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					DISTRICT COURT, CITY AND COUNTY OF
   DENVER, COLORADO

1437 Bannock Street
Denver, CO 80202
FRED J. JOSEPH,
Securities Commissioner for the State of Colorado,

Plaintiff,

v.

XL CAPITAL PARTNERS, INC., a Nevada
Corporation, H. ALAN BIRD, DAVID BURDINE,
KEVIN BURDINE, JAY HAWPE, LES HOUGHTON,
DONAVON JOHNSON, GREG MILLS, RICHARD
MUTCH, DAVID NEWTON, individually and d/b/a
D.E.N. VENTURES, INC., BRIAN PETERSON,
individually and d/b/a SECURED FINANCIAL
COMPANIES, INC., BENJAMIN RAPHAEL,
individually and d/b/a PRO VISION INVESTMENTS,
INC., and DOUG SCOTT, individually and d/b/a DOUG
SCOTT, INC.,

Defendants,

XL PROPERTIES, INC., a Nevada corporation,

Relief Defendant.
                                                     t COURT USE ONLY t
JOHN W. SUTHERS, Interim Attorney General            Case No.: 2004 CV 9931
PAUL L. VORNDRAN, First Assistant Attorney
  General*                                           Courtroom 1
ROBERT J. SHILLIDAY III
Assistant Attorney General*
1525 Sherman Street, 5th Floor
Denver, CO 80203
(303) 866-5286
*Counsel of Record
     FIRST AMENDED COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF
       Plaintiff, Fred J. Joseph, Securities Commissioner for the State of Colorado, by and
through his counsel, the Office of the Colorado Attorney General, and for his First Amended
Complaint against the Defendants, alleges as follows:

                                       JURISDICTION

         1.    Plaintiff Fred J. Joseph is the Securities Commissioner for the State of
Colorado (the “Commissioner”) and is authorized, pursuant to § 11-51-703, C.R.S. (2004), to
administer all provisions of the Colorado Securities Act (the “Act”). Pursuant to § 11-51-
602, C.R.S. (2004), the Commissioner is authorized to bring this action against the
Defendants and to seek monetary relief, temporary, preliminary and permanent injunctive
relief, and other equitable relief against the Defendants for their alleged violations of the Act.

                                    THE HEDGE FUNDS

       2.     Vision Fund, L.P. (“Vision Fund”) is a hedge fund organized as a limited
partnership under the laws of the State of Nevada on October 10, 2002 with its principal
place of business at 14725 Gleneagle Drive, Colorado Springs, Colorado 80921.

       3.     Vision Fund II, L.P. (“Vision Fund II”) is a hedge fund organized as a limited
partnership under the laws of the State of Nevada on June 6, 2003 with its principal place of
business at 14725 Gleneagle Drive, Colorado Springs, Colorado 80921.

        4.     The XL Velocity Fund, L.P. (“XL Velocity Fund”) is a hedge fund organized
as a limited partnership under the laws of the State of Nevada on June 20, 2003 with its
principal place of business at 14725 Gleneagle Drive, Colorado Springs, Colorado 80921.

       5.      The Vision Fund, Vision Fund II, and the XL Velocity Fund are collectively
referred to herein as the “Hedge Funds.” Beginning in approximately October 2002 and
continuing to at least November 2004 (hereafter, “the relevant period”), the Hedge Funds
received millions of dollars from the investing public.

                            THE XL CAPITAL DEFENDANTS

       6.     Defendant XL Capital Partners, Inc. (“XL Capital”) is a corporation organized
under the laws of the State of Nevada on September 26, 2002 with its principal place of
business at 14725 Gleneagle Drive, Colorado Springs, Colorado 80921. Defendant XL
Capital provides asset management services to the Hedge Funds. Defendant XL Capital is
the general partner of the Hedge Funds.



                                                2
       7.      Defendant H. Alan Bird (“Bird”) is an adult male individual whose last known
address is 14725 Gleneagle Drive, Colorado Springs, Colorado 80921. Defendant Bird was
the President of Defendant XL Capital and, at all times relevant hereto, was an officer,
director, agent, member, partner, shareholder, employee, agent, representative, and/or control
person of Defendant XL Capital. Defendant Bird was responsible for the day-to-day
management of Defendant XL Capital, including overall investment, risk management,
marketing, sales, and client relationship services for Defendant XL Capital. On information
and belief, Defendant Bird received approximately $920,000 from Hedge Fund investors
during the relevant period.

        8.     Defendant David Newton d/b/a D.E.N. Ventures, Inc., a Colorado corporation
with its principal place of business at 16855 Remington Road, Colorado Springs, Colorado
80908 (collectively, “Newton”), is an adult male individual whose last known address is
16855 Remington Road, Colorado Springs, Colorado 80908. On information and belief,
Defendant Newton jointly had day-to-day responsibility for management of Defendant XL
Capital with Defendant Bird and, at all times relevant hereto, was an officer, director,
member, partner, shareholder, employee, agent, representative, and/or control person of
Defendant XL Capital. Defendants Bird and Newton collectively managed XL Capital, and
each had a different role in the operation of XL Capital. In addition, Defendants Bird and
Newton each had primary responsibility for executing different but complementary parts of a
scheme to defraud Hedge Fund investors. On information and belief, Defendant Newton
received approximately $448,000 from Hedge Fund investors during the relevant period.

      9.     Defendants XL Capital, Bird, and Newton are collectively referred to herein as
the “XL Capital Defendants.”

                               THE SALES DEFENDANTS

       10.    Defendant David Burdine is an adult male individual whose last known
address is 14960 Pristine Drive, Colorado Springs, Colorado 80921, and is the father-in-law
of Defendant H. Alan Bird. On information and belief, Defendant David Burdine received
approximately $363,000 from Hedge Fund investors during the relevant period.

       11.    Defendant Kevin Burdine is an adult male individual whose last known
address is 215 Luxury Lane, Colorado Springs, Colorado 80921, and is the brother-in-law of
Defendant H. Alan Bird. On information and belief, Defendant Kevin Burdine received
approximately $56,000 from Hedge Fund investors during the relevant period.

       12.    Defendant Jay Hawpe is an adult male individual whose last known address is
515 Fox Run Circle, Colorado Springs, Colorado 80921. On information and belief,
Defendant Jay Hawpe received approximately $3,400 from Hedge Fund investors during the
relevant period.
                                              3
        13.   Defendant Les Houghton is an adult male individual whose last known address
is 1435 Paula Drive, Apopka, Florida 32703. On information and belief, Defendant Les
Houghton received approximately $28,000 from Hedge Fund investors during the relevant
period.

       14.     Defendant Donavon Johnson is an adult male individual whose last known
address is 15030 Raton Road, Colorado Springs, Colorado 80921. On information and belief,
Defendant Donavon Johnson received approximately $14,000 from Hedge Fund investors
during the relevant period.

        15.    Defendant Greg Mills is an adult male individual whose last known address is
6470 Apricot Lane, Colorado Springs, Colorado 80918. On information and belief,
Defendant Greg Mills received approximately $41,000 from Hedge Fund investors during
the relevant period.

        16.    Defendant Richard Mutch is an adult male individual whose last known
address is 14380 Vollmer Road, Colorado Springs, Colorado 80908. On information and
belief, Defendant Richard Mutch received approximately $16,000 from Hedge Fund
investors during the relevant period.

       17.     Defendant Brian Peterson is an adult male individual whose last known
address is 3210 Cathedral Spires, Colorado Springs, Colorado 80904. Defendant Brian
Peterson is an investment adviser representative who provides financial and consulting
services to his clients through Secured Financial Companies, Inc. d/b/a Secure Financial
Group with a principal place of business at 90 South Cascade Avenue, Suite 1230, Colorado
Springs, Colorado 80903. On information and belief, Defendant Brian Peterson received
approximately $16,500 from Hedge Fund investors during the relevant period.

        18.     Defendant Benjamin Raphael d/b/a Pro Vision Investments, Inc., a Nevada
corporation with its principal place of business at 1045 Pepper Lane, Fernly, Nevada 89408
(collectively, “Raphael”) is an adult male individual whose last known address is 9300
Southern Breeze, Orlando, Florida 32836. On information and belief, Defendant Benjamin
Raphael received approximately $449,000 from Hedge Fund investors during the relevant
period.

       19.     Defendant Doug Scott d/b/a Doug Scott, Inc., a Colorado corporation with its
principal place of business at 6550 Alberta Drive, Colorado Springs, CO 80918 (collectively,
“Scott”) is an adult male individual whose last known address is 3734 Oak Meadow Drive,
Colorado Springs, Colorado 80921. On information and belief, Defendant Doug Scott
received approximately $686,500 from Hedge Fund investors during the relevant period.



                                             4
       20.     Defendants Dave Burdine, Kevin Burdine, Jay Hawpe, Les Houghton,
Donovan Johnson, Greg Mills, Richard Mutch, Brian Peterson, Benjamin Raphael, and Doug
Scott are collectively referred to herein as the “Sales Defendants.”

                                  RELIEF DEFENDANT
       21.     Relief Defendant XL Properties, Inc. (“XL Properties”) is a corporation
organized under the laws of the State of Nevada on August 26, 2003 with its principal place
of business at 1045 Pepper Lane, Fernley, Nevada 89408. Defendants Bird and Newton
were officers, directors, members, partners, shareholders, employees, agents, representatives,
and/or control persons of Relief Defendant XL Properties. On information and belief, Relief
Defendant XL Properties received approximately $300,000 of investor funds from the XL
Capital Defendants without giving value in exchange for receiving these funds.

                          SUMMARY OF THE HEDGE FUNDS

        22.    A hedge fund, like a mutual fund, is a pooled investment vehicle that is
privately organized and administered by professional investment managers. However, unlike
mutual funds, hedge funds may employ a variety of trading strategies, such as the purchase
of options and other derivatives, short selling, and the use of leverage, in order to maximize
investor profits while simultaneously offsetting or “hedging” potential losses. The Hedge
Funds launched by Defendant Bird used many of these trading strategies available only to
hedge funds. For example, the Vision Fund purportedly used a “collar” strategy to reduce
investor risk. A collar strategy involves the purchase of stocks that meet predetermined
criteria together with call and put options near the purchase price to maximize returns while
simultaneously minimizing potential losses.
        23.    The partnership agreements name Defendant Bird as the “Principal” of XL
Capital with power to bind both the Hedge Funds and XL Capital, as general partner of the
Hedge Funds. Defendant Bird made all investment decisions on behalf of the Hedge Funds
and executed all purchases and sales of securities on behalf of the Hedge Funds. Defendant
Bird is the sole signatory for the bank accounts of Defendant XL Capital and is the only
person authorized to purchase and sell securities in the trading accounts maintained by the
Hedge Funds. In addition, beginning in at least June 2003, Defendant Newton maintained
the books and records for Defendant XL Capital and the Hedge Funds and issued monthly
statements to each investor summarizing investment returns.

        24.    To invest in the Hedge Funds, prospective investors purchased limited
partnership interests in each Hedge Fund. However, as limited partners, these investors had
no right to make investment decisions or to manage the securities portfolios of the Hedge
Funds. Capital contributions from the investors were placed by Defendant Bird into separate
capital accounts and, for each fiscal period, a partnership percentage was determined by
dividing each investor’s capital contribution by the total capital contributions for each Hedge
                                                5
Fund. As a result, the partnership percentage for each investor increased or decreased as
investors were added to or withdrawn from the Hedge Funds.

        25.     To induce prospective investors to invest in the Hedge Funds, Defendant Bird
prepared and distributed Private Placement Memorandums for each Hedge Fund
(collectively, the “PPMs”). The PPMs provided that Defendant XL Capital generally would
not charge a management fee for administering and managing the Hedge Funds. Rather,
provided that a Hedge Fund enjoyed net profits during a fiscal period, Defendant XL Capital
was paid an “incentive allocation” equal to 20% of the net profits allocated to each investor’s
capital account. A “service agreement contract” between each Hedge Fund and Defendant
XL Capital authorized Defendant XL Capital to deduct this incentive allocation from each
investor’s capital account in exchange for its investment and management services. This
incentive allocation, however, was subject to a “high water mark” procedure, whereby
Defendant XL Capital was entitled to its 20% incentive allocation only if net profits allocated
to an investor exceeded net losses allocated to that investor. Accordingly, where an investor
suffered net losses, Defendant XL Capital was not entitled to its incentive allocation until the
investor had first recovered these net losses.

        26.      After Defendant XL Capital’s 20% incentive allocation, any partnership
profits, i.e., gains in the value of the securities and other investments held by each Hedge
Fund, were allocated to the investors in proportion to their capital accounts. The pro rata
share of partnership profits thus increased or decreased depending on investor contributions
and withdrawals during the fiscal period.

        27.     Defendant Bird began offering to prospective investors limited partnership
interests in the Vision Fund in approximately October 2002 and in the XL Velocity Fund
beginning in approximately June 2003. On information and belief, Defendant Bird has not
offered limited partnership interests in the Vision Fund II to prospective investors.

        28.     By the end of November 2004, the XL Capital Defendants and the Sales
Defendants brought in more than 400 investors and approximately $23.5 million in investor
funds. Nearly all of these funds (approximately $22.8 million) were purportedly invested in
the Vision Fund, while the remaining funds (approximately $700,000) were purportedly
invested in the XL Velocity Fund. Most investors are Colorado residents, and many of these
investors used money from 401(k) retirement plans to invest in the Hedge Funds. In
addition, many of the investors in the Hedge Funds are religious organizations or persons
affiliated with religious organizations.

       DEFENDANTS’ SCHEME TO DEFRAUD HEDGE FUND INVESTORS

      29.    Beginning in 2002, the XL Capital Defendants engaged in a scheme to defraud
Hedge Fund investors and prospective investors by significantly inflating investment returns
                                               6
for the Hedge Funds. By way of example, to induce prospective investors to invest in the
Vision Fund, the XL Capital Defendants represented on Defendant XL Capital’s website
that the Vision Fund generated a 74.6% return from December 2002 through May 2003 when
in fact they knew that the actual returns for this period were substantially lower. The XL
Capital Defendants never corrected or updated these fraudulently inflated returns but
nonetheless gave prospective investors “guest access” to the Defendant XL Capital website
and induced investors to rely on these fraudulent returns in making their investment
decisions.

        30.    The XL Capital Defendants also fraudulently overstated investment returns in
account statements sent to Hedge Fund investors. Specifically, the XL Capital Defendants
represented to Hedge Fund investors in these account statements that the Hedge Funds
generated a total return of approximately 195% from December 2002 through November
2004. In truth, the XL Capital Defendants knew that the Hedge Funds generated a total
return that approached zero during this period. As a result, many investors withdrew
substantial profits from the Hedge Funds that in fact did not exist. These withdrawals were
detrimental to the remaining investors. Other Hedge Fund investors and prospective
investors placed additional money into the Hedge Funds based on these fictitious returns.

        31.     Furthermore, based on these inflated returns, the XL Capital Defendants
withdrew incentive allocations from the Hedge Funds that grossly exceeded what they were
entitled to receive. By way of example, the XL Capital Defendants improperly withdrew
incentive allocations for periods in which they represented that the Hedge Funds generated
positive returns when in fact they suffered trading losses. Reporting positive returns for
periods in which the Hedge Funds actually suffered net losses also enabled the XL Capital
Defendants to avoid having to offset these net losses against future net profits when
calculating their incentive allocation. In addition, the XL Capital Defendants withdrew
incentive allocations that were grossly in excess of what they were entitled to receive by
significantly overstating net profits in periods in which the Hedge Funds enjoyed positive
returns.

        32.     The XL Capital Defendants also misappropriated investor funds to themselves
and the Sales Defendants. The PPMs generally prohibited the use of investor funds to pay
commissions in connection with sales of limited partnership interests to Hedge Fund
investors. Notwithstanding these restrictions, the XL Capital Defendants paid substantial
referral fees to themselves and the Sales Defendants based on a percentage of the net profits
allocated to each investor referred to the Hedge Funds. And because the XL Capital
Defendants fraudulently overstated investment returns, these improper fees greatly exceed
the maximum 20% incentive allocation the XL Capital Defendants were entitled to withdraw
from the Hedge Funds. Indeed, because net profits for the Hedge Funds approached zero
between December 2002 and November 2004, the XL Capital Defendants were entitled to
withdraw little or no inventive allocations from the Hedge Funds during this period.
                                                7
Nonetheless, because of excessive incentive allocations and improper fees as set forth above,
the XL Capital Defendants in fact misappropriated more than $3 million from the Hedge
Funds for themselves and the Sales Defendants.

        33.    Moreover, the XL Capital Defendants misappropriated investor funds through
improper “loans.” By way of example, instead of depositing investor funds into trading
accounts maintained by the Hedge Funds, the XL Capital Defendants misappropriated over
$1.2 million in investor funds during 2004 to purchase and maintain a corporate jet that the
XL Capital Defendants used primarily for personal activities. No loan documents exist
relating to use of investor funds to purchase the corporate jet. Defendants Bird and Newton
have also taken personal loans from investor funds for which no loan documents exist and to
date have not been repaid. The XL Capital Defendants did not disclose these improper loans
and other improper uses of investor money to Hedge Fund investors.

       34.    Furthermore, the XL Capital Defendants used investor funds to make
investments that were specifically prohibited by the partnership agreements and PPMs. By
way of example, although the XL Capital Defendants represented that the Hedge Funds
would not invest in real estate, they transferred approximately $300,000 in investor funds to
Relief Defendant XL Properties for the purchase of residential real estate in Florida. The XL
Capital Defendants never disclosed these transactions to Hedge Fund investors and, as of
November 2004, XL Properties had failed to repay over $100,000 of these investor funds.

       35.    Indeed, although investors continued to invest millions into the Hedge Funds
during 2004, most of this money was never deposited into trading accounts maintained by
the Hedge Funds to purchase stock and other securities. Rather, like a classic ponzi scheme,
these funds were used by the XL Capital Defendants to pay substantial profits to prior
investors based on the fraudulently inflated investment returns.
       36.     The Hedge Funds have insufficient funds to repay the capital contributions
made by the remaining Hedge Fund investors. Indeed, by the end of November 2004, and
because of the XL Capital Defendants’ fraudulent conduct set forth above, the Hedge Funds
are short more than $8 million necessary to repay the original capital contributions of the
remaining investors. Meanwhile, although the remaining Hedge Fund investors have
suffered catastrophic losses, the XL Capital Defendants and Sales Defendants have enjoyed
huge profits through the fraudulent conduct set forth above.

                DEFENDANTS’ UNTRUE STATEMENTS AND OMISSIONS

        37.     In connection with the offer and sale of securities, the XL Capital Defendants,
either directly or indirectly, made written and oral representations to Hedge Fund investors in
and from the State of Colorado, including, but not limited to, the following:


                                              8
             a. the Vision Fund generated a 74.6% return from December 2002 through
       May 2003;

               b. from December 2002 through November 2004, the Vision Fund generated
       either positive returns or a zero return each month, resulting in a cumulative total
       return during this period of approximately 195%;

              c. the XL Capital Defendants issued to Hedge Fund investors Form K-1
       statements representing that investors had earned substantial profits for tax year 2003;

              d. the XL Capital Defendants would withdraw not more than 20% net profits
       from each investor’s capital account as an incentive allocation;

              e. the XL Capital Defendants would withdraw an incentive allocation only if
       net profits allocated to an investor’s capital account for a fiscal period exceeded
       allocated net losses;

              f. the XL Capital Defendants, through monthly account statements or on
       Defendant XL Capital’s website, represented to each investor the balance of their
       limited partner capital accounts;

            g. the XL Capital Defendants generally would not use investor funds to pay
       commissions; and

                 h. the XL Capital Defendants would not use investor funds to invest in real
       estate.

       38. In truth and material fact, and contrary to the representations made by the XL
Capital Defendants:

              a. total returns for the Vision Fund from December 2002 through May 2003
       were substantially less than 74.6%;

               b. many months from December 2002 through November 2004 generated
       either negative returns, or substantially lower positive returns, for the Vision Fund,
       resulting in a cumulative total return that approached zero;

              c. the Hedge Funds had sustained either losses or zero returns for tax year
       2003. As a result, Hedge Fund investors paid substantial taxes on profits that did not
       exist;

                                                9
             d. the XL Capital Defendants withdrew incentive fees from investors’ capital
       accounts that were substantially in excess of 20% of net profits;

               e. the XL Capital Defendants withdrew incentive allocations even though
       allocated net losses to an investor’s capital account for a fiscal period exceeded net
       profits;

              f. the balance in the capital accounts for each investor was falsely and
       substantially overstated;

              g. the XL Capital Defendants paid themselves and the Sales Defendants
       millions in improper fees using investor funds; and

               h. the XL Capital Defendants used investor funds to invest in real estate.

       39.      Furthermore, the XL Capital Defendants failed to disclose to Hedge Fund
investors, in connection with the offer and sale of securities, material facts, including, but not
limited to, the following:

              a. the XL Capital Defendants misappropriated investor funds to purchase a
       corporate jet;

             b. Defendants Bird and Newton used investor funds to make loans to
       themselves;

              c. because of the fraudulent conduct set forth above, there were insufficient
       funds to repay the capital contributions of remaining investors beginning in at least
       2004; and

              d. beginning in at least 2004, money invested into the Hedge Funds by new
       investors was never invested but instead used to pay substantial and falsely inflated
       returns to prior investors
      DEFENDANTS’ UNLICENSED SALE OF SECURITIES IN COLORADO

        40.     The limited partnership interests in the Hedge Funds offered and sold by the
XL Capital Defendants and Sales Defendants are “securities” in that the limited partnership
interests are at least “investment contracts” under § 11-51-201(17), C.R.S. (2004). The XL
Capital Defendants and the Sales Defendants acted as “broker-dealers” and/or “sales
representatives” with respect to sales of the limited partnership interests since, as these terms
are defined in 11-51-201(2) and (14), respectively, they engaged in the business of effecting

                                               10
or attempting to effect the purchases and sales of these limited partnership interests for the
accounts of others or purchasing or selling securities for their own accounts.

      41.    During the relevant period, the XL Capital Defendants and the Sales
Defendants were not licensed as broker-dealers and/or sales representatives in the State of
Colorado.

       42.     In addition, the stock, options, and other investments purchased and sold by
the XL Capital Defendants on behalf of the Hedge Funds are “securities” as defined in § 11-
51-201(17), C.R.S. (2004). During all times relevant hereto, Defendant XL Capital acted as
an “investment adviser,” as defined in § 11-51-201(9.5)(a)(I), C.R.S. (2004), in that
Defendant XL Capital for compensation engaged in the business of advising others as to the
value of securities or as to the advisability of investing in, purchasing, or selling securities, or
who, for compensation and as part of a regular business, issued or promulgated analyses or
reports concerning securities.

        43.    During all times relevant hereto, Defendants Bird and Newton acted as
“investment adviser representatives,” as defined in § 11-51-201(9.6)(a), C.R.S. (2004), in
that they are partners, officers, directors, and control persons of Defendant XL Capital who
(i) make recommendations or otherwise render advice to Hedge Fund investors, (ii) manage
securities accounts or portfolios for Hedge Fund investors, and (iii) determine which
recommendations or advice regarding securities should be given to Hedge Fund investors.
       44.    The XL Capital Defendants have never been licensed as investment adviser or
investment adviser representatives in the State of Colorado. Further, the XL Capital
Defendants failed to furnish a written disclosure statement to each prospective client and to
each client who received investment advisory services as required by § 11-51-409.5, C.R.S.
(2004).

                               FIRST CLAIM FOR RELIEF
                           (Offer or Sale of Unregistered Securities)

       45.     Paragraphs 1 through 44 are incorporated herein by reference.

       46.     By engaging in the conduct described above, the Sales Defendants and the XL
Capital Defendants have made “offers” or “sales” of securities in the State of Colorado
pursuant to § 11-51-201(13), C.R.S. (2004).

       47.     The limited partnership interests in the Hedge Funds were securities and were
not registered or exempted from registration as required by § 11-51-301, C.R.S. (2004).



                                                11
       48.    By engaging in the conduct described herein, the Sales Defendants and the XL
Capital Defendants offered and sold securities in and from Colorado in violation of
§ 11-51-301, C.R.S. (2004).

        49.     The Commissioner is entitled to an award of damages, interest, costs, attorneys
fees, restitution, disgorgement and other equitable relief on behalf of persons injured by the
conduct of the Sales Defendants and the XL Capital Defendants pursuant to §§ 11-51-602(2)
and 604(1), C.R.S. (based on violations of § 11-51-301, C.R.S. (2004)). The Commissioner
is also entitled to a temporary, preliminary and permanent injunction pursuant to § 11-51-
602, C.R.S. (2004) (based on violations of § 11-51-301, C.R.S. (2004)) against the Sales
Defendants and the XL Capital Defendants, their agents, servants, employees, successors and
attorneys-in-fact, as may be; any person who, directly or indirectly, through one or more
intermediaries, controlled, or is controlled by or is under common control with the Sales
Defendants and/or the XL Capital Defendants; and all those in active concert or participation
with the Sales Defendants and the XL Capital Defendants.

                           SECOND CLAIM FOR RELIEF
               (Unlicensed Broker-Dealer and Sales Representative Activity)

       50.    Paragraphs 1 through 49 are incorporated herein by reference.

        51.     By engaging in the conduct described above, the Sales Defendants and the XL
Capital Defendants acted as “broker-dealers” or “sales representatives,” as may be, as
defined in § 11-51-201(2) and (14), C.R.S., in that they were engaged in the business of
effecting or attempting to effect purchases or sales of the limited partnership interest
securities of the Hedge Funds.

        52.    At no time were the Sales Defendants or the XL Capital Defendants licensed,
or exempt from licensure, as “sales representatives” or “broker-dealers,” as may be, or
registered in any capacity with the Commissioner as required by §§ 11-51-401, C.R.S.

        53.     The Commissioner is entitled to an award of damages, interest, costs, attorneys
fees restitution, rescission, disgorgement and other equitable relief on behalf of persons
injured by the conduct of the Sales Defendants or the XL Capital Defendants pursuant to
§§ 11-51-602(2) and 604(2), C.R.S. (based on violations of § 11-51-401, C.R.S. (2004)), and
is also entitled to a temporary, preliminary and permanent injunction against each of the
Sales Defendants and the XL Capital Defendants, their officers, directors, agents, servants,
employees, successors and attorneys-in-fact, as may be; any person, directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under common control
with any of the Sales Defendants or the XL Capital Defendants; and all those in active

                                              12
concert or participation with any of the Sales Defendants or the XL Capital Defendants,
enjoining violations by them of § 11-51-401, C.R.S., by virtue of § 11-51-602, C.R.S.

                            THIRD CLAIM FOR RELIEF
      (Unlicensed Investment Adviser and Investment Adviser Representative Activity)

       54.    Paragraphs 1 through 53 are incorporated herein by reference.

       55.     By engaging in the conduct described above, Defendant XL Capital acted as
an “investment adviser,” and Defendants Bird and Newton acted as “investment adviser
representatives,” as defined in §§ 11-51-201(9.5)(a)(I) and (9.6)(a), C.R.S. (2004)
respectively. At no time were the XL Capital Defendants ever licensed, or exempt from
licensure, as an “investment adviser,” “investment adviser representative,” or in any other
capacity with the Commissioner as required by § 11-51-401, C.R.S. (2004).

        56.    By engaging in the conduct described above, the XL Capital Defendants acted
as unlicensed investment advisers and/or investment adviser representatives in violation of
§ 11-51-401(1.5), C.R.S. (2004).

        57.     The Commissioner is entitled to an award of damages, interest, costs, attorneys
fees, restitution, rescission, disgorgement, and other equitable relief on behalf of persons
injured by the conduct of Defendants pursuant to §§ 11-51-602(2) and 604(2.5), C.R.S.
(2004) (based on violations of § 11-51-401, C.R.S. (2004)), and is also entitled to a
preliminary and permanent injunction against each of the XL Capital Defendants, their
officers, directors, agents, servants, employees, successors, and attorneys-in-fact, as may be;
any person, directly or indirectly, through one or more intermediaries, who controls, is
controlled by, or is under common control with any of the XL Capital Defendants, and all
those in active concert or participation with any of the XL Capital Defendants, enjoining
violations by them of § 11-51-401, C.R.S. (2004), by virtue of § 11-51-602, C.R.S. (2004) )
(based on violations of § 11-51-401, C.R.S. (2004).

                             FOURTH CLAIM FOR RELIEF
                                  (Securities Fraud)

       58.    Paragraphs 1 through 57 are incorporated herein by reference.

      59.    The conduct described above in this Complaint constitutes violations of the
Colorado Securities Act in at least the following respects:

       60.   In connection with offer, sale, or purchase of securities in Colorado, the XL
Capital Defendants, directly or indirectly:
                                              13
                a.     employed a device, scheme or artifice to defraud;
                b.     made written and oral untrue statements of material fact or omitted to
        state material facts necessary to make the statements made, in light of the
        circumstances under which they were made, not misleading; or
                c.     engaged in acts, practices or courses of business which operated and
        would operate as a fraud and deceit on investors;
all in violation of § 11-51-501(1), C.R.S. (2004).

      61.     The XL Capital Defendants received, directly or indirectly, consideration
from other persons for advising such persons as to the value of securities or of any
purchase or sale thereof, whether through the issuance of analyses or reports or
otherwise and:
              a.     employed a device, scheme, or artifice to defraud clients or
              prospective clients;
              b.     made untrue statements of material fact to a client or prospective
      client or omitted to state to a client or prospective client a material fact necessary
      to make the statements made, in light of the circumstances under which they were
      made, not misleading, during the solicitation of such client or otherwise in
      connection with providing investment advisory services;
              c.     engaged in transactions, acts, practices, or courses of business that
      operated or would operate as a fraud or deceit upon any client or prospective client
      or was fraudulent, deceptive, or manipulative.

       62.       The XL Capital Defendants recklessly, knowingly, or with intent to defraud,
                 (a)   sold or bought securities in violation of § 11-51-501(1), C.R.S. (2004),
       and/or,
               (b)    provided investment advisory services to another person in violation of
        § 11-51-501(5), C.R.S. (2004).
The XL Capital Defendants are therefore liable to the Commissioner for damages under
§ 11-51-604(3), C.R.S. (2004) by operation of § 11-51-602(2), C.R.S. (2004) (based on
violations of §§ 11-51-501(1) and (5), C.R.S. (2004)).

        63.     The XL Capital Defendants offered or sold securities by means of untrue
statements of material fact or omissions to state material facts necessary in order to make the
statements, in light of the circumstances under which they were made, not misleading (the
buyers not knowing of the untruths or omissions), and therefore the XL Capital Defendants
are liable to the Commissioner for damages under § 11-51-604(4), C.R.S. (2004), by
operation of § 11-51-602(2), C.R.S. (2004) (based on violations of § 11-51-501(1)(b), C.R.S.
(2004)).



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       64.     By engaging in the conduct described above, the XL Capital Defendants
provided investment advisory services to purchasers of Fund interests but recklessly,
knowingly, or with an intent to defraud failed to furnish to those purchasers a written
disclosure statement as required by § 11-51-409.5, C.R.S. (2004).

        65.    Each of the XL Capital Defendants knew, or was reckless in not knowing, of
the other of these Defendants’ violation of the Colorado Securities Act, and gave substantial
assistance to the other Defendants, who are each liable to the Commissioner for damages
under § 11-51-604(3) and (4), C.R.S. (2004), by operation of § 11-51-602(2), C.R.S., and are
therefore liable to the Securities Commissioner for damages under § 11-51-604(5)(c), C.R.S.
(2004), by operation of § 11-51-602(2), C.R.S. (2004) (all based on violations of § 11-51-
501, C.R.S. (2004)).

       66.     Each of the XL Capital Defendants is jointly and severally liable to the
Commissioner for damages, rescission, restitution, interest, disgorgement, costs, reasonable
attorneys fees, and other legal and equitable relief on behalf of all persons injured by the acts
and practices described in this claim for relief pursuant to §§ 11-51-602(2), 604(2.6), 604(3),
604(4) and 604(5)(c), C.R.S. (2004) (based on violations of §§ 11-51-409.5 and 501, C.R.S.
(2004)), and the Commissioner is further entitled to a temporary and permanent injunction
against each of the XL Capital Defendants, their officers, directors, agents, servants,
employees, and successors; any person who directly or indirectly, through one or more
intermediaries, controlled or is controlled by or is under common control with any of the XL
Capital Defendants, and all those who acted in concert participation with any of the XL
Capital Defendants pursuant to § 11-51-602, C.R.S. (2004) (based on violations of § 11-51-
409.5 and 501, C.R.S. (2004))., enjoining the conduct alleged above.

                               FIFTH CLAIM FOR RELIEF
                     (Imposition of Constructive Trust or Equitable Lien)

       67.     Paragraphs 1 through 66 are incorporated herein by reference.

       68.    Sales Defendants Dave Burdine, Kevin Burdine, Jay Hawpe, Les Houghton,
Donovan Johnson, Greg Mills, Richard Mutch, Brian Peterson, Benjamin Raphael, Doug
Scott and Relief Defendant XL Properties received funds fraudulently obtained by the XL
Capital Defendants from Hedge Fund investors.

       69.    Sales Defendants and Relief Defendant XL Properties received these
fraudulently obtained funds from the XL Capital Defendants without giving a reasonably
equivalent value in exchange and, as a result, have no legitimate right or claim to these
monies. Sales Defendants and Relief Defendant XL Properties therefore will be unjustly

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enriched if they are allowed to maintain ownership of the funds the XL Capital Defendants
fraudulently obtained from Hedge Fund investors and transferred to them.

        70.    Based on the foregoing, each of the Sales Defendants and Relief Defendant
XL Properties, or any entity controlled by them, are constructive trustees with respect to the
fraudulently obtained funds they received from the XL Capital Defendants and hold these
funds in a constructive trust for the benefit of the Hedge Fund investors. As constructive
trustees with respect to these fraudulently obtained funds, each of the Sales Defendants and
Relief Defendant XL Properties hold these funds under circumstances in which it is unjust or
inequitable for any of the Sales Defendants and Relief Defendant XL Properties, or any
entity controlled by them, to retain the funds.

       71.     Defendants Newton and Scott received from the XL Capital Defendants funds
or monies derived from Hedge Fund investors. Defendants Newton and Scott received these
fraudulently obtained funds from the XL Capital Defendants without giving a reasonably
equivalent value in exchange for the transfer of these monies. Defendant Newton purchased
residential real estate located at 16855 Remington Road, Colorado Springs, Colorado
(“Remington Property”) using a portion of these fraudulently obtained investor funds.
Defendant Scott purchased residential real estate located at 3734 Oak Meadow Drive,
Colorado Springs, Colorado (“Oak Meadow Property”) using a portion of these fraudulently
obtained investor funds.

       72.     Defendants Newton and Scott obtained title to the Remington and Oak
Meadow Properties, respectively, by fraud, and under circumstances where it is unjust or
inequitable for them to retain the funds by retaining ownership of the Remington and Oak
Meadow Properties. Defendants Newton and Scott will be unjustly enriched if they are
allowed to maintain ownership of the Remington and Oak Meadow Properties.

        73.    Based on the foregoing, Defendants Newton and Scott are constructive
trustees with respect to the fraudulently obtained funds which were used to purchase the
Remington and Oak Meadow Properties. They are holding these funds in the form of
ownership of the Remington and Oak Meadow Properties in a constructive trust for the
benefit of the defrauded investors.

        74.    Based on the foregoing, the Commissioner requests that the Court impose a
constructive trust and/or equitable lien on the fraudulently obtained funds received by each
of the Sales Defendants and Relief Defendant XL Properties, and order each of the Sales
Defendants and Relief Defendant XL Properties, and any entity controlled by them, to
account for and disgorge all funds received by them from the XL Capital Defendants. And,
the Commissioner requests that the Court impose a constructive trust and/or equitable lien on
the fraudulently obtained Remington and Oak Meadow Properties, and order Defendants

                                              16
Newton and Scott, and any entity controlled by either of them, to account for and disgorge all
profits and monies received as a result of, or in connection with, the scheme to defraud the
investors in the Hedge Funds.

       WHEREFORE, Plaintiff prays for relief as follows:

       1.      For preliminary and permanent injunctive relief against all Defendants, and
each of them, their officers, directors, agents, servants, employees, and successors; any
person who directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with any of the Defendants, and all those in active
concert of participation of Defendants, enjoining each of the Defendants’ violations of the
Colorado Securities Act, or successor statute.

        2.     For a judgment in an amount to be determined at trial against each Defendant,
jointly and severally, for restitution, disgorgement, and other equitable relief pursuant to
§ 11-51-602(2), C.R.S. (2004), and for damages, rescission, interest, costs, reasonable
attorney fees, and such other legal and equitable relief as the court deems appropriate,
pursuant to §§ 11-51-602(2) and 604, C.R.S. (2004), all on behalf of persons injured by the
acts and practices of all Defendants constituting violations of the Colorado Securities Act.

       3.     For an Order imposing a constructive trust on the fraudulently obtained funds
held by each Sales Defendant Dave Burdine, Kevin Burdine, Jay Hawpe, Les Houghton,
Donovan Johnson, Greg Mills, Richard Mutch, Brian Peterson, Benjamin Raphael, Doug
Scott and Relief Defendant XL Properties, or any entity controlled by them, and to order
these Sales Defendants and Relief Defendant XL Properties to account for and disgorge all
funds fraudulent obtained by them from the Hedge Fund investors and transferred to them.

        4.     For an Order imposing a constructive trust and/or equitable lien on the
fraudulently obtained Remington and Oak Meadow Properties, and order Defendants
Newton and Scott, and any entity controlled by either of them, to account for and disgorge all
profits and monies received as a result of, or in connection with, the scheme to defraud the
investors in the Hedge Funds.

       5.      For appointment of Andrew C. Snyder as receiver for the assets of XL Capital
Partners, Inc. and Vision Fund, L.P., Vision Fund II, L.P., and XL Velocity Fund, L.P.,

       6.     For such other and further relief as the court deems proper.




                                             17
Dated this __ day of February, 2005


                                      John W. Suthers
                                      Interim Attorney General



                                      PAUL L. VORNDRAN, 22098*
                                      First Assistant Attorney General
                                      ROBERT J. SHILLIDAY, 35595*
                                      Assistant Attorney General
                                      Financial Unit
                                      Business and Licensing Section
                                      Attorneys for the Colorado Division of Securities
                                      *Counsel of Record




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