FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 1, 1999
Performance Asset Management Fund III, Ltd., A California Limited Partnership
(Exact name of Registrant as specified in its charter)
California 0-28764 33-0526128
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
4100 Newport Place, Suite 400, Newport Beach, California 92660
(Address of principal executive offices)
Registrant's telephone number, including area code: 949.797.3400.
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Item 1. Changes in Control of Registrant. Not applicable.
Item 2. Acquisition or Disposition of Assets. Not applicable.
Item 3. Bankruptcy or Receivership. On or about November 16, 1998, the State
of California Department of Corporations ("Department") filed an
action in Los Angeles County Superior Court, which action is entitled
People of the State of California v. Vincent Galewick, et al. and
which action has been assigned case number BC 200771, pursuant to the
provisions of which the Department sought to have appointed by that
court a receiver for the affairs of the Registrant and several related
entities, including (i) Performance Development, Inc., a California
corporation and the General Partner of the Registrant, and (ii)
Performance Capital Management, Inc., a California corporation, which
services, collects, purchases and sells portfolios of distressed
indebtedness acquired by and on behalf of the Registrant and several
other similar California limited partnerships. In the complaint filed
by the Department in that action, the Department alleged that certain
affiliates of the Registrant, i.e., Income Network Company, a
California corporation and the Placement Manager for the offer and
sale of limited partnership interests in the Registrant; and Vincent
E. Galewick, President of Performance Development, Inc. and
Performance Capital Management, Inc., caused to be omitted from
certain documents filed with the Department, but not distributed to
prospective investors, certain material information, which, in the
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opinion of the Department, constituted fraud. As a result, the
Department has concluded that a receiver was necessary for the affairs
of the Registrant and its several related entities. The Registrant and
the other defendants in that litigation matter deny all of the
allegations of wrongdoing made by the Department in that litigation
matter. On December 15, 1998, the court denied the request of the
Department for the appointment of such a receiver.
The complaint filed by the Department in that matter requests that (i)
the Registrant make a rescission offer to each and every one of its
limited partners; (ii) the Registrant make full and complete
restitution to each and every limited partner of the Registrant
accepting that rescission; (iii) the Registrant disgorge its
unlawfully obtained profits; (iv) the Registrant pay the State of
California $2,500.00 for each offer and sale of securities and for
each instance of fraud committed by the Registrant in the offer and
sale of securities. The Registrant denies that it has committed,
directly or indirectly, fraud in the offer and sale of securities.
Therefore, the Registrant opposes any order for rescission or
restitution and any order regarding payment of any amount whatsoever
to the State of California.
On December 15, 1998, the Los Angeles Superior Court issued an
preliminary injunction regarding the Registrant pursuant to which the
Registrant and its General Partner, agents, employees, attorneys, and
those persons in active concert or participation with any of those
persons are enjoined temporarily from, directly or indirectly, (i)
transferring, changing, dissipating, converting, concealing or
otherwise disposing of in any manner any funds, assets, claims or
other property or asset or interest therein, owned or controlled by,
or in the possession or custody of the Registrant; (ii) destroying,
mutilating, concealing, transferring, altering or otherwise disposing
of in any manner any books, records, computer records, computer
programs, computer files, computer printouts, correspondence,
memoranda, brochures or any other writings or documents of any kind
pertaining in any manner to Registrant; or (iii) transferring,
assigning, selling, hypothecating or otherwise disposing of any
securities, including any investment contracts or other securities or
interest in the Registrant. The Registrant has complied and will
continue to comply with the provisions of that preliminary injunction.
On or about December 23, 1998, the Registrant filed a petition with
the United States Bankruptcy Court, Central District of California,
Santa Ana Division, for reorganization, pursuant to Chapter 11 of the
federal Bankruptcy Code. That action has been assigned case number SA
98-27105-RA. In addition to the Registrant, certain entities
affiliated with the Registrant also filed similar actions in the same
court, including, but not limited to, Performance Development, Inc.
The reorganization filing by Performance Development, Inc. was
assigned case number SA 98-27042-RA. The Registrant and its General
Partner are continuing in the operation and management of the
Registrant's business as debtors-in-possession. Also filing a similar
reorganization action was Performance Capital Management, Inc. The
reorganization filing by Performance Capital Management, Inc. was
assigned case
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number SA 98-27043-RA.
The filing by the Registrant of that petition in that Bankruptcy Court
preempted the appointment of a receiver for the Registrant. The
enforcement nature of the action filed by the Department in the Los
Angeles County Superior Court was not stayed by the filing of that
bankruptcy petition; and, therefore, the enforcement aspect of that
litigation matter will be ongoing in the Los Angeles County Superior
Court.
Many of the motions and applications to be presented to the Bankruptcy
Court will involve matters which ordinarily fall within the parameters
of notices required to be given to all creditors, but which will not
directly affect or impact the majority of those creditors or the
various interest holders.
The plan of reorganization contemplated by the Registrant involves
reorganizing the Registrant; Performance Capital Management, Inc.;
Performance Development, Inc.; and four other California limited
partnerships with and into a Delaware corporation, Performance Asset
Management Company ("PAMCO"), as a result of which the creditors and
interest holders of the Registrant; Performance Development, Inc.;
Performance Capital Management, Inc. and those other California
limited partnerships shall receive, in exchange for their claims and
interests, shares of PAMCO's common stock, which, as a result of the
confirmation of the reorganization plan, should be considered
"unrestricted" securities.
The Registrant and the related debtors will provide notice to all
creditors and interest holders, including trade creditors, employees,
independent contractors and the limited partners of the Registrant and
the other California limited partnerships, of (i) the hearing to
consider approval of disclosure statements; (ii) the hearing to
consider confirmation of the reorganization plan; (iii) the notices
regarding the date fixed for filing proofs of claim or interests
against the estates (bar date); (iv) the hearing regarding any
dismissal or conversion of the bankruptcy filings; (v) the hearings
regarding any matters directly affecting a particular creditor,
interest holder or entity; and (vi) such other hearings during the
course of those cases as the Court may require specifically.
The date that an order confirming that plan of reorganization will be
entered is unknown. In fact, no guaranty or assurance can be provided
that such plan of reorganization will be confirmed by the bankruptcy
court.
The Department may oppose any plan of reorganization. Moreover, the
Department has concluded that the action brought against the
Registrant and those related entities is a police power action and,
therefore, not subject to the provisions of any automatic stay which
may be available for the benefit of the Registrant and those related
entities. On December 29, 1998, the bankruptcy court appointed James
Joseph, Attorney-at- Law, as the Trustee of the Registrant and those
related entities.
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Item 4. Changes in Registrant's Certifying Accountant. Not applicable.
Item 5. Other Events.
Item 6. Resignations of Registrant's Directors. Not Applicable.
Item 7. Financial Statements and Exhibits. Not Applicable.
Item 8. Change in Fiscal Year. Not Applicable.
Item 9. Sales of Equity Securities Pursuant to Regulation S. Not Applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: February 1, 1999 Performance Asset Management Fund III, Ltd.,
A California Limited Partnership
By: Performance Development, Inc.,
a California corporation
By: _______________________________
Vincent E. Galewick
Its: President
Approved: _________
JJ
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