PCAOB Sanctions Whitley Penn LLP, UDF Engagement Partners and Engagement Quality Review Partner

Posted April 17, 2020

“The Board is imposing these sanctions based on its findings that: (1) Powell and Babb violated PCAOB rules and standards 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.”

Dallas homebuilder files federal racketeering and fraud lawsuit against Moayedi, Greenlaw and UDF

Posted April 15, 2020

Click here to view Megatel's allegations which are consistent with Hayman's research.  Below is an excerpt from the pleading.  

"For its part, UDF began operating as a Ponzi-like scheme, using freshly-raised capital in newer funds to pay investors in older funds. To implement this scheme, a newer UDF fund (e.g. UDF V) would loan money to Centurion—ostensibly for a specific land-development project—that Centurion would use to repay loans it had received from an older UDF fund (e.g. UDF III). The older UDF fund, in turn, used this money to pay distributions to its investors, thereby concealing the failure of the loans made by the older fund. Each new loan originated from a newer fund to pay an older fund generated millions of dollars in asset management and origination fees for the UDF Defendants, which starved the funding for development projects for which Megatel had contracted."

June 10, 2019 (Must Read): US Federal Judge Barbara Lynn Denies UDF Management’s Motion to Dismiss

Posted July 19, 2019

"Defendants also argue that LOF’s Offering Memorandum discloses that LOF 'expect[s] to make Investments with affiliates of [UMTH].' (ECF No. 32 at 20). Although the Offering Memorandum and the Partnership Agreement discuss that conflicts of interest may arise between LOF and its affiliates, neither document waives or exculpates Defendants from bad faith."

"Further, Plaintiff’s Complaint sufficiently pleads that the UDF Entity Defendants knowingly participated in the alleged breach. (See ECF No. 1 ¶¶ 39, 52) (alleging that Defendants caused LOF to enter into the loan participation agreement with UDF III while 'knowing that UDF III’s financial condition was precarious, that it could not pay distributions to its investors and that UDF III would not be able to fully repay any loan from LOF . . . .')"

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