HLNT/NIR/Ribotsky/Humphries/Walters/PWC Lawsuits Update 05/31/2012:
Lots of stuff to discuss. The most important is the Judge's Status Conferene Order. As mentioned by rdsd, the Judge has given hard dates for the depositions and stated that failure to attend the depositions can result in Sanctions (Contempt of Court, which means fines and/or Jail time).
Interpretation (Walters):
Walters has been trying everything that he and his lawyers can come up with to try to avoid having to give a Deposition. From the very beginning, he played the game that if you can't serve me, you can't involve me in this case, which backfired on him when his attorney's filed in opposition to HLNT's motion to allow the case against NIR and Walters to continue without Humphries. That act also came back to bite Walters in the backside when his attorneys tried to have the case sent to Arbitration in California. So now he has a new issue, the acts of his attorneys in trying to get themselves dismissed from representing him in this case.
There are two camps of thought on this development. The first, taking the situation between Walters and his attorneys at face value, Walters not having paid them could have been due to the failure of his attorneys to find that "Magic Bullet" that would have freed him from any involvement in the New York case. Walters, used to getting his way, decided to not pay them because they were not performing as he thought they should. Why the time delay in getting paid? In the affirmations provided by Chang, the law firm that he is a member of cited their past relationship with Monarch Bay, and based upon that relationship, were willing to act as Walters counsel and cousel for his two businesses. Based upon that past trust, Chang's law firm was extending Walters credit for the time they spent in representing him. When Walters wouldn't commit to a Deposition date, things came to a head, and Shapiro and Chang (and firm) opted to divorce themselves from Walters and his entourage of companies to avoid having to experience sanctions along with Walters.
The second camp of thought is that Walters and attorneys decided to use this as a ploy to buy Walters more time, in the hopes of frustrating the Judge and HLNT into capitulation. At issue here is that Walters could have easily paid both attorneys their fee charges to date. What we don't know is how much he has paid them already (although for Shapiro, he evidently hasn't been paid a thing), but there was no mention from Chang's law firm of a total lack of payment. What is so interesting in this second scenario is that the amount of legal fees unpaid is above an apparent threshold that would allow Chang and firm to use such a method to get themselves removed from the case. And couple that with the timing in which this occurred and it certainly raises eyebrows in suspicion of some attempt to manipulate the legal system in Walters favor (which by the way is illegal). But fortunately for Waltes and attorneys, the Judge can't read their minds.
One last note at this point. Walters has submitted documents requested in discovery. The reason that this is certain is that HLNT's lawyers have not brought up this issue of a lack of production on the part of Walters. Unfortunately, we may never get to see those documents unless they are presented as evidence at trial. Still, something that Humphries and Ribotsky ought to be very concerned about. Their attorneys get to see them also.
Interpretation (Humphries):
Humphries has changed is tactics a little. While he is still claiming that he is representing himself 'Pro Se', he has been getting some legal advice and assistance, as evidenced by the use of Espinoza (Who by the way lives in the same town as Walters, is there a connection here, possibly?). Odd that Espinoza has not filed to represent Humphries in the New York case, though. Maybe he doesn't want to get embarrased again? But Humphries has told Judge Kornreich in his fiings that he is looking for an attorney to represent him in New York. Wonder if there will be another attorney from Walters home town to step up for Humphries in New York? Ah, but I digress.
For all that he has been exposed to the legal system, Humphries does not understand it. Never mind his repeatedly failed attempts to get a stay against the case in New York by filing Bankruptcy. Now he has filed his response to the demand for discovery stating that he doesn't have to give them (HLNT's attorneys) anything because it comes under attorney/client privaledge (sorry, Humphries, that would apply only to communications, oral or written, between yourself and your attorney [whoever that may be at this point] that were not otherwise public record), or that the FBI and/or SEC has them and he can't get them back (cross his heart, he tried [no, seriously, he really, really tried - l&l&l&l&lol], oh yeah, a slight discrepancy, in his response dated 03/31/2011, he states "Subject to the above objection without waiving same, Humphries believes that if any such documents exist they would have been provided to the SEC under a Subpoena. Those documents are no longer in Humphries possession or control." yet in his response to the Order to Show Cause, dated 05/30/2012, he states "Humphries later disclosed that he had provided all documentation, several boxes, to governmental agencies.". The one thing that is consistent about Humphries is his inconsistancy.) Funny thing about Humphries arguments, he has no documents, yet in his Bankruptcy Hearing, not more than two and a half months ago, he was able to present bank statements in his BK trial that belonged to Systems Evolution, when he was in control of it as the CEO, before any SEC subpoenas or FBI seizures. Humphries is about to learn a big lesson in what is subject to and required to be given by virtue of subpoena. He isn't going to like it, and he will have to provide the names and or offices of the governmental agencies to which he gave the documents as well (including those seized by the FBI), so that they can be obtained.
A time line could be constructed to show Humphries requests for delays (along with a deceptively written request for an extention to "prep and response to the production of docs" and other excuses to show how he has used the legal system to try and thwart the Demand for Documents in Discovery, including stating in April that he was going to seek an attorney in New York to represent him, but finally culminating in a repeat of his Response (filed in March of 2011) on the 30th of May.
Other Issues and What's Next:
Judge Kornreich may have been on vacation when Judge Kapnick signed the Orders to Show Cause against Walters and Humphries (Docuemnts 171 and 172 on the SCROLL system). Judge's will often sit in for other Judges. Order's to Show Cause are "actions" that are to be heard and decided on like Motions. What is interesting is that there was no indication that the Judge, Kornreich, decided in any way on the Orders, nor was the Order to Show Cause by Walters attorneys signed and subsequently dated for a hearing. By not making her decisions today, the Judge has indicated that there was enough reason (by confusion if nothing else) to give Walters and Humphries the benefit of doubt that the reasons that they were not deposed was due to among other things miscommunication. Essentially, this means that Chang and Shapiro are still Walters attorneys of record for the time being (and Walters, being a man of means, better pay his attorneys). It also means that the Judge is holding the Orders filed by HLNT's attorneys until after the depositions are completed. The dates of the Depositions that the Judge has set were agreeable to all parties, Walters through his attorneys who were present at the conference, and Humphries by his attorney Espinoza, who stated anytime after June 2nd. Now, the Depositions are fixed in stone, and if they should be missed, it had better be for good reason, and not some subterfuge or legal trickery, because those Orders to Show Cause can be implemented, and according to the Judge, will be implemented against Walters and Humphries.
There are other little issues in the filings that can be discussed but the basic message is no more game playing for Walters and Humprhies. Time to step up and be deposed or face the wrath of the court in the sting from the power of the Judge.
The opinions expressed herein are my own and every investor should conduct their own due diligence and make their own investment decisions accordingly.
