there are several presumptions that i think all apply in this case but they've all been ignored in the prior decisions st of course is the well known presumption of giving a fresh start to a debtor i think it's been suggested by the other side well that doesn't really apply in this case that there's some wrong with this guy second is a presumption in favor of settlements no one's really addressed that but normally when you have something settled you want to trim and settled and in this case we've got a settlement agreement judge the bankruptcy judge can look through the settlement to what the underlying claim or conduct was i don't mind that your honor i'm fine but that without a doubt myself goes against the idea that a settlement ends everything i don't think i'm  every other fact because of that i'm happy to look behind it and i'm going to dress like the underlying this is the underlying facts but again i'm starting off just talking about presumptions and i think it's presumed in this case as it proves presume that all cases th settlement agreements are a good thing that we want to encourage it we're certainly not setting aside the settlement agreement or are we're looking at it and really the other facts and i guess somehow the courts have managed to ignore this and transfer this finding of liability to the l c or from the l l c to the individual defendant when you should we just ignore the findings oh absolutely not no i think i am in favor of as you said looking through and looking at the cease and desist order and the l g s findings but i think when you actually do that and you have that in the supplemental excerpts of the record you'll see that the sales of the securities and the violations were not done by decision was hey there's something wrong with what's being done here and you all seem very familiar with it you know this l l c is secretly buying properties marking it up and selling it at a profit and that is what was in joint you can't do that anymore and so anybody who was managing member was said hey you can't do that anymore but in this yale j say that's that's why mr upshaw was himself being ordered to cease and desist because he happened to be the the transcript as well as the decision and we have said in our briefing of the you'll see that it's true that this was really a case of an l l c selling securities i mean let me jump and i was going to go through some prism but this jump ahead it's a bankruptcy case and it's all five hundred and twenty three a nineteen and you need two things you need a settlement and you need the securities violation and you certainly got sell so we're not disputing that you had a settlement agreement so the question is about the securities violation and i contend and i think the record reflects that the problem here is there's a securities violation but not by my client to give you an example i had another case involving driving drunk because clearly drunk driving has to be by the debtor and i think that's the flaw here there clearly was a securities violation and that clearly was selling these lies and securities but it wasn't the focus of those prior hearings is this the securities violation by chris actual that's not what it was all about no one's determined that and they've sort of gotten a free pass in the but if you look at if you look at the order specifically mentions m and then the l a j order is served on mr quote as an individual then another separate order same order me served separately to christopher managing member so it's clear to me that the someone's discharge is a serious thing and to take that from like a proof of service and say hey your name appears there twice you know you could actually establish this in the bankruptcy court the court that normally tries discharge ability issues is the bankruptcy court but the judge here decided on the same sort of basis that you have your honor well you know the proof of service as this and he was a matter of that but those cases were focused on stopping some you know violation that it would be the people of state of california i was very interested in hearing you know mr kaczynski as argument and he talked about something being thrown out you know too soon i think that's what happened here the focus before really was not the individual conduct of chris and whether or not his discharge should be denied there was no bankruptcy there was no discharge and we're trying to read the tea leaves and kind of infer whether or not there's been some finding of a personal violation i don't think you can find that in the original cease and desist order i think there's different you know parties but that somebody could argue about or you could actually find out what happened in the bankruptcy case it's not unusual for the bankruptcy court to try discharge ability cases there's different reasons so i still say someone obtain money by fraud that's not an allegation here we've got a basically a contractual agreement under the settlement agreement that we're talking about but i think that judge bluebonnet very experienced you know fair judge could make this decision if she allowed the matter to go forward but again this was determined at the earliest stage which kind of brings to this question what do we do with race  discretionary and you know you could apply it or you could and you'll see there were a bunch of different parties who are hearing more like the l l c is in another individual they're not involved in all of this discharge of debt issue i think that  made the biggest presumption is that the statute means what it says and the statue is clear that you need to find some violation of securities by this debtor just like you had to have that one drunk driving and we're kind of inferring that here from proof of service or satisfy the facts as set forth in both the desist from fraying order and the ministry of wiring and here we are for the rd time or mr shah's attempting to is given the opportunity to try and contest he's trying to get a rd bite at the apple he had a previous chance to contest the question of whether there were not one but two securities violations a violation of california corporation's code twenty five thousand one  the selling of unregistered or nonexempt securities and two hundred and fifty four a one which involve misrepresentation or misstatements with regard to sale of said securities the decision refrain or if you look at the  and then the subsequent avi's and in this situation for instance with regard and the court does describes this specifically land co purchased the property that found form the corpus of v twelve for two hundred and seven thousand dollars in august of two thousand and seven then they sort turned around and sold that property to the a v twelve which was acting as managing director of i am indy spoke to an investor who testified at the in a ministry of law hearing and reassured him very the investments cave the people an opportunity for a cooling off period to revoke their investment an investor by the name of juan rodriguez testified he wanted to revoke and mr f l called and revote and and talk him into not doing that now the sarbanes oxley is what for why do before you talk about serbians actually coming to her p s q question your talked about how there are two bases two bases for the proceedings in the administrative agency the unregistered securities and misrepresentations exactly is either for purposes of the nine just charge ability provision in the bankruptcy code is either one of those good enough or does it have to be the misrepresented i think either one would be good your honor i mean you know that the if you look at the stilson both are securit you know and one is just the sale of not non registered are not exempt securities which is the violation and the other is making misrepresentations took lessers in the sale of these now with regards to our basic question s on the till case actually stands for the proposition that you can look behind the facts of the settlement agreement to the entire picture and you know and that's similar to what archer's stood for as well you look at the underlying basis of the settlement and in this situation we have as as mr berger conceded we have a debt and the court utilized the collateral stoppel to deal with the question of securities violation gains as a result of enron sought to discharge their debts through bankruptcy and so that's why this section was a nat enacted that the comment which was referenced in our pleading papers noted that technical different technical evidence at elements them now i guess common law cause of action and they also noted that settlements may not have the same class will stop will effect so the court noted that in short with resources already stretched to the breaking point state regulators must plow the same ground twice in securities fraud cases by ensuring state law securities judgments instead of once and state cases are not discharge precious state resources or be preserved and directed towards preventing fraud in the st place is which is what my department attempts to do the public policy behind the utilization of the administrative law hearing and the findings of fraud are completely consistent with that comment and with regard to the question that was raised about giving a fresh start to t debtor and the discretion by the court in utilizing office of collateral stoppel that's decided on a do novo basis and i am a breach of discretion basis and there's nothing in this record that shows that the judge blow abuse discretion and not in deciding to apply the collateral stoppel aspect of this case the presumption that the the argument that m did not sell the securities is something that is not particularly relevant to this situation because he was the person along with mr thompson put together this scheme in its entirety the factors of collateral stoppel are completely mad here of the prior issue that was decided at the ministry while hearing was the same issue that was decided here securities not one but two violations the california securities accrued the issue was actually litigated and nestled necessarily desired it the early decision was final and resolve the issue on the merits and it occurred between the same parties so that is you know when you look at this in short congress and in that thing this section thought this section was necessary to preserve the state resources and not require my department to relate this matter and to call when there were four hundred and forty three investors in the various fifteen l c s it would you know that by using the collateral stop which addressed this issue we were able nineteen were completely satisfied and the debt should not be discharge while i would argue that the summary judgment was properly granted securities the other one is that there's some sort of fraudulent representation so that's like one of two blocks of holding the whole case and in fact it's undisputed he didn't sell securities so that block this isn't they're kind of pulls out a basis of the case and a point that wasn't were dressed in my argument i want to make here it's very troubling to me that you've got an allegation of a securities violation of representation that one investor  settlement that makes reimbursement for four hundred and fifty three investors and we're saying it's the same thing the damages for this st alleged representation you know might have been fifty or one hundred dollars grand i guess you try and compute what the numbers would be but be something very small the liability that is taken on by the settlement is millions of dollars and that's done contractually so it seems we sort of a disconnect again to go back to drunk driving if you drunk driving b someone's license plate frame it doesn't mean you kill four hundred and fifty three people even if there was a finding that there was some securities violation by one representation in one case with one investor or with one of these i don't see how that makes this whole debt not discharge and it wouldn't there wouldn't work for the sale of unregistered securities radio there's either the registered or they're not right now if you if you sold unregistered securities individually correct then you would have a securit the point being you have how do you extract the late from one dollar to four hundred and fifty dollars whatever it is a mole you sold unregistered securities old and registered securities in the mail j just was talking about one situation how how does it make a difference of settlement agreement goes beyond that as to that particular issue either on either the register of the not and they weren't i agree with the securities re the register or not and i agree that they were not i think the question here is damages he has taken on some liability that totally unrelated to any decision that this is a made i guess again you're breaking into so it sounds like you're maybe giving me the nd part as if you had one investor say that i got a representation that was false that doesn't mean that we don't have to hear for four hundred and fifty other and i mean they could ask your questions about the will and take ok time but my point is the bankruptcy court didn't look into any of that and it is they they they found that there was some violation and so they've kind of rubber stamp the settlement agreement measure of damages which is totally unrelated to the securities violation i am not saying you shouldn't look at the underlying administrative law decision i'm not saying you should look at  actually encouraging the court to do what it's doing which is to look at the underlying facts but i think that you also need to see what facts have been established that support this damages we've got a contractual agreement that he's going to make up seventy percent of the losses for investors but we have no evidence that was presented at these hearings we've got no findings you've got nothing to back up this representation so they're kind of getting a free ride and never having to have a trial never having any discovery and you