USDC CASE NO. 3:17-CV-0023-RS

SEC V: SFRC" ET AL.

BXHIBIT A

TO

DECLARATION OF SUSAI{ L. UECKER

Case 3:17-cv-00223-RS Document 71-1 Filed 02/16/17 Page 1 of 72
In the Matter Of:

ALLAN YOIJI{G vs. THOMAS M. I{ENDERSON, et al.,

MOTIOI\ HEARII{G

Moy 05, 2016

Court Reporters, Videography, Trial Preparatlon

Ilideoconfe,rence Cenhr

takland " San Francisco . San Jose * LosAngehs

9rr.451"158{l

wunru.aikenurclch,com

EXHIBIT A

A¡ken

Wetch

COU RT

REPORTERS

Case 3:17-cv-00223-RS Document 71-1 Filed 02/16/17 Page 2 of 72
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SUPERIOR COURT OF CALIFORNI.A,

COT'NTY OF ALAIVIEDA

BEFORE HONORABLE .'ULIA SPi\IN

DEPARTIVTENT L9

---ooo---

ALLÀN YOUNG.

P]-aínti ff ,

vs. No. Re].577889L

TIIOMJAS M. HENÐERSON. MJATTÉIEW

T. I{ENDERSON, et aI. ,

Defendants.

REPORTER I S

(Mo tíon

TRANSCRIPT OF PROCEEDINGS

for Attorneyr s Fees)

May 5, 2OL6

Taken before ERIN F. ROBINSON

CSR No. L2I99

Jlíken WeLch Court RePorters

One Kaiser Pl-aza, Suíte 25O

Oakland, Ca1ifornia 946L2

(s10) 4s1-1s80/ (877) 4s1-1580

Fax: (510) 45L-3797

25 www. aíkenweLctr. com

Case 3:17-cv-00223-RS Document 71-1 Filed 02/16/17 Page 3 of 72
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APPEARANCES OF COUNSEL:

E'or the Receiver Susan Uecker:

WILLIÀM HUCKINS, EsÇ.

Allen, Matkíns, Leck, Gamble, Mallory & Natsís

Tlrree Embarcadero Center, L2En. Floor

San Francisco, California 9ALL]-

(41s) 837-151s

wtruckíns@aL L enmatkins . com

For the Plaint,iff A1lan Young:

,JONATHAN K. LEVINE, Esç[.

ELIZABETH C. PRITZKER, Esq.

Prítzker Levíne L'LP

1-80 Grand Avenue, Suíte 1390

Oak].and, Calífornia 946L2

(s1o) 41-s) 692-0772.

j k1@pritzkerlevÍne . com

ecp@pri tzkerlevíne . com

For tlre Def end.ants SFRC; and llenderson Def endants:

LEEDS DISSTON, EsÇ.

Casalína Dísston

4O9 13th Street, 9th Floor

Oakland, Cal-ifornia 946L2

(s1o) 83s-8110

casdiss@yahoo. com

Jllso Present:

Sr¿san Uecker, Receíver

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PROCEEDINGS

Thursday, May 5, 20L6 - 3220 p.m

-oOo- - -

THE COURT: What I'd

format that at least, I

This may make ít more díffÍcult for all of you,

but at least Ít's so I can better understand ít. So

we're going to distríbute ít to you and gíve you some

time to look at it, and then I want to talk about it.

Before we do thatr wê wÍII address the motíon that

brought you here today because it may determine how we

proceed.

So Iet me just get

t,o give you some tÍme

that off of my desk. I,m

versus Henderson mat,ter ís I

through all of the document,s

thus far to put them ínto a

could better understand.

like to do on the Young

spent my eveníng goÍng

that had been presented

to Look at alL those and

time to do that's correct, but

of time doing it, I feel

ir,

and

state your

seeing the

appearances for the

court reporter

goíng

take a break to give you

before you

oblÍged to

application for

compensation of

going to have you kindly

record, and I appreciate

do spend a Lot

address the receíverrs ex parte, was

an order authorízÍng empJ-o¡rment,

counsel.

Yourre all welcome to be seated, and then I'm

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here.

MR. HUCKINS: Bill Huckíns from Al1en Matkins

on behalf of the receíver, Susan Uecker. Ms. Uecker is

Ln the courtroom as well

MR. LEVINE: .Tonathan Levine for the plaintÍff .

MS. PRITZKER: Elizabeth Prítzker for Lhe

pIaíntiff.

MR. DISSTON: Leeds DÍsston for San Francisco

Regíonal Center and Lhe Henderson defendants.

THE COURT: Okay. Thank you. I'm goÍng to

give you my tentatíve ruling, and then I I 11 alJ.ow you

to respond. I made this rulÍng after I put, together

all these document,s.

f put these documents together, honestly, by

goÍng through the declarations of the receiver that was

fíIed on April the 6th, I think it was, Ms. Baptiste

Shepard on AprÍI 19th and one from Mr. Henderson on

April 22nd t,hat I found very helpful.

And honestly, what I had to do was cut and

paste them and sort of try to figure out for myself

what was J-ining up under CallSocket f , Call-socket II,

CaLlSocket IIf and get a handle on, honestly, just how

díre the sítuation appears to be. HavÍng what felt to

me like a fuller und.erstandíng of the serious economÍc

sít,uatíon that at least these three entítíes fÍnd

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themseLves in, I then found myself in a very hard place

because.

And I'11 just I am goíng to the tentative

ruling ís, I wíII approve the receiver'g request to

empJ.oy legal counsel to provide lega1 advíce to her

with respect to the Lawful díscharge of her powers,

rights and dutíes under the amended order, Íncludíng

securíng control of and protecting the assets and

I'Ll gíve you all a copy of this granted subject to

the following IÍmítations.

And that Ís No. 1, the emplo¡rment of tegal

counsel is soleIy rel-ated to providing J-ega1 advice.

IL does not ext,end to prepare pleadings, reports or

writÍng lett,ers on the receíver's behalf wÍthout prior

court approval. It does not ext,end tor Çuote unquote,

representation of the receiver before this courÈ.

I don't f rankly thínk t,he receiver needs any

repreÉ¡entat,ion, and I wouLd, quíte frankly, far prefer

Èo hear dÍrectJ.y from Ms. Uecker herself . And I

consulted several outside resources. frm sure yourre

famíliar wit,h them. There's a Laf fey matríx Lhat's put

t,ogether. There are some other resources that the

court has access to.

And uLtímateJ.y, and also based on my own 20

years of experience, the last two of which has been

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entirely in complex 1ítÍgatíon, the average hourly rate

for coungeL, I discovered, wíth over ten years of

experience ín Oakland is between $300 and $400 an hour.

And f,or counsel between fíve and ten years of

experience, Ít's been $175 and $300 per hour.

Now, I have to sây, I am quite confident that

the receíver and thÍs court would benefit from the

great expertÍse that Mr. HuckÍns in partícular and his

fírm Allen Matkins has.

Thís seems to me t,o get onJ-y more complícated

and convoluted the further I dig ínto it. NonetheLess,

gíven what Irve díscovered about the fínancial

sítuation of the three ent,ities Èhat are within the

jurisdíction at this poÍnt of this court,, I feel

constraíned.

And I can onJ-y approve the employment of

counseL by the receÍver, not to exceed an average of

those ranges whÍch means S350 an hour for counsel wÍth

more than ten years' experience and $235 per hour for

counsel between fíve and ten yearst experÍence.

And in this case itrs hard to believe anybody

involved in it hasn't got at Least fíve years of

experÍence. And approvaL of the number of hours much

wíII remaín subject to prÍor court approval prior to

payment.

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Now, Counsel thatrs been employed by the

receiver prÍor to seekÍng, formal court approval should

prepare an itemizatíon of fee request, and the court

will approve reasonable fees incurred to date. But I

am sadly cognÍzant that the firm Allen Matkíns may

decide that they cannot provide servíces within the

IÍmitatíons that the court has approved, imposed.

And I wíII be very sorry if that occurs, but íf

it does, f will understand.. And the receiver will have

to act accordíngIy. I want to make it clear that I do

not requí:ie nor expect J.ega1 pleadings from the

receÍver. Reports are fine. A letter addressed to me

with copies to the parties Ís fine.

To the degree the receÍver has relied upon

legal advice Ín makíng any reco¡nmendations to the

court, recoÍtmendations thaÈ may be Íncluded in the

reportr folr can note that and tell me, I consulted with

counsel and counsel tells me we should puII the pJ.ug.

If I requÍre further legal authority Ín support

of a recoxnmendatíon, I will ask for it. I ' l-1 either

ask my own research attorney. Irtl- do it myself, or Íf

I am constrained by time and resources, I will prevail

upon the receiver to do so.

But this Ís, I regret to say, about, the best I

can d.o gÍven the circumstances that we fÍnd ourselves

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Ín. And I am sorry.

Does anybody wish to be heard?

MR. HUCKINS: Nor four Honor. We'll take at

least I wiLl take your rulíng under consÍderatíon, but

Let's I thÍnk you spent a lot of time and effort

trying to outlíne things, and letts proceed today and

then we'11 decíde how we're goíng to proceed based upon

your rulíng, íf that'e okay.

THE COURT: Thank you. I

So what, I'd l,íke to do is give you

what I've trÍed to do here. What

appreciate that, sir.

some time to look at

Irve done, fÍrst of

all, just for my own purposes' was to díagram what the

San Francísco RegÍona1 Center

,And the best I could

with Mr. Young at least

sure of CallSocket III.

in CallSocket I

Then there are

have partnered

and II, I'm not

13 other

is.

fínd, they

entities

Regional

partners

that are ínvolved with the San FrancÍsco

Center somehow that I don't know if they have

or what's going on with them.

And then I have received a request from WOMAC

Partners, who has partnered with San Francísco RegÍona1

Center ín a busíness caIled the 'JL Gateway and who has

invested ín the ,JL Gateway Shopping Center. They want

to be joined with thís case because they have now also

sued for an accountÍng fraud and breach of contract.

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At t,hís point ín time, I put Andew Young and

WOMAC Partners on opposite sídes of the paper because I

honestly see myself at thÍs point as only deal-Íng wit,h,

I guess, what ís on the far ríght-hand sÍde of the

paper, whích clearly conveys to me that thís ís the

smallest píece. We've got aIJ- these other entítÍes

about whieh I know nothing, and over which I have no

j urisdiction.

So thatrs what thís was to say to me. Okay,

that's what that is. The next thing I díd, honesÈIy,

was to start wÍth each CallSocket entíty. So if we go

to page 2 of your handout, I went through each and

every one, and just tríed to fígure out based on the

declaratíons that had been submítted under penalty of

perjurfr what the fÍnances look IÍke for each one.

And I'm going to gÍve you time to study them

before we taLk further, but so the one I came up with

for CallSocket I, when I look at, it, they raised a

total from what, Irve been told of 1-9.8 to date through

,June 30th with the mílLion dollars I approved the last

time we were here, they will have spent 19.84 mitlÍon

dol1ars.

And ae much as the decLaration for

Mr. Henderson re1íed upon some níce letter from some

guy named Bennett who thínks that the propertíes are

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worth a whole lot more, I díd a líttle bit of research

and used a conservative estimate of 10 percênt, íncrease

per year, whích still pops Ít up by 40 percent. He

paid, what was it, I mÍI1íon for the Tribune Tower.

It's now wortn. 12 at least, maybe more.

But somebody had to get in there and ascerLaín

the sLatuc of that buÍIding, which some people think

Ít's about to falL down on itself, and see what ít

would be worth to seII Ít. But it's got a 9.9 miLlion

dollar loan outstandÍng on it that also owes CS III a

milLion dollars. So the equity is 1 mil-lion bucks max,

ít looks to me LÍke right, now.

So I have not got too much trouble sayíng CS I

is ínsolvent, completely and totalJ-y ínsolvent, whÍch

is of course what the receÍver trÍed to teII me last

tíme whÍch f recognized Last tÍme, but was quite torn

between the goals of fuLfil-ling Ínvestor expectatÍons,

employee expectatÍons, maybe not quíte prepared to jr¡¡np

off that brÍdge so early in the game, maybe much more

prepared now.

Went to CaLl-Socket II, and they raÍsed 15.5

mil-l-ion. You guys probabJ.y know all this. But Ít's

now set forth in a way that I can understand it. We

know that theyrve expended about 2.23 mÍIlíon Ín down

payments on the two buildíngs. They are carryíng loans

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on those buildings of 6 .3 míIlion, which interestíngl-y

was not dÍvíded between the two buÍIdÍngs apparently

but is ínstead secured against, both.

So I allocated ít based upon the settlement'

documents that Mr. Henderson provided t,o me, so ít

looks Iíke of the 15.5 raised, they spent 2.23 míLLion.

So there's ]-3.26 mÍllíon, don't know where Ít went.

Looking for it.

Then it turns out that the community bank

building accordíng to my al.locatíons probably should

have been if they were collectíng the rents that they

were entitled t,o, should have been makíng about

$250,000 a year in rent. Don't know where that went.

And it looks to me Like the equíty in that buiLding is

only about 2.49 miLLion dollars.

So if you recall Last time we were here, and

we'll go on to the rest of thÍs, but last time we were

here, part of what I re1íed upon Ín agreeíng to borrow

a míI1ion bucks from CS III and loan Ít to CS I was the

representation that all together these entitíes own 48

mil-LÍon doll-ars worth of real estate. They donrt own

48 miLlion doLLars worth of real estate.

The best I'm comíng up with, the nu¡nber as

you'I1 see on the front, the value of combined

equity of all three is 7 . 4 mill-ion. So we rve

Pa9e,

around

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guessed was Èhe

Still meanc it

almost $174,000

went.

should have

got problems, bí9 problems. I went on, then, and went

through the Duffwin Theatre purchase príce, 4.3

míI1ion, down payment was 1 míILion. The mortgage

attributable to iL is probably 3.3 míllion. So we know

that Ít should have been making $4O,9OO a month ín

rental íncome.

I tríed to take out what should be the Loan

payment attríbutable to ít, tried Lo take out what I

taxes and insurance attrÍbutable to ít.

been bringing ín about

a year in rent. Don't know where that

If Ít started at 4.3 míI1Íon, ít's probably

worth somewhere around 6 mÍllíon. That couLd be 10w.

Maybe 7 miIIíon. I donrt know. But it's not goíng to

be worth 15 million. It's got an outstandíng loan of

3.3, so Irm arrÍving at equity of about 2.74.

Then I go on to CalLSocket III. WeII, I guess

I should have CalLSocket II has t'he big problem

there with the 13 million unaccounted for. we go on to

CallSocket III, they raísed 20 miIIíon. They put in a

down payment on the I. MagnÍn building of 3'3'

Donrt know where the rest of Ít went, donrÈ

know Íf there were operating expenses for the I. Magnin

buiJ.díng. Ilaven't been told any of that. The baLance

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of ínvestor funds unaccounted for at thís point ' 6.6

million. The buíIdíng as you know was sold. Okay.

They bought it for 9.8, plus alL of these anciJ-lary

charges they assuÍied.

So looking at, the sett'lement documents províded

by Mr. Henderson, I'm willíng to say theír acquísítion

cost was 11.41 mÍILíon. They put in a down payment and

some other costs, wound up with a mortgage of 7.6. So

they sold ít, and I'm guessíng because I have never

been toLd what the sales price wac.

But based upon what turned out to be the net at

the end and knowíng they had 7.6 loan I'm guessíng they

sold ít for abouL t7.3, I donrt know, but thatrs what

the math seems to show.

MR. LEVINE z 20.L.

IIow much?

20 .L or 20.6.

20.5.

Whatever. Somebody ís going to go

revíews alL of these for me and

real numbers are. So that's why lrve

gÍven you this, so you can at Lhe end of

the day I want to know what

THE COURT:

MR. I,EVINE:

MR. HUCKINS:

THE COURT:

back, Ms. Uecker and

tell me what the

see because

the real nr¡mbers are.

But the best guess I came away wíth from the

information I have been gíven was that we know that

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they had.8.8 miIIíon

about L7.5 of CS III

where they went.

stíII on hand, so I'm lookíng for

funds that ríght now I don't know

So it looks like CS I ís insolvent'' so probably

we don't have too much obJ.igation anymore Èo their

investors. They got their green cards, and that's all

they're going to get. CS II investors, we have a

questíon about whatrs our oblígation to them. I donrt

know. CS IfI, I'm not, Çuite frankly, even sure

because I donrt have a complaínt' on fÍIe if I have any

jurísdÍction over them.

So maybe theyrre not my problem other than I

borrowed a million bucks from them that Irve got to

make sure gets paid back. So what I'm going to do Ís

let you have some time to look at this, and then Irm

going to come back and we're goíng to talk about the

conclusions and concerns, which is the front page

because this is reaIly wliere I am ríght now, and we

need to discuss where we go from here.

So I thought sínce you were coming anyways, and

I had fínaIIy had tÍme to reaLLy devote to looking at

thís, that t,his would be a good opportunity for us to

discuss it. Okay. So if I gíve you like ten minutes,

ís that enough? You can look at this, and then we'Il

come back and talk about ít?

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MS. PRITZKER: YCS.

. MR. HUCKINS: Yes.

MR. LEVINE: Is it okay if we staY here?

THE COURT: Absolutely. Make yourselves at

home.

(Recess taken. )

THE COURT: Werre back on the record, and all

counsel are present. The first question I'd lÍke to

ask is, where does Runway fit ín on my chart?

MR. LEVINE: Your Honor, ,Jonathan Levíne for

the record, I was going to walk through the chart and

sort of explain a IíttLe bít of it, Íf I could. Runway

is a part of CatLSocket I. Our understanding is that,

CaLl Teks Securíty, whích shows up in t'he mÍddLe.

THE COURT: Hold on. Runway Ís under

CallSocket I.

MR. LEVINE: CaLL Teks SecurÍty which is No. 4

ín the mÍddLe, I belÍeve, ís also part of CallSocket I,

according to the money fJ.ow. Sort of broader' there

are other entities which we can provide the names of.

I don'È have them offhand, but there are a number of

other entíties that have appeared on t'he financial

statements that we can fill ín. That would go in the

middle of thÍs chart.

THE COURT: You mean ot,her business entitÍes

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where I left the blank boxes?

MR. LEVINE: Yes. Now, ín terms of your sort

of your Honorrs statement about the CallSocket part

beíng the smallest part of t,hís, it'rs actualJ-y, wê

thínk, the largest part of thís because all the money,

the 55 miIIíon sits ín here, and then aLl of these

entítíes for the most part have gotten money bo or from

.the CallSocket entities.

THE COURT: And You base that on what?

MR. LEVINE: The financÍal statements that we

have that werre

limited set of

stiLl parsing through. We have a

financíaL statements. They show money

fJ.owing to from directly a nr¡mber of t'hese

entÍties,

ot,herwíse

and

and then separately aIL of the money

flows through SFRC and then may fLow down

through thÍs.

But every penny of investors' funds that came

ín all 55 miltíon here went immedÍateLy out the door'

eÍther to Mr. Henderson hímse1f or to SFRC and then

gets disbursed and some of Ít shows up on the financíal

stalements as an SFRC receivable.

THE COURT: I understand those are your

contentÍons. So it's your contention that none of

these other companies, Bear Trading, Berkeley HeaIth,

CaLifornía Gotd Medal, eL cetera, they dÍd not

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independently seek ínvestor funds?

MR. LEVINE: We don't know yet because we donrt

have the fínancÍa1 ínformation for any entity other

than the three CallSocket entitÍes. We have requested

Ít but haven't gotten ít yet. So we see the money

goíng out, and we see some of it comíng back

I think my understanding is that all of the

money from the CalLSocket entities got moved out, and

then it got brought back as needed, but Ít was also

used for a lot of other purposes íncludÍng a lot of

these other

THE COURT: Werve gone far afield now. Díd you

want to say something?

MR. DISSTON: I dídn'L actually bring a chart

that wouLd expJ.ain thís, but can certainly help

straighten out t,he concerns

how these different ent'itÍes

seven EB-5 projects.

THE COURT: You mean natíonwide or withín thís

I

that the court has about

are associated. There are

SF RegionalMR. DISSTON: SF Regional-. There are seven

EB-5 projects aponsored by SF Regional Center. Those

are CCOO. Not on your chart, I don't think. It's

Comprehensive Care of Oakland LP. General partner ís

CCOC, Comprehensíve Care of CaLífornia LLC. They own a

Center?

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buiJ.díng on 10th St'reet. It's a subacute care

facilÍty. I Lhink that project has 20 ínvestors.

THE COURT: Sír, rather than me taking alI thís

down, why don't you just do a chart?

MR. DISSTON: WeIL, I have a charÈ that I could

maybe get faxed to the court that lays out t'he

relationshíp between all these.

But as to the seven as to the call sockets

that werre talkíng about ín this case, there are three

caltsocket entítíes the court knows, and I believe that

the companies that are assocíated wíth those three

besides the confusíngly named holding companies and

LLCs t,hat have the same n¿Lmes as the caLl" sockets'

there is Cíty Brand Medía

THE COURT: And Cíty Brand Media' are these all

under CallSocket I?

MR. DISSTONZ Í, offhand, canrt teIl you which

of the call socket,s these are as€tociated with' but wíth

one or more of the call sockets, Cíty Brand Medía'

fmmedÍa, Magnín Events, TTRG.

THE COURT: What is TTRG?

MR. DISSTON: It'g the restaurant. It's the

Tríbune Tavern thatrs in the

TIIE COURT: We have a separate one for Tribune

Tavern.

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MR. DISSTON: WeII, ít's the same thing.

TrÍbune Tavern and TTRG are the same thing. And I

belÍeve CaII Teks. So those entities are associated

wíth

THE COURT:

you mean, owned by?

MR. DISSTON:

somehow connected Lo

can and, ín fact'

When you say "asgocíaLed, rr what do

Yes, owned by, partnered with,

those call centers. As I say, I

we'Ll be provÍded specifíc

information about that.

THE COURT: lrlait, a second. So the Tríbune

Tavern, TTRG, they are somehow connected to CallSocket

MR. DISSTON: The Tribune Tavern Ís not owned

any of those entitÍes. Itrs just in the building.

TIIE COURT: I know. It showed uP on

Henderson's declaratíon with Íts own bank account,

II.

by

Mr.

and

MR. DISSTON: I

conducting business

TIIE COURT:

asa

so I tríed to figure out why.

think it has a bank account for

restaurant.

WeII, does SFRC run Èhe restaurant?

He doesn't just lease out the space to a restaurant to

run it?

MR. DISSTON: IL has an interest in TTRG. Itrs

a member of the limíted Iíabítity company that runs the

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companies?

MR. DISSTON: Some of them.

THE COURT: So what was t'he Lawsuit involving

the TrÍbune Tower about? The TrÍbune Tavern?

MR. DISSTON: Mr. Henderson had a partner named

Chris PastÍna. They started two restaurants. One in

the Tribune buiLding calIed the Tríbune Tavern.

Another Ín 'Jack London Square, a hotel, waterfront

restaurant.

THE

companíes?

MR. DTSSTON:

THE COURT:

hotel Ín 'Jack London

Mr. Henderson and Mr.

each other back

THE COURT:

CalLSocket entíties,

CallSocket entities,

lawsuÍt.

MR. DISSTON:

COURT: Sir, did you set, uP all these

I'm sorry?

Did you organíze all these

Square that was called Lungomare.

Pastina got into a lawsuit with

But they also sued all the

right, Mr. Pastina sued all- the

and you represented them in that

If you're teIIíng me that theY

were aLl defendants in that Lawsuit, I'Íl surprÍsed. I

thought Mr. PastÍnats case, âs I remember ít, was

against Mr. Henderson and San Francisco Regional

Cent,er, but not the CaLlsocket entitíes.

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THE COURT: WeII, the counsel who represents

wot'lAc Partners, who asked me to relate that case here,

which thus fat, quite honestJ.y, I have declined to do,

alt,hough t,he judge that has that case ís quite

ínterested in me takíng it, also represented the

Tribune Tavern plaintiff, Mr. Pastína' I guess'

And so he has been allegÍng there is some

relationshÍp, and I donrt have any idea becauge Irm

onJ"y lookíng at hís notíce of related actions 

'

MR. LEVINE: Your llonor, if I may'

THE COURT: Yes.

MR. LEVINE: I thínk Mr. Pastina, and I've

spoken wÍth Mr. Pastina and wíth hís counsel' My

understandíng ís that the reason the CallSocket

entÍtÍes were named in that case Ís because there were

payments that there was a dÍspute about payments and

money.

And some of the money that went into that

restaurant to build ít out and to run it was using

CalLSocket money, and the checks were wrít'ten on

CalLSocket accounts so Mr. Pastina when he sued,

because he knew that because he saw the checks that

saíd callsocket on them, he named them as defendants.

THECOURT:Isee.Isthatcasestillongoing?

MR. DISSTON: No.

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THE COURT: So that one is resolved. I don't

have to worry about beíng asked to take that one.

MR. LEVINE: If I may on the WOMAC case, there

are that ís a completely separate case. What I will

say ís that .fL Gateway, which is the entity under

WOMAC, t,here are payments to or from that entity that

appear on the call in certaÍn of the CallSocket

financial statements, as well ae just about every other

entity on here.

THE COURT: WelI, I'ñ not overly surprísed to

hear that, sÍr, because there's a dÍfference between

there's a dífference between beíng partners Ín a

busíness, therers a difference as opposed to making a

Ioan to a busÍness, as opposed to failing to maintain

business entities aft separate entitÍes and commíngIÍng

all their funds.

And I am endeavoríng the best I can to give the

benefit of the doubt right now, but one reason I put

all these on this chart Ís because f'm aLready on

notíce by the declaratíon, I think, of Ms. Uecker that

funds from Immedía were used to pay the cal-l centers

payroll by Mr. Henderson that he transferred ImmedÍa

funds.

And what I'm looking for here is, is he the the

CEO of aLl these companíes? Doesn't he have a board of

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directors? Isn't there anybody he has to answer to?

MR. DISSTON: He has memlcers in the seven

separate EB-s projects, and just to finÍsh out the

chart, N¡\3PL, LP Ís an EB-s Project.

fHS COURf: Okay. So NA3PL, so so far I have

three, CCOO, CallSocket, NA3PL. Who are the others?

MR. DISSTON: You've got three call sockets.

THE COURT: TheYrre each theír own?

MR. DISSTON: Yes. So you have CCOO, three

call sockets, NA3PL, LP, and iIL Gateway, and then

CaLifornía

California

So thatrs

Gold MedaL,

Farms here.

also you've got Central

That's a separate EB-5 Project.

the seven entít,ies.

THE COURT: And so you're saying Central

Calífornia Farms ís under Californía Gol-d Medal?

MR. DISSTON: Frank1y, I can't remember which

is the LP and whích is the LLC, but one of them is the

LP.

THE COURT: Okay. That's heLpful. Where does

Tesh fít?

MR. HUCKINS: Excuse me. Leeds, I

make sure

mentioned

CaLLSocket

beLieve t,hat you had

thaL wetve got Ít squared away.

that Immedía was an entitY wíthin

family. Previously when we met

expLained that Immedia

just want to

I think you

the

and then I

is

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basícatly the SFRC Level and that that was basicalLy an

entity that was created at the same time as SFRC and

was essentially, I think the descríptíon was, it's

basicaLLy a dba of SFRC.

MR. DISSTON: I thought

donrt t,hink thatrs a companY that

that Immedía, and I

Irve certainly lost track of it in

think Lhat fmmedia was a busÍness

leads for the call centers, and so

I set up. If so,

the mix here, but I

that was generally

ít is assocÍated

wíth the call centers

So Teeh, Berkeley Health Care Dynamics are

assocÍated with the NA3PL and North Ameríca 3PL, LLC

proj ect .

THE COURT: So Berkeley health and NA3PL and

Tesh are all related?

MR. DISSTON: TheYrre all reLated.

THE COURT: OkaY.

MR. DISSTON: Along wíth MagÍc Ear.

THE COURT: Magíc Ear beLongs wÍth t'he NA3PL.

MR. DISSTON: Yes.

THE COURT: Okay. The EB-s project that ís ,JL

Gateway has a partner named WOMAC ín that entity' and

there's a lawsuit where WOMAC is suÍng San Francísco

RegÍonal Cenler altregíng that a note from San Francisco

Regíonal Center has been Paíd.

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THE COURT: Right. That's the

asking me to consoLidate, which Irm not

THE COURT:

ínterestíng, but it

ríght now, and we've

IÍke to

one theyrre

inclined to do

Thank you. ALI of thís Ís quÍte

doesnrt address anY of mY concerns

only got ten more mínutes. So I'd

address my concerns. And the first one ís

you know, I cannot

MR. DISSTON: It's an unrelated

THE COURT: So Yourre confirmíng my instínct.

Where does Bay Area Tradíng fít ín?

MR. DISSTON: Bay Area Trading, I beIíeve I

belíeve Bay Area Tradíng Ís wíth t'he call centers. I

canrt remember íf it's part of the call centers or íf

it's wíth NA3PL. If I were going to make an educated

guess, I'd say it was with the call centers.

TIIE COURT: What does wíth the call cent'ers

mean? They own it?

MR. DISSTON: Yeg, that woul-d be what ít means.

They are members. Either one of the cal-l' centers or

several of the caLl centers are members of that

THE COURT: What does them being a member mean,

an investor?

MR. DISSTON: LLC. The onJ-y ínvestors, the

only investor busÍnesses are the limited partnerships

that are CCOO, LP, CalLSocket LP

because, teI1 I don¡t know

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whether yourre trying to teLl me, Mr. Dísston, that

these Bay Area Tradíng CaLL Teks Security, City Brand

Media, are aLL assets belongíng to CallSocket?

MR. DISSTON: Some of them certainly are in

that counsel índícated that what happens when ínvestors

release the funds from escrow to the IÍmited

partnershíp, that is the entity that they are investíng

ín, it then goes to San Francisco Regíonal Center. It

is then used by San Francisco Regional Center to pay

expenses of some of these entÍtíes.

And so in t'he accountÍng that Mr. Tate Ís

preparing for the court, there's a trackÍng of alL of

the funds from the time they come from the ínvegtor,

where they go, when they go to san Francisco RegionalCenter, and then where they're ínvested by San

Francisco Regíona1 Center.

MR. LEVINE: Your Honor, we have sJ-íghtJ-y

different víew of thís.

THE COURT: Okay. Irm not interested ín all of

that right now, quite frankly. what I am int,erested ín

Ís whet,her I'm going to close down the call center

today or next week or whenever.

MR. HUCKINS: Let's deal with the values' The

receíver has got her own opínions on the values of the

property.

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THE COURT: Excellent. Thatrs whaL I was goÍng

to ask you to do. Do you have it wíth you?

MS. Uecker: Yes.

MR. HUCKINS: Do you mínd if she bríngs ít up?

THE COURT: Has everybody seen this? You canrt

taLk to me.

MR. DISSTON: I have not.

THE COURT: I'm going to read it out Loud. So

what do you base these numbers on?

MS. UECKER: This is from a broker opinion of

value from Colliers Internatíonal Brokerage.

THE COURT: Is ít just over the Phone?

MS. UECKER: No, I have them written. I dídnrt

have them aLl today, but I called my offíce.

THE COURT: Tribune buíIding could be worth

between 22 and 24. It thinks the Duffwin Theatre could

be worth between L0.2 and 10.8. It thinks the 17th

Street property, whích I thínk is the Communíty Bank

could be worth between 7.2 and 7.5, and the 20th street

property, whatrs that?

MS. UECKER: Thatrs the warehouse.

THE COURT: Thatrs not part of us. Thatrs Part

of the Berkeley So I don't know if I can one

of the thíngs we

my jurísdiction.

thing.

have to address here is the lÍmít of

So what I'm lookíng at here is if f

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just take the averagec, I've got 23,10.5' and I have

got 7.35, so if we rely upon those nr¡¡nbers, then you

mÍght not have been so far off the mark in terms of the

gross va1ue. It could be as much as 41 miLlíon dollars

gross. Now, who has the number of what' the total loans

are, off the top of theír head?

MR. HUCKINS: The debt on the TrÍbune Tower we

talked to Lender's counseL this week and they saÍd --

HE COURT: Hold on. Let me get my paper so I

can wríte Ít down. The Tríbune Tower debt right now ís

how much?

MR. HUCKINS: They said 9.9 milLíon doLLars.

THE COURT: That's the number I used.

MR. HUCKINS: And they said that was a soakÍng

wet nu¡nber, so I'm assumÍng thaL's the high end. And I

believe the cross-collateralízed loan on the Duffwín

and the Broadway buildings ís

THE COURT: OkaY. I

let's just double-check here.

that down. So 6.2 on Duffwin.

6.2 miLLion.

thínk

Okay

So

I used 6.3, but

. So they brought

that means we owe

that means we míght

WeLl, thatrs a

16.1. We've got we've got 16.1, 60

have as much equity as 24.9. OkaY.

whole lot better than 15.

MR. DISSTON: And then there's I

THE COURT: Right. But let me explain that

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problem as I went over this, Mr. Disston. If I were an

ínvestor sitting someplace else Ín the worLd and I

invested ín CaLlsocket II, and I found out that I

have I gave my $500,000 and my 500'000 and aLL

that's left of ít rÍght now, Ít's hard because of the

way they did that, 7, L7.7, and we owe 6.2 and 5 and

so if we just separate that out and we talk about

CallSocket II, I would thínk that, the 9.5 ín equity

they might have ís aLL mine.

And since we raised 15.5r wêrre at a loss

already of 5 míI1ion in CallSocket II. So I'm still

not goÍng to get my whoLe 500'000 grand back. But I

woutd not be happy Íf I did not get back have you

got your calculat,or -- my l/31, since there were 31

ínvestors, my L/31 of the 9.5 there Ís to be had. Do

you see what I'm saYíng?

So herers where I had thÍs real problem and

t,hís íe where my iurísdictÍonaL problem comes because I

don't have a compJ-aínt on file. I don't know if t'he

purpose of

accountíng.

I

this whole lawsuít, is just t'o get you an

know yet Íf the purPose

the assets and return to

donrt of t,hís lawsuit

is to J-Íquidate

what they originally ínvested. I don't

Mr. Young was an ínvestor in terms of act'ualJ-y

the investors

even know íf

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contributing cash. so thís is why when we were here on

April 20th I'm kÍnd of Like, what the heck' I donrt

even I don't know the scope of my jurisdÍction'

I canrt even be exactly sure right now who the

parties are because Mr. Tate has at various times been

a party when sFRc gets sued. so Irm a Littl-e concerned

about hím comíng forward and voLunteering a1"1 thÍs

informatíon off the record wÍthout counsel. QuÍte

frankly, werre going to have to vísit that'

So thís is the deal. You can't jusL keep

sayíng, we have aLl this money and these t,hree separate

entítÍes and three separate groups of investors we can

just shuffle the walnut shells however we want'

MR. IIUCKINS: Your Honor, can I give you a

couple of other data points that you may need?

THE COURT: P1ease.

MR. HUCKINS: Werre trYing to break down t'he

payroll gettíng to your for you because

ultímate questíon.

THE COURT: Are

a month, You've got 100

5,000 a month, that's 5

center?

I think ít's

these peopLe aLI making $5,000

employees and theY're Pullíng

grand a person, at a caLl

MR. LEVINE: No, it's management fees, which is

the hígher level people taking huge chunks of money

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out.

MS. UECKER: If I may, Runway in San Francisco

are higher saLaries anlnrhere from 50 to 100. The caLL

centers are hourLy indÍviduals, but what you add to it

ís all the benef íts. We have 100 percent healt'h

Íngurance, Kaiser, vísíon, dentaL, Workergr Comp. We

have a lot of benefíts.

THE COURT: Does the payroll you requested of

me on ApriJ. 20th incLude Runway?

MS. UECKER: Yes.

THE COURT: Okay. That was not clear to me. I

thought Runway was standalone self-supportÍng at thís

point.

MS. UECKER: No, no. What Irve tríed to do as

the receiver ís to try to pull the information out of

Ca1lSocket I to see íf Runway can stand on íts own

because Ít's reatly a separate operation. It is not a

calt center. It's truly an íncubator space ín

San Francisco.

So what I plan to do for the next hearíng was

puII ouÈ from Catlsocket I a separat,e Runway financíal

Éro we could see. I belíeve t'hey're cLose to breakíng

even, but I haven't run aIl the fínal numbers, your

Honor.

THE COURT: Okay. WeLI, Yoürre one step ahead,

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and I regret that I'm feeling time pressure. We can

stay as late as 5:00, but after that it gets a

bit dicey wÍth the sheríffs, and they donrt get

and they start billing us for overtime ín cÖurt,

have the administrators on my neck.

MR. HUCKINS: Do you want the payroLL

information, the head count nu¡nbers?

IittIe

happy

and I

THE COURT:

MR. HUCKINS:

If you have it, yes.

Callsocket I head count, 105

employees,

I thínk the

rea1ly expect

MR.

THE

advíce.

for the

comÍng

because

gome.

and that includes the Runway employees, and

receiver said it was 30 to 40.

THE COURT: RunwaY is 30 to 40?

MS. UECKER: No, no, I emPloYees.

MR. HUCKINS: CallSocket II, head count Ís 65.

THE COURT: And just' for purposes of future, I

to be hearing from Ms. Uecker.

HUCKINS: That's fíne.

COURT: You're only supposed to give lega1

MS. UECKER: And your llonor, these numbers are

last payrotl. Therers new payroll that's

out tomorrow. Our nu¡nbers are going down

you didn't aLlow any hiring and there's been

THE COURT: Good. So how many does CS II own

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or hire, how many has ít got? How many employees does

CS II have?

MS. UECKER: 65.

THE COURT: They have 65 empJ-oyees aLready?

MS. UECKER: What happened ís thÍs ís the

second payroll for CaLlsocket II. Mínd You, they

haven't been up and runnÍng, but they geared up and

hired a bunch of people ín CaLlSocket II.

THE COURT: According to the declaratíon fíIed

by Ms. Bapt,iste Shephard, they only started March of

20L6. This lawsuit was filed Ehe end of March.

MS. PRITZKER: Actually, werve been on fí1e

sínce ,IuIy of Last Year.

MS. UECKER: Your llonor, so ít's cLear, the CS

II employees have onLy been employed and been on

payroll for the last two payrol"ls, so one month, these

55 people.

THE COURT: How díd thÍs get out, they've only

been employed for one month and how dÍd this get up

to -- when you came in, you asked me to shut down what

I understood was callsocket T, conference what,ever it

is, call center 1.

MS. UECKER: WeII, calL center CallSocket I

and 2 are co-míngIed. They're on the fourth floor and

the sixth floor of the Tríbune Tower.

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THE COURT:

another? You canrt

entity?

MS. UECKER:

payroll reports. But

was for CallSocket If

So you can't teI1 one employee from

t,ell who ís an employee of which

You can if you go through the

there's two report,s. The plan

to be in the Duffwín buildíng,

that space ís vacant. I have

So what I'm gett,Íng at is and

but they

sreen that

cantt because

space.

THE COURT:

this is where we could use some lega1 advice should

CallSocket I be put into bankruptcy, ghouLd the doors

just be ctosed?

Whatrs more imporÈant t,o the ínvestors, gettÍng

their green card or getting the financía1 return on

theÍr ínvestment wit,h regard to CaLlSocket' I, I don'È

thínk it matters because they're íngolvent anyways'

theír money has all gone bye-bye.

So what happens if we cLose call center 1, we

start savÍng all that money, we don't let call center 2

hÍre anybody eLse, and my understandingr, what were

their reguírements, they had to hire ten people per

ínvestor, so they had 31 investors, so they're supposed

to wÍnd up wíth 310 employees ín order to qualify under

the BK 5 thing?

MR. DISSTON: I think CallSocket II has, I

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believe, 29 investorg. The fírst four investors wiLl

submít IA-29 petítions by the end of thís month. That

Ís the reason that there are, if the head count ís 65

for employee€t for CallSockeL II, because the first

batch of investors wÍLl be submÍttíng theír I.A'2g

petítíons, so there wÍlL be an accounting prepared for

the USCIS for all

THE COURT: Sír, I aPPrecíate that.

MR. DISSTON: 14.5 miIlíon.

THE COURT: Yeah, right. You know, I found

thís excellent brochure, I guess it is, that had been

attached to, I beLieve ít was somebody's declaratíon,

the CalLSocket II

MR. DISSTON: Business PIan?

THE COURT: No, it was the CalLSocket II saLes

brochure for investors. And ít basically explaíns to

them that wíthín five yearE they're goÍng to be makÍng

a great Profít.

And I read that and I thought to myseJ'f, 9êê'

given that the actuaL experience wÍth cal1socket I has

been insoLvency within five year€t, how could the

representatíon be made that you're goÍng to gtart

turnÍng a profít on your investment, withÍn the fírst

two years and by five years you are goíng to be home

free?

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MR. DISSTON: I confess I canrt respond given

t,hat I'm not famíi-íar with the brochure that you are

talking about.

THE COURT: You produced it. It was attached

to your documentatíon.

MR. DISSTON: We copied that for the court to

indicate I thought it was the business plan. But if

it's somethÍng else, then I'm not sure what that was.

But the purpose

MS. UECKER: Your Honor, if I couLd, t,herers

orre concern that I don't thÍnk anyorre has addressed,

but if we're going to do anything wíth these employees,

we have what's called the WJIRN Act notíce iesues and

that I do need lega]- counsel but that' affects

CaLlsocket I employees.

The majority of them have been there long

enougrh that the notice would be required, where the

CallSocket II employees, because they're only there for

the last 30 days, there wouLd only be one WARN notice

that would be required. My concern is Íf we g¡o down

that road is to make sure we comply wÍth the WÀRN Act

ín gíving appropriate notice.

THE COURT: IIow much notíce do you need' two

weeks?

MR. HUCKINS: Itrs 60 days. It's basically a

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day-for-day penal.ty. So if you terminate prior to 50

daysr 1roll basÍcalIy owe the employees every day of

compensation that's a qualified empJ.oyee

THE COURT: You mean if you close the whole

thÍng?

MR. HUCKINS: If we were to shut down tomorrow

and we didn't give the requisÍte notÍce, potentiaLly a

WARN Act cLaim for 60 daYs.

TIIE COURT: And what if you lay off in stages?

MR. HUCKINS: Irve díscussed that briefly with

my counsel, and I've talked to one of my labor

partners, and he said that's frowned upon, and they may

Look through Ít. But that's a possibíJ-Íty as we1l.

MS. UECKER: I also have had experÍence in

bankruptcy court where they have not gíven the WARN Act

notíce because it's an emergency, which Ís another

situatíon Irve actually encountered where debtor's

counsel did not have the tíme to give the notice. But

I just bring it up, your Honor, if Ít's something

yourre looking at ín an orderly shutdownr 1rou may want

to stage ít.

MR. HUCKINS: And just so that werre trYing to

give you the facts I think that you need, we were

before thís hearÍng

presented them wít'h

talkíng to counsel and we had

the necessíty of fÍIíng a

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stipulated motion to present to your Honor laying out

the cash flow burn that the receíver has experíenced to

date so that the court would have what it needed to

make an informed decísion because we were goíng to need

another funding request before the üune 9th hearing.

Thereceiverhasthenumbereínfrontofher

for what's Left from the mill-ion dollars, but it ís a

signífícant burn. And the best, guess ís that million

doLlars might carry us through the míddle of this

month.

MS. UECKER: Through hopefulLy the May 20th

payroll.

TIIECoURT:Myunderstandíngisyou.recomíng

back May 17th anlnuays. We have a reservatÍon for you

on May 17th at 2230. But that doesnrt mean I'm goíng

to give you any money that day' That's the day thaÈ we

had reserved for you to come back and ask'

SolamveryconcernedaboutÈherateatwhích

that money is being used. As you see down here' what

Irve basicalLy said ís if we were to try to fund t'he

caLlcenterpayroJ-lthroughal'lCSentitÍes'itwould

bealloftheentÍtíesthenwouldbecompletel.y

insolvent withín a mat'ter of 25 to 30 months'

Andwhywou].dIconsíderdoíngthatwhenitIs

veryclearnowthatcal].center1ísinsolventother

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than maybe this new ínformat,ion about t,he Tribune

Tower, and it can't pay any of the money back' so f'm

not going to advance any more money t'o call center 1

unless I am confident it can be paÍd back.

And I just, have

ThÍs is new ínformation.

to so I don't know here.

It's information I very much

needed. And thís Ís further Ínformation whÍch I need.

So in the ínterest of tíme, wê've got the fair market

vaLue apparently of the properties.

I need to know Íf any of the CS entities are

actually generatíng any íncome. So if they act,ual-J-y

have, I need to see the operating íncome and expense

sheet for every CallSocket entity that has íncome and

expense. I only understand those right now to be

CallSocket I, CallSocket II and Runway.

Now, maybe ít extends to the real property, the

Tribune Towers. I rm hoping that real estate agency you

híred ís monítorÍng the rents and kÍckíng out the

people who aren't PaYing.

MS. UECKER: Along that liner folJr Honor, the

real difficulty ís in the Tríbune Tower the majority of

the tenants are Henderson entities that do not pay

rent.

THE COURT: TheY have

MS. UECKER: TheY have

no rental agreement.

rent,aL agreemente. TheY

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do not pay rent.

THE COURT: Evict them.

MS. UECKER: Irm just and we also have Tesh

who Ís a tenant, at the Duffwín buíIding. Magíc Ear was

going to be a tenant at Broadway. It's pervasive. So

we are trying to puII those nu¡nbers together. Itrs

going to look at what the rent shouLd be and then what

Ít actual-Iy is and what ís colLected. Theyrre very

dif f erent nu¡nbers.

MR. HUCKINS: I know your llonor needs to have

the necessary factual record to make the decision, but

I believe t,hat when the facts are presenbed, there will

be suffÍcient equíty or at least the foundatíon for

sufficíent equity in the Tribune Tower buiLding to at

Least make the payrolL obligations t,hat have already

been íncurred.

And then we would need authorízatíon, a

receíver would need authorization to essentíaL1y shut

down the operat'ions to terminate further Losses 

'

THE COURT: Okay. This is what I want you to

do ríght now. I want you to lay off I want you to

cut the cal-L center and any other related expenses by

30 percent. So we're going to begÍn to stop the

bleeding.

Do You wish to be heard, Mr' Dísston?

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MR. DISSTON: Yesr 1rolrr Honor. May we deal

with that issue by eíther increasíng Èhe revenues to a

sufficíent extent to cover whatever your

TIIE COURT: What revenues?

MR. DISSTON: The revenues from t'he calL

center. When we preÉtented the

THE COURT: Sir, I don't know how much pie in

the sky you believe in, but you've had five years to

turn that ínto an income-producíng busíness.

MR. DISSTON: And I believe werre there. So

aLL l'm askíng for is that if what werre tryÍng to do

is reduce the burn rate that we do that by either

laying peopLe off or by íncreasing the revenues.

There are new agreements that are eíther ín

effect or are, if they're not in effect, theyrre beíng

foLlowed by clients of the call center, and I think

that the revenues are íncreased or íncreasing. If we

Iay off

TIIE COURT: fÙhy shouldn't we just put the caII

center 1 ínto bankruptcy and let the trustee worry

about this?

MR. HUCKINS: We need a voluntary pet'ítion by

the debtor, which is possible. Mr. Disston is trying

to do that. Or you need an involuntary petiLion. You

need to petítion the credÍtor to do so. The receiver,

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I don't belíeve, is aut,horized at this poínt to

essentíally put the calLsocket entity into bankruptcy.

MR. LEVINE: Our hope, your Honor, was to try

and effectuate ín a less -- bankruptcy ig obvíously

very expensive, takes on a life of íts own'

And our hope was to try and effectuate an

orderly wind-down of the entities to marshal-l the

assets that could be marshalLed, stop the bleeding and

then fígure out where that money, who that money

belongstoandclawbackasmuchaspossiblefrom

Mr. Henderson and aLI these other entities

werve taken all these moníes out which are

legÍtimately assets of the callsocket entitíes. That

could take a whÍ]e, but werve stopped the burn, go! the

money from the properties, we don't need a receiver or

counseL there, and we can come back and figure out a

way to distríbute that money but without doing the

bankruPtcY.

ThebankruptcywÍ1].eatupagoodhunkofthís

money and that was our hope to do that. we would hope

that Mr. Ilenderson

THE COURT: Wel-L, thq bankruptcy can eat ít up

or the receíver and counsel can eat ít up. Either wâ1rr

there ísn¡t going to be anythíng Left. Letrg face the

facts.

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MR. LEVINE: There could be if Mr. Henderson

would stop fightÍng and, you know, step off. There

could be substantíal money here Left to return to some

of the invegtorg, which ís what we think shouLd be done

at this poínt.

THE COURT: What makes you believe that they

care more about getting a return on t'heir ÍnvesLment

than on theír green card?

MR. LEVINE: It's my beIíef that they donrt,

the Ínvestors, that they probably want their green

cards. But if get,t,ing their green cards means

perpetratíng a fraud on the Ínvestors and perpetratíng

a fraud on the federal government and not complyÍng

with the EB-S program, thatrs not something I t'hink any

of us síttÍng at this table want to particípate in.

THE COURT: The EB-5 program, as far as I can

thus far ascertain, only requÍres that t,he busíness be

vÍable untiL t,hey get theír green cards. Therers

nothÍng that says, and thÍs has to be a solidLy based

business that we can count on is going to go on even

for a three-year term that the IRS requíres that you

can take a loss on a busíness for three years.

I couldn't find a single thing that saÍd, and

if werre not sat,ísfÍed bhat this is a vÍab1e busÍnesg,

so aÊi J.ong as you can Irm sorry to say thÍs so

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plainl,y, but it's the only way I know how to talk. If

you can keep a sham up for fíve years and all your

investors get theÍr green cards, mÍssÍon accomplished.

MR. LEVINE: I franklY don't theY're

supposed to be sustainabJ.e jobs. sustainable shouLd

mean someLhíng.

THE COURT: Five Years.

MR. LEVINE: I guess the question is if ít's

I think yourre rÍght. And I thínk that's why therers

so many problems wíth this program and why it's so ripe

with abuse and there's so much fraud in it. But it is

not being it is our víew, at Ieast, that this

program ís not beíng implemented properly.

And íf ít was simpJ-y a matter of they tried

their best and used alL the money of these programs to

create the jobs and símp1y couldn't make them

sustainabte but everyone got their green cards' that

would be one thing. But thatrs not what's happening

here.

Whatrs happening here ís this money ís not

being used to create gustainabl.e jobs through the call

centers. It's beíng diverted for lots and l"ots of

other purposes for Mr. Henderson and hís family for

personal- gain. And that is not somethíng

TIIE COURT: Now you're off into argument for

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which I donrt yet have any proof. So you need to f

can only deal with what I have rÍght now, and what I

have right now and what, makes thís such a challenge ís

because I don't know where the target ís.

I don't know is the target t'o leave

calLsocket I has accomplished íts purpose,. €to we can

safely shut ít down and now move on to cal"lsocket II

and help those people get theír green cards by

fulfiLtÍng its míssion, and if we can if the caLl

center stays víab1e for three, four years, however long

ít takes for them to get their green cards, then okay.

Under the BK 5 prograrn, misgion accomplíshed

and then move on to CaI socket 3, I don't know' And

the problem Ís because you don't have a compLaínt on

fíLe.

MR. LEVINE: We do have a compJ'aint on file'

We don't have an amended comPlaínt.

THE COURT: No. It's been demurred' In the

eyes of the court, there ís no víabLe compJ'aint on

file. so you got notice from defense counseL t,hat

you're not going to fiLe until- May 13th. Donrt seek

another extension.

And I need to see a compLaínt on fíIe, and I

need to find out what the scope of t,hÍs is because íf

all I have is one 50 percent ínvestor who is concerned

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about all of this, then t,he easy way out is buy hím out

and get ríd of him and let the other ínvestors get

their green cards becauþe t,hat's apparently aIJ- they

wanted.

MR. DISSTON: Mr. Young is not an investor.

The

THE COURT: Hers pay 50 percent partner

according to the representations I have thus far.

MR. DISSTON: And Êto your Honor has scheduled a

hearíng Lo sit down and go through alL of the fínancÍaI

d.ocuments. My understanding ís that Mr. Tate is

preparíng all of the fínancÍaL documente for all of the

entít,ies that are at Íssue here, and some kind of a

cash flow analysís to show how that all works.

THE COURT: Thank You, sir. And now I'd Like

to address the further things I need, and I don't know

whether I'm going to bring you back next week. See, Ï

am not avaiLable from May the 18th untíl the 31st' so

but I've gotten the fair market vaLues now.

I want the operating expense, income and

expense for all CalLSocket entities, and your request,

Mr. Disston, ís deníed. We will rolL back the caLl

center expenses by 30 percent effective, giving

what,ever notice you need to give under t'he Iaw' But

we've got to stop the bleeding now. Any tenants that

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are not payÍng rent should be evicted.

If they have some kÍnd of a rental agreement in

place, Ry understandíng ís the receiver is now in

charge of the reaL propert'ies, and ít's up to you to

decíde what the rents shouLd be or abíde by the monthly

rental agreement,s or the leases. Anybody who doesnrt

pay rent gets out.

MS. UECKER: I wil-I absolutely folJ.ow that,

your Honor. is some tenants have

leases that

rents.

The other issue

are sweetheart deals at very, very low

THE COURT: Therers unfortunately not too much

we can do about that without gettÍng sued.

MS. UECKER: One ís SFRC and Mr. DÍsston on the

nínth floor pay S1 a year rent.

MR. IIUCKINS: Your Honor, as a procedural

matter on these evíctíon matterÉ íf we go that route,

can we relate those so yourre aware of those?

THE COURT: What are you talking about?

MR. HUCKINS: If the receÍver ends upbringíng

eviction proceedings'to dísplace tenants at the varíous

properties because theyrre not paying rent or t'hey have

some, lack of a better term, sweetheart deal that

doesn't make economíc sense, caxl we bríng those, You

don't want the UB proceedíngs ín your court.

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THE COURT: I wouLd be gJ-ad to have them except

I belíeve it woul-d be unethicaL for me to do so if I

have ordered the evíctions, 9êê, how would you feel íf

you were the tenant?

MR. IIUCKINS: Faír enough. Can I have two

other things that would be heLpfuL for you to have?

The payroll breakdown so that you have the dollars, the

employees by entítY?

The other thíng I thínk you need to underetand

is the amount of cash that the receíver has because you

can probably telL from nqr voÍce and the points Èhat Irm

makíng, cash flow ís críticaL and we are nearing a

crisis.

THE COURT: You mean yourve almost al'ready

bLown through a míILíon bucks?

MS. UECKER: No, Your llonor. We have

approximately 5O0,OO0 Ieft, and I have a payroJ-I on May

20th of.230,000 and we have not yet paíd the Tribune

loan whÍch ís 71,000, and then I have another.payroJ.l

on ,June 3rd.

TIIE COURT: okay. wetl, payrolL ís goÍng to

begÍn decreasÍng substantÍa11y. When I say cut by 30

percent, I really don't understand how this whole BK 5

t,híng works, but,so when you were here before, the

informatíon I had was that, the call center 1 payroll

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was 250,000, and the call center 2 payrolL was only

50,000 a month.

MS. UECKER: That is correct.

MR. HUCKINS: That was every pay period.

THE COURT: BíweekJ-y. So the calt center two

payrott ís 100 grand. Okay. And calL center 2 ís

sitting on substantÍa1J.y more assets than calL center 1

from the best I can teLl ríght now ín terms of whatrs

c1ear. And so the 30 percent does not apply t'o caLl

center 2.

Cal-t center 1 is the one that werre goÍng to

start ratcheting down and so yourre going to cut caII

center 1 expenses by 30 percent. Werre going to Leave

call center 2 expenses where t,hey are right now, but,

donrt you dare híre anybodY else.

And see íf at least a few of those investors

can obtaín their goal of a temporary green card or at

least a preferentíaL green card placement. So I've got

the fair market vaIue.

So Irve already gotten the information that I

needed, then, ís that we are looking at a wind-down of

CS I more than J-ike1y you don't think the receiver has

the authoríty to put CS I ínt'o bankruptcy, and lrm not

sure what the advantages would be of the bankrupt'cy

anl^/vays other than it wouLdn't be my headache. IL

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wouLd be somebody else's. OkaY.

So what I'm goíng to do now is I'm going to go

back over alL of my projected fínancials, and I'm goíng

to pLug ín the new Ínformation you've given me

Ms. uecker with regard to the faír market values. Irm

goÍng to see where ít looks like we stand, but this

again ís my problem.

Somuchofthatfairmarketvalue,thecurrent

equity would be what the Ínvestors in each separate

callsocket wouLd have expected as the return on their

Ínvestment. so we have to keep t,hese separate. so Iet

me gee here now.

Ifitshou].dturnoutthattheTribuneshould

be wotUn 22, then maybe it has a value of 10, and maybe

if we shut it down, we'lL have some money to give back

to those ínvestorg, if we put the Tribune Tower up for

sale.

MR. HUCKINS: The loan matures in October, so

it would be aPProPríate Lo do so.

THECOURT:HasitnotbeenbeÍngpaídmonthly?

MR. HUCKINS: It Ís.

MS. UECKER: It matures.

THE COURT: But it's going to be so ít's one

of these bal-loon payment thíngs, itrs not a 3o-year

rnortgage or something.

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MR. HUCKINS: It might' have a small

amortízation to Ít, but basical-ly 9.9 míI1íon would be

due in october.

THE COURT: Put ít uP for sale.

MR. DISSTON: And taking some giant steps here

at a hearing that

THE COURT: Do you want me to contÌnue this

until next week, Mr. Dísston? I'LI be happy to'

MR. DISSTON: I certainly want to be able to

present a record on whether we ought to lay off a bunch

of people at the call center and selL the building'

What I was going to request wae that sínce

Ms. Shepherd is, in effect, managing the employees at

the call center, that she be consulted wíth respect to

who gets notÍces if what werre doíng ís layíng people

off there. There are employees who are more productíve

employees at the caLl center than others, and

THECoURT:Icertaínlythinkt'hatthereceiver

wouLd do that. If ghe's going to lay peopJ'e off , I

would expect that ít's part of her oblÍgatíon to

preserve the assets that she would choose the least

productive of the emPloyees.

Now, if You want me to if You want' to

contÍnue this hearíng, what I have ordered thus far is

that anybody who is not paying their rent be given a

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three-day notice and get evícted. And that to the

degree that there are sham renEa1 agreements for which

no value is beÍng receÍved like, f.or example, for all I

know Mr. Dísston ís waiving the huge attorney fees thaL

are being Íncurred. I don't know.

So but ít boggles the mind that SFRC ís not

payíng any rent. So to the degree something ís a sham,

give them notice that ít appears to be a sham and

consuLt with J.egal counsel about what your obligations

and responsibÍlities are Ín terms of beíng able to

evict them, or set asÍde the rental agreement and teLlthem what their new rent is. Maybe they'I1 pay it.

So t,hat's all ef f ective thatrs ef f ectíve

now. And the cutting the CS calL center expenses by 30

percent ís effectíve now. Now, Íf you want me to

continue this untíI next week so that you can have a

fuLter opportuníty to be heard as to whether or not we

put the Tribune Tower up for sale, I'LL gladly do that,

Mr. Disston.

MR. DISSTON: Thank You, your Honor. When

would you like to do that?

THE COURT: Letrs Eee. I can do it next

Thursday.

MR. DISSTON: ALL ríght. Thatrs fine.

MR. LEVINE: In the afternooll, your Honor?

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MR. HUCKINS: The receiver is ín Delaware.

THE COURT: When can You be here?

MS. UECKER: MondaY. Irm out TuesdaY,

Wednesday, Thursday, I'11 be flying back Fríday.

THE COURT: Monday doesn't give you a lot of

not,ice. You already have t'hís date reserved for the

17th at 2:30. Do you want to jusL let that' be the day?

MR. DISSTON: That ' s f íne r forrr llonor .

THE COURT: Ànd in the meantÍme, find a broker'

MS. UECKER: I¡ve got a brokerr 1rout Honor'

MR. HUCKINS: In terms of the receiver's

filíngs with the court, do you want them submítted

you had suggested that letters wouLd be fine'

THE COURT: LetterE are fine and nu¡nbers are

fine. I read numbers really weLl. So just give me

the I just want the facts. Me and the guy on

Dragnet. The facts, please, nothíng but the facts'

MR. LEVINE: The hearíng on the 17th Ís lÍsted

as a case management conference. Do you expect case

management statements ?

THE COURT: I absoluteLy donrt. And that was

just because my wonderfuL cLerk wanted to be sure she

reserved, you a space. And we don't have a Lot of

optÍons with our electronic system, so she just pícked

one that she thought, woutd fít. No, I don't want

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statements.

What I want ís to see your complaínt because

I'LI teII you I am concerned about, fírst of all, canrt

the receiver get aLJ- the account,ant's documents

an)rways? I mean, yourre the receíver. Cantt you just

go and say yourre the accountant, gíve me all the

stuff? Isn't that wíthín your purvíew?

MS. UECKER: Typically, your Honor' there's ín

house bookkeeping and the company that's the defendant,

Mr. Tate is a third-party cPA firm. Irm not sure that

I can go ínto hÍs space LÍke I can the Tribune Tower

and take things.

THE COURT: Of course, you can't just take them

but you can make the request. And yourve got a lawyer.

Ask your lawyer now, as long as Mr. Huckins ís

stíI1- willíng to be your J.awyer, you can teIl Mr. Tate

that he's now your accountant, apparently, and you want

all the documents because I am not I am having some

real reservations about our plan to sit down with him

and just grill him about these documents and him not

being represented.

He has been a party in the past, as I said'

I'm not going to put him in that posítion. That'wouId

be overgtepping as an offícer of the court myself. Irm

not ever goÍng to put somebody ín that position. so

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maybe hers goíng to volunteer, and I'LI have Lo give

hÍm his whole Sth Amendment right,s or something.

That's also a possibilitY.

MR. LEVINE: He waÉt represented earlÍer. He

does have a lawyer.

TIIE COURT: And I invÍt,ed him at the last

hearíng to bring him íf he chose to, but lrm stílI

uncomfortable.

MR. LEVINE: We understand. We're alJ' having

great difficuLtíes getting informatíon out of Mr. Tate.

Mr. Disston and I had a two-hour meeting

earlíer this week and we made it abundantly clear to

Mr. ÐÍsston that information we need in advance of this

meetíng that we can't rely on simply a spreadsheet

Mr. Tate provides. We need the underlyÍng general

ledgers.

THE COURT: Supporting documentatíon'

MR. LEVINE: Mr. Disston is, I hope' gettíng it

for us for al"I these other entítíes

THE COURT: WeIl, I can put ít Lo you thís way'

.And Mr. Disston, I reaL1y hesÍtate to do thís because

at thís point I don't know if lrm just lookíng at a

mísmanagement situatíon where funds were co-mingled and

not maintaÍned seParat'elY.

But maybe there are documents someplace that'

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has tracked all of thís E¡o we can undo thís and a1l is

welL, or if I'm Looking at a sítuation that at some

poÍnt needs to be turned over to the dÍstrict

attorney's offíce, just to be perfectJ.y candíd.

MR. DISSTON: Your Honor referred Ít to the

USCIS and the SEC, I think the Last time we were here,

and at least one of those entities ís now receíving

documents and ot,her Ínformation.

THE COURT:

extend

I'm glad to hear it because their

pursue will to all seven EB-s entíties and mine

will not. And that's t,he other issue t,hat I have been

quíte concerned about.

So I want to I guess what I

was the more information I receive that

upon, the more 1íkeJ-y ít is that I feel

delaying decisions that could result in

of all Ca1lSocket assets because that's

we are, where some of us are headed and

considered.

And I am paínfuJ.Iy aware

divest of aLl the current assets,

wanted to say

I can rely

comfortable Ín

the dÍvestment

cIearJ-y where

what's being

that, even were we to

that wÍLl not answer

many of the

not going

past. So

discovery issues in

t,elL us where all

this case. So that's

to the money went in the

I'11 see you all back. I'11 redo my numbers.

To the degree you find it helpfuJ-, I can read

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you these numbers and send you back this Eo you see

where I,m 100kÍng at, You have ít Ín advance of our May

17th meetíng and the May 17th meetíng we wilL notíce on

right now is for the receiverrs requeet for additíonal

funding which may or may not be granted and is on for

consideration of whether or not the Tribune Tower needs

to be put, uP for sale

Okay. Thank you. Sorry it went so long'

(Whereupon, proceedings concluded at

5:05 P.m. )

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REPORTER I S CERTIFICATE

I, ERIN F. ROBINSON, a Strorthand Reporter, state

of CaJ-ífornia, do LrerebY certífY:

That said proceedíngs were taken before me at

saíd time and place, and were taken down in short'trand

by me, a certifíed shorttrand. Reporter of the state of

caIífornia, and were tl¡ereaft,er transcríbed into

typewrít,íng, and that the foregoing transcrípt

constitutes a fuII, true and correct report of saíd

proceedíngs that took PJ-ace;

IN WITNESS WHEREOF' I have Ïrereunder subscribed my

trand thís 8th day of MaY 2016.

a

ütþ t

ERIN F. ROBINSON, CSR NO

State of Calífornía

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16.1 28"21

17.3 13"13

17.5 14:2

17.7 29:6

17th 27:17 38:14,15

53:7,18 57:3

18th 46:18

19.8 9:19

19.84 9:21

'lgth 4'.17

2 9.12 33.24 34:19 49:1,

6,1 0,1 4

2.23 10:2411:6

2.49 11.15

2.74 12:17

20 5"2412"21 18:2

20.1 13'.15,17

20.5 13:18

20.6 13:17

2016 3.233"11

20th 27'.19 30:2 31:9

38:11 48:18

22 27:16 50:14

22nd 4'.18

23 28:1

230,000 48:18

24 27"16

24.9 28.22

25 38.23

250,000 49:1

29 35:1

2:30 38:15 53:7

2

3

3 45"13

$

51 qtts

$174,000 1211

$175 6:5

$235 6:19

$250,000'11:13

$300 6:3,5

$350 6:18

$40,900 12:5

$400 o:0

$5,000 so:zo

$500,000 29:4

---ooo--- 3:3

1

1 5:11 10'.11 12:33322

34:18 38:25 39:3 41:2Q

48.25 49'.7,11,13

113'l 29.14,15

'10 10.2 50'.14

10.2 27"17

10.5 28.1

10.8 27:17

100 30:2'l 31:3,5 49:6

105 32:9

'lOth 18:1

11.4',1 137

12 10:5

13 8:16 12:20

13.26 11.7

13th 45:21

14.5 35:9

15 12:1628:23

1 5.5 1 0:21 11:6 29:10

3.3 12.4,17,22

30 32:1'1,12 36:19 38:23

40.23 46'.23 48:22 499,

13 52:14

3O-year 50:24

30th 9:20

31 29.1434:22

310 34.23

31st 46:18

3:20 3:2

3PL 24.12

3rd 48:20

4 1517

4.3 12.2,13

40 '10:3 32.11,12

41 28.4

48 11.20,22 .

5 3:2 29'.6 30:22 34:24

45.12 48:23

5,000 30:22

50 31:3 45',2546:7

50,000 49:2

500,000 294,12 48:17

55 16:6,'18

5:00 32:2

5:05 57:10

5th 55:2

6 12.14 29:11

6.2 28:17,20 29:6

6.3 11:1 28:18

6.6 l3:1

4

5

6

60 36:25 37:1,8

65 32.14 33:3,4,17 35:3

6th 4:16

712"1529.6

7.2 27:19

7.35 28.2

7.4 11"25

7.5 27"19

7.6 13'.8,12

71,000 48:19

8 10:4 28:2432:13

8.8 14:'l

9.5 29:8,15

9.8 13:3

9.9 '10:9 28'.12 51:2

9th 38:5

abide 47:5

absolutely 15.4 47'.8

5321

abundantly 55:12

abuse 44:11

access 5:23

accomplished 44:3

45:6,12

account 19:17,19

accountant 54:6J7

accountant's 54:4

accounting 8:25 26'.11

29:21 356

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accounts 21:21

acquisit¡on 13:6

act 7:10 36:13,21 37:8,

15

actions 21:9

actual 35:20

add 31:4

additional 57:4

address 3.13,20 25.22,

2427:24 46:16

addressed 7',12 36'.11

administrators 32:5

advance 39:3 55:'13

57:2

advantages 49:24

advice 5:5,127,15

32:19 34:10

affects 36:'14

afield 17:12

afternoon 52:25

agency 39:17

agreeing 1 1:18

agreement 39:24 47:2

52:11

agreements 39:25

41:14 47:6 52:2

ahead 3'l:25

alleging 21:7 24:24

Allen 4:2 6:9 7:5

allocated 11:4

allocations I 1 :10

amended 5.7 45.17

Amendment 55:2

America 24:12

amortization 51 2

amount 48:10

analysis +O:14

ancillary 13:3

Andew 9:1

anymore '14:5

apparently 11.2 39:9

46:3 54:17

appearances 3:24

appeared 15:22

appears 4:23 52:8

application e:zt

apply 49:9

approval 5:15 6:23,24

7:2

approve 5:46:167:4

approved 7.7 9'.20

approximately 48:17

April 4:16,17,18 30:2

31:9

Area 25:5,6,7 26:2

argument 44:25

arriving 12:17

ascertain 1Q.6 43:17

assets 5:8 26:3 29:23

42:8,13 49:7 51:21

56:17,21

assumed 13:4

assuming 28:15

attached 35.12 36:4

attorney 7:2152:4

attorney's 56:4

attributable 12:4,8,9

authority 7:19 49.23

authorizatíon 40'.17,

18

authorized 42'.1

authorizing 3:21

average 6:1,17

averages 28:1

aware 47:18 5620

back 1 3:20 14',14,16,25

15:7 17:6,9 20:16

29:12,13 38:1 4,17 39:2,

4 42:10,16 46:17,22

50:3,15 53:4 56:24 57:1

balance 12:25

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bank 1 1:9 19:17,19

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base 16:9 27:9

based 5:24 8:7 9:13

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basically 24:1,4 35.16

36:25 37:2 38:20 51:2

batch 35:5

Bay 25:5,6,7 26.2

Bear 16,24

begin 40:23 48'.22

behalf 4:3 5:14

belief 43:9

belonging 26:3

belongs 24'.19 42'.10

benefit 6:7 22:18

benefits 31:5,7

Bennett 9:25

Berkeley 1624 24:11 ,

14 27:23

big 12:1,19

Bill a:2

billing 32:4

bit 10:1 15'.1232:3

Biweekly 49:5

BK 34:24 45:12 48',23

blank '16:1

bleeding 40:24 42.8

46:25

blown 48:15

board 22:25

boggles 52:6

bookkeeping 54:9

borrow 11:18

borrowed 14:'13

bought 13:3

boxes 16:1

Brand 18.14,15,19 26'.2

breach 8:25

break 3:18 30:17

breakdown 48:7

breaking 31:22

bridge 10:19

briefly 37:10

bring 17:14 37:19

46:17 47:24 55:7

bringing 12:10

br¡ngs 27:4

broader 15:19

Broadway 28'.17 40.5

brochure 35:11,16

362

broker 27:'10 53:9,'10

Brokerage 27:1 1

brought 3,14 17.9

28:19

bucks 1011 11:19

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build 21:19

building 1Q:7 11.10,14

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buildings 10:25 11'.1,2

28:17

bunch 33:8 51:10

burn 38:2,8 41.1242.14

business B:22 15:25

19:20 22:13,14,15 24:8

35:14 36:7 41:9 43:17,

20,22,24

B

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Case 3:17-cv-00223-RS Document 71-1 Filed 02/16/17 Page 62 of 72
businesses 25:19

buy 46:1

bye-bye 34:17

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Gal 45:13

calculator 29:'14

Galifornia 16.2517:25

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18

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case 6:21 8"24 189

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cash 30:1 38:246:14

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23 34:18,19 38:21,25

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Central 23.11,14

cEo 22"25

cetera 16:25

challenge 45:3

chaîge 47:4

charges 13:4

chart 15:9,1 1,24 17:14,

23 18.4,5 22:19 23:4

checks 21:20,22

choose 51:21

chose 55:7

Chris 20:1 1

chunks 30:25

circumstances 725

City 18:14,15,1926:2

claim 37:8

claw 42:10

clear 7:10 31:1133:14

38:25 49:9 55:12

clerk 53,22

clients 41:16

close 26.2131:22

34:18 37:4

closed 34:'12

co-m¡ngled 33:24

5523

cogn¡zant 7:5

collected 40:8

collecting tt:11

Colliers 27:11

comb¡ned 11:24

comfortable 56:15

comm¡ngling 2215

community 11.927'.18

Comp st:6

companies '16:24

18'.11,12 20:3,6 22:25

company 19:2524:6

54:9

compensation 3.22

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complaint 14:1Q 29:19

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completely 10:14 22:4

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complex 6:1

complicated 6:'10

comply 36:21

comply¡ng 43:13

Comprehensive

17:24,25

concern 36:11,20

concerned 30:6 38:18

45:25 54:3 56:12

concerns 14:17 17:16

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concluded 57:9

conclusions 14:17

conducting 19:20

conference 33:2'l

53:1 9

confess 36:1

confident 6:6 39:4

confirm¡ng 25:4

confusingly 18:12

connected 19'.8,12

conservative 10'.2

consideration 8:4

57:6

considered 56:19

consol¡date 25:2

constra¡ned 6',15 7 .22

consult 52:9

consulted 5.207:17

51:14

content¡on 16:23

contentions 16:23

continue 51.7 ,24 52:16

contract 8:25

contributing go:1

control 5:8

conveys 9:5

convoluted 6:11

cop¡ed 36:6

copies 7:13

copy 5:9

correct 3:18 49:3

cost 13:7

costs 13:8

counsel 3:22 5:5,12

6:2,4,17 ,18,20 7:1,18

15:8 21'.1,13 26',5 28:8

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count 32:7,9,14 35:3

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court 3:4,25 4',10 5:15,

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15,22 28:9,13,18,25

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30:16,20 31:8,11,25

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cîeated 24i2

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critical 48:12

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data 30:15

date 7:4 9:19 38:3 53:6

day 13:23 37',238:16

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day-for-day 37:1

days 36:19,25 37:2,8

dba 24',4

deal 26.23 30',10 41'.1

452 47:23

dealing 9:3

deals 47:10

debt 28:7,10

debtor 41:23

debtor's 37:17

decide 7:6 8:7 47.5

decision 38:4 40:11

decisions 56:16

declaration 9.23 19.17

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declarations 4:15 9.14

declined 21:3

decreasing 48:22

defendant 54:9

defendants 4.920:22

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defense 45:20

degree 7:14 52:2,7

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demurred 45:18

denied 46:22

dental 31:6

description z+:a

desk 3:16

determine 3:14

devote 14:21

diagram 8:12

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difference 22:1 1,12,13

difficult 3:9

difficulties 55:10

difficulty 39:21

dig 6:11

dire 4:23

directly 5:19 16:'13

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discharge s:o

discovered 6:2,12

discovery 56:22

discuss 14',19,23

discussed 37:10

displace az:zt

dispute zt:10

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16,18,20 25:3,6,13,18

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40:25 41:1,5,10,23

46:5,9,22 47 :1 4 51 :5,8,

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55:11,13,18,21 56:5

distribute 3:1142:17

district 56:3

diverted 44:22

divest 56:21

divestment 56:16

divided '11:2

documentation 36:5

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documents 3:6 4:13,

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dollar 10:10

dollars 9:20,2210:11

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38:7,9 48:7

door 16:18

doors 34:11

double-check 28:19

doubt 22:18

Dragnet 53:17

due 51:3

Duffwin 12:227'.16

28:16,20 34:6 40:4

D

duties 5:7

Dynamics 24:11

Ear 24:18,19 40:4

earlier 55,4,12

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easy 46:1

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effort 8:5

electronic 53:24

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emergency 37:'16

employ 5:5

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employee 1o:1834.1,2

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employment 3:215:11

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end 1312,2228:15

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endeavoring 22:17

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entities 4,25 6:13 8',17

9:6 1'l:20 15:20,22,25

E

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Case 3:17-cv-00223-RS Document 71-1 Filed 02/16/17 Page 64 of 72
16:7,8,14 17:4,8,17

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25 21:15 22:15 23:13

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equ¡ty 10',11 11:14,25

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estate 11'.21,22 39:17

estimate 10:2

evening 3:5

Events 18:20

evict 40.2 52:11

evicted 47:152:1

eviction 47:17,21

evictions 48:3

exceed 6:17

excelfent 27.1 35:11

Excuse 23:21

expect 7:1132:16

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expectations 10:17,18

expected 50:10

expended 10:24

expense 39'.12,14

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expenses 12:2426:1Q

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expens¡ve 42:5

experience 5:25 6:3,5,

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expertise 6:8

expla¡n 15.1217:15

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expla¡ns 35:16

extend 5:13,15 56:10

extends 39:16

extension 45:22

extent 41:3

eyes 45:'19

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facility 18:2

fact 19:9

facts 37:23 40:12 42:25

53:1 6,1 7

factual 40:11

faifing 22:14

fair gg:g 46:19 48:5

49:19 50:5,8

fall 10:8

familiar 5:2136:2

family 23:24 44:23

Farms 23:12,15

faxed'18:6

federal 43:13

fee 7:3

feel 3:19 6:14 48:3

56:1 5

feeling 32:1

fees 7:4 3o:24 52:4

felt 4:23

fighting 43:2

figure 4.20 9',13 19:18

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filings ss:tz

fill 15:23

final 31:23

linally 14.21

finances 9:15

financial 6:1215.22

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financials 50:3

Íind 4'.257:25 8'.14

43:23 45:24 53:9 56:25

fine 7:12,13 32:17

52:24 53:8,13,14,15

finish 23:3

firm 6:9 7.5 54:10

fit '15:9 23'20 255 53:25

floor 33'.24,25 47:15

flow tS:tg 16:'15 38:2

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flowing 16:13

flows 16:15

flying 53:4

follow ¿z:g

formal 7'.2

format 3:7

forward 30:7

found 4:'18 5:1 29:3

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fourth 33:24

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frankly 5.17,1814:9

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front 1 1'.24 14'.17 38:6

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fulfilling 10.17 45:9

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fund 38:20

funding 38:5 57:5

funds 13'.1 14'.216:17

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gain 44'.24

game 10:19

Gateway 8:22,2322:5

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gave 29i4

geared 33:7

gee 35:19 48:3

general 17:24 55:15

generally 24:8

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glad 48:'l 56:9

gladly 52:18

goal 49.17

goals to:12

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good 14:22 32',25 42:19

government 43:13

grand 29:1230',2249:6

granted 5:9 57:5

G

F

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Case 3:17-cv-00223-RS Document 71-1 Filed 02/16/17 Page 65 of 72
great 6:8 35:18 55:10

green 14:6 34'.14 43:8,

1 0, 1 '1 ,1 8 44:3,17 45:8,

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grill 54:20

gross 28:4,5

groups 30:12

guess 9:412:18 13:24

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guessed 12:9

guessing 13:9,12

guy 9:25 53:'16

guys 10:22

hand 14:'l

handle q:zz

handout 9:12

happened 33:5

happening 44:18,20

happy 29:13 32:3 51:8

hard 5:1 6:2129:5

head 28:6 32.7,9,14

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headache 49:25

headed 56:18

heálth 16:24 24:11,14

31:5

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heard 8:2 40:25 52:17

hearing 31:20 32'.16

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helpful 4:18 23.19 48:6

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high 28:15

higher 30:25 31:3

hire 33:1 34.20,21

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hiring 32:23

Hold 15:15 28:9

holding 18:12

home 15'.5 35'.24

honestly 4:14,19,22

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Honor 8:3 15:10 21:'10

26:17 30:14 31:24

32:20 33:14 36:10

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hour 6:3,5,18,19

hourly 6.1 31:4

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immediately 16:18

implemented 44:13

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imposed 7:7

inclined 25:2

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includes gz:10

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income 12',6 39.11,12,

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41:9

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increasing 41.2,13,17

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insolvent 1O'.1414'.4

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instinct 25:4

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involuntary 41:24

involved 6'22 8:17

involving 20:8

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issues 3613 56:22

itemization 7:3

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judge zt:+

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J

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Case 3:17-cv-00223-RS Document 71-1 Filed 02/16/17 Page 66 of 72
jump 10:18

June 9:20 38:5 48:20

jurisdiction 6:14 9:8

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Kaiser 31:6

kicking 39:18

kind 30:2 46:13 47:2

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knowing 13:12

labor 37:1 I

lack 47'.23

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lays 18:6

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leases 47:6,10

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legal 5:5,1 1,127:11,15,

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lender's 28:8

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letters 5'.14 53'.13,14

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LLCS 18:13

loan 10:1 0 11:19 12:7 ,

16 13:12 22:14 28',16

48:19 50:18

loans 1o:25 28:5

London 20:13,14

long 36:16 43:25 45:10

54'.15 57:8

loss 29:10 43:22

losses 40:19

lost 24:7

lot 3:19 8:510:1 17:10

28:23 31:7 53:5,23

lots 44',22

loud 27:8

low 12:14 47:10

LP 17:2423.4,10,17,18

25:20

Lungomare 20:14

M

made 4:1235:2255.12

Magic 24:18,19 40.4

Magnin 12:22,2418.20

maintain 22'.14

maintained 55:24

majority 36:16 39:21

make 3:9 7:1Q 14'.14

15:4 23:22 25:9 36:21

38:4 40:1 1,15 44:16

47:24 54:14

makes 43:6 45:3

making 7.1511:12

12',5 22:13 30:20 35:'1 7

48:12

management 30:24

53:19,20

managing 51:13

March 33:10,1 1

mark 28:3

market 39:8 46:19

49:19 50:5,8

marshall 42:7

marshalled 42:8

math 13:14

Matkins 4.26'.97'.5

matrix 5:21

matter 3:5 38:23 44:14

47:17

matters 34:16 47:17

matures 5Q:18,22

max 10:11

means 6:1812:10

25'.13 28.20,21 43:11

meantime 53:9

Medal 16.2523:11,15

Media 18:14,15,19 26'.3

meeting 5511,14 57.3

member 19.2525:16

members 23.225'.14,

15

mentioned 23:23

met 23:24

middle 15:14,18,24

38:9

million 9.20,21 10.4,9,

11,22,24 11:1,6,7 ,15,

1 9,21,22,25 1 2:3,4,1 3,

14,15,16,20,21 13:2,7

14:1,1316:6,18 28:4,

12,17 29'.11 35:9 38:7,8

48:15 51:2

mind 27:4 33:6 52:6

mine 29:9 56:10

minutes 14.2325.23

mismanagement

55:23

mission 44.3 45,9,12

mix 24:7

Monday sl:s,s

money 15:19 16:5,7,12,

1417'.5,8 21:17,18,20

30'.11,25 34:17 ,19

38:16,19 39:2,3 42:9,

15,17,20 43:3 44:15,20

50:15 56:23

monies 42:12

monitoring 3o:ta

month 12.530:21,22

33:16,19 35:2 38:10

49:2

monthly 47:5 50:20

months 38:23

mortgage 12:313:8

50:25

motion 3:13 38:'1

move 45:7,13

K

L

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Case 3:17-cv-00223-RS Document 71-1 Filed 02/16/17 Page 67 of 72
October 50;18 51:3

offhand 15:21 18.17

ottice 27.14 56:4

officer 54'.24

ongoing 21:24

operating 12:24 39.12

46:20

operation 3'1:17

operations 40:19

opinion 27:10

opinions zo:z+

opportunity 14:22

52:17

opposed 22:13,14

opposite 9:2

options 53:24

order 3:21 5.7 34:23

ordered 48'.3 51:24

orderly 37'.20 42:7

organize 20:5

originally 29:24

outline 8:6

outstanding to:10

12:16

overly 22:10

overstepping 54'24

overtime 32:4

owe 28i2029l'637:2

owes 10:10

owned 19.6,7,14

p.m. 3:2 57:10

paid 10:4 14:1424',25

39:4 48:18 50:20

painfully 56:20

paper 9:2,5 28:9

parsing 16:11

P

moved 17:8

NA3PL 23:4,5,6,10

24:12,14,19 25:9

named 9.2518.12

20:10 21:15,23 24:22

names 15:20 18:13

nationwide 17:19

near¡ng 48:'12

necessity 37:25

neck 32:5

needed 17:9 38:3 39:7

49:21

net 13:11

nice 9:24

ninth 47:15

Nonetheless 6:11

Notth 24:12

note 7:17 24:24

notice 21:9 22:20

36: 1 3,17,1 9,22,23 37 :7,

16,18 45.20 46:24 52:1,

I 53:6 57:3

notices 51:15

number 6:23 11.23

15:2116:13 28:5,13,15

numbers 13'.21,23 27'.9

28.2 31'.23 32:7,2Q,22

38:6 40:6,9 53:14,15

56:24 57:1

Oakland 6:317'24

obligation t+:s,8

51:20

obligations 40'.15 52:9

obliged 3:20

obtain 49:17

occurs 7:8

N

o

part 1'1:18'15:13,18

16:3,4,5,7 25:827:22

51:20

parte 3;20

participate 43:15

parties 7:13 30:5

partner 17:24 2Q:10

24:22 46:7

partnered 8:14,21 19',7

partners 8:19,21 9:2

21:222:1237:12

partnership 26:7

partnerships 25:19

party 30:6 54:22

past 54:22 56:24

paste 4:20

Pastina 20:11,15,18

21:6,12,13,21

Pastina's 20:23

pay 22'.21 26:9 39:2,22

40:1 46:7 47:7,15 49:4

52:12

paying 39:1947.1,22

51:25 52:7

payment 6:2512:3,8,

2213:7 50:24

payments 10'25 21:16

22:6

payroll 22'.2230.18

31:8 32:6,21 33:6,16

34:5 38:12,21 40:15

48.7 ,17 ,19,21,25 49:1,6

payrolls 33:16

penalty 9'.14 37 .1

penny 16:17

people 10',7 30.20,25

33:8,'17 34:2139:19

41,13 45'.8 51 :1 1,15,19

percent 10:2,3 31:5

40',23 45:25 46:7,23

48:23 49:9,13 52:15

perfectly 56:4

period 49:4

perjury 9:'15

perpetrating +0:12

person 30:22

personal 44:24

pervasive 40:5

petition 41.22,24,25

pet¡tions 35:2,6

phone 27:12

picked 53:24

pie 41:7

piece 9:6

place 5:1 47:3

placement 49:18

plainly 44:1

plaintiff 4:5,7 21',6

plan 31:20 34.535:14

36:7 54:19

pleadings 5:137'.11

plug 7:18 50:4

point 6:14 9:1,313:1

31:13 42:1 43:5 55:22

56:3

points 3o:15 48:11

pops 10:3

position 54:23,25

possibility 37:13 55:3

potentially 37:7

powers 5:6

prefer 5:18

preferential 49:18

prepare 5:13 7:3

prepared 10',18,20

35:6

preparing 26:12 46.12

present 15:8 38:1

51:10

presented 3'.6 37:25

40:12 41:6

Page 66

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Case 3:17-cv-00223-RS Document 71-1 Filed 02/16/17 Page 68 of 72
preserve 5'1 :21

pressure 32:1

pfevail 7"22

Previously 23:24

pîice 12:213,10

prior s:1a 6.247:237:1

Pritzker 4'.6 15'.1 33:12

problem 12',1914'.12

29:1,17,18 45:14 50:7

problems 12'.144:10

procedural 47:'16

proceed 3:'15 8:6,7

proceedings 47:21,25

57:9

produced 36:4

productive 51J6,22

profit 35:'18,23

program 43:14,16

44:10,13 45:12

programs 44:15

project 18'.2 23:4,12

24:13,21

projected 50:3

projects 17'.18,22 23:3

proof 45:1

properly ++:13

properties 9:25 39:9

42:15 47:4,22

propeÉy 26:2527:18,

20 39:16

protecting 5:8

provide 5:57.615:20

provided 11:513:5

19:9

providing 5:12

pull 7:18 31'.15,21 40:6

pulling so:2t

purchase 12:2

purpose 29:20,2236:9

45:6

purposes 8:1217:10

32:15 44:23

pursue 56:10

purview 54:7

put 3:7 4',12,14 5:21 9:1

12',21 13:7 22:18 34:11

41.19 42:2 49:23 50:16

51.4 52:18 54:23,25

55:20 57:7

qualified 37:3

qualify 34:23

question 14:8 15:8

30:19 44:8

quote 5:15

raised 9:18 10:21 11:6

12:21 29:10

ranges 6:18

ratcheting 49:12

rate 6:1 38:1841:12

read 27 .8 35: 1 9 53: 15

56:25

real 1 1.21,2213:21,23

29:17 39:16,17,2147:4

54:19

reason 21:14 22:18

35:3

reasonable 7:4

recall 11:16

receivable l6:21

receive 56:14

received 8.20 52:3

receiver 4'.3,15 5:16,17

6:7,17 7'.2,9,12,1 4,23

10.15 26:24 31:15

3211 38.2,6 40:18

41:25 42:15,23 47:3,2Q

48:10 49'22 5'1:'18 53:1

54:4,5

rece¡ver's 3',20 5'.4,14

53:1157:4

recelvrng btt: /

recess 15:6

recognized 10;16

recommendation

7:20

recommendations

7:15,16

record 3'.25 15:7,11

30:840:115'l:10

redo 56:24

reduce 41'.12

referred 56:5

regard 34:15 50:5

Regional 4:9 8:13,18,

21 17"20,21,22 20:24

24:24,25 26:8,9,14,16

regret 7'.24 32:1

rclate 21:2 47:18

related 5:1221:9

24'.15,16 40:22

refationship 18.7 21:8

release 26:6

relied 7:14 9:24 11:18

rely 28.2 55:14 56:14

remain 6:24

remember 20'.2323:16

25:8

rent 11'.1312:11 39:23

40'.1,7 47:1,7,15,22

51:25 52:7,12

rental 12:6 39'.24,25

47.2,6 52:2,11

rents 'l 1:11 39:18 47:5,

11

report 7:17

reporter 3:25

reports 5:13 7:12 34:5

representation 5:16,

1811:20 35:22

representations 46:8

represented 20:19

21:5 54:21 55:4

represents 21:1

request 5',47:3 8:20

38:5 46:21 51:12 54:14

57:4

requested 17:431.8

require 7:11,19

required 36:17,20

requirements 34'.21

requires 43:17,21

requisite 37:7

research 7.21 10'.1

reservation 38:14

reservations 54:19

reserved 38:17 53:6,23

resolved 22:1

resources 5:20,22

7'.22

respect 5:6 5'l:14

respond 4:12 36'.1

responsibilities 52: 1 0

rest 11:17 12i23

restaurant 18:22

1 9',20,21,22 20: 1 21 : 1 I

restaurants 20:'l I

result 56:16

return 29:23 34:14

43:3,7 50:10

revenues 41:2,4,5,13,

17

reviews 13:20

¡id 46:2

right-hand 9:4

rights 5'.7 55'.2

ripe 44'.10

road 36:2'l

roll 46'.22

o

R

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Case 3:17-cv-00223-RS Document 71-1 Filed 02/16/17 Page 69 of 72
route 47:17

rul¡ng 4:11,12 5:4 8:4,8

run 19:21 ,2321:19

31:23

running 33:7

runs 19:25

Runway 15:9,12,15

31 :2,9,1 2,16,21 32:1 0,

12 39:15

sadly 7:5

safely 45:7

salaries 31:3

sale 50:17 51:452'.18

57:7

sales 13:10 35:15

San 4:8 8:13,17,21

20.24 24:23,24 26:8,9,

14,15 31:2,19

satisfied 43:24

saving 34:19

scheduled 46:9

scope 30:3 45:24

seated 3:23

SEG 56:6

secured 11:3

securing 5:8

Security 15:14,17 26:2

seek 17 145.21

seeking 7:2

self-supporting 31'.12

sell 10:9 51:1 I

send 57:1

sense 47:24

separate 18:24 22:4,15

23,3J2 29:7 30:11,12

31:17 ,21 50:9,1 '1

separately 16'.14 55'24

services 7:6

set 10:23 16:1220:2

24:6 52:11

settlement 11:413:5

sF 17"20,21,22

SFRC 16:15,19,21

19:21 24:1,2,4 30:6

47:14 52:6

sham 44:252:2,7,8

sheet 39:13

shells gO:'tg

Shepard 4:17

Shephard 33:10

Shepherd 5'l:13

sheriffs gz:3

Shopping 8:23

show 13:14 16:12

46:14

showed 19:16

shows 15:1416:20

shuffle 30:13

shut 33:20 37:6 40:'18

45:7 50:15

shutdown 37:20

side g:¿

sides g:2

significant 38:8

simply 44:14,16 55',14

single as:zs

sir 8:9 18.320:222:11

35:8 41:7 46:15

sit 46:10 54:19

sits 16:ô

sitting 29.2 43,15 49:7

situation 4:23,25 6:13

37:17 55:23 56:2

sixth 33:25

sky 41:8

slightly 26:17

small 51:1

smallest 9:616:4

soaking 28:14

socket 45:13

sockets l8:8,13,18,19

23:7,10

sold 13:2,9,13

solely 5:12

solidly 43:19

somebody's 35:12

someplace 29:2 55.25

sort 4:20 15:12,19 16:2

space 19:2231:18

34:7,8 53:23 54:11

specific 19:9

spend 3:19

spent 3:5 8:5 9:21 '1 1:6

spoken 21:13

sponsored 17:22

spreadsheet 55:'14

Square 20'.13,14

squared 23:22

stage 37:21

stages 37:9

stand 31 : 16 50:6

standalone 31:12

start 9:'l I 32:4 34:19

35:22 49:12

started 12:1320:11

33:1 0

state 3:24

statement 16:3

statements 15:23

16:10,12,21 22:8 53:20

54:1

status 10:7

stay 15:3 32:2

stays 45:10

step 31:25 432

steps 51:5

stipulated 38:1

stop 40:23 42:8 43:2

46:25

stopped 42:14

straighten 17:16

Street 18127:18,19

study 9:16

stuff 54:7

subacute 18:1

subject 5'.9 6.24

submit 35:2

submitted 9:14 53'.12

submitting 35:5

substantial 43:3

substantially 48':2

49:7

sued 8:25 20.17,18

21:21 30:6 47:13

sufficient 40.13,14

41:3

suggested 53:13

su¡ng 24:23

support 7:'19

Supporting ss:'tz

supposed 32:1834.22

44'.5

surprised 20:2222.10

Susan 4:3

sustainable 44:5,17,

21

sweetheart 47:10,23

system 53:24

table 43:15

takes 42',5 45.11

taking 18:3 21:5 30:25

51:5

s

T

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Case 3:17-cv-00223-RS Document 71-1 Filed 02/16/17 Page 70 of 72
talk 3:12 9'.17 14:16,25

27:6 29:7 44:1

talked 288 37 11

talkíng 18:9 36:3 37:24

47:19

target 45:4,5

Tate 26:11 30:5 46:11

54:10,16 55:10,'15

Tavern 18:23,2519:2,

12,14 20:9,12 21:6

taxes 12:9

Teks 15:14,17 19:3

26:2

telling 20:21

tells 7:18

temporary 49:17

ten 6:2,4,19 ,20 14:23

25:23 34:21

tenant 40:4,5 48:4

tenants 39:2246:25

47:9,21

tentative 4.115:3

term 43i2147i23

terminate 37.1 40:19

terms 16:228:3 29:25

49:8 52:10 53:1 '1

Tesh 23:20 24'.11,15

40:3

Theatre 12:2 27:16

thing 9:10 19:1,227:23

34:24 37,5 43:23 44:18

48:9,24

things 8'.627.2446:16

48:6 5O:24 54:12

thinks 9.25 27:16,17

third-party 54:10

thought 142020'.23

24:5 31:12 35:'l 9 36:7

53:25

three-day 52:1

three-year 43:21

Thursday 3.252:23

53:4

t¡me 3:12,17,18,19 7:22

8:5,'10 9:1,'16,21 10:16

11.16,17 14:15,21 24:2

26.13 32:1 37:'18 39:8

56:6

times 3o:5

today s:t+ 8.626:22

27:14

told 9:19 12',2513:10

tomorrow 32:2237:6

top 28:6

torn'10:16

total 9:19 28:5

totally '10:14

Tower 10:4 20:9 28:7,

10 33:25 39:2,2140:14

50:16 52:18 54:1157:6

Towers 39:'17

fiack 24.7

tracked 56:1

tracking 26:12

Trading 16.2425:5,6,7

26:2

fiansferred 22.22

Tribune 10',418:23,24

19,2,11 ,14 20:9,12 21 6

27.15 28:7,10 33:25

391,17,21 4Q:14 48:18

50:13,'16 52'.18 54:11

57:6

trouble 10:13

trustee 41:20

TTRG 18:20,2119:2,12,

24

Tuesday 53:3

turn 41 :9 50:13

turned 13:1 1 56:3

turning 35:23

turns 1 1:9

two'hour 55:11

Typically 54:8

U

uB 47.25

Uecker 4:3 5:1913:20

22:20 27:3,10,13,21

31 .2,1 0,1 4 32: I 3,1 6,20

33:3,5,1 4,23 34:4 36:'l 0

37:14 38:11 39:20,25

40:3 47:8,14 48:16 49:3

50.5,22 53:3,10 54:8

ultimate 30:tg

ultimately 5:24

unaccounted 12'.20

13:1

uncomfortable 55:8

underlying 55:15

understand 3:8,10 7:9

10.2316:22 39:14 48:9,

23 55:9

understanding 4.24

15:13 17'.7 21:14 34:20

38:13 46:11 47:3

understood 33:2'l

undo 56:'1

unethical ¿a:z

unquote 5:'15

unrelated 25:3

upbringing az:zo

USG¡S 35:7 56:6

vacant 34:7

values 26.23,24 46:19

50:5

versus 3:5

viable 43.18,24 45:10,

19

view 26.18 44:12

vision 31:6

visit 30:9

V

vo¡ce 48:11

voluntary 41:22

volunteer 55:1

volunteering 30:7

W

Wait 19:11

waiving 52:4

walk 15:11

walnut 30:13

wanted 464 53:22

56:1 3

warehouse 27:21

WARN 36:13,19,21

37:8,15

waterfront 20:13

Wednesday 53:4

week 26.2228'.8 4617

51'.8 52:16 55:12

weeks 36:24

wet 28:15

wind 34:23

wind-down 42',7 49:21

WOMAC 8:209:221:2

22:3,624:22,23

wonderful 53:22

Workers' 31:6

works 46j4 48:24

world 29'.2

worry 22:2 41:20

worth 10:1,5,9 11:21,22

12'.14,16 27:15,17,19

50:1 4

wound 13:8

write 28:10

writing s:t+

written 21'.20 27:13

Page 69

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Case 3:17-cv-00223-RS Document 71-1 Filed 02/16/17 Page 71 of 72
Y

yêar 10:3 11:1312:11

33:13 47:15

yeans 5:256:2,4,22

35:17,21,24 41:8 43:22

44:2,7 45:1ß

yeans'6:19,20

Young 3:4 8:15 9:1

29:25 46:5

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Case 3:17-cv-00223-RS Document 71-1 Filed 02/16/17 Page 72 of 72