---
type: court_doc
id: "court_ctb_2947_0"
court: "CTB"
case_no: "22-50073"
doc_number: 2947
doc_type: "ORDER"
filed_date: "2024-02-22"
lang: "zh"
url: "https://mubeitech.com/court/court_ctb_2947_0"
json_url: "https://mubeitech.com/api/court/court_ctb_2947_0"
---
# UNITED STATES BANKRUPTCY COURT DISTRICT OF CONNECTICUT BRIDGEPORT DIVISION In Re \* Case No. 22-50073 (JAM) \* HO WAN KW
> 原始法庭文件为英文；下方为英文全文，顶部为中文摘要。
UNITED STATES BANKRUPTCY COURT DISTRICT OF CONNECTICUT BRIDGEPORT DIVISION In Re \* Case No. 22-50073 (JAM) \* HO WAN KWOK and GENEVER \* Bridgeport, Connecticut HOLDINGS CORPORATION, \* February 13, 2024 \* Debtors. \* \* \* \* \* \* \* \* \* \* \* \* \* \* \* \* \* \* TRANSCRIPT OF PROCEEDINGS BEFORE THE HONORABLE JULIE A. MANNING UNITED STATES BANKRUPTCY JUDGE #2509 MOTION FOR ENTRY OF ORDER EXTENDING DEADLINE FOR TRUSTEE TO FILE AVOIDANCE ACTIONS UNDER BANKRUPTCY CODE SECTIONS 108, 546(a) and 549 APPEARANCES: For the Chapter 11 Trustee: NICHOLAS A. BASSETT, ESQ. SHLOMO MAZA, ESQ, Paul Hastings LLP 200 Park Avenue New York, NY 10166 PATRICK R. LINSEY, ESQ. Neubert Pepe and Monteith 195 Church Street,13th Floor New Haven, CT 06510 Chapter 11 Trustee: LUC A. DESPINS, ESQ. Paul Hastings LLP 200 Park Avenue New York, NY 10166 For the U.S. Trustee: HOLLEY L. CLAIBORN, ESQ. Office of the United States Trustee The Giaimo Federal Building 150 Court Street, Room 302 New Haven, CT 06510 Proceedings recorded by electronic sound recording, transcript produced by transcription service. **Fiore Reporting and Transcription Service, Inc. Shelton, CT 06484 (203)732-6461**
APPEARANCES: (Cont'd) For the Creditors Committee: JONATHAN KAPLAN, ESQ. Pullman & Comley 850 Main Street Bridgeport, CT 06601 For the Creditor, Pacific STUART M. SARNOFF, ESQ. Alliance Asia Opportunity O'Melveny & Myers LLP Fund L.P.: Times Square Tower 7 Times Square New York, NY 10036 ANNECCA H. SMITH, ESQ. Robinson & Cole 28 Trumbull Street Hartford, CT 06103 For Mei Guo: SAM DELLA FERA, JR., ESQ. Chiesa Shahinian & Giantomasi, PC 105 Eisenhauer Pkwy Roseland, NJ 07068 JAMES M. MORIARTY, ESQ. Zeisler & Zeisler, P.C. 10 Middle Street, 15th FL Bridgeport, CT 06604 For Defeng Cao: MICHAEL A. CARBONE, ESQ. Parrett Porto Parese & Colwell, P.C. 2319 Whitney Avenue Suite 1D Hamden, CT 06518 (Excused) KATHERINE E. MATEO, ESQ. ADAM FRIEDMAN, ESQ. Olshan Frome Wolosky, LLP 1325 Avenue of the Americas New York, NY 10019 For UBS: LISA FRIED, ESQ. Herbert Smith Freehills New York, LLP 450 Lexington Avenue New York, NY 10017
APPEARANCES: (Cont'd.) For DBS Bank Ltd.: GENEVIEVE G. WEINER, ESQ. Sidley Austin, LLC 555 West Fifth Street Los Angeles, CA 90013 For Taurus Fund, LLC, MICHAEL T. CONWAY, ESQ. Taurus Management, LLC, Lazare Potter Giacovas & and Scott Barnett: Moyle, LLP 747 Third Avenue New York, NY 10017 For G Club Operations, LLC: JEFFREY M. SKLARZ, ESQ. Green & Sklarz, LLC One Audubon Street New Haven, CT 06511 CAROLINA A. FORNOS, ESQ. Pillsbury Winthrop Shaw Pittman LLP 31 West 52nd Street New York, NY 10019 For Rule of Law Foundation DOUGLAS M. EVANS, ESQ. III, Inc. and Rule of Law Shapiro, Dorry & Masterson LLC Society, IV, Inc.: 71 Raymond Road West Hartford, CT 06107 For Chris Lee and Qidong JON P. NEWTON, ESQ. Xia: Reid and Riege PC One Financial Plaza Hartford, CT 06103 (Excused) ERIC T. SCHMITT, ESQ. The Quinlan Law Firm, LLC 233 S. Wacker Drive Suite 6142 Chicago, IL 60606 For Greenwich Land, LLC CHRISTOPHER J. MAJOR, ESQ. and Hing Chi Hgok: Meister Seelig & Fein LLP 125 Park Avenue New York, NY 10017
APPEARANCES: (Cont'd.) For GS Security Solutions, ROBERT J. GRAND, ESQ. Inc.: Lax & Neville LLP 350 Fifth Avenue New York, NY 10118 For Yingying Wang: DAVID H. WANDER, ESQ. Tarter Krinsky & Drogin LLP 1350 Broadway New York, NY 10018 For Sotheby's International STEVEN BROWN, ESQ. Realty, Inc.: Wilson Else Moskowitz Dicker 1010 Washington Blvd. Stamford, CT 06901 MARY AUGUSTINE, ESQ. A.M. Saccullo Legal LLC 27 Crimson King Drive Bear, DE 19701 For Yongbing Zhang: JAMES EDWARD NEALON, ESQ. Nealon Law LLC 1266 East Main Street Suite 700 Stamford, CT 06902
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Ho Wan Kwok - February 13, 2024 5 (Proceedings commenced at 2:06 p.m.) THE COURTROOM DEPUTY: Case No. 22-50073, Ho Wan Kwok. THE COURT: Okay. Good afternoon. Obviously, there are many people on this remote hearing due to the weather today that we are experiencing. And I can see that some people have their cameras on and some people don't, and some people don't have their full names and some do. I would like everyone to have their cameras on, have their full names on. And if you can't do that, then I'm -- you're not going to participate in this hearing, because it's too distracting otherwise to the Court. And I'm going to ask everyone to file -- I'm going to have everyone announce their appearance for the record starting -- first, I'm going to ask the Chapter 11 Trustee and his counsel. But then I'm going to take the appearances of the parties who have filed objections to the motion that's on for hearing this afternoon, the motion for entry of order extending the deadline for the trustee to file avoidance actions, which is ECF Number 2509. And then after I take the trustee's appearance and his counsel, I'll take the appearance of the United States Trustee, if the United States Trustee is on. And I believe I did see someone from the United States Trustee's office
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Ho Wan Kwok - February 13, 2024 6 on. And then we will go through each ECF number and have everyone note their appearance. And if you haven't filed an objection and you are appearing, you're going to note your appearance as well, and we will go from there. So we will first take the appearance of Trustee Despins and his counsel. MR. DESPINS: Good afternoon, Your Honor. Luc Despins, Chapter 11 Trustee. THE COURT: Good afternoon. MR. BASSETT: Good afternoon, Your Honor. Nick Basset is from Paul Hastings, counsel to the Chapter 11 Trustee. MR. MAZA: Hi, Your Honor. Shlomo Maza with Paul Hastings, also for the trustee. MS. CLAIBORN: Holley Claiborn for the U.S. Trustee. THE COURT: Okay. The only people, Attorney Despins, that are appearing on your behalf today have noticed their appearance? MR. DESPINS: Well, I was expecting Mr. Linsey, but I -- we can proceed without him, but I was expecting him. I don't know. Maybe he's having technical -- THE COURT: Okay. We'll proceed for now, and we'll come back. Thank you.
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Ho Wan Kwok - February 13, 2024 7 All right. The first objecting parties that have filed -- that have responded to the trustee's motion is Mei Guo, ECF Number 2551. So I'd like the counsels that are appearing on behalf of Mei Guo to note their appearance for the record, please. MR. MORIARTY: Good afternoon, Your Honor. James Moriarty from Zeisler & Zeisler for Ms. Guo. MR. DELLA FERA: Good afternoon, Your Honor. Sam Della Fera, Chiesa Shahinian & Giantomasi, for Ms. Guo. THE COURT: Anyone else on behalf of Ms. Guo? Okay. Then the next objecting party is Defeng Cao, ECF Number 2553. I would ask people to -- who are representing that objecting party to please note their appearance for the record. MR. CARBONE: Good afternoon, Your Honor. Michael Carbone from Parrett Porto on behalf of Defeng Cao. MS. MATEO: Good afternoon, Your Honor. Katherine Mateo from Olshan Frome Wolosky on behalf of Mr. Cao. And I'll also note just that in yesterday's request to appear remotely, we also included a request to excuse our local counsel, Mr. Carbone, from having to participate in today's hearing. THE COURT: Okay. I didn't see that request. Because, as I said, when I set the hearing remotely, all of the motions were moot, because we were having this remote
Ho Wan Kwok - February 13, 2024 8 hearing. So you're asking if Mr. Carbone may be excused? MS. MATEO: Yes, Your Honor. THE COURT: Okay. Mr. Carbone, you may be excused. MR. CARBONE: Thank you, Your Honor. THE COURT: You're welcome. Anybody else then representing -- Ms. Mateo, anybody besides yourself? There's an Adam Friedman, I think, also has an appearance on record. Is he participating in this hearing? MR. FRIEDMAN: Correct, Your Honor. Adam Friedman's here. I'm on the phone. Ms. Mateo will be leading the argument for us, however. Thank you very much. THE COURT: You're welcome. The next objecting party was UBS AG, but I saw a withdrawal of an objection. But I don't know if I saw Attorney -- I don't remember if Attorney Fried is on this call or not. MS. FRIED: Good afternoon, Your Honor. Yes, this is Lisa Fried of Herbert Smith Freehills for UBS. And I'm -- Your Honor correctly noted that we have withdrawn our objection. But I did want to appear in the event that the Court had any questions for us. THE COURT: Okay. Thank you. The next objecting party then is DBS Bank, which
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Ho Wan Kwok - February 13, 2024 9 is ECF Number 2556. Who is appearing on behalf of DBS Bank? MR. WEINER: Good afternoon, Your Honor. This is Genevieve Weiner with Sidley Austin on behalf of DBS Bank Limited. THE COURT: Good afternoon. And, Ms. Weiner, you're the only party that is here on behalf of DBS Bank this afternoon? MS. WEINER: That's correct. We had understood -- and our local counsel, Bill Fish, is not on. We had understood his appearance wasn't necessary since this was just being done over Zoom. THE COURT: Well, that's not exactly true, but that's fine. Okay? MS. WEINER: Okay. Okay. THE COURT: (Indiscernible) local counsel at least introduces the counsel, and then -- the visiting counsel, and then there's a request such as what was made by Ms. Mateo to excuse local counsel. And that's fine. That's fine. MS. WEINER: Okay. THE COURT: Okay? That's fine. MS. WEINER: Okay. All right. THE COURT: Okay. MS. WEINER: Well, thank you for the accommodation. We'll make note of that in the future. Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 9 of 170
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| 1 | THE COURT:
Thank you. |
| 2 | The next objecting party is Taurus Fund, LLC, ECF |
| 3 | 2557.
Attorney Conway, I think I saw you somewhere in this |
| 4 | screen. |
| 5 | MR. CONWAY:
You did, Your Honor.
Thank you, and |
| 6 | good afternoon.
Michael Conway, Lazare Potter Giacovas & |
| 7 | Moyle for Taurus Fund, LLC; Taurus Management, LLC; and |
| 8 | Scott Barnett. |
| 9 | THE COURT:
Good afternoon.
Anybody else with you |
| 10 | this afternoon, Attorney Conway? |
| 11 | MR. CONWAY:
No, just me. |
| 12 | THE COURT:
Okay.
Thank you. |
| 13 | All right.
Then the next objecting party is G |
| 14 | Club Operations, LLC, which is ECF Number 2563. |
| 15 | MR. SKLARZ:
Good afternoon, Your Honor.
Jeffrey |
| 16 | Sklarz, Green & Sklarz, for G Club Operations, LLC. |
| 17 | THE COURT:
Good afternoon. |
| 18 | MS. FORNOS:
Good afternoon. |
| 19 | MR. SKLARZ:
And Ms. Fornos will introduce |
| 20 | herself. |
| 21 | MS. FORNOS:
Yes.
Good afternoon, Your Honor. |
| 22 | Carolina Fornos with Pillsbury Winthrop. |
| 23 | THE COURT:
Good afternoon, Attorney Fornos.
I |
| 24 | see you there.
Thank you. |
| 25 | The next objecting party -- I'm not sure if |
| | |
Ho Wan Kwok - February 13, 2024 11 these -- there are -- there were two separate objections, but I think 2565, Rule of Law Foundation III, Inc. I think, Attorney Evans, is that you? MR. EVANS: Yes, Your Honor. Douglas Evans representing Rule of Law Foundation and Rule of Law Society, Your Honor. We filed an objection and a declaration. So the objection is 2565. The declaration at 2568. THE COURT: Oh, thank you. Okay. All right. Thank you very much. MR. EVANS: Thank you. THE COURT: And you're by yourself, Attorney Evans? No one else appearing on behalf of those parties? MR. EVANS: Correct, Your Honor. THE COURT: Okay. Thank you. MR. EVANS: Thank you. THE COURT: Then the next objecting party is Chris Lee and Qidong Xia, 2566. Attorney Newton, are you appearing? Do I see you? MR. NEWTON: Yes, Your Honor, with one qualification. So good afternoon. Jon Newton for Mr. Lee and Mr. Xia. I do have lead counsel on with me. In the motion pro hoc, I did request to be excused from this hearing. That was denied. But after Mr. Schmitt's appearance now -- he has been admitted pro hoc -- I would ask if you would reconsider and then allow me to be excused. Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 11 of
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| 1 | THE COURT:
I think that's fine.
I think the only |
| 2 | reason you weren't excused was because Mr. Schmitt didn't |
| 3 | have an appearance in the case. |
| 4 | MR. NEWTON:
Understood. |
| 5 | THE COURT:
Okay?
So that's fine, Attorney |
| 6 | Newton.
You may be excused. |
| 7 | And Attorney Schmitt?
I don't -- |
| 8 | MR. SCHMITT:
Yes. |
| 9 | THE COURT:
Okay.
I'm sorry. |
| 10 | MR. SCHMITT:
Yes. |
| 11 | THE COURT:
I don't see you yet, but I'm sure I |
| 12 | will. |
| 13 | MR. SCHMITT:
Yes.
Eric Schmitt on behalf of |
| 14 | Mr. Xia and Mr. Lee. |
| 15 | THE COURT:
Thank you.
Welcome. |
| 16 | Okay.
Then the next objecting party is Greenwich |
| 17 | Land, LLC, and Ms. Hgok, 2569.
And, Attorney Major, I think |
| 18 | I saw you. |
| 19 | MR. MAJOR:
Yes.
Good afternoon, Your Honor. |
| 20 | Chris Major of Meister, Seelig & Fein.
We represent Hing |
| 21 | Chi Hgok and Greenwich Land, LLC. |
| 22 | THE COURT:
Good afternoon. |
| 23 | Then the next objecting party is GCS (sic) |
| 24 | Security Solutions, Inc.
2571 is the ECF number.
And, |
| 25 | Attorney Schurr, you're local counsel?
Or is it -- |
| | |
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| 1 | MR. GRAND:
This is Robert Grand from -- |
| 2 | THE COURT:
Oh, okay.
Attorney Grand, you're |
| 3 | right.
Attorney Schurr has already been excused in prior |
| 4 | proceedings.
So I apologize. |
| 5 | MR. GRAND:
Yes. |
| 6 | THE COURT:
I understand.
Are you alone, Attorney |
| 7 | Grand, or is your colleague with you? |
| 8 | MR. GRAND:
I am alone. |
| 9 | THE COURT:
Okay.
Thank you. |
| 10 | The next objection is Yingying Wang, 2582.
And |
| 11 | Michael (indiscernible) is local counsel. |
| 12 | MR. WANDER:
Good afternoon, Your Honor.
This is |
| 13 | David Wander.
My pro hoc vice motion was approved, and then |
| 14 | I filed my notice of appearance.
And with Your Honor's |
| 15 | permission, I'll be -- I'm from Tarter Krinsky & Drogin, and |
| 16 | I'll be appearing on behalf of my client. |
| 17 | THE COURT:
That's fine.
So, Attorney |
| 18 | (indiscernible) isn't here today, which is fine, correct? |
| 19 | MR. WANDER:
Correct, Your Honor. |
| 20 | THE COURT:
Okay.
All right.
Thank you. |
| 21 | The next objecting party is Sotheby's |
| 22 | International Realty.
Steven Brown is local counsel.
Is |
| 23 | Attorney -- |
| 24 | MR. BROWN:
Yes, Your Honor.
Steven Brown on |
| 25 | behalf of Sotheby's, and I'll be -- I'm here on my own at |
| | |
Ho Wan Kwok - February 13, 2024 14 the moment. THE COURT: I thought I saw Attorney Augustine. MR. BROWN: No. Yeah. THE COURT: Where is she? MR. BROWN: She's having trouble with her camera, Your Honor, so she's looking to just be observing. And I think we might even have an agreement when we get into the case. THE COURT: Okay. So just Attorney Augustine, though, would be local counsel, not her colleague? MR. BROWN: Correct, Your Honor. THE COURT: All right. But she's having trouble with her camera. MR. BROWN: Yes. THE COURT: Okay. Thank you. MR. BROWN: Thank you. THE COURT: Then the last objecting party, I believe, that I have today, and someone can obviously correct the record if I'm incorrect, is Yongbing Zhang, ECF Number 2591. Attorney Nealon? MR. NEALON: Yes, Your Honor. I'm here for Attorney Zhang. THE COURT: All right. Would you note your full appearance for the record, please? MR. NEALON: Sure. James Nealon, Nealon Law, LLC. Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 14 of
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| 1 | THE COURT:
Okay.
Good afternoon.
Thank you. |
| 2 | All right.
Now, I believe that I have now stated |
| 3 | for the record all the parties that have filed objections to |
| 4 | the trustee's tolling motion.
Is there anyone else that has |
| 5 | filed an objection that I have not noted for the record? |
| 6 | Okay.
Thank you.
Hearing none.
I think that we've gotten |
| 7 | everybody then. |
| 8 | MR. LINSEY:
Your Honor, this -- I had a technical |
| 9 | glitch.
This is Patrick Linsey, also counsel for the |
| 10 | trustee. |
| 11 | THE COURT:
Good afternoon. |
| 12 | MR. LINSEY:
Good afternoon, Your Honor. |
| 13 | MR. KAPLAN:
Good afternoon, Your Honor.
Jonathan |
| 14 | Kaplan on behalf of the committee. |
| 15 | THE COURT:
Good afternoon. |
| 16 | And then we have other people.
I know there -- |
| 17 | counsel for PAX, I think, is on the -- is participating in |
| 18 | this virtual hearing.
So if you could note your appearance |
| 19 | for the record, please. |
| 20 | MR. SARNOFF:
Yes.
Good afternoon, Your Honor. |
| 21 | Stuart Sarnoff, O'Melveny & Myers, on behalf of Creditor |
| 22 | PAX.
And with me is local counsel, Annecca Smith of |
| 23 | Robinson Cole. |
| 24 | THE COURT:
Good afternoon. |
| 25 | MR. SMITH:
Good afternoon, Your Honor. |
| | |
Ho Wan Kwok - February 13, 2024 16 THE COURT: Good afternoon. So Attorney Keller. Oh, I'm sorry. That's not Attorney Keller. That's Mr. Keller. He's here. Okay. Sorry. I'm looking to make sure I have everyone noted for the record. Attorney Claiborn, did we miss you? MS. CLAIBORN: I announced myself at the very beginning, Your Honor, but I'll happily do it again. THE COURT: Okay. MS. CLAIBORN: Holley Claiborn for the U.S. Trustee. THE COURT: Okay. Thank you. I just wanted to make sure everybody's on the record. That's all. I also see someone name -- whose name is Jackie Marasco. And who -- where is Jackie Marasco and who are you representing, please? MS. MARASCO: Good afternoon, Your Honor. Jaclyn Marasco, Faegre Drinker Biddle & Reath. We are just observing today on behalf of potential interested parties, (indiscernible) Aircraft. THE COURT: Okay. Well, you're not -- did you file an appearance? MS. MARASCO: We did not, Your Honor. We were just -- THE COURT: Well, this was a hearing for appearing Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 16 of
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| 1 | parties only.
I will let you listen, but you will not be |
| 2 | allowed to speak.
This was not a hearing where people were |
| 3 | going to just appear, because this was a hearing about a |
| 4 | motion for which there were objections.
So in any event, |
| 5 | that's fine.
You'll just mute yourself, please. |
| 6 | MS. MARASCO:
Understood, Your Honor. |
| 7 | THE COURT:
Attorney Wolman?
If you could please |
| 8 | note your appearance for the record and who you are |
| 9 | representing?
Attorney Wolman?
I can see that you're |
| 10 | connected, but you're on mute, and your camera's off.
You |
| 11 | need to announce who you're here for. |
| 12 | All right. I'm going to come back to Attorney |
| 13 | Wolman.
He may be removed from the hearing in a moment if I |
| 14 | don't hear from him. |
| 15 | Lisa Fried?
Did I speak with someone already this |
| 16 | morning -- or this afternoon?
I don't believe I have. |
| 17 | Who's Lisa Fried? |
| 18 | MS. FRIED:
Yes.
Good afternoon again, Your |
| 19 | Honor.
I'm counsel for UBS in connection with -- |
| 20 | THE COURT:
Oh, I'm sorry.
You know what?
I |
| 21 | marked you -- I didn't mark you as present because of the |
| 22 | withdrawal of the objection.
I apologize. |
| 23 | MS. FRIED:
Understood. |
| 24 | THE COURT:
All right.
So I think that I have |
| 25 | been -- everyone has announced their appearance for the |
| | |
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| 1 | record.
Is that correct?
All right. |
| 2 | Then, Trustee Despins, this is your motion, so |
| 3 | please proceed. |
| 4 | MR. BASSETT:
Your Honor, I was going to proceed |
| 5 | on behalf of Trustee Despins.
Again, for the record -- |
| 6 | THE COURT:
Go right ahead. |
| 7 | MR. BASSETT:
Thank you, Your Honor.
And, by the |
| 8 | way, thank you for accommodating us all on Zoom.
I know it |
| 9 | can be technologically difficult, but everybody appreciates |
| 10 | it, that's for sure. |
| 11 | I wanted to begin, if I could, by giving the Court |
| 12 | a bit of an update as to some other filings leading up to |
| 13 | this hearing that have been relevant, kind of the current |
| 14 | state of play with respect to objecting parties.
And then, |
| 15 | after doing that, we did plan to present evidence, including |
| 16 | the testimony of the trustee, so I would then move into that |
| 17 | portion of the hearing, if that's okay for the Court. |
| 18 | THE COURT:
That's fine. |
| 19 | MR. BASSETT:
Thank you, Your Honor.
So in terms |
| 20 | of updates, as the Court knows, we are conducting this |
| 21 | hearing pursuant to a set of notice procedures that were |
| 22 | ordered by the Court.
I did just want to reference ECF |
| 23 | Docket Number 2540.
That is the certificates of service. |
| 24 | That document contains the various certificates of service |
| 25 | that the trustee has filed.
And just by way of a quick |
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| 1 | summary on that note, I think, overall, at this point, the |
| 2 | trustees across Paul Hastings and Neubert Pepe have served, |
| 3 | I believe, more than 840 parties with the motion either by |
| 4 | email, by ECF, and/or by address where available. |
| 5 | Basically, if there was an email, we served it.
If they |
| 6 | were signed up for ECF, they got notice.
And if we had a |
| 7 | mailing address, we mailed it. |
| 8 | In addition to that, we had BVI counsel serve a |
| 9 | total of 55 entities in the BVI.
So I think, in total, |
| 10 | we're up to around 900 entities that got some form of notice |
| 11 | along the lines that I described. |
| 12 | In addition to that, we've done publication notice |
| 13 | across five different publications, including USA Today, and |
| 14 | two BVI publications, as well as two publications circulated |
| 15 | in the U.S. and internationally in Mandarin.
So I wanted to |
| 16 | provide that update in terms of the notice that's been |
| 17 | provided, which I think dovetails into where we are with the |
| 18 | objections for today's hearing. |
| 19 | So a total of, I believe, 13 objections were filed |
| 20 | in response to the trustee's motion.
At this point, two of |
| 21 | those have been resolved, which leaves 11, although one of |
| 22 | the 11, by DBS Bank, is actually just a reservation of |
| 23 | rights.
And DBS Bank, according to that reservation of |
| 24 | rights, does not object to the trustee's request for a |
| 25 | six-month period of the tolling of the statute of |
| | |
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| 1 | limitations, but reserves its rights thereafter.
That |
| 2 | leaves 12 objections. |
| 3 | Two of the remaining objections by DBS, and then |
| 4 | also an objection by Sotheby's, those have both been |
| 5 | resolved.
And there is a revised proposed order, which we |
| 6 | have filed on the docket at point 803, which adds some |
| 7 | language that addresses those parties and carves them out of |
| 8 | the order.
They are no longer objecting, as I understand |
| 9 | it. |
| 10 | The last point I would note is that -- well, two |
| 11 | more points, actually.
One, the ten remaining objections -- |
| 12 | and I'll get to this later through the evidentiary |
| 13 | presentation and also in argument.
But, you know, that |
| 14 | leaves ten people who really the Court would recognize as |
| 15 | having been involved in this case in various capacities, |
| 16 | people who are defendants, people who are associated with |
| 17 | the debtor, et cetera.
There are no remaining objecting |
| 18 | parties who are sort of banks or vendors or parties who are |
| 19 | sort of unrelated to the course of events that has |
| 20 | transpired thus far in this case.
Again, I'll save most of |
| 21 | those remarks for later and during the evidentiary portion |
| 22 | as to the relevance of that. |
| 23 | But then the last point I wanted to note for the |
| 24 | Court was that we have also filed a motion at ECF 2801, |
| 25 | filing -- excuse me -- approximately 30 stipulations, |
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| 1 | tolling agreements to be entered by the Court.
Those are |
| 2 | all being filed under seal pursuant to agreements with the |
| 3 | parties and the request that we've made with the Court.
I |
| 4 | mention that because, obviously, those tolling stipulations |
| 5 | would resolve, you know, any issue as to all of those 30 |
| 6 | parties, because the statute of limitations as to those |
| 7 | parties is going to be tolled by consent. |
| 8 | So with that, that's all I had by way of updates. |
| 9 | I'll pause there to see if the Court has any questions. |
| 10 | Then after that, I -- we will plan to move into our |
| 11 | evidentiary presentation. |
| 12 | THE COURT:
Thank you.
I have no questions. |
| 13 | Please proceed. |
| 14 | MR. BASSETT:
Thank you, Your Honor.
So yesterday |
| 15 | morning, I believe it was, at ECF 2763, the trustee filed a |
| 16 | proposed witness and exhibit list listing the trustee as a |
| 17 | witness.
And then I think we have approximately 130 or so |
| 18 | odd exhibits.
Your Honor, we filed that exhibit list, I |
| 19 | think, primarily as a helpful guide and summary for the |
| 20 | Court as to all of the various documents that we've |
| 21 | mentioned in our briefing and that we otherwise think are |
| 22 | particularly relevant to the relief that we are requesting. |
| 23 | But every single document on that exhibit list is actually a |
| 24 | docket item in the main Chapter 11 case for an adversary |
| 25 | proceeding.
And for that reason, I don't think it is |
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Ho Wan Kwok - February 13, 2024 22 necessary to move all of those into evidence as exhibits. I think they are all documents of which the Court can take judicial notice, and that's what we would ask the Court to do. Again, the real reason for filing that is to just put in one place a lot of the exhibits we will be referencing. But, of course, this is a very lengthy
bankruptcy case thus far with thousands upon thousands of docket entries and related events. And, you know, it's really the entire record in this case that we will be relying upon.
So in terms of that exhibit list, I don't think we need to have it moved into evidence, but we would ask the Court to take judicial notice of all of those documents and, of course, any others on the docket of this case that we might direct the Court's attention to.
THE COURT: Well, that's fine, except that if you want me to look at certain provisions in those -- in any of those pleadings that are on the docket of the case, then I'm going to ask you to direct me to those, because -- I can certainly take judicial notice that they've all been filed. And I have some -- under the federal rules of civil -- of evidence, have some recollection as to what they may include.
But if there are very specific things that you
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| 1 | would like the Court to take judicial notice of in those |
| 2 | documents, I will need you to point me to those documents. |
| 3 | So I think if you are asking the Court to make findings with |
| 4 | regard to specific information in a specific pleading, |
| 5 | you're going to need to point me to that pleading and |
| 6 | whatever it is in it that you think is relevant.
I can |
| 7 | certainly take judicial notice of the fact that they've all |
| 8 | been filed.
And I know generally what they are. |
| 9 | MR. BASSETT:
Understood.
Understood, Your Honor. |
| 10 | THE COURT:
All right.
Thank you. |
| 11 | MR. BASSETT:
With that, Your Honor, the trustee |
| 12 | would call Attorney Despins, the trustee himself, to the |
| 13 | witness stand. |
| 14 | THE COURT:
Well, as there isn't a witness stand, |
| 15 | we just have to improvise a little bit.
So we -- I'm going |
| 16 | to ask the courtroom deputy -- and, obviously -- I don't |
| 17 | even see Mr. Despins at the moment, but I might have to go |
| 18 | to a different page. |
| 19 | Mr. Despins, oh, there you are.
So, obviously, |
| 20 | you understand that even though we are not in a courtroom, |
| 21 | the courtroom deputy is authorized to swear you in and ask |
| 22 | you to swear about the truth of what you are going to |
| 23 | testify to.
You can't see the courtroom deputy, but you'll |
| 24 | be able to hear the courtroom deputy.
And I believe, |
| 25 | although I shouldn't say that -- I would ask you, Trustee |
| | |
Ho Wan Kwok - February 13, 2024 24 Despins, I think you'd recognize the courtroom deputy's voice in any event. You will not, obviously, see her raise her right hand, but she's going to ask you to raise yours, and I'm going to see you raise yours, and then we will proceed accordingly. Is that okay with you, Trustee Despins? MR. DESPINS: Yes, Your Honor. THE COURT: Okay. Thank you. MR. DESPINS: Understood. THE COURT: Thank you. All right. Then I would ask the courtroom deputy to please swear in the witness. THE COURTROOM DEPUTY: Okay, thank you. Sorry. Excuse me. I'm sorry. I just lost my voice for a minute. LUC DESPINS, TRUSTEE, SWORN THE COURTROOM DEPUTY: Okay. State your name and address for the record, please. THE WITNESS: Luc Despins. My business address is 200 Park Avenue, New York, New York, 10166. THE COURTROOM DEPUTY: Thank you. THE COURT: Okay, Attorney Bassett, you may proceed. MR. BASSETT: Thank you, Your Honor. DIRECT EXAMINATION BY MR. BASSETT: Q Trustee Despins, could you please start by just Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 24 of
Ho Wan Kwok - February 13, 2024 25 reminding the Court and everyone else on the line when you were appointed as the trustee in this case? A Early July 2022. Q Okay. And then the Chapter 11 petition was originally filed by the debtor in February of 2022, I believe. So is it the case that you were not appointed until approximately five months into the case? A That's correct. Q Trustee Despins, could you please tell the Court, generally, what did you do upon your appointment to start getting up to speed in this case? A Obviously, I involved my counsel, Paul Hastings, to try to get our arms around the information that was available at the time we were appointed. Q And when you say information that was available, what are you referring to? What types of -- A Well, we were looking for books and records, for the schedules of assets and liabilities, statements of financial affairs, those types of documents. Q And what did you find after you had undertaken those initial efforts to sort of get your arms around the information available? A That there were no books and records, that -- it became clear that the schedules of assets and liabilities and the statements of financial affairs were fraudulent. So, Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 25 of
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| 1 | basically, there was no real information.
And on top of |
| 2 | that, there was no money in the estate.
Zero.
Well, that's |
| 3 | not true.
There was about \$15,000 in the estate at that |
| 4 | time. |
| 5 | Q
So what did the -- you mentioned the schedules of |
| 6 | assets and statements of financial affairs.
What did those |
| 7 | list as it relates to the debtor's assets that he was |
| 8 | identifying to the Court? |
| 9 | A
\$3,850 in assets, basically. |
| 10 | Q
So then you mentioned that there was, well -- the |
| 11 | \$3,800 in assets, what were you to do about funding costs |
| 12 | and expenses of the work that you undertake in this case? |
| 13 | A
Well, we have no choice but to go forward and try to |
| 14 | identify assets that could be liquidated to cash to fund the |
| 15 | estate and, at the same time, conduct a broad Rule 2004 |
| 16 | investigation. |
| 17 | Q
Can you please talk a little bit more about the |
| 18 | investigation that you began to undertake after getting your |
| 19 | arms around the lay of the land, so to speak, as you just |
| 20 | noted? |
| 21 | A
Yeah.
I think that within a month or less, we filed |
| 22 | our first Rule 2004 motion.
And, basically, you know, that |
| 23 | was targeted to the family -- debtor's family members or |
| 24 | close associates that -- basically that we have been able to |
| 25 | identify as being involved with the debtor in the debtor's |
| | |
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| 1 | various transactions. |
| 2 | Q
And after those -- that initial -- or initial 2004 |
| 3 | motions, you have since filed others, correct? |
| 4 | A
Yeah.
We filed a total of 15 Rule 2004 motions to |
| 5 | date. |
| 6 | Q
And across those 15, how many parties have you |
| 7 | subpoenaed? |
| 8 | A
About 250 subpoenas were issued. |
| 9 | Q
And in response to those subpoenas, do you have a sense |
| 10 | of approximately the total number of documents that your |
| 11 | team has received in response? |
| 12 | A
Yes.
If we're talking about documents, which is not |
| 13 | pages, but documents, it's about 700,000 documents.
And |
| 14 | that's a bit misleading, because it's more than that. |
| 15 | Because there -- if you look at number of pages, it would be |
| 16 | more like 2 million pages.
And it's even more than that, |
| 17 | because some documents are produced in the live format, |
| 18 | native format, so that means that those have not been |
| 19 | printed and cataloged.
You can look at them on a computer |
| 20 | screen, but -- so they still need to be reviewed, but yet |
| 21 | you can't count those pages.
So that would be in addition |
| 22 | to that. |
| 23 | Q
So when you're saying native documents, you mean like |
| 24 | spreadsheets and things like that that have to be reviewed |
| 25 | sort of on a computer and have multiple tabs and things like |
| | |
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| 1 | that? |
| 2 | A
Correct. |
| 3 | Q
Now, were all of these documents in English? |
| 4 | A
No.
A number of them were in Mandarin. |
| 5 | Q
And, by the way, when did you get all of these |
| 6 | documents?
Was it one dump at the beginning of your |
| 7 | investigation, over time?
Trying to get a sense of the |
| 8 | timing. |
| 9 | A
Yeah.
I would say there was very slow initial |
| 10 | production trickling through.
I would say that from a |
| 11 | number of pages point of view that the bulk of this was |
| 12 | received in the fall of 2023. |
| 13 | Q
And what has your team done with the documents that |
| 14 | have been received in response to the subpoenas? |
| 15 | A
Well, attempt to, you know, review them all and |
| 16 | understand them.
As I pointed out, there are no books and |
| 17 | records to tell us what -- how this worked, really.
So |
| 18 | you -- you're reviewing documents, but you have no way of |
| 19 | knowing whether the document is a critical document, because |
| 20 | you -- the best way to look at this would be like the |
| 21 | equivalent of a puzzle.
You don't know if that -- does that |
| 22 | piece go in the middle of the puzzle, on the border, or not? |
| 23 | So that -- so what we tried to do is get our arms around |
| 24 | this and, you know, get as much of an understanding of what |
| 25 | has -- what transpired in the, you know, ten years or so |
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| 1 | before the filing through these documents -- that document |
| 2 | review. |
| 3 | Q
So have you actually -- has your team actually reviewed |
| 4 | all of the 700,000 or so documents at this point? |
| 5 | A
I would say that most, if not all of them, have been |
| 6 | reviewed.
Yes. |
| 7 | Q
But then you mentioned sort of it being a puzzle.
And |
| 8 | would it be fair to say that just because a document has |
| 9 | been reviewed once, it doesn't mean that you've necessarily |
| 10 | been able to appreciate the significance of that document at |
| 11 | that time? |
| 12 | A
Yeah. |
| 13 | MR. SKLARZ:
Objection to leading. |
| 14 | THE COURT:
Who is objecting? |
| 15 | MR. SKLARZ:
I'm sorry, Your Honor.
This is |
| 16 | Jeffrey Sklarz.
Leading. |
| 17 | THE COURT:
You're objecting to a leading |
| 18 | question, as to that's a leading question? |
| 19 | MR. SKLARZ:
Yes.
He -- |
| 20 | THE COURT:
All right.
Overruled.
Thank you. |
| 21 | Go ahead, Attorney Bassett. |
| 22 | BY MR. BASSETT: |
| 23 | Q
So you had said that it was sort of like putting |
| 24 | together a puzzle.
And my question for you is, that comment |
| 25 | that you made, you know, how does that relate to the |
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| 1 | document review process and what your team is able to learn |
| 2 | from that process? |
| 3 | A
That there are very rarely, in today's environment, |
| 4 | like documents where somebody says, I did it, I did this, or |
| 5 | it's a fraud or something like that.
There's none of that. |
| 6 | So you have to piece -- put the pieces together.
And so you |
| 7 | know parts of the story, but you need them to verify all of |
| 8 | this, because some of those may be false leads.
I've talked |
| 9 | to the Court about false leads before, because we've got a |
| 10 | lot of documents that were not produced to us through the |
| 11 | 2004 process but rather by people who had been previously or |
| 12 | alleged to have been previously involved in the debtor's |
| 13 | affairs.
And we -- you know, when you review this, you |
| 14 | can't take this for what's asserted there.
You need to |
| 15 | verify that.
So there's a whole process of reviewing these |
| 16 | documents, testing the various theories that are there.
And |
| 17 | so it's a fairly lengthy and burdensome process. |
| 18 | Q
Other than reviewing the documents that you've received |
| 19 | in response to Rule 2004 subpoenas, has your team reviewed |
| 20 | any other information? |
| 21 | A
Yes.
You know, the debtor was a prolific user of |
| 22 | social media, so there's tons of videos of him that he |
| 23 | posted on social media.
And so they're all -- I would say |
| 24 | they're mostly all in Mandarin.
Most of them do not have |
| 25 | translation.
So obviously the part of the team that speaks |
| | |
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| 1 | Mandarin needed to review those. |
| 2 | And as I said, we had people who believed they had been |
| 3 | defrauded by the debtor, and, therefore, they were providing |
| 4 | us with information voluntarily.
And we reviewed those as |
| 5 | well.
And as I said, you can't assume that anything that is |
| 6 | provided either by the debtor or by these folks is accurate, |
| 7 | so we need to test them and challenge every assumption |
| 8 | there. |
| 9 | Q
Other than your legal counsel, have any other |
| 10 | professionals assisted in the trustee's investigation? |
| 11 | A
Yes.
We hired Kroll to do the forensic and accounting |
| 12 | investigation -- part of the investigation. |
| 13 | Q
And when did you retain Kroll? |
| 14 | A
Very early.
August 2nd or August 3rd of 2023. |
| 15 | Q
And so that was approximately a year after your |
| 16 | appointment.
Why did you not hire Kroll earlier? |
| 17 | A
Because -- and I have already testified to this. |
| 18 | Because, given that we had not been able to capture assets |
| 19 | and sell them so that we had cash on hand, it was |
| 20 | practically impossible to hire a forensic accountant in the |
| 21 | sense that I did approach one to see if they wanted to do |
| 22 | under contingency.
They turned me down.
I know my |
| 23 | colleague, Mr. Avi Luft, also approached some -- another |
| 24 | firm, a forensic investigator, who also turned him down. |
| 25 | And I think that people say, well, you could have found |
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| 1 | somebody on a contingency basis.
But I think it's very |
| 2 | important to understand that it's not only the contingency |
| 3 | that was an issue.
It's the fact that we, meaning |
| 4 | Mr. Linsey's firm and ourselves, were already in the hole |
| 5 | for probably \$8 million by the time we were in May of '23. |
| 6 | And even a contingency firm would not agree to be |
| 7 | behind us.
They would want to share or pari-passu with us |
| 8 | over any recoveries.
And, of course, I -- you know, I want |
| 9 | to get paid first because that -- obviously, we've been |
| 10 | funding the case for a long period of time. |
| 11 | So that -- so it's not only the contingency.
Even if |
| 12 | you could find somebody on a contingency basis, they would |
| 13 | say that -- by experience, I'm sure that they would say, |
| 14 | fine, but we're pari-passu with you.
And that created a |
| 15 | huge issue until we had funding in the case, which was in |
| 16 | late June 2023. |
| 17 | Q
So what -- and that was what I was going to ask you. |
| 18 | What was it that happened sort of before August when you |
| 19 | said you retained Kroll that finally gave you the means and |
| 20 | the funding to be able to hire Kroll? |
| 21 | A
It was the sale of the Lady May in late June 2023. |
| 22 | Q
So that was late June of 2023.
I think you said Kroll |
| 23 | was retained as of early August.
Just is there a reason why |
| 24 | there was sort of a month gap between selling the Lady May |
| 25 | and retaining Kroll? |
| | |
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| 1 | A
Yeah, because we had to have an interview process.
We |
| 2 | went out to a number of firms to interview them.
They had |
| 3 | to themselves do their conflicts check, which takes -- given |
| 4 | the number of parties involved in this case takes a lot of |
| 5 | time.
And we needed to decide which way to go.
And that |
| 6 | took -- basically, if you put away July 4th and, you know, |
| 7 | summer, you know, vacation for some of the team, not all, |
| 8 | that took basically 30 days to select and hire and -- and |
| 9 | it's not only select but also negotiate the engagement |
| 10 | letter and all that.
So that took 30 days. |
| 11 | Q
So at the outset of this discussion about Kroll, you |
| 12 | very briefly talked about, you know, the kind of work that |
| 13 | Kroll has performed.
But could you talk about that in a |
| 14 | little more detail, that since Kroll's appointment, what |
| 15 | kind of investigation and analysis has it assisted you with? |
| 16 | A
Yes.
Basically, it's a forensic but also tracing |
| 17 | analysis of how -- you know, how did money flow, which |
| 18 | accounts did it go into, et cetera, et cetera.
But also |
| 19 | they do investigative work in terms of are there assets in |
| 20 | country X or country Y.
So they do some of that.
But I |
| 21 | would say that 80 percent plus of their work has been |
| 22 | focused, since their retention, on the review and analysis |
| 23 | of the flow of funds, reviewing, you know, hundreds of bank |
| 24 | accounts. |
| 25 | Q
So on that particular point, to help give the Court a |
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| 1 | sense -- and it's not a memory test here, but do you have a |
| 2 | ballpark idea of -- just to give the Court a sense of the |
| 3 | scope of the work, the number of accounts, transactions, et |
| 4 | cetera, that Kroll has identified and has been |
| 5 | investigating? |
| 6 | A
Yes.
So there's more than 330 accounts.
And by that, |
| 7 | I would say that we're still discovering accounts this week, |
| 8 | but so it's just -- it's a yardstick.
It's more than 300 |
| 9 | accounts.
There are something like 85 -- I could be off by |
| 10 | 2,000 or 3,000 -- but 85,000 transactions.
More than |
| 11 | 3 billion transiting through these accounts that Kroll has |
| 12 | been reviewing. |
| 13 | And I would say just -- Your Honor, just to -- I always |
| 14 | like to use this example of the Russian doll.
I mean, you |
| 15 | start with one bank account, and it shows you a number of |
| 16 | transfers.
So the first one is you open that doll, so |
| 17 | that's the bank account.
The bank account leads you to |
| 18 | other smaller Russian dolls.
Because what happens is that |
| 19 | there are transfers from that account to other accounts. |
| 20 | Sometimes the account is completely closed, because the |
| 21 | banks, you know, got wind of, you know, bad things going on, |
| 22 | and they closed the account.
So it goes to another account. |
| 23 | But even if the account is not closed, during a period |
| 24 | of six months, there could be thousands of transfers to |
| 25 | other accounts that are similarly controlled by the Kwok |
| | |
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| 1 | enterprise.
And so you need to go -- now Mr. Linsey needs |
| 2 | to go to those new banks, get 2004 discovery from them, and |
| 3 | have them produce their accounts.
And then what you find |
| 4 | often is that you go to that second layer, and there are |
| 5 | payment transfer companies like PayPal. |
| 6 | So people know what PayPal is.
And there's a |
| 7 | transfer, let's say, of 100,000 to PayPal.
By the way, it's |
| 8 | not PayPal.
It's other competitors of PayPal, but.
So now |
| 9 | Mr. Linsey has to go back to the equivalent of PayPal and |
| 10 | say please produce all the documents regarding this -- these |
| 11 | transfers.
Then you open that Russian doll.
Then there are |
| 12 | hundreds of transfers. |
| 13 | And then you have information regarding the bank |
| 14 | opening accounts.
Like who opened that account at -- again, |
| 15 | it's not PayPal.
I'm using that as shorthand.
Who opened |
| 16 | the account at PayPal? |
| 17 | And then you have all sorts of things you're |
| 18 | discovering through that process.
But that takes -- as I |
| 19 | explained, that Mr. Linsey has to go back again and again |
| 20 | and again to different banks.
On top of that, these banks |
| 21 | are not all -- meaning if the production is due on June 1st, |
| 22 | to give an example, I would say 90 percent of these banks |
| 23 | don't produce on June 1st.
You know, they're taking their |
| 24 | time, not in a nefarious way, but because they're not happy |
| 25 | to do this work.
They don't make money that way.
So they |
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Ho Wan Kwok - February 13, 2024 36 are slow producers. And, of course, I can't send Mr. Linsey to court every week to file a motion to compel, because we're going to be broke very soon. So, therefore, we need to have some tolerance. And, therefore, the banks take time to produce. Not only that, they don't do a good job of producing. Meaning that we looked at the documents they produced. That's good. Thank you very much. But we're missing, you know, like probably six months of statements. So we have to go back to them and get them to produce that. So it's a huge, complex, and time-consuming effort to do all of this. Q So you've now talked about -- thank you for that -- for the explanation. But you've now talked about Kroll's investigation. You also talked about your team's Rule 2004 investigation. Through that investigation collectively, what are you doing once you have determined that there is information that may give you a cause of action? What are you doing at that point? A Well, we -- as I said, we test it to make sure that it holds together. But once we're -- we have enough, we draft the complaint, and we are filing them. And as you can -- as Your Honor has seen in the last -- since Friday, I think we've probably filed 180 complaints. So when we have the
information, we are filing the complaints.
And I would say most of the people who are objecting
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| 1 | are in complaints.
Now, they are named as a defendant in |
| 2 | complaints already filed or to be filed between now and |
| 3 | Thursday. |
| 4 | Q
So you mentioned 100 and some complaints that have been |
| 5 | filed since Friday.
How would you characterize those |
| 6 | complaints?
Is there a particular type of complaint?
What |
| 7 | are the ones that have been filed recently? |
| 8 | A
The ones that have been filed since Friday by |
| 9 | Mr. Linsey's firm are typically avoidance actions |
| 10 | complaints, fraudulent transfer, actual intent fraudulent |
| 11 | transfer, generally. |
| 12 | Q
And prior to the filing of those complaints, had you |
| 13 | and your team filed other complaints previously in the |
| 14 | Chapter 11 case? |
| 15 | A
Yeah.
We had filed about ten or so complaints to try |
| 16 | to recover assets like the Lady May, HCHK funding, the |
| 17 | funds, the UBS fund, the Bombardier jet, all of these. |
| 18 | Sherry Netherland.
I'm sorry, I forgot to mention Sherry |
| 19 | Netherland. |
| 20 | Q
Understood.
So other than these complaints and other |
| 21 | than the avoidance action complaints that you just talked |
| 22 | about, are there any additional complaints that you and your |
| 23 | team intend to file prior to February 15th or prior to the |
| 24 | end of the day on February 15th of 2024? |
| 25 | A
Yes.
There are two other categories.
We're still |
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| 1 | continuing with the filing of the avoidance actions.
But |
| 2 | other than those, we're going to file a very broad alter ego |
| 3 | complaint that basically seeks to have the Court find that |
| 4 | the debtor equitably owns or a -- the alter ego -- or that a |
| 5 | number of entities are the alter ego of the debtor.
The way |
| 6 | the Court has found with respect to some of these entities |
| 7 | so far.
But this is a much broader list.
So that's one. |
| 8 | And the second complaint that's, you know, a very broad |
| 9 | complaint is a civil RICO complaint which alleges that a |
| 10 | number -- I would say most of the people who are objecting |
| 11 | today are part of a fraudulent scheme that the debtor was |
| 12 | running to hide assets, to obstruct justice, bankruptcy |
| 13 | fraud, et cetera, et cetera. |
| 14 | Q
Are any of the potential objecting parties going to be |
| 15 | named defendants in either of those two complaints that you |
| 16 | just described? |
| 17 | A
I would say most, if not all. |
| 18 | Q
Okay.
Now I'd like to shift gears a little bit and ask |
| 19 | you about some of the challenges or difficulties you've |
| 20 | experienced along the way in your investigation.
Before I |
| 21 | do that, please remind the Court, I know we've talked about |
| 22 | this in the past, but how long you've been practicing |
| 23 | bankruptcy law and have been involved in Chapter 11 cases. |
| 24 | A
Over 35 years now. |
| 25 | Q
And sort of, you know, within the context of that |
| | |
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| 1 | experience of yours, were there any unique challenges that |
| 2 | you faced during your investigation that you've described |
| 3 | that have affected your ability to complete that |
| 4 | investigation by the February 15th deadline? |
| 5 | A
Yes.
I would say this is unprecedented in the sense |
| 6 | that I've seen fraud cases before, very sophisticated fraud |
| 7 | cases before I've been involved in, but this -- in terms of |
| 8 | the brazenness of what's going on and the fact that it |
| 9 | continued post-bankruptcy in spades and with renewed vigor |
| 10 | is -- I've never seen something like this.
And yet, the |
| 11 | level of obstruction and the lack of any shame in doing it |
| 12 | is unprecedented.
Sorry to say. |
| 13 | Q
So we're in the thousands of docket entries in this |
| 14 | case.
A lot has gone on.
Again, it's not a memory test, |
| 15 | but can you just highlight for the Court some of the |
| 16 | particular issues or challenges that arose? |
| 17 | A
Well, if we focus for a minute on -- well, from the |
| 18 | beginning, you know, the debtor tried to disqualify the |
| 19 | firm, tried to get me removed, appealed that, did it again, |
| 20 | then withdrew it.
So that's just a little segment. |
| 21 | And then it went on from there to -- I mean, I don't |
| 22 | want to take too much of the Court's time, because the Court |
| 23 | has lived this probably more than we have.
But, you know, |
| 24 | there just -- it was nonstop, like the -- not producing any |
| 25 | documents.
For example, the debtor, I think, produced -- |
| | |
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| 1 | the total was, I could be off by a few, but 45 documents. |
| 2 | Mei Guo produced like 47 documents.
There was a, you know, |
| 3 | constant battle, for example, on the yacht where, you know, |
| 4 | even though there was a finding by a New York judge, there |
| 5 | was just constant fighting over all the assets.
And it's |
| 6 | just silly.
There was nonstop obstruction both on the |
| 7 | discovery front but also on the asset recovery front. |
| 8 | Q
So in addition to that, you said the debtor tried to |
| 9 | have you and your firm disqualified.
You mentioned the |
| 10 | discovery challenges.
How about outside of that?
Anything |
| 11 | else that occurred that interfered with your investigation? |
| 12 | A
Well, the whole protest that took a lot of time.
And |
| 13 | there was the distraction, intentional distraction, I'm |
| 14 | sure, to try to get us off of our appointed work so that, |
| 15 | you know, the whole protest thing. |
| 16 | The lawsuit filed against us by one of the parties |
| 17 | present here that's objecting to this that -- where this |
| 18 | person was sanctioned by -- against us but also against PAX |
| 19 | and the counsel, et cetera, so much so that one of the |
| 20 | district court judges ordered this gentleman to always |
| 21 | file -- attach to any pleading he files in any court a copy |
| 22 | of the sanction order that he was -- basically, that he was |
| 23 | found to be -- have committed -- or had, you know, been |
| 24 | sanctioned for.
Now, the reason why it wasn't filed with |
| 25 | this Court is because he's retained a lawyer to represent |
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Ho Wan Kwok - February 13, 2024 41 him. But if he had appeared here himself as a lawyer, he would have had to attach a sanction order by -- I forget which judge, by the Southern District of New York judge. So that's just another level of, you know, obstructionism and -- that took, you know, time away from what should have happened. Q Now, you mentioned it was one of the objecting parties. Is that Mr. Yongbing Zhang? A That's correct. Q Now, when the bankruptcy court has issued decisions, whether it's on a motion to compel or in a litigation, what typically happens following that from an appellate perspective? A Well, appeals. Numerous appeals. But on top of that, stay pending appeal, both before Your Honor and before Judge Dooley, all of them denied. But that takes time, and it's incredibly time-consuming. Very expensive. So there have been a number of those as well. Q So recently -- and this is in the adversary proceeding that relates to the Mahwah mansion, there was a subpoena that you filed with respect to a storage unit to investigate. And as has been reported to the Court, the trustee has been going through the contents of that. Can you talk about how that may have affected your investigation
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| 1 | and the timing of it? | | | | |
| 2 | A
Yes.
There are dozens of boxes in these storage units | | | | |
| 3 | that are basically Golden Springs documents, documents that | | | | |
| 4 | should have been produced to us months ago.
And, obviously, | | | | |
| 5 | we're trying to go through them, but it's not like an easy | | | | |
| 6 | task.
And, obviously, Your Honor knows that Golden Springs | | | | |
| 7 | defaulted on their production obligations.
They were held | | | | |
| 8 | in contempt. | | | | |
| 9 | But now we know that those documents that we're looking | | | | |
| 10 | for, now we found them, but we found them in -- I forget. | | | | |
| 11 | Is it December of last year?
Something along those lines. | | | | |
| 12 | And by the way, I am sure there are other storage units, | | | | |
| 13 | maybe not in the U.S. but around the world that contain | | | | |
| 14 | other documents or artwork. | | | | |
| 15 | Q
So before we leave the sort of topic of the challenges | | | | |
| 16 | that you face -- and I think you've given some examples of | | | | |
| 17 | what you view as obstruction of your investigation -- can | | | | |
| 18 | you talk about any particular instances of obstruction that | | | | |
| 19 | stick out in your mind as it relates to the particular | | | | |
| 20 | objecting parties to this motion? | | | | |
| 21 | A
Sure.
Well, the leader of the group, Mei Guo, I mean, | | | | |
| 22 | I just -- I don't know how to say this, but is a poster | | | | |
| 23 | child for obstruction and for, you know, misrepresentation | | | | |
| 24 | and perjury.
There's no other way to describe it.
You | | | | |
| 25 | know, she, for example, said that she had stopped using a | | | | |
| | | | | | |
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| 1 | smartphone because of the concern with the Chinese Communist |
| 2 | Party.
That wasn't true.
Because later, we got all her |
| 3 | WhatsApp -- or not all of it, but some of her WhatsApp or |
| 4 | text messages sent with a smartphone, an iPhone.
So that's |
| 5 | number one. |
| 6 | Two, she was deposed.
This is incredible.
She was |
| 7 | deposed in January.
January 20, 2023.
And she said, oh, |
| 8 | yeah, the airplane that I owned, even though she was a |
| 9 | teenager when it was bought, that I owned was sold during |
| 10 | the case in August 2022, and I don't know where the money |
| 11 | is.
I don't know.
Okay. |
| 12 | So that complete lie.
We know now from documents that |
| 13 | she was emailing the entity that got those funds, the |
| 14 | \$13 million.
It's an entity in London called JMFX.
It's a |
| 15 | foreign exchange entity.
She was emailing, communicating |
| 16 | with them as late as December 17, 2022.
And she said in her |
| 17 | deposition that she had no idea where these funds were. |
| 18 | It's just -- you know, that is just a -- that's why I |
| 19 | said, she's a poster child for what is going on in this |
| 20 | case. |
| 21 | Q
And how has that affected your investigation and the |
| 22 | need for your -- |
| 23 | A
Well -- |
| 24 | Q
-- request for tolling that's set forth in the motion |
| 25 | before the Court today? |
| | |
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| 1 | A
Well, that -- you know, that's -- because we were -- we |
| 2 | had to spend a lot of time chasing all of this instead of, |
| 3 | you know, being able to review all of the claims that should |
| 4 | be brought.
We were -- we had to chase this asset that was |
| 5 | right under our nose, but we didn't know it.
Our nose -- |
| 6 | you know, I guess London is not under our nose, but close |
| 7 | enough.
But she knew that. |
| 8 | And, of course, that is just an example of the |
| 9 | obstructionism that we faced throughout the case.
The |
| 10 | more -- that's a more blatant one. |
| 11 | Q
So you mentioned Mr. Yongbing Zhang.
But, again, not a |
| 12 | memory test.
We don't need to go down the line.
But |
| 13 | anything else from any of the other objecting parties that |
| 14 | stands out to you as a problem? |
| 15 | A
Well, you know, G Club.
I mean, that was a drag-down |
| 16 | fight to get documents from them.
Again, appeals, stay |
| 17 | pending appeals, all denied.
I mean, the appeal on the |
| 18 | merits has not been heard, but stay pending appeal was |
| 19 | denied. |
| 20 | Just, you know, Defendant Cao, C-A-O, that we just sued |
| 21 | last week, because he is the title owner to three luxury |
| 22 | motorcycles that are the debtor's motorcycles, obviously. |
| 23 | In his deposition, I -- because it's confidential, I have to |
| 24 | be careful.
But, basically, I invite anyone to read that |
| 25 | deposition.
And it's just -- the evasiveness of this |
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| 1 | 45
person.
You know, he says that a person, Max, called me to |
| | |
| 2 | sign title, to get title to these motorcycles.
But who's |
| 3 | Max?
Don't know.
Don't know his name.
Of course we know |
| 4 | who Max is.
It's Krasner.
But, you know, the concept that |
| 5 | somehow he doesn't know that. |
| 6 | And then he gets money from a Chinese company that he |
| 7 | hasn't worked for for 12 years or 15 years.
He doesn't know |
| 8 | why he's getting the money.
I just -- the level of |
| 9 | obstructionism -- it's all very subtle, I mean, in the sense |
| 10 | that you might say, well, that's -- how do you know that |
| 11 | he's lying?
Okay.
Fair enough.
But it's -- once you've |
| 12 | done like 15 of these depositions, I think you get a pretty |
| 13 | clear pattern of what's going on. |
| 14 | Q
The Court is familiar with, from one of the adversary |
| 15 | proceedings in this case, a group of individuals known as |
| 16 | the HCHK Creditors Committee.
Has your team identified any |
| 17 | relationship between that committee and any of the objecting |
| 18 | parties? |
| 19 | A
Yeah.
There are -- and we pointed that out in our |
| 20 | reply.
There's a few of them that are members of that |
| 21 | creditors committee which was headed by Mr. Yongbing Zhang. |
| 22 | Who, by the way, visits the debtor in prison all the time. |
| 23 | We know that from maybe a social media posting.
So he's the |
| 24 | debtor's counsel on immigration matters, apparently.
So, |
| 25 | you know, so they're -- again, they're in contact.
They're |
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| part of the creditors committee for HCHK.
They were |
| involved in the protests, et cetera, et cetera. |
| Some of them, I believe, got money from the Rule of Law |
| Foundation.
So that I'm not 100 percent sure of, but I know |
| that a number of protesters are getting sued in the next two |
| days for receiving substantial sums from the Rule of Law |
| Foundation. |
| Q
Which is another objecting party, correct? |
| A
That's correct. |
| Q
So you talked a little bit earlier about how you're |
| planning to file -- or you're continuing to file avoidance |
| action complaints and then planning to file two additional |
| complaints prior to the 15th.
And you also mentioned that |
| you're going to be naming, you think, most if not all of |
| these objecting parties in one or both of those complaints. |
| My question for you is, if you are able to file all of these |
| complaints that you talked about prior to the February 15th |
| deadline, why do you need the tolling that you are seeking |
| through your motion? |
| A
Yeah.
So let me take two very specific examples.
The |
| first one is when I know that there's an issue, but I don't |
| have enough information to bring a claim.
So I'll give -- |
| you know, I mentioned the Russian doll analogy when talking |
| about bank accounts.
But we have a very specific issue here |
| |
where going through the first account leads us to a second
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| 1 | account, which leads us to a PayPal type of entity.
It's |
| 2 | not PayPal.
I'm just using that as a shorthand for a |
| 3 | payment transfer entity.
So we go to that entity. |
| 4 | Mr. Lindsay asked them to produce their documents, including |
| 5 | the account opening documents. |
| 6 | Well, what do we find in there?
We find a passport for |
| 7 | one of the persons that is very close to the debtor, |
| 8 | involved in many of the schemes, asset hiding schemes.
And |
| 9 | it's a passport for a country in Europe that, how shall I |
| 10 | say this, was very liberal in granting passports to |
| 11 | foreigners that bought real estate in the past and maybe |
| 12 | five, six years ago. |
| 13 | And so you might say, well, so what does that tell you? |
| 14 | What that tells me is that there's probably real estate in |
| 15 | that country.
And it's not owned by that person, because |
| 16 | that person has no money.
It's the debtor's real property. |
| 17 | Now, do I know that enough to file a complaint?
No, |
| 18 | absolutely not.
There's no -- we discovered that |
| 19 | information in late November.
There's no way we -- there's |
| 20 | no central real estate registry, Your Honor, that we have in |
| 21 | all our states here in the states, so you can't go and do a |
| 22 | search like that. |
| 23 | So we're absolutely looking through that issue, but |
| 24 | I -- there's no way I can file a complaint saying I think |
| 25 | there's a house in that country, but I don't know where it |
| | |
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| 1 | is.
By the way, it could have been sold, so I have no -- so |
| 2 | the point is, we have a number of these nuggets, if you |
| 3 | will, that we cannot pursue because we don't know enough. |
| 4 | And then the next type of claim is, as I said -- I |
| 5 | don't want to sound pedantic about this.
I'm 100 percent |
| 6 | sure that there are other claims of asset transfers that we |
| 7 | don't know about, because that's just the nature of what |
| 8 | we're dealing with.
And there we don't even have a tip.
So |
| 9 | that is why, I'm sorry to say this, but why all of these |
| 10 | objectors are coming here, because there's real benefit for |
| 11 | them to have a strict statute of limitations of February |
| 12 | 15th, because they could actually benefit tremendously from |
| 13 | that. |
| 14 | And that's the second example.
And that's why it's |
| 15 | critical to get the tolling -- equitable tolling of statute |
| 16 | of limitations in this case. |
| 17 | Q
So some of the objecting parties have said in their |
| | |
papers that they usually just wait and seek equitable tolling later if you decide to bring a complaint against a particular party. What's your response to that suggestion? A In this extraordinary case with these extraordinary circumstances, that doesn't work, because it puts the estate at incredible risk. It's the risk of going down the -- continuing our investigation, spending real money investigating real leads, only to find out later after you
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Ho Wan Kwok - February 13, 2024 49 spend all that money that you're time barred. Basically, the people that are objecting here should not benefit from the obstructionism of either the debtor or other people. They don't have to cause the obstruction themselves, although I would say in most cases they have. The point is that the estate should not be at risk of spending hundreds of thousands of dollars continuing the investigation that might be found to be time barred six months from now. That's really the crux of the issue. Q And you've mentioned six months, and that's the length of the extension that you're seeking in your motion. Why six months? A Because, as I said, we have a number of -- I call them nuggets or potential leads. We believe that six months is a -- there's a balancing here. So, I mean, we could have asked for a year, but the point is we -- we're conscious that we're asking the Court to enter an order that affects people's rights. And so we're trying to balance that against the issue of protecting the estate and maximizing recovery for unsecured creditors. So we believe that six months is a good -- certainly a good check-in point. It may be the last extension, because we will have concluded that these nuggets are not worth pursuing, too costly or too complicated, because they involve foreign jurisdictions, or we may have filed them the
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| 1 | same way we filed -- we will have filed 230 complaints now |
| 2 | by February 15th.
Because we will have -- you know, those |
| 3 | were ready to be filed. |
| 4 | There's no strategic waiting here.
We're not sitting |
| 5 | on a complaint that's ready to go, and we're not filing it |
| 6 | for strategic reasons.
I think there was some allegation of |
| 7 | that.
But, no, none of that.
When a complaint is ready, we |
| 8 | have the information, it passes Rule 11, we're filing it. |
| 9 | And but we think that six months is going to put us in a |
| 10 | very good position to file more or say that's the end of it. |
| 11 | Q
Thank you.
I think I have just one final question, and |
| 12 | that's to ask you if you have any response to the assertion |
| 13 | that's been made by not all but I think several of the |
| 14 | objecting parties that they don't believe you and your team |
| 15 | have acted diligently in pursuing your investigation of |
| 16 | potential claims by the deadline.
Do you have a response to |
| 17 | that? |
| 18 | A
Well, I -- again, I don't want to be pedantic, but I |
| 19 | think we've been working around the clock.
And I would say |
| 20 | especially on the (indiscernible), Mr. Linsey's team have |
| 21 | been working around the clock for the last six months on |
| 22 | this process.
We've been as diligent as -- I've done a lot |
| 23 | of these, and I think we've explored every possibility. |
| 24 | We've captured any possibility by filing complaints when we |
| 25 | had enough information to do so.
And, therefore, it's not a |
| | |
Ho Wan Kwok - February 13, 2024 51 question of lack of diligence. It's a question of the impossibility of knowing the full universe of what happened here in the period since the appointment of the trustee. It's just impossible. MR. BASSETT: Thank you, Trustee Despins. Your Honor, I have no additional questions at this time. THE COURT: Okay. Thank you. Now, we have several objecting parties. And I'm sure people would like to cross-examine Trustee Despins, but I'm not going to allow parties to ask the same questions someone else already asked. So I'm just letting people understand that before we begin with any cross-examination of Mr. Despins. So I'm going to start with counsel for Mei Guo, who is in the -- Mr. Moriarty or Mr. Della Fera. Obviously, just one of you is going to question -- cross-examine Trustee Despins, not two of you. So I assume you've already worked that out prior to this hearing this afternoon. MR. DELLA FERA: Yes, Your Honor. Sam Della Fera. I'll be asking --- I'll be cross-examining the trustee. Thank you. THE COURT: Okay. Thank you. You may proceed. MR. DELLA FERA: Okay. Thank you, Your Honor. CROSS-EXAMINATION Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 51 of
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| 1 | BY MR. DELLA FERA: |
| 2 | Q
Mr. Despins, you testified about the risk to the estate |
| 3 | of bringing -- trying to bring a claim in the absence of the |
| 4 | requested extension that may ultimately be time barred. |
| 5 | THE COURT:
Mr. Della Fera, unfortunately, you're |
| 6 | frozen.
Is that true for everyone else? |
| 7 | MR. BASSETT:
Yeah. |
| 8 | THE WITNESS:
Yes, Your Honor. |
| 9 | THE COURT:
Okay.
Hold on a second.
Let's see if |
| 10 | we can get him back. |
| 11 | THE WITNESS:
I think he's back now. |
| 12 | MR. DELLA FERA:
I'm sorry, Your Honor.
Can you |
| 13 | hear me? |
| 14 | THE COURT:
I'm sorry.
Yeah.
We could.
You were |
| 15 | just asking a question about what Trustee Despins just |
| 16 | testified about.
And then you kind of -- |
| 17 | MR. DELLA FERA:
Right. |
| 18 | THE COURT:
So you may want to ask the question |
| 19 | again. |
| 20 | MR. DELLA FERA:
I will do that, Your Honor. |
| 21 | Again, I apologize. |
| 22 | BY MR. DELLA FERA: |
| 23 | Q
Mr. Despins, you testified as to -- regarding the risk |
| 24 | to the estate that a claim that is brought down the road in |
| 25 | the absence of the requested extension of the deadline, that |
| | |
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| 1 | the -- that that claim would be time barred for the estate. |
| 2 | Do you recall that testimony? |
| 3 | A
The risk to the estate of incurring, you know, hundreds |
| 4 | of thousands in fees, you know, direct from that process, |
| 5 | yes. |
| 6 | Q
And, ultimately, spending that money, bringing the |
| 7 | claim, and ultimately that claim might be found to be time |
| 8 | barred, correct? |
| 9 | A
That's the risk unless we get a tolling decision today, |
| 10 | yes. |
| 11 | Q
Well, isn't it -- but is it a risk if -- isn't it only |
| 12 | a risk if the equities at the time you bring that claim are |
| 13 | unfavorable to you and the estate? |
| 14 | A
I don't know what could transpire at that hearing.
But |
| 15 | it's hard to believe that Mei Guo can argue today that the |
| 16 | equities would favor -- are you saying that equities would |
| 17 | favor us in that context? |
| 18 | Q
I'm not arguing that the equities are favoring you. |
| 19 | You're arguing that the equities favor you today.
And we |
| 20 | don't know what those claims are that you're -- that you |
| 21 | potentially could bring against my client, correct? |
| 22 | A
We don't know precisely what they are.
That's correct. |
| 23 | Q
Okay.
So it seems to me, I'm wondering if you agree |
| 24 | with me, the risk to the estate that the claim is time |
| 25 | barred, that risk only arises if the equities do not favor |
| | |
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| 1 | the estate when that claim is brought.
Isn't that correct? |
| 2 | A
No, because there could be many things.
The Court |
| 3 | could find that we had sufficient information to bring the |
| 4 | claim or that we waited too long.
Or I -- you know, there |
| 5 | are multiple -- it's a multifaceted analysis.
So, |
| 6 | therefore, there's no way to predict how that ruling would |
| 7 | be. |
| 8 | But the point is that when you're faced with people who |
| 9 | have obstructed justice, as your client has, they -- we |
| 10 | should not be in a position where we have any risk -- |
| 11 | Q
So it sounds -- |
| 12 | A
-- on that issue. |
| 13 | Q
Sounds like you're not a big fan of my client.
Is that |
| 14 | fair to say? |
| 15 | A
Well, I don't know, but I think that we've come to know |
| 16 | what she stands for.
Yes. |
| 17 | Q
Do you consider her a bad actor? |
| 18 | A
Well, it depends how you view perjury. |
| 19 | Q
Well, it sounds like you do.
Are perjurers -- are bad |
| 20 | actors entitled to due process, in your opinion? |
| 21 | MR. BASSETT:
Objection.
This is legal -- this is |
| 22 | argumentative, and it's legal argument, Your Honor. |
| 23 | THE COURT:
Mr. Della Fera, I understand your |
| 24 | question.
You've gotten the trustee to answer your |
| 25 | question.
But if you want to ask about due process, I think |
| | |
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| 1 | you need to ask the question a different way.
Okay? |
| 2 | MR. DELLA FERA:
That's okay.
Thank you, Your |
| 3 | Honor.
I'll withdraw that question. |
| 4 | BY MR. DELLA FERA: |
| 5 | Q
How many attorneys are at your law firm, Mr. Despins? |
| 6 | A
You mean all attorneys? |
| 7 | Q
All attorneys. |
| 8 | A
Yeah.
Something like 1,200 or maybe more. |
| 9 | Q
Right.
And how many appeals have been filed in this |
| 10 | bankruptcy case, more or less? |
| 11 | A
At least ten, if not more. |
| 12 | Q
Okay.
So is it your testimony that those ten appeals |
| 13 | have prevented you and your firm of 1,200 lawyers from |
| 14 | efficiently and expeditiously investigating claims you may |
| 15 | have against certain individuals and entities? |
| 16 | A
Yeah.
Let me address that.
That's a fundamental |
| 17 | issue, which is that you cannot run a case like this with 50 |
| 18 | lawyers.
I could throw 50 lawyers or 70 lawyers at this. |
| 19 | We cannot do, that because the cost would be incredible, and |
| 20 | you would lose all efficiency.
So we're operating with a |
| 21 | team that is large enough to handle a case like this without |
| 22 | being wasteful.
So, of course, we could put 1,200 lawyers |
| 23 | working on all these things, but the -- it would not be an |
| 24 | efficient case, and it would be impossible to manage a case |
| 25 | like that with that number of lawyers.
And also the costs |
Ho Wan Kwok - February 13, 2024 56 would be prohibitive. So the answer is, it makes no sense whatsoever to have a larger team than we have. When you think about our team, it's fairly large as it is. But we have also Mr. Linsey's team that's working on this. So that's a fairly large group. And it's very expensive, very expensive. And, you know, I understand that from the debtor's point of view, you would like the -- basically to have us run the most inefficient process possible, but we cannot do that. Q I don't represent the debtor, Mr. Despins, but that may or may not be true. But now I'm thinking back to your testimony regarding the circumstances surrounding the retention of a forensic accountant. Do you recall that testimony generally? A Yes, generally. Q And I believe you testified that one of the problems in retaining a forensic accountant was that they wanted to be paid, like other administrative creditors, pari-passu with you and your firm. Is that correct? A That's one of the issues with retaining a forensic accountant, even on a contingency basis, assuming that they would be willing to do that. They would honestly say, well, then if there's a \$20 million pot, we're sharing pari-passu, and that's not -- in the context where we were then, Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 56 of
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| 1 | 57
which -- where we're already owed, I think, 7 or \$8 million, |
| | |
| 2 | that's just not realistic. |
| 3 | Q
Do you think you could have retained a forensic |
| 4 | investigator sooner than 13 -- sooner than the 13 or 14 |
| 5 | months that it took you to retain one if you weren't |
| 6 | concerned about the protection and priority of your -- of |
| 7 | the fees of you and your firm? |
| 8 | A
No, that's not the way I would put it.
I would put it |
| 9 | in the way that the financial advisor would be obviously |
| 10 | looking at that issue.
And so, as I said, assuming they're |
| 11 | willing to do contingency -- which I've already testified we |
| 12 | were turned down as to two of those.
So understanding -- |
| 13 | assuming that you find someone who can do it on a |
| 14 | contingency basis, you face the other issue, which is they |
| 15 | want to be sharing pari-passu with us. |
| 16 | MR. DELLA FERA:
Okay, thank you, Mr. Despins. |
| 17 | Your Honor, I have no further questions. |
| 18 | THE COURT:
Okay.
Thank you, Attorney Della Fera. |
| 19 | The next objecting party, I think -- Attorney |
| 20 | Mateo, are you going to be cross-examining, if you are going |
| 21 | to ask any questions? |
| 22 | MS. MATEO:
Yes, Your Honor. |
| 23 | THE COURT:
Go right ahead. |
| 24 | CROSS-EXAMINATION |
| 25 | BY MS. MATEO: |
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| 1 | Q
Good afternoon, Trustee Despins.
I will be asking you |
| 2 | a few questions about Mr. Defeng Cao, C-A-O, one of the |
| 3 | objectors.
As a shorthand, I'll refer to Mr. Cao -- to |
| 4 | Mr. Defeng Cao as Mr. Cao.
Is that okay? |
| 5 | A
Sure. |
| 6 | Q
When did you first learn about Mr. Cao? |
| 7 | A
I don't remember specifically.
I mean, I -- I've |
| 8 | learned about him.
Of course, the question is putting a |
| 9 | time frame on that about him.
It's what I -- actually, |
| 10 | yeah, I can put a frame on this.
It's after our visit to |
| 11 | the Mahwah mansion.
So Mahwah mansion, I want to say that |
| 12 | it was July 4th.
Maybe I'm mixing -- is it Memorial Day or |
| 13 | July 4th?
Anyway, so -- wait.
No, no.
Actually, it was |
| 14 | Labor Day.
Sorry.
Labor Day weekend. |
| 15 | Q
I'll help you out, because it sounds like maybe you're |
| 16 | doing a little bit of speculating.
You filed a Rule 2004 |
| 17 | motion to seek discovery for Mr. Cao on May 15th, 2023, |
| 18 | correct? |
| 19 | A
Okay.
So it would have been, yeah, around that time. |
| 20 | Okay.
Sure. |
| 21 | Q
Isn't it correct that in that Rule 2004 motion, you |
| 22 | stated that you identified Mr. Cao's name from a list of |
| 23 | proposed shorters in a proposed bond package for a defendant |
| 24 | in the parallel criminal action?
Isn't that correct? |
| 25 | A
That's probably right.
Yeah. |
Ho Wan Kwok - February 13, 2024 59 THE COURT: May I just interrupt? THE WITNESS: We had no idea about the motorcycles -- THE COURT: May I interrupt for one second? Attorney Mateo, I didn't hear your question. One part of your question didn't come across. And because we do everything on audio, if I didn't hear it right, that means it didn't get picked up. You said, didn't you identify Mr. Cao's name from a list of -- and I didn't hear the word. MS. MATEO: Of proposed shorters. THE COURT: Shorters? MS. MATEO: Yeah, shorters. THE COURT: Okay. Okay. Thank you. I'm sorry. MS. MATEO: No, it's okay. THE COURT: I appreciate that. I appreciate that. Go ahead. MS. MATEO: It's a tricky word. No worries. BY MS. MATEO: Q Okay. And Mr. Cao did not file an objection to your Rule 2004 motion, correct? A I don't know. To be candid with you, I have no involvement -- I mean, I -- yes, I'm involved, because I'm the trustee. But I hope it comes as no surprise to anyone that I don't follow every 2004 target. So I -- my first recollection of him, why I was interested in him, was after Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 59 of
Ho Wan Kwok - February 13, 2024 60 the visit with the Mahwah mansion. And I think that was in Labor Day or July 4th. I remember it was a big holiday. And because we found motorcycles there they eventually turned out that he was the registered owner of. But sorry to interrupt your line of questioning. MS. MATEO: Objection to strike as non-responsive. BY MS. MATEO: Q My question was, Mr. Cao did not file a motion -- an objection to your Rule 2004 motion, correct? A And I said I don't know. Q Okay. I'll help you out that Mr. Cao did not, in fact, file an objection or a motion to quash the Rule 2004 subpoena. Mr. Cao voluntarily accepted service of your Rule 2004 subpoena. Isn't that correct? A I don't know. Q He did. And Mr. Cao also served timely written responses to your Rule 2004 subpoena. Isn't that right? A That's possible, but I have no personal knowledge of that. Q And Mr. Cao also timely served you and Paul Hastings with documents responsive to your Rule 2004 subpoena. Isn't that right? A He did produce some documents. Whether all documents that are responsive were produced, that I would -- I have severe doubts about. Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 60 of
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| 1 | MS. MATEO:
Motion to strike as non-responsive. |
| 2 | BY MS. MATEO: |
| 3 | Q
I also did not ask you whether he produced all |
| 4 | documents.
I asked you whether he timely served you with |
| 5 | documents responsive to your Rule 2004 subpoena.
Isn't that |
| 6 | right? |
| 7 | A
I don't know whether they were timely filed or not. |
| 8 | Q
Isn't it correct that Paul Hastings did not schedule |
| 9 | Mr. Cao's deposition until October 20, 2023? |
| 10 | A
I know we scheduled it in October, but I don't know |
| 11 | more details of that. |
| 12 | Q
And after Mr. Cao's deposition, isn't it correct that |
| 13 | you and your counsel did not seek any additional discovery |
| 14 | from Mr. Cao? |
| 15 | A
That may be.
I don't know.
Again, I don't follow the |
| 16 | 250, you know, 2004 targets on a daily basis.
I don't know |
| 17 | precisely in that case whether he did or not. |
| 18 | Q
Well, I'm just probing here.
Because a moment ago in |
| 19 | your testimony, you testified that Mr. Cao was someone who |
| 20 | had obstructed your search for discovery, and so I'm just |
| 21 | trying to tease out here that that, in fact, is not the |
| 22 | case.
Isn't it correct that subsequent Rule 2004 subpoenas |
| 23 | to other third parties list Mr. Cao as an associated |
| 24 | individual? |
| 25 | A
That's certainly possible. |
| | |
Ho Wan Kwok - February 13, 2024 62 Q And isn't it correct that Mr. Cao has not objected to any of those Rule 2004 subpoenas seeking information about him as one of the numerous individuals identified as associated individuals? A That may very well be. I don't know. Q Isn't it correct that your counsel only began drafting the adversary proceeding complaint against Mr. Cao last week after they saw that he objected to the tolling motion? A No. That's completely false. Q Isn't it correct that the adversary proceeding complaint against Mr. Cao only relies on his deposition testimony and documents he produced to you four months ago? A I'm not sure if -- I'm not sure that's the case. Q It is. A Okay. Q Isn't it correct that your counsel -- MR. BASSETT: Objection. Objection. Objection to counsel testifying. If she gets an answer to the question, that's fine, but following up with providing testimony is inappropriate. THE COURT: Sustained. BY MS. MATEO: Q Isn't it correct that your counsel filed the adversary proceeding complaint against Mr. Cao the day after they saw that he objected to the tolling motion? Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 62 of
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| 1 | A
I don't know that, but I know we've been working on |
| 2 | that complaint for at least two months. |
| 3 | Q
Isn't it correct that the adversary proceeding against |
| 4 | Mr. Cao was only filed to try to moot his objection to the |
| 5 | tolling motion? |
| 6 | A
Absolutely not.
And, by the way, that wouldn't |
| 7 | accomplish that, because I want to be able to assert other |
| 8 | claims against him that we don't know enough about.
So it |
| 9 | doesn't moot it. |
| 10 | Q
You talked earlier about having to balance the needs of |
| 11 | the estate with the right to due process of the more than |
| 12 | 900 potential defendants.
Do you recall that? |
| 13 | A
No, I didn't say that.
Sorry.
I think you're talking |
| 14 | about the 900 defendants.
And I said that -- I didn't talk |
| 15 | about due process.
I said that we're affecting some |
| 16 | people's rights, and we want to balance that against the |
| 17 | need to protect the estate to maximize value for creditors. |
| 18 | Q
I believe when we started this hearing, your counsel |
| 19 | provided an update to the Court where he identified that |
| 20 | more than 900 potential defendants had been noticed in |
| 21 | connection with the tolling motion.
Isn't that right? |
| 22 | A
He didn't say potential defendants.
He said 900 |
| 23 | entities were notified. |
| 24 | Q
And those entities and individuals have been identified |
| 25 | in the tolling motion as "potential defendants."
Isn't that |
Ho Wan Kwok - February 13, 2024 64 correct? A That I -- I don't recall whether the 900 were identified as potential defendants. But we tried to cast --- in terms of notice, we tried to cast as wide a net as we could so that we didn't fall, you know, outside of -- from a noticed point of view that they had accurate notice of the proceedings that are going on before the Court. Q Well, if they're not potential defendants, then how would you classify or describe who the -- these 900 individuals and entities are? A Because they are people who had dealings with the debtors, but it doesn't mean that they're going to get sued, actually. The notice expressly said, I think at my request we put that in, that it's not because you're getting that notice that you will get sued. It's because we don't have all the facts, and that's really the crux here. Q How would the equity serve by infringing the right of due process of parties that have cooperated with you in your counsel? MR. BASSETT: Objection. Argumentative. THE COURT: Sustained. BY MS. MATEO: Q Is it possible that you may get to the six months that you're asking for and that your -- you and your counsel will have to request another extension? Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 64 of
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| 1 | A
That definitely is possible, but no -- it will be my |
| 2 | job to make sure that, to the extent possible, this doesn't |
| 3 | happen.
I mean, I really want to wrap up this part of the |
| 4 | case as expeditiously as possible.
So we're going to go |
| 5 | full steam ahead, you know, provided we can get the relief |
| 6 | here with what we're doing.
And hopefully we'll not have to |
| 7 | ask the Court for more. |
| 8 | Q
And how can the potential defendants have any assurance |
| 9 | that their due process rights won't be further infringed by |
| 10 | additional extensions that you may seek to the statute of |
| 11 | limitations? |
| 12 | MR. BASSETT:
Objection.
Argumentative.
Assumes |
| 13 | facts not in evidence. |
| 14 | THE COURT:
Sustained. |
| 15 | MS. MATEO:
I have nothing further, Your Honor. |
| 16 | THE COURT:
Okay.
Thank you, Attorney Mateo. |
| 17 | The next objecting party then would be DBS Bank, |
| 18 | and that's Attorney Weiner, I believe? |
| 19 | MS. WEINER:
Yes.
Thank you, Your Honor.
I have |
| 20 | no questions for the witness but would just like to reserve |
| 21 | for a brief statement later, if possible. |
| 22 | THE COURT:
Yes, you may.
Thank you. |
| 23 | MS. WEINER:
Thank you. |
| 24 | THE COURT:
All right.
Then the next objecting |
| 25 | party is Taurus Fund, LLC, and that's you, Mr. Conway. |
| | |
Ho Wan Kwok - February 13, 2024 66 Mr. Conway, if you can give me one moment before you start your questioning, please. I just need to catch up with where I am. Just give me one second. Well, maybe more than one second. About 30 seconds, please. MR. CONWAY: Sure. THE COURT: Okay. Go right ahead, Mr. Conway, whenever you're ready. MR. CONWAY: Thank you, Your Honor. Michael Conway, for the record, representing Taurus Fund, LLC; Tourist Management, LLC; Scott Barnett. CROSS-EXAMINATION BY MR. CONWAY: Q Good afternoon, Mr. Despins. A Good afternoon. Q Just a couple follow-ups. There was a statement about 900 folks were served with this motion, but about how many potential defendants are you aware of? A Well, that assumes I know the universe. I know we're going to file approximately 230 complaints. Don't hold me to that number. It could be 10 more, 20 more, or 15 less, you know, depending on the tolling agreements we were able to obtain from people. But so that's one universe, but that's known. If you're asking me to speculate as to, on the other side of February 15th, the potential defendants, I don't Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 66 of
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| 1 | know.
I know that -- I shouldn't say I know.
I believe |
| 2 | that it's very likely that additional claims will be filed |
| 3 | against most of the objectors, just because I know that we |
| 4 | don't have the full picture yet.
But I can't tell you 15, |
| 5 | 20, 12, 50.
I can't assess that.
I'm sorry. |
| 6 | Q
That's all right.
We don't want you to speculate.
I |
| 7 | want to ask you a little bit about the exhibits that we |
| 8 | heard about before you started testifying.
Were they -- we |
| 9 | didn't really hear you testify about any of the exhibits, |
| 10 | but were they listed as examples of obstructive conduct? |
| 11 | A
Well, but, I mean, they were -- they're docketed |
| 12 | documents.
So I'm sure there are like motions to compel, |
| 13 | motions for sanction, motions or orders by the Court, so -- |
| 14 | Q
Relating to obstructive conduct? |
| 15 | A
I assume that's the case.
Yeah. |
| 16 | Q
Okay.
Were there any instances of obstructive conduct |
| 17 | which did not make their way into your exhibit list? |
| 18 | A
Well, yes.
If we're talking about your clients, you |
| 19 | know, Mr. Barnett, for example, well, we just learned -- and |
| 20 | that's what just shows, you know, to the Court, you know, |
| 21 | how we learn things all the time -- that, in fact, he was |
| 22 | the owner of the motorcycles before Mr. Cao became the |
| 23 | owner. |
| 24 | So that's another example of what's going on there.
Of |
| 25 | course, he was not the real owner.
He was used by the |
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| 1 | debtor to have ownership of the motorcycles the debtor was |
| 2 | using. |
| 3 | And also, we just learned probably two months ago that |
| 4 | as to the storage units in Mahwah, who was the tenant of |
| 5 | that?
Mr. Barnett or his company.
So that -- these are |
| 6 | other examples of obstructionists, obviously.
He's there to |
| 7 | make sure the debtor is not the tenant of the facility, or |
| 8 | he's not the owner of the motorcycles.
He's part of the |
| 9 | scheme.
So that would be more obstruction, yes. |
| 10 | Q
Those are allegations about misconduct.
He didn't hide |
| 11 | any of these facts from you, did he? |
| 12 | A
Well, he didn't disclose them.
That's for sure. |
| 13 | Q
When did you ask him about it? |
| 14 | A
I didn't -- I don't -- as I said, I don't handle every |
| 15 | aspect of discovery, so I couldn't say. |
| 16 | Q
Okay.
You're not aware of any requests to him where |
| 17 | that information was solicited but withheld, correct? |
| 18 | A
I don't know.
The answer is I don't know. |
| 19 | Q
Okay.
But my question was broader than just |
| 20 | Mr. Barnett.
I'm asking whether you're aware of whether |
| 21 | there are instances where somebody was requested -- you made |
| 22 | a request to somebody, they refused to respond to your |
| 23 | request, and you didn't raise the issue with the Court. |
| 24 | A
Again, I -- there are 250 subpoenas, targets.
So I |
| 25 | cannot give you -- I think generally we try to follow up |
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| 1 | with the Court.
Although there are instances where either |
| 2 | it's too time-consuming or the target is too small or we're |
| 3 | going to get the target in some other way.
And Barnett may |
| 4 | be in that category, because we're suing him in the |
| 5 | adversary proceeding regarding Mahwah. |
| 6 | So there are many reasons why we may not have followed |
| 7 | up with the Court in getting motion -- or an order of |
| 8 | contempt.
Because to get an order of contempt against |
| 9 | someone with no money or an entity that's been liquidated |
| 10 | may not be attractive. |
| 11 | So I wouldn't conclude, Mr. Conway, that every time |
| 12 | somebody did not produce something that we filed something |
| 13 | with the Court.
It may be in the works that we're about to |
| 14 | file it, or we decided not to file it now because we're |
| 15 | going to get it in some other way. |
| 16 | Q
Okay.
And just to clarify, you mentioned you had a |
| 17 | couple of teams working on this matter.
How many attorneys |
| 18 | in your -- in Paul Hastings are working on this bankruptcy? |
| 19 | A
About 10, 12. |
| 20 | Q
We would be able to see essentially all the attorneys |
| 21 | working on this bankruptcy from looking at your invoices |
| 22 | that are submitted to the Court for approval, correct? |
| 23 | A
That's correct. |
| 24 | Q
Okay.
Now, have you been receiving information from |
| 25 | the Department of Justice related to their investigations |
| | |
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| 1 | and the criminal prosecution of the debtor? |
| 2 | A
No.
Actually, we -- that's another reason where we're |
| 3 | seeking equitable tolling is, after a lot of fighting, this |
| 4 | Court found that the debtor should ask the criminal court to |
| 5 | provide to us whatever documents the DOJ gave to them.
And |
| 6 | we had -- we basically had to withdraw that request, and |
| 7 | therefore we don't have that.
So the answer to your |
| 8 | question -- sorry for the long way of getting there -- is, |
| 9 | no, we're not getting anything from the DOJ. |
| 10 | Q
So and you say we're not getting -- you have not |
| 11 | received any information from the DOJ relating to the |
| 12 | debtor? |
| 13 | A
Well, that's -- actually, I spoke without nuance there. |
| 14 | In your case, in the Mahwah case, we did obtain pictures |
| 15 | that FBI agents took of certain items such as the debtor's |
| 16 | prescription drugs or family photos or -- I forget.
There |
| 17 | were others.
But you know what they are.
Other things like |
| 18 | that.
So we did get that from the DOJ.
But that -- to my |
| 19 | knowledge, that's the only information that we got from them |
| 20 | regarding the debtor's documents or anything regarding the |
| 21 | debtor. |
| 22 | Q
Okay.
And they didn't provide you with anything that |
| 23 | related to someone other than the debtor, the bank account |
| 24 | records, for instance, of any of the -- |
| 25 | A
No, not -- |
| | |
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| 1 | Q
-- BVI entities that you're noticing? |
| 2 | A
No.
So too I would say, tongue in cheek, but our -- to |
| 3 | our great frustration, no, we're not getting anything from |
| 4 | them. |
| 5 | Q
You asked for it?
They said no? |
| 6 | A
No, we didn't ask for it, but it was -- we asked for it |
| 7 | through the motion we filed with the Court where the Court |
| 8 | directed the debtor to seek from the criminal court to give |
| 9 | us access to the documents.
And so that's frustrating, |
| 10 | because we assumed there would be a lot of very good |
| 11 | documents there.
But that's why I'm saying it's frustrating |
| 12 | to us, because we didn't -- |
| 13 | Q
Just to clarify, the motion was made in which court? |
| 14 | A
We filed the motion to compel the debtor, that was a |
| 15 | long saga, but to compel the debtor to produce all documents |
| 16 | that the debtor would have received in the criminal case |
| 17 | from the DOJ on the theory that it's coming from the DOJ. |
| 18 | So we should be able -- if the debtor has it, there's no |
| 19 | harm with us seeing it.
And, obviously, that didn't happen, |
| 20 | so -- |
| 21 | Q
Okay.
And just to clarify, my question was did you ask |
| 22 | the DOJ for documents? |
| 23 | A
Yes.
And it -- well, we asked for the -- early on, we |
| 24 | said we wanted access to that, and they told us no way.
Not |
| 25 | from them, we couldn't get it. |
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| 1 | MR. CONWAY:
I have no further questions. |
| 2 | THE COURT:
Okay.
Thank you, Attorney Conway. |
| 3 | Then the next objecting party is G Club |
| 4 | Operations.
And Attorney Sklarz, Attorney Fornos, which one |
| 5 | of you, if either of you, are going to be cross-examining |
| 6 | Mr. Despins? |
| 7 | MR. SKLARZ:
Thank you, Your Honor.
I will. |
| 8 | THE COURT:
Go right ahead. |
| 9 | CROSS-EXAMINATION |
| 10 | BY MR. SKLARZ: |
| 11 | Q
Good afternoon, Trustee Despins.
My name is Jeff |
| 12 | Sclarz, and I represent G Club.
G Club's produced more than |
| 13 | 140,000 documents in this matter, correct? |
| 14 | A
I don't know the precise number.
I know they produced |
| 15 | documents, but I don't have a count of exactly what they |
| 16 | produced. |
| 17 | Q
And the documents were produced beginning in June of |
| 18 | 2023, correct? |
| 19 | A
What I recall is that there was months of back and |
| 20 | forth until we moved to compel, and then we got some |
| 21 | documents.
Whether it was June 2023, I could not say for |
| 22 | sure. |
| 23 | Q
Right.
And you mentioned a motion to compel.
You're |
| 24 | familiar with the rules of bankruptcy procedure and the |
| 25 | federal rules of civil procedure? |
| | |
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| 1 | A
Yes, generally. |
| 2 | Q
And they permit parties to object to discovery |
| 3 | requests, correct? |
| 4 | A
Yes, of course. |
| 5 | Q
And those are promulgated by the Supreme Court? |
| 6 | A
That's correct. |
| 7 | Q
So the Supreme Court feels that it's appropriate for |
| 8 | parties to object to discovery and for courts to rule on |
| 9 | those objections, correct? |
| 10 | MR. BASSETT:
Objection.
Argumentative. |
| 11 | Relevance. |
| 12 | MR. SKLARZ:
The relevance is Mr. Despins, when |
| 13 | asked a yes or no question about production of documents in |
| 14 | June, gave a little speech about how we fought discovery. |
| 15 | We used the rules, which is appropriate.
So I think the |
| 16 | question is appropriate. |
| 17 | MR. BASSETT:
I don't think it's appropriate to be |
| 18 | asking the witness how the Supreme Court feels about |
| 19 | something, Your Honor. |
| 20 | MR. SKLARZ:
I didn't ask how the Supreme Court |
| 21 | feels. |
| 22 | MR. BASSETT:
That's what you did. |
| 23 | MR. SKLARZ:
Let me rephrase the -- |
| 24 | THE COURT:
Why don't we just ask a different |
| 25 | question? |
| | |
Ho Wan Kwok - February 13, 2024 74 MR. SKLARZ: Yeah. I'll rephrase. BY MR. SKLARZ: Q G Club followed the rules of civil procedure. Is that correct? A I couldn't say whether they did or not. I know that you objected to production. Of course, everyone is entitled to object. That's -- but that's not what went on. That went on for many months. Q Okay. A And also -- Q There's no question. There's no question pending. A Okay. Q You have no question pending. But regardless of your opinion on the matter, by October of 2023, G Club produced over 140,000 documents, correct? A As I said, I know you produced documents. I cannot tell you the exact count. Q Do you have any reason to disbelieve me when I say G Club produced over 140,000 documents? A I -- well, no more than somebody asking me whether you produced 125,000. I don't know the count. I'm sorry. Q Okay. And just two weeks ago, your co-counsel, Mr. Linsey, asked G Club for a affidavit authenticating documents produced by G Club in an adversary proceeding related to Mei Guo and the summary judgment motion. Is Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 74 of
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| 1 | that -- you would agree with that? |
| 2 | A
I -- to be candid, I knew there was some of that going |
| 3 | on, but I didn't know precisely what it was about.
But, |
| 4 | okay. |
| 5 | Q
And -- |
| 6 | A
And -- |
| 7 | Q
-- G Club facilitated the production of that document |
| 8 | affidavit, correct? |
| 9 | A
I'm sorry.
I don't know precisely what happened.
I |
| 10 | have no reason to believe that's not true, but I don't know |
| 11 | the details. |
| 12 | Q
And, unfortunately, the record is sealed, Your Honor, |
| 13 | but I believe -- and counsel -- Attorney Linsey can correct |
| 14 | me if the record is wrong, because I don't have access to |
| 15 | this.
But I believe the document was produced in Adversary |
| 16 | Proceeding 23-5008 and probably is in ECF Number 116, which |
| 17 | contains some sealed documents.
And I believe this is a |
| 18 | sealed record.
But the question -- and so I believe the |
| 19 | Court will have access to the sealed documents.
I don't, |
| 20 | but I believe it's in there.
And the question for |
| 21 | Mr. Despins is, do you have any reason to believe that G |
| 22 | Club did not facilitate the production of the document |
| 23 | affidavit? |
| 24 | A
I couldn't say whether you facilitated it or not. |
| 25 | There's a -- it's an -- I can't -- you know, I would have to |
| | |
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Ho Wan Kwok - February 13, 2024 76 talk to Mr. Linsey to confirm that. I was not close enough to this aspect to really tell you whether it was facilitated. And, you know, he would have to opine on that, because he's handling it, so. Q Okay. Well, you've retained Mr. Linsey's firm, correct? A That's correct. Q And he's your agent, correct? A Correct. Q Okay. So if we put Mr. Linsey on the stand to confirm this, would that be helpful to you? Or perhaps counsel can just stipulate that this has occurred. THE COURT: Mr. Sklarz -- Attorney Sklarz, so let me just ask you a question. You're talking about a document that you're saying G Club helped to authenticate, right? MR. SKLARZ: Correct. THE COURT: Is that what you're -- okay. And you've told me I can figure that out by looking at a sealed document, correct? MR. SKLARZ: I think that's the case, because I -- Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 76 of
THE COURT: Okay. MR. SKLARZ: -- can't personally -- THE COURT: So just tell me -- okay. So just tell me why you -- well, I mean, I understand why you're asking
the question. But I think we can move on insofar as you've
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| 1 | either -- you either did or didn't help authenticate a |
| 2 | document.
And I understand your questions about production. |
| 3 | And I think Trustee Despins has said that he knows that |
| 4 | you've produced these documents. |
| 5 | So why don't we move on to -- I completely |
| 6 | understand what you're saying, but I do have familiarity |
| 7 | with this issue.
So I think the question then is -- let's |
| 8 | get to your objection as to -- and I think you already have. |
| 9 | I'm not suggesting that you haven't.
But I think your |
| 10 | objection is based upon the fact -- or at least your |
| 11 | questioning right now is that you have complied with what |
| 12 | the trustee has asked. |
| 13 | MR. SKLARZ:
Yes.
The trustee said in direct |
| 14 | testimony that G Club -- I think the words were something |
| 15 | along the lines of it was a knock-down, drag-out fight.
And |
| 16 | while -- my point is that, while we may have had a discovery |
| 17 | dispute, we went by the rules.
Your Honor ruled on the |
| 18 | dispute, and we complied with Your Honor's ruling.
And I |
| 19 | just want to make sure that that's clear, because -- and |
| 20 | I'll reserve oral argument on our legal positions.
But I |
| 21 | just want to make sure I have a factual predicate to make |
| 22 | that argument.
And it sounds like Your Honor |
| 23 | (indiscernible). |
| 24 | THE COURT:
As far as what I think you're trying |
| 25 | to accomplish on cross-examination, I think you have done |
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| 1 | that.
But I -- but that doesn't mean you should stop asking |
| 2 | questions.
I just want us to move on to any other parts of |
| 3 | objection that you may have, if you would, please. |
| 4 | MR. SKLARZ:
So, yes.
So, Your Honor, I'm |
| 5 | prepared to present our legal argument at this time, but I |
| 6 | assume you want me to reserve that until after everybody's |
| 7 | cross-examined? |
| 8 | THE COURT:
Yes, please.
I'm sorry, but I think |
| 9 | that's the better way to handle the matter, even though I -- |
| 10 | MR. SKLARZ:
I agree.
Absolutely. |
| 11 | THE COURT:
Okay.
Okay. |
| 12 | MR. SKLARZ:
And so, my last point.
I don't have |
| 13 | any additional questions at this time, but I would like |
| 14 | to -- I am going to make a motion to strike Attorney |
| 15 | Despins' -- I'm sorry, Trustee Despins' direct testimony for |
| 16 | two reasons.
First, it's irrelevant on the legal issues |
| 17 | presented, which is equitable tolling and the applicability |
| 18 | of Rule 9006.
Those are purely legal issues, and there's |
| 19 | been no evidence offered on the elements of equitable |
| 20 | tolling. |
| 21 | And the second ground is that much of Attorney -- |
| 22 | Trustee Despins' testimony was legal argument, including why |
| 23 | they -- why the trustee and his team took certain steps. |
| 24 | Again, this issue is related to equitable tolling and Rule |
| 25 | 9006, and his strategy did not relate to either of those |
| | |
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Ho Wan Kwok - February 13, 2024 79 elements. So with that, I move to strike his direct testimony. MR. BASSETT: Your Honor, may I respond? THE COURT: Yes. MR. BASSETT: First of all, all of Trustee Despins' testimony relates directly to the issues before the Court. As the Court knows, and as we will get into in arguments, as already been articulated in the papers, it is absolutely relevant to a request for equitable tolling whether or not the party seeking equitable tolling, in this case the trustee, acted reasonably, diligently. The other element of the test is whether there have been extraordinary circumstances that have prevented the trustee from otherwise meeting the deadline. All of the testimony he gave about the efforts that he and his team undertook, factual testimony, factual testimony about the obstruction that he faced, the way that that obstruction impacted his investigation, all of that is centrally relevant to that standard. Second of all, to the extent counsel had an objection to any of the testimony that Trustee Despins was providing during direct, he should have objected during direct, not waited until the entire testimony was finished and raising his objection at this time. So, the objection,
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| 1 | Your Honor, we respectfully ask be overruled. |
| 2 | THE COURT:
Okay.
Attorney Sklarz, with regard to |
| 3 | your motion to strike, there were two prongs I heard.
The |
| 4 | first is that you would like to strike Trustee Despins' |
| 5 | direct testimony with regard to his statements that -- and I |
| 6 | recall -- I believe you are accurate, Attorney Sklarz, that |
| 7 | Trustee Despins said it was a drag-down fight or something |
| 8 | along those lines.
With regard to that, you're asking me to |
| 9 | strike that. |
| 10 | I'm going -- not -- I'm going to deny that.
I'm |
| 11 | going to allow that in the record, but I'll give that |
| 12 | whatever weight I think is appropriate. |
| 13 | With regard to your second prong, I'd like you to |
| 14 | explain it to me one more time, please. |
| 15 | MR. SKLARZ:
Sure.
The thrust of the trustee's |
| 16 | motion was really, at least as I saw it, in two ways. |
| 17 | First, that equitable tolling can be applied prospectively. |
| 18 | And to do that, there has to be evidence offered on the |
| 19 | elements of equitable tolling, not a summary of what may |
| 20 | happen as to many cases. |
| 21 | So, for example, with respect to my client, G |
| 22 | Club, the only thing he said was we had a knock-down, |
| 23 | drag-out discovery fight.
So, I'm not sure how that |
| 24 | addresses any of the elements of equitable tolling. |
| 25 | Secondly, under Rule -- the second basis for -- |
| | |
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| 1 | for tolling the statute limitations is Rule 9006 of the |
| 2 | bankruptcy rules.
That's a purely legal argument.
Attorney |
| 3 | Bassett and the rest of counsel will certainly have |
| 4 | significant arguments over that issue coming up, but there |
| 5 | can't be evidence authored on why this Court -- why your |
| 6 | Honor should apply a particular rule in a particular way. |
| 7 | It either applies or it doesn't apply as a matter of law. |
| 8 | So, Attorney -- I'm sorry, Trustee Despins' testimony on the |
| 9 | applicability of what he said is really just argument but |
| 10 | through a witness. |
| 11 | And then what I didn't mention is, obviously, |
| 12 | yesterday we were served with the witness and exhibit list |
| 13 | with 132 exhibits 24 hours before trial that references |
| 14 | exhibits that would have taken two days to download.
I |
| 15 | understand that they're on the docket, but there's no |
| 16 | possible way that we could have reviewed all those exhibits |
| 17 | and properly prepared a cross-examination. |
| 18 | So I think that the offer of testimony is just |
| 19 | generally unfair given the nature of what's -- of these |
| 20 | proceedings. |
| 21 | THE COURT:
All right.
Well, I understand your |
| 22 | objection on the second part then.
And I'm going to |
| 23 | overrule your -- well, your motion to strike, I'm going to |
| 24 | deny your motion.
Whether or not you are correct that this |
| 25 | is a legal argument is something I will have to consider, |
| | |
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| 1 | right, as the finder of fact and the trier of fact and the |
| 2 | party who makes the conclusions of law.
So I do understand |
| 3 | your argument, and I will consider it, but I'm not going to |
| 4 | strike the testimony of the trustee.
So that motion is |
| 5 | denied. |
| 6 | MR. SKLARZ:
Understood, Your Honor.
And I don't |
| 7 | have any further questions for the trustee. |
| 8 | THE COURT:
Okay.
And you would like to be heard, |
| 9 | obviously, for a -- you would like to make, excuse me, an |
| 10 | argument at the end of the hearing, as I will allow other |
| 11 | objecting parties to do as well. |
| 12 | MR. SKLARZ:
Yes, Your Honor. |
| 13 | THE COURT:
But I -- yeah.
But that's fine.
So |
| 14 | you'll reserve some time.
We'll talk about that.
Now -- |
| 15 | MR. SKLARZ:
Thank you. |
| 16 | THE COURT:
-- we've been going at this hearing |
| 17 | for a few hours now.
And I'm going to give the courtroom |
| 18 | deputy a five-minute break.
Because we're not even halfway |
| 19 | through the objecting parties' objections yet and the |
| 20 | cross-examination of Mr. Despins.
And then we're going to |
| 21 | have legal arguments made by the parties. |
| 22 | So it is 3:50.
We are going to come back -- well, |
| 23 | it's 3:51.
Now that I've said that, I've already used a |
| 24 | minute.
So we'll come back at 3:56.
I need to give the |
| 25 | courtroom staff a five-minute break.
Okay?
So we will -- |
| | |
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| 1 | the Court is in recess until 3:56. |
| 2 | THE WITNESS:
Thank you. |
| 3 | MR. BASSETT:
Thank you, Your Honor. |
| 4 | THE COURTROOM DEPUTY:
Court is in recess until |
| 5 | 3:56. |
| 6 | (Recess from 3:51 p.m. to 3:58 p.m.) |
| 7 | THE COURTROOM DEPUTY:
Court is in session after |
| 8 | recess.
The Honorable Julie Manning is presiding. |
| 9 | THE COURT:
Okay.
So before we took a recess, |
| 10 | G Club Operations finished their cross-examination. |
| 11 | So the next party that has objected to the tolling |
| 12 | motion is the Rule of Law Foundation, Inc. and the Rule of |
| 13 | Law Society, Inc.
And, Attorney Evans, will you be |
| 14 | conducting any cross-examination, if there is any |
| 15 | cross-examination to be conducted? |
| 16 | MR. EVANS:
Your Honor, in order, I guess, to |
| 17 | really address that, I'd like to inquire on whether the |
| 18 | trustee is objecting to our declaration.
As I indicated |
| 19 | before, on behalf of the Rule of Law Foundation and Rule of |
| 20 | Law Society, we filed a written objection.
And it's not |
| 21 | dissimilar to other objecting parties.
We also included a |
| 22 | declaration and set forth certain facts concerning our |
| 23 | discovery compliance.
And if the trustee accepts that as |
| 24 | part of the record, then I really won't need to ask any |
| 25 | questions. |
| | |
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| 1 | THE COURT:
Okay.
Thank you.
I don't know if |
| 2 | Trustee Despins is with us.
I should have asked that before |
| 3 | I even asked you, Attorney Evans. |
| 4 | THE WITNESS:
I am here, but I don't know if |
| 5 | Mr. Bassett will address this question or -- |
| 6 | THE COURT:
Okay. |
| 7 | MR. BASSETT:
Your Honor, I'm all for expediting |
| 8 | the proceedings today, if we can.
I had assumed that if |
| 9 | anything were going to be offered into evidence today, there |
| 10 | would be a witness supporting it.
That said, I'm happy to |
| 11 | consider the request.
Would it be possible if we modified |
| 12 | the order, and I could have a colleague sort of take a look |
| 13 | at this while we are having some other individuals or other |
| 14 | parties ask questions? |
| 15 | THE COURT:
That's fine with me. |
| 16 | Attorney Evans, I think that's fair.
We can come |
| 17 | back to you after -- |
| 18 | MR. EVANS:
Of course. |
| 19 | THE COURT:
-- they are able to look at -- to |
| 20 | consider and respond to your request, okay? |
| 21 | MR. EVANS:
Of course.
No problem.
Thank you. |
| 22 | THE COURT:
All right.
Thank you. |
| 23 | Then the next objecting party is Mr. Lee and |
| 24 | Mr. Xai.
And, Mr. Schmitt, are you going to be |
| 25 | cross-examining Trustee Despins? |
| | |
Ho Wan Kwok - February 13, 2024 85 MR. SCHMITT: No, Your Honor. We have no questions for the witness, although we will reserve some time at the end. THE COURT: Okay. Thank you. All right. Then we can move on to Mr. Major -- Attorney Major for Greenwich Land and Ms. Hgok. Mr. Major -- or Attorney Major, are you going to be cross-examining Mr. Despins, Trustee Despins? MR. MAJOR: Your Honor, I'm not going to ask any questions of the witness. Thank you. THE COURT: Okay. Thank you. Then, Mr. Grand -- Attorney Grand, I believe you're next for GS Security Solutions, Inc.? MR. GRAND: Yes. I have no questions for the witness either, Your Honor. THE COURT: Okay. Thank you. And then we're -- the objecting party, Wang. Attorney Wander, are you going to be cross-examining Trustee Despins? MR. WANDER: Yes, Your Honor. I have a few questions. THE COURT: Go right ahead. MR. WANDER: Yes. CROSS-EXAMINATION BY MR. WANDER: Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 85 of
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| 1 | Q
Mr. Despins, in paragraph 12 of the motion -- of the -- |
| 2 | well, of the trustee's reply, that's the only place it gives |
| 3 | any specifics about my client.
And it says, "Finally, |
| 4 | Yingying Wang, Chris Lee, and Qidong Xia are members of the |
| 5 | purported HCHK Creditors Committee led by Objector Yongbing |
| 6 | Zhang, who has been sanctioned multiple times for frivolous |
| 7 | litigation against the trustee and others.
My question is, |
| 8 | the motion does not and you're not making any claim that |
| 9 | Ms. Wang hindered or obstructed your investigation, are you? |
| 10 | A
Well, clearly the committee -- the informal committee |
| 11 | that is referred to did. |
| 12 | Q
Correct.
But is it possible that a person could have |
| 13 | had involvement with the HCHK Creditors Committee without |
| 14 | engaging in any improper conduct that would support the |
| 15 | filing of an adversary complaint? |
| 16 | A
I think the sole purpose of that committee was to |
| 17 | obstruct the trustee's work on HCHK.
And I believe that -- |
| 18 | if it's your client -- or, well, there are two people |
| 19 | involved here, and one of them was clearly involved in the |
| 20 | protest as well.
But certainly in terms of the HCHK |
| 21 | Committee, the sole goal of that, because it was run by |
| 22 | Mr. Yongbing Zhang, was to obstruct the trustee's work on |
| 23 | the HCHK adversary proceeding.
So, you know, I don't think |
| 24 | they were discussing the Super Bowl at these meetings.
They |
| 25 | were there to try to impede the trustee's work.
That's the |
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| 1 | goal of the -- of this organization. |
| 2 | Q
Right.
But my question was more nuanced.
And I don't |
| 3 | represent Yongbing Zhang.
I'm only concerned about |
| 4 | Ms. Wang, who seems to have been caught up in things.
And, |
| 5 | again, my question is, is it possible that she or anyone |
| 6 | could have been involved with this committee without having |
| 7 | done anything that would justify the filing of an adversary |
| 8 | complaint?
Was it simply the guilt by the association with |
| 9 | this committee? |
| 10 | A
Yeah.
I'm sorry.
I think now I understand your |
| 11 | question better.
I thought you were asking me is it |
| 12 | possible that that person did nothing wrong that would |
| 13 | justify tolling, and I was responding to that.
Now you're |
| 14 | asking me whether it's possible that somebody could be a |
| 15 | party to or involved with that committee, and that full |
| 16 | activity being the basis to get sued -- and I think that's |
| 17 | now your -- if I got it right, tell me.
If I -- so -- |
| 18 | Q
Yes. |
| 19 | A
Okay.
I don't think anyone is going to -- I shouldn't |
| 20 | say that.
I think that that could be part of allegations |
| 21 | made with respect to the civil RICO complaint.
The question |
| 22 | is, is that the only allegation, though, being made against |
| 23 | some of the people involved?
I don't think so.
But now I'm |
| 24 | speculating, so.
But there's no -- there's not going to be |
an avoidance action brought against your client because she
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| 1 | or he participated in the committee -- informal committee | | | | |
| 2 | meetings.
If that helps? | | | | |
| 3 | Q
Yes.
Well, see the only allegation about my client in | | | | |
| 4 | the papers is that she was a member of this committee.
And | | | | |
| 5 | that's why I'm asking, is the membership in the committee | | | | |
| 6 | alone sufficient to justify the view that this person | | | | |
| 7 | engaged in some kind of improper conduct that would bring | | | | |
| 8 | them under the tolling motion? | | | | |
| 9 | A
No.
But by the way, so just again to be precise, our | | | | |
| 10 | argument is not that everyone that will be covered by the | | | | |
| 11 | tolling needs to have engaged in bad conduct.
No.
The | | | | |
| 12 | extraordinary circumstances that Mr. Bassett described can | | | | |
| 13 | be brought on by the debtor, the debtor's daughter, the | | | | |
| 14 | debtor's son, et cetera.
And it's possible to have people | | | | |
| 15 | who've had no involvement in that but that still will be | | | | |
| 16 | subject to the tolling.
Why?
Because that's an | | | | |
| 17 | extraordinary circumstance that precluded the trustee from | | | | |
| 18 | reaching the conclusion before the expiration of the statute | | | | |
| 19 | of limitation that a claim should be brought even against | | | | |
| 20 | people not involved in the -- so I know that everyone is | | | | |
| 21 | trying to prove that they didn't do anything wrong. | | | | |
| 22 | That's not -- sorry, but that's -- Mr. Bassett will | | | | |
| 23 | argue this, but that's not our view of the test.
The test | | | | |
| 24 | is, one, was the trustee diligent?
Two, are there | | | | |
| 25 | extraordinary circumstances?
And those circumstances do not | | | | |
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| | Ho Wan Kwok - February 13, 2024
89 | | | | | |
| 1 | need to apply to each individual party subject -- that the | | | | | |
| 2 | tolling will apply to.
So -- | | | | | |
| 3 | Q
I appreciate the argument you're making.
I'm simply | | | | | |
| 4 | trying to see what is in the record about my client.
Now, | | | | | |
| 5 | you testified before that, I believe, with respect to the | | | | | |
| 6 | three people that in paragraph 12 are identified as being | | | | | |
| 7 | connected with this committee, I believe you testified that | | | | | |
| 8 | two of the three are going to be sued in the next two days. | | | | | |
| 9 | Do you recall that? | | | | | |
| 10 | A
That's correct.
But only as to what we have ready to | | | | | |
| 11 | go in the next few days.
There may be other claims.
That's | | | | | |
| 12 | the whole point of this is we don't need relief to file | | | | | |
| 13 | something in the next two days.
We are doing that.
The | | | | | |
| 14 | question is what we don't know or don't know sufficiently to | | | | | |
| 15 | bring later. | | | | | |
| 16 | Q
I appreciate that.
It's just that you filed the motion | | | | | |
| 17 | against 331 individuals and entities, and 10 of them filed | | | | | |
| 18 | an objection, approximately 10.
And so that means there's | | | | | |
| 19 | 321 of the people who are subject to the motion that there's | | | | | |
| 20 | no issue about.
So that brings us down to the 10. | | | | | |
| 21 | And I've heard your testimony.
And I'm not going to | | | | | |
| 22 | say which one you were talking about, but several of them | | | | | |
| 23 | you may have made a good case for, for your tolling motion. | | | | | |
| 24 | That brings it down to three people.
And I only | | | | | |
| 25 | represent one.
And I'm submitting that of the 331 people | | | | | |
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| 1 | subject to your motion and of the objectors -- and, frankly, |
| 2 | if my client didn't object, we are deemed to consent.
If |
| 3 | there's one person that the Court denies the motion to, and |
| 4 | if that's my client, based upon the showing that's been |
| 5 | made, is that in any way going to cause any type of |
| 6 | significant damage to the estate or to your investigation, |
| | |
| 7 | assuming my client is cooperating with whatever else you may |
| 8 | ask from our Rule 2004 exam? |
| 9 | A
The point is we don't know.
That's the whole point of |
| 10 | tolling is that we know that your client was involved in |
| 11 | this committee.
We know that the committee was not up to |
| 12 | any good.
But the point is, we're seeking (indiscernible) |
| 13 | tolling because of extraordinary circumstances brought on by |
| 14 | the debtor and other associates.
And you're saying, my |
| 15 | client had such a tiny little roll in this, why don't you |
| 16 | leave her alone.
My point is, she may not get sued.
She |
| 17 | may get sued in the next two days, but she may not get sued |
| 18 | later.
We don't know.
But we certainly don't want to give |
| 19 | her a bye or pass now, because, for all we know, she was |
| 20 | heavily involved in something we don't know about today. |
| 21 | That's the entire relief we're seeking. |
| 22 | Q
But you were able to determine that some people |
| 23 | involved with this committee received funds, and you're |
| 24 | going to sue them, correct? |
| 25 | A
Correct. |
| | |
Ho Wan Kwok - February 13, 2024 91 Q And you also have articulated facts about several objectors who you claim hindered or obstructed your investigation, correct? A Yes. But that's not necessary to the relief we're seeking. It was obstruction -- Q I appreciate that. A -- across the board. Q No, I appreciate that. And I understand all the difficulties that you've been involved in with regard to the investigation. And I'm only -- I only want to make the record clear for the Court with respect to my client, who seems to be, in my view, of the 331 people subject to the motion -- at least to my client, I don't see -- can you say in any way how, if the Court denies the motion to my client, that would adversely affect your investigation just with regard to my client? Q And that's the whole point here is that given -- two things. One is that, based on the record of these cases, there are more claims that should be brought. And the involvement of your client in that is yet to be determined. And the reason it cannot be determined is because the trustee was not able to complete his work on this. That's really what this is. And so your client may be completely uninvolved going forward or could be the center or one of the main elements Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 91 of
Ho Wan Kwok - February 13, 2024 92 of something that we have yet to discover. That's the whole issue. Q Yet with regard to all of the other objectors, it seems that my client, assuming she's not one of the two people who are going to get sued in the next day, that my client is the one person that there's nothing in the record that would indicate that she has had any involvement whatsoever with anything that might result in a claim against her. I just want to make sure that the record is clear on that. MR. BASSETT: Objection, Your Honor. I think this is now argumentative, if it hasn't been already. I also think we're treading over the same ground, asking the same questions multiple times. Obviously, counsel can make the point that he's trying to make in argument, but the utility of trying to do it during direct examination has run -- during cross-examination has run its course. BY MR. WANDER: Q Well, let me ask you. You had testified that one person went to Europe with apparent nefarious intentions. That's not my client, correct? A I don't know. I don't recall. I mean, there are a lot of parties involved, but it could very well be. And I'm not Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 92 of
next two days. She -- I don't recall this particular
saying, by the way, that she's not going to get sued in the
example, whether she will or not. So I -- Mr. Linsey would
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| 1 | know that, but I don't know that offhand.
So I don't want |
| 2 | to mislead you in thinking that she is not going to get sued |
| 3 | in the next two days. |
| 4 | But, regardless, that has nothing to do with what we're |
| 5 | asking for, because we don't need the Court's approval to |
| 6 | sue people in the next two days.
That's not what we're |
| 7 | talking about. |
| 8 | MR. WANDER:
I have no further questions, Your |
| 9 | Honor. |
| 10 | THE COURT:
Okay.
Thank you, Attorney Wander. |
| 11 | The next objecting party is Sotheby's |
| 12 | International Realty.
And, Attorney Brown, are you going to |
| 13 | be conducting a cross-examination, if there is any |
| 14 | cross-examination to conduct? |
| 15 | MR. BROWN:
Yes.
There's going to be no |
| 16 | cross-examination at this time, Your Honor, for the trustee. |
| 17 | But we would, depending on what we hear, reserve some time |
| 18 | at the end of the hearing, please. |
| 19 | THE COURT:
Okay.
Give me one moment then.
Thank |
| 20 | you. |
| 21 | MR. BROWN:
Thank you. |
| 22 | THE COURT:
All right.
Then the last objecting |
| 23 | party on my list is Mr. Zhang.
And, Mr. Nealon, are you |
| 24 | going to be conducting cross-examination? |
| 25 | MR. NEALON:
Yes, Your Honor.
I have a few |
| | |
Ho Wan Kwok - February 13, 2024 94 questions, if I could. THE COURT: Go right ahead. MR. NEALON: Thank you. CROSS-EXAMINATION BY MR. NEALON: Q Trustee Despins, how many adversary proceedings have you brought in the last four days? Am I correct that it's around 200, maybe plus or minus 10 percent? A Yeah. The last time I checked, it was 180. But while we're talking, they're getting filed every, you know, 20 minutes or so. So 200 might be the right number right now. Q And assuming this motion isn't granted, hypothetically, your deadline is Thursday, correct, to file the rest of them? A That's correct. Q And how many more, you know, ballpark, should we expect over the next two days? A Around -- well, assuming that your number of 200 is correct for -- just for sake of argument, I think we could expect another 30 or so. Q Okay. So what we're talking about with this tolling extension is you're expecting you'd like to bring other adversary proceedings over the -- up until the August proposed extended deadline, correct? A That's correct. Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 94 of
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| 1 | Q | All right.
And do you have a ballpark sense as to how |
| 2 | | many more we should expect if you're given that extension? |
| 3 | A | No. |
| 4 | Q | Okay. |
| 5 | A | Sorry. |
| 6 | Q | Now, you mentioned that we can expect a RICO suit to be |
| 7 | | forthcoming over the next couple of days.
Is that tied to |
| 8 | | this extension in any way?
Or are you planning -- in other |
| 9 | | words, do you need to file that within this time period, or |
| 10 | | does that have its own time -- |
| 11 | A | We're filing it before Thursday, whether we have to or |
| 12 | not. | We're filing it before Thursday. |
| 13 | Q | Okay. |
| 14 | A | Or on Thursday. |
| 15 | Q | All right.
And are any of those planned RICO claims |
| 16 | | specifically tied to or going to be based on an obstruction |
| 17 | | of your investigation as a trustee? |
| 18 | A | In part, yes. |
| 19 | Q | Okay.
And is Mr. Zhang, my client, a planned defendant |
| 20 | | in that suit? |
| 21 | A | I think so. |
| 22 | Q | Okay.
And what is it that Mr. Zhang did that would |
| 23 | | cause you to believe he's an appropriate defendant in terms |
| 24 | | of obstructing your investigation? |
| 25 | A | That's not the scope of this hearing.
We're not |
| | | |
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| 1 | litigating a complaint that's yet to be filed. |
| 2 | Q
Okay.
Well, I'll ask you the question in the abstract. |
| 3 | You have the floor here.
What is it that my client, |
| 4 | Attorney Zhang, did that has obstructed your investigation |
| 5 | and has required you to seek additional time? |
| 6 | A
No, I -- so I want to be clear.
He will be sued on |
| 7 | certain counts, certain claims by Thursday.
No doubt about |
| 8 | that.
But we want to have the ability to bring other claims |
| 9 | against him in the future. |
| 10 | Q
Right.
But my question, Trustee Despins, is what is |
| 11 | it, if anything, that my client has done that has obstructed |
| 12 | your investigation to date and caused you or contributed to |
| 13 | the need for you to file for this extension? |
| 14 | A
Well, clearly, the whole HCHK informal committee, |
| 15 | that's his creation, and he was the quarterback there. |
| 16 | That's one thing.
And that cost a fortune, and it took -- |
| 17 | it was a very time-consuming side show in the case.
That's |
| 18 | number one. |
| 19 | Two, the whole -- all these claims that he filed where |
| 20 | he was sanctioned, you know, that's -- it's an effort to |
| 21 | intimidate a court officer.
And, of course, that takes |
| 22 | time.
We need to deal with that.
And it costs money.
So |
| 23 | that's another basis whereby he should -- one of the last |
| | |
people that should get the benefit of the statute of limitation given his conduct.
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| 1 | And we know, based on informants, that he visits the |
| 2 | debtor prison and that he professes to tell people after |
| 3 | these visits what debtor's directions are. |
| 4 | Q
And what are those directions? |
| 5 | A
Well, to organize the HCHK committee to do this or to |
| 6 | do that. |
| 7 | Q
Well, what are the other things besides organizing the |
| 8 | HCHK committee? |
| 9 | A
I don't recall them at this point.
But the point is |
| 10 | that he's as involved in this as Mei Guo or the debtor's |
| 11 | son. |
| 12 | Q
So you indicated when you were being examined by one of |
| 13 | the prior counsels that -- I think you said that HCHK |
| 14 | committee was plainly not up to any good.
Was that your |
| 15 | testimony? |
| 16 | A
Correct.
The purpose of that committee was to find |
| 17 | people to appear in court, file false documents, documents |
| 18 | that have been backdated, provide testimony that was not |
| 19 | credible, et cetera, et cetera.
Their sole goal was to stop |
| 20 | this, stop the trustee's effort to get control of HCHK. |
| 21 | Q
So is it your view, Trustee Despins, that anyone who -- |
| 22 | anyone who comes into court and objects to your motion -- |
| 23 | and I believe you had a motion to approve a settlement |
| 24 | agreement, a motion for an injunction, a motion to take |
| 25 | control of approximately 38 million -- anyone who |
| | |
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| 1 | obstructs -- or objects is an obstructor?
Is that your |
| 2 | view? |
| 3 | A
No.
Of course not. |
| 4 | Q
Okay.
Specifically, what is it that Attorney Zhang did |
| 5 | that you consider improper relative to that committee?
Are |
| 6 | you saying he had knowledge that a frivolous or false claim |
| 7 | would be brought?
Do you have any evidence of that? |
| 8 | A
No.
No.
We're not going to litigate claims against |
| 9 | him right now. |
| 10 | Q
But you have no evidence of that, do you, sir? |
| 11 | A
Well, we know that he spearheaded the committee, and |
| 12 | the committee caused the folks to appear in court and file, |
| 13 | you know, false documents that were backdated, et cetera, et |
| 14 | cetera.
So -- |
| 15 | Q
Okay.
But you have no evidence that Attorney Yongbing |
| 16 | Zhang had anything to do with that witness who testified |
| 17 | about backdating a document, do you? |
| 18 | A
I'm not going to go through the claims we're going to |
| 19 | bring against him in the next few days. |
| 20 | Q
All right.
So the answer is no then.
Let me ask you a |
| 21 | true or false question if I could, okay?
Is it true or |
| 22 | false the number one overriding reason why you're filing |
| 23 | this motion is it took you a long period of time to hire |
| 24 | Kroll to investigate all these avoidance claims because the |
| 25 | estate simply didn't have the resources until the Lady May |
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| 1 | was solved in June of 2023?
Isn't that a fact?
That is the |
| 2 | primary overarching reason why you need more time? |
| 3 | A
No.
That's one of the reasons.
As I said, this whole |
| 4 | enterprise with -- that have no books and records, no |
| 5 | reliable documents, was so convoluted.
And, you know, as I |
| 6 | said, 330 bank accounts that have to be completely analyzed, |
| 7 | et cetera, et cetera, that no one could have conducted -- or |
| 8 | completed the investigation and the prosecution of the |
| 9 | claims in the two-year period. |
| 10 | Q
Well, wouldn't it be fair to say, though, that the bank |
| 11 | records that you referenced, the 330 bank accounts, are the |
| 12 | principal source of information that Kroll is analyzing in |
| 13 | order to make recommendations as to what claims to make? |
| 14 | Isn't that a fact? |
| 15 | A
That's a very important source of the documents.
Yes. |
| 16 | Q
Well, it's the most important source, right?
Because |
| 17 | you testified earlier there were no reliable ledgers or |
| 18 | accounting systems. |
| 19 | A
Well, the bank accounts are good, because they don't |
| 20 | lie.
But they don't tell you the full story.
So you need |
| 21 | to actually do more analysis.
And as I said, it's the |
| 22 | Russian doll concept, which is that one bank account leads |
| 23 | you to another, to another, to another.
And that's what |
| 24 | makes this impossible to complete in the time frame statute. |
| 25 | Q
Isn't it a fact, Trustee Despins, that the -- you as |
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| 1 | trustee have had the vast majority of these banking records |
| 2 | for many years prior to -- |
| 3 | A
No, no.
That's completely not accurate. |
| 4 | Q
What percentage of the 330 bank accounts did you get |
| 5 | after Kroll was hired in August of 2023? |
| 6 | A
I can't give you a precise percentage, but it's |
| 7 | certainly more than half. |
| 8 | Q
More than half?
And that's through the 2004 exam? |
| 9 | A
Correct. |
| 10 | Q
So then you'd agree with me that if you got those |
| 11 | records late, that's the principal reason you need more |
| 12 | time, correct? |
| 13 | A
No.
So I don't -- no. |
| 14 | Q
Okay. |
| 15 | A
Because these -- because of the complexity of the |
| 16 | scheme.
And, as I said, you know, you go to one bank.
They |
| 17 | give you documents.
As I said, they don't give it to you on |
| 18 | the spot.
You need to press them, press them.
And they |
| 19 | eventually produce.
They don't produce completely -- the |
| 20 | complete set of documents.
You need to follow up again. |
| 21 | And then that opens up, like the example I gave about |
| 22 | the PayPal, although it's not PayPal but the equivalent of |
| 23 | PayPal, opens up that whole line of inquiry.
And there's |
| 24 | that multiplied by, you know, 300 accounts.
I'm |
| 25 | exaggerating when I say that, but it's exponential. |
| | |
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Ho Wan Kwok - February 13, 2024 101 And, therefore, all of that takes a lot of time and a lot of work. And we need -- as I said, bank accounts are great. They don't give you the full story. You need to go and figure out when the payments were made and in what context, et cetera, et cetera. So now the lawyers get involved, not only Kroll. And it's the combination of the two teams that get us where we are now, which is a fairly, I would say, incredible accomplishment to be able to file 230 complaints regarding avoidance actions by the deadline is -- is amazing. But that's not the full story. Q Now, we talked about or you mentioned that Mr. Zhang was sanctioned by at least two federal courts for -- I think he brought a complaint against you or your firm for supposedly being an unregistered foreign lobbyist or something to that effect. Is that correct? A He was actually -- I think he was sanctioned three times -- Q Okay. A -- by three Southern District of New York judges. Q Okay. Well, I'm not -- maybe we'll agree to disagree about that. But it -- A Okay. Q -- doesn't matter. Is it not a fact that all of those are on appeal at the moment?
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| 1 | A
I'm not sure about that.
I thought that the plaintiffs |
| 2 | were dropping out or, at least in our case, that they were |
| 3 | trying to drop out.
So I -- so the answer is I don't know. |
| 4 | Q
Okay.
But it's fair to say that in all of those cases, |
| 5 | whether it's two or three, that was handled by a law firm |
| 6 | other than Paul Hastings, correct?
Davis Polk was counsel |
| 7 | in one.
I forget who the counsel was in the other.
Isn't |
| 8 | that a fact? |
| 9 | A
Yes.
But that doesn't involve us, because Davis Polk |
| 10 | is handling -- |
| 11 | Q
But those were back in 2022, correct? |
| 12 | A
I'm not so sure about that.
I think it was in 2023, |
| 13 | actually. |
| 14 | Q
So but it is your testimony as you sit here today, |
| 15 | under oath, that that was one of the major reasons why you |
| 16 | need an extension on these -- the disruption caused by that |
| 17 | is one of the major reasons you need more time? |
| 18 | A
No.
I wouldn't put (indiscernible) major.
It's one -- |
| 19 | it's -- as I said during the direct, there's just tons of |
| 20 | these events that occurred.
And that's one of them.
So I'm |
| 21 | not going to say it's 50 percent of it or -- no, I can't put |
| 22 | a percentage on it.
But it was certainly a massive |
| 23 | distraction. |
| 24 | Also, the protests were a massive distraction to deal |
| 25 | with that.
They took the Court -- I think there was a full |
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| 1 | week or maybe a seven-day evidentiary hearing, et cetera, et |
| 2 | cetera.
It's a huge distraction from the work that should |
| 3 | have gone on in this case. |
| 4 | Q
And what were these protests, just in brief, because |
| 5 | we're short on time? |
| 6 | THE COURT:
I just want to know how all this is |
| 7 | relevant at this point, Mr. Nealon.
You've had many |
| 8 | questions that you've asked.
Your objection says that -- |
| 9 | and you've established what you believe is your case on |
| 10 | cross-examination that Trustee Despins has not met his |
| 11 | burden with -- vis-a-vis your client.
So what's the point |
| 12 | about asking about the protests at -- |
| 13 | MR. NEALON:
Okay.
That's fine, Your Honor.
I |
| 14 | know we're short on time, so I'll move on. |
| 15 | THE COURT:
Okay. |
| 16 | BY MR. NEALON: |
| 17 | Q
Just a couple more questions for you, and I'll be done. |
| 18 | Now, you mentioned that one of your concerns, Trustee |
| 19 | Despins, was that my client frequently visits Miles Guo in |
| 20 | prison.
Is that correct? |
| 21 | A
It's a concern, but it's a fact. |
| 22 | Q
Okay.
Has that obstructed your ability to investigate |
| 23 | avoidance actions that might be available to the trustee? |
| 24 | A
The visit in itself is wonderful.
He's going there for |
| 25 | the right reason.
The question is, is he going there to get |
| | |
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| 1 | instructions from the debtor about what to convey to the |
| 2 | team outside of prison, is really the issue.
Which time |
| 3 | will tell exactly what went on there. |
| 4 | Q
Okay.
But you have no specific evidence that he has |
| 5 | gotten any instructions to hide assets or do any other |
| 6 | things as you sit here today, do you? |
| 7 | A
I'm not going to share.
That's work product.
That's |
| 8 | ongoing. |
| 9 | Q
Well, okay.
I don't agree with that.
But a final |
| 10 | question here.
So is it your belief -- your -- well, strike |
| 11 | the question.
Mr. Zhang, you're aware that he is the |
| 12 | immigration lawyer who's trying to process a political |
| 13 | asylum request by Miles Guo, correct? |
| 14 | A
No, I don't agree with that.
He filed a notice of |
| 15 | appearance in the immigration case, but the immigration case |
| 16 | was handled by a famous immigration firm, Wildes & Weinberg. |
| 17 | And, actually, the gentleman passed away recently.
It was |
| 18 | very sad.
But that's that immigration lawyer. |
| 19 | But that appearance in that case allows Zhang to go to |
| 20 | prison and not have his conversations with the debtor |
| 21 | recorded. |
| 22 | Q
Okay.
And you don't know what those communications |
| 23 | are, obviously, correct? |
| 24 | A
We've been through this already.
I am not going to |
| 25 | give you what our work product (indiscernible). |
| | |
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| 1 | MR. NEALON:
No further questions, Your Honor. |
| 2 | THE COURT:
Okay.
Thank you. |
| 3 | All right.
Attorney Bassett?
I don't know if |
| 4 | Attorney Bassett has had a chance to look at the request |
| 5 | that Attorney Evans made with regard to the declaration of |
| 6 | the Rule of Law Foundation and the Rule of Law Society. |
| 7 | MR. BASSETT:
We have, Your Honor.
You know, some |
| 8 | of it is just innocuous attachments of pleadings that were |
| 9 | filed on the docket. |
| 10 | But I, unfortunately, can't agree that the |
| 11 | entirety of the declaration (indiscernible) which contains |
| 12 | representations about completeness of production, et cetera. |
| 13 | So, unfortunately, I'm going to have to decline that |
| 14 | request. |
| 15 | MR. EVANS:
Your Honor, may I be heard on that? |
| 16 | THE COURT:
Yes. |
| 17 | MR. EVANS:
I was unaware when we filed our |
| 18 | objection that this was going to be taken as an evidentiary |
| 19 | matter.
I'm not sure if it's assigned as a contested matter |
| 20 | under the rules.
One of the primary objections, Your Honor, |
| 21 | we had asserted in our objection here was that the trustee's |
| 22 | motion was unsupported by declaration, affidavit, wasn't |
| 23 | verified.
And then we made a point to make sure that we |
| 24 | supported our objection with a declaration.
It's strictly |
| 25 | factual as to my client's efforts to comply with a subpoena |
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| 1 | that was attached -- the subpoenas that were served, the |
| 2 | objections, email communications between the trustee's |
| 3 | lawyers in regards to our efforts to comply with that |
| 4 | subpoena, along the lines that other parties have argued to |
| 5 | this Court.
That we have endeavored to comply.
There's no |
| 6 | motion to compel. |
| 7 | I think under the circumstances under which the |
| 8 | motion -- the tolling motion was presented to this Court, it |
| 9 | would be appropriate for the Court to take an affidavit in |
| 10 | lieu of live testimony of a lawyer whose licensed and barred |
| 11 | in New York City. |
| 12 | THE COURT:
Attorney Basset, do you have any |
| 13 | response? |
| 14 | MR. BASSETT:
I do, Your Honor.
Like I said, the |
| 15 | declaration in many respects seeks to, I suppose, have the |
| 16 | Court take notice of the subpoenas that the trustees served |
| 17 | on the Rule of Law Foundation, responses and objections that |
| 18 | were served on particular dates, et cetera.
Again, I don't |
| 19 | have a problem with that. |
| 20 | And to the extent that counsel is, you know, |
| 21 | attempting to support his position factually that -- you |
| 22 | know, that his client has not been the subject of any, you |
| 23 | know, adverse orders by the Court with respect to discovery, |
| 24 | et cetera, I think he can make that argument and showing, to |
| 25 | the extent he thinks it is an accurate one, by simply |
| | |
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Ho Wan Kwok - February 13, 2024 107 pointing the Court to the docket in this case. It's when this declaration, which is not subject to cross examination, there is no witness here to support it, starts saying that the Rule of Law Foundation has complied fully with all of their discovery obligations, they produced voluminous emails -- there are statements like that in the declaration that simply can't come in unrebutted. So I think we -- it was clear from our papers that this is a motion that we intended to make an evidentiary showing in support of. And that's what we are doing today. If counsel thought that he needed to make an evidentiary showing on behalf of the clients, you know, they should have done the same. So that's our view, Your Honor. THE COURT: Well, what I would note for the record is that this motion is a motion for extension of time and/or statute of limitations, which under our local rules is not a contested matter. It does -- it is an exception to the contested matter procedure. It does not follow the contested matter procedure. And the trustee filed a motion to expedite the hearing on this motion, which is also not a contested matter under our local rules. It was -- both of those types of motion would appear on Appendix M to our local rules. And it says motions, applications that do not follow the contested matter procedure and may be scheduled for a hearing. And
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| 1 | two of those motions are a motion for extension of time and |
| 2 | a motion to expedite the hearing.
So I did not view this |
| 3 | matter in connection with the filings made by the trustee as |
| 4 | a contested matter, number one. |
Number two, there is an order that was entered -- if you give me a moment, I will find it -- on January 19th, almost a month ago, ECF Number 2515, that granted the trustee's emergency motion for an entry of the order approving the form and manner of trustee's forthcoming tolling motion and scheduling the hearing on that. That order entered on January 19th, and that order has been in place since that time.
No one has raised any issues. None of the objecting parties, until Attorney Evans, has raised any issues about putting forth evidence until today. The trustee indicated in the motion for which the order applies that they would establish the reason for their requested relief.
So what I'm going to do, Attorney Evans, is I'm going to take a look at the declaration that you submitted, and I'll determine -- I have not looked at it other than to know it exists. And then I will determine whether or not I will consider it and, if I consider it, what weight I will give it. Okay?
MR. EVANS: Understood. Thank you, Your Honor.
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| 1 | THE COURT:
Thank you. |
| 2 | All right.
Attorney Bassett, would you like to |
| 3 | make your closing argument on the legal and evidentiary |
| 4 | issues related to the trustee's tolling motion? |
| 5 | And then I, obviously, will let the objecting |
| 6 | parties make a statement as well.
I'm going to say that, |
| 7 | you know, we're going to have to be cognizant of time.
I |
| 8 | understand that every objecting party should be able to make |
| 9 | a statement, if they care to.
The overwhelming majority -- |
| 10 | well, I shouldn't say that.
That's not fair, the |
| 11 | overwhelming majority.
But the majority of objectors did |
| 12 | cross-examine Trustee Despins.
But others reserved their |
| 13 | right to speak.
So that's fine. |
| 14 | So, Attorney Bassett, are you ready to proceed? |
| 15 | MR. BASSETT:
Your Honor, I was actually looking |
| 16 | to determine whether I had any redirect testimony for the |
| 17 | trustee and -- |
| 18 | THE COURT:
Oh, okay.
That's fair.
Go ahead |
| 19 | then. |
| 20 | MR. DESPINS:
Your Honor, before Mr. Bassett does |
| 21 | that, I was a bit confused, because counsel for Sotheby's |
| 22 | said, oh, I may have some comments at the end.
I thought |
| 23 | Sotheby's had been carved out of the order, so I -- |
| 24 | THE COURT:
I didn't see any withdrawal of -- of |
| 25 | their objection, though, Trustee Despins. |
| | |
Ho Wan Kwok - February 13, 2024 110 MR. DESPINS: I know, but I -- THE COURT: I did see an objection of the withdrawal by UBS, though. MR. DESPINS: No, I understand, Your Honor. But, obviously, they were carved out of the order. That was -- part of the deal is that they would go away if their -- THE COURT: I didn't look at your order, so I don't know. I mean, it was filed. But, Attorney Bassett and Attorney Brown, why don't you address that issue, please. MR. BASSETT: Sure. Your Honor, as I had said in my comments at the outset, we had understood, and I have emails in my inbox that I thought confirmed it, that we had resolved Sotheby's objection with revised language to the order, which I believe references them specifically, carves them out. They're no longer affected by it. So I don't understand there to be any basis for an objection or other comments by their counsel. If they do feel the need to object, then I think we would -- THE COURT: Well, let's let -- MR. BASSETT: I think we would need to revisit -- THE COURT: Why don't we hear from Attorney Brown? MR. BASSETT: Thank you, Your Honor. MR. BROWN: All right. And hearing some of the trustee's comments and Attorney Bassett's concerns, I -- Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 110 of
Ho Wan Kwok - February 13, 2024 111 just that we didn't see anything. And we were working on it literally just, you know, moments before this hearing. So I -- you know, I would have figured I would (indiscernible). That's the only reason why I asked. Because as I was sitting here, I see complaint after complaint after complaint. So I wanted to make sure we did have a (indiscernible). I have no reason to believe, Attorney Bassett, you're not -- you're going -- THE COURT: Well, Attorney Brown, let me stop you right there. MR. BROWN: Okay. THE COURT: There is a revised proposed order that was filed on the docket. Have you not seen that? MR. BROWN: I'm going through it as we sat here, Your Honor. I didn't see it. Unless -- THE COURT: Well, it was put -- it was filed on the docket before the hearing today. And I'll tell you where it is if you give me a second. MR. BROWN: Okay. THE COURT: Actually, it was filed yesterday. MR. BROWN: I don't -- THE COURT: It was filed -- but it was filed at 10:20 last night, so I'll give you that. But it has been on the docket since 10:20 last night. It's ECF Number 2803. Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 111 of
Ho Wan Kwok - February 13, 2024 112 And there's a -- the pages with the redline changes, which are pages 8 through 10 of the document, have language about your client in it. Let's see. What, the second page of the order, fourth ordered paragraph relates to UBS and Sotheby's. And look at those pages. You can see it in redline. MR. BROWN: Yep. I will just say there were emails which are related to this afternoon's discussion. So we -- it's not, I think, anything that holds up this hearing (indiscernible). I don't (indiscernible). THE COURT: Well, I need to know whether you agree to that. So I'm going to tell you to -- why don't you turn off your camera and go talk to people. And let's get that worked out. Okay? MR. BROWN: Thank you. THE COURT: One way or another. MR. BASSETT: Your Honor, if I may, because it may be helpful for Attorney Brown. I have an email in my inbox from Meg Augustine, who I believe is his co-counsel -- THE COURT: Well, she's here. She -- Ms. Augustine, you're here, so -- MR. BROWN: Yeah, she's here. MR. BASSETT: -- at 12:05 p.m. just indicating that they were signed off on the language of the revised proposed order. So I just am a little confused. There was Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 112 of
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| 1 | a miscommunication. |
| 2 | THE COURT:
Attorney Augustine? |
| 3 | MR. BROWN:
That was today? |
| 4 | THE COURT:
I see that you're here. |
| 5 | MS. AUGUSTINE:
Yes, Your Honor.
This is Mary |
| 6 | Augustine at Sotheby's.
And I'm looking at the proposed |
| 7 | order on the docket.
I think the confusion, which it's not |
| 8 | really that important at this point, was that after that was |
| 9 | filed there was still back and forth about whether the |
| 10 | language was agreed upon.
And I can tell you, having read |
| 11 | the order right now, it is agreed upon.
And we agreed to |
| 12 | withdraw our objection based on this language. |
| 13 | THE COURT:
Okay.
Great.
Thank you very much. |
| 14 | Then the objection 2584 is withdrawn on the record, and |
| 15 | Sotheby's agrees with -- I'm not saying that the order -- |
| 16 | you know, there aren't other issues if we have -- but the |
| 17 | language in the order that the trustee submitted at 10:20 |
| 18 | last night, ECF number 2803, is acceptable to Sotheby's, and |
| 19 | that resolves their objection, which is now withdrawn on the |
| 20 | record. |
| 21 | All right.
So, Attorney Brown, you're all set. |
| 22 | You don't need to worry about anything. |
| 23 | MR. BROWN:
Thank you. |
| 24 | THE COURT:
All right.
So let's go back to you, |
| 25 | Attorney Bassett.
You're correct.
If you'd like to ask, |
| | |
Ho Wan Kwok - February 13, 2024 114 redirect, you are entitled to do so. So go right ahead. MR. BASSETT: Your Honor, I've actually decided that I don't think it will be necessary, so I'm happy to proceed with closing arguments. THE COURT: Okay. Then you go right ahead and proceed. MR. BASSETT: Thank you, Your Honor. Your Honor, the trustee's position is that the evidentiary record, which has been established not only by his testimony but by the record on the docket of this case over the past two years with thousands of docket entries, establishes that this -- establishes that if there was ever a case, Your Honor, in which equitable tolling for claims held by a chapter trustee is warranted, it is this one. The case law, Your Honor, that applies to this motion provides that a trustee, such as Attorney Despins, may equitably toll the statute of limitations if, despite all due diligence, he is unable to obtain vital information bearing on the existence of his claim. That's the Valdez v. United States case we cite in our papers, Second Circuit, 2008. The case law bears out that there are two showings a trustee must make to obtain that release. The first is that he has acted with reasonable diligence during the time period that he seeks to have tolled. And second, that he Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 114 of
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Ho Wan Kwok - February 13, 2024 115 has proved that circumstances are so extraordinary that the doctrine should apply. That's the In Re Anderson case from Bankruptcy Court in Connecticut, District of Connecticut, 2020.
Your Honor, the facts of this case, as established by the testimony and the record more generally, blow that standard out of the water. To be clear, on the first prong, whether the trustee has exercised reasonable diligence, it is just that: reasonable diligence. The case law has established, Supreme Court, the Holland v. Florida case, it is not maximum feasible diligence. That's a quote from the Supreme Court. It is not maximum feasible diligence. It is reasonable diligence.
No one can credibly look at the record in this case, which the Court has lived through painstakingly at times, and possibly contend that this trustee has not acted reasonably diligently in trying to pursue his investigation and identify and timely pursue all claims that he holds. The trustee today demonstrated that through his testimony when he talked about all of the various work his team has performed, the hundreds of thousands of documents his team has tried to review, the difficulty in this -- in that process.
It's not merely laying eyes on a document. It's getting the puzzle pieces together. The fact that the
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Ho Wan Kwok - February 13, 2024 116 trustee may have had hundreds of thousands of documents for a long period of time, may have been able to have some people lay eyes on those documents, does not mean that the review and analysis and the investigation has concluded. Far from it. It is a puzzle and, in this case, a very complicated one given the financial affairs of this debtor, the web of shell companies, bank accounts, et cetera, that we have to sort through.
You know, in fact, I think -- one thing that occurred to me as I was thinking about the hearing today is it's a bit ironic, too, to hear some of the parties here object as to the trustee's diligence. I just -- I think it's absolutely not credible. And one of the reasons for that is, as the Court well knows, you know, for the first year, at least, of this case, all you heard from the debtor and those who followed him and were perpetuating his protests across the globe is how overzealous the trustee was being. They can't have it both ways.
This is a trustee who has obviously very passionately investigating claims, pursuing his investigations diligently, and there's no credible basis to contend otherwise.
The second component of the standard that I mentioned at the outset, Your Honor, is whether there are extraordinary circumstances that justify equitable tolling
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| 1 | in a particular situation.
I would submit, Your Honor, that |
| 2 | the circumstances in this case are not only extraordinary, |
| 3 | they are essentially the perfect storm of things that have |
| 4 | happened, of circumstances that have not only slowed and |
| 5 | delayed the trustee's investigation but at times have |
| 6 | derailed it entirely and required him and his team to focus |
| 7 | on work that has no real bearing on what he has been |
| 8 | appointed to do. |
To start with, and the trustee testified about this, this is a case where the trustee was appointed to oversee an estate that had effectively zero money. Zero money to fund the trustee's legal fees, zero money to fund additional expenses, zero money for the trustee to use to hire advisors who are necessary to complete his work. Yet on top of that, a debtor who prior to the case had been found to have been operating a shell game across the world to hide his assets from creditors by tucking them into the pockets of his family members and associates and shell companies across the world, a tangled web that the trustee has to investigate and get to the bottom of.
You add on top of that the near constant obstruction, which despite the objecting parties' protestations to the contrary, the docket in this case and the Court's own experiences in this case make clear has happened repeatedly and over and over again. It's the
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| 1 | debtor.
It's close family members, including Mei Guo, who's |
| 2 | one of the objecting parties.
G Club, one of the objecting |
| 3 | parties.
Have constantly delayed producing documents in |
| 4 | response to Rule 2004, have altogether refused to produce |
| 5 | categories of documents, have forced the trustee to come to |
| 6 | the Court, filed motions to compel.
And even motions to |
| 7 | compel, as the Court knows, were not complied with, forcing |
| 8 | the trustee to bring motions for sanctions. |
That has happened time and time again. I don't need to chronicle every instance, because it's right there on the docket, and this Court knows all of it all too well.
In addition to that, we have the overlay of the criminal case, Your Honor. And, of course, that has caused complications for a variety of reasons, including that the debtor, his daughter, others involved in that case have asserted the Fifth Amendment when the trustee attempts to obtain testimony from them. The debtor, of course, has filed a motion to stay this bankruptcy case in its entirety, forcing the trustee and his attorneys to spend all kinds of time and effort in the criminal case.
And then, finally, Your Honor, and this is what, among many, many other things, makes this case so unprecedented, is the worldwide harassment campaign that the debtor and his followers engaged in for months. I don't need to recount all of that for the Court, the vile and
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| 1 | disgusting images and signs outside of the trustee's office, | |
| 2 | outside of his family members' homes and offices, outside of | |
| 3 | PAX's offices and their counsel.
That required the trustee | |
| 4 | and his counsel, including myself, to spend over a week | |
| 5 | conducting a trial in this court to deal with those types of | |
| 6 | issues instead of focusing on the investigation.
That's not | |
| 7 | to mention the delay and obstruction, as set forth in the | |
| 8 | testimony at that hearing, that the harassment was itself | |
| 9 | causing. | |
| | | |
I cannot -- I'm not aware of, from all the case law we've looked at prior to this hearing, Your Honor, of any case that involves all of these different elements that set forth a truly extraordinary set of circumstances where you have people who are determined at every step of the way to prevent the trustee from conducting his investigation and delaying it in any way possible.
And, Your Honor, when it comes to these two elements, to diligence and whether there are extraordinary circumstances, none of the objectors seriously argue otherwise. There are legal arguments, which I'll get to later, which are incorrect, that some of the objectors say, you know, you have to look at a case-by-case, entity-by-entity, or objector-by-objector analysis to figure out, you know, whether each party has engaged in particular obstructionist activities, et cetera. That's not a correct
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Ho Wan Kwok - February 13, 2024 120 articulation of the law. But what they really don't argue, none of them, is that, generally, the trustee has not acted diligently and that there are not overall extraordinary circumstances that have affected his ability to complete his investigation in a timely manner in this case. I won't go through all of the testimony and recount it for the Court, because the Court just heard it, about particular actions that have been taken by particular objecting parties. I do, however, want to briefly respond to some of the points that G Club's counsel was making during the trustee's testimony when he was, you know, trying, I think, to make the point that all G Club had done is complied with its rules -- with the rules of civil procedure and the federal rules of bankruptcy procedure and had not done anything to delay the trustee's investigation. I just want to reference, in response to that particular argument, the Court order granting the trustee's motion to compel as to G Club at ECF 1960 filed on June 28, 2023. This is a quote from that order: "It is clear that the production of documents by G Club is several months overdue. The production of 300 documents in three weeks is not an encouraging sign, and an additional 60-day extension of time is not reasonable." That was in response to an extension request. Your Honor, the Court has already found that
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| 1 | G Club delayed by several months in producing its documents, |
| 2 | which necessarily delayed the trustee's investigation.
Your |
| 3 | Honor, having no real ability to respond to the robust |
| 4 | factual record established through the trustee's testimony, |
| 5 | and the record more generally, that he's been diligent and |
| 6 | that there have been extraordinary circumstances impeding |
| 7 | his investigation, what we're left with is the legal |
| 8 | arguments that all of the objectors, I think, uniformly |
| 9 | raise, the primary one being that, in their view, this Court |
| 10 | is incapable as a matter of law of entering an order tolling |
| 11 | the statute of limitations before adversary complaints have |
| 12 | been filed. |
| 13 | Obviously, as the Court is aware from the papers, |
| | |
there has been much focus placed on Judge Tancredi's decision in the Walnut Hill case in this bankruptcy court from June 2018. We've addressed that decision in our papers, and I'll address it again, Your Honor.
A few quick notes first. Although from another bankruptcy judge, a former bankruptcy judge in this district, that decision is not binding on this Court, of course. Second, there are a number of other decisions which we cite in our papers in which courts have, in fact, equitably tolled the statute of limitations prior to the expiration of the deadline and prior to the filing of complaints. These cases are listed in paragraph 30 of our
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Ho Wan Kwok - February 13, 2024 122 motion. One of those cases, which we spent some time discussing, of course, is the International Administrative Services case out of the Eleventh Circuit in 2005. That case, Your Honor, I think is highly relevant to the analysis before the Court today, because its facts are, in many ways -- I would say identical, but I think they are -- they share similarities, but they are far less extraordinary than the facts we have at issue here. This is from the Second -- from the Eleventh Circuit decision in that case. The Eleventh Circuit observed that the debtor there had engaged in a fraud and then had took steps to hide his assets in "a tangled and complex web of multi-step international transactions." And then it described the trustee's investigation as "The trustee began the unenviable task of unraveling the knotted trail of transfers. The trustee's ability to investigate the transfers was hampered by the debtor and his associates who, among other things, delayed document production, withheld discovery responses, and simply 'lost' records of the asset transfers. As a result, the trustee filed a motion to hold the debtor and his professionals assisting him in covering their tracks in contempt of court." Your Honor, that's just one aspect of the extraordinary circumstances and obstruction that this
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| 1 | trustee has faced in this case.
And yet, on that record, |
| 2 | the court, in fact, extended the statute of limitations |
| 3 | twice prior to the expiration of the deadline.
It did that |
| 4 | both under Federal Rule of Bankruptcy Procedure 9006 and |
| 5 | based on the doctrine of equitable tolling. |
| 6 | Now, Judge Tancredi, in the Walnut Hill case, he |
| 7 | attempted to discredit that Eleventh Circuit decision on |
| 8 | what he described as his reading of that decision, that the |
| 9 | equitable tolling requested in that case did not occur until |
| 10 | after the adversary proceeding was filed.
But I would |
| 11 | submit if you look at the International Administrative |
| 12 | Services decision, that is simply not the record.
That is |
| 13 | not how that case transpired. |
| 14 | In fact, as I said before, the request to toll the |
| 15 | statute of limitations to extend it beyond the initial |
| 16 | deadline was made twice prior to the expiration of the |
| 17 | deadline and granted by the court.
The Eleventh Circuit |
| 18 | separately analyzed equitable tolling in its decision.
But, |
| 19 | again, it does not affect the fact that that decision was |
| | |
one in which equitable tolling was granted on a prospective basis.
Now, the objectors argue that, well, look, why does it matter? Why can't the trustee just file his complaints and then seek equitable tolling after the fact? Your Honor, you heard from the trustee why that doesn't
work.
And the reason it doesn't work is because of the sheer volume of additional investigative tasks before the trustee and his need to pour resources into those tasks at significant cost and expense to the estate. This is not a situation where the trustee only has one or two leads that he needs to run down, and he can do that and then seek equitable tolling as to those claims later. This is a situation where the trustee has all kinds of things that he continues to need to investigate and things he needs to start investigating from scratch, because he hasn't had the opportunity to get all the discovery prior to the deadline that he needs.
What all that means is that this is an extraordinarily large undertaking and an extraordinarily expensive one. And what these objectors are asking the trustee to do is to force this estate to bear all of the costs of investigating, of pursuing that investigation, not having any clarity and any certainty as to whether or not those claims will, in fact, be -- whether the statute of limitations governing those claims will, in fact, be tolled.
In addition, what the trustee is asking for is a breathing spell, Your Honor, of six months through -- I believe it's August 15th, to try to complete his investigation and pursue additional claims. What the
Fiore Reporting and Transcription Service, Inc.
Ho Wan Kwok - February 13, 2024 124
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Ho Wan Kwok - February 13, 2024 125 objectors are asking for is for the Court to not allow that to happen. And the result would be the trustee is essentially forced to operate for every day after February 15th that he's conducting his investigation and trying to find additional claims with, essentially, a gun to his head where he has to finish that investigation as fast as he possibly can or else any party who argues that the statute of limitations has lapsed on claims that he brings is going to say he didn't bring them fast enough.
That is unfair and inequitable to the trustee and to this estate under these circumstances where he's been unable to complete his investigation the way he needs to prior to the deadline. He is entitled to an additional period to finish his investigation, the investigation that he should have been able to complete prior to the deadline absent the extraordinary circumstances that existed. And it's a modest six-month extension that he's looking for.
The second major legal argument that several of the objectors raised, Your Honor, that I want to address briefly is the argument which you've heard -- or you saw previewed time and time again during cross-examination, and that's the argument that equitable tolling as against particular defendants is not appropriate because they claim that their particular defendants or potential defendants or objectors did not themselves engage in any obstruction or
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Ho Wan Kwok - February 13, 2024 126 other behavior contributing to the circumstances that prevented the trustee from completing his investigation. And that argument, Your Honor, fails on two bases. First, as the record has demonstrated, with respect to the lion's share, if not all, of the defendants, that's just factually wrong. The defendants have either been directly involved in failing to timely produce documents, to providing testimony under oath that turned out to be inaccurate in the case of Mei Guo, to being held in a contempt of court, which is the case for several of the defendants, to being members of the creditors committee with which the Court is familiar. That's just simply not true factually.
But legally, Your Honor, more importantly, it's irrelevant. And I think the Taurus Funds spend a lot of time in their objection citing to case law which they suggest stands for the proposition that it is the defendants or the potential defendants at issue who has to have engaged in wrongful conduct. And they even cite a case saying that it's sort of unsettled in some jurisdictions as to whether the conduct needs to be on behalf or brought by the particular defendant or not.
I don't think there's any dispute that it doesn't, Your Honor. And the case that I would direct the Court to is the Second Circuit's decision in the Valdez case from
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| 1 | 2008, which we cite in our reply papers at paragraph 20.
I |
| 2 | think that decision removes any doubt as to the standard and |
| 3 | as to whether or not the trustee on a motion for equitable |
| 4 | tolling has to show some sort of wrongful conduct on behalf |
| 5 | of each of the potential defendant parties.
And what the |
| 6 | Court said in that case was "Equitable tolling permits a |
| 7 | plaintiff to avoid the bar of the statute of limitations if, |
| 8 | despite all due diligence, he is unable to obtain vital |
| 9 | information bearing on the existence of his claim. |
| 10 | Equitable tolling is frequently confused both with |
| 11 | fraudulent concealment on the one hand and with the |
| 12 | discovery rule governing accrual on the other.
It differs |
| 13 | in that the former" -- sorry.
The accrual prong of the |
| 14 | analysis differs from the former, i.e. fraudulent consumer, |
| 15 | in that it does not assume a wrongful or any effort by the |
| 16 | defendant to prevent the plaintiff from suing. |
| 17 | The court then goes on and says, "Because |
equitable tolling is often confused with fraudulent concealment, cases may be found holding that equitable tolling applies where the defendants have engaged in such concealment. Nevertheless, we," i.e. the Second Circuit, "have held explicitly that the application of the doctrine of equitable tolling is not limited to such cases."
So, Your Honor, there is no requirement that the defendants at issue be the ones who have engaged in
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| 1 | concealment of information, obstruction of justice, et | | | | | | | |
| 2 | cetera.
What is relevant is whether there are extraordinary | | | | | | | |
| 3 | circumstances generally that have presented -- have | | | | | | | |
| 4 | prevented, rather, the trustee from completing his | | | | | | | |
| 5 | investigation in general and pursuing claims against any | | | | | | | |
| 6 | parties, including the parties who are objecting. | | | | | | | |
| 7 | With that, Your Honor, the last point I would make | | | | | | | |
| 8 | is that there's -- two things.
First of all, there's a lot | | | | | | | |
| 9 | of mention in several of the objections to the number of | | | | | | | |
| 10 | parties who would be affected by this motion and efforts by | | | | | | | |
the objecting parties to assert their rights and sort of make arguments on behalf of parties who are not here objecting today. I don't think there should be any reasonable dispute about this, although from some of the papers it appears there might be.
But the parties who are here today objecting can assert their rights and only their rights. They have no ability to appear and object on behalf of other parties. And the consequence of that, Your Honor, is that even if the Court were inclined to sustain any of the objections of the objecting parties, which we don't think it should, that would not affect the ability of the Court to grant the motion as to all other parties who have not appeared and have not objected.
Lastly, again, if the Court were inclined to
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| 1 | sustain any of the objections, which the trustee does not | | | | | | | | | |
| 2 | think it should be, I think it goes without saying that that | | | | | | | | | |
| 3 | would have to be without prejudice to the trustee's ability | | | | | | | | | |
| 4 | to seek equitable tolling in the future.
Although, for all | | | | | | | | | |
| 5 | the reasons I've said, we think that the law supports it now | | | | | | | | | |
| 6 | and the record before the Court supports it now as well. | | | | | | | | | |
| 7 | That's all I had, Your Honor, unless the Court has | | | | | | | | | |
| 8 | any questions. | | | | | | | | | |
| 9 | THE COURT:
Thank you.
No, I have no questions. | | | | | | | | | |
| 10 | Thank you. | | | | | | | | | |
| 11 | Okay.
Mr. Della Fera, would you like to make a | | | | | | | | | |
| 12 | closing statement on behalf of the objection that was filed | | | | | | | | | |
| 13 | on behalf of Mei Guo? | | | | | | | | | |
| 14 | MR. DELLA FERA:
Yes, Your Honor.
Thank you.
Of | | | | | | | | | |
| 15 | course, we will rely primarily on our -- on the arguments in | | | | | | | | | |
| 16 | our filed objection, but just to supplement briefly there, | | | | | | | | | |
| 17 | there is little, if any, dispute that equitable tolling is | | | | | | | | | |
| 18 | available if this two-part test that the Court has heard | | | | | | | | | |
| 19 | much about is satisfied, i.e. extraordinary circumstances | | | | | | | | | |
| 20 | and reasonable diligence.
Contrary to trustee's counsel's | | | | | | | | | |
| 21 | argument, however, with respect to reasonable diligence, | | | | | | | | | |
| 22 | Ms. Guo does contest the reasonableness of the trustee's | | | | | | | | | |
| 23 | failure, for example, to retain a forensic accountant until | | | | | | | | | |
| 24 | 13 or 14 months after his appointment, apparently primarily | | | | | | | | | |
| 25 | because the potential forensic accountants had the temerity | | | | | | | | | |
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| 1 | to seek pari-passu treatment as administrative expense | | | | | | | | |
| 2 | creditors with the trustee and his firm. | | | | | | | | |
| 3 | Be that as it may, there is a dispute as to when | | | | | | | | |
| 4 | that two-part test should be applied.
We submit that that | | | | | | | | |
| 5 | test should only be applied to specific claims when they are | | | | | | | | |
| 6 | asserted, after they are asserted, and when the parties | | | | | | | | |
| 7 | against whom those claims are asserted are known. | | | | | | | | |
| 8 | Picking up on a point that Mr. Sklarz made during | | | | | | | | |
| 9 | the hearing, no amount of testimony, Your Honor, can | | | | | | | | |
| 10 | authorize this Court to do what the law does not authorize | | | | | | | | |
| 11 | it to do.
And what the trustee is asking the Court to do | | | | | | | | |
| 12 | today is to find and to enter essentially a declaratory | | | | | | | | |
| 13 | judgment against every individual and corporate entity on | | | | | | | | |
| 14 | the planet that today the trustee has made an adequate, | | | | | | | | |
| 15 | equitable argument to excuse his filing of presently unknown | | | | | | | | |
| 16 | avoidance actions against presently unknown defendants for, | | | | | | | | |
| 17 | you know, up to six months from now, by the way.
And we | | | | | | | | |
| 18 | submit that the Court should not grant that relief. | | | | | | | | |
| 19 | Although the requested relief is not | | | | | | | | |
| 20 | unprecedented, it is extraordinary.
And as Judge Tancredi | | | | | | | | |
| 21 | explained in Walnut Hill, and Your Honor has read enough | | | | | | | | |
| 22 | about that and probably knows enough about it anyway, it | | | | | | | | |
| 23 | finds no support -- that relief finds no support in the | | | | | | | | |
| 24 | Bankruptcy Code, the bankruptcy rules, or in the ideals of | | | | | | | | |
| 25 | due process. | | | | | | | | |
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Ho Wan Kwok - February 13, 2024 131 The trustee ignores the declaratory judgment nature of the relief requested, as well as the fact that he is not prejudiced in the least if the relief requested is denied. Like other trustees, he may have to impair costs to pursue claims. But, frankly, Your Honor, if equity dictates after those claims are asserted that the trustee should not be permitted to assert those claims due to the expiration of the statute of limitations, well, if equity doesn't support the relief at that time, it certainly doesn't support it up to six months prior to that time, which is the trustee's request.
The trustee goes so far as to say in his motion papers that he would be left with no recourse if the extraordinary relief he seeks is denied. And he knows better than that, Your Honor. He knows that he retains the ability after avoidance actions are filed -- to the extent, by the way, a statute of limitations defense is raised, he retains the ability at that time to seek equitable relief, likely from this Court, based on the actual and demonstrable facts and circumstances associated with that specific claim against that specific defendant.
There is no prejudice, at least no material prejudice, to the trustee or the estate if the motion is denied. And we respectfully request that the Court deny the motion. Thank you, Your Honor.
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| 1 | THE COURT:
Thank you. | | | | | | | | |
| 2 | Attorney Mateo, did you wish to make a closing | | | | | | | | |
| 3 | argument on behalf of your client, Mr. Cao? | | | | | | | | |
| 4 | MS. MATEO:
Yes, Your Honor. | | | | | | | | |
| 5 | THE COURT:
Go right ahead. | | | | | | | | |
| 6 | MS. MATEO:
We join in Mr. Della Fera's argument. | | | | | | | | |
| 7 | The tolling motion is a thinly veiled request for a | | | | | | | | |
| 8 | declaratory judgment that the trustee can equitably toll the | | | | | | | | |
| 9 | statutory deadline for filing avoidance actions, carte | | | | | | | | |
| 10 | blanche, as against hundreds of potential defendants without | | | | | | | | |
| 11 | any case or controversy before the Court.
Nothing justifies | | | | | | | | |
| 12 | the imposition of such a blanket extension. | | | | | | | | |
| 13 | The trustee's counsel refers to this additional | | | | | | | | |
| 14 | six months as a "breathing spell," but his counsel ignores | | | | | | | | |
| 15 | the cost to due process to -- of hundreds of potential | | | | | | | | |
| 16 | defendants.
Aside from listing the names of what appear to | | | | | | | | |
| 17 | be any and all entities and associates with any connection | | | | | | | | |
| 18 | to the debtor, no matter how remote, the tolling motion is | | | | | | | | |
| 19 | noticeably silent on the specifics of what claims the | | | | | | | | |
| 20 | trustee intends to bring and specifically against whom.
The | | | | | | | | |
| 21 | trustee referred to it as casting a wide net, and that it | | | | | | | | |
| 22 | is. | | | | | | | | |
| 23 | And as you heard from the trustee directly, six | | | | | | | | |
| 24 | months is not the most that he may seek, testifying that he | | | | | | | | |
Fiore Reporting and Transcription Service, Inc.
may seek additional extensions in the future. To justify
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| 1 | his acts now, the trustee conflates Federal Rules of | | | | | | |
| 2 | Bankruptcy Procedure Rule 9006(b) and the doctrine of | | | | | | |
| 3 | equitable tolling.
Neither authorizes the trustee's | | | | | | |
| 4 | requested extension. | | | | | | |
First, Rule 9006(b) cannot be used to extend statutory deadlines. As Walnut Hill and its progeny confirm, judicial modification of substantive deadlines established by Congress would violate the separation of powers preserved in the Constitution (indiscernible) the legislature has spoken authoritatively, it is not within the province of the judiciary to modify its determination. And even assuming that Rule 9006(b) could be used to extend the Section 546(a) deadline or any other of the statutory deadlines, such an enlargement would be inappropriate on the facts as against Mr. Cao because the decision to enlarge a deadline under Rule 9006(b) must be for "cause shown," and the trustee has not demonstrated any basis that justifies extending the deadline to file an avoidance action against Mr. Cao.
The trustee seeks to paint a broad stroke when describing the objectors, as well as the other potential defendants, claiming that all the objectors have been complicit in their efforts to obstruct and delay the trustee's investigation. But as you heard today from the questioning from the objectors' counsel, that is certainly Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 134 of
Ho Wan Kwok - February 13, 2024 134 not the case with many of the objectors and definitely not the case with regard to the hundreds of potential defendants that have been served with this motion.
As Your Honor learned from my cross-examination, Trustee Despins has virtually no knowledge of my client and did not challenge, because he can't, that Mr. Cao has fully cooperated with the trustee since first being served with the Rule 2004 subpoena. For one, Mr. Cao voluntarily accepted service of the Rule 2004 subpoena. He timely served written responses and produced documents. And he sat for more than seven hours for a deposition on October 20, 2023. Unlike what Mr. Despins' counsel claims, Mr. Cao did not plead the fifth, and he did not refuse to answer any questions substantively.
Further highlighting the lack of diligence by the trustee, he has never sought any additional information from Mr. Cao following his deposition. Highlighting Mr. Cao's cooperation, on the other hand, at no point has Mr. Cao attempted to quash any of the Rule 2004 subpoenas seeking information from him or about him, and in no way has wasted the trustee's time, money, or resources with any motion practice or by filing litigation against the trustee, as the trustee claims that others have allegedly done.
This is yet another example of how the trustee is attempting to leverage allegedly obstructive behavior by a
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| 1 | few others to trample on the rights of hundreds of potential |
| 2 | defendants.
Alternatively, the trustee availed himself of |
| 3 | the equitable tolling doctrine to warrant his extension. |
| 4 | While statutory deadlines are subject to equitable tolling, |
| 5 | any such arguments are procedurally premature at this |
| 6 | juncture, as there are no actual identified defendants and |
| 7 | no pending adversary proceedings ripe for consideration. |
As the case law makes abundantly clear, the Court can only properly consider whether equitable tolling is appropriate after a belated adversary proceeding is commenced and a statute of limitations defense is asserted. This is logical, since application of equitable tolling requires a fact-based assessment. Indeed, the Court would need to analyze whether the trustee, despite his diligence, was unable to commence the action against that defendant due to extraordinary circumstances.
The trustee does not dispute this in his motion, even though he claims to do so today. He concedes in paragraph 45 of his opening brief that "Equitable tolling must be decided on a case-by-case basis." That's exactly what Walnut Hill says is required, and only after filing an adversary proceeding, knowing the claims, knowing the defendant, and knowing the trustee's diligence with regard to those claims.
The trustee's lack of diligence was further
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| 1 | confirmed when we served the trustee with discovery requests | | | | | | | | |
| 2 | seeking documents and information as to any other | | | | | | | | |
| 3 | investigation into Mr. Cao since his deposition.
And we did | | | | | | | | |
| 4 | that in connection with this tolling motion.
The trustee | | | | | | | | |
| 5 | merely responded with broad and improper objections and | | | | | | | | |
| 6 | pointed us back to Mr. Cao's deposition transcript and | | | | | | | | |
| 7 | documents that we produced to the trustee four months ago. | | | | | | | | |
| 8 | That is because the trustee has been sitting on his hands | | | | | | | | |
| 9 | for months, and now, seeing the impending deadline, wants | | | | | | | | |
| 10 | the Court to preemptively excuse his negligence by giving | | | | | | | | |
| 11 | him an additional six months to do what he should have been | | | | | | | | |
| 12 | doing since his appointment. | | | | | | | | |
| | | | | | | | | | |
That is not diligence and is certainly not what is required for equitable tolling. The trustee vaguely claims that forcing him to have to meet the relevant standard for equitable tolling only after filing an adversary proceeding, which is exactly what the law requires, will prejudice him, because he may not be able to make the requisite showing then and may waste resources. But if the trustee is unable to make that showing then, when the claims are more crystallized and the defendants are known, it is inappropriate to give the trustee a blank check now with no known claims or actual defendants on the basis that equitable tolling justifies that.
For the reasons explained and discussed further in
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| 1 | our opposition, as well as the other arguments that the |
| 2 | objectors will make in their closing arguments, Mr. Cao |
| 3 | respectfully requests that the Court deny the tolling |
| 4 | motion.
Thank you, Your Honor. |
| 5 | THE COURT:
Thank you. |
| 6 | All right.
Moving to DBS Bank.
Attorney Weiner? |
| 7 | I might be mispronouncing your name.
I'm not sure if you |
| 8 | pronounced it -- |
| 9 | MS. WEINER:
No.
That's correct, Your Honor. |
| 10 | Genevieve Weiner.
Thank you.
And, yes, I'll be very brief. |
| 11 | As noted, we did just file a reservation of |
| 12 | rights.
And just two points to clarify quickly.
There's |
| 13 | been a number of references throughout the hearing today |
| 14 | referring to sort of the objecting parties sort of lumped |
| 15 | together.
And I don't think this is meant to refer to DBS, |
| 16 | which, again, just filed a reservation of rights.
But just |
| 17 | noting for the record that DBS Bank has been cooperating |
| 18 | with the trustee.
And this has been noted in two consensual |
| 19 | continuances, which are at Docket Numbers 2438 and 2517. |
| 20 | And then very briefly, and I'm hoping this is |
| 21 | non-controversial, we had one requested change to the second |
| 22 | proposed order which was filed last night.
And this is |
| 23 | consistent with our reservation of rights.
Right now, the |
| 24 | order says that the ordered extension, the new defined term, |
| 25 | which date may be further extended.
I'm quoting there.
We |
| | |
Ho Wan Kwok - February 13, 2024 138 would just ask that that be clarified that it can only be further extended after notice and a hearing. So we should all be before Your Honor again if there is going to be further continuances or extensions. THE COURT: You're looking at the order that was submitted, was the second ordered paragraph on the second page? MS. WEINER: Yeah. Yes, Your Honor. Well, I was looking at the redlines. I'm looking at page 9 of the PDF at 28 -- THE COURT: Yeah. No, I'm looking at the same page. It's just the second page of the order is what I'm saying. MS. WEINER: Correct. Yes. THE COURT: In the second ordered paragraph where you're saying which date may be further extended, you're saying it should say after notice and a hearing? MS. WEINER: Correct, Your Honor. THE COURT: Okay. I just -- I'm making a note that that's what you are requesting. MS. WEINER: Okay. I appreciate that. MR. DESPINS: And, Your Honor, we have no issue with that. It's very reasonable. Thank you. THE COURT: Okay. Thank you. MS. WEINER: And that's it. Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 138 of
Ho Wan Kwok - February 13, 2024 139 THE COURT: All right. Anything further? Okay. All right. Great. Thank you very much. Then we will move on to Mr. Conway for Taurus Fund. Do you have a closing statement that you'd like to make, Attorney Conway? MR. CONWAY: Yes. Thank you, Your Honor. Michael Conway for Taurus Fund, LLC. I'm not going to get into the case law. It's cited in our brief. It's been discussed by a lot of folks here today. I know we're short of time. But I do want to just point out that one of the reasons why the Walnut Hill case comes down the way it does is that that's the way the statutes are written. That's the way every court and almost universally around the country has interpreted these statutes. The reason is to protect from the very problem we have here. And that is -- and there's been no case cited by the trustee that comes anywhere close to this case. This case has what is estimated to be more than 900 potential defendants. We don't know how many potential defendants there really are. And we have a handful of situations where there may have been folks during the course of the last two years who have not been complying with discovery requests. There is no way of knowing whether, one, any of Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 139 of
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| 1 | those potential defendants have been obstructing the |
| 2 | trustee's investigation or, two, whether any of the people |
| 3 | who were obstructing the trustee's investigation result -- |
| 4 | caused the result of them not being able to bring a case |
| 5 | against these hundreds and hundreds of possible defendants. |
| 6 | And the reason we don't know that, we don't know who the |
| 7 | defendants are or what the claims are.
We would know that |
| 8 | if they followed the correct procedure, which is file the |
| 9 | claims and then deal with the equitable tolling defense as |
| 10 | part of that case. |
| 11 | You know, and the trustee says, well, we don't |
| 12 | want to run the risk here.
You know, what if we get there |
| 13 | six months down the road and find out that Your Honor |
doesn't believe that what we had for a defense is sufficient? Well, you know what? It's the same today as it is six months from now.
And right now, what we don't know in order to dispute this motion is what it is they -- you know, they claim that these hundreds of defendants did to obstruct. And I would guess that most of them did zero. There's been little evidence.
There's just -- the evidence that was presented on behalf of my clients consisted of, well, we found out that Mr. Barnett's name was on title to a motorcycle. Well, he didn't do anything to obstruct you from doing your
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Ho Wan Kwok - February 13, 2024 141 investigation. That's not the same thing. You know, and you've already got a claim against my clients. So, you know, you could have amended if you thought there was a claim based on the fact that he had his name on the title to a motorcycle. You could have amended well before the statute of limitations came away, which obviously doesn't come for another couple of days. But the fact of the matter is, this is the same problem that everybody has. And I wanted to respond to a comment by, you know, Mr. Bassett, but also Mr. Wander. I wasn't sure why he was making this argument when he was questioning the trustee. But there is no law that -- or case or statute that says that if Your Honor decides this motion is inappropriate with respect to one defendant, it can find it appropriate with respect to everybody else. It's an all or nothing deal here. Either they have a valid motion to extend or they don't. The law doesn't say you can pick and choose when to violate the law. Either this can be extended as to everybody or it can be extended as to nobody. And the fact that there are only 10 people or 12 people or 14 people who file objections is irrelevant. The fact of the matter is that most of these people probably have no idea we're here today. And the reason that Your Honor is -- you know, has precedent and case law and
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| 1 | statutes to rely on is because, you know, it's your job to |
| 2 | protect these folks that don't know that we're here today. |
| 3 | And so it's not fair to say, oh, well, you know |
| 4 | what, they could have been here and they weren't.
And, |
| 5 | therefore, I'm going to just sort of tweak the statute here |
| 6 | and say I can extend it.
That's just not the way it works. |
| 7 | And I just wanted to make that clear, because both |
| 8 | Mr. Bassett and it sounded like Mr. Wander thought that you |
| 9 | could do that on a case-by-case basis. |
| 10 | That's all I have to say. |
| 11 | THE COURT:
Okay.
Thank you. |
| 12 | Attorney Sklarz for G Club? |
| 13 | MR. SKLARZ:
Thank you.
Thank you, Your Honor. |
| 14 | To be clear, this is a motion that has never been |
| 15 | presented to any court that I can possibly find.
Over 900 |
| 16 | people, according to Trustee Despins, this applies to.
The |
| 17 | IAS case or IBT case, whatever you want to call it, applied |
| 18 | to two defendants, not 900. |
| 19 | Both the Court -- and I concede that, perhaps, me |
| 20 | standing on a soapbox representing G Club looking out to |
| 21 | protect other people may or may not be relevant.
But |
| 22 | certainly, the U.S. Trustee has that obligation.
And |
| 23 | certainly, the Court has an obligation to look at that. |
| 24 | So I commend the Court to consider the |
| 25 | extraordinary motion.
This is a class action extension of |
Ho Wan Kwok - February 13, 2024 143 time motion to change a statute of limitations written by Congress. There are constitutional ramifications. There are statutory ramifications. And there are rules interpretations here. First, Stern vs. Marshall says that private rights of actions, which are avoidance actions -- all avoidance actions are Stern claims. Wellness says that. Executive Benefits says that. Hundreds of cases in the Madoff case say that. It's not controversial. These are all Stern claims. To extend a Stern claim, you certainly can't just ignore Stern. So first of all, the Court, I believe -- I believe it's correct that the Court would have to write reports and recommendations, and then this matter would need to be considered by the district court. These are clearly private rights of actions. There's no such thing as a public rights claim under Chapter 5. The one exception I possibly may have found is 502(d) claims. There is one case that says 502(d) claims may be public rights claims. But that's not at issue here. We're talking about fraudulent transfer actions. I saw some 549 actions and possibly some preference actions, but no public rights claims. Second, we need to look at the enabling act that Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 143 of
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| 1 | created the bankruptcy rules.
Again, during my |
| 2 | cross-examination of the trustee, we spoke -- we -- I |
| 3 | mentioned there are two primary bases for tolling.
One is |
| 4 | the rule, 9006, and one is the concept of equitable tolling. |
| 5 | Turning first to the rule.
28 U.S.C. 2075 is the |
| 6 | enabling act, and it says such rules shall not abridge, |
| 7 | enlarge, or modify any substantive right.
The IAS case is |
| 8 | the only case that has addressed Rule -- Rule 9006 and said |
| 9 | you can use that to toll.
However, that court doesn't even |
| 10 | look at the enabling act.
That court doesn't consider the |
| 11 | arguments raised in Walnut Hill.
It just assumes without |
| 12 | analyzing the issue.
It only cites Rule 9006, I think, four |
| 13 | times.
And, moreover, Rule 2000 -- I'm sorry, 28 U.S.C. |
| 14 | 2075 is not even reviewed. |
| 15 | Congress has -- legislatures are very capable of |
| 16 | giving courts authority to extend statutes of limitations. |
| | |
legislature affords a court -- the Superior Court the ability to extend the statute of limitations upon petition for med mal action.
One example from our brief is that the Connecticut
Let's think about if this case was upstairs in district court as opposed to in bankruptcy court. We'd be operating under Rule 6. The Second Circuit has held Rule 6 -- Rule 6(a) is a rule of procedure relating to acts done or proceedings had after commencement of the action and any
Ho Wan Kwok - February 13, 2024 145 statute expressly applicable to such proceedings. It is not intended to modify and change existing statutes of limitations. And that's the Dining Car Employees case, 157 F.2d 417, pinpoint site 420. It's a 1946 case that's still good law. And here's two additional citations. THE COURT: Are these cites in your brief? MR. SKLARZ: No. These are in response to the reply that doesn't -- trustee's reply doesn't really address our argument on the enabling act or our Rule 6 district court argument. Ward v. Hudson City Department of Corrections, 2015 U.S. Dist. LEXIS 147383, page 11, note 4. And that's a District of New Jersey case from 2015. And In Re Vermont Knitting Company 98 B.R. 184, page 186, note 2. And that's a District of Vermont case, 1989. And they both cite the Dining Car case. Again, let's think about this. If the trustee walked into Judge Bolden's chamber upstairs and said I'm filing a class action lawsuit to extend the statute of limitations for a fraudulent transfer action, that wouldn't even be a case that anyone would consider legitimate. There's just no analog outside of this action. There's no district court case that I could find that consider this Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 145 of
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| 1 | | type of ruling. | | | |
And again, remember, we're not talking extensions to one or two recalcitrant defendants. We're talking hundreds and hundreds of people who, as counsel just indicated, could be anyone in the world.
Now, the cases -- and it's not just Judge Tancredi's case in Walnut Hill. It's Judge Krechevsky's case in Damage (ph). There, he looked at extending the statute of limitations. Actually, that was under public rights before that concept existed in bankruptcy law. It talked -- Damage addressed extending lease assumption. And he said you can't extend that statute of limitations. There's a statute of limitations. The statute applies. You can't use Rule 9006 to move it.
So IAS is the only thing they have to rely on. And that case doesn't analyze the issue. It just assumes it in its two parties.
Now, turning to the equitable tolling argument, the other ground for extension. The Second Circuit is very clear here. The term "extraordinary" does not refer to the uniqueness of a party's circumstance, but rather to the severity of the obstacle impeding compliance with limitations period. And that's from a case called Harper, 648 F.3d 132, page 137, Second Circuit, 2011. And there's a number of cases that specifically
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| 1 | say limited financial means are not extraordinary.
In fact, | |
| 2 | in a case called Djurdjevich, a 2020 U.S. Dist. LEXIS case, | |
| 3 | 223295, at page 16, the court -- the Southern District held | |
| 4 | "The law is clear that lack of education, limited financial | |
| 5 | means, and ignorance of the law are not extraordinary | |
| 6 | circumstances that justify equitable tolling." | |
So here, there is no causation between the diligence and the extraordinary circumstances. And the diligence needs to be throughout the period. It can't just be once we got money we could hire Kroll, because we wanted to make sure we got paid before everybody. Attorney Bassett gave his number one reason for extraordinary circumstances, no money. Limited financial means are not extraordinary circumstances.
Now, finally, the trustee could have filed this motion months ago. It is not fair to Your Honor and to the parties here that we're doing this two days before the statute of limitations run. There was a status report given, I think, in September/October time frame indicating that this motion was coming. And now we're here two days before statute of limitations dealing with it.
I can't remember the wise man that once said someone's delay is not everybody else's emergency, or some version of that. This emergency could have been averted. We could have had a proper evidentiary hearing. We could
Ho Wan Kwok - February 13, 2024 148 have had a proper briefing schedule. We could have had proper -- more time to consider this. This is extraordinarily relief. Never been done as far as I can tell. We were then handed 132 exhibits. Actually, not handed 132 exhibits. We were handed a list of 132 exhibits, some of which we can't even access, about 24 hours before the hearing. There was no reason to create this level of fire drill. Due process has to matter. Due process for the objectors, but also due process for the process. Now, lastly, addressing counsel's suggestion that in ECF 1960, in June of '23, that G Club delayed on several matters. We've complied. The Court has ruled, and we have followed the Court's ruling. I do not -- and counsel is right. There doesn't have to -- this is not a claim for fraudulent concealment. This is a claim for equitable tolling. They know everything they need to know about G Club. They said they're going to sue us, so I guess they're going to sue us. But this case is not like IBT. This case is -- has no reason for it to have played out this way. And the Court should deny this motion, because it's simply constitutionally improper. There's no statutory basis to grant the relief, and the relief is unnecessary. Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 148 of
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Ho Wan Kwok - February 13, 2024 149 They have to show it on a particular basis with respect to each claim. There's no such thing as class-action relief for equitable tolling. Thank you, Your Honor. THE COURT: Okay. Thank you, Attorney Sklarz. Attorney Evans? Is Attorney Evans still with us, or did he leave? MR. EVANS: Yes, Your Honor. Thank you. Attorney Sklarz broke up there at the end. Can the Court hear me okay? THE COURT: Yes, I can hear you fine. Go right ahead. Can you not hear us? MR. EVANS: I can now. It just came back. THE COURT: Okay. Okay. MR. EVANS: I'll be brief, Your Honor. Thank you. And I'm not going to repeat the arguments in our objection and those other objections that have been made here, which urge the Court to deny the tolling motion on the basis that the Court does not have the authority to issue a prospective blanket tolling order, whether under Rule 9006(b) or under the equitable tolling doctrine. I just wanted to focus the Court for just a brief moment on just the unfairness, the unfairness to a party like my client who, despite, I think, what Attorney Bassett had opened up about, said that we're, as an objecting party,
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| 1 | someone who's recognized by this Court has been involved in |
| 2 | this case.
That's really not true.
And as Your Honor |
| 3 | knows, this is the first time I've appeared before the Court |
| 4 | on this case.
We haven't been involved.
There's been |
| 5 | (indiscernible) filings.
And the trustee supports his |
| 6 | motion.
We know very little about the case. |
And so my objection, primarily, that I want to focus the Court on goes really to process, the process of a party like the Rule of Law entities not having a meaningful opportunity to defend the motion. We were entitled to go through no discovery on the assertions in the trustee's motion. As I indicated earlier, it's not supported by an affidavit or declaration.
Normally, the way affidavits would happen, and other parties have alluded to this, is the statute of limitations gets pled as an affirmative defense, and then the trustee would, I guess, assert as a matter of avoidance in the adversary proceeding that there's been -- there's some grounds for equitable tolling. In that case, the party would be entitled to discovery, specific discovery on whether equitable tolling applies to that case.
Be seeking it in this context prior to filing of the adversary proceeding, a client like Rule of Law entities who've not been involved at all, we -- we're deprived of any opportunity to rebut any of the testimony offered by the
Ho Wan Kwok - February 13, 2024 151 trustee today. I learned a lot about what's going on in this case from the trustee's testimony, all of which was information not known to me before. We have -- from my client's perspective, we have to accept it as true for purposes of the motion, because I have no way to meaningfully cross-examine him on whether his assertions are true. I have no doubt that he is speaking truthfully to the Court, but (indiscernible) -- THE COURT: We lost you there for -- MR. EVANS: -- can't meaningfully challenge it. I can't refute those -- THE COURT: We lost you there for -- MR. EVANS: -- allegations without having -- THE COURT: We lost you there for a second -- MR. EVANS: For how long? THE COURT: -- Attorney Evans. MR. EVANS: Okay. THE COURT: You said -- I think the last thing we heard is we have no doubt the trustee is testifying as to what he's doing. And then I -- we lost you. MR. EVANS: Okay. And then from there, we have no opportunity to meaningfully address his assertions. Without the benefit of discovery, without being able to go through a process with a scheduling order to be able to protect parties against the one-sided approach, we're here with one Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 151 of
Ho Wan Kwok - February 13, 2024 152 arm tied behind our back. And we've provided the Court with our declaration saying that we fully cooperate. And there's been no motion to compel as to my client. We dutifully responded to a subpoena by providing thousands of documents as early as October of 2022. And then we provided supplemental discovery in, I think, April and May of 2023 and, since then, did not hear back from the trustee until December 20 of 2023 asking for additional documents, which we'll provide. So we would urge the Court on the basis of that to deny the motion as to our clients, the Rule of Law entities. Thank you. THE COURT: Okay. Thank you, Attorney Evans. Then Attorney Schmitt? MR. SCHMITT: Yes, Your Honor. I'll be extremely brief. You know, I'll initially say I just join in the legal arguments of counsel for our fellow objectors, which are well stated. And I'll say I am -- we were limited in our response here factually, because, like counsel just said, we're new to this case as well. And I will note that I didn't hear the trustee actually discuss my clients, Mr. Lee or Mr. Xia, specifically today either. I will note, you know, that in the reply brief, both Mr. Lee and Mr. Xia were accused of Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 152 of
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Ho Wan Kwok - February 13, 2024 153 having obstructed the trustee's investigation. Expected to hear something about that specifically. We didn't hear anything about that. And I will note that they're -- the way they were alleged, and this is in paragraph 12 of the reply, was by being members of the HCHK Creditors Committee. I think it has already been discussed it's not clear exactly how any individual member of that committee obstructed the trustee. And I think the trustee conceded it's not clear it's even legally significant. But I will note, because it is such a serious allegation, that that -- based on the evidence here, I just believe it is -- it's factually incorrect that Mr. Xia was a member of that creditors committee. And I would just direct the Court to the Trustee's Exhibit 12, which is the memorandum opinion in the HCHK case. And at paragraph 27, and the findings of fact of that opinion, Your Honor lays out -- and I believe it was pursuant to a stipulation by the trustee and the other parties in that case -- who exactly the members of the creditors committee were. And they do not include Mr. Xia. And, again, I'm not sure that the trustee is even saying that that's legally relevant, but I will just note that, you know, it's a pretty serious accusation against someone if they were -- obstructed the trustee's
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| 1 | investigation.
I think the reply also says that both my |
| 2 | clients were complicit in the fraudulent scheme because they |
| 3 | were members of the creditors committee.
And I will say, |
| 4 | with respect to Mr. Xia, at least, the trustee's own |
| 5 | exhibits made clear that that is not true, that he was not a |
| 6 | member of the creditors committee. |
| 7 | And, like I said, I'd be brief, Your Honor. |
| 8 | That's all I have to say. |
| 9 | THE COURT:
Okay.
Thank you very much. |
| 10 | Mr. Major? |
| 11 | MR. MAJOR:
Thank you very much, Your Honor.
I |
| 12 | will be brief as well, because I will join in the arguments |
| 13 | of counsel who have already gone and in the various written |
| 14 | objections, including ours, that are on file. |
| 15 | So I just want to start on -- and I'm going to be |
| 16 | very careful to not retread the same ground you've just been |
| 17 | hearing.
But I want to start with the proposed order.
The |
| 18 | language of the proposed order is exceedingly broad and |
| 19 | makes it clear that the trustee is not looking for equitable |
| 20 | tolling, but rather for the Court to amend Congress's |
| 21 | statute.
He's asking that the statute of limitations be |
| 22 | moved from this week until mid-August of 2024.
Because |
| 23 | under his proposed language in the order, he could file a |
| 24 | claim -- if this order gets -- if this order is approved, he |
| 25 | could file a claim two months from now that he knew about on |
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| 1 | December 1st.
And I'm not suggesting he's going to do that. |
| 2 | I'm saying that's what the order would -- says.
And that's |
| 3 | proof to me that what he's really asking is to extend the |
| 4 | six-month statute of limitations. |
I can give you another example of something he could do that has nothing to do with equitable tolling. He could have decided on December 1st that a particular avoidance action wasn't worth the expense because of collection risk, right? The statute of limitations gets extended, and he determines a different analysis of collection risks in a few months and decides now it is worthwhile to bring the action. That's a problem. And that's an order that I think would be unprecedented and, obviously, would violate the separation of powers.
Another problem that this is creating is the trustee is asking the Court to make a finding of equitable tolling without any sort of causation. Because he's asking for you to extend the statute of limitations, it will never get revisited, never have -- he'll never have to demonstrate that a particular claim or case could not have been filed by him in reasonable diligence by this week. That would all get swept under the rug if he gets the order that he's looking for.
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| 1 | can't bring a particular claim.
That's why Judge Tancredi |
| 2 | issued the decision he issued, which everyone has cited and |
| 3 | discussed.
That's another critical problem with this entire |
| 4 | process. |
Finally, I want to touch on some cases that were cited, and particularly the Valdez case that counsel for the trustee read from during his closing argument. The Valdez case -- and this deals with the issue of whether or not the defendant has to be in some way responsible for the delay. At a minimum, a court would have to examine a particular claim or case to determine whether it -- there should be equitable tolling. But on top of that, Valdez, I don't think, stands for the proposition that counsel alluded to.
It was a federal tort claim act case. And in that case, the U.S. government, which was the defendant, failed to inform the mother of a deceased infant that the doctor that the mother wanted to sue for medical malpractice was a federal employee, which changes the statute of limitations from what she and her lawyer anticipated, not knowing it thought a federal employee, would -- they thought they were going to apply the state law statute of limitations in New York. And there -- and for that reason, there was tolling there. But, again, you have conduct by the defendant that led to the delay.
And the quote that Mr. Bassett read to the Court
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| 1 | today cites to -- in that Valdez decision cites to another |
| 2 | decision called Veltri, V-E-L-T-R-I.
It's in the Valdez |
| 3 | decision that the trustee cited in his reply.
That was an |
| 4 | ERISA case.
And, again, in that case, the defendant failed |
| 5 | to inform the plaintiff of their -- of its right and the |
| 6 | procedure for challenging the denial of benefits, and that's |
| 7 | what led to the delay.
So that's why there was equitable |
| 8 | tolling. |
So, yes, it's true; it doesn't necessarily have to be fraudulent concealment in order to have equitable tolling, but there has to be some conduct that, A, caused the delay -- and we have no way of measuring that right now, because the trustee who testified for a long time this afternoon didn't identify a single action that he's being impeded from filing. And he jumped the gun by filing this motion now before he had such an action. And then, number two, there does have to be some conduct. It's equitable tolling, so I don't know how a Court could possibly balance the equities if you don't know who the defendant is and what, if anything, they did to impede the progress of the lawsuit. So I'd just like to add those things into the
record, and I thank the Court for its time. THE COURT: Okay. Thank you, Attorney Major. Attorney Grand?
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| 1 | MR. GRAND:
Thank you, Your Honor.
I also, on |
| 2 | behalf of GS Security, just will join in the |
| 3 | well-articulated legal arguments advanced by counsel for the |
| 4 | other objectors and only wish to add -- or highlight the |
| 5 | points articulated about the fact that the equities need to |
| 6 | be addressed on a case-by-case basis.
The trustee in his |
| 7 | moving papers cites Supreme Court precedent that basically |
| 8 | holds that equitable tolling decisions need to be made on a |
| 9 | case-by-case basis and, I think it's just three or four |
| 10 | paragraphs later, argues that despite that authority that |
| 11 | this Court should determine that equitable tolling decision |
| 12 | based on the entirety of the factual record. |
| 13 | So I -- again, I urge the Court to take note |
| 14 | that -- you know, that that's the standard, and that's what |
| 15 | should be applied in this case as to each defendant or |
| 16 | potential defendant.
And I don't have -- beyond that, I |
| 17 | don't have anything more to add. |
| 18 | THE COURT:
Okay.
Thank you. |
| 19 | So I think now it's Attorney Wander, if I'm |
| 20 | correct? |
| 21 | MR. WANDER:
Thank you, Your Honor.
I also will |
| 22 | be brief.
And in large part, I'm going to echo some |
| 23 | statements by the last two counsel, Major and Grand.
My |
| 24 | argument, focusing on my particular client, Yingying Wang, |
| 25 | was not intended to undercut the arguments by other counsel |
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| 1 | that the motion should be denied to all 331 noticed parties. |
| 2 | I'm just here to speak to my client, whose situation is |
| 3 | different. |
| 4 | If this Court finds that the trustee has overcome |
| 5 | the first hurdle, which many of the objectors argue he has |
| 6 | not, that equitable tolling is permissible under the |
| 7 | applicable law and the facts of this case, in that |
| 8 | situation, then I submit that the Court should only grant |
| 9 | the trustee 99 percent of the relief requested.
Judge, they |
| 10 | noticed 331 people, and 221 of them there's no issue with, |
| 11 | unless you can't have this motion granted to anyone.
And if |
| 12 | that's correct, then what I say next doesn't matter. |
| 13 | But if the Court finds that we have to go to the |
| 14 | next step, that equitable tolling is permissible under |
| 15 | certain facts, then we have to look at the facts, and there |
| 16 | are only ten people left.
And the trustee, arguably, on an |
| 17 | individualized basis, has made a showing to seven of those |
| 18 | ten.
Three of them, of which my client is one, are |
| 19 | categorically different than everyone else. |
| 20 | The only evidence in the record against my client |
| 21 | and two others is that they were members of a committee.
If |
| 22 | that is the only thing that the trustee can hang his hat on, |
| 23 | then that has grave implications if the Court grants the |
| 24 | motion to everyone, first amendment implications.
No one |
| 25 | can be a member of this committee without becoming a target |
| | |
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| 1 | of this type of motion. |
| 2 | And, again, the only evidence in the record as to |
| 3 | my client and two others is that they were members of a |
| 4 | committee.
Not that they did anything wrong, but that the |
| 5 | committee did.
And because this motion is in the nature of |
| 6 | a class action type of request for relief, the Court needs |
| 7 | to drill down on who is affected.
And when you get to the |
| 8 | individual people who will be affected and who are asking |
| 9 | for a minimum amount of due process, the Court should |
| 10 | consider the particular facts and the lack of any support |
| 11 | for the motion against my client.
Thank you. |
| 12 | THE COURT:
Thank you. |
| 13 | All right.
Then I think the final objecting party |
| 14 | to argue would be Attorney Nealon, correct? |
| 15 | MR. NEALON:
Yes, Your Honor.
I'll be brief.
So, |
| 16 | you know, what was -- I don't think it matters, |
| 17 | particularly, consistent with the arguments of the other |
| 18 | objectors, what all of these individuals did.
I think it's |
| 19 | more of a macro question, as was very articulately put by |
| 20 | the other parties.
Is it appropriate to effectively have a |
| 21 | class action declaratory judgment in a vacuum that permits |
| 22 | the trustee to bring future avoidance actions out of time |
| 23 | against potentially hundreds or thousands of new parties? |
| 24 | I spent some time dealing with Mr. Zhang's |
| 25 | circumstances, because the trustee likes to use him as a bit |
Ho Wan Kwok - February 13, 2024 161 of a piñata in the various pleadings he files throughout this case. I went through three or four particular points that were raised by Trustee Despins. And let's just focus on those real briefly. Again, I don't think they're central to anything. But the idea that Mr. Zhang might have attended a protest and been carrying around a sign in 2022, while although I would think that's probably ill-advised and is ill-advised, it has nothing to do with the trustee's ability to discover avoidance actions. Same thing with the sanctions motions that were brought against Attorney Zhang in his capacity as co-counsel for -- from -- for some other parties. What in the world, if anything, does that have to do with the trustee's ability to discover the facts that would support avoidance actions against third parties? Nor is there any evidence that's been presented that Mr. Yongbing Zhang did anything to conceal or hide any facts that might relate to any monetary payments, if any, that he received. As in nothing. And then when I pressed the trustee on some of the other points about this HCHK Creditors Committee -- I'm Case 22-50073 Doc 2947 Filed 02/22/24 Entered 02/22/24 13:48:18 Page 161 of
like, here's your opportunity. Tell us specifically what it is Mr. Zhang did. We get nothing. Because there's no proof of anything. It's just a big innuendo.
Oh, and what's the other thing? Well, Attorney
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| 1 | Zhang went to visit Miles Guo in prison, so therefore -- |
| 2 | well, therefore what?
It has nothing to do with the |
| 3 | trustee's ability to pursue avoidance actions. |
| 4 | Attorney Bassett did a great job in the afternoon, |
| 5 | and there almost should have been a drum roll in front of |
| 6 | it, when he set up the question for the trustee that I |
| 7 | interpreted as, look, the fundamental reason why we're doing |
| 8 | this so late is we couldn't afford to hire Kroll until we |
| 9 | got some money in when we sold the Lady May.
That's the |
| 10 | thrust of why we're here.
Not all these shiny objects that |
| 11 | are getting thrown out, innuendos and insinuations, which |
| 12 | are really all irrelevant. |
| 13 | But I think Attorney Evans hit on a good point |
| 14 | here and another reason to deny this motion.
This is, from |
| 15 | what I've observed -- albeit my powers of observation are |
| 16 | limited, because I've been on the periphery.
This is not a |
| 17 | very transparent situation we have here.
What do we know |
| 18 | about what Kroll's been doing?
I don't think we know very |
| 19 | much. |
| 20 | And, again, when I asked questions today saying, |
| 21 | let's hear your evidence, that's work product; I'm not going |
to tell you that. Well, that's been a theme of this trustee's operation. And maybe Kroll's been super diligent. Maybe it'll be proven that the trustee's been super diligent. But that should be evaluated later in the context
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| of individual cases and not decided now in a vacuum, |
| particularly when the trustee tends to operate like a black |
| box. |
| Thank you, Your Honor. |
| THE COURT:
I don't understand what you mean, when |
| the trustee operates like a black box.
What do you mean? |
| MR. NEALON:
Well, I'll give you an example.
In the |
| HCHK proceedings, all the relevant -- most of the relevant |
| documents, as I understand it, that relate to those entities |
| are in the possession of the trustee.
And I know some of |
| the parties in that case have been trying to get access to |
| those.
And -- |
| THE COURT:
Well, there's -- there are protective |
| orders and confidentiality orders in place in this case for |
| almost two years, Mr. Nealon.
And so you can make that |
| argument.
And that's fine.
But you also need to understand |
| the other side of that argument -- |
| MR. NEALON:
Right. |
| THE COURT:
-- which is the requirements and the |
| positions taken by the debtors since the beginning of the |
| time that the trustee was appointed that everything had to |
| be confidential and that there were all kinds of |
| requirements with regard to documents. |
| So all I'm saying to you is, you're correct; |
| you're on the periphery.
And so when you make a statement |
| |
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| 1 | that -- when you say a trustee, any trustee, is operating in |
| 2 | a black box when you haven't been involved in the case, I |
| 3 | think you need to be careful about that.
Okay? |
| 4 | MR. NEALON:
I'll modify my statement.
I didn't |
| 5 | intend to describe any intentionality to it.
I'm just |
| 6 | saying, at the moment, there's not a lot of visibility -- |
| 7 | THE COURT:
Well, there can't be if there are |
| 8 | confidentiality agreements, Mr. Nealon.
Do you want people, |
| 9 | including people that are affiliated with the debtor, |
| 10 | violating those confidentiality agreements and that |
| 11 | protective order that the debtor's counsel fought so hard |
| 12 | for? |
| 13 | What I'm saying to you is, I understand your |
| 14 | arguments, and you are absolutely entitled to make them. |
| 15 | But to say -- to make that statement at the end of this |
| 16 | hearing, I think, is inappropriate in that you have not been |
| 17 | involved.
And maybe you need to go read those protective |
| 18 | orders and confidentiality orders to understand what's been |
| 19 | going on in this case. |
| 20 | I don't -- I have no problem with legal arguments. |
| 21 | I have no problem with you making any kind of arguments on |
| 22 | behalf of your clients.
But I do have problems when lawyers |
| 23 | make arguments that are not supported by the record that is |
| 24 | before a court.
So that's all I wanted to say on that |
| 25 | point, okay? |
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| 1 | MR. NEALON:
All right.
I'll withdraw the |
| 2 | argument, Your Honor.
Thank you. |
| 3 | THE COURT:
Okay.
Thank you. |
| 4 | All right.
Well, that concludes -- Attorney |
| 5 | Bassett, I'm not going to have another round of arguments. |
| 6 | I'm sure you want one, but we'll be here until 8:00 at that |
| 7 | point.
And I have to let the courtroom staff go. |
| 8 | Plus, I have to rule on this motion.
And I would |
| 9 | assume I have to rule on this motion by the close of |
| 10 | business tomorrow.
Is that -- isn't that correct? |
| 11 | MR. BASSETT:
I'm thinking about that in real -- |
| 12 | THE COURT:
Well, the close of business could be |
| 13 | 11:59 p.m., I suppose.
But, in any event, I mean, I -- it |
| 14 | might be the 15th.
But what I'm saying to you is, I'm not |
| 15 | going to -- I am going to -- I need to go now and listen |
| 16 | to -- go back to what everything -- everything was said |
| 17 | today.
Obviously, we've been doing this for about four |
| 18 | hours.
I have to take into account Trustee Despins' |
| 19 | testimony, the cross-examination by various counsel on |
| 20 | behalf of the objecting parties. |
| 21 | And then I have to make a determination.
So I |
| 22 | don't want to put any party in a position where the Court is |
| 23 | somehow impacting this issue in one way or another.
It has |
| 24 | to be decided.
So that's what I'd like to spend the time |
| 25 | doing. |
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| 1 | MR. BASSETT:
Understood, Your Honor. |
| 2 | THE COURT:
Okay?
So I -- there -- I will take |
| 3 | into consideration what everyone has said today, of course, |
| 4 | and what has been said in the pleadings that have also been |
| 5 | filed, which I have read, but I'm going to go back and |
| 6 | re-read.
I need to do that in light of the issues raised |
| 7 | today.
And there were some cases cited today that aren't in |
| 8 | the briefs, so I have to look at that.
I have to take |
| 9 | everything into consideration, which I will do. |
| 10 | And some -- I anticipate that something will be |
| 11 | issued tomorrow.
But if for some reason it's not, we'll |
| 12 | notify everyone.
Everyone that's on -- participated in this |
| 13 | hearing today is a CM/ECF filer, so you will have notice of |
| 14 | what the Court does when the Court does it.
Okay? |
| 15 | Does anyone have any questions? |
| 16 | MR. LINSEY:
I just have a one-line update about |
| 17 | the tolling stipulations, if that's all right, Your Honor. |
| 18 | THE COURT:
About the what? |
| 19 | MR. LINSEY:
The tolling stipulations that we |
| 20 | filed -- that we had filed yesterday.
Could I just update |
| 21 | the Court about something? |
| 22 | THE COURT:
Yeah.
Go ahead. |
| 23 | MR. LINSEY:
So there was a motion to approve |
| 24 | tolling stipulations that was filed yesterday.
In footnote |
| 25 | two, we indicated that more may come in and that, if so, we |
| | |
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| 1 | would file those on a supplemental basis.
We did receive |
| 2 | three additional tolling stipulations today.
I will file |
| 3 | those this evening in the same manner as we filed the |
| 4 | others. |
| 5 | We would just ask that the Court please rule one |
| 6 | way or the other on those tomorrow as well, because we |
| 7 | have -- |
| 8 | THE COURT:
Well, I have to ask you -- |
| 9 | MR. LINSEY:
Yes, Your Honor. |
| 10 | THE COURT:
I haven't looked.
I haven't looked, |
| 11 | because, obviously, we've been in court.
And we had other |
| 12 | hearings as well this week.
If you have a tolling |
| 13 | stipulation, there -- no -- who's going to -- there's no one |
| 14 | that's going to object to that.
What would be the basis to |
| 15 | object to it?
If the party against whom the trustee is |
| 16 | going to file a cause of action has agreed to toll the |
| 17 | statute of limitations, what would be a basis for any party |
| 18 | to object to that? |
| 19 | MR. LINSEY:
I don't expect that any party would |
| 20 | object to it, but they're drafted as stipulated orders to be |
| 21 | approved by the Court. |
| 22 | THE COURT:
Okay.
That's fine.
I'll take a look |
| 23 | at them.
I will -- |
| 24 | MR. LINSEY:
So I don't I just wanted to let Your |
| 25 | Honor know the extras were coming, because there's a lot of |
| | |
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| 1 | stuff hitting the docket right now.
That was all.
I | | |
| 2 | appreciate the Court taking the time to listen. | | |
| 3 | THE COURT:
That's fine.
Thank you very much. | | |
| 4 | All right.
Thank you all very much. | | |
| 5 | MR. DESPINS:
Thank you. | | |
| 6 | MR. BASSETT:
Thank you, Your Honor. | | |
| 7 | THE COURT:
That concludes today's hearing.
And | | |
| 8 | you will -- you'll know what the Court decides when there's | | |
| 9 | something that is filed on the docket. | | |
| 10 | IN UNISON:
Thank you, Your Honor. | | |
| 11 | THE COURT:
Thank you all.
Court is adjourned. | | |
| 12 | THE COURTROOM DEPUTY:
Court is adjourned. | | |
| 13 | (Proceedings concluded at 6:05 p.m.) | | |
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| 1 | I, CHRISTINE FIORE, court-approved transcriber and | | |
| 2 | certified electronic reporter and transcriber, certify that | | |
| 3 | the foregoing is a correct transcript from the official | | |
| 4 | electronic sound recording of the proceedings in the above | | |
| 5 | entitled matter. | | |
| 6 | | | |
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| 8 | | February 21, 2024 | |
| 9 | Christine Fiore, CERT | | |
| 10 | Transcriber | | |
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