A federal court has been asked to OK a Chattanooga Lookouts request to buy the share of the team owned by a Georgia man accused in a massive Ponzi scheme for $1.87 million.
The court-appointed receiver in the U.S. Securities and Exchange Commission's action against businessman John J. Woods sought an order relative to the 20.1% interest he owns in the minor league baseball team.
A. Cotten Wright, the receiver, said in court papers that payment of the price in connection with Woods' removal as a member of the Lookouts conforms with the team's operating agreement.
"While this case is in its early stages, the receiver is of the view that liquidating the Woods interest at this juncture would serve to capture the value of that asset," she said.
Jason Freier, managing owner and CEO of the Lookouts, said Friday that Woods told him to "do what you need to do that's in the best interest of the team and investors."
"John and I had a conversation about this. He was gracious," Freier said.
He said he spoke to the receiver and the SEC about obtaining Woods' shares, which are "in limbo in a sense."
Freier said the receiver recognized the team's right to obtain the share and the SEC has no objection. He said the next step is gaining the court's approval and he believes there's "a good chance" that will happen.
The Lookouts CEO said he then plans to bring multiple people into ownership of the team.
"The plan is ... to bring in local owners," Freier said. "I'm trying to bring in people connected to and tied to Chattanooga."
An announcement of the identify of the additions to the ownership group depends on when the court takes action, he said.
In August, federal regulators charged Woods with "running a massive Ponzi scheme for over a decade" that has defrauded more than 400 investors.
The SEC charged Woods, of Marietta, Georgia, and the Chattanooga-based Southport Capital investment firm with six counts of securities fraud.
The complaint said Woods' Ponzi scheme, which goes by the name Horizon Private Equity, collected more than $110 million from investors with promises of 6-7% rates of return. But the complaint said the investments "are worth far too little for there to be any realistic prospect that the Ponzi scheme will be able to pay back existing investors their principal, let alone the promised returns."
In 2014, Woods became one of the minority owners of the Chattanooga Lookouts when the group bought the team from longtime owner Frank Burke. Woods also has been an investor in several local real estate projects.
"The Lookouts have no relationship with any of the entities mentioned in the complaint, and we do not expect our operations or future plans to be affected by this development," Freier said.
Woods' Atlanta attorney, David Chaiken, said "the SEC's allegations present only one side of the story."
"We look forward to presenting Mr. Woods' side in court, through the judicial process," Chaiken said.
Contact Mike Pare at firstname.lastname@example.org or 423-757-6318. Follow him on Twitter @MikePareTFP.