郭文贵破产案 · EXHIBIT · ECF #50-4

元数据

当事人: 郭文贵 (Guo Wengui / Miles Guo / Ho Wan Kwok)
法院: CTB
案号: 22-50073
ECF #: 50
类型: EXHIBIT
立案日: 2022-02-28

原始法庭文件为英文，下方为英文全文。

全文

Case 22-50073 Doc 50-4 Filed 02/28/22 Entered 02/28/22 21:19:53 Page 1 of 159

# **EXHIBIT 19**

From: Sent: To: **Subject:** Attachments:

Susan Hennelly Tuesday, March 03, 2015 3:31 PM BoardOfDirectors Sale of Apartment 1801 and Maid's Room 2219 Kwok board package.pdf

**FILED: NEW YORK COUNTY CLERK 11/28/2018 12:22 PM** INDEX NO. 652077/2017 NYSCEF DOC. NO. 256 RECEIVED NYSCEF: 11/28/2018 Case 22-50073 Doc 50-4 Filed 02/28/22 Entered 02/28/22 21:19:53 Page 2 of 159

We have received a contract for the sale of the 2,950 shares allocated to Apartment 180'1 and the 50 shares allocated to Maid's Room 2219 from Sherry 1800s, LLC (Haroche) to Genever Holdings LLC (Miles Kwok).

Attached are copies of the contract of sale1 Mr. Kwok's application and several letters of reference.

The purchase price is \$67,500,000, plus \$2,500))00 for the furnishings. The 2015 maintenance is \$55,214 per month plus an additional \$936 for the Maid's Room. This is a residential apartment and will be used by Mr. Kwok and his family.

Due to Mr. Kwok's foreign status and purchasing in an LLC, he will be required to sign an occupancy agreement and personally guarantee the lease. He will also be required to provide a security deposit.

This apartment encompasses the entire floor and is approximately 7,300 sq. ft. plus 2,170 sq. ft. of terraces. Attached is a floor plan.

Mr. Kwok has also entered into a contract to purchase Maid's Room 719 which he will purchase simultaneously, if approved.

Michael Horvitz and Fred Seegal have interviewed Miles Kwok and his son, Mileson Kwok. His wife, Hing Chi, was present via Skype.

Very truly yours,

Michael J. Ullman Executive Vice President & Chief Operating Officer The Sherry Netherland Hotel 781 Fifth A venue New York, NY 10022 P: 212-231-6811 F: 212-832-4845 For reservations and special offers, go to

## Executed Contract of Sale

#### CONSULT YOUR LA WYER l3EP'ORE SIGNJNC THIS AGREEMENT Contrllc(of Salc-\_Cooperative Apartment

T/Jis Contract is marle as of February \_\_\_ , *2015* between the "Seller" and the "Purchaser)I identified be!ow.

J Certain Dcfinlt!ons And foformation ! . I The: "Parties" arc: J.f.'Z "Purclrnsor"; Gcncver Holdingi LLC

*1.1.1* ''Seller"; Sherry l800s, LLC *Prtor Hames 1.1.ud by Sellar: ;fddrc~s. l 233 Rock Rimmon RMr/i Sf(lmf1'rd, CT 06903*

*Tcv: ID. No .. l0-0780J54*

*A dd1e,1·,r* · *SS. No .. •*

1.2 Tl1e "Atcornc:ys" ort *(name, firm name, address <111d telephone.fax).* 1.2. I "Seller's Allorney" ! .2.2 ''Pun:haser's Attorney''

Michael *J.* Jones, Esq, Im Gilbert, **Esq, 170 Muon** *Street,* Greenwich, CT O@JIJ 1285 Avenue of the Amerl.:11 Tel: 203-661..{;000 New Ywk1 [';\' 10019-6064 Fax: *203-661,1088* **Tei;** 2l2<J?3-3529 mJorm@iholow.com Fu: ZU-492-0529

J .J 1ne "Escrowcc" is *1he (Seller 'sj* Attorney,

l ,4 The Managing Agent is *(1tom.e addre.rs and Je/ephorre, fax)· Sherry Nelftt:rlrmd Hofe/ Susan Hmud(y 7~1 Flfllt A11m11e, r', New York., NY /0022 Tel: J /J.]3!~68/ l 2/1-83;....,MJ*

*1,5* TI1c real estate ''Broker{st (see~ 12) is/are: J-0!111 Burger, 11 n d **Ka** thy Sloime, Drown !~lllrris Stever1s *And* Soren *a* Bo11rdmirn, Sotheby's l *,G* The name of the cooperative housing corporation (''Corporarion'') is: Sh~rry **Netherland,** lne:.

I. 7 "J110 "Unit" !lumber is: 1801, which eocomp11tsses the entire •

! .8 The Unit is located in "Pr:miscs" known as: *7B* I fifth Avenue, New Yor!<1 NY

l. 9 The ''Sh!!rcs" ore the sh!lres of the Corporation allocuted to the Units.

• 11,<" Floor, excrp( elevator haflw11y onrl ioclu~ling Maid's Room 1519

1.1 0 The 'Lease" is the Corporation'., proprielary lc11sc *or* I, 19 **!Purchaser}** shall pay lhc Corpornt:on's flip tux, trans for occupancy ugreernen? for the U:iit, given by the Corroration fee (apart from the transfer agent fee) and/or waiver *o(* option which expires on fee ("Pllp 'fox"), ff ~ny.

exlent existing i11 the Unil on **the** date hereof: t/ie rddge111tors, *-hJO,Hf'-h.J{),-P}* freezers, rang~, ovens, bui/(-i11 microwave owns, dish,;,tashcrs, ~fvMWHOO,y-«J¥ly-¾Br-lir-1aftOiHg-ifH:iooM-OtioR-',Y+llt-#lls garbc1gc disposal 1Jllits, cabinet:; iu1d coun:ers, lighlin~ fixtures, 6€».:HilHi-•Pw4as~ati<:IA-1~~\rncl--tll ch11r1deliers, waif-lo-wall carpc:ing, rlumbing and ht:iiting 0011tiA~fH>ft.W-.,1JMl6il-·-O-f--O-booft-C~fflfflt{moot-~t.ir-..to/-U1e fixtures, central a.ir-<.:ondition/ng **;and/or** window or sleeve unit:;, 6%ft~!ffi~-Ga~.:i+, washing 111aci1ine;;, *cryrrs,* screen:; .ind storm wiodows, window +~~P.¼lr-\lfl~-may-af})lly--feHiFWM~nH~oo-Yrlth-lhts !m1rmcnts. switch pJatcs, door h:mJwllfc, mirrors. buif:-ins not ~-&-~H1~as~RHJ0Hgalien-to-fHtl'OOtlSfH.l1ltlef-4.is-GMtffi~-tS excluded Jn *1* l.12 tllld all of the 'urnishiogs n,,ekt<ltnttbtH· n&t Ml-GGnH<1g1!flHJJ}OJ1• 6tJUi\noooH1-h-Oan-Q:imffiitm<;fOH&Wr H,nH-«l- *~o-* -evcr,rd rtr- dtin~, -~.---p,nn,-rovkrng-- H-erm, +o-J{}.J.Jlur<;1t1.asw-,t;h,a~-epp~.feHifH1Ratf\-g-11KOOf100t-ioo-w.itl1 **Rt1tWM'-e,1t1-we!f-1H"'i.'f")'ft111-tm~-rl-eeaftters,-etc-hi-tfw** *~le. bltt"'ttt'-c-ilr"* and personal property (except os 1.21 Tr~ I 2G. I or-1..,;,o~ffli~o-!!-RMn-G~w+J.S

**Ivey,** D1mrnm & **O'Mar11 1**LLC Paul, Weiss, **Rffkl11ci 1**Wlrnrton & Gnrr!son, LLP igllbcrt@pa ulwclss .com

1see l.12 below0

t. !2 Sp.c,;;;.fi.1;..iUy..cx,.;Juo,:,J../.;o~l..illL&.s11lc-u .all..J1"t.501Jl'i .. pt0f~- **-!lwi.** in<lu,:k4-~.;4,i . .J.J-uu.i.<lU...w~LJu.clud~~ .tw;..iul.t- "4fu.tM~ffj.H~I-J.ff~,gi. tHtff-4f'IIWfflg'~nt~ **'lfect"mf'J"fl,-k,,e1t-« ,f-wa -LR-fwUJ..oo.~rf16r~&fHH- "'k1t~k-ktltek!1Lw-e{1-a~:,~r-fl~~~•11ttt,** p **tcttrreS ,-e1e.**

L 13 **The** safo [docs} [e~J Include Seller's lnt¢rest in [~}/ *[Servnnt 1 s* Room# 15191/ f Pw-ktftg-SpslOOJ

("lnch,Jed !nten:sts") 1.14 TI1e "Closing" is the transfer of ownership of the !-ihares and Lease,

1.15 The dato scheduled for Closing is no later than 3/6/15 C'Scheduled Closing Date"} at I0:00 **A.M.** (Sec ml *9* and lO)

I. t6 The uPurchase Price" is: \$67,500,000.00

1.16.1 The "Contract Deposit" is: \$7,000,0-00.00

l .16.2 The HBalance" of the Purchase Price due al Closing is;

\$63rOOO,OOO.OO (See~ 2.2.2) See SR18 in Second Rider

1.17 The monthly "Ma.lntc1111ncc" charge is \$57,085.53 (Sec i

4) LI 8 The "As:;i;ssment", if any, payable to the Corporation, n(

*the* date of this Contract *is* NONE, pay11bfc *as* follows:

I.I I "Personally" is lht: following person11/ property, to the *+.-a~tftfttlfflg-GptiiiFY.,-{~le-AWH,/-lh.e-{o/lewittg* ?11 *UI.I,*

specifically excluded in 1.2.2), including but uroH1-loon--of-~----f1•HJ~(unn--0~----.ye,m;..:1r-1;uch-J£1r,1;t,r not UJtlited t..o 411 it~ms set t,oxth i.ri trie series of videos contained in the DVD(the "DVD") delivered by Brown Harris Stevens to Unit 1801 at L:Ou pm or i-ebruary :LU, 201 o.

(j 1.12 - Specifically excluded from this sate are thirteen (13) **paintings** and drawings; one antique secretary desk on east wall of LR *(to* be replaced by a piece of furniture that resembles this desk); personal 'knick knacks' such as small boxes, docks, picture frames, pictures, etc. (but if 'knick knacks' are in the DVD, they are included); file cabinets in Gil's office and contents thereof; all the clothing, framed photographs(except specific frame to be designated by buyer) and the model of the Seller's private yacht located in Seller's office.

> c,,:1nut *,(* j,1,ft (ll~jtHttl','t n.pl'l(/l,j(fli1 1-:.00 I J'cop.r,,I h) "'' (.',,,,,,i,rr<un Co11don1l1,l11,11 ,11i/ <:001m~fln *o(* Iii< ll<MI l'ru1m 1y Serl/on 1/ tli~ Ii"• *York* lilllf *Dur* A11arlnl1u,1

#### CONSULT VOUR LA WYE!{ I3Efl'ORII SYGNJNG THIS AGREEMENT

#### Contract Qf Sulc - Cooperative Apartment

Tills Contract is made *as* of Fcbruary\_l\_i\_1 20 J 5 between the "Sellcr'1 and the "Purchaser'' identified below.

J Certain Definitions 1rnd Informa1!011 1.1 Th~ "Panics" am: l.i.l 11Sc/ler": Sherry *1800s,* u:,c **l,f,2** 11Purchssor 11 1Gonovcr f-loldlngs LLC

*Prior Hattuu 1md by Sd!ar: Addr!!n: 1233 Rock Rlt11mott Read, Sla11tf(}nf1 CT 0690J*

*Tax ID. No.: 'J0-0780.fJ'I*

*Addre,v.,;·: S.S. N1J,:*

1.2 The "Attorneys" ore *(nam,, firm name, add,·e.rs and ulephone, fax),* 1.2. I "Seller's /\tcornoy" ! .2.2 "Purchast:r's Allomey'' Mlch11e! J. *Jones,* E;q, *il'R* GUbert, *tsq,* Ivty, 131mn1m & O1 M11r11 1 LLC Poul, **Weiss,** Rll'kfnd, Wh11rton & G11rrlsori1 LLP *1 '70* Muon *Street,* Groenwlch1 CT 06830 l:28~ Avenue o(the America Tel: 203-661-6000 New York, N\' 10019-6064 Fu: 203-651-7088 Tri: Zl2-J7J.JSl9 mJorie.s@lhofow.com Fin:: **212-492•0529**

l .3 The "E~crowcc" *Is 1he /Seller 'J}* A Horney.

l ,4 The Managing l\genl is *(Ham,e, addres., and telep!wrra, fu.X): Slfttrry Nti1(11:rin11d Hori:( Susan H1m11el{J! 781 Flftlt Avttnw.:, 1'1 1 Nt!W fork, NY 10011 Td: :Jl].J3J,681J P~ JJJ-8J:.i-fU5*

*1.5* TI1c real cstat~ 1 'Brnl<~r(s)" (see~ 12) ls/are: John Burger, 1rnd Kathy S1011.ne, Drown **Harris** *Stevens ind* Serena Dondm•n, Sotheby'\$ 1.v The name of the ccoporatlve hol.l!llng corporal/on ( 11C-Orporarlon") b: Sherry Netherland, Inc.

I. 7 'Jl10 "Unit" 1wmber I:;: 1801, which eticompaues the entire•

! , *8* The Unii ls locate<! /11 "Pr-::mlses" known us: 78 **t** fflfth

**Avenue,** New York, **NY** 1.9 The "Shares" are the shores or the Corporation aflocated to

the Unit.a • **JH'"** Floor, except clcv11tor hallw»y 11nd Including Maid's Room 1519

LIO The "Lec~c" *is* !he Corporation's pruprletvry tense or U *9* IJ"'urchuor} shall pay (Ile Corpor1ttion's flip ui;r;, tta11\$for occupanay ogrcement for the U:-ilt, g(vcn by the Corr,oratlon fee (apat\ from the transfer aicnl fctJ) and/or waiver oi option which ~1<p!rcs on fee (''Flip Tru<''), Ir 11ny.

cxh;11t existing in lhe Unit on the cliue ht'!reor: 1hc refrigerators, *f-:;Jl>..J-tlf'-/-;-J{):1-) frcc,.crs,* ranges, *ovens,* bul/(•in m lcrowovo oven~, dish washers, ~~r-fifi8:fKttilf:-tlH9fHl-eeHeA-Wkfl---#lJs gorb~ge dlspo5fll units, Cftblnets DJld counter.i, llghtlng fj:,:turcs, ~1&-P-uf'OOB~&Hgatwn-4~hl&-Ooo\taCHil chn11dollers, wal/-10-wflll *carpo:ing,* plumbing ond he!lting &OOt-ffi&:~~~er--Oy--tlie *f1xturos,* Qan(rai alr...cundhlon/ng ;and/or window or sleeve uni!s, l,,ffn <AmmhMenl Date ('Ill *8.* I .2) washing mschlno~. *dry~rs,* screens and *storm* window,, wii1dow ~r~~ey-app~y..fw--RMfl~~<>fl-WHIHhf5 treafmcnt5, switch piatcs, door h!mlware, mirrors, buil:•lns no! ealiHl~~UgaHen-40-p1;1HJtWJ&-u~Hltl~ excluded /11 Y l. 12 *and* all of tit~ .. urn/.,hJni:.v tR1ktdf1tg-b«l-tt&! IHl~gtlflt--upon--i~o~n-{;emmltmool-le¼Wr H11tf~- **-~~d** 'tr - c-ftfti11 ;-p-&f,,---p1'1ltr,-ci,oirinir-H'C m,, ~~~1:1,-tiwi~1~tofi00-with fltt **tw1tt1e; 1tt-wttl-M-c-ry,<-11-t 1Mltt'"1tttd--d~e1t!lieNr -e~** m-tm,

lgllbor(@pllulwob-.com

1soe 1.12 helow0

I. 12 Spc.;;!kt1Uy..e;..;;lu.;JuLCl'.,ru....i.h~alc.J\$.lllLp,:ironaJ.propco.y .• mJl• tn-t,looe,d ..Jn ~"a-1 *""1-1-u .. i.* all-400tt..u'-Jw:;Juded. .ia..t!ie-.-i.1+:t~ **wfff"t-+ite--e«"t><~J.J..p~,g1r«ffQ4f°ffW~~~ te«l&fff')'~&tt-ffM--Wili-ff.1.J+twUI-IJ+-~r~ttWH- "knl-t.1<'1ffl1ttkt1'-~t-•t-e~~~~lfH--ff•Mff\ plct11'1"C3;e((',** I. 1J nw safo [dtwsJ [~) lnclude Scllc(s !ntttest io (Sto~t,i)/ [Servnnt's Room 1115191/ (PsAEi11g opaaej (•tncJudol.f **Jntt1ro-il.f')**

1.14 The ~closing" i, the tram:for of ownership of tho Shares and **Lcase,**

*I.IS* The date scheduled for Closing ts no later than 3/6/15 ('1

Scheduled Closing Date") *at* I0:00 **A.M.** (Seo *V'\19* and 10)

I, 16 The "Purohuse Price" Js: \$67,500,000.00

I, 16, l Tho "Contraot Deposit" *Is:* \$71000,000,00 LI *6,2* The "13alence" of the Purchase Price dUI! a( Closing !s:

\$6J,ooo,ooo.oo (See~ 2.2,2) See SR18 in Second Rider

LI 7 The rnonthly "Malnlcnoncc'' charge fs \$S7,0BS.5J (Sec 1 4)

1.18 The "As~i:ssrnenl", If any, payable to the Cnrporatlo11, 111 the dale ofthfs Contract is NON€, payable as fol!uw:;:

f. I r uri:rson11/!y" is tile followlng pmon11I propcrt1, to th<i *-ti~-fl11HH1-0tng-GpH,1A-t,-fDoiffl!--lwc-({-<hv-fQ{fowt11t•.W-,LJ{;L/,*

bff"!tt"("tlr and personal property ( except as l.-at--f-P./-l,-.'10-,l--0r- h-20,~-«pplH)Hr1ho..!!.f.'1nnn~li1g-. 1'-0fr1w!!..-fof-•1-l 8

specifically excluded in 1.12), including but 11ro1----0-l1Jo11-0f-~- for-11-(vrrn· of-- -----y~11rn or-1,uoh-ll<vf!t•t· r;i.ot. UJllit~~ to till it~ms set f.o.rth in the series of videos contained In the DVD(the "DVD") delfvered by Brown Harris Stevens to unit 1801 at 2:0u pm or r-ebruary :.::u, 201b·.

G 1.12 - Speclflcally excluded from this sale are thirteen (13) paintings and drawings; one antique secretary desk on east wall of LR (to be replaced by a piece of furniture that resembles this desk)i personal 'knick knacks' such as small boxes, clocks, picture frames, pictures, etc. {but if 'knick knacks' are In the DVD, they ere , Included); file cabinets in Gil's office and contents thereof, all the ciothlng, framed photographs(except specific frame to be designated by buyer) and the model of the Seller's private yacht located in Seller's office. ·

8Hl0tJIH **Of** AhOf~M-ffif'--0~ aoae111~el0 ta Puf&hfl9Ell't e-tt~-4,oott--Gllflrn ttfft~t-Ptt?-for~f- ~g... i !I 1;1u/i;ntfor 111\y,,-a-Aef-d+~;er)' Dttli!,

I .22 The ''Delivery Date" oflhh Contract !s the :late on which a (1.JIJy executed counterpart of this Co11tr11ct l:i deemed given to ond r~ceived by Purchnser or P Jrchascr's Anorney as provided in~ l7.3.

1.23 All "Proposed OccupeJJts" ofthu U11H fire

l .2J i person, and relationship t, Purchnser:

L23,2pcm:

I. 24 The Contract Deposit sh1:!I be held in (A non-! IOLA -:scrow account. ff the account is o non• IOLA ucc0unt then Interest shall bo *paid* to the Party ontlllcd ''lo the Contract Deposit. The Party receiving the interest shall piy any Income 111.xes thereon. The escrow accoont shull be a segregated bank account at Depository: BNY MELLON

Addres~: 10 **Mamo Street,** Greenwich, CT 06830 (See 127) l 25 Th/,:; Conlrnct *Is* continuBd r,11 uwiched rlder(s),

*Z* **Agreement** to Se!l 11ntl P1m::hase; Purchase **Ptico;** Escrow

2.1 Seller **agrees** lo sell to Purrniiser, and Purchaser **agrees** to purchnse from Soller, the Seller's Shares, Lea.,c, Pmooally and any Inciuded Interests 11nd all o·hcr item~ lncluccd /11 thls sale, for tho Purcha~c: Price 1111d upO':'l the terms nnd condllion~ **set** forth in chll Comrncl.

2.2 The Purchase Price is payable to Seller by Purchaser **as** follows:

2,2. l th1.1 Conlracl Deposit a,t the time of signing this Contrncl *by* Purchaser's good check to the orcer of Escrowee; imd

2,2.2 the Bahince al Closing, or:!y by cushkr's or offi-:inl bank check or ccrllfied check of Purd:aser payahle to :he di reel order of Seller. The check(.~) shall be dn1wn on 1md payable by o branch of a commercial or sa.vings bank, sa, lngs a11d loan Hs:1ociAllon or trust company localed In the same City c,· County ns the Unit. Seller may direc(, on n::asonablc Nofico (defined in~ 17) pdor to Closing, th11t all or a portion of tho Buie nee shall be niado payable to person~ other thar. Seller (see l 17.7).

3 PerrnnAHy

J I Subject to ony rights of the C:irporatlon or any holder of a mong1\ge lo which the Lease Is ~ut:ordinate, this sale includes all of tht: Sel!i.ir'~ lnt1;Jre~t. if ony, In ·.he Per~ons!ty Md the Included !11terests.

3 ,2 No conslderntlc-11 is being paid for th1;: Pen.onalty or for the lncludcd Interests; nothing :1hall be sold lo Purchaser if the Closing does not occur.

3,3 Prior to Closing, Seiter shal remove from t:,e Unit all the furniture, .furnishings and other property not !r.clude:i fn this sale, 1md repair MY damage caused by such removal.

*4* **Representlltlons** Hnd **Cov1tnar.ts**

4. l St,bject to any matter affccl ng title to the Prernis.es (as to which Seller makea no rcprose:ritotlons or covonantB), Seller repre.~ents a11d covenants tiiat:

4, J. l SelieJ" is, and sl;atl at Closing be, the sole owner of the Shares, Lease, Personalty and l11cl11dcd I **,-nere!lt~,** Wi\r: the full right, power 11nd flUthorl\y tu sci and asslgn them, Sclier Jhali maku timely provision to satisfy cxii;tlfli security intc--cs1{s) in the Shan.:H Bnd Lease and havtl lhi some deltvored at Closing (See ~10 l);

4, l ,:2 tile Sht\rcs wcrll dlily l\$suc:d, fully *µttiJ* for and arti nonasst:ssobte;

4.) ,3 the Le(lse is, t1nd wiii nt *Clcsing* be, in fuil f:m:e nnd effect and 10 notice of default under the Lease Is tlOW o~ wil! at Closin& be in effect;

4, 1.4 the Mnintcnance 1md Asscss:ncnt~ payable !J!j of the date hcr:)ofarcfls 3peci0cd 111 i11.17 ind 1,18;

4 I.Sas oftl1ts date, Seifer neither :1as actual kno'-Vlcdge nor hM received ttny written notk;e of uny incrctlsc in 1'.fotntenancc or uny A,;scssrnenl which has been adopted by the Board of Directors of the Corporation and ls not reflected ln the amounts sci forth *In* I. l 711nd *I.* 18;

4, ! ,6 Seller hus not muJe w,y mnlerltil alterations or additions to the Unit wilhoL( any required consent of the Corporation or, to Seller's actual knowledge, without compliance with all appllcable Jaw. This provision shRII not survive C!o~ing.

4.) .7 Setler hos not entered Into, shnll not enter Into, and has no aclutil knowkdge of any agreement (ulher (han 1he Lease) affecting tJt!e lo tile Unit or Its use and/or occupMwy anor Closing, or which would be binding on or 11dYemly o!fect Purchaser ofter Closing (e.g. n sublease or aitcnirrnn ngrecmont); 4.1,8 Seller ha\$ been knowri by no other name for the pest I 0 years ~xcept ns set forth In~ ! . I, I.

4, 1.9 at Clo£ing in accordance with~ l 5.2;

*4.* J *,9,* ! there sl:all be 110 judgments outs1a11<ilng e.galn:ll Seller which have not been bo:1ded against collection out of the Unit ("Judgment.'!'');

4. J .9.2 the Sho~es, Len.so, Personalty and any lnclucied *lntertsts* shall be free and clear of liens (other than the Corpor1ttlon's ge1iernl lien on t.he Shares for which no monies shall bt owed), encumbrances and adverse interests ("Liens");

4. 1.9.3 all sums due to the Corporatlon shail be fuliy paid by Seller to the end of the payment period lrnmedlotcly prece<ling the date of Closing;

4.1,9.4 Scltor sball not be indebted for labor or materiill which might **give** rlso to ttrn fllittg of a notice of mechurlic's lien 11g1tlnst the Unll or the **Premlses; and**

4, 1.9.~ M vlolotlons shall be of record which the owner of the Sht1rcs and Loftsc would be oo\lgated to remedy under the Lease. 4.2 Purchaser **represents** nm.I covenants thot:

4.2, **l** Purchaser Is acquiring the Shares tuid Lease for **resldential** occupa11cy of the Unlt solely *by* the Proposed Occupants **ldcnt!fied** in~ ! .23

4.2,2 Purchaser is not, and wi(hin the past 7 yeHrs h1U not been, the s11bjec1 of a bnnkrup1cy proceeding;

4.2.3 if, l.20,3 applies, Purchaser ~hull not apply for fin!lncing In connection with thts purchase,

4,2.4 Each lndh idual comprising Purchaser is *over* the age or 13 and Is purchasing for P•.1rchascr's own ncco\lnt (benefioli!I ond of **record);**

4.2.5 Purclrn~er :;hall not make *any* representation~ to the Corporatkin co:1trnry to the **foregoing** und ~hall provlJe all documents In support thereof required by the Corporadon in connc'C!ion with Purchaser's appl ic.:ntion for approval of this tronsllctlor1; and

4,2.6 there are not now ond shall not be ut Clo~lng any \mpald tax liens or monetary Judgrmmts against Purchaser.

4.3 Each Party covenants that Its representations and covenant~ contained In **1** 4 shall **be** true and complete at C!osJng and, except for 4.1.6, shal I survive Closing but any uction based thereon mus< be instituted w{thin one year after Closing.

**5 Corporate DocumeotJ**

Purchaser ha, cxnmincd and (\$ sutlstied witl\, or (except as to any matlt.Jr represl!nted in this Contract by Seller) accepl~ and assumes th,; l'isk of not havin~ cx1mdncd, thti Lease, tho Corpomtion'R Certificate of Jncorporaflon, By-law3, House Rules, minutes of !iharchoJd~rs' and directors' meetings, most recent :i.udlted f. nancial stntcmcnt and most recent statement of tax deductions llYttilahic to the Corporation's sharcholder-i under lnterMJ Revenue Code ("!RC'') §2 i *6* (or 1:1ny successor 3tr.tuto),

6 Requlrc<J Approvnl and **Ref•rence.s**

6.1 This sule is subJect to the unconditional consent of th~ Corpor1Hlon.

6.2 Purchttscr 3r11tl/ i11 good folth:

6.2. I submit 10 the Corporo.tfon or rhe Mrtnilging Ag~nt an application with respect to thi!! sale on the form requlr~d *by* the Corpora1lon, ccntaining such data and together with *such* documents tts tho Corporntlon requires, nnd pay the applicable

fees ond charges ch11t the Corporation Imposes upon ?urchaser Ail oJ' tho foregoing ,hall bo submitted within IO bus.nm doys tifkr the Delivery Date, or, I!' ii l .20.1 or 1.20.2 appfks and the Loan Comrr,i!ment Let1or is rcqi.tln:d by the Corpora.t/Jn, wlthl11 J business day/I ll.fler the earller of (I) the Lonn Co·r.mitment Dene (defined In~ 1.21) *or* (ii) the d!Uo of receipt of the Loim Commitment Letter *(* defined in 18. 1.2);

6.2,2 a(tcnd ( and *ca,se* eny Proposed Oc-c11pant lo 11ttcnd) one or more personal riterviews, RS requested by the Corporntlon; And

6.2J promp1ly submit to the Corpornt!on such fltrthc( rclerences, elate and documents rcastmabfy reque.~Ced by the Corporation,

6J Either Party, after learning of the Corporation's decision, ilhall promptly advise the other ?arty thereof, *If* the Corporation hris no! made *a* decision on or bt:forc the Scheduled Closing Date, the Closing shall be 11djourncd fol' JO business *dr.ys* for **the** purpose of obtaining such consent. If 11uch consent i~ not given by rnch t1djoumed date, o[ther Party may cancel this Coniraci by Notice, provided thnl the **Corporation's** consent Js rot issued hoforc such Notice of cancellot.on ls glvcn, If such consent *is* refused nt any time, cilhcr **Pany** may cancel this C0rHract by Notice. In the event *or* c11ncelktiun pursuam co this V 6.3, the Escrnwoti shall rerJnd the Contn1ct Deposit to Purchasor,

6. 4 ff .such consent is refused, Cir not given, due to P·.irchaser's bad faith condi.;ct. Purchaser sh2II be In acfa.ult und 13, l shall govern.

#### 7 Condition or Unit and Pcrsor111ty; Possc9sion

7, I Seller makes no representat:on as to the physical condlllon or srnte of rcpa!r of the Unit the Personally, lhti Included Interests *or* che Premises. Purc.1ascr has Inspected or waived inspecrfon of the Unit, tbc Porsooalty and the Inoluded [nterests ond shnll take the .~flme ''us Is", as of the date of this Contract, except for re11Sonable wear nnd tear, Howc.ivcr, ut tho lime of Closing, the nppliflnces shall be Jn working or~er and required smoke detector(s) shall be instolbd and operable.

*7.Z* Al Closing, Seller shall d:;liv1:r *possession* of :he *Unit,* Per,rn1rnlty ond Included Interest; 1n the condition requin,d by~ 7, l, broom-clean, vacunt nnd free of atl nccupnnts o.nd rlghl9 of pos~ession,

#### *B* Risk of Loss

8.1 The provision\$ of General Obligations Law *§* S-1311, as modified herein, shall apply lo this Lnrnsactlon as lf it were u ::111\e or realty. ror purposes of l.hls parngroph, tho ter:11 "Unit'' I nc!udes built-In Personalty.

8.2 Dcstruct:on shall be deemed "material" under OOL ? *5* l J 11, If the reasonably rnimatd cost *to* restore lhe Unit shall exceed *5%* of tile Purcha~c Price, ·

8.3 !n the even( or any destructhn of the Unll or the Premises, when neither logal title nor the po:rncsslon of the Unit hos been transferred to Purchaser, Si.:ller sh.ill **give** Notice of the loss to Purcnaser {''Los:i Notice") by the earlier of the date of Closing or 7 bus,noss dnys flflcr lhc diltc r-f the loss.

8.4 If there *is* material destruction of the Unit withou: fault of Purchtiscr, this Conlract .~hall be Jee1ned canceled ln accordance with , 16,3, unles5 Purchaser eleot~ by Notice to Seller to complete the purchase with an abatement of the Purchi:se Price; or

3. *5* Whether or not *there is* atty destruction of the Unit, lf without fault of Purchasa, rnore thon I 0% of ~he units In the Premisc.s nro rendered uninhabitable, or reasom1hlc acceRs to the Unit i5 not ftvoilab/c, lhen Purchaser shall have Ll1e right to cunccl this Contract In accordaoce with 16.3 by Notice to Selle!'.

8,6 PurchMcr's Notice pursuant t.o 8 4 or~ *8.5* shalt be glvcr. wi1hin 7 busint;1s.'l duys fo1iowing the giving of the Loss Notice except thut *Ir* Seller dot:s not grvc d Los:; Notice, Pu.rcho.ser'\$ Notico may be given *B.\* any time r:t or prior to Closing.

8, 7 In the event of 8ny destruction of the Unit, Purchaser sholl not be entitled \o nn obatement of the Pl1rcho.se Price (i) lhat exc1;eds the rcasonnbly eMimated cost uf repolr ond restoration or (il) for any loss thet the Corporation is obliged *to* repair or restore; but 8ellor shall assign to Purchaser, without recourse, Seller'~ cliilm, if any, ngl\lrist the Corporation with re~pcct to such loss.

#### 9 **Closing** Locution

The Closing shall be held ut the location designated by the Corporation or, lf no such designation ls m11de, at the office of **Seller's** Attorney.

#### 10 **Closing**

I **0,** I At **Clo:1i11g,** Seiter shall dellver or cause (o be delivered:

l 0. LI Seller's certificate for the S!larea duly endorsed for transfer to Purchaser or accompanled by a separate duly executed stock power to Purchaser, and In either case, with any **gu1mmtcc of Sellcr'R** signature **required** by the Corporation;

10.1.2 Seller's counterpart originnl of **the Lea.~e,** al I assignmer:ts and as~umptlons in lho chain or title and R duly executed **assignment** thereof to Purchaser In lhe form required by the Corporation;

IO. l J rtRPTA documents **required** by~ 25;

I 0, l ,4 keys to the Unh, but id ina cntroncc(s), 11nd, if applicable, garage, m&!lbox, storago unit und any locke In the Unit;

I 0. U If requested, an asslg111ncn! to Purctiascr of So!ler'.'.I intemt In the Pertlonalty and Included lntermi;

10. L6 any documents and payments to comply wllh l 5.2

l0.1.7 If Seller is unable to deliver the documents required in ,1 10. I.! or 10. 1.2 then Seller shall deliver or cause to bij ctel!vored all documenfa and payments required by the Corporati()n for the issuance of a new certificnto for the Share:> or a new Lease. 10,2 At Closing, Purchaser shall:

t0.2, I PRY the 8Rlancc In 11ocordonce with ~2.2,2;

10.2,2 execute and deliver to Seller and the Corporation an agreement wisumlng the Lease, in the form required by the Corporation; and

to,2.3 if requested by the Corporation, execute nnd deliver **counterparts** of a new **lease** substantially the same 11s the Lease, for the **bu:ance** of the Lease term, in which cflse the Lease shall be canceled and surrendered to the Corporation togeiher whh Seller's assignment tl1ereofto Purch11Rer

10.J At Closing, the Parlics shall complete end execute all documents necessury:

I0.3, l for Internal Revenue Ser.ice ("IRS") form !099-S or othor ,9/mll0r requirements:

I 0.3.2 to comply with smoke detecior requiremonts and any applicnble transfer tux ftl!ngs; and

t 0.3 .3 to trnnsfer Seller's lnteresl, if any, In and to the Personalty and Included rnterests.

I 0.4 Purchnser shrill not be. obligurcd to close urilcs,q, u1 Closing, the Corporntion dellvers ·

10.4, 1 to Purchaser u new certli: cute for (he Shares in the nume of Purcha5er; and

I 0.4.2 a written statement by an officer or nuthori1.cd agent of tho Corporation consenting *to* the traMfcr of tho Shares and Lease to Purchaser and setting forth the amounts of *and* payment status of all sums owed by Seller to tne Corporation, Including Molntenance and any Assessments, nnd the date.'! tn which e!lch has been paid.

#### ll **Closing Fees, Tftxca llnd Apportionments**

11. l At *or* prior to Clo.,fng,

I 1.1, l Seller shnll pny, if t1ppl!cuble:

**11,** I. f, i the cost of stock tram fer .stamps; and

11. r, 1,2 transfer taxes, except as set forth in l I. l. 2 .2

11. 1.2 Purchaser shnl! pt1y, if 11pplicable:

l I, 1,2, l any foe Jmpo~cd by the Corporntion relRting to Purcha:rnr's financing; 11nd

11.1.2.2 trnr.~fcr taxes imposed by statute pdnrnrlly on Purchaser (e.g., the ''mAn,ion ~ux 11 ),

! l.2 The Flip Tax, if any, shall b1; paid by the Purty sr,ec1ficd In ,, I.I 9,

I I J Any fee imposed by the Corporation and not specified in this Contract she\! be p1tld by the Party upon whom such fee Is expressly *imposed* hy the Co•ror•tlon, nnd 1f 110 Pr1r1y !~ sped fied by the Corporation, t·1en :mch foe sh11ll be p!iid by Seller,

114 Tht". Port/c3 sluill npportlon es of ! 1 :59..P.M. o: lhc *day* preceding tho Closing, the Malrtcnance, 11nd anyother periodic charges due the Corporation 'other thun Assessments) und STAR Tax Exumption (if tho Uolt ls tht: beneficiary of &amo), 'oas~d on \he 11umber of the days in the month of Closin6,

l l *.5* Assessment,, whether fnyablc In II lump sum or instflllmenls, *shall* not be apportioned, out shall be paid by UH: Party who is the owner of the **Shues** on the d!lte specified by the Corporation for payrnenL Purch~ser slwl! pay nny lnstollments payable after Closing provided Selier had the right and oiected to pay tl1e Assessment 111 installmonts,

I l .6 E11ch Party sh&IJ timely pay any transfer **taxes** for which it is prlmndly ltabte purs1111n1 tn law by cashier's, official bank, i:;1iriiiied *or* Rl!orney's escrow chock, Th/9 l 1.6 shul. survive Closing,

I l. 7 Any computational errors Cli' omissions shall be l.)Orrected within 6 months after Clo~ing, *Ths* ~I l 7 shall **survive** Closing, 12 Broker

12. l Each Pa11y represents that SL ch Party hes not dealt with 1rny pe,3011 uctin~ Iii/ a broker, whctfier licensed or onliceirned, in connection wlU1 this transactlnn other thnn the Broker(-'>) named in~ U.

12.2 **Seller** ~hall pay lhc l3roket's commis~ion pursuant to a suporntc Rgreemcnl The Broker(s) shn/1 not be dccmcc to be a third-party bt:neficiary of this Crmtrnct.

12.3 "111/s ~l2 shall survive Cioslng, conce!lntlon or (er:nim1Uon of th is Contract.

#### 13 Def11ults 1 Remedies *and* Indumnities

I J. l In the event of n dofo11!t or m i:.rcpros\!ntotlon by Purchaser, Sollcr's soto und exclutiivo rcn.;:dics shall he to ctmce! thl~ Contract, rctt1l11 lho Contract Depos1t as liquldtncd d11rnages und, *If* npp/lcoblc, Soller may enforce the indomnlty in , l3.3 as co brokcrago comrnl!slon or sue uncer ii l 3.4. Purchaser prcfors to limit Purchaser's exposure for actual damages to the amount of the Controct Deposit, which Purchasor e.groc:; constltuta11 a fair ond reasonable amount of compensation for S~ller>s tl!images under Hie clroutnstnnces and is not a penally, The principles of real property law shtill apply to this liquidated damogcs provision.

13.2 ln the event of a default o· mlsrcprcscntatlon by Seller, Purchager shall have:: su(.:h remedies as Purchaser Is entitled to nl *11\W M* in equity, i11cludi11g sped1-: pr.:rformirncc, bccuuse tit,;: Unit and possession tbereof can no: be dup/ icated,

13.3 Subject to th¢ provi:1ions of~ 4.3, **ea.oh** Party indemnifies nnd holds harmless the other egalnst and from an} claim, Judgment, los~, liability, cosl or cxpen:.e rt:sultlng from the indcmnltor's breach of ony of Its rt:prescntations or ccvenants stated to survive Closing, cence l11tion or tennltlation of this Con(racc Purchtl-'icr indtrnnlfles and holds harmles~ Seller nguinsi and from any cloim, Judiment, [oss, li~blllty, i:;ost or i;:xpense resulting from the Lct\sc '.)b/igations 11ccru!ng from ond after the Closing. Each indernnit) in..:lud~s, without llmltatlon, reasonable attorneys' **fees** and disbursernc:nt.~, court ccsts und l!tlga\ion expenses arising from the defense of any cliim and cnforcemcn1 or coliectio11 of fl judgment under this indemnity, provided the indemnitoc is glvea Nollce nnd upportunlly lo defend th¢ cluil11, Thi~ ii IJ,J shall survive Closing, cuncclfa!ion or l<.:rm inatlon of th is Contract,

13 .4 In the event 11ny instrument for the payment of the Contrnc( Dopo~it falls of collection, Seiter shall have the right to sue on the uncollected instrument. In nrlditlon, such fullurn of collect Ion shall be a defo.ult under this Contract, provided Selle1 gives Purchaser Notice of such raHun: of collcctlon and, within 3 business dayi after Notice ls givi,n, E,gcrowee do~ not recelvc from Purchaser an unondor:.ed good cortlfiod check, bank che-ck or immediately avalfab/e funds in th" amount of the uncollected funds, failure to cure \$UCh default shall en!ltle Seller to the remedies set forth in **1** 13. I and to retain 1111 sums as mny be coHcctcd and/or recovered

#### 14 Entire Agreement; Modlfk1H!on

!4.1 l'dl prlM ord! or written rcprcsentntl11nfi, understandings nnd **11greemcnts** had between Hie P;;rtJI::, wl\h rclµte\ lo the subjecl ,nnttcr of thb Contract, nnd with the Escrnwcc as to 27, aro merged in lhi11 Con!racl, whlch alone fully and compk:tely expresses the Parties' find Escrowee•~ t1greement. 14.2 The Attorneys may extend In wrl1f og any of the time llmlM:t!ons ~tat~d in thio Contract.. Any otllef provi1,lon of !his Contrnc( ,rniy bo chtinse-d or wuived only in writing signed by !he Party or Bscrnwcc to **be** charged,

#### **15** Removal of Liens rrnd Judgm~nts

l *5,* 1 Purchnscr shall deliver or cnuse to be delivered to Seller or Seller's Atto1·noy, not less than l O oulendnr <fays prior to the Scheduled Clo:3ini Date fl Lien and Jucigmtint StW'oh, **except** that Liens or Judimen!s first disclosed in a continuation ,oe.rch shall be reported to Seller within 2 business days after receipt there-Of, but not lator them tho Closing. Seller shall have the right to adjourn the Clos/ni pursuant to~ 16 to remove ony .rnch Liens ttnd Judgments, Failure by Purchaser to timely **dollver** such search or continuation search shall not const!tule a waiver of Sellen covenants in ~4 as to Liens and Judgments, However, lf the Closing Is adjourned solely by reason of untimely delivory of the Lien and Judgment seMch, tho t'lpportionments under , I U shall be made as of 1 I :59 P.M. of the duy pm.:eding the Scheduled Closing Date In 1.15,

l5.2 Seller, 11t Seller's expense, shall obtain and deliver (o t11e Purchnser the documents ond pf\ymenu necessary to secure the relea.qe, satlsfoctlon, termlnotlon nnd d 1sch11rge *or* removal of record of any Liens and Judgments, Sdler muy use any portion of the Purchl\&e Price for such purposes.

i 5.3 This ~115 shall survive Closing,

16 Seller's Inability

*16.1 lf* Seller shall be unable to (ronsfer the Items set forth in 1 2. l lo accordance wlrh thll:l Contract for any mason other lhrui Seller's failure to make a n:quin:d payment or other willful act or omJsslon 1lhen Seller shall have the right to adjourn the Clolllng for periods nol exceeding 60 calendar days in !he **llggregate,** bul not extending beyond the expiration of Purch11ser'i Loan Commitment Letter, lffi l .20. J or 1.20.2 app!les.

l 6.2 ff Seller does not duct tu ad}ourn tho Closing or (if odjournod) on tho odjournod date of Closing Seller is stlll unflhle :o perform. tl1en unless Purchaser clecti to proceed with lhe Closing without abatement of the Purchase Price, either Party may cancel this Contract on Notlce to the other Party given e.t any time thereafter.

16.J In the even~ of such cancel let ion, lhti sole liability of Seller shall be to cause the Contract Deposit lo be refunded to Purchaser nnd to reimburse Purchaser *for* the actual *casts* incurred for Purcha.sc's lion and tltle !iea.rch, If 11ny,

#### 17 Notice, nnd Contrnct Delivery

17.1 Any notlcti or demond ("Norioe") shnll be in writing ond delivered either by hand. Overnight llel1very or certified or registeroct :ntill, return reoeipt rcque,ted, to the; Party ~d j/mu!tancously, in like manner, to such Party's Attorney, if uny, and to ERcrowee ut their respective 11ddn:sses or to such other 11ddrtlss as shall hereafter be designntcd by Notice g!vcn pursuant to this i1 17.

not reqt-Jir11d tG flpply ffl6ttt~~

datt¾-

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159

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#### **19 Singular/Plural** And **JolnUSeven1I**

The use *or* the slngufor !!hall be ceemed lo include the plural ond vice *ver.>'B,* whenever tl!e *context so* requires. lf *more* !hl¾n one person cons1ltutes Seller or Purchaser, their obi fgafions as such Party shall be Joini and ~evcra/.

#### 20 **No** Sundv11i

No representation and/or co~nant contained herein shell survive Closing except as exprc.ssly provided. Payment of the Delancc sh~ll constitute *a* dlscha:-ge and release by Purchaser of nil of Seller's obligations hemmder except those expressly stuted to survive Cio~ing.

#### 2l lnsp11ctio11s

Purchaser Md Purchnser's representatives sho/J he.ve the ri&hl to Inspect the U11it within 48 hour.; prioi· to Closing, anc at other misonable times upon nmona.bk request *tq* Seller.

#### 22 Governing LRw and Venue

This Contract !ihttll be governed by the laws o[thc Ste.tc of New York without regard to principies of conflict ofh1ws. Any 11ctlon or proceedini **Oiising** o\lt or this Contrnct slrnl I b~ brought In tile county or Federal district whe!'! the Unit is located and the Parties hereby consent to said venue.

#### 23 No **Assignment** by Purclrnser; Death of Purchaser

2J, I Purchescr may *not* ns.slin this Contract or any of Purchaser'~ right:i hereunder. A:iy such purported assignment :Jhiill be null ond *void*

23,2 This Contract shnll ttrmirrnte upon the death of ft!. persons comprising Purchaser ond the Contract Deposit shall be refunded 10 the Purchaser. Upon maklng .mch ref'md and rvimtium:ment. ncilhc:r Party she.II have any further liability or claim against tile **other hereu11del',** except !lS Sllt forth In ,r 12,

#### 24 **Cooparatlon** of Parties

24. l The ?~rtics shall each CJopernte with the other, the Corporation and Purchaser's hstltutlonal Lender and title compc1ny, if *any,* and obtain execule and delive1· such documents as are reasonably necessary (a consummate 1.11. sale. 24,2 The Parties shall timely f le all required documents in vonncclion witb nil governmentil fl!lngs that are reqJlred by luw. Each *Pany represents* ro the *otiwr that its* 1.tatementJ In *such tilings* shall be true end complete. This **,i** 24.2 :,hall survive Clo~ing,

#### 25 **FIRPTA**

The parties she!I comply with !RC \*1 897, 1445 and the regulation~ thereunder e.~ :mme m.!ly be amended ("FIRPTA"). If appllcoblc, Seller shalt execute and deliver to purc!111Ser 11t Closlng a Ccrtlflcntlon of Non~ Foreign Stulus ("C~S") or Jeli11et ti Withho!dlng Certi(1catc from **the** JRS, ff Seller fails to deliver a CNS or a Wlthhoidhig Certiflcale, Purchaser shall withhold from the Balance, ond ~emit lo the IRS, such sum **11s** may be required *by* law. Seller he·eby waivos any right of action nga!nst Purchaser on account of such withholdlng ond rcrniHance. This 12,~ shall survive Closlnli',,

#### 26 Additional Rcq11irement.s

26.1 Purchaser shall not be oblfb'(ltcd lo closi.; unle:;s all of 1he following requirements **are** sntisfied at the time o(the Cbsing;

26, i. I the Corporation *19* !n good standing;

26. l .2 cho Corporntlon hos fee or leasehold title to the Premises, whether or :10t mttrkc111b(e or Insurable; and

26, l.3 there is no pending *In rem* action, rnx certiticate/ Jon sule *or* foreclosure action of any unde dying mongogc affecting the Prcmi~cs,

26.2 lf any rcqulremcnt in 26. l ls not sa{isfred o.t !he time of lhe Closing, Purchaser .~hnll give Seller Notict:l and if the some L'.l noi sulisflcd wlth!n a reasom1bk period of time thereafti.;r, Chen either Party *way* cancel this Contract (pursuant to ,i 16.3) by Notice,

#### **2 7 Escrow** Terms

27.1 The Contmct Deposit shul! he deposited by Rscrowoe ln un escrow account us set forth tn *'i* l ,24 and !lie proceeds held 1md disbursed in 11ccordancc **with** the ti.:rms of this Conlract At Closing, 1he Contract Deposit shall be p11id by Escrowee to Seller. If the Closlng does nor occur *and* eHher Party gives Notice lo Escrnwcc demundlng payment of the Contract De:po81t, Escrowee shall gfve prompt Notlcc to the other Party of such demand. lf Esctowee does not receive a Notice of objection to the proposed pAyment from such o~her Party within l 0 bus(ness dny5 after the **giving** of l3scrowee's Notice, B:icrowce **b** h\lrcby 11uthorizcd and directed to make such p11ymcnt to the domand[ng party. If Escrowee does receive such *a* Nottcc of objoctlon within soid period, or if for any reason Escrowee in good faith e!ecls not to make such paycrn:ml, Escrowco may continue to hold the Contnict Deposit until otherwise directed by a joint Notice by tht: Partlos or a fins!, non-appealeble judimcnt, order or decree of a court of competent jurisdiction. However, Bscrowee shall hnve the right at ony time to dcpo~lt the Contract Deposit er,d the interest thereon, if any, with t.hc cl~rk of fl court In tho cou1ty as set forth in 1 22 and shall give Notico of such deposit to each Party, Upon disposition of the Contrac.:t Depo5it *and* Interest thereon, *if* any, in accordance wl\h this 27, Escrowee shall be **released and** discharged of all e~crow

**obligations** and **liabilities,**

**27.2 The** Pnrty whose **Attorney** is Escrowce shall be llable for loss of the Contract Deposit. **Jf the** Escrowee is Scl!cr'i **attorney,** then Purchaser shall be credited with the amount or !he **contract** Deposit at Closing.

27.3 Escrawee wlll ~erve without compensotlon. Escrowec **is** tlctrng solely as a stakeho!dcr at the Par(le61reque8C ~nd for their convenience, Escrowee :shull not be liable to either Party for a11y oct *or* omissfon unless lt involves bad faith, willful disregard or this Contract or gniss negligence. [n the evenl of any dispute, Seller nnd Purchns1;:r sh.ti! jointly and severally (with rJght of contribution) defend (by 11ttorneys elected by Escrowec}, indemnify and hold harmlti~a' Escrowee erom and against any chtlm, judgment, foss, !iab!lity, cost and tJxpensts tncurred in connection with the performance of Escrowee's acts or omissions not lnvolvlng bad fallh, wl llful disrer.ard of thls Contract *or* gross negligence. This Indemnity *Includes,* without limitation, rcRsonnble attornoys' fees either p!ild lo retoin nttomeys or repre~entlng the fair value of loge.I services rendered by Escrowee to itself and disbursements, court (;OSts and litigation expenses.

27.4 Escrowcc i,.cknowlodges receipt of the Contract Deposit, by check subject to collection.

27.5 Rscrowoe agrees *to* tho provisions of this~ 27.

?.7.6 If Escrowcc Is the Attorney for **a** Party, E:icrowec shall be

pt:rmltted to t'eprosent such Party !n ,my d{spulc or lawsuit. 27.7 Thi~ 1 27 shall survive Closing, canctilla(ion or \~rmlnlllion

#### of this Contrncl 28 M~rgln Headlnis

**The margin** bending do not constitute part of lhc tcxl of ~his Conlrnct.

#### **29 Misccllancou.s**

This Contract sh1t!I not bt, binding units~ nnd until Seller delivers **a** fully executed counterpart of this Controct lo Purchaser (or P Jrchaser's Attorney) purrnont to 17.2 and I 7.3. This Contract shal! bind

onrt Inure to tho benefit of the Porties hereto 11nct their respective helm, ptrsorrnl and kgul represe11tellv~~ and successors In i:Herest

30 Lead Paint If appJlcabfo, lho oomplote and fully executed Disclosure or lnformlltlon on Lead Based Paint and or Lead•Basod Paint Hanrd3 Is attached hereto and mid,; a part hereof.

In Witness Whereof, the Parties horeto havo duly executed this Contract us of tho date flrst above written.

| S .d(1mo TO: | SBLLER: SUB:RRY 1800s, LLC / ~#"v· -~x/ Hy: • f!:. ··-········ _______ | PUR.CHASBR: G!NEVER HOLD~QS LLC ,,~~- vi'Ji-,< LL_( Byt~\!,,.,,X:,<, | |--------------|------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------| | | | | | | | ------ ~-+••··--- | | | | |

#### **FIRST RIDER ANNEXED TO AND FORMING A PART OF CONTRACT OF SALE FOR THE 18TH FLOOR KNOWN AS UNIT 1801 AT SHERRY NETHERLAND**• **INC .• 781 FIFTH AVENUE, NEW YORK, NEW YORK, A COOPERATIVE APARTMENT BETWEEN SHERRY 1800s, LLC, AS SELLER, AND GENEVER HOLDINGS LLC, AS PURCHASER, DATED FEBRUARYZ..I, 2015**

31. In the event of any conflict between the provision of this Rider or any other Rider, and the provisions of the Contract to which this Rider is attached, the provisions of this Rider shall control.

32. In addition to the representation made by Purchaser in Paragraph 4 of this Contract) Purchaser) jointly and severally, represents and warrants to Seller that Purchaser knows of no outstanding judgments or tax liens and knows of no threatened lawsuit or claim (including criminal and/or tax proceedings).

33. Supplementing Paragraph 20, the acceptance of the Shares and the assumption of the Lease by Purchaser anc the delivery of possession of the Unit and keys by Seller shall be deemed full perfonmmce by Seller of Seller's obligations under this Contract, except any of which that survive Closing, and such acceptance and assumption by Purchaser shall discharge Seller from all terms• conditions, representations and agreements required to be performed by Seller under this Contract1 except any of which that survive Closing. No liability on the part of Seller shall survive the Closing except as expressly set forth *in* this Contract.

34. In the event that there is any refund on real estate taxes attributable to the time period in which Seller has owned the Unit, such refund shall belong solely to Seller. In this regard, Purchaser shall cooperate with Seller in connection with obtaining such refund and Purchaser agrees to sign any reasonable documentat:on to assist Seller in obtaining such refund, If such refund is delivered to Purchaser (or credited t::Jwards Purchaser's monthly maintenance by the Corporation), Purchaser shall promptly remit such refund to Seller. The Parties acknowledge that the provision of this Paragraph 34 shall survive the Closing

35. An increase in the maintenance or the imposition of an assessment after the date hereof shall not be deemed a misreprcsentF,ltion or breach by Seller hereunder. In this regard, any assessment imposed by the Corporation after the date of this Contract, shall be solely the obligation of Purchaser if such assessment is payable on or after the date of Closing, Seller will send Purchaser a copy of any notices from the Corporation regarding material facts relating to the Corporation including any maintenance increases.

3 6. A "Disc~osure of Infonnation on Lead.Based Paint and/or Lead Based Paint Hazards" *is* attached hereto as Exhibit A hereto. Such document may be executed in counterpruis, This Contract shall be ceemed executed when signed by the parties hereto notwithstanding that the Broker's signature on such Exhibit A have not yet been obtained. Purchaser acknowledges that Purchaser has received the pamphlet Protect Your Home From Lead in Your Home and Purchaser hereby waives the opportunity to conduct a. risk assessment or inspection for the presence of lead• based paint and/or lead-based paint hazards in the Unit and/or the Premises. Purchaser acknowledges that Seller has made no representations to Purchaser concerning the presence of lead paint in the Premises except in the Unit and then only to the extent expressly set forth in the attached disclosure form. Notwithstanding any requirements pursuant to any Local Law, Purchaser

the Premises and Unit in their current 11as is 11 condition concerning the presence of lead paint and any hazards related to same,

> 37. All representations made by the Seller in the Contract or any Rider thereto are made to the best of Seller's knowledge and belief without independent investigation and shall not survive the closing.

**IN WITNESS WHEREOF,** of the parties hereto have executed this Rider to Contract of Sale as of the date first above written.

#### **SELLER:**

**PURCHASER:**

**GENEVER HOLDINGS LLC**

SECOND RlDER TO CONTRACT *OF* SALE DATED AS OF FEBRUARYjJ\_, 2015, BETWEEN SHERR v 1800S LLC, AS SELLER, AND GENEVER HOLDrNGS LLC, AS PURCHASER, COVERING PREMISES LOCATED AT 781 FIFTH A VENUE, NEW YORK, NEW YORK, 18TH FLOOR (UNITS 1801, 1804, 1807, 18091 1811, SERVANTS ROOM 1519)

159

SR 1. In case of any inconsistency or conflict between the printed portion of this Contract or the First Rider, and the provisions of this Second Rider, the provisions of this Second Rider shall control,

SR2. Seller shall, promptly after receipt thereof, deliver to Purchaser copies of any written notices from the Corporation receiwd after the Delivery Date and relating to: (1) any increase in the amount of the monthly Maintenance as set forth in paragraph 1.1 7; (2) any intended or proposed assessment other than the Assessment; (3) any intended or proposed changes to the "flip tax" or other transfer fee charged by the Corporation or its Managing Agent; ( 4) any proposed amendment or modification of the Lease, the Certificate ofincorporation of the Corporation or the Cc-rporation's By-Laws; (5) any proposed construction or repair work the cost of which is intended to be borne by the Corporation, its insurers or its shareholders; (6) any refinancing or other material change with respect to any mortgage affecting the Premises; or (7) any damage or casualty to the Unit or the Premises.

SR3. Supplementing paragraph 3.3: In the event Setler removes any light fixtures from the Unit, such fixtures will be replaced with standard fixtures, so that no exposed wiring or bulbs remain in place of the removed fixtures. Seller shall, at its own expense and prior to the Closing, remove from the Unit all furniture, furnishings and other personal property and/or fixtures not included in this transaction and shall repair in a good and workmanlike manner any material damage caused cy such removal. Any of Seller's personal property not included in the sale contemplated hereby which is not removed from the Unit prior to the Closing shall be deemed abandoned property. Purchaser may (but shall not be obligated to) cause any such abandoned property to be removed from the Unit at Seller's risk and expense. The provisions of this paragraph shall survive the Closing.

SR4. Notwithstanding the provisions of paragraph 7 or any other provision of this Contract to the ccntrary, Seller represents and warrants that the plumbing, heating, electrical and air conditioning systems and fixtures and all Personalty shall be in working order at the Closing, to the extent the responsibility of Seller under the Lease.

SR5. (a) As 1i material inducement to Purchaser entering into this Contract, Seller hereby represents that Seller has obtained all necessary approvals, pennits and certificates from the Corporation and the New York City Department of Buildings for any work done by Seller to the Unit. Fu:iher, Seller is not obligated to perform any work or expend any monies

D(1cY: US! 984 I I 54v4

( other than maintenance) pursuant to any agreement ( other than the Lease and other Co-op Documents) with the Corporation that would be binding on Purchaser after Closing.

159

(b) Prior to Closing, Seller shall, at its sole cost and expense, cause any and all open permits against the Unit to be closed, discharged, and otherwise paid **for,** and shall deliver satisfactory proof of same to Purchaser. A Letter of Completion from the NYC Department of Buildings shall be deemed satisfactory proof. Notwithstanding the foregoing, Seller shall not be required to close two open permits that are listed by the New York City Department of Buildings as Job Nos. 101785169 and 101778836, copies of which Jobs are attached hereto. The parties acknowledge the reason for the prior sentence is that the Corporation has stated it will agree in writing to duly close these two open pennits. In the event the Corporation does not deliver such written agreement, then Seller may either elect to close these permits, but if it does not, then either party may terminate this Contract.

(c) Seller shall either (a) deliver to Purchaser a letter of completion from the New York City Deprrtment of Buildings evidencing that the Unit has been legally combined, or (b) at Closing, execu:e and file with the transfer taxes returns an affidavit stating the reELo;;ons that the Unit is properly and legally considered to be a single unit with one kitchen and that transfer tax should be paid to New York City at the rate of 1.425%. Seller shall also deliver an indemnity letter to Purchaser indemnifying Purchaser against any costs and damages (including, but not limited to penalties and interest for late payment) resulting from the City's requiring payment at a higher rate of taxafon. Notwithstanding the foregoing, if (i) Seller is unable to deliver a letter of completion as set ::'brth above, and (ii) Seller elects to pay the New York City transfer tax at the rate of 1.425% (rather than the so-called "bulk rate" of 2.625% ), then Seller's attorneys shall hold in escrow the sum of \$840,000 representing the difference between these rates of taxation. Seller's attorneys shall hold such sum for the shorter of (i) two (2) years (representing the current audit period for this tax by the New York City Department of Finance ("DOF")i or (ii) until such time that the Corporation delivers satisfactory written evidence from the New York City Department of Buildings (and/or other appropriate governmental entities) that the Unit has been properly and legally combined. Seller's attorneys shall either release the balance to Seller if it is determined thet 1.425% was the appropriate rate of taxation, or pay this sum, plus interest and penalties, if any, in the event it is determined by DOF that 2.625% was the appropriate transfer tax rate.

SR6. Supplementing paragraph 4.1: "4.1.10. To Seller's knowledge, Seller has not received any written notice of any major repairs or replacements contemplated to the Premises or to the building systems in the Premises (including, without limitation, the heating, plumbing and electrical systems~ that could materially affect the Premises or the Unit.

"4.1.1 L To Seller 1 s knowledge, there are currently no water leaks into the Unit and there have been no such leaks during the twelve (12)- month period immediately

NYSCEF DOC. NO. 256 RECEIVED NYSCEF: 11/28/2018 Case 22-50073 Doc 50-4 Filed 02/28/22 Entered 02/28/22 21:19:53 Page 16 of

preceding the date hereof. In addition, Seller has not been notified during said twelve ( 12) month period of any water leaks elsewhere in the Premises which were purported to emanate from the Unit."

"4.1.12 During Seller's ownership of the Unit, to Seller's knowledge, Seller has not been aware of (a)° the presence any toxic mold in either the Unit, or (b) any bedbug infestation in the Unit."

"4. 1. 13 That to Seller's knowledge, there are no claims, actions, suits or legal proceedings of any kind pending or threatened (in writing), wrjch affect the Unit, Seller's ownership of the Unit or which may cause a lien of any kind to be imposed against the Unit or the Seller.''

''4.1.14 To Seller's knowledge, in the last twelve ( 12) months, that neither Seller, nor any person acting on behalf of Seller, has made any complaint **(in writing,** electronic communication or by telephone) to tl:e Corporation, Managing Agent, superintendent or any other unit owner or tenant-shareholder at the Premises regarding noise, offensive odors, offensive conduct, lack of heat or hot water, or any other disturbance or adverse condition affecting the Unit."

SR 7. All representations, warranties and covenants of Seller set forth in this Contract shall be true in all material respects as of the Closing, and Purchaser's obligation to perform under this Contract is expressly conditioned upon there being no breach, inaccuracy or misrepresentation in any of the same.

SR8. If the Corporation approves the Purchaser's application but conditions its consent upon Purchaser complying with requirements outside the scope of the Contract, such as a demand for the Purchaser to deposit funds into escrow, then Purchaser may elect, in its sole discretion, to either (i) comply with such conditions and proceed with the Purchase, or (ii) decline to comply wi-:h such conditions. If Purchaser decHnes *to* comply, then Purchaser shall deliver to Seller written notice of same and this Contract shall be deemed canceled, and Escrowee shall promptly refund ,the Contract Deposit to Purchaser. Further, Seller acknowledges and agrees that Purchaser shall only be required to disclose to the Corporation liquid assets of \$420,000,000.00 (more than five times the Purchase Price), with supporting docwnentation as may be required by the Corporation as *to* the aforesaid amount (such as bank statements), Submission by Purch3.ser of the foregoing shall be deemed complete for purposes of the "Financial Statemenf', "Statement of Assets and Liabilities signed by Purchaser or Accountant" and supporting "Veri4cation of Assets" which are required by the Corporation as part of its HStandard Transfer Requirements" Board application. Purchaser may, in its sole discretion, decline any request by the Corporation to submit any documentation showing liquid assets in excess of the aforesaid amount, so th2.t in the event the Corporation rejects the Purchaser's

Doc# US I 984 I I 54v4

application for any reason (other than willful bad faith by Purchaser), this Contract shall be deemed canceled, and Escrowee shall promptly refund the Contract Deposit to Purchaser.

159

SR9. Supplementing paragraph 11. l. 1.2: Seller's obligation with respect to payment of transfer taxes shall apply to transfer taxes imposed by both the City and the State of New York. Within fourteen (14) days following the Closing, Seller shall furnish to Purchaser's attorney proof of filir:g of such transfer taxes. Seller shall indemnify and hold Purchaser harmless from and against any and all costs, loss or expenses incurred by Purchaser, including reasonable attorneys' fees and disbursements, by reason of Seller's failure to timely perform its obligations with respect to such transfer taxes. The provisions of this paragraph shall survive the Closing.

SR 10. Supplementing paragraph 13: "13 *.5* Should either party willfully default in its obligations hereunder, it shall be liable to the other for reasonable attorneys' fees and costs incurred by the other party in enforcing this Contract as determined by a court of competent jurisdiction. In the event that either party purports to cancel this Contract and Seller elects to retain the Contract Deposit as liquidated damages, the prevailing party in any subsequent lawsuit shall recover its reasonable attorneys' fees and costs from the non~prevailing party. The award of such attorneys' fees and costs shall be recoverable as actual compensatory damages in addition to the amour:t of the Contract Deposit and/or liquidated damages which may be payable hereunder by either party."

SRl 1. Supplementing paragraph 15.1: Purchaser may also deliver a supplemental list of s·.1ch Liens at a later date but not subsequent to the Closing if Purchaser becomes aware of the same at such later date.

SR12. Supplementing paragraph 16: "16.4. Seller shall not be deemed unable to transfer the Lease anc. the Shares if such inability can be overcome by the payment of a sum of money by Seller not in excess of the Purchase Price less any loan payoff, brokerage commission, transfer truces and customary closing costs."

SR! 3. Seller agrees to deliver to Purchaser, at or prior to the execution of this Contract, to the extent within Seller) s actual possession, all drawings and plans of the Unit, including the original floor plans, and all renderings of any proposed or completed renovations therein. In addition, Seller agrees to deliver to Purchaser, at or prior to the Closing and to the extent within Seller's actual possession, originals of all instruction manuals and all guaranties and warranty agreements affecting the Unit or any of the appliances or other personalty included in this sale, the rights under which shall be deemed assigned, to the extent assignable, to Purchaser at the Closing.

SRI 4. This Contract may be executed in any number of counterparts. Each such counterpart shaH for all purposes be deemed to be an original, and all such counterparts shalJ

DocJ/: {JS i ;984 t I 54v4

together constitute and be but one and the same instrument. Facsimile signatures or scanned signatures sent by e~mail shall bind the parties,

159

SRI 5 Seller hereby agrees to cooperate with Purchaser if Purchaser elects to obtain leasehold title insurance or the Eagle 9 UCC Cooperative Interest Insurance Policy in connection with Purchaser's purchase of the Unit, including, without limitation, signing a title affidavit in the form requested by the issuer of the Eagle 9 UCC Cooperative Interest Insurance Policy.

SR16. 1ffor any reason the Corporation does not permit the Purchaser to purchase the Unit1 then Purchaser may assign this Contract to another entity within the control of the Purchaser herein.

SR 1 7. Each of the parties hereto desire that this Contract and the terms thereof (the "Confidential Aspects") be kept confidential to the greatest extent practicable. Accordingly, each of the parties hereto shall, and s~all instruct his or her agents, representatives and contractors to, maintain the confidentiality of the Confidential Aspects. It is understood, however, that the Co:ifidentia1 Aspects may be disclosed: (a) to the professional advisors of each of the parties (for example, without limitation, their attorneys and accountants), and to various other third parties (such as, for example, title insurance companies) who may be involved in aspects of the transactions or are otherwise necessary in order to consummate the transactions contemplated hereby; (b) if required to be disclosed by court order, subpoena, or other government process, or ifrequired by law; (c)with the consent of the parties; or (d) if already in the public domain,

SRI 8. Notwithstanding anything contained herein to the contrary, the parties hereby agree that the sum of (a) \$67,500,000 is hereby allocated to the Purchase Price for the Unit, and that the adc:.itional sum of (b) \$2,500,000 is hereby allocated to the Personalty included in the Unit. Accordingly, appropriate New York State and City transfer taxes shall be paid by the respective parties based upon the sum of \$67,500,000, and, in addition, Purchaser shall pay the New York State sales tax on the Personalty, whlch Seller shall collect at Closing. *() fY1 flt7*

SRl 9. Seller represents it will cause the third party sale of an additional maid'{n the Building to Purchaser either prior to or simultaneously with the closing of this transaction, In the event that Pmchaser is unable to buy this additional maid's room either prior to or simultaneous with the actual Closing of this transaction, Seller acknowledges that Purchaser may terminate this Contra~t and receive a full and prompt refund of the Contract Deposit, with interest. It is within the sole discretion of Purchaser whether to exercise or waive thls option to terminate. It is also r..oted that the Brokers listed ln this Contract shall pay for the maid's room, including costs and expenses associated therewith (including transfer **taxes).**

Doc/I: *US* I :984 l ( 54v4

*I / l*

SR20. In the event th2.t for any reason the parties are unable to close this transaction by March *6,* 2015, then Purchaser may terminate this Contract and receive a full refund of the Contract Deposit. It is within the sole discretion of Purchaser whether to exercise or waive this option t:) terminate.

159

SR21. Seller shal! pay the brokerage commissions based upon the total consideration being paid by Purchase:- for both the Unit and Personalty (which is the sum of \$70,000,000.00).

SHERRY 1800s LLC, Seller ,,,., -•~~•~•••~'<~•••,\_. · ">' vs•••••••~,.V,•--

Name: Title:

GENEVER HOLDINGS LLC, Purchaser V\..- \.../ 1 (.., ,\_ <- l,-'"', By: ~-? */J"'J,.,~~'=-~/,* , *c:--:-:~::-;;.~i r~* Ira J. Gi~ert 1 Authorized Person

Doc#: USl :98411 **S4v4**

159

![](_page_19_Picture_2.jpeg)

• 3142--Ludp,i•<illsclosure,glrafd"<lllng, l• C'FR Put ,S, Cfll fu, *?<1\$, 9+96,*

## **Disclosure** of **Information on Lead-Based Paint and/or Lead-Based Paint Hazards**

#### **SALES**

## **Lead Warning Statement**

**Ev~ry purchaser of any interest in residential** real property on which a residential dwelling was **built prior to 1978 is notified that such property** mny present exposurt: to lead from lead-1:msed paint **that may place young children at risk of developing** lt>,t1d poisoning. Lead poisoning in young children **may produce permanent neurological damage,** including learning disabilities, reduced intclti~cnce quotient, behavioral problems, and impaired memory. I.,ead poisoning also poses a particular nsk to pregnant women. The seller of any interest in residential real property is required to provide the buyer with any inlbmrntion on lead-bused paint hazards from risk assessments or inspections in the seUer's possession and notify the buyer of any known lead-based paint haiards. A risk assessment or inspec~ tion for possible lend~based paint hazards is recommended prior to purchase.

## **Seller's Disclosure**

(a) ~resence of lead-based paint and/or lead-based paint hazards *(Check (i) or (ii) below):*

(1) D Known lead-based paint and/or lead-based paint hazards are present in the housing *(explain).*

<<' "•••• •••••"\*·•' • ••••'·"•'''"'"' •• •••••••••• •• ••~•••• .,.,.,.,, •• n,;, ,,, "' ,.,.,,,,, . ., .... ,,, .............................. ,.,.,0.,,, .. 0.,,,,.,, •• ,\_.,,,u•,•••• •••••••••• •~•• ••"••••• •••• ,,.,,, ,.,., .-..,

![](_page_19_Picture_12.jpeg)

/P~··::··:.·::.::::::::::::::::::::::::::::·:::::::::::·:::::::::::::·::::::::.:::·::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::·:::::::::::::::::::::·:::::::::::::::::::::::::::::::::::::::::::: (ii) Seller has no bow ledge of lead-based paint and/or lead-based paint hazards in the housing. /

(b) Records and reports available to the seller *(Check (i) or (ii) below):*

- (i) Cl Seller has provided the purchaser with all available records and reports pertaining to lead- *fii/J* based paint and/or lead-based paint hazards in the housing *(list documents below).* - *w* .. , .. ,,,.,::::::::::::::::::::::::::: .. :::::::::::::::::::::::::::::.,::.::::::.::::::.::::.::::::::::::::::::::::::::::::::::::::::::::~::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: - (ii) eller has no reports or records pertaining to lead-based paint and/or lead-based paint aza ·ds in the housing.

## **Purchaser's Acknowledgment** *(initial)*

(c) Purchaser has received copies of all infonnation listed above. *\_L* Purchaser has received the pamphlet *Protect Your Family from lead in four lf ome.*

- ··-·· --··· Purchaser has *(check (i) or (ii) below):* - (i) D received a lQ .. day opportunity (or mutually agreed upon period) to conduct a risk assess- ,m;nt or inspection for the presence of lead-based paint and/or lead-based paint hazMds; or

(ii) 05- wai vcd the opportunity to conduct a risk assessment or inspection for the presence of lead- \_..- based paint and/or lead-based paim hazards,

## **Agent's Acknowledgment** *(initial)*

(f) \_\_\_ Agent has bfonned the seller of the seller's obligations under 42 U.S.C. 4852d and is aware of his/her responsibility to ensure compliance.

## Certfficatton **of Accuracy**

| The following parties have reviewed the information above and certify, to the best of their knowledge, Iha< the information they have provioed is true and | ac~ Y ;/l,; | | |---------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------|---------------------| | | ~--~-,-~-- | _;., • /.~' r / LC_ | | siCu:Re,.z;,,~.-J<--;.-,;::,;"J.) L,(-c:. i,,;. -DATE: l , , '- / P -~ :±- -~-~\ I (>_,:'::,} !'½-to, l·\'s"\< j} | /Ill ta e"Jr SF.Ll~R ' \ (f~f!. v'". 11r --- b | '1i/:!;!-P | | T --} PuRCHASe;R IDAre: | Pu~t;M,i.,.1.a:r-r | DATE |

;

*[*

#### Purchase Application

159

Pt:rchase Application

New York . Fe~ru~\_ry 26 20 15 Apoiicant's N.irn,! 11Miles" KwokJ:i?.\IY~\_r:!\_JGeneve£ t{\_olqLQ\_gs L\_!:-\_fJ \_\_ (t-fam~ or Nam~~ mu,t f.><: t!nt;,r1>d ~hove i11 manner rhat Srcrk Cert1[icole ~nd oilier Doc.Jm~I),IS ,rn tc b~ drawl\.) Applicant's Attorney Ira Gi!bert Esq. (igilbert@paulweiss~\_:>-~rduphoiw 212-373-3529 1\1tomey'~ Firm and Addrn\$, \_\_\_ eaul: ~~is\_s\B\_i!\_½\_i~S!, Y\'harton, & Ga\_r[i~q\_n L~p 1285.A.v\_eoue.ofJhe.8.rnencas. New York,.NYJ0O19:6064 Se!ltn's Nnme **She,r~ 1800s,b~Q** Seller's Attorney MifhaE?J J. Jones) Es\_q. J'elq:ho11!'\_?9~::.?~1~E3gpo Attonwis Fi~.n and :\ddrcs.~ \_\_ Jvey, Barnum & O'Ma\_r.c1.~~q\_ .. -------~- 170 MafiQn S.tr~~t Greenwich, CT 0683D Closing Date and Tirne\_Jj\_Q lat~J.tb~D *~L6{16* at 1 O.am \_\_\_\_ .\_ D~f-? of Po9session\_l'J9 later tnan *316115* ThP u11dcrs11-;ned lwrnby 1.,if,11\ to p~(rcha:;r 3,000 .shares of the 1.\1p,hli stvd: n/ Ttw :::iiwrry-Nrlhelland, Inc. and the ;1,:t:ompa11yu,g prupr1eta1y li.!aiie lot Ap.irtm(•nr :J..B.OJ\* \_\_\_\_\_ in thQ huildit·,g !oc,1ted a1 781 Fifth /\vcmh!, *:,.Jew* Yc,rk, New York, en !lw lolfr\_,v,nng term•; m-:.i condtll()OS • and Maid's room 1519 Purchase Pnce d Stock\$ 67,500,000 Mcnrh *1,* 57,085.53 \_Present Estimated Prnpriu'.ary Rental Per DCf!OSit S \_\_ Z,QQO,OQQ\_\_\_ Specla: conditions, ff ;mv:.6Q.ditiqnal sum of \$2.,\_;)QQ,QOO is allocated to the personal prop~rty inc:ludE?c1Jn the ~nit-F1nar.c-,ns: Yes • No(8J 1\mOi.HI!\_ **None \_\_ ·~---**Bank. \_\_\_ ~----- :he undersigned h;c;s filled 0ci! the irformation sheei below and understands fr,,;t thif> inform,,!ion is essential lo considering this appllcatlcm. 1t is further und<:rstood th.it t.his appl.cat1on, wher signed by rhe under~igned, ts to be subiect to appruval by the Seller or Authorlzed Representative and to the Terms and Conditions on the r<?vf!rse ,1de hereof. Broker\_Selle E,iurgerLBrown Harris Stevens and Serena Boardman, Sotheby's Purchaser: Kathy Sloane, Brown Harris Stevens Signan,r~ ot Purcn.se Appi\canl !JJlQL!l1.i1ltQlJ...&\_f..ii1:4.i.L~rmLK£!.C! lfome ,\dd,.:;s :!\_6A, \_\_ ,~\_oyth Bay Roa~,--~!9.~9 \_\_ ~?fl[ \_\_\_\_ Te!<-phone +852 2169 0888 Buslness Connection and h;:,;rtiori: and Owner (Securitie.s~n~--R-~-~ Estate Investments) Bus:··i.:;ss Addr,'.ss. ~9/F, B~n~\_9,!\_~hina ToweE:~?..:~, . \_\_ ,.\_ fc!ep!lcme +852 2160 0888 :-Jnr•,eq ,;f p•r:,:1!1~-~/1~~~11f1~~~{,; 9,fQ;[~;'/;8:;~.1~~~~ if chllciren. statt> nllmber and their apprc,xmtate ;,ge~:(1) Kwok Ho Wa, Purchc!\_~~L(?Jf\lgok Hmg\_Chi;yVife *of* PL1rchas€lr 13) QLJo\_ Qia ng\_; \$c:>n\_ 9,( Purchaser ('1J QJJ\_o Mei:. Daug.hter.of...2u.rctiaseL(5).Yaz Qinghua;\_ Sister of Purchaser:s Wife N,11\_nes of a!l :.·Jubs ar,d society m,m1bersi1ipsl fraterr\llies and honorary societies to which ;;ppl1cant t-;elongs: .Mar:~.--~~~g c.,Ll~, Pa,.m Beach: FL Jru\_rnp Golf Cql)\_rse. Palm Beach. FL Schools ,md coll,•rts .3t'.end1•d by hu;-;l;<11id, wdP and chi!dr,,11:. \_\_\_\_ , Mr and \_ty1rs. \_rwwk receiye.cJ\_H1e.ir education in GJtlr29 Guo of Mr. Kv\_.iokj attended Bard-College

#### **FILED: NEW YORK COUNTY CLERK 11/28/2018 12:22 PM** INDEX NO. 652077/2017 NYSCEF DOC. NO. 256 RECEIVED NYSCEF: 11/28/2018 Case 22-50073 Doc 50-4 Filed 02/28/22 Entered 02/28/22 21:19:53 Page 23 of 159

| | | No Does applicant wish to maintain pets, and lf so please spHcify: | |----|----------|---------------------------------------------------------------------------------------------------| | | | | | | Landlwd: | | | | | Present Landlord or Agent Own a p_rivat~!:_e5idenc~_ | | | | • Addrt'»> !~:='??_Lilh ~ay Road_,_ ~r1JL K2D.9 | | | | Approximate L~ngth oi Occupancy_ | | | | Previous Landlord or i\r,cnl __ _ | | | | | | | | Address of previous rcsidertce and approx,rnate l&ngth of ,v:cup,mcy: ___ _ | | | | | | | | | | | | | | | | | | | | _ -· _ --······· Ste':~~_ Wong (Bank- Personal Account) | | | | Addr~s, UBSA~~2.fF Two l~tE:_rnational fir1~11ce Centre.!8f=ir1anc~_Street, Central, Hong Kong | | A. | | (Business) H~~~_!:<'.l, Pa_rtner~~tev~_!lS_C>_n, Wor_igJtQQ_ | | B | | ,\,Mrm Centraf To~er,. ?§.9.U§EJn'sRq~cf. C~n.trnl, t!,Q[19152rt9 | | | | Stock Brol <er, any<="" c.p.a,="" executor,="" if="" td=""></er,> | | C | | i\dJrc;; ____ . | | | | For Information regarding source of income contact. | | | | _______ ····---··" | | | | | | | | | | | | | | | N.1m,• | ··"··· _!he Rt Hon. Tony Blah~_ | | | | ,\ <tdrns,_ 6051~.,.london="" box="" po="" td="" uk<="" w,2?.ju=""></tdrns,_> | | | | | | | | | | | | ---- ··- ------~~ | | 4 | | |

Please give any additlonai information which may be pertinent or h.elpftil: .. Mr.- and Mrs. Kwok are Y~!'/\_ir,nprei.segvv,itl1\_Th<;<§herry-NEitb1:1rlen~2nct .... look forward to making The Sherry-Netherland the principle residence for ffielffamr1y ·•·············· ······ ···· · ·· -·· · ·-- ····-·

Purchase Application

| | | New York _______ ~20_,_ | | |---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------|------------------------------|-----------| | KWOK Applicant's Name | ·~-ll:.->-a-k'\,A | __________ _ | | | (Name or Names must be entenro abQve in manner that Stock Certibcatund other DocW!lents are to be drawn.) | Ira_. J. t:td~ ~~Te!ephonelJ,I )-J jj | | 3 3;.).tj | | Applicant's Attorney inn and Address~~~~~~-WNL.b¼d:• Alloc1;1ey' !L~-rl\L~w,'), r-:ltw | | 6~ ~JM rC[ - 60 l:t!f: | i,J' | | J>:_\l.2 Seller's Name, ____________________________ _ | | | | | Seller's Attomey ________________ Telephone ______ | | | _ | | Attorney's Firm and Address ______________________ _ | | | | | Closing Date and Time ______________ Dateof Possession ___ _ | | | | | The undersigned hereby o{fers to purchase __________ .shares of the capital stock of The Sherry-Netherland, Inc. and the accompanying proprietary lease for _____ Apartment the foHowing terms and conditions. | ln the building located at 781 Fifth Avenue, New York, New York, on | | | | Purchase Price of Stock \$ _________ ,Prt>sent Estimated Proprietary Rental Per ___ Month\$ _ | | | | | | Special conditions, if any;, ____________ _ | | | | Yes D Nol:8J ( Note: 'Th.is proposal shall r"sult in no legal obligation u.niiI a formal contract of purchase and ~e i:!. executed by the parties <:oncer11ed.) The undersigned has filled out the information sheet below and understands that this information is essential in considering this application. It is further understood that this application, when signed by the undersigned, is to be subject to approval by the Seller or Authorized Representative and to the Terms and Conditions on the Broker ___________ _ | Amount _______ Sank _______ | reof. | -------- | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

## Personal Letter of Reference

NYSCEF DOC. NO. 256 RECEIVED NYSCEF: 11/28/2018 Case 22-50073 Doc 50-4 Filed 02/28/22 Entered 02/28/22 21:19:53 Page 26 of 159

From The Rt Hon Tony Blair

February 2015

Ladies and Gentlemen *9f* the Board of The Sherry Netherland,

It is my great pleasure that I am writing you this letter of reference for Miles Kwok as a potential owner in your building. I have known Miles for seven years and have only the highest respect for him in business and as a friend. I have worked closely with Miles over the years and have always admired his honesty and loyalty.

Miles is dependable, sincere and extremely responsible as an individual; conducting himself with dignity and intelligence. Miles is honest, forthright and has impeccable taste.

I would highly recommend him to your building as I know that Miles would be a wonderful addition as your neighbour at The Sherry Netherland. Miles is a very accomplished man and, in my opinion, would be a most valuable asset to The Sherry Netherland.

PO Box 60619 London W27JU

## Business Letter of Reference

| | FILED: NEW YORK COUNTY CLERK 11/28/2018 12:22 PM | | | | INDEX NO. 652077/2017 | |---------------------------------------------------------------------------------------------------------------|--------------------------------------------------|----------------------------|-----|------------------------------------------------------------------------------------------------------------------------|-------------------------------------------| | NYSCEF DOC. NO. 256 | Case 22-50073 | Doc 50-4 Filed 02/28/22 | | Entered 02/28/22 21:19:53 | Page 28 of RECEIVED NYSCEF: 11/28/2018 | | | Stevenson Wong &Co. | | 159 | Wi!ly Y.P. Cheng- 0 | ~::;::ii ~tfHt | | | X 1:_ ]![ §£:. | Pfr grp | | .Hank H.F Lo• Cathenne K.G. Por Er,c CH. Lui• 1~4evHte J,J, \VatkinS"' W(:ndy \NS. L,;m• Lai 5, Lam• | ;~U~ Sz,~ ta£J 1H~H ,tf;(r,\" | | ()ur Ref | EYC/HLO(P)/75450/15 | | | Cornelia VV,C. Chu· J,mice L.H Heidi H. Chui• Er <a cheng<="" th="" yy=""><th>;;~~]{ \;,f,rf Ya;</th></a> | ;;~~]{ \;,f,rf Ya; | | Your ,' <et< th=""><th></th><th></th><th></th><th>)er·ior Consultant: Angus Forsyth1n</th><th></th></et<> | | | | )er·ior Consultant: Angus Forsyth1n | | | Rep!y Fax | | | | Consuf!ant Sher!ynn G. Chan | | | | 17 February 2015 | | | Notary Public of Hong K0ng ~~,;,:-::m:~Rt | | | | | | | o China-Appointed Attesting Officer q:i:ffl~H.i;lifA | | | BY POST | | | | • Civil CelebiJnt of fAarriages ~~~-lf}, | |

Board of Directors of The Sherry-Netherland The Sherry-Netherland 781 Fifth Avenue New York, NY 10022

Dear Board members of The Sherr/ Netherland,

I am writing this letter of recommendation rn support of the application of Mr. Kwok Ho Wan (also known as Miles Kwok) to become a resident shareholder of your cooperative.

I first met Miles when he engaged my /aw firm in one of his business transactions about seven years ago. I was and am a partner of my firm. We have since established a long-standing relationship. Over the years, my firm has acted for Miles in various business transactions in different areas, including project financing, fund-raising, corporate mergers and acquisitions and acquisition of aircrafts, leisure boats and properties in Hong Kong, China and different parts of the world.

Miles is a successful businessman and a polite, dependable and responsible individual who conducts himself with dignity and intelligence. Putting aside our work relations, Miles has also been a good friend of mine. Personally, I know Miles to be delightful, considerate and respectful. I trust that his personal qualities will definitely make him a good neighbor and responsible steward of your building.

In my opinion, Miles will be a valued addition to your building.

If you wish to contact me personally, please feel free to call me at +852 2533 2552,

**[ Hank** Lo Partner

STEVENSON, WONG & CO.

*t1!~~,* Tt.~!: i 852 2526 6.J 11 **·WJ,i** fax, ~e52 2845 0638 **l!lt(l** [m,,i/ info(\llsv,;-hk.com *\NWW.* S\V~hk.corr,

g™ 1N .. dfJ it B *i&, W* itr\_;, t,U·ti ri;ii \* ;;,tt; i **i.HH** *i-1,:Jf* % *it'.* a~ Hong Kong Cuangzhou 5h;:,ngha. -~anjing Shenz~ien Suzhou !n!erl.:i-v 19/l.1

18 February 2015

**BY POST**

Board of Directors of The Sherry-Netherland The Sherry-Netherland 781 Fifth Avenue New York, NY 10022

Dear Ladies and Gentlemen of the Board of The Sherry Netherland,

It is a great pleasure for me to recommend Kwok Ho Wan, also known as Miles Kwok, to be a shareholder in The Sherry-Netherland, Inc. and~ resident in your building. I am a managing director of the Wealth Management and Swiss Bank Department at UBS AG and attach my name card for your kind reference. I *have* known Miles for about five years since he first began working with UBS AG. Miles has since been working with us in the areas of securities investment and also in financing his various projects in areas such as aircraft acquisitions.

159

Miles has been a successful and accomplished entrepreneur who has developed and managed a number of companies, both domestically and internationally. Over the years, Miles has earned his credibility in our bank. He is very reliable and always fulfills his repayment obligations. For this reason, our bank is happy to have him as our long-term client.

From a personal standpoint, Miles is a sincere and modest gentleman with a warm heart. He is financially sound but very humble. He is also one of the most intelligent, genuine and respectful people I have ever known.

Based on my long standing relationship with Miles, I do recommend Miles to be a shareholder in your cooperative and a resident in your building. I am sure your community will be pleased to have him and his family join you at The Sherry.

If you have any questions, please do not hesitate to contact me at stephen-kc. wong@ubs.com.

Yours faithfully,

## Financial Letter of Reference

.UDu

159

Hong Kong Branch 52/F Two International Finance Centre 8 Finance Street, Central, Hong Kong Tel. +852-2971 8888 Fax +852-2971 8001

Feb. 23, 2015

Board of Directors of the Sherry-Netherland The Sherry-Netherland 781 Fifth Avenue New York, NY 10022

Dear Sirs,

## **Bank Reference - [Application for Real Estate Investments]**

We have been asked to provide a reference letter in connection with Application for Real Estate Investments. We confirm that:

#### **Kwok Ho Wan**

[client's ID: P746467(7)J

has been a client of ours through a personal investment company since July 2012 and during this time Mr. Kwok Ho Wan has had a satisfactory banking relationship with us. As at 18 Feb, 2015, the funds involved in thts banking relationship is not less than USD400, 000,000.

The above information is based on our experience of this banking relationship as at current date and is given in confidence for your private use only, without any responsibility on the part of UBS AG or its employees. This letter may only be used in the business context outlined at the beginning of this letter and does not constitute a guarantee or any other obligation on the part of UBS AG. In particular, we are under no obligation to inform you of any subsequent change of circumstances in this banking relationship.

Yours faithfuliy, For and on behalf of UBS AG Hong Kong Branch

~})/ rom4 Che6ng

Managing1Director

Stephen ong Managing Director

![](_page_31_Figure_0.jpeg)

Case 22-50073 Doc 50-4 Filed 02/28/22 Entered 02/28/22 21:19:53 Page 33 of 159

# **EXHIBIT 20**

#### **FILED: NEW YORK COUNTY CLERK 02/05/2016 07:09 PM** INDEX NO. 653316/2015 NYSCEF DOC. NO. 27 RECEIVED NYSCEF: 02/05/2016 Case 22-50073 Doc 50-4 Filed 02/28/22 Entered 02/28/22 21:19:53 Page 34 of 159

## **SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK**

| ----------------------------------------------------------------x | | | |-------------------------------------------------------------------|------------|----------------------------------------| | ACE DECADE HOLDINGS LIMITED, | | : | | | | : | | | Plaintiff, | : Index No. 653316/2015 (Bransten, J.) | | | | : | | -v.- | | : Motion Sequence No. 001 | | | | : | | UBS AG, | | : | | | | : | | | Defendant. | : | | -------------------------------------------------------------x | | |

## **AFFIDAVIT OF KWOK HO WAN IN SUPPORT OF PLAINTIFF'S OPPOSITION TO DEFENDANT'S MOTION TO DISMISS THE COMPLAINT**

KWOK HO WAN being duly sworn, hereby deposes and says:

1. I am the employer of Yong Yu, the Director and sole shareholder of Ace Decade

Holdings Limited ("Ace Decade").

2. I make this Affidavit based upon my personal knowledge.

3. I first began having discussions with UBS AG ("UBS") about potential

investments in 2010. I have been a client of UBS since July 2012.

4. My main contact person at UBS has been Stephen Wong, who is a Managing

Director of the Wealth Management and Swiss Bank Department at UBS.

5. I met Mr. Wong in May 2010. Since that time, Mr. Wong has advised me on

numerous matters relating to investments and financing on projects such as aircraft acquisitions.

Over the years, I have depended and relied upon Mr. Wong's and UBS's knowledge and

expertise in making investment and financing decisions.

#### Case 22-50073 Doc 50-4 Filed 02/28/22 Entered 02/28/22 21:19:53 Page 35 of 159

6. In addition, I have had an account at UBS since July 2012 for an investment vehicle that I control. Since then, I have opened other accounts at UBS for two other investment vehicles that I control and have obtained financing from UBS for two airplanes.

7. In early to mid-2014, I began discussions with UBS regarding an investment opportunity (the "Investment") in an upcoming placement of H-shares (the "Shares") of Haitong Securities Co., Ltd. ("Haitong").

8. From 2014, when I first began discussions with UBS, to May 13, 2015, when Ms. Yu and I authorized the final payment of HK \$2 billion (approximately US \$260 million) to enter into this Investment, Mr. Wong and I communicated frequently through telephone calls, inperson meetings, and electronic messages. Throughout this period, including after January 9, 2015 when I moved to New York, Mr. Wong made numerous misrepresentations, which I relied upon in deciding to make this Investment.

9. UBS was a joint global coordinator and placement agent for the Shares, and held itself out as knowledgeable and experienced in providing advice on this Investment.

10. At the outset, Mr. Wong assured me that if UBS got my business, it would protect my interests and provide the best possible terms for a loan to finance part of the Investment. Mr. Wong told me that because of the size of the Investment that I was planning to make, senior executives from UBS globally would participate in structuring the deal. Mr. Wong told me that he would serve as my personal contact and as UBS's representative throughout the Investment but that he would be acting under the instructions of senior executives from UBS offices in the United States, Switzerland, England, and Hong Kong.

#### Case 22-50073 Doc 50-4 Filed 02/28/22 Entered 02/28/22 21:19:53 Page 36 of 159

11. Based on these representations that senior executives at UBS globally would be involved in structuring and overseeing this Investment and that UBS would act in my best interests, I entrusted UBS to act as my advisor for the Investment.

12. I have read Mr. Wong's affirmation submitted in support of UBS's motion to dismiss Ace Decade's complaint. In it, he affirmed under penalty of perjury that "[t]he first time I heard of Ace Decade was when I learned of this lawsuit in October 2015." (Affirmation of Stephen Wong ¶ 3.) I was astonished when I read this statement because it is false. To the contrary, Mr. Wong and UBS not only had previously heard of Ace Decade, but also they were the ones who advised me on which of my employees to appoint as sole shareholder and Director of Ace Decade, to utilize Ace Decade to enter into a side agreement with an intermediary entity that would hold legal title to the Shares, and how best to transfer the funds necessary for the Investment from one of my UBS accounts to the Ace Decade account. In sum, Mr. Wong and UBS knew that the ultimate investor in the Investment was Ace Decade.

13. UBS advised that because the planned Investment comprised greater than 5% of the outstanding H-shares of Haitong, if I invested through Ace Decade directly, applicable disclosure requirements would require certain filings.

14. UBS advised that if I invested through an intermediary entity, with the intermediary entity holding legal title to the Shares, no such disclosure would be required.

15. UBS recommended that I select Haixia Huifu Asset Investment and Fund Management Co., Ltd. ("Haixia") as the intermediary for the Investment. UBS said that it recommended Haixia because Haixia was best qualified to act for Ace Decade. UBS further stated that Haixia was independent of UBS and would protect my and Ace Decade's interests. Relying on these representations, I selected Haixia as the intermediary for the Investment.

#### Case 22-50073 Doc 50-4 Filed 02/28/22 Entered 02/28/22 21:19:53 Page 37 of 159

16. At no time did UBS disclose that Haixia was controlled by its joint venture partner, State Development & Investment Corp. ("SDIC"). Nor did UBS disclose that Lu Bo, who served as the principal contact between UBS and Haixia, was previously the CFO of the joint venture between UBS and SDIC. I did not become aware of Haixia's close relationship with UBS until July 21, 2015 (after Ace Decade had made the Investment and after UBS had liquidated the Shares), when Mr. Wong disclosed that relationship during a telephone call, which I took from my office in New York.

17. Mr. Wong initially said that if we chose Haixia as the intermediary to make the Investment, we would not need to undergo Haixia's Know Your Customer ("KYC") process. However, he later said that we needed to prepare some paperwork to undergo a background examination for Haixia, but he did not explain if this paperwork was for Haixia's KYC process. Mr. Wong asked to review the resumes of some of my employees to assess whose background would most likely satisfy Haixia's requirements so that such employee could be appointed as the Director and sole shareholder of Ace Decade. He reviewed these resumes and advised that Ms. Yu's resume and background was best suited to satisfy Haixia's requirements and thus, that I should appoint Ms. Yu as the Director and sole shareholder of Ace Decade. Mr. Wong said that he would provide comments on Ms. Yu's resume and asked her to send it to him. (*See* Ace Decade Exhibits 3 and 4.)

18. Mr. Wong subsequently gave comments on Ms. Yu's resume to make it more likely to satisfy Haixia's requirements.

19. Mr. Wong and I also discussed on multiple occasions potential financing for the Investment. Mr. Wong stated that Ace Decade should obtain financing for part of the Investment

#### Case 22-50073 Doc 50-4 Filed 02/28/22 Entered 02/28/22 21:19:53 Page 38 of 159

through UBS rather than another bank because UBS would handle the financing on the most favorable terms to Ace Decade.

20. During discussions about the loan financing, I told Mr. Wong that Ace Decade would not make the Investment unless the loan documents did not include any provisions that would permit UBS to demand repayment of the loan (a "margin call") based on short term price fluctuations of the Shares and unless UBS represented that it would provide Ace Decade with adequate time (for example, five business days to pay the first 25%, 10 business days to pay the second 25%, and 20 business days to pay the remaining 50%) to meet any margin calls.

21. Mr. Wong stated on more than one occasion in 2014 that the loan financing documents would be consistent with my requirements, specifically that there was no repayment or margin call trigger based on short term price fluctuations.

22. Mr. Wong also stated on several occasions in 2014 and 2015 that UBS would work with Ace Decade to allow it to meet any margin calls and UBS would not sell any of the Shares as a result of any margin call without giving Ace Decade adequate time.

23. Mr. Wong also stated numerous times in 2014 and 2015 that UBS had made a loan to a large shareholder of Ping An Insurance Group ("Ping An"). Mr. Wong explained that the Ping An shareholder's loan was substantially larger than Ace Decade's, but that UBS had never sold off any of the shares owned by that shareholder following a margin call. Mr. Wong stated that when a margin call had been triggered, UBS had worked with the Ping An shareholder to resolve the situation without selling any of his shares. Mr. Wong said repeatedly that UBS would give Ace Decade the same treatment as it gave to the Ping An shareholder and would work cooperatively to allow Ace Decade to meet any margin calls but in any event would not sell the Shares following a margin call without giving Ace Decade adequate time.

#### Case 22-50073 Doc 50-4 Filed 02/28/22 Entered 02/28/22 21:19:53 Page 39 of 159

24. Throughout our discussions about the Investment, Mr. Wong repeatedly stated that I could trust him and UBS, and that he and UBS were always working in my best interests.

25. On December 14, 2014, while discussing the Investment, Mr. Wong told me in a message on WhatsApp (a mobile messaging application for smart phones): "Once I've promised General Manager Guo, I'll definitely make utmost efforts; I'm only hoping General Manager Guo will trust me." Later that day, he told me in another message: "I have no reason not to strive for the best for General Manager Guo!" (General Manager Guo is what Mr. Wong called me.)

26. Also on December 14, 2014, Mr. Wong left me a voice message, stating that during the negotiations over the Investment "General Manager Guo's interests must be guaranteed," and that he had involved top UBS management from offices around the world to assist.

27. On December 15, 2014, Mr. Wong left me a voice message stating that he was working on the terms of the Investment in order to "protect [me]."

28. On December 19, 2014, Mr. Wong left me a voice message stating: "General Manager Guo, you can rest absolutely assured, and I will completely protect your interests."

29. As a result, I believed that Mr. Wong and UBS were acting in Ace Decade's best interests and I trusted that the representations Mr. Wong made about the loan financing documents were true and that UBS would not sell the Shares without working with Ace Decade to allow it to meet any margin calls.

30. On January 9, 2015, while I was still negotiating the terms of the Investment with UBS, I moved to New York with Ms. Yu and other employees with the intention of expanding my business projects to New York and to find investors interested in investing in Ace Decade.

#### Case 22-50073 Doc 50-4 Filed 02/28/22 Entered 02/28/22 21:19:53 Page 40 of 159

31. I first discussed this plan to move to New York to find investors for Ace Decade with Mr. Wong in December 2014. I subsequently had multiple discussions with Mr. Wong about finding investors for Ace Decade by telephone from New York in March, May, and June 2015.

32. On February 9, 2015, Ace Decade signed a Memorandum of Understanding (the "MOU"), governed by U.S. law, with China Golden Spring Group (Hong Kong) Limited ("Golden Spring Hong Kong"). The MOU provided that Ace Decade would acquire Haitong Shares and Golden Spring Hong Kong would establish a branch in New York to find investors for projects relating to the Haitong Shares.

33. In furtherance of the MOU, Golden Spring Hong Kong formed a company called Golden Spring (New York) Ltd. ("Golden Spring New York"), which was incorporated in March 2015 in Delaware and registered to do business in New York. Golden Spring New York is wholly owned by Golden Spring Hong Kong.

34. Shortly thereafter, Golden Spring New York signed a lease for part of the 46th Floor of the General Motors Building at 767 Fifth Avenue, New York, NY 10153. Ms. Yu and I conduct business relating to Ace Decade from our offices at 767 Fifth Avenue.

35. Not only had I discussed with UBS my plans to move to New York and to operate my business projects out of New York in December 2014, I also asked for UBS's help in setting up my operations in New York. In March 2015, Mr. Wong and others at UBS, including Agnes Fu and Liz Lam, arranged to transfer funds from one of my accounts at UBS to my personal JPMorgan Chase account in New York.

#### Case 22-50073 Doc 50-4 Filed 02/28/22 Entered 02/28/22 21:19:53 Page 41 of 159

36. In April 2015, Mr. Wong, Ms. Fu, and Ms. Lam assisted me with setting up Golden Spring New York by transferring funds from one of my accounts at UBS to Golden Spring New York's JPMorgan Chase bank account in New York.

37. UBS also submitted reference letters on my behalf in connection with my purchase of an apartment in a New York cooperative building. In a letter dated February 18, 2015 from Mr. Wong to the building's board of directors, Mr. Wong wrote, "I have known Miles for about five years since he first began working with UBS AG." (Miles is my English name.) Mr. Wong also stated, "Over the years, Miles has earned his credibility in our bank. He is very reliable and always fulfills his repayment obligations. For this reason, our bank is happy to have him as our long-term client." (Ace Decade Exhibit 1.)

38. Mr. Wong and Tommy Cheung, also a UBS Managing Director, submitted another reference letter on my behalf to the board of the apartment building on February 23, 2015, stating: "Kwok Ho Wan has been a client of ours through a personal investment company since July 2012." (Ace Decade Exhibit 2.)

39. On March 6, 2015, I purchased an apartment in this building. I, along with Ms. Yu and other employees and representatives of Ace Decade and Golden Spring New York, have lived in the apartment since the purchase.

40. During this period of time after I had moved to New York, Mr. Wong and I communicated frequently through telephone calls and voice and instant messages. Mr. Wong spoke to me by telephone while I was in New York dozens of times and sent numerous electronic messages to me while I was in New York. Ms. Yu joined me on some of the calls with Mr. Wong. At a minimum, Mr. Wong spoke to me by telephone while I was in New York on the following dates:

- January 26, 2015 (three calls) - January 28, 2015 (two calls) - March 2, 2015 - March 4, 2015 (three calls) - March 5, 2015 - March 13, 2015 - March 15, 2015 - March 16, 2015 (six calls) - March 17, 2015 (two calls) - March 18, 2015 (two calls) - March 24, 2015 - March 31, 2015 - April 28, 2015 (three calls) - April 30, 2015 (five calls) - May 6, 2015 (two calls) - May 11, 2015 (three calls) - June 23, 2015 (two calls) - July 21, 2015

41. During these calls in 2015, which I participated in from New York, Mr. Wong and I discussed the Investment and the UBS loan on numerous occasions. On one or more of these calls, Mr. Wong and I also discussed my concerns about the loan, including a margin call trigger based upon the loan-to-value ratio ("LTV ratio"), the size of the loan, the interest rate on

#### Case 22-50073 Doc 50-4 Filed 02/28/22 Entered 02/28/22 21:19:53 Page 43 of 159

the loan, and the issuance price of the Haitong shares. Mr. Wong and I also discussed the status of my efforts to seek investors in New York for Ace Decade.

42. During this period of time in 2015, I did not raise with Mr. Wong again my concerns about repayment triggers conditioned on short term price fluctuations of the Shares because Mr. Wong had previously told me that there were no such triggers.

43. However, during several of these calls in March, April, and May 2015, Mr. Wong and I discussed the topic of margin calls generally, and specifically the LTV ratio trigger. Mr. Wong said that I did not have to worry because UBS would act in my best interests, that UBS would give Ace Decade adequate time to meet any margin calls, and that UBS would make every effort to work with Ace Decade to allow it to meet any margin calls. He also reminded me several times during this period that UBS had never sold the shares of the Ping An shareholder following a margin call on its loan, and stated that Ace Decade would receive the same treatment as the Ping An shareholder.

44. While I was in New York, Mr. Wong also sent me numerous WhatsApp messages about the Investment and the UBS loan. For example, on March 21 and 22, 2015, Mr. Wong and I exchanged a series of WhatsApp messages in which we discussed the UBS loan for the Investment. I told Mr. Wong that some of UBS's proposed conditions, such as the margin call trigger based upon the LTV ratio for the UBS loan, were "definitely not okay" and "we would rather not do it than agree to your clauses." Had I not been relying upon Mr. Wong's prior representations that the loan financing documents did not contain repayment triggers based on short term price fluctuations of the Shares, I would have raised that issue again with Mr. Wong and not focused our discussions solely on the margin call trigger based on the LTV ratio.

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45. Mr. Wong replied that he understood my concerns about potential margin calls, and told me: "You rest assured!. . . I'm working for General Manager Guo! Don't worry." I relied upon Mr. Wong's representations that he and UBS were looking out for my interests. All of these discussions occurred while I was in New York.

46. On May 8, 2015, Haitong announced that it had obtained the shareholder and regulatory approvals necessary (in February and May, respectively) to issue the Shares, which was expected to occur on May 15. Haitong also announced that because the trading price of Haitong's shares during the 30 trading days prior had surpassed a pre-agreed threshold, the subscription price would be increased.

47. After this announcement, I had several discussions with Mr. Wong, by telephone and WhatsApp messages, in order to finalize the terms of the Investment. Among the topics we discussed were the fact that the loan would have to be increased to reflect the increase in the per share price of Haitong's shares, the amount of the payment required, the LTV ratio, the interest rate, and the method by which we should exchange U.S. dollars for the Hong Kong dollars required for the payment.

48. During one of our discussions after May 8, Mr. Wong stated yet again that Ace Decade would receive the same treatment as the Ping An shareholder with respect to any margin calls.

49. Relying on these representations, I decided to make the Investment. I discussed with Mr. Wong during telephone conversations on May 11 how best to transfer the funds necessary for the Investment from one of my UBS accounts to the Ace Decade account. Mr. Wong said that I first needed to exchange the funds from U.S. dollars to Hong Kong dollars in my UBS account. He also gave instructions not to transfer the funds from my UBS account

#### Case 22-50073 Doc 50-4 Filed 02/28/22 Entered 02/28/22 21:19:53 Page 45 of 159

directly to the Ace Decade account, but rather to transfer the funds from my UBS account to an account at another bank and then to transfer the funds from that account to the Ace Decade account.

50. Relying upon Mr. Wong's advice, I decided to transfer the funds from my UBS account first to an account at China Minsheng Banking Corp., Ltd. Hong Kong Branch ("China Minsheng Account") and then to transfer the funds from the China Minsheng Account to the Ace Decade account.

51. On May 11, 2015, Ms. Fu sent an e-mail to Ms. Yu, copying Mr. Wong and Ms. Lam, and asked Ms. Yu to obtain my signature on a payment instruction document that UBS had prepared. The document contained a request to transfer HK \$860 million (approximately US \$111 million) from my UBS account to the China Minsheng Account that Mr. Wong had instructed me to use.

52. In reliance upon Mr. Wong's representations about the Investment and the UBS loan, I signed the document authorizing the wire transfer.

53. Later that day, Ms. Lam sent an e-mail to Ms. Yu, copying Mr. Wong and Ms. Fu, attaching a confirmation of the outgoing transfer from my UBS account.

54. Following Mr. Wong's instructions, I then authorized the transfer of the funds from the China Minsheng Account to the Ace Decade account.

55. After the funds reached the Ace Decade account, on May 13, 2015, Ms. Yu and I authorized a payment of HK \$2 billion (approximately US \$260 million) from Ace Decade's account to an account held by Dawn State Limited ("Dawn State"), a special purpose vehicle and wholly-owned subsidiary of a Haixia fund, to fund the Investment of the Shares to be issued on May 15. Prior to this, I had authorized an initial down payment of approximately US \$250

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million from Ace Decade's account, through Dawn State, to a UBS security account. That payment would have been returned to Ace Decade had the Investment not been completed.

56. All of the steps I took to make the Investment, including requesting the wire transfers of approximately HK \$860 million (approximately US \$111 million) from one of my UBS accounts to the China Minsheng Account and ultimately to the Ace Decade account and authorizing the payment of HK \$2 billion (approximately US \$260 million) from the Ace Decade account to Dawn State's account on May 13, 2015, occurred from my office or my apartment in New York.

57. I would not have made the Investment or authorized this payment in May 2015 had I known that UBS had lied that the loan financing documents did not contain repayment triggers based on short term price fluctuations of the Shares and that UBS would refuse to work with Ace Decade to meet any margin calls and would sell off Ace Decade's Shares immediately if a margin call were made.

58. Under the terms of an agreement between Ace Decade and Haixia, Haixia was required to transfer Dawn State (the entity that held legal title to the Shares) to Ace Decade after July 13, 2015 upon Ace Decade's request.

59. However, on the morning of July 6, 2015 New York time—just a week before Haixia would have had to transfer Dawn State to Ace Decade—I learned that UBS was demanding that I repay approximately US \$200 million in less than 24 hours due to short-term price fluctuation of the Shares.

60. Had I known that it was possible for UBS to demand payment in such a short period of time and that UBS had lied about providing adequate time to meet any margin calls, I would have ensured that Ace Decade had sufficient funds available to make such payment.

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61. Before UBS's deadline, Ace Decade informed UBS that we could obtain the necessary funds quickly, but not before UBS's deadline.

62. However, on July 6, 2015, Mr. Wong stated that UBS would not give Ace Decade any additional time. Mr. Wong stated that UBS had already identified buyers for the Shares and would make a substantial profit by selling the Shares instead of allowing Ace Decade to make the payment.

63. On July 7th, I sent Mr. Wong a WhatsApp message telling him that UBS's margin call was "illegal." Mr. Wong did not disagree with me or deny that he had told me that there were no repayment triggers based upon short term price fluctuations of the Shares. Instead, he said that he had told senior management to cancel the sale of the Shares and said that he would ask UBS to return the Shares to me. Mr. Wong told me that the Shares were still under UBS's control and he promised to come up with a plan for their repurchase. Mr. Wong reassured me: "I've always been standing by General Manager Guo."

64. On July 9th, Mr. Wong stated that the decision to sell the shares was made by UBS executives outside of Hong Kong and China.

65. On July 17th, I reminded Mr. Wong that he had said on numerous prior occasions that "there would never be" a margin call based on short term price fluctuations of the Shares and the many times he had stated that UBS had not sold off the shares of a large Ping An shareholder following a margin call.

66. In another message on July 17, I said to Mr. Wong: "I told you, it was since last year that I've come to the U.S. for better opportunities, didn't I? All the information I sent you from the U.S., my requirements, you know them all. . . . Under these circumstances, all were

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handed over to you, [I] all listened to you. It was you who introduced Haixia . . . . It turned out to be messed up like this now."

67. Mr. Wong did not deny that he had made these misrepresentations and in fact replied that he understood.

68. In another message on July 17, I said to Mr. Wong: "You told me several times that you UBS would not liquidate assets like that; otherwise how I would trust you." I also told him: "If it weren't for you to tell me that margin call was like Ping An, it would not be like that. There would be reasonable time to get some assets to deal with it."

69. On July 17, I also said to Mr. Wong: "You said UBS signed the agreement with them [Haixia] to permit UBS to sell all the shares within 24 hours of the margin call. How was that signed? How did they implement that? It's not fair. You told me back then that was not the case."

70. Mr. Wong replied "I've always been firmly opposing them, but they ignored me and told me it was an order by the Swiss CEO." He did not deny my assertion that he had previously stated that the loan agreement would not permit UBS to sell the Shares within 24 hours of the margin call.

71. At no point during any of our discussions did Mr. Wong deny that he had stated that UBS would treat Ace Decade the same as the Ping An shareholder.

72. At no point during any of our discussions did Mr. Wong deny that he had stated that the loan documents would not contain repayment triggers based on short-term price fluctuations of the Shares.

73. At no point during any of our discussions did Mr. Wong deny that he had stated that UBS would work with Ace Decade and provide it adequate time to meet any margin call.

## Case 22-50073 Doc 50-4 Filed 02/28/22 Entered 02/28/22 21:19:53 Page 49 of 159

74. At no point during any of our discussions did Mr. Wong deny that UBS had engaged in misconduct.

75. Mr. Wong told me that on July 7, 2015, UBS sold all of the Shares belonging to Ace Decade at HK \$11.12, a 20% discount off the closing price of Haitong stock on July 7.

76. As a result of losing the Haitong shares, Ace Decade lost New York investors, whom I had met with after I had relocated to New York in 2015 and who had been interested in investing in Ace Decade. For example, on four occasions in New York in April through June 2015, my representatives and/or I met with a co-founder of a private investment firm based in New York. The firm expressed significant interest in investing in Ace Decade. However, following UBS's sale of the Haitong Shares belonging to Ace Decade, Ace Decade lost this potential investor.

I swear that the foregoing is true and correct.

[Signature of Kwok Ho Wan on Chinese version] Kwok Ho Wan

[Notarization on Chinese version]

CITY OF Meseryqy COUNTY OF Ceno Gordo ) ) ) ss.:

I, Linmag lds- being duly swom, depose and say that I aur fluent in both the English and Chinese languages. I hereby certiS that the attached document is an accurate hanslation of the Chinese version of "Affidavit of Kwok Ho Wan."

Swomto before me this

Lou, ofl\*qec|ts €ebr^-^-r1 gotb

Notary Public

![](_page_50_Picture_7.jpeg)

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# **EXHIBIT 21**

**FILED: NEW YORK COUNTY CLERK 06/01/2021 04:48 PM** INDEX NO. 652077/2017 NYSCEF DOC. NO. 833 RECEIVED NYSCEF: 06/01/2021 Case 22-50073 Doc 50-4 Filed 02/28/22 Entered 02/28/22 21:19:53 Page 53 of 159

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK : CIVIL TERM : PART 61 ------------------------------------------X PACIFIC ALLIANCE ASIA OPPORTUNITY FUND L.P., Plaintiff, INDEX NO: -against- 652077/2017 KWOK HO WAN, a/k/a KWOK HO, a/k/a GWO WEN GUI, a/k/a GUO WENGUI, a/k/a GUO WENGUI, a/k/a WAN GUE HAOYUN, a/k/a MILES KWOK, a/k/a HAOYUN GUO, GENEVER HOLDINGS CORPORATION, and GENEVER HOLDINGS LLC, Defendants. ------------------------------------------X MICROSOFT TEAMS May 27, 2021 B E F O R E: THE HONORABLE BARRY OSTRAGER, J U S T I C E A P P E A R A N C E S: O'MELVENY & MYERS LLP Attorney for the Plaintiff Times Square Tower New York, New York 10036 BY: EDWARD MOSS, ESQ. STUART SARNOFF, ESQ. BAKER HOSTETLER, LLP Attorney for the Defendant 45 Rockefeller Plaza New York, New York 10111 BY: MELISSA CARVALHO, ESQ. JOHN SIEGAL, ESQ. LAWALL & MITCHELL, LLC Attorney for the Defendant GENEVER 162 E. 64th Street New York, New York 10065 BY: AARON A. MITCHELL, ESQ.

#### **FILED: NEW YORK COUNTY CLERK 06/01/2021 04:48 PM** INDEX NO. 652077/2017 NYSCEF DOC. NO. 833 RECEIVED NYSCEF: 06/01/2021 Case 22-50073 Doc 50-4 Filed 02/28/22 Entered 02/28/22 21:19:53 Page 54 of

| 1 | YANKWITT LLP | | |----|-----------------------------------------------------------|--| | 2 | Attorney for the Defendant 140 Grand Street, Suite 705 | | | 3 | New York, New York NY BY: DANIEL ALTER ESQ. | | | 4 | | | | 5 | | | | 6 | | | | 7 | | | | 8 | | | | 9 | | | | 10 | | | | 11 | | | | 12 | | | | 13 | | | | 14 | | | | 15 | | | | 16 | | | | 17 | | | | 18 | | | | 19 | | | | 20 | | | | 21 | Karen Mangano, CSR | | | 22 | Senior Court Reporter | | | 23 | | | | 24 | | | | 25 | | | | | | |

| | 8 Proceedings | |----|------------------------------------------------------------------| | 1 | there is an actual burden. | | 2 | I want to just end on one particular argument on | | 3 | the subpoena point because I expect Mr. Alter will focus on | | 4 | it. We ask -- we do. He's right. We ask for information | | 5 | about 60 people and entities, no one knowing to be | | 6 | associated with Kwok. | | 7 | Mr. Alter quips in the brief, well, known by whom? | | 8 | Known by whom? Known by us, Judge. Known by us based on | | 9 | spending a lot of money and lot of time to dig through | | 10 | public records, court filings, social media accounts because | | 11 | that's the game Mr. Kwok has forced us to play. | | 12 | The reason we have to ask for this information is | | 13 | because Golden Springs is the hub. We can't spend the rest | | 14 | of our lives chasing 100 entities. I mean, my grandkids | | 15 | would be doing this. Golden Springs is the entity that has | | 16 | the information. It's produced documents relating to Shiny | | 17 | Times, the entity that was involved in the underlying case. | | 18 | It has the documents. It is the hub of the empire. If it | | 19 | doesn't have information about a couple of these entities, | | 20 | if we're wrong about one or two, okay, fine. Then they | | 21 | should run the search and tell us they don't have it and not | | 22 | produce it. But run the search terms, collect the ESI and | | 23 | provide the documents. | | 24 | THE COURT: All right, Mr. Moss. I understand your |

25 argument. I also understand that Mr. Kwok is incurring

## **FILED: NEW YORK COUNTY CLERK 06/01/2021 04:48 PM** INDEX NO. 652077/2017

NYSCEF DOC. NO. 833 RECEIVED NYSCEF: 06/01/2021

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159

| | Proceedings | | |----|-----------------------------------------------------------------|--| | 1 | \$500,000 a day in contempt penalties. I understand that Mr. | | | 2 | Kwok believes that these court proceedings are a game of | | | 3 | evasion that he -- that he wants to play. | | | 4 | And let me hear from counsel for Golden Springs. | | | 5 | MR. ALTER: Good afternoon, your Honor. It's | | | 6 | Daniel Alter, and we've just heard a lot of talk but | | | 7 | relatively little truth, and I'd like to step back and | | | 8 | clarify some issues that were quite muddied. | | | 9 | First of all, to correct two specifically | | | 10 | inaccurate statements, it's my understanding that Mr. Kwok | | | 11 | has never said that he is entirely unrelated or has no | | | 12 | connection to Golden Springs. Quite the opposite. He said | | | 13 | that it is his family office. So let's be accurate about | | | 14 | that. | | | 15 | The second thing is that, you know, apparently -- | | | 16 | they take the position that Mr. Kwok has entirely funded | | | 17 | Golden Springs. Well, I don't see the evidence of that. | | | 18 | What I see is a statement in the record that he initially | | | 19 | provided capital to Golden Springs, but I see no evidence | | | 20 | that he's continued to do so or that the capital there now | | | 21 | is his. Let me step back a moment and talk about this. | | | 22 | THE COURT: Before you do so, Mr. Alter, because | | | 23 | rightly or wrongly, Mr. Kwok has exhausted the Court's | | | 24 | patience with his antics. | | | 25 | It's quite undisputed that Golden Springs has | | | | | |

## **FILED: NEW YORK COUNTY CLERK 06/01/2021 04:48 PM** INDEX NO. 652077/2017 Case 22-50073 Doc 50-4 Filed 02/28/22 Entered 02/28/22 21:19:53 Page 57 of

NYSCEF DOC. NO. 833 RECEIVED NYSCEF: 06/01/2021 159

funded seven-figure payments to facilitate Mr. Kwok's lifestyle, and Mr. Kwok leads a rather extravagant lifestyle, purports to have zero assets whatsoever. So the plaintiff is a judgment creditor. The plaintiff knows that Golden Springs is funding expenses for Mr. Kwok. Not minor inconsequential expenses. Major expenses. And the judgment creditor is entitled to have discovery of the entity that is funding Mr. Kwok's expenses. The judgment creditor is also entitled to an order directing Golden Springs not to transfer, dispose or otherwise dissipate whatever assets Golden Springs has because the best evidence that has been made available to the Court compellingly suggests that any assets that Golden Springs has were provided to Golden Springs by Mr. Kwok. Now if the discovery that the judgment creditor is seeking from Golden Springs disproves that, well, then we

Proceedings

have a different situation than the situation we now have.

18 19 20 21 22 Under the CPLR, a judgment creditor is entitled to discovery of third parties of which in this case may well be alteregos of Mr. Kwok, but it's not necessary for the judgment creditor to establish that Golden Springs is an alterego of Mr. Kwok.

23 24 25 MR. ALTER: You know, your Honor, we haven't - that's not our position. That's the straw man that has been presented.

#### 10 of 19

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# **EXHIBIT 22**

|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------|--| | UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ---------------------------------------------------------------------- | X | 6/22/2021 | | | | : | | | | EASTERN PROFIT CORPORATION LIMITED, | : | | | | Plaintiff, | : : | | | | | : | 18-cv-2185 (LJL) | | | -v | : | | | | | : | FINDINGS OF FACT AND | | | STRATEGIC VISION US LLC, | : | CONCLUSIONS OF LAW | | | | : | | | | Defendant. | : | | | | | : | | | | ---------------------------------------------------------------------- | X | | |

LEWIS J. LIMAN, United States District Judge:

Plaintiff Eastern Profit Corporation Limited ("Plaintiff" or "Eastern") brings this action against Defendant Strategic Vision US LLC ("Defendant" or "Strategic") for breach of contract, a declaratory judgment, and unjust enrichment. 1 Strategic asserts counterclaims for breach of contract and fraudulent inducement.

An in-person bench trial commenced on April 19, 2021 and concluded on April 23, 2021. Closing statements were made remotely on April 30, 2021. This opinion constitutes the Court's Findings of Fact and Conclusions of Law pursuant to Fed. R. Civ. P. 52.

For the reasons that follow, the Court finds for Eastern on its claim seeking a declaratory judgment that the research agreement at issue is void and unenforceable as a matter of Virginia law and public policy.

1 Eastern also previously brought a claim for fraudulent misrepresentation, but the parties stipulated to dismissal with prejudice of that claim. *See* Dkt. No. 299 ¶ 6.

## **I. FINDINGS OF FACT**

## **A. Relevant Persons**

Eastern is a private limited company registered under the laws of the Hong Kong Special Administrative Region of the People's Republic of China.

Eastern is, in essence, a shell corporation for an individual named Guo Wengui, also known as Mile Kwok ("Guo"). Eastern is not registered to do business in the United States. It has no office in the United States and no operations in the United States. It also has no operations in Hong Kong where it is registered. Its only asset is a bank account in Hong Kong that was frozen by the Hong Kong High Court in 2007 and that now has \$80,000 in it. Prior to 2017, the owner and sole director of Eastern was an individual named Han Changhui ("Han"). In 2017, Han transferred ownership and control to Guo's daughter, Guo Mei, who was a friend of Han's and who is now the owner and sole director of Eastern.

Guo is a former resident of China who now resides in the United States. He has achieved some notoriety in this country and internationally as he has made claims that are critical of the policies and practices of the Chinese Communist Party ("CCP") while at the same time making statements supportive of individuals within the Chinese government. He has applied for asylum in the United States. Guo maintains a family office under the name Golden Spring New York Ltd. ("Golden Spring").

Yvette Wang ("Wang") is an associate of Guo and is the president and director of his company Golden Spring.

Defendant Strategic is a limited liability company registered and in good standing with the Nevada Secretary of State. Strategic's principal place of business is in Arlington, Virginia.

Among other services, Strategic provides private "investigatory research" to clients within the United States in exchange for monetary compensation.

French Wallop ("Wallop") was and is Strategic's sole manager and only member. Wallop was married to Malcolm Wallop, the U.S. Senator representing Wyoming from 1977 to 1994, who is now deceased. Wallop resides in Arlington, Virginia.

J. Michael Waller ("Waller") is a long-time friend and professional acquaintance of Wallop and is an active member of the community of persons in the United States opposed to the CCP. He holds a Ph.D. in international security affairs from Boston University and has an extensive academic background. In addition to his work with Strategic, he is also currently employed as a senior analyst for strategy at the Center for Security Policy, a think tank based in Washington D.C. Waller has worked with Strategic on a number of projects since 2016 or 2017.

Strategic has never had employees. Nor has Eastern.

## **B. The Origins of the Agreement**

The case concerns a research agreement (the "Agreement") dated December 29, 2017 and signed by Strategic and Eastern on January 6, 2018. Wallop signed on behalf of Strategic. Wang signed the name Han on behalf of Eastern.

The Agreement stated that it was "for the purpose of [Strategic] providing business research, reporting, documentation, and other consulting services." The Agreement also reflected Strategic's promise to "conduct high quality original research and prepare reports on subjects chosen at [Eastern's] discretion, for the purpose of detecting, stopping, and preventing crime or other harm to innocent people." PX1.

The Agreement had its origins in meetings among Wallop, Waller, and Guo and persons associated with Guo in late 2017.

Guo was introduced to Wallop and Waller in late October or early November of 2017, by an individual named Linchao Han ("L. Han"). A former reporter for the Washington Free

Beacon and current reporter for the Washington Times named Bill Gertz ("Gertz"), who is a mutual acquaintance of Guo, Wallop, and Waller, was also involved in the introduction.

Both Gertz and L. Han are members of the community of persons in the United States who are opposed to the CCP and self-identify as "China Hawks." L. Han had immigrated to the United States from China and worked in the United States Senate for several years (including for the late Senator Wallop) on matters relating to China. Before he immigrated and after the Tiananmen Square Massacre in 1989, L. Han helped found the Independent Federation of Chinese Students and Scholars. Gertz has opposed the CCP through his writings and books. He met Guo when he interviewed him in June or July 2017 and was asked by Guo to be a director of the Rule of Law Foundation, an organization established by Guo in October 2018 to bring about democratic reform in China.

Wallop and Waller also have been involved in activities dedicated to the overthrow of the CCP.

In late 2017, Gertz approached Wallop and offered to introduce her to L. Han with respect to a project Gertz thought might be of interest to Wallop. L. Han, who is a lawyer, was helping Guo with his application to obtain asylum in the United States. Gertz believed that Wallop could provide strategic communications support to Guo who was engaged in activities to oppose the CCP.

Wallop and Waller met with L. Han and Gertz in late October or early November 2017 at Wallop's home in Virginia. L. Han described Guo to Strategic as a wealthy businessman who had moved to the United States to escape political persecution in China and who had recently purchased the penthouse at the Sherry-Netherland Hotel in Manhattan. According to L. Han and Gertz, Guo had developed several broad goals involving the Chinese government that would be

beneficial to the people of China. In particular, Gertz described Guo as a dissident who had broken with the CCP, who was engaged in a whistleblower campaign, and who wanted to devote his resources to undermining the CCP and causing it to collapse. L. Han believed that Guo needed to sustain an image as a "whistleblower" against the CCP. To be a "whistleblower," L. Han believed Guo needed to obtain and publish well-researched information against highranking government officials.

Thereafter, Wallop and Waller held several meetings with Guo in late 2017. Other meetings were held with Wang and L. Han. The first meeting, held by Wallop with Guo, was at Guo's apartment in New York City. Subsequent meetings, which were held by Wallop and Waller with L. Han and Wang, were held in Virginia or in Washington, D.C.

Wallop and Waller first met with Guo at his New York apartment on November 21, 2017. L. Han was also in attendance. Guo stated that he was on a mission to dismantle the CCP and described himself as an enemy of the CCP who wanted to use his wealth and influence and contacts to bring out information to expose the contradictions within the CCP to bring it down.

Wallop presented a document reflecting a "Vision" for Guo "to remain safely in [the United States] and accomplish his mission back home," i.e., in China. DX38. The document was prepared at the request of L. Han, who Strategic understood to be Guo's emissary but who in fact acted simply as an intermediary between Strategic and Guo. *See, e.g.*, Trial Tr. at 57. The "Vision" document tracked Wallop's then-understanding of the services Guo desired. It was addressed both to his asylum application and to activities intended to help him undermine figures in the CCP. It was also addressed to transforming Guo's public image. The document reflected the objective for Guo to "transform himself from an apolitical businessman to an international statesman" and to "build a global moral standing, with a sound philosophical or principled base,

to show a positive vision for his country's future that will unite people who ordinarily would never follow a wealthy businessman" as well as to "bring Mr. G into a new community of leaders and follows to accomplish his objectives." DX38.

In the "Vision," Strategic proposed to provide services to Guo to change his public image and to build that community. Strategic stated it would "focus on building those communities [of support] in this country, for the purpose of preventing any chance of [Guo] being forcibly repatriated, and as a base from which to expand publicly." *Id.* The services would include helping to change his public image, expanding sources of respect, developing a social engagement presence for Guo with policymakers, media figures, and decisionmakers in Washington D.C., making Guo a thought-leader and policy leader, and building a foundation to educate people from the United States and China on Guo's ideas. Among the services promised to Eastern was that Strategic would deploy a secretive and untraceable network of persons supportive of and associated with then-President Donald J. Trump. Strategic proposed to provide an "aggressive defense" against attacks that were expected to intensify and to develop a network of surrogates who could speak on Guo's behalf without being traced back to him and who would be developed from online networks supportive of President Trump. Wallop proposed a "three-year effort [with] an experienced team in [Washington D.C.] to advise Mr. G and help him navigate the political and policy terrain, develop strategy, execute programming, and coordinate messaging." DX38.

At the meeting, Guo stated that he "want[ed] now immediately information" and that the "[f]irst month is critical for quality of information." Trial Tr. at 383-84.

Those ideas were further developed at a second meeting between Guo, Wallop, and Waller on December 4, 2017. Trial Tr. at 134. L. Han and Yang were also at the meeting. At

this meeting, Wallop presented a three-year timeline for the campaign. The objectives were stated to be the following: "Remain free in the United States; Become a thought-leader and an international statesman; Change thinking on China and incubate new ideas and strategies; Develop and build self-replicating personal networks; Successfully drive long-term change back home." DX39.

The proposal had several components, including the establishment of a foundation that would be supportive of Guo's objectives but would be structured so as to avoid the requirement to register with the United States government as an agent of a foreign government or individual. The components included: (1) the creation of "a personal presence in Washington, build friends and allies, make it impossible for US to deport back to China," including the development of "support among Washington influencers and decision-makers" and "support among the president's nationwide grassroots base"; (2) "[d]evelopment of a proper personal presence sufficient to rival the regime," including the purchase of a "Washington residence to show purpose and power, and provide hospitality" (a specific location was mentioned in Georgetown); and (3) the creation of an institutional presence, including through a "Washington-based educational and cultural foundation" that would not have to register under the Foreign Agents Registration Act ("FARA"), 22 U.S.C. § 611 *et seq.*, and through the acquisition of a "[p]hysical office in downtown Washington, D.C." *Id.* The three-year timeline concluded: "Implementation of the three-year effort will require an experienced team in Washington to advise Mr. G. and navigate the political and policy terrain, develop strategy, execute programming, and coordinate messaging. These will all be direct and transparent. Most can be done through the Foundation, which eliminates any need to register under FARA." *Id.*

Strategic also proposed that it would marshal the social media network developed by President Trump and would deploy alternative media to support Guo in ways that Strategic was reluctant to put in writing. It noted that Strategic could provide an "'[a]ctive defense' campaign" against those who were expected to "apply intense pressure on the US government to deport Mr. G back to China," including through "aggressive second-tier journalists in alternative media (compartmented from the Foundation)," which "will be described verbally," and by "[o]rchestrat[ing] social media campaigns to promote Mr. G, attack his critics when needed, and generate a groundswell of support among the President's nationwide grassroots base to ensure that Mr. G is never forced to leave the US against his will. This is also compartmented from the Foundation." DX39. Strategic proposed to charge anywhere from \$33,000 to \$120,000 per month for its services. *Id.*

A subsequent meeting occurred between Wallop, Waller, and L. Han on December 10, 2017. Trial Tr. at 134-35.

Wallop and Waller had a third meeting with Guo on December 11, 2017. *Id.* at 134-36. L. Han was also present at the meeting. *Id.* At that third meeting, the parties' discussions turned to the investigative services Strategic could provide to Guo. *Id.* at 137. Guo stated he was interested in conducting an investigation into members of the CCP with the ultimate objective of helping to overturn the regime. *See, e.g.*, *id.* at 133, 137, 632-38. Strategic described its extensive background in investigation, including its relationships with federal law enforcement and other federal agencies that it could exploit. The investigative services Strategic proposed are described in a PowerPoint prepared by Waller in consultation with L. Han and Wallop entitled, "Time To Get Them: Beginning the psycho-political campaign for China," a portion of which

became the foundation for the Agreement. PX2. The PowerPoint described six parts of Phase 1 of the proposed work (the "Plan"):

- Run micro-targeted intelligence collection and analysis; - Active threat reduction; - Establish foundation and get it running; - Network with Russian opposition; - Acquire appropriate Washington, DC residence; and - Acquire appropriate Washington, DC foundation offices.

The Plan was discussed at a fourth meeting among Wallop, Waller, Guo, L. Han, and Yang on or about December 21, 2017. Trial Tr. at 134-37, 252.

The first part of Phase 1 of the Plan became the foundation for the Agreement. The goal was to "[b]uild and operate a secret system for micro-targeted intelligence and collection analysis." PX2. The PowerPoint observed that "[t]his is an extremely sensitive capability that must be handled with extreme care." *Id.* In several bullet points, it describes the "intelligence and collection analysis." *Id.* It would involve ten targets (described as "fish"), who would be monitored "for several months to understand their habits, patterns, personal and professional networks, businesses, corruption." *Id.* The objectives were to "[k]now what they are going to do before they do it, so we can anticipate, pre-empt, and disrupt," to obtain "leverage to gain concessions, protect people, use as political weapon, or as aid in criminal prosecution and asset recovery," to "[p]rovoke confusion, panic, and infighting within CCP; divide opponents, peel away potential allies; break the Party's control of corruption information; operate more quickly than Party can react," to "[e]xpand the capability to go after all desired targets," to "[b]urrow into commercial and political networks for business purposes," and to "[b]uild an image of invincibility." *Id.* Strategic thus understood that Guo wanted the investigation to uncover

corruption relating to members of the CCP, including crimes committed by members of the CCP, such as the illegal removal of funds from the country. Trial Tr. at 66. Other aspects of the Plan included "reduc[ing] political threats to [Guo] and [his] cause" by "aggressive, grassroots, online social media/activist network in the United States," establishing a foundation for Guo, networking with exiled Russian opposition leaders and internal Russian opposition activists, acquiring a Washington, D.C. residence for Guo, and acquiring a Washington, D.C. office for Guo's foundation office. PX2.

#### **C. The Negotiation of the Agreement**

By mid to late December 2017, the parties were in a position to negotiate the terms of what became the Agreement. *See, e.g.*, Trial Tr. at 137. The terms were initially negotiated by Wallop and Waller with Guo and L. Han. At the final stages, Wang negotiated the terms of the Agreement with Wallop and Waller.

As reflected in the Plan's PowerPoint describing the Plan, it appears that the parties agreed early on that Strategic would obtain information on at least ten targets and that such information would include financial information, tracking information, and information derived from social media.

From the evidence before the Court, the bulk of the negotiations concerned the financial terms of the Agreement. The parties initially disagreed over those terms. Strategic wanted to be paid a monthly retainer and to receive a large "evergreen" deposit that it could hold until the last payment was made in light of the large start-up costs that the operation would require. Guo wanted to pay only on a per report basis. Eastern was willing to pay a deposit but only if it could be recovered if Strategic failed to provide the deliverables as defined in the Agreement. Trial Tr. at 268-69.

Strategic expected Wang to sign the Agreement; Wang had become the liaison for Guo by the end of negotiations. *See, e.g.*, Trial Tr. at 139-40. Strategic expected Wang to sign by December 29, 2017, in Virginia, as she had traveled to Washington D.C. the day prior, but the parties still had an ongoing disagreement about the payment terms. Instead, on December 29, 2017, Wallop gave L. Han and Wang a tour of a number of estates and larger properties in Washington D.C. and its environs that were good candidates for Guo to purchase. *Id.* at 139-41.

The negotiations stalled for a few days but on January 5, 2018, Wang sent a text message to Wallop stating that "both L [L. Han] and M [Guo] advised me that we [sic] supposed to meet again." *Id.* at 149; DX16. Negotiations then continued.

Wallop's negotiations with Wang and with Guo, both before and after January 5, focused on the request that Strategic investigate an additional five subjects, as well on the concept of a "waterline" in the "tank, " (i.e., a minimum amount of work that Strategic would need for the work to be worthwhile). As to the former request, Strategic agreed to investigate an additional five subjects but only for the month of January. As to the latter request, Strategic insisted on a minimum payment and a minimum number of subjects in order to commence the investigation but agreed on a scale for the valuation of each report so that if the parties agreed that Strategic would not deliver a particular report for a particular "fish," an equivalent report would be delivered for another fish.

As expressed in the text messages, Strategic would be paid a monthly fee of \$750,000 for each of the first three months of the agreement (January, February, and March of 2018) and would investigate 15 subjects for the first month and 10 subjects for each of February and March. The number of subjects and the monthly rate would be adjusted thereafter. The fee structure was further expressed in a January 5, 2018 text message from Wallop to Wang:

The agreement for 3 months is correct. January we have allowed 15 fish. 10 fish each for Feb and March. We will determine the subsequent monthly costs obviously by the next numbers of fish in the tank, once we have recapped the previous 3 months. That has not changed. We will agree that we will always have 10 fish minimum in the tank which may be adjusted by agreement each month thereafter March 30, 2018 depending on the actual fish count. We have fish count. We have discussed this and agreed to this formula from the beginning with your boss—that we remain flexible with his additions. Naturally if your boss adds or subtracts the number, we shall prorate or add amounts due the following month. The entire point of the water line in the tank was to keep the costs to a minimum and a planned budget for your boss. All of this was to give 30 units of reports per month as planned and agreed. Some months may therefore cost far large amounts than your boss has budgeted, then there will be additional fees per fish, solely becau . . . [the message was cut off].

#### DX16. The reference to "boss" was to Guo.

In response, Wang wrote: "Can you please send the contract here? . . . There is of course no impasse here. I work with several people, M [Guo] is one of them, saying for this project, he is not the only boss." *Id.* Wang and Wallop agreed that Wang would sign the contract the next day, January 6, 2015, in person. Wang wrote: "[T]his contract and all communications from contract signed tomorrow, are exclusively between NY [Guo], you, M [Waller] and me—four of us." DX17; *see* Trial Tr. at 153-55.

The last-minute negotiations and changes to the terms of the arrangement are reflected in the difference between a draft of the Agreement that Wang was given to negotiate with Wallop and the final Agreement. *Compare* DX6 (draft)*, with* DX4*, and* PX1 (final). The draft of the Agreement, which is dated January 1, 2018, was virtually identical to the final Agreement with a few significant exceptions. The third page of the draft Agreement recited prices of \$300,000 annually per subject for each of the three reports Strategic was to prepare: forensic financial reports, tracking reports, and social media reports. It calculated a total of \$3,000,000 per year "for 10 units or deliverables for the first stage . . . or \$250,000 per month for 12 months." DX6. Each "unit" was a target or fish. It further provided:

These units or deliverables may be mixed and matched as the Client requests. As one unit is deleted from one fish, an extra fish with the equivalent deliverable is added, as shown in the attached charts. *Such payments will be made following receipt of the agreed-upon number of reports per month.*

DX6 (emphasis added).

The final Agreement similarly required regular monthly installments. It calculated a total of \$9,000,000 per year for 30 units, i.e., 10 subjects each with 3 reports, "or \$750,000 per month for 12 months." DX4; PX1.

The final Agreement, however, contained a significant change in the language. It provided the same language: "These units or deliverables may be mixed and matched as, the Client requests. As one unit is deleted from one fish, an extra fish with the equivalent deliverable is added, as shown in the attached charts." DX4; PX1. But it deleted the following sentence from the draft Agreement: "Such payments will be made following receipt of the agreed-upon number of reports per month." The change reflected the parties' agreement that Strategic would be paid a flat fee regardless of the number of reports delivered on any particular month. There might be a variation in the number of reports delivered in a particular month depending, for example, on whether Eastern added a new fish. On average, however, Strategic would deliver three reports per month on each subject.

In addition, the concept that the obligation to make regular monthly payments would extend only for the first three months of the contract, as reflected in the draft, was replaced by a new concept in the final Agreement that the term of the Agreement would be three years with \$9,000,000 due each year, but that the parties would meet "after the March reports and payments [were] made" to "recap the accounting" and that such meeting would take place "prior to moving forward with the next quarter." DX4; PX1. Thus, the obligation to make regular monthly payments at a rate of \$750,000 per month would continue throughout the term of the

Agreement—and the Agreement was terminable by either side on 30 days' notice—but the parties agreed to assess the value of the relationship and whether the terms should be changed after the three-month period.

In short, the compromise gave Strategic the comfort that, before it began work, it would receive \$1 million that it could devote to the establishment of an infrastructure and that Eastern would not be able to terminate the Agreement without 30 days' notice, thus providing Strategic with an additional \$750,000. The compromise additionally assured Eastern that it was not irrevocably committing itself to the arrangement for the full three years, and that after three months, the parties would look back to review the quality of the work before deciding how to further proceed under the Agreement or whether changes should be made to it. *See, e.g.*, Trial Tr. at 269-78; PX1 (stating that after the first three months, the parties "will meet to recap the accounting, prior to moving forward with the next quarter" and "that with any change to the numbers above 10 fish in the tank, that [Strategic] will reserve the right to renegotiate [the] financial Agreement").

#### **D. The Insertion of Eastern into the Agreement**

During negotiations, Guo requested that, to protect his confidentiality and anonymity, he would not sign or be a party to the Agreement but that a separate entity would sign and be a party. Strategic agreed.

Either on the day the Agreement was signed (January 6, 2018) or only shortly before the witnesses disagree—Eastern's name was first mentioned to Strategic. Strategic did very little, if any, investigation into the identity of Eastern. Wallop simply assumed that it was a shell company associated with Guo and determined that the company was registered in Hong Kong to Guo's daughter but did no other research. *See, e.g.*, Trial Tr. at 285.

Both Wang and Han testified that, prior to Eastern being added as the party to the Agreement, the two had a conversation in which Wang asked Han if Eastern would be interested in commissioning Strategic to conduct research on figures in the CCP and in funding that research and Han agreed. *Id.* at 413-14.2 The Court finds that testimony not to be credible. Wang signed interrogatories in connection with this case. One of the interrogatories asked for Eastern to identify the names of each person with knowledge of the Agreement, including its negotiation. Wang, who signed on behalf of Eastern, did not include the name Han. DX5. The Court finds that the testimony regarding Han was an after-the-fact creation to make it appear that Eastern was an entity, separate from Guo.

The more plausible inference, and the one that the Court draws, is that Guo told Wang to provide the name Eastern to Strategic and to sign Han's name to the Agreement. If there was any conversation between Wang and Han, it was perfunctory, to confirm the arrangement that Guo had already made and directed. At the time, Eastern was registered to the same address as Guo's family office in Hong Kong. It is now registered to an address that is also the residential address of Guo's daughter. Although at the time Han was the ostensible owner of Eastern, it has now been transferred to Guo's daughter but Han could not testify that he received anything in exchange. Trial Tr. at 596. Eastern is a shell for Guo and his family.

The Court draws that conclusion from several facts. At the time of the supposed conversation, Eastern was essentially a defunct entity. Although, according to Han, its purpose

2 Wang testified that she met briefly with Han, told him that the investigation firm was very capable and could assist in the investigation of high-level governmental officials from China, and asked Han if he had an interest "to be part of this." Trial Tr. at 414-15. She testified that she told him the contract requested a \$1 million deposit and that Han said he would figure out how to get the money for the project. *Id.* at 415. He later called Wang to say he would take care of the payment and that he was onboard and asked Wang to negotiate the contract. *Id.*

was to make real estate investments, it had made no such investments. It had no assets other than the \$80,000 frozen in a Hong Kong bank account and it had no operations and no employees. *See, e.g.*, *id.* at 595-96. Its location was in the offices of Guo's family company in Hong Kong and its sole director was Guo's daughter. It had no reason to be fund the research and no ability to pay for the research. There was no evidence that anyone from Eastern read the Agreement or even understood its terms before its name was put on the Agreement. Guo's daughter did not testify at trial. Han testified but his testimony was that he called Guo's daughter, told her about the project and that Eastern was going to participate, and that she agreed on the spot and authorized him to take care of it. *Id.* at 567-69. He admitted that he was not aware of the name Strategic until after this litigation began, that he never saw the Agreement, and that—aside from the obligation to pay \$1 million—he did not understand or know any of the terms of the Agreement. *Id.* at 603-05. Han did not even see the Agreement at any time prior to signing, and the first time he saw the Agreement was at his deposition in this case. Even at trial, he testified that he did not know the content of the Agreement and that he had never read the Agreement from beginning to end. Moreover, Wang did not tell Han of the obligation and Han did not know of the obligation Eastern supposedly was assuming to pay Strategic \$750,000 a month or even of the obligation ultimately reflected in the Agreement that Eastern would pay Strategic \$9 million a year for Strategic's services over a three-year period. *Id.* at 606.

Aside from supposedly arranging for the payment of a \$1 million deposit, there is no evidence that Eastern did anything with respect to the Agreement. It did not make payments to Strategic or provide the names of the persons to be investigated to Strategic (or even know which names were being provided to Strategic).

Finally, the testimony of both witnesses was largely conclusory and when accompanied by details, those details were discredited. Wang did not provide any details of the supposed conversation with Han; her testimony as a whole was undermined by the repeated examples of the prior inconsistent statements that she made at deposition. While Han's prior inconsistent statements were less pronounced than Wang's, his testimony was no more convincing. Finally, no director of Eastern even signed the Agreement; the Agreement was signed by Wang who forged Han's signature.

#### **E. The Terms of the Agreement**

On January 6, 2018, Eastern and Strategic signed the Agreement. The Agreement is dated December 29, 2017. Eastern is identified as the Client and Strategic as the Contractor.

The parties executed the Agreement at Wallop's home in Virginia. The Agreement was ultimately signed by Wang and Wallop. Wang signed the Agreement in the name Han after Guo approved its final terms for Eastern, which Wang read him over the phone.

The Agreement is stated to be "for the purpose of providing business research, reporting, documentation, and other consulting services." PX1. Under the Agreement, Strategic agreed to "conduct high quality original research and prepare reports on subjects chosen at [Eastern's] discretion for the purposes of detecting, stopping, and preventing crime or other harm to innocent people" and to prepare research and reports on . . . three subject categories: A) Financial forensic Historical research; B) Current Tracking research; and C) Social media research." *Id.* Eastern was to provide Strategic "the necessary basic information, and desired areas of focus . . . to research," including the "specified subjects" of the reports, identified in the Agreement as "fish." *Id.* Strategic was to provide Eastern with "comprehensive confidential reports" on 10 "fish" per year on a timetable set forth in the Agreement. *Id.*

The "Financial forensic Historical research" was to "consist of, but not be limited to, indepth and detailed reports of existing and historical business and financial transactions, on subjects selected by [Eastern], and relations of the subject as identified by [Eastern]." *Id.* at 1. Strategic was required to produce a weekly progress report, a preliminary report in the first month of the Agreement, one comprehensive report within three months of the Agreement, and update reports each following month. *Id.* at 2. Under "Deliverables," the Agreement specifies that Strategic was required to produce these reports "as specified above one time per subject, subject to occasional updating throughout the year." *Id.* at 3.

"Current Tracking research" was to "consist of, but not be limited to, in-depth and detailed reports on movements of specified subjects by land, air, and sea (private and commercial); schedules and itineraries, addresses and lodging, means of transportation, names of carriers, manifests, geolocation, major events and significant contacts the subjects involved, videos and audio that can be accessed remotely, and other data that may be of relevance to the overall research, such as past travel records that may [sic] significant to the research." *Id.* at 2. Strategic was required to produce weekly reports in the first month of the Agreement and thereafter research on a monthly basis. *Id.* Under "Deliverables," the Agreement specifies that Strategic was required to produce reports for each subject "monthly or more frequently as [Eastern] directs." *Id.* at 3.

"Social media research" was to "consist of, but not be limited to, in-depth and detailed reports on the social media usage and networks of specified subjects and public figures." *Id.* at 2. Strategic was required to produce research on a weekly basis for the first month of the Agreement and on a monthly basis thereafter. *Id.* Under "Deliverables," the Agreement

specifies that Strategic was also required to produce reports for each subject "monthly or more frequently as [Eastern] directs." *Id.* at 3.

In all, Strategic was to provide deliverables on 10 subjects (or fish) on each of the three topics for a total of 30 reports per year. *Id.* (Confusingly, the monthly and weekly deliverables were also referred to as "reports" but were also considered to be "units.") For the first month of the Agreement (January 2018), Strategic was to provide "comprehensive confidential reports" for up to "15 fish for a total of 30 reports." *Id.* at 4. That figure was to "decrease to 10 fish for a total of 30 reports at the beginning of the second month (February) and for (March) and for the duration of [the Agreement]." *Id.*

The research was to be "based on the best practices and standards of the industry, comparable to other top firms with similar services" and Strategic was obligated to "make most diligent efforts to ensure the served render[ed] are of very high quality, revealing a true, complete and full profile of the subject." *Id.* Strategic guaranteed "that all information provided is genuine." *Id.* at 3.

At the same time, the Agreement also reflected the understanding that "occasional unforeseen challenges may arise that will slow or block comprehensive research, and that there may be periods in which information is irregular, unavailable, or incomplete." *Id.* In such circumstances, Strategic was obligated to "endeavor to make all research and reports as complete was possible in a timely scheduled manner." *Id.*

The Agreement reflected the further understanding that Eastern "may not wish for each of the 10 fish to be the subject of all three reports, and that the number of report work duties [sic] per month will vary." *Id.*

The parties agreed that the identity of the fishes or subject might change: "It is also understood that [Eastern] may find it necessary to remove certain fish from time to time, or [Strategic] may find circumstances do not permit sufficient work to research a given fish." *Id.* When a fish was removed from consideration, "a new fish will be put in its place by [Eastern], keeping the number of fish being monitored at any time at 10." *Id.*

In exchange for Strategic's commitment to conduct the identified research and to deliver the reports, Eastern agreed to pay Strategic a monthly fee calculated on a scale of \$300,000 for each of the financial forensic historical research, current tracking research, and social media research on a single "fish" for a total of \$900,000 per fish per year for an aggregate of \$9,000,000 for the 10 fish (or \$750,000 per month) to which Eastern and Strategic were committing.

The actual payment for Strategic's services and reports was "to be made in regular monthly installments of US\$750,000, at the end of each month." *Id.* at 5. The parties agreed that "for the first 3 months of th[e] Agreement, January, February and March 2018, . . . the payment of \$750,000. USD will be wired per [Strategic's] instructions to [Strategic's] US Bank account." *Id.* at 4. "[A]fter the March reports and payments are made, [] all involved Parties will meet to recap the accounting, prior to moving forward with the next quarter." *Id.* Strategic reserved the "right to renegotiate [the] financial Agreement" "with any change to the numbers above 10 fish in the tank." *Id.*

The parties also agreed that Eastern would pay Strategic "a deposit of US\$1,000,000 (one million dollars) upon signing the contract," which would "be credited on a prorated basis to the final 1-1/3 (1.3) months of the contract." *Id.* at 5.

The term of the Agreement was three (3) years from the date of signing but the Agreement also provided that "[e]ither party may terminate the contract with 30 days' written notice." No cause was required. *Id.*

The Agreement contemplated that Eastern might want additional subjects to be investigated and gave Eastern the right to "direct [Strategic] to conduct other research, not specified in th[e Agreement] for an additional fee." *Id.* at 4. It noted that both parties anticipated that the contract "could expand to many more subject of research" and that Eastern had "expressly stated that there could be as many as 4000 such 'fish in the tank.'" *Id.* at 5. It provided, "Obviously, negotiations for the far larger range will be agreed upon in writing at a later date." *Id.*

Several provisions of the Agreement reflected the sensitive nature of the assignment and the parties' desire for confidentiality. The Agreement begins with the statement:

Both parties agree that the nature of this contract, and work related to it, is highly confidential. Both parties are bound by the strictest secrecy not to disclose the existence of the contract, sources and methods used to execute the contract; and participants in formulating, supervising, or executing the contract's provisions, to any third party, except as required under United States law or the laws of the State of Nevada.

PX1.

It includes the agreement that "there will be single line of communication between [Strategic] and [Eastern]" and that "[t]he individuals through which such communication will be made will be identified upon the initiation of this contract." *Id.* at 1. "Any and all materials provided by [Eastern] to [Strategic] will be treated with absolute confidentiality and will not be shared by [Strategic] with any other entity." *Id.*

It also provides that "[Eastern] may direct other entities to pay [Strategic], and that such payments will be deemed satisfactory compensation by [Strategic]." *Id.* at 4.

All of the deliverables were to be provided "by USB drive only"; oral reports were insufficient. *Id.* at 3.

## **F. ACA Capital Group Limited Provides the Deposit**

Even before the signing of the Agreement and as part of the negotiations that ultimately led to the Agreement, Wallop had requested that Eastern provide a \$1 million deposit.

The deposit ultimately was provided by an organization called ACA Capital Group Limited ("ACA"). On January 2, 2018, before the Agreement was finalized, ACA sent two \$500,000 wire transfers to Strategic that Strategic understood to be the deposit that the parties had previously discussed in relation to the Agreement then under negotiation.

The parties disagree as to the nature of the relationship between ACA and Eastern and the basis upon which ACA funded the security deposit.

Eastern claims that it borrowed the money from ACA. It points to a loan agreement dated December 29, 2017 (the "Loan Agreement") signed by Han on behalf of Eastern and a William Je ("Je") on behalf of ACA. The document has the formalities associated with a true loan agreement. It purports to document a \$1 million loan from ACA to Eastern with a 6-month term and an interest rate of 2% compounded monthly "or otherwise mutually agreed by the Lender and the Borrowing in writing from time to time." 3 PX11. The 2% interest is equivalent to \$20,000 for the first month. The Loan Agreement reflects that the loan is not collateralized and that ACA would wire transfer the \$1 million to a bank designated by Eastern.

Strategic claims that the \$1 million reflects an investment by ACA in the research venture launched by Eastern and Strategic and that, in reality, Eastern did not borrow the \$1 million from

3 The Court overrules the objection to the authenticity of the Loan Agreement. There is sufficient information before the Court to support its authenticity for the purposes of admissibility (i.e., a factfinder could find it to be authentic). But, as factfinder, the Court finds that the document does not reflect a genuine loan agreement.

ACA and does not owe \$1 million to ACA. It contends that the return of \$1 million to Eastern rather than to ACA would represent a windfall to Eastern because Eastern would have no obligation to pay the funds over to ACA.

The Court finds that the \$1 million paid from an ACA bank account does not represent a genuine loan from ACA to Eastern. It reaches that conclusion largely for the reasons identified by Strategic. First, Eastern's evidence regarding the extension of the loan is wholly implausible. It is based almost entirely on the testimony of Han, the purported representative of Eastern. According to his testimony, Han, who at the time had ceased his role as owner and director of Eastern, called Je, whom he described as a good friend, upon learning of the obligation to pay Strategic \$1 million. Han knew Je as an opponent of the CCP and believed he might be interested in funding anti-CCP research. Je stated that he was willing to extend the \$1 million loan and the parties agreed on a six-month term for the loan and a 2% interest rate. Han testified that he saw the Loan Agreement for the first time on December 29, 2017 when he met Je at the Palace Hotel in New York to sign the agreement. The meeting lasted 20 minutes. Han, who does not read English, did not read the agreement which was in English and which he was supposedly signing on behalf of Eastern; Je just pointed out to him the amount of the loan, the interest rate, and the term. Han also did not get approval for the loan from Guo's daughter—the ostensible owner of Eastern—and the agreement he was signing on her behalf. He testified: "I don't need her approval; however, I did report such a matter to her." Trial Tr. at 598-99.

There was no discussion between Han and Je as to how Eastern would repay the loan. Han stated that he gave the issue some thought but his testimony was not credible. He testified that Guo's daughter, who was interested in film, would be able through her film investments to operate Eastern to make it profitable and to generate the \$1 million (plus interest) necessary to

repay ACA. *Id.* at 605-06, 610. As Han put it: "I also believe that after the company transferred to Guo Mei and since she is very good in film, I believe she can operate this company and make it profitable." *Id.* at 606; *see also id.* at 610 ("Even though at the time that was 80,000 only, we could still be operating and then we could still be investing in film."). Wang also suggested that the Hong Kong authorities might agree to lift the freeze on the funds based on Strategic's research. *Id.* at 439-40, 510-11. The testimony is implausible. Eastern's assets were limited to \$80,000 in a frozen bank account. Regardless of the skill of Guo's daughter as a film investor (as to which no evidence was introduced), there would have been no way for Eastern to satisfy the terms of the purported loan or to repay even the principal that it presumably owed, much less the interest. The monies were more in the form of a gift.

Notably, in its interrogatory responses, Eastern stated that it was Guo who, on behalf of Eastern, ordered the two \$500,000 wires totaling \$1 million to be sent to Strategic. DX5.

Strategic also points out that after the Agreement was signed, an additional \$750,000 the first monthly payment in January 2018—would have been due in just a few weeks, further adding to Eastern's debt load. In all, over \$27 million would have been due over the three-year term of the Agreement. Those terms thus had no economic substance for a company with the value of Eastern.

If ACA had loaned the money to Eastern, one would have expected each party to know how much Eastern owed ACA. But the evidence at trial established that Eastern has not repaid the loan, made any principal payments, or made any interest payments. At trial, Han was unable to testify as to how much Eastern owed per month in interest on the loan. Trial Tr. at 607. According to Han, Eastern's only plan to repay the loan is if it wins the litigation. *Id.* at 574. But that is a wholly implausible understanding of the obligations under the loan, which was

reached before there was any litigation and which was made in order for Strategic to perform under the Agreement.

Wang also could not say with confidence what Eastern owed under the loan or what its terms were. Despite being Eastern's corporate representative—who had claimed authority to act for Eastern even during the negotiation of the Agreement, through performance, and through the litigation itself—Wang had not even seen the purported loan agreement when she first testified at her deposition in January 2019, only later seeing it in the litigation file of her prior counsel. *Id.* at 508-09. Although she testified that the counterparty to the loan, Je, had contacted her orally and in person about repayment, that testimony was not credible. All she remembered was that he said that he wanted the loan to be repaid. *Id.* at 504-07. He did not mention what ACA was owed.

There are also irregularities in the loan document and its production. Eastern's agent, Han, is shown to have signed the loan document as "Director," but he was not Eastern's Director at the time. In addition, Eastern did not keep a copy of the loan document after it was signed. There are no accounting records indicating a loan obligation to ACA.

At the same time, however, the evidence does not support that ACA was an investor in the research project. ACA did not provide the names of subjects to be investigated, it did not receive any of the results of the research, there is no evidence that it made any arrangements in advance to receive the results of the research, and there is no credible evidence that it made requests after the fact to see the research. Although there is reference in certain documents to "investors," the Court found convincing Wang's testimony that the reference was to constituents who might use or benefit from the research and not persons who contributed money to fund the Agreement. The source of the funds sent by ACA is unknown to the Court and was not the

subject of testimony. But regardless of whether those funds are ultimately traceable to Guo as Strategic suggested or are independent from him, the Court finds that they were a gift on behalf of Eastern (and Guo) and not provided out of any obligation.

#### **G. Strategic's Performance Under the Agreement**

The execution of the Agreement imitates a fact pattern imagined by Robert Ludlum and played out in the Pink Panther. It was shrouded in the secrecy befitting the best spy novels. It was beset with mishaps befitting of Inspector Clouseau.

Because of security concerns and for fear that any electronic communications would be hacked or be transparent to the CCP, the parties agreed in advance that they would exchange reports and identification of research subjects only by USB drives and through in-person contact at secure locations.

Strategic would coordinate with subcontractors (i.e., intelligence analysts in the U.S. and overseas) to perform the research that Strategic would then incorporate into the reports for Guo. Guo would not be allowed to contact the team/network because Strategic's relationships and approach to the research were proprietary, and Strategic declined to reveal the names or titles of team members. Pursuant to Guo's instructions and the parties' agreement, instructions to the investigators who would conduct the work, as well as the actual products of the research, could not be transmitted by email but only in-person.

The negotiated start date for the work under the contract was January 16, 2018. *See, e.g.*, *id.* at 156, 161, 304, 319. The parties agree that the weekly Financial Forensic Reports, Current Tracking Reports, and Social Media Reports were due no later than January 23, 2018, January 30, 2018, February 6, 2018 and February 13, 2018. *See also* PX1. The parties also agree that the first monthly Financial Forensic Reports, Current Tracking Reports, and Social Media Reports were due no later than February 16, 2018.

The parties further agree Strategic ultimately never delivered any "financial forensic [h]istorical research" called for under the Agreement. Dkt. No. 299-1 ("JSOAF") ¶ 54. The parties also agree Strategic did not deliver to Eastern any "current tracking research" called for under the Agreement. *Id.* ¶ 55. The parties further agree Strategic did not deliver to Eastern any "social media research" called for under the Agreement. *Id.* ¶ 56.

On or about January 6, 2018—the same day that the Agreement was signed—Wang delivered to Wallop's home in Virginia a set of USB drives containing information for a list of 15 individuals that Eastern wanted investigated under the Agreement (the "Subject List"). Trial Tr. at 156-57; JSOAF ¶ 50. But when Wallop tried to access the USB drives, she discovered that they were all corrupted. Surprisingly, Wallop brought the USB drives to a person described as "a neighbor," despite the fact that the Agreement and the information it sought were described as highly secretive. The "neighbor" tested them and discovered that they did not contain any readable files. Trial Tr. at 156-57.

On January 8, 2018, Wallop met Wang in New York and obtained three more USB drives. Fortunately, one of those worked and Wallop was able to download the files for the persons who would be the subject of the investigation. *Id.* at 76-77, 157-58. The individuals were virtually all high-ranking CCP members or persons closely related to high-ranking CCP members or their children living in the United States and elsewhere. PX7.

Wallop and Waller agreed to split the work. Wallop would focus on domestic investigation. Waller would focus upon investigation done by investigators overseas.

In early January 2018, Waller travelled to Europe and engaged a 10-person team of computer and data analytic engineers to conduct data mining and research, including research into the "dark web" ("Team 1"). *See, e.g.*, Trial Tr. at 198, 289-92. Team 1 was led by a person

whom Waller knew. The operation was shrouded in secrecy. Waller purchased computers for the team in cash in three separate countries in order to prevent any electronic tracing of the serial numbers of the devices to the purchaser. He also purchased electronic material in a fourth country for the purposes of camouflaging the actual activity that was taking place. Information could not even be exchanged by encrypted email or encrypted phone. *Id.* at 292. Per the instructions of Guo, information could only be exchanged in person by exchanging USB drives. There was compartmentalization to make sure that if any link in the chain was broken it could not betray the other links in the chain. Travel was onerous because it would take two or three days to do a round trip to meet in a third location to exchange data. Before Waller could give the list of the 15 names to Team 1, he had to print out the names from a computer not connected to the internet, scan them, and then place them onto a new encrypted drive to be delivered to Europe. *Id.* at 304. Guo had also instructed that Strategic not have Mandarin speakers on Team 1 in case they were spies for the CCP. L. Han eventually permitted Waller to hire retired European diplomats who spoke with fluent Mandarin who were not of Chinese background.

Waller gave the names to Team 1 in Washington D.C. and traveled to Europe a few days later to obtain a status report and to collect the research that the team had conducted (which was stored on a USB drive). He received a drive from Team 1 on January 24, 2018 and delivered that material to Wang two days later. *Id.* at 304-05.

Wallop met with Guo at the end of January 2018. *Id.* at 162. At the meeting, Guo stated that he needed the reports by January 26, 2018—10 days after the negotiated start date of the Agreement but three days after the first deadline for the weekly reports.

Strategic delivered a first USB drive to Eastern on January 26, 2018, after Waller's return from Europe. Strategic has admitted that the information contained on the USB drive delivered

to Eastern on January 26, 2018 was "of no use to Mr. Guo or Eastern because it was nothing more than the researchers' own work to familiarize themselves with the fifteen subjects using open-source information." *Id.* at 199; DX2 at 35 ¶ 45. At a meeting with Wang, Waller stated that the drive reflected the work that the team had done to orient itself and that several of the 15 names were misspelled. Trial Tr. at 307-310, 313-14. He also stated that the drive contained the location of some offshore companies and the password to a computer server of the Chinese government. Wang responded with disappointment as to the information, stating that it was not "good enough" and was "all junk." *Id.* at 314. In addition, while L. Han expressed the view that Strategic had good leads and should keep working on them, 4 he also relayed that Guo was angry with the information that was delivered under the Agreement and believed that it reflected that Strategic was incompetent and trying to "rip him off." *Id.* at 320.5

Waller traveled to Ireland to receive the second USB drive a few days later and delivered it to Wang in Pennsylvania Station in New York on January 30, 2018. *Id.* at 199, 327-28.

Wang took the second USB drive to Guo and placed it in the "virgin" laptop that had been left by Strategic from the last meeting. The two discovered that the drive did not contain useful information. The information on the drive was limited to raw code that was not actionable by the client but was intended to show that the work was being executed. *Id.* at 200. The parties agree that this second USB drive was not "of any use" to Eastern and that it contained

4 L. Han, who did not testify at trial, also testified under oath at deposition that the hard drive that Strategic provided contained only "lots of junk information." Trial Tr. at 368. But L. Han was an intermediary between Strategic and Guo and not Guo's agent. *Id.* at 365.

5 Waller testified that he did report to Wang or L. Han that Eastern had discovered from sources other than social media that one of the people on Eastern's list was carrying a counterfeit non-Chinese passport of a NATO ally. Trial Tr. at 320-21.

"incomplete work product . . . in the form of raw research data." *Id.* at 78-79, 199, 200-01, 359, 383; DX2 at 28 ¶ 24. Among the information on the drive were encrypted email addresses and passwords of communist figures on Guo's list. Trial Tr. at 329. Strategic did not deliver any other USB drives to Eastern and Strategic admits it "was unable to prepare any detailed reports." *Id.* at 79, 359.

After the second meeting, and after Wang had conveyed the message in the wake of that meeting that work with Strategic might not be continued for a second month, Waller made arrangements with a new team ("Team 2"). Team 2 was from an obscure organization called the Allied Special Operations Group ("ASOG"), which was purportedly based in Dallas, Texas. Conspicuously, Strategic offered no evidence regarding the bona fides, qualifications, or legitimacy of this organization. It would conduct the research using different methodologies from those used by Team 1. Rather than using data mining and intrusive computer capabilities, ASOG claimed it would work with other commercially available databases and contacts within the federal government to do the research.

Waller testified he met with ASOG in Texas in the first couple of days of February 2018 and presented ASOG with the list of subjects to be investigated, asking the organization to research a selection of those names to see what it could discover using its own methods. Within a week, ASOG replied to Waller with its results and Waller flew back to Texas to meet with it. Waller testified that ASOG gave him an oral report at the meeting and permitted him to view but not take—the research ASOC conducted, which Waller testified included detailed tracking information on the subjects. *Id.* at 95-96, 344-45.

Waller further testified that he told L. Han at a subsequent meeting that ASOG had told him that it was illegal to obtain this information under federal law given the nature of what was

obtained.6 In particular, Waller testified that he stated that he had been told that it would be a federal crime to investigate further the five subjects ASOG had investigated because the National Clandestine Service of the CIA had classified the individuals in a category that ASOG said was called "records protected." *Id.* at 351-52. He testified that he was told and conveyed that this classification is intended to protect foreign subjects from database searches for the purpose of protecting their records either because they were subjects of criminal or national security investigations or because they were cooperating with the United States government. *Id.* Waller testified L. Han told him that he understood that the information was classified and that he would come up with new names. Trial Tr. at 352-53. At the same time, however, ASOG was reluctant to continue work on the assignment without knowing the identity of Strategic's client. *Id.* at 354. L. Han, however, ultimately did not provide additional names. *Id.*

The testimony regarding ASOG is of dubious veracity. As noted, Strategic offered no evidence of the qualifications of ASOG or its competence to do the work that it supposedly performed. It also offered no evidence that ASOG actually did any work, save for the testimony of Waller that he saw work and an invoice for \$104,595 that ASOC reduced to \$5,412 supposedly based on a "termination credit." DX56; Trial Tr. at 345, 350. There was no evidence offered—from either a fact or expert witness, or in the form of a document or stipulation—that a classification of "records protected" even existed, much less that there was any prohibition on ASOG sharing any work it performed with Strategic or with Eastern. Waller himself had never heard of the term "records protected" before ASOG mentioned it to him and he does not know of a legal source for it. Trial Tr. at 369-71. All that was offered is the

6 Waller testified that he was instructed by Wang on or about January 30, 2018 that he should not contact her in connection with the project anymore and that he should work solely with L. Han. Trial Tr. at 349-50.

testimony of what Waller was told, which was received solely for Waller's state of mind and as background for what he told L. Han, and not for the truth of what was stated.

A few weeks later in February 2018, Wallop and Waller met with L. Han at Wallop's home. *Id.* at 354-56. L. Han told the two to stand down their work.

#### **H. Eastern Terminates the Agreement With Strategic**

Neither Eastern nor ACA made the first monthly \$750,000 payment that was due on February 16, 2018 under the Agreement. Strategic did not deliver any of the monthly reports.

On February 23, 2018, Eastern delivered a letter to Strategic terminating the Agreement. Trial Tr. at 163; DX8; JSOAF ¶ 58.

The letter purported to terminate the Agreement effective immediately and demanded a full and complete refund of the \$1 million deposit. After noting that the start date of the Agreement had been delayed from January 6, 2018 to January 16, 2018, the letter listed a number of missteps by Strategic that Eastern claimed constituted a breach of contract and demonstrated that Strategic had fraudulently misrepresented its capabilities. These missteps included the failure to deliver the reports required by the Agreement and the failure to meet the schedule laid out in the Agreement. Eastern demanded that Strategic cease work immediately and return or destroy all materials and information provided by Eastern to Strategic. The letter demanded that the \$1 million deposit be returned to ACA at a Singapore address.

Strategic did not return the deposit.

## **I. Guo's Alleged Misrepresentations**

Strategic, through Wallop and Waller, claims that Guo misrepresented his identity and his objectives and that they reasonably relied upon his misrepresentations to Strategic's detriment.

Specifically, Guo represented to Wallop and Waller that he was an opponent of the CCP and that he wanted to use the research Strategic would provide to sow discord in that

organization and ultimately to overthrow the CCP and the current regime in China.7 Wallop and Waller both testified that they were comfortable entering into an agreement with Guo because they believed that he held the same anti-CCP views that they did and shared their objective of undermining the CCP. Strategic claims it later learned that Guo was in fact affiliated with the CCP and if it had known that prior to signing the Agreement, it would not have entered into the Agreement.

The Court finds that Wallop and Waller did not rely on Guo's statements that he was anti-CCP, that any such reliance would not have been reasonable given the facts here, and that Strategic has not proved a misrepresentation by Guo.

First, Wallop and Waller's testimony that they relied on Guo's statements was largely conclusory and was undermined by the fact that, despite purportedly being investigators, they did no investigation into Guo's identity or allegiances, much less the identity and allegiances of Eastern, the corporate entity that was later introduced into the transaction. Guo undoubtedly represented that he was anti-CCP. He made that point vehemently in his testimony at trial. However, from the evidence, it appears and the Court finds that what attracted Wallop and Waller was the nature of the work: an investigation into alleged corruption by high-ranking members of the CCP, funded by a person who claimed to be a billionaire who would pay them \$750,000 per month in order to do that research. They were less interested in the identity of the funder, Guo, his personal political beliefs, and which faction he sided with in the internecine battles within China.

7 Gertz and L. Han made similar representations about Guo, but they did not do so as Guo's agent and their statements are not attributable to Guo.

Second, any such reliance would have been unreasonable. According to their testimony, Wallop and Waller largely relied—to the extent they relied on anything—on the testimonials of Gertz and L. Han. They knew that Gertz and L. Han held similar views to their own views, that Gertz and L. Han had introduced Guo to Strategic, and that if Gertz and L. Han were willing to associate with Guo and to make the introduction, Wallop and Waller simply assumed they should be willing to associate with Guo.

However, much of the information that Strategic now relies upon to suggest that Guo was not genuinely opposed to the current leadership in China was in the public record before the first meetings Wallop and Waller held with Guo and well before the Agreement was signed. Sufficient evidence was available that should have caused Strategic to investigate. The fact that it did not do any investigation, or ask Guo to make any representations, undermines the reasonableness of any reliance it claims on Guo's statements. Even before its first meeting with Guo, Strategic had received information that "some suspect that [Guo] may simply represent a faction in an internal leadership struggle." DX38; *see, e.g.*, Trial Tr. at 58-59, 203. Waller was also aware of reports that Guo owed his fortune to ties to the CCP and that he maintained close ties to senior CCP leaders after he left China. Trial Tr. at 203-04, 206. In the words of Waller, Guo had made it "very public" that he rose up through the CCP and the secret police apparat, Ministry of State Security ("MSS"), with MSS's Deputy Head of Security Ma Jian ("Jian"). *Id.* at 205, 207.

Against this backdrop, it is telling that Strategic did not investigate Guo but rather simply placed blind faith on the fact that Gertz and L. Han vouched for Guo. *Id.*; *see also id.* at 85-86, 88. By that time, however, Gertz had written an article dated May 23, 2017, stating Guo has "close ties to senior Chinese Communist Party leaders, including government ministers and

Politburo members" and "access to Ministry of State Security (MSS) operations overseas and in the United States." DX43. The article also reported that Guo's wife and daughter were permitted to visit him in the United States but were required to return to China after 20 days where they could be used as political leverage against him—information that Strategic now says is evidence of Guo's relationship with the CCP. By October 9, 2017, Gertz had publicly written that "Guo said he maintains close ties to supporters within the Chinese government and security system and is able to obtain many internal documents." DX32. Also in October 2017, the Wall Street Journal published reports—of which Waller was aware—that Guo had met with four officials from China's MSS in his New York apartment. DX34. It is precisely these "close ties," the relationship with the MSS, and the fortune Guo made from the CCP that Strategic now relies on to say that Guo is secretly allied with the CCP.

Wallop testified that she did not know what Eastern or Guo were going to do with the research and thought maybe Guo was going to "run it both ways." Trial Tr. at 89. Yet neither Wallop nor Waller insisted that Guo or Eastern make any representation about their being anti-CCP or using the research only for anti-CCP purposes. At trial, Strategic, presumably a sophisticated party, claimed that it did not include a representation in the Agreement because it was concerned about confidentiality. That explanation was undermined, however, by the evidence that the parties took to keep the Agreement (with its terms) confidential, including that "there's no decrypted electronic copy anywhere." *Id.* at 386. The terms of the Agreement themselves were confidential and kept highly confidential. The parties could have included a representation in the Agreement regarding how the information would be used or about Guo's objectives had Guo's objectives or his allegiances been important to Strategic. The fact that Strategic did not even suggest that such a representation was ever made is revealing, in that it

shows both that Strategic did not rely on any view regarding Guo's politics or allegiances and that any such reliance was not reasonable. Waller ultimately admitted that the reason that Strategic did not include a representation—despite the fact that Eastern says it considered Guo's anti-CCP ties to be material—was because of the assumption that one was not needed: "[I]t was just second nature to what we both wanted." *Id.* at 386-87.

Finally, there also is no clear and convincing evidence as to whether Guo is a supporter or opponent of the CCP. Guo asserted forcefully at trial that he was an opponent of the CCP. But other witnesses testified with equal force as to their belief that he was a friend of the CCP. There is evidence of statements by him that are consistently hostile to the CCP. But there was also evidence introduced at trial of a conversation that he had with officials of the CCP at his apartment in which he declared his loyalty to Chinese President Xi Jinping and the CCP. *See, e.g.*, *id.* at 628-32, 716-21, 727-34, 736-50; DX114B.

The Court credits a portion of the testimony of Waller. He stated: I've worked a lot with communist defectors over the years, actually since I was an undergraduate at George Washington University, and had some of them as professors. I learned over the years, as well as talking, learning through a lot of people in U.S. intelligence and counter-intelligence, that it's very hard to discern whether someone who has broken with a communist system, whether it's Soviet or Chinese or others, to discern conclusively whether or not they still maintain a loyalty.

Trial Tr. at 204.

Waller went on to state that many defectors and dissidents "still maintain ties because they had families or other connections, and those ties would be valuable if they were indeed dissidents or genuine opponents because they could mine those ties for information that would be useful to the United States, to do damage to their own system." *Id.* at 204-05. Thus, Waller

admitted that evidence of a relationship that someone has with people within the CCP on its own is not necessarily indicative of the fact that he or she is a supporter of the CCP.8

Strategic's evidence that Guo was a secret supporter of the CCP largely consisted of the testimony of another member of the Chinese dissident community, Sasha Gong ("Gong"); statements by Guo himself; and circumstantial evidence. Guo testified assertively that he was genuinely anti-CCP, and Eastern offered evidence of its own in support of that contention.

Gong is a journalist and dissident. Gong testified that she interviewed Guo several times beginning in April 2017 and continuing through 2018. The interviews were conducted both off the record and live on-air. In the interviews, Guo claimed to Gong, and has also publicly claimed, that he was arrested for his support of the 1989 Tiananmen Square movement. But Guo also told Gong that, after a time in Hong Kong following Tiananmen Square, he came back to mainland China, where he built real estate, made many high-ranking friends, and became one of the major players in China's intelligence community. Gong claims that Guo said he was one of only three people who could visit Hu Jintao, the former general secretary of the CCP (predecessor to President Jinping) without an appointment. He used this access to battle with the former Vice Mayor of Beijing by allying with MSS Deputy Head Jian. Guo told Gong he maintained connections with senior Chinese leaders and that he believed President Jinping was a good leader; Guo's only goal was to target corrupt persons in the CCP. Strategic argued that those statements are consistent with a continuing relationship with the CCP.

Strategic also argued that there is evidence Guo has moved money from Hong Kong or mainland China since he began speaking out as a dissident through ACA and that persons

8 Waller gave similar testimony when asked if Elliott Broidy, who was revealed to be funding Strategic's defense, was associated with the CCP. Trial Tr. at 387-88; *see also id.* at 181

associated with Guo, such as Han and Wang, were comfortable with sending money from Hong Kong or China into the United States and repaying the obligation to ACA by a transfer of funds into China. It claims that Guo would not have been able to do so without the cooperation of the CCP.

Finally, Strategic argues that Guo has attacked dissidents such as Gong and Bob Fu ("Fu"). Strategic argues that in continuing to attack members of the China Hawk community and dissidents by claiming they are actually controlled by the CCP, Guo continues to turn members of this community against each other.

The evidence is not sufficient to establish that Guo is a supporter of the CCP.

The force of Gong's testimony—that she now believes Guo is a supporter of the CCP based on his associations with certain political leaders, his later harassment of her, and certain pro-CCP statements he is accused of making—is undermined by the fact that even after Guo made the statements to her and after she was aware of his supposed continuing relationships with persons who are members of the CCP, she wrote a letter on his behalf to the United States government supporting Guo's application for asylum and claiming that he was an opponent of the CCP. In her letter, Gong wrote that Guo had challenged the legitimacy of communist leaders in China, worked Chinese intelligence services, and financed operations investigating overseas corruption by Chinese government officials, all of which made him valuable to the United States government. *Id.* at 794-98; DX123.

As to Guo's alleged transfers of money and other circumstantial evidence, Strategic's arguments are based on speculation. It offered no evidence, expert or otherwise, regarding the inferences that can be drawn from the fact that money travelled from Hong Kong or mainland China to the United States supposedly on behalf of Guo. Indeed, Strategic's presentation was

telling for its failure or apparent inability to offer any expert testimony regarding the inferences to be drawn from Guo's relationships.

As to the attacks on Chinese dissidents, Guo testified that his attacks were only ever in retaliation: "I have never initiated any attack to any Chinese person. Always it was []they who attacked me, then I retaliate." Trial Tr. at 747. "I have never attacked. I was always on the side of retaliation." *Id.* at 748. He added: "I have never initiated any attacks on any person, only under attack under the natural protection do I retaliate. And also, there were millions of people or up to a million people online who were attacking me, and . . . it's not possible that I would retaliate against every one of them either." *Id.* at 748.9 The evidence shows that Guo is extraordinarily combative, as are other members of the Chinese dissident community. It does not demonstrate on which side of the political battle Guo stands.

Finally, there is evidence to question whether Strategic even believed it was defrauded. Strategic did not assert a counterclaim for fraud when it filed its initial pleadings in this case. Dkt. No. 22. Nor did it in its amended pleadings. Dkt. No. 47. It only asserted such claim after it received litigation funding from an alleged opponent of Guo with an interest in undermining his assertions of hostility to the CCP, a wealthy United States businessperson named Elliott Broidy, whose credibility also is subject to question. *See* Dkt. Nos. 114, 127. Broidy was convicted of federal crimes before he received a presidential pardon in 2020.10 The evidence

9 When asked about whether he had accused Sasha Gong of being a communist spy, Guo testified: "It was after she called me a spy, then I retaliate." Trial Tr. at 748.

10 Eastern offered evidence that Broidy himself was a supporter of the CCP as proof that Strategic, which accepted litigation funding from him, did not truly care about the political allegiances of those with whom it did business. *See, e.g.*, Trial Tr. at 181:24-184:17. Some of the evidence was subject to evidentiary challenge. The Court need not resolve those evidentiary challenges because it is satisfied from the testimony of Wallop and Waller that they did not actually or reasonably rely on Guo's representations.

suggests that the claim of fraud was not based on any evidence that Strategic discovered or on any genuine view that Strategic was defrauded but on a recognition that the assertion of a fraud claim would have strategic value in the case or otherwise.

#### **II. CONCLUSIONS OF LAW**

Eastern brings three claims: a declaratory judgment that the contract is illegal and void as against public policy, breach of contract, and unjust enrichment. Dkt. No. 93. Strategic brings two counterclaims for breach of contract and fraudulent misrepresentation. Dkt. No. 127.

#### **A. Eastern's Declaratory Judgment Claim**

Each party contends that the other breached the Agreement and that it is entitled to damages. Before addressing the breach of contract claims, however, the Court must address the argument in Eastern's declaratory judgment claim that the Agreement is void and unenforceable because it violates Virginia's private security services statute and thus Eastern is entitled to a refund of its deposit regardless of whether any party breached the Agreement. The Court holds that the services contemplated by and performed under the Agreement fall within the conducted prohibited by the statute and that the Agreement is therefore void and unenforceable. Eastern is entitled to its deposit back.

#### **1. Virginia Private Security Services Statute**

Under Virginia law, "a contract made in violation of a statute is void, and there can be no recovery thereon, unless it is apparent from the statute that the legislature did not intend to make the contract void and unenforceable." *Massie v. Dudley*, 3 S.E.2d 176, 180 (Va. 1939) (holding plaintiffs could not recover under an express contract for a real estate commission where they were not licensed as brokers); *see F. S. Bowen Elec. Co. v. Foley*, 72 S.E.2d 388, 394 (Va. 1952) (violation of statute preventing a contractor from "engaging in business until he has been licensed and registered, and the acts prohibited are termed unlawful and punishment is provided

in the statute for the violation thereof . . . is illegal, not merely invalid") (internal quotation marks and citation omitted). "[I]mplicit in *Bowen* and *Massie* is that failure to abide by the provisions of a specific statute renders a contract invalid," *Am. Demolition & Design v. Pinkston*, 96 Va. Cir. 142, 2017 WL 11452748, at \*8 n.2 (Va. Cir. Ct. Aug. 2, 2017), and "[w]here the Court has declared contracts void under this doctrine the plaintiff has not been able to recover damages otherwise due him," *Beard v. Ragan*, 51 Va. Cir. 229, 2000 WL 33258655, at \*3 (Va. Cir. Ct. Jan. 12, 2000). Under Virginia law, the "policy behind [a] licensing statute and the underlying voidability of contracts for noncompliance" is to "protect the public from inexperienced, unscrupulous, irresponsible, and incompetent contractors . . . [where] [e]nforcement of the contract is denied the unregistered contractor, not because of the nature of the transaction, but as a penalty for failing to comply with the registration statutes." *Butler v. Creative Design Builders, Inc.*, 24 Va. Cir. 362, 1991 WL 11015277, at \*2 (Va. Cir. Ct. Aug. 7, 1991) (quoting *Bacigalupo v. Fleming*, 102 S.E.2d 321, 324 (Va. Ct. App. 1958)). In essence, it would undermine the policy of the statute for a court to award in damages monies for which a party was not entitled to receive pursuant to law or regulation.

Virginia's "Private Security Services Statute" is a licensing statute that requires persons who perform or contract to provide certain private investigatory work to have a license. It makes it unlawful for a person to "engage in the private security services business or solicit private security business in the Commonwealth [of Virginia] without having obtained a license from the Department [of Criminal Justice Services]." Va. Code Ann. § 9.1-139(A). The statute defines a "private security services business" to mean "any person engaged in the business of providing, or who undertakes to provide . . . private investigators . . . to another person under contract, express or implied." Va. Code Ann. § 9.1-138. A "private investigator," in turn, is defined to mean "any

individual who engages in the business of, or accepts employment to make, investigations to obtain information on (i) crimes or civil wrongs; (ii) the location, disposition, or recovery of stolen property; (iii) the cause of accidents, fires, damages, or injuries to persons or to property; or (iv) evidence to be used before any court, board, officer, or investigative committee." *Id.*

Strategic first argues that it did not violate the Private Security Services Statute by entering into the Agreement because the work performed under the Agreement does not fall within the purview of the statute. Specifically, it argues that Strategic did not provide private investigators in Virginia: there was no actual investigation in Virginia as Team 1 and ASOG were located elsewhere and there was no evidence that there was a target in Virginia.

"[T]he constant endeavor of the courts is to ascertain and give effect to the intention of the legislature, that intention must be gathered from the words used." *Chase v. DaimlerChrysler Corp.*, 587 S.E.2d 521, 522 (Va. 2003). Thus, when interpreting statutes, "we start with the plain language." *U.S. Dep't of Labor v. N.C. Growers Ass'n*, 377 F.3d 345, 350 (4th Cir. 2004); *see also Lamie v. United States Tr.*, 540 U.S. 526, 534 (2004) ("It is well established that when the statute's language is plain, the sole function of the courts . . . is to enforce it according to its terms.") (internal quotation marks and citation omitted). "[C]ourts apply the plain language of a statute unless the terms are ambiguous, or applying the plain language would lead to an absurd result." *Boynton v. Kilgore*, 623 S.E.2d 922, 925-26 (Va. 2006) (internal citations omitted). "Ambiguity exists if the text can be 'understood in more than one way or refers to two or more things simultaneously [or] when the language is difficult to comprehend, is of doubtful import, or lacks clearness or definiteness.'" *Id.* at 926 n.8 (quoting *Brown v. Lukhard*, 330 S.E.2d 84, 87 (Va. 1985)). "The phrase 'absurd result' is used 'to describe situations in which the law would be internally inconsistent or otherwise incapable of operation.'" *Id.* at 926 n.9 (quoting *Cook v.*

*Commonwealth*, 597 S.E.2d 84, 87 (Va. 2004)). But even "if the literal text of the statute produces a result that is, arguably, somewhat anomalous," the courts "are not simply free to ignore unambiguous language because we can imagine a preferable version." *Sigmon Coal Co., Inc. v. Apfel*, 226 F.3d 291, 308 (4th Cir. 2000), *aff'd sub nom. Barnhart v. Sigmon Coal Co.*, 534 U.S. 438 (2002).

Under the plain language of the statute, Strategic' conduct can qualify as that of a private security services business not only if it is "engaged in the business of providing" a private investigator but also if it "undertakes to provide" private investigators under contracts. The focus of the statute is not limited to the actual performance of security services or the actual investigation of crimes or civil wrongs; it also is addressed to the agreement to undertake such services, regardless of whether the services are actually performed by the party to the agreement or by someone with whom that party subcontracts. *See Ervin B. Davis & Co. v. Dep't of Crim. Just. Servs.*, 49 Va. Cir. 447 (1999), *judgment entered*, No. 160-97, 1999 WL 907550 (Va. Cir. Ct. Sept. 13, 1999) ("[T]he statute makes no reference to a quantity of private security services in which the business must engage before the statute applies."). The act of "undertaking to provide" is what must occur in Virginia. The statute does not require that the private investigator, or the information he or she seeks to obtain, must be located in Virginia as well.

That the statute requires a private security services business to be licensed if, while in Virginia, it "undertakes to provide" private investigators is reinforced by the statute's reciprocity provision. Under Section 9.1-140(10), Virginia exempts from its license requirement "[l]icensed or registered private investigators from other states entering Virginia during an investigation originating in their state of licensure or registration when the other state offers similar reciprocity to private investigators licensed and registered by the Commonwealth." Va. Code Ann.

§ 9.1-140(10). The statute anticipates that a private security services business operating in Virginia may require its private investigators, whether acting as employees or independent contractors, to enter other states and so it affords consideration to out-of-state investigators entering Virginia. That Virginia considers allows out-of-state private investigators to enter Virginia "during an investigation originating in their state of licensure or registration" and gives reciprocity to such out-of-state investigators, suggests that the Virginia legislature was focused at least in part on where the investigation "originates" rather than where the investigation may lead. Indeed, the provision making it unlawful for an unlicensed person to engage in a private security services business in Virginia extends that prohibition to the "undertaking" of such business in Virginia as well.

Setting aside the second question of whether the services that Strategic undertook to provide constitute "private investigation" as defined by the statute, Strategic's conduct manifestly occurred in Virginia. Strategic operated and continues to operate out of Wallop's home in Virginia. Trial Tr. at 37. The Agreement setting forth the services Strategic undertook to provide was executed at Wallop's home in Virginia. Trial Tr. at 69. Additionally, much of the work that Strategic did in connection with the Agreement took place in Virginia. Strategic received the Subject List and the first USB drive from Team 1 in Virginia. Trial Tr. at 319, 420.

In light of this reading, the Court asked the parties to brief whether, to the extent that the statute could be deemed to regulate commerce outside of its borders, the statute violated the Commerce Clause. Article I, Section 8, Clause 3 of the United States Constitution empowers Congress to "regulate commerce . . . among the several States." U.S. Const., Art. I § 8, cl. 3. The Commerce Clause contains a dormant aspect that denies the states "the power unjustifiably to discriminate against or burden the interstate flow of articles of commerce." *Or. Waste Sys.,*

*Inc. v. Dep't of Env't Quality*, 511 U.S. 93, 98 (1994). A statute's extraterritorial effect can violate the Commerce Clause when it seeks to regulate commerce that takes place "wholly outside of its borders." *Healy v. Beer Inst., Inc.*, 491 U.S. 324, 328 (1989). But the "critical question" is "where the transaction being regulated is consummated" and "in grappling with whether the practical effect of a regulation is to control conduct beyond the boundaries of the State, the circuit courts have focused on the location (or locations) where the contract was formed." *Berman v. City of New York*, 2012 WL 13041996, at \*18 (E.D.N.Y. Oct. 3, 2012); *see also Brown v. Hovatter*, 561 F.3d 357, 365 (4th Cir. 2009) (rejecting plaintiffs' challenge to "the way [the State] authorizes them to do business within the State in a profession regulated by the State" because such "complaints do not involve burdens placed on the interstate movement of goods, materials, or other articles of commerce, and the matters of which they complain—the manner of professional practice in [the State]—are not matters protected by the dormant Commerce Clause"). That is because "there is a residuum of power in the state to make laws governing matters of local concern which nevertheless in some measure affect interstate commerce or even, to some extent, regulate it." *Kassel v. Consol. Freightways Corp. of Del.*, 450 U.S. 662, 670 (1981) (quoting *S. Pacific Co. v. Arizona*, 325 U.S. 761, 767 (1945)).

The statute here does not seek to regulate commerce that takes place "wholly outside of its borders." Virginia has an interest in regulating and licensing not just those who take investigative actions within its borders but also those who in Virginia offer such services to persons in Virginia regardless of where the services are actually performed. The statute reflects that interest. It regulates private security services businesses in Virginia where that "private security services business" is defined as engaged in the business of providing, or undertaking to provide, private investigators by implied or express contract. A "private security services

business" thus is subject to regulation when in Virginia it undertakes to provide private investigators. That reading is also consistent with the purpose of the overall statute, which is to create a local licensing and regulatory scheme. "In the immediate case, Virginia is not attempting to regulate a contract occurring wholly outside the Commonwealth. The contract in question was entered into in the Commonwealth of Virginia . . . [and] [w]hile it may be true that elements of the transaction occurred outside of the Commonwealth of Virginia, this does not necessarily deprive Virginia of its interest in regulating the transaction." *Atl. Mach. & Equip., Inc. v. Tigercat Indus., Inc.*, 427 F. Supp. 2d 657, 666 (E.D. Va. 2006).

Strategic argues, second, that the services it undertook to provide did not include investigations of the type enumerated in the statute: "(i) crimes or civil wrongs; (ii) the location, disposition, or recovery of stolen property; (iii) the cause of accidents, fires, damages, or injuries to persons or to property; or (iv) evidence to be used before any court, board, officer, or investigative committee." Va. Code Ann. § 9.1-139(A).

The parties agree that there is little law on this statute. One Virginia state court interpreting the definition of "private investigator" under the statute held that a company fell within the definition of a "private security services business" because it employed "private investigators" to obtain information listed in the statute.11 In *Ervin B. Davis & Co.*, the court held that the "activities in which the corporation engage[d] as evidenced by the Plaintiff's answers to Defendant's Interrogatories and as described by the company's advertisements, including the web page information submitted . . . comport[ed] with the statutory definition of a

11 *United States v. Commonwealth*, 139 F.3d 984, 986 (4th Cir. 1998), which dealt with the question of whether *Leslie Miller v. Arkansas*, 352 U.S. 187 (1956) precluded the application of the Virginia's licensing and registration requirements to private investigators working solely for the FBI in its Background Investigation Contract Services Program, did not address the question at issue in this case.

private security services business." 1999 WL 33722350, at \*2. The court, however, did not describe in its opinion what those precise activities were and how they fell into clauses (i)-(iv). It did note that the company's employees had performed surveillance investigations, but it did not say what information was so surveilled.12 The court ultimately held that the company was subject to a statutory exception to the licensing requirement due to its status as a claims adjuster. *See id.* The case thus does not offer much guidance. Little guidance is also offered from cases interpreting similar statutes passed in other states.13

"In considering the meaning of particular language in context, '[w]ords in a statute should be interpreted, if possible, to avoid rendering [other] words superfluous." *Eley v. Commonwealth*, 826 S.E.2d 321, 324 (Va. App. Ct. 2019) (quoting *Cook v. Commonwealth*, 597 S.E.2d 84 (Va. 2004)). "It is one of the fundamental rules of construction of statutes that the intention of the legislature is to be gathered from a view of the whole and every part of the statute taken and compared together, giving to every word and every part of the statute, if possible, its due effect and meaning." *Epps v. Commonwealth*, 626 S.E.2d 912 (Va. App. Ct. 2006) (en banc), *aff'd*, 641 S.E.2d 77 (Va. 2007) (quoting *Posey v. Commonwealth*, 96 S.E. 771

12 It also held that any employees of the company who qualify as private investigators, including its proprietor, would be subject to the registration requirement. *Ervin B. Davis & Co.*, 1999 WL 33722350, at \*2.

13 Both parties agree that comparable private investigator statutes are of little help in attempting to ascertain the definition of "crimes or civil wrongs." Strategic submits that most states requiring licenses typically define "private investigation" to include attempts to obtain information about "crimes or civil wrongs" but limit that prong to crimes or wrongs against the state and are therefore of little use. *See* Dkt. No. 360 at 2 & n.2. Other states' statutes do not provide such a limitation but have a catch-all prong that defines private investigation more broadly to include information about "the identity, habits, conduct, business, occupation, honestly, integrity, etc. of any person." *Id.* at 2. Connecticut's equivalent statute comes closest to matching Virginia's, but the parties have not identified case law on the definition of "crimes or civil wrongs," and the statute contains additional definitional prongs for "conducting surveillance activity" and "conducting background investigations." *Id.*; *see* Conn. Gen. Stat. Ann. § 29-152u(4).

(Va. 1918)). Moreover, under the canon of ejusdem generis, "when a particular class of persons or things is enumerated in a statute and general words follow, the general words are to be restricted in their meaning to a sense analogous to the less general, particular words." *Sainani v. Belmont Glen Homeowners Ass'n, Inc.*, 831 S.E.2d 662, 667 (Va. 2019) (quoting *Martin v. Commonwealth*, 295 S.E.2d 890 (Va. 1982)).

Applying those canons, reading the statute as a whole and interpreting each provision of clauses (i)-(iv) of the statute both individually but also as part of a collective group, the Court concludes that they cover certain of the services Strategic undertook to provide in the Agreement and therefore that Strategic violated the statute by entering into the Agreement. The Agreement cannot be enforced.

The meaning of the statute can be gleaned from several of its terms. It addresses only "business" or "employment." It does not address persons who act as volunteers or do work for themselves and not for others. Second, the business that is regulated is that of providing "investigations to obtain information"; research that is incidental to some other service is not governed. A person must be contracted to conduct an "investigation to obtain information." Third, the information must be of a particular type or quality. As to type, a person is a private investigator if he or she is in the business or accepts employment to make an investigation of three types of information: information regarding "crimes or civil wrong," information regarding "the location, disposition, or recovery of stolen property," and information regarding "the cause of accidents, fires, damages, or injuries to persons or to property." As to the quality of the information, a person is also a private investigator if he or she conducts an investigation to obtain "evidence to be used for any court, board, officer, or investigative committee." Clause (iv) thus

addresses an investigation of any subject matter but so long as its objective is to obtain items that would qualify as "evidence."

The Court rejects Strategic's argument that a person can be a private investigator only if he or she is engaged in the process of collecting evidence to be used in some formal proceeding or to prosecute an individual for a specific crime. That argument runs afoul of the principle that the Court must strive to give meaning to each word in a statute and that state legislatures do not write meaningless or superfluous language. Clause (iv) is addressed to the collection of "evidence." It specifically focuses on the collection of information to be used as evidence for a court or an officer, including the collection of evidence to be used in a criminal prosecution. Under the principle of avoiding surplusage, clauses (i)-(iii) must mean something different. They cannot be limited to the collection of evidence for a formal proceeding. Instead, those provisions by their terms are directed to the subject of the investigation—if a person is to offer investigative services for money, it must be licensed if the investigation is to fall within one of the three categories set forth in clauses (i)- (iii).

The Court also rejects Strategic's argument that for an investigation to be of "crimes or civil wrongs" the investigator must be retained to investigate "some specific prosecutable criminal act, rather than generally wrong or detestable behavior involving no particular victim." Strategic's Proposed Findings of Fact & Conclusions of Law at 38 ¶ 3. That interpretation makes no sense and would exclude from the statute much activity that is commonly understood to be private or public investigative activity. It is not an infrequent occurrence that an investigator who sets out on an investigation does not know where it will lead. He or she may start off with a suspicion that the subject may have engaged in one form of conduct that may implicate any number of different laws (none of which is specified in advance) only to come

across conduct that may violate another law. There is no reason to think that the Virginia legislature intended to protect the client who starts with a suspicion of specific criminal activity engaged in by the subject and directs the investigator to follow the evidence but deny protection to the putative client who merely starts out with the suspicion that the subject is generally a criminal and asks the investigator to use its know-how to confirm the suspicion. Strategic does not argue that an investigation that starts out with a broad net would fall outside of the protections of the Virginia statute. But that is the implication of its argument. An investigator could opt out of the statute and deprive the client of its protections by the mere expedient of securing an engagement to investigate all crimes, rather than a specific crime.

Strategic's argument that an investigation must concern a "particular victim" is no more persuasive. The number of criminal statutes, both federal and state, that address "victimless" crimes is legion.14 Victimless crimes are generally understood to include crimes of public corruption where the victim is not an identifiable individual but rather the public at large.15 Strategic has offered no reason why the Virginia legislature would require a license for the investigation of a crime with an identifiable victim but not for the investigation of a victimless crime.

Once the scope of the statute is properly understood, it is evident that Strategic engaged in a private security services business by undertaking to provide private investigators. First, the

14 *See, e.g.*, Uniform Crime Reporting Program's National Incident-Based Reporting System (2019) (reporting "crimes against society" as 15.8% of reported offenses in 2019); Matthew K. Suess, *Punishment in the State of Nature: John Locke and Criminal Punishment in the United States of America*, 7 Wash. U. Juris. Rev. 367, 384, 388 (2015) ("[T]he expansion of criminal codes in the United States has led to the widespread prosecution of victimless crime. . . . In line with the states, the majority of federal prisoners are convicted of victimless crimes.") 15 *See, e.g.*, Mat Tromme, *Waging War Against Corruption in Developing Countries: How Asset Recovery Can Be Compliant with the Rule of Law*, 29 Duke J. Comp. & Int'l L. 165, 218 (2019) ("[C]orruption is often seen as a victimless crime.").

Agreement itself reflects that Strategic was hired to conduct research and prepare reports for "the purpose of detecting, stopping, and preventing crime or other harm to innocent people." PX1. It thus was engaged to obtain information through investigators on "crimes or civil wrongs." It is no matter that the Agreement required Strategic to conduct research for the purpose of "detecting . . . crimes," *id.*, while the statute defines a private investigator as one "who . . . accepts employment to make [] investigations to obtain *information* on . . . crimes or civil wrongs," Va. Code Ann. § 9.1-138 (emphasis added). The "research" methods Strategic was to deploy are those involved in investigations and the detection of crime is merely the outcome of the enterprise of engaging in the collection of investigation of crime. It also is no matter that Guo (and Eastern) had ulterior purposes for their detection of criminal activity—to bring down the CCP and to bolster Guo's chances for obtaining asylum. Persons do not hire private investigators only for public-minded reasons. They occasionally will do so because a criminal investigation and a criminal conviction will advance their private interests. Strategic also is not exempted from the coverage of the statute because it undertook to investigate the "crimes" of the ten subjects generically as opposed to specific crimes. To the contrary, the evidence at trial established that Guo had a suspicion that the subjects whom he asked to be investigated had engaged in corruption and other public wrongs and tasked Strategic with finding information regarding that corruption and those public wrongs.

The conclusion that Strategic engaged in conduct regulated by the Virginia Private Security Services Statute but without the license required by that statute is reinforced by the nature of the "reports" Strategic undertook to deliver and the methods it would use to prepare those reports. The reports were not limited to the information that could be gleaned from conventional internet searches or reviews of readily available public information such as a

newspaper reporter or a book author might employ. To prepare the financial reports, Strategic was to review confidential and not readily accessible information, such as "statements, capital sources, inflow and outflow information, bank receipts, financial instruments, financial products, statements of credits, precious metals transfers, commodity transfers, crypto currency exchange, stocks and other equities, business ownership, real property ownership, trusts, large amounts of spending, specific information to indicate the transaction participants, and other data required by [Eastern]." PX1 at 1-2. This information is the stuff of private investigatory work, not mere research. To prepare the tracking research, Strategic was to engage in the activities that are engaged in by those who conduct surveillance, including tracking travel, private or commercial, by land, air, or sea, and obtaining geolocation information and videos and audios that can be accessed remotely. *See id.* To conduct the social media research, Strategic was to review such other information accessible to private investigators, such as criminal databases, sex offender and child abuse databases, passports and identification documents, and comments on social media. *See id.*

As Strategic admitted, the work thus included hacking into Chinese government servers, obtaining evidence of forged U.S. documents, obtaining information regarding social security fraud and tax fraud, finding the location of certain offshore companies, and obtaining information regarding CCP members' bank accounts. *See* Trial Tr. at 308, 314-317. All of this work was to be done "based on the best practices and standards of the industry, comparable to other top firms with similar services," i.e., comparable to others engaged in private investigations—the only conceivable industry with which to compare the services offered by Strategic. PX1 at 3.

Thus, Strategic understood that a portion of the services that Guo sought pertained to the investigation of crimes committed by CCP members. Wallop testified that Guo wanted "to uncover corruption relating to members of the CCP . . . [i]ncluding crimes committed by members of the CCP" and "information about funds stolen by the members of the CCP and taken out of China illegally." Trial Tr. at 65. Wallop testified at her deposition that Guo wanted Strategic to "investigate and retrieve" information on the "great deal of corruption within the leadership" of the CCP, such as "funds that would have been taken out of the country illegally, cash payments." *Id.* at 66. Guo also sought to obtain "information about location and disposition and recovery of stolen assets," and the "cause of injuries to persons or property." *Id.* at 40.

The conclusion that Strategic was engaged in the private security services business, as defined by Virginia law, is further supported by the work that Strategic performed after it was engaged. Wallop admitted that she engaged in surveillance on at least one occasion. Waller hired private investigators. Those investigators included Team 1, which engaged in data mining and research, including research into the dark web, and Team 2, or ASOG, which accessed commercially available databases and also contacts within the federal government. *See supra*. Waller testified that he told Guo that he and Wallop could do the type of work he requested. Trial Tr. at 191-92.

Analyzing the definition of "private investigator" by the company it keeps in the statutory definition of private security services business—which includes persons who fill such quasi law enforcement functions as security officers, personal protection specialists, and electronic security employees—those whom Strategic undertook to employ, and did in fact employ, comfortably fit in. In Strategic's own words, it was to deploy "an extremely sensitive

capability that must be handled with extreme care." PX2. Strategic's investigators were engaged in the types of activities engaged in by law enforcement.

Strategic argues that its work did not constitute private investigation because Eastern never reported or made an appointment to report any of the results to law enforcement, nor did Eastern contract with another party to do so such research after the Agreement was terminated. Aspects of that argument read as if Strategic is trying to benefit from its own failures. Under Strategic's argument, if a firm is unable to find information on crimes to report to law enforcement, it means it could not have undertaken to find such information and therefore it does not need to be licensed. That argument would require licensure only of good private investigators; those who are unsuccessful would not ever need to be licensed. That result would be plainly inconsistent with the intent of the Virginia legislature and the terms of the statute. More importantly, however, the statute's focus is on an unlicensed business's offer to undertake private security services and not on the actual use by the counterparty of the information that is provided. If a firm as part of its business undertakes to investigate crimes within the meaning of the statute and agrees to do so, it is irrelevant whether the party with whom it contracts ultimately decides to bring the fruits of the investigation to law enforcement or not.

Because Strategic undertook work that fell within the scope of Virginia's Private Security Services Statute, but failed to secure the requisite license therein, the Agreement is void and unenforceable. *See Urban Protective Servs. v. Great Latin Restaurants*, 2007 WL 1660374 (Va. Cir. Ct. Mar. 5, 2007) (noting prior ruling that plaintiff "could not contract to engage in private security services as it was not licensed as required by the Code and that the contract was illegal as a matter of law"); *see also Massie*, 3 S.E.2d at 181; *Bacigalupo*, 102 S.E.2d at 324-25.

Strategic argues that the Agreement cannot be void because Strategic did not commit a "willful" violation of the statute. It devoted much time at trial to the evidence that Wallop and Waller did not believe a license was necessary and that they had engaged in investigations in the past without obtaining a license, as if by long usage, Strategic would acquire the right to act without being regulated. It cites to the language in *Massey*, which states that "where a licensing statute is a police regulation, having for its object the protection of the public, making it unlawful for a person to engage in a business without a license, *and imposing a penalty for its violation*, a contract made by an unlicensed person is void and unenforceable." *Massie*, 3 S.E.2d at 181 (emphasis added). It argues that Virginia only penalizes "willful" private security licensing violations under Va. Code Ann. § 9.1-147(B), which are knowing or intentional, *see Correll v. Commonwealth*, 607 S.E.2d 119, 124 (Va. 2005), and that because any licensing mistake was not willful, the Agreement cannot be void. Assuming that Strategic did not knowingly or willfully violate Virginia law, it still is not entitled to retain Eastern's deposit.

Sections 9.1-147–150 provide for penalties in connection with violations of the statute. Strategic focuses on Section 9.1-147(A), which reads, "It shall be unlawful for any person to: 1. Practice any trade or progression licensed, certified or registered under this article without obtaining the necessary license, certification or registration required by statute or regulation . . . 4. Violate any statute or regulation governing the practice of the private security services businesses or training schools regulated by this article." Va. Code Ann. § 9.1-147(A). "Any person who is convicted of willful violation of [this subsection] shall be guilty of a Class 1 misdemeanor." *Id.* § 9.1-147(B).

But the other sections on penalties—one of which applies here—do not require willful violations. Section 9.1-148 provides that any person convicted of a violation of its provisions,

without reference to willful violation, shall be guilty of a Class 2 misdemeanor. *Id.* § 9.1-148. Section 9.1-149 provides that any person convicted of a violation of its provisions, without reference to willful violation, shall be guilty of a Class 1 misdemeanor. *Id.* § 9.1-149.

Relevant here also is Section 9.1-150, which provides: "Any person required to be licensed, certified or registered by the Board pursuant to this article who violates any statute or Board regulation who is not criminally prosecuted is subject to the monetary penalty provided in this section." *Id.* § 9.1-150. In other words, if Strategic violated Section 9.1-139(A) by engaging in the private security services business without the requisite license from the Department of Criminal Justice Services in Virginia, but did so in a non-willful way, it could be subject to monetary penalty under Section 9.1-150. If the violation was willful, Strategic could be subject to criminal penalties under Section 9.1-147(A). *Massie*'s holding does not require a willful violation; the court requires only that the statute impose a penalty for "a violation." *Massie*, 3 S.E.2d at 181. It thus does not require that a willful violation be imposed to render a contract by an unlicensed person void and unenforceable, only that there is some type of penalty. *See id.*

The Court need not address Strategic's alternative argument that if the Agreement fell within clause (iv), it also falls within the exemption to clause (iv) under Va. Code Ann. § 9.1-140(29), which exempts any individual engaged in "computer or digital forensic services . . ., the acquisition, review, or analysis of digital or computer-based information, in order to obtain or furnish information for evidentiary purposes or to provide expert testimony before a court." Va. Code Ann. § 9.1-140(29). The Court does not rest its conclusion on a finding that the Agreement sought to obtain information on "evidence to be used before any court, board, officer, or investigative committee" under clause (iv), but rather on a finding that Strategic undertook to provide persons to conduct an investigation to obtain information on "crimes" under clause (i).

The Court also rejects Strategic's in pari delicto defense.16 Strategic argues that even if the Agreement were void as against public policy, Virginia courts will not afford equitable relief where the "objects sought to be achieved" by the plaintiff were also illegal. *Am.-LaFrance & Foamite Indus. v. Arlington Cty.*, 192 S.E. 758, 761 (Va. 1937). It argues that the object of the Agreement was illegal because Eastern intended to share the results of Strategic's investigation with third parties, including ACA and Golden Spring, in exchange for value.

The in pari delicto doctrine provides that where a "the contract is illegal, as involving an immoral purpose, or one for which a punishment is provided, and both parties have knowingly joined therein, they are held to be in pari delicto, and the court will not render aid to relieve either party of the consequences of their acts, but will leave them where it finds them. If the contract is, however, merely invalid, or is based upon a transaction involving no moral turpitude, and is simply contrary to some legal provision relating to the manner, method, or terms of its performance, with no penalty provided other than its invalidity, the court will not require performance of either the express contract or a contract by implication." *Id.* "The doctrine of in pari delicto, like the related doctrine of unclean hands, 'prohibits a party from recovering damages arising from misconduct for which the party bears responsibility, bears fault, or which resulted from [ ] [its] wrongdoing." *Concord Crossroads, LLC v. Human Cap. Res. and Concepts, Inc.*, 2020 WL 9367543, at \*11 (E.D. Va. Sept. 2, 2020) (quoting *Ashmore for Wilson v. Dodds*, 262 F. Supp. 3d 341, 353 (D.S.C. 2017)). It is "based on the principle that a party who consents to and participates in an illegal act may not recover from other participants for the consequences of that act." *Lee v. Nationwide Mut. Ins. Co.*, 497 S.E.2d 328, 329 (Va. 1998); *see also Stith v. Thorne*, 488 F. Supp. 2d 534, 541 n. 6 (E.D. Va. 2007) ("The doctrine of in pari

16 Strategic also failed to plead this affirmative defense in its Answer. *See* Dkt. No. 127.

delicto stands for the principle that 'a plaintiff who has participated in the wrongdoing may not recover the damages resulting from the wrongdoing.'") (quoting Black's Law Dictionary 806 (8th ed. 2004)); *see also In re Bogdan*, 414 F.3d 507, 514 (4th Cir. 2005)).

Virginia's Private Security Services Statute does not penalize a party receiving the research from a private security services firm for sharing that research for free with a third party. There is no evidence that Eastern intended to resell the information or that it had contracted to do so. The Court has found that the contribution by ACA was a gift and not part of a sale. The only prohibition on sharing the research comes from the Agreement which contains a confidentiality provision. *See* PX1 ("Both parties agree that the nature of this contract, and work related to it, is highly confidential."). But even if Eastern had shared the information with ACA or others, that action would result in a breach of the Agreement and would not be illegal in and of itself. In short, the wrong here is Strategic offering and agreeing to provide services to Eastern it was not licensed to provide. It was not Eastern's acceptance of those services.

Finally, the Court rejects Strategic's belated argument that the Virginia Private Security Statute is unconstitutionally overbroad and vague. The argument is waived.17 It also is without merit. A statute is overbroad if it prohibits or chills a substantial amount of protected speech. "The substantiality of the overbreadth is determined examining the amount of protected speech affected in relation to the amount of unprotected speech legitimately regulated by the statute." *Nitke v. Ashcroft*, 253 F. Supp. 2d 587, 606 (S.D.N.Y. 2003). A statute is vague if it "fails to

17 Strategic first made this argument in its post-trial brief, which was also not an issue on which the Court had asked for post-trial briefing. *See Grand Light & Supply Co. v. Honeywell, Inc.*, 771 F.2d 672, 679-80 (2d Cir. 1985) (district court erred in considering claim raised for first time in a post-trial brief); *U.S. Bank Nat'l Ass'n as trustee for Registered Holders of CD 2005-CD1 Com. Mortg. Tr., Com. Mortg. Pass-Through Certificates v. 2150 Joshua's Path, LLC*, 2020 WL 5417085, at \*10 (E.D.N.Y. July 2, 2020) ("Plaintiff's remaining arguments—raised for the first time in its post-trial briefs—will not be considered at this juncture.").

'give the person of ordinary intelligence a reasonable opportunity to know what is prohibited, so that he may act accordingly.'" *Id.* at 608 (quoting *Grayned v. City of Rockford*, 408 U.S. 104, 108 (1972)).

Strategic argues that the statute is overbroad and vague because it would regulate other types of research, without giving notice to the parties conducting the research, including "political candidates conducting research on opponents, business consultants hired to evaluate competitors, and authors or journalists gathering data for books and reports." Dkt. No. 360 at 9. It cites to *Gurley v. Mo. Bd. of Priv. Investigator Exam's*, 361 S.W.3d 406, 411 (Mo. 2012) in which a plaintiff challenged a private investigator licensing statute as overbroad because it reached further than professional private investigators by requiring, as plaintiff argued, "ordinary citizens to obtain licensure before engaging in all manner of protected First Amendment activity." *Id.* Specifically, the statute made it unlawful for "any person to engage in the private investigator business in [Missouri] unless such person is licensed as a private investigator" where "private investigator business" was defined as:

[T]he furnishing of, making of, or agreeing to make, any investigation for the purpose of obtaining information pertaining to:

(a) Crimes or wrongs done or threatened against the United States or any state or territory of the United States;

(b) The identity, habits, conduct, business, occupation, honesty, integrity, credibility, knowledge, trustworthiness, efficiency, loyalty, activity, movement, whereabouts, affiliations, associations, transactions, acts, reputation, or character of any person;

(d) Securing evidence to be used before any court, board, officer, or investigating committee;

(e) Sale of personal identification to the public; or

(f) The cause of responsibility for libel, losses, accident, or damage or injury to persons or property or protection of life or property.

*Id.* at 412. Plaintiff argued that this statute swept in numerous First Amendment-protected activities,

pointing specifically to subdivision (9)(b), which could include persons who use a social networking

website "to locate a former classmate or to search for a potential romantic partner." *Id.*

Noting that the "primary rule of statutory interpretation is to ascertain the intent of the legislature from the language used, to give effect to that intent if possible, and to consider the words in their plain and ordinary meaning," the court determined that the term "business" in the definition of "private investigator business" limited the scope of private investigator-related activities listed in the definition and indicated that the statute included within its sweep "only investigations conducted by commercial entities." *Id.* at 413 (quoting *S. Metro. Fire Prot. Dist. v. City of Lee's Summit*, 278 S.W.3d 659, 666 (Mo. 2009)). The court thus held that the statute was not unconstitutionally overbroad because it regulated the activities listed in the statute "only when done as part of a commercial enterprise carried on for profit or as part of a particular occupation habitually engaged in for livelihood or gain" and that " none of the hypothetical unconstitutional applications suggested by [plaintiff] are authorized by the statute when it is so construed." *Id.*

Here too, Virginia's Private Security Services Statute refers to a "private security services business," defining it as "any person engaged in the business of providing, or who undertakes to provide . . . private investigators." Va. Code Ann. § 9.1-138. A private investigator is also defined only in connection with a commercial enterprise. *See id.* (defining a "private investigator" as "any individual who engages in the business of, or accepts employment to make, investigations to obtain information"). Thus, the statute does not cover ordinary citizens doing social media research. Nor, as the Court held above, does the statute address persons who act as volunteers or do work for themselves, thus alleviating Strategic's concern that the statute would require the license of investigations by "authors or journalists gathering data for books and reports" or by political candidates conducting their own research on opponents. Dkt. No. 360 at 9. The statute also clearly does not cover a business consultant who is hired to evaluate a

competitor's business—Strategic's third hypothetical in its parade of horribles—but who is not in the business of investigating the specific information listed under the statute, or if that consultant was not engaged "to obtain information on (i) crimes or civil wrongs; (ii) the location, disposition, or recovery of stolen property; (iii) the cause of accidents, fires, damages, or injuries to persons or to property; or (iv) evidence to be used before any court, board, officer, or investigative committee." Va. Code Ann. § 9.1-138. If such information arose during the course of the consultant's work, that research would be "incidental" to the consultant's other work, as the statute's focus is on an unlicensed business's offer to undertake private security services and not on the counterparty's actual use of the information that is provided. *See supra.* Indeed, construing the reference to private investigator by the company it keeps in the Virginia Private Security Services Statute, and considering the activities Strategic performed and agreed to perform, what is distinctive about those activities and what qualifies them for regulation is that they constitute conduct, and in particular, conduct that is conventionally engaged in by law enforcement but which Strategic here sold privately for commercial gain.

Strategic's remaining cited cases are either inapposite or do not support its argument. *See Gray v. Dep't of Pub. Safety*, 248 A.3d 212, 217, 223 (Me. 2021) (rejecting challenge to professional investigator licensing requirement that applicants must have "demonstrated good moral character" because it did not prohibit or constrain speech and because denial of plaintiff's application based on his presentation of false information as fact was "narrowly tailored to serve the significant governmental interest in maintaining standards for licensing professional investigators, who are responsible for researching and reporting on some of the most consequential details of people's lives"); *Castillo v. Ingram*, 2015 WL 3559104, at \*1 (D. Nev. June 5, 2015) (not reaching question of whether Nevada statute requiring individuals who work

as private investigators in Nevada be licensed by the state violated the Free Speech Clause because plaintiff lacked injury-in-fact); *K-Mart Corp. v. St. Louis Cty.*, 672 S.W.2d 127, 132-33 (Mo. Ct. App. 1984) (ordinance requiring private investigators to first obtain a private watchman's license from the superintendent of police was not overbroad or vague because the state has power to regulate police power and because the "ordinance conveys a sufficiently definite warning as to the proscribed conduct when measured by common understanding and practices").

#### **2. Relief**

Because the Agreement is void, Eastern is entitled to restitution in the amount of \$1 million.

A restitution measure of damages "aims to restore the nonbreaching party to as good a position as the one she occupied before the contract was made, without attempting to compensate her for consequential harms." *360Networks Corp. v. Geltzer (In re Asia Glob. Crossing, Ltd.)*, 404 B.R. 335, 341 (S.D.N.Y. 2009); *Daniel v. Wells Fargo Bank, N.A.*, 2013 WL 5723704, at \*8 (E.D. Va. Oct. 17, 2013).

Virginia and New York follow the Restatement (Third) of Restitution and Unjust Enrichment to determine whether a party may recover the value of performance rendered in connection with an illegal and consequently void contract. *See, e.g.*, *T. Musgrove Constr. Co., Inc. v. Young*, 840 S.E.2d 337, 342 (Va. 2020); *Mazzei v. Money Store*, 308 F.R.D. 92, 106 (S.D.N.Y. 2015), *aff'd*, 829 F.3d 260 (2d Cir. 2016).

Under Section 32 of the Restatement (Third) of Restitution and Unjust Enrichment:

A person who renders performance under an agreement that is illegal or otherwise unenforceable for reasons of public policy may obtain restitution from the recipient in accordance with the following rules:

(1) Restitution will be allowed, whether or not necessary to prevent unjust enrichment, if restitution is required by the policy of the underlying prohibition.

(2) Restitution will also be allowed, as necessary to prevent unjust enrichment, if the allowance of restitution will not defeat or frustrate the policy of the underlying prohibition. There is no unjust enrichment if the claimant receives the counterperformance specified by the parties' unenforceable agreement.

(3) Restitution will be denied, notwithstanding the enrichment of the defendant at the claimant's expense, if a claim under subsection (2) is foreclosed by the claimant's inequitable conduct (§ 63).

Restatement (Third) of Restitution and Unjust Enrichment § 32.

Where Section 32(1) applies, the Court need not engage in a traditional unjust enrichment analysis. *Id.* cmt. C. Instead, under Section 32(1), the party that performed under an agreement that is void as against public policy is entitled to recover the value of that performance, without considering whether that party derived any benefit thereunder, where the demands of policy so require. *Id.* § 32(1), Illustration 21. For example, where a client pays for services to a contractor that is not licensed to provide those services, Section 32(1) requires the contractor to return the payments made by the client irrespective of whether it conferred some type of benefit upon the Client. *Id.* Illustration 21 states:

21. A pays B \$2000 in advance for a series of medical treatments. After two visits to B's office, A learns that B is not licensed to practice medicine. A repudiates the agreement and asks for his money back. A is entitled to recover \$2000 from B by the rule of § 32(1). It is irrelevant to A's recovery that he may have derived benefit from B's services.

*Id.*; *see also* Illustration 4; Illustration 18.

Restitution damages can include, for example, the return of a deposit paid under a contract that the defendant has failed to perform. *See In re Asia Glob. Crossing, Ltd.*, 404 B.R. at 342 (stating that restitution damages are particularly appropriate when used to recover a deposit or down payment paid pursuant to a contract that was not performed by the other party);

*Gulati v. Coyne Int'l Enters. Corp.*, 805 F. Supp. 365, 371 (E.D. Va. 1992) (similar); *Busman v. Beeren & Barry Invs., LLC*, 69 Va. Cir. 375, 379 (Va. Cir. Ct. 2005) (similar).

Here, pursuant to Section 32(1) of the Restatement (Third) of Restitution and Unjust Enrichment and consistent with Illustration 21, Eastern is entitled to recover the \$1 million deposit it paid to Strategic, and it is irrelevant whether it derived any benefit from Strategic's attempt to perform under the Agreement.

The Agreement authorized Eastern to "direct other entities to pay [Strategic], and that such payments will be deemed satisfactory compensation." PX1 at 5. The \$1 million deposit was paid by ACA. As the payor of the \$1 million deposit, it may be that ACA has a claim to that restitution amount as against Eastern. However, the fact that ACA was the immediate payor of the monies due from Eastern does not relieve Strategic of its liability to Eastern in this matter. Nor does it permit Strategic to retain the sums. It is sufficient that the payment of the \$1 million relieves Strategic of any liability in restitution to either Eastern or ACA. *See* Restatement (Third) of Restitution and Unjust Enrichment § 48 ("If a third person makes a payment to the defendant to which (as between claimant and defendant) the claimant has a better legal or equitable right, the claimant is entitled to restitution from the defendant as necessary to prevent unjust enrichment."); *see also id.* § 64 cmt. c & Illustration 3.

## **B. Remaining Claims**

The Court's ruling that the Agreement is void and that Strategic is not entitled to retain the \$1 million deposit but must return it to Eastern disposes of this case. The Court nonetheless addresses the parties' remaining claims in the alternative. The Court concludes that even if the Agreement were not in violation of the Virginia Private Security Services Statute, Eastern would be entitled to the return of \$250,000 of its deposit.

#### **1. Breach of Contract**

Strategic and Eastern each claim that the other materially breached the Agreement. Eastern claims that Strategic breached by failing to provide the weekly reports and monthly reports and thus that it is entitled to return of its deposit on that basis alone. Strategic disputes that it materially breached the agreement and argues that it was Eastern who breached the Agreement by failing to pay the monthly fee as due on February 16, 2019.

The elements of a breach of contract claim under Virginia law are: (1) the existence of a contract; (2) performance or offers by the plaintiff to perform under the contract; (3) the defendant's failure to perform under the contract or breach of the agreement; and (4) actual damage to the plaintiff caused by the breach." *Car Pool LLC v. Hoke*, 2012 WL 4854652, at \*3 (E.D. Va. Oct. 11, 2012) (citing *Filak v. George*, 594 S.E.2d 610, 614 (Va. 2004)); *see also Dodge v. CDW Gov't, Inc.*, 2009 WL 1605010, at \*3 (E.D. Va. June 5, 2009) (stating same). Similarly, under New York law, the elements of a breach of contract claim include: "(1) the existence of an agreement, (2) adequate performance of the contract by the plaintiff, (3) breach of contract by the defendant, and (4) damages." *Ellington Credit Fund, Ltd. v. Select Portfolio Servicing, Inc.*, 837 F. Supp. 2d 162, 188-89 (S.D.N.Y. 2011) (quoting *Harsco Corp. v. Segui*, 91 F.3d 337, 348 (2d Cir. 1996)); *see also Tessler v. NBC Universal, Inc.*, 2009 WL 866834, at \*6 (E.D. Va. Mar. 31, 2009), *aff'd sub nom. Tessler v. Nat'l Broad. Co.*, 364 F. App'x 5 (4th Cir. 2010) ("[B]oth New York and Virginia law essentially require the same elements for a legally enforceable contract.").18

18 Strategic cites to New York law for the breach of contract claim, while Eastern cites to both New York and Virginia law. "Federal courts sitting in diversity apply state substantive law." *Ellington Credit Fund*, 837 F. Supp. 2d at 179-80 (citing *Gasperini v. Ctr. for Humanities, Inc.*, 518 U.S. 415, 427 (1996)). The Court has included references to both New York and Virginia law but "[w]here both parties rely upon New York law in their briefs, the Court may assume the parties impliedly consent to the application of New York law." *Fort Prods., Inc v. Men's Med.*

#### **a. The Parties' Claims**

Eastern alleges that Strategic breached by failing to provide quality information in the form of the weekly reports by the Agreement's deadlines and that it is entitled to restitution damages in the amount of the \$1 million deposit because Strategic conferred no benefit. It argues that Strategic was in material breach no later than January 30, 2018 after it failed to timely deliver the first weekly report on January 23 and when it delivered the USB drives with the "useless" information on January 26 and January 30. Strategic does not deny that it did not provide the report, but rather defends that Eastern substantially hindered its performance and therefore Strategic cannot held it in breach, i.e., it argues frustration of purpose and lack of good faith and fair dealing. It also argues that to the extent it breached the Agreement, the breaches were not material. In addition, Strategic argues, Wang and L. Han instructed Strategic to keep working and thus Eastern lost its right to terminate the contract based on the alleged breaches.

Strategic's counterclaim alleges that Eastern first breached the Agreement by failing to pay the \$750,000 monthly payment due on February 16, 2018. 19 It argues Eastern breached the Agreement again when it delivered a termination letter without 30 days' notice. Eastern responds that Strategic's performance was to precede Eastern's payment of the \$750,000 and because there was no performance, it did not breach in its failure to pay. In addition, Eastern argues that because \$1 million was to be credited to work performed on a prorated basis to the final 1 1/3 months of the Agreement, PX1, it did not fail to pay Strategic the \$750,000 because Strategic had the \$1 million in its account that it could prorate. If both parties breached, Eastern

*Clinic, LLC*, 2016 WL 797577, at \*1 n.1 (S.D.N.Y. Feb. 23, 2016) (citing *Krumme v. WestPoint Stevens, Inc.*, 238 F.3d 133, 138 (2d Cir. 2000) ("The parties' briefs assume that New York law controls, and such implied consent . . . is sufficient to establish choice of law.") (internal quotation marks and citations omitted)).

19 The Court rejects Strategic's argument that Eastern breached the contract by having ACA pay the \$1 million deposit. *See supra*.

argues it would still get its \$1 million deposit less any substantiated benefit conferred by Strategic, which it claims was zero or at most, \$338,709.68 for the 14 days of work performed by Strategic prior to its breach.

The Court concludes that Strategic did not materially breach the Agreement by delivering the "useless" USB drives or failing to deliver the weekly reports, but that it did breach by failing to deliver the first monthly report on February 16, 2018 in accordance with the Agreement. Eastern also breached by failing to pay the \$750,000 monthly fee on February 16, 2018. There is thus a simultaneous breach. As a result, Eastern was within its rights in terminating the Agreement shortly after February 16 and Strategic is not entitled to performance or damages from Eastern. Eastern also is not entitled to performance or damages from Strategic.

#### **b. Eastern's Claim**

Eastern argues that Strategic breached the Agreement by failing to deliver the progress report on the financial forensic research each week in the first month of the Agreement, weekly current tracking reports each week during that first month, and social media research each week during the first month. The parties agree Strategic never delivered any financial forensic historical research, current tracking research, or social media research called for under the Agreement. JSOAF ¶¶ 54-56. The two USB drives that Strategic delivered were useless: the first contained only the researchers' own work to familiarize themselves with the subjects based on open source information while the second was unreadable raw material delivered from a subcontractor who refused to provide the actual information. Strategic also never provided any monthly reports. Eastern argues that Strategic breached the Agreement. Strategic claims that any breaches were immaterial or were caused by Eastern who frustrated its performance.

The Court begins, as always, with the Agreement. *See, e.g.*, *Kelly v. Ammado Internet Servs., Ltd.*, 2012 WL 4829341, at \*3 (E.D. Va. Oct. 10, 2012) ("To interpret a contract's terms,

Virginia courts 'consider the words of [the] contract within the four corners of the instrument itself.'") (quoting *Mathews v. PHH Mortg. Corp.*, 724 S.E.2d 196, 201 (Va. 2012)). The Agreement is not a model of clarity. Each side presents powerful arguments. The Court concludes that the failure to deliver the weekly reports or research during the first month was not a material breach.

"A material breach is a failure to do something that is so fundamental to the contract that the failure to perform that obligation defeats an essential purpose of the contract." *Horton v. Horton*, 487 S.E.2d 200, 204 (Va. 1997); *see VFS Fin., Inc. v. Falcon Fifty LLC*, 17 F. Supp. 3d 372, 379-80 (S.D.N.Y. 2014) ("A breach is material if it "go[es] to the root of the agreement between the parties [and] is so substantial that it defeats the object of the parties in making the contract.").

In some senses, the Agreement here is akin to an installment contract. Strategic was to conduct research on three topic areas with respect to ten individuals designated by Eastern and to deliver the fruits of that research in the form of periodic reports: (i) weekly and then a preliminary report in the first month for financial forensic historical research, (ii) weekly and then monthly in the case of current tracking research, and (iii) weekly and then monthly for social media research. "[T]he most effective way" for Eastern to have made clear that the failure to deliver each of the specified reports each week during the first month would have been to say that time was of the essence in the Agreement. *ADC Orange, Inc. v. Coyote Acres, Inc.*, 857 N.E.2d 513, 516 (N.Y. 2006). For example, where a party has failed to make payment in a contract for the purchase of real estate, "whether [a] [party]'s late installment payment constitutes a material breach depends on whether time [i]s of the essence with respect to that payment." *Id.* (contract for purchase of real property). Whatever its expressed desires in the

Agreement or during contract negotiation, Eastern here did not insist on a provision that time would be of the essence. It thus cannot avail itself of that doctrine.

The absence of an explicit "time is of the essence" provision is not dispositive, however, of Eastern's claim. It just requires the exercise of judicial interpretation. Although "[t]ime is generally of the essence where a definite time of performance is specified in a contract," that is not so where "circumstances indicate a contrary intent." *Burgess Steel Prod. Corp. v. Mod. Telecomms., Inc.*, 613 N.Y.S.2d 158, 159 (1st Dep't 1994). "The mere designation of a date upon which a thing is to be performed does not alone bring about [the] result [that time is of the essence]." *Ring 57 Corp. v. Litt,* 280 N.Y.S.2d 330, 332 (2d Dep't 1967). "What constitutes a reasonable time for performance depends upon the facts and circumstances of the particular case." *Zev v. Merman*, 533 N.E.2d 669, 669 (N.Y. 1988). Indeed, courts have held that "[i]n the absence of a provision that time was of the essence, the plaintiff was required to communicate unequivocal notice that tardy payments would not be accepted." *Cmty. Nat. Bank & Tr. Co. of N.Y. v. Joseph*, 504 N.Y.S.2d 185, 185 (2d Dep't 1986).

Reviewing the Agreement as a whole, the Court concludes that the requirement that Eastern deliver reports on all three subjects for the 15 fish in each week of the first month was not a material term of the Agreement and that the failure to deliver those weekly reports did not defeat an essential purpose of the Agreement. The Court starts with the fact that the Agreement was intended to create a long-term relationship between the parties. Eastern retained Strategic to conduct research over a three-year period terminable only on 30 days' notice. Although the Agreement gave Eastern the right to "remove certain fish from time to time," it was not necessarily the case that Eastern would choose to do so or that Strategic would find "circumstances do not permit sufficient work to research a given fish." PX1 at 3. The

Agreement contemplated that Strategic might continue its research on a given subject throughout the entire three-year period. *See, e.g.*, *id.* at 2 (noting that, for current tracking research, Eastern could direct more frequent reporting "for up to a six-month period"). In these circumstances, it is impossible to say that the failure to deliver research on one or more or even all of the subjects in the first couple of weeks of the Agreement would frustrate or defeat the purpose of the Agreement as a whole.

That conclusion is reinforced by numerous other provisions of the Agreement. In the first instance, the timing of the weekly reports and the form which they were to take are stated in the Agreement in somewhat vague terms, hardly the unequivocal and definitive language one would expect if time were of the essence for each of the reports. The financial forensic research was to be in the form of "a progress report . . . each week in the first month," with no specific date set for delivery or specific content required. *Id.* The language with respect to the weekly current tracking research and social media research similarly is general: it refers to "research" not reports and provides for that research to be delivered weekly without setting a date certain. *See id.* It stands in contrast to the more definitive language with respect to the monthly reports a "preliminary report" on financial forensic historical research in the first month, *id.*; "Current Tracking reports for each subject . . . produced monthly," *id.* at 3; and "Social media reports . . . produced monthly," *id.* Indeed, the weekly reports are not even singled out as "Deliverables." *See id.*

Moreover, Eastern did not give Strategic the final list of subjects to research and was not required to do so until the Agreement was signed, one week before the first weekly reports were due. *See id.* at 1. It thus could not have been within the reasonable contemplation of the parties that Strategic would have been required to deliver actionable information as to each and every

one of the subjects in the first couple of weeks of the Agreement. Strategic did not even know for certain who the subjects were and whether they would be able to be researched. Indeed, the Agreement itself recognized that the "circumstances [might] not permit sufficient work to research a given fish." *Id.* at 3.

Furthermore, Strategic was not even required to continue the research for five of the original 15 subjects designated by Eastern beyond the first month, and Eastern would not be entitled to reports on those subjects in the ensuing months. Strategic was required to research 15 subjects in the first month. It was required to research only ten subjects in each of the following months. At the time the Agreement commenced, the parties did not know which, if any, of the 15 initial subjects would form the group of ten subjects for the rest of the research. It is inconceivable that the failure to deliver information in the first couple of weeks for a subject as to whom research might not continue beyond those first couple of weeks would defeat the purpose of the Agreement.

Finally, after Eastern still had not received the fourth weekly report due by February 13, 2018, it did not warn Strategic that it was late on its payments, in breach of the Agreement, or otherwise indicate that "time was of the essence" in the Agreement. Even if the Agreement could be considered a time of the essence contract, "a party, by acquiescence or failure to pursue rights diligently under a time of the essence provision, eliminates or waives the provision as a term or implied term of the contract." *Lockheed Martin Transp. Sec. Sols. v. MTA Cap. Constr. Co.*, 2014 WL 12560686, at \*22 (S.D.N.Y. Sept. 16, 2014) (collecting cases); *see Atateks Foreign Trade Ltd. v. Priv. Label Sourcing, LLC*, 2009 WL 1803458, at \*21 (S.D.N.Y. June 23, 2009), *aff'd*, 402 F. App'x 623 (2d Cir. 2010) ("[I]t is improper for a party who has waived its right to timely performance to attempt suddenly to cancel the contract without first notifying its

counterparty that time is of the essence and re-setting the time for performance within a reasonable time by clear, distinct, and unequivocal notice.") (internal quotation marks and citation omitted); *see also Ring 57 Corp.*, 280 N.Y.S.2d at 332 ("[A]cquiescence in [a] series of delays" waives default).

For those reasons, the Court concludes that the failure to deliver the research or the weekly reports for the first month of the Agreement did not constitute a material breach.

The Court reaches a different conclusion with respect to the monthly reports: the preliminary financial forensic research reports due in the first month and the current tracking and social media reports whose production monthly was listed as a deliverable. The failure to produce those monthly reports was material. The monthly reports play an important role within the context of the Agreement. It was on the basis of the monthly reports that Eastern was to dictate the work to be done by Strategic. The Agreement provided that it was "understood that [Eastern] may not wish for each of the 10 fish to be the subject of all three reports, and that the number of report work duties per month [would] vary." PX1 at 3. That was particularly so with respect to the first month—the reports for which would dictate which ten of the 15 subjects would become the focus of the future reports. Without those reports, Eastern would have no means by which to determine who Strategic should focus on in the ensuing months. And, without a basis to determine who Strategic should investigate, an essential purpose of the Agreement would be defeated.

The monthly reports for the first month also play an important part in the accounting provision of the Agreement. That provision, it will be recalled, reflected that after the "March reports and payments [were] made, . . . all involved Parties will meet to recap the accounting, prior to moving forward with the next quarter." *Id.* at 4. There might be an increase the number

of "fish" thereafter. *Id.* The parties might also decide to renegotiate the terms of their agreement. It was to be at that March meeting that the parties were to discuss whether they found "the proper information requested on target A and any of the couple of categories under target A," and where "this ma[d]e sense or should [they] stop and move on to a different target with a different parameter, and was this working properly." Trial Tr. at 274. It is the only provision for a recap set in the Agreement, and that provision for a recap was an essential provision of the Agreement. It was the basis for the compromise between Strategic, which wanted a monthly retainer regardless of results, and Eastern, which wanted to pay by result. But, in order for that accounting mechanism to function properly, it could not be based solely on the results of one month's reporting—even the most recent month. The parties would need to have some trajectory and to understand whether the results for a particular month reflected an increase in what had been found and might suggest additional work to be done, or instead reflected that after exhaustive work a dead-end had been reached. Strategic's failure to deliver monthly reports thus frustrated an essential provision of the Agreement.

#### **c. Strategic's Counterclaim**

Strategic's counterclaim alleges that Eastern first breached the Agreement by failing to pay the \$750,000 monthly payment due on February 16, which it argues, was required under the Agreement regardless of the deliverables and which it needed to fund Team 1's research.20 It also argues Eastern breached the Agreement again when it delivered a termination letter without 30 days' notice. As shown below, it does not follow from the fact that Strategic failed to deliver the monthly reports that Eastern was privileged to withhold the \$750,000 payment. Analyzing the facts and the law, the correct result is that Eastern still owes Strategic the \$750,000 and its

20 The Court rejects Strategic's argument that Eastern breached the contract by having ACA pay the \$1 million deposit. *See supra*.

breach will be satisfied by allowing Strategic to withhold that sum from the money it is holding as a deposit. At the same time, however, Strategic's breach did entitle Eastern to declare that it would cease performing under the Agreement and not pay the next \$750,000 installment.

The Court rejects Eastern's interpretation that it was obligated to pay Strategic only upon the delivery of a report and thus that it had no obligation to pay Strategic the \$750,000 in mid-February.

Eastern's argument is based on the section of the Agreement headed "Prices." That section states in pertinent part: "The prices for each deliverable "A," "B," and "C" are \$300,000 each per subject per year, for a total of \$900,000 per fish per year." PX1 at 3. It further states that the pricing for the first month "will include up to 15 fish for a total of 30 reports and will decrease to 10 fish for a total of 30 reports at the beginning of the second month (February) and for (March) [sic] and for the duration of this contract." *Id.* at 4. It contains a paragraph that states:

(A) Comprehensive historical reports: \$300,000 per report (or report-equivalent) per year.

(B) Tracking reports: \$300,000 per report (or report-equivalent) per year.

*Id.*

The "Prices" section, however, also states that the "solution [of prices per report] does not provide for predictable budgeting or workloads," "[t]o ensure the maximum workload for predictability of the agreed price, [Strategic] will measure the deliverables as 30 units per year (10 fish x 3 reports [A+B+C] each = 30 jobs/reports at any given time)," and "[t]he pricing for 30 units or deliverables per year remains a constant \$9,000,000 per ear, or \$750,000 per month for 12 months." *Id.* at 3-4.

The parties disagree as to the import of this language. Eastern argues that it reflects an agreement by the parties that Eastern would pay \$300,000 per report only when the reports were delivered. Strategic responds that the language sets forth the methodology by which the \$750,000 per month and \$9,000,000 was derived. The Court concludes that Strategic has the better of the argument.

First, the Court is obliged to give meaning and effect to all of the provisions of the Agreement and to avoid rendering any provision surplusage or meaningless. *See Goodman v. Resol. Tr. Corp.*, 7 F.3d 1123, 1127 (4th Cir. 1993) ("Contract terms must be construed to give meaning and effect to every part of the contract, rather than leave a portion of the contract meaningless or reduced to mere surplusage."); *Fifth Third Bank, N.A. v. Int'l Bus. Machs. Corp.*, 2021 WL 508727, at \*9 (W.D. Va. Feb. 11, 2021) ("[N]o word or clause in a contract will be treated as meaningless if a reasonable meaning can be given to it, and parties are presumed not to have included needless words in the contract.") (quoting *TM Delmarva Power, L.L.C. v. NCP of Va., L.L.C.*, 557 S.E.2d 199, 200 (Va. 2002)); *Berry v. Klinger*, 300 S.E.2d 792, 796 (Va. 1983) ("The court must give effect to all of the language of a contract if its parts can be read together without conflict."). The Agreement states, in several places, that Eastern is obligated to pay Strategic a monthly fee of \$750,000 for Strategic's agreement to the terms of the contract. That language is unambiguous: "Payment is to be made in regular monthly installments of US\$750,000, at the end of each month." PX1 at 5.

Second, Strategic's interpretation is the best way to construe the Agreement as a whole to satisfy the purposes of the parties. *See First Am. Bank of Va. v. J.S.C. Concrete Const., Inc.*, 523 S.E.2d 496, 501 (Va. 2000) ("[T]he court will not treat any word or clause as meaningless if any reasonable interpretation consistent with the other portions of the contract can be ascribed to

it."). As Strategic points out, the Agreement contemplated that there would be circumstances where it would not deliver, or be able to deliver, three reports a month. With respect to financial forensic reports, Strategic's obligation was only to produce "update reports" on a monthly basis after the three-month marker. Most importantly, as Strategic highlights, Eastern had the unfettered discretion to substitute subjects over the term of the Agreement: if it deemed it necessary to remove one subject, it had the right to designate an additional subject to be investigated and thus "the number of report work duties per month will vary." PX1 at 3. The substitution of one subject for another would result in delay in reporting and increased costs for Strategic. But Strategic was willing to accept those increased costs and the discretion that the Agreement gave Eastern over the timing of reports because Eastern would pay a flat monthly fee in exchange for Strategic's agreement to provide the agreed number of reports or report equivalents over the course of the year.

Third, reflecting the fact that Strategic's obligation was measured on an annual and not a monthly basis, the very language to which Eastern points reflects the price per deliverable "per year." There is no price per deliverable per month. Thus, Eastern's own reading of the Agreement, applied literally, would lead to a result that not even Eastern urges—that (notwithstanding the language regarding \$750,000 per month), Eastern's only obligation was to pay "\$900,000 per fish per year." *Id.*

Contrary to Eastern's argument, Strategic's interpretation does give effect and meaning to each provision of the Agreement. Given the flexibility the Agreement accorded Eastern to request the reports and to the timing of their delivery, as well as with respect to the subjects to be investigated, there was a need to set forth a methodology showing the correspondence between reports owed and money to be paid. In the absence of such a provision, there would be no ready

method to determine whether Eastern received all the reports it was owed in a circumstance where, for example, it had substituted subjects and mixed and matched reports. The language to which Eastern points provided such a method. Eastern's failure to pay \$750,000 by its due date was a material breach of the Agreement. *See, e.g.*, *Tandberg, Inc. v. Advanced Media Design, Inc.*, 2009 WL 4067717, at \*4 (E.D. Va. Nov. 23, 2009) ("[It] is well-settled that failure to make timely payment constitutes a material breach.") (collecting cases).

Finally, Eastern's argument that Strategic was to deliver quality reports in the first weeks and that if it did not do so, Eastern would have the right both to declare a material breach and to obtain the return of its deposit is, in essence if not in form, an attempt to achieve through contrived contract interpretation the very right to make payment contingent on the delivery of reports and to deprive Strategic of the value of the deposit that it attempted but failed to achieve through contract negotiation. During contract negotiation, Eastern argued that the payments should be due based on deliverables and that if the reports were not of the quality Eastern expected, it would be able to obtain the return of its deposit. Strategic objected to those requests and insisted that it needed the security of a regular monthly payment, a \$1 million evergreen deposit, and one-month notice before the contract could be terminated. Those provisions were needed before Strategic embarked on the venture and made the investments necessary to establish a research network, without knowing in advance whether it would be able to successfully research any or all of the subjects. The Agreement permitted Eastern to terminate at any time and for any reason, but that termination would not be effective for one month ensuring that Strategic would be able to recoup through the deposit the investment it made to begin the research. Eastern's argument would essentially reverse those provisions and frustrate the expressed intent of the parties at the time of contracting. If accepted, it would permit Eastern

to condition payment on the quality of the reports and to recoup its deposit, notwithstanding the 30-day notice provision.

Strategic brings a second, separate claim based on Eastern's failure to provide the proper termination notice under the Agreement, which provides that "[e]ither party may terminate the contract with 30 days' written notice." PX1. Eastern submitted a letter on February 23, 2018 stating that it was terminating the contract and made no payments thereafter. The Agreement indicates that termination would be effective only 30 days after notice of termination. However, when a party materially breaches a contract, the other party is relieved of its future obligations. *See New Windsor Volunteer Ambulance Corps, Inc. v. Meyers*, 442 F.3d 101, 117 (2d Cir. 2006) ("When a party has breached a contract, that breach may excuse the nonbreaching party from further performance if the breach is 'material.'"). Given Strategic's material breach, Eastern was permitted to terminate the Agreement without giving 30 days' notice, and this basis for the counterclaim thus fails.

#### **d. Relief**

The evidence establishes that Strategic and Eastern both materially breached the Agreement and did so at the same time. Strategic breached by failing to deliver the monthly report on February 16, 2018. Eastern breached when it failed to pay the \$750,000 installment on February 16, 2018.

It is black letter law that, upon a material breach of contract, the non-breaching party may elect to cease performance and seek damages. *See, e.g.*, *Lovink v. Guilford Mills, Inc.*, 878 F.2d 584, 586 (2d Cir. 1989) ("A total breach justifies termination of the contract and damages for complete failure of performance."); *The Est. of Mantle v. Rothgeb*, 2007 WL 4548127, at \*10 (S.D.N.Y. Nov. 6, 2007) ("If plaintiff did materially breach the Agreement, defendants would have been entitled to terminate the contract and sue for damages."). Absent circumstances not

applicable here, a party who fails to perform cannot itself seek damages. *See Optima Media Grp. Ltd. v. Bloomberg L.P.*, 2021 WL 1941878, at \*8 (S.D.N.Y. May 14, 2021) ("In order to recover for breach of contract, a party must first show it substantially performed under that contract"); *Car Pool*, 2012 WL 4854652, at \*3 (requiring plaintiff's adequate performance of the contract to state a claim). It follows that, upon Strategic's failure to deliver the monthly reports, Eastern had the right to send the termination notice and direct Strategic not to perform any further activities for Eastern. Eastern is not liable for any portion of the \$750,000 payment that would have been due in mid-March for services performed from mid-February on, after Eastern validly terminated the Agreement. It also follows that upon Eastern's failure to pay the \$750,000 in consideration of the retention of Strategic from mid-January to mid-February, Strategic was no longer required to engage in investigative services for Eastern. Eastern's beach gave it the right at that time to immediately elect to stop working for Eastern and not to incur any additional expenses on its behalf.

It does not follow that either of Eastern or Strategic is entitled to contract damages. Eastern has not identified any damages it suffered by failing to receive the first monthly reports. In addition, by failing to tender payment and materially breaching the Agreement, Eastern is not entitled to damages. At the same time, Strategic too is not entitled to recover damages for Eastern's breach of contract. Had Strategic performed and delivered the monthly reports (regardless of their quality), it would have been entitled to damages for Eastern's premature termination of the Agreement in the amount of at least \$750,000—representing the payment it would have been owed for the 30-day period it was entitled to payment after Eastern served a notice of termination (and which was due on February 16). But it did not perform on February 16, and thus it cannot complain that it did not receive the \$750,000.

Where "each party breached an obligation due and owing under the contract . . . neither party is entitled to damages from the other." *Buffardi v. Parillo*, 563 N.Y.S.2d 948, 950 (3d Dep't 1990) (finding "no merit in each party's claim that he was relieved from the obligation to perform by the other party's failure to perform" because "[n]either party engaged in the type of conduct that frustrated or prevented the other party from performing, and since both conditions were to be fulfilled in a reasonable time, neither party was justified in waiting for the other party to perform first") (internal citation omitted).

A different conclusion follows with respect to whether Eastern is entitled to recover the full \$1 million deposit it paid Strategic at the beginning of the Agreement. It is not entitled to do so on a breach of contract theory. Eastern does not dispute that the parties had agreed that the \$1 million deposit could be credited by Strategic against the final 1 and 1/3 months of the Agreement. *See* PX1 at 5. As described above, that agreement was critical to Strategic's agreement to perform investigative services—had Eastern not agreed to provide an advance against its obligations and had it not further agreed that Strategic could retain that sum for as long as the Agreement was in effect, up to a maximum of 1 and 1/3 months, Strategic would not have invested in the infrastructure necessary to carry out the Agreement. The Agreement here was in effect for one month, from January 16, 2018 to February 16, 2018. It follows that, had Strategic not violated the Virginia Private Security Services Statute, Strategic would have been entitled to retain that portion of the \$1 million that it earned while the Agreement was in effect, or \$750,000. That amount and Strategic's right to retain it are not contingent upon Strategic's

*delivery* of reports—that is the precise contractual provision Eastern demanded but was not able to obtain during contract negotiations. 21

Eastern is entitled to restitution in the amount of \$250,000 on a breach of contract theory. That represents the \$1 million deposit Eastern paid less the \$750,000 amount that Strategic is owed and entitled to keep under the Agreement. "[I]f a party justifiably refuses to perform on the ground that his remaining duties of performance have been discharged by the other party's breach, the party in breach is entitled to restitution for any benefit that he has conferred by way of part performance or reliance in excess of the loss that he has caused by his own breach." Restatement (Second) of Contracts § 374 (1981); *see also New Windsor*, 442 F.3d at 118 ("[A] plaintiff whose breach was not willful and deliberate may, in some instances, recover so much as his efforts have actually benefited the non-breaching party."). Even if Eastern breached the Agreement by failing to pay the \$750,000 due on February 16, it is still entitled to restitution for the benefit it conferred on Strategic, which is equal to the amount in excess of the \$750,000 that Strategic is owed, i.e., \$250,000. However, that sum is subsumed within the \$1 million Eastern is entitled to recover on its claim based on the Virginia Private Security Services Statute.

#### **2. Eastern's Unjust Enrichment Claim**

Eastern also bring a claim for unjust enrichment. That claim does not provide any relief for Eastern.

The elements of unjust enrichment are: "(1) a benefit conferred on the defendant by the plaintiff; (2) knowledge on the part of the defendant of the conferring of the benefit; and (3) acceptance or retention of the benefit by the defendant in circumstances that render it inequitable for the defendant to retain the benefit without paying for its value." *The Christian Broad.*

21 That the \$750,000 is not contingent on Strategic's delivery of services distinguishes Eastern's reliance on Restatement (Second) of Contracts § 234 cmt. e, f.

*Network, Inc. v. Busch*, 2006 WL 2850624, at \*7-8 (E.D. Va. Oct. 3, 2006) (collecting cases); *see Mandarin Trading Ltd. v. Wildenstein*, 944 N.E.2d 1104, 1110 (N.Y. 2011) (same).

"Where the parties executed a valid and enforceable written contract governing a particular subject matter, recovery on a theory of unjust enrichment for events arising out of that subject matter is ordinarily precluded." *IDT Corp. v. Morgan Stanley Dean Witter & Co.*, 907 N.E.2d 268, 274 (N.Y. 2009) (plaintiff could not use unjust enrichment claim to recover fee paid because it arose from services governed by engagement letter). The parties do not dispute that the Agreement is enforceable and that payment of the \$1 million deposit was required by the Agreement. Regardless of whether its breach of contract claim succeeds, Eastern cannot recover for the \$1 million under an unjust enrichment claim. *See UETA Latinamerica, Inc. v. Zafir*, 10 N.Y.S.3d 566, 568 (2d Dep't 2015) (claim for unjust enrichment "only applies in the absence of an express agreement, and is not really a contract at all, but rather an equitable obligation imposed in order to prevent a party's unjust enrichment"); *The Christian Broad. Network*, 2006 WL 2850624, at \*8 ("Unjust enrichment claims arise 'when there is no contractual relationship.'") (quoting *Aerotek, Inc. v. Tyonek Native Corp.*, 2005 WL 3372872, at \*3 (E.D. Va. Dec. 8, 2005)); *see also Bazak Int'l Corp. v. Tarrant Apparel Grp.*, 347 F. Supp. 2d 1, 4 (S.D.N.Y. 2004) ("If a valid, enforceable contract existed between the parties, then [plaintiff] cannot recover under a theory of unjust enrichment. However, if no valid contract was in place regarding the sale of the goods, [plaintiff] has failed to state a claim for relief under the theory of unjust enrichment because, absent a contract, the benefit that [defendant] garnered from selling the merchandise was not at [plaintiff]'s expense.").

#### **3. Strategic's Fraud Counterclaim**

Strategic argues that Eastern cannot recover the \$1 million deposit because it was paid by ACA and because it was the victim of fraud by Guo and Eastern. The Court rejects these arguments.

Under Virginia law, the elements of actual fraud are: "(1) a false representation, (2) of a material fact, (3) made intentionally and knowingly, (4) with intent to mislead, (5) reliance by the party misled, and (6) resulting damage to the party misled." *Winn v. Aleda Constr. Co.*, 315 S.E.2d 193, 195 (Va. 1984). The burden of proof applicable to fraud under Virginia law is "clear and convincing evidence," which is "higher than a mere preponderance." *Sweely Holdings, LLC v. SunTrust Bank*, 820 S.E.2d 596, 604 (Va. 2018); *see Hitachi Credit Am. Corp. v. Signet Bank*, 166 F.3d 614 (4th Cir. 1999).

Similarly, under New York law, "a claim of fraudulent inducement requires proof (1) that the defendants made a representation, (2) as to a material fact, (3) which was false, (4) and known to be false by the defendants, (5) that the representation was made for the purpose of inducing the other party to rely upon it, (6) that the other party rightfully did so rely, (7) in ignorance of its falsity, (8) to his injury." *Internet L. Libr., Inc. v. Southridge Cap. Mgmt., LLC*, 2005 WL 3370542, at \*5 (S.D.N.Y. Dec. 12, 2005), *aff'd sub nom. ITIS Holdings Inc. v. Southridge Cap. Mgmt. LLC*, 329 F. App'x 299 (2d Cir. 2009). "Each element of [a] fraud claim must be shown by clear and convincing evidence, at the summary judgment stage as well as at trial." *Century Pac., Inc. v. Hilton Hotels Corp.*, 528 F. Supp. 2d 206, 219 (S.D.N.Y. 2007), *aff'd*, 354 F. App'x 496 (2d Cir. 2009)

To prevail on a fraud claim under both Virginia and New York law, a plaintiff must establish that the defendant made a false statement. Strategic here failed to do so. Strategic's claim is based on the notion that, at the time Guo requested Strategic to perform investigative

services for Eastern, Guo falsely represented that he was anti-CCP and that he would use the research obtained by Strategic for the purposes of sowing discord in the CCP and eventually overthrowing it. Thus, to prove its case, Strategic would have had to show either that Guo was a proponent of the CCP or at best indifferent to the CCP, or that Guo did not intend to use the research for the stated purposes.

The evidence did not establish Strategic's claim. Although there is evidence that Guo has made statements in favor of the CCP and of some conduct that would suggest that he is not hostile to the Chinese government (or at least not to all parts of it), Guo also testified to being an opponent of the CCP and to an intent to use the Strategic research in a manner hostile to the Chinese government. There is also evidence that Guo made statements consistent with a person who is hostile to the CCP. The evidence at trial does not permit the Court to decide whether Guo is, in fact, a dissident or a double agent. In the absence of a definitive or at least clear answer to that question, Strategic has not satisfied its burden of providing a false statement. Others will have to determine who the true Guo is.

The evidence before the Court also does not establish that Strategic reasonably or actually relied on Guo's representations about his political allegiances and the purposes for which he sought the research.

"In assessing the reasonableness of a plaintiff's alleged reliance, [the Court] considers the entire context of the transaction, including factors such as its complexity and magnitude, the sophistication of the parties, and the content of any agreements between them." *Meisel v. Grunberg*, 651 F. Supp. 2d 98, 118 (S.D.N.Y. 2009) (quoting *Glidepath Holding B.V. v. Spherion Corp.*, 590 F. Supp. 2d 435, 459 (S.D.N.Y. 2007)). "In applying the test of reasonableness, the court must determine whether the plaintiff availed itself of the means

available to it given its size and sophistication." *Ambac Assur. Corp. v. Countrywide Home Loans, Inc.*, 2016 WL 7374210, at \*12 (N.Y. Sup. Ct. Dec. 19, 2016) (internal quotation marks and citation omitted). "Factors to be considered in making this determination may include the particular parties' prior course of dealing, the roles of other participants in the transaction, the time and expense of the investigation, the feasibility of practical[ity] of the plaintiff's performance of a particular type of investigation before entering into the transaction, the foreseeable risk to the plaintiff of failing to undertake the investigation, and responsible industry custom." *Id.* (internal quotation marks and citation omitted).

Before reasonably relying on a representation regarding information material to participation in a significant transaction, a sophisticated party "has a duty to conduct an independent appraisal of the risk it is assuming and a duty to investigate the nature of its business transactions." *Granite Partners, L.P. v. Bear, Stearns & Co. Inc.*, 58 F. Supp. 2d 228, 259 (S.D.N.Y. 1999); *see id.* (noting that they "cannot be heard to complain when they fail to make diligent inquiries"). "Where sophisticated businessmen engaged in major transactions enjoy access to critical information but fail to take advantage of that access, . . . courts are particularly disinclined to entertain claims of justifiable reliance." *Crigger v. Fahnestock & Co., Inc.*, 443 F.3d 230, 235 (2d Cir. 2006). "[I]f false representations are made regarding matters of fact, and the means of knowledge are at hand and equally available to both parties, and the party, instead of resorting to them, sees fit to trust himself in the hands of one whose interest is to mislead him, the law, in general, will leave him where he has been placed by his own imprudent confidence." *Persaud Cos., Inc. v. IBCS Grp., Inc.*, 425 F. App'x 223, 226 (4th Cir. 2011) (quoting *Costello v. Larsen*, 29 S.E.2d 856, 858 (1944). "Succinctly put, a party will not be heard to complain that he has been defrauded when it is his own evident lack of due care which is responsible for his

predicament." *Rodas v. Manitaras*, 552 N.Y.S.2d 618, 620 (1st Dep't 1990); *accord Crigger*, 443 F.3d at 235; *see also Hitachi Credit*, 166 F.3d at 629 ("A plaintiff cannot claim that its reliance was reasonable and justified when it makes a partial inquiry, with full opportunity of complete investigation, and elects to act upon the knowledge obtained from the partial inquiry.").

Similarly, to establish actual reliance in a fraud action under New York law, "the plaintiff must show a belief in the truth of the representation and a change of position in reliance on that belief." *Hecht v. Components Int'l, Inc.*, 867 N.Y.S.2d 889, 895 (Sup. Ct. 2008) (citing *CBS Inc. v. Ziff-Davis Pub. Co.*, 553 N.E.2d 997, 1000 (N.Y. 1990)). Put another way, the plaintiff must show that the "defendant's misrepresentation induced plaintiff to engage in the transaction in question[.]" *Laub v. Faessel*, 745 N.Y.S.2d 534, 536 (1st Dep't 2002). Actual reliance requires proof "that 'but for the claimed misrepresentations or omissions, the plaintiff would not have entered into the detrimental securities transaction.'" *Basis PAC-Rim Opportunity Fund (Master) v. TCW Asset Mgmt. Co.*, 48 N.Y.S.3d 654, 656 (1st Dep't 2017) (quoting *Lentell v. Merrill Lynch & Co.*, 396 F.3d 161, 172 (2d Cir. 2005)).

Strategic is and holds itself out to be a sophisticated entity. Its business includes the investigation of people, including their backgrounds and their financial relationships. Information was available to it that called Guo's political allegiances and objectives into question. Gertz had written an article on May 23, 2017, prior to the Agreement, that described Guo's "close ties to senior Chinese Communist Party leaders, including government ministers and Politburo members," indicated Guo had "access to Ministry of State security operations overseas and in the United States," and noted that "Guo's wife and daughter currently have been allowed by Chinese authorities to visit him in New York but are required to return to China after 20 days, where they can be used for political leverage against Guo." Trial Tr. at 82; DX 43.

Wallop denied seeing this article, despite Strategic's focus on "research and analysis of political intelligence," her 30-year relationship with Gertz, and the fact that Gertz introduced her to Guo. *See, e.g.*, Trial Tr. at 34; *see also id.* at 55-56. In another article, dated October 9, 2017, Gertz had noted that "Guo said he maintains close ties to supporters within the Chinese government and security system." Trial Tr. at 84-85; DX32. It was therefore a matter of public knowledge that Guo had provided funds to security forces in China and maintained relationships with highlevel members of the CCP. If Wallop and Waller were concerned that such relationships were consistent with support of the CCP or at least ambivalence towards it, they could have investigated or inquired further. Instead they did not. *See, e.g.*, *PNC Bank, Nat'l Ass'n v. Dominion Energy Mgmt., Inc.*, 2018 WL 1768061, at \*11 (E.D. Va. Apr. 12, 2018) ("Examples of unreasonable reliance include 'where a party had information that would excite the suspicions of a reasonably prudent person' or 'where one relies upon an oral statement that is contrary to a written statement in his possession.'") (citation omitted).

If Guo's allegiances and the purpose for which Eastern commissioned the research had been important to Strategic, as it testified, it could have protected itself. It could, for example, have asked for a representation of Guo's loyalties, or at least a recital in a whereas clause in the Agreement. It need not necessarily have feared that including such a representation or recital would have undermined the purpose of the Agreement and the parties' mutual desire for confidentiality. Representations are included in the most confidential of agreements. Moreover, the parties already went to extensive lengths to preserve confidentiality, including by having a confidentiality provision in the Agreement, by using "virgin laptops" to transfer the research data, and by making sure no non-encrypted electronic versions of the Agreement were available.

Moreover, although Strategic argued that Guo did not want references to himself in the Agreement, Strategic need not have acceded to that request.

Indeed, the structure of the Agreement and the deliverables Strategic was obligated to provide to Eastern are themselves inconsistent with the notion of reasonable reliance. The Agreement gave Eastern (and Guo) alone the power to dictate Strategic's research agenda. Strategic did not have input into the subjects of investigation or a veto over them. The Agreement provides that Eastern "will provide the necessary basis information, and desired areas of focus, to [Strategic] to research." PX1. It also provided that Eastern could "direct [Strategic] to conduct other research, not specified in this agreement, for a fee." *Id.* Eastern had the right to select fish. If Eastern had demanded that Strategic research an opponent of the CCP, the Agreement would have required Strategic to do so. Strategic's only option not to investigate a subject was if "circumstances do not permit sufficient work to research a given fish." *Id.*

## **CONCLUSION**

For the reasons explained above, the Court concludes that Eastern prevails on its claim for a declaratory judgment that the Agreement is unenforceable and void, and Eastern is entitled to restitution in the amount of the \$1 million Strategic was never entitled to collect from Eastern. The Court has reviewed the remaining arguments and defenses, which fail.

The parties are directed to meet and confer regarding a proposed form of judgment and to file with the Court a joint stipulation or judgment by June 29, 2021.

SO ORDERED.

New York, New York LEWIS J. LIMAN

Dated: June 22, 2021 \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

United States District Judge

Case 22-50073 Doc 50-4 Filed 02/28/22 Entered 02/28/22 21:19:53 Page 148 of 159

# **EXHIBIT 23**

**FILED: NEW YORK COUNTY CLERK 05/07/2021 07:59 PM** INDEX NO. 652077/2017 NYSCEF DOC. NO. 785 RECEIVED NYSCEF: 05/07/2021 Case 22-50073 Doc 50-4 Filed 02/28/22 Entered 02/28/22 21:19:53 Page 149 of 159

![](_page_148_Picture_1.jpeg)

*MILES KWOK October 3, 2018*

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*Original File 247294.TXT Min-U-Script® with Word Index*

## **FILED: NEW YORK COUNTY CLERK 05/07/2021 07:59 PM** INDEX NO. 652077/2017 NYSCEF DOC. NO. 785 RECEIVED NYSCEF: 05/07/2021 Case 22-50073 Doc 50-4 Filed 02/28/22 Entered 02/28/22 21:19:53 Page 150 of 159

| 1 | SUPREME COURT OF THE STATE OF NEW YORK | | | |----|---------------------------------------------------------------------------------------------------|--|--| | 2 | COUNTY OF NEW YORK | | | | 3 | ------------------------------------------------x PACIFIC ALLIANCE ASIA OPPORTUNITY FUND L.P., | | | | 4 | Plaintiff, | | | | 5 | -against- | | | | 6 | KWOK HO WAN, a/k/a KWOK HO, a/k/a GWO WEN | | | | 7 | GUI, a/k/a GUO WENGUI, a/k/a GUO WEN-GUI, a/k/a WAN GUE HAOYUN, a/k/a MILES KWOK, | | | | 8 | a/k/a HAOYUN GUY, | | | | 9 | Defendant. | | | | 10 | Index No.: 652077/2017 ------------------------------------------------x | | | | 11 | | | | | 12 | 7 Times Square | | | | 13 | New York, New York | | | | 14 | October 3, 2018 9:39 a.m. | | | | 15 | | | | | 16 | Videotaped Examination Before Trial | | | | 17 | of the MILES KWOK, before Kristi Cruz, a Notary | | | | 18 | Public of the State of New York. | | | | 19 | | | | | 20 | | | | | 21 | | | | | 22 | | | | | 23 | ELLEN GRAUER COURT REPORTING CO. LLC | | | | 24 | 126 East 56th Street, Fifth Floor New York, New York 10022 | | | | 25 | 212-750-6434 REF: 247294 | | |

| 1 | | A P P E A R A N C E S: | | | | |----|-------------------------|------------------------------|--|--|--| | 2 | | | | | | | 3 | O'MELVENY & MYERS LLP | | | | | | 4 | Attorneys for Plaintiff | | | | | | 5 | | Times Square Tower | | | | | 6 | | 7 Times Square | | | | | 7 | | New York, New York 10036 | | | | | 8 | BY: | EDWARD MOSS, ESQ. | | | | | 9 | | STUART SARNOFF, ESQ. | | | | | 10 | | SARA N. PAHLAVAN, ESQ. | | | | | 11 | | 212.326.2000 | | | | | 12 | | emoss@omm.com | | | | | 13 | | ssarnoff@omm.com | | | | | 14 | | spahlavan@omm.com | | | | | 15 | | | | | | | 16 | | | | | | | 17 | HODGSON RUSS LLP | | | | | | 18 | Attorneys for Defendant | | | | | | 19 | | 605 Third Avenue, Suite 2300 | | | | | 20 | | New York, New York 10158 | | | | | 21 | BY: | MARK A. HARMON, ESQ. | | | | | 22 | | JILLIAN MARIE SEARLES, ESQ. | | | | | 23 | | 212.751.4300 | | | | | 24 | | mharmon@hodgsonruss.com | | | | | 25 | | jsearles@hodgsonruss.com | | | |

| 1 | A P P E A R A N C E S: (Cont'd) | |----|-----------------------------------------------| | 2 | | | 3 | ALSO PRESENT: | | 4 | ELIZABETH YAOYING JIANG, Mandarin Interpreter | | 5 | DAN MACOM, Videographer | | 6 | KARIN MAISTRELLO, Golden Spring | | 7 | | | 8 | | | 9 | | | 10 | | | 11 | | | 12 | | | 13 | | | 14 | | | 15 | | | 16 | | | 17 | | | 18 | | | 19 | | | 20 | | | 21 | | | 22 | | | 23 | | | 24 | | | 25 | | | | |

| 1 | | ------------------- I N D E X ------------------- | | |----|--------------|---------------------------------------------------|--| | 2 | WITNESS | EXAMINATION BY PAGE | | | 3 | MILES KWOK | MR. MOSS 8 | | | 4 | | | | | 5 | | | | | 6 | DIRECTIONS: | PAGE 17, 18, 19, 58, 59, 61, | | | 7 | | 62, 67, 70, 71, 72, 73, | | | 8 | | 78, 101, 102, 117, 118, | | | 9 | | 126, 128, 129 | | | 10 | | | | | 11 | | | | | 12 | | --------------- DOCUMENT REQUESTS --------------- | | | 13 | PAGE: 129 | Document evidencing agreement | | | 14 | | with Zhang Wei relating to the | | | 15 | | hotel | | | 16 | | | | | 17 | | | | | 18 | | ---------------- E X H I B I T S ---------------- | | | 19 | KWOK | DESCRIPTION FOR I.D. | | | 20 | Exhibit 1 | Genever Holdings LLC 33 | | | 21 | | Corporate Documents | | | 22 | Exhibit 2 | Printout from YouTube 59 | | | 23 | Exhibit 3 | Federal Complaint 69 | | | 24 | Exhibit 4 | Letter with attached 73 | | | 25 | | financial information | |

| 1 | KWOK | |----|-------------------------------------------------| | 2 | opposition to its attachment motion Mr. Kwok | | 3 | filed a brief dated May 16, 2018, and relating | | 4 | to this issue on page 15, the brief reads as | | 5 | follows: | | 6 | "Yet Frances," who is PAX's | | 7 | investigator, "offers no proof beyond his own | | 8 | assertion that the voices are those of Kwok | | 9 | and his associates or that Kwok or anyone | | 10 | associated with him uploaded the audio | | 11 | recording in question, and there is | | 12 | substantial reason to question both the | | 13 | authenticity of the audio and the motives | | 14 | behind the individual or entity who uploaded | | 15 | it and represented that it was, in fact, Kwok | | 16 | making the statements in question." | | 17 | Now I'm going play the audio. | | 18 | (Whereupon, an audio/video is | | 19 | played.) | | 20 | THE WITNESS: I refuse to listen. | | 21 | I'm not going to listen. | | 22 | Q. Sorry, Mr. Kwok, were you covering | | 23 | your ears? | | 24 | A. This is all communist. Everything | | 25 | here is all communist. Unless you prove this |

| 1 | KWOK | |----|---------------------------------------------------| | 2 | is not communist, then I will listen. They | | 3 | have recorded over a million of tax audios, | | 4 | videos that are fake. Unless you could prove | | 5 | this is real, otherwise I will not listen to | | 6 | it. What relationship is this to me? Unless | | 7 | you could prove this is what I have said, that | | 8 | this is my words, my audio, my video, then I | | 9 | will listen to it. | | 10 | Q. You refuse to listen to the video? | | 11 | DI MR. HARMON: I object on the same | | 12 | basis and direct the witness not to answer | | 13 | the question. | | 14 | A. I have a sensation of committing | | 15 | suicide if you're going play that. This is | | 16 | communist. Very simple. There is like a | | 17 | number of place that the communist that have | | 18 | been proven by the FBI to be fake. So you | | 19 | want me to commit suicide? Are you here to | | 20 | kill me? I here seriously declare for all the | | 21 | videos that you would show as outside the | | 22 | parameters that's causing me mental distress, | | 23 | I will reserve my right to sue. I like my | | 24 | attorney to note I reserve my right of the | | 25 | personal attacks by the other party against |

| 1 | KWOK | |----|--------------------------------------------------| | 2 | me, and I like to ask for the authenticity of | | 3 | this documents with a person's authenticity. | | 4 | I like to request an investigation of it. I'm | | 5 | done. | | 6 | Q. So, Mr. Kwok, you will not answer | | 7 | any questions about the video? | | 8 | DI MR. HARMON: Same objection. Same | | 9 | direction. Beyond the scope of what I | | 10 | believe appropriate to ask in discovery. | | 11 | A. I believe this is humiliation, these | | 12 | are threats and will need to pay | | 13 | responsibility for these actions. | | 14 | MR. MOSS: Please let the record | | 15 | reflect that when Mr. Kwok asked me to | | 16 | stop playing the video, I stopped playing | | 17 | the video. I will not play it anymore. | | 18 | I note that Mr. Harmon has objected | | 19 | to this line of questioning and instructed | | 20 | Mr. Kwok not to answer any questions about | | 21 | this video. | | 22 | I have that right, right, | | 23 | Mr. Harmon? | | 24 | MR. HARMON: I'm sorry? | | 25 | MR. MOSS: I got it right? You're |

| 1 | KWOK | |----|----------------------------------------------| | 2 | instructing -- | | 3 | MR. HARMON: I thought you said you | | 4 | I have that right, as opposed to it's my | | 5 | right to something. | | 6 | MR. MOSS: Fair enough. I'm | | 7 | correct, you're instructing the witness -- | | 8 | MR. HARMON: I'm instructing the | | 9 | witness not to answer the questions for | | 10 | the reasons I've already stated on the | | 11 | record. | | 12 | Q. What is Golden Spring New York Ltd.? | | 13 | A. It is Hong Kong Golden Spring, a | | 14 | company that they have expanded in New York. | | 15 | Q. Who is "they"? | | 16 | A. Hong Kong Golden Spring. | | 17 | Q. Who owns Golden Spring New York? | | 18 | A. Hong Kong Golden Spring owns. | | 19 | Q. Who owns Hong Kong Golden Spring? | | 20 | A. Guo Qiang. | | 21 | THE INTERPRETER: G-U-O, Q-I-A-N-G, | | 22 | phonetic spelling. | | 23 | Q. Is Guo Qiang a family member of | | 24 | yours? | | 25 | A. Yes. |

| 1 | | KWOK | |----|------------|--------------------------------------| | 2 | Q. | What is the relation? | | 3 | A. | My son. | | 4 | Q. | Do you have any ownership interest | | 5 | | in Golden Spring Hong Kong? | | 6 | A. | No. | | 7 | Q. | Is Guo Qiang the same son as Mileson | | 8 | | or is it a different son? | | 9 | A. | It's the same person. | | 10 | Q. | Do you have any ownership interest | | 11 | | in Golden Spring New York? | | 12 | A. | No. | | 13 | Q. | So Golden Spring is owned by your | | 14 | son? | | | 15 | A. | My son also represents the family in | | 16 | owning it. | | | 17 | Q. | Does the son represent you in owning | | 18 | it? | | | 19 | A. | No. | | 20 | Q. | Your son represents other family | | 21 | | members in owning it? | | 22 | A. | Yes. | | 23 | Q. | Does your son represent Zhang Wei in | | 24 | | owning Golden Spring? | | 25 | A. | Yes. |

| 1 | KWOK | | |----|--------------------------------------------|--| | 2 | Q. Is your son the sole shareholder of | | | 3 | Golden Spring? | | | 4 | MR. HARMON: Object to the form of | | | 5 | the question. | | | 6 | A. I'm not really sure. | | | 7 | Q. Do you know of any other | | | 8 | shareholders of Golden Spring? | | | 9 | MR. HARMON: Object to the form of | | | 10 | the question. | | | 11 | A. I'm not sure. I don't know. | | | 12 | Q. Does Golden Spring have any | | | 13 | directors? | | | 14 | MR. HARMON: Object to the form of | | | 15 | the question. | | | 16 | A. I'm not sure. | | | 17 | MR. MOSS: Mark, what's wrong, you | | | 18 | don't like that I'm not using one of the | | | 19 | entities? | | | 20 | MR. HARMON: I don't know which | | | 21 | entity -- | | | 22 | MR. MOSS: Hong Kong or New York? | | | 23 | MR. HARMON: I don't know which one | | | 24 | you're talking about, or both. | | | 25 | Q. Do any of the Golden Spring entities | |