (1) she misstated the true facts surrounding Whitley

Penn’s work for UDF and Whitely Penn’s decision to resign as the auditor for the

Plaintiffs; and, (2) she mislead the Court regarding a then-active (and in fact nearly concluded) SEC investigation into the Plaintiffs’ business practices in order to leave the

Court with a false impression. The crux of Cirangle’s false statements were an emphatic denial of the SEC’s independent investigation, among other events and circumstances that have since become evident, which generally supported and reinforced the substance of Hayman’s public statements that financial irregularities existed within UDF and that the findings of its research were of public interest.

Shortly after the Court’s ruling on the anti-SLAPP motion, the media reported

UDF’s settlement of the SEC fraud charges, and the SEC’s filings (and UDF’s consent thereto) were made public. Judge Montgomery called counsel for the parties to a meeting in her Chambers to address the obvious discrepancies between the newly available public documents and the facts represented by Cirangle at the hearing. It is now clear that the

Plaintiffs delayed settlement of the SEC’s fraud charges, and the inevitable scandal and publicity arising from same, until just after the Court ruled on the Motion to Dismiss and the Court’s plenary power expired. Cirangle’s comments at the hearing were designed to mislead the Court relating to the status of the SEC investigation, which was at that time not only active, but apparently had effectively been largely resolved, with UDF’s consent

RESPONSE TO PLAINTIFFS’ MOTION FOR ADMISSION PRO HAC VICE FOR IAN EDWARD BROWNING and MOTION TO REVOKE THE PRO HAC VICE ADMISSIONS FOR ALL OF THE LUBIN, OLSON & NIEWIADOMSKI, LLP ATTORNEYS PAGE 4 OF 26 to significant SEC fraud charges and UDF’s principals paying millions of dollars in fines and penalties arising out of their misconduct.

In addition, on March 24, 2020, the Public Company Accounting Oversight Board

(“PCAOB”) issued an Order Instituting Disciplinary Proceedings, Making Findings and

Imposing Sanctions (the “PCAOB Order”) against Whitley Penn, which also demonstrates the falsity of Cirangle’s statements. (See Ex. “A”).

There is no limit to the lengths (and depths) to which UDF will go in order to further their disinformation campaign to deceive and defraud the public. Recently, UDF filed a Bivens action against the FBI agents and the U.S. Attorneys’ Office that are conducting an active criminal investigation of UDF, and attempted to have the Assistant

United States Attorney James Nicholas Bunch removed from that case. The United States recently filed a Response in Opposition to Plaintiffs’ Motion to File Redacted Complaint, complaining about UDF’s tactics in connection with its disinformation strategy:

…disappointed by their failure to convince either the United States Attorney’s Office for the Northern District of Texas (“NDTX”) or the Deputy Attorney General to halt a complex criminal investigation of their conduct and have Assistant United States Attorney James Nicholas Bunch (hereinafter “AUSA Bunch”) removed from that case, Plaintiffs are using this “Bivens action” to yet again interfere with legitimate law enforcement activity. In furtherance of their efforts, Plaintiffs ask the Court to unseal a redacted complaint and publicize their version of the history of a very active ongoing criminal investigation in the NDTX including details of non-public aspects of the investigation.

(See Ex. “B” p. 2)

It is clear that the Lubin attorneys are nothing but a mouthpiece for their clients’ endless and dishonest efforts to deflect attention from UDF’s own (and now admitted) misconduct and blame third parties (including Defendants and the federal government) for UDF’s misconduct and resulting investor losses. The revocation requested in this

RESPONSE TO PLAINTIFFS’ MOTION FOR ADMISSION PRO HAC VICE FOR IAN EDWARD BROWNING and MOTION TO REVOKE THE PRO HAC VICE ADMISSIONS FOR ALL OF THE LUBIN, OLSON & NIEWIADOMSKI, LLP ATTORNEYS PAGE 5 OF 26 Motion will send a clear message to UDF that its deceptive and misleading conduct, including that propagated by its current lawyers, will not be tolerated.

II. RESPONSE AND MOTION TO REVOKE

Attorneys in Texas are bound by the mandates of civility, candor, and professionalism. Texas attorneys are trained in accordance with Texas Lawyers’ Creed, which provides that “[t]he conduct of a lawyer should be characterized at all times by honesty, candor, and fairness. In fulfilling his or her primary duty to a client, a lawyer must be ever mindful of the profession’s broader duty to the legal system.” Order of the

Supreme Court of Texas and the Court of Criminal Appeals, (adopting and incorporating the Texas Lawyer’s Creed: A Mandate for Professionalism (Nov. 7, 1989)).

Lawyers admitted in Texas pro hac vice are held to the same standards as Texas attorneys and rarely does an out-of-state attorney fail to rise to the occasion. However, the lawyers from the firm of Lubin, Olson & Niewiadomski, LLP have failed to conduct themselves with the professionalism expected of attorneys admitted pro hac vice and therefore, this Court should deny the pro hac vice admission of Ian Edward Browning and revoke the pro hac vice admissions of all the other Lubin, Olson & Niewiadomski,

LLP’s attorneys.

III. THE HEARING ON THE ANTI-SLAPP MOTION

A. Timeline of the Anti-SLAPP Hearing and the Secret SEC Settlement

The hearing on the Anti-SLAPP Motion was held on May 21, 2018. Unbeknownst to everyone in the Courtroom except the Plaintiffs and their lawyers, namely Cirangle, the

Plaintiffs had been working on a settlement of part of the SEC investigation for weeks or months. The following timeline is compiled from documents, which were not available

These facts, now judicially admitted by UDF in its filed pleadings, demonstrate that the

Plaintiffs were under several regulatory investigations and in talks with the SEC to settle claims identical to Hayman’s criticisms at least six months before the Plaintiffs filed the lawsuit against the Defendants, and a year before the hearing on the Anti-SLAPP Motion.

These undisputed facts make it abundantly clear that UDF and its lawyers orchestrated a delay in the filing of the SEC Complaint and unopposed motions for entry of judgment until shortly after the hearing and ruling on the Anti-SLAPP Motion:

5.22.17 A full year before the anti-SLAPP hearing, the SEC indicates it is prepared to recommend a resolution that would not charge UDF with a scienter-based violation, and UDF “thereupon indicated they would agree to settle without admitting or denying on this non-scienter basis”. (UDF’s Deregistration Brief, p. 13, ¶2).

7.5.17 UDF and SEC discuss non-scienter language and terms (UDF’s Deregistration Brief, p. 13, ¶6).

8.31.17 UDF executed four month tolling agreements through 12.26.17 (3 subsequent tolling agreements ran through 8.20.18) (UDF’s Deregistration Brief, p. 13, ¶6 – p.14, ¶1).

11.28.17 UDF sues Hayman.

12.20.17 SEC FW office says it will send settlement recommendation to Commission during this week. (UDF’s Deregistration Brief, p.14, ¶1).

5.21.18 ANTI-SLAPP HEARING – In response to the Court’s direct question about the SEC Investigation, Cirangle states: “we absolutely know there’s no claim against us…there’s no filing * * * there is no charges.”

1 This timeline is based on (1) a Motion and Supporting Brief filed by the Plaintiffs in a SEC deregistration proceeding commenced on September 24, 2018 (“UDF’s Deregistration Brief”); (2) a SEC Complaint and unopposed Motions for Entry of Judgment, filed days after the Anti-SLAPP hearing on July 3, 2018 (“SEC Complaint”); and, (3) the PCAOB Order and a PCAOB Inspection Report issued in November 2018.

6.1.18 Court informs parties it will deny the Anti-SLAPP Motion.

6.11.18 Court’s original Order denying motion.

6.13.18 Court’s Amended Order dated 6.11.

6.18.18 SEC approval of non-scienter settlement. (UDF’s Deregistration Brief, p.14, ¶2).

6.29.18 Defendant’s Notice of Appeal of ruling on the Anti-SLAPP Motion.

7.3.18 SEC Complaint filed, as well as unopposed motions for entry of judgment (SEC Complaint) (See Ex. “C”).

7.3.18 Dallas Morning News article regarding SEC charges and UDF fines.

7.5.18 Court requests counsel conference in chambers regarding SEC filing.

7.31.18 SEC Consent Judgment entered. (See Ex. “D”).

9.24.18 SEC deregistration proceeding commenced, last briefs filed May 2019 (UDF’s Deregistration Brief).

8.12.20 SEC deregisters UDF securities, citing a “high degree of culpability” by UDF. (See Ex. “E”).

The strategy of UDF’s attorneys at the May 21, 2018 hearing was to convince the

Court that there was no truth to the public statements made by the Defendants as set forth and explained in the Anti-SLAPP Motion, and very particularly (as strenuously and repeatedly emphasized by UDF counsel) no truth to the statement that the independent actions taken by the SEC, among other events or circumstances that have since become evident, generally supported and reinforced the substance of Hayman’s public statements that financial irregularities existed within UDF and that the findings of its research were

Court, and wholly concealed the imminent charges by and settlement with the SEC.

B. Statements Regarding the SEC Investigations:

The following is a listing of Cirangle’s false statements regarding the SEC investigation, followed by the contradicting proof that Cirangle and the other Lubin attorneys knew and kept quiet so those pending charges, fines and penalties would not be made public until after the hearing and the Court’s ruling:

42:16-23 Defense Counsel and Cirangle argue about the filings and record, and Cirangle says “your honor I agree the SEC began investigation. What he said was the same things that came out in Hayman’s post, which is a complete lie…that came out in defendant’s posts. There’s nothing whatsoever to suggest that’s what the SEC was investigating. That’s what’s false about what he said.

44:7-9 Cirangle says “Right. And that’s four and half years later and there’s not a charge. There’s not what a claim. There’s not a conviction. There’s nothing.” She then says “we are not aware that they were….” and then stops upon the Judge’s inquiry.

44-45 Defense Counsel shows the Judge the December 2015 UDF filing that admits that the SEC had been conducting an investigation into UDF since April 2014, long before Defendants’ public comments. Cirangle says “your honor look at the next sentence” (the next sentence says that the company has been informed by the SEC that the investigation is not an opinion that any violations of any laws have occurred, or that the SEC has a negative opinion about any person or entity.)

122 – To rebut Defendants’ argument that all these government agencies form their independent conclusions which are consistent with Hayman…”There is not one shred of evidence in the record or in existence to support this. No one, no government agency has ever accused UDF of being a Ponzi scheme.”

123 – Cirangle states that “they don’t know any of this, they’re making it up.”

123-124 -- Regarding Defense Counsel’s statements that UDF’s counsel should tell the Court why the FBI is investigating and why the SEC intends to file litigation via the Wells notice…”Four years later…we don’t know everything in the government’s mind, but we absolutely know there’s no claim

RESPONSE TO PLAINTIFFS’ MOTION FOR ADMISSION PRO HAC VICE FOR IAN EDWARD BROWNING and MOTION TO REVOKE THE PRO HAC VICE ADMISSIONS FOR ALL OF THE LUBIN, OLSON & NIEWIADOMSKI, LLP ATTORNEYS PAGE 9 OF 26 against us…there’s no filing…if we were a ponzi scheme, don’t you think after they took all our books and records 2.5 years ago, they would have shut us down……we don’t even have a claim, we don’t have a case number.”2

125-- “The record here does not support that…it’s all a red herring…Government’s done nothing at this point, and that’s not before this court.”

126-127 -- Judge says “I have a question are the FBI and SEC still investigating?” Defense Counsel says yes, court says “but you know nothing about the investigation yet”? Cirangle says “there is no charges”.

1. SEC Settlement Documents are purposely Filed Shortly After the Appellate Deadline for the Ruling on the Anti-SLAPP Motion. On July 3, 2018, the SEC filed a Complaint against UDF. Unopposed motions for entry of judgment were also filed. All of the UDF Defendants signed Consent Decrees agreeing to pay substantial fines, to entry of the Final Judgment, and to the entry of an injunction against the same conduct in the future. (See, Defendants’ Notice of Filing of

S.E.C. Complaint and Related Documents, filed in this cause on July 12, 2018). In connection with its investigation of UDF’s failures to properly impair loans, the SEC detailed how UDF fabricated cash flow projections that it provided to its auditors. After the Buffington affiliated borrower provided a “Borrower Projection” that showed an ever- increasing loan balance, which the borrower could not repay, UDF created its own cash flow projection (the “UDF Projection”) that falsely included future projects that the borrower had not agreed to undertake and that showed the borrower repaying the loan in

2 UDF counsel also knew the FBI was actively investigating UDF. See Ex. “B,” Response in Opposition to Plaintiffs’ Motion to File Redacted Complaint filed by the United States in a UDF lawsuit against the FBI agents and U.S. Attorneys’ Office. In this pleading, the U.S.A. describes UDF’s abusive tactics, which included attempting to disqualify the U.S. Attorney and interfere with law enforcement: “In reality, disappointed by their failure to convince either the United States Attorney’s Office for the Northern District of Texas (“NDTX”) or the Deputy Attorney General to halt a complex criminal investigation of their conduct and have Assistant United States Attorney James Nicholas Bunch removed from that case, Plaintiffs are using this “Bivens action” to yet again interfere with legitimate law enforcement activity.”

RESPONSE TO PLAINTIFFS’ MOTION FOR ADMISSION PRO HAC VICE FOR IAN EDWARD BROWNING and MOTION TO REVOKE THE PRO HAC VICE ADMISSIONS FOR ALL OF THE LUBIN, OLSON & NIEWIADOMSKI, LLP ATTORNEYS PAGE 10 OF 26 full. (SEC Complaint, Para. 38). Eventually, UDF was forced to forgive $122 Million of debt related to the Austin Borrower, [the Buffington affiliated borrower]. (SEC

Complaint, Para. 40).

UDF and its principals agreed to an injunction against further violations of the

securities laws, and agreed to pay substantial fines:

“It is further Ordered, Adjudged, and Decreed that:

Defendants Greenlaw, Wissink, Etter, and Obert are jointly and severally liable for disgorgement of $6,809,282, representing profits gained as a result of the conduct alleged in the Complaint, together with prejudgment interest thereon in the amount of $390,718.

Defendant Greenlaw is liable for a civil penalty in the amount of $250,000 pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)].

Defendant Wissink is liable for a civil penalty in the amount of $250,000 pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)].

Defendant Etter is liable for a civil penalty in the amount of $250,000 pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)].

Defendant Obert is liable for a civil penalty in the amount of $250,000 pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)].

See, Final Judgment as To Defendants Hollis M. Greenlaw, Benjamin L. Wissink,

Theodore F. Etter, And Cara D. Obert, in Cause No. 3:18-cv-01735-L; Securities and

Exchange Commission v. UDF III, LP et al., § VI (See Ex. “F”).

Cirangle’s statements at the hearing on the Anti-SLAPP Motion that no claims had been filed was deliberately misleading because she knew, and the other Lubin, Olson &

Niewiadomski, LLP attorneys knew and said nothing, that the SEC Complaint and the

SLAPP Motion.

In addition, the SEC Complaint shows that, contrary to Cirangle’s representations to the Court, the SEC was in fact investigating the exact same conduct that was the subject of Hayman’s public statements.3 A brief review of the “Summary of the Action” from the

SEC Complaint shows the similarity:

1. “From at least January 2011 through December 2015 (the “Relevant Period”), UDF used money from a newer fund to pay distributions to investors in an older fund, without adequately disclosing the use of funds and the nature and status of loans made to developers.” (SEC Complaint, Para. 1).

2. “By 2009, UDF III had made substantial loans to developers and was making monthly distributions to investors in amounts that at times exceeded developer interest payments during the same period. In 2011, UDF IV began loaning money to developers of UDF IV projects who had also borrowed money from UDF III. Unbeknownst to investors, however, UDF directed the developers to use the UDF IV money to pay down separate UDF III loans, instead of using the funds loaned from UDF IV to develop UDF IV projects. In most of these cases, the developers never actually received the borrowed funds at all, and UDF simply transferred the money from UDF IV to UDF III. UDF III then used the loan payments—which were comprised of funds from UDF IV—to, in part, make distributions to UDF III investors. Using these transactions, which were not adequately disclosed to investors, UDF was able to cause UDF III to pay its investors at least $67 million of distributions using funds from UDF IV.” (SEC Complaint, Para. 2).

3. “UDF IV also failed to adequately disclose the nature of multi-phase projects in its loan portfolio. UDF IV told investors that none of its loans were invested in unimproved real property. This gave the impression that all of the loans in UDF IV’s portfolio were funding real estate projects that were under construction. In truth, UDF IV had loaned money for acquisition of unimproved properties designated for multi-phase development. In some cases, the properties remained in the entitlement phase even after they had been in UDF IV’s portfolio for years.” (SEC Complaint, Para. 4).

4. “In addition, Generally Accepted Accounting Principles (“GAAP”) required UDF III to report if any of its significant outstanding loans

3 A fuller comparison of the UDF Exposed Website’s content with the allegations in the SEC Complaint is attached hereto as Ex. “C” and incorporated herein for all purposes as if set forth in full.

RESPONSE TO PLAINTIFFS’ MOTION FOR ADMISSION PRO HAC VICE FOR IAN EDWARD BROWNING and MOTION TO REVOKE THE PRO HAC VICE ADMISSIONS FOR ALL OF THE LUBIN, OLSON & NIEWIADOMSKI, LLP ATTORNEYS PAGE 12 OF 26 became “impaired”—meaning UDF III believed it was unlikely to fully collect on the loan. UDF III knew or should have known before it filed its 2013 Form 10-K that it was unlikely to fully collect on an approximately $80 million loan to its second largest borrower. Although UDF III’s financial statements reflected general reserves, UDF III took no specific impairment on the loan and told investors that full collectability was probable.” (SEC Complaint, Para. 5).

2. Comparison of Hayman’s Public Comments to SEC Complaint Paragraphs 1 and 2.

SEC Complaint, Para. 1 -- UDF used money from a newer fund to pay distributions to investors in an older fund.

SEC Complaint, Para. 2 -- In 2011, UDF IV began loaning money to developers of UDF IV projects who had also borrowed money from UDF III. Unbeknownst to investors, however, UDF directed the developers to use the UDF IV money to pay down separate UDF III loans, instead of using the funds loaned from UDF IV to develop UDF IV projects.

These complaints by the SEC are the crux of the Defendants’ statements that UDF is operating in a “Ponzi like manner.” Although the SEC does not use the term “Ponzi”, no doubt a result of negotiation with the Plaintiffs, the conduct complained of herein is the very definition of a Ponzi scheme as articulated by the SEC itself:

[A ] Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier‐stage investors to create the false appearance that investors are profiting from a legitimate business.4

The following is a summary of Hayman’s statements on UDFExposed discussing this conduct:

1) Hayman Overview Presentation: Hayman detailed four ways in which new investor capital was used to funnel capital to existing investors;

4 Fact Answers Ponzi‐Schemes, under “What is a Ponzi scheme” available at https://www.sec.gov/fast‐answers/answersponzihtm.html (visited Jan. 22, 2018).

2) Hayman Williamsburg Case Study: Hayman detailed in a 23-page case study how i) UDF I defaulted on loans and then ii) used UDF IV capital to lend to a developer (Centurion) which then iii) used that capital to pay UDF I a profits interest payment of $8 million, all after the bank (Premier Bank) which had originally lent funds to UDF I failed during the financial crisis and took impairment charges on the UDF I loans in question (slides 7 and 8) (See Ex. “G”).

3) Hayman Shahan Prairie Case Study: Hayman detailed in a 20-page case study how i) UDF I lent money to Centurion on Shahan Prairie, then ii) UDF III lent money to Centurion on Shahan Prairie and the UDF I loan was repaid, and then UDF V lent money to Centurion on Shahan Prairie and UDF III was repaid; this occurred during a period from 2004 to 2015 all while the land was not developed (i.e. finished lots were never developed to completion such that developers could sell to home builders as supported by pictures taken of the undeveloped by Hayman and by a third-party lawsuit filed by Megatel Homes in 2018) – slides 10 and 11 (See Ex. “G”).

4) Hayman Preston Manor Case Study: Hayman detailed in 37-page case study how i) UDF I financed a real estate development that went bust, then ii) UDF III lent on the same project subsequently, then iii) the SEC inquired about the treatment of the loan and specifically asked how UDF determined whether all amounts due would be collected, then iv) the loan was repaid along a similar time line when UDF III was lending money to UDF I and when UDF IV was lending money on the same project subsequently – slides 13 and 14 (See Ex. “G”).

5) Hayman Northpointe Crossing Case Study: Hayman detailed in a 42- page case study how i) how UDF III financed a real estate development and then ii) UDF IV bought a participation interest in the loan and the balance owed to UDF III declined as the balance owed to UDF IV increased demonstrating that UDF IV capital was being used to repay UDF III investors. The SEC also inquired related to the treatment of this loan in 2011 – slides 16 and 17 (See Ex. “G”).

6) Hayman Initial Post: Hayman detailed how UDF I (private partnership) began defaulting on loans and then UMT (public shareholders) lent money to UDF I at times when it had defaulted on third-party debt and later UDF III (public limited partners) purchased a significant participation interest in the UMT loan (its affiliate) which demonstrated how UMT capital was used to repay UDF I investors (whether partners or creditors) and how UDF III capital was used to repay UMT investors (whether public shareholders or creditors) – slides 19 and 20 (See Ex. “G”).

Despite Cirangle’s representations to the Court, the SEC had not only very much accused

UDF of engaging in Ponzi behavior, but UDF itself had consented to relief based on those very allegations, and agreed not to deny any of those allegations.

3. Comparison of Hayman’s Public Comments to SEC Complaint Paragraphs 4 and 5.

SEC Complaint, Para. 4 -- “UDF IV also failed to adequately disclose the nature of multi-phase projects in its loan portfolio. In some cases, the properties remained in the entitlement phase even after they had been in UDF IV’s portfolio for years.”

SEC Complaint, Para. 5 -- “Generally Accepted Accounting Principles (“GAAP”) required UDF III to report if any of its significant outstanding loans became “impaired”—meaning UDF III believed it was unlikely to fully collect on the loan. UDF III knew or should have known before it filed its 2013 Form 10-K that it was unlikely to fully collect on an approximately $80 million loan to its second largest borrower.”

These SEC complaints regarding the ever-increasing loan balances and lack of development of properties over many years, were also a subject of much of the

UDFexposed website, particularly the slides dealing with “the Precarious Preston Manor

(aka the Preston Manor Case Study). (See slides 13 and 14 (See Ex. “G”) attached hereto.

In particular, Slide __ titled, “Relevant UDF III and UDF IV Loan Balances” deals directly with the loans with ever increasing balances being passed from one fund to the next:

C. Cirangle’s Statements Regarding Whitley Penn.

At the Anti-SLAPP hearing, Cirangle was not candid with the Court. She deliberately downplayed any issues with Whitley Penn’s audit work and otherwise accused the Defendants of being the source of the friction between the Plaintiffs and their auditors. Cirangle and the other Lubin, Olson & Niewiadomski, LLP attorneys knew, or should have known, that Whitley Penn’s audit work was already the subject of investigations by the SEC and the PCAOB, which later imposed civil penalties of

$250,000 against Whitley Penn and three of its accountants that worked on audits of

Plaintiffs, barred a Whitely Penn auditors from being associated with a registered public accounting firm for a minimum of two years, suspended another Whitley Penn auditor

RESPONSE TO PLAINTIFFS’ MOTION FOR ADMISSION PRO HAC VICE FOR IAN EDWARD BROWNING and MOTION TO REVOKE THE PRO HAC VICE ADMISSIONS FOR ALL OF THE LUBIN, OLSON & NIEWIADOMSKI, LLP ATTORNEYS PAGE 16 OF 26 from being associated with a registered public accounting firm for one year, and limited another auditor’s activities in connection with an audit for two years – all based on their failures and complicity with regard to UDF’s misconduct. The following is list of misleading statements Cirangle made to the Court regarding Whitley Penn:

Page 83 – Cirangle says Whitley Penn “did not resign... They did something called declination that said they wanted to no longer work for us. We could sit here and talk about that all day, but Dale Kitchens tells you tells you there was a rule that said if there’s anything wrong, they have to disclose it. They didn’t. There’s no evidence of any wrongdoing.”

Page 118 – Cirangle says “they said UDF and its auditor were concealing disagreements and reportable events. We showed that was false.”

Page 129-- Auditors filed statements with SEC, said there were zero issues with our prior filings, no disagreements between auditors and UDF. If you uncover fraud, you can’t just resign and walk away…. We stand by what we did, we have no disagreements is actually evidence that it’s not a Ponzi scheme. That’s why they have to accuse WP of being part of this fraud, either being so negligent and such awful accountants or being part of the fraud b/c they know when auditor says there’s not a problem, that’s a problem for saying we’re a ponzi scheme.

Page 131 – Hayman efforts to push communications to all local accountants, LinkedIn and other means. “Trying to interfere with our auditors and quite frankly it’s worked… they are putting us through the wringer doing extra due diligence because of all these things.”

See Transcript attached hereto as Ex. “H.”

1. What Cirangle Clearly Knew at the Time of the Hearing

At a minimum, at the time of the Anti-Slapp hearing, Cirangle undoubtedly knew, and other Lubin, Olson & Niewiadomski, LLP attorneys knew about the following events that were not public at the time and that contradict her statements to the Court:

1. On August 31, 2015, the SEC met with Whitley Penn, questioned whether UDF had misled WP about a “spreadsheet” related to a borrower, and prohibited Whitley Penn from asking UDF questions about the spreadsheet.

RESPONSE TO PLAINTIFFS’ MOTION FOR ADMISSION PRO HAC VICE FOR IAN EDWARD BROWNING and MOTION TO REVOKE THE PRO HAC VICE ADMISSIONS FOR ALL OF THE LUBIN, OLSON & NIEWIADOMSKI, LLP ATTORNEYS PAGE 17 OF 26 Whitley Penn added 6 additional procedures to its 3Q15 review but did not withdraw prior audit opinions (UDF’s Deregistration Brief, p. 4).

2. On October 29, 2015, the PCAOB issued a report on its 2014 inspection of Whitley Penn (“PCAOB Report on 2014 Inspection”), notes “significant deficiency” – firm had not obtained sufficient evidence to support its opinion that the financial statements were presented fairly, failed to satisfy fundamental obligation to obtain reasonable assurance that the financial statements were free of material misstatement. “A serious matter…it is a failure to accomplish the essential purpose of the audit, and it means that…the audit opinion should not have been issued”. The deficiency was “failure to perform sufficient procedures to test occurrence and valuation of revenue” for an issuer. (See page 3, last ¶ through page 4, PCAOB Report on 2014 Inspection).

2. After The Hearing, Additional Public Accounting Board Findings Are Disclosed Demonstrating The Falsity Of Cirangle’s Comments.

Cirangle and the Lubin, Olson & Niewiadomski, LLP attorneys had a duty to correct or supplement their false representations to the Court and never did.

Cirangle knew and other Lubin, Olson & Niewiadomski, LLP attorneys knew, or should have known, of further PCAOB investigations of Whitley Penn that became the subject of a November 2018 Inspection Report:

11.18 PCAOB inspection report detailing significant deficiencies in WP’s work with respect to “Issuer A” – “auditor issued opinion without satisfying its fundamental obligation to obtain reasonable assurance about whether financial statements are free of material misstatement…a serious matter… it is a failure to accomplish the essential purpose of the audit, and it means that, based on the audit work performed, the audit opinion should not have been issued.” The deficiency was “failure to perform sufficient procedures to test the allowance for loan losses”. (See Ex. “I”).

3. Cirangle and other Lubin, Olson & Niewiadomski, LLP attorneys knew, or should have known, of further PCAOB investigations of Whitley Penn that eventually became the subject of the PCAOB Order:

(a.) Whitley Penn’s audit work in 2013-2014

RESPONSE TO PLAINTIFFS’ MOTION FOR ADMISSION PRO HAC VICE FOR IAN EDWARD BROWNING and MOTION TO REVOKE THE PRO HAC VICE ADMISSIONS FOR ALL OF THE LUBIN, OLSON & NIEWIADOMSKI, LLP ATTORNEYS PAGE 18 OF 26 During the 2013-2014-time frame, three significant mishaps occurred in connection with Whitley Penn’s audit work, which became the subject of the SEC investigation and the PCAOB findings:

• In connection with the 2013 audit of UDF’s 2012 financial statements, UDF provided Whitley Penn with a fabricated “revised spreadsheet” showing collectability of the line of credit to Buffington (See page 8, ¶26 PCAOB Order);

• In connection with the 2013 audits, the Whitley Penn engagement teams knew of transfers from UDF IV directly to UDF III for distributions to investors, recorded as loans to 3rd party borrowers with no prior request or approval of borrower, and UDF did not select which borrower until after the transfer. Whitley Penn determines those fit into “limited circumstances” whereby UDF had right to make discretionary advances (See page 15, ¶48-50 PCAOB Order); and,

• By the time of 2014 audit, Powell was aware the SEC had commenced an investigation of the UDF entities that included questions about UDF III’s monitoring of the Buffington LOC, the valuation of LOC collateral, and management’s decision to renew the LOC in 2013 (See page 11, ¶36 PCAOB Order).

(b.) Whitley Penn’s 2015 Work

The PCAOB made the following findings in connection with Whitley Penn’s 3rd quarter 2015 Review:

• Before 3Q15 review, Whitley Penn auditor Susan Lunn Powell was interviewed by the SEC and shown documents that called into question the accuracy and veracity of UDF information regarding the LOC. At a minimum, this raised questions about whether UDF entities misstated cash flow projections for the LOC to conceal its impairment (See page 18, ¶56 PCAOB Order).

• 3Q15 review – Powell performed procedures to follow up on what she learned from the SEC – verifies that in March 2014 Buffington had provided cash flow projections showing it would be unable to repay substantial balance of the LOC. Powell also confirmed that UDF had modified the projections that were provided to Whitley Penn, showing “future projects” not belonging to Buffington (See page 18, ¶57 PCAOB Order).

• 3Q15 review – Whitley Penn “became aware of facts indicating material modifications may have been necessary to UDF III and UDF IV’s 3Q15 financial statements”. Whitley Penn analysis projected shortfall on the LOC of $73M. (See page 22, ¶70 PCAOB Order).

RESPONSE TO PLAINTIFFS’ MOTION FOR ADMISSION PRO HAC VICE FOR IAN EDWARD BROWNING and MOTION TO REVOKE THE PRO HAC VICE ADMISSIONS FOR ALL OF THE LUBIN, OLSON & NIEWIADOMSKI, LLP ATTORNEYS PAGE 19 OF 26 • Powell relied on non-binding LOIs provided by UDF for new developers and collateral. Powell and Lawlis, knowing the SEC was investigating, tried to get information from Buffington but ultimately relied on management reps. (See page 19, ¶60-62 PCAOB Order).

In a lack of candor, Cirangle deliberately downplayed any issues with Whitley

Penn’s audit work and otherwise accused the Defendants of being the source of the friction between the Plaintiffs and their auditors, because this bolstered her statements to the Court that there was nothing of substance to the SEC investigations regarding

Whitley Penn’s work. To the contrary, the PCAOB later imposed civil penalties and bars against Whitley Penn and three of its accountants who worked directly on the UDF audits.

All of this demonstrated the truth of the Defendants’ public statements regarding these very same matters.

IV. UDF is Hiding the Ball: the SEC Revocation of all classes of the registered securities of UDF III, IV, and V for Failure to File Periodic Reports

The Lubin lawyers’ efforts to portray the Defendants as the cause of their troubles is undermined by UDF’s efforts to hide the truth. To date, all four publicly‐registered

Plaintiffs have not filed required periodic reports with the SEC since the filing period ending September 30, 2015. On August 14, 2020, the SEC issued an Opinion (See Ex.

E) revoking the registration of all classes of the registered securities of UDF III, IV, and

V for failing to file necessary reporting documents for over 5 years:

RESPONSE TO PLAINTIFFS’ MOTION FOR ADMISSION PRO HAC VICE FOR IAN EDWARD BROWNING and MOTION TO REVOKE THE PRO HAC VICE ADMISSIONS FOR ALL OF THE LUBIN, OLSON & NIEWIADOMSKI, LLP ATTORNEYS PAGE 20 OF 26 additional required filings since the OIP. The record further establishes substantial reason to doubt that they will return to compliance and avoid delinquencies in the future. As a result, we find that Respondents have not made any showing that would justify a sanction other than revocation. Nor have Respondents established a genuine dispute of material fact that would necessitate an in-person evidentiary hearing or that the Division is not entitled to judgment as a matter of law. We therefore grant the Division’s motion for summary disposition, deny Respondents’ motion for summary disposition, and revoke the registration of all classes of the registered securities of Respondents as in the public interest and necessary and appropriate for the protection of investors. (Emphasis added).

(See Ex. E SEC Order, Page 13).

V. UDF Sets Up and Controls Strawman Borrowers in violation of IRS Regulations

On December 28, 2015, UDF IV was sued in Fort Bend County, Texas. The Lubin lawyers knew or should have known that Hayman’s postings about UDF skirting the IRS regulations and controlling its borrowers were true based upon the allegations filed by the

Plaintiffs in Fort Bend County. The lawsuit documents admissions by UDF principals that UDF creates and controls its borrowers, and were at all times in control of the negotiation, planning and development of this project. UDF principals admitted that the representatives of the spin off borrowers “don’t even know where the property is.” (See

Fort Bend Petition, Para 13 attached hereto as Ex. “J”). UDF is not a legitimate REIT.

There are more admissions of fact that contradict the Lubin lawyers’ representations to this Court. UDF IV’s largest borrower is a private real estate developer based in Farmers Branch, Texas which does business under the name of Centurion

American through a complex web of affiliated entities, which are controlled by Dallas businessman, Mehrdad Moayedi (“Moayedi”) (Moayedi, Centurion American entities and their affiliates are collectively referred to as “Centurion”). As of September 30, 2015,

RESPONSE TO PLAINTIFFS’ MOTION FOR ADMISSION PRO HAC VICE FOR IAN EDWARD BROWNING and MOTION TO REVOKE THE PRO HAC VICE ADMISSIONS FOR ALL OF THE LUBIN, OLSON & NIEWIADOMSKI, LLP ATTORNEYS PAGE 21 OF 26 Moayedi owed UDF-related entities approximately $585 million. In a recent prospectus filing, it was disclosed by Moayedi that he owed UDF [$900 million].

Yet at a meeting of the Farmer’s Branch city council in February 2016, Moayedi claimed that he did not really owe significant debts to UDF, instead explaining that he managed non-performing real estate assets (REO) on behalf of UDF, both of which completely contradict public disclosures made by UDF. Moayedi’s statements amounted to admissions of being a “strawman borrower.” The Lubin lawyers cite this meeting in the Plaintiffs’ Original Petition in Paragraph 160. The Lubin lawyers knew or should have known of these facts when they drafted Paragraph 160.

VI. The incidents detailed in the Complaint filed by the SEC, the PCAOB Order, and the SEC Revocation are just the tip of the iceberg.

These same business practices filter through UDF and its web of affiliates and

companies. The Lubin lawyers have a duty to be truthful with this Court, and they have

breached this duty. The Lubin lawyers’ efforts to portray the Defendants as the cause

of their troubles is undermined by the following list of events, lawsuits and

investigations against UDF:

• UDF’s officers were raided by the FBI; • UDF’s documents and computers were confiscated by the Government; • UDF was sued by the SEC; • UDF settled with the SEC; • UDF paid substantial $8.5M penalty to the SEC, including disgorgement of ill-gotten gains; • UDF entered into Agreed Consent Decrees; • UDF entered into Agreed Judgments; • UDF’s Auditors resigned; • UDF’s Auditors/CPAs were sanctioned; • UDF’s Public Entities Delisted by the SEC; • UDF’s Public Entities Deregistered by the SEC; • UDF admitted a forgiveness of indebtedness to UDF of $122 million; • UDF has been sued in numerous investor lawsuits;

RESPONSE TO PLAINTIFFS’ MOTION FOR ADMISSION PRO HAC VICE FOR IAN EDWARD BROWNING and MOTION TO REVOKE THE PRO HAC VICE ADMISSIONS FOR ALL OF THE LUBIN, OLSON & NIEWIADOMSKI, LLP ATTORNEYS PAGE 22 OF 26 • UDF settled one investor class action suit and paid an approximately eight figure settlement, and is actively attempting to settle other investor class action claims; • UDF has more investor suits pending, from Texas to Delaware; • UDF sued the FBI Agent investigating them, interfering with a very active criminal investigation; • UDF sued the DOJ/Assistant US Attorney Investigating them; • UDF stopped paying regular distributions to investors. That accrued amount of missed distributions is now in the hundreds of millions of dollars, not to mention additional hundreds of millions of investor money that has not been accounted for; • UDF is being sued by business partners, including racketeering allegations from Megatel; and, • UDF’s largest borrower has admitted in money-raising documents that he owes UDF at least $839 million dollars.

In the suit against the FBI agents and the U.S. Attorneys Office, the United States recently filed a Response in Opposition to Plaintiffs’ Motion to File Redacted Complaint, in which it was highly critical of the Public Relations aspect of UDF’s actions:

This case is a Bivens action in name only. In reality, disappointed by their failure to convince either the United States Attorney’s Office for the Northern District of Texas (“NDTX”) or the Deputy Attorney General to halt a complex criminal investigation of their conduct and have Assistant United States Attorney James Nicholas Bunch (hereinafter “AUSA Bunch”) removed from that case, Plaintiffs are using this “Bivens action” to yet again interfere with legitimate law enforcement activity. In furtherance of their efforts, Plaintiffs ask the Court to unseal a redacted complaint and publicize their version of the history of a very active ongoing criminal investigation in the NDTX including details of non-public aspects of the investigation.

(See Ex. B, p. 2).

It is clear that the Lubin lawyers are nothing but an instrument for their clients’ endless propaganda and spin in an attempt to place the blame on the Defendants for UDF investor losses. From the outset, Cirangle and the Lubin lawyers have deceived the Court, violated the ethical rules they agreed to uphold, and should be banned from the Texas

Courts.

Despite certifying that she was familiar with Texas’s ethical rules, Ms. Cirangle was inattentive to her duty of candor to this Court and conveyed that neither her nor her law firm have regard for the ethical duties of Texas attorneys. Now that the cat is out of the bag, her firm has had more than tw0 (2) years to correct these misrepresentations, and has utterly declined to do so. Mr. Browning now seeks admission with the same certification to this Court of his own familiarity with the Texas Rules of Professional

Conduct. However, their firm has shown that their attorneys have no obligation to take

Texas ethical mandates seriously.

“The question of reputability of a non-resident attorney is addressed to the discretion of the trial court.” State Bar v. Belli, 382 S.W.2d 475, 476 (Tex. 1964). Ms.

Cirangle’s misrepresentations to this Court were indicative of her firm’s overall strategy, which clearly requires its attorneys to forego their ethical responsibilities. Lubin, Olson &

Niewiadomski, LLP’s track record in this Court and this case supports denying Ian

Browning’s admission and revoking the previous admissions of Cirangle and the other

Lubin lawyers. Thus, Defendants ask this Court to exercise its sound discretion and deny the pro hac vice admission of Ian Edward Browning and to revoke the Pro Hac Vice

Admissions of each of the attorneys associated with Lubin, Olson & Niewiadomski, LLP.

UDF already employs Texas counsel in this matter, so the requested revocation will not affect any of the deadlines in place for the case.

Defendants request discovery on an emergency basis in order to prepare for the hearing on this Motion.

Plaintiffs’ Motion for Admission Pro Hac Vice for Ian Edward Browning and to revoke the

Pro Hac Vice Admissions of each of the attorneys associated with Lubin, Olson &

Niewiadomski, LLP.

Respectfully submitted,

FRIEDMAN & FEIGER, LLP

By: __/s/ Lawrence J. Friedman______Lawrence J. Friedman State Bar No. 07469300 [email protected] James R. Krause State Bar No. 24049314 [email protected] Shauna A. Izadi State Bar No. 24041170 [email protected] Jason H. Friedman State Bar No. 24059784 [email protected]

5301 Spring Valley Road, Suite 200 Dallas, Texas 75254 (972) 788-1400 (Telephone) ATTORNEYS FOR DEFENDANTS J. KYLE BASS AND HAYMAN CAPITAL MANAGEMENT, L.P.

-and-

KILPATRICK TOWNSEND & STOCKTON LLP

Cole B. Ramey State Bar No. 16494980 [email protected] Karly Stoehr Rodine State Bar No. 24046920 [email protected] Patrick J. Carew State Bar No. 24031919 [email protected]

2001 Ross Avenue, Suite 4400 Dallas, Texas 75201 Telephone: (214) 922-7100 Facsimile: (214) 922-7101

ATTORNEYS FOR DEFENDANTS

CERTIFICATE OF SERVICE

I hereby certify that the foregoing document has been electronically served upon all counsel of record on this the 7th day of October 2020.

__/s/ Lawrence J. Friedman______Lawrence J. Friedman

) ) ORDER INSTITUTING DISCIPLINARY ) PROCEEDINGS, MAKING FINDINGS, ) AND IMPOSING SANCTIONS ) PCAOB Release No. 105-2020-002 ) In the Matter of Whitley Penn LLP, Susan ) March 24, 2020 Lunn Powell, CPA, Jeffry Shannon ) Lawlis, CPA, and John Griffin Babb, CPA, ) ) Respondents. )

)

By this Order, the Public Company Accounting Oversight Board ("Board" or "PCAOB") is imposing sanctions upon Whitley Penn LLP ("WP" or the "Firm"), Susan Lunn Powell, CPA ("Powell"), Jeffry Shannon Lawlis, CPA ("Lawlis") and John Griffin Babb, CPA ("Babb") (collectively, "Respondents"). The Board is:

(1) requiring WP to undertake certain remedial actions, as described in Section IV of this Order, and imposing a $200,000 civil money penalty on WP;

(2) barring Powell from being associated with a registered public accounting firm,1 limiting Powell's activities in connection with any "audit," as that term is defined in Section 110(1) of the Sarbanes-Oxley Act of 2002, as amended (the "Act"), for an additional period of one year following the termination of the bar, requiring that Powell complete forty additional hours of continuing professional education ("CPE"), and imposing a $25,000 civil money penalty on Powell;

(3) suspending Lawlis from being associated with a registered public accounting firm for a period of one year, limiting Lawlis's activities in connection with any "audit," as that term is defined in Section 110(1) of the Act for an additional period of one year following his suspension, requiring that Lawlis complete twenty additional hours of CPE, and imposing a $15,000 civil money penalty on Lawlis; and

1 Powell may file a petition for Board consent to associate with a registered public accounting firm after two years from the date of this Order. PCAOB Release No. 105-2020-002 March 24, 2020 ORDER Page 2

(4) limiting Babb's activities in connection with any "audit," as that term is defined in Section 110(1) of the Act for a period of two years, requiring that Babb complete ten additional hours of CPE, and imposing a $10,000 civil money penalty on Babb.

The Board is imposing these sanctions based on its findings that: (1) Powell and Babb violated PCAOB rules and standards2 in connection with the audits of the 2012- 2014 financial statements of United Development Funding III, L.P., and the review of that issuer's Q3 2015 interim financial statements; (2) Lawlis violated PCAOB rules and standards in connection with the audits of the 2013-2014 financial statements of United Development Funding IV and the review of that issuer's Q3 2015 interim financial statements; and (3) WP violated PCAOB rules and standards by failing to design, implement, and maintain appropriate quality control policies and procedures.

The Board deems it necessary and appropriate, for the protection of investors and to further the public interest in the preparation of informative, accurate, and independent audit reports, that disciplinary proceedings be, and hereby are, instituted pursuant to Section 105(c) of the Sarbanes-Oxley Act of 2002, as amended (the "Act") and PCAOB Rule 5200(a)(1) against Respondents.

II.

In anticipation of the institution of these proceedings, and pursuant to PCAOB Rule 5205, Respondents have submitted Offers of Settlement ("Offers") that the Board has determined to accept. Solely for purposes of these proceedings and any other proceedings brought by or on behalf of the Board, or to which the Board is a party, and without admitting or denying the findings herein, except as to the Board's jurisdiction over Respondents and the subject matter of these proceedings, which is admitted,

2 All references to PCAOB rules and standards in this Order are to the versions of those rules and standards, and to their organization and numbering, in effect at the time of audits discussed herein. As of December 31, 2016, the PCAOB reorganized its auditing standards using a topical structure and a single, integrated numbering system. See Reorganization of PCAOB Auditing Standards and Related Amendments to PCAOB Standards and Rules, PCAOB Release No. 2015-002 (Mar. 31, 2015).

PCAOB Release No. 105-2020-002 March 24, 2020 ORDER Page 3

Respondents consent to the entry of this Order Instituting Disciplinary Proceedings, Making Findings, and Imposing Sanctions ("Order"), as set forth below.3

III.

On the basis of Respondents' Offers, the Board finds that:4

A. Respondents

1. Whitley Penn LLP is a limited liability partnership organized under the laws of the State of Texas and headquartered in Fort Worth, Texas. The Firm is licensed by the State Boards of Accountancy in Texas (License No. P05377), California (License No. OFR659), New Jersey (License No. 20CZ00034600), Oklahoma (License No. 13919), and Minnesota (License No. F2269). The Firm is, and at all relevant times was, registered with the Board pursuant to Section 102 of the Act and PCAOB rules.

2. Susan Lunn Powell, CPA, is a certified public accountant licensed by the Texas State Board of Accountancy (License No. 078380). At all relevant times, Powell was an associated person of a registered public accounting firm as that term is defined in Section 2(a)(9) of the Act and PCAOB Rule 1001(p)(i).

3. Jeffry Shannon Lawlis, CPA, is a certified public accountant licensed by the Texas State Board of Accountancy (License No. 058485). At all relevant times, Lawlis was an associated person of a registered public accounting firm as that term is defined in Section 2(a)(9) of the Act and PCAOB Rule 1001(p)(i).

4. John Griffin Babb, CPA, is a certified public accountant licensed by the Texas State Board of Accountancy (License No. 081948). Babb is an associated person of a registered public accounting firm as that term is defined in Section 2(a)(9) of the Act and PCAOB Rule 1001(p)(i).

3 The findings herein are made pursuant to the Offers and are not binding on any other person or entity in this or any other proceeding.

4 The Board finds that Respondents' conduct described in this Order meets the conditions set out in Section 105(c)(5) of the Act, 15 U.S.C. § 7215(c)(5), which provides that certain sanctions may be imposed in the event of: (1) intentional or knowing conduct, including reckless conduct, that results in a violation of the applicable statutory, regulatory, or professional standard; or (2) repeated instances of negligent conduct, each resulting in a violation of the applicable statutory, regulatory, or professional standard.

PCAOB Release No. 105-2020-002 March 24, 2020 ORDER Page 4

B. Issuers

5. United Development Funding III, L.P. ("UDF III"), was an issuer as that term is defined by Section 2(a)(7) of the Act and PCAOB Rule 1001(i)(iii). UDF III's public filings disclosed that it originated, acquired, serviced, and managed mortgage loans secured by real property or equity interests that held real property already subject to other mortgages.

6. United Development Funding IV ("UDF IV") was, at all relevant times, a Maryland real estate investment trust, and an issuer as that term is defined by Section 2(a)(7) of the Act and PCAOB Rule 1001(i)(iii). UDF IV's public filings disclosed that it originated, purchased, participated in, and held for investment secured loans to persons and entities relating to real estate development.

7. UDF III and UDF IV were affiliates of one another and were under common management, along with several other affiliates (collectively, the "UDF Entities").

C. Summary

8. WP was the UDF Entities' external auditor, including for the year ended December 31, 2012 and continuing through the third quarter of 2015. Powell was the engagement partner for the audits and reviews of UDF III's 2012 through Q3 2015 financial statements. Babb was the engagement quality review ("EQR") partner for those same UDF III audits and reviews. Lawlis was the engagement partner for the audits and reviews of UDF IV's 2013 through Q3 2015 financial statements.

9. This matter concerns, among other things, (a) Powell's, Lawlis's, and Babb's failures to exercise due professional care, including professional skepticism, in connection with procedures they performed concerning loans made by UDF III and UDF IV to a key borrower, which accounted for a significant portion of each issuer's assets; (b) Powell's and Lawlis's failures to appropriately respond to evidence of possible undisclosed related party transactions between UDF III and UDF IV during the 2013 and 2014 audits; and (c) Whitley Penn's failure to maintain an adequate system of quality control ("QC system") both during and after those audit failures.

10. Specifically, Powell repeatedly failed to gather sufficient appropriate evidence to determine whether a significant loan was properly valued, and failed to adequately consider evidence indicating UDF III needed to record a substantial reserve for that loan. By Q3 2015, that loan accounted for $104 million (26%) of UDF III's assets. Evidence gathered by Powell indicated that it could be impaired by as much as $73 million at Q3 2015, which was approximately three times UDF III's total allowance for loan losses. Powell also failed to adequately respond to (a) evidence from confirmation procedures of a possible dispute between UDF III and the borrower for that loan and (b) the fact that UDF IV was repeatedly transferring cash to UDF III without either fund disclosing the transfers as related party transactions.

PCAOB Release No. 105-2020-002 March 24, 2020 ORDER Page 5

11. Lawlis failed to adequately respond to evidence from confirmation procedures of a possible dispute between UDF IV and that same key borrower, whose loans accounted for approximately 10% of UDF IV's assets. Lawlis also failed to adequately respond to the transfers from UDF IV to UDF III that were not disclosed as related party transactions.

12. Babb, in connection with his EQRs for the UDF III audits, repeatedly failed to properly evaluate, with due professional care, the significant judgments that Powell made concerning the UDF III loan to the key borrower described above.

13. The above violations resulted, at least in part, from WP's insufficient QC system. During the period of the violations, WP's QC system failed to provide reasonable assurance that WP and its personnel performed audit work in accordance with professional standards or appropriately consulted with persons outside of the engagement team when necessary.

D. Background

Notes Receivable and Key Customer

14. The vast majority of UDF III's and UDF IV's assets were comprised of the notes receivable and accrued interest receivable balances from the loans they made. WP understood that the loans funded long-term development projects, with typical interest of 15% and above for UDF III, and 13% and above for UDF IV. WP also understood that UDF III and UDF IV typically set maturity dates on the loans for dates that were prior to the expected completion dates for the development projects. WP expected that UDF III and UDF IV would renew loans for ongoing projects if UDF III and UDF IV believed that the loan was adequately performing and collectable.

15. UDF III and UDF IV each reported their notes receivable both on a gross basis and net of an allowance for loan losses ("ALL"). The ALL was comprised of two components: (1) provisions for expected losses on loans individually evaluated for impairment ("specific reserves"), and (2) an accrual for losses on non-impaired loans.

16. UDF III and UDF IV recognized interest income from their loans on an accrual basis. Both funds disclosed that they suspend recognition of interest income on a loan when full recovery of principal and income was no longer probable. Accordingly, a loan that was impaired and not fully recoverable would also generally require suspension of interest revenue recognition.

17. One of the key borrowers for both UDF III and UDF IV was a group of related land development entities based in Austin, Texas (the "Austin Developer"). At all relevant times, UDF IV had several outstanding loans to the Austin Developer, which accounted for approximately 10% of UDF IV's assets and revenues. UDF III had just one outstanding loan to the Austin Developer, a line of credit (the "LOC"), which accounted for more than

PCAOB Release No. 105-2020-002 March 24, 2020 ORDER Page 6

20% of UDF III's assets and revenues. The LOC bore interest at 15%, and was subordinate to both the UDF IV loans and other senior debt.

18. In December 2016, the UDF Entities entered into a settlement with the Austin Developer, which resulted in UDF III forgiving more than $122 million of the Austin Developer's indebtedness to UDF III associated with the LOC.5 Although UDF III disclosed that the settlement may have a material adverse impact on its financial statements, UDF III has not publicly filed any financial statements after the Q3 2015 financial statements that WP reviewed. WP completed its Q3 2015 review for UDF III in November 2015, and then declined to stand for reappointment as the UDF Entities' auditors three days later.

Settlement with the Commission

19. On July 3, 2018, UDF III and UDF IV, along with several members of their management, entered into a settlement with the U.S. Securities and Exchange Commission ("Commission").6 The settlement stemmed from a Commission investigation that WP first learned about during the 2014 audits. The settlement concerned allegations by the Commission that UDF III had failed to recognize a specific impairment on the LOC and put the LOC on non-accrual status. It also concerned allegations that the UDF Entities did not disclose the true nature of the transactions involving cash transfers from UDF IV to UDF III for distribution to UDF III investors.

E. Powell Failed to Obtain Sufficient Appropriate Evidence Concerning the ALL During the 2012-2014 UDF III Audits

20. PCAOB rules require that registered public accounting firms and their associated persons comply with applicable auditing and related professional practice standards.7 An auditor may express an unqualified opinion on an issuer's financial statements only when the auditor has formed such an opinion on the basis of an audit

5 See Form 8-K filed by UDF III (Jan. 6, 2017). The impact of the settlement on UDF IV's financial statements has not been publicly reported.

6 See SEC Charges Real Estate Investment Funds and Executives for Misleading Investors, SEC Lit. Rel. No. 24185 (Jul. 3, 2018); Securities and Exchange Commission v. United Development Funding III, LP, et al., No. 3:18-cv-01735-L (N.D. Tex. filed July 3, 2018; final judgments entered Jul. 31, 2018).

7 See PCAOB Rule 3100, Compliance with Auditing and Related Professional Practice Standards; PCAOB Rule 3200T, Interim Auditing Standards.

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performed in accordance with PCAOB standards.8 PCAOB standards require, among other things, that an auditor plan and perform the audit with due professional care9 and to obtain sufficient appropriate audit evidence to provide a reasonable basis for the auditor's opinion.10

21. The auditor must design and implement audit responses that address the risks of material misstatement that are identified and assessed during the audit.11 In designing the audit procedures to be performed, the auditor should obtain more persuasive audit evidence the higher the auditor's assessment of risk.12 To be appropriate, audit evidence must be both relevant and reliable in providing support for the conclusions on which the auditor's opinion is based.13

22. Powell identified notes receivable as a significant account for each of the UDF III audits, and assessed that there were significant risks, including fraud risks, associated with that account. Powell designated the ALL as a "critical issue" and identified it as a significant estimate giving rise to high inherent risk for valuation of the net notes receivable balance. Powell also identified that management could perpetrate and conceal fraudulent financial reporting in connection with its notes receivable, including through understatement of the ALL.

23. Despite identifying those significant risks relating to UDF III's notes receivable, including the ALL, Powell failed to exercise due professional care, including professional skepticism when performing audit procedures over that account. In violation of PCAOB rules and standards, Powell failed to gather sufficient appropriate audit evidence about the value of the LOC, which was a significant loan. She also improperly relied on management estimates, data, and assumptions about that loan, without sufficiently evaluating their reasonableness.14

8 See AU § 508.07, Reports on Audited Financial Statements.

9 See AU § 230.01, Due Professional Care in the Performance of Work.

10 See AS 15, Audit Evidence, ¶ 4.

11 See AS 13, The Auditor's Responses to the Risks of Material Misstatement, ¶ 3.

12 See AS 13 ¶ 9.

13 See AS 15 ¶ 6.

14 See AU §§ 342.09-.10, Auditing Accounting Estimates.

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2012 Evaluation of the LOC

24. At year-end 2012, the LOC accounted for approximately 22% ($80 million) of UDF III's assets. UDF III's records indicated that the LOC collateral was also securing $49 million in additional debt at year-end 2012, including $26 million in senior debt. Powell knew that the LOC was past due as of year-end 2012 and UDF III management designated the LOC as impaired, but did not record any specific reserve for it in UDF III's ALL. During the audit, management asserted to Powell that it believed the loan was collectable. Management also provided Powell with documentation showing UDF III renewed the LOC in late March 2013.

25. In her initial analysis of the LOC for the 2012 audit, Powell noted that, if all of the land currently listed as collateral for the LOC was fully developed and sold, the lot sales would not generate sufficient proceeds to repay the LOC and other senior debt secured by the same collateral.

26. Nevertheless, Powell ultimately agreed with management that UDF III likely could collect the full amount of principal and interest, and that no specific reserve or suspension of revenue recognition was necessary. Powell based her conclusion on a revised projection that the Austin Developer's total future cash receipts from the development and sale of all lots would be approximately $152 million, exceeding the outstanding total debt and accrued interest by approximately $23 million. That calculation was based on management-provided data about the number of lots available for sale to repay the loan, the projected sale prices of those lots, and the amounts the Austin Developer would receive in development incentives.

27. Powell, however, failed to perform her analysis with due professional care and, as a result, failed to obtain sufficient appropriate audit evidence to support her conclusions about the LOC.15 For example, in performing that analysis, Powell did not adequately:

 Test the accuracy and completeness of management-provided data that was critical to her calculation,16 including the number of lots that remained for sale, despite receiving a schedule from management indicating that some of the lots identified as collateral might have been sold already;

15 See AS 15 ¶ 4.

16 See AS 15 ¶ 10.

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 Evaluate the reasonableness of key factors and assumptions that were significant to the analysis, including the projected costs that would affect the collectability of the loan (e.g., future development costs being funded through senior debt);17 and

 Discount the future cash receipts to present value in her analysis, despite knowing that the interest rate on the LOC was 15% and the developments would take several more years to complete.18

28. Powell also considered that management had informed her that the Austin Developer had "pledged" additional collateral to support the repayment of the LOC, which it claimed would increase the number of lots available for sale. However, Powell did not take adequate steps during the 2012 audit to analyze that pledge and determine whether it, in fact, added valuable collateral to the LOC. Powell also did not consider whether that pledged collateral was, itself, subject to senior liens that affected the collateral's value.

29. As a result of these deficiencies, Powell failed to obtain sufficient appropriate audit evidence to determine whether UDF III's reported 2012 notes receivable was properly valued and whether revenue recognition should have been suspended for the LOC.

2013 Evaluation of the LOC

30. For the 2013 audit, Powell again failed to appropriately evaluate management's conclusions concerning the impairment and specific reserves of the LOC.

31. During the 2013 audit, Powell identified that available appraisals or other initial WP testing did not support the valuation of the LOC, which then accounted for approximately 23% ($84 million) of UDF III's assets. The engagement team asked management for additional support for the value of the LOC and, in response, received a cash flow analysis reflecting management's conclusions concerning the collectability and value of the LOC. Management's analysis for the LOC calculated that there would be $173 million of cash flows that could be used to satisfy that loan.

17 See AU § 342.09.

18 Cf. ASC 310-10-35-25 ("If a creditor bases its measure of loan impairment on a present value amount, the creditor shall calculate that present value amount based on an estimate of the expected future cash flows of the impaired loan, discounted at the loan's effective interest rate.").

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32. Powell, however, failed to adequately evaluate whether the information contained within the cash flow projection was sufficient and appropriate for purposes of the audit, as required by PCAOB standards.19 She failed to adequately test the accuracy and completeness of the information in the cash flow projections, or to test the controls over the accuracy and completeness of that information.20 She also failed to adequately evaluate whether the information was sufficiently precise and detailed for purposes of the audit.21

33. Specifically, while Powell performed testing procedures over certain data in the management cash-flow analysis, such as lot pricing data, she failed to plan or perform procedures to evaluate or test certain other critical data and assumptions. For example, she failed to test the accuracy, completeness and reasonableness of:

 Data in the cash flow model about the number of lots that would be developed and were available for sale in the future, including whether the underlying projects existed;

 Data and assumptions in the cash flow model relating to the amount of future development costs that would be incurred as senior debt; and

 Data and assumptions in the cash flow model about the timing of the estimated cash advances and repayments, which were important to the analysis because of the LOC's 15% interest rate.

34. As a result of these deficiencies with the LOC testing, Powell failed to obtain sufficient appropriate audit evidence to determine whether UDF III's reported 2013 notes receivable was properly valued and whether revenue recognition should have been suspended for the LOC.

2014 Evaluation of the LOC

35. For the 2014 audit, Powell again failed to appropriately evaluate management's conclusions concerning the impairment and specific reserves of the LOC. By that time, the LOC accounted for approximately 24% ($94 million) of UDF III's assets.

19 See AS 15 ¶ 10.

20 See id.

21 See id.

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Management's 2014 analysis for the LOC calculated that there would be $176 million of cash flows that could be used to satisfy the LOC.

36. By the time of the 2014 audit, Powell was aware that the Commission had commenced an investigation of the UDF Entities that included questions about UDF III's monitoring of the LOC, the valuation of the LOC's collateral, and management's decision to renew the LOC in 2013. This information should have caused her to exercise heightened professional skepticism when testing the value and impairment of the LOC, but she failed to do so.22

37. Powell also failed to adequately consider additional information which should have caused her to review the analyses with heightened professional skepticism. For example, during the 2014 audit, UDF III told Powell that the principal of the Austin Developer had informed the UDF Entities of his desire to retire, and was negotiating a settlement with the UDF Entities. Management indicated that the settlement negotiations were ongoing, and that management anticipated a settlement involving another developer taking over the projects reflected in the LOC cash flow analysis, which consisted of both existing projects and "future projects."

38. Powell also failed to adequately consider that:

 There had not been any cash payments of principal on the LOC during 2014, despite management's 2013 cash flow analysis projecting a substantial pay- down of the LOC in 2014;

 The cash flow analysis for the LOC included proceeds from "future projects," for which the WP engagement team had no evidence to support that they existed; and

 The ongoing settlement negotiations with the Austin Developer could indicate a dispute with the Austin Developer, and the Austin Developer did not respond to confirmation requests about its 2014 loan balance, despite responding to similar requests in prior audits.23

39. Powell again relied on management's cash flow analysis in testing the LOC for potential impairment, but she again failed to adequately test the accuracy and completeness of the information in the cash flow projections, despite all of the foregoing information. Powell reviewed a summary cash flow for the LOC, as well as a selection of five cash flow analyses for individual development projects that she understood were

22 See AU § 230.07.

23 See Section III.F, infra.

PCAOB Release No. 105-2020-002 March 24, 2020 ORDER Page 12 generating repayments reflected in the summary cash flow. Powell also discussed the cash flow analysis with management, and reviewed management's support for the lot pricing management used in the cash flow model. Based on those steps, and inquiry to management about the LOC's status, Powell concluded that the LOC was fully collectable.

40. However, Powell again failed to adequately evaluate whether the information contained within the cash flow projection was sufficient and appropriate for purposes of the audit.24 While she performed testing procedures over certain data in the cash flow projection, she again failed to test the completeness and accuracy of other critical data and assumptions, including the number of lots that would repay the loans, the timing of estimated cash advances and repayments, or the projected amounts of future development costs.25 Powell also failed to take adequate steps during the 2014 audit to understand the nature of the "future projects" management included in its cash flow projection, and their qualitative and quantitative impact on the cash flow analysis. As a result, Powell failed to obtain sufficient appropriate audit evidence to determine whether UDF III's reported 2014 notes receivable was properly valued and whether revenue recognition should have been suspended for the LOC. 26

F. Powell and Lawlis Failed to Properly Evaluate the Results of the Confirmation Procedures Concerning the Austin Developer during the 2014 UDF III and UDF IV Audits

41. Both Powell and Lawlis violated PCAOB rules and standards in their respective UDF III and UDF IV 2014 audits by failing to follow-up on (a) loan confirmation requests to the Austin Developer and (b) information that management provided to explain the Austin Developer's failure to respond to a confirmation request.27

24 See AS 15 ¶ 10.

25 See AS 15 ¶ 10; AU § 342.09.

26 See AS 15 ¶¶ 4-6.

27 See AU § 330.30, The Confirmation Process ("When using confirmation requests other than the negative form, the auditor should generally follow up with a second and sometimes a third request to those parties from whom replies have not been received."); AU § 330.33 ("If the combined evidence provided by the confirmations, alternative procedures, and other procedures is not sufficient, the auditor should request

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42. At year-end 2014, the Austin Developer's debt to UDF III was comprised entirely of the LOC. The Austin Developer's debt to UDF IV was comprised of multiple loans, accounting for approximately 10% of UDF IV's assets. Roughly half of the Austin Developer's debt to UDF IV was overdue at the time of the audit and designated as impaired by management.

43. Both engagement teams considered it appropriate to send confirmation requests to the Austin Developer. After receiving confirmation requests from the engagement teams, the Austin Developer did not respond, despite having responded to such requests in the past, including for the 2013 audits. Management for the UDF Entities then informed both Powell and Lawlis that the Austin Developer would not respond to confirmation requests due to its principal's intent to retire and ongoing negotiations between the UDF Entities and the Austin Developer. The UDF Entities also informed Powell and Lawlis that it would not further extend the due dates on any of the Austin Developer's loans.28 Both Powell and Lawlis should have understood from those statements that there was a potential dispute between the Austin Developer and the UDF Entities, including UDF III and UDF IV. Nevertheless, they both failed to follow up with a second confirmation request.29

44. Having not received a response to their loan confirmation request, both engagement teams performed alternative procedures. The alternative procedures consisted of tying a selection of loan draws and paydowns to management provided documentation, including third party bank statements and draw requests signed by the borrowers, to roll forward the prior year's audited balance. However, the alternative procedures failed to provide sufficient evidence about the potential dispute concerning the Austin Developer and whether that dispute affected the loans' valuation. As a result, Powell and Lawlis failed to obtain sufficient audit evidence to determine whether the notes receivable were, among other things, properly valued for 2014.30

additional confirmations or extend other tests, such as tests of details or analytical procedures.").

28 Because management classified all overdue loans as impaired, Powell and Lawlis knew or should have known that such loans were likely to be classified as impaired by management as they came due, and therefore that they would need to be assessed for a potential specific reserve.

29 See AU § 330.30.

30 See AU § 330.33; AS 15 ¶¶ 4-6.

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G. Powell and Lawlis Failed To Perform Sufficient Related Parties Procedures During the 2013 and 2014 UDF III and UDF IV Audits

45. PCAOB standards recognize that, "[d]uring the course of the audit, the auditor may become aware of significant transactions that are outside the normal course of business for the entity, or that otherwise appear to be unusual given the auditor's understanding of the entity and its environment."31 The standards further provide that "[t]he auditor should gain an understanding of the business rationale for such transactions and whether that rationale (or the lack thereof) suggests that the transactions may have been entered into to engage in fraudulent financial reporting or conceal misappropriation of assets."32

46. PCAOB standards also provide that, when examining related party transactions, "the auditor should be aware that the substance of a particular transaction could be significantly different from its form and that financial statements should recognize the substance of particular transactions rather than merely their legal form."33 After identifying related party transactions, "the auditor should apply the procedures he considers necessary to obtain satisfaction concerning the purpose, nature, and extent of these transactions and their effect on the financial statements."34 For each material related party transaction (or aggregation of similar transactions), "the auditor should evaluate all the information available to him and satisfy himself that it is adequately disclosed in the financial statements."35

47. During their respective 2013 and 2014 UDF III and UDF IV audits, Powell and Lawlis designated related party transactions as a significant audit issue, but failed to

31 AU § 316.66, Consideration of Fraud in a Financial Statement Audit.

32 Id.

33 AU § 334.02, Related Parties; see also AU § 411.06, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles ("Generally accepted accounting principles recognize the importance of reporting transactions and events in accordance with their substance. The auditor should consider whether the substance of transactions or events differs materially from their form.").

34 AU § 334.09.

35 See AU § 334.11; see also Rule 4-08(k) of Regulation S-X, Related party transactions which affect the financial statements, codified as 17 C.F.R. 210.4-08(k).

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properly respond to evidence of unusual transfers from UDF IV to UDF III that were not disclosed as related party transactions.

Evaluation of Transfers During the 2013 Audits

48. During the 2013 audits, the WP engagement teams brought to the attention of both Powell and Lawlis certain unusual transfers from UDF IV to UDF III that management did not present or disclose as related party transactions. During the 2013 audits, the engagement teams learned that UDF IV transferred $1.2 million to UDF III in January 2014 so that UDF III, which otherwise lacked sufficient cash, could make distributions to its investors that same day. The engagement teams also understood that the transfer had been recorded as loans by UDF IV to third-party borrowers and paydowns of loans by those same borrowers to UDF III, even though: (a) UDF IV and UDF III's joint management had initiated the transfer, without the prior request or approval of any third-party borrower; (b) the transfer flowed directly from UDF IV to UDF III without notice to any third-party borrower; and (c) UDF IV and UDF III's joint management had unilaterally selected which third-party borrower and loans it would use to record the transfer, and did not finalize that selection until after the transfer had already been completed. The engagement teams communicated that understanding to Powell and Lawlis, sent them supporting documentation, and also advised them that there might be additional similar transactions.

49. Both Powell and Lawlis initially agreed that the transaction flagged by the engagement team was "strange" and questioned why the initial transfer was not recorded as a payable/receivable between UDF III and UDF IV, which they knew were related parties. Powell and Lawlis also agreed that they should determine how many similar transactions took place in 2013. Nevertheless, Powell and Lawlis failed to perform sufficient procedures to obtain satisfaction concerning the extent of those transactions and their effect on the financial statements in 2013, including whether the transactions had been properly presented and disclosed.36

50. Instead, Powell and Lawlis improperly concluded that no further analysis of the accounting for the transfers was required after management pointed to language in its loan agreements that it claimed allowed UDF IV to make discretionary advances on a borrower's behalf, in certain limited circumstances, without advance consent from the borrower. Powell and Lawlis accepted management's assertion that the loan agreement provision allowed the UDF Entities to characterize the transfers as third-party loan activity, even though management had initiated the transfers on its own, without any borrower request, and for the express purpose of enabling cash distributions to UDF III's investors.

36 See AU §§ 334.02, .09, .11; see also Rule 4-08(k) of Regulation S-X.

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Although Powell and Lawlis read the loan provision that management identified, they did not determine whether the transfers fit into the limited circumstances described in the loan provision or obtain any other evidence to support management's interpretation. They also failed to consider whether the substance of the transaction, regardless of its form, required disclosure as a related party transaction.37

Evaluation of Transfers During the 2014 Audits

51. During the 2014 UDF IV audit and reviews, Lawlis became aware that UDF IV made additional transfers to UDF III similar to the January 2014 transfer, but he failed to adequately address them. Lawlis again knew that UDF IV recorded those transfers as third-party loan advances even though there was no evidence of the borrower's request or approval for the transfer. UDF IV also confirmed to Lawlis that it had initiated some transfers to its affiliates without the third-party borrowers' prior consent and obtained approval afterward. Nevertheless, Lawlis again failed to perform sufficient procedures to obtain satisfaction concerning the extent of the transactions and their effect on the financial statements, including whether the transactions had been properly presented and disclosed.38 For the additional transfers that came to the engagement team's attention, the team either verified that the relevant borrower eventually approved the transaction, or that the loan agreements included the provision for discretionary advances. However, Lawlis again failed to consider whether the substance of the transactions, regardless of their form, required disclosure as a related party transactions.39

52. For the 2014 UDF III audit, Powell failed to perform any procedures over the transfers to UDF III from UDF IV.

H. Powell and Lawlis Failed to Act with Due Professional Care During the Q3 2015 UDF III and UDF IV Reviews

53. In an interim review, an accountant may become aware of information that leads him or her to believe that the interim financial information under review may not be in conformity with GAAP in all material respects. In such circumstances, PCAOB standards provide that the accountant should make additional inquiries or perform other

37 See AU § 334.02.

38 See AU §§ 334.02, .09, .11; see also Rule 4-08(k) of Regulation S-X.

39 See AU § 334.02.

PCAOB Release No. 105-2020-002 March 24, 2020 ORDER Page 17 procedures to provide a basis for communicating whether he or she is aware of any material modifications that should be made to the interim financial information.40

54. If the accountant becomes aware of information which relates to a prior audit report and is of such a nature and from such a source that he would have investigated it had it come to his attention during the course of his audit, PCAOB standards also require that he take certain steps concerning his prior report.41 First, he should determine whether the information is reliable and whether the facts existed at the date of his report.42 If those conditions are satisfied, the auditor should then consider if the nature and effect of the matter are such that (a) his report would have been affected if the information had been known to him at the date of his report and had not been reflected in the financial statements and (b) he believes there are persons currently relying or likely to rely on the financial statements who would attach importance to the information.43 The auditor is then required to consider whether to take action to prevent future reliance on his report.44

55. As discussed below, during their respective Q3 2015 reviews, Powell and Lawlis became aware of facts indicating material modifications may have been necessary in UDF III's and UDF IV's Q3 2015 financial statements, specifically to the notes receivable balances. That information also cast doubt on UDF III's previously audited annual financial statements. Although Powell and Lawlis performed procedures to respond to those facts for purposes of the Q3 2015 financial statements, they failed to perform those procedures with due professional care.45 Powell also failed to appropriately consider the possible implications for WP's previously issued audit reports on UDF III's financial statements.46

40 See AU § 722.22, Interim Financial Information.

41 See AU §§ 561.04-.06, Subsequent Discovery of Facts Existing at the Date of the Auditor's Report.

42 See AU § 561.04.

43 See AU § 561.05.

44 See AU § 561.06.

45 See AU § 722.22.

46 See AU §§ 561.04-.05.

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Powell Failed to Adequately Consider Indications of Potential Impairment for the LOC at 2013, 2014, and Q3 2015

56. Before the start of the Q3 2015 reviews, Powell was interviewed by the Commission staff, in connection with its investigation. During the interview, Powell was shown documents and asked questions by the Commission staff that called into question the veracity and accuracy of information that UDF III provided to the WP engagement team in connection with the FY 2013 and 2014 audits concerning the expected cash flows for the LOC. Specifically, Powell was shown documents that, at minimum, raised questions about whether the UDF Entities misstated their cash flow projections for the LOC to conceal its impairment by unilaterally including potential "future projects" in addition to current projects.

57. During the Q3 2015 review, Powell performed procedures to follow-up on the information she learned from the Commission staff, which included inquiries of management and reviewing additional documentation relating to the Commission's investigation and the LOC. Through these procedures, Powell verified that, in March 2014, the Austin Developer had provided its own cash flow projection to the UDF Entities, indicating that it would be unable to repay a substantial portion of its LOC balance. Powell also corroborated that UDF III had modified the version of the projection that it provided to WP for both 2013 and 2014, adding cash flows from "future projects" that the Austin Developer did not own and did not plan to develop.

58. During the review, Powell and the engagement team also quantified the amounts in management's LOC cash flow projections for 2013, 2014, and Q3 2015 that were attributable to existing projects, excluding the amounts attributable to future projects. That analysis showed that, in each of those periods, the cash flows from the existing projects were expected to leave a substantial portion of the LOC unpaid. By Q3 2015, the analysis projected a shortfall of approximately $73 million,47 suggesting that material modifications to the interim financial information might be necessary.

59. Despite this information, Powell did not adequately consider whether to withdraw WP's earlier audit reports.48 Powell also failed to propose that UDF III record any specific reserve for the LOC at Q3 2015 or suspend revenue recognition on the LOC. Instead, Powell concluded that UDF III could file Q3 2015 interim financial statements

47 At year-end 2013 and year-end 2014, the projected shortfall indicated by WP's calculation was $27 million and $60 million, respectively. The 2013 and 2014 financial statements did not include any specific reserve for the LOC.

48 See AU §§ 561.04-.05.

PCAOB Release No. 105-2020-002 March 24, 2020 ORDER Page 19 that continued interest revenue recognition from the LOC, contained no specific reserve for the LOC, and included a total ALL for all loans of just $24.5 million.49 However, as discussed below, she failed to perform sufficient other procedures to provide a basis for that conclusion.50

Powell Inappropriately Relied on Non-Binding Letters of Intent at Q3 2015

60. Powell's conclusion that no specific reserve was required at Q3 2015 was based on three management-provided non-binding letters of intent. One of those letters, dated October 21, 2015, was between the Austin Developer and the UDF Entities and described that the Austin Developer would surrender its collateral in full satisfaction of its debts. The other letters, dated November 12, 2015, were between the UDF Entities and two new developers and described a proposal for new developers to take possession of the LOC collateral, pledge additional collateral, and assume the LOC debt as part of two larger transactions with UDF III.

61. Powell reviewed the letters and discussed them with management. From those discussions, Powell understood that management expected that the transactions described in the letters of intent would occur in late November or early December 2015.

62. After discussing the letters of intent with management, Powell concluded that she would rely upon them for the purpose of evaluating the LOC's impairment for the quarterly review. However, Powell failed to consider with due professional care whether they provided a basis to determine whether a material modification should be made to the interim financial statements to record an impairment for the LOC.51 For example, Powell did not adequately consider that:

 The letters did not reliably indicate whether the transactions described in the letters would occur, because the letters each stated they were "intended as a non-binding expression of intent" and "subject to the preparation, negotiation and full execution of the agreement"; and

49 UDF III management had initially calculated that its Q3 2015 ALL should be $23.9 million. During the review, Powell performed a calculation of the general reserve portion of UDF III's ALL with different reserve ratios for certain loans, which she based on her discussions with management. Powell's calculation resulted in a total ALL that was approximately $600,000 higher, and UDF III adjusted its total ALL accordingly.

50 See AU § 722.22.

51 See AU § 722.22.

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 The letters did not support that the LOC was properly valued, because they indicated that the UDF Entities would provide as yet unquantified fees and concessions to the new developers for them to take over the LOC and its related development projects.

Powell and Lawlis Failed to Appropriately Respond to New Evidence of a Dispute between the Austin Developer and the UDF Entities at Q3 2015

63. Based on documents they reviewed concerning the Commission's investigation, Powell and Lawlis both understood, among other things, that the Commission staff was examining whether UDF Entities, or persons associated with them, may have made false statements or material omissions about the credit quality of loan portfolios and the use of cash proceeds relating to certain loans.

64. As a result, Powell and Lawlis concluded that it was appropriate to send confirmation requests for all of the Austin Developer's loans as part of their respective Q3 2015 reviews for UDF III and UDF IV. In response to each request, the Austin Developer wrote that it could not confirm its loan balances or loan collateral because "the lender has failed to properly apply or adjust certain payments made on the loan or related loans. In addition, lender and its affiliates have, from time to time, transferred or collaterally assigned their rights with respect to the collateral under various loans to affiliates or third parties."

65. To follow up on the confirmation response, Lawlis emailed the Austin Developer, asking whether it could provide additional information. The response of the Austin Developer, however, provided no additional detail. Powell and Lawlis, in turn, relied on management inquiry to understand the nature of the potential dispute and once again rolled forward the prior year's audited balance by tying a selection of draws and payments to management-provided documents including third-party bank statements and draw requests signed by the borrowers. However, the alternative procedures failed to provide sufficient appropriate evidence about the potential dispute concerning the Austin Developer and whether that dispute affected the loans' valuation. As a result, Powell and Lawlis failed to adequately extend the review procedures to resolve the questions raised by the Austin Developer's confirmation response.52

52 See AU § 722.22.

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I. Babb Failed to Perform His Engagement Quality Reviews for the 2012-2014 UDF III Audits and Q3 2015 UDF III Review with Due Professional Care

66. The EQR partner is responsible for evaluating the significant judgments made by the engagement team and the related conclusions reached in forming the overall conclusion on the engagement and in preparing the engagement report, if a report is to be issued.53 In an audit, the EQR partner is responsible for evaluating the engagement team's responses to significant risks identified by the team and the EQR partner.54 In both audits and reviews, the EQR partner should evaluate whether the documentation that he or she reviewed supports the conclusions reached by the engagement team with respect to the matters reviewed.55 The EQR partner is also responsible for evaluating whether appropriate consultations took place on difficult or contentious matters during the audits and reviews.56 The EQR partner must perform his or her responsibilities with due professional care and skepticism.57

67. In each of the engagements discussed above, Babb reviewed the critical work papers relating to the UDF III engagement teams' response to the significant risks, including fraud risks, identified concerning notes receivable and ALL. However, Babb violated PCAOB rules and standards in those engagements by failing to properly evaluate, with due professional care, whether that documentation indicated that the engagement team responded appropriately to the significant risks and/or supported the conclusions reached by the engagement team.58

68. During the 2012 audit, Babb knew that the LOC was significant to the notes receivable balance and that UDF III management had classified the LOC as impaired without recording any specific reserve. Although Babb reviewed the documentation of the engagement team's testing of the LOC for impairment, there is no evidence he discussed it with the engagement team. Furthermore, he failed to evaluate with due professional care whether that testing adequately supported the conclusion that no specific reserves

53 See AS 7, Engagement Quality Review, ¶¶ 9, 14.

54 See AS 7 ¶ 10(b).

55 See AS 7 ¶¶ 11,16.

56 See AS 7 ¶¶ 10(h), 15(f).

57 See AS 7 ¶¶ 12, 17; AU §§ 230.07-.09.

58 See Rule 3100; AS 7 ¶¶ 10(b), 11, 16.

PCAOB Release No. 105-2020-002 March 24, 2020 ORDER Page 22 were required for the LOC.59 For example, Babb did not consider whether the engagement team had tested the completeness and accuracy of the management- provided data used in that test. He also did not consider, among other things, that the engagement team had not discounted the future cash flows to present value for its impairment analysis.

69. During the 2013 and 2014 audits, Babb was aware that the engagement team changed its audit approach from 2012. Specifically, he knew that the engagement teams for those audits used management-provided cash flow projections to test the valuation of certain notes receivable and the adequacy of the ALL, including for the LOC. Babb reviewed the audit documentation describing the review of the cash flow analyses, but he failed to properly evaluate whether the engagement team's approach provided an appropriate response to the significant risks concerning the ALL.60 For example, Babb did not properly consider whether the engagement team had adequately tested whether the information contained within the cash flow projections was sufficient and appropriate for purposes of the audit. He also did not consider whether the engagement team had appropriately responded to the inclusion of "future projects" in the cash flow projections, in light of the fraud risk for ALL.

70. During the Q3 2015 review, Babb reviewed the engagement team's Summary Review Memorandum ("SRM") and he discussed with Powell the issues that had arisen concerning the LOC.61 Babb also reviewed each of the documents that were referenced in the SRM as pertaining to the analysis of the LOC's impairment. Those documents included the engagement team's analysis showing that the existing project cash flows would leave approximately $73 million of the LOC balance unpaid. They also included the non-binding letters of intent, which Babb understood Powell had relied on for her conclusions that the LOC did not need to be specifically reserved at Q3 2015 and that the prior audit reports did not need to be withdrawn. However, Babb failed to properly evaluate whether those letters of intent actually supported Powell's conclusion.62

59 See AS 7 ¶ 11.

60 See AS 7 ¶¶ 10(b),11.

61 The SRM served as the engagement team's engagement completion document for the Q3 2015 review, which Babb was required to review. See AS 3, Audit Documentation, ¶ 13; AS 7 ¶ 15(c).

62 See AS 7 ¶ 16.

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71. Babb also failed to properly evaluate whether appropriate consultations had taken place on the difficult and contentious issues that arose during the UDF III Q3 2015 review.63 Babb understood that WP's Partner-in-Charge of Technical Resolution ("Technical Partner") had been consulted during the review. However, Babb failed to determine whether the consultation, which was limited to reviewing the clarity of the documentation in two work papers, was appropriate in the circumstances.

72. As a result, Babb violated AS 7 by providing his concurring approval of issuance in each of those engagements without performing his EQR with due professional care.64

J. Whitley Penn Failed to Comply with PCAOB Quality Control Standards

73. PCAOB rules and standards require that registered firms establish and maintain an adequate system of quality control.65 "A firm's system of quality control encompasses the firm's organizational structure and the policies adopted and procedures established to provide the firm with reasonable assurance of complying with professional standards."66 "The nature, extent, and formality of a firm's quality control policies and procedures should be appropriately comprehensive and suitably designed in relation to the firm's size, the number of its offices, the degree of authority allowed its personnel and its offices, the knowledge and experience of its personnel, the nature and complexity of the firm's practice, and appropriate cost-benefit considerations."67

74. A firm's system of quality control should, among other things, include policies and procedures for engagement performance.68 A firm should establish policies and procedures to provide it with reasonable assurance that the work performed by engagement personnel meets applicable professional standards, regulatory

63 See AS 7 ¶ 15(f).

64 See AS 7 ¶¶ 12, 17; AU § 230.01.

65 See Rule 3400T, Interim Quality Control Standards; Quality Control Standard 20, System of Quality Control for a CPA Firm's Accounting and Auditing Practice ("QC § 20").

66 QC § 20.04.

67 QC § 20.04.

68 See QC § 20.07.

PCAOB Release No. 105-2020-002 March 24, 2020 ORDER Page 24 requirements, and the firm's standards of quality.69 It should also establish policies and procedures to provide it with reasonable assurance that personnel consult, on a timely basis, with individuals within or outside the firm, when appropriate (for example, when dealing with complex, unusual, or unfamiliar issues).70 A firm should also establish policies and procedures to provide the firm with reasonable assurance that its quality control policies and procedures are suitably designed and are being effectively applied.71

75. During the period of the violations described above, WP failed to design, implement and maintain appropriately comprehensive and suitably designed quality control policies and procedures in relation to the firm's size 72 and the complexity of its practice. In particular, WP did not have appropriately comprehensive policies and procedures concerning consultations with persons outside of the engagement team.73 Although WP designated one of its partners as the Technical Partner, it failed to implement specific policies or procedures concerning the Technical Partner's role. Among other things, there were no established procedures to provide reasonable assurance that the Technical Partner was qualified for the consultations he was asked to perform regarding the complex, unusual and unfamiliar issues that arose during the Q3 2015 UDF III review. 74

76. WP also failed to design, implement and maintain appropriately comprehensive policies and procedures to provide reasonable assurance that its personnel complied with professional standards and regulatory requirements.75 Many of the violations described above were repeated across multiple years and, in some cases, across multiple audit teams with different partners. Additionally, Powell's failure to

69 See QC § 20.17.

70 See QC § 20.19. Individuals consulted should have appropriate levels of knowledge, competence, judgment, and authority. See id.

71 See QC § 20.20; Quality Control Standard 30.02, Monitoring a CPA Firm's Accounting and Auditing Practice.

72 As indicated by the Board's inspection reports, WP grew from having 137 partners and professional staff in 2011 to 248 partners and professional staff by 2015.

73 See QC § 20.19.

74 See id.

75 See QC § 20.17.

PCAOB Release No. 105-2020-002 March 24, 2020 ORDER Page 25 adequately consider whether to withdraw the 2013 and 2014 audit reports during the Q3 2015 review resulted, in part, from WP's failure to have sufficiently comprehensive policies and procedures relating to consideration of subsequently discovered information relating to previously issued audit reports. Multiple partners besides Powell and Babb, including partners in WP's leadership, were aware that WP had learned information during the Q3 2015 review that related to UDF III's 2013 and 2014 financial statements. However, WP's QC system failed to include policies or procedures to provide reasonable assurance that the information was actually evaluated with due professional care and in accordance with AU § 561.76

IV.

In view of the foregoing, and to protect the interests of investors and further the public interest in the preparation of informative, accurate, and independent audit reports, the Board determines it appropriate to impose the sanctions agreed to in Respondents' Offers. Accordingly, it is hereby ORDERED that:

A. Pursuant to Section 105(c)(4)(B) of the Act and PCAOB Rule 5300(a)(2), Powell is barred from being an associated person of a registered public accounting firm, as that term is defined in Section 2(a)(9) of the Act and PCAOB Rule 1001(p)(i).77

B. Pursuant to PCAOB Rule 5302(b), Powell may file a petition for Board consent to associate with a registered public accounting firm after two years from the date of this Order.

76 WP has represented to the Board that, since the events described in this Order, WP established and implemented the following changes to its quality control processes and procedures: (1) WP hired a full-time Director of Quality Control, (2) WP hired a full-time Learning and Development Coordinator, (3) WP assigned a Senior Manager to its quality control function on a half-time basis, and (4) WP amended its quality control policies and procedures relating to consultations and pre-issuance reviews.

77 As a consequence of the bar, the provisions of Section 105(c)(7)(B) of the Act will apply with respect to Susan Lunn Powell, CPA. Section 105(c)(7)(B) provides: "It shall be unlawful for any person that is suspended or barred from being associated with a registered public accounting firm under this subsection willfully to become or remain associated with any issuer, broker, or dealer in an accountancy or a financial management capacity, and for any issuer, broker, or dealer that knew, or in the exercise of reasonable care should have known, of such suspension or bar, to permit such an association, without the consent of the Board or the Commission."

PCAOB Release No. 105-2020-002 March 24, 2020 ORDER Page 26

C. Pursuant to Section 105(c)(4)(C) of the Act and PCAOB Rule 5300(a)(3), for one year following the termination of the bar ordered in paragraph B, Powell's role in any "audit," as that term is defined in Section 110(1) of the Act and PCAOB Rule 1001(a)(v), shall be restricted as follows: Powell shall not (1) serve, or supervise the work of another person serving, as an "engagement partner," as that term is used in the Board's AS 1201, Supervision of the Audit Engagement; (2) serve, or supervise the work of another person serving, as an "engagement quality reviewer," as that term is used in the Board's AS 1220, Engagement Quality Review; (3) serve, or supervise the work of another person serving, in any role that is equivalent to engagement partner or engagement quality reviewer, but differently denominated (such as "lead partner," "practitioner-in-charge," or "concurring partner"); (4) exercise authority, or supervise the work of another person exercising authority, either to sign a registered public accounting firm's name to an audit report, or to consent to the use of a previously issued audit report, for any issuer, broker, or dealer; or (5) serve, or supervise the work of another person serving, as the "other auditor," or "another auditor," as those terms are used in the Board's AS 1205, Part of the Audit Performed by Other Independent Auditors;

D. Pursuant to Section 105(c)(4)(B) of the Act and PCAOB Rule 5300(a)(2), Lawlis is suspended, for one year from the date of this Order, from being an associated person of a registered public accounting firm, as that term is defined in Section 2(a)(9) of the Act;78

E. Pursuant to Section 105(c)(4)(C) of the Act and PCAOB Rule 5300(a)(3), for one year following the suspension ordered in paragraph E, Lawlis's role in any "audit," as that term is defined in Section 110(1) of the Act and PCAOB Rule 1001(a)(v), shall be restricted as follows: Lawlis shall not (1) serve, or supervise the work of another person serving, as an "engagement partner," as that term is used in the Board's AS 1201, Supervision of the Audit Engagement; (2) serve, or supervise the work of another person serving, as an "engagement quality reviewer," as that term is used in the Board's AS 1220, Engagement Quality Review; (3) serve, or supervise the work of another person serving, in any role that is equivalent to engagement partner or engagement quality reviewer, but differently denominated (such as "lead partner," "practitioner-in-charge," or "concurring partner"); (4) exercise authority, or supervise the work of another person exercising

78 As a consequence of the suspension, the provisions of Section 105(c)(7)(B) of the Act, discussed supra, at n.77, will apply with respect to Jeffry Shannon Lawlis, CPA.

PCAOB Release No. 105-2020-002 March 24, 2020 ORDER Page 27

authority, either to sign a registered public accounting firm's name to an audit report, or to consent to the use of a previously issued audit report, for any issuer, broker, or dealer; or (5) serve, or supervise the work of another person serving, as the "other auditor," or "another auditor," as those terms are used in the Board's AS 1205, Part of the Audit Performed by Other Independent Auditors;

F. Pursuant to Section 105(c)(4)(C) of the Act and PCAOB Rule 5300(a)(3), for a period of two years from the date of this Order, Babb's role in any "audit," as that term is defined in Section 110(1) of the Act and PCAOB Rule 1001(a)(v), shall be restricted as follows: Babb shall not (1) serve, or supervise the work of another person serving, as an "engagement partner," as that term is used in the Board's AS 1201, Supervision of the Audit Engagement; (2) serve, or supervise the work of another person serving, as an "engagement quality reviewer," as that term is used in the Board's AS 1220, Engagement Quality Review; (3) serve, or supervise the work of another person serving, in any role that is equivalent to engagement partner or engagement quality reviewer, but differently denominated (such as "lead partner," "practitioner-in-charge," or "concurring partner"); (4) exercise authority, or supervise the work of another person exercising authority, either to sign a registered public accounting firm's name to an audit report, or to consent to the use of a previously issued audit report, for any issuer, broker, or dealer; or (5) serve, or supervise the work of another person serving, as the "other auditor," or "another auditor," as those terms are used in the Board's AS 1205, Part of the Audit Performed by Other Independent Auditors;

G. Pursuant to Section 105(c)(4)(D) of the Act and PCAOB Rule 5300(a)(4), the Board imposes the following civil money penalties:

1. Whitley Penn LLP, $200,000;

2. Susan Lunn Powell, $25,000;

3. Jeffry Shannon Lawlis, $15,000; and,

4. John Griffin Babb, $10,000.

All funds collected by the Board as a result of the assessment of these civil money penalties will be used in accordance with Section 109(c)(2) of the Act. Respondents shall pay these civil money penalties within ten days of the issuance of this Order by (1) wire transfer in accordance with instructions furnished by Board staff; or (2) United States Postal Service money order, bank money order, certified check, or bank cashier's check (a) made payable to the Public Company Accounting Oversight Board,

PCAOB Release No. 105-2020-002 March 24, 2020 ORDER Page 28

(b) delivered to the Controller, Public Company Accounting Oversight Board, 1666 K Street, N.W., Washington D.C. 20006, and (c) submitted under a cover letter, which identifies the entity or person as a respondent in these proceedings, sets forth the title and PCAOB release number of these proceedings, and states that payment is made pursuant to this Order, a copy of which cover letter and money order or check shall be sent to Office of the Secretary, Attention: Phoebe W. Brown, Secretary, Public Company Accounting Oversight Board, 1666 K Street, N.W., Washington D.C. 20006.

H. Pursuant to Section 105(c)(4)(F) of the Act and PCAOB Rule 5300(a)(6), Powell, Lawlis, and Babb, are required to complete continuing professional education ("CPE") in subjects that are related to the audits of issuer financial statements under PCAOB standards (such hours shall be in addition to, and shall not be counted in, the CPE they are required to obtain in connection with any professional license) as follows:

1. Powell shall complete forty additional hours of CPE before filing any petition for Board consent to associate with a registered public accounting firm, including CPE related to allowances for loan losses and the auditing of related party transactions under PCAOB standards;

2. Lawlis shall complete twenty additional hours of CPE within one year of this Order, including CPE related to allowances for loan losses and the auditing of related party transactions under PCAOB standards; and

3. Babb shall complete ten additional hours of CPE within one year from the date of this Order, including CPE related to allowances for loan losses and the performance of engagement quality reviews under PCAOB standards.

I. Pursuant to Sections 105(c)(4)(F) and (G) of the Act and PCAOB Rules 5300(a)(6) and (9), the Firm shall carry out the following Undertakings:

1. Within 30 days of the date of this Order, WP shall retain and pay the fees and reasonable expenses for an independent consultant acceptable to the PCAOB staff who has experience with, and is knowledgeable concerning, PCAOB auditing and quality control standards ("Independent Consultant") and promptly notify the PCAOB staff of the identity, qualifications, and proposed terms of retention of the Independent Consultant.

2. To ensure the independence of the Independent Consultant, WP: (i) shall not have the authority to terminate the Independent Consultant

PCAOB Release No. 105-2020-002 March 24, 2020 ORDER Page 29

or substitute another independent consultant for the initial Independent Consultant, without the prior written approval of the PCAOB staff; and (ii) shall compensate the Independent Consultant and persons engaged to assist the Independent Consultant for services rendered pursuant to this Order at their reasonable and customary rates.

3. WP shall cooperate fully with the Independent Consultant and shall provide reasonable access to its personnel, information, and records as the Independent Consultant may reasonably request for the Independent Consultant's evaluation and certification.

4. Within 90 days of this Order, WP will review, evaluate, and implement any necessary enhancements to, WP's quality control policies and procedures applicable to audits and reviews conducted pursuant to PCAOB standards as they relate to the following areas:

a. consideration of the subsequent discovery of facts existing at the date of the auditor's report;

b. consultations (including but not limited to determining and documenting the scope of consultations, and the evaluation of such consultations by an EQR partner); and

c. monitoring (including selection of audits for pre- issuance review, root cause analysis, post-issuance review, or other enhanced monitoring based on engagement risk).

5. Independent Consultant Certifications.

a. Within 90 days of the Independent Consultant being retained, WP will brief the Independent Consultant regarding: (i) WP's review, evaluation and implementation of enhancements to its system of quality control in the areas identified in Paragraph IV.I.4 above, and (ii) how those quality control policies and procedures, and any enhancements to them since the time of the conduct described in this Order, are reasonably designed to ensure that WP system of quality control is appropriately comprehensive and suitably designed in relation to the firm's size, the number of its offices, the degree of authority allowed its personnel and its offices, the knowledge and experience of its personnel, the nature and complexity of the firm's practice, and appropriate cost-benefit considerations.

PCAOB Release No. 105-2020-002 March 24, 2020 ORDER Page 30

b. Within 120 days of the Independent Consultant being retained, WP shall require the Independent Consultant to evaluate WP's review, evaluation and implementation of enhancements its system of quality control in the areas identified in Paragraph IV.I.4, above. If, as a result of that evaluation, it appears to the Independent Consultant that any further enhancements to the system of quality control are necessary, it shall recommend such enhancements to WP.

c. Within 180 days of the Independent Consultant being retained, WP shall either, (1) implement any recommendations received from the Independent Consultant, pursuant to Paragraph IV.I.5.b, and have the Independent Consultant certify that WP complied with those recommendations, or (2) communicate to the Director of the Division of Enforcement and Investigations the recommendations of the Independent Consultant that it did not implement, and the reasons for doing so.

d. Pursuant to Section 105(c)(4)(C) of the Act, Whitley Penn shall within twelve months of the date of the Order cause the Independent Consultant to certify in writing to the Director of the Division of Enforcement and Investigations, PCAOB, 1666 K Street N.W., Washington DC 20006, the Firm's compliance with the above paragraphs. The certification shall identify the undertakings, provide written evidence of compliance in the form of a narrative, and be supported by exhibits sufficient to demonstrate compliance. The certification shall include a description of the specific enhancements implemented to WP's system of quality control in the areas identified in Paragraph IV.I.4, above, since the time of the conduct described in the Order. WP shall also submit such additional evidence of and information concerning compliance as the staff of the Division of Enforcement and Investigations may reasonably request.

e. For good cause shown, the PCAOB staff may extend any of the procedural dates relating to these undertakings. Deadlines for procedural dates shall be counted in calendar days, except that if the last day falls on a weekend or federal holiday, the next business day shall be considered to be the last day.

PCAOB Release No. 105-2020-002 March 24, 2020 ORDER Page 31

f. WP agrees that the Division of Enforcement and Investigations may petition the Board to reopen this matter to determine whether additional sanctions or findings are appropriate if it believes that WP has not satisfied these undertakings.

ISSUED BY THE BOARD.

/s/ Phoebe W. Brown ______Phoebe W. Brown Secretary

March 24, 2020

Case 4:20-cv-00311-SDJ Document 21 Filed 08/19/20 Page 1 of 7 PageID #: 1071

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS SHERMAN DIVISION

HOLLIS M. GREENLAW, TODD F. ETTER, CARA D. OBERT, BENJAMIN L. WISSINK, UMT HOLDINGS, L.P., UDF HOLDINGS, L.P., UNITED DEVELOPMENT FUNDING, L.P., UNITED DEVELOPMENT FUNDING III, L.P., UNITED DEVELOPMENT FUNDING IV, L.P., UNITED DEVELOPMENT FUNDING INCOME FUND, V, UNITED MORTGAGE TRUST, AND Case No. 4:20-cv-00311-SDJ UNITED DEVELOPMENT FUNDING LAND OPPORTUNITY, FUND, L.P.,

Plaintiffs,

DAVID KLIMEK, JAMES NICHOLAS BUNCH, CHRISTINE L. EDSON, a/k/a CHRISTY EDSON, and DOES 1 – 10.

Defendants.

INTERESTED PARTY UNITED STATES OF AMERICA’S RESPONSE IN OPPOSITION TO PLAINTIFFS’ MOTION TO FILE REDACTED COMPLAINT1

Pursuant to 28 U.S.C. § 517, interested party the United States of America (hereinafter

“United States”) respectfully submits this Response in Opposition to Plaintiffs’ Motion to File

Redacted Complaint (the “Motion”). Although the United States is not a party to this action, the

1 Plaintiffs served the Motion to File Redacted Complaint via email on August 4, 2020, at 5:29 p.m. CST. Therefore, pursuant to Local Rule 5(d), service is deemed to have taken place on August 5, 2020. Local Rule CV-5(d). Therefore, the United States’ and individual defendants’ responses to Plaintiffs’ Motion are due on or before August 19, 2020. Local Rule CV-5(d), 7(e).

Case 4:20-cv-00311-SDJ Document 21 Filed 08/19/20 Page 2 of 7 PageID #: 1072

relief sought in the Motion implicates an ongoing federal criminal investigation, in which the

United States has an interest. The individual-capacity Defendants, AUSA Nick Bunch and FBI Special

Agents David Klimek and Christine Edson, through their undersigned counsel, join in the United States’

arguments.

I. INTRODUCTION

This case is a Bivens action in name only. In reality, disappointed by their failure to

convince either the United States Attorney’s Office for the Northern District of Texas (“NDTX”)

or the Deputy Attorney General to halt a complex criminal investigation of their conduct and have

Assistant United States Attorney James Nicholas Bunch (hereinafter “AUSA Bunch”) removed

from that case, Plaintiffs are using this “Bivens action” to yet again interfere with legitimate law

enforcement activity. In furtherance of their efforts, Plaintiffs ask the Court to unseal a redacted

complaint and publicize their version of the history of a very active ongoing criminal investigation

in the NDTX including details of non-public aspects of the investigation.

Plaintiffs filed this case under seal in recognition of the potential threat to the NDTX’s

ongoing criminal investigation and of violating district court orders in NDTX. The threat exists

because the complaint is based, at least in part, on the NDTX’s sealed search warrant affidavit,

which the Plaintiffs obtained a limited right to review, but not copy. That search warrant affidavit

remains sealed to this day despite Plaintiffs’ efforts, including its unsuccessful filed motion to unseal, in NDTX. Although Plaintiffs have purported to redact references to the sealed search warrant affidavit in their proposed redacted complaint, those limited redactions they proposed fail to ensure that the remaining allegations are not tainted from information gleaned from the sealed affidavit. Additionally, the proposed redacted complaint contains references to and descriptions of non-public and sealed aspects of the NDTX’s criminal investigation, which Plaintiffs have not

Case 4:20-cv-00311-SDJ Document 21 Filed 08/19/20 Page 3 of 7 PageID #: 1073

proposed to redact.2 In this case, the United States’ interest in preserving the integrity of this

ongoing pre-indictment investigation outweighs the public’s qualified right to review judicial

records. Accordingly, Plaintiffs’ complaint should remain sealed until at least the NDTX’s

criminal investigation results in either (1) charges being filed, or (2) prosecution being declined.

II. ARGUMENT

The United States maintains a strong interest in the integrity of ongoing criminal

investigations. The Fifth Circuit recognizes the public shares a similar interest in law enforcement.

Campbell v. Eastland, 307 F.2d 478 (5th Cir. 1962). The common law right to inspect and copy judicial records that Plaintiffs rely on here clashes with the United States’ and public’s interest in effective investigations and law enforcement. And while the Fifth Circuit has recognized the public has a common law right to inspect and copy judicial records, it has recognized that the common law right of access is not absolute. Bradley on Behalf of AJW v. Ackal, 954 F.3d 216, 225

(5th Cir. 2020). The court has consistently held the public’s right to inspect and copy judicial records is a qualified right of access that must be balanced against countervailing factors supporting non-disclosure, such as the United States’ and the public’s interest in maintaining the integrity of law enforcement. See generally, Ackal, 954 F.3d at 225-33 (conducting a case-specific analysis balancing the public’s right of access against interests favoring non-disclosure). The balance of interests in here weighs in favor of keeping the complaint under seal for now.

In this case, Plaintiffs were correct to file the case under seal in the first instance. The

Complaint contained references to and discussions of NDTX’s sealed search warrant affidavit.

Although Plaintiffs’ proposed redacted complaint purportedly redacts these references, there is no

2 Although Plaintiffs’ counsel conferred with counsel for the individual-capacity Defendants and United States regarding potentially unsealing the complaint and search warrant affidavit, they did not confer regarding a potential redacted complaint and did not share any proposed redactions prior to filing their motion. 3

Case 4:20-cv-00311-SDJ Document 21 Filed 08/19/20 Page 4 of 7 PageID #: 1074

indication that their access to a “transcription” of that affidavit does not color the remaining

unredacted allegations. Regardless, it is clear that the proposed redacted complaint still discusses

non-public aspects of NDTX’s ongoing, very active, pre-indictment investigation. See e.g.s.

Redacted Compl. ¶¶ 73- 75, 97, 100-01, 103. Publicizing this information could threaten NDTX’s

investigation, and therefore weighs against unsealing the proposed redacted complaint at this

time.3 Also, given these allegations discuss meetings between witnesses and investigators,

publicizing the nature and content of these meetings could have a chilling effect on these

witnesses’ willingness to cooperate with investigators for the duration of the investigation, on the

cooperation of new witnesses, and could potentially chill witness cooperation in future

investigations. See United States v. Amodeo, 71 F.3d 1044, 1050 (2d Cir. 1995) (“Officials with

law enforcement responsibilities may be heavily reliant on the voluntary cooperation of persons

who may want or need confidentiality. If that confidentiality cannot be assured, cooperation will

not be forthcoming.”)

Ultimately, the NDTX investigation will result in the filing of charges or the determination

not to do so. At that time, the threat posed to NDTX’s criminal investigation through public

disclosure of the complaint’s allegations will be less signficant.4 For this reason, the United States

opposes Plaintiffs’ Motion at this time. Once the NDTX files charges or declines to do so, sealing

3 Plaintiff’s Motion to File Redacted Complaint is only 13 pages long. Yet, ten of those pages—not to mention the 35 pages and eighty-one (81) exhibits in the Declaration of Paul Pelletier—consist of a recitation of the allegations contained in the Plaintiffs’ Sealed Complaint. Plaintiffs’ decision to file the Motion unsealed and immediately publish the Motion and Pelletier Declaration, see http://www.udfonline.com/bivens-action (last visited Aug. 19, 2020), is yet another example of Plaintiffs’ attempt to impede the criminal investigation. The timing is questionable given that the Defendants’ responsive pleadings are not due until September 14, 2020, meaning there is no urgent need to publicize this matter, especially when Plaintiffs have not even survived a motion to dismiss.

4 In the event of an indictment, it is likely the Government and the individual-capacity Defendants will seek a limited stay of this civil suit except to resolve any motions to dismiss.

Case 4:20-cv-00311-SDJ Document 21 Filed 08/19/20 Page 5 of 7 PageID #: 1075

the redacted complaint would no longer be necessary to protect the integrity of NDTX’s criminal

investigation. Given the United States is not requesting these documents remain sealed forever, the interest in protecting the integrity of the criminal investigation outweighs the qualified public

interest in inspecting judicial records. See In re Sealed Search Warrants Issued June 4 and 52008,

No. 08-M-208, 2008 WL 5667021, at *4 (N.D.N.Y. July 14, 2008) (“Where, as here, the

investigation will result in the filing of charges or the determination not to do so, the interest in the

integrity and security of that investigation outweighs the interest in immediate access to the

documents, particularly where future disclosure of the documents is likely.”). The fact the United

States does not seek to keep the seal in place indefinitely mitigates Plaintiff’s purported “need to

litigate this case publically.” Pls.’ Mot. 12, ECF No. 17. This is especially true at such an early

stage of the pleadings when the Plaintiffs’ claims have not even survived a motion to dismiss.

III. CONCLUSION

Plaintiffs’ attacks on NDTX’s investigation of their conduct are nothing new. However,

the Court should not allow Plaintiffs to use this purported Bivens action as a weapon to further

their crusade. To preserve the integrity of NDTX’s investigation, the Court should deny Plaintiffs’

Motion to unseal the proposed redacted complaint. Once NDTX’s investigation concludes,

resulting in charges or a declination, unsealing of the redacted complaint may be appropriate. But,

until that time, the Motion should be denied.

Respectfully submitted,

STEPHEN J. COX United States Attorney

/s/ James Gillingham JAMES GILLINGHAM Assistant U.S. Attorney Eastern District of Texas 110 N. College Street; Suite 700

Case 4:20-cv-00311-SDJ Document 21 Filed 08/19/20 Page 6 of 7 PageID #: 1076

Tyler, Texas 75702 E-mail: [email protected] (903) 590-1400 (903) 590-1436 Texas State Bar # 24065295

ATTORNEYS FOR THE UNITED STATES OF AMERICA

/s/ Andrea Jae Friedman ANDREA JAE FRIEDMAN Trial Attorney Civil Division, U.S. Department of Justice Ben Franklin Station, P.O. Box 7146 Washington, DC 20005 E-mail: [email protected] (202) 305-0336 California Bar # 291692

ATTORNEY FOR INDIVIDUAL- CAPACITY DEFENDANTS JAMES NICHOLAS BUNCH, CHRISTINE EDSON, AND DAVID KLIMEK

Case 4:20-cv-00311-SDJ Document 21 Filed 08/19/20 Page 7 of 7 PageID #: 1077

CERTIFICATE OF SERVICE

I certify that on this 19th day of August, 2020, a true copy of this motion with attachments was served on all counsel of record by way of the Court’s CM/ECF system.

/s/ James Gillingham JAMES GILLINGHAM

RESPONSE in Opposition re 17 MOTION to file redacted complaint filed by James Nicholas Bunch, Christine L. Edson, David

General Information

Court United States District Court for the Eastern District of Texas; United States District Court for the Eastern District of Texas

Federal Nature of Suit Civil Rights - Other[440]

Docket Number 4:20-cv-00311

Case 3:18-cv-01735-L Document 1 Filed 07/03/18 Page 1 of 22 PageID 1

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff, C.A. No. ______v.

UNITED DEVELOPMENT FUNDING III, LP, UNITED DEVELOPMENT FUNDING IV, HOLLIS M. GREENLAW, BENJAMIN L. WISSINK, THEODORE F. ETTER, CARA D. OBERT, and DAVID A. HANSON

Defendants.

COMPLAINT

Plaintiff Securities and Exchange Commission (the “Commission”) files this Complaint against Defendants United Development Funding III, LP (“UDF III”), United Development

Funding IV (“UDF IV”), Hollis M. Greenlaw (“Greenlaw”), Benjamin L. Wissink (“Wissink”),

Theodore F. Etter (“Etter”), Cara D. Obert (“Obert”), and David A. Hanson (“Hanson”)

(collectively, “Defendants”) and alleges as follows:

SUMMARY OF THE ACTION

1. The United Development Funding family of investment funds (“UDF”) deploys investor capital towards the financing of homebuilders and land developers through private and publicly-traded investment funds. From at least January 2011 through December 2015 (the

“Relevant Period”), UDF used money from a newer fund to pay distributions to investors in an

Case 3:18-cv-01735-L Document 1 Filed 07/03/18 Page 2 of 22 PageID 2

older fund, without adequately disclosing the use of funds and the nature and status of loans

made to developers.

2. More specifically, UDF solicited investments in a series of investment funds

(UDF III, UDF IV) by stating its ability to generate 8% to 9.75% annualized returns and to pay

investors regular distributions from loans for property development. UDF III began offering

limited partnership interests in 2006 and raised approximately $350 million from private

investors. Building on its track record of paying regular distributions to UDF III investors, UDF

launched UDF IV in 2008 and raised over $610 million from investors through May 2013. UDF

IV listed on the NASDAQ in June 2014.

3. By 2009, UDF III had made substantial loans to developers and was making monthly distributions to investors in amounts that at times exceeded developer interest payments during the same period. In 2011, UDF IV began loaning money to developers of UDF IV projects who had also borrowed money from UDF III. Unbeknownst to investors, however,

UDF directed the developers to use the UDF IV money to pay down separate UDF III loans, instead of using the funds loaned from UDF IV to develop UDF IV projects. In most of these cases, the developers never actually received the borrowed funds at all, and UDF simply transferred the money from UDF IV to UDF III. UDF III then used the loan payments—which

were comprised of funds from UDF IV—to, in part, make distributions to UDF III investors.

Using these transactions, which were not adequately disclosed to investors, UDF was able to

cause UDF III to pay its investors at least $67 million of distributions using funds from UDF IV.

4. UDF IV also failed to adequately disclose the nature of multi-phase projects in its

loan portfolio. UDF IV told investors that none of its loans were invested in unimproved real

property. This gave the impression that all of the loans in UDF IV’s portfolio were funding real

SEC v. United Development Funding III, LP, et al. COMPLAINT Page 2

Case 3:18-cv-01735-L Document 1 Filed 07/03/18 Page 3 of 22 PageID 3

estate projects that were under construction. In truth, UDF IV had loaned money for acquisition of unimproved properties designated for multi-phase development. In some cases, the properties remained in the entitlement phase even after they had been in UDF IV’s portfolio for years.

5. In addition, Generally Accepted Accounting Principles (“GAAP”) required UDF

III to report if any of its significant outstanding loans became “impaired”—meaning UDF III believed it was unlikely to fully collect on the loan. UDF III knew or should have known before it filed its 2013 Form 10-K that it was unlikely to fully collect on an approximately $80 million loan to its second largest borrower. Although UDF III’s financial statements reflected general reserves, UDF III took no specific impairment on the loan and told investors that full collectability was probable.

6. This misconduct violated Sections 17(a)(2) and (3) of the Securities Act of 1933

(the “Securities Act”) and Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities

Exchange Act of 1934 (“Exchange Act”) and Rules 12b-20, 13a-1, 13a-13, and 13a-14 thereunder. As a result, Defendants should be enjoined from violating the securities laws they violated as alleged herein, Defendants Greenlaw, Wissink, Etter, and Obert should be required to disgorge all ill-gotten gains with prejudgment interest, and Defendants Greenlaw, Wissink, Etter,

Obert, and Hanson should be ordered to pay appropriate civil penalties.

JURISDICTION AND VENUE

7. This Court has jurisdiction over this action pursuant to Sections 20(b), 20(d), and

22(a) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. §§ 77t(b), 77t(d), and 77v(a)] and Sections 21(d), 21(e), and 27 of the Securities Exchange Act of 1934 (“Exchange Act”) [15

U.S.C. §§ 78u(d), 78u(e), and 78aa]. Defendants directly or indirectly made use of means or

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instrumentalities of interstate commerce or the mails in connection with the transactions, acts, practices, and courses of business alleged herein.

8. Venue is proper in this district pursuant to Section 22(a) of the Securities Act [15

U.S.C. § 77v(a)] and Section 27(a) of the Exchange Act [15 U.S.C. § 78aa(a)]. Defendants reside or have their principal place of business in this district. In addition, certain of the transactions, acts, practices, and courses of business constituting alleged violations of the federal securities laws occurred within this district. Among other things, Defendants offered and sold the securities at issue in this district.

DEFENDANTS

9. Defendant United Development Funding III, LP (“UDF III”) is a Delaware limited partnership headquartered in Grapevine, Texas. UDF III limited partnership units are registered with the Commission pursuant to Section 12(g) of the Exchange Act and are not listed on any exchange. UDF III files periodic reports with the Commission pursuant to Section 13(a) of the Exchange Act and related rules thereunder. UDF III has not filed a Form 10-Q or 10-K for periods ended after September 30, 2015.

10. Defendant United Development Funding IV (“UDF IV”) is a Maryland real estate investment trust headquartered in Grapevine, Texas. UDF IV’s common shares are registered with the Commission pursuant to Section 12(g) of the Exchange Act. UDF IV’s common shares traded on the NASDAQ Global Select Market under the symbol “UDF” beginning on June 4,

2014. NASDAQ halted trading in UDF IV on February 18, 2016, suspended trading on October

19, 2016 for failing to timely file audited financial statements, and filed a Form 25 with the

Commission to delist UDF IV on May 18, 2017. As of the date of the Complaint, UDF IV’s common shares were quoted on OTC Markets Inc. under the symbol “UDFI.” UDF IV files

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periodic reports with the Commission pursuant to Section 13(a) of the Exchange Act and related rules thereunder. UDF IV has not filed a Form 10-Q or 10-K for periods ended after September

30, 2015.

11. Defendant Hollis M. Greenlaw (“Greenlaw”) is a resident of Colleyville, Texas.

Greenlaw is the Chief Executive Officer of UMTH Land Development, L.P. (“UMTH LD”), which is the general partner of UDF III and asset manager of UDF IV. Greenlaw also serves as the Chief Executive Officer and Chairman of the Board of Trustees for UDF IV, and serves as one of three voting Investment Committee members for UMTH LD. Greenlaw is a licensed attorney and member of the Maine (inactive), District of Columbia, and Texas bars.

12. Benjamin L. Wissink (“Wissink”) is a resident of Dallas, Texas. Wissink is the

President of UMTH LD. He also serves as one of three voting Investment Committee members for UMTH LD.

13. Theodore F. Etter (“Etter”) is a resident of Dallas, Texas. Etter is the Executive

Vice President of UMTH LD. He also serves as one of three voting Investment Committee members for UMTH LD.

14. Cara D. Obert (“Obert”) is a resident of Dallas, Texas. Obert is the Chief

Financial Officer of UMTH LD, UDF IV, and UDF V. From May 2008 through April 10, 2017, she served as UDF III’s principal financial officer and principal accounting officer. Obert is a licensed CPA in the state of Texas.

15. David A. Hanson (“Hanson”) is a resident of Coppell, Texas. Hanson is the Chief

Accounting Officer for UDF IV. From May 2008 until February 2014, Hanson also served as

UDF IV’s Chief Operating Officer. Hanson is a licensed CPA in the state of Texas.

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FACTUAL ALLEGATIONS

A. The UDF Funds

16. Greenlaw and Etter founded UDF in 2003 with the aim of starting one or more investment funds to loan money to developers of residential real estate, with rates above those offered by commercial lenders. Over time, UDF established a family of investment funds (i.e.,

UDF I, II, III, and IV) that each raised money from investors. UDF III and UDF IV each said that the fund would strive to make a 8% to 9.75% annualized return for investors based on the ability of the fund’s borrowers to successfully develop real estate and repay their loans.

17. During 2003 and 2004, UDF sold limited partnership interests in its first two funds, United Development Funding LP (“UDF I”) and United Development Funding II LP

(“UDF II”). UDF I and UDF II were private investment funds offered through a select number of broker-dealers and required a minimum investment of $25,000. The funds raised a total of approximately $33 million, and were formed to make equity investments and lend money to real estate developers, including first lien and subordinate loans secured by residential real estate designated for single-family lot development.

18. In August 2005, UDF filed a Form S-11 with the Commission to offer investments in a third fund, UDF III. UDF III was formed to originate and invest in loans for the acquisition of real property to be developed as single-family residential lots that would be sold to home builders. UDF III is a publicly-reporting, non-traded fund. The minimum investment for

UDF III, however, was only $3,000, and the fund was offered by a much broader network of broker-dealers than the prior funds. UDF III concluded its primary offering in April 2009, raising approximately $350 million, which was 10 times the amount raised in its two prior funds combined.

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19. UDF explained UDF III as being appropriate for investors seeking “current interest income.” In an era of low investment yields, UDF III was an attractive investment because it offered to pay distributions (a/k/a investment returns) at an 8% to 9.75% annualized rate.

20. UDF III explained that it expected to earn investment returns by originating and purchasing loans as well as charging fees for providing credit enhancements to developers (e.g., loan guarantees to third-party lenders). It would make short to medium-term loans to real estate developers at interest rates of 15% and above, which was higher than traditional bank financing.

The developers would pledge existing real estate projects as collateral, and agree to pledge future projects as additional collateral, when needed. UDF III generally structured its loans as notes with interest payments and reductions to principal or “balloon payments” tied to cash received by the developer from the sale of a lot or parcel of land, municipal reimbursements, and refinancings. From inception of the note until a revenue or sale event, interest on the notes would accrue and then be rolled into the principal owed by the developer on a monthly or annual basis with the accrued interest amount being recognized by UDF III as income.

21. However, if and when developers made principal repayments, UDF III disclosed that its intent was to redeploy those funds “to create or invest in new loans during the term of the partnership” and that “[a]ny capital not reinvested will be used first to return to [investors’] capital contributions and then to pay distributions to [investors].” Instead, if UDF III wanted to make an investor distribution, it could borrow funds, use net proceeds from the offering, or use

“cash available for distribution,” which UDF III defined to include funds received from operations but not principal repayments. In sum, this meant that: (1) UDF III planned to loan investor funds to real estate developers; (2) when those developers repaid principal on their

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loans, UDF III would reinvest those funds by creating or investing in new loans; and (3) UDF III was not obligated to make investor distributions, but if it did, that money would come from cash flow from operations, borrowings, or net proceeds of offerings, but not principal repayments.

22. The problem for investors under this scenario, given the nature of the limited partnership structure, is that they might find themselves responsible to pay taxes on “phantom income”—a situation where the partnership reports accrued interest as income to the IRS during a tax year, but no cash is received by the limited partners, because no distributions are paid out.

As a result, UDF III disclosed in its prospectus that from time to time it “may borrow funds or use net proceeds from this offering… if we do not have cash available for distribution sufficient to cover taxes on any ‘phantom income’ to our limited partners.” UDF III also disclosed that

“we may fund our distributions from borrowings and the amount of distributions paid at any time may not reflect current cash flow from our investments.” But nowhere did UDF III state that it could use funds from an affiliated fund (e.g., UDF I, UDF IV) to pay distributions to UDF III investors.

23. In August 2008, UDF filed a Form S-11 with the Commission to offer investments in a new fund, UDF IV, with a plan to raise up to $500 million. UDF IV’s initial registration statement, which went effective in 2009, offered common stock at $20 per share without listing on a public exchange. UDF IV concluded its primary offering in May 2013 after raising at least $610 million. In June 2014, UDF IV listed its stock on the NASDAQ under the symbol ”UDF,” becoming UDF’s first publicly-traded fund.

24. Once funded, UDF IV issued loans at rates of 13% and above, which was again higher than rates offered by commercial lending banks. UDF IV built on the story of UDF III, and the prospectus described UDF IV being involved with investments similar to UDF III. For

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example, UDF IV claimed that it would employ an “actively managed portfolio approach” to

“make, originate or acquire interest in secured loans . . . for the acquisition of land and development of single-family lots” and related construction. The UDF IV prospectus section exclusively discussing UDF III also stated, “UDF III has investment objectives similar to ours and concentrates on making development loans to single-family lot developers. . . . UDF III reinvests the proceeds from loan repayments . . . [and] [p]roceeds from the repayment of loans are reinvested in new loans.”

B. UDF III Pays Distributions Using Undisclosed Transfers

25. UDF III’s and IV’s offering model was predicated on an expectation that it would make regular distributions to investors. UDF III began making distributions to investors in

September 2006, before the offering had even closed. By 2009, the offering was complete and substantially all of its capital was deployed, because UDF III had made numerous loans to developers. At times, UDF III’s monthly distributions to investors exceeded the payments UDF

III received from its developer borrowers during the same period. As a result, UDF III borrowed

$15 million from a third-party lender so it could continue to fund investor distributions, which it previously disclosed to investors that it might do. UDF III also sold interests (a/k/a participations) in its loans to other UDF funds to raise cash, and disclosed these related-party transactions to its investors in its periodic reports.

26. By 2011, UDF III, at times, did not have sufficient monthly cash flow to cover its distributions. UDF III investors had come to expect regular monthly income from distributions and did not want to have to pay taxes on phantom income. Also, UDF had begun offering interests in its newest fund, UDF IV. Because UDF emphasized UDF III’s regular distributions in its prior performance disclosures to prospective investors in UDF IV, any suspension or

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stoppage in distributions could harm its ability to raise investor funds. UDF IV was raising money in its offering that it needed to put to work; not only to generate interest income to fund distributions to its investors, but also to generate origination and asset management fees for UDF operations—a portion of which were ultimately distributed to principals of the fund’s advisor— and were tied to when money was loaned out on projects.

27. At times, UDF funded UDF III distributions in part by having UDF IV make secured real estate loans to UDF IV developers who used the proceeds to pay down their previous loans from UDF III. Those developers did not use the new UDF IV money to advance the underlying UDF IV development projects, but instead—at UDF’s direction—used it to pay down interest and principal on the developers’ outstanding loans from UDF III. UDF III then used the funds it received from the borrowers to make distributions to UDF III investors.

28. The developers involved did not object because their total outstanding indebtedness to “UDF” remained the same, and in many instances their cost of borrowing went down, because UDF IV loaned funds at a lower rate than UDF III. In fact, many times the borrower never touched the money from UDF IV.

29. Furthermore, UDF’s reporting of these transfers created the appearance that UDF

III was receiving enough money from operations on a monthly basis to support its ongoing distributions, and that UDF IV had sufficient borrower demand for its money to justify continuing to raise more. Money advanced by UDF IV was reflected in UDF IV’s disclosures as an increase in a specific loan’s carrying balance, but at times was not used to advance the construction of the project. And the pay down of UDF III loans with UDF IV money reduced the carrying amount of UDF III’s loan portfolio. UDF III’s disclosures reflected the repayment of loans, recognized income, and the timely payment of distributions; while UDF IV’s

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disclosures showed developers borrowing increasing amounts related to specific real estate

projects.

30. The amounts involved were substantial. From at least January 2011 through

December 31, 2015, UDF III received at least $225 million in cash inflows from various sources,

including approximately $80 million from UDF IV. During this time period, UDF III paid its

investors at least $133 million in monthly distribution payments, of which at least $67 million

came from UDF IV.

31. Each of the UDF IV-to-UDF III transfers exhibited similar characteristics. Each month UDF received an email from an outside vendor detailing how much money was needed to make distributions to investors. UDF, which monitored daily cash flows and bank balances among all UDF entities, then determined the UDF III cash requirements to fund the investor distributions. When UDF III had insufficient cash on hand, UDF sent an internal email directing a transfer of funds available from UDF IV to UDF III. Once the transfer from UDF IV to UDF

III was complete, instructions were sent to the accounting department directing a distribution to

UDF III investors. Further, although UDF eventually obtained approval from the borrower for these transactions, and the transfer from UDF IV was permitted pursuant to certain transaction agreements, it was the lender (i.e., UDF) and not the borrower that initiated the transactions. As discussed above, in many instances, the borrower never even touched the money from UDF IV.

32. UDF did not disclose the true nature of the transactions giving rise to the distributions to its investors, either internally or externally. To the contrary, UDF III investors were led to believe that their distributions were being paid from the operations of their fund, while UDF IV investors were led to believe that their investments were being deployed towards active real estate projects. Relying in part on these UDF IV-to-UDF III transfers, UDF III made

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a monthly distribution payment to UDF III investors each month until February 2016.

Thereafter, all distributions stopped.

33. UDF III’s and UDF IV’s annual reports on Forms 10-K, for at least the periods ended December 31, 2011 through December 31, 2014, and quarterly filings on Forms 10-Q for

the periods ended December 31, 2011 through December 31, 2015, failed to adequately disclose

the source of funds for UDF III’s distributions to investors, and UDF III and UDF IV failed to

adequately disclose the use of UDF IV funds to pay down UDF III loans and to make

distributions to UDF III investors.

34. UDF IV investors would have considered this information important when

making an investment decision that a portion of their invested funds were being used, not for the

development of residential lots, but instead to pay down UDF III loans and to make distributions

to UDF III investors. Likewise, UDF III investors would have considered it important when

making an investment decision that the true source of a portion of their received distributions

were not actually coming from funds from operations as disclosed in UDF III’s filings with the

Commission, but instead were the result of transfers from UDF IV. Further, in early 2016, UDF

III and UDF IV ceased making dividend payments, causing investors’ income to dry up and

jeopardizing their investment returns. UDF IV shares plummeted from approximately $17 per

share on the NASDAQ in late 2015 to consistently less than $3.50 per share on the OTC market.

C. UDF III Fails to Impair Loans in Violation of GAAP

35. UDF III was required to file financial statements with the Commission that

complied with Generally Accepted Accounting Principles (“GAAP”). Among other things, this

meant that UDF III had to disclose certain information about the loans it had made to developers

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and inform investors if any significant outstanding loans became “impaired”—i.e., UDF III believed it was unlikely to be able to collect on the loan.

37. In its 2012 Form 10-K, filed on March 31, 2013, UDF III identified several loans totaling $111,749,000 that had matured but had not been repaid or extended as of December 31,

2012 and impaired eight of those loans. The largest of these loans, which was not impaired as the note was amended during March 2013, was a 2008 loan to an Austin-based developer (the

“Austin Borrower”) that reflected an outstanding principal balance of $76,999,000. The 2013

10-K, filed on March 31, 2014 disclosed that the loan to the Austin Borrower was extended in

March 2013 to a new maturity date of March 31, 2014, and increased to a new commitment amount of approximately $85 million. The disclosures further stated that full collectability for this loan was considered probable. But, UDF knew or should have known that full collectability from the Austin Borrower was not probable and, at best, highly uncertain.

38. In early March 2014, UDF’s outside auditors met with UDF in connection with the 2013 audit to discuss any impairment issues related to UDF’s loans. The outside auditors requested cash flow (i.e., collectability) projections for selected loans, including the loan to the

Austin Borrower. UDF had previously requested the Austin Borrower to prepare a cash flow projection (the “Borrower Projection”) for its loan, which the Austin Borrower sent to UDF on

March 18, 2014. The Borrower Projection showed an ever-increasing loan balance and that

Austin Borrower would be unable to repay the loan with cash from current projects. UDF did not provide the Borrower Projection to its outside auditors. UDF created its own cash flow projection (the “UDF Projection”) that used different assumptions and included the addition of eleven new projects that were projected to provide the Austin Borrower additional cash flow to pay off the loan. But the Austin Borrower had not vetted or agreed to undertake these eleven

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new projects. The UDF Projection showed the Austin Borrower paying off the loan in full. The

UDF Projection also used undiscounted cash flows. GAAP requires a company like UDF to

measure impairment based on the present value of expected future cash flows discounted at the

loan’s effective interest rate. On March 25, 2014, UDF advised its auditors that it had completed

its cash flow analysis and sent them the UDF Projection without providing the Borrower

Projection or the nature of the assumptions UDF used.

39. UDF III violated GAAP because it recognized no specific impairment on its loan

to the Austin Borrower in UDF III’s 2013 Form 10-K filed on March 31, 2014, and in all

subsequent periodic reports. Had UDF III properly complied with applicable GAAP, it would

have recognized a specific loan loss allowance in addition to its general reserve balance and put

the loan on non-accrual status with suspended income recognition at least as early as UDF III’s

2013 Form 10-K. Impairment of the loan to the Austin Borrower was material to investors

because it affected the status of the loan for UDF III’s second-largest borrower.

40. Thereafter, UDF and the Austin Borrower engaged in protracted negotiations to

unwind the failing relationship. Ultimately, UDF was unable to consummate the transfer of the

Austin Borrower’s loan portfolio to another developer. On January 6, 2017, UDF III filed a

Form 8-K announcing certain agreements involving the Austin Borrower, including UDF III’s

forgiveness of more than $122 million of indebtedness.

D. UDF IV Does Not Adequately Disclose Status of Real Property

41. UDF IV disclosed to investors in its risk disclosures that “0%” of its loans were

invested in “unimproved real property” for the periods ended December 31, 2012 through

December 31, 2014. For example, UDF IV’s 2014 Form 10-K states:

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We may invest in loans to purchase unimproved real property. As of December 31, 2014, we have invested 0% of our assets in such loans. Unimproved real property is generally defined as real property which has the following three characteristics: (a) an equity interest in real property which was not acquired for the purpose of producing rental or other income; (b) has no development or construction in process on such land; and (c) no development or construction on such land is planned in good faith to commence within one year.

42. These disclosures were important, because it led investors to believe that all the loans in UDF IV’s portfolio, particularly those with large, multi-million dollar balances, were

funding real estate projects that were actually under construction. The disclosures, however, did

not adequately differentiate between loans under development versus actual construction.

Several significant UDF IV properties were in entitlement and planning, but not being

constructed. In some cases, there was no development at all on the properties, even after they

had been in UDF IV’s portfolio for years.

43. Nevertheless, UDF IV underwrote several loans that were disclosed in its 2014

Form 10-K that were for unimproved real property, including one where a UDF asset manager

specifically requested property that would not need development for a period of years.

45. In November 2015, UDF’s outside auditor declined to stand for reappointment

and, since then, no UDF fund has released audited financial statements or periodic reports.

Further, UDF III has now forgiven more than $100 million in debt on real estate in some of the

fastest appreciating markets in the United States, but the exact write-offs by UDF III and UDF

IV are unknown because no audited financials have been released.

E. The Roles of Greenlaw, Etter, Wissink, and Obert

46. Throughout the Relevant Period, Greenlaw, Etter, and Wissink were the only

three voting members of UDF’s Investment Committee, which made all of the investment, loan

underwriting and impairment decisions for UDF III and IV. Obert was a regular attendee of and

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participant in the Investment Committee meetings and knew the nature and status of these decisions. Greenlaw, Etter, Wissink, and Obert each knew, or should have known, about the transactions between UDF IV and UDF III giving rise to the distributions at issue, the payment of the distributions to UDF III investors using UDF IV funds, the collectability of UDF III’s loan to the Austin Borrower, and UDF IV’s loans to purchase unimproved real property.

47. Greenlaw and Obert signed every UDF III and UDF IV Forms 10-K and 10-Q filed with the Commission during the Relevant Period, and Etter signed every UDF III Form 10-

K filed with the Commission during the Relevant Period. Greenlaw and Obert also, as required under Section 302 of the Sarbanes-Oxley Act, certified each of UDF III’s and UDF IV’s periodic filings during the Relevant Period. In addition, Greenlaw and Obert signed several UDF IV registration statements and amendments thereto filed with the Commission during the Relevant

Period and through which UDF IV offered and sold securities. Greenlaw, Obert, and Wissink signed management representation letters to UDF’s outside auditor during the Relevant Period.

48. As a result, Greenlaw, Obert, Wissink, and Etter knew, or should have known, that the disclosures and statements discussed above were false and misleading. UDF IV’s capital raising activities also provided a portion of the fees paid to the funds’ advisor. Greenlaw, Etter,

Obert, and Wissink collectively received millions of dollars in compensation from the advisor during the Relevant Period in the form of distributions, guaranteed payments, salary, dividends, and miscellaneous income.

F. The Role of Hanson

49. During the Relevant Period, Hanson did not hold a position at UDF III and did not serve on the UDF Investment Committee or participate in its investment, loan underwriting, and impairment decisions. Hanson was, however, the Chief Accounting Officer of UDF IV, and in

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that capacity signed every UDF IV Form 10-K, several UDF IV registration statements and amendments thereto through which UDF IV offered and sold securities, and numerous management representation letters to UDF IV’s outside auditor. Hanson placed undue reliance

on other UDF personnel and did not take sufficient actions to ensure the accuracy of or a

sufficient basis for many of the representations contained therein, including representations

related to loan losses, cash flows, disclosures, and internal controls.

FIRST CLAIM FOR RELIEF

Violations of Section 17(a)(2) of the Securities Act (against UDF III, UDF IV, Greenlaw, Etter, and Obert)

50. The Commission realleges and incorporates by reference each and every

allegation contained in the paragraphs above.

51. By engaging in the conduct described herein, UDF III, UDF IV, Greenlaw, Etter,

and Obert, directly or indirectly, singly or in concert with others, in the offer or sale of securities,

by use of the means and instrumentalities of interstate commerce and/or by use of the mails

obtained money or property by means of untrue statements of a material fact and omitted to state

a material fact necessary in order to make the statements made, in light of the circumstances

under which they were made, not misleading.

52. By reason of the foregoing, UDF III, UDF IV, Greenlaw, Etter, and Obert have

violated and, unless enjoined, will continue to violate Section 17(a)(2) of the Securities Act [15

U.S.C. § 77q(a)(2)].

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SECOND CLAIM FOR RELIEF

Aiding and Abetting Violations of Sections 17(a)(2) (against Wissink and Hanson)

53. The Commission realleges and incorporates by reference each and every allegation contained in the paragraphs above.

54. By engaging in the conduct described herein, Wissink and Hanson knowingly or recklessly gave substantial assistance to UDF III, UDF IV, Greenlaw, Etter, and Obert in their violations of Sections 17(a)(2) of the Exchange Act [15 U.S.C. § 77q(a)(2)].

55. By reason of the foregoing, Wissink and Hanson aided and abetted UDF III’s,

UDF IV’s, Greenlaw’s, Etter’s, and Obert’s violations of Section 17(a)(2) of the Securities Act

[15 U.S.C. § 77q(a)(2)], and unless enjoined, will continue to aid and abet violations thereof.

THIRD CLAIM FOR RELIEF

Violations of Section 17(a)(3) of the Securities Act (against UDF III, UDF IV, Greenlaw, Wissink, Etter, Obert, and Hanson)

56. The Commission realleges and incorporates by reference each and every allegation contained in the paragraphs above.

57. By engaging in the conduct described herein, UDF III, UDF IV, Greenlaw,

Wissink, Etter, Obert, and Hanson, directly or indirectly, singly or in concert with others, in the offer or sale of securities, by use of the means and instrumentalities of interstate commerce and/or by use of the mails have engaged in transactions, practices, and courses of business which operate or would operate as a fraud and deceit upon the purchasers.

58. By reason of the foregoing, UDF III, UDF IV, Greenlaw, Wissink, Etter, Obert, and Hanson have violated and, unless enjoined, will continue to violate Section 17(a)(3) of the

Securities Act [15 U.S.C. § 77q(a)(3)].

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FOURTH CLAIM FOR RELIEF

Violations of Section 13(a) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1, and 13a-13 (against UDF III and UDF IV)

59. The Commission realleges and incorporates by reference each and every

allegation contained in the paragraphs above.

60. By engaging in the conduct described herein, UDF III and UDF IV, whose

securities are registered pursuant to Section 12 of the Exchange Act [15 U.S.C. § 78]), failed to

file annual and quarterly reports (on Forms 10-K, 10-KSB, 10-Q, and 10-QSB) with the

Commission that were true and correct, and failed to include material information in its required

statements and reports as was necessary to make the statements made, in light of the

circumstances under which they were made, not misleading.

61. By reason of the foregoing, UDF III and UDF IV violated, and unless enjoined,

will continue to violate, Section 13(a) of the Exchange Act [15 U.S.C. § 78m(a)] and Exchange

Act Rules 12b-20, 13a-1, and 13a-13 [17 C.F.R. §§ 240.12b-20, 240.13a-1, and 240.13a-13].

FIFTH CLAIM FOR RELIEF

Violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act (against UDF III and UDF IV)

62. The Commission realleges and incorporates by reference each and every

allegation contained in the paragraphs above.

63. By engaging in the conduct described herein, UDF III and UDF IV, whose securities are registered pursuant to Section 12 of the Exchange Act [15 U.S.C. § 78l]: (a) failed to make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly

reflected the transactions and dispositions of its assets; and (b) failed to devise and maintain a

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recorded as necessary to permit preparation of financial statements in conformity with GAAP or

any other criteria applicable to such statements, and (ii) to maintain accountability of assets.

64. By reason of the foregoing, UDF III and UDF IV violated, and unless enjoined, will continue to violate, Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act [15 U.S.C. §§

78m(b)(2)(A) and 78m(b)(2)(B)].

SIXTH CLAIM FOR RELIEF

Aiding and Abetting Violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1, and 13a-13 (against Greenlaw, Wissink, Etter, Obert, and Hanson)

65. The Commission realleges and incorporates by reference each and every

allegation contained in the paragraphs above.

66. By engaging in the conduct described herein, Greenlaw, Wissink, Etter, Obert,

and Hanson knowingly or recklessly gave substantial assistance to UDF III and UDF IV in their

violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act [15 U.S.C. §§

78m(a), 78m(b)(2)(A) and 78m(b)(2)(B)] and Exchange Act Rules 12b-20, 13a-1, and 13a-13

[17 C.F.R. §§ 240.12b-20, 240.13a-1, and 240.13a-13].

67. By reason of the foregoing, Greenlaw, Wissink, Etter, Obert, and Hanson aided

and abetted UDF III’s and UDF IV’s violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of

the Exchange Act [15 U.S.C. §§ 78m(a), 78m(b)(2)(A) and 78m(b)(2)(B)] and Exchange Act

Rules 12b-20, 13a-1, and 13a-13 [17 C.F.R. §§ 240.12b-20, 240.13a-1, and 240.13a-13], and

unless enjoined, will continue to aid and abet violations thereof.

SEC v. United Development Funding III, LP, et al. COMPLAINT Page 20

Case 3:18-cv-01735-L Document 1 Filed 07/03/18 Page 21 of 22 PageID 21

SEVENTH CLAIM FOR RELIEF

Violations of Exchange Act Rule 13a-14 (against Greenlaw and Obert)

68. The Commission realleges and incorporates by reference each and every allegation contained in the paragraphs above.

69. Rule 13a-14 of the Exchange Act [17 C.F.R. § 240.13a-14] requires quarterly and annual reports on Forms 10-Q and 10-K to include certifications of the issuer's principal executive and principal financial officers in the form set forth under Section 302 of the Sarbanes-

Oxley Act [15 U.S.C. § 721].

70. Pursuant to Section 302 of the Sarbanes-Oxley Act [15 U.S.C. § 721], Greenlaw and Obert certified that, based upon their knowledge, UDF III’s and UDF IV’s quarterly and annual reports did not contain any material misstatements or omissions, disclosed all significant deficiencies in internal controls, and fairly presented in all material respects the issuer’s financial condition and results of operations. Greenlaw and Obert knew, or should have known, these certifications were false.

71. By reason of the foregoing, Greenlaw and Obert violated Exchange Act Rule 13a-

14 [17 C.F.R. § 240.13a-14].

SEC v. United Development Funding III, LP, et al. COMPLAINT Page 21

Case 3:18-cv-01735-L Document 1 Filed 07/03/18 Page 22 of 22 PageID 22

RELIEF REQUESTED

The Commission respectfully requests that the Court enter a final judgment:

a. permanently enjoining all Defendants from, directly or indirectly, violating Sections 17(a)(2) and (3) of the Securities Act [15 U.S.C. § 77q(a)(2) and (3)] and Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act [15 U.S.C. §§ 78m(a), 78m(b)(2)(A) and 78m(b)(2)(B)] and Rules 12b-20, 13a-1, and 13a-13 thereunder [17 C.F.R. §§ 240.12b-20, 240.13a-1, and 240.13a-13];

b. permanently enjoining Defendants Greenlaw and Obert from, directly or indirectly, violating Exchange Act Rule 13a-14 [17 C.F.R. § 240.13a-14];

c. ordering Defendants Greenlaw, Wissink, Etter, and Obert to disgorge all ill- gotten gains, with prejudgment interest;

d. ordering Defendants Greenlaw, Wissink, Etter, Obert, and Hanson to pay civil penalties under Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Sections 21(d)(3) and 21A of the Exchange Act [15 U.S.C. §§ 78u(d)(3) and 78uA]; and

e. granting such other and further relief as the Court may deem just and appropriate.

Dated: July 3, 2018 Respectfully submitted,

/s/ Keefe M. Bernstein Keefe M. Bernstein Lead Attorney Texas Bar No. 24006839 B. David Fraser Texas Bar No. 24012654 Securities and Exchange Commission 801 Cherry Street, Suite 1900 Fort Worth, TX 76102 (817) 900-2607 (phone) (817) 978-4927 (facsimile) [email protected]

Attorneys for Plaintiff

SEC v. United Development Funding III, LP, et al. COMPLAINT Page 22

Case 3:18-cv-01735-L Document 4 Filed 07/03/18 Page 1 of 4 PageID 28

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff, C.A. No. ______v.

UNITED DEVELOPMENT FUNDING III, LP, UNITED DEVELOPMENT FUNDING IV, HOLLIS M. GREENLAW, BENJAMIN L. WISSINK, THEODORE F. ETTER, CARA D. OBERT, and DAVID A. HANSON

Defendants.

PLAINTIFF’S UNOPPOSED MOTION FOR ENTRY OF FINAL JUDGMENT AGAINST DEFENDANT DAVID A. HANSON

Plaintiff Securities and Exchange Commission (“SEC”) files this Unopposed Motion for

Entry of Final Judgment against Defendant David A. Hanson (“Defendant”), and respectfully shows the Court as follows:

1. On July 3, 2018, the SEC filed its Complaint alleging that Defendant violated the federal securities laws.

2. The SEC has reached a settlement with Defendant. Pursuant to the settlement,

Defendant executed the Consent attached hereto as Exhibit A and, without admitting or denying the allegations in the Complaint, agreed to entry of the proposed Final Judgment submitted herewith (the “Final Judgment”).

Case 3:18-cv-01735-L Document 4 Filed 07/03/18 Page 2 of 4 PageID 29

3. Pursuant to the Consent, Defendant also waived service of summons and the

Complaint and agreed that the SEC may present the proposed Final Judgment to the Court for signature and entry without further notice.

4. The SEC’s counsel conferred with counsel for Defendant, who indicated

Defendant does not oppose the relief sought herein.

5. The SEC respectfully moves the Court to enter the proposed Final Judgment.

Dated: July 3, 2018 Respectfully submitted,

Attorneys for Plaintiff

Case 3:18-cv-01735-L Document 4 Filed 07/03/18 Page 3 of 4 PageID 30

CERTIFICATE OF SERVICE

I affirm that on July 3, 2018, I electronically filed the foregoing with the Clerk of the Court for the Northern District of Texas, Dallas Division, by using the CM/ECF system which will send a notice of electronic filing to all CM/ECF participants. I further certify that on the same date, I caused the foregoing to be served by U.S. Mail and email to the following:

Barrett R. Howell Katten Muchin Rosenman LLP 1717 Main Street, Suite 3750 Dallas, TX 75201-7301 214-765-3681

Attorney for Defendants United Development Funding III, LP and United Development Funding IV

Michael P. Gibson Burleson, Pate & Gibson, LLP 900 Jackson Street, Suite 330 Dallas, Texas 75202 214-871-4900

Attorney for Defendant Hollis M. Greenlaw

Mike Uhl Law Offices of Michael J. Uhl, P.C. 500 North Akard, Suite 2150 Dallas, Texas 75201 214-237-0809

Attorney for Defendant Theodore F. Etter.

Jay Dewald Jackson Walker LLP 2323 Ross Avenue, Suite 600 Dallas, TX 75201 214-953-6130 and

Matthew G. Nielson Stanton LLP 1717 Main Street, Suite 3800 Dallas, Texas 75201 214-996-0209

Case 3:18-cv-01735-L Document 4 Filed 07/03/18 Page 4 of 4 PageID 31

Attorneys for Defendant Benjamin L. Wissink

Weston C. Loegering Evan P. Singer Joan E. McKown Jones Day 2727 North Harwood Street Dallas, Texas 75201 214-969-5264

Attorneys for Defendant Cara D. Obert

Arnold A. Spencer Spencer & Associates 201 Main Street, Suite 1375 Fort Worth, Texas 76102 214-385-8500

Attorney for Defendant David A. Hanson

/s/ Keefe M. Bernstein Keefe M. Bernstein

Case 3:18-cv-01735-L Document 4-1 Filed 07/03/18 Page 1 of 7 PageID 32

Exhibit A

Case 3:18-cv-01735-L Document 4-1 Filed 07/03/18 Page 2 of 7 PageID 33

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff, C.A. No. ----- v.

UNITED DEVELOPMENT FUNDING III, LP, UNITED DEVELOPMENT FUNDING IV, HOLLIS M. GREENLAW, BENJAMIN L. WISSINK, THEODORE F. ETTER, CARA D. OBERT, and DAVID A. HANSON

Defendants.

CONSENT OF DAVID A. HANSON

1. Defendant David A. Hanson ("Defendant") waives service of a summons and the complaint in this action, enters a general appearance, and admits the Court's jurisdiction over

Defendant and over the subject matter of this action.

2. Without admitting or denying the allegations of the complaint (except as provided herein in paragraph 12 and except as to personal and subject matter jurisdiction, which

Defendant admits), Defendant hereby consents to the entry of the Final Judgment in the form attached hereto (the "Final Judgment") and incorporated by reference herein, which, among other things:

(a) permanently restrains and enjoins Defendant from violation of Sections

17(a)(2) and (3) of the Securities Act of 1933 (the "Securities Act") [15

U.S.C. § 77q(a)j and aiding and abetting violations of Sections 13(a),

13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 (the

Case 3:18-cv-01735-L Document 4-1 Filed 07/03/18 Page 3 of 7 PageID 34

"Exchange Act") [15 U.S.C. §§ 78m(a), 78m(b)(2)(A), 78m(b)(2)(B)] and

Rules 12b-20, 13a-l, and 13a-13 thereunder [17 C.F.R. §§ 240.12b-20,

240.13a-l, and 240.13a~13]; and

(b) orders Defendant to pay a civil penalty in the amount of $75,000.00 under

Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section

2l(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)].

3. Defendant acknowledges that the civil penalty paid pursuant to the Final

Judgment may be distributed pursuant to the Fair Fund provisions of Section 308(a) of the

Sarbanes-Oxley Act of 2002. Regardless of whether any such Fair Fund distribution is made, the civil penalty shall be treated as a penalty paid to the government for all purposes, including all tax purposes. To preserve the deterrent effect of the civil penalty, Defendant agrees that he shall not, after offset or reduction of any award of compensatory damages in any Related Investor

Action based on Defendant's payment of disgorgement in this action, argue that he is entitled to, nor shall he further benefit by, offset or reduction of such compensatory damages award by the amount of any part of Defendant's payment of a civil penalty in this action ("Penalty Offset"). If the court in any Related Investor Action grants such a Penalty Offset, Defendant agrees that he shall, within 30 days after entry of a final order granting the Penalty Offset, notify the

Commission's counsel in this action and pay the amount of the Penalty Offset to the United

States Treasury or to a Fair Fund, as the Commission directs. Such a payment shall not be deemed an additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed in this action. For purposes of this paragraph, a "Related Investor Action" means a private damages action brought against Defendant by or on behalf of one or more investors based on substantially the same facts as alleged in the Complaint in this action.

Case 3:18-cv-01735-L Document 4-1 Filed 07/03/18 Page 4 of 7 PageID 35

4. Defendant agrees that he shall not seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made pursuant to any insurance policy, with regard to any civil penalty amounts that Defendant pays pursuant to the Final Judgment, regardless of whether such penalty amounts or any part thereof are added to a distribution fund or otherwise used for the benefit of investors. Defendant further agrees that he shall not claim, assert, or apply for a tax deduction or tax credit with regard to any federal, state, or local tax for any penalty amounts that Defendant pays pursuant to the Final

Judgment, regardless of whether such penalty amounts or any part thereof are added to a distribution fund or othe1wise used for the benefit of investors.

5. Defendant waives the entry of findings of fact and conclusions of law pursuant to

Rule 52 of the Federal Rules of Civil Procedure.

6. Defendant waives the right, if any, to ajury trial and to appeal from the entry of the Final Judgment.

7. Defendant enters into this Consent voluntarily and represents that no threats, offers, promises, or inducements of any kind have been made by the Commission or any member, officer, employee, agent, or representative of the Commission to induce Defendant to enter into this Consent.

8. Defendant agrees that this Consent shall be incorporated into the Final Judgment with the same force and effect as if fully set forth therein.

9. Defendant will not oppose the enforcement of the Final Judgment on the ground, if any exists, that it fails to comply with Rule 65(d) of the Federal Rules of Civil Procedure, and hereby waives any objection based thereon.

10. Defendant waives service of the Final Judgment and agrees that entry of the Final

Case 3:18-cv-01735-L Document 4-1 Filed 07/03/18 Page 5 of 7 PageID 36

Judgment by the Comt and filing with the Clerk of the Court will constitute notice to Defendant of its terms and conditions. Defendant further agrees to provide counsel for the Commission, within thhty days after the Final Judgment is filed with the Clerk of the Court, with an affidavit or declaration stating that Defendant has received and read a copy of the Final Judgment.

11. Consistent with 17 C.F.R. 202.S(f), this Consent resolves only the claims asserted against Defendant in this civil proceeding. Defendant acknowledges that no promise or representation has been made by the Commission or any member, officer, employee, agent, or representative of the Commission with regard to any criminal liability that may have arisen or may arise from the facts underlying this action or immunity from any such criminal liability.

Defendant waives any claim of Double Jeopardy based upon the settlement of this proceeding, including the imposition of any remedy or civil penalty herein. Defendant further acknowledges that the Court's entry of a permanent injunction may have collateral consequences under federal or state law and the rules and regulations of self-regulatory organizations, licensing boards, and other regulatory organizations. Such collateral consequences include, but are not limited to, a statutory disqualification with respect to membership or participation in, or association with a member of, a self-regulatory organization. This statutory disqualification has consequences that are separate from any sanction imposed in an administrative proceeding. In addition, in any disciplinary proceeding before the Commission based on the entry of the injunction in this action, Defendant understands that he shall not be permitted to contest the factual allegations of the complaint in this action.

12. Defendant understands and agrees to comply with the terms of 17 C.F .R.

§ 202.S(e), which provides in part that it is the Commission's policy "not to permit a defendant or respondent to consent to a judgment or order that imposes a sanction while denying the

Case 3:18-cv-01735-L Document 4-1 Filed 07/03/18 Page 6 of 7 PageID 37

allegations in the complaint or order for proceedings," and "a refusal to admit the allegations is equivalent to a denial, unless the defendant or respondent states that he neither admits nor denies the allegations." As part of Defendant's agreement to comply with the terms of Section 202.5(e ),

Defendant: (i) will not take any action or make or permit to be made any public statement denying, directly or indirectly, any allegation in the complaint or creating the impression that the complaint is without factual basis; (ii) will not make or permit to be made any public statement to the effect that Defendant does not admit the allegations of the complaint, or that this Consent contains no admission of the allegations, without also stating that Defendant does not deny the allegations; (iii) upon the filing of this Consent, Defendant hereby withdraws any papers filed in this action to the extent that they deny any allegation in the complaint; and (iv) Defendant stipulates solely for purposes of exceptions to discharge set forth in Section 523 of the

Bankruptcy Code, 11 U.S.C. §523, that the allegations in the complaint are true, and further, that any debt for disgorgement, prejudgment interest, civil penalty or other amounts due by

Defendant under the Final Judgment or any other judgment, order, consent order, decree or settlement agreement entered in connection with this proceeding, is a debt for the violation by

Defendant of the federal securities laws or any regulation or order issued under such laws, as set forth in Section 523(a)(l9) of the Bankruptcy Code, 11 U.S.C. §523(a)(l9). If Defendant breaches this agreement, the Commission may petition the Court to vacate the Final Judgment and restore this action to its active docket. Nothing in this paragraph affects Defendant's: (i) testimonial obligations; or (ii) right to take legal or factual positions in litigation or other legal proceedings in which the Commission is not a pmty.

13. Defendant hereby waives any rights under the Equal Access to Justice Act, the

Small Business Regulatory Enforcement Fairness Act of 1996, or any other provision of law to

Case 3:18-cv-01735-L Document 4-1 Filed 07/03/18 Page 7 of 7 PageID 38

seek from the United States, or any agency, or any official of the United States acting in his or her official capacity, directly or indirectly, reimbursement of attorney's fees or other fees, expenses, or costs expended by Defendant to defend against this action. For these purposes,

Defendant agrees that Defendant is not the prevailing party in this action since the parties have reached a good faith settlement.

14. Defendant agrees that the Commission may present the Final Judgment to the

Comt for signature and entry without fu11her notice.

15. Defendant agrees that this Coui1 shall retain jurisdiction over this matter for the purpose of enforcing the terms of the Final Judgment.

Dated: -:::Sune \S 1 'dol

On 3J..AY'\'('.l \ S , 2018, ~~\.)\c\ 'A- \·\.rnm, a person known to me, personally appeared before me and acknowledg[ uting the foregoing Consent.

,... ._:;;~ DONHAR.LAWSON )Q&.Ct Nl'- '11 PUBLIC-STATE OF TEXAS 'tr ... i ~··'..lb,\ ~NOTARY r: LJ...lJvO'-V'- \'\~~.. ~~j COMM. EXP. 10-oJ-2019 Notary Public -.,::,::"'f..••' NOTARY 10 11211sso Commission expires:

Appro~/ as to formo .k

Arn61d A. Spencer Spencer and Associates 201 Main Street, Suite 1375 F 011 Worth, Texas 7 6102

Attorney for Defendant

Case 3:18-cv-01735-L Document 4-2 Filed 07/03/18 Page 1 of 7 PageID 39

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff, C.A. No. ______v.

UNITED DEVELOPMENT FUNDING III, LP, UNITED DEVELOPMENT FUNDING IV, HOLLIS M. GREENLAW, BENJAMIN L. WISSINK, THEODORE F. ETTER, CARA D. OBERT, and DAVID A. HANSON

Defendants.

FINAL JUDGMENT AS TO DEFENDANT DAVID A. HANSON

The Securities and Exchange Commission (the “Commission”) having filed a Complaint and Defendant David A. Hanson (“Defendant”) having entered a general appearance; consented to the Court’s jurisdiction over Defendant and the subject matter of this action; consented to entry of this Final Judgment without admitting or denying the allegations of the Complaint

(except as to jurisdiction and except as otherwise provided herein in paragraph VII); waived findings of fact and conclusions of law; and waived any right to appeal from this Final Judgment:

IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that Defendant is permanently restrained and enjoined from violating Sections 17(a)(2) and 17(a)(3) of the

Securities Act of 1933 (the “Securities Act”) [15 U.S.C. § 77q(a)(2) and (a)(3)] in the offer or sale of any security by the use of any means or instruments of transportation or communication in interstate commerce or by use of the mails, directly or indirectly: (i) to obtain money or

Case 3:18-cv-01735-L Document 4-2 Filed 07/03/18 Page 2 of 7 PageID 40 property by means of any untrue statement of a material fact or any omission of a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or (ii) to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided in

Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraph also binds the following who receive actual notice of this Final Judgment by personal service or otherwise: (a) Defendant’s officers, agents, servants, employees, and attorneys; and (b) other persons in active concert or participation with Defendant or with anyone described in (a).

II.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant is permanently restrained and enjoined from aiding and abetting any violation of Section 13(a) of the Exchange Act [15 U.S.C. § 78m(a)] by knowingly or recklessly providing substantial assistance to an issuer that files with the Commission any periodic report pursuant to Section

13(a) of the Exchange Act [15 U.S.C. § 78m(a)] that contains any untrue statement of material fact, or which omits to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or which fails to comply in any material respect with the requirements of Section 13(a) [15 U.S.C. § 78m(a)] or

Rules 12b-20, 13a-1, or 13a-13 promulgated thereunder [17 C.F.R. §§ 240.12b-20, 240.13a-1, and 240.13a-13].

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided in

Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraphs also bind the following who receive actual notice of this Final Judgment by personal service or otherwise: (a) Defendant’s

Case 3:18-cv-01735-L Document 4-2 Filed 07/03/18 Page 3 of 7 PageID 41 officers, agents, servants, employees, and attorneys; and (b) other persons in active concert or participation with Defendant or with anyone described in (a).

III.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant is permanently restrained and enjoined from aiding or abetting any violation of Section 13(b)(2)(A) of the Exchange Act [15 U.S.C. § 78m(b)(2)(A)] by knowingly or recklessly providing substantial assistance to an issuer that fails to make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided in

Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraphs also bind the following who receive actual notice of this Final Judgment by personal service or otherwise: (a) Defendant’s officers, agents, servants, employees, and attorneys; and (b) other persons in active concert or participation with Defendant or with anyone described in (a).

IV.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant is permanently restrained and enjoined from aiding or abetting any violation of Section 13(b)(2)(B) of the Exchange Act [15 U.S.C. § 78m(b)(2)(B)] by knowingly or recklessly providing substantial assistance to an issuer that fails to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that: (a) transactions are executed in accordance with management’s general or specific authorization; (b) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements, and to maintain

Case 3:18-cv-01735-L Document 4-2 Filed 07/03/18 Page 4 of 7 PageID 42 accountability for assets; (c) access to assets is permitted only in accordance with management’s general or specific authorization; and (d) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided in

IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant is liable for a civil penalty in the amount of $75,000 pursuant to Section 20(d) of the Securities

Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)].

Defendant shall satisfy this obligation by paying $75,000 to the Securities and Exchange

Commission within 180 days after entry of this Final Judgment.

Defendant may transmit payment electronically to the Commission, which will provide detailed ACH transfer/Fedwire instructions upon request. Payment may also be made directly from a bank account via Pay.gov through the SEC website at http://www.sec.gov/about/offices/ofm.htm. Defendant may also pay by certified check, bank cashier’s check, or United States postal money order payable to the Securities and Exchange

Commission, which shall be delivered or mailed to

Enterprise Services Center Accounts Receivable Branch 6500 South MacArthur Boulevard

Case 3:18-cv-01735-L Document 4-2 Filed 07/03/18 Page 5 of 7 PageID 43

Oklahoma City, OK 73169

and shall be accompanied by a letter identifying the case title, civil action number, and name of

this Court; Defendant’s name; and specifying that payment is made pursuant to this Final

Judgment.

Defendant shall simultaneously transmit photocopies of evidence of payment and case

identifying information to the Commission’s counsel in this action. By making the payment,

Defendant relinquishes all legal and equitable right, title, and interest in such funds and no part

of the funds shall be returned to Defendant.

The Commission may enforce the Court’s judgment for disgorgement and prejudgment

interest by moving for civil contempt (and/or through other collection procedures authorized by

law) at any time after 180 days following entry of this Final Judgment. Defendant shall pay post

judgment interest on any delinquent amounts pursuant to 28 U.S.C. § 1961. The Commission

shall hold the funds, together with any interest and income earned thereon (collectively, the

“Fund”), pending further order of the Court.

The Commission may propose a plan to distribute the Fund subject to the Court’s

approval. Such a plan may provide that the Fund shall be distributed pursuant to the Fair Fund

provisions of Section 308(a) of the Sarbanes-Oxley Act of 2002. The Court shall retain

jurisdiction over the administration of any distribution of the Fund. If the Commission staff

determines that the Fund will not be distributed, the Commission shall send the funds paid

pursuant to this Final Judgment to the United States Treasury.

Regardless of whether any such Fair Fund distribution is made, amounts ordered to be

paid as civil penalties pursuant to this Final Judgment shall be treated as penalties paid to the

government for all purposes, including all tax purposes. To preserve the deterrent effect of the

Case 3:18-cv-01735-L Document 4-2 Filed 07/03/18 Page 6 of 7 PageID 44

civil penalty, Defendant shall not, after offset or reduction of any award of compensatory damages in any Related Investor Action based on Defendant’s payment of disgorgement in this

action, argue that Defendant is entitled to, nor shall Defendant further benefit by, offset or reduction of such compensatory damages award by the amount of any part of Defendant’s payment of a civil penalty in this action (“Penalty Offset”). If the court in any Related Investor

Action grants such a Penalty Offset, Defendant shall, within 30 days after entry of a final order granting the Penalty Offset, notify the Commission’s counsel in this action and pay the amount of the Penalty Offset to the United States Treasury or to a Fair Fund, as the Commission directs.

Such a payment shall not be deemed an additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed in this Final Judgment. For purposes of this paragraph, a “Related Investor Action” means a private damages action brought against

Defendant by or on behalf of one or more investors based on substantially the same facts as alleged in the Complaint in this action.

VI.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant’s Consent is incorporated herein with the same force and effect as if fully set forth herein, and that

Defendant shall comply with all of the undertakings and agreements set forth therein.

VII.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, solely for purposes of

exceptions to discharge set forth in Section 523 of the Bankruptcy Code, 11 U.S.C. §523, the

allegations in the complaint are true and admitted by Defendant and further, any debt for

disgorgement, prejudgment interest, civil penalty or other amounts due by Defendant under this

Final Judgment or any other judgment, order, consent order, decree or settlement agreement

Case 3:18-cv-01735-L Document 4-2 Filed 07/03/18 Page 7 of 7 PageID 45

entered in connection with this proceeding, is a debt for the violation by Defendant of the federal

securities laws or any regulation or order issued under such laws, as set forth in Section

523(a)(19) of the Bankruptcy Code, 11 U.S.C. §523(a)(19).

VIII.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that this Court shall retain jurisdiction of this matter for the purposes of enforcing the terms of this Final Judgment.

IX.

There being no just reason for delay, pursuant to Rule 54(b) of the Federal Rules of Civil

Procedure, the Clerk is ordered to enter this Final Judgment forthwith and without further notice.

So Ordered and signed, this ____ day of ______2018.

______UNITED STATES DISTRICT JUDGE

Case 3:18-cv-01735-L Document 5 Filed 07/03/18 Page 1 of 4 PageID 46

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff, C.A. No. ______v.

UNITED DEVELOPMENT FUNDING III, LP, UNITED DEVELOPMENT FUNDING IV, HOLLIS M. GREENLAW, BENJAMIN L. WISSINK, THEODORE F. ETTER, CARA D. OBERT, and DAVID A. HANSON

Defendants.

PLAINTIFF’S UNOPPOSED MOTION FOR ENTRY OF FINAL JUDGMENT AGAINST DEFENDANTS UNITED DEVELOPMENT FUNDING III, LP AND UNITED DEVELOPMENT FUNDING IV

Plaintiff Securities and Exchange Commission (“SEC”) files this Unopposed Motion for

Entry of Final Judgment against Defendants United Development Funding III, LP and United

Development Funding IV (collectively, “Defendants”), and respectfully shows the Court as follows:

1. On July 3, 2018, the SEC filed its Complaint alleging that Defendants violated the federal securities laws.

2. The SEC has reached a settlement with Defendants. Pursuant to the settlement,

Defendants executed the Consent attached hereto as Exhibit A and, without admitting or denying the allegations in the Complaint, agreed to entry of the proposed Final Judgment submitted herewith (the “Final Judgment”).

Case 3:18-cv-01735-L Document 5 Filed 07/03/18 Page 2 of 4 PageID 47

3. Pursuant to the Consent, Defendants also waived service of summons and the

Complaint and agreed that the SEC may present the proposed Final Judgment to the Court for signature and entry without further notice.

4. The SEC’s counsel conferred with counsel for Defendants, who indicated

Defendants do not oppose the relief sought herein.

5. The SEC respectfully moves the Court to enter the proposed Final Judgment.

Dated: July 3, 2018 Respectfully submitted,

Attorneys for Plaintiff

Case 3:18-cv-01735-L Document 5 Filed 07/03/18 Page 3 of 4 PageID 48

CERTIFICATE OF SERVICE

Barrett R. Howell Katten Muchin Rosenman LLP 1717 Main Street, Suite 3750 Dallas, TX 75201-7301 214-765-3681

Attorney for Defendants United Development Funding III, LP and United Development Funding IV

Michael P. Gibson Burleson, Pate & Gibson, LLP 900 Jackson Street, Suite 330 Dallas, Texas 75202 214-871-4900

Attorney for Defendant Hollis M. Greenlaw

Mike Uhl Law Offices of Michael J. Uhl, P.C. 500 North Akard, Suite 2150 Dallas, Texas 75201 214-237-0809

Attorney for Defendant Theodore F. Etter.

Jay Dewald Jackson Walker LLP 2323 Ross Avenue, Suite 600 Dallas, TX 75201 214-953-6130 and

Matthew G. Nielson Stanton LLP 1717 Main Street, Suite 3800 Dallas, Texas 75201 214-996-0209

Case 3:18-cv-01735-L Document 5 Filed 07/03/18 Page 4 of 4 PageID 49

Attorneys for Defendant Benjamin L. Wissink

Weston C. Loegering Evan P. Singer Joan E. McKown Jones Day 2727 North Harwood Street Dallas, Texas 75201 214-969-5264

Attorneys for Defendant Cara D. Obert

Arnold A. Spencer Spencer & Associates 201 Main Street, Suite 1375 Fort Worth, Texas 76102 214-385-8500

Attorney for Defendant David A. Hanson

/s/ Keefe M. Bernstein Keefe M. Bernstein

Case 3:18-cv-01735-L Document 5-1 Filed 07/03/18 Page 1 of 6 PageID 50

EXHIBIT A

Case 3:18-cv-01735-L Document 5-1 Filed 07/03/18 Page 2 of 6 PageID 51

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff, C.A. No. ______v.

UNITED DEVELOPMENT FUNDING III, LP, UNITED DEVELOPMENT FUNDING IV, HOLLIS M. GREENLAW, BENJAMIN L. WISSINK, THEODORE F. ETTER, CARA D. OBERT, and DAVID A. HANSON

Defendants.

CONSENT OF UNITED DEVELOPMENT FUNDING III, LP AND UNITED DEVELOPMENT FUNDING IV

1. Defendants United Development Funding III, LP and United Development

Funding IV (“Defendants”) waive service of a summons and the complaint in this action, enter a

general appearance, and admit the Court’s jurisdiction over Defendants and over the subject

matter of this action.

2. Without admitting or denying the allegations of the complaint (except as provided

herein in paragraph 10 and except as to personal and subject matter jurisdiction, which

Defendant admits), Defendants hereby consents to the entry of the Final Judgment in the form

attached hereto (the “Final Judgment”) and incorporated by reference herein, which, among other things:

(a) permanently restrains and enjoins Defendants from violation of Sections

17(a)(2) and (3) of the Securities Act of 1933 (the “Securities Act”) [15

Case 3:18-cv-01735-L Document 5-1 Filed 07/03/18 Page 3 of 6 PageID 52

U.S.C. § 77q(a)] and Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the

Securities Exchange Act of 1934 (the “Exchange Act”) [15 U.S.C. §§

78m(a), 78m(b)(2)(A), 78m(b)(2)(B)] and Rules 12b-20, 13a-1, and

13a-13 thereunder [17 C.F.R. §§ 240.12b-20, 240.13a-1, and 240.13a-13].

3. Defendants waive the entry of findings of fact and conclusions of law pursuant to

Rule 52 of the Federal Rules of Civil Procedure.

4. Defendants waive the right, if any, to a jury trial and to appeal from the entry of

the Final Judgment.

5. Defendants enter into this Consent voluntarily and represents that no threats,

offers, promises, or inducements of any kind have been made by the Commission or any

member, officer, employee, agent, or representative of the Commission to induce Defendants to

enter into this Consent.

6. Defendants agree that this Consent shall be incorporated into the Final Judgment

with the same force and effect as if fully set forth therein.

7. Defendants will not oppose the enforcement of the Final Judgment on the ground,

if any exists, that it fails to comply with Rule 65(d) of the Federal Rules of Civil Procedure, and hereby waives any objection based thereon.

8. Defendants waive service of the Final Judgment and agrees that entry of the Final

Judgment by the Court and filing with the Clerk of the Court will constitute notice to Defendants

of its terms and conditions. Defendants further agree to provide counsel for the Commission, within thirty days after the Final Judgment is filed with the Clerk of the Court, with an affidavit

or declaration stating that Defendants have received and read a copy of the Final Judgment.

9. Consistent with 17 C.F.R. 202.5(f), this Consent resolves only the claims asserted

Case 3:18-cv-01735-L Document 5-1 Filed 07/03/18 Page 4 of 6 PageID 53

against Defendants in this civil proceeding. Defendants acknowledges that no promise or

representation has been made by the Commission or any member, officer, employee, agent, or

representative of the Commission with regard to any criminal liability that may have arisen or

may arise from the facts underlying this action or immunity from any such criminal liability.

Defendant waives any claim of Double Jeopardy based upon the settlement of this proceeding,

including the imposition of any remedy or civil penalty herein. Defendants further acknowledge

that the Court’s entry of a permanent injunction may have collateral consequences under federal

or state law and the rules and regulations of self-regulatory organizations, licensing boards, and

other regulatory organizations. Such collateral consequences include, but are not limited to, a

statutory disqualification with respect to membership or participation in, or association with a

member of, a self-regulatory organization. This statutory disqualification has consequences that

are separate from any sanction imposed in an administrative proceeding. In addition, in any

disciplinary proceeding before the Commission based on the entry of the injunction in this

action, Defendants understand that they shall not be permitted to contest the factual allegations

of the complaint in this action.

10. Defendants understands and agrees to comply with the terms of 17 C.F.R.

§ 202.5(e), which provides in part that it is the Commission’s policy “not to permit a defendant

or respondent to consent to a judgment or order that imposes a sanction while denying the

allegations in the complaint or order for proceedings,” and “a refusal to admit the allegations is equivalent to a denial, unless the defendant or respondent states that it neither admits nor denies the allegations.” As part of Defendants’ agreement to comply with the terms of Section 202.5(e),

Defendants each: (i) will not take any action or make or permit to be made any public statement

denying, directly or indirectly, any allegation in the complaint or creating the impression that the

Case 3:18-cv-01735-L Document 5-1 Filed 07/03/18 Page 5 of 6 PageID 54

complaint is without factual basis; (ii) will not make or permit to be made any public statement

to the effect that Defendant does not admit the allegations of the complaint, or that this Consent

contains no admission of the allegations, without also stating that Defendant does not deny the allegations; and (iii) upon the filing of this Consent, each Defendant hereby withdraws any papers filed in this action to the extent that they deny any allegation in the complaint. If either

Defendants breach this agreement, the Commission may petition the Court to vacate the Final

Judgment and restore this action to its active docket. Nothing in this paragraph affects

Defendants’: (i) testimonial obligations; or (ii) right to take legal or factual positions in litigation or other legal proceedings in which the Commission is not a party.

11. Defendants hereby waives any rights under the Equal Access to Justice Act, the

Small Business Regulatory Enforcement Fairness Act of 1996, or any other provision of law to seek from the United States, or any agency, or any official of the United States acting in his or her official capacity, directly or indirectly, reimbursement of attorney’s fees or other fees, expenses, or costs expended by Defendants to defend against this action. For these purposes,

Defendants agrees that Defendants are not the prevailing party in this action since the parties

have reached a good faith settlement.

12. Defendants agree that the Commission may present the Final Judgment to the

Court for signature and entry without further notice.

13. Defendants agrees that this Court shall retain jurisdiction over this matter for the

purpose of enforcing the terms of the Final Judgment.

Case 3:18-cv-01735-L Document 5-1 Filed 07/03/18 Page 6 of 6 PageID 55

Dated: _ __,~/.~) _f_/_;8_ I I By: Name: Title:

On :::SUn~d-<6 , 2018, =teidd(~~t"' , a person known to me, personally appeared before me and acknowledged executing the foregoing Consent with full

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Barrett R. How II Katten Muchin Rosenman LLP

1717 Main Stre~t,Suite 3 750 Dallas, TX 75201-730 I

Attorney for Defendants

Case 3:18-cv-01735-L Document 5-2 Filed 07/03/18 Page 1 of 5 PageID 56

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff, C.A. No. ______v.

UNITED DEVELOPMENT FUNDING III, LP, UNITED DEVELOPMENT FUNDING IV, HOLLIS M. GREENLAW, BENJAMIN L. WISSINK, THEODORE F. ETTER, CARA D. OBERT, and DAVID A. HANSON

Defendants.

FINAL JUDGMENT AS TO DEFENDANTS UNITED DEVELOPMENT FUNDING III, LP AND UNITED DEVELOPMENT FUNDING IV

The Securities and Exchange Commission (the “Commission”) having filed a Complaint and Defendants United Development Funding III, LP (“UDF III”) and United Development

Funding IV (“UDF IV”) (collectively, “Defendants”) having each entered a general appearance;

consented to the Court’s jurisdiction over Defendants and the subject matter of this action;

consented to entry of this Final Judgment without admitting or denying the allegations of the

Complaint (except as to jurisdiction); waived findings of fact and conclusions of law; and waived

any right to appeal from this Final Judgment:

Case 3:18-cv-01735-L Document 5-2 Filed 07/03/18 Page 2 of 5 PageID 57

IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that Defendants UDF III

and UDF IV are permanently restrained and enjoined from violating Sections 17(a)(2) and

17(a)(3) of the Securities Act of 1933 (the “Securities Act”) [15 U.S.C. § 77q(a)(2) and (a)(3)] in the offer or sale of any security by the use of any means or instruments of transportation or communication in interstate commerce or by use of the mails, directly or indirectly: (i) to obtain money or property by means of any untrue statement of a material fact or any omission of a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or (ii) to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided in

Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraph also binds the following who receive actual notice of this Final Judgment by personal service or otherwise: (a) Defendants’ officers, agents, servants, employees, and attorneys; and (b) other persons in active concert or participation with Defendants or with anyone described in (a).

II.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Defendants UDF III and UDF IV are permanently restrained and enjoined from filing with the Commission any periodic report pursuant to Section 13(a) of the Exchange Act [15 U.S.C. § 78m(a)] which contains any untrue statement of material fact, or which omits to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or which fails to comply in any material respect with the requirements of

Section 13(a) of the Exchange Act [15 U.S.C. § 78m(a)] or Rules 12b-20, 13a-1, or 13a-13

Case 3:18-cv-01735-L Document 5-2 Filed 07/03/18 Page 3 of 5 PageID 58 promulgated thereunder [17 C.F.R. §§ 240.12b-20, 240.13a-1, and 240.13a-13].

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided in

Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraphs also bind the following who receive actual notice of this Final Judgment by personal service or otherwise: (a) Defendants’ officers, agents, servants, employees, and attorneys; and (b) other persons in active concert or participation with Defendants or with anyone described in (a).

III.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Defendants UDF III and UDF IV are permanently restrained and enjoined from violating, directly or indirectly,

Section 13(b)(2)(A) of the Exchange Act [15 U.S.C. § 78m(b)(2)(A)] by failing to make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided in

Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraphs also bind the following who receive actual notice of this Final Judgment by personal service or otherwise: (a) Defendants’ officers, agents, servants, employees, and attorneys; and (b) other persons in active concert or participation with Defendants or with anyone described in (a).

IV.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Defendants UDF III and UDF IV are permanently restrained and enjoined from violating, directly or indirectly,

Section 13(b)(2)(B) of the Exchange Act [15 U.S.C. § 78m(b)(2)(B)] by failing to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that: (a) transactions are executed in accordance with management’s general or specific

Case 3:18-cv-01735-L Document 5-2 Filed 07/03/18 Page 4 of 5 PageID 59 authorization; (b) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements, and to maintain accountability for assets; (c) access to assets is permitted only in accordance with management’s general or specific authorization; and (d) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided in

Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraphs also bind the following who receive actual notice of this Final Judgment by personal service or otherwise: (a) Defendants’ officers, agents, servants, employees, and attorneys; and (b) other persons in active concert or participation with Defendants or with anyone described in (a).

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Defendants’

Consents are incorporated herein with the same force and effect as if fully set forth herein, and that Defendants shall comply with all of the undertakings and agreements set forth therein.

VI.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that this Court shall retain jurisdiction of this matter for the purposes of enforcing the terms of this Final Judgment.

Case 3:18-cv-01735-L Document 5-2 Filed 07/03/18 Page 5 of 5 PageID 60

VII.

There being no just reason for delay, pursuant to Rule 54(b) of the Federal Rules of Civil

Procedure, the Clerk is ordered to enter this Final Judgment forthwith and without further notice.

So Ordered and signed, this ____ day of ______2018.

______UNITED STATES DISTRICT JUDGE

Case 3:18-cv-01735-L Document 6 Filed 07/03/18 Page 1 of 4 PageID 61

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff, C.A. No. ______v.

UNITED DEVELOPMENT FUNDING III, LP, UNITED DEVELOPMENT FUNDING IV, HOLLIS M. GREENLAW, BENJAMIN L. WISSINK, THEODORE F. ETTER, CARA D. OBERT, and DAVID A. HANSON

Defendants.

PLAINTIFF’S UNOPPOSED MOTION FOR ENTRY OF FINAL JUDGMENT AGAINST DEFENDANTS HOLLIS M. GREENLAW, BENJAMIN L. WISSINK, THEODORE F. ETTER, AND CARA D. OBERT

Plaintiff Securities and Exchange Commission (“SEC”) files this Unopposed Motion for

Entry of Final Judgment against Defendants Hollis M. Greenlaw, Benjamin L. Wissink,

Theodore F. Etter, and Cara D. Obert (collectively, “Defendants”), and respectfully shows the

Court as follows:

1. On July 3, 2018, the SEC filed its Complaint alleging that Defendants violated the federal securities laws.

2. The SEC has reached a settlement with Defendants. Pursuant to the settlement,

Defendants executed the Consents attached hereto as Exhibits A, B, C, and D and, without admitting or denying the allegations in the Complaint, agreed to entry of the proposed Final

Judgment submitted herewith (the “Final Judgment”).

Case 3:18-cv-01735-L Document 6 Filed 07/03/18 Page 2 of 4 PageID 62

3. Pursuant to the Consents, Defendants also waived service of summons and the

Complaint and agreed that the SEC may present the proposed Final Judgment to the Court for signature and entry without further notice.

4. The SEC’s counsel conferred with counsel for Defendants, who indicated

Defendants do not oppose the relief sought herein.

5. The SEC respectfully moves the Court to enter the proposed Final Judgment.

Dated: July 3, 2018 Respectfully submitted,

Attorneys for Plaintiff

Case 3:18-cv-01735-L Document 6 Filed 07/03/18 Page 3 of 4 PageID 63

CERTIFICATE OF SERVICE

Barrett R. Howell Katten Muchin Rosenman LLP 1717 Main Street, Suite 3750 Dallas, TX 75201-7301 214-765-3681

Attorney for Defendants United Development Funding III, LP and United Development Funding IV

Michael P. Gibson Burleson, Pate & Gibson, LLP 900 Jackson Street, Suite 330 Dallas, Texas 75202 214-871-4900

Attorney for Defendant Hollis M. Greenlaw

Mike Uhl Law Offices of Michael J. Uhl, P.C. 500 North Akard, Suite 2150 Dallas, Texas 75201 214-237-0809

Attorney for Defendant Theodore F. Etter.

Jay Dewald Jackson Walker LLP 2323 Ross Avenue, Suite 600 Dallas, TX 75201 214-953-6130 and

Matthew G. Nielson Stanton LLP 1717 Main Street, Suite 3800 Dallas, Texas 75201 214-996-0209

Case 3:18-cv-01735-L Document 6 Filed 07/03/18 Page 4 of 4 PageID 64

Attorneys for Defendant Benjamin L. Wissink

Weston C. Loegering Evan P. Singer Joan E. McKown Jones Day 2727 North Harwood Street Dallas, Texas 75201 214-969-5264

Attorneys for Defendant Cara D. Obert

Arnold A. Spencer Spencer & Associates 201 Main Street, Suite 1375 Fort Worth, Texas 76102 214-385-8500

Attorney for Defendant David A. Hanson

/s/ Keefe M. Bernstein Keefe M. Bernstein

Case 3:18-cv-01735-L Document 6-1 Filed 07/03/18 Page 1 of 8 PageID 65

EXHIBIT A

Case 3:18-cv-01735-L Document 6-1 Filed 07/03/18 Page 2 of 8 PageID 66

DEVELOPMENT FUN DING IH, FUNDING HOLLIS M. GREENLAW, BENJAMIN L. WISSINK, THEODORE CARA D. OBERT, and DAVID HANSON

Defendants.

M.GREENLAW

1. Detendant Hollis Greenlaw ("Defendant") •.vaives service of a summons and

the complaint in this action, enters a general appearance, and admit~.theCourt's jurisdiction over

Defendant and over the subject matter of this action.

2. Without admitting or denying the allegations of the complaint (except as provided herein in paragraph 12 and except as to personal and subject matter jurisdiction, which

Defendant admits), Defendant hereby consents to the entry of the Final Judgment in the form attached hereto (the "Final Judgment") and incorporated by reference herein, which, among other things:

(a) permanently restrains and enjoins Defendant from violation of Sections

l 7(a)(2) and (3) of the Securities Act of 1933 (the "Securities Act") [ 15

U.S.C. § 77q(a)], aiding and abetting violations of Sections 13(a),

13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 (the

Case 3:18-cv-01735-L Document 6-1 Filed 07/03/18 Page 3 of 8 PageID 67

[15

(b) on a

in amount

$6,809,282, plus amount

$390,718; and

orders Defendant to pay a civil penalty in the amount of $250,000.00

under Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section

2l(d)(3) ofthc Exchange [15 U.S.C. § 78u(d)(3)].

3. that the civil penalty pursuant to the Final

Judgment may be distributed pursuant to the Fair Fund provisions of Section 308(a) of the

Action based on Defendant's payment of disgorgement in this action, argue that he is entitled to, nor shall he further benefit by, offset or reduction of such compensatory damages award by the amount of any part of Defendant's payment of a civil penalty in this action ("Penalty Offset"). If the court in any Related f nvestor Action grants such a Penalty Offset, Defendant agrees that he shall, within 30 days after entry of a final order granting the Penalty Offset, notify the

Commission's counsel in this action and pay the amount of the Penalty Offset to the United

Case 3:18-cv-01735-L Document 6-1 Filed 07/03/18 Page 4 of 8 PageID 68

or as not

means a one or more

investors based on as ~... v,...,~~ this

not or

source, including not to made

pursuant to any insurance policy, with regard to any civil penalty amounts that Defendant pays pursuant to the Final Judgment, regardless of whether such penalty amounts or any part thereof are added to a distribution fund or otherwise used for the benefit of investors. Defondant further agrees that he shall not assert, or apply for a tax deduction or tax credit regard to any federal, state, or local tax for any penalty amounts that Defendant pays pursuant to the Final

Judgment, regardless of whether such penalty amounts or any part thereof are added to a distribution fund or otherwise used for the benefit of investors.

5. Defondant waives the entry of findings of fact and conclusions of law pursuant to

Ruic 52 of the Federal Rules of Civil Procedure.

6. Defendant waives the right, if any, to a jury trial and to appeal from the entry of the final Judgment.

8. Defendant agrees that this Consent shall be incorporated into the Final Judgment

Case 3:18-cv-01735-L Document 6-1 Filed 07/03/18 Page 5 of 8 PageID 69

same as if set

9. on if it to hereby any objection based thereon.

that the

to Defendant of terms Defendant further to for the Commission,

thirty days after the Final Judgment is filed with the Clerk of the Court, with an affidavit or declaration stating that Defendant has received and read a copy of the Final Judgment.

11. Consistent with 17 C.F .R. 202.5(f), this Consent resolves only the claims asserted against Defendant in this civil proceeding. Defendant acknowledges that no promise or representation has been made by the Commission or any member, officer, employee, agent, or representative of the Commission with regard to any criminal liability that may have arisen or may arise from the facts underlying this action or immunity from any such criminal liabiJity.

member of, a self~regulatoryorganization. This statutory disqualification has consequences that are separate from any sanction imposed in an administrative proceeding. In addition, in any disciplinary proceeding before the Commission based on the entry of the injunction in this

Case 3:18-cv-01735-L Document 6-1 Filed 07/03/18 Page 6 of 8 PageID 70

not to contest

to terms 17

§ provides in or to consent to a judgment or imposes a sanction

,, complaint or IS

to a denial, unless or respondent states he nor the allegations." As part of Defendant's agreement to comply with the terms of Section 202.5(e),

Defendant: (i) will not take any action or make or petmit to be made any public statement denying, directly or indirectly, any allegation in the complaint or creating the impression the complaint is without factual basis; (ii) will not make or pennit to be any public statement to the effect contains no admission of the allegations, without also stating that Defendant docs not the allegations; (iii) upon the filing of this Consent, Defendant hereby withdraws any papers filed in this action to the extent that they deny any allegation in the complaint; and (iv) Defendant stipulates solely for purposes of exceptions to discharge set forth in Section 523 of the

Bankruptcy Code, 11 U.S.C. §523, that the allegations in the complaint are true, and further, that any debt for disgorgement, prejudgment interest, civil penalty or other amounts due by

Defendant under the Final Judgment or any other judgment, order, consent order, decree or settlement agreement entered in connection with this proceeding, is a debt for the violation by

Defendant of the federal securities laws or any regulation or order issued under such laws, as set forth in Section 523(a)( 19) of the Bankruptcy Code, 11 U.S.C. §523(a)(l 9). If Defendant breaches this agreement, the Commission may petition the Court to vacate the Final Judgment

Case 3:18-cv-01735-L Document 6-1 Filed 07/03/18 Page 7 of 8 PageID 71

and restore this action to its active docket. Nothing in this paragraph affects Defendant's: (i)

testimonial obligations; or (ii) right to take legal or factual positions in litigation or other legal

proceedings in which the Commission is not a party.

13. Defendant hereby waives any rights under the Equal Access to Justice Act, the

Small Business Regulatory Enforcement Fairness Act of 1996, or any other provision of law to

seek from the United States, or any agency, or any official of the United States acting in his or

her official capacity, directly or indirectly, reimbursement of attorney's fees or other fees,

expenses, or costs expended by Defendant to defend against this action. For these purposes,

Defendant agrees that Defendant is not the prevailing party in this action since the parties have

reached a good faith settlement.

14. Defendant agrees that the Commission may present the Final Judgment to the

Court for signature and entry without further notice.

15. Defendant agrees that this Court shall retain jurisdiction over this matter for the purpose of enforcing the terms of the Final Judgment. .•

Dated: r;/z~tJI! Hollis

on Juv"e.. '2.8 , 2018, YJl,icsM.Gree11/o.w , a person known to me, personally appeared before me and acknowledged executing the foregoing Consent.

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Case 3:18-cv-01735-L Document 6-1 Filed 07/03/18 Page 8 of 8 PageID 72

Attorney for Defendant

Case 3:18-cv-01735-L Document 6-2 Filed 07/03/18 Page 1 of 8 PageID 73

EXHIBIT B

Case 3:18-cv-01735-L Document 6-2 Filed 07/03/18 Page 2 of 8 PageID 74

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff, C.A.No. ------v.

UNITED DEVELOPMENT FUNDING III, LP, UNITED DEVELOPMENT FUNDING IV, HOLLIS M. GREENLAW, BENJAMIN L. WISSINK, THEODORE F. ETTER, CARA D. OBERT, and DA YID A. HANSON

Defendants.

CONSENT OF BENJAMIN L. WISSINK

I. Defendant Benjamin L. Wissink ("Defendant") waives service of a summons and the complaint in this action, enters a general appearance, and admits the Court's jurisdiction over

Defendant and over the subject matter of this action.

2. Without admitting or denying the allegations of the complaint (except as provided herein in paragraph 12 and except as to personal and subject matter jurisdiction, which

Defendant admits), Defendant hereby consents to the entry of the Final Judgment in the form attached hereto (the "Final Judgment") and incorporated by reference herein, which, among other things:

(a) permanently restrains and enjoins Defendant from violation of Sections

17(a)(2) and (3) of the Securities Act of 1933 (the "Securities Act") [15

U.S.C. § 77q(a)], aiding and abetting violations of Sections 13(a),

13(b )(2)(A), and l 3(b )(2)(8) of the Securities Exchange Act of 1934 (the

Case 3:18-cv-01735-L Document 6-2 Filed 07/03/18 Page 3 of 8 PageID 75

"Exchange Act") [15 U.S.C. §§ 78m(a), 78m(b)(2)(A), 78m(b)(2)(B)] and

Rules 12b-20, 13a-l, and 13a-13 thereunder [17 C.F.R. §§ 240.12b-20,

240.13a-l, and 240.13a-13];

(b) orders Defendant to pay disgorgement, on a joint and several basis with

Hollis M. Greenlaw, Theodore F. Etter, and Cara D. Obert, in the amount

of $6,809,282, plus prejudgment interest thereon in the amount of

$390,718; and

under Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section

2l(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)].

3. Defendant acknowledges that the civil penalty paid pursuant to the Final

Judgment may be distributed pursuant to the Fair Fund provisions of Section 308(a) of the

Commission's counsel in this action and pay the amount of the Penalty Offset to the United

States Treasury or to a Fair Fund, as the Commission directs. Such a payment shall not be

Case 3:18-cv-01735-L Document 6-2 Filed 07/03/18 Page 4 of 8 PageID 76

deemed an additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed in this action. For purposes of this paragraph, a "Related Investor Action" means a private damages action brought against Defendant by or on behalf of one or more investors based on substantially the same facts as alleged in the Complaint in this action.

Judgment, regardless of whether such penalty amounts or any part thereof are added to a distribution fund or otherwise used for the benefit of investors.

5. Defendant waives the entry of findings of fact and conclusions oflaw pursuant to

Rule 52 of the Federal Rules of Civil Procedure.

6. Defendant waives the right, if any, to a jury trial and to appeal from the entry of the Final Judgment.

8. Defendant agrees that this Consent shall be incorporated into the Final Judgment with the same force and effect as if fully set forth therein.

Case 3:18-cv-01735-L Document 6-2 Filed 07/03/18 Page 5 of 8 PageID 77

10. Defendant waives service of the Final Judgment and agrees that entry of the Final

Judgment by the Court and filing with the Clerk of the Court will constitute notice to Defendant of its terms and conditions. Defendant further agrees to provide counsel for the Commission, within thirty days after the Final Judgment is filed with the Clerk of the Court, with an affidavit or declaration stating that Defendant has received and read a copy of the Final Judgment.

Case 3:18-cv-01735-L Document 6-2 Filed 07/03/18 Page 6 of 8 PageID 78

the complaint in this action.

12. Defendant understands and agrees to comply with the terms of 17 C.F.R.

§ 202.5(e), which provides in part that it is the Commission's policy "not to permit a defendant or respondent to consent to a judgment or order that imposes a sanction while denying the allegations in the complaint or order for proceedings," and "a refusal to admit the allegations is equivalent to a denial, unless the defendant or respondent states that he neither admits nor denies the allegations." As part of Defendant's agreement to comply with the terms of Section 202.5(e),

Bankruptcy Code, 11 U.S.C. §523, that the allegations in the complaint are true, and further, that

any debt for disgorgement, prejudgment interest, civil penalty or other amounts due by

Defendant under the Final Judgment or any other judgment, order, consent order, decree or

settlement agreement entered in connection with this proceeding, is a debt for the violation by

Defendant of the federal securities laws or any regulation or order issued under such laws, as set

forth in Section 523(a)(l9) of the Bankruptcy Code, 11 U.S.C. §523(a)(l 9). If Defendant

breaches this agreement, the Commission may petition the Court to vacate the Final Judgment

and restore this action to its active docket. Nothing in this paragraph affects Defendant's: (i)

Case 3:18-cv-01735-L Document 6-2 Filed 07/03/18 Page 7 of 8 PageID 79

testimonial obligations; or (ii) right to take legal or factual positions in litigation or other legal proceedings in which the Commission is not a party.

13. Defendant hereby waives any rights under the Equal Access to Justice Act, the

Small Business Regulatory Enforcement Fairness Act of 1996, or any other provision of law to seek from the United States, or any agency, or any official of the United States acting in his or her official capacity, directly or indirectly, reimbursement of attorney's fees or other fees, expenses, or costs expended by Defendant to defend against this action. For these purposes,

Defendant agrees that Defendant is not the prevailing party in this action since the parties have reached a good faith settlement.

14. Defendant agrees that the Commission may present the Final Judgment to the

Court for signature and entry without further notice.

15. Defendant agrees that this Court shall retain jurisdiction over this matter for the purpose of enforcing the terms of the Final Judgment.

Dated: (Q - 1 -:::;- - l ~ ( ~ \JJ0 B enJa. mm. L . w1ssm· • k

On 6 - ~ / - , 2018, B-e.n LU t 5 5 "t f1~ , a person known to me, personally appeared before me and acknowledged executing the foregoing Consent.

Commission expires:

Case 3:18-cv-01735-L Document 6-2 Filed 07/03/18 Page 8 of 8 PageID 80

}1;~ Jay De aid Jackson Walker LLP 2323 Ross A venue, Suite 600 Dallas, TX 75201

and

Matthew G. Nielson Stanton LLP Comerica Bank Tower 1717 Main Street, Suite 3800 Dallas, Texas 75201

Attorney for Defendant

Case 3:18-cv-01735-L Document 6-3 Filed 07/03/18 Page 1 of 8 PageID 81

Exhibit C

Case 3:18-cv-01735-L Document 6-3 Filed 07/03/18 Page 2 of 8 PageID 82

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff, C.A.No. ----- v.

UNITED DEVELOPMENT FUNDING III, LP, UNITED DEVELOPMENT FUNDING IV, HOLLIS M. GREENLAW, BENJAMIN L. WISSINK, THEODORE F. ETTER, CARA D. OBERT, and DAVID A. HANSON

Defendants.

CONSENT OF THEODORE F. ETTER

1. Defendant Theodore F. Etter ("Defendant") waives service of a summons and the complaint in this action, enters a general appearance, and admits the Court's jurisdiction over

Defendant and over the subject matter of this action.

2. Without admitting or denying the allegations of the complaint (except as provided herein in paragraph 12 and except as to personal and subject matter jurisdiction, which

Defendant admits), Defendant hereby consents to the entry of the Final Judgment in the form attached hereto (the "Final Judgment") and incorporated by reference herein, which, among other things:

(a) permanently restrains and enjoins Defendant from violation of Sections

l 7(a)(2) and (3) of the Securities Act of 1933 (the "Securities Act") [15

U.S.C. § 77q(a)] and aiding and abetting violations of Sections 13(a),

13(b)(2)(A), and 13(b)(2)(8) of the Securities Exchange Act of 1934 (the

Case 3:18-cv-01735-L Document 6-3 Filed 07/03/18 Page 3 of 8 PageID 83

"Exchange Act") [15 U.S.C. §§ 78m(a), 78m(b)(2)(A), 78m(b)(2)(B)] and

Rules 12b-20, 13a-l, and 13a-13 thereunder [17 C.F.R. §§ 240.12b-20,

240.l 3a-l, and 240. l 3a-13];

(b) orders Defendant to pay disgorgement, on a joint and several basis with

Hollis M. Greenlaw, Benjamin L. Wissink, and Cara D. Obert, in the

amount of $6,809,282, plus prejudgment interest thereon in the amount of

$390,718; and

( c) orders Defendant to pay a civil penalty in the amount of $250,000.00

under Section 20( d) of the Securities Act [ 15 U .S.C. § 77t(d)] and Section

2l(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)].

3. Defendant acknowledges that the civil penalty paid pursuant to the Final

Judgment may be distributed pursuant to the Fair Fund provisions of Section 308(a) of the

Commission's counsel in this action and pay the amount of the Penalty Offset to the United

States Treasury or to a Fair Fund, as the Commission directs. Such a payment shall not be

Case 3:18-cv-01735-L Document 6-3 Filed 07/03/18 Page 4 of 8 PageID 84

Judgment, regardless of whether such penalty amounts or any part thereof are added to a distribution fund or otherwise used for the benefit of investors.

5. Defendant waives the entry of findings of fact and conclusions of law pursuant to

Rule 52 of the Federal Rules of Civil Procedure.

6. Defendant waives the right, if any, to a jury trial and to appeal from the entry of the Final Judgment.

8. Defendant agrees that this Consent shall be incorporated into the Final Judgment with the same force and effect as if fully set forth therein.

Case 3:18-cv-01735-L Document 6-3 Filed 07/03/18 Page 5 of 8 PageID 85

9. Defendant will not oppose the enforcement of the Final Judgment on the ground,

if any exists, that it fails to comply with Rule 65( d) of the Federal Rules of Civil Procedure, and

hereby waives any objection based thereon.

10. Defendant waives service of the Final Judgment and agrees that entry of the Final

Judgment by the .Court and filing with the Clerk of the Court will constitute notice to Defendant

of its terms and conditions. Defendant further agrees to provide counsel for the Commission,

within thirty days after the Final Judgment is filed with the Clerk of the Court, with an affidavit

or declaration stating that Defendant has received and read a copy of the Final Judgment.

11. Consistent with 17 C.F.R. 202.5(t), this Consent resolves only the claims asserted

against Defendant in this civil proceeding. Defendant acknowledges that no promise or

representation has been made by the Commission or any member, officer, employee, agent, or

representative of the Commission with regard to any criminal liability that may have arisen or

may arise from the facts underlying this action or immunity from any such criminal liability.

Defendant waives any claim of Double Jeopardy based upon the settlement of this proceeding,

including the imposition of any remedy or civil penalty herein. Defendant further acknowledges

that the Court's entry of a permanent injunction may have collateral consequences under federal

or state law and the rules and regulations of self-regulatory organizations, licensing boards, and

other regulatory organizations. Such collateral consequences include, but are not limited to, a

statutory disqualification with respect to membership or participation in, or association with a member of, a self-regulatory organizatio_n. This statutory disqualification has consequences that are separate from any sanction imposed in an administrative proceeding. In addition, in any disciplinary proceeding before the Commission based on the entry of the injunction in this action, Defendant understands that he shall not be permitted to contest the factual allegations of

Case 3:18-cv-01735-L Document 6-3 Filed 07/03/18 Page 6 of 8 PageID 86

the complaint in this action.

12. Defendant understands and agrees to comply with the terms of 17 C.F.R.

Bankruptcy Code, 11 U.S.C. §523, that the allegations in the complaint are true, and further, that any debt for disgorgement, prejudgment interest, civil penalty or other amounts due by

Defendant under the Final Judgment or any other judgment, order, consent order, decree or settlement agreement entered in connection with this proceeding, is a debt for the violation by

Defendant of the federal securities laws or any regulation or order issued under such laws, as set forth in Section 523(a){l 9) of the Bankruptcy Code, 11 U.S.C. §523(a)(l 9). If Defendant breaches this agreement, the Commission may petition the Court to vacate the Final Judgment and restore this action to its active docket. Nothing in this paragraph affects Defendant's: (i)

Case 3:18-cv-01735-L Document 6-3 Filed 07/03/18 Page 7 of 8 PageID 87

testimon ial obli gati ons; or (ii) ri ght to take legal or factua l positions in litigation or other legal proceedings in which the Commission is not a party.

13. Defendant hereby waives any rights under the Equal Access to Justice Act, the

Small Business Regul atory Enforcement Fairness Act of 1996, or any other provision of law to seek from the United States, or any agency. or any official of the United States acting in hi s or her official capacity, directly or ind irectly. reimbursement of attorney's fees or other fees. expenses, or costs expended by Defendant to defend against this action. For these purposes,

Defendant agrees that Defendant is not the prevai li ng party in this action since the parties have reached a good faith settlement.

14. Defendant agrees that the Commission may present the Final Judgment to the

Court for signature and entry without fu rther notice.

15. Defendant agrees that this Court shall retain jurisdiction over th is matter for the purpose of enforcing the terms of the Final Judgment.

Dated :.-----'-6+--=') ~'-+-)--'--1-"'C.-& _ I I Th eod~t~

On J\).)AL S: ,20 1sJ1e..oc\o(e... Y ~~e._vJ ~a person known to me, personall y appeared before me and acknowledged executi ng thd foregoing Consent.

Case 3:18-cv-01735-L Document 6-3 Filed 07/03/18 Page 8 of 8 PageID 88

Law Offices of Mich el J. Uhl , P.C. 500 North Akard. Su ite 2150 Dal las, Texas 7520 I

Attorney fo r Defendant

Case 3:18-cv-01735-L Document 6-4 Filed 07/03/18 Page 1 of 8 PageID 89

Exhibit D

Case 3:18-cv-01735-L Document 6-4 Filed 07/03/18 Page 2 of 8 PageID 90

UNITED STA TES DISTRICT COURT NORTHERN DISTRICT OF ·~"'EXAS DALLAS DIVISION

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff, C.A.No. ----- v.

UNITED DEVELOPMENT FUNDING III, LP, UNITED DEVELOPMENT FUNDING IV, HOLLIS M. GREENLAW, BENJAMIN L. WISSINK, THEODORE F. ETTER, CARA D. OBERT, and DA YID A. HANSON

Defendants.

CONSENT OF CARA D. OBERT

1. Defendant Cara D. Obert ("Defendant") waives service of a summons and the complaint in this action, enters a general appearance, and admits the Court's jurisdiction over

Defendant and over the subject matter of this action.

2. Without admitting or denying the allegations of the complaint (except as provided herein in paragraph 12 and except as to personal and subject matter jurisdiction, which

Defendant admits), Defendant hereby consents to the entry of the Final Judgment in the form attached hereto (the "Final Judgment") and incorporated by reference herein, which, among other things:

(a) permanently restrains and enjoins Defendant from violation of Sections

l 7(a)(2) and (3) of the Securities Act of 1933 (the "Securities Act") [15

U.S.C. § 77q(a)], aiding and abetting violations of Sections 13(a),

13(b)(2)(A), and 13(~1 )(2)(B) of the Securities Exchange Act of 1934 (the

Case 3:18-cv-01735-L Document 6-4 Filed 07/03/18 Page 3 of 8 PageID 91

"Exchange Act") [15 U.S.C. §§ 78m(a), 78m(b)(2)(A), 78m(b)(2)(B)] and

Rules 12b-20, 13a-1, and 13a-13 thereunder [17 C.F .R. §§ 240.12b-20,

240.13a-1, and 240.13a-13], and violation of Rule 13a-14 of the Exchange

Act [17 C.F.R. § 240.13a-14];

(b) orders Defendant to pay disgorgement, on a joint and several basis with

Hollis M. Greenlaw, Theodore F. Etter, and Benjamin L. Wissink, in the

amount of $6,809,282, plus prejudgment interest thereon in the amount of

$390,718; and

(d) orders Defendant to pay a civil penalty in the amount of $250,000.00

under Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section

21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)].

3. Defendant acknowledges that the civil penalty paid pursuant to the Final

Judgment may be distributed pursuant to the Fair Fund provisions of Section 308(a) of the

Sarbanes-Oxley Act of2002. Regardless of whether any such Fair Fund distribution is made, the civil penalty shall be treated as a penalty paid to the government for all purposes, including all tax purposes. To preserve the deterrent effect of the civil penalty, Defendant agrees that she shall not, after offset or reduction of any award of compensatory damages in any Related

Investor Action based on Defendant's payment of disgorgement in this action, argue that she is entitled to, nor shall she further benefit by, offset or reduction of such compensatory damages award by the amount of any part of Defendant's payment of a civil penalty in this action

("Penalty Offset"). If the court in any Related Investor Action grants such a Penalty Offset,

Defendant agrees that she shall, within 30 days after entry of a final order granting the Penalty

Offset, notify the Commission's counsel in this action and pay the amount of the Penalty Offset

Case 3:18-cv-01735-L Document 6-4 Filed 07/03/18 Page 4 of 8 PageID 92

to the United States Treasury or to a Fair Fund, as the Commission directs. Such a payment shall not be deemed an additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed in this action. For purposes of this paragraph, a "Related Investor Action" means a private damages action brought against Defendant by or on behalf of one or more investors based on substantially the same facts as alleged in the Complaint in this action.

4. Defendant agrees that she shall not seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made pursuant to any insurance policy, with regard to any civil penalty amounts that Defendant pays pursuant to the Final Judgment, regardless of whether such penalty amounts or any part thereof are added to a distribution fund or otherwise used for the ben~fit of investors. Defendant further agrees that she shall not claim, assert, or apply for a tax deduction or tax credit with regard to any federal, state, or local tax for any penalty amounts that Defendant pays pursuant to the Final

Judgment, regardless of whether such penalty amounts or any part thereof are added to a distribution fund or otherwise used for the benefit of investors.

5. Defendant waives the entry of findings of fact and conclusions oflaw pursuant to

Rule 52 of the Federal Rules of Civil Procedure.

6. Defendant waives the right, if any, to a jury trial and to appeal from the entry of the Final Judgment.

7. Defendant enters into this Consent voluntarily and represents that no threats, offers, promises, or inducements of any kind have been made by the Commission or any member, officer, employee, agent, or representative of the C~mmission to induce Defendant to enter into this Consent.

8. Defendant agrees that this Consent shall be incorporated into the Final Judgment

Case 3:18-cv-01735-L Document 6-4 Filed 07/03/18 Page 5 of 8 PageID 93

with the same force and effect as if fully set forth therein.

10. Defendant waives service of the Final Judgment and agrees that entry of the Final

11. Consistent with 17 C.F.R. 202.5(t), i.his Consent resolves only the claims asserted against Defendant in this civil proceeding. Defendant acknowledges that no promise or representation has been made by the Commissio:~ or any member, officer, employee, agent, or representative of the Commission with regard to any ~r;:ninal liability that may have arisen or may arise from the facts underlying this action or immunity from any such criminal liability.

Case 3:18-cv-01735-L Document 6-4 Filed 07/03/18 Page 6 of 8 PageID 94

action, Defendant understands that she shall not be permitted to contest the factual allegations of the complaint in this action.

12. Defendant understands and agrees to comply with the terms of 17 C.F .R.

§ 202.5(e), which provides in part that it is the Commission's policy "not to permit a defendant or respondent to consent to a judgment or order that imposes a sanction while denying the allegations in the complaint or order for proceedings," and "a refusal to admit the allegations is equivalent to a denial, unless the defendant or respondent states that she neither admits nor denies the allegations." As part of Defendant's agreement to comply with the terms of Section

202.5(e), Defendant: (i) will not take any action or make or permit to be made any public statement denying, directly or indirectly, any allegation in the complaint or creating the impression that the complaint is without factual basis; (ii) will not make or permit to be made any public statement to the effect that Defendant does not admit the allegations of the complaint, or that this Consent contains no admission of the allegations, without also stating that Defendant does not deny the allegations; (iii) upon the filing of this Consent, Defendant hereby withdraws any papers filed in this action to the extent that they deny any allegation in the complaint; and

(iv) Defendant stipulates solely for purposes of exceptions to discharge set forth in Section 523 of the Bankruptcy Code, 11 U.S.C. §523, that the allegations in the complaint are true, and further, that any debt for disgorgement, prejudgment interest, civil penalty or other amounts due by Defendant under the Final Judgment or any other judgment, order, consent order, decree or settlement agreement entered in connection with this proceeding, is a debt for the violation by

Case 3:18-cv-01735-L Document 6-4 Filed 07/03/18 Page 7 of 8 PageID 95

and restore this action to its active docket. Nothing in this paragraph affects Defendant's: (i) testimonial obligations; or (ii) right to take legal or factual positions in litigation or other legal proceedings in wh ich the Commission is not a party.

13. Defendant hereby waives any rights under the Equal Access to Justice Act, the

Small Business Regulatory Enforcement Fairness Act of 1996, or any other provision of law to seek from the United States, or any agency, or any official of the United States acting in his or her official capacity, directly or indirectly, reimbursement of attorney' s fees or other fees, expenses, or costs expended by Defendant to defend against this action. For these purposes,

Defendant agrees that Defendant is not the prevai ling party ir1 this action since the parties have reached a good faith settlement.

14. Defendant agrees that the Commission may present the Final Judgment to the

Court for signature and entry without furiher notice.

15. Defendant agrees that this Court shall retain jurisd iction over this matter fo r the purpose of enforcing the terms of the Fina l

Dated: 62 _, ·/ Y

On JI" ne s ,20 18, Co r~ Db-e I+ , a person known to me, personally appeared before me and acknowledged executing the fo regoing Consent.

1--L J\) NotaryM ru~Pub l c A Hu.g 1 11 , •"" "" 1, HlllARY A. HAGEN ,.... ~· ~"• ,, Commi ss i o~xpires: ff:·~··!-:% Notary Public. Stole of Texas ;~\~. .:.;og Comm. Exp11es 05-03 -2020 ,,~,e · · · · ~+ ,... '•,,,,,~ 1>•' Notary ID 124912158

Case 3:18-cv-01735-L Document 6-4 Filed 07/03/18 Page 8 of 8 PageID 96

Joan McKown Weston Loegeri Evan Singer JONES DAY 2727 North Harwood Street Dallas, Texas 75201

Attorneys for Defendant

Case 3:18-cv-01735-L Document 6-5 Filed 07/03/18 Page 1 of 9 PageID 97

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff, C.A. No. ______v.

UNITED DEVELOPMENT FUNDING III, LP, UNITED DEVELOPMENT FUNDING IV, HOLLIS M. GREENLAW, BENJAMIN L. WISSINK, THEODORE F. ETTER, CARA D. OBERT, and DAVID A. HANSON

Defendants.

FINAL JUDGMENT AS TO DEFENDANTS HOLLIS M. GREENLAW, BENJAMIN L. WISSINK, THEODORE F. ETTER, AND CARA D. OBERT

The Securities and Exchange Commission (the “Commission”) having filed a Complaint and Defendants Hollis M. Greenlaw (“Greenlaw”), Benjamin L. Wissink (“Wissink”), Theodore

F. Etter (“Etter”), and Cara D. Obert (“Obert”) (collectively, “Defendants”) having each entered

a general appearance; consented to the Court’s jurisdiction over Defendants and the subject matter of this action; consented to entry of this Final Judgment without admitting or denying the

allegations of the Complaint (except as to jurisdiction and except as otherwise provided herein in

paragraph VIII); waived findings of fact and conclusions of law; and waived any right to appeal from this Final Judgment:

Case 3:18-cv-01735-L Document 6-5 Filed 07/03/18 Page 2 of 9 PageID 98

IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that Defendants Greenlaw,

Wissink, Etter, and Obert are permanently restrained and enjoined from violating Sections

17(a)(2) and 17(a)(3) of the Securities Act of 1933 (the “Securities Act”) [15 U.S.C. § 77q(a)(2) and (a)(3)] in the offer or sale of any security by the use of any means or instruments of transportation or communication in interstate commerce or by use of the mails, directly or indirectly: (i) to obtain money or property by means of any untrue statement of a material fact or any omission of a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or (ii) to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided in

Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraph also binds the following who receive actual notice of this Final Judgment by personal service or otherwise: (a) Defendants’ officers, agents, servants, employees, and attorneys; and (b) other persons in active concert or participation with Defendants or with anyone described in (a).

II.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Defendants

Greenlaw, Wissink, Etter, and Obert are permanently restrained and enjoined from aiding and abetting any violation of Section 13(a) of the Exchange Act [15 U.S.C. § 78m(a)] by knowingly or recklessly providing substantial assistance to an issuer that files with the Commission any periodic report pursuant to Section 13(a) of the Exchange Act [15 U.S.C. § 78m(a)] that contains any untrue statement of material fact, or which omits to state a material fact necessary in order to

Case 3:18-cv-01735-L Document 6-5 Filed 07/03/18 Page 3 of 9 PageID 99

make the statements made, in the light of the circumstances under which they were made, not

misleading, or which fails to comply in any material respect with the requirements of Section

13(a) [15 U.S.C. § 78m(a)] or Rules 12b-20, 13a-1, or 13a-13 promulgated thereunder [17 C.F.R.

§§ 240.12b-20, 240.13a-1, and 240.13a-13].

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided in

Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraphs also bind the following who

receive actual notice of this Final Judgment by personal service or otherwise: (a) Defendants’

officers, agents, servants, employees, and attorneys; and (b) other persons in active concert or

participation with Defendants or with anyone described in (a).

III.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Defendants

Greenlaw, Wissink, Etter, and Obert are permanently restrained and enjoined from aiding or

abetting any violation of Section 13(b)(2)(A) of the Exchange Act [15 U.S.C. § 78m(b)(2)(A)]

by knowingly or recklessly providing substantial assistance to an issuer that fails to make and

keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the

transactions and dispositions of the assets of the issuer.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided in

Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraphs also bind the following who

receive actual notice of this Final Judgment by personal service or otherwise: (a) Defendants’

officers, agents, servants, employees, and attorneys; and (b) other persons in active concert or

participation with Defendants or with anyone described in (a).

Case 3:18-cv-01735-L Document 6-5 Filed 07/03/18 Page 4 of 9 PageID 100

IV.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Defendants

Greenlaw, Wissink, Etter, and Obert are permanently restrained and enjoined from aiding or abetting any violation of Section 13(b)(2)(B) of the Exchange Act [15 U.S.C. § 78m(b)(2)(B)] by knowingly or recklessly providing substantial assistance to an issuer that fails to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that: (a) transactions are executed in accordance with management’s general or specific authorization; (b) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements, and to maintain accountability for assets; (c) access to assets is permitted only in accordance with management’s general or specific authorization; and (d) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided in

Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraphs also bind the following who receive actual notice of this Final Judgment by personal service or otherwise: (a) Defendants’ officers, agents, servants, employees, and attorneys; and (b) other persons in active concert or participation with Defendants or with anyone described in (a).

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Defendants Greenlaw and Obert are permanently restrained and enjoined from violating Rule 13a-14 of the Exchange

Act [17 C.F.R. § 13a-14] by signing a certification of a Form 10-K or 10-Q filed with the

Commission falsely confirming that the Form 10-K or 10-Q does not contain any untrue

Case 3:18-cv-01735-L Document 6-5 Filed 07/03/18 Page 5 of 9 PageID 101

statement of a material fact or omit to state a material fact necessary to make the statements

made, in light of the circumstances under which such statements were made, not misleading.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided in

Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraph also binds the following who

receive actual notice of this Final Judgment by personal service or otherwise: (a) Defendants

Greenlaw’s and Obert’s officers, agents, servants, employees, and attorneys; and (b) other persons in active concert or participation with Defendants Greenlaw or Obert or with anyone described in (a).

VI.

IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that:

Defendants Greenlaw, Wissink, Etter, and Obert are jointly and severally liable for

disgorgement of $6,809,282, representing profits gained as a result of the conduct alleged in the

Complaint, together with prejudgment interest thereon in the amount of $390,718.

Defendant Greenlaw is liable for a civil penalty in the amount of $250,000 pursuant to

Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange

Act [15 U.S.C. § 78u(d)(3)].

Defendant Wissink is liable for a civil penalty in the amount of $250,000 pursuant to

Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange

Act [15 U.S.C. § 78u(d)(3)].

Defendant Etter is liable for a civil penalty in the amount of $250,000 pursuant to Section

20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15

U.S.C. § 78u(d)(3)].

Defendant Obert is liable for a civil penalty in the amount of $250,000 pursuant to

Case 3:18-cv-01735-L Document 6-5 Filed 07/03/18 Page 6 of 9 PageID 102

Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange

Act [15 U.S.C. § 78u(d)(3)]..

Defendants shall satisfy these obligations by paying the amounts stated above to the

Securities and Exchange Commission within 180 days after entry of this Final Judgment.

Defendants may transmit payment electronically to the Commission, which will provide detailed ACH transfer/Fedwire instructions upon request. Payment may also be made directly from a bank account via Pay.gov through the SEC website at http://www.sec.gov/about/offices/ofm.htm. Defendants may also pay by certified check, bank

cashier’s check, or United States postal money order payable to the Securities and Exchange

Commission, which shall be delivered or mailed to

Enterprise Services Center Accounts Receivable Branch 6500 South MacArthur Boulevard Oklahoma City, OK 73169

and shall be accompanied by a letter identifying the case title, civil action number, and name of

this Court; the name of the Defendant making payment; and specifying that payment is made

pursuant to this Final Judgment.

Defendants shall simultaneously transmit photocopies of evidence of payment and case

identifying information to the Commission’s counsel in this action. By making the payment,

Defendants relinquish all legal and equitable right, title, and interest in such funds and no part of

the funds shall be returned to Defendants.

The Commission may enforce the Court’s judgment for disgorgement and prejudgment interest by moving for civil contempt (and/or through other collection procedures authorized by law) at any time after 180 days following entry of this Final Judgment. Defendants shall pay

Case 3:18-cv-01735-L Document 6-5 Filed 07/03/18 Page 7 of 9 PageID 103 post judgment interest on any delinquent amounts pursuant to 28 U.S.C. § 1961. The

Commission shall hold the funds, together with any interest and income earned thereon

(collectively, the “Fund”), pending further order of the Court.

The Commission may propose a plan to distribute the Fund subject to the Court’s approval. Such a plan may provide that the Fund shall be distributed pursuant to the Fair Fund provisions of Section 308(a) of the Sarbanes-Oxley Act of 2002. The Court shall retain jurisdiction over the administration of any distribution of the Fund. If the Commission staff determines that the Fund will not be distributed, the Commission shall send the funds paid pursuant to this Final Judgment to the United States Treasury.

Regardless of whether any such Fair Fund distribution is made, amounts ordered to be paid as civil penalties pursuant to this Final Judgment shall be treated as penalties paid to the government for all purposes, including all tax purposes. To preserve the deterrent effect of the civil penalty, Defendants shall not, after offset or reduction of any award of compensatory damages in any Related Investor Action based on a Defendant’s payment of disgorgement in this action, argue that a Defendant is entitled to, nor shall a Defendant further benefit by, offset or reduction of such compensatory damages award by the amount of any part of a Defendant’s payment of a civil penalty in this action (“Penalty Offset”). If the court in any Related Investor

Action grants such a Penalty Offset, the Defendant receiving the benefit of the offset shall, within 30 days after entry of a final order granting the Penalty Offset, notify the Commission’s counsel in this action and pay the amount of the Penalty Offset to the United States Treasury or to a Fair Fund, as the Commission directs. Such a payment shall not be deemed an additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed in this

Final Judgment. For purposes of this paragraph, a “Related Investor Action” means a private

Case 3:18-cv-01735-L Document 6-5 Filed 07/03/18 Page 8 of 9 PageID 104

damages action brought against a Defendant by or on behalf of one or more investors based on

substantially the same facts as alleged in the Complaint in this action.

VII.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Defendants’

Consents are incorporated herein with the same force and effect as if fully set forth herein, and

that Defendants shall comply with all of the undertakings and agreements set forth therein.

VIII.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, solely for purposes of

exceptions to discharge set forth in Section 523 of the Bankruptcy Code, 11 U.S.C. §523, the

allegations in the complaint are true and admitted by Defendants Greenlaw, Wissink, Etter, and

Obert, and further, any debt for disgorgement, prejudgment interest, civil penalty or other

amounts due by Defendants Greenlaw, Wissink, Etter, or Obert under this Final Judgment or any

other judgment, order, consent order, decree or settlement agreement entered in connection with

this proceeding, is a debt for the violation by Defendants of the federal securities laws or any regulation or order issued under such laws, as set forth in Section 523(a)(19) of the Bankruptcy

Code, 11 U.S.C. §523(a)(19).

IX.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that this Court shall retain jurisdiction of this matter for the purposes of enforcing the terms of this Final Judgment.

Case 3:18-cv-01735-L Document 6-5 Filed 07/03/18 Page 9 of 9 PageID 105

There being no just reason for delay, pursuant to Rule 54(b) of the Federal Rules of Civil

Procedure, the Clerk is ordered to enter this Final Judgment forthwith and without further notice.

So Ordered and signed, this ____ day of ______2018.

______UNITED STATES DISTRICT JUDGE

9 United Development Funding III, LP, United Development Funding IV, Hollis M. Greenl... Page 1 of 2

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ABOUT DIVISIONS & OFFICES ENFORCEMENT REGULATION EDUCATION FILINGS NEWS

ENFORCEMENT SEC Charges Real Estate Investment Funds

Accounting and Auditing Enforcement Releases and Executives for Misleading Investors

Administrative Litigation Release No. 24184/ July 3, 2018 Proceedings

ALJ Initial Decisions Securities and Exchange Commission v. United Development

ALJ Orders Funding III, LP, United Development Funding IV, Hollis M. Greenlaw, Benjamin L. Wissink, Theodore F. Etter, Cara D. Amicus / Friend of the Court Briefs Obert, and David A. Hanson, (N.D. Tex. filed July 3, 2018)

Fair Funds The Securities and Exchange Commiss on today announced charges against two real SEC Complaint estate investment funds and four executives in connection with their alleged roles in Information for Harmed misleading investors by failing to disclose that it could not pay ts distribut ons and was Investors using money from a newer fund to pay distributions to investors in the older fund. The SEC also charged a fifth executive for allegedly signing false SEC filings. Litigation Releases

Opinions and According to the SEC’s complaint, Texas-based United Development Funding (UDF) is a Adjudicatory Orders family of private and publicly-traded investment funds that deploys investor capital as loans to homebuilders and land developers. UDF allegedly solicited investors by Receiverships advertising annualized returns of up to 9.75 percent as well as regular distributions. According to the complaint, for almost five years, UDF did not tell investors that it lacked Stop Orders the monthly cashflow at times to cover investor distributions in one of its older funds, UDF III. Instead, to pay these distributions, the newer UDF IV fund loaned money to Trading Suspensions developers who had also borrowed money from UDF III. Rather than using those funds for development projects that were underwr tten by UDF IV, UDF directed the developers to use the loaned money to pay down their older loans from UDF III. In most of these cases, the developer never received the borrowed funds at all, and UDF simply transferred the money between funds so that UDF III could make the distributions to its investors. UDF III, UDF IV, and UDF executives Hollis Greenlaw, Benjamin Wissink, Theodore Etter, and Cara Obert knew or should have known that they had misled investors about the use of funds and the nature and status of loans made to developers.

The complaint also alleges that UDF III failed to appropriately impair loans in violation of GAAP, and that UDF IV did not adequately disclose the status of real property w thin ts portfolio. Finally, the complaint alleges that David Hanson signed false and misleading SEC filings and management representation letters w thout taking sufficient act ons to ensure the accuracy of or a sufficient basis for many of their representations.

Without admitting or denying the SEC’s allegations, Greenlaw, Wissink, Etter, and Obert agreed to pay $8.2 million in disgorgement, prejudgment interest, and civil penalties. Hanson agreed to pay a $75,000 civil penalty. The defendants consented to the entry of final judgments that order them to be permanently enjoined from violating Sections 17 (a)(2) and (3) of the Securities Act of 1933, and the disclosure, books and records and internal accounting control provisions of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Secur ties Exchange Act of 1934 and Rules 12b-20, 13a-1, and 13a-13 thereunder. Greenlaw and Obert consented to also be enjoined from violating the certification provisions of Exchange Act Rule 13a-14.

The SEC’s investigation was conducted by David Whipple, David Hirsch, Keith Hunter, and Keefe Bernstein, and supervised by Eric Werner of the SEC’s Fort Worth Regional Off ce.

Modified: July 5, 2018

https://www.sec.gov/litigation/litreleases/2018/lr24185.htm United Development Funding III, LP, United Development Funding IV, Hollis M. Greenl... Page 2 of 2

https://www.sec.gov/litigation/litreleases/2018/lr24185.htm Issues Raised by Hayman of a Ponzi-Like Real Estate Scheme In Evidence Hayman Statements Showing Ponzi-Like Scheme

1) Hayman Overview Presentation: Hayman detailed four ways in which new investor capital was used to funnel capital to existing investors; Hayman gave a descriptive example of each type of transaction (slides 4 and 5).

5) Hayman Northpointe Crossing Case Study: Hayman detailed in a 42-page case study how i) how UDF III financed a real estate development and then ii) UDF IV bought a participation interest in the loan and the balance owed to UDF III declined as the balance owed to UDF IV increased demonstrating that UDF IV capital was being used to repay UDF III investors. The SEC also inquired related to the treatment of this loan in 2011 – slides 16 and 17.

UDFexposed.com Hayman Presentation Slide SEC Press Release

Source in evidence: Slide 4: http://udfexposed.com/assets/content/UDF_Overview_Presentation_1_28_16.pdf Hayman Presentation Slide SEC Complaint

Source in evidence: Slide 7: http://udfexposed.com/assets/content/UDF_Overview_Presentation_1_28_16.pdf Case Study on Where Public Shareholder Capital Went (aka the Williamsburg Case Study)

UDFexposed.com Hayman Presentation Slide Hayman Presentation Slide

Source in evidence: Slides 2 and 5: http://udfexposed.com/assets/content/Case_Study_Williamsburg_4_1_16_.pdf Hayman Presentation Slide Hayman Presentation Slide

Source in evidence: Slides 14 and 15: http://udfexposed.com/assets/content/Case_Study_Williamsburg_4_1_16_.pdf Case Study on How the Scheme Works (aka the Shahan Prairie Case Study)

UDFexposed.com Hayman Presentation Slide Hayman Presentation Slide

Source in evidence: Slides 2 and 7: http://udfexposed.com/assets/content/Case_Study_on_How_the_Scheme_Works_Shahan_Prairie_1_28_16.pdf Hayman Presentation Slide Hayman Presentation Slide

Source in evidence: Slides 9 and 11: http://udfexposed.com/assets/content/Case_Study_on_How_the_Scheme_Works_Shahan_Prairie_1_28_16.pdf The Precarious Preston Manor (aka the Preston Manor Case Study)

UDFexposed.com Hayman Presentation Slide Hayman Presentation Slide

Source in evidence: Slides 16 and 28: http://udfexposed.com/assets/content/News__Research_-_The_Precarious_Preston_Manor_FINAL.pdf Hayman Presentation Slide Hayman Presentation Slide

Source in evidence: Slides 29 and 30: http://udfexposed.com/assets/content/News__Research_-_The_Precarious_Preston_Manor_FINAL.pdf The Northpointe Crossing Quandary (aka the Northpointe Crossing Case Study)

UDFexposed.com Hayman Presentation Slide Hayman Presentation Slide

Source in evidence: Slides 3 and 9: http://udfexposed.com/assets/content/News__Research_-_The_Northpointe_Crossing_Quandary_9.9.16_vF.pdf Hayman Presentation Slide Hayman Presentation Slide

Source in evidence: Slides 17 and 18: http://udfexposed.com/assets/content/News__Research_-_The_Northpointe_Crossing_Quandary_9.9.16_vF.pdf Hayman’s Letter to the Auditor (aka the Initial Anonymous Post) Hayman Commentary in Post Attached to Auditor Letter

Source in evidence: Hayman initial post, December 10, 2015 Live link: https://www.hvst.com/posts/a-texas-sized-scheme-wVvf4Y2w Hayman Letter to Auditor (Whitley Penn)

Source in evidence: Page 4, Hayman Letter to Auditor: http://udfexposed.com/assets/content/Hayman_Letter_to_Auditor.pdf Other Non-Ponzi Issues that SEC Found Similar to Hayman Disclosure Issues Concerning: Unimproved Real Property Hayman Overview Presentation Slide SEC Complaint

Source in evidence: Slide 14, http://udfexposed.com/assets/content/News__Research_-_Alpha_Ranch_10.5.16_vF.pdf Hayman Letter to Auditor (Whitley Penn)

Source in evidence: Pages 3 and 4, Hayman Letter to Auditor: http://udfexposed.com/assets/content/Hayman_Letter_to_Auditor.pdf Hayman Presentation on Alpha Ranch

Source in evidence: Slides 3 and 4, http://udfexposed.com/assets/content/News__Research_-_Alpha_Ranch_10.5.16_vF.pdf Hayman Presentation on Alpha Ranch (continued)

Source in evidence: Slides 7 and 8, http://udfexposed.com/assets/content/News__Research_-_Alpha_Ranch_10.5.16_vF.pdf Disclosure Issues Concerning: Impairment Charges Hayman Letter to Auditor SEC Complaint

Source in evidence: Page 2 & 3, Hayman Letter to Auditor: http://udfexposed.com/assets/content/Hayman_Letter_to_Auditor.pdf