By Brad Rosen, J.D.
The SEC and Timbervest LLC have come to terms ending their acrimonious and high-stakes litigation dating back to September 2013. According to the Commission order in this matter, the SEC found that Timbervest violated Section 204 of the Advisers Act, which generally requires an investment adviser to make and keep accurate books and records as required by the Commission. Timbervest, while neither admitting nor denying the Commission’s findings, agreed to cease and desist from committing or causing any violations and any future violations of the applicable provision of the Advisor Act (In the Matter of Timbervest, LLC, December 21, 2018).
All further appellate and agency litigation put to rest. The resolution of this matter puts an end to ongoing appellate litigation between the parties. In September of this year, Timbervest, LLC took a step towards restarting its battle against the SEC by asking the D.C. Circuit to move forward with oral arguments on a statute of limitations argument. On November 19, 2018, the D.C. Circuit issued a decision remanding this matter back to the Commission for a new hearing before a new ALJ, or the Commission itself, in accordance with the Supreme Court’s decision in Lucia v. SEC.
In light of the D.C, Circuit’s November 19, 2018 opinion setting aside the SEC’s September 17, 2015 opinion and order, the order resolving this matter provides that the SEC’s opinions and orders dated August 22, 2016, September 17, 2015, and all prior orders of the SEC and its Administrative Law Judges in this matter will no longer have any force or effect.
SEC’s underlying claim. The SEC’s order also summarizes the agency’s underlying claim. It notes that in September 2006, Timbervest entered into a contract to sell to a third party an Alabama timberland property held by New Forestry, LLC, a fund managed by Timbervest that held pension assets of a large, publicly held company. That deal closed in October 2006, and in December 2006, Timbervest Partners, LP (“TVP”), another Timbervest managed fund, offered to repurchase the Alabama timberland from the same third party for approximately 8% more than the price for which New Forestry had sold it. That transaction closed in February 2007.
The Commission found that Timbervest failed to maintain books and records regarding the disclosure of the sale of the Alabama property and its repurchase by another fund to New Forestry or to TVP. The SEC also found that Timbervest failed to maintain sufficient books and records regarding the disclosure to New Forestry of two brokerage fees that it paid in connection with the sale of the Alabama property and another property. Timbervest’ operations have ceased. Timbervest is a Georgia limited liability company with its principal place of business in Atlanta, Georgia. The company was established in 1995, and during the period relevant to its litigation with the SEC, managed approximately $1.2 billion in timber-related investments. Timbervest registered as an investment adviser with the SEC on October 5, 1995. According to the order, Timbervest ceased its operations in May 2017.