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Guttilla Murphy Anderson, P.C.Patrick M. Murphy (Ariz. No. 002964)5415 E. High St., Suite 200Phoenix, Arizona 85054Email: [email protected]: (480) 304-8300Fax: (480) 304-8301
Attorneys for the Receiver
IN THE SUPERIOR COURT FOR THE STATE OF ARIZONA
IN AND FOR THE COUNTY OF MARICOPA
State of Arizona,
Plaintiff,
v.
Sherman Eugene Unkefer, III, et al;
In Personam Defendants.
))))))))))
Cause No. CV2014-006765
ORDER APPROVING RECEIVER’S STATUS REPORT DATED SEPTEMBER
27, 2018
RE: PETITION NO. 39
(Assigned to Judge Pamela Gates)
The Receiver having filed Petition No. 39, Petition for Order Approving Receiver’s
Status Report Dated September 27, 2018, and the Court having considered same, and it
appearing to the Court that the matters requested by Petition No. 39 are reasonable, just and
appropriate:
NOW, THEREFORE, IT IS HEREBY ORDERED approving the Receiver’s Status
Report dated September 27, 2018, filed by the Receiver as Exhibit “1” to Petition No. 39.
Dated this ___ day of ____________, 2018.
______________________________Judge of the Superior Court
1928-001(347001)
Granted as SubmittedGranted as SubmittedGranted as SubmittedGranted as Submitted***See eSignature page***
Chris DeRose, Clerk of Court*** Electronically Filed ***
K. Ballard, Deputy12/10/2018 8:00:00 AM
Filing ID 9955109
Granted as SubmittedGranted as SubmittedGranted as SubmittedGranted as Submitted
/S/ Pamela Gates Date: 12/6/2018_____________________________Judicial Officer of Superior Court
eSignature Page 1 of 1eSignature Page 1 of 1eSignature Page 1 of 1eSignature Page 1 of 1
Filing ID: 9955109 Case Number: CV2014-006765 Original Filing ID: 9769336_______________________________________________________________________________
ENDORSEMENT PAGEENDORSEMENT PAGEENDORSEMENT PAGEENDORSEMENT PAGECASE NUMBER: CV2014-006765 SIGNATURE DATE: 12/6/2018
E-FILING ID #: 9955109 FILED DATE: 12/10/2018 8:00:00 AM
BENJAMIN L HODGSON
GREGORY A STEIN
LEE D STEIN
MARK A HOLMGREN
PATRICK M MURPHY
RAYMOND A HANNA
REID CHARLES PIXLER
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(480
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-830
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Guttilla Murphy Anderson, P.C. Patrick M. Murphy (Ariz. No. 002964) 5415 E. High St., Suite 200 Phoenix, Arizona 85054 Email: [email protected] Phone: (480) 304-8300 Fax: (480) 304-8301 Attorneys for the Receiver
IN THE SUPERIOR COURT OF THE STATE OF ARIZONA
IN AND FOR THE COUNTY OF MARICOPA
State of Arizona,
Plaintiff,
v.
Sherman Eugene Unkefer, III, et al;
In Personam Defendants.
))))))))))
Cause No. CV2014-006765
PETITION NO. 39
PETITION FOR ORDER APPROVING RECEIVER'S STATUS REPORT DATED SEPTEMBER 27, 2018
(Assigned to the Honorable Pamela Gates)
Michael J. FitzGibbons, as the court appointed Receiver, respectfully petitions the
Court as follows:
1. On April 16, 2014, this Court entered its Order Appointing Receiver, which
appointed Michael J. FitzGibbons as Receiver of Mango Trust; X-1, LLC fka X-1, Inc.;
Magic Wand Services, LLC; Occidental Resources Group, LP; Occidental Management,
LLC; E.A.P. Trust; International Marketing Systems; G.M.S. LLC; Catshaker Family Trust,
Inc.; SLADUR; Black Rock, Inc.; and X-1 Global, LLC. (“Receivership Order”). On April
22, 2014 the Court entered is Order Appointing Michael J. Fitzgibbons Receiver, which
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(480
) 304
-830
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appointed Michael J. FitzGibbons as Receiver of the Receivership Entities. These two orders
are referred to hereafter as the “Receivership Order”.
2. The Receiver has prepared and files herewith the Report of the Receiver dated
September 27, 2018, which is attached hereto as Exhibit 1. The attached Report of the
Receiver includes a statement of cash receipts and disbursements from inception through June
30, 2018, and a combined balance sheet as of June 30, 2018.
WHEREFORE, the Receiver respectfully requests that the Court enter an order
approving the Report of the Receiver dated June 30, 2018, attached hereto as Exhibit 1.
Respectfully submitted this 5th day of October, 2018. GUTTILLA MURPHY ANDERSON, P.C. /s/Patrick M. Murphy Patrick M. Murphy Attorneys for the Receiver
1928-001(346990)
Report of the Receiver
Mango Trust et al.
Submitted By: Michael J. FitzGibbons, Receiver
September 27, 2018
Exhibit 1
1
1) Procedural
Receivership Court (Court): Superior Court of the State of Arizona in and for the
County of Maricopa
Cause #: CV2014-006765
Receivership Order: April 16, 2014
Order Appointing Receiver: April 22, 2014
Order Service Date: May 23, 2014
Receiver: Michael J. FitzGibbons
Counsel to Receiver: Guttilla Murphy Anderson, P.C.
Other Professionals: FitzGibbons and Company, Inc.
Henry and Horne, LLC
2) Operating Receivership Entities and Status
A) X-1, LLC: X-1 remains the primary operating company. Effective
December 31, 2015, the final Mango Trust 1041 tax return was filed.
All remaining Mango Trust bank accounts were collapsed into X-1.
Distributorship Sale Agreement: The Buyer defaulted under the
Distributorship Sale Agreement. Xango, the guarantor, had all of its
assets seized by purported secured creditors. Receiver has now filed a
collection action against the Buyer. See Exhibit A.
B) Magic Wand Services, LLC (Magic Wand): Closed in August 2015.
C) Occidental Resources Group, LP/Occidental Management, LLC (ORG):
Closed in August 2015.
D) Mango Trust: Closed with filing of December 31, 2015 1041 return.
2
3) Non- Operating and Previously Closed Receivership Entities: As previously
reported to the Court, all other legal entities subject to this Receivership Order
were either closed at outset of the receivership or closed during this
receivership.
4) Employees: None
5) Distributions to Defendants: The Receivership Order prohibited asset
distributions to certain individuals without approval of the Court, however, this
restriction was modified by a settlement subsequently approved by the Court as
described below.
Settlement: Plaintiff settled with all defendants and stipulated to the entry of
the Amended Final Order and In Rem Judgment, entered on March 20, 2015
(“Judgment”). The Judgment requires that certain payments be made by the
Receiver:
a) Laundy Unkefer receives 10% of each payment received by the Receiver from
the sale of the XANGO distributorship sale discussed above at 2 (a), not to
exceed $300,000. Ms. Unkefer has been paid $ 166,541 through 6-30-181.
b) The Receiver paid $55,000 to counsel for the co-trustees of the Mango Trust
for Trustee fees, legal fees and expenses incurred.
6) Other
A) X-1: X-1 continues to be the vehicle for receipt of distributorship sale
proceeds and expense payments. X-1 is now a non-taxable entity since all
of its assets were forfeited to the State of Arizona pursuant to this Court’s
Order on March 20, 2015 (Forfeiture Order). See Exhibit A.
B) Core Resources: The Core Resources $100,000 investment is valueless
as a result of its Bankruptcy filing dated June 13, 2016. We have not
investigated the circumstances for the investment.
C) Federal and State Tax Recoveries: The Forfeiture Order resulted in the
forfeiture of the Trust Res to the State effective in 2008. The Receiver
through consultation with his tax advisors concluded
1 Buyer has now defaulted. See 2 (A)
3
the tax recovery was limited to the Res conveyed at the date of the
Forfeiture Order. Amended returns for 2014 and 2015 were filed and
$150,114 in tax refunds were collected.
D) Victim Compensation: On August 15, 2016 the Receiver filed his
Report on Requests for Compensation in accordance with this Court’s
Order re: Petition 16.
Significant effort was undertaken to locate victims. The Receiver’s efforts
resulted in the filing dated October 24, 2016 (Receiver’s Report on
Objections). See Exhibit B.
The Court approved a $1.0 million distribution on May 27, 2017, which we
paid $965,201 to and on behalf of Victims2. We initially withheld $34,799,
pending the receipt of additional documents from certain of the
Victims/Victim Representatives. On June 7, 2018, the Court approved an
additional $24,972 distribution3 for a total distribution of $1,024,972. We
are currently withholding $32,310 of the $1.025 million pending the
receipt of additional documents from certain of the Victims/Victim
Representatives.
Since this initial pro-rata payment, we have adjusted our victim listing to
reflect the following:
Number of Victims
Court Approved Compensation
Compensation Paid
Compensation Pending
609 $7,947,716 $992,662 $32,309
There will be at least one additional distribution. The amount of this final
distribution is dependent on the pending collection litigation discussed at
2A above.
7) Receivership Fees & Costs: Set forth at Exhibit C is a schedule of all fees and
costs paid from the receivership estate to the Receiver and his professionals in
accordance with the orders of the Court.
2 Order Re: Petition 27 3 Order Re: Petition 35
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8) Financial Statements at June 30, 2018:
a) The Receivership Cash Flow ending June 30, 2018 is attached at Exhibit D.
b) The Balance Sheet can be found at Exhibit E.
9) Closure of Mango Trust Receivership: The Distributorship payout originally
extended to June 2018. The Receiver had hoped to terminate the receivership
within a few months of receiving the final Distributorship payment. However,
with collection litigation now pending, closure is now dependent on this
collection litigation’s conclusion.
WOOD BALMFORTH LLC
Mary Anne Q. Wood (3539)
60 East South Temple, Suite 500
Salt Lake City, Utah 84111
Telephone: (801) 366-6060
Facsimile: (801) 366-6061
Email: [email protected]
Attorneys for Plaintiff Michael J. FitzGibbons
IN THE THIRD JUDICIAL DISTRICT COURT
IN AND FOR SALT LAKE COUNTY, STATE OF UTAH
MICHAEL J. FITZGIBBONS, as Receiver for
The X-1, LLC,
Plaintiff,
v.
ARMANDO DEGUZMAN, an individual;
PATRICIA DEGUZMAN, an individual; and
JOHN DOES 1-20.
Defendants.
COMPLAINT
Case No. 180905881
Judge: Adam Mow
Plaintiff Michael J. FitzGibbons, as Receiver for the X-1, LLC (“X-1”) by and through
his undersigned counsel, brings this complaint (the “Complaint”) against Defendants Armando
DeGuzman and Patricia DeGuzman for causes of action alleges as follows:
PARTIES, JURISDICTION, AND VENUE
1. Plaintiff is a resident of Scottsdale, Arizona.
2. Upon information and belief, Defendants are residents of Vail, Arizona.
3. This Court has jurisdiction over the parties and the subject matter of this action
pursuant to Utah Code Ann. § 78A-5-102.
4. Venue is proper in this Court pursuant to Utah Code Ann. § 78B-3-304 and 307.
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DISCOVERY DESIGNATION
5. Pursuant to Rule 26(c) of the Utah Rules of Civil Procedure, Plaintiff
designates this case as a Tier 3 discovery.
FACTUAL ALLEGATIONS
6. On April 22, 2014, Michael J. FitzGibbons was appointed as Receiver for the
Mango Trust and all of its entities, including but not limited to, X-1.
7. On approximately April 23, 2014, Defendants entered into a Distributor
Purchase Agreement (“Agreement”) whereby X-1, LLC, Laundy Unkefer, Alexandria M.
Unkefer Raynes, Derrick Raynes, Sherman E. Unkefer (collectively defined in the Agreement
as “SELLERS”) agreed to sell to Defendants certain XanGo LLC (“XanGo”) distributorships
for Three Million Dollars ($3,000,000.00), through monthly commission payments
(“Payments”), as set forth in the Agreement.
8. Pursuant to Paragraph 3 of the Agreement, all Payments are made to X-1 and are
calculated at a rate of seventy percent (70%) of gross monthly commissions earned, or not less
than a total of Five Hundred Thousand Dollars ($500,000.00) for each full twelve-month period.
9. Pursuant to Paragraph 6 of the Agreement, the Defendants personally guaranteed
all financial obligations under the Agreement and XanGo agreed to pay any payment deficiency
or any remaining financial obligations due on or by the last day of the 49th month from the
execution of the Agreement.
10. Pursuant to Paragraph 15 of the Agreement, in the event of a default in any
Payments when due, the SELLERS may declare all principal and interest due and payable
immediately, plus a default interest rate.
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11. Pursuant to Paragraph 27, all claims, actions, disputes, or otherwise arising out of
the Agreement shall be heard in the state courts of Utah in Salt Lake City.
12. On or about May 5, 2017, XanGo and Zija International Inc. made representations
to the public that they had joined forces in a merger and/or strategic partnership.
13. For example, on May 5, 2017, Zija announced on its website “BREAKING
NEWS: XANGO BECOMES PART OF ZIJA INTERNATIONAL.”
14. On the same day, an industry website Business for Home published an article
quoting XanGo CEO and Chairman Aaron Garrity: “As many of you know, the network
marketing business is rapidly changing. Zija International will carry forth the next phase of
XANGO’s amazing journey—the result is a powerful company that could serve as home to the
greatest distributor leaders in all of network marketing.” Zija’s CEO, Ryan Palmer, was also
quoted: “We’re very excited for the momentum we have been able to create by adding the mega-
brand XANGO to our family. . . . Ken, myself, and the full Zija International team are excited to
share our company’s story and offerings with a distributor workforce who fueled the global
growth of one of the most recognized brands in the history of the industry.”
15. On May 6, 2017, XanGo and Zija representatives conducted an hour-long webinar
posted by “XanGo by Zija University” on YouTube entitled: “BIG NEWS Webinar: XANGO by
ZIJA Strategic Partnership.”
16. Defendants personally participated in the May 6, 2017 webinar promoting the
merger/strategic partnership to XanGo distributors. For example, after touting the
merger/strategic partnership, Defendant Armando DeGuzman stated “XanGo is Zija, Go!”
17. During the same webinar, Mr. Garrity stated that he had “just finished an amazing
week, a beautiful week . . . . It is a wonderful day for XanGo, XanGo nation and I will tell you
4
why, because XanGo is twice as strong today as it was yesterday.” Describing Zija’s projected
2017 growth, Mr. Garrity stated: “Every single person on this call and XanGo nation is going to
be a huge part of that growth strategy . . .We are going to take the world by storm, that’s all there
is to it. So, what does this mean for you? Your products, everything we have in XanGo, you got
it. You’ve got it in every country we operate.”
18. After the merger, XanGo’s distributors, including the Defendants and their
distributor downlines were transferred to Zija.
19. XanGo’s products are now sold through Zija distributors.
20. Patricia DeGuzman is currently listed as a Triple Black Diamond distributor on
Zija’s website.
21. After May 2017, Defendants stopped making any payments pursuant to the
Agreement.
FIRST CLAIM FOR RELIEF
(Breach of Contract)
22. The preceding paragraphs are incorporated herein by reference.
23. X-1 and the Defendants entered into a valid and binding Agreement pursuant to
which Defendants agreed to make Payments to X-1.
24. X-1 performed all of the conditions, duties and obligations under the Agreement.
25. Defendants breached the Agreements by, among other things: failing to make the
promised payments.
26. As a direct and proximate result, X-1 has been injured and suffered damages in an
amount to be determined at trial.
5
SECOND CLAIM FOR RELIEF
(Breach of Implied Covenant of Good Faith and Fair Dealing)
27. The preceding paragraphs are incorporated herein by reference.
28. X-1 and the Defendants entered into a valid and binding Agreement pursuant to
which Defendants agreed to make Payments to X-1.
29. A covenant of good faith and fair dealing inheres in every contract, including the
Agreement.
30. Defendants were obligated to deal with X-1 fairly and in good faith and not to
intentionally or purposely do anything to destroy or injure their right to receive the fruits of the
Agreement, and to realize X-1’s justified expectations relating to the Agreement.
31. Defendants breached their duty of good faith and fair dealing by, among other
things: transferring their distributorships and downlines to Zija and by selling XanGo products
through Zija, while refusing to make the required Payments under the Agreement.
32. As a direct result of Defendants’ breach of their duty to act in good faith and deal
fairly, X-1 has been damaged in an amount to be proven at trial.
THIRD CAUSE OF ACTION
(Unjust Enrichment)
38. The preceding paragraphs are incorporated herein by reference.
39. In the alternative, X-1 conferred a benefit on Defendants by transferring the
XanGo distributorships to Defendants.
40. Defendants were aware of and accepted the benefits conferred by X-1 under
such circumstances that failing to fully compensate X-1 would be inequitable and would allow
Defendants to retain the benefit of the distributor downlines by selling XanGo products
through Zija while refusing pay fair value.
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41. As a result, X-1 is entitled to judgment and damages against Defendants in such
sums as may be proven at trial.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff requests judgment against Defendants as follows:
A. A judgment awarding Plaintiff all general and compensatory damages in an
amount to be proven at trial;
B. A judgment awarding Plaintiff attorneys’ fees and court costs;
C. A judgment awarding Plaintiff prejudgment and post-judgment interest, as
applicable, at the highest lawful rate; and
D. A judgment awarding such further and additional legal or equitable relief as the
Court deems appropriate.
DATED this 15th day of August, 2018.
WOOD BALMFORTH LLC
/s/ Mary Anne Q. Wood
Mary Anne Q. Wood
60 East South Temple Street, Suite 500
Salt Lake City, Utah 84111
Telephone: (801) 366-6060
Attorneys for Plaintiffs
Mango Trust Receivership
Fees Paid to Professionals
May 2014 to June 30, 2018
Grand
2014 2015 2016 2017 2018 Total
FitzGibbons and Company 97,913 136,581 190,988 107,266 5,005 537,754
Guttilla Murphy Anderson PC 55,726 56,335 40,853 32,186 5,611 190,712
Henry & Horne, LLP 9,160 25,875 57,043 - 92,078
Gilardi - 5,000 17,697 - 22,697
Carpenter, Hazelwood, Delgado, Bolen, PC - 55,000 - - 55,000
Wood Balmforth LLC - - - - 975 975 -
Total 162,799 278,792 306,581 139,452 11,591 899,215
Exhibit C
Mango Trust in Receivership
Cash Recepts and Disbursements Inception to Date
Period Ending June 30, 2018
2014 (a) 2015 2016 2017 2018 Total
Beginning Balance January 1 38,686 963,776 1,165,009 1,447,230 559,552 38,686
Receipts
Gary Road House Sale 569,620 - - - 569,620
Rev - 13th Street Property - 13,400 - - 13,400
Interest Income - 4,621 94,576 48,074 529 147,799
Revenues 402,802 544,481 417,215 166,400 1,530,897
Tax refunds - 187,299 126,600 30,179 344,078
Derrick Raynes Payments - 6,000 1,699 - 7,699
Deposit from Wells Fargo - 147 - - 147
Net Sale of Investments 141,251 - - - 141,251
Net Sale of Assets 19,326 - - - 19,326
Dividends Received 279 - - - 279
Misc. Income - 2,237 (7) - 2,230
Total Receipts 1,133,278 758,185 640,083 244,652 529 2,776,727
Disbursements
Victim Distributions - - - 967,728 23,475 991,203
Bank Fees 236 592 348 446 30 1,652
Supplies - - - 566 566
Outside Services - - - 1,849 1,849
Payroll taxes 19,380 - - - 19,380
Wells Fargo Pmt to MOB 147 - - 147
Insurance 4,380 1,306 684 1,290 1,290 8,950
Postage 457 5,176 - 5,633
Misc. Expense 3,378 822 2,733 - 914 7,847
Tax Expense - - - - -
Federal 18,015 180,098 (44,784) - 153,329
State - - 36,281 - 36,281
L. Unkefer payments - 94,738 50,803 21,000 166,541
Professional - 5,000 17,697 - 22,697
Legal Fees 55,726 134,986 23,191 32,186 246,089
Receiver Fees 97,913 136,581 190,990 107,266 5,003 537,753
Tax Prep Fees 9,160 2,225 74,743 - 6,548 92,676
Total Disbursements 208,189 556,952 357,862 1,132,330 37,260 2,292,592
Net Cash Flow 925,090 201,233 282,221 (887,678) (36,732) 484,134
Ending Balance 963,776 1,165,009 1,447,230 559,552 522,821 522,821
(a) May 24, 2014 Incepting
Exhibit D
Mango Trust in Receivership
Balance Sheet
30-Jun-18
Unaudited
Assets
Cash 522,822
Note Receivable 1,469,102
Interest Accrued on Dist, sale 273,367
Various Receivables 26,551
Allowance for Bad Dept (299,918)
Total Assets 1,991,924
Liabilites
Accrued Payables 28,361
Deferred Revenue 1,335,642
Due Laundy Unkefer 133,460
Total Liabilities 1,497,463
Net Worth 494,462
Exhibit E
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