Source: https://www.scribd.com/document/117187522/SEC-v-Gold-Standard-Mining-Corp-Et-Al-Doc-48-Filed-13-Dec-12
Timestamp: 2017-02-19 17:43:23
Document Index: 765352528

Matched Legal Cases: ['§ 78', '§ 240', '§ 78', '§ 78', '§ 240', '§ 78']

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LESLIE J. HUGHES, Colo. Bar No. 15043 HughesLJ@sec.gov Securities and Exchange Commission 1801 California Street, Suite 1500 Denver, Colorado 80202 Telephone: (303) 844-1000 Fax: (303) 844-1068 Attorney for Plaintiff United States Securities and Exchange Commission KENNETH G. EADE (SBN 93774) keneade@gmail.com 6399 Wilshire Blvd., Suite 507 Los Angeles, CA 90048 Telephone: (323) 782-8802 Facsimile: (323) 704-3539 Defendant, IN PROPRIA PERSONA PANTELEIMON ZACHOS c/o Irving M. Einhorn 1710 10th Street Manhattan Beach, CA 90266-6206 Telephone: (310) 798-7216 Defendant, PRO SE UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA WESTERN DIVISION SECURITIES AND EXCHANGE COMMISSION, Plaintiff v. Gold Standard Mining Corp., et al., Defendants. ) ) ) ) ) ) ) ) ) )
Case No. CV 12-5662 PA (CWx) JOINT REPORT PURSUANT TO FRCP 26(f) Date: January 7, 2013 Time: 10:30 a.m. Courtroom: 15 Judge: Hon. Percy Anderson
Case 2:12-cv-05662-PA-CW Document 48
Filed 12/13/12 Page 2 of 9 Page ID #:874
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 dates:
Pursuant to Rules 16(c) and 26(f) of the Federal Rules of Civil Procedure, Local Rule 26-1, and the Court’s Order entered October 31, 2012 (Docket No. 38), Plaintiff Securities and Exchange Commission (“SEC”), and defendants Kenneth Eade (“Eade”) and Panteleimon Zachos (“Zachos”) (collectively, the “Parties”) have met and conferred, and submit this Joint Report in anticipation of the Scheduling Conference set for January 7, 2013.Defendant Zachos previously consented to a permanent injunction, which was entered on October 30, 2012, but the issue of the amount of civil penalties to be entered remains to be resolved.(Docket No. 35) Defendants Edward Randall Gruber and Gruber & Company LLC are in default(Docket No. 17), and did not participate in the conference or preparation of this joint report. Final judgment was entered against defendant Gold Standard Mining Corporation (“Gold Standard”) on October 30, 2012; no issues remain as to Gold Standard. 1. Discovery Plan The Parties agree that discovery should proceed with respect to any matter, not privileged, that is relevant to the claims or defenses of the parties or reasonably calculated to lead to the discovery of admissible evidence. Plaintiff has moved to dismiss several of Mr. Eade’s defenses and no discovery should occur on those matters until the motion is resolved. The Parties recommend that the Court waive the requirement of filing a discovery plan other than what has been submitted below. a. Rule 26(a)(1) Disclosures The Parties agree that initial disclosures under Federal Rule of Civil Procedure Rule 26(a)(1) shall be served by January 4, 2013. b. Proposed Discovery and Pre-Trial Dates The Parties stipulate to the following proposed discovery and pre-trial
Filed 12/13/12 Page 3 of 9 Page ID #:875
Event: Fact Discovery Cut-off Identification of Expert’s Name Exchange of Initial Expert Reports Expert Discovery Cut-off Motions for Summary Judgment Summary Judgment Opposition Briefs Summary Judgment Reply Briefs Summary Judgment Hearing Motions in Limine Response to Motions in Limine Final Pretrial Conference Trial 16-2 through 16-10. c. Electronic Discovery
Date: August 23, 2013 May 31, 2013 June 28, 2013 August 23, 2013 September 27, 2013 October 25, 2013 November 8, 2013 December 2, 2013 February 3, 2014 February 10, 2014 February 24, 2014 March 10, 2014
The Parties agree to follow the pre-trial deadlines specified by Local Rules
The SEC received documents during its investigation as emails and attachments that have been electronically saved, as files on compact disks, and on Flash Drives produced by Jeffery Volpe and George Stewart. Eade drafted reports, sent them to Mr. Zachos by email, and received comments and approval from Mr. Zachos by email. Mr. Eade has agreed to provide copies of those emails in native form. The Parties agree to work on how to best provide these electronically stored documents. The Parties agree that it is too early to determine whether any issues relating to electronic discovery will potentially require the Court’s intervention. d. Claims of Privilege Eade was the general counsel for Gold Standard which was previously known as Fluid Solutions Inc. In a letter dated June 7, 2011, the company
Filed 12/13/12 Page 4 of 9 Page ID #:876
affirmed that it waived assertion of the attorney-client privilege as to any and all communications between it and Mr. Eade. e. Proposed Changes to Limitations on Discovery under the Rules The Parties agree that no changes to the limitations on discovery should be made at this time. f. Other Orders the Court Should Issue The SEC filed a motion to strike ten of Mr. Eade’s affirmative defenses, which is currently under submission, and will affect discovery in this case. 2. Trial Estimate Trial in this case will be by jury. The Parties preliminarily estimate that trial will take 10 trial days. 3. Settlement Prior to the SEC filing its civil injunctive action, the Parties explored settlement discussions resulting in the bifurcated settlement with Zachos, but leaving the amount of civil penalties for later resolution. The SEC and Eade have not been able to reach a settlement regarding any issues in the case. Pursuant to Local Rule 16-15.4(2), the parties agree that no later than 45 days before the Final Pretrial Conference to participate in mediation before an attorney selected from the Attorney Settlement Officer Panel. 4. Case Complexity The Parties stipulate that the action should not be governed by the Manual for Complex Litigation. 5. Additional Parties and Amended Pleadings The Parties do not anticipate adding other parties. or amending the pleadings in the case. 6. Dispositive Motions The SEC and Mr. Eade have not yet determined whether each will file a motion for summary judgment. But Mr. Eade believes that there are purely legal
Filed 12/13/12 Page 5 of 9 Page ID #:877
issues based on facts not in dispute that could be resolved on summary judgment, which include the necessity of Russian government approval of the acquisition of Rosszoloto, the existence of an oral agreement between the contracting parties, overbreadth of injunctive relief, and the lack of knowledge of GAAP violations on the part of the Defendant, who is not trained or experienced in accounting issues. The Parties may also file motions in limine relating to expert witnesses and other issues, such as evidentiary issues. Section 1.b. of this Joint Report specifies the proposed schedule when these motions may be filed. 7. Unusual Legal Issues The SEC alleges that Mr. Eade failed to disclose that the acquisition of Ross Zoloto Ltd. was not registered or approved by Russian governmental authorities. Resolving this issue will involve determining what certain Russian statutes require. The parties have agreed to prepare a stipulation on which Russian statutes apply to the circumstances of this case by March 22, 2013. 8. Severance, Bifurcation, or Other Ordering of Proof The Parties do not anticipate the need for severance, bifurcation or other ordering of proof. 9. Expert Witnesses The Parties agree that the identity of any expert witnesses will be disclosed by May 28, 2013, and that initial reports will be exchanged on or before June 28, 2013. 10. Lead Trial Counsel Lead Trial Counsel for Plaintiff is Leslie J. Hughes, who is a registered as an ECF User. Ms. Hughes’ email address of record is HughesLJ@sec.gov. Lead Trial Counsel for Mr. Eade is himself and he is registered as an ECF User. Mr. Eade’s email address of record is KenEade@gmail.com. Counsel for Mr. Zachos is Irving Einhorn. Mr. Einhorn’s email address of record is ime@einhornlaw.com. Mr. Einhorn has not entered an appearance on
Filed 12/13/12 Page 6 of 9 Page ID #:878
behalf of Mr. Zachos and has only been involved in facilitating the settlement agreement reached with Mr. Zachos. Under the terms of that Settlement Agreement, Mr. Zachos will not be appearing at the trial in this matter to defend himself. 11. Synopsis of the Principal Issues in the Case The SEC claims that Mr. Eade aided and abetted Gold Standard in filing false and misleading reports misrepresenting or omitting material facts that: (1) the acquisition of Gold Standard’s Russian gold mining subsidiary, Ross Zoloto Ltd., had not been registered or approved by Russian governmental authorities; (2) as part of the acquisition, Gold Standard verbally agreed to continue to pay profits from the alluvial mining operations to the prior owner, Araik Khachatrian, with new investors participating in profits only after investing between $40 million to $100 million to develop hard rock mining; and (3) the company’s financial statements were prepared in conformance with Generally Accepted Accounting Principles, when they were not. While these false and misleading statements and omissions of material fact were distributed in the company’s public reports to investors, Eade offered and sold securities of Gold Standard from which he obtained ill-gotten gains. The SEC seeks an injunction prohibiting Mr. Eade from aiding and abetting further violations of the securities fraud and corporate reporting provisions of 15 U.S.C. §§ 78j(b), 78m(a), and the rules adopted under those provisions, 17 C.F.R. §§ 240.10b-5(b), 240-12b-20, 240.13a11 and 240.13a-13; disgorgement of ill-gotten gains along with prejudgment interest; and civil penalties under 15 U.S.C. § 78u(d)(3). The SEC initially sought an injunction against Mr. Zachos, the president of Gold Standard, who consented to be permanently enjoined from violating or aiding and abetting violations of 15 U.S.C. §§ 78j(b), 78m(a) and Rules 17 C.F.R. §§ 240.10b-5(b), 240-12b-20, 240.13a-11 and 240.13a-13. He agreed that the SEC may file a motion to impose civil penalties under 15 U.S.C. § 78u(d)(3), and
Filed 12/13/12 Page 7 of 9 Page ID #:879
for purposes of that motion the allegations of the Complaint are to be taken as true. He also agreed that discovery may be taken on the issue of the amount of civil penalties. Mr. Eade claims that he did not knowingly or recklessly assist Gold Standard Mining in failing to disclose an alleged oral agreement regarding profits and the failure of the company to register the acquisition or seek approval from the Russian government because: 1) there was no oral agreement between Khachatrian and Gold Standard Mining for Khachatrian to keep the profits of Rosszoloto, and the written contracts between the parties preclude the use of parole evidence to controvert their integrated terms; 2) Rosszoloto did not have sufficient mineral deposits to subject itself to government approval of the transaction under Russian law; and 3) that the registration of the acquisition was not required to effectuate it or enforce it under Russian law. Therefore, these were not material facts requiring a disclosure. Finally, Eade contends that he did not knowingly or recklessly assist Gold Standard Mining in the alleged GAAP violations, as he had not the expertise to identify any of the alleged violations. Defendant Gruber and Gruber & Co. are in default. 12. 13. Amended Pleadings The Parties do not anticipate amending the pleadings in the case. Statement of Issues to be Determined by Motion. The Parties believe that the following issues may be determined by motion: a. Whether Russian law requires the acquisition of Ross Zoloto Ltd. by Gold Standard to be registered with Russian governmental authorities. b. Whether Russian law requires Russian governmental approval of strategic acquisitions of gold and platinum mineral deposits, and whether Rosszoloto had mineral deposits which triggered governmental approval. c. The amount of civil penalties to be assessed against Mr. Zachos.
Filed 12/13/12 Page 8 of 9 Page ID #:880
DATED: December 14, 2012. Respectfully submitted, /s/ Leslie J. Hughes Leslie J. Hughes, Esq. Attorney for Plaintiff Securities and Exchange Commission
/s/ Kenneth G. Eade__________ Kenneth G. Eade, Esq. Defendant, IN PROPRIA PERSONA
________________________ Panteleimon Zachos Defendant, Pro Se
Filed 12/13/12 Page 9 of 9 Page ID #:881
CERTIFICATE OF SERVICE I certify that on December 13, 2012, I electronically filed the JOINT REPORT PURSUANT FRCP 26(f) with the Clerk of the Court using the ECF system, which will send notification of such filing to all parties of record herein: Kenneth G. Eade, Esq. 6699 Wilshire Blvd. Suite 507 Los Angeles, California 90048-5708 Keneade@gmail.com Appearing Pro se I certify that on December 13, 2012, I caused true and correct copies of the foregoing to be mailed: Irving M. Einhorn, Esq. 1710 10th Street Manhattan Beach, CA 90266 Attorney for Gold Standard Mining Corporation And Panteleimon Zachos Edward Randall Gruber, CPA Gruber & Co. LLC 99 Saybridge Manor Parkway Lake Saint Louis, MO 63367 Pro se
s/ Leslie J. Hughes
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