HLNT/NIR/Walters lawsuits, Year in Closing
The courts have gone quiet for the Christmas/New Years holidays, which is a breather for all parties concerned.
Summary:
When Humphries was ousted and the company was given new management, Ribotsky, through his New Mellinnium companies, was going to kick HLNT's behind and force them to convert the notes that Humphries had brought to HLNT when it was the predecessor, SSEV. Humphries own company, DLAD (Dealers Advance), couldn't service the notes, so in a three way conspiracy, Walters, Humphries, and Ribotsky cooked up a deal in which DLAD would transfer a Software asset to SSEV, along with 6 million in convertible notes, so that SSEV could be used to complete the note conversions, bilking shareholders out of 10's of millions of dollars. These three men had no thoughts that Humphries would one day be forced out of the company for which he had helped arrange a gang rape. Ribotsky had even denied Humphries any further funding, which led Humphries to seek other illegitimate means to raise money for his expensive lifestyle. Before Humphries was ousted from SSEV, he was caught in a sting operation by the FBI, so the lack of support by Ribotsky already led to Humphries downfall. Then the surprise of all surprises, Humphries got booted from SSEV. That even caught the FBI by surprise.
So SSEV is changed to HLNT, which now has new management. Ribotsky, who hasn't a clue as to the findings of the new management, or the details of the sting Operation, or a lot of other misdeeds by Humphries, decides to take the upstart HLNT to the woodshed for a spanking, filing the initial lawsuit in April 2010. Only problem is, he finds out the hard way that HLNT is no pushover, and Humphries, in his departure, was not able to get rid of all the evidence of the fraud that he and Ribotsky and Walters participated in. HLNT files a response and Counter Claims suit in June of 2010. As a part of the case, HLNT requests certain records in the discovery process, NIR(Ribotsky) refuses, and is ordered to produce documents by the court.
Then the sting of Humphries becomes news, and Humphries had to accept a plea bargain for his misdeeds. The FBI is attempting to get the testimony on Ribotsky, because of the NIR involvement in the repackaged subprime mortgages that were put together by Levowitz and his company, Magnetar.
Ribotsky's attorneys realize the weakness in the original filng, and submit an amended filing to include DLAD in the wording of the original suit. Then HLNT files its Counter Claims and Third Party Action, citing the fraud and perpetrators, January of 2011. The FBI deposes Humphries in February, and you can bet that they have copies of all of HLNT's evidence.
Ribotsky's attorneys file a Motion to Dismiss HLNT's Counter Claims, citing among other things that both sides were involved, so essentially the fraud shouldn't count. Humphries files a Motion to Dismiss, saying the case shouldn't include him because he is from Texas, and the case is in New York. Walters, in the mean time, is hiding out in his estate in California, playing a game that if he can't be served, he can't be involved in the case.
Humphries, who is having severe financial problems now, as he is facing ultimate jail time for his plea bargain, decided to file Chapter 11 Bankruptcy, which causes an automatic stay to be invoked on any case involving himself as a defendant. HLNT filed a motion to have the Counter Claims and 3rd Party Action reunited, leaving out only Humphries. Suddenly, Walters, who could never be reached or served, comes out of the woodwork to challenge HLNT's motion, citing among other things, the same excuse that Ribotsky's Company cited, that all parties were involved, so therefore, the Counter Claims and 3rd Party Action should not be allowed to proceed. HLNT's Motion was denied, unfortunately, but a new twist occurs.
The trustee of Humphries bankruptcy trial files a Motion to Dismiss the Bankruptcy, citing that Humphries does not have the income to support any type of Chapter 11 bankruptcy, and that Humphries must file a Chapter 7 or drop any attempt of filing a bankruptcy. The Motion is approved in June and Humphries Chapter 11 is over. Within days following the dismissal of the Humphries bankruptcy, Walters files for payment of notes he received as a part of the fraud deal, that were created from SSEV. The case is filed in Texas and HLNT is now defending in two cases. In New York, HLNT files for lifting of the stay, and rejoining the case, but is put on hold again because Humphries files a Chapter 7 bankruptcy this time, keeping the original stay in effect.
At the same time, HLNT files for Commissions to depose Walters, his companies, and Humphries, due to their involvement in the actions that led eventually to NIR's suit against HLNT, and that they are witnesses, even if the Counter Claims and 3rd Party Action is kept on hold. Walters tries to counter this, but fails and the Commissions are issued.
Humphries second bankruptcy filing is terminated because he failed to pay a fee that was necessary, but is intent on refiling just as soon as he can, which he does in October. Walters lawyer files a Motion to stay the Counter Claims and 3rd Party Action, citing an agreement created during the fraudulent activity, requiring Arbitration. He also files a Motion to stay, based upon Humprhies 3rd bankruptcy filing. However, due to the law concerning bankruptcy filings, Humphries 3rd filing does not invoke any automatic stay, and Walters attorney has to withdraw his motion.
Where do the cases stand now?
As of the 8th of September, no other action has taken place on the Texas case. It appears to be on hold, pending the resolution of other related actions.
For the New York case, regarding the original NIR case, the parties are supposed to have filed their NOI's (Notices of Intent). These include proceeding to trial, Filing of other Motions, etc. But for the time being, there is no indication as to what any of the parties have decided, other than Motions that already exist and have not yet been decided. The Counter Claims and 3rd Party Action is still on hold at the moment.
As for the Arbitration that Walters has initiated in California, HLNT is currently participating in that but there is no public source to determine what is going on there at the moment.
Where are the cases headed?
Although some have stated that HLNT will end up having to pay the notes, they make that statement based upon their own personal objectives, not because of any real understanding of the law.
The original case will be decided in HLNT's favor, fraud was prevalant in all aspects of the transfers of the notes. The arguments that NIR has put forth do not circumvent the law, as NIR and Ribotsky wishes it would. HLNT will not have to pay or convert any 6 million dollars in notes, including accumulated interest. The original 2 million worth of notes will have to be decided, as to who has responsibility, HLNT or Walters.
In the Texas Case, the notes created from, during, and by the fraud will render them unenforceable, and Walters will walk away with nothing except legal fees. The arbitration in California will not legitize Walters claims in Texas.
In regards to the Arbitration in California. At some point, HLNT will request the arbitration be moved to a California Court for a Jury trial, which is their right, taking the arbitration out of the picture.
But the biggest kicker of all is that Fraud is a criminal act, even though there is the civil aspect of it as well. At some point, either by HLNT, or the Feds, criminal charges will be brought against Ribotsky, Humphries, and Walters. Humphries is already serving time, and unless he failed to provide the FBI full disclosure of the fraud and the involvement of Walters and Ribotsky, he is subject to more jail time. Ribotsky has charges against him right now from the SEC, and things are just going to get worse for him. His only real way out is turn over as a witness on Levowitz. And Walters, this is not going to be good for him either, and especially for his wifes political career. While 2012 is not going to be a good year for these three, it is going to be a good year for HLNT.
The opinions expressed herein are my own, and each investor should do his or her own due diligence and make investment decisions accordingly.
And with that, have a safe and Happy New Year, everyone!
