A bit more than a month ago I wrote about a civil case against a Malibu Media attorney Jason Aaron Kotzker (NVD 15-cv-01512). Plaintiff, the Federal Trade Commission, alleged that two entities, which were largely controlled by Kotzker (Sequoia One LLC and Gen X Marketing Group LLC), had been collecting consumer data from payday loan applicants and subsequently selling this data to con artists. The FTC alleged that Kotzker and his co-conspirators (all of whom were conditionally settled since) scammed about seven million dollars from already broke citizens.

At that time I questioned why it was a civil case given the gravity of the allegations. I also speculated that a criminal prosecution would follow.

It turned out that my questions were not unreasonable. Today I learned from Mr. Kotzker himself that a criminal investigation against him is underway: Mr. Kotzker first learned about it in early December, 2014, when he received a Grand Jury subpoena addressed to Sequoia One, LLC.

Kotzker tells this story in a motion to stay civil action pending resolution of criminal proceedings filed on 10/2/2015:

In light of this ongoing federal criminal investigation, Kotzker should not be forced to choose between defending himself in this civil action brought by one federal government agency (the FTC) and preserving his Fifth Amendment rights in the ongoing federal criminal investigation being conducted by other federal government agencies (U.S. Postal Inspection Service, the U.S. Department of Justice, and the U.S. Attorney’s Office for the District of Nevada). To protect his Fifth Amendment rights, a stay of this civil proceeding is required during the pendency of ongoing parallel federal criminal investigation.

From this motion we learn that after the subpoena mentioned above, the following events took place:

On January 7, 2015, a Postal Inspector interviewed Kotzker at his residence in Highlands Ranch, Colorado for two hours, asking questions related to the civil action allegations.

On January 22, Kotzker was questioned for 5 ½ hours by an Assistant US Attorney, DOJ attorneys and a Postal Inspector.

On January 30, DOJ extended a plea offer to Kotzker, which would require Kotzker to plead guilty to a federal felony. I assume that the offer was not accepted.

We are closely watching another criminal case against a Malibu Media attorney, Paul Nicoletti. Recently I learned that 8 months prior to his indictment, Mr. Nicoletti was offered a plea bargain, which he declined.

I will be keeping an eye on Pacer and report if/when Mr. Kotzker is indicted.

Updates

12/29/2015

On 10/15 FTC responded to Kotzker’s motion. On 10/22 Kotzker replied. Two months later, on 12/23 Judge Hoffman denied the motion to stay and set the Answer deadline:

IT IS THEREFORE ORDERED that Defendant Jason A. Kotzker’s Motion to Stay Civil Action Pending Resolution of Criminal Proceedings (ECF No. 22) is DENIED.

IT IS FURTHER ORDERED that Defendant Kotzker must answer or otherwise respond to the Government’s Complaint (ECF No. 1) on or before January 18, 2016.

2/5/2016

Today Kotzker answered to the FTC’s complaint by invoking the Fifth Amendment right against self-discrimination in each paragraph, then adding some vague affirmative defenses, and finally asking the Court to dismiss the case and pay attorney’s fees to Kotzker:

12/7/2016

This saga came to its finale on 11/2/2016: Kotzker and FTC stipulated a suspended $7,135,992 judgment. $43,000 payment must be made within 120 days, and the rest will be hanging above Jason’s head for years: the suspension can be lifted at any time if any of the order’s many conditions (prohibition to handle other people’s sensitive data, accuracy of financial statements, 10 years of compliance reporting etc.) are violated.

Note that this order only ends the civil lawsuit. I don’t’ know if any criminal investigation is still active: time will tell. Also, the Colorado Office of Regulatory Counsel investigations are independent of any civil or criminal actions, and given the gravity of Kotzker’s conduct, the probability of him being disbarred is close to 100%.

Thanks to Raul for keeping an eye on this case.

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