---
type: court_doc
id: "court_ctb_1719_0"
court: "CTB"
case_no: "22-50073"
doc_number: 1719
doc_type: "UNKNOWN"
filed_date: "2023-04-28"
lang: "en"
machine_translated: false
url: "https://mubeitech.com/en/court/court_ctb_1719_0"
json_url: "https://mubeitech.com/api/court/court_ctb_1719_0"
---
# Guo Wengui / Miles Guo — bankruptcy case · ECF #1719



UNITED STATES BANKRUPTCY COURT
DISTRICT OF CONNECTICUT
BRIDGEPORT DIVISION

In Re　*
Case No. 22-50073 (JAM)
*
HO WAN KWOK and GENEVER
HOLDINGS CORPORATION,　*
*
Debtor.　*
*
HK INTERNATIONAL FUNDS
INVESTMENTS (USA) LIMITED,　Adv. Proc. No. 22-05003
*
*
Plaintiff,　*
v.　*
*
Bridgeport, Connecticut
*
April 20, 2023
LUC A. DESPINS,　*
*
Defendant.　*
*
* * * * * * * * * * * * * * * *
#185
MOTION FOR PARTIAL SUMMARY JUDGMENT ON SECOND
COUNTERCLAIM
#1679 ORDER SCHEDULING HEARING ON ORAL MOTION FOR RELIEF
FOR ORDER AUTHORIZING ABANDONMENT OF PROPERTY
PURSUANT TO BANKRUPTCY CODE SECTION 554 AND
BANKRUPTCY RULE 6007　TRANSCRIPT OF
#1453 MOTION FOR ORDER TO SHOW CAUSE WHY DEBTOR, MEI GUO and
HK (USA) SHOULD NOT BE HELD IN CONTEMPT FOR FAILURE
TO COMPLY W/ORDER TO COMPEL RE FRBP 2004 SUBPOENAS
#1649 MOTION FOR A LIMITED STAY OF ORDER GRANTING IN PART
MOTION TO COMPEL COMPLIANCE WITH RULE 2004 SUBPOENA
FROM JUDGMENT OR ORDER PURSUANT TO FED. R. CIV. P.60
AND FED R. BANKR. P. 9024(THE 'MOTION') WITH REGARD
TO THE ORDER GRANTING MOTION OF CHAPTER 11 TRUSTEE
TO LIMIT NOTICE AND TO SEAL WITH RESPECT TO MOTION
BEFORE THE HONORABLE JULIE A. MANNING
UNITED STATES BANKRUPTCY JUDGE
produced by transcription service.　Proceedings recorded by electronic sound recording, transcript
Fiore Reporting and Transcription Service, Inc.
4 Research Drive, Suite 402
Shelton, Connecticut 06484 (203)929-9992

APPEARANCES: For the Chapter 11 NICHOLAS BASSETT, ESQ. Trustee: Paul Hastings, LLP 200 Park Avenue New York, NY 10166 DOUGLAS S. SKALKA, ESQ. Neubert Pepe & Monteith, PC 195 Church Street New Haven, CT 06510 Chapter 11 Trustee: LUC A. DESPINS, ESQ. Paul Hastings 200 Park Avenue New York, NY 10166 For Bravo Luck Limited: JOANNA J. CLINE, ESQ. Troutman Pepper Hamilton Sanders, LLP Hercules Plaza 1313 N. Market Street Suite 5100 Wilmington, DE 19899 For the Plaintiff, MELISSA F. WERNICK, ESQ. HK International and Chiesa Shahinian & Mei Guo: Giantomasi, PC 105 Eisenhauer Pkwy Roseland, NJ 07068 For the U.S. Trustee: HOLLEY L. CLAIBORN, ESQ. Office of the United States Trustee The Giaimo Federal Building 150 Court Street, Room 302 New Haven, CT 06510 For the Debtor and JAMES MORIARTY, ESQ. Plaintiff, HK ERIC HENZY, ESQ. International and Mei Guo: Zeisler & Zeisler, PC 10 Middle Street, 15th Floor Bridgeport, CT 06604 For the Debtor: STEPHEN BEST, ESQ. WILLIAM BALDIGA, ESQ. Brown Rudnick 601 13th Street NW, Suite 600 Washington, DC 20005
APPEARANCES (Cont'd): For Pacific Alliance PETER FRIEDMAN, ESQ. Asia Opportunity Fund, LP: O'Melveny & Myers, LLP 1625 Eye Street NW Washington, DC 20006 For Rui Ma, Weican Meng, KRISTIN MAYHEW, ESQ. Zheng Wu, and Official Pullman & Comley, LLC Committee of Unsecured 850 Main Street, 8th Floor Creditors: P.O. Box 7006 Bridgeport, CT 06601
Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 4 of 159

Ho Wan Kwok - April 20, 2023 4 (Proceedings commenced at 9:39. a.m.) THE COURTROOM DEPUTY: Number 22-50073, Ho Wan Kwok, and Adversary Number 22-5003, HK International Funds Investments vs. Despins. THE COURT: Good morning. If we could have appearances for the record, starting with the Chapter 11 Trustee, please. MR. DESPINS: Good morning, Your Honor. Luc Despins, Chapter 11 Trustee, appearing remotely. Thank you. THE COURT: Good morning. MR. BASSETT: Good morning, Your Honor. Nick Bassett, from Paul Hastings, counsel to the Chapter 11 Trustee. THE COURT: Good morning. MR. SKALKA: Good morning, Your Honor. Douglas Skalka, of Neubert Pepe & Monteith, as Connecticut counsel for the Chapter 11 Trustee. THE COURT: Good morning. MS. WERNICK: Good morning, Your Honor. Melissa Wernick, from Chiesa Shahinian & Giantomasi, on behalf of HK USA. THE COURT: Good morning. MR. MORIARTY: Good morning, Your Honor. James Moriarty, Zeisler & Zeisler, for HK USA and the debtor. And I believe that Attorney Henzy will be joining me shortly,

Ho Wan Kwok - April 20, 2023 5 also for the debtor, which I believe that's on for 10:30. THE COURT: Okay. MR. MORIARTY: Thank you. THE COURT: Thank you. Is anyone appearing on behalf of Ms. Guo? MS. WERNICK: Also on behalf of Ms. Guo, but the particular summary judgment motion is really directed towards HK USA. But we are also counsel for Mei Guo in connection with the motion as well. THE COURT: Okay. Thank you. MR. MORIARTY: As is Zeisler & Zeisler, Your Honor. THE COURT: Okay. Thank you. On the calendar in Adversary 22-05003 is the motion for partial summary judgment filed on behalf of the Chapter 11 Trustee, counterclaimant. Mr. Bassett, are you going to be making that argument? MR. BASSETT: Yes, Your Honor. THE COURT: All right. Please proceed. MR. BASSETT: So, again, Your Honor, for the record, Nick Bassett, from Paul Hastings, on behalf of the Chapter 11 Trustee. As the Court indicated, the reason we are here at this part of the hearing this morning is for the Court to Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 5 of 159

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 6 of 159

Ho Wan Kwok - April 20, 2023
1　consider the trustee's second motion in this adversary
2　proceeding for partial summary judgment, this time on his
3　second counterclaim which seeks a ruling from this Court
4　that HK USA is the alter ego of the debtor and, therefore,
5　all of HK USA's property is the debtor's property.
6　Your Honor, I hope I can keep my remarks this
7　morning fairly brief.
And one of the reasons for that is
8　that, as discussed in our papers and as the Court well
9　knows, we are not operating on a blank slate here.
Far from
10　it.
11　In fact, the Court has already decided many of the
12　key issues that are going to be discussed before the Court
13　today on this motion for summary judgment.
14　First, of course, the Court decided the trustee's
15　prior partial motion for summary judgment on his first
16　counterclaim.
And in doing so, the Court found that the
17　debtor and now the trustee owns and controls the Lady May.
18　Second, last Friday, the Court issued a decision
19　denying in part the defendant's motion to dismiss, denying
20　entirely the defendant's motion to dismiss the second
21　counterclaim which is at issue here.
22　And in doing so, the Court overruled arguments
23　that the counter-defendants have raised again in response to
24　summary judgment, including arguments related to the Wagoner
25　rule, in pari delicto, and arguments related to the Lady May

Ho Wan Kwok - April 20, 2023 7

1　stipulation.

2　Your Honor, because of these prior rulings of the
3　Court and because of the undisputed factual record that is
4　before the Court on summary judgment, I would submit that as
5　far as alter ego cases go, this case before Your Honor is
6　about as simple as a case can get and is the perfect
7　candidate for summary judgment at this stage of the
8　litigation.
9　The established, admitted, undisputed facts are,
10　one, that HK USA never in its history conducted any business
11　activities other than owning and operating the Lady May.
12　THE COURT:
Are you referring specifically to the
13　Rule 56(a)(1) and (a)(2) statements, Attorney Bassett?
14　MR. BASSETT:
That's correct.
And I can get to
15　particular references where these facts --
16　THE COURT:
I would like both parties to do that
17　when we make the arguments this morning, because, as you
18　know, the District Court of Connecticut requires those
19　statements for very specific purposes, including for the
20　Court -- whatever Court is determining summary judgment to
21　refer to those facts when necessary.
22　So I didn't mean to interrupt your argument, which
23　I did, but I did -- I'm doing so to let both parties know
24　that I would like you to, when you can, reference the Rule
25　56 -- the Local Rule 56(a)(1), which would be your

Ho Wan Kwok - April 20, 2023 8 statement, and then counsel for the plaintiff counterclaim defendants, their 56(a)(2) statement. Okay? So go right ahead. MR. BASSETT: That's fair, Your Honor. And to that point, on the statement I just made, if you were to look at the counter-defendant's response to the trustee's Rule 56 statement, which is at ECF 204, paragraph 11, the counter-defendants admit that "On March 31, 2023, with the consent of the counter-defendants, the Court entered an order confirming that the Lady May II is also property of the debtor's estate." Next paragraph: "The estate thus already owns and controls all of the assets that the counter-defendants contend HK USA has ever owned." So that, Your Honor, is -- back to what I was -- to my framing of the issues and the argument and why I think this is a very straightforward candidate for summary judgment, you have that admitted. The only assets that this entity ever owned and the only business it ever conducted with respect to the Lady May, and then as we later determined based on the undisclosed ownership of the Lady May II, the Lady May II as well. And then what we also have is, again, what I just read to the Court. We already have a binding ruling from Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 8 of 159

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 9 of 159

Ho Wan Kwok - April 20, 2023 9 this Court that the debtor, not his daughter, as she contends, owns and controls both of these assets which are the only assets it has ever owned. And there is not a single -- and I can't point you to a negative, but there is not a single thing in the record suggesting that the Lady May -- or, sorry, that HK USA ever engaged in anything, any other business activities, any other ownership of assets historically other than owning and operating the Lady May and, along with it, the Lady May II. That, Your Honor, is the very essence, I would submit, of an alter ego claim. Because you have complete domination and control by the debtor of everything HK USA has ever done. In response, the counter-defendants have raised certain defenses. But I think, as I will describe later, the Court has already rejected those in ruling on the motion to dismiss. And while it's a different posture for reasons I will discuss, I don't think it makes a difference under the facts and circumstances here. So I'll spend the balance of my time -- and, again, I'll try to be relatively brief, but I'll first, again, walk through a little bit more -- in a little bit more detail the merits of the alter ego claim itself and responses to some of the counter arguments. And then, after that, I'll briefly adjust -- address some of the defenses.
Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 10 of

Ho Wan Kwok - April 20, 2023 10 As to the merits of the alter ego claim, I think the standard is not disputed. Under Delaware law, to determine whether one entity is the alter ego of another, the Court will consider first -- there's two elements. First, whether the debtor -- and in this case, whether the debtor in HK USA operated as basically one single unit which involves a showing that the debtor dominated and controlled HK USA and its activities. That's the first element. And the second is whether this alter ego status was used to perpetuate some type of fraud or injustice. And I think both of those are readily satisfied beyond any genuine dispute of material fact. On the issue of the first prong, sort of the domination and control prong as I will call it, I would again emphasize that the starting point on this is the fact that it is now law of the case. This Court has already determined that the debtor dominates and controls the only assets that HK USA has ever had which formed the basis for the only business activities it has ever engaged in. So to the extent HK USA ever did anything, it was with respect to those assets. And the debtor controls them, so it is the debtor who dominates and controls HK USA in that manner. Now, the counter-defendants in their papers

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 11 of

Ho Wan Kwok - April 20, 2023

1　mischaracterize the trustee's argument by saying that we're
2　trying to basically, I guess you could say, bootstrap the
3　Court's prior summary judgment ruling and the collateral
4　estoppel issue at play there into effectively obtaining
5　collateral estoppel as to the alter ego issue.
6　But that is not at all what the trustee is
7　arguing.
We're not arguing that the fact that the Court
8　determined that the debtor owns and controls the Lady May
9　and the Lady May II is itself determinative of the alter ego
10　claim.
11　What we're arguing is that under the facts and
12　circumstances of this case, where the other facts establish
13　that HK USA never did anything else, that that ruling and
14　that finding goes all the way there or basically all the way
15　there in getting to that point, because there's simply
16　nothing else that HK USA has ever done for which facts need
17　to demonstrate that the debtor exercised domination and
18　control over HK USA.
19　And the trustee is also not arguing, contrary to
20　what the counter-defendants suggest, that Justice Ostrager
21　decided the alter ego question.
He did not.
He decided, as
22　the Court already recognized and held, that the debtor owns
23　and controls the Lady May.
24　And it's a little unclear to me if the
25　counter-defendants are -- I mean, it appears to me, frankly,

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 12 of

Ho Wan Kwok - April 20, 2023 12 that the counter-defendants are asking the Court to revisit that prior finding. There's statements in their opposition and in their statement of facts that talk about the fact that, you know, the issue before Justice Ostrager was not ownership of the Lady May, et cetera. All that is irrelevant and not before the Court, because it's been decided by the Court. It's law of the case. They've appealed that decision. To the extent they have a problem with it, that's an issue for the district court. And I want to point out, because, again, the -- as the counter-defendants would frame it, we're saying ownership and control of the Lady May, that's it, there's nothing else. But that's not it. I mean, there are significant other facts in the record which go directly to the alter ego analysis and prove, as I said, the fact that there was no dispute that HK USA never did anything else. And this is in both sets of the Rule 56 fact statements. And I can get the particular reference. But I think it's easy to find. There is no dispute that HK USA "has and has never had any officers, directors, or employees, that it does not file tax returns, that it has no bank accounts, that it is not capitalized, that it has no other assets than the Lady

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 13 of

Ho Wan Kwok - April 20, 2023 13 May and the Lady May II, and that it has had no dedicated email server or email suffix, i.e., it has none of its own documents" according to the debtor.

 Now, the counter-defendants say these facts could simply mean that HK USA is the alter ego of the debtor's daughter and not the alter ego of the debtor. But there's no basis for that position.

 Because in order to make that argument, they would have to show that HK USA has engaged in some business and done something in its existence other than owning and operating the Lady May, which activities the debtor's daughter and not the debtor could have exercised control over.

 But whereas here there was nothing else, all of these alter ego factors, the fact that it's a shell company with no assets, no employees, no assets other than the Lady May and the Lady May II, no employees, no officers, directors, no bank account, all of that only goes to show the fact that this is an entity dominated and controlled by the debtor who is the one this Court has found has dominion and control over the only assets that it ever had.

 In addition to the Rule 56.1 statement, paragraph 11, which I referenced on this point, I would direct the Court to the declaration of Mei Guo, which was submitted in the main case at ECF 1544, on the issue of HK USA's

Ho Wan Kwok - April 20, 2023 14 compliance with its document production obligations. This is at paragraphs 24 and 25 where Mei Guo says, "As explained above, I am the sole owner of HK USA, and HK USA does not have any employees or maintain any bank accounts. Indeed, the Lady May is HK USA's sole asset." Then she goes on, "Moreover, the only documents or communications that I maintained for HK USA relate to the Lady May, which documents were excluded from the January 20th order." In other words, what she was saying is the only documents HK USA has are documents that I have, and the only documents that I have are documents that relate to the operation of the Lady May, because that's all HK USA has ever done. Now, this is another point we emphasized in our papers to which the counter-defendants did not even respond, but I think it's a critically important fact to emphasize for the Court and one which is, in my view, incredibly damning for the counter-defendant's position that the debtor's daughter and not the debtor is the one who owns and controls HK USA. And this is where in February 2022, before Justice Ostrager in the New York court, the debtor's daughter testified under oath that, as far as she knew, her brother owned the Lady May II. She was shown a picture of the Lady Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 14 of

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　May II, asked on the stand who owns this.
My brother does.
2　Of course, now we know, and now it's been admitted
3　and conceded, that the Lady May II is and always has been
4　registered to HK USA, including at the time she gave that
5　testimony.
6　So unless she's going to admit that she committed
7　perjury, which she's not doing, then what this shows, Your
8　Honor, is that the person who purports to own and control HK
9　USA did not even know that it owned one of HK USA's two
10　assets.
11　And this is not an immaterial asset.
The Lady May
12　II is an approximately 50-foot long boat worth more than a
13　million dollars that would be considered probably the
14　largest luxury boat many of us have ever seen or set foot
15　on.
16　The fact that she didn't know her company owned it
17　tells you all you need to know about whether or not she, in
18　fact, owned and controlled that entity.
The answer is she
19　didn't.
Her father did.
20　Just briefly, as to some of the case law -- I
21　think there's a statement in the counter-defendant's
22　response that it's somehow relevant that the debtor is not
23　the named member of HK USA in its operating agreement.
24　That's irrelevant, because it's not a requirement of
25　Delaware veil-piercing or alter ego law that the person at

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　issue in the veil-piercing analysis be the named shareholder
2　or, in this case, member of an LLC.
3　Were it otherwise, that would obviously be ripe
4　for abuse, because, as in a situation like this, any debtor
5　who wants to hide his or her assets would simply put them in
6　a company owned by, as in this case, a family member.
7　Whereas here we've shown the requisite domination and
8　control.
The fact that the debtor is not the named party in
9　the LLC agreement is obviously irrelevant.
10　On the second prong of the alter ego analysis,
11　which is the existence of a fraud or injustice that was
12　perpetuated by the alter ego relationship, although they try
13　to do so, I don't see how the counter-defendants can
14　credibly suggest that if, in fact, HK USA was the debtor's
15　alter ego, it was not used to perpetuate an injustice on the
16　debtor's creditors.
17　Indeed, the entire purpose of HK USA being the
18　debtor's alter ego is to shield the Lady May and the Lady
19　May II from recovery by the debtor's creditors.
20　That's the entire position he's taken before
21　Justice Ostrager in the New York litigation, before this
22　Court in litigation, and it's the position that the debtor's
23　daughter herself supported in the testimony she tried to
24　give before Justice Ostrager in February 2022, which
25　testimony, as the Court knows, Justice Ostrager found had no

Ho Wan Kwok - April 20, 2023 17 credibility. So I don't think it can possibly be disputed that if, in fact, there's an alter ego relationship, that alter ego relationship was used for the purpose of perpetuating an injustice on the debtor's creditors. I'll now move -- and I'll reserve time, obviously, to respond to any additional comments counsel may make on the sort of threshold alter ego analysis. But I'll now move to briefly talk about a couple of the defenses. First, as I mentioned, the counter-defendants raise the Wagoner rule and in pari delicto. I don't think there can be any disagreement -- and by the way, that brief was submitted by the counter-defendants before this Court issued its -- or before simultaneously with, I think, when this Court issued its -- or its decision on the motion to dismiss. But I think the decision on the motion to dismiss disposes with that issue, because as the Court properly held in that decision, the Wagoner rule and in pari delicto are inapplicable to the second counterclaim on alter ego, because the trustee has brought that counterclaim not standing in the debtor's shoes but rather in the shoes of the debtor's creditors under Section 544(a) of the Bankruptcy Code. So I think that issue has been settled. The other argument they raise is the argument with

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 18 of

Ho Wan Kwok - April 20, 2023

1　respect to the Lady May stipulation contending that the
2　stipulation prevents this Court from entering an order on
3　the alter ego relationship, because it would result in the
4　debtor -- sorry, the trustee becoming -- the owner of the
5　estate, rather, becoming the owner of the escrowed funds
6　which originally were 37 million and now are approximately
7　\$33 million.
8　Again, I think this defense has been addressed and
9　disposed of in a Court's -- in one of the Court's prior
10　rulings, this time also -- I guess also the motion to
11　dismiss ruling.
12　And as the Court will recall, in that decision the
13　Court conducted an extensive review of the applicable case
14　law talking about the circumstances under which a
15　stipulation entered into by a debtor in possession is or is
16　not binding on a subsequently appointed trustee.
17　And what the Court observed is that the case law
18　is legion in holding that the answer to that question comes
19　down to the facts and circumstances and the equities of the
20　case.
21　And then based on that law, the Court went through
22　and conducted an analysis of the facts at issue here and
23　made four points in particular.
24　And as we pointed out in the reply brief that we
25　filed, each of those four points is equally valid to the

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　motion before the Court today for summary judgment as it was
2　on the motion to dismiss, even though the standards are
3　admittedly different.
4　And the reason for that is because there is no
5　genuine dispute of material fact as to any of the facts that
6　are relevant to those four considerations that the Court
7　identified.
8　The first -- and I'll briefly recap those, but the
9　first consideration which the Court identified was the fact
10　that neither HK USA nor the debtor's daughter, parties to
11　the stipulation against whom relief is sought, is a
12　creditor.
13　And because of that, the policy concern about
14　creditors becoming comfortable with agreements in the --
15　with a debtor in possession was not implicated.
No dispute
16　as to that -- as to the facts related to that consideration.
17　The second consideration, and this one, in my
18　view, is very important, is the Court acknowledged in ruling
19　on the motion to dismiss that if it were to "find in the
20　trustee's favor on the merits of the alter ego claim,
21　allowing the trustee to recover from the escrowed funds
22　would not implicate any prejudice to HK USA, because the
23　Court would have found that HK USA is the individual debtor
24　or is owned or controlled by the individual debtor."
25　Then the Court went on to say, "There is no public

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　policy interest in allowing an individual debtor to self
2　deal in bankruptcy to shield assets from bankruptcy
3　proceedings."
4　So obviously, Your Honor, this motion before the
5　Court is all about whether or not HK USA is the debtor's
6　alter ego.
And we're only going to get to the question of
7　the applicability of the stipulation if the Court believes
8　that the trustee has demonstrated that HK USA is, in fact,
9　the debtor's alter ego.
10　So we're operating in a world where all the facts
11　relevant to this consideration of the Court and the motion
12　to dismiss decision have been established.
13　And I would stress that I think the Court was
14　absolutely correct in emphasizing the -- this issue or these
15　considerations, because I don't see how there could be any
16　doubt that it would be highly inequitable, to say the least,
17　to allow the debtor here in the event it is determined that
18　HK USA is and always has been his alter ego, to have used
19　the Lady May stipulation as an effective subterfuge to
20　shield \$30-plus million of assets that are now his from his
21　creditors.
22　Were that the case, were that known at the time,
23　there's no way the parties to that stipulation, including
24　PAX and the Committee, would have agreed to it.
And I can't
25　imagine the Court would have approved it either.

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 21 of

Ho Wan Kwok - April 20, 2023 21 So I think that is a -- that, in and of itself, is reason enough on the equities for this Court to hold that the Lady May stipulation does not the -- does not prevent the relief that the trustee seeks. The next consideration that the Court identified is similar to the last one, which is that the debtor's history of engaging in shell games, et cetera, also provides appropriate context to decide for equitable reasons that the stipulation is not binding. And the Court observed there, again, I think, accurately, that the type of proof that the trustee would offer to show this type of use of shell games may be the same as the proof that the debtor -- or that the trustee has offered to show that HK USA is the debtor's alter ego. I say that that's exactly true. And for the reasons I just discussed, the fact that the debtor has used HK USA to shield assets from creditors is another reason why the stipulation here should not be used to prevent the relief the trustee seeks. Fourth consideration that the Court identified was that, unlike in many of the other cases that have held that stipulations of a debtor in possession are binding on a trustee, here the stipulation does not -- it's undisputed the stipulation on its face does not expressly bind the trustee despite the pendency at the time of the stipulation

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　of a motion to appoint the trustee.
2　So, again, those are all the considerations the
3　Court identified in finding that the stipulation is not
4　binding on the trustee, and none of them involve a genuine
5　issue of material fact.
Therefore, the Court can grant
6　summary judgment as to that issue in the trustee's favor.
7　The last point I would make is that we had raised
8　another argument in our motion for summary judgment that the
9　Court did not address in the motion to dismiss decision
10　which is related to the ones that I just made, but it's the
11　fact that, as a matter of law, if HK USA and the debtor were
12　alter egos at the time of the Lady May stipulation, meaning
13　that there was no distinction between them, then as a matter
14　of law, and this is Hornbook contract law, an agreement
15　between them is not binding, because it is a immutable
16　principle of contract law that one cannot enter into an
17　agreement with itself.
Every agreement needs two parties.
18　And we've cited authority for that in our briefing.
19　So, Your Honor, the last point I'll make, and then
20　I'll reserve any additional comments for rebuttal, is that
21　the counter-defendants had raised at the end of their
22　opposition what appears to be a request to dissolve the PJR
23　and the preliminary injunction in the event the Court grants
24　the motion for summary judgment.
25　All I would say in response to that is that that's

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　a separate request for relief.
And, in fact, acknowledging
2　that, the counter-defendants have filed a separate motion
3　asking for that relief, and that motion remains pending.
4　They had asked to expedite it to have it heard
5　today.
We objected to that.
And as far as I'm aware, the
6　Court has not issued an order setting that on the calendar.
7　So all I would say is that the trustee reserves his rights
8　to address that argument if and when appropriate in response
9　to that motion.
10　Thank you, Your Honor.
11　THE COURT:
Just a few questions.
12　MR. BASSETT:
Sure.
13　THE COURT:
So I understand your arguments, I
14　believe.
I've read the papers.
As I noted at the beginning
15　of your argument, I'm going to be -- I am focused on the
16　five -- the 56(a)(1) and (a)(2) statement.
17　And when counsel for the counter-defendant --
18　counterclaim defendants speak -- and I mean, I've seen
19　several facts that the trustee put forth that the
20　counterclaim defendants object to.
21　And you may need to be prepared to respond to that
22　if and when the counterclaim defendants raise those

 know, the 44 facts in the trustee's 56(a)(1) statement, and then there's these additional material facts that the

objections in their argument, because there are, as you

Ho Wan Kwok - April 20, 2023 24 counterclaim defendants have set forth. And while I -- you have not addressed those at this point, but I'm going to have the parties address those issues. So -- MR. BASSETT: No, no. THE COURT: -- I don't know if you want to make any statements at this point with regard to the additional material facts set forth by the counterclaim defendants, but I'm going to have you respond -- either tell me now or I'm going to have you respond to those issues when the counterclaim defendants make their arguments. MR. BASSETT: Sure. And I'm happy to -- maybe I'll respond now to the extent that I can. And then, obviously, when counsel -- if and when counsel raises particular issues, I can respond to those again in rebuttal. What I would say is that -- well, obviously, our 56.1 statement contained a number of facts, many of which are contextual, in leading up to the relief that we're ultimately seeking. What I tried to do in my argument today was emphasize for the Court the only facts that I think are the material facts that the Court needs to consider in order to determine that HK USA is the debtor's alter ego. And, you know, they dispute other facts. There may be facts that are disputed in our 56.1 statement, but Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 24 of

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　the Court -- to the extent that some of those facts are
2　disputed, that would not prevent the issuance of summary
3　judgment.
4　THE COURT:
I'm not saying it would or wouldn't.
5　I'm just saying I want the record to be clear --
6　MR. BASSETT:
And what I would --
7　THE COURT:
-- with regard to these issues.
8　MR. BASSETT:
And I would emphasize is that the
9　Rule 56.1 statements are clear, and I articulated this
10　before and I gave references to it, that the only assets
11　that HK USA has ever had are the Lady May and now the Lady
12　May II.
It's also undisputed that the trustee, via the
13　debtor, owns and controls those assets.
There's an
14　admission.
I think it was paragraph 12 that I referenced.
15　It's also undisputed, and this is a quote, because
16　it's a -- this comes from, in part, a letter that Attorney
17　Vartan had submitted, I believe, to the New York court that
18　we put before the Court.
And they, of course, admitted this
19　in full in their statement of facts that HK USA has never
20　had any officers, employees, or bank accounts or directors.
21　It's never had any assets other than the Lady May and the
22　Lady May II.
It's never had -- it's never been capitalized
23　in any way.
It's never maintained its own email server for
24　communications.
25　Those facts demonstrate that all that's ever --

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 26 of

Ho Wan Kwok - April 20, 2023

1　all HK USA has ever done -- and there's no counter -- other
2　than there are a couple of statements in the
3　counter-defendant's statement of facts where they say that,
4　well, HK USA through Mei Guo has entered into certain
5　contracts.
These contracts that they reference are a series
6　of non-disclosure agreements with parties who work on the
7　boat and then one agreement with the staffing company.
8　A couple of responses to that.
First, these are
9　agreements that go to the ownership and control of the Lady
10　May.
It has already been established that the debtor's
11　daughter does not control the Lady May or its operations.
12　And that's for good reason, by the way.
This record is
13　before the Court, because the Court decided in connection
14　with the first summary judgment motion.
15　And while the Court decided that on the basis of
16　collateral estoppel, there's a reason why Justice Ostrager
17　reached the decision that he reached.
18　Because at the February 2022 hearing, when all of
19　these individuals testified -- and, by the way, this is also
20　before this Court in Mei Guo's deposition testimony that we
21　submitted as part of our reply on the motion for summary
22　judgment where we asked her to review and confirm and agree
23　with the statements that these individuals made before
24　Justice Ostrager.
25　The former captain of the Lady May, a person at

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 27 of

Ho Wan Kwok - April 20, 2023

1　the management company, YACHTZOO, they all took the stand,
2　and they all said they never had contact with the debtor's
3　daughter.
She was not giving them directions.
And she
4　agreed to all of that in her deposition.
And I can give the
5　Court citations to the deposition transcript.
6　They also testified that it was the debtor's --
7　that it was the debtor himself, the daughter's father, who
8　gave directions as to where the boat should go.
One of them
9　was asked, you know, who was on the boat more, the debtor or
10　the debtor's daughter.
He said the debtor by far.
11　All of that is relevant given the fact that the
12　only thing counter-defendants can point to as purportedly
13　additional activities of HK USA -- if you look at all of
14　their statements of facts, it's all noise about what Justice
15　Ostrager did or did not decide.
That's irrelevant and moot,
16　because it's law of the case that collateral estoppel
17　applies to the ownership question.
Everything else is
18　irrelevant to the alter ego analysis.
19　Again, because as far as I can recall, the only
20　thing they point to are these contracts.
But those
21　contracts prove nothing when they relate to the Lady May,
22　which is the only asset of HK USA, which the Court has
23　already found the debtor owned and controlled.
24　So, again, I'm happy to address other facts, but I
25　don't think there's anything else they raise that's material

Ho Wan Kwok - April 20, 2023 28 to the analysis. THE COURT: Ms. Guo's deposition that you're speaking of, that is attached to your declaration, the deposition in January of this year? MR. BASSETT: That's correct. And I'll just give, for the record, some citations to particular testimony. And so that deposition transcript, page 93 -- THE COURT: All right. Just give me a moment. Okay? I'm looking -- MR. BASSETT: Sure. THE COURT: I'm looking at your declaration, and I believe it -- the deposition transcript is Exhibit 12 to your declaration. Is that right or no? MR. BASSETT: Let me check. THE COURT: I want to make sure I'm looking at the right thing. Oh, maybe not. MR. BASSETT: Well, it's -- THE COURT: Oh, you're look -- you're talking about your -- in the reply. MR. BASSETT: Yeah. It's attached to the reply. THE COURT: Okay. So not attached to your original declaration but attached to the reply. MR. BASSETT: That's right. THE COURT: Which is ECF Number 209 that was filed on Monday. I mean, what's today? On Tuesday. On Tuesday Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 28 of

Ho Wan Kwok - April 20, 2023 29 the 18th. MR. BASSETT: That's right. THE COURT: Okay. Go ahead. You want me to go to page 93? Is that what you're saying? MR. BASSETT: Sure. And Your Honor can do it now, or I can give you the citations to the record to look at it later. It -- THE COURT: I'd like to go -- MR. BASSETT: Sure. THE COURT: -- there right now. MR. BASSETT: Sure. THE COURT: Okay? So where on page 93 do you specifically want me to look at? MR. BASSETT: So if you -- I think it's beginning at line 16. There are questions asked of -- we asked in the deposition Ms. Guo to look at the testimony of Russell Stockil, who was the person responsible for management at YACHTZOO. And if you look at that testimony from 93, I think, 16 to 94-16, she -- Mei Guo confirms the accuracy of his testimony that she never contacted him about the yacht. If you go down to 95-13 to 96-3, Mei Guo confirms the testimony that she never spoke to Mr. Stockil. And if you go to 96-4 to 22, she confirms his testimony that all instructions related to the Lady May came Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 29 of

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

from "the family office."
So again, you know, to the extent that they're
pointing to these management agreements, it doesn't
establish independent control over HK USA, one, because the
Court already found that the debtor has that control, and
two, because the other facts demonstrate that she, in
reality, was not exercising control.
97-13 to 99-3 is another excerpt.
This is
questions about the testimony of Momchil Ivanov.
THE COURT:
I'm sorry.
97 what?
I apologize.
MR. BASSETT:
97-13 to 99-3.
THE COURT:
Okay.
Give me one second, please.
MR. BASSETT:
Sure.
THE COURT:
Okay.
Go ahead.
MR. BASSETT:
These are the questions about the
testimony of Momchil Ivanov who is the former captain of the
Lady May.
And here, again, if you look at the transcript,
Mei Guo agreed with Mr. Ivanov's testimony that he never
spoke to Mei Guo and never took directions from her.
If you go to page 102, line 4 to 107, line 17,
this is testimony about Craig Heaslop, who's the current
Lady May captain.
And the testimony here, which Mei Guo
confirmed she did not disagree with, was that the debtor was
"on and off the yacht."
And when asked, he said that the
debtor was on the yacht much more than his daughter.

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 31 of

Ho Wan Kwok - April 20, 2023

1　Mei Guo also confirmed the accuracy in this
2　excerpt that I've referred the Court to of Mr. Heaslop's
3　testimony that Mei Guo was not the one who ultimately told
4　him -- told Mr. Heaslop that the yacht no longer needed to
5　stay in New York.
She also confirmed his testimony that the
6　debtor, when he would use the yacht, would direct where it
7　goes on all occasions.
8　I would also point the Court to page 168 of the
9　deposition transcript.
10　THE COURT:
Give me a moment to get there, please.
11　MR. BASSETT:
Sure.
12　THE COURT:
Okay.
Go right ahead.
13　MR. BASSETT:
And she was asked in particular
14　about these NDAs and this staffing agreement and asked --
15　this is 168-13.
She was asked whether she was aware of any
16　other documents at HK USA that bearing -- that bear her
17　signature.
Her testimony, "I'm not sure."
18　That's not surprising, because, again, it is
19　admitted and not disputed, much less genuinely disputed,
20　that HK USA didn't do anything else.
There's nothing else
21　for her to have signed a contract regarding.
22　And the fact that she -- to be clear, the fact
23　that she signed these NDAs and one staffing agreement does
24　nothing to wrestle control over HK USA from the debtor where
25　the debtor, indisputably at this point, is the one who owned

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 32 of

Ho Wan Kwok - April 20, 2023

1　and controlled the Lady May.
He was the one making the
2　decisions for the Lady May.
He controlled it, not her.
3　I would also point out that these agreements, the
4　NDAs and the staffing agreements, were provided and dated --
5　curiously, to say the least, they were provided in the midst
6　of the PAX litigation in New York where the debtor's
7　daughter was trying to show through the testimony which
8　Justice Ostrager deemed completely not credible that there
9　was some separateness and that she somehow exercised
10　independent control over HK USA.
11　And because of that curious timing, we, of course,
12　asked her, as the deposition transcript indicates, whether
13　she's aware of any other agreements, any NDAs with the
14　current captain, any documents from other times.
15　THE COURT:
You asked her that?
16　MR. BASSETT:
We asked her that in her deposition.
17　THE COURT:
Not in the deposition -- on the page
18　you were just showing me?
Is that where you're talking
19　about?
You said this came out during the PAX litigation --
20　MR. BASSETT:
No.
That did.
But we were asking
21　her about that --
22　THE COURT:
Okay.
23　MR. BASSETT:
-- in her deposition.
24　THE COURT:
Okay.
Go ahead.
25　MR. BASSETT:
And it's the -- I think the

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 33 of

Ho Wan Kwok - April 20, 2023

1　deposition testimony that I just cited for the Court stands
2　for that proposition, because we asked her are you aware of
3　any other agreements.
She said, I'm not sure.
4　I think there was a point where we asked her more
5　specifically about whether there were NDAs with other
6　people.
And I could find that.
But either way, the answer
7　was no.
And I think that's revealing, because the only NDAs
8　and the only agreement she were (sic) able to come up with
9　were ones that came about when there was a litigation reason
10　to produce them.
11　So, you know, the other thing I would point out
12　just on the issue -- all these facts that I've been
13　discussing go to this.
14　But on the issue of whether collateral estoppel
15　applies here, again, that's not what we're arguing.
We're
16　not arguing that this is a collateral estoppel issue where
17　Ostrager decided collateral -- decided, you know, alter ego.
18　Rather, the Court already decided ownership.
19　That's binding.
That's law of the case.
Needs not be --
20　does not need to be revisited.
21　But even if for some reason the Court were
22　inclined to -- and, again, I don't even think the Court can,
23　because it's on appeal, and there's no jurisdiction.
But
24　even if the Court could reconsider that, these facts that
25　I've just read and other facts in the record make clear

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　beyond doubt who the owner and controller of the Lady May
2　was.
3　In addition to the facts that I just read, if you
4　look at the complaint itself, the story in the complaint in
5　this action is that while Mei Guo was detained in China, her
6　brother in February of 2015 purchased the Lady May for her
7　even though she did not come to the U.S. and have access to
8　the Lady May even in theory until -- by her own admission in
9　her complaint, until May 2017.
10　But who was in the U.S. and who did have access to
11　the boat?
This is the paragraph immediately preceding the
12　paragraph talking about the Lady May being purchased in
13　February 2015 in their complaint.
The debtor fled to the
14　United States in early 2015.
15　It just -- and for all of these reasons, which
16　again I -- we shouldn't even be talking about, because this
17　issue need not be re-litigated.
But that's why Justice
18　Ostrager reached the decision that he did.
There's simply
19　no credible basis to believe that this yacht was actually
20　purchased for the daughter and not the debtor.
21　And it's also undisputed -- you looked at the
22　complaint.
HK USA was created for the purpose of having the
23　Lady May transferred from a BDI entity to a US entity.
24　And I think Mei Guo said in her deposition -- I
25　don't have the particular site for it -- the deposition in

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　this case that, oh, she thought it would be easier to
2　control if the entity were in the U.S.
3　But what the point is, is that by her own
4　admission this was just a shell company created to own the
5　yacht.
That's all it is.
And it's already been established
6　that the debtor owns and controls the yacht.
7　This is a rare alter ego case, as I said, for its
8　simplicity.
You have a situation where this entity did
9　nothing else ever, and the debtor dominated and controlled
10　its only asset which provided the basis for the only
11　operations and business the entity ever engaged in.
Thank
12　you.
13　THE COURT:
All right.
Thank you, Attorney
14　Bassett.
15　Let me hear from the counterclaim defendants,
16　please.
17　MS. WERNICK:
Good morning, Your Honor.
18　THE COURT:
Good morning.
19　MS. WERNICK:
Hi.
This morning, the trustee has
20　asked the Court to make a remarkable finding that a
21　non-record owner is the alter ego of a Delaware limited
22　liability company.
23　And it's remarkable, because there's no construct
24　under Delaware corporate law to make such a finding.
And
25　the trustee notably in its reply to the motion for summary

Ho Wan Kwok - April 20, 2023 36 judgment offers no case law to the contrary and makes just a passing reference in its presentation this morning. THE COURT: Let me just stop you right there. MS. WERNICK: Uh-huh. THE COURT: What do you mean when you say there's no law in Delaware that supports a finding that there can't be an alter ego -- MS. WERNICK: Sure. Certainly. So under sort of black letter Delaware law, veil piercing applies to hold a member or shareholder responsible for a company's liability. And then there's a separate construct of a reverse veil-piercing claim that applies to hold the company liable for a shareholder's liability. THE COURT: Well, what about Judge Walrath's case that says it doesn't have to be companies, it doesn't have to be -- it says as long as there isn't a relationship, there can be veil piercing. What about that case? MS. WERNICK: So the relationship has to be established. And so, here, the essence of our argument is that the trustee is skipping steps, is taking the conclusion in the summary judgment decision that the Lady May is owned by the debtor and applying that, and I think it's stated quite clearly on page 2 of the initial moving papers, to say that the only reasonable conclusion must be that the debtor also controls and owns HK USA. Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 36 of

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 37 of

Ho Wan Kwok - April 20, 2023

1　But that's a separate legal analysis and step that
2　is really entirely glossed over in the entirety of the
3　summary judgment proceedings, right?
It's --
4　THE COURT:
Okay.
I just want to understand your
5　argument.
And I'm not saying -- just don't understand your
6　argument at the moment.
Okay?
This is a counterclaim
7　asserting an alter ego theory, right?
So they've made these
8　assertions in the third counterclaim.
And you're saying
9　they're skipping steps because summary judgment was entered
10　on the first counterclaim?
11　MS. WERNICK:
So, I mean, I think -- I don't know
12　if it was inadvertent or intentional, but referencing, I
13　think, the third counterclaim here is important, right?
So
14　right now we're here on summary judgment proceedings with
15　respect to the second counterclaim --
16　THE COURT:
I'm sorry.
The second counterclaim.
17　MS. WERNICK:
-- on alter ego.
But I think it is
18　important that the Court notes that there is a third
19　counterclaim where the trustee specifically asserted a claim
20　that HK USA is owned by the debtor in contrast to the alter
21　ego claim that's now before the Court.
22　And our position is that that's really a necessary
23　step in the Court's consideration to reach the alter ego
24　question.
And by skipping essentially what they had raised
25　as a separate counterclaim in terms of ownership of HK USA,

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　the Court -- the trustee is asking the Court to really rely
2　on more of a conclusory argument in reaching its alter ego
3　determination.
4　THE COURT:
All right.
So you're saying that the
5　motion for summary judgment should be on both Counts 2 and
6　3?
7　MS. WERNICK:
So the -- because I think that
8　the --
9　THE COURT:
Is that your argument?
10　MS. WERNICK:
Yeah.
Essentially.
Because it's an
11　important step to -- for -- and it's really -- it's the
12　trustee's burden, right?
13　We're here on a summary judgment motion to
14　establish the ownership and control of HK USA as part of the
15　alter ego analysis.
And the ownership and control of HK USA
16　is a much more fact-intensive question than this really
17　threadbare record that's before the Court this morning.
18　THE COURT:
Well, when you say threadbare record,
19　you've admitted in the -- in your 56(a)(2) statement at
20　paragraph 7 that HK USA generated no revenue; has no
21　directors, officers, or employees; has not filed tax
22　returns; had no bank account and otherwise -- had not
23　otherwise been capitalized; and maintained no documents
24　other than those relating to the Lady May.
That's your
25　admission.
So how is that threadbare?

Ho Wan Kwok - April 20, 2023 39 MS. WERNICK: Because there's no nexus -- and that's the key, to the summary judgment motion here this morning. And I think it would be all the more clear if we were here in connection with a Count 3 counterclaim regarding ownership of HK USA. Because there's nothing in paragraph 7 that connects to the debtor, right? So those are assertions generally with respect to HK USA. But nothing therein ties back to ownership or control to the debtor. And I think that's the step that the trustee is -- THE COURT: Well, when you say nothing ties back to ownership or control, so you're saying the Court's prior orders don't matter with regard to that issue? MS. WERNICK: No, of course not, Your Honor. But they're addressing separate things. And so the Court's prior order with respect to the -- Count 1 of the counterclaim relates to ownership of a specific asset, the Lady May. THE COURT: Right. And you've just admitted in paragraph 7 that's all -- HK USA ever had. MS. WERNICK: So that's the -- but that's not the -- there's no admission there that that's the entirety of the purpose or connecting the debtor to HK USA -- THE COURT: Well, wait a minute. Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 39 of

Ho Wan Kwok - April 20, 2023 40 MS. WERNICK: -- the entity. THE COURT: Hold on. That's a little bit different. You're changing your argument now. You admit that the only asset of the -- of HK USA is the Lady May. And you just stated that this Court found that the debtor owns and controls the Lady May, right? So -- MS. WERNICK: Yeah. THE COURT: So then I don't understand your argument. MS. WERNICK: And so that's the exact equation that the trustee is asking you to make this morning, that the finding that the debtor owns -- that the debtor owns the Lady May is sufficient to determine that the debtor also must, without having additional showings or determinations, own HK USA or that it must therefore be the alter ego. And one thing -- and I think this is an important point that was absent from the earlier conversation with counsel is that while there -- we recognize that HK USA's asset was the Lady May, the real reason why we're here, right, is not the Lady May. The trustee already has the Lady May. The real reason why we're here is the \$37 million loan from Himalaya that the trustee also wants to have as part of the estate. And so there's no question, and we've included it in our statement of material facts -- and I'll give you the Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 40 of

Ho Wan Kwok - April 20, 2023 41 paragraph references related -- beginning at paragraph 53 of our additional facts -- is that the loan agreements with Himalaya -- THE COURT: Wait. Hold on. You're on page what? MS. WERNICK: I'm sorry. On paragraph 53. THE COURT: Paragraph 53 of your additional material facts? MS. WERNICK: Yes. It's page 23, paragraph 53. THE COURT: Okay. Go right ahead. MS. WERNICK: Is that the agreements relating to the Himalaya loan were entered by Ms. Guo and Ms. Guo has taken a personal guaranty with respect to the \$37 million loan. And she was, in fact, personally sued in an arbitration that's pending in the London Court of International Arbitration as a result of the failure to repay that loan amount. THE COURT: Well, okay. Where does it say that in paragraph 53, what you just said? MS. WERNICK: So 53, continuing on to 56 on the next page. THE COURT: Okay. All right. That's what I'm saying. MS. WERNICK: Yes. THE COURT: Just tell me where you're reading it. Tell me -- okay. Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 41 of

Ho Wan Kwok - April 20, 2023 42 MS. WERNICK: Sure. No problem. And so not reading directly. But those points are referenced generally in paragraph -- THE COURT: Okay. MS. WERNICK: -- 53 to 56. THE COURT: Okay. And when at the time that the \$37 million was put into escrow was the Court made aware of that the loan was guaranteed by Mei Guo? Because I don't recall ever learning that until now. MS. WERNICK: So this is certainly part of the record. My belief is as part of the prior PJR proceedings -- THE COURT: But at the time -- I -- that wasn't the question. MS. WERNICK: Yeah. So I -- THE COURT: The question was, when -- MS. WERNICK: I don't know the answer to that specific question as whether in August of 2022 that issue was raised. THE COURT: Oh, I think it was earlier than August 2022. I think the \$37 million was delivered to the -- into escrow before -- while the debtor was still a debtor in possession. That was all part of the resolution of the motion for relief from stay and in connection with the debtor's Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 42 of

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　proposed plan of reorganization in which the Lady May was
2　going to be gifted, essentially, to the estate for the
3　benefit of creditors.
4　So my question is, you're raising facts now that
5　were not ever disclosed or raised at the time that the \$37
6　million transaction occurred.
It was a loan from Himalaya
7　financial is my recollection.
And there was no -- I mean,
8　someone should correct me if I'm wrong.
9　But I don't remember ever hearing anything about
10　Ms. Guo, who I don't even think had filed an appearance in
11　the case at this time -- at that time and certainly wasn't
12　represented in this Court at that time, that she guaranteed
13　that \$37 million loan.
14　So now you're adding -- so you're -- and the
15　reason I'm having this conversation with you is you're
16　saying to me that these are additional material facts.
17　Well, how is it material?
18　How is it material to whether or not summary
19　judgment should enter on the second counterclaim of whether
20　Ms. Guo personally guaranteed a loan, didn't repay it, and
21　there's some proceeding in Europe?
How is that a material
22　fact?
23　MS. WERNICK:
Certainly.
Because Ms. Guo
24　guaranteed the loan as the owner of HK USA.
HK USA had the
25　loan agreement with Himalaya.
Ms. Guo --

Ho Wan Kwok - April 20, 2023 44 THE COURT: Well, where is the guarantee agreement? Did you submit it? MS. WERNICK: It is -- it's referenced in the cites to the -- yeah. So in our statement of fact -- THE COURT: But is the actual agreement -- MS. WERNICK: Correct. THE COURT: Okay. MS. WERNICK: As part of -- because I think they were all included in the exhibits to the PJR proceedings. And so the referenced statement of facts -- THE COURT: Yeah. But did you submit it in connection with this summary judgment motion, is my question. MS. WERNICK: So, yes, by reference to the specific docket numbers in the statement of facts. THE COURT: All right. Let's go back to your paragraph then. You were at 53? MS. WERNICK: Correct. And so really the point is, is because that's the point why we're here. And so I think it's important to take note of that, right? We're here because the trustee is looking for the \$37 million that are being held in escrow. And just on that alone makes clear that HK's separate corporate existence goes hand in hand with Ms. Guo as its sole member who signed the loan agreement and who Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 44 of

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　guaranteed the loan.
2　THE COURT:
All right.
Hold on one minute.
I
3　want to look at this.
You're referring to, I believe, in
4　this adversary proceeding -- the guarantee agreement, you
5　say, is at ECF 84.
So let's just take a look at that for a
6　second.
7　And as you'll recall, your clients consented to
8　the entry of the PJR.
So the Court never looked at and
9　no -- nor was that exhibit introduced into evidence.
I
10　mean, it's part of the record, but insofar as it appears on
11　the docket.
So let me just take a look.
And your exhibits
12　were 3,206 pages.
So I will look at Exhibit 84-2.
It's
13　going to take a moment to --
14　Well, I'm looking at 84-1 which is in this
15　adversary proceeding.
It says, HK International Funds
16　Investments USA, incorporated in the State of Delaware,
17　borrower, and Himalaya International Financial Group BBI
18　(phonetic), lender, April 29, 2022.
Side letter to loan
19　agreement dated April 19, 2022.
20　MS. WERNICK:
Right.
And I believe --
21　THE COURT:
So the --
22　MS. WERNICK:
-- 84 proper is the full loan
23　agreement, and the 84-1 is the side letter.
24　THE COURT:
But the side letter, when was that
25　ever introduced into evidence in the debtor's case when the

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　debtor was a debtor in possession?
2　MS. WERNICK:
I guess I can't comment.
But I'm
3　also not entirely sure as to the relevance as part of our
4　discussion this morning.
5　THE COURT:
Well, you're making it relevant,
6　right?
You're saying that this is a -- this is a genuine
7　issue of material fact.
You're saying to me that this is
8　relevant.
So I'm saying to you, when was this ever -- and
9　it's absolutely relevant.
10　I mean, you're making an argument that this Court
11　should somehow look at facts that have never been put into
12　evidence before in any kind of evidentiary hearing that --
13　about a guarantee of a loan that when the loan was made and
14　disclosed to this Court as part of a settlement of a motion
15　for relief from stay none of these -- none of this was put
16　before the Court.
None of this information was in front of
17　the Court.
18　And so now -- and you're saying -- and your
19　argument is and, by the way, that stipulation that
20　results -- that relates to all this 37 million, the
21　trustee's bound by it.
That's what your argument is.
22　So you're now saying to me how do I -- why do I
23　think this is relevant?
Because you've now said you think
24　it's relevant.
And I'm saying when was this information
25　ever put in the record of the case prior to this adversary

Ho Wan Kwok - April 20, 2023 47 proceeding. And, apparently, it wasn't. MS. WERNICK: Well, so, I mean, I guess my question is, is -- and I apologize if I'm, you know, having a misunderstanding over more semantics. Because my -- we're addressing it now -- THE COURT: I don't think it's semantics. I think it's facts, right? MS. WERNICK: Well, it's fact, but it's -- the existence of these agreements are facts that are material facts for purposes of -- THE COURT: So how are they -- no. Excuse me. But they're facts. How are they material if you're now saying the trustee should be bound by this stipulation, and you're saying the trustee should be bound by this stipulation for many reasons, including that Ms. Guo guaranteed the loan, a fact that no one knew prior to this adversary proceeding? MS. WERNICK: So to be clear, I'm -- my argument right now is not with respect to the stipulation. And I understand that the Court ruled in its motion to dismiss on the arguments surrounding the stipulation. So that was not my intent. Why I wanted to raise this guarantee is with respect to the notion that there's no connection between Ms. Guo and HK USA separate and apart from the agreements Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 47 of

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　that counsel had already referenced this morning.
And it
2　gets --
3　THE COURT:
Well, the 37 million was related to
4　the Lady May.
So it's all related to the Lady May.
The \$37
5　million that was put in escrow was put in escrow with regard
6　to the stipulation for the return of the Lady May.
Isn't
7　that correct?
8　MS. WERNICK:
Yes.
And she -- and personally
9　guaranteed by Ms. Guo.
10　THE COURT:
And no one knew that it was personally
11　guaranteed.
And by the way, I'm looking at the guarantee
12　agreement, and it says it's dated effective as of April 19,
13　and it's signed with no witness, no nothing, no date.
So we
14　have no idea when that guarantee agreement was signed.
15　There's nothing in the record that establishes
16　that this guarantee agreement was actually entered into at
17　the time that the loan was made.
18　And there was no evidence submitted to this Court
19　at the time of the resolution of the relief from stay motion
20　that talked about Ms. Guo personally guaranteeing the \$37
21　million loan.
And what was she personally guaranteeing it
22　with?
23　MS. WERNICK:
Yeah.
24　THE COURT:
What was the collateral?
25　MS. WERNICK:
So --

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　THE COURT:
What does she have?
2　MS. WERNICK:
No.
And so right --
3　THE COURT:
You could get into that.
4　MS. WERNICK:
Yeah.
5　THE COURT:
If you want to get into the
6　materiality of it, and if you think it's material, then it
7　would have to be material as to what it was that she had as
8　assets to -- that -- why Himalaya Financial would want her
9　personal guarantee.
Because that's what a guarantee's for.
10　So what is it that she had as assets?
If you're
11　saying that these facts are material, then you haven't gone
12　all the way you need to go.
Okay?
13　So I don't find that this is material unless you
14　can somehow establish that -- first of all, there's a
15　guarantee agreement that isn't -- is not dated.
It says
16　effective as of.
I don't know when she signed it.
It never
17　was part of this record.
18　And you're now coming here and saying to me, but,
19　you know, Judge, the reason you can't grant summary judgment
20　on this counterclaim is because Mei Guo guaranteed the loan
21　that Himalaya Financial made for the \$37 million to come
22　into this estate and to provide for the return of the Lady
23　May to the United States.
That's what you're saying.
24　MS. WERNICK:
So, I mean, I -- respectfully, Your
25　Honor, I would submit that this has been part of the record

Ho Wan Kwok - April 20, 2023 50 since it was included with our exhibits. The trustee certainly -- THE COURT: The PJR exhibits -- MS. WERNICK: Right. Correct. THE COURT: -- that were filed months ago and well after the loan was made and after Mr. Kwok was no longer a debtor in possession, correct? MS. WERNICK: Correct. THE COURT: Okay. MS. WERNICK: Correct. THE COURT: Go ahead. MS. WERNICK: Yeah. And there's no dispute that Ms. Guo has now been sued on this guarantee and is personally on the hook by virtue of -- THE COURT: Well, I don't know that there's no dispute. You put something in here that she's been sued. Okay. MS. WERNICK: Yeah. So, I mean -- THE COURT: She's been sued. MS. WERNICK: -- but we are -- I mean, we're -- we've again appended to -- THE COURT: Okay. MS. WERNICK: -- the docket -- THE COURT: Why don't you continue. MS. WERNICK: -- a -- all right. Thank you, Your Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 50 of

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　Honor.
2　THE COURT:
Why don't you continue.
3　MS. WERNICK:
But this is exactly the point.
And
4　I think it's a fallacy to say that this is the only thing
5　that's being put forward to demonstrate Ms. Guo's ownership
6　of --
7　THE COURT:
Well, you put it into -- you've put it
8　into question, because you say it's material.
9　MS. WERNICK:
Oh, and I would maintain that point.
10　I think it's material.
I think all -- the operating
11　agreement for HK USA is material.
I think all of the --
12　THE COURT:
And it all relates -- and the only
13　asset that HK USA had was the Lady May.
14　MS. WERNICK:
Correct.
15　THE COURT:
And the only guarantee that supposedly
16　Ms. Guo gave was with regard to a loan that relates directly
17　to the Lady May, correct?
18　MS. WERNICK:
And she is now on the hook for.
19　Correct.
20　THE COURT:
Well, whether she is or isn't, that's
21　not this Court's issue, right?
22　MS. WERNICK:
But it speaks directly to the point
23　of the domination that the trustee is asking you to infer.
24　The domination and the --
25　THE COURT:
They're not asking me to infer

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　anything.
They're asking me to find that there are no
2　genuine issues of material fact, most of which you have
3　admitted to in your Rule 56(a)(2) statement.
They're not
4　asking me to infer anything.
5　MS. WERNICK:
I mean, I disagree.
Because they
6　are starting with the proposition that the Lady May is owned
7　by the debtor, which this Court found, which is subject to
8　the appeal and we're not looking to collaterally attack in
9　this proceeding this morning.
10　However, they're taking that proposition that the
11　Court decided and -- I don't know how else you would phrase
12　it but inferring, because that's essentially what they say
13　on page 2 of their brief -- that the only possible
14　conclusion on the record is that the debtor also owns and
15　controls HK USA.
16　I don't know what else to call that but for an
17　inference that's not supported by any material facts
18　presented in their statement connecting the debtor to the
19　separate corporate entity, HK USA.
20　I mean, again, going back to the paragraph that
21　we -- that the Court referenced in paragraph 7.
Nothing in
22　that paragraph connects HK USA to the debtor.
And so that's
23　really the essence of the proceeding this morning is, from
24　our perspective, to skip necessary steps in actually making
25　a determination with respect to the debtor's ownership of HK

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　USA, which I don't see any, frankly, on the record that was
2　submitted by the trustee.
3　And I think, you know, to cut to the point of the
4　alter ego determination -- and, I think, you know, it's fair
5　to say the undisputed two-prong test that courts look to
6　under Delaware law, this goes back to the domination and
7　control discussion that we had a little while ago and
8　whether there is operation as a single economic entity.
9　So the record before the Court -- and, again, I
10　would point you to in our statement of additional facts
11　beginning at paragraph 10 is that Ms. Guo is the owner of HK
12　USA.
She's the only member in -- referenced in the
13　operating agreement.
14　I think it's undisputed that she formed the
15　company in 2019 which, incidentally, predates this
16　bankruptcy by a number of years and predates the judgment in
17　the New York action.
That Ms. Guo is the signatory on
18　agreements relating to HK USA.
And, again, that Ms. Guo
19　personally guaranteed the loan obligations of HK USA.
20　And what is, you know, all the more important for
21　purposes of this conversation, because the Court is not --
22　the trustee is not asking the Court to make a determination
23　that HK USA has a alter ego.
It's asking the Court to make
24　a determination that the debtor is HK USA's alter ego.
But
25　there are no agreements involving the debtor.
There's no

Ho Wan Kwok - April 20, 2023 54 agreements where the debtor is a signatory or a beneficiary. THE COURT: Where in the law does it say there have -- there has to be? MS. WERNICK: Well, so -- THE COURT: What cases are you citing from -- under Delaware law that says it has to -- there -- that has to be before any court could make the finding that the trustee's -- MS. WERNICK: Sure. And I would reference the Court to the cases cited in our brief with respect to the fact -- THE COURT: Well, no. I'm asking you. MS. WERNICK: It's a fact -- THE COURT: You tell me in those cases where -- MS. WERNICK: Yeah. Where -- THE COURT: -- where it holds that. MS. WERNICK: Certainly. That it's a fact-specific determination under Delaware law. And the facts before the Court, respectfully, do not yield to the conclusion that the trustee is asking the Court to find on summary judgment where it's their burden, right? So a number of times in counsel's presentation this morning is nothing that -- looking back to HK USA, nothing that we've presented to, you know, challenge their assumptions. But it's their burden, right? They have the Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 54 of

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　burden to show that --
2　THE COURT:
Where does it say under Delaware law
3　that they have the burden to show that the party who they're
4　seeking to have this second counterclaim have summary
5　judgment enter has to be a party to a contract?
Where does
6　it say that under any of the cases that you've cited?
7　MS. WERNICK:
It's a -- so, I mean, respectfully,
8　it's a holistic determination.
But there's no case -- to
9　put the shoe on the other foot, there's no case that the
10　trustee has cited, and I'm sure that if there were, they
11　would have pointed it out to the Court with flashing lights,
12　that stands for the proposition that solely because there's
13　a determination with respect to an asset that that must mean
14　that a separate legal entity is the alter ego of the owner
15　of that asset.
16　And, in fact, I think it's --
17　THE COURT:
The only asset of that entity.
And
18　you've admitted that --
19　MS. WERNICK:
Yeah.
20　THE COURT:
-- numerous occasions, as has your
21　client in testimony.
22　MS. WERNICK:
Certainly.
But that would create a
23　slippery slope for conclusions that any holding company is
24　automatically the alter ego --
25　THE COURT:
Well, no, it wouldn't, because you

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 56 of

Ho Wan Kwok - April 20, 2023

1　just stated it would depend upon the facts and circumstances
2　of the case, correct?
3　MS. WERNICK:
Correct.
4　THE COURT:
Okay.
5　MS. WERNICK:
Certainly.
It's a fact-specific --
6　THE COURT:
Okay.
7　MS. WERNICK:
-- inquiry that is often found by
8　courts not to be ripe for determination on summary judgment
9　because of that factual inquiry.
And so I would apologize
10　for -- I'm finding the page.
But I would refer to the cases
11　cited in paragraph 55 of our brief.
12　THE COURT:
Okay.
13　MS. WERNICK:
So that was touching upon the first
14　prong of the alter ego analysis.
And I think the second
15　prong is equally as conclusory from the trustee's
16　presentation that somehow that HK USA was perpetrating a
17　fraud or injustice.
18　And I would go back to the notion that HK USA was
19　formed by Ms. Guo in 2019, years before the bankruptcy
20　proceeding and prior to the judgment in the New York action.
21　So for them to conclusorily state that there can
22　be no other conclusion that it was intended to serve as some
23　fraud again jumps and seeks to skip necessary factual
24　determinations on summary judgment.
25　And so really, Your Honor, I mean, that's the

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 57 of

Ho Wan Kwok - April 20, 2023

1　essence of our argument and what we put forward in our
2　papers is going back to the very simple assertion that we
3　have a fundamental disagreement with where the trustee seeks
4　to take part one that the Lady May is owned by the debtor
5　and skip forward two or three steps to argue that HK USA
6　therefore must somehow be the debtor's alter ego.
There is
7　necessary findings that are required to reach that
8　conclusion that we respectfully submit can't be made on the
9　record before the Court.
10　THE COURT:
Okay.
Anything further?
11　MS. WERNICK:
Nothing further.
Thank you.
12　THE COURT:
Mr. Bassett, do you have any response?
13　MR. BASSETT:
Yes, Your Honor.
Just a few points
14　in response.
First, one of the arguments counsel made at
15　the outset was that we're skipping a step, because we first
16　have to establish that the debtor owns HK USA before we can
17　thereafter ask for a finding that its his alter ego.
I
18　don't think there's any support in the law for that
19　proposition.
20　The standard, as I think the Court acknowledged,
21　is what it is as set out in the case law, which is you have
22　to show that one person or one entity exercised dominion and
23　control over another and that it did so for the purpose of
24　perpetuating a fraud or an injustice.
25　And I have some cases that I can point the Court

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 58 of

Ho Wan Kwok - April 20, 2023
1　to that stand for the proposition that in order to -- and I
2　think it's an obvious one, but that in order to pierce the
3　corporate veil or to find an alter ego relationship, it's
4　not a predicate that the person who allegedly is using
5　another entity as the alter ego is a named shareholder or
6　owner or member of that company.
7　Case I would cite the Court to is the United

 States vs. Golden Acres case, 702 F. Supp. 1097 at page 113, Note 7, District of Delaware, 1988. It was affirmed subsequently by the Third Circuit. "The alter ego doctrine may be applied even where defendants personally own no stock in the corporation so long as the necessary action and total control have been established."

 Another case, United States Securities and Exchange Commission vs. Levine, 671 F. Supp. 2d. 14, pages 34 to 35. This was the -- this one is District of D.C. 2009 applying Delaware law and finding that the lack of a status of shareholder, officer, or director is not preclusive in finding veil piercing.

 There's cases from other jurisdictions that have similar standards. Freeman vs. Complex Computing Company, 119 F.3d 1044, Second Circuit, 1997, page 1051. The court noted that New York courts only require equitable rather than actual ownership for piercing the corporate veil. Mallard Auto Group Ltd. vs. LeClair Management

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 59 of

Ho Wan Kwok - April 20, 2023

1　Corporation, 153 F. Supp. 2d. 1211, District of Nevada 2001
2　at page 1215.
It has been noted elsewhere in decisions that
3　the Delaware and Nevada analysis are the same for alter ego
4　purposes.
And the case that I mentioned, the Court found
5　that the lack of stock ownership is not determinative of the
6　alter ego question.
7　So, Your Honor, I don't think it's disputed that
8　there's no predicate determination that needs to be made
9　that the debtor first owns HK USA before it can be found to
10　be his alter ego.
And I had made this point in my opening
11　remarks, but just think about the consequences of that from
12　a practical and an equitable point of view.
13　Any debtor who's trying to shield assets from its
14　creditors through the use of an alter ego would simply have
15　his daughter, for example, or somebody else be the nominal
16　owner.
And then, according to the defendants, the
17　counter-defendants, veil piercing or reverse veil piercing
18　and a finding of alter ego could never be established.
That
19　can't be the law.

 There was a lot of discussion about -- and, in fact, as it turns out, the entire counter argument on the facts as to why -- as I understand it, at least, basically the entire counter argument as to why HK USA is not the debtor's alter ego is because the daughter signed a personal guarantee of the Himalaya loan and because the Himalaya loan

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　itself was allegedly taken out by the daughter on behalf of
2　HK USA.
A couple of responses to that.
3　First of all, I think the Court was correct in
4　noting that I don't see how there's any materiality to that
5　fact, particularly as it relates to the personal guaranty.
6　I mean, if, as we've alleged, HK USA -- and as we've proven,
7　HK USA is the debtor's alter ego, the fact that the
8　daughter, even if this is a real enforceable guarantee, the
9　fact that the daughter took it out shows nothing more than
10　that she guaranteed what was effectively her father's
11　obligation.
It doesn't show in any way that she is the one
12　who owns and controls HK USA.
13　Also on the 33 -- or on the -- yeah.
On the
14　Himalaya loan issue, I think the context and history and
15　larger record of undisputed facts are absolutely critical.
16　Because what we have is a situation where, for all the
17　reasons I've discussed, and as the statement of the facts
18　that the Court has gone through make clear, there's no
19　dispute that HK USA has never done anything other than own
20　the Lady May and the Lady May II.
21　It's never had employees, officers, directors,
22　bank account, no capitalization, no ability, frankly, to
23　engage in any other business.
And that was all true.
It
24　has been established that was all true at the time of the
25　Lady May stipulation, at the time of this alleged loan.

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 61 of

Ho Wan Kwok - April 20, 2023 61 So all you have, according to what the defendants are alleging, is you have a situation where at best the debtor's daughter decided to use her father's alter ego to take out a loan. And oh, by the way, that makes a lot of sense given the context. Because the whole impetus for that loan and the whole impetus for the Lady May stipulation was the fact that the debtor was standing before this Court desperate to avoid the Court's lifting of the stay to allow PAX to proceed with its litigation before Justice Ostrager. So what I think the record pretty clearly shows is that this was all done for the debtor's benefit. Again, that's fully consistent with the fact that HK USA was and always has been, including at the time of the loan, the debtor's alter ego. It can't be that -- the best they're doing is pointing to this one isolated event in HK USA's entire history. But it can't be that that -- even if Mei Guo is a signatory to some of these documents, it can't be that that changes the true character of HK USA; it means it's not the alter ego of the debtor. I mean, what they're asking the Court to conclude, I think, is truly remarkable, because basically what they would be saying is that the daughter could execute this loan on behalf of HK USA, which was at the time and has always

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　been the debtors alter ego, for the purpose of misleading
2　the Court on the Lady May stipulation.
3　And then because she did that, because of that,
4　that in and of itself means that the Court could not
5　subsequently find that HK USA is the debtor's alter ego.
I
6　mean, I think that's an absurd proposition, because it
7　allows them through misconduct to prevent a remedy for that
8　misconduct.
9　A couple of other points that were raised.
The
10　fact that the -- and this goes to the fraud or injustice
11　point as well.
12　But I think counsel said that while the daughter
13　nominally formed HK USA and it did so -- and she did so, you
14　know, prior to some of the events in question, but that's a
15　misconstruction of Delaware law to the extent she's arguing
16　that the entity in question has to have been created from
17　its inception for the purpose of perpetuating a fraud or
18　injustice or to be an alter ego or another -- that's just
19　not the law.
20　What the law is, is that it has to be used to be
21　the alter ego of another.
But even if it were the law,
22　which it's not, again I think the record is absolutely clear
23　what happened here.
You had the debtor's daughter say that
24　her brother bought her a yacht in 2015 when she is in China,
25　but yet she didn't come to the United States until 2017.

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　Meanwhile, the debtor was here the entire time.
And then
2　she says HK USA was formed as a shell company to hold the
3　yacht.
4　I mean, none of that changes the alter ego
5　analysis.
So it's just simply material, to go to the
6　question the Court asked.
7　Counsel did not revisit any of the defenses.
I
8　think that's because there is an acknowledgment that the
9　Court has already decided those in the motion to dismiss.
10　So I won't revisit those again in my concluding remarks.
11　All I would say, Your Honor, is that we do think
12　this -- even though alter ego is admittedly usually a
13　fact-intensive analysis, this is a case, due to the facts as
14　agreed upon by their -- by the parties in their submissions,
15　where it is ripe for summary judgment.
16　Because there is simply no genuine dispute of
17　material fact that the debtor dominated and controlled HK
18　USA by exercising domination and control over its only asset
19　which provided the only basis for any business that it
20　conducted and that he did so for the purpose of shielding
21　assets from his creditors which is made clear by the fact
22　that the debtor and his daughter have scratched and clawed
23　for years to put up the facade of separateness to hide the
24　Lady May from creditors.
25　So we think and we respectfully request that the

Ho Wan Kwok - April 20, 2023 64 Court grant the motion for the trustee. Thank you. THE COURT: Thank you. (Counsel confer) THE COURT: I'm going to give them one more minute, and then I'll give you an opportunity to respond. Okay, counsel? (Counsel confer) MR. BASSETT: Sorry about that, Your Honor. I appreciate the indulgence. Thank you. THE COURT: Okay. Attorney Wernick, would you like to respond? MS. WERNICK: Sure. Just briefly. Thank you. One point just for clarification with respect to the defenses relating to the Wagoner rule, in pari delicto, and the Lady May stipulation. Just for clarity of the record, HK USA is not waiving and maintains its position on those doctrines and on the stipulation but in recognition of the Court's motion to dismiss ruling will not belabor those points for purposes of this argument this morning. And the lasting thing that I would want to leave with the Court, just with all of the information that was put forward in the briefing, I would just enforce that there is nothing connecting the debtor to the HK USA entity separate and apart from the Lady May. And we would continue Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 64 of

Ho Wan Kwok - April 20, 2023 65 to submit that's insufficient for an alter ego determination at this stage. Thank you. THE COURT: Okay. Thank you. All right. I have taken the arguments of the parties. I think there may have been one or two cases cited today that were not in the briefs. Is that correct, Mr. Bassett, those cases that you cited? MR. BASSETT: A couple of the cases that I cited on rebuttal, yes, that's correct. They were not. But they -- THE COURT: All right. So I'd have to take a look at those. MR. BASSETT: Thank you. THE COURT: So I will review the matter after our hearings today, and I will rule accordingly. Okay? Thank you. The next matter on the calendar today is the motion -- there are several matters, but the motion for order to show cause why the debtor, Mei Guo, and HK should not be held in contempt for failure to comply with the 2004 subpoenas and the motion for a limited stay of order filed by Mr. Kwok, which I believe those matters -- I see those matters as related matters. So I would proceed first with the moving party's motion regarding contempt and the Fifth Amendment issue Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 65 of

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　regarding the Court's ruling that there be some further
2　hearing on the Fifth Amendment issue.
Okay?
3　MR. MORIARTY:
Yes.
Your Honor, just for the
4　record, the motion -- the contempt motion only relates as to
5　the debtor.
6　THE COURT:
Right now it does.
7　MR. MORIARTY:
Okay.
8　THE COURT:
That's correct.
9　MR. MORIARTY:
So --
10　THE COURT:
But I'm just -- that was the title of
11　the motion.
That's all.
12　MR. MORIARTY:
I understand.
Attorney Wernick --
13　I think we're done with HK and Mei -- and Ms. Guo for today.
14　So I think she will be excused, and other counsel will be
15　joining us.
16　THE COURT:
You do whatever you think is
17　appropriate, counsel.
18　MR. MORIARTY:
Thank you, Your Honor.
19　MR. DESPINS:
Your Honor, this is Trustee Despins
20　speaking.
I would like to be heard as a preliminary matter
21　with respect to the Brown Rudnick involvement in these
22　matters before we go to address the merits, if I may.
23　THE COURT:
I will allow you to be heard, and then
24　I'll have to allow the counsel to be able to respond to
25　whatever your statements are for the record, Trustee

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　Despins.
2　MR. DESPINS:
So just tell me when I can proceed.
3　THE COURT:
Go right -- oh, actually, you're
4　right.
Hold on a second.
We need to take appearances for
5　Mr. Kwok, please.
6　MR. BEST:
Thank you, Your Honor.
Stephen Best
7　with the law firm of Brown Rudnick in the Washington D.C.
8　office, B-E-S-T.
9　THE COURT:
Good morning.
10　MR. BALDIGA:
Good morning again, Your Honor.
11　William Baldiga.
12　THE COURT:
Good morning.
13　MR. BALDIGA:
Thank you.
14　MR. HENZY:
Eric Henzy, of Zeisler & Zeisler, for
15　Mr. Kwok.
16　THE COURT:
Good morning.
17　MR. HENZY:
Good morning, Your Honor.
18　MR. MORIARTY:
James Moriarty, Zeisler & Zeisler,
19　also for the debtor.
20　THE COURT:
Good morning.
21　Hold on a second, Trustee Despins.
22　Attorney Friedman, did you want to note your
23　appearance?
24　MR. FRIEDMAN:
Yes, Your Honor.
Peter Friedman,
25　from O'Melveny & Myers, on behalf of PAX.
I will ask to

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　make brief remarks in the context of the motions.
2　THE COURT:
Thank you.
3　MR. FRIEDMAN:
Thank you, Your Honor.
4　MS. CLAIBORN:
And good morning, Your Honor.
5　Holley Claiborn for the U.S. Trustee.
6　THE COURT:
Good morning.
7　All right.
I understand there have been some
8　pleadings filed recently with regard to these issues, and
9　apparently Trustee Despins would like to make an argument
10　with regard to some of the issues that, while I may be aware
11　of them, I don't know that I've actually studied yet.
12　So go ahead, Trustee Despins.
13　MR. DESPINS:
And just to facilitate the Court's
14　task, you know, we're not seeking any relief today on this.
15　But we certainly didn't want to be perceived as waiving any
16　rights.
17　And the point was made in the filing we made
18　regarding the motion for a stay, and it is as follows that,
19　you know, Brown Rudnick represented the debtor as debtor in
20　possession in the case and now is representing him
21　individually in a criminal -- as criminal counsel.
22　And as Your Honor may know, we are -- as part of
23　our investigation as to what happened here, we're deposing
24　all the law firms that have prior -- previously provided
25　services to the debtor.
That will include Brown Rudnick,

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　and that will include Mr. Baldiga.
2　And the concern comes from the fact that,
3　guaranteed, one of the questions that will be asked at their
4　deposition is when did you know that the Government was
5　investigating Mr. Kwok, when did you know that the
6　Government was taking the position that all of this was
7　Kwok's, meaning all of these assets were Kwok's assets.
8　If that puts them in a position where he cannot
9　answer those questions, because he's now appearing as
10　criminal counsel, we have a problem with that.
11　And if there's no issue, then we'll continue to
12　monitor the situation.
But that issue is pretty
13　fundamental.
When you represent a debtor in possession, you
14　don't represent him individually.
You represent him as a
15　fiduciary to the creditors.
16　And now they don't.
And they could be a
17　connection between these two worlds that it was not foreseen
18　at the beginning when they took on this representation of
19　Mr. Kwok as a criminal defendant.
But I want to be clear on
20　the record that there may very well be connections.
And,
21　therefore, we have to act very prudently in that regard.
22　That's the only statement I wanted to make, Your
23　Honor.
Thank you.
24　THE COURT:
Okay.
Mr. Baldiga, just before you --
25　was -- the U.S. Trustee's office was here a moment ago, and

Ho Wan Kwok - April 20, 2023 70 they're not -- oh. Attorney Claiborn? MS. CLAIBORN: Yes. THE COURT: Did you hear what Mr. Despins just stated for the record? MS. CLAIBORN: I did, Your Honor. THE COURT: And has the U.S. Trustee's Office known about -- I'm not saying you should have known. I'm saying is this the first time that you are hearing that the trustee has a concern with regard to Brown Rudnick's prior representation of the debtor as a debtor in possession and now Brown Rudnick's representation of the debtor in a criminal matter? MS. CLAIBORN: Your Honor, I read the pleading filed yesterday by the trustee which raised the issue on some level. And then the comments made today are the first time I've heard the explanation of some of the issues. So the U.S. Trustee is, at this time, not prepared to make any comments further about the issue. THE COURT: I understand you're not prepared at this time to make any comments, but when will you be prepared? MS. CLAIBORN: I cannot say, Your Honor. But I will bring the facts of today back to the U.S. Trustee. THE COURT: Well, I think you need to be prepared to respond as the United States Trustee, as the party that Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 70 of

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 71 of

Ho Wan Kwok - April 20, 2023

1　oversees the administration of cases and deals with many
2　issues, including conflict issues.
If this issue is -- if
3　this is an issue, it needs to be raised and addressed.
And
4　the United States Trustee's Office will need to have some
5　position on this issue.
6　This is not -- I mean, I just heard what
7　Mr. Despins said.
I'm going to hear from Mr. Baldiga,
8　obviously.
But, you know, we've been talking about
9　conflicts in this case since the day it was filed.
And the
10　parties need to appropriately address the issues before the
11　Court in this case.
12　And so the United States Trustee's Office, one of
13　the roles is to -- as the overseer of the administration of
14　cases has to assert a position on this issue.
15　And so, Trustee Despins, you're saying you're not
16　putting it before the Court today.
But you are, because you
17　just did.
I mean, it may not be in writing, and there may
18　not be a schedule with regard to briefing and issues and
19　determinations that may or may not be made.
20　But now the Court is in a position where we're
21　having a hearing on whether or not -- and, Mr. Baldiga,
22　Mr. Best can disagree with what I'm going to say.
23　But my belief is that this hearing is -- has the
24　debtor complied with the requirements of his obligations
25　to -- his discovery obligations and, therefore, he's

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 72 of

Ho Wan Kwok - April 20, 2023

1　essentially -- because he's asserted the Fifth Amendment
2　privilege, you know, can't be held in contempt and is not --
3　has no ability to purge himself from the contempt.
That's
4　what I think you're going to argue.
Isn't that what you're
5　going to argue, Mr. Best?
6　MR. BEST:
Yes, Your Honor.
7　THE COURT:
Okay.
So then we're in a difficult
8　position, because right now the trustee is saying that he's
9　concerned -- he hasn't said it in writing yet other than
10　I -- in a statement, I understand, in a document that was
11　filed yesterday which I didn't have an opportunity to read
12　yet -- that if you represent -- my understanding of the
13　argument is, is if you represent -- if Brown Rudnick
14　represents Mr. Kwok in a criminal case and has already
15　represented him as a debtor in possession, and the trustee's
16　seeking information with regard to the assets of Mr. Kwok's
17　estate and has to get that information or attempts to seek
18　that information from Brown Rudnick, he believes he will be
19　met with a statement that you can't respond, because you
20　represent him in a -- now criminally.
21　That could cause a problem.
I don't know what
22　else to say about that.
What do you think, Mr. Best and
23　Mr. Baldiga?
24　MR. BEST:
Yeah.
Well, I'm going to -- excuse me.
25　So it may very well be a germane issue in the future.
For

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 73 of

Ho Wan Kwok - April 20, 2023

1　the purposes of this hearing and your determination of
2　whether there has been compliance on the subpoena, I don't
3　think the issue is germane.
And it may affect --
4　Mr. Despins' concern may affect future proceedings.
It
5　doesn't affect this proceeding.
6　I think the law -- by the way, thank you.
This is
7　my first appearance before a bankruptcy court.
So I'm
8　normally in other --
9　THE COURT:
You're welcome.
10　MR. BEST:
-- federal courts.
11　THE COURT:
Welcome to the bankruptcy court.
12　MR. BEST:
Thank you very much.
I think that
13　you're going to hear in a measured explanation that we have
14　black letter law before us on the assertion of the Fifth
15　Amendment privilege.
16　And then Your Honor can then revisit the conflict
17　issue if you think that after the arguments today that
18　somehow they're implicated.
But I don't think it's germane
19　for today at least.
20　I'm going to let Mr. Baldiga speak.
21　THE COURT:
Okay.
What I think I'm going to do is
22　I'm going to take a five-minute recess.
I'll come back out
23　here at 11 -- maybe more than five minutes, because I guess
24　it's only 11:21.
But I'll come back out at 11:30.
And it's
25　likely that we'll proceed with arguments.
But I'd like to

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　take a look at something for a moment.
2　So Court is in recess until 11:30.
3　THE COURTROOM DEPUTY:
All rise.
Court is in
4　recess until 11:30.
5　(Court recessed from 11:21 a.m. to 11:30 a.m.)
6　THE COURTROOM DEPUTY:
All rise.
The United
7　States Bankruptcy Court for the District of Connecticut is
8　now in session after recess.
The Honorable Julie Manning
9　presiding.
10　THE COURT:
Okay.
Please be seated.
Will someone
11　mind going out and letting the trustee's counsel know that
12　we're ready?
Oh, I think they're coming.
13　UNIDENTIFIED SPEAKER:
I believe Attorney Skalka
14　just did that.
15　THE COURT:
Thank you.
16　(Pause)
17　THE COURT:
All right.
Before the Court took a
18　recess, you know, the issue was raised about conflicts
19　and -- with regard to Brown Rudnick serving as both the
20　debtor in possession counsel to Mr. Kwok and the duties and
21　obligations that Brown Rudnick has in that role that
22　continue regardless of the fact that the debtor is no longer
23　in possession and Brown Rudnick's now representation of
24　Mr. Kwok in connection with the allegations -- the criminal
25　allegations made against Mr. Kwok.

Ho Wan Kwok - April 20, 2023 75 Mr. Best stated that he doesn't think there's a conflict at the moment. I'm not -- I don't know if that's fair, but I think that's what you said. And that you'd like to -- MR. BEST: In essence. THE COURT: -- proceed with your arguments. I think we're going to proceed with the arguments today, and then we'll see where things go. But the burden, I think, for this morning, Mr. Best and Mr. Baldiga, are on the debtor in first instance. And then I'll hear from counsel for the trustee. And then as part of your argument, are you also going to argue, Mr. Best, about this limited stay, or are you going to take that separately? How are you -- MR. BEST: I can do it all. I think it's all wrapped up. THE COURT: I think it is too. So that'd be fine. Thank you. MR. BEST: Thank you, Your Honor. MR. DESPINS: Your Honor, just briefly on this. This is Luc Despins, Chapter 11 Trustee. THE COURT: Yes. MR. DESPINS: I want to be clear that there is -- that Brown Rudnick is agreeing on the record that there is no waiver of any argument with respect to the issues I Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 75 of

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　raised so that that's very clear.
Otherwise, we should not
2　go forward without -- with that waiver.
3　THE COURT:
Well, I'm not finding that there's a
4　waiver, so I don't know that I need to have Brown Rudnick
5　find -- to make any statement, Mr. Despins.
The
6　statement --
7　MR. DESPINS:
Okay.
8　THE COURT:
-- that you made this morning we've
9　all just talked about.
It's an issue.
I think it's pretty
10　clear that I'm going to have the parties have to address
11　that, including the Office of the United States Trustee.
12　Okay?
13　So I understand your point, but --
14　MR. DESPINS:
Okay.
15　THE COURT:
-- there will be no waiver of the
16　argument made, because it was made last night in a pleading
17　for which I have not had an opportunity to really have any
18　kind of thoughtfulness about it yet.
19　And I will make -- I'm going to -- at the end of
20　today, we're going to have some kind of scheduling order
21　issue with regard to this issue so that it can be addressed
22　in short order.
23　Because even though we're going to have these
24　arguments today, which I agree we should, the issue is going
25　to have to be resolved one way or another, because the

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 77 of

Ho Wan Kwok - April 20, 2023

1　Court's not going to proceed down a path of many, many
2　issues in this case if there is an issue that needs to be
3　resolved one way or another with regard to conflicts.
Okay?
4　MR. DESPINS:
Thank you, Your Honor.
5　THE COURT:
All right.
Go ahead, Mr. Best.
6　MR. BEST:
Thank you, Your Honor.
May it please
7　the Court.
I am here to assert that the debtor, also
8　Mr. Guo, also known as Mr. Kwok, has fully complied with his
9　obligations under the subpoena that's before the Court
10　today.
In wrapping the second argument as to a stay in, I
11　give Your Honor and the parties multiple options to explore
12　past that, but it's all wrapped up into the following.
13　The documents that have been requested under the
14　subpoena I am sure will be part of the Government's
15　production, the U.S. Department of Justice's production in
16　the criminal case at issue.
17　And the trustee or any other party who believes
18　they have standing can subpoena those documents which are
19　germane to the specific issue, documents that evidence
20　custody and control by Mr. Guo or Mr. Kwok in other entities
21　or persons.
22　And so whether Your Honor takes it as a stay where
23　then the documents then will be produced and we can agree on
24　protective orders or they're publically produced by the
25　Department of Justice, they are going to be produced in

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　terms of their discovery demands.
2　And now there's two cases.
There's the Southern
3　District case where Mr. Guo is a defendant.
And now there's
4　also as of, I think, yesterday or the day before an Eastern
5　District of New York case where Mr. Guo is a victim.
And so
6　there will be ample evidence provided by the Department of
7　Justice in that case as well.
8　Today, however, the issue that's implicated is an
9　invocation of the Fifth Amendment privilege against
10　self-incrimination.
And, specifically, the question before
11　the Court is, well, how can a mere act of production of
12　documents implicate the Fifth Amendment privilege.
13　And so the doctrine -- and if I may?
I'm sure
14　this is not always on your plate, so I'll walk you
15　through --
16　THE COURT:
Go right ahead.
17　MR. BEST:
-- a bit of history of this privilege.
18　It's called the act of production document doctrine.
And
19　the first case that addressed this that became controlling
20　law for this country was in, I believe, 1974 or 1976.
And
21　it's the Harris case.
And I'll give you the cite, Your
22　Honor.
23　THE COURT:
Isn't the Harris case 1911?
24　MR. BEST:
No.
425 -- excuse me.
25　THE COURT:
Well, what's --

Ho Wan Kwok - April 20, 2023 79 MR. BEST: 1976. There may -- excuse me. It's the Fisher case. THE COURT: Okay. MR. BEST: I apologize. I misstated. Fisher v. U.S., 425 U.S. at 408. 1976 decision. But the issue is whether or not compulsion of production of documents implicates the Fifth Amendment privilege that, in pertinent part, no person shall be compelled in any criminal case or any case which has criminal implications to be a witness against himself. And the Fisher case really lines out what is at issue with the production of documents. And so it starts with, you know, breaking down the Fifth Amendment privilege which is the information sought was compelled here. Nobody's arguing that the information sought, i.e. documents, was compelled under a subpoena. Second, that it arguably could be incriminating. And so to that end, may I approach your -- THE COURT: Certainly. Thank you. MR. BEST: I passed up for Your Honor the unsealed indictment in the Kwok case. THE COURT: We've seen this. We -- MR. BEST: Yeah. THE COURT: -- saw this a few weeks ago. Right? MR. BEST: Yeah. That's right. And so I point Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 79 of

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 80 of

Ho Wan Kwok - April 20, 2023

1　out for Your Honor page 3 of this indictment speaking on
2　paragraph 6 to the relevant persons and entities.
Just to
3　point to specifically the relevant parts of the
4　indictment -- and it's relevant -- the whole indictment's
5　relevant -- but in part, those entities which have been
6　alleged to be in the custody or control of Mr. Guo, also
7　known as Mr. Kwok.
8　So the second prong of the Fifth Amendment
9　privilege, which is could this be incriminating, I think is
10　by itself, on its face, clearly shown here that his custody
11　and control of various entities has been -- is part of an
12　active criminal case now filed before the Southern District.
13　Importantly, I don't have to even stop there, even
14　though I think that's enough under the prong.
As I
15　understood from my conversations today, the Department of
16　Justice is also conducting a criminal investigation of
17　whether there's been bankruptcy fraud.
18　And I point out that that is a second --
19　THE COURT:
And what -- how do you know that, sir?
20　MR. BEST:
I'm going to have my colleague -- I
21　think there's a subpoena.
22　MR. HENZY:
Yes.
Yeah.
I'm sure Mr. Best will
23　address this, Your Honor, but the trustee has been served
24　with a subpoena.
And --
25　MR. BEST:
Can I approach?

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 81 of

Ho Wan Kwok - April 20, 2023

1　THE COURT:
Yes, please.
2　MR. BEST:
So I'm presenting to Your Honor a copy
3　of the subpoena that I think that was served on Paul
4　Hastings regarding an active criminal investigation of
5　bankruptcy fraud which I think is gleaned from --
6　THE COURT:
The statutes.
7　MR. BEST:
Yeah.
8　THE COURT:
Yeah.
9　MR. BEST:
So, importantly, if that hasn't built
10　the cake, and I haven't put icing on it, let me put the
11　cherry on top.
In the Second Circuit, which is the only
12　circuit in the country that has actually acknowledged this
13　extension -- incredible extension of the law, the Second
14　Circuit recognizes that you can commit a criminal violation
15　not only by lying to the court but by lying to attorneys who
16　are cooperating with the Government, if you will.
17　And so I cite that.
It's U.S. vs. Kumar from the
18　Second Circuit.
And it's the Computer Associates case,
19　which is widely known in the white collar community, where
20　Sanjay Kumar and other individuals pled guilty to lying in
21　their corporate criminal -- excuse me, corporate internal
22　investigation that was being conducted because the
23　Government has taken the position -- and in fact they ended
24　up pleading guilty, it's settled law in this jurisdiction --
25　they knew or should have known that the private counsel were

Ho Wan Kwok - April 20, 2023 82 cooperating with the Government. And the Sanjay Kumar case, for Your Honor, is 617 F.3d 612. That's a Court of Appeals decision not reversing the convictions. Really, they were pleas to these types of counts. So the second prong, which was their criminal -- it's -- real criminal process could be implicated by production of these documents, I think, is not in question. The final one is whether or not -- and this is where I'm going to spend most of my time discussing, which is whether the production is testimonial in nature. There are two critical reasons why, in fact, this prong has been met. First, while it is our obligation to show that the assertion of the privilege is appropriate here, once you get to the testimonial piece of it, the burden tends to shift to the United States or, in this case, the counterparty to show that the Government doesn't already have the information in question. And it's not totally germane to Your Honor, but it is in the criminal cases, because if the Government doesn't already have the information -- it's called the foregone conclusion piece of this prong, which is the Government has to show that they already had access to the information or had it. If that hat can't be shown either by the Government or the counterparty here, then the Fifth Amendment assertion Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 82 of

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　is valid.
2　And where it impacts Your Honor is if that is
3　turned over by compulsion and the Government isn't shown to
4　have a foregone -- it's not a foregone conclusion that they
5　already had this information, it will have significant and
6　negative implications for the Government in their criminal
7　proceedings.
8　So one thing that Your Honor should consider is
9　getting the U.S. Department of Justice's view on this
10　specific issue and asking that they as a related party to
11　this argument make a presentation on the foregone conclusion
12　piece.
13　If that is asking too much, then I specifically --
14　excuse me, I respectfully submit that it's not a foregone
15　conclusion that they have this information.
I don't know,
16　because we haven't gotten discovery yet.
17　So that's the first core argument.
The second
18　core argument is by producing any documents --
19　THE COURT:
May I stop you for a second just --
20　MR. BEST:
Of course.
21　THE COURT:
So if it is a foregone conclusion, if
22　the Government already has this information, what are you
23　saying then?
That the trustee has to get it from the
24　Government?
25　MR. BEST:
It would be the cleanest way, right?

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

And so the ask is going to be on -- it would be the same ask
to the Government as to us.
We'd have to sign -- and so
that's a perfectly relevant question.
I couldn't turn over anything I get in discovery
without the Government's consent anyway, because it's all
part of the Southern District's confidentiality provisions
of the discovery in the case.
So the Government and the Southern District Court
will be necessarily involved in any future production of
that discovery anyway.
So they're going to be involved one
way or the other.
They might as well make the request of
the Government.
The trustee actually in this case is a member of
the Department of Justice.
Another arm of her department is
the one with the documents in question.
So it's a natural
course that way, Your Honor.
THE COURT:
Okay.
One other question --
MR. BEST:
Yeah.
THE COURT:
-- before you go on with regard to
this issue that you raised, the foregone conclusion, the
third prong.
MR. BEST:
Yeah.
THE COURT:
The subpoena and the request for
information was -- the subpoena was served, and the request
and the order granting the 2004 examination were -- those

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　issues -- the order was issued and the subpoena was served
2　well before the indictment, right?
3　And while -- and some of -- you could argue some,
4　if not all, of the information sought by the trustee
5　relates -- definitely some of the -- and I'm not going to
6　say, because I don't know what the percentage is.
7　But I would say most likely more than half if --
8　of the information, maybe even more, that the trustee seeks
9　was information that the debtor was obligated to maintain
10　and provide and provide to the Court and others while he was
11　a debtor in possession, well before the indictment.
12　So how does that change, if at all, from your
13　perspective this whole issue of the foregone conclusion?
14　Because the foregone conclusion, at least my reading of the
15　indictment -- and that doesn't mean anything, okay -- but is
16　that it's related to certain business entities and
17　transactions that the debtor is alleged to have controlled
18　and raised money through and doesn't necessarily relate to
19　all of the issues that the debtor would be responsible for
20　providing while a debtor in possession in a bankruptcy
21　proceeding.
22　So how do you respond to that with regard to this
23　foregone conclusion?
Because if all the Government has --
24　and let's just be -- you know, give a hypothetical and -- if
25　all the Government has is issues related to this indictment

Ho Wan Kwok - April 20, 2023 86 and, as you said, the relevant persons and entities in paragraphs 6 and 7 -- you know, 6 -- MR. BEST: Yeah. 6 through, I think, 10 or 11. THE COURT: Right. MR. BEST: Right. THE COURT: That doesn't necessarily cover all the issues in this case, believe it or not. You may not have looked at that, but it doesn't. I mean, it doesn't relate to, in particular -- you were here, I think, and had to hear a lot of the argument with regard to the Lady May and the loan. MR. BEST: Right. THE COURT: It doesn't on its face -- the indictment on its face does not necessarily address those issues or seek information with regard -- doesn't put into issue those issues. Nor does it put into issue issues or information that are relevant to the trustee's investigation with regard to -- MR. BEST: Right. THE COURT: -- an apartment in New York. And so while I understand what you're saying, the concern I have at this point -- but I'm going to let you -- I'm going to -- I want to hear from you about what your position is, is how does that -- how does the argument that he doesn't have to produce anything with regard to matters Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 86 of

Ho Wan Kwok - April 20, 2023 87 that aren't specific to the indictment, how does that case law protect him on those issues? MR. BEST: Yeah. So the -- thank you, Your Honor. Another perfectly relevant point. One, he doesn't have to be indicted and doesn't have to be named, right? THE COURT: Understood. MR. BEST: And so at this point, everything that's under his custody and control, I would argue, is under federal criminal investigation. THE COURT: Has he sworn to that, though? I mean, wouldn't you have to -- if you're going to make a record with this Court that says, look, we can't turn over anything because it's all subject to the indictment and/or your argument under Fisher, right -- MR. BEST: Right. THE COURT: -- which I, you know, have to look at, and under Kumar, right, these two cases that you've told me about -- MR. BEST: Okay. THE COURT: -- doesn't he still have to create the record here in this court that he swears that he has turned over -- he has nothing in his possession or control and whatever he had the Government has? Doesn't he still have to do that? Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 87 of

Ho Wan Kwok - April 20, 2023 88 MR. BEST: That request of him is testimonial in nature. He doesn't have -- under his Fifth Amendment privilege, respectfully, he doesn't have to say anything. And, in fact, swearing one way or the other -- so I'll give you the perfect example. If he swears to Your Honor on that point, and the Government finds evidence that contradicts that affirmation, then he can be criminal indicted -- THE COURT: Well, it doesn't even have to be the Government. It could be someone in this court, right? It doesn't have to be the Government. It could be that he swears he doesn't have anything, right? MR. BEST: Yeah. THE COURT: And then the trustee finds it. The trustee could bring it forth, right? And then he'd still have -- he'd have -- MR. BEST: He'd -- THE COURT: -- exposure. But isn't that part of the process? MR. BEST: It isn't. Part of the process is that he's frozen right now, and he can't make any statements one way or the other without implicating himself. And that's black letter law as to the invocation of the Fifth Amendment privilege. THE COURT: Well, but, you know, when you said at Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 88 of

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 89 of

Ho Wan Kwok - April 20, 2023 89 the beginning of your argument -- and I'm not suggesting I'm ruling on anything. I'm trying to understand the positions of the parties, right? You did mention the Harris case which is a case that was decided in 1911. MR. BEST: Yeah. THE COURT: And when you read the language of it, it's interesting. But it talks about the constitutional rights against self-incrimination in -- of a bankrupt and that they -- when a trustee or a receiver was trying to get the books and records, right? MR. BEST: That law -- I think it -- I may have quoted it, because -- no. I got another case. I've been trying to learn bankruptcy law pretty quickly this morning, but -- THE COURT: Well, I don't think this has a lot to do with bankruptcy law, actually. MR. BEST: But any cases that deal with the issue of invocation of the Fifth Amendment privilege as regards production of documents are controlled by Fisher and its progeny, including U.S. vs. Doe, which was 1984. I'll give you the cite. And then I have really the more recent U.S. Supreme Court case is U.S. vs. Hubbell, which was a grand jury proceeding. And then even more recently in the Second Circuit, it's U.S. vs. Greenfield. The Hubbell case is -- excuse me,

Ho Wan Kwok - April 20, 2023 90 120 S. Ct. 2037. And I'll pass it up to Your Honor. THE COURT: I actually have it right here -- MR. BEST: You do? THE COURT: -- so you don't need to pass that up. MR. BEST: Okay. And then I have Greenfield, if you'd like me to pass that up. It's -- THE COURT: I don't think I have seen Greenfield before. I don't think that is -- is that cited in your papers? MR. BEST: It isn't. It was me doing -- THE COURT: Okay. MR. BEST: -- work on the airplane coming up. THE COURT: That's fair. Then I would like you to -- and you gave counsel -- MR. BEST: I -- THE COURT: Okay. Thank you. MR. BEST: Yeah. The other piece to this -- so there is no unclean hand -- and may I -- the question you asked had multiple ways to answer it. THE COURT: It did. MR. BEST: Right? And so there is no unclean hands argument that because he didn't produce it and he obstructed the process before, he has waived his right to assert his Fifth Amendment privilege. Importantly, you know, the foregone conclusion Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 90 of

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

piece, if indeed he had produced under compulsion and we had
had these arguments months ago, and you nonetheless held him
in contempt and -- okay, then he has a choice.
And I actually don't know if the law goes this far
as to -- I don't know if it's ever been decided that if a
court forces compulsion and he produces under that
compulsion whether he's waived his privilege.
I doubt it.
I can't imagine that that would be the case.
But if he did -- if we had this exercise months
ago before the indictment in the case, there would be a
significant challenge to the U.S. Government to put on a
Kastigar hearing to show that they already had or knew about
this information prior to that -- prior to our hearing that
we're having today if it had taken place months before.
The foregone conclusion piece is an obligation on
the Government to show that they already had the information
and knew about it.
And so it would have arguably tainted
the Government's case that they wanted to bring against Kwok
if we had had this exercise months before the indictment.
So that would be my second answer to the query as
to whether or not we had addressed this months before.
I
wasn't involved at that point, but --
THE COURT:
No.
I don't think it was whether it
was addressed.
I think my question was what about the
information that doesn't directly relate to the indictment.

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　And, you know, with regard to the boat, we -- the yacht --
2　MR. BEST:
Yeah.
3　THE COURT:
-- there's nothing in the indictment
4　about the yacht that I see.
Now, you could say it doesn't
5　matter, Judge, because that -- the Government can doesn't
6　have to say anything about the yacht.
7　MR. BEST:
Yeah.
8　THE COURT:
But I'm trying to understand why he
9　doesn't need to make a record before this Court to say what
10　you're saying, which is, look, whatever I had the Government
11　has anyway.
12　MR. BEST:
So, again, first of all, as Mr. Baldiga
13　has pointed out, paragraph 23 of the indictment does talk
14　about the boat.
15　THE COURT:
Okay.
Well, then it talks about the
16　boat.
Then I'm wrong.
17　MR. BEST:
But to your -- to the relevant question
18　as to anything else that's not covered in the indictment,
19　the perfect answer to this is all of these inquiries and the
20　invocation of this, 95 percent of the time it happens
21　pre-indictment, right?
And so and the relevance of that is
22　you don't know what is at issue for the Government or not
23　when you're getting a compulsory process.
24　If there is a -- if they -- there is a
25　determination that he wants to invoke -- he or she wants to

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 93 of

Ho Wan Kwok - April 20, 2023

1　invoke their Fifth Amendment privilege against
2　self-incrimination, that's where the exercise has to stop.
3　There is no inquiry as to -- past that as to him or her, in
4　this case him, affirming to any court the breadth of that
5　invocation of the Fifth Amendment privilege, if you will.
6　And so it's a -- look, the simplest answer is his
7　invocation of the Fifth Amendment privilege can never be
8　held to be an obstruction of any process.
It's as simple as
9　that.
So I've never seen one instance where an invocation
10　of the privilege has been held to be an obstruction.
11　THE COURT:
Okay.
So you're saying that the only
12　way the trustee can proceed is to get the information from
13　the Government?
14　MR. BEST:
Correct.
Now --
15　THE COURT:
Did you say that you have to agree to
16　that too?
17　MR. BEST:
Well, I don't think we'd object, right?
18　THE COURT:
Well, I'm trying to understand the
19　process, right?
I don't understand the process.
20　MR. BEST:
Yeah.
So I'm sorry.
21　THE COURT:
I don't -- as you said quite clearly
22　and correctly, this is not something that the bankruptcy
23　court has to deal with on a regular basis, although we deal
24　with it.
But so your point is --
25　MR. BEST:
The could go to --

Ho Wan Kwok - April 20, 2023 94 THE COURT: -- the only way the trustee can proceed is to get it from the Government. And I thought you said earlier in the -- in your comments that you'd have to agree to that. MR. BEST: No. If it was through -- if the exercise was we as defense counsel received a discovery packet, we would have to go to the Government and get their assent. We would also then have to go to the Court and get the Court's assent to make a production to this Court vis-a-vis the subpoena. They could go directly to the Government and bypass all of that. I don't know whether the Government would reach out to us and say do we have your assent or not. THE COURT: Is it required? MR. BEST: I don't -- no, it's not. THE COURT: Okay. I'm just asking. I -- MR. BEST: No. I mean, I think it's more of a courtesy than anything else. So the testimonial piece of this, which is the second prong past the foregone conclusion, Your Honor, is in the demand that's before us which is, in essence, to produce documents which necessarily are within his custody and control, which means that if anything is produced pursuant to that provision of the subpoena, then it's a tacit, if not explicit, admission that the information in those entities were within his custody or Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 94 of

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　control, which directly implicates his right against
2　self-incrimination, because those issues are squarely before
3　the Court.
4　And they don't even have to be squarely before the
5　Court.
As I said, it -- 99 percent of the time it's prior
6　to an indictment that all these issues come up.
7　And so when I looked at this originally, I didn't
8　even think about the foregone conclusion argument.
It was
9　simply black letter law that what's being asked for here by
10　the trustee -- counsel for the trustee is testimonial in
11　nature in that if anything gets turned over, then it's an
12　admission that, in fact, those entities were within his
13　custody and control.
14　And that's simply black letter law that it's a
15　compulsion of process and once -- for information which
16　there's a causal link to incriminate him that he does not
17　have to -- he doesn't have to comply with pursuant to his
18　constitutional rights.
19　And so, for those reasons, I submit to Your Honor
20　that he has complied with the subpoena.
Once you invoke
21　your constitutional rights on these points, unless there's
22　anything else that's open, it is -- it is considered fully
23　complied.
So thank you very much.
24　THE COURT:
Thank you.
25　Attorney Bassett or -- and Trustee Despins?

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 96 of

Ho Wan Kwok - April 20, 2023 96 MR. DESPINS: Your Honor, I know Mr. Bassett will address the technical parts of this, but I wanted to correct one statement that was made, which is that I'm a Department of Justice employee or somehow working for the Department of Justice. I'm not the Department of Justice. I was appointed by the Department of Justice, but I don't report to them. I have no -- as Your Honor knows, a trustee has no reporting function to the Department of Justice. I wanted to correct that. Thank you. MR. BEST: Yeah. I didn't mean to imply that Mr. Despins was a DOJ employee. But the U.S. -- a representative from the U.S. Trustee's Office is, in fact, here who is a Department of Justice employee. That's who I was referring to, Mr. Despins. Thank you. THE COURT: Okay. Thank you. MR. BASSETT: So, Your Honor, again, it's Nick Bassett from Paul Hastings on behalf of the Chapter 11 Trustee. So I think -- I'm going to address, to the best I can, the substance of all of the legal arguments that counsel made as well as address one of the proposals he made about getting documents that are subject to disclosure by the Government in a criminal case which I do think may be a useful subject to the trustee getting the right order on

Ho Wan Kwok - April 20, 2023 97 that point. Before I do those things, I do think, as I often have done in this case, I think just to understand exactly how we got here, which is part of what the Court was doing with counsel, is important. So obviously this case has been going on for over a year. Trustee was appointed last summer. Immediately upon his appointment, by operation of law -- and this is a fact that's important and has sort of been glossed over to some degree to this point. But by operation of law, the debtor was required and is still required, under Section 521 of the Bankruptcy Code, (a)(3) and (a)(4), to produce records concerning property of the estate to the trustee and also to provide any property of the estate to the trustee. That's by operation of the Bankruptcy Code. In addition to that, shortly after the trustee's appointment in August of 2022, as the Court knows, the trustee served a Rule 2004 subpoena on the debtor. As the Court also knows, and the reason we are here today, is in the six-plus however months we are now since then, we've received nothing but delay, excuses, obstruction, et cetera. And as the Court pointed out, we're now at a point where the debtor is actually using all that past obstruction and delay essentially to his benefit, because he's now, Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 97 of

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 98 of

Ho Wan Kwok - April 20, 2023
1　whether he wanted to or not, created a bridge to a situation
2　where he is under criminal indictment.
Now he's using that
3　criminal indictment as a means to say I can't give you
4　anything.
Sorry.
No more cooperation from me.
No more
5　documents related to property of the estate.
Nothing else.
6　Can't do it, because I'm under criminal investigation, and
7　there's a criminal case against me.

 I think that backdrop is very important, because we're not operating on a blank slate. And the fact that we're in bankruptcy in particular is important. We cited some of these cases in the brief that we submitted to the Court, and it goes back to the In Re Harris case that came up during counsel's argument and during some of the Court's comments.

 But I think, first, it's important to point out that I don't believe in the motion to stay or in the response on the order to show cause counsel has cited to any bankruptcy case involving a stay as it relates to the debtor in that case.

 They cite one case that's in our papers, I'm trying to find it, that I'm escaping the name. But the one case they cite that's a bankruptcy case involved an adversary proceeding by the debtor against other defendants who were under criminal investigation. Completely different situation.

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 99 of

Ho Wan Kwok - April 20, 2023

1　What they're asking for here is an order staying
2　the bankruptcy case -- order staying discovery in the
3　bankruptcy case from the debtor related to property of the
4　estate and other issues that are critical to the trustee's
5　investigation and to the ultimate administration of this
6　case.
7　What they're saying is, well, they're not seeking
8　a stay of the whole case.
And they cite cases from district
9　courts and other civil litigation where courts have stayed
10　discovery.
11　But what they haven't cited to, and what I don't
12　think any court would hold, is that the trustee here has to
13　go forward, as he must, in the interest of the bankruptcy
14　process and in the interest of the debtor's creditors and
15　continue to administer this case and ultimately bring it to
16　a conclusion.
17　But he has to do that without any participation or
18　cooperation from the debtor in providing to the trustee the
19　documents that we've not only requested in discovery but are
20　entitled to under the Bankruptcy Code.
21　And I think that's where the Harris case and some
22　of the other cases that it relies on come into play.
And
23　the Harris case is, admittedly, an old decision from the
24　Supreme Court back in 1911, but it involved the question of
25　the production of documents from a debtor in possession and

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　whether or not his Fifth Amendment rights would be
2　implicated.
3　And what the court said was in that situation
4　constitutional rights were not touched, because "The
5　question is not of testimony but of surrender, not of
6　compelling the bankrupt to be a witness against himself in a
7　criminal case present or future but of compelling him to
8　yield possession of property that he is no longer entitled
9　to keep.
That is one of the misfortunes of bankruptcy if it
10　follows a crime.
The right not to be compelled to be a
11　witness against oneself is not a right to appropriate
12　property that may tell one's story."
13　And the Supreme Court in the Baltimore City
14　Department of Social Services v. Bouknight case in 1990
15　again referenced the Harris decision.
Bouknight involved a
16　different regulatory regime.
17　It involved a mother who was forced to bring her
18　child to the court or to child services by compulsion of
19　law, and the court said that is not -- you know, citing to
20　the principle annunciated in Harris, that type of action is
21　not something that invokes the Fifth Amendment through the
22　act of production doctrine or otherwise.
23　Like counsel, I've been moving quickly here.
The
24　motion was filed on an expedited basis.
I've also been
25　doing some further looking.
And I'm sure we all could do

Ho Wan Kwok - April 20, 2023 101 more. But another case that's more recent that I would encourage the Court to take a look at is the In Re Ross case from the Bankruptcy Court District of Idaho, 1993. That's 156 B.R. 272 at -- and the discussion is extensive. I think part of it's at page 279. But that was a case involving the question of whether requiring a debtor in a Chapter 7 case to exercise his rights under Section -- or to comply with his rights under Section 521 of the Bankruptcy Code would implicate the Fifth Amendment, including specifically the act of production doctrine. So what the Court did in that case is conduct an extensive analysis talking about the interplay between the act of production doctrine and bankruptcy cases. In addition to Harris, there's progeny that developed from there. The Ross court cited Johnson vs. United States from a 1913 decision where the court again articulated the same general principle of Harris that compelling a debtor in possession to turn over property and records of the estate is not something that implicates the Fifth Amendment. The court also cited the Fuller case, 262 U.S. 91 from 1923. The Dier v. Banton case, Supreme Court, 262 U.S. 147 from 1923. And McCarthy v. Arndstein, 266 U.S. 34 from

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　1924.
2　Ultimately, in the Ross case, the court
3　concluded -- I'm just going to quote from it, because I
4　think it's helpful.
"The court finds that the Fifth
5　Amendment privilege may not be claimed by the debtors with
6　regard to property of the estate for the following reasons.
7　First, the Fifth Amendment provides no protection for the
8　contents of the documents."
I think that's an immutable
9　principle.
10　"Second, the act of producing documents required"
11　in that case the court found, "was not sufficiently
12　testimonial or incriminating to come within the protection
13　fo the Fifth Amendment.
14　"Third," the court observed, "the Harris line of
15　cases holds that a bankrupt is not able to claim the
16　privilege with regard to documents relating to property of
17　the estate, and Fisher does not modify that rule."
18　"Fourth, even if the act of producing documents
19　(sic) might be testimonial by implicitly authenticating the
20　documents, the debtors have not made a positive disclosure
21　to support invocation of the privilege" in that way.
22　And then there's a fifth reason that -- yeah, the
23　fifth reason is: "Fifth, even if the act of production
24　doctrine (sic) involved here was both testimonial and
25　incriminating, the nature of Chapter 7 as a regulatory

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 103 of

Ho Wan Kwok - April 20, 2023

1　regime directed toward society as a whole, and not
2　inherently toward suspected (sic) criminal classes renders
3　the act of production doctrine (sic) outside the protection
4　of the Fifth Amendment."

 So there's several reasons here. I'm not disputing that this is a complicated, nuanced area of criminal law that's not normally before this Court and certainly isn't what I normally deal with. But there are a lot of issues that I don't think have been addressed as it relates to do these concepts even apply in bankruptcy. If they do apply in bankruptcy, how is it modified by the fact that there are statutory obligations that require the production of these documents?

 And by the way, the motion to compel that we filed which led to the order to show cause also referenced 521 and the obligations thereunder as the basis for the production. We were not solely relying on our 2004 subpoena and the lack of compliance with that.

 So another point I want to address that came up during the argument previously is the type of showing -- and I think the Court hit on this in some of the questions that Your Honor asked -- the type of showing that if the act of production doctrine applies and if the debtor is going to seek to invoke it, what kind of showing does he have to make in order to demonstrate to the Court that he has fully

Ho Wan Kwok - April 20, 2023 104 complied with all aspects of the January 20th order. And I think what the case law makes pretty clear is that the showing has to be particularized. The debtor cannot just say in a blanket matter -- and that's really what I hear the argument being. You know, I'm under criminal indictment. And our -- and criminal investigation. And our position is that that means that everything the debtor owns, everything he's ever touched, everything he has in his possession that could somehow be relevant to this bankruptcy case is somehow involved in or related to these criminal issues and, therefore, production of them could implicate the Fifth Amendment. I don't think the debtor can do that in that blanket manner. And the trustee is entitled, for good reason, to a more specific showing. To give a particular example, counsel spent a lot of time talking about the fact that if the debtor were required to produce documents under the control of certain other associated entities and associated individuals as those terms are defined in our subpoena that he would basically be conceding that control by producing documents, and that would implicate the indictment and his criminal exposure. But I don't see how the debtor can possibly say that -- and I think the Court was attuned to this as well -- Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 104 of

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 105 of

Ho Wan Kwok - April 20, 2023

1　that literally every -- and I don't have our subpoena right
2　here, and it wouldn't be a productive use of time to go
3　through every entity we've identified and every person we've
4　identified in those defined terms, but there's a lot of
5　them.
6　And I don't see how the debtor can say that every
7　single one of those entities somehow falls within the scope
8　of what's been plausibly alleged in the criminal case for
9　which he is under investigation and, therefore, he doesn't
10　need to say anything else.
He just doesn't have to produce
11　anything, doesn't have to look for anything, and he's done
12　complying with the January 20th order.
13　He has to do more than that, and we're entitled to
14　more than that.
We're entitled to a particularized showing
15　or assertion by the debtor as to each of those entities.
16　And that's consequential.
17　Because if he's going to say that I can't produce
18　documents from this entity, because that would demonstrate
19　my control over it, then we're entitled to ask the Court to
20　take an adverse inference from that as we have in the past.
21　He can't simply get away with saying I'm not
22　producing anything and giving the trustee no recourse which
23　he would otherwise have to ask this Court to take
24　appropriate -- to make appropriate findings as a result of
25　his invocation of the Fifth.

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 106 of

Ho Wan Kwok - April 20, 2023 106 The other -- so subject to checking my notes, the -- and the one other point I wanted to make was to go back to this question of the documents that the Government will produce to the debtor, purportedly is going to produce to the debtor in connection with the criminal case. Obviously, the trustee would want those documents. Counsel said that, well, we -- you know, we could subpoena them and then, you know, do whatever we want to try to do to get them. Two main points in response to that. First, I don't see why we would need to subpoena them. There's already a subpoena that the debtor is under. And to the extent that the documents are responsive to that subpoena, when the debtor becomes in possession of them, they need to be produced not only in accordance with that subpoena but in accordance with the January 20th order that is operative. To the extent the trustee needed to serve a new subpoena asking specifically for these documents, we could do so. We may do so anyway. But I don't think it's necessary. The second point I would make, which I think is critical, is that if they're offering that as a partial solution to the issue, any order that this Court issues in the trustee's view has to very clearly require the debtor to take whatever action it needs to take vis-a-vis the

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　Government or vis-a-vis the criminal court to get permission
2　to give us those documents.
3　What it sounds like they're proposing is, well,
4　let's put the onus on the trustee.
It's not our problem.
5　If you want to try to get the documents, you can.
You go
6　ask the criminal court.
You go ask the Government.
7　We may well do that as well, but the debtor has
8　obligations before this Court under the orders of this Court
9　and under the Bankruptcy Code.
So the onus should be on him
10　to do what's necessary to get us the documents that we're
11　entitled to, not on the trustee.
12　I just want to check my notes, Your Honor, to see
13　if I had other points I wanted to make.
14　(Counsel confer)
15　MR. BASSETT:
I think that's all for the moment,
16　Your Honor.
The one thing I noticed in looking at my
17　outline is that the case I was trying to find earlier that
18　is the only case in bankruptcy that I've noticed that the
19　debtor cited was the In Re Julmice case, Bankruptcy Court
20　Eastern District of New York, 2011.
And, again, that was
21　not a case involving, you know, the debtor and a stay of
22　discovery against the debtor but rather an adversary
23　proceeding against other defendants.
24　Subject to the Court's questions, that's what I
25　had.

Ho Wan Kwok - April 20, 2023 108 THE COURT: I do not have any questions of you at this time. Thank you, Attorney Bassett. Attorney Friedman, you wish to be heard? MR. FRIEDMAN: Yes, Your Honor. Peter Friedman from O'Melveny & Myers on behalf of PAX. I wanted to add a little bit of context to what Attorney Bassett said in his remarks. This is not just an issue of what's happened in this Chapter 11 case. PAX has been pursuing its claims against Mr. Kwok for years going back to the inception of the loan made more than a decade ago. It has been consistently told there are no assets. There have been shifting assertions of the Fifth Amendment in the past when it was convenient and then they have been revoked. There was a Chapter 11 filing, a filing that said Mr. Kwok had \$3,850, as you'll recall, and a Pomeranian, but he needed time to put together his schedules. He hired the Verdolino & Lowey entity which apparently he, you know, didn't tell them about substantial assets that actually exist in his name. But this has been going on for years. PAX has been frustrated for years. And yet, with very little insight into this debtor's assets, of course money shows up whenever it's needed to pay lawyers, although, you know, purportedly not from Mr. Kwok. Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 108 of

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 109 of

Ho Wan Kwok - April 20, 2023 109 We'll find out shortly who's paying for Brown Rudnick to be here today when they file their required pleadings, unless of course they try to claim that's -- some sort of barrier to that because that would also incriminate Mr. Kwok. If you think about the logical extent of what they're saying, they would be immune from having to comply with that regulation as well, that statute as well, which of course can't be right. But in any event, Your Honor, the other thing I wanted to just raise with you is in one of the pleadings there's a statement that the bankruptcy and the prior case is all a product of CCP machinations. And I think as Your Honor has heard from me before, that's just -- I don't know whether to be mad about it or to laugh at it, but it's just absurd. This Court, I think, knows the bona fides of the PAX litigation that proceeded in front of Justice Ostrager. And it knows that Mr. Kwok actually offered to pay, because he broadcasted on Twitter or GETTR, you know, an extraordinarily large amount of money, maybe not his own money but somebody's money, to PAX to settle litigation. And Mr. Kindseth testified that Mr. Kwok knew that PAX was owed money and that Mr. Kwok went on GETTR to say that they had to make piece with Kwok, all of which are

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 110 of

Ho Wan Kwok - April 20, 2023

1　completely at odds with this phony narrative that's being
2　pitched both here and, sadly, in federal court in the
3　criminal matter just to make what are absurd assertions that
4　have no basis in truth and are, you know, more of the same.
5　One point, Your Honor.
Well, I won't -- I
6　actually can't do it, because counsel for the summary
7　judgment proceedings wasn't here.
So I won't go back and
8　re-argue that.
But there's stuff in the documents there
9　that's very troubling.
10　In any event, Your Honor, I did want to echo also
11　Mr. Bassett's comments about the very nature of bankruptcy,
12　the obligation as to, you know, fulsome disclosure that
13　arose immediately when Mr. Kwok voluntarily filed for
14　bankruptcy, filed schedules, showed up at 341s that he
15　needed to appear in and may not have testified honestly.
16　But there were certainly many requests made there that we
17　still need to be able to prove out.
18　And for parties like PAX that have waited for over
19　a decade to be repaid, the idea and prospect that, yet
20　again, there can be obfuscation and delay should be viewed
21　with, you know, intense skepticism by this Court.
Thank
22　you, Your Honor.
23　THE COURT:
Thank you.
24　Mr. Best, would you like to respond?
25　MR. BEST:
Yes, Your Honor.
I literally could not

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 111 of

Ho Wan Kwok - April 20, 2023

1　have made a better argument for the proper invocation of the
2　Fifth Amendment privilege than what we just heard from
3　opposing counsel or creditor's counsel and trustee's
4　counsel.
Their explanations to Your Honor are the absolute
5　reason why a proper invocation of the Fifth Amendment
6　privilege is applicable here.
7　Specifically, the trustee's counsel said, I
8　think -- I think the record will be correct.
I counted
9　three times trustee's counsel said that my client has
10　obstructed the bankruptcy process.
11　Even better, counsel for the creditor from
12　O'Melveny & Myers -- or is it just O'Melveny?
I don't know.
13　But said that -- I think the words were "phony narrative"
14　that has been advanced, which is essentially a fraud on the
15　bankruptcy court.
16　And I will tell you that the head of O'Melveny's
17　white collar practice, Steven Olson, would also tell Your
18　Honor this is the perfect application of the Fifth Amendment
19　privilege for these exact issues which are before us.
20　Counsel has conceded the issues that are before
21　us.
It's not that he doesn't have a right.
And by the way,
22　I want to start by saying with all due respect to Your
23　Honor, the bankruptcy court, and counsel who are all
24　bankruptcy practitioners, the constitutional rights of an
25　individual trump any Bankruptcy Code.

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 112 of

Ho Wan Kwok - April 20, 2023

1　And so when bankruptcy counsel was quoting the
2　Harris case, it specifically referenced that the Harris case
3　noted that what was being asked for -- and I don't -- I
4　haven't dug into it -- but he specifically said was not
5　testimonial in nature.
It's the specific requests beyond
6　the foregone conclusion piece.
7　It's the demand of the trustee's counsel asking
8　for all documents which are in the custody and control of
9　the individual which then specifically, tacitly requires my
10　client to turn over documents of entities which he may be in
11　custody and control of.
12　And with all due respect to trustee's counsel,
13　it's not for him to determine whether it has been brought
14　before the Department of Justice in their criminal case.
15　To give clarity now to the issue of a blanket
16　invocation, when it happens in the grand jury and a
17　prosecutor is allowed to ask specific questions and not
18　accept a blanket invitation (sic passim) of the privilege,
19　so instead of accepting the blanket invitation, they can ask
20　a hundred questions specific to the issues before, and that
21　individual can then assert the privilege on those specific
22　questions.
But you end up at the same place, which is
23　they're allowed to assert a blanket privilege or do it
24　through either one blanket privilege or a hundred different
25　questions that are posed to them.

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 113 of

Ho Wan Kwok - April 20, 2023

1　I tried to come in here and craft a solution which
2　may work.
This whole notion that we have some obligation to
3　present any documents when they can simply go -- the
4　trustee -- the representative from the Department of Justice
5　is here from the U.S. Trustee's Office -- is a member of the
6　Department of Justice.
7　They can go to the Department of Justice Criminal
8　Division, U.S. Attorney's Office Southern District and ask
9　for the discovery.
10　What they -- what the problem, which we need to
11　figure out, is the Southern District has a protective order
12　over the use of that information.
I don't know how that can
13　be worked out with Your Honor and with counsel, but that
14　will come up whether it's directly to the Department of
15　Justice or through us.
16　And so this whole notion that we have to turn
17　something over is, quite honestly, having no respect for the
18　proceedings in the Southern District.
It all has to be
19　addressed.
I wanted -- I fronted this as an opportunity,
20　which I didn't have to do, to show a way through this rather
21　than just-- and basically a grounds for the stay here while
22　that gets worked out.
23　Again, with all due respect to the Bankruptcy Code
24　and this Court, an individual's constitutional rights
25　against self-incrimination trump any requirements and

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　demands under a Bankruptcy Code proceeding.
And I'm happy
2　to answer any questions, and I appreciate Your Honor giving
3　me the time.
4　THE COURT:
The only question I have is -- I think
5　you just said you haven't read Harris yet.
Is that what you
6　said?
7　MR. BEST:
No.
I haven't read the details of --
8　the specific fact details.
9　THE COURT:
Because it does talk about -- it's an
10　old case.
11　MR. BEST:
Yeah.
12　THE COURT:
It's 1911.
But it is the United
13　States Supreme Court saying under the Bankruptcy Act that
14　was in existence at the time, before the 1978 Bankruptcy
15　Code was modernized, that the debtor's duty in turning over
16　the information was surrender and not testimonial.
That's
17　what it says in light of a Fifth Amendment privilege against
18　self-incrimination.
19　So I -- what I'm saying to you is, I understand
20　your argument.
And I don't think anyone is arguing that --
21　at least I haven't heard anyone argue that the debtor -- any
22　debtor isn't entitled to assert a Fifth Amendment privilege
23　when they feel -- when they assert it.
They're entitled to
24　assert it.
25　I think what Harris is saying is that there are

Ho Wan Kwok - April 20, 2023 115 some limitations on the application of that assertion. MR. BEST: It has to be -- so the limitations here, Your Honor -- would it be a harder argument for me if there was just a subpoena issued broadly for all documents? Probably. What was -- the limitations, though -- I can guaranty you in that case it doesn't talk about a specific issue where the documents that are requested are not simply the documents that were in possession of the debtor, Mr. Guo. It was those documents in addition to those that he possessed, which I believe as I understand have been turned over, that -- for him to go and get documents in the custody or control of him which by production necessarily is testimonial that he's in custody or control of those entities. And I can -- I know that Harris didn't stand for that. THE COURT: Okay. And then this Ross case that counsel has cited from Idaho in 1993 talks about Harris, and it also talks about some of the cases you cited saying that -- in Doe -- well, you cited Doe. You said -- you mentioned Doe. It says -- and I'm not saying it's -- I'm just telling you what it says. I -- MR. BEST: I appreciate this. THE COURT: Okay. It says -- Justice O'Connor Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 115 of

Ho Wan Kwok - April 20, 2023 116 states she has written to make explicit what is implicit in the analysis of that opinion, that the Fifth Amendment provides absolutely no protection for any contents of private papers of any kind. MR. BEST: Yeah. THE COURT: That's what it says. MR. BEST: That had -- THE COURT: And then the Bouknight case that -- I don't know that you addressed but counsel cited. That's the case that was not a bankruptcy case. No question. It was the case involving the mother of the child with regard to the city department of social services turning over information with regard to the custody of her child. I mean, the facts of the case are very difficult facts. But the Bouknight case said that the mother couldn't resist production of the information on the grounds that the child might reveal incriminating evidence. MR. BEST: I understand your argument, and I'm not -- MR. BEST: Let me -- THE COURT: I'm not saying anything you're saying is inaccurate. I'm saying -- MR. BEST: Let me -- THE COURT: -- there appears to be some cases out there that limit the applicability -- there appears to be, Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 116 of

Ho Wan Kwok - April 20, 2023 117 that limit the applicability of the extent of the Fifth Amendment privilege with regard to the obligations of a debtor under the Bankruptcy Code. MR. BEST: I would agree with that. It has to be a determination, one, as to whether or not -- really, it's -- I would -- you know, all the analysis you see in court cases start with the foregone conclusion argument first. I focus on the testimonial nature of the admission that if he produces documents as regards entities that he's in the custody or control of or be required to, as you brought up at our first discussion about it, affirm one way or the other as to those, that that is the most -- is the reason why he has the best argument as to invocation of his Fifth Amendment privilege on these issues. Their request is, essentially, admit that these are within your custody and control and give me the documents. That's what's being asked by the subpoena. So I agree with you there are limitations. Doe did not address that piece. Doe was squarely focused on the foregone conclusion piece. And, in fact, Doe ended up in the defendant's favor, affirming his right to invoke the privilege against self-incrimination and admonishing the Government for using Doe to get information which they should have been able to get themselves through Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 117 of

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　the grand jury process.
2　So Doe does not talk about the -- it focuses on
3　foregone conclusion.
It doesn't focus on really what is
4　being asked here is the testimonial nature of the
5　production.
6　So happy to go through -- I'm happy to do a full
7　briefing on this.
I know it's not normally before Your
8　Honor or these esteemed counsel from fine firms.
9　I do this for a living.
I will tell you the
10　Government wouldn't be super happy if their case was
11　negatively implicated because of the demands of a creditor's
12　counsel or of trustee's counsel.
Because I'd be using that
13　in the Southern District case to require the U.S. Department
14　of Justice to put on a Kastigar hearing to prove that they
15　have this information before it was turned over.
16　And if not -- and by the way, the lineage of cases
17　is that the Government's burden on Kastigar is severe.
And
18　it would -- if I win that, which I'm pretty confident I
19　would on a number of issues and other entities, it would,
20　one, thwart their present investigations they have going on,
21　and two, implicate what they could do and what evidence they
22　could produce in their present case.
23　And so I'm not speaking for the Government.
I'm
24　just talking about all the complications that would arise
25　out of this Court requiring either that he produce and not

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　honor his Fifth Amendment privilege or then have him sign
2　some sort of declaration or affidavit attendant thereto.
3　THE COURT:
Well, I just -- on the Bouknight case
4　that has been cited, the Supreme Court case, you know,
5　they -- the Supreme Court talks about that -- says even if
6　the act of production would amount to what you call a tacit
7　admission of the debtor's control over something or
8　possession of something, that that -- the privilege can't be
9　invoked to resist the production in the -- in that
10　circumstance, right?
11　And so the circumstances that we have in this case
12　is that, as we've all talked about and you know, this is
13　information that the trustee is looking to obtain which the
14　debtor was required to produce once he voluntarily consented
15　to this -- the jurisdiction of this Court by filing a
16　bankruptcy case, which he did.
He voluntarily did it.
17　Nobody forced him to do it.
18　And so that Supreme Court case, when you -- I
19　understand your argument about if he has to turn it over
20　then he's -- and -- then he's admitting that he had
21　possession or control.
22　Well, this Supreme Court case, Bouknight case,
23　seems to say that that's not necessarily determinative of
24　whether or not the Fifth Amendment privilege would apply to
25　not require the debtor -- or the party -- it wasn't a debtor

Ho Wan Kwok - April 20, 2023 120 in that case, it's the -- that's the case that we talked about already through the mother and the son -- MR. BEST: Uh-huh. THE COURT: -- to require the debtor to provide this information to the trustee. Now, all I'm saying to you is I think it's -- I understand all the arguments that you've made. I believe I do. And I've looked at a lot of the cases, if not all of the cases, that you've cited. But there is an issue here that's a little bit different from some of the -- from Fisher and other cases that you've cited, because those were not addressing the present circumstances and the specific circumstances of a debtor in possession -- MR. BEST: Right. THE COURT: -- who voluntarily came before the Court and -- MR. BEST: Right. THE COURT: -- and subjected himself to the duties and responsibilities of a debtor under the Bankruptcy Code. MR. BEST: I also think that it needs to be stated that the case that trustee cited -- is it the Idaho case? THE COURT: The Rogers case, I think it was called. MR. BEST: As well as the -- THE COURT: Ross case. I'm sorry. Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 120 of

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 121 of

Ho Wan Kwok - April 20, 2023

1　MR. BASSETT:
Ross.
2　THE COURT:
The Ross case.
3　MR. BEST:
As well as the case Your Honor's
4　referring to does not have in play that the debtor that's
5　before you is actively criminally charged and is --
6　THE COURT:
But as you said --
7　MR. BEST:
-- as well --
8　THE COURT:
-- he doesn't have to be actively
9　criminally charged, right?
10　MR. BEST:
I understand.
But is under active
11　criminal investigation for fraud in this Court.
And so
12　that's a nuance to this whole exercise that -- there's no
13　question if he's under investigation for fraud in relation
14　to any of his statements in the Bankruptcy Court that any
15　demand upon him for production along those lines is a
16　compulsory process which he's allowed to invoke his Fifth
17　Amendment privilege of.
18　It in essence is the documents that would be
19　produced, if there are any, would be used not only for Your
20　Honor's purposes and the trustee's purposes and the
21　bankruptcy purposes but would be part of a ongoing criminal
22　investigation of what we now know is allegations of fraud in
23　this Court.
24　I mean, it -- there's no stronger case that I know
25　of for the testimonial component of a production of

Ho Wan Kwok - April 20, 2023 122 documents which is being called for in this case. And I respect this Court's desire to honor its obligations. And I understand that he filed for protections here. There are always intervening circumstances that have to be taken into consideration here. And that is what's before us right now. THE COURT: Okay. I understand. Thank you. MR. BEST: Okay. THE COURT: Is there anything further you'd like to add? MR. BEST: Not at this time. I'm happy to do further briefing if Your Honor desires. THE COURT: I need to think about that. But thank you. MR. BEST: Yeah. MR. BASSETT: Your Honor, may I be heard and respond to this? MR. DESPINS: Your Honor, if I -- just if I can just jump in here for a second? I want to offer a practical solution to this. I understand the issue. Act of production. Got it. But I think counsel for Mr. Kwok will agree that the act of production doctrine does not apply to documents provided by the Government to Mr. Kwok. There's no act of production issue there. Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 122 of

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 123 of

Ho Wan Kwok - April 20, 2023 123 So he's saying let's have the U.S. Trustee call the DOJ, da, da, da. That's not the way that works. We don't exist in the criminal court. We don't exist in the Southern District of New York U.S. Attorney group, I mean, meaning that they do their own thing. And we wish them the best, also Mr. Kwok. It's not our issue. But the defendant, he has standing in that court to say, you know what, Judge, criminal judge, we would like a modification to the protective order, and that modification would be that we can provide to the trustee -- Chapter 11 trustee copies of the documents that the Government gives us. This Court, Your Honor, could direct the debtor to seek such a modification to the protective order. That doesn't guarantee that the criminal court will agree to that or that the Government will agree to that. But the debtors seem to be okay with that, meaning have no problems with us seeing the documents that are being produced to the defendant by the Government. He just doesn't want to be involved in it. And as I -- I'm telling you, Your Honor, we have no standing in that court. We cannot go to the criminal court and be heard on that issue. But the defendant can. And he -- the defendant happens to be a debtor in your court, and you can direct the defendant to seek that relief.

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　No guarantee of a positive result.
But, to me, that would
2　avoid a lot of brain damage on everyone's part.
3　And the second part is that on the issue of
4　negative inferences that we want to be able to derive from
5　his invocation of the Fifth, there is a way for that
6　invocation of the Fifth Amendment to be particularized and
7　to address our concern.
And I don't think that criminal
8　counsel to Mr. Kwok should have an issue about that, because
9　they are invoking the Fifth as to all those documents.
It's
10　not like some of them they'll answer.
They're invoking the
11　Fifth as to all of them.
12　There should be a procedural way -- Mr. Bassett
13　can propose something -- but that would allow for that
14　individualized or particularized invocation of the Fifth as
15　to each of the document production requests.
16　So, to me, if we deal with these two issues, I
17　think we've resolved or we've arguably made a lot of
18　progress in resolving the issues without going into a --
19　what I would call a complete clash between criminal court
20　and bankruptcy court.
21　THE COURT:
Mr. Best?
22　MR. BEST:
Yeah.
I have no objections if counsel
23　for the trustee wants to put a long list of requests
24　together to do a particularized -- review them, make sure
25　it's appropriate with -- in how they're written, to go

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 125 of

Ho Wan Kwok - April 20, 2023

1　through them with the client and get his determination as to
2　whether he is going to do a particularized invocation on one
3　or all of the inquiries by the trustee's counsel.
4　So to that point, I agree with Mr. Despins that if
5　that's presented, it's -- if that's a solution, I -- I'm
6　here to try to solve -- I understand the issues.
I'm
7　trying -- I want to -- I went through it, and I offered it
8　up as to how the process works in grand jury.
And it would
9　be the normal course for that to be the way here as well.
10　THE COURT:
What about the -- and I have no idea.
11　But what about what Trustee Despins just said about a
12　modification of the protective order in the criminal
13　proceeding to have the Government share the documents they
14　have that they were going to produce to your client also to
15　the trustee?
16　MR. BEST:
So it's not our protective order.
17　That's the point.
I have no problem working with the court
18　and the Department of Justice on that.
But it's the court's
19　order.
And so that, I'm sure, can get figured out along the
20　way.
But --
21　MR. DESPINS:
Your Honor, the criminal court --
22　MR. BEST:
But just understand --
23　MR. DESPINS:
-- the criminal court does not enter
24　(indiscernible).
25　MR. BEST:
-- I can't force the Southern District

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 126 of

Ho Wan Kwok - April 20, 2023 126 Court to amend their order, but -- THE COURT: I don't think that -- I think Trustee Despins already acknowledged that. MR. DESPINS: No, that's not what -- THE COURT: He's already acknowledged that they might not do it. MR. BEST: Yeah. THE COURT: Right? MR. BEST: Happy to try. THE COURT: I think what he was asking was would this Court enter an order requiring the debtor to seek that relief from the Southern District of New York, knowing that the Southern District of New York may say no. But I don't know -- MR. DESPINS: Correct. THE COURT: -- you know, if you oppose that. If you don't oppose that, and you all can come up with an order that this Court could enter, then that's fine. But, I mean, you need -- yeah. You need time to talk about it. That's fine. MR. BEST: Yeah. If I may? THE COURT: Do you want a few minutes? UNIDENTIFIED SPEAKER: Sure. UNIDENTIFIED SPEAKER: Yes. If we could. THE COURT: All right. So before we take a break

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　on this, okay, and we'll take a recess, we have one other
2　matter in this case today.
And it was -- it's with regard
3　to Bravo Luck whose counsel's been, I think, here the whole
4　time.
5　And it's -- it was an issue regarding this motion
6　for relief for judgment or order on -- I guess that -- I'm
7　asking, how much time do the parties think that hearing is
8　going to take?
Do you have any idea?
9　MS. CLINE:
It should be short (indiscernible).
10　MR. DESPINS:
From my point of view, Your Honor,
11　three minutes.
What I have to say will take three minutes.
12　THE COURT:
So this is what my thought is.
Okay?
13　And so I -- and I think, counsel, you're agreeing with
14　Trustee Despins that it would be a short hearing?
15　MS. CLINE:
So depending on what he says, yes,
16　Your Honor, it should be short.
17　THE COURT:
That's fair, I suppose.
In any event,
18　why don't you all -- the -- Mr. Kwok's counsel be excused
19　for now.
We'll pass the hearing that is ongoing right now.
20　We'll stop it for now.
You'll be excused.
You can go have
21　some conversations.
22　You're going to have to have conversations with
23　the trustee's counsel at some point, though, too.
24　MR. BEST:
Absolutely.
25　THE COURT:
Okay.
So why don't we hear this final

Ho Wan Kwok - April 20, 2023 128 matter, and then I'll take some form of a recess, and you all -- you can all convene first, and then you can talk to the trustee's counsel. MR. BEST: Great. THE COURT: Okay? I think that's -- let's do that. And there are conference rooms, they should be unlocked, in the hallways. MR. BEST: They're much nicer than any conference rooms I deal with on criminal cases, so -- THE COURT: Well, that's good. MR. BEST: It is. THE COURT: Maybe that'll produce a result. MR. BEST: Yes. THE COURT: Okay? But in any event, why don't you do that. All the -- Mr. Kwok's lawyers can be excused for now. And I'll have Bravo Luck's counsel come forward. We'll address the final matter on the calendar. And then I'm going -- I am going to take a recess, because not only we -- does the staff need some time but then you can have a conversation with trustee's counsel. MR. BEST: Absolutely. Why don't we plan at least on -- I don't know how long your recess -- 2:00, 2:15 being back. THE COURT: I would think we would do about an hour. Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 128 of

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 129 of

Ho Wan Kwok - April 20, 2023

1　MR. BEST:
Okay.
2　THE COURT:
Because I have some other things I
3　have to attend to later this afternoon.
4　MR. BEST:
Come back at 2:00 or 2:15?
5　THE COURT:
I would say 2:00, please.
6　MR. BEST:
Great.
7　THE COURT:
Okay?
8　MR. BEST:
Thank you, Your Honor.
9　THE COURT:
Thank you.
10　All right.
Now, we -- because we're suspending
11　that hearing in some respects so that parties can have some
12　discussions, let's turn to the last matter on the calendar
13　that was set for hearing quickly, because counsel -- oh,
14　counsel, could you state your appearance for the record,
15　please?
16　MS. CLINE:
Yes, Your Honor.
Joanna Cline,
17　Troutman Pepper, on behalf of Bravo Luck.
18　THE COURT:
Good afternoon.
All right.
Hold on
19　one second, please.
20　So with regard to the -- ECF Number 1679, the
21　order scheduling hearing on motion -- on the oral motion
22　that Attorney Cline made the other day when she was in court
23　on Tuesday in a pretrial conference, she was concerned about
24　the notice parties -- who are deemed to be the notice
25　parties in connection with a proposed abandonment motion

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　that has not been filed yet but that the Court had allowed
2　to be filed under seal.
3　So, Trustee Despins, I set this for a hearing
4　because I wanted to give counsel the opportunity -- she
5　explained why she wants to be a notice party.
From what I
6　understand on the record the other day, there was an
7　affirmative decision not to make Bravo Luck a notice party.
8　Is that correct?
9　MR. DESPINS:
That's correct.
10　THE COURT:
Okay.
Could you just explain --
11　MR. DESPINS:
Or any other creditor other than the
12　ones that are listed -- that's correct, Your Honor.
13　THE COURT:
That are already what?
Subject to the
14　protective order?
15　MR. DESPINS:
That are listed -- so the -- no.
So
16　the -- it would be the creditors' committee, PAX, the U.S.
17　Trustee, and the debtor.
18　THE COURT:
All of whom are --
19　MR. DESPINS:
And there's a --
20　THE COURT:
-- signatories to the protective
21　order, correct?
22　MR. DESPINS:
Yes.
But it was not driven by that.
23　But, yes, they are all signatories for that.
24　But so if I can explain in my three minutes?
25　Basically, this is an issue that -- granted, the motion that

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　Mr. Linsey filed does not disclose what property is to be
2　abandoned.
3　But I can tell -- and I hope that it would give
4　comfort to -- but, actually, we've already tried that, I
5　don't think it worked -- to counsel for Bravo Luck that has
6　nothing to do with The Sherry Netherland or Bravo Luck.
So
7　that's the first part.
It's an issue in the Kwok case.
8　So they're saying, well, we're a creditor in the
9　Kwok case.
They're not a fiduciary.
We have a fiduciary,
10　which is the creditors' committee.
11　As Your Honor will know from the testimony I will
12　give at that hearing, there are very sensitive issues to be
13　discussed in terms of strategy of abandonment and potential
14　other alternative approaches.
And I just don't want this to
15　be out there.
16　And it doesn't involve Bravo Luck.
Bravo Luck --
17　you know, let's remember, they're a fraudulent transfer of
18　defendant.
And that's all they are.
And they -- you know,
19　their principal has refused to be served.
20　It's just -- you know, they can't be involved in
21　any other thing.
They should not be involved in any other
22　thing.
This is an issue that goes to the core of the
23　administrative of the case.
There's a fiduciary, the
24　creditors' committee.
The U.S. Trustee is there.
The
25　debtor's counsel is there.

Ho Wan Kwok - April 20, 2023 132 And PAX is there. And the reason for PAX is that, you know, they do happen to have a judgment for millions of dollars. So they're not like a defendant that is trying to get involved in the case in some fashion. So that -- basically, that's my (indiscernible), Your Honor. They don't belong there. They shouldn't be there. This deals with very sensitive information. And it does not affect them, because it doesn't affect The Sherry Netherland or Bravo Luck directly. So it may impact them as a creditor of Kwok. Frankly, I'm not sure how they're a creditor of Kwok. But assuming that they are, it may affect them in that capacity. But there's plenty of coverage there with the U.S. Trustee and the creditors' committee covering that. Thank you, Your Honor. THE COURT: Thank you. Counsel, you wish to be heard? MS. CLINE: Yes, Your Honor. Joanna Cline on behalf of Bravo Luck. I guess what the trustee is seeking are two things: one, to limit notice, and two, to file this motion for abandonment under seal. And there's no basis in the case law or nor has he articulated a factual reason for either request. Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 132 of

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 133 of

Ho Wan Kwok - April 20, 2023 133 On the issue of notice, limiting notice usually is done where the party giving notice seeks to avoid the cost or the time that's required for notice. The case cited by the trustee in his papers, In Re Karan (ph), does relate to the Court's ability to limit notice in the context of an abandonment proceeding, but it actually supports our position and underscores the proposition that the purpose of the notice requirement is to provide an opportunity for people to be heard and to object. That case doesn't articulate the standard for limiting notice, and instead if denies a motion for an entry of a consent order on abandonment, because the parties did not file an appropriate motion to limit notice that fully stated the limits of service that was supported by an affidavit. We are not aware of and the trustee has not cited any cases in which a court has, in fact, limited notice in an abandonment proceeding for a reason other than cost or timing of notice. In fact, the case law says that notice is a crucial aspect of abandonment. And that can be found in a case called In Re Telcar. With respect to the notion of filing under seal -- THE COURT: Do you have a cite for that case, In Re Telcar? MS. CLINE: Yeah. In Re Telcar, 363 B.R. 345 at

Ho Wan Kwok - April 20, 2023 134 Note 19, Bankruptcy Eastern District 2007. THE COURT: Thank you. MS. CLINE: And all of this is also in Collier's section on Rule 6007. THE COURT: On Rule 6007? Okay. MS. CLINE: Yes, Your Honor. THE COURT: Okay. Thank you. MS. CLINE: And then on the second point, filing under seal, as a preliminary matter, we're not aware of any case in which an abandonment motion was sealed and kept from parties in interest in a litigation. But the proper standard is under Rule 107(b), which if one are -- is to read it carefully, I think the cite that the trustee is relying on relates to the notion that the Court may protect an entity with respect to a trade secret or confidential research, development, or commercial information. So that's the prong they rely on. This is a case involving an individual debtor, and the trustee has not articulated whether there's a trade secret, what's so confidential, what's the commercial -- the supposedly commercial information that's in dispute here. The trustee has a burden to overcome the presumption of open public access to our court system that is the very foundation of the way we do business in the United States courts. A generalized interest is not enough. Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 134 of

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 135 of

Ho Wan Kwok - April 20, 2023

1　And types of information that the courts have found to be
2　confidential relate to sort of -- some sort of business
3　value when the debtor's asset is at stake, a customer list
4　or a creditor list or something to that effect.
5　But to sort of generalize -- generally just say,
6　as the trustee here does even in his brief, things would run
7　more smoothly without the interference of Bravo is an
8　argument that has been squarely rejected by courts on this
9　point.
And that case is called Itel, I-T-E-L, which is
10　cited -- there's a discussion in Collier's -- the Collier's
11　section on Rule 107.03(a).
12　The trustee's essentially saying what we're doing
13　may affect the rights of others, so we'd like to keep them
14　in the dark so they can't complain.
And that's just at odds
15　with the way our system of justice works and is at odds with
16　Bravo's due process rights.
17　THE COURT:
Okay.
Thank you, counsel.
18　Anything further, Trustee Despins?
19　MR. DESPINS:
Your Honor, you know, the right of
20　others is not Bravo Luck.
It's somebody else.
We don't
21　want them to be -- to know of this or to learn of this.
And
22　I haven't heard anything about the particularized interest
23　that Bravo Luck has after the representation I made that
24　this has nothing to do with Bravo Luck, it doesn't involve
25　The Sherry Netherland.

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 136 of

Ho Wan Kwok - April 20, 2023 136 And they are represented by the U.S. Trustee and the creditors' committee. They're there as watch dogs to make sure we're not doing anything crazy. In terms of the secrecy around this is because it involves complex strategies involving that asset and how it's being abandoned and what is being preserved that I really don't want Bravo Luck to have any knowledge of or other creditors, by the way. Because they -- unless they have a particularly -- particularized interest in that matter, they should not participate in this. Because it's highly confidential and could be damaging to the estate (indiscernible). THE COURT: Okay. Thank you. MR. DESPINS: Thank you. THE COURT: Anything further, counsel? MS. CLINE: Yeah. Just, Your Honor, that -- yeah, just to point out the obvious, which is that the burden is not ours. The burden is on the trustee to overcome the presumption of access to the public records in the court system. THE COURT: Okay. Thank you. Does anyone else wish to be heard? MS. MAYHEW: The only thing I'd like to add, Your Honor -- Kristen Mayhew, Pullman & Comley, on behalf of the committee -- is that based on the representations from the

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 137 of

Ho Wan Kwok - April 20, 2023

1　Chapter 11 Trustee that this is a highly confidential,
2　sensitive matter, we believe that as a fiduciary to all of
3　the creditors, the creditors' committee having received
4　notice, we will be in an appropriate position if there's
5　anything that will be of concern to individualized
6　creditors, we will have that information.
But based on the
7　representations of the trustee, we do not believe that Bravo
8　Luck should be given notice of the abandonment.
9　THE COURT:
Okay.
Thank you.
10　MS. MAYHEW:
Thank you.
11　THE COURT:
Anyone else wish to be heard?
12　MS. CLINE:
If I may?
Just one last --
13　THE COURT:
Sure.
14　MS. CLINE:
-- thing, Your Honor.
I guess if the
15　committee has access and PAX has access, we haven't heard
16　why -- why Bravo can't have access.
17　There's been no particularized explanation as to
18　why our client needs to be kept into the -- in the dark
19　other than, I assume, the trustee's theory that underlies
20　his whole case.
But there's been no showing here, and
21　there's no basis for denying us access.
22　THE COURT:
Okay.
Anyone else wish to be heard?
23　All right.
I am going to take the matter under
24　advisement, and I will rule accordingly.
Okay?
25　And, counsel, you do not need to stay unless you

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　want to.
You're more than welcome to.
I didn't anticipate
2　that the hearings would be this length and that we wouldn't
3　have gotten to your hearing sooner.
But that's completely
4　up to you.
5　But the Court is going to take a recess until 2
6　p.m. as noted with regard to the prior matter that the Court
7　was hearing so that the parties can have some discussions.
8　So Court is in recess until 2 p.m.
9　THE COURTROOM DEPUTY:
Court is in recess until 2
10　p.m.
11　(Court recessed from 1:07 p.m. to 2:03 p.m.)
12　THE COURT:
Please be seated.
All right.
Before
13　we took a recess --
14　MR. BASSETT:
Your Honor, I apologize for
15　interrupting, but I don't see Trustee Despins on the Zoom.
16　THE COURT:
Oh.
Here he comes, it appears.
17　MR. DESPINS:
Apologies.
Sorry.
18　THE COURT:
That's okay.
That's fine.
19　All right.
Before we took a recess, we were
20　addressing two motions that are pending in the case -- in
21　the main case of Mr. Kwok.
22　And the motions were the motion for an order --
23　related to the motion for order to show cause why Mr. Kwok
24　should not be held in contempt with regard to his invocation
25　of his Fifth Amendment privilege and then Mr. Kwok's motion

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　for a limited stay of the order granting in part the motion
2　to compel compliance with the 2004 examination.
And
3　Mr. Best and the parties were going to have some
4　discussions.
5　Mr. Best, did you want to report on where things
6　stand at the moment?
7　MR. BEST:
Yes, Your Honor.
We were in agreement
8　even, I think, before the recess as to the -- Mr. Despins'
9　request that the invocation of the Fifth be specific --
10　subject matter specific.
And then the only remaining
11　question was on any discovery in the Southern District case
12　and the trustee's availability to it.
13　We are in agreement in principle that, subject to
14　the U.S. Department of Justice and really, most importantly,
15　the district court judge agreeing to the disclosure of it,
16　I'm sure with many limitations or qualifications, that we
17　won't stand in the way of that.
The discussion really is
18　what's the best way -- how's the best way to accomplish
19　that.
20　We have not received any discovery, as I
21　understand, yet.
Whether it be that the present subpoena
22　remains in force with specific provisos regarding this
23　specific issue -- all this is, I guess -- we didn't talk
24　about this, but, you know, I would ask that the motion to
25　hold the client in contempt be withdrawn without prejudice

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　and that we'll withdraw our extension motion as well.
And
2　then we're left with let's sit down and try to figure out
3　the best course ahead.
4　There is a concern from the U.S. Trustee's counsel
5　that they don't have standing in the Southern District for
6　this subpoena.
I don't care how we get home.
There are
7　multiple ways to do it so that -- they spoke about not
8　wanting to have the obligation to go to the Department of
9　Justice themselves.
10　They're going to end up -- just so I'm transparent
11　with the Court, they're going to end up in front of the U.S.
12　District Court judge in the Southern District of New York,
13　because I'm sure she or he is going to want to hear from
14　them on the issues regarding limitations of use and the
15　confidentiality and protective order.
So --
16　THE COURT:
When you say they, do you mean the
17　Office of the United States Trustee?
18　MR. BEST:
Correct.
19　THE COURT:
Okay.
20　MR. BEST:
And so I want to help the Court explore
21　this and then help the Court in fashioning an order that --
22　or a ruling or -- and you don't -- I mean, I don't even know
23　if you need to issue a ruling.
But I'd like clarity on the
24　way forward.
I know you would.
I know everyone would.
And
25　understanding that we will abide by whatever process makes

Ho Wan Kwok - April 20, 2023 141 the best sense. THE COURT: Okay. Thank you. MR. DESPINS: Your Honor, the U.S. Trustee has nothing to do with this, with all due respect. This is discovery of the Chapter 11 Trustee. MR. BEST: Chapter 11 Trustee. MR. DESPINS: So and, you know, that's very different. THE COURT: Yes. MR. DESPINS: And so what should happen is that I think the Court should enter an order saying that the debtor is directed to seek a modification of any applicable protective order in the criminal case to allow the Chapter 11 Trustee access to the documents produced by the Government to the debtor. And you can add language saying that the debtor does not represent in any way that they have the ability to achieve that, but they're just going to ask and -- because they have standing. And if they get shot down, they get shot down. That's the risk we take. They cannot oppose that relief, because there's nothing -- with act of production, that's totally out the door then. So I think that should happen. And we should adjourn the hearing on the underlying motions for 20 days or something like that to see what transpires in the criminal Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 141 of

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　case.
That's, I think, the path forward.
2　And, again, it doesn't cause the debtor to agree
3　to something that they cannot deliver, because it's
4　understood that they will simply ask.
And that's our
5　pathway to that.
And if that doesn't work, you know,
6　because the criminal court or the DOJ vetoes it, that's our
7　risk.
We understand that.
8　But the debtor has no standing -- I'm not using
9　standing in the legal sense but practical sense -- to oppose
10　an order that says you shall seek the right to share this
11　with your Chapter 11 Trustee.
Thank you.
12　THE COURT:
Thank you.
13　Attorney Claiborn?
14　MS. CLAIBORN:
Thank you, Your Honor.
I do want
15　to echo the clarification just made by Trustee Despins which
16　is to say that Attorney Best's references to the Chapter --
17　to the U.S. Trustee are, in fact, references to the Chapter
18　11 Trustee.
The U.S. Trustee is not part of the discussions
19　that have been happening between counsel and is not party to
20　the agreement or lack thereof that they've been discussing.
21　MR. BEST:
I apologize that I misspoke.
22　THE COURT:
That's okay.
23　MR. BEST:
I'm sorry.
Go ahead.
24　MR. FRIEDMAN:
Go ahead.
Go ahead.
25　MR. BEST:
No.
I'm fine with counsel proposing a

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　draft order that we look at and get to Your Honor if that's
2　the easiest way of doing it.
3　I just want to make sure everybody knows that
4　there will be -- the protective order has limitations of use
5　of the information.
And I think -- I see Mr. Despins
6　shaking his head in acknowledgment.
7　So that I think there's an agreement to be --
8　abide by if the Southern District Court so allows to use the
9　information subject to the protective -- them being part of
10　the protective order.
11　THE COURT:
Okay.
So I think what I'm hearing
12　is -- Mr. Friedman, did you want to be heard?
13　MR. FRIEDMAN:
I did, Your Honor.
It's Peter
14　Friedman for O'Melveny & Myers.
And I'm going to also be
15　joined by Ms. Mayhew --
16　MS. MAYHEW:
Yes.
17　MR. FRIEDMAN:
-- on the committee.
We would both
18　ask for -- to be in whatever discussions there are about a
19　modification to the protective order in SDNY.
Both of our
20　clients would like to be able to have access to documents
21　or -- you know, subject to their willingness to sign onto
22　any protective order the same way as occurred in the Chapter
23　11 case.
24　THE COURT:
The problem is, it's not the Chapter
25　11 case, though.
I mean, that's the problem, right?

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 144 of

Ho Wan Kwok - April 20, 2023

1　I mean, Trustee Despins, you have -- you're trying
2　to get this information for your investigation.
3　MR. DESPINS:
Correct.
And, by the way, I could
4　not hear what Mr. Friedman said, because he was --
5　THE COURT:
Mr. Friedman is --
6　MR. DESPINS:
-- too far from the --
7　THE COURT:
Oh, yeah.
He --
8　MR. FRIEDMAN:
Sorry.
9　THE COURT:
Go ahead.
10　MR. FRIEDMAN:
May I -- should I speak, Your
11　Honor, or --
12　THE COURT:
Please.
13　MR. FRIEDMAN:
Okay.
We were just requesting
14　permission to also be able to review documents that are
15　received in connection with your investigation subject to
16　being a party to any protective order.
And I think the
17　committee is making the same request.
18　MR. DESPINS:
And I -- normally, I would say
19　absolutely.
But this is a sure bet way of making sure that
20　we never get access to those documents.
The more people
21　have access, the less likely it is that we have a right
22　to -- that even we have the right to seek it.
So I'm not
23　trying to be a difficult participant here, but I just --
24　it's not going to work.
25　MR. FRIEDMAN:
Your Honor, we believe that we

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　should be -- that the trustee should -- and we should be
2　permitted to make the request.
If the judge in New York
3　says that's an issue, then that's an issue.
But --
4　THE COURT:
Well, it's not an issue for the judge
5　in New York.
It's an issue here.
Right?
We're resolving
6　matters that are in front of this Court.
And whether the
7　judge in New York agrees to what the trustee is seeking is a
8　different issue.
9　But right now, the trustee is seeking to continue
10　to perform his duties under the Bankruptcy Code.
11　Apparently, Mr. Best, I think, and the trustee have an
12　agreement that there'll be some form of an order that will
13　be presented to this Court resolving these two matters that
14　are on today's calendar, which is the trustee's motion
15　which -- with regard to the trustee's motion to compel and
16　the debtor's motion for stay.
17　And the resolution is that the trustee is going to
18　seek those documents from the court in the Southern District
19　of New York, which the District of New York court may say
20　no.
And but --
21　MR. DESPINS:
Well, actually, Your Honor, it's
22　that the debtor will seek --
23　THE COURT:
Well, yes.
24　MR. DESPINS:
We're not seeking.
25　THE COURT:
I'm sorry.

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 146 of

Ho Wan Kwok - April 20, 2023

1　MR. DESPINS:
The debtor will seek.
2　THE COURT:
The debtor will seek but then share
3　with you once they're -- when they're --
4　MR. DESPINS:
Correct.
5　THE COURT:
Right.
Right.
And I have to say,
6　under the circumstances as we're in right now, I have to
7　agree with the Chapter 11 Trustee at this point that the --
8　that at this point, if the debtor seeks a modification of
9　whatever the application orders are in the Southern District
10　of New York, and if the Southern District of New York judge
11　and, I guess, the U.S. Attorney's Office don't oppose that
12　and it's granted, then the only information that will be
13　produced to -- at this point to Mr. Kwok would be shared
14　only with the Chapter 11 Trustee.
15　There's just too much going on in this case right
16　now that we can't have another month of fight about who gets
17　what.
And that's what's going to happen.
And I'm not going
18　to have that happen.
19　The trustee has been appointed by this Court to

 conduct the investigation. That's what he's going to do. And whatever -- or he's going to try to do. And if he is -- if his resolution of these motions between the trustee and the debtor are on the terms and conditions that Mr. Best and Mr. Despins agree to, then that's how we're going to proceed at this time.

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 147 of

Ho Wan Kwok - April 20, 2023

1　MR. FRIEDMAN:
So, Your Honor, I guess my concern
2　is then suppose the trustee files something in this Court
3　under seal --
4　THE COURT:
Then we'll address that --
5　MR. FRIEDMAN:
-- we would --
6　THE COURT:
-- when that happens.
7　MR. FRIEDMAN:
So would we then have the ability
8　to ask this Court to permit us --
9　THE COURT:
We'll --
10　MR. FRIEDMAN:
-- to review documents filed under
11　seal and not be precluded, because we've been told we -- you
12　know, that when the negotiations occur in -- between the
13　trustee and the debtor in SDNY that, well, that order
14　doesn't say that parties can apply to Judge Manning in order
15　to obtain documents filed under seal.
That --
16　THE COURT:
We'll address that when and if that --
17　we get to that point.
18　Look, the situation is this.
As you all know,
19　we're up to over 1,700 docket entries in this case.
Every
20　single day there is a new motion filed that needs an
21　emergency hearing.
Every day.
I don't think we've gone
22　through a day -- a week where we haven't had that.
Okay?
23　There's an agreement here to try to make some
24　progress between the trustee and Mr. Kwok's counsel.
I'm
25　going to allow that to occur, and then we'll see what

Ho Wan Kwok - April 20, 2023 148 happens. Every single thing in this case has changed from day to day and week to week. And so we'll see. I understand the concerns of PAX, and I understand the concerns of the committee. But if I'm -- I'm seeing that when you made that request, the debtor's counsel shake their head no. I'm not going to have another fight. We're not going to have briefs that are going to be filed about who can get what and -- There's an agreement. We're going to proceed with that agreement. I'm going to hold Mr. Best and Mr. Despins to that agreement. If they don't -- if something goes awry, then they'll have a problem in this Court. But right now, there's an agreement that could result in some progress for the trustee. And that's where we're going to -- that's how we're going to resolve the issue right now. That doesn't mean you can't ask anything you want to ask at some point in the future. But I -- we can't provide for every eventuality, or we'll never leave this room. And we've been here on this matter -- you know, we've been here on this matter then -- many more times than complex Chapter 11 corporate cases have been. And I think it's time to -- everyone has been trying. And I understand that. But at this point, that's where we are. Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 148 of

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 149 of

Ho Wan Kwok - April 20, 2023

1　The trustee and Mr. Best are going to submit an
2　order.
How much time do you both need?
Are you going to do
3　it by tomorrow?
4　MR. DESPINS:
Yes, from our point of view.
5　MR. FRIEDMAN:
Thank you, Your Honor.
May I be
6　excused from the lectern so that it can be used?
7　THE COURT:
Yes.
Thank you.
8　MR. FRIEDMAN:
Thanks.
9　MR. BEST:
If Mr. Despins or his colleagues can
10　get us the draft order for Your Honor to sign, we just need
11　a little time to take it to see our client.
We don't have
12　him -- we don't have easy access in that vein.
So by
13　Monday, if we can get by close of business Monday?
14　THE COURT:
All I would say about what you just
15　said is when you say see your client -- I understand you
16　have to see your client.
But you've agreed that your
17　client's not going to oppose this.
So --
18　MR. BEST:
I agree.
19　THE COURT:
Okay.
20　MR. BEST:
He just needs to see the order and --
21　THE COURT:
Okay.
And that's fair.
22　MR. BEST:
Yeah.
23　THE COURT:
I'm not suggesting anything to the
24　contrary.
I'm just saying I don't want to hear that there's
25　not -- there's no longer an agreement, because otherwise

Ho Wan Kwok - April 20, 2023 150 then I'm -- MR. BEST: I completely understand. THE COURT: -- going to rule on these motions. MR. BEST: And without a doubt, you'd be free to. And I'm not using it as a qualifier. THE COURT: I'm not suggesting you are. MR. BEST: Okay. THE COURT: I want to make it very clear for the record. Okay? MR. BEST: And as I -- so in that vein, when we submit it and it's ordered, as I understand it, the trustee's motion for sanctions or contempt, show cause hearing and contempt are going to be withdrawn -- THE COURT: I don't think there is an agreement on withdrawal. MR. DESPINS: No. Adjourned. THE COURT: I think the agreement was about the order. What the Court what I would do, and I think is appropriate in this case, that we would continue these hearings out for some time to see where things stand. Because we need -- the trustee -- I know you haven't been involved in this case, Mr. Best -- MR. BEST: Right. THE COURT: -- for very long. But the trustee needs to do his investigation, right? What he -- and if Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 150 of

Ho Wan Kwok - April 20, 2023 151 this is -- it may not even work, what he's trying to do, right? But he's trying to do it. And this Court's going to support that, because that's why the trustee -- not Mr. Despins in particular, but that's why a trustee was appointed in this case. Okay? So I am not going to have the motions be withdrawn to only have them have to be filed again. I'm going to continue them for some time. And we'll see where things stand. And what we need to do is have the parties, you - and you will, you and Mr. Despins, cooperate and see what can be done, if anything, in the Southern District of New York. I have ruled right now that the only parties that are going to see these documents are -- is the trustee. No one else. Okay? And where that goes, who knows. We'll see. But at this point, I am not going to have either of the motions withdrawn. I will have them both continued. Okay? MR. BEST: Yes, Your Honor. THE COURT: And we will figure out -- and I'm going to continue them -- well, I'll take a look at the calendar in a moment. But I'm not going to go much beyond 30 or so days, because I want to see what progress has been made in the Southern District of New York. Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 151 of

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 152 of

Ho Wan Kwok - April 20, 2023

1　MR. BEST:
I want to be clear.
We haven't gotten
2　any discovery yet, so I --
3　THE COURT:
I understand all that.
4　MR. BEST:
So --
5　THE COURT:
I completely --
6　MR. BEST:
Okay.
7　THE COURT:
And I appreciate that.
8　MR. BEST:
Okay.
9　THE COURT:
But once you both start talking to the
10　parties in the Southern District of New York, who knows what
11　will happen, right?
12　MR. BEST:
Right.
13　THE COURT:
Or you may report back they're telling
14　us they're not going to give us anything for 60 days.
I
15　don't know what you're going to report back.
But we need to
16　keep the trustee's ability to try to do his job at least
17　moving in a forward direction --
18　MR. BEST:
Understood.
19　THE COURT:
--
however small that may be.
20　MR. BEST:
Understood.
21　THE COURT:
Okay?
22　MR. BEST:
Yes, Your Honor.
23　THE COURT:
All right.
So then let's see.
Well,
24　we have a hearing scheduled in the case -- in the -- I'm
25　sorry.
Not in the case but in an adversary proceeding

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 153 of

Ho Wan Kwok - April 20, 2023

1　related to Mr. Kwok's case on March -- excuse me, May 30 at
2　1 p.m.
So I would continue the -- both of these matters
3　until May 30 at 1:00 p.m., both the motion -- I will note it
4　for the record since we -- our record is only audio, so we
5　have to be very careful about what we say, make sure it's
6　clear.
7　So the motion for order to show cause with regard
8　to the contempt issue with -- in particular with regard to
9　Mr. Kwok, ECF 1453, is continued until May 30 at 1:00 p.m.,
10　as is the debtor's motion -- if you just give me one second,
11　I'm sorry -- as is the debtor's motion for a limited stay of
12　the order granting in part motion to compel compliance with
13　Rule 2004 examination.
Subpoena, I should say.
Excuse me.
14　Subpoena.
So that matter is continued which is ECF 1649.
15　That matter is also continued to May 30 at 1:00 p.m.
16　Now, Mr. Despins, before we adjourn for the day,
17　you've now -- and you're both going to get that order to the
18　Court no later than Monday, the agreed-upon order regarding
19　documents in the control of the Southern District of New
20　York.
I guess that's really what it is, right?
21　MR. BEST:
Yes, Your Honor.
22　THE COURT:
So, Mr. Despins, you started the
23　argument today by indicating your concern about a conflict
24　issue.
And I let these hearings go forward for many
25　reasons, including the fact that everyone's here, and these

Ho Wan Kwok - April 20, 2023 154 issues do need to be addressed. Are you pressing the issue of the conflict now, or are you holding that -- are you not pressing it at the moment in light of trying to proceed with your investigation? Because I need to determine whether or not I need to set a briefing schedule. And if -- I'll -- to be fair, since some -- you've had some discussions over the last hour. I will allow you to tell the Court that when you and Mr. Best submit the order regarding the attempt to -- you know, the process of trying to obtain the information in the Southern District of New York, if that's how you want to proceed. MR. DESPINS: Yeah. I was going to say I need to reflect on it. There's something I learned through the hearing today that, you know, made me think more about it, which is I knew we had received a subpoena, of course I knew that, from the DOJ. And it was to produce the deposition transcripts. That was very clear to me on that. But what I did not -- I have not focused on is that there was a line item that Mr. Best, you know, focused on which is Title 18 Section 152 which is bankruptcy crime, bankruptcy fraud. And the point there is -- first of all, there's nothing in the indictment about that at all. The subpoena clearly says that. And if that's real, I mean, if that -- they Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 154 of

Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 155 of

Ho Wan Kwok - April 20, 2023 155 actually are looking at that, that could only cover the period during which Brown Rudnick was counsel. So I need to get smarter about that issue, frankly, before I come back to Your Honor. I'm sorry. THE COURT: That's fine. That's fine. No. MR. DESPINS: I would love to be able to do it on the spot, but -- THE COURT: That's fine. That's fine. I do not want to have parties engage in briefing when it's not clear we're going to be doing that at this point in time. Okay? MR. DESPINS: Okay. And, Your Honor, I have a few housekeeping matters, if we can. THE COURT: Go right ahead. MR. DESPINS: First, I want to make sure you've seen the -- you remember that emergency order that describes who can have access to The Sherry Netherland and who cannot? We're submit -- THE COURT: All I know is -- MR. DESPINS: We submitted -- THE COURT: All I know is at some point yesterday afternoon there was a request that it be amended. But I -- do I actually have an amended order? The courtroom deputy is nodding her head. MR. DESPINS: You should have it, I believe. THE COURT: All right. I haven't seen it yet, but

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

1　I'll take a look at it.
2　MR. DESPINS:
Okay.
So that's one thing.
The
3　second thing is that we had asked for a hearing date or
4　objection deadline for the retention of Edmiston,
5　E-D-M-I-S-T-O-N.
They're the Lady May sales broker.
We
6　asked for -- we moved on an expedited basis.
Apologies.
7　But, you know, they -- since they're starting to sell the
8　yacht now, we need -- they want an order entered saying
9　they're retained.
10　So I just -- you don't have to decide that now.
I
11　want to make sure it's on -- you know, that it's on your
12　radar screen.
13　THE COURT:
So hold on.
14　MR. DESPINS:
And the last --
15　THE COURT:
Hold on a second.
16　MR. DESPINS:
Oh.
17　THE COURT:
An emergency motion on -- I thought we
18　retained all the people for the yacht.
No?
19　MR. DESPINS:
No.
There was a -- the broker piece
20　was missing.
We basically interviewed three different
21　brokers.
We received bids for that.
And we filed a motion,
22　I want to say --
23　THE COURT:
Oh, okay.
24　MR. DESPINS:
-- Monday or --
25　THE COURT:
Okay.
All right.

Ho Wan Kwok - April 20, 2023 157 MR. DESPINS: -- seeking emergency relief on that. So I just wanted to make sure it's on your radar -- THE COURT: Is that where you're seeking a hearing for next Thursday? Is that the one? I -- MR. DESPINS: Well, not this Thursday. The Thursday next week for -- THE COURT: Right. A week from today. Isn't today Thursday? I hope it's Thursday. Okay. MR. DESPINS: Yeah, you're right. Sorry. THE COURT: A week from today. MR. DESPINS: Yes, you're right. Yes. THE COURT: All right. Yeah. I believe that the Court can accommodate the request, but it will -- might -- won't -- it most likely will not be until noon or later that day. MR. DESPINS: That's fine, Your Honor. THE COURT: Okay? MR. DESPINS: And the last point I wanted to mention is that the order you entered, and thank you very much for doing that, regarding the motion to abandon scheduled a hearing on that motion for May 2nd. And, of course, implicit in that is that we would file the motion, which we have not. This week -- or and I'm not sure we'll be in a position to do that. And, therefore, we may need to move that May 2nd hearing to a later date, not too much Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 157 of

Ho Wan Kwok - April 20, 2023 158 later but maybe five days or six days after -- THE COURT: That's fine. You can report on that next week. You can report on that -- MR. DESPINS: Okay. THE COURT: -- next week if you're not ready to go forward on the 2nd of May on that issue. MR. DESPINS: Okay. Okay. Thank you, Your Honor. So that's all I had in terms of housekeeping matters. THE COURT: Okay. Thank you. All right. So then all of the matters then on today's calendar have been addressed, and the Court has no further hearings this afternoon. So court is adjourned. THE COURTROOM DEPUTY: All rise. Court is adjourned. MR. DESPINS: Thank you. (Proceedings concluded at 2:33 p.m.) Case 22-50073 Doc 1719 Filed 04/28/23 Entered 04/28/23 08:44:48 Page 158 of

Case 22-50073
Doc 1719
Filed 04/28/23
Entered 04/28/23 08:44:48

Ho Wan Kwok - April 20, 2023

3　I, CHRISTINE FIORE, court-approved transcriber and
4　certified electronic reporter and transcriber, certify that
5　the foregoing is a correct transcript from the official
6　electronic sound recording of the proceedings in the above
7　entitled matter.

10　April 27, 2023
11　Christine Fiore, CERT