You're viewing Docket Item 50 from the case Securities and Exchange Commission v. Jenkins. View the full docket and case details.

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Case 2:09-cv-01510-GMS Document 50 Filed 06/23/10 Page 1 of 13

JOHN W. SPIEGEL (Pro Hac Vice)
[email protected]
GREGORY J. WEINGART (Pro Hac Vice)
[email protected]
MELINDA E. LEMOINE (Pro Hac Vice)
[email protected]
MUNGER, TOLLES & OLSON LLP
355 South Grand Avenue
Thirty-Fifth Floor
Los Angeles, CA 90071-1560
(213) 683-9100
Telephone:
Facsimile:
(213) 687-3702

Attorneys for Defendant
MAYNARD L. JENKINS

UNITED STATES DISTRICT COURT

DISTRICT OF ARIZONA

SECURITIES AND EXCHANGE
COMMISSION,

Plaintiff,

v.

MAYNARD L. JENKINS,

Defendant.

CASE NO. CV-09-01510-PHX-GMS

DEFENDANT MAYNARD L. JENKINS’
ANSWER TO COMPLAINT

Judge: The Honorable G. Murray Snow

Defendant Maynard L. Jenkins answers the Complaint filed by Plaintiff the

Securities and Exchange Commission (“SEC”) as follows:

SUMMARY1

1.

In response to Paragraph 1, Jenkins admits that he was the chairman

and chief executive officer of CSK Auto Corporation (“CSK”). The remaining allegations

of Paragraph 1 consist of conclusions of law to which no responsive pleading is required.

Except as expressly admitted and to the extent Paragraph 1 requires a response, Mr.


1 The headings from the Complaint are incorporated herein solely for ease of reference. To the
extent the headings purport to contain any allegations to which a response is required, Mr. Jenkins
denies each and every such allegation.
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DEFENDANT MAYNARD L. JENKINS’
ANSWER TO COMPLAINT

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Case 2:09-cv-01510-GMS Document 50 Filed 06/23/10 Page 2 of 13

Jenkins is without sufficient knowledge or information to form a belief as to the truth of

the allegations in Paragraph 1, and on that basis denies each and every allegation

contained therein.

2.

Paragraph 2 consists of conclusions of law to which no responsive

pleading is required. To the extent that a response is required, Jenkins denies the

allegations of Paragraph 2.

3.

In response to Paragraph 3, Jenkins admits that CSK was a retailer of

automotive parts and accessories in the United States. Jenkins further admits that CSK

purchased products from vendors that manufacture automotive parts and accessories.

Except as expressly admitted, Mr. Jenkins is without sufficient knowledge or information

to form a belief as to the truth of the allegations in Paragraph 3, and on that basis denies

each and every allegation contained therein.

4.

Paragraph 4 consists of conclusions of law to which no responsive

pleading is required. To the extent that a response is required, Mr. Jenkins is without

sufficient knowledge or information to form a belief as to the truth of the allegations in

Paragraph 4, and on that basis denies each and every allegation contained therein.

5.

Paragraph 5 consists of conclusions of law to which no responsive

pleading is required. To the extent that a response is required, Mr. Jenkins is without

sufficient knowledge or information to form a belief as to the truth of the allegations in

Paragraph 5, and on that basis denies each and every allegation contained therein.

6.

Paragraph 6 consists of conclusions of law to which no responsive

pleading is required. To the extent a response is required, Mr. Jenkins admits that CSK

filed an accounting restatement as part of its Form 10-K annual report for fiscal year 2004,

and that he was one of the individuals that signed that Form 10-K annual report. Mr.

Jenkins avers that the Form 10-K for fiscal year 2004 is the best evidence of its content.

Except as expressly admitted and averred, Mr. Jenkins is without sufficient knowledge or

information to form a belief as to the truth of the allegations in Paragraph 6, and on that

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basis denies each and every allegation contained therein.
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DEFENDANT MAYNARD L. JENKINS’
ANSWER TO COMPLAINT

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Case 2:09-cv-01510-GMS Document 50 Filed 06/23/10 Page 3 of 13

7. Mr. Jenkins admits that CSK announced an investigation into certain

accounting practices on March 27, 2006. Mr. Jenkins avers that that public announcement

is the best evidence of its content. Mr. Jenkins also admits that CSK filed a Form 10-K

for fiscal year 2005 that included restated financial information. Mr. Jenkins avers that

the form 10-K for fiscal year 2005 is the best evidence of its content. Except as expressly

admitted and averred, Mr. Jenkins is without sufficient knowledge or information to form

a belief as to the truth of the allegations in Paragraph 7, and on that basis denies each and

every allegation contained therein.

8. Mr. Jenkins admits that he received compensation from CSK during

the specified period of May 5, 2003 through May 2, 2005. Mr. Jenkins further admits that

he earned a profit from the exercise of his fully vested and expiring stock options during

the specified period. Except as expressly admitted, Mr. Jenkins denies the allegations of

Paragraph 8.

9.

Paragraph 9 consists of conclusions of law to which no responsive

pleading is required. To the extent a response is required, Mr. Jenkins denies the

allegations of Paragraph 9.

JURISDICTION AND VENUE

10. Mr. Jenkins admits that this Court has jurisdiction over this action.

11. Mr. Jenkins admits that venue is proper in this district. The

remaining contentions in Paragraph 11 are conclusions of law as to which no responsive

pleading is required. To the extent a response is required, Mr. Jenkins denies the

allegations of Paragraph 11.

THE DEFENDANT

12. Mr. Jenkins admits that he served as CSK’s chief executive officer

and chairman of the board from January 1997 until his retirement in August 2007. Except

as expressly admitted, Mr. Jenkins denies the allegations of Paragraph 12.

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DEFENDANT MAYNARD L. JENKINS’
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Case 2:09-cv-01510-GMS Document 50 Filed 06/23/10 Page 4 of 13

RELATED PARTIES

13. Mr. Jenkins admits that during the time he served as chairman and

chief executive officer, CSK had its principal executive offices in Phoenix, Arizona. Mr.

Jenkins further admits that stock in CSK was publicly traded on the New York Stock

Exchange. Mr. Jenkins also admits that CSK operated auto parts stores under names

including Checker Auto Parts, Schucks Auto Supply, and Kragen Auto Parts. Mr. Jenkins

further admits that CSK became part of O’Reilly Automotive, Inc. in 2008. Except as

expressly admitted, Mr. Jenkins is without knowledge or information sufficient to form a

belief as to the truth of the allegations of Paragraph 13, and on that basis denies each and

every allegation included therein.

14.

Paragraph 14 consists of conclusions of law as to which no

responsive pleading is required. To the extent a response is required, Mr. Jenkins is

without knowledge or information sufficient to form a belief as to the truth of the

allegations of Paragraph 14, and on that basis denies each and every allegation in

Paragraph 14.

15. Mr. Jenkins admits that Martin G. Fraser was CSK’s chief operating

officer and president until September 2006. Mr. Jenkins further admits that Mr. Fraser

was a defendant in both a civil case brought by the SEC (the “SEC Action”) and a

criminal case pending in the District of Arizona (the “DOJ Action”). Mr. Jenkins avers

that the complaint and indictment referenced in Paragraph 15 are the best evidence of their

content. Except as expressly admitted and averred, Mr. Jenkins is without knowledge or

information sufficient to form a belief as to the truth of the allegations of Paragraph 15,

and on that basis denies each and every allegation therein.

16. Mr. Jenkins admits that Don W. Watson was CSK’s chief financial

officer, senior vice president, and treasurer until September 2005. He further admits that

Mr. Watson served as CSK’s chief administrative officer and senior vice president from

September 2005 until his termination in October 2006. He further admits that Watson is a

named defendant in the SEC Action and the DOJ Action. Except as expressly admitted,
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DEFENDANT MAYNARD L. JENKINS’
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Case 2:09-cv-01510-GMS Document 50 Filed 06/23/10 Page 5 of 13

Mr. Jenkins is without knowledge or information sufficient to form a belief as to the truth

of the allegations of Paragraph 16, and on that basis denies each and every allegation

therein..

17. Mr. Jenkins admits that Edward W. O’Brien was CSK’s controller

and vice president until his termination in September 2006. Mr. Jenkins further admits

that Mr. O’Brien is a named defendant in the SEC Action, and that Mr. O’Brien pled

guilty to obstruction of justice in connection with the DOJ Action. Except as expressly

admitted, Mr. Jenkins is without knowledge or information sufficient to form a belief as to

the truth of the allegations of Paragraph 17, and on that basis denies each and every

allegation therein..

18. Mr. Jenkins admits that Gary M. Opper was CSK’s director of credit

and receivables, reporting to O’Brien, until his termination in September 2006. Mr.

Jenkins further admits that Mr. Opper is a named defendant in the SEC Action, and that

Mr. Opper pled guilty to obstruction of justice in connection with the DOJ Action. Except

as expressly admitted, Mr. Jenkins is without knowledge or information sufficient to form

a belief as to the truth of the allegations of Paragraph 18, and on that basis denies each and

every allegation therein.

BACKGROUND: CSK’S “LET’S WORK TOGETHER” PROGRAM

19. Mr. Jenkins admits that CSK had various vendor allowance

programs, and that one was called “Let’s Work Together” or “LWT.” Mr. Jenkins further

admits that LWT agreements covered a one-year period, which was generally referred to

as the “program year.” Mr. Jenkins admits that the LWT agreements varied. Except as

expressly admitted, Mr. Jenkins denies each and every allegation in Paragraph 19.

20. Mr. Jenkins is without knowledge or information sufficient to form a

belief as to the truth of the allegations of Paragraph 20, and on that basis denies each and

every allegation therein.

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Case 2:09-cv-01510-GMS Document 50 Filed 06/23/10 Page 6 of 13

SUMMARY OF CSK’S FRAUDULENT SCHEME

I. The Fraudulent Scheme to Avoid Vendor Allowance Write Offs

21. Mr. Jenkins is without knowledge or information sufficient to form a

belief as to the truth of the allegations of Paragraph 21, and on that basis denies each and

every allegation therein.

22.

Paragraph 22 consists of conclusions of law as to which no

responsive pleading is required. To the extent Paragraph 22 requires a response, Mr.

Jenkins is without knowledge or information sufficient to form a belief as to the truth of

the allegations of Paragraph 22, and on that basis denies each and every allegation therein.

23.

Paragraph 23 consists of conclusions of law as to which no

responsive pleading is required. To the extent Paragraph 23 requires a response, Mr.

Jenkins is without knowledge or information sufficient to form a belief as to the truth of

the allegations of Paragraph 23, and on that basis denies each and every allegation therein.

24.

Paragraph 24 consists of conclusions of law as to which no

responsive pleading is required. To the extent Paragraph 24 requires a response, Mr.

Jenkins is without knowledge or information sufficient to form a belief as to the truth of

the allegations of Paragraph 24, and on that basis denies each and every allegation therein.

25.

Paragraph 25 consists of conclusions of law as to which no

responsive pleading is required. To the extent Paragraph 25 requires a response, Mr.

Jenkins is without knowledge or information sufficient to form a belief as to the truth of

the allegations of Paragraph 25, and on that basis denies each and every allegation therein.

A. Fiscal Year 2002

26.

Paragraph 26 consists of conclusions of law as to which no

responsive pleading is required. To the extent Paragraph 26 requires a response, Mr.

Jenkins is without knowledge or information sufficient to form a belief as to the truth of

the allegations of Paragraph 26, and on that basis denies each and every allegation therein.

B. Fiscal Year 2003

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27.

Paragraph 27 consists of conclusions of law as to which no

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Case 2:09-cv-01510-GMS Document 50 Filed 06/23/10 Page 7 of 13

responsive pleading is required. To the extent Paragraph 27 requires a response, Mr.

Jenkins is without knowledge or information sufficient to form a belief as to the truth of

the allegations of Paragraph 27, and on that basis denies each and every allegation therein.

28.

Paragraph 28 consists of conclusions of law as to which no

responsive pleading is required. To the extent Paragraph 28 requires a response, Mr.

Jenkins is without knowledge or information sufficient to form a belief as to the truth of

the allegations of Paragraph 28, and on that basis denies each and every allegation therein.

29.

Paragraph 29 consists of conclusions of law as to which no

responsive pleading is required. To the extent Paragraph 29 requires a response, Mr.

Jenkins is without knowledge or information sufficient to form a belief as to the truth of

the allegations of Paragraph 29, and on that basis denies each and every allegation therein.

30.

Paragraph 30 consists of conclusions of law as to which no

responsive pleading is required. To the extent Paragraph 30 requires a response, Mr.

Jenkins is without knowledge or information sufficient to form a belief as to the truth of

the allegations of Paragraph 30, and on that basis denies each and every allegation therein.

C. Fiscal Year 2004

31.

Paragraph 31 consists of conclusions of law as to which no

responsive pleading is required. To the extent Paragraph 31 requires a response, Mr.

Jenkins is without knowledge or information sufficient to form a belief as to the truth of

the allegations of Paragraph 31, and on that basis denies each and every allegation therein.
II. As A Result Of Its Fraud, CSK’s Forms 10-K For Fiscal Years 2002, 2003,
And 2004 Were In Material Non-Compliance With Financial Reporting
Requirements Under The Securities Laws

32.

Paragraph 32 contains conclusions of law as to which no responsive

pleading is required. To the extent Paragraph 32 requires a response, Mr. Jenkins admits

that CSK filed Forms 10-K for fiscal years 2002, 2003, and 2004. Mr. Jenkins avers that

the Forms 10-K for fiscal years 2002, 2003 and 2004 are the best evidence of their

content. Mr. Jenkins further admits that he is one of the individuals who signed those

annual reports. Mr. Jenkins also admits that he signed accompanying Sarbanes-Oxley
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Case 2:09-cv-01510-GMS Document 50 Filed 06/23/10 Page 8 of 13

certifications, to the extent such certifications were included with the specified Forms 10-

K.

33.

Paragraph 33 consists of conclusions of law as to which no

responsive pleading is required. Mr. Jenkins avers that the notes in the financial

statements included with CSK’s Forms 10-K for fiscal years 2002, 2003, and 2004 are the

best evidence of their content. Except as expressly averred and to the extent Paragraph 33

requires a response, Mr. Jenkins is without knowledge or information sufficient to form a

belief as to the truth of the allegations of Paragraph 33, and on that basis denies each and

every allegation therein.

34.

Paragraph 34 consists of conclusions of law as to which no

responsive pleading is required. To the extent Paragraph 34 requires a response, Mr.

Jenkins is without knowledge or information sufficient to form a belief as to the truth of

the allegations of Paragraph 34, and on that basis denies each and every allegation therein.

35.

Paragraph 35 consists of conclusions of law as to which no

responsive pleading is required. To the extent Paragraph 35 requires a response, Mr.

Jenkins is without knowledge or information sufficient to form a belief as to the truth of

the allegations of Paragraph 35, and on that basis denies each and every allegation therein.

III. CSK Was Required to Prepare Two Accounting Restatements

36. Mr. Jenkins admits that CSK filed annual reports in its Forms 10-K

for fiscal years 2002, 2003, and 2004. Paragraph 36 consists of conclusions of law as to

which no responsive pleading is required. Except as expressly admitted and to the extent

Paragraph 36 requires a response, Mr. Jenkins is without knowledge or information

sufficient to form a belief as to the truth of the allegations of Paragraph 36, and on that

basis denies each and every allegation therein.

37.

Paragraph 37 consists of conclusions of law as to which no

responsive pleading is required. To the extent Paragraph 37 requires a response, Mr.

Jenkins is without knowledge or information sufficient to form a belief as to the truth of

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the allegations of Paragraph 37, and on that basis denies each and every allegation therein.
10953396.1
DEFENDANT MAYNARD L. JENKINS’
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Case 2:09-cv-01510-GMS Document 50 Filed 06/23/10 Page 9 of 13

38. Mr. Jenkins admits that CSK restated its financials twice in

connection with its vendor allowance accounting. He further admits that CSK’s Form 10-

K for fiscal year 2004 included the first of these two restatements. Mr. Jenkins avers that

CSK’s Form 10-K for fiscal year 2004 is the best evidence of its content. Except as

expressly admitted and averred, Mr. Jenkins is without knowledge or information

sufficient to form a belief as to the truth of the allegations of Paragraph 38, and on that

basis denies each and every allegation therein.

39.

Paragraph 39 includes conclusions of law as to which no responsive

pleading is required. To the extent Paragraph 39 requires a response, Mr. Jenkins is

without knowledge or information sufficient to form a belief as to the truth of the

allegations of Paragraph 39, and on that basis denies each and every allegation therein.

40. Mr. Jenkins admits that CSK restated financials in its Form 10-K for

fiscal year 2004. Mr. Jenkins also admits that CSK publicly announced an investigation

into various accounting practices on March 27, 2006. He admits that CSK announced that

investigation was substantially complete as of September 28, 2006. Mr. Jenkins avers that

the Form 10-K for fiscal year 2004, the public announcement of an investigation on

March 27, 2006, and the announcement of the substantial completion of that investigation

as of September 28, 2006 are the best evidence of their content. Except as expressly

admitted and averred, Mr. Jenkins is without knowledge or information sufficient to form

a belief as to the truth of the allegations of Paragraph 40, and on that basis denies each and

every allegation therein.

41. Mr. Jenkins admits that CSK filed a second restatement as part of its

Form 10-K for fiscal year 2005, and that he was one of the individuals who signed that

Form 10-K. Mr. Jenkins avers that the Form 10-K for fiscal year 2005 is the best

evidence of its content. Except as expressly admitted and averred, Mr. Jenkins denies the

each and every allegation in Paragraph 41.

IV. Jenkins Received Bonuses and Profits From the Sale of CSK Stock

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42. Mr. Jenkins admits that between May 5, 2003 and May 2, 2006 he

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Case 2:09-cv-01510-GMS Document 50 Filed 06/23/10 Page 10 of 13

received compensation from CSK. Mr. Jenkins further admits that, between May 5, 2003

and May 2, 2006, he realized profits from the exercise of his fully vested and expiring

options on CSK stock. Except as expressly admitted, Mr. Jenkins denies each and every

allegation in Paragraph 42.

CLAIM FOR RELIEF

FAILURE TO REIMBURSE

43.

Paragraph 43 contains no allegations as to which a responsive

pleading is required. To the extent a response is required, Mr. Jenkins refers to his

responses to Paragraphs 1-42 above.

44.

Paragraph 44 consists of conclusions of law as to which no

responsive pleading is required. To the extent a response is required, Mr. Jenkins is

without knowledge or information sufficient to form a belief as to the truth of the

allegations of Paragraph 44, and on that basis denies each and every allegation therein.

45.

Paragraph 45 consists of conclusions of law as to which no

responsive pleading is required. To the extent a response is required, Mr. Jenkins is

without knowledge or information sufficient to form a belief as to the truth of the

allegations of Paragraph 45, and on that basis denies each and every allegation therein.

46.

Paragraph 46 consists of conclusions of law as to which no

responsive pleading is required. To the extent a response is required, Mr. Jenkins is

without knowledge or information sufficient to form a belief as to the truth of the

allegations of Paragraph 46, and on that basis denies each and every allegation therein.

47.

Paragraph 47 consists of conclusions of law as to which no

responsive pleading is required. To the extent a response is required, Mr. Jenkins is

without knowledge or information sufficient to form a belief as to the truth of the

allegations of Paragraph 47, and on that basis denies each and every allegation therein.

48.

Paragraph 48 consists of conclusions of law as to which no

responsive pleading is required. To the extent a response is required, Mr. Jenkins denies

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each and every allegation in Paragraph 48.
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Case 2:09-cv-01510-GMS Document 50 Filed 06/23/10 Page 11 of 13

AFFIRMATIVE DEFENSES

First Affirmative Defense

(Failure to State a Claim)

1.

The Complaint fails to state a claim upon which relief may be granted.

Second Affirmative Defense

(Statute of Limitations)

2.

The SEC’s claims are barred in whole or in part by applicable statutes of

limitation.

Third Affirmative Defense

(Estoppel)

3.

The SEC’s claims are barred by the doctrine of estoppel.

Fourth Affirmative Defense

(Waiver)

4.

The SEC’s claims are barred by the doctrine of waiver.

Fifth Affirmative Defense

(Bad Faith)

5.

The SEC is barred from recovery of damages or any other relief because it

or the party it seeks to “reimburse” acted in bad faith.

Sixth Affirmative Defense

(No Damages)

6.

Neither the SEC nor the party the SEC purports to seek to “reimburse” have

suffered any damages.

Seventh Affirmative Defense

(Unjust Enrichment)

7.

The SEC cannot recover damages because any such recovery would be a

windfall resulting in unjust enrichment to the SEC or to the party the SEC purports to seek

to “reimburse”.

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Case 2:09-cv-01510-GMS Document 50 Filed 06/23/10 Page 12 of 13

Eighth Affirmative Defense

(Unclean Hands)

8.

The SEC’s claims are barred or abated substantially because the SEC or the

party the SEC claims to seek to “reimburse” is guilty of unclean hands.

Ninth Affirmative Defense

(Laches)

9.

The SEC’s claims are barred, in whole or in part, by the doctrine of laches.

Tenth Affirmative Defense

(Adequacy of Remedy At Law)

10.

The SEC’s claim for “reimbursement” fails because there exists an adequate

remedy at law.

Eleventh Affirmative Defense

(Breach of Contract)

11.

The SEC’s claims constitute a breach of contract.

Twelfth Affirmative Defense

(Failure to Join an Indispensable Party)

12.

The SEC’s claims fail because it has failed to join an indispensable party.

Thirteenth Affirmative Defense

(Forfeiture)

13.

The SEC’s claims fail because the complaint seeks an impermissible

forfeiture.

Fourteenth Affirmative Defense

(Accord and Satisfaction)

14.

The SEC’s claim for “reimbursement” fails because there has been an

accord and satisfaction.

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Case 2:09-cv-01510-GMS Document 50 Filed 06/23/10 Page 13 of 13

Fifteenth Affirmative Defense

(Lack of Real Party in Interest)

15.

The SEC’s claim for “reimbursement” fails for lack of a real party in interest

who either is a party to or may be made a party to the claim.

Sixteenth Affirmative Defense

(Usury)

16.

The SEC’s claim fails because it constitutes usury, or amounts to an

usurious penalty.

Seventeenth Affirmative Defense

(Unconstitutionality)

17.

The SEC’s claim fails because the relief it seeks violates the federal and

state constitutions.

Eighteenth Affirmative Defense

(Set-off)

18.

The SEC’s alleged claims for “reimbursement” are barred, in whole or in

part, by Mr. Jenkins’ right to a set-off.

WHEREFORE, Defendant Maynard L. Jenkins prays judgment as follows:

1.

That the SEC take nothing by its Complaint and that the Complaint be

dismissed in its entirety with prejudice; and

2.

That Mr. Jenkins be awarded his costs and attorneys’ fees incurred herein.

DATED: June 23, 2010

Munger, Tolles & Olson LLP

JOHN W. SPIEGEL
GREGORY J. WEINGART
MELINDA E. LEMOINE

By: /s/ John W. Spiegel

JOHN W. SPIEGEL

Attorneys for Defendant
MAYNARD L. JENKINS

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DEFENDANT MAYNARD L. JENKINS’
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