Guo Wengui / Miles Guo — bankruptcy case · MOTION · ECF #2119

UNITED STATES BANKRUPTCY COURT DISTRICT OF CONNECTICUT BRIDGEPORT DIVISION In Re \* Case No. 22-50073 (JAM) \* HO WAN KWOK and GENEVER \* HOLDINGS CORPORATION, \* \* Debtor. \* U.S. BANK NATIONAL \* Adv. Proc No. 23-05012 ASSOCIATION, as escrow \* agent, \* \* Plaintiff, \* v. \* \* HK INTERNATIONAL FUNDS \* INVESTMENTS (USA) LIMITED, \* \* Defendant. \* \* LUC A. DESPINS, \* Adv. Proc. No. 23-05013 \* Plaintiff, \* \* v. \* Bridgeport, Connecticut \* July 11, 2023 HCHK TECHNOLOGIES, INC., \* et al., \* \* Defendants. \* \* \* \* \* \* \* \* \* \* \* \* \* \* \* \* \* \* TRANSCRIPT OF PROCEEDINGS BEFORE THE HONORABLE JULIE A. MANNING UNITED STATES BANKRUPTCY JUDGE Proceedings recorded by electronic sound recording, transcript produced by transcription service. Fiore Reporting and Transcription Service, Inc. 4 Research Drive, Suite 402 Shelton, Connecticut 06484 (203)929-9992

#1749 APPLICATION TO EMPLOY AFFILIATES ADJUSTMENT

#1805 MOTION TO COMPEL COMPLIANCE WITH RULE 2004 SUBPOENAS (SECOND OMNIBUS)(INSOFAR AS IT RELATES

#1903 MOTION TO WITHDRAW AS ATTORNEY FILED BY A. ROMNEY

#1936 MOTION TO COMPROMISE CONTROVERSY W/BRIAN W. HOFMEISTER AS ASSIGNEE FOR THE BENEFIT OF CREDITORS OF HCHK ENTITIES UNDER NY COURT

25 MOTION TO COMPROMISE CONTROVERSY W/BRIAN W. HOFMEISTER AS ASSIGNEE FOR THE BENEFIT OF CREDITORS OF HCHK ENTITIES UNDER NY COURT ASSIGNMENT PROCEEDINGS, 3131 PRINCETON PIKE BLDG. 5, STE 110, LAWRENCEVILLE, NJ 08648

APPEARANCES: Chapter 11 Trustee: LUC A. DESPINS, ESQ. Paul Hastings 200 Park Avenue New York, NY 10166 For the Chapter 11 Trustee: NICHOLAS A. BASSETT, ESQ. AVRAM E. LUFT, ESQ. Paul Hastings LLP 200 Park Avenue New York, NY 10166 PATRICK R. LINSEY, ESQ. Neubert Pepe & Monteith, PC 195 Church Street New Haven, CT 06510 For the U.S. Trustee: HOLLEY L. CLAIBORN, ESQ. Office of the U.S. Trustee 150 Court Street New Haven, CT 06510 For the Creditors Committee: IRVE J. GOLDMAN, ESQ. Pullman & Comley 850 Main Street Bridgeport, CT 06601 For HK International Funds ERIC A. HENZY, ESQ. Investments, LLC and JAMES M. MORIARTY, ESQ. Mei Guo and Hudson Diamond AARON ROMNEY, ESQ. NY: Zeisler & Zeisler, P.C. 10 Middle Street, 15th Floor Bridgeport, CT 06604 For the Plaintiff, LEE VARTAN, ESQ. HK International Funds and Chiesa Shahinian & Mei Guo: Giantomasi, PC 105 Eisenhauer Pkwy Roseland, NJ 07068 For the Assignee, RYAN T. JARECK, ESQ. Brian W. Hofmeister: Cole Schotz P.C. 25 Main Street Court Plaza North Hackensack, NJ 07601 APPEARANCES (Cont'd): For Various Creditors JOSEPH M. PASTORE, III, ESQ. Of HCHK Technologies: MELISSA R. McCLAMMY, ESQ. Pastore, LLC 4 High Ridge Park, Third Floor Stamford, CT 06905 For Joshua Sherman: JOSHUA SHERMAN, ESQ. HCHK Technologies, Inc. 303 5th Avenue #1705 New York, NY 10016 For G Club News GREGORY F. ARCARO, ESQ. Operations, LLC: GRAFSTEIN & ARCARO, LLC 114 W. Main Street, Suite 105 New Britain, CT 06051 For G Club Operations, LLC: KELLIANE BARANOWSKY, ESQ. Green & Sklarz, LLC 1 Audubon Street, 3rd Floor New Haven, CT 06511 CAROLINA A. FORNOS, ESQ. Pillsbury Winthrop Shaw Pittman 31 West 52nd Street New York, NY 10019

2 THE COURTROOM DEPUTY:

3 Wan Kwok and Genever Holdings, LLC.

4 excuse me, 23-5012, U.S. Bank National Association vs. HK 5 Funds Limited. And also, Case Number 23 -- Adversary Number 6 23-5013, Despins vs. HCHK Technologies, Inc. 7 THE COURT: Okay. Good afternoon.

8 have appearances for the record, starting with the Chapter 9 11 Trustee, please. 10 MR. DESPINS: Good afternoon, Your Honor.

11 Despins, Chapter 11 Trustee. 12 MR. BASSETT: Good afternoon, Your Honor.

13 Bassett from Paul Hastings on behalf of the Chapter 11 14 Trustee. 15 MR. LINSEY:

16 Connecticut counsel for the trustee. 17 MS. CLAIBORN: Good afternoon, Your Honor.

18 Claiborn for the U.S. Trustee. 19 MR. GOLDMAN: Good afternoon, Your Honor.

20 Goldman, Pullman & Comley, for the Creditors' Committee. 21 MR. MORIARTY: Good afternoon, Your Honor.

22 Moriarty from Zeisler & Zeisler for the debtor and also for 23 HK International Funds Investments (USA) Limited, LLC in 24 Docket 23-05012. 25 MR. ROMNEY: Good afternoon, Your Honor.

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Ho Wan Kwok - July 11, 2023 6 Romney for the same parties as well as for Hudson Diamond Holdings, LLC. And I'm appearing today on behalf of myself in response to the Court's order to show cause. I also want to put on the record, Attorney Vartan was stuck in very terrible traffic. He should be here any minute. THE COURT: Okay. Thank you. MR. MORIARTY: Thank you. MR. HENZY: And Eric Henzy on behalf of the debtor and also potentially on behalf of Mr. Romney. THE COURT: The debtor, Mr. Kwok? MR. HENZY: Correct, Your Honor. THE COURT: Okay. Thank you. MR. HENZY: Thank you, Your Honor. THE COURT: Attorney Vartan? MR. VARTAN: Good afternoon, Your Honor Lee Vartan also on behalf of Mei Guo and HK USA. THE COURT: Good afternoon. MR. VARTAN: Good afternoon. THE COURT: All right. Trustee Despins, there are several matters on the calendar today. We've just gone through appearances. How would you like to proceed today? MR. DESPINS: We had promised Mr. Romney that we would start with his matter, so unless the Court has a preference, we're okay with that order.

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Ho Wan Kwok - July 11, 2023 7 MR. ROMNEY: If I may, Your Honor, just by further way of explanation? I have a 7:00 flight out of LaGuardia for depositions in Atlanta tomorrow which I'm very much trying to make. THE COURT: Okay. Then we will proceed that way. MR. DESPINS: Actually, Your Honor, if I -- maybe take five minutes to do the public adjustor retention. Mr. Luft is also -- was also stuck in traffic. He's on his way. Should be here. MR. ROMNEY: I think he'll be here in five minutes or so. If he's not here by the time we get through this, somebody else can handle the motion to withdraw. I'll handle the motion to withdraw if Mr. Luft is not here. But this will take probably five minutes. MR. DESPINS: The public adjustor retention. THE COURT: Okay. Does any -- Mr. Romney, do you have any opposition if we -- MR. ROMNEY: No, of course not. THE COURT: Okay. Thank you. MR. ROMNEY: Thank you. THE COURT: All right. Then let's address the application to employ the public adjustor first which is in the main case, ECF Number 1749. MR. DESPINS: Correct, Your Honor. And you may have noticed that we filed a amended retention order at

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Ho Wan Kwok - July 11, 2023 8 Docket Number 1992, because we had received comments from the U.S. Trustee to -- so at 1992 you have both the clean and the marked to show changes. 1992 at pages 10 and -- of the 11 -- or, sorry, 10 of 11, yes? You can see the changes. And, basically, it was to clarify their compensation. Just to give you a little bit of background, this is regarding the fire at The Sherry Netherland. Public adjustors are often retained by companies or owners to negotiate settlements with insurance companies. And you might say, well, but there's no settlement with the insurance company. Good point. But there may come a time where there would be a settlement mode. And, here, this retention is purely on a contingency basis. So no settlement, no compensation. And this person actually has been very helpful in helping me prepare things like a proof of claim. You need to actually submit to the insurance company a claim form. And we did that with respect to -- and he did that with respect to the cleanup costs, et cetera, et cetera. So even though at one point we thought we were going to put this retention to the side for now, it's becoming clear now that we need this person to do the various -- you know, all the legwork that needs to be done with respect to the evaluation of the claim. And given

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Ho Wan Kwok - July 11, 2023 9 that, again, he doesn't get paid anything unless there's a recovery from the insurance company, we believe it's -- that, you know, it's appropriate to go forward, because there's no risk to Genever US, which is the entity retaining him. And just for the record, to state the compensation, basically it's 5 percent on the first 3 million or less plus 4 percent on any settlement proceeds recovered in excess of 3 million up to 15 million, plus 3 percent on any settlements recovered in excess of 15 million up to 50 million. And we also made a correction to state that the public adjustor -- the acronym is AAGL -- will not hold any settlement proceeds recovered under such insurance policies. That's a change that the U.S. Trustee wanted to make, and so we made that change. So at this point, there had been an objection filed by PAX. It was withdrawn. We have been working with PAX on this, and we're happy that they withdrew the objection. And at this point, we would -- subject to any comments Your Honor may have with respect to the order, we would like to proceed with the retention. THE COURT: I have no comments or questions at this time. Attorney Claiborn, do you wish to be heard?

Ho Wan Kwok - July 11, 2023 10 MS. CLAIBORN: Thank you, Your Honor. The order as revised and filed at ECF 1992 resolves the U.S. Trustee's concerns. THE COURT: Okay. Thank you. And I note, obviously, that the application is both under 327(a) and 328 because of the setting of the compensation at this time, the schedule of compensation. Does anyone else wish to be heard on the application -- the trustee's application to employ the public adjustor, Affiliated Adjustment Group, LTD? All right. Hearing nothing, I have seen no written objections other than the objection of PAX, which I note for the record was withdrawn. The United States Trustee has just stated their position that they are in support of the application in connection with the revised proposed order that was filed on the docket yesterday at ECF Number 1992 which resolves any concerns that the U.S. Trustee has. I understand the reason for the retention that you are seeking, Trustee Despins, and it certainly seems to be reasonable under the circumstances of the case. And for all those reasons, the application to employ Affiliated Adjustment Group as a public adjustor is granted, and the proposed order that is -- appears on pages 5, 6, and 7 of ECF Number 1992 can enter. Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 10 of

1 MR. DESPINS: Thank you, Your Honor. 2 THE COURT: Thank you. 3 MR. DESPINS:

4 colleague is in route, but we shouldn't hold up the hearing 5 for him. So we're ready to go forward. 6 THE COURT: Okay. Give me one second, please. 7 MR. DESPINS: Okay. All right.

8 next matter -- there are many matters on the calendar.

9 we -- Attorney Romney specifically requested and the trustee 10 and the trustee's counsel agreed to proceed next with the 11 motion to withdraw as attorney filed by Attorney Romney, 12 1903, on behalf of the Hudson Diamond entities from which an 13 appearance was filed. 14 I had indicated that the -- Attorney Romney and 15 Attorney Vartan needed to appear today to address the motion 16 to withdraw. And I -- and both are in the courtroom.

17 Attorney Romney, do you wish to proceed? 18 MR. ROMNEY: I do, Your Honor.

19 clarification. Your Honor just said a moment ago that it 20 was a motion to withdraw from representation of the Hudson 21 Diamond entities.

22 entity, Your Honor. 23 THE COURT: Okay. That's true. I did see that. 24 I'm sorry. But I thought originally -- originally, I 25 thought it was all of the entities. But you're correct.

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1 Thank you for noting that for the record. 2 MR. ROMNEY: Understood, Your Honor.

3 as more further set forth in the affidavit submitted at the 4 request of the U.S. Trustee, this is a situation where we 5 became aware of a subpoena directed to the -- both Hudson 6 Diamond entities by virtue of the trustee's motion to compel 7 filed in May.

8 Diamond Holdings, LLC as the sole member of Hudson Diamond 9 New York and had documentation supporting that proposition 10 attached to it.

11 entities. 12 I had been -- known as of that time that Ms. Guo 13 was -- is the sole member of Hudson Diamond Holdings.

14 was under the very distinct impression for a number of 15 reasons, including the Chapter 11 trustee's pleading but 16 also conversations that I've had with Ms. Guo who was under 17 the impression, that Hudson Diamond New York was a 18 wholly-owned subsidiary of Hudson Diamond Holdings. 19 That is why I negotiated an extension on behalf of 20 both entities. That is why I filed an appearance on behalf 21 of both entities.

22 I following the negotiation of an adjournment in order to 23 allow compliance diligently attempted to locate documents on 24 behalf of both entities, neither of which were in the actual 25 physical possession of the natural human being that's our

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Ho Wan Kwok - July 11, 2023 13 client, Ms. Guo. During the course of that investigation/process, we were told by the general counsel of Hodgson Russ, LLP that Ms. Guo was not the -- sorry, that Hudson Diamond Holdings, LLC was not the sole member of Hudson Diamond New York and, at that time, identified another individual who is identified in my affidavit, the debtor's son, Mileson Guo, was the member of that entity. At that moment, as stated in my affidavit, I immediately first sought the advice of firm's general counsel who's with me today, Mr. Henzy. The next thing I did was call Attorney Luft to tell him that I had just been informed that it appeared Hudson Diamond Holdings was not the sole member and that it appeared I had made a mistake and that I intended to withdraw, because I didn't believe I had authority to represent the New York entity as distinguished from the holdings entity which, to this -- am positive that I have authority to represent. My understanding is that under the rules of professional conduct, Rule 1.16(b), I cannot represent an entity unless I've been authorized by someone with actual authority and, therefore, must withdraw. And that's why I filed a motion to withdraw, because at the time that I filed

general counsel of a very reputable firm who I believe to be

the motion to withdraw, based upon the representation of the

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an honest person and upstanding member of the bar, led me to believe that I had made a mistake.

Subsequent to filing that motion, further questions have been raised that now, as I sit here today, I do not know who the sole member of Hudson Diamond New York is. And as set forth in my affidavit, on -- I believe it was June 25th, Attorney Luft brought a document to my attention which was attached to their motion to compel and for contempt that was consistent with our original understanding that, in fact, Hudson Diamond Holdings was the sole member of this New York entity -- of the Hudson Diamond New York entity, and that Mei Guo was the sole member of Hudson Diamond Holdings.

At that point, Attorney Vartan and I reached out to Hodgson Russ that confirmed that they, in fact, had prepared that document on which the Chapter 11 trustee appears to have relied, which was entirely consistent with Ms. Guo's original understanding that the holdings entity was the parent of the New York entity. They do not have any explanation for why they have an operating agreement that says the debtor's son or an entity he controls is the parent of that entity, but they also prepared and are in possession of a document that indicates Ms. Guo's entity is the parent of this New York entity.

Because, as I stand here today, I have no

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1 confidence that I have actual authority to represent the New 2 York entity, I believe that the Rules of Professional 3 Conduct require me to continue to pursue this motion to 4 withdraw. Since the day that this issue has arisen, other 5 than what I say what I do every day, which is wake up and 6 make sure my family is okay, this has been my number one 7 priority to both gather documents or attempt to locate 8 documents and attempt to answer this question so that I 9 could come in here today and answer any questions the Court 10 has or anyone else.

11 have for the Court today. 12 Everything that I did was an attempt to further 13 this process to avoid a situation where it appeared that 14 either me, my firm, or Ms. Guo or any entity that she 15 controls was attempting to ignore a court order or do 16 anything other than attempt to comply with it.

17 at all times been my sole motivation for every action that I 18 have undertaken in connection with this entire process. 19 I'm prepared to answer any questions that the 20 Court or anybody else in the room has, but with that I rest 21 on my motion. 22 THE COURT:

23 to raise their issues, and then I'll see if I have any 24 questions. Attorney Romney, you did file a -- an affidavit, 25 but I don't think -- and I may have missed -- Attorney

Ho Wan Kwok - July 11, 2023 16 Vartan, did you file anything? MR. VARTAN: I did not, Your Honor. But I've obviously reviewed Attorney Romney's affidavit, and I -- THE COURT: Well, that doesn't -- that's fine. I just wanted to know whether you filed anything. MR. VARTAN: Oh. I have not, Your Honor. THE COURT: And why did you not file anything? MR. VARTAN: Because everything that Mr. Romney cited in his affidavit is consistent with the record, and I have nothing more -- THE COURT: And don't you have an obligation to make a statement to the Court and not through Attorney Romney? I mean, the issues that we've talked about in this case at different times is who represents whom, who's acting in what nature, you're local counsel, you're main counsel. We've had these discussion before. And the discussion -- what I don't understand is -- I know you're here, and I appreciate that you're here, but I don't understand why Attorney Romney is the only one that filed an affidavit. I would think you would have filed an affidavit. And Attorney Romney has stated, as have other members from his firm, that they got involved and were retained through discussions with you, that your -- you had the contact with the client. Attorney Romney didn't speak directly to Mei Guo. Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 16 of

Ho Wan Kwok - July 11, 2023 17 That's not what your affidavit says. You said you and Attorney Vartan -- MR. ROMNEY: We -- THE COURT: -- spoke with Mei Guo. And doesn't Attorney Vartan have the relationship with Mei Guo? Don't you, sir? MR. VARTAN: Your Honor, I certainly do have a relationship with the client, as does -- THE COURT: Well, who retained you, Attorney Vartan? MR. VARTAN: Ms. Guo did. THE COURT: Okay. And who did she retain when she retained you? Did she retain you, or did she retain you and Mr. Romney? MR. VARTAN: Both of us. THE COURT: Okay. And there's -- MR. VARTAN: Well, Mr. Romney had already been retained, Your Honor. THE COURT: In connection with the motion for contempt? MR. VARTAN: So in -- I was answering questions with respect to Ms. Guo's retention of Mr. Romney and then Ms. -- with me generally. With respect to the Hudson Diamond entities, Mr. Romney and I both spoke with Ms. Guo. THE COURT: And why didn't you file an appearance Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 17 of

1 on behalf of the Hudson Diamond entities? 2 MR. VARTAN:

3 Mr. Romney put forward in his affidavit why I did not. 4 THE COURT: Well, that's Mr. Romney's affidavit. 5 That's not your affidavit. 6 MR. VARTAN: No, I understand, Your Honor.

7 there was nothing that I had to add to the record beyond 8 what Mr. Romney put forward in his affidavit.

9 happy to answer any questions that Your Honor may have or 10 anyone else may have. 11 THE COURT:

12 you didn't answer. Why didn't you file an affidavit? 13 MR. VARTAN:

14 anything more to add to the record.

15 understanding that we were under court order to file. 16 THE COURT:

17 June 20, 2023, that you were to appear and show cause why 18 the motion to withdraw should not be granted.

19 United States Trustee filed a response to the motion to 20 withdraw. And, remember -- well, maybe you don't remember, 21 but I do -- that there was a hearing on the motion to compel 22 at which I was told on the record through counsel, and which 23 included you, that you were resolving -- or attempting to 24 resolve the motion for contempt, because you represented the 25 Hudson Diamond entities and that you would be producing

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1 documents in accordance with the subpoena. 2 Immediately after -- no, that's not fair.

3 not immediately after.

4 Attorney Romney files a motion to withdraw the appearance. 5 Now, I've asked on many occasions, is Mr. Romney 6 taking direction from Ms. Guo, or is he taking direction 7 from you and Ms. Guo? I've had that discussion.

8 we've had a discussion about who's local counsel, who's main 9 counsel. 10 We're not going to do this where -- you're at two 11 different firms. Either you're both counsel where you both 12 are bound and have to comply with court orders or you're 13 not. But we're not going to have, oh, I'm not going to say 14 anything further because Attorney Romney already said it. 15 Otherwise, why would I put you in that order?

16 put you in that order, sir, because you're the person who's 17 come in and said you have the client contact and authority 18 with Ms. Guo. That's what you've said on many occasions in 19 this court. And you've said it in -- and the pleadings that 20 are filed are signed by you first and then Attorney Romney. 21 So the -- you have an obligation, a professional 22 obligation and ethical obligation, to the Court and all the 23 parties involved in the case.

24 so that's fine. If you're telling me you're going to rely 25 on Attorney Romney's affidavit, that's what you're telling

1 me. I'm not sure that's showing cause why the motion to 2 withdraw shouldn't be granted. 3 But in any event, with regard to -- a couple of 4 questions with regard to Hodgson Russ.

5 first of all, I don't see how there's been any -- maybe 6 there has been. But there's nothing in the record before me 7 right now that shows that there's been any compliance with 8 the motion for contempt even on behalf of the entity which 9 you say you still represent, which is Hudson Diamond 10 Holdings. 11 Has there been any compliance with the subpoena? 12 MR. ROMNEY: Yes, there has, Your Honor. 13 THE COURT: And what has that compliance been? 14 MR. ROMNEY:

15 me -- June 15th, which was the deadline for compliance, 16 Attorney Vartan sent a letter which the two of us prepared, 17 that explained that -- what we had done at -- as of that 18 time to attempt to locate documents.

19 operating agreement that showed Ms. Guo controlled Hudson 20 Diamond Holdings, LLC.

21 organization that showed Hudson Diamond Holdings' creation. 22 It explained the efforts that we had undertaken to attempt 23 to locate documents. 24 We, as officers of the court and our client as a 25 natural human being, only have the ability to produce

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Ho Wan Kwok - July 11, 2023 21 documents that we can physically possess or that are under the possession of people who we have the ability to control, in other words that we constructively control. We have attempted every which way that we could to locate documents, and we have produced what we could. But we -- and we have also identified other sources of documents where we believe to have them but will not give them to us or Ms. Guo, such as Hodgson Russ and Capital One Bank. We have done everything we could, but they will not give them to us. The other two individuals who -- THE COURT: Well, so let's slow down a little bit on that. Okay? So there's a couple of things that you said. You said that you -- but Attorney Vartan signed a letter and sent it to the trustee on June 15th saying you've done all you can to comply. Is that right? I think I -- I'm just making sure I heard what you said. MR. ROMNEY: We didn't say we've done all we can to comply. We said that. But also -- meaning, yes, that's a fair summary of what we said. And we produced the documents I just described. THE COURT: Okay. And tell me -- I apologize. What are the documents that were produced on June 15th? MR. ROMNEY: It's the Hudson Diamond Holdings operating agreement signed by Ms. Guo.

Ho Wan Kwok - July 11, 2023 22 THE COURT: Signed by -- so Exhibit T? MR. ROMNEY: No. THE COURT: The two -- the two-page document? MR. ROMNEY: No. THE COURT: So there's an operating agreement. MR. ROMNEY: There's a -- THE COURT: How many pages is that document? You don't need to tell me exactly. I'm saying like is it -- are you talking about a 25-page document -- MR. ROMNEY: I believe it -- THE COURT: -- a 50-page document? MR. ROMNEY: I believe it's about a five-page -- THE COURT: Okay. MR. ROMNEY: -- five or six-page document. THE COURT: And that operating -- that agreement is an operating agreement of which entity? MR. ROMNEY: Hudson Diamond Holdings, LLC signed by Mei Guo as the sole member. THE COURT: Okay. And you -- you're telling me, and I'm just trying to make it clear for the record, that Mei Guo retained you specifically to represent Hudson Diamond Holding, LLC in this case in connection with the motion for contempt? MR. ROMNEY: She directed me to represent Hudson Diamond Holdings, LLC in connection with -- Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 22 of

Ho Wan Kwok - July 11, 2023 23 THE COURT: So she didn't retain you? MR. ROMNEY: I don't understand the distinction. THE COURT: Well, I think there is a -- MR. ROMNEY: But we do not have a separate retention letter. THE COURT: You do not have a separate -- is that what you said? MR. ROMNEY: With the entity. That's correct. THE COURT: Okay. So you don't have a separate retention letter with regard to Hudson Diamond Holdings, LLC. And you believed at the time that she directed you to represent the Hudson Diamond entities. That included Hudson Diamond New York, LLC, correct? MR. ROMNEY: No. I know that she did. THE COURT: Okay. Yeah. MR. ROMNEY: Yeah. THE COURT: Okay. So then things progress. You file a notice of appearance, and you come to the Court and you say at the hearing on the motion for contempt, which I'm not saying it would have happened, okay, but the trustee's counsel was pressing for an order of contempt against both Hudson Diamond New York, LLC and Hudson Diamond Holding, LLC. You say -- MR. ROMNEY: Yes. And that matter is on the calendar today. Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 23 of

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1 THE COURT: Right.

2 you said we have an agreement to adjourn that hearing 3 because we're going to enter into a consent order about how 4 we're going to comply with the subpoenas essentially, 5 correct? 6 MR. ROMNEY:

7 on the record. 8 THE COURT: No, you did. 9 MR. ROMNEY: Yeah. 10 THE COURT: I'm actually looking at it right now. 11 MR. ROMNEY: Yeah. Yeah. 12 THE COURT: Okay. 13 MR. ROMNEY:

15 THE COURT:

16 regarding the motion for entry, holding Hudson Diamond New 17 York, LLC, and Hudson Diamond Holdings, LLC in civil 18 contempt for failing to respond to the subpoenas.

19 that order, the Hudson entities say that they have no reason 20 to and therefore do not dispute that they were properly 21 served with the 2004 subpoenas directed to each of them and 22 that they contend that the relevant individual of the Hudson 23 entities was not actually made aware of the subpoenas until 24 after the filing of the motion.

25 individual at the Hudson entities that was not made --

Ho Wan Kwok - July 11, 2023 25 actually made aware of the subpoenas until after the filing of the motion for contempt? MR. ROMNEY: Ms. Guo was the individual -- THE COURT: Okay. MR. ROMNEY: -- I was referring to in that statement. THE COURT: Okay. MR. ROMNEY: And what we meant by it was we have no reason to doubt the veracity of the returns of service that indicate that statutory service agents were signed. But what I was reporting back was that as best I could tell, Ms. Guo was learning about those subpoenas for the first time when Attorney Vartan and I -- I think it was actually me in that particular case that sent the email. And then the three of us had a phone call together. But that it appeared that we were informing her of those subpoenas. THE COURT: Why do you say it appeared that we were informing her? You know or didn't know? MR. ROMNEY: Well, I don't -- THE COURT: She's told you she'd never seen the subpoenas before? MR. ROMNEY: Without waiving privilege with respect to any other statement, yes. THE COURT: Okay. Well, I don't think it's waiving privilege if you want to show cause as to why you Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 25 of

1 want to be -- withdraw as an attorney, right?

2 you bring Ms. Guo in. She can testify. Right?

3 bring her in. She could support everything you've said. 4 MR. ROMNEY:

5 with the target on my back, and I'm not going to throw my 6 client under the bus. 7 THE COURT:

8 means, what you just said. 9 MR. ROMNEY:

10 something I've done, and I'm here to explain my behavior. 11 THE COURT:

12 questions. You said -- I think you ended your presentation 13 by saying does the Court have any questions.

14 do. So I'm asking them. 15 MR. ROMNEY: Understood.

16 to ease your concerns.

17 concerned.

18 THE COURT:

19 was an agreement made on the record that there would be 20 compliance with a subpoena so that the Court would not rule 21 on the motion for contempt with regard to the Hudson Diamond 22 entities that you filed a notice of appearance on behalf of. 23 And in your affidavit and in your statements here -- and 24 Mr. Vartan's not disputing it -- it's with -- in 25 consultation with Mr. Vartan too.

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Ho Wan Kwok - July 11, 2023 27 So if you have a target on your back, it may be placed by somebody else other than the Court. Because you're putting yourself out there, and I'm not sure why. Because at this point, you're saying you believe that Mei Guo didn't know about the subpoenas until the motion for contempt was filed and you sent an email and then had a phone call with Attorney Vartan and Ms. Guo. MR. ROMNEY: The typical practice when there's matters of substance is for the three of us to have a phone call and discuss matters concerning her or entities that she controls. And sometimes -- I mean, we can't jointly send an email. Sometimes one of us sends it. And if there's a ministerial update, either one of us could have the call. But my point was, in this particular case, I have a recollection of going through my emails where I was the one that sent the subpoenas to her and then requested a call with her and Attorney Vartan. And then we had that call. THE COURT: Okay. So who authorized you to file the notice of appearance on behalf of Hudson Diamond, LLC and Hudson Diamond New York, LLC? MR. ROMNEY: Just so we have a clear record, it's Hudson Diamond Holdings, LLC and Hudson Diamond New York, LLC. THE COURT: That's fine. Hudson Diamond New York, LLC and Hudson Diamond -- because the notice of appearance

Ho Wan Kwok - July 11, 2023 28 was on behalf of both of those entities, correct? MR. ROMNEY: Correct. THE COURT: Okay. And who authorized you to file that notice of appearance? MR. ROMNEY: Mei Guo. THE COURT: Okay. And in what capacity? MR. ROMNEY: As counsel for those entities believing that -- THE COURT: No, I'm sorry. I didn't ask the question properly. I'm sorry. How do you believe she had authority to direct you to file an appearance on behalf of Hudson Diamond New York, LLC and Hudson Diamond Holding, LLC? MR. ROMNEY: Well, as stated, but apparently not very clearly, the Chapter 11 trustee's motion for contempt represents that Hudson Diamond Holdings, LLC is the parent of Hudson Diamond New York and that Mei Guo is the sole member of Hudson Diamond Holdings, LLC. I knew that Mei Guo was the sole -- was the parent -- sorry, the sole member of Hudson Diamond Holdings, LLC. I also believed based upon statements from Ms. Guo, which I believe she was subjectively -- I believe she believed she was the sole member of Hudson Diamond Holdings and that Hudson Diamond Holdings was the sole member of Hudson Diamond New York. I believe the basis of Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 28 of

1 her belief, among other things, is that she had been asked 2 to sign documents on behalf of Hudson Diamond New York as 3 the member of Hudson Diamond Holdings which was New York's 4 sole member. 5 And the sole reason that caused us to believe that 6 Ms. Guo was mistaken, just like I may or may not have been 7 mistaken based upon what we know now, is that Hodgson Russ 8 informed Attorney Vartan and I when we called them together, 9 Attorney Kevin Kearney stated to us that Hudson Holdings, 10 LLC was not the sole member of Hudson Diamond -- Hudson 11 Diamond New York and that he was -- appeared to have been 12 reading an operating agreement that his firm had prepared 13 that indicated that the debtor's son was the sole member of 14 the New York entity. 15 THE COURT: Of Hudson Diamond New York, LLC? 16 MR. ROMNEY: Hudson Diamond New York, LLC.

17 is what prompted me to immediately consult with Attorney 18 Henzy, immediately call Attorney Luft, and then the 19 following morning file my motion to withdraw the appearance 20 pursuant to what I believed I had to do under Rule 1.16(b) 21 of the Rules of Professional Conduct. 22 THE COURT:

23 of Hudson Diamond New York, LLC, you may have done this -- 24 I'm sorry, but there are, as you know, substantial amount of 25 documents in this case.

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Ho Wan Kwok - July 11, 2023 30 agreement on the docket somewhere that indicates that the debtor's -- the individual debtor's son is the member of Hudson Diamond New York, LLC? MR. ROMNEY: I don't have that operating agreement -- THE COURT: Okay. MR. ROMNEY: -- because Hodgson -- Hodgson Russ would not provide any information concerning any of the Hudson Diamond entities to me, Ms. Guo, or Attorney Vartan. And in my affidavit -- declaration, excuse me, as well as copied into the body of the declaration as well as the email chain with the attachment evidenced that Hodgson Russ will not give us any documentation concerning those entities. So I don't have it. All I had was the word of the general counsel of what I understand to be a highly reputable firm telling me that the debtor's son was the member. THE COURT: So -- MR. ROMNEY: He then subsequently amended his statement to say that it was not the debtor's son in his individual capacity but the debtor's son as an officer and -- an officer in some other capacity of some third entity, Hudson Diamond Holdings, Inc., which is a British Virgin Island company, which I have no idea who actually owns that entity, only I believe it -- I have no reason to believe it's Ms. Guo. Ms. Guo has no reason to believe it's

1 her. And it appears to be the debtor's son based upon 2 statements that Hodgson Russ has made to us, because he 3 appears to be signing documents on behalf of that entity. 4 THE COURT:

5 appearance because Hodgson Russ told you that Hudson Diamond 6 New York, LLC's managing member is the debtor -- individual 7 debtor's son, but you never saw a document that confirmed 8 that? 9 MR. ROMNEY:

10 correct. 11 THE COURT: Okay. Okay. 12 MR. ROMNEY:

13 because Hodgson Russ has also prepared a subsequent document 14 that indicates that it prepared a document for Ms. Guo to 15 sign as the member of Hudson Diamond Holdings, LLC as the 16 sole member of Hudson Diamond New York.

17 here right now is I don't know who the sole member of Hudson 18 Diamond New York is. Hodgson Russ doesn't appear to know. 19 I've asked them for information concerning why 20 they prepared this document which is the only document they 21 first identified to Attorney Vartan and I at the time I 22 filed the motion to withdraw.

23 why they produced that document that referenced the debtor's 24 son and the debtor's -- and then subsequently prepared a 25 document identifying the debtor's daughter as the indirect

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1 member of the New York entity.

2 absolutely no idea which one it is.

3 believe I'm required to pursue my motion to withdraw my 4 appearance. 5 I will say that to the extent I was able to 6 determine that Ms. Guo directly or indirectly is, in fact, 7 the member, indirect member or person with the authority to 8 control or retain counsel for Hudson Diamond New York, I 9 would withdraw my -- well, I would withdraw my -- I would 10 withdraw my motion to withdraw my appearance, because I am 11 in no way trying to hide from this situation, run from this 12 situation, or try and pull a fast one on behalf of Hudson 13 Diamond New York, Hudson Diamond anything or Ms. Guo.

14 simply trying to fulfill my ethical duties to this Court, my 15 sole natural client in this situation, Ms. Guo, and everyone 16 else in the room. 17 THE COURT:

18 situation. 19 MR. ROMNEY: No. But she's my client in general.

21 THE COURT: No.

22 situation. The client -- and you've been very careful, and 23 I understand why.

24 represent at this point -- or that you believe you represent 25 and had authority to represent is Hudson Diamond Holding,

Ho Wan Kwok - July 11, 2023 33 LLC. MR. ROMNEY: Correct. But my statement, Your Honor, and maybe it wasn't precise enough, was that all I'm trying to do is my best to fulfill my ethical obligations to the Court, the Hudson Diamond entities, Ms. Guo, and everybody else in the room. I don't represent anybody else in this room, but I have ethical obligations to them just like I have ethical obligations to the Court. And that's to

tell the truth and to do my best and to honor the agreements that I make to the best of my ability. And that's what I do every day in every one of my cases. And it's what I'm doing right now.

THE COURT: Well, let me ask one more question. So the hearing on the motion to -- for contempt was held on June 6th.

MR. ROMNEY: Correct.

THE COURT: There were a number of hearings held on that day, but that was one of -- that -- the motion for contempt directed against many parties, including the Hudson Diamond New York, LLC and the Hudson Diamond Holdings, LLC entities. And at that hearing, you had filed a notice of appearance before that hearing.

You had prepared -- appeared at that hearing and said there was an agreement with regard to the production and that the production would be completed, not just done

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1 but completed, by June 15th on behalf of both entities.

2 then on June 8th, the consent order was filed that 3 memorialized the agreement made on the record on June 6th. 4 And the Court entered that order, I think.

5 it was the same day or the next day.

6 like the same day. And then -- which is June 8th.

7 order is ECF 1896. 8 And so as of June 6th -- and, again, confirmed on 9 June 8th, you represented both Hudson Diamond -- excuse

me -- New York, LLC and Hudson Diamond Holdings, LLC. And you and Attorney Vartan represented that you were going to complete the compliance with the subpoenas by June 15. On June 13, two days before -- you know, so five days after the consent order entered but two days before the compliance was due, you filed a motion to withdraw only as to Hudson Diamond New York, LLC.

So you're saying -- I want to just make sure that I understand. You're saying from -- you have complied with the consent order as far as Hudson Diamond Holdings, LLC is concerned?

MR. ROMNEY: That's correct.

THE COURT: Okay. And what about Hudson Diamond New York, LLC? They haven't complied, correct?

MR. ROMNEY: I'll answer that, if I may, two ways. I believe that's correct. And I am not here to oppose and

Ho Wan Kwok - July 11, 2023 35 do not intend to oppose and will not oppose an entry of an order of contempt against the New York entity, because I don't have authority to argue that one way or another. Or I'm not convinced that I do. What I will say is that in the intervening period between June 6th, when I entered into the stipulated order that Your Honor just described, and the present, Attorney Vartan and I and Ms. Guo have attempted to locate documents concerning Hudson Diamond New York as well as Hudson Diamond Holdings. And we have just not been able to locate them. We believe that there are documents at Capital 1 -- THE COURT: I'm sorry. Say that again. You've been attempting to locate documents for Hudson Diamond New York, LLC? MR. ROMNEY: That's correct. THE COURT: Why if you don't represent them? MR. ROMNEY: Because during this intervening period, I believed that I did. THE COURT: Okay. So what did you do to try to locate the documents? MR. ROMNEY: As set forth in my declaration, the -- we did three things. We contacted Hodgson Russ, which we believed to have represented -- well, we knew formed the New York entity, because we had the articles of Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 35 of

Ho Wan Kwok - July 11, 2023 36 organization that confirmed it formed it. So we attempted to contact -- THE COURT: That the articles of -- I'm sorry. I'm not trying to interrupt you. I just want -- MR. ROMNEY: It's -- THE COURT: -- to be very clear. The Hudson Diamond New York, LLC articles of incorporation. Is that what you're talking about? MR. ROMNEY: Yes. THE COURT: And those were signed by whom? MR. ROMNEY: They were filed by Hodgson Russ. THE COURT: Yeah. But who signed them? Who would the -- who was the Hudson Diamond New York, LLC signatory? MR. ROMNEY: I don't believe there was a signatory. THE COURT: Okay. So you have articles of incorporation that aren't signed? MR. ROMNEY: I don't believe New York law or Connecticut, for that matter, requires a signatory. But New York -- THE COURT: Well, who's the managing member? MR. ROMNEY: It's not identified in the -- there is no natural person identified -- THE COURT: Okay. MR. ROMNEY: -- in the articles -- Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 36 of

Ho Wan Kwok - July 11, 2023 37 THE COURT: All right. MR. ROMNEY: -- of organization other than Hodgson Russ as the "filing party." THE COURT: So you got that document from Hodgson Russ? Is that what you're telling me? These articles of incorporation? MR. ROMNEY: I got that document from Ms. Guo. THE COURT: Okay. And it's not signed. But she had it? MR. ROMNEY: Correct. THE COURT: In her personal files? MR. ROMNEY: Which further -- which was further support for my belief and her belief that it was her entity. Correct. THE COURT: Okay. MR. ROMNEY: Yes. THE COURT: All right. That's what I'm asking. MR. ROMNEY: Yes. THE COURT: All right. So she had it in her files, and she turned it over to you. And Mr. Vartan or just you or Mr. Vartan? MR. ROMNEY: She sent an email to Attorney Vartan and I. So she turned it -- THE COURT: Okay. MR. ROMNEY: -- over to us -- Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 37 of

Ho Wan Kwok - July 11, 2023 38 THE COURT: Okay. MR. ROMNEY: -- simultaneously. THE COURT: And what other documents did she turn over with regard to Hudson Diamond New York, LLC? MR. ROMNEY: With regard to Hudson Diamond New York, LLC? Those were the only ones. THE COURT: Okay. And did you -- and you may have said this, okay, so I'm sorry. I need to be clear. Did you supply that document to the trustee? MR. ROMNEY: That document had been supplied to the trustee, I believe, in connection with earlier production on the part of Ms. Guo. THE COURT: But you didn't produce it to the trustee on behalf of Hudson Diamond New York, LLC, even though Ms. Guo sent you an -- you and Attorney Vartan an email with that document? MR. ROMNEY: I did not. Because by the time of the production date, I didn't believe I had authority to do anything on behalf of Hudson Diamond New York, LLC, because -- THE COURT: When did you get the email from Ms. Guo that had that agreement attached to it? MR. ROMNEY: I don't recall the date. It was before -- THE COURT: Was it before you filed your motion to Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 38 of

Ho Wan Kwok - July 11, 2023 39 withdraw as attorney? MR. ROMNEY: It was before I filed -- THE COURT: Okay. MR. ROMNEY: -- my motion to withdraw as an attorney. THE COURT: All right. Now, with regard -- so you have no opposition, because you can't -- you have no authority to oppose an order entering against Hudson Diamond New York, LLC to hold them in contempt. Is that correct? MR. ROMNEY: That's correct. THE COURT: Okay. With regard to Hudson Diamond Holding, LLC, you believe -- and, Attorney Vartan, you're going to be asked the same question -- that you complied and you -- with the consent order for -- and what your terms are in this consent order is that you've completed the production to the trustee on behalf of Hudson Diamond Holdings, LLC? You -- by June 15th. You believe you've complied with that order? MR. ROMNEY: I do. THE COURT: Okay. Attorney Vartan, you believe you've complied with the order -- the consent order that included Hudson Diamond Holdings, LLC, completing its production of documents to the trustee by June 15th? MR. VARTAN: Yes, Your Honor. We sought to obtain all documents from all sources that we could and -- Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 39 of

Ho Wan Kwok - July 11, 2023 40 THE COURT: What sources did you seek to obtain them from? MR. VARTAN: So we sought to obtain documents from Hodgson Russ. We sought to obtain documents from Capital One. And we obviously also sought to obtain documents from our client directly. There were a number of other individuals who could theoretically have had documents who would not speak with us. THE COURT: Well, what does that mean? I mean, I don't know what that means, who would not speak with us. MR. VARTAN: So -- THE COURT: What attempts did you make? MR. VARTAN: So we attempted to reach out through our client to both -- THE COURT: So you didn't reach out. Your client reached out? MR. VARTAN: Correct. THE COURT: So you have no knowledge as the lawyer representing the Hudson Diamond entities at that time of whether your client actually reached out to these other sources? MR. VARTAN: Well, we have knowledge that our client went to the bank, because we were on the phone with her both before and after. THE COURT: But you don't know if she was at the Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 40 of

Ho Wan Kwok - July 11, 2023 41 bank when she was -- MR. VARTAN: We don't -- THE COURT: You don't -- MR. VARTAN: We have no reason to doubt our client in any way. THE COURT: That's not my question. You don't know. You're the lawyer, right? Aren't you supposed to know? MR. VARTAN: I know that she went to the bank based upon -- THE COURT: How do you know that? MR. VARTAN: -- based upon my conversations with her. THE COURT: So based upon what she says, you know that? MR. VARTAN: Again, I have no reason to doubt her, Judge. THE COURT: I didn't say you have a reason to doubt her. I'm saying based upon what she says to you. MR. VARTAN: If you're asking me if I went to the bank with her, I did not. THE COURT: That's -- okay. So -- MR. VARTAN: But we -- THE COURT: What other sources -- what are you -- were you there when she went through the records of these Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 41 of

Ho Wan Kwok - July 11, 2023 42 entities to see what was -- what would be responsive to the subpoena? MR. VARTAN: I have been through Ms. Guo's records with her previously in making -- THE COURT: That wasn't my question. MR. VARTAN: -- prior productions. THE COURT: That wasn't my question. My question was a very direct question. MR. VARTAN: Not -- THE COURT: Were you there when she went through her records, reviewing documents that would be responsive to the subpoenas served on the Hudson Diamond entities? MR. VARTAN: My understanding, Judge, is she has no records beyond the records she and I had previously reviewed. THE COURT: That still didn't answer my question, Attorney Vartan. MR. VARTAN: So then -- THE COURT: Listen to the question. Were you there when your client went through her records that -- to -- that would -- to determine whether she had records that were responsive to the subpoenas issued and served, which you acknowledge were served on the Hudson Diamond entities? MR. VARTAN: I was not when she went through -- Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 42 of

Ho Wan Kwok - July 11, 2023 43 THE COURT: Okay. MR. VARTAN: -- documents right prior to June 15th. Correct. THE COURT: So you were not there. You did not view, observe, or discuss what your client did with regard to the review of the documents in her possession and control that would be responsive to the subpoenas served on the Hudson Diamond entities? MR. VARTAN: We absolutely did discuss. So I didn't view or observe her. THE COURT: Well, what discussions did you have about responsive to subpoenas? That isn't protected. So you can argue it's attorney/client. It's not. MR. VARTAN: Well, I -- THE COURT: You have a subpoena. You've already acknowledged the subpoena was appropriately served. You didn't oppose the subpoena. You didn't file a motion to quash. You didn't file a protective order. So there's no opposition that you can raise right now that is in any way privileged. So what discussions did you have with regard to documents that would have been responsive to the subpoenas served on the Hudson Diamond entities? MR. VARTAN: Well, I would maintain that the communications are privileged. Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 43 of

Ho Wan Kwok - July 11, 2023 44 THE COURT: Well, you can, but I -- you're wrong. So go ahead. What -- MR. VARTAN: So, well, I'm not going to go into privileged communications with my client, but certainly what we -- THE COURT: Well, then you're going to get held in contempt, okay? Because you have obligations, Attorney Vartan. You have obligations to the Court as an officer of the court. MR. VARTAN: No doubt. THE COURT: Okay? MR. VARTAN: And not to interrupt -- THE COURT: And you stated in a consent order and on the record through Attorney Romney that you were going to comply with these subpoenas. And you have to demonstrate, not just your client, you have to demonstrate what steps you've taken to be in compliance with the subpoenas. And I haven't heard anything. Not one thing. MR. VARTAN: Well, Your Honor, first and foremost, we had multiple conversations, both telephonic and email, with Hodgson Russ who we understood to be the attorneys for both the holdings entity -- THE COURT: And you didn't get any documents from them. They told you they wouldn't produce them. And what did you do at that? You just said, okay, they're not going Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 44 of

Ho Wan Kwok - July 11, 2023 45 to produce them. That's what you said. I've seen it. I mean, Attorney Romney has attached to his declaration some -- one person from Hodgson Russ who said I decline to talk to you. MR. VARTAN: Correct. That was the attorney who actually worked on the file. THE COURT: Okay. And what did you do when he said I -- MR. VARTAN: So when he -- THE COURT: -- decline to talk to you. MR. VARTAN: -- when he said I decline to speak with you, we said it was incredibly important that we speak. He then directed -- THE COURT: I don't think I saw anything about that. MR. VARTAN: Well, there was email communication which -- THE COURT: Well, it's not in the record. MR. VARTAN: Well, Your Honor, if I could finish. All I was saying -- THE COURT: You can finish, Attorney Vartan, but you need to be very careful. Okay? MR. VARTAN: I'm trying to be. THE COURT: Okay. Go right ahead. MR. VARTAN: And after we spoke with Mr. Harmon Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 45 of

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1 and he declined to speak with us, he then referred us to the 2 general counsel at Hodgson Russ.

3 the second attorney.

4 conversations with him where we explained that we were 5 endeavoring to do our best to make a complete production on 6 behalf of both Holdings and on behalf of New York. 7 In the context of those conversations is when he 8 told us that he did not believe that Ms. Guo had anything to 9 do with New York.

10 of the motion to withdraw. 11 THE COURT: Right.

13 MR. VARTAN:

14 THE COURT:

15 opposite. 16 MR. VARTAN:

17 THE COURT: Wait. Hold on. Hold on.

18 documents to support the statement made by the attorney from 19 Hodgson Russ. 20 MR. VARTAN: That's correct. 21 THE COURT: You have no documents. 22 MR. VARTAN:

23 THE COURT: And -- hold on, please. 24 MR. VARTAN: I'm sorry. I apologize. 25 THE COURT:

1 opposite, that she was the managing member of Hudson Diamond 2 New York, LLC. 3 MR. VARTAN:

4 it? The reason that we don't have documents from Hodgson 5 Russ is not for lack of effort on our part.

6 Hodgson Russ was representing that Hudson Diamond New York 7 had nothing to do with our client, had everything to do with 8 her brother who we don't represent.

9 there's a privilege between Hodgson Russ and the brother of 10 Hodgson Russ and Hudson Diamond New York that we certainly 11 can't abrogate. So it's not for lack of effort on our part. 12 And the one thing, Judge, that I just want to 13 point out, I think it was implicit and explicit in what 14 Mr. Romney was saying, but we're not here in any way to hide 15 the ball from the Court or from the trustee.

16 reason that we made an appearance on behalf of both Holdings 17 and New York in this case was not to obfuscate in any way, 18 but it was to make as complete a production as possible to 19 the trustee. 20 We did not have an interest in either entity to 21 the extent that we believed at the time that Ms. Guo was 22 affiliated with them to have either entity held in contempt. 23 And I believe the trustee isn't looking to hold entities in 24 contempt. The trustee is looking to get documents.

Ho Wan Kwok - July 11, 2023 48 THE COURT: Well, he's got a pending motion to hold them in contempt, so I disagree with you. MR. VARTAN: But what I was saying is I assume the trustee's preference would be to get documents -- THE COURT: It may -- yeah, it would be his preference. MR. VARTAN: -- as opposed to hold an entity in contempt. And that's what we were endeavoring to do no more. Had we continued to believe that we represented Hudson Diamond New York in addition to Holdings, then we would have made a production. The only reason there was a motion to withdraw with respect to New York was based upon the conversations, based upon the due diligence we were doing with respect to Hodgson Russ. THE COURT: Did you meet the Hodgson Russ lawyer in person? MR. VARTAN: I did not, Your Honor. THE COURT: Did you have a video conference with the person? MR. VARTAN: We had multiple telephone conversations. THE COURT: So you don't even know who the person is. You don't even know what the person looks like, right? MR. VARTAN: From the website, I do. But, no, I did not have -- Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 48 of

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1 THE COURT: Okay. 2 MR. VARTAN: -- a video conference. 3 THE COURT:

4 which the person at Hodgson Russ who wouldn't produce any 5 documents to you told you that the son is the managing 6 member.

7 MR. VARTAN: Of New York. 8 THE COURT: Right. Of New York. 9 MR. VARTAN: Correct. 10 THE COURT:

11 withdrew -- you moved -- well, you didn't file an 12 appearance, which is another whole issue.

13 talk about that at a different point.

14 ping pong thing. Okay?

15 beginning of this case.

16 both out, or you're one in or you're one out. 17 I need to know who represents these entities. 18 This is not going to continue in this court. Okay?

19 need to decide how that's going to work, and you need to 20 stick by that. 21 Because to have you sign some documents with 22 Attorney Romney's signature under them as -- which appears 23 as local counsel and then have Attorney Romney be the only 24 person that files a notice of appearance is not appropriate. 25 And it will not continue in this case.

1 to figure that out.

2 of you represents them, and that's it. 3 MR. VARTAN:

4 the record. So since I and my law firm have been involved 5 with the case it's very much been a co-counsel relationship

7 THE COURT:

8 appearance on behalf of both the Hudson Diamond entities? 9 MR. VARTAN:

10 preparing to do that, there was an issue, obviously, which 11 we brought to the Court. 12 THE COURT: That's not accurate.

13 accurate. The motion to compel for contempt was pending. 14 And Mr. Romney filed an appearance well before the hearing 15 on the motion for contempt.

16 accurate. So I don't want to hear that, because that's not 17 accurate. 18 You made a choice.

19 choice. But you're not making that choice anymore.

20 either both represent the entities or one or the other of 21 you does. 22 We are not doing this anymore.

23 the Court's time, and I don't feel that you are being 24 accurate in your representations to this Court.

25 need to think long and hard about that.

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Ho Wan Kwok - July 11, 2023 51 Attorney Romney's the only one that filed an affidavit or a declaration in connection with this motion to compel. You're going to argue, well, I didn't have to. I never filed the notice of appearance on behalf of the Hudson Diamond entities. But what do I hear? Every conversation that has to do with the motion for contempt and the notice of appearance and the motion and the production of documents has you involved in it, Attorney Vartan, not just Attorney Romney. That's not appropriate. MR. VARTAN: Understood, Your Honor. And I am truly not trying to hide anything from this Court or any party in the courtroom. Really, what we have endeavored to do since the filing of the motion seeking to hold the Hudson Diamond entities in contempt was to do our level best to figure out which of the entities that we represent. We certainly -- THE COURT: Well, you didn't do your level best to figure out which one of the -- entities you represented when Mr. Romney filed the notice of appearance. He represented both of them. MR. VARTAN: Your Honor, but, again, it was done -- and I understand a mistake was made. But what we're saying here is it was done with the best of intentions. Meaning we were not trying to hide anything from anyone. We were just --

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Ho Wan Kwok - July 11, 2023 52 THE COURT: Whether it's done with the best of intentions really doesn't matter, Attorney Vartan. MR. VARTAN: Well, I -- THE COURT: What matters is what are your professional obligations -- MR. VARTAN: We were trying -- THE COURT: -- under the applicable codes of conduct and as a member of the bar of the State of New York or New Jersey and practicing before this Court. And that's what your obligations are. You can have whatever intent you think. It doesn't matter. What matters is, what are your requirements? What are your obligations? What are you obligated to do? MR. VARTAN: And, Your Honor, I believe that we've met those obligations. THE COURT: Okay. That's your belief. That's fine. All right. Attorney Romney, is there anything else you'd like to add? MR. ROMNEY: Yes. Very briefly, Your Honor. My appearance on behalf of the Hudson Diamond entities -- I actually don't have that with me, but I believe it was -- THE COURT: I can -- we can put it up on the screen if you'd like. MR. ROMNEY: If it's not too much trouble, that

Ho Wan Kwok - July 11, 2023 53 would be helpful. THE COURT: All right. We'll find it. Give us a minute, and we'll put it up on the screen. MR. ROMNEY: I believe it's June 1st, filed at around 10-something p.m., if I recall correctly. THE COURT: 1848 is the ECF number. And it says that you entered an appearance on behalf of Hudson Diamond New York, LLC and Hudson Diamond Holding, LLC, parties in interest. MR. ROMNEY: And I -- am I correct that it was filed at 10-something p.m.? THE COURT: 10:16 p.m. Actually -- yes. No. 8:16 p.m. MR. ROMNEY: 8:16. Okay. I thought it was around 10. But the -- perhaps it was the motion for an adjournment that was filed at 10-something. THE COURT: That may be. You want me to -- MR. ROMNEY: No, no, no. THE COURT: Okay. MR. ROMNEY: The point I was making, Your Honor, was that this was filed on the evening before the deadline to respond for -- or the evening of -- THE COURT: I understand. MR. ROMNEY: -- the deadline to respond. THE COURT: I understand. Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 53 of

1 MR. ROMNEY:

2 THE COURT: The hearing wasn't until June 6th. 3 MR. ROMNEY: I understand.

4 is admitted in this Court pro hac vice on behalf of 5 HK International and Mei Guo.

6 why I am the one that filed this appearance was because 7 there wasn't time to get another pro hac vice application. 8 THE COURT: I understand that.

9 done that the next day. 10 MR. ROMNEY: It could have.

11 THE COURT:

12 done it that night, because it's all electronic filing. 13 It's very easy. 14 MR. ROMNEY:

15 THE COURT:

16 occasions, as have other people in the court. 17 MR. ROMNEY:

18 which is pretty sad in this day and age.

19 have very good support staff, so that's a distinction 20 without a difference. 21 At the time that we filed this, nobody -- not me, 22 not Attorney Vartan, not Ms. Guo and nobody else that I've 23 had discussions with -- was expecting for anything other to 24 happen other than us to negotiate a brief extension in 25 exchange for our compliance.

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1 believe correctly so in connection with the case law -- but 2 if I'm mistaken, I apologize -- to attempt in good faith and 3 diligently to locate every document that is within the 4 client's control, actual and constructive.

5 we intended to do. That's what we agreed to do.

6 what we did do. 7 And nobody, between Attorney Vartan, myself, and 8 Ms. Guo, expected this to become anything worthy of having 9 another attorney file a pro hac -- another pro hac vice 10 application, another docket entry in this case, because we 11 all intended and did act in good faith to comply and get the 12 trustee everything that the trustee wanted concerning these 13 entities.

14 THE COURT:

15 Ms. Guo, so I can't make any findings with regard to that. 16 The only thing I could make a finding with -- is with regard 17 to what you've said in your declaration under penalty of 18 perjury, which I appreciate that you filed. Okay? 19 MR. ROMNEY: Thank you. 20 THE COURT:

21 intentions are.

22 intentions are, because he hasn't filed anything.

23 speak to is what has happened in this case and what -- where 24 we are. 25 And we were at a point on June 6th where there was Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 56 of

1 going to be an order possibly entered against the Hudson 2 Diamond entities holding them in contempt.

3 on the docket, on the record that there was agreement that 4 you represented both of them, that there was an agreement 5 that they would produce and they would do so by June 15th. 6 You've now stated, Attorney Romney, that you 7 believe that you complied with regard to -- that you've 8 complied on the -- with the subpoenas for the production of 9 the documents with regard to Hudson Diamond Holding, LLC. 10 That's your statement.

11 what the trustee's going to do with that.

12 a -- I'm sure soon. 13 With regard to Hudson Diamond New York, LLC, there 14 has been no compliance that I'm aware of.

15 shown me that there is any compliance.

16 moves for a contempt, then I'm going to consider that. 17 MR. ROMNEY: And I will not oppose it. 18 THE COURT:

20 MR. ROMNEY: Correct.

21 THE COURT:

22 to withdraw your attorney, you don't have any authority to 23 oppose it. 24 MR. ROMNEY: Correct. 25 THE COURT:

Ho Wan Kwok - July 11, 2023 57 else you wanted to add? MR. ROMNEY: No. Thank you for -- THE COURT: Okay. MR. ROMNEY: -- hearing us. THE COURT: All right. Then I'd like to hear from the trustee's counsel -- MR. VARTAN: Thank you, Your Honor. THE COURT: -- and the Office of the United States Trustee as well. MR. LUFT: Your Honor, do you have a preference as to which you hear from first? THE COURT: I have no preference. MR. LUFT: Okay. Your Honor, may I approach? THE COURT: Yes, please. MR. LUFT: Thank you, Your Honor. Good afternoon, Your Honor. Avi Luft, Paul Hastings, on behalf of the trustee. Your Honor, I don't have any intention to speak today as to what the intent was of counsel. I wasn't part of their conversations that they had with anyone else, whether it be their client or Hodgson Russ. And I have no way to speak to that. So what I do want to speak to, and hopefully briefly, though, is with regard to this notion that no one knows who runs Hudson Diamond New York and that all Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 57 of

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Ho Wan Kwok - July 11, 2023 58 documents that presumably exist in the world that could have been responsive to our subpoena have been produced and, thus, there has been compliance. Because I don't think either of those is quite that straightforward. Look, as I understand it, Your Honor, they made reference to the fact that we filed papers indicating that Hudson Diamond New York appeared to be -- have a sole member of Ms. Guo. We did. They're attached to my declaration which is at Exhibit 1805. And specifically, Your Honor, if you look -- THE COURT: Exhibit T. MR. LUFT: There is Exhibit T, Your Honor. There is also Exhibit U which -- THE COURT: I may not have looked at Exhibit U. Go ahead. MR. LUFT: -- as well as Exhibits G, H, and I, Your Honor. THE COURT: Okay. MR. LUFT: And in brief, and this is why we believed it, if you look at Exhibit G, it is a document prepared by Hodgson Russ for Ms. Yvette Wang of Golden Springs which sets out an -- sets out org charts of the entities, which I can tell you from speaking to them they believed were controlled by the debtor. But be that as it may, they had listed who is named.

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Ho Wan Kwok - July 11, 2023 59 And under the one for Hudson Diamond Holdings, you can see Ms. Guo on the top directly above Hudson Diamond Holdings, directly above Hudson Diamond New York, LLC. Consistent with that, at Exhibit H is a document for Hudson Diamond New York which lists Ms. Wang as the contact but as the sole member says Hudson Diamond Holdings, LLC, 100 percent. Not surprisingly, located at 162 East 64th Street in Manhattan which is where most of the debtor's entities are located. And then if we go to Exhibit I, we see who owns Hudson Diamond Holdings. The member is listed as Ms. Guo, 100 percent interest, again with the 162 East 64th Street address. As Your Honor mentioned, and there is Exhibit T in which we see Ms. Guo signing consistent in her role as the sole member of Hudson Diamond Holdings. And Exhibit U where we see Ms. Guo again signing, this time as the sole member of Hudson Diamond Holdings. Based on that documentation, that is why we understood Ms. Guo to be the person in control of Hudson Diamond Holding and Hudson Diamond New York. We are not aware of any document which indicates that anyone else is the named member. I will tell you I

on discovery and our investigation. But in terms of who is

believe that the debtor actually controlled the entity based Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 60 of

Ho Wan Kwok - July 11, 2023 60 the member and who can -- should be responding to the subpoena, that is what -- who we believe is in charge. Now, I feel like I'm not sure why we have confusion at this point, because my understanding is that while there is no document anywhere that someone has seen that indicates that someone other than Ms. Guo is the member, there have been representations that there were conversations in which Mr. Kearney of Hodgson Russ indicated that the son may be the member. That very well may have happened. I don't know. What I do know is if we look at Mr. Romney's declaration and Exhibit A, Mr. Kearney wrote to Mr. Romney and Mr. Vartan saying that he questions whether he ever said that but then more importantly says the documents indicate that Holdings was the member, not Qiang Guo, who is the son. And he goes on to say that the engagement concerning Hudson Diamond New York was addressed to Ms. Wang. So whatever may have been said on the call, and very well there may have been a miscommunication, I think Mr. Kearney has made clear at this point that there is not a belief that Mr. -- the debtor's son, Mr. -- again, Mr. Guo is the member of Holdings, in which case there is no reason to believe that Ms. Guo, Mei Guo, is not the member of Holdings, in which case they should be able to comply. Why do I care about this, Your Honor? Solely for

1 one reason. We need to get documents.

2 we can speak to, who we can get from. 3 And that brings me to really the second point we 4 have here, which is you've heard today that they've said 5 that they've gotten all documents from all sources. 6 Mr. Romney in his declaration says I do not have any reason 7 to believe that New York or Holdings have any assets or the 8 ability to produce additional documents. 9 Well, Your Honor, I don't know how that could be 10 true. I've had conversations with Mr. Vartan and 11 Mr. Romney. And I've pointed them in particular to Exhibit 12 J of my declaration, which is an insurance agreement on 13 behalf of Hudson Diamonds New York with AIG indicating that 14 there's a Rolls-Royce in their name.

15 documents about that.

16 compliance from Holdings. So J talks about a Rolls-Royce. 17 If you look at Exhibit V, that is the deposition 18 of Margaret Conboy. 19 THE COURT: Exhibit -- which? 20 MR. LUFT: V as in Victor. 21 THE COURT: V? Okay. Hold on one second. 22 MR. LUFT: Of course, Your Honor. 23 THE COURT: All right.

24 MR. LUFT:

25 THE COURT:

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1 MR. LUFT: Correct, Your Honor. 2 THE COURT:

3 1805-36, page 1 of 5.

4 declaration page.

5 insured, and mailing address, Hudson Diamond New York, LLC, 6 162 East 64th Street, New York, New York.

7 of issuing company, AIG Property Casualty Company. 8 Description of your covered automobiles.

9 with a VIN number and an agreed-upon value of \$283,712. 10 That's what you're referring to? 11 MR. ROMNEY: Yes, Your Honor. 12 THE COURT:

13 two individuals who says are authorized and covered, Dean 14 Rabideau -- I'm not sure I'm pronouncing that right -- 15 R-A-B-I-D-E-A-U -- and I -- Cao Defeng -- and again, I 16 probably did not pronounce that correctly -- C-A-O is the 17 first name. D-E-F-E-N-G is the second name. 18 And there's a million-dollar coverage -- liability 19 coverage per occurrence.

20 \$50,000 person.

21 occurrence. Collision coverage for your damage to your 22 automobile up to the agreed value.

23 protection with a premium of \$5,817.

24 document, it looks like. 25 Okay. Go ahead. That's Exhibit G -- J as in jam.

Now we need to look at V as in Victor? MR. LUFT:

of a deposition of Margaret Conboy who is a lawyer at Whitman Breed who represented on behalf of Hodgson -- Hudson Diamond with regard to at least five real estate

THE COURT:

this deposition? I've opened up Exhibit V now. MR. LUFT:

21 -- page 21 where there is a discussion about Hudson Diamond. I don't -- just so you can see what it is.

don't intend to go through all of this. THE COURT:

screen, or do you just want to -- wait.

handle that? MR. LUFT: Your Honor, I'll make reference to it. I think that'll just expedite things. THE COURT: Okay. Go right ahead. MR. LUFT:

purchase being made on behalf of an entity called Hudson Diamond. And then it says, "Is this the same engagement where you were told you were representing the interests of Mr. Kwok and his family, correct?

from there. I raise these, Your Honor, and I raised them with

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1 Mr. Vartan and Mr. Romney previously to say we know about 2 the car, we know that there were real estate transactions, 3 we know there seems to be transfers related to the Hudson 4 Diamond entities, meaning there should be documents.

5 isn't a shell company that did nothing or that no one ever 6 did anything on behalf of. 7 But all we've received is the two documents you've 8 heard about from Holdings, and we've received nothing from 9 New York at this point.

10 we're being told there's no one we can even talk to about 11 that. I really would rather much prefer to have the 12 information about where these assets are, whether some -- a 13 house was actually purchased. 14 Some of these houses that I looked up were worth 15 upwards of \$35 million, Your Honor.

16 anything was ever consummated.

17 have had funds if they were looking to buy it.

18 that would be a reasonable assumption. 19 So that's what I'm trying to find out here.

20 at this point, it seems to me that this seems knowable.

21 only do all the documents suggest it, but the idea that a 22 brother and a sister and a father can't speak and understand 23 who's the person that the debtor -- whose name the debtor 24 put on top of the company, that seems knowable, particularly 25 when two of the three entities are represented by the same

Ho Wan Kwok - July 11, 2023 65 counsel. So, Your Honor, that's really where we are with regard to this. I understand the idea that if they -- if they say that they're not representing them then they can't -- they need to withdraw, because they're not representing them. I can only speak to in terms of what we know and we've presented to you in terms of why we believed Ms. Guo was the person in charge. That's where that is. But what I do have to take issue with is the idea that there has been compliance or we've received all the documents related to Hudson Diamond, whether from Holdings, which appears to us to wholly own New York, or from New York. I don't know which specific -- where all the assets are or whatever else. That's what the documents would tell me. But I don't believe we've had compliance. And so as to both, I would renew our motion for contempt, Your Honor. THE COURT: Okay. Thank you. MR. LUFT: Thank you. THE COURT: Attorney Claiborn? MS. CLAIBORN: Thank you, Your Honor. Holley Claiborn for the U.S. Trustee. I want to circle back to something Attorney Luft pointed out, and I think that that is important to focus on, which is that based upon the

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1 emails between Attorney Romney and Attorney Kevin Kearney at 2 Hodgson Russ, there appears to be a consensus that the last 3 document that exists that anyone's seen was actually signed 4 by Mei Guo in her capacity as the sole member of Holdings, 5 which is the same -- it's the same sole member of New York. 6 So that's the last document that's been before the Court and

7 the last document that's been talked about. 8 That document is consistent with what Attorney 9 Kearney is saying in the emails that are attached to 10 Attorney Romney's affidavit.

11 doesn't seem to be any confusion, at least on paper, that 12 Mei Guo is the person in charge. 13 So if Mei Guo is the person in charge, then 14 Attorney Romney appears to have a direct connection to her, 15 because he represents her in her individual capacity as 16 well. And then there seems to be no reason to do a 17 withdrawal of the appearance. 18 The other thing I wanted to say is that the 19 withdrawal of the appearance on behalf of Hudson Diamond -- 20 sorry, Hudson Diamond New York, LLC appears to be 21 detrimental to the estate.

22 pointed out, there are a number of areas of documents that 23 should have been provided, haven't been provided, and are 24 delinquent. The trustee has a pending motion for contempt 25 for the failure to comply with the subpoenas and allowing

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1 Attorney Romney to withdraw from representing Hudson Diamond 2 New York, LLC would appear to be detrimental to the estate 3 and detrimental to the investigation that the trustee is 4 trying to pursue.

5 don't think that Attorney Romney has met his burden to 6 demonstrate that the withdrawal is appropriate. 7 The other thing I would say is that the U.S. 8 Trustee's response to the Court's order asked both Attorney 9 Romney and Attorney Vartan to provide answers to a number of 10 different questions.

11 Attorney Vartan did not file anything in response.

12 would say that the response filed by Attorney Romney did not 13 address all of the points requested by the United States 14 Trustee. And it appears based on not only the declaration 15 that was filed and the comments that are made today that 16 there is more information that could have been provided to 17 the Court about the series of events that led to the motion 18 to withdraw. So, unfortunately, the U.S. Trustee's efforts 19 to try to get some more information about what's happened 20 and how we got here remain unfulfilled. 21 But getting back to the point I made a minute ago which

is that the last document anyone has that has been provided demonstrates that Mei Guo is at the heart of all of these entities and, therefore, based on that, it appears that Attorney Romney has a basis to stay in this case. Thank

Ho Wan Kwok - July 11, 2023 68 you. THE COURT: Thank you. Attorney Romney, do you wish to respond? MR. ROMNEY: Yes, I do. On the first issue, responding to Attorney Luft, the issue is not whether there are documents in the world concerning the Hudson Diamond entities. I'm in no position to opine on that beyond what I already have. The issue is whether I or somebody I can control can locate them. The trustee has alleged in this case that the two individuals that, as far as their investigation is concerned with all of their resources, which is well beyond what I can do -- and they have all of Hodgson Russ's files. I don't. The record is clear that I requested it. I demanded it, and I was told no. That is in the record. I cannot go to Hodgson Russ' office with a gun in my hand, nor am I required to, and make them give me my files. I can ask. I can demand. But at the end of the day, I was told no. They were told yes. They got the files. I didn't. They have the information. With that information, they have alleged, consistent to what Ms. Guo has said or told us and what we have represented, is that the two individuals who were responsible for the management of these entities were Yvette Wang, who is incarcerated and I have no access to

Ho Wan Kwok - July 11, 2023 69 whatsoever, and Max Krasner, who we cannot locate, has had no contact with Ms. Guo as far as we know for months. And we are unable to locate him. So the individuals that have the information for all that we know, all that the documents that are being referred to by the trustee beyond the extent that they're with Hodgson Russ and whoever else is cooperating with them and not us are in the possession of the U.S. Department of Justice. I don't believe -- I have not taken it upon myself to ask the U.S. Department of Justice for their files on these entities, because I've never in my entire career, even when I had clients that were cooperating with them, received a document from the U.S. Department of Justice. We have done what we can. That's point number one. Second, Hodgson Russ, in the most recent communication with us, is refusing under Ethical Rule 1.6 to communicate confidential information with us, because he, as the general counsel of the firm that prepared the document that the U.S. Trustee's Office and Mr. Luft are saying is now conclusive, but he, the general counsel to the firm that prepared this so-called conclusive document is unsure enough as to what that document is, why it was prepared that he won't give me as counsel to Ms. Guo and Hudson Diamond Holdings any information besides the fact that it was prepared at the Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 69 of

Fiore Reporting and Transcription Service, Inc.

rest -- at the request of Max Krasner. Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 70 of

1 So I find that far from conclusive that Ms. Guo 2 controls these entities.

3 these entities, as I've said on the record, I will withdraw 4 my motion to withdraw the appearance, because my sole basis 5 for moving to withdraw is -- was because I do not know 6 whether Ms. Guo has the authority to direct me to appear on 7 behalf of it. And the attorney who prepared the smoking gun 8 that she does doesn't know himself or the general counsel of 9 the firm. 10 So I don't know how this Court can require me to 11 stay in on behalf of this entity.

12 of these facts and be able to stay in on behalf of this 13 entity and continue to do everything I can. But I don't.

14 do not have sufficient information that I believe under the 15 ethical rules that I can continue to represent this entity 16 based on the facts that are available to me. 17 One point with respect to what Attorney Luft said 18 with respect to Attorney Kearney and Hodgson Russ's 19 comments. Attorney Kearney did not say, contrary to the -- 20 or despite the fact that in his email communication he does 21 not recall telling us -- telling Attorney Vartan and I that 22 it was the debtor's son.

23 without a difference, because he is clearly saying that it 24 was the debtor's son as signatory on behalf of Hudson 25 Diamond Holdings, Inc.

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1 Hudson Diamond's Holding, Inc. (sic) per Hodgson 2 Russ, is a British Virgin Islands company.

3 Diamond Holdings, LLC.

4 name Hudson Diamond Holdings in them does not make them the 5 same entity and does not make Ms. Guo the principal of the 6 British Virgin Island company. 7 And as best as I recall, I don't even think the 8 trustee has alleged in this case that Ms. Guo has anything 9 to do with Hodgson Diamond Holdings, Inc.

10 Attorney Kearney told us that it was Mileson Guo, the 11 debtor's son, which I am 100 percent sure he did, or told us 12 that it was Hudson Diamond Holdings, Inc., a British Virgin 13 Island company -- which the emails in the record do draw 14 distinctions between those two entities towards the, you 15 know, earlier part of the email chain, because he 16 specifically referred to Hudson Diamond Holdings, Inc.

17 I said Attorney Vartan and I represent Hudson Diamond 18 Holdings, LLC, a Delaware limited liability company.

19 your answer that you do not represent the same with respect 20 to the Delaware LLC as it is with the BVI Inc.?

21 response was, yes, it is. 22 So whether it's Mileson Guo in his individual 23 capacity or Mileson Guo as president of Hudson Diamond 24 Holdings, Inc., a BVI company, the answer with respect to -- 25 that it was -- that it -- there's no connection that I can

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Ho Wan Kwok - July 11, 2023 72 ascertain with respect to Ms. Guo is the same. And for that reason, I believe I am required to withdraw. The last thing, with respect to the U.S. Trustee's contention or belief that I have not answered her questions in response to the affidavit that she requested, was I went through her questions. I believed them to be largely redundant, at least with respect to the two entities, but --

same time with respect to both of them. And I gave -- I did my best to provide everything I could with respect to her questions, my knowledge, and my diligent investigation with respect to this matter.

because many of these discussions were happening, all at the

And, in fact, what I did after I drafted this declaration is I went back and I re-read the U.S. Attorney's request for information. And after I drafted, based upon having reviewed her request three times, drafting this document, I realized that the only question that I believed I have not ascertained was the question of why I and not Attorney Vartan -- or why my appearance was the only one. And that's why that -- the answer concerning why I appeared and Attorney Vartan did not. And that involved the pro hac vice motion as well as our understanding at the time that this was a very minor matter that did not strike us as prudent or efficient to involve multiple appearances in a pro hac vice motion.

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1 THE COURT: Hold on one second.

2 what you just said, so I'm clear, you believed that the 3 motion for contempt was a very minor matter? 4 MR. ROMNEY:

5 contempt -- or the process of negotiating a brief extension 6 and doing everything possible to comply would be a minor 7 matter, because I did not -- I expected us to appear.

8 believed I could negotiate a brief -- actually, I take that 9 back. By the time I appeared, I knew that Attorney Vartan 10 and Attorney Luft had reached an agreement for a brief 11 extension, and I knew that I was going to do everything I 12 could in conjunction with Ms. Guo and Attorney Vartan to 13 comply or -- and locate as many responsive documents as 14 possible. 15 As I've said earlier, my understanding of 16 responding to a subpoena is providing all documents that are 17 in the actual and constructive control of a client.

18 do not believe that if I make a demand on a former law firm 19 or law firm that claims it never represented the client and 20 it tells me to go pound sand, I believe that that is -- the 21 documents in that firm's control are not under my or my 22 client's actual or constructive control. 23 Actual or constructive control under my 24 understanding is that it's under the control of somebody who

Fiore Reporting and Transcription Service, Inc.

is acting under the direction of me or my client and that if

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1 I tell them they have to comply.

2 legal action against someone to produce documents that my 3 understanding is the Chapter 11 trustee already has, because 4 their whole position -- notwithstanding that Hodgson Russ 5 doesn't know whether it was the debtor's son or the debtor's 6 daughter that owned these companies, it still produced all 7 of its files concerning these to the Chapter 11 trustee 8 despite the fact that it's not contending, as far as 9 anything that's been told to me, that it was the debtor's 10 entity. 11 And there's no objection to that.

12 trustee got the documents.

13 we do. But we, as is evidence by these documents, tried and 14 tried again and tried again. We told them it was important. 15 We told them why it was important.

16 a motion to withdraw based on their representation, and I 17 needed all information. I made multiple demands in writing. 18 I do not know what else I can do with respect to 19 the Hodgson Russ firm.

20 respect to Max Krasner.

respect to Max Krasner. And I told -- to the extent that the Chapter 11 trustee wasn't aware of the Capital One bank accounts, I told them about them so that they can get them from Capital One. And I tried -- I would have much rather been the one to deliver them, so then I could have delivered them. But I can't.

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Ho Wan Kwok - July 11, 2023 75 The best thing I could do is tell them these accounts exist. And I know these accounts exist, because they told Ms. Guo that -- according to what she told me, they told her that these accounts existed, but they would not give the documents to her. So -- THE COURT: You're saying -- just so -- you mean the bank, Capital One? MR. ROMNEY: Capital One Bank. Yes. THE COURT: And the documents existed that are the Hudson Diamond entities accounts. Is that what you're saying? MR. ROMNEY: That's what I'm saying. THE COURT: Okay. Go ahead. MR. ROMNEY: And the last thing I would like to say is that if the Chapter -- if the U.S. Trustee or anybody else in the room believes I have neglected to answer any questions under oath, I am right here and prepared to answer any questions under oath that anybody would like to ask me. Thank you. THE COURT: Okay. Thank you. I just have a question, though, that I didn't ask you before, because I didn't focus on some of the exhibits that Attorney Luft focused on. So did you ask Ms. Guo to give you any documents about this insurance policy with AIG between Hudson Diamond New York and -- covering an automobile?

1 MR. ROMNEY:

2 concerning an automobile. 3 THE COURT:

4 that is that exhibit was filed back with 1805, and that was 5 filed back sometime before you filed an appearance on behalf 6 of -- it was filed on May 18th. 7 MR. ROMNEY: I understand that.

8 as Your Honor has pointed out, there's a tremendous amount 9 of paper in this case. There's a tremendous amount to do.

11 THE COURT: Right.

12 Hudson Diamond. This was -- remember, this is part of the 13 motion for contempt. 14 MR. ROMNEY:

15 THE COURT:

16 specifically laid out exhibits to support an assertion that 17 certain entities -- and there were many.

18 the Hudson. I agree with you.

19 attached to it that -- with regard to the Hudson Diamond 20 entities. 21 And it said this is why we want the documents. 22 Here's some exhibits that show you that, at least from what 23 we've been shown to this point, that Hudson Diamond New 24 York, LLC and/or Hudson Diamond Holdings, LLC had assets and 25 have assets in the present.

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1 time through May of 2023.

2 deposition transcription of a prior counsel who talked about 3 the Hudson Diamond entities trying to purchase real estate. 4 I mean, there's Exhibits G, E, H, U, J, and then 5 T, which you refer to.

6 declaration, which is one of the reasons I looked back at 7 it, because you refer to Exhibit T in your declaration.

8 I appreciate that you referred to that exhibit. 9 But there's other exhibits attached to that very 10 same motion in which Exhibit T appears that directly address 11 the existence of assets of Hudson Diamond New York, LLC or 12 Hudson Diamond Holdings, LLC.

13 you ask your client about those exhibits and those assets? 14 MR. ROMNEY:

15 ways. And the -- phrased as did I ask them about those 16 exhibits, no.

17 adjournment -- you know, again, I didn't think there was any 18 dispute about the ownership.

19 THE COURT:

20 MR. ROMNEY: Of the New York entity. 21 THE COURT:

22 MR. ROMNEY: Yes. 23 THE COURT: -- not of specific assets? 24 MR. ROMNEY: Yes. 25 THE COURT: Okay.

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Ho Wan Kwok - July 11, 2023 78 MR. ROMNEY: I spoke with Attorney Luft in the conference room, as the Court directed, for purposes of reaching our agreement. He, in that meeting, mentioned a Rolls-Royce, didn't mention a -- an exhibit or anything but asked me about a Rolls-Royce. I said I'd ask about it. And I -- that was when I first mentioned the -- what I was aware of was a Capital One bank account that had been closed. I did inquire about the Rolls-Royce with Ms. Guo. I did not receive any response or any documentation concerning it. Had I done so, I would have turned it over. I didn't -- THE COURT: So she never responded to your question about the Rolls-Royce? MR. ROMNEY: She didn't neglect to respond. She responded by indicating that she did not have any documentation and -- THE COURT: About the Rolls-Royce? MR. ROMNEY: About a Rolls-Royce. And -- THE COURT: See, none of that's in the record. She didn't file any declaration. MR. ROMNEY: Well, again, she's not a party to this. It's -- THE COURT: Well, she is a party if she's the management member of Hudson Diamond Holdings, LLC, which the documents indicate she is. And you represent her. You've

Ho Wan Kwok - July 11, 2023 79 clearly said -- MR. ROMNEY: I do. I represent her. THE COURT: -- you -- as the managing member of Hudson Diamond Holdings, LLC. MR. ROMNEY: I don't know that that's -- she was the -- THE COURT: Well, how else do you have authority to -- MR. ROMNEY: -- individual that directed me to -- THE COURT: How else do you have authority to act on behalf of Hudson Diamond Holdings, LLC? MR. ROMNEY: That is the only way. THE COURT: Okay. MR. ROMNEY: But I don't believe -- THE COURT: So then -- MR. ROMNEY: -- when I -- THE COURT: So then you do represent her in her capacity as the managing member of Hudson Diamond Holdings, LLC. MR. ROMNEY: That's -- I look at it as representing the entity. But I also represent her in her individual capacity. THE COURT: Yeah. But you represent the entity. That's who the appearance -- that's who the motion for contempt is addressed against. Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 79 of

Ho Wan Kwok - July 11, 2023 80 MR. ROMNEY: That is. And I believe that we -- I don't believe -- THE COURT: But she never answered your question about the Rolls-Royce? MR. ROMNEY: I -- that's not what I said. THE COURT: Okay. And -- MR. ROMNEY: She answered my question in that she did not have any documentation, and she could not get -- THE COURT: And you specifically asked her about the Rolls-Royce? MR. ROMNEY: I specifically asked her about the Rolls-Royce. THE COURT: And you specifically asked her about the real estate transactions that Hudson Diamond were supposedly involved in? MR. ROMNEY: I don't believe I specifically asked her about the -- I don't recall, is the answer. And what I was getting into was that I did not read Attorney Luft's declaration or all of the exhibits. When Attorney Luft brought Exhibit T, I believe -- THE COURT: It wasn't a declaration. It was the actual motion. MR. ROMNEY: I thought it was the -- THE COURT: No. That's the -- well, in support of the motion. Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 80 of

1 MR. ROMNEY: No. Right.

2 THE COURT: Right. 3 MR. ROMNEY:

4 declaration or the exhibits. 5 THE COURT: In support of the motion for contempt. 6 Yeah. Yeah. 7 MR. ROMNEY:

8 attention, which I very much appreciated and expressed that 9 to him and called him.

10 that we were willing to do anything that we could to help 11 the trustee locate documents on behalf of either entity. 12 And if he had any information available to him that would 13 assist me to locate documents for them, that I would do 14 anything I could with that information.

15 receive any additional information. 16 Perhaps that was foolish of me, and that is on me. 17 And I will own that. I should have done that.

18 many moving parts of this situation and the other moving 19 parts of what goes on in any given day in the world that is 20 this case and the others that we all have to manage, I did 21 not go back to that declaration and see if there were any 22 other documents that could have helped me. 23 However, I was told among -- I was told and I 24 believe this is Hodgson Russ and -- but I am not positive. 25 And, frankly, I didn't think of it as very significant.

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1 I believe I was told by Hodgson Russ's general counsel that 2 the New York entity explored real estate transactions but to 3 the best of their knowledge never consummated a single one. 4 And I am virtually certain that Attorney Luft told me the 5 exact same thing without referencing any particular 6 documents. 7 THE COURT: Okay. 8 MR. ROMNEY: Okay. Thank you, Your Honor. 9 THE COURT:

10 add? 11 MR. ROMNEY: No.

12 answer any questions that anybody else has under oath. 13 THE COURT:

14 they would like to place Attorney Romney under oath and ask 15 as part of this proceeding? 16 MR. LUFT: None from me, Your Honor. 17 MS. CLAIBORN:

18 opportunity to ask Attorney Romney to go through the U.S. 19 Trustee's pleading, which is ECF 1971. 20 THE COURT:

21 to the stand and be sworn in? 22 MS. CLAIBORN: If I could. 23 THE COURT: Yeah. 24 MS. CLAIBORN:

25 THE COURT:

1 MS. CLAIBORN:

2 had that were not answered. 3 THE COURT: Mr. Romney, come forward, please. 4 MR. ROMNEY: Yep.

5 me, Your Honor. 6 THE COURT:

7 actually. 8 MR. ROMNEY:

9 right to counsel for the purpose of lodging objections. 10 THE COURT: I understand that.

11 suggesting that.

12 represents the debtor and other parties, going to be your 13 counsel in connection with a motion to withdraw an 14 appearance? 15 MR. ROMNEY:

16 conflict in terms of -- Attorney Henzy has been my firm's 17 general counsel for years.

18 conflict between representation of me and any of my clients. 19 I don't believe I have any adverse interest to any of my 20 clients. 21 I believe as a witness I'm not entitled to lodge 22 an objection to a question.

23 counsel to lodge an objection if there is one. 24 THE COURT:

25 to -- I'm not quarreling that you're entitled to counsel if

Ho Wan Kwok - July 11, 2023 84 you want to have counsel and -- you offered to get on the stand. Okay? MR. ROMNEY: I did. THE COURT: You offered. MR. ROMNEY: With my general counsel present. THE COURT: Okay? But, I mean, I don't understand how Attorney Henzy can be your lawyer in this situation. You are partners in a firm together. You both have pecuniary interests in the firm. How could it not be a conflict? How could it -- because he has to worry about him as well. Because whatever happens to you happens to him. How could that not be a conflict? MR. ROMNEY: I would say that means our interests are 100 percent aligned. THE COURT: Okay. Well, guess what? We're not going to do this today until -- there is -- I mean, Trustee Despins, United States Trustee's Office, do you really believe that Attorney Henzy can represent Attorney Romney in connection with a cross-examination of documents in this case that relate to a motion for contempt that might enter against Attorney Romney in addition to the client that Attorney -- client or clients that Attorney Romney represents? Am I just on another planet here? I mean, this is Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 84 of

1 insane. How is that not a conflict?

2 a conflict? 3 MR. ROMNEY:

4 lodging evidentiary objections.

6 THE COURT:

7 lodging evidentiary objections.

8 protect you, which he -- any lawyer would do who represented 9 you. That's the point, right?

10 lawyer. You want to be protected. 11 How is it not a conflict? I just -- I'm sorry.

12 just don't see it.

13 entitled to counsel.

14 stand. You now want me to allow Attorney Henzy, your 15 partner with whom the -- all of you and your other partners 16 all have a pecuniary interest to help each other, you all 17 have -- you're involved in a partnership agreement.

18 know what your obligations are to each other. 19 And you might be found -- you could be -- I'm 20 talking now for the analysis of the conflict.

21 found personally held in contempt for which you'd have to 22 pay a fine, supposedly. Okay?

23 contempt purpose. How is that not a conflict? 24 MR. ROMNEY: I don't believe it is. 25 THE COURT: We got 80 lawyers in the room.

Ho Wan Kwok - July 11, 2023 86 this not a conflict? MR. ROMNEY: Well, if I have to pay a fine, then I have to pay a fine. If my firm has to pay a fine, my firm has to pay a fine. And I'd say my partners have the same interest as I do, which are the same as my clients. THE COURT: I don't know that that's true. Depends upon what your partnership agreement says. I don't even know what you have. I have no idea, and I don't want to know, because it's not relevant to the issue. MR. ROMNEY: Your Honor, I am trying to be as transparent as possible. I am -- THE COURT: I'm not suggesting otherwise, Attorney Romney. I'm not suggesting any of that. I just don't know how Attorney Henzy can be your lawyer in this situation. And I don't know why anyone else thinks that he can be. MR. HENZY: Well, I think I can be, so just -- THE COURT: Well, I don't -- MR. HENZY: -- just to be clear -- THE COURT: I'm not asking you right now. MR. HENZY: -- just to be clear, there's at least one other person in the courtroom who thinks that I can be, but -- THE COURT: Okay. Well, that's good. I'm glad you think that. MR. HENZY: Okay. Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 86 of

Ho Wan Kwok - July 11, 2023 87 THE COURT: But I'm not asking you right now. MR. HENZY: Okay. THE COURT: I'm asking other people. MS. CLAIBORN: Your Honor, perhaps I can propose a solution, which is that if you go back to what the U.S. Trustee filed at 1971, it is very straightforward, with the questions that are being asked. But, for example, if you just look at the first bullet point, which is little (Indiscernible), that question never actually gets answered in Attorney Romney's declaration. So my suggestion was going to be that Attorney Romney redo his declaration and actually respond to all the questions that are asked or -- THE COURT: Fine. You know what? MS. CLAIBORN: -- assert that he -- or assert that he can't. THE COURT: Actually, just get him on the stand. Let Attorney Henzy represent him. Nobody seems to think it's a problem, so go right ahead. MS. CLAIBORN: I didn't say that, Your Honor. I'm just suggesting -- THE COURT: Oh, well, I'm saying that. Attorney Romney, get on the stand. Trustee -- Attorney Claiborn, start asking your questions. Let Attorney Romney get sworn in. Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 87 of

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1 THE COURTROOM DEPUTY:

2 stand and raise your right hand.

4 THE COURTROOM DEPUTY:

5 name for the record? 6 THE WITNESS: Aaron Romney. 7 THE COURTROOM DEPUTY: Name and address. 8 THE WITNESS:

9 THE COURT: Yeah. Just your business address. 10 THE WITNESS:

11 Bridgeport, Connecticut, 0604 -- 06604. May I be seated? 12 THE COURT: Yes, you may. 13 THE WITNESS: Thank you. 14 THE COURT: If you need -- there's water.

15 should be water there too. 16 THE WITNESS: Thank you. 17 THE COURT: All right.

18 Claiborn. 19 MS. CLAIBORN: Thank you.

20 U.S. Trustee.

22 BY MS. CLAIBORN:

Attorney Romney, can you please tell the Court when you 24 were first contacted by a representative of Hudson New York 25 with respect to the subpoena issued to Hudson New York?

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1 I'm using that term as defined in my pleading with respect 2 to the subpoena issued by the trustee to Hudson New York.

Yes. And I interpret that question as in the capacity 4 as somebody acting as behalf of Hudson New York.

5 only reason -- point of clarification I draw there is that 6 obviously I've spoken to Mei Guo, the individual who was 7 that representative.

8 since I began representing her in April of last year. 9 But with respect to in her capacity as a representative 10 of Hudson Diamond New York, I believe I contacted her.

11 that was on, I believe -- it's stated in my declaration when 12 I did it. I believe it was on April -- sorry, May 30th that 13 I sent her the subpoenas.

14 been discussing them prior to that.

15 April 23rd and May 30th, I believe closer to May 23rd.

16 it was within that time frame.

Do I understand your testimony correctly that Ms. Guo 18 did not know about the subpoena issued to Hudson Diamond New 19 York until you told her about it?

That is my correct -- that is my understanding.

And what do you base that understanding from?

Because she told me.

Do you know what the first point of contact was for 24 Attorney Vartan with respect to the Hudson Diamond New York

subpoena issued by the trustee?

I do.

What was that?

It was the same as I just described.

4 May 23rd, read the motion to compel for the first time.

5 believe it was filed May 18th.

6 times in court today, we have very case -- we have very busy 7 case loads right now, so I did not actually read that 8 document until May the 23rd.

9 portions with respect to Hudson Diamond.

10 names, and I emailed Attorney Vartan, and I said something 11 to the effect of we need to contact Ms. Guo about this 12 immediately.

Who was the person on behalf of Hudson Diamond New York 14 who engaged your representation as their counsel?

Ms. Guo.

Who were the members of Hudson Diamond New York as of 17 December 1, 2022?

I don't know the answer to that question for the 19 reasons stated in my declaration.

Who were the members of Hudson Diamond New York as of 21 June 1, 2023?

I don't know the answer to that -- I'm sorry.

23 you -- was that question about Hudson Diamond -- were either 24 of those questions about Hudson Diamond New York or 25 Holdings?

They were both intended to be about Hudson Diamond New 2 York.

Okay. That's what I thought, but I just -- I don't 4 know the answer to that question.

Okay. And who are the members of Hudson Diamond New 6 York as of June 13, 2023?

I don't know the answer to that question for the 8 reasons stated on the record today.

Did you ever ask Mei Guo those questions as to those 10 memberships and those dates we just went over?

Specifically with respect to those particular dates, I 12 don't believe I specifically referenced those dates.

13 your question is did I ever discuss with Mei Guo whether she 14 was -- whether Hudson Diamond Holdings was a -- was the 15 member of Hudson Diamond New York, the answer is yes.

16 her belief, as I've stated, was that Hudson Diamond Holdings 17 controlled the New York entity, which is why she directed me 18 to respond -- to attempt to negotiate a -- me and Attorney 19 Vartan to attempt to negotiate an extension and then do 20 everything that I could to provide the Chapter 11 trustee 21 with responsive documents that we were able to locate.

22 she offered to -- or she indicated, and I believe did, 23 assist Attorney Vartan or participate in that process with 24 us.

With respect to Hudson Diamond Holdings, LLC, do you

Ho Wan Kwok - July 11, 2023 92 intend to continue to represent that entity? A Of course. MS. CLAIBORN: Okay. I have nothing further. Thank you, Your Honor. THE COURT: Okay. You can step down, Attorney ROmney. THE WITNESS: Thank you, Your Honor. THE COURT: Anything further on the motion for contempt, the motion to withdraw as attorney? Okay. I'll take those matters under advisement. Let's proceed to the next matter. MR. ROMNEY: Your Honor, I apologize. May I be excused? THE COURT: Yes, you may. MR. ROMNEY: I do have to catch a flight. Thank you very much, Your Honor. THE COURT: You're welcome. MR. BASSETT: Your Honor, if it pleases the Court, I think the next matter we would propose to take up is the motion for summary judgment in the Adversary Proceeding 23-5012, which involves the -- it's the interpleader action with respect to the HK USA escrow funds. THE COURT: Go right ahead. MR. BASSETT: Thank you, Your Honor. So I apologize. I think I may have started a past hearing with a Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 92 of Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 93 of

1 similar remark, and it's unfortunate, but I do feel like 2 there are several occasions in which we find ourselves 3 before Your Honor arguing motions that, in our view, just 4 are not necessary. This is another one of those. 5 I think it will be brief.

6 and the reason why this hearing is, in our view, necessary 7 is because the issue before the Court, which is whether or 8 not the funds sitting in escrow pursuant to the escrow 9 agreement should be released to the trustee, has already 10 been conclusively decided by this Court's summary judgment 11 decision issued on May 18th finding both that HK USA is the 12 debtor's alter ego and that all of its property, including 13 the escrow funds, are property of the estate.

And I'd like to cite to the Court the particular language of the order. And this May 18th order is at ECF 221. On page 36, the first two so-ordered paragraphs. The first so-ordered paragraph says that "HK USA is and was at all relevant times the alter ego of the debtor, Mr. Kwok." The very next paragraph says that "All property of HK USA at all relevant times to the present is property of the estate."

What this means, Your Honor, is that the definition of property of the estate under Section 541 of the Bankruptcy Code, which refers to all legal or equitable interests in property, extends by virtue of the May 18th

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1 summary judgment order to all of HK USA's property.

2 is not subject to any reasonable dispute.

3 suggestion to the contrary in the papers filed by HK USA 4 that the definition of property of the estate under Section 5 541 of the Bankruptcy Code includes contractual rights and 6 legal rights. 7 So therefore, by operation of the May 18th order, 8 any contractual right that HK USA ever could have hoped to

hold and to exercise under the escrow agreement is now a right that belongs to the estate and is property of the estate under the Bankruptcy Code. So HK USA has no ability to stand before the Court today and to obstruct in the way that it has for the last several weeks or, I guess, since the issuance of the summary judgment order and prevent the funds from being released by purportedly hiding behind contractual rights that it's trying to exercise. Those rights now belong to the estate.

They have no response to this point in their papers, because there is not one. This ends the analysis, and the Court need not consider anything else. Whether or not the escrow funds are property of the estate has already been decided, and it cannot be relitigated. That's res judicata.

Now, HK USA in its opposition to the trustee's motion for summary judgment spends a lot of time focusing on paragraph 4 of the escrow agreement, which is attached as

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1 Exhibit 1 to the complaint.

2 purportedly standing for the unremarkable proposition that, 3 generally speaking, contracts should be enforced and public 4 policy concerns related to that principle.

5 is irrelevant in this situation where the Court has already 6 decided that any contractual rights that HK USA held or 7 holds under the escrow agreement are, by virtue of the May 8 18th decision, property of the estate, exercisable by the 9 estate.

And not surprisingly, none of the cases they cite which talk about enforcement of contractual rights generally or enforcement of rights in escrow agreements have anything to do with the finding that one entity is another's alter ego and that, therefore, the rights that a party is purportedly trying to exercise, under an escrow agreement or otherwise, are actually rights that belong to another party. They don't cite any case like that. And it's not surprising why, because it wouldn't make sense for there to be an outcome in a situation like this other than the one we are asking the Court to order.

What I would also point out, while we're on the topic of looking at the language of the escrow agreement, which HK USA is so intent on doing, is that if you look at paragraph 16 of the escrow agreement, it specifically deals with revisions, amendments, modifications to, changes to the Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 96 of

1 escrow agreement. What it says is that the escrow agreement 2 may not be modified unless ordered by the bankruptcy court. 3 Now, this is significant, because even assuming HK 4 USA still had the ability to exercise its contractual rights 5 under the escrow agreement, which it does not for the 6 reasons I've already discussed, this paragraph 16 allows the 7 Court to modify it.

8 that really means is that if the parties agree then the 9 Court has to so order that agreement.

10 that language doesn't appear in paragraph 16. 11 If it did, it would say in order to modify this 12 agreement, the parties have to agree on it, and then the 13 Court needs to so order it. It doesn't say that.

14 the Court can order a change to the agreement.

15 going to be held to the benefit of the bargain that they 16 seem so worried about, then it needs to apply to the entire 17 agreement. 18 The last point that I'll make, Your Honor, is the 19 one we make in our motion, which is with respect to the 20 overall purpose of the escrow agreement and the related 21 stipulation concerning the Lady May and the fact that there 22 is no question the purpose of the agreement has run its 23 course. The agreement and the stipulation, and it's 24 undisputed, were designed originally, ostensibly, to secure 25 delivery of the Lady May yacht to the estate.

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Ho Wan Kwok - July 11, 2023 97 The Court recognized this in its recent decision denying the HK USA or the -- I guess HK USA's motion for stay pending appeal at ECF Number 24. And there is no genuine factual dispute about this purpose. In their opposition to the motion for summary judgment, they try to erect the strawman argument that if we're talking about the intent of the agreement it must be introducing questions of fact.

There is no genuine factual dispute about the very clear purpose of that agreement. You can just look at background paragraph D of the agreement which makes it very clear that the entire purpose of the escrow agreement was to complement the stipulation and secure delivery of the Lady May to the estate.

Now, why is this significant? Because, obviously, that purpose has run its course. As the Court again pointed out in its decision denying the motion for stay pending appeal, the HK certification was going to be submitted so that the funds could be released to HK USA. That was postponed while the Court considered the trustee's pending motion for preliminary injunction and a prejudgment remedy.

So but there's no question. I mean, the yacht's now been sold. The purpose of holding the funds in escrow has run its course and is no longer necessary. You know, in fact, if you were to ask counsel today or anytime in the

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Ho Wan Kwok - July 11, 2023 98 recent past whether they think that the escrowed funds should be released to HK USA, I'm sure they would tell you yes. I don't think they could say with a straight face that they don't think they should get the funds back. The problem with that argument from their perspective is the second that the funds are released to them, they're our property. Because all property of HK USA under the May 18th order is property of the estate. I say this because it just highlights the absurdity of their position. They are not using the escrow agreement and its provisions in order to fulfill its intended purpose of holding the funds in escrow while there might be a dispute resolved about whether or not the certification requirements have been satisfied. They're now using it to obtain a de facto stay pending appeal and to hold hostage this Chapter 11 case and the trustee's efforts to enforce the May 18th order. So for those reasons, Your Honor, I think there's no question in our mind. This is an open and shut motion for summary judgment. There are no disputed issues of fact. This issue has already been decided by the Court. There's no stay pending appeal. The escrow funds should be delivered to the trustee. Thank you, Your Honor. THE COURT: Thank you.

1 Mr. Moriarty, you're going to respond? 2 MR. MORIARTY: Yes. Thank you, Your Honor.

3 for the record, James Moriarty for HK International Funds 4 Investments (USA) Limited, LLC. 5 So I will start, Your Honor, with Attorney 6 Bassett's point about paragraph 16 of the escrow agreement. 7 Obviously, I agree with what he says about it, because it 8 says what it says.

9 and as Your Honor remembers, the escrow agreement was for, 10 for lack of a better term, amended back in October of 2022. 11 At that point, \$4 million were released from escrow to 12 create the repair reserve for the Lady May. 13 And the order that Your Honor entered is at Docket 14 Entry 932. It's dated October 7, 2022.

15 order, the first paragraph starting with order, that 16 actually refers to paragraph 42 of the escrow agreement. 17 And it says that as soon as reasonably practical after this 18 order becomes a final non-appealable order.

19 respect to the repair reserve, the order had to become final 20 and non-appealable before that \$4 million was going to be 21 released. 22 So can the escrow agreement be amended by court 23 order? Absolutely. That's what the parties agreed to. 24 Does that order have to become final and non-appealable 25 before that modification of the escrow agreement would be

Ho Wan Kwok - July 11, 2023 100 enforceable and applicable? Yes. And we see that in the Court's order at Docket 932. As far as the escrow agreement running its course, HK cites in its opposition the case Netherberg vs. G.V. Licensing (sic). And I will give Your Honor the citation for that in a second. So that is at 1995 US Dist. LEXIS 11725 and also 1195WL491489. And in that case, the Court was looking at an escrow agreement, and the escrow agreement had been set up in connection with the sale of some intellectual property. And the escrow was designed to protect the seller post closing for litigation that based on the decision was then ongoing. The seller settled its litigation. The party with whom it settled sought to either terminate the escrow or to have released from escrow proceeds that were not disputed. And one of the arguments that was made to the Southern District in that case was, well, this escrow agreement is now superfluous, because we've settled the litigation that the escrow funds were intended to secure. And what the court said -- and this is on PDF page 2 of 3, and it's at start 4 in my LEXIS printout -- even if the reasons for the parties' execution of the escrow agreement fail to have continued validity, that would not void the amended escrow agreement which plaintiff agreed to Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 100 of

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in its settlement agreement with Gitano.

argument that only GVTI, which was the buyer of the intellectual property, has an interest in the escrowed funds fails to state a legally recognized reason to override the negotiated terms of a binding agreement.

the court -- it held that it was not going to alter the terms of the escrow agreement and that one of the contingencies that was required to occur before the funds would be released had to occur, and it had not happened yet. And that is our case.

the escrow agreement four contingencies.

occurrence of one of those contingencies, the escrow funds would be released.

entered an order that HK USA is the debtor's alter ego. We are not seeking to relitigate that issue here at all. What we are talking about here is we are talking about timing and conditions precedent.

going to be released from escrow to the trustee, who, by the way, has the proceeds right now.

contingencies has to be satisfied.

And the contingency that we're focused on is that we need a final, non-appealable order of this Court. And the order that the Court entered on May 18th is presently being appealed. The appeal is pending before Judge Dooley in the district court, and so that contingency has not been

1 satisfied, and the funds should not be released pursuant to 2 the terms of the escrow agreement. 3 This is a summary judgment motion.

4 contract issue.

5 contingencies is non-ambiguous.

6 those conditions -- one of those conditions has to be 7 satisfied before the funds can be released. 8 Now, Attorney Bassett did argue that this 9 agreement was really all about returning the Lady May and 10 now the Lady May has been sold.

11 the Court, there's the Netherberg (sic) decision.

12 we're talking about summary judgment, and that is what we're 13 talking about, if we're going to get into the intent of the 14 parties, what did the parties intend when they drafted this 15 language that there has to be a final, non-appealable order 16 of the bankruptcy court?

17 with respect to issues regarding the Lady May, or did they 18 expect it to apply more broadly? 19 If you read the plain language of the agreement, 20 it has to be applied more broadly.

21 talking about what did the parties mean by this provision, 22 and we're not going to give it its plain meaning from the

judgment has to be denied based on the fact that there is an issue of fact as to what the parties intended with the

agreement, then there's an issue of fact, and summary

Ho Wan Kwok - July 11, 2023 103 escrow agreement. And then lastly, Your Honor, with respect to property of the estate, there is no dispute that HK's right to receive the escrow proceeds is an asset of the estate. But that right is contingent on the happening of a contingency or a condition precedent, which has not happened yet. And in Your Honor's decision granting summary judgment on the trustee's second counterclaim on May 18th, Your Honor distinguished between Count 2 of the counterclaim, which was alter ego, and Count 3, which I believe was a fraudulent transfer claim, but I could be mistaken on that. But in distinguishing it, what Your Honor distinguished was with respect to the alter ego claim, it makes the assets of HK available to satisfy the claims of the creditors. If the trustee wanted to control the entity, he would have to move under Count 3. And if the trustee had moved solely under Count 3 as Your Honor discusses in the decision which is at page 25, then the trustee would control the entity. The entity would be property of the estate, an asset of the estate. But in order to get to the assets of the entity, the trustee would still have to pierce the veil. So the trustee does not control HK. HK is an independent entity whose assets have been made available to Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 103 of

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Ho Wan Kwok - July 11, 2023 104 the creditors. And, Your Honor, if you have any questions, I'd be happy to answer them. THE COURT: I have no questions. MR. MORIARTY: Thank you. MR. BASSETT: Just a few brief points in response, Your Honor. And I'll -- I guess I'll start where Attorney Moriarty ended, which is the question of the passage of property rights to the estate and what is the consequence of that under the May 18th order. The rights that it -- to the extent that what Attorney Moriarty is arguing is that the only right that passed to the estate is the right to receive the escrow funds and that any contractual rights that HK holds to prevent that from happening are not rights of the estate, that is simply not the law. The estate is now, pursuant to this Court's very clear order -- and I want to make another point, which is that when Attorney Moriarty was referencing the Court's order, he's focused on the alter ego finding and what that means. And I will get to that in a second. But he's ignoring the very clear provision saying that all property of HK USA, which includes contractual rights, is property of the estate. So to the extent -- and he's -- I don't think he's

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1 arguing that HK USA does not have this ability, because it 2 obviously does.

3 knows it could, could go to the escrow agent and say, hey, 4 we authorize you to release these funds, that right, that 5 ability now belongs to the trustee.

7 MR. GOLDMAN:

8 to which the committee was a party, no one certainly 9 envisioned the situation we are now dealing with right now, 10 which is that a trustee would later be appointed months 11 after the transaction took place and would end up freezing 12 and obtaining a PJR against the funds that were on deposit. 13 The purpose of that deposit, as articulated by Mr. Bassett, 14 was to secure the delivery of the Lady May. 15 Certainly, this situation was not envisioned by 16 any party at the time the escrow agreement was entered into. 17 And Your Honor ought to interpret the contract in light of 18 that purpose. And it's specifically the situation of the 19 parties and the circumstances connected with the transaction 20 at the time, which means that it just simply is inapplicable 21 to the current situation right now. 22 And we otherwise fully support the arguments made 23 by Mr. Bassett. 24 THE COURT: Okay. Thank you. 25 Anyone else wish to be heard? Okay.

Ho Wan Kwok - July 11, 2023 106 for summary judgment is taken under advisement. What's the next matter that the Court needs to address this afternoon? MR. DESPINS: It's the HCHK settlements, Your Honor. And Mr. Luft is going to handle that matter. THE COURT: Okay. MR. DESPINS: Unless Your Honor wants to take a break. THE COURT: No. I think -- MR. DESPINS: No? Okay. THE COURT: -- we should continue. MR. GOLDMAN: Okay. Thank you. MR. LUFT: Your Honor, may I approach? THE COURT: Yes, you may. MR. LUFT: Thank you, Your Honor. THE COURT: Please proceed. MR. LUFT: Thank you, Your Honor. Excuse me. Avi Luft of Paul Hastings on behalf of the Chapter 11 trustee. Your Honor, what I'm here is (sic) in connection with our 9019 motion to approve the settlement agreement between the Chapter 11 trustee and the assignee for the HCHK entities. Your Honor, the agreement we present to the Court is highly beneficial to the estate for multiple reasons. It is the product of extensive good faith negotiation. It will immediately transfer on an interim basis pending the outcome Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 106 of

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1 of the adversary proceedings over \$38 million of the HCHK 2 entity's cash to the trustee's account. 3 Sum and agreement will resolve all open issues 4 between the trustee and the assignee, avoiding an expensive 5 and time-consuming disputed preliminary injunction 6 litigation. It also helps pave the way for an expedited and 7 less costly resolution of the adversary proceeding.

8 assignee has agreed not to oppose the relief sought by the 9 trustee in the adversary proceeding which we believe should 10 clear the path. 11 The settlement agreement provides for continued 12 administration of the assignee, of the HCHK entities, the 13 Columbus Circle offices, and the Columbus Circle assets, 14 which will lessen the administrative burden on the trustee. 15 And, Your Honor, the settlement ensures that there is -- 16 will be due process available to all. 17 Now, Your Honor, the 9019 standard the Court is 18 well aware of. But in short, the settlement need not be the 19 best that the debtor could have obtained, but rather it must 20 be in the range of reasonableness and make sure it falls not 21 within the lowest point.

22 factors to determine if that's the case.

23 the benefits we just discussed in light of the Iridium 24 factors, I think it's quite clear that the -- this 25 settlement is most assuredly in the best interests of the

Ho Wan Kwok - July 11, 2023 108 estate. With regard to possibility of success versus future benefits, by securing the funds now, settlement eliminates the risk and cost related to the PI litigation as well as providing a more likely positive outcome with regard to the adversary proceeding. As to the second factor of the likelihood of complex and protracted litigation, this would eliminate both the PI -- the need for a PI evidentiary hearing as well as, as I said, streamline the future adversary. With regard to the interests of the creditors of the estate, Your Honor, I'll note that not one creditor of the estate has objected. The UCC supports this. And I'll note that this -- by making sure that the assets are within the trustee's control, it prevents the possible dissipation of substantial assets of the trustee, which he hopes to bring into the estate for the benefit of all creditors. The fourth factor under Iridium is support of other parties in interest. As I noted, the UCC is in support. There have been very few objections. Notably, a number of them that have been filed in fact make clear that they do not dispute the terms of the settlement but rather seek to make sure that their own claim can be added or with regard to a very discrete issue in the case of the U.S. Trustee. I will deal with all those. Which really leaves

1 only one substantial objection which is from the Himalaya 2 parties. And I will deal with that shortly, but it -- I 3 think, clearly, on balance most parties support this 4 settlement. 5 With regard to competency of counsel and 6 experience of Judge, I will be modest here, but I will 7 certainly say that this Court is by far the most up-to-date 8 and aware of the issues related to this case and more than 9 appropriate to judge whether this is an appropriate 10 settlement. 11 As to the nature and breadth of releases of the 12 directors and officers, the former HCHK executives are not 13 getting releases.

14 exculpation provision, which will be addressed later.

15 with regard to the directors and officers of HCHK who 16 existed previously, they are not getting a release. 17 And as to whether this was an arm's length, I can 18 report to the Court that this was the product of extensive 19 negotiations following an emergency TRO in which the parties 20 very much were on -- had different interests at the start 21 but were able to reach resolution. 22 Your Honor, before I delve into the objections, 23 though, I think it would be helpful -- and if you're -- the 24 Court would appreciate, I would like to walk through how the 25 settlement will work.

1 in our papers, sort of three phases as to the settlement. 2 THE COURT: Go right ahead. 3 MR. LUFT: Thank you, Your Honor.

4 proposed order with regard to the settlement will modify the 5 TRO order that exists, and it does so in three phases.

6 first is stage one.

7 transfer of the HCHK funds to the trustee.

8 be \$38,835,734.27. 9 The trustee will invest those funds in treasury 10 securities pending a dispositive ruling.

11 dispositive ruling, to be clear, the trustee will not be 12 authorized to use the HCHK funds for any purpose other than 13 set forth in the 9019 order. 14 Another part of the stage one will be the assignee 15 will make available to the trustee all HCHK non-privileged 16 corporate records and other documents in his possession. 17 The assignee has agreed to take no position in connection 18 with the adversary proceeding.

19 in their papers that they were -- would not be in a position 20 to say otherwise.

21 opposing such relief. 22 At the same time, Your Honor, this order would 23 make clear that this settlement and the fund transfers are 24 without prejudice of the rights of any party, other than the 25 assignee who for the reasons stated above, to file pleadings

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1 and take positions subject to meeting standing requirements. 2 And the trustee notes that, of course, he has -- reserves 3 the right to oppose standing.

4 is if you qualify for standing and you have it, then you'll 5 have the opportunity.

6 the opportunity to challenge that.

That is stage one. Stage two will be following the entry of the proposed order, should it be entered, and the occurrence of the initial HCHK fund transfer. That deals with in paragraph 9 of the order the authorized assignee actions. This allows the assignee, pursuant to the terms of the order, to take certain actions related to the Columbus Circle offices, HCHK's remaining employees, and related issues to that which are procedural and administrative, and that the trustee may advance portions of the HCHK funds for payment of those expenses. And this is the administrative relief that I referred to, which is a benefit to the estate.

Paragraph 10 notes that the New York court relief is not -- will not be binding, which brings us to stage three which arises upon dispositive ruling on the alter ego and the equitable ownership claim. To the extent that there is a favorable ruling on the trustee's adversary proceeding, it does provide -- paragraph 11 of the order provides for settlement payments. It sets out the amounts.

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Ho Wan Kwok - July 11, 2023 112 Paragraph 12 deals with a modification of the bar date where the trustee is authorized to seek the Court to modify the bar date to allow HCHK entities' creditors, to the extent there are any, to now file under the debtor's Chapter 11 case, because to the extent an alter ego or equitable ownership is granted, those creditors will now become creditors of the debtor's estate to the extent they exist. Paragraph 13 deals with the channeling injunction which we will speak about later. Paragraph 14, the exculpation provision. And then, Your Honor, I'll turn to what happens to the extent there is a final order ruling against the trustee and the adversary. Paragraph 15 explicitly provides for the return of funds to the trustee -- from the trustee to the assignee. So that is the three stages of how the order would work and what we would propose under the settlement. Your Honor, before I turn to the objections, I'll ask if you have any questions. THE COURT: I have no questions. Thank you. MR. LUFT: Thank you, Your Honor. Okay. In which case, let me turn to the objections. So I started off by speaking about why we believe the Iridium factors have been met. I will note that, overall with regard to the

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Ho Wan Kwok - July 11, 2023 113 objections, the Iridium factors have largely been not addressed. Rather, they seem to be a mishmash of things that people would like, attempts to jump ahead on the claims process, or in the case of Himalaya, who I will turn to, frankly, a person who is not happy with how the assignment process has worked out for them but not one who has actual basis to be objecting here.

So the Himalaya parties who, as we detail in our reply brief, Your Honor, are largely made up of entities that this Court has either directly found the debtor to control -- the Himalaya farms, Himalaya -- or other entities that the debtor has been involved with, has filed an objection. And I think the heart of it is effectively saying we would have preferred to be in New York state court; we thought that's where the assignment was going to go.

Everyone's entitled to their preferences, but that's not a basis to object to the settlement. And it's certainly not a basis to claim that this is not in the best interest of the debtor's estate, which is what the 9019 motion is about.

Now, the Himalaya parties spend a good part of their papers contesting the alter ego and equitable ownership claims in the adversary proceeding. That's not what's before us today, Your Honor. They -- to the extent

1 they have standing, they will have an opportunity to raise 2 whatever objections they have to the trustee's adversary 3 proceeding. But nothing about the settlement precludes them 4 from that. 5 Similarly, Your Honor, the assignee is the party 6 who makes the decisions.

7 appointed.

8 assignment, to my knowledge.

9 to my knowledge intend -- file any objections to date of the 10 idea of -- when the assignee was considering selling these 11 entities to another party, a G News party. 12 The assignee made the decision that this was -- 13 this settlement is in its best interest.

14 for purported creditors or the assignee to take issue with 15 it. 16 This Court clearly has jurisdiction as set forth 17 in the TRO order.

18 about its jurisdiction are really just a collateral attack 19 on that. I don't think they're appropriate. 20 Finally, Your Honor, the Himalaya entities raise 21 issues with regard to the channeling injunction and the 22 exculpation provision.

23 focus on those issues.

24 agreed to those provisions and supports them.

25 let counsel from Cole Schotz address those as they focus

1 more directly on their issue and their papers. 2 Finally, Your Honor, the only other issue I 3 believe the Himalaya parties raise is with regard to 4 authority. Again, counsel for Cole Schotz will focus on 5 this. But I will note that under the deeds of assignment, 6 which not only weren't objected to but were entered, it is 7 my understanding that the assignee has full authority to 8 settle any and all claims against it.

9 think that this would fall within that. 10 If Your Honor has any questions with regard to the 11 Himalaya parties' objection, I'll answer them.

12 I'll move on to the next one. 13 THE COURT: I have no questions.

14 to the next objection. 15 MR. LUFT: Thank you, Your Honor.

16 the U.S. Trustee's limited objection with regard to the 17 channeling and exculpation issues.

18 Cole Schotz is going to focus on that.

19 think, a very similar issue. I'll leave that there. 20 Otherwise, there's a question about the notice. 21 The U.S. Trustee's office has indicated that they'd like 22 three days' notice and a \$25,000 cap.

23 proposed a \$50,000 cap just given the costs in the case in 24 an effort to decrease administrative burden.

25 view that raising it to 50,000 would not harm the interests

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1 of people interested in understanding what expenses were 2 being made and, at the same time, would make it much more 3 manageable for the trustee to handle to have a slightly 4 higher cap. So that is the only difference there to my 5 knowledge. 6 With regard to G News' limited objection and the 7 objection from Attorney Sherman, both of them raise a very 8 similar issue, which is they believe they have what I think 9 they would term an administrative claims.

10 that they -- either in the case of Mr. Sherman who he 11 believes is owed to him pursuant to a severance agreement. 12 In the case of G News, they outlaid a limited amount of 13 money when they thought their transaction was going to go 14 forward for rent and other expenses. 15 I don't believe the -- an objection to the 9019 16 motion is the appropriate procedural vehicle for raising 17 these claims. Certainly don't speak to the interests of the 18 estate. I don't believe moving forward with this settlement 19 would in any way prejudice either parties' rights.

20 have -- if these claims are valid, they'll be dealt with in 21 a number of ways.

22 deal with them.

23 settlement for it or to change the settlement to add other 24 people's claims into it.

I believe, Your Honor, that leaves us with the G

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1 Club -- what it refers to as its notice and not an 2 objection. I should pause and say does Your Honor have any 3 questions before I turn to that last one? 4 THE COURT: I do not. 5 MR. LUFT: Thank you, Your Honor.

6 is -- I think we've been talking about G Club for a while 7 recently in this Court.

8 we have been having the discovery issues with.

9 course, involves documents again. 10 G Club has in its notice made clear that they are 11 not objecting but that they claim that there is a master 12 services agreement, which is not attached, nor is any 13 provision cited.

14 services agreement -- which there may be, I don't know -- 15 that provides -- pursuant to which all documents and emails, 16 in fact, for G Club, they say, in fact, were being 17 administered by HCHK. 18 Now, Your Honor will recall that previously we 19 were told that there was, at best, a tangential relationship 20 between the debtor and G Club, and that's why they couldn't 21 produce their documents.

22 spokesperson.

23 executives left, documents couldn't be produced, because the 24 relevant people had left. 25 Now, we've sort of taken a 180, and now G Club is

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Ho Wan Kwok - July 11, 2023 118 saying not only is there a relationship with the debtor but, in fact, it's so close that it -- an entity which we believe we will show to be its alter ego had a management service agreement with it and that the emails were, in fact, sitting in Manhattan, available at HCHK this whole time. Be that as it may, they now have a new argument for why the trustee should not be able to get documents.

They ask for a modification of the order to say that the trustee should only be allowed to see HCHK documents that only relate to HCHK. Now, the impact of that, Your Honor, quite likely is to create a null set of documents because, by HCHK's own papers, the -- what they did was they provided services for all the different debtor entities. So to the extent you can only talk about documents only related to HCHK, they would have carved it out such that I would -- my guess is that almost all their documents would once again be pulled out from the grasp of the trustee, and we would once again not have them.

The second thing that they claim is that these documents are confidential and, thus, must be returned to them. And here, Your Honor, I will note that the assignee, when he was appointed, G Club didn't come forward and say these are -- you have confidential documents; you can't be looking at them. They've certainly never argued that any of these are privileged.

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1 And then when the assignee was going to sell all 2 the assets to G News, another entity which would have

3 included these same files, again, to my knowledge, no 4 objection to it. It seems that G Club only has an objection 5 when the trustee is going to gain access to the documents. 6 I don't think there's any basis for it, Your 7 Honor. I think the settlement should stand as it is.

8 think, to the extent there are responsive documents from G 9 Club, we will be able to see them.

10 that the trustee be able to see HCHK's documents who also 11 had a pending 2004 against it at the time is completely 12 appropriate. 13 I think, for all those reasons and what I've said 14 before, Your Honor, G Club's objection shouldn't stand. 15 The final thing I'll just mention, Your Honor, 16 there are -- I did mention that fees will be paid.

17 clear, the trustee has done an initial review of the 18 documentation. The fees that are listed in the order appear 19 to be reasonable in the trustee's view.

20 the trustee does have an opportunity to do a further review 21 to the extent there is any question to make sure that the -- 22 any such fees are reasonable. 23 Your Honor, if you have any questions, I'm happy 24 to answer them. Otherwise, I'll -- I have nothing further

this time.

Ho Wan Kwok - July 11, 2023 120 THE COURT: Okay. Thank you. I have no questions. Thank you. MR. LUFT: Thank you, Your Honor. Who wishes to be heard in response to the trustee's motion to compromise? MR. LUFT: Your Honor, I believe this is the attorney from Cole Schotz. THE COURT: Okay. Yes. Come forward, sir. So if you'd just state your name again for the record, please. MR. JARECK: For the record, Your Honor, Ryan Jareck, Cole Schotz PC, on behalf of the assignee, Mr. Hofmeister. And, Your Honor, just by way of introduction, Mr. Hofmeister is in the room. THE COURT: Okay. MR. JARECK: I just wanted to briefly introduce you to him. THE COURT: Good afternoon, Mr. Hofmeister. MR. HOFMEISTER: Afternoon, Judge. Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 120 of

MR. JARECK: Your Honor, I don't know if you have a preference if I address the U.S. Trustee's objection first or the Himalaya objection as it relates to the authority issue. THE COURT: You can -- you should proceed in any

way you think is appropriate. Okay? MR. JARECK: Thank you, Your Honor. I'll start

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1 with the U.S. Trustee's objection. So, Your Honor, the U.S. 2 Trustee objects to the 9019 motion on two bases.

3 U.S. Trustee objects to the proposed channeling injunction 4 which is paragraph 13 of the proposed order.

5 secondly objects to the proposed exculpation provision, 6 which is paragraph 14 of the order.

Your Honor, we put in a response on Friday to sort of put the -- put some context as to why these are critical components of the settlement for the assignee, and I would just like to hit on a couple of points. The assignee is currently enjoined under the TRO from prosecuting the assignment proceedings. If the settlement is approved, the assignment essentially will be wound down in an orderly fashion.

If the trustee obtains a dispositive ruling, the HCHK estates will essentially be folded into the Kwok estates before this Court. Accordingly, as part of the settlement discussions, it was important that any and all claims arising from the assignment proceedings be decided by this Court, be channeled to this Court as opposed to having piecemeal litigation in multiple forums. And that's the reason why the assignee requested a channeling injunction.

The channeling injunction is solely intended to be a forum mechanism, and it will not -- is not intended to affect any parties' rights. If Your Honor actually has

Ho Wan Kwok - July 11, 2023 122 paragraph 13 of the order or can pull it up, please. THE COURT: Of the temporary restraining order? MR. JARECK: No. Of the proposed 9019 order. THE COURT: Oh, okay. Hold on a minute. MR. JARECK: Thank you, Your Honor. THE COURT: No, I don't have that. MR. JARECK: It's Case 23-05013, Docket Entry 25. THE COURT: Just give me a moment, and I will do that. MR. JARECK: Absolutely, Your Honor. (Pause) THE COURT: Oh, good. We've just pulled it up. What page do you want me to go to? MR. JARECK: Page 24 of 28, paragraph 13. THE COURT: Thank you. MR. JARECK: So, Your Honor, you see paragraph 13, the channeling injunction? THE COURT: Yes. MR. JARECK: It says in sum and substance, in the event of a dispositive ruling -- so in other words, assuming you're -- the -- Your Honor agrees with the trustee and finds that there is an alter ego, all creditors and equity holders shall be barred and enjoined from asserting claims and causes of action. And as you continue to scroll down, it then says, "except as raised through the appropriate Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 122 of

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Ho Wan Kwok - July 11, 2023 123 pleadings filed in this court." This is not, as the United States Trustee asserts, whether it's a non-consensual, non-debtor, third-party release, this is solely a forum mechanism. This is simply a mechanism to ensure that any and all claims following a dispositive ruling be filed in this court under the Court's supervision. And, in fact, we actually thought the U.S. Trustee's Office would prefer this. When speaking with Attorney Claiborn over the weekend and as most recently as yesterday, we circulated language to make it even more clear that this was a forum mechanism. And, in fact, we proposed -- after the words "except as raised through the appropriate pleading filed in this court," we proposed "(it being expressly understood that the foregoing provision is solely intended to be a forum mechanism and not affect any parties' rights)". That proposed revision as part of more global settlement discussions, unfortunately, was rejected. Similarly, Your Honor, the exculpation provision is very important. All right? You may have the opportunity to -- excuse me. The exculpation provision is also not a release of third-party claims. The provision, which is found in paragraph 14

right below the channeling injunction provision, is contingent upon the Court issuing a dispositive ruling in

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1 favor of the trustee.

2 if any, against the assignee for purposes of the assignment 3 proceedings and the settlement agreement become estate 4 causes of action.

5 of fiduciary duty, to the extent they exist, they're no 6 longer direct claims of any creditor.

7 causes of action.

In other words, the exculpation provision is more in the nature of a debtor release, not a third-party release. The Second Circuit is very clear that a debtor is authorized to release estate causes of action under Rule 9019. And I'm happy to provide the Court with citations to the extent that the Court is interested. I think it's pretty well known that debtors and trustees can compromise claims under 9019. That's what the rule's actually for.

Therefore, although it is styled as an exculpation, it's more in the nature of a limited debtor release for certain acts in favor of the assignee. This is not a Purdue Pharma third-party release issue whatsoever. And to the extent the language is not clear, we're open to any modification to make sure that the intent of the assignee is explicit in the order.

Your Honor, just to put it more in perspective, if the U.S. Trustee is successful and the other creditors are successful in knocking out the exculpation provision and the

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1 channeling injunction, after a dispositive ruling, again

2 assuming these provisions are not approved, the assignee may 3 be subject to claims in multiple forums without any 4 resources to defend against them.

5 inequitable based on the services that the assignee 6 performed and his professionals for these estates and the 7 value derived therefrom. 8 Your Honor, I'll stop there and ask if you have 9 any questions on our position as it relates to the 10 channeling injunction and the exculpation. 11 THE COURT: I do not have any questions.

12 you. 13 MR. JARECK:

14 shift to the Himalaya creditors' objection and focus on the 15 authority issue that has been raised by them, which I think 16 is more appropriate that it be addressed by the assignee and 17 his counsel. 18 THE COURT: Okay. 19 MR. JARECK: Thank you, Your Honor.

20 objectors cite to numerous provisions of the deeds, New York 21 debtor/creditor law.

22 applicable to what we're proposing to do by way of this 23 settlement. And I'll just give you a few examples. 24 First, the objectors challenge the assignee's 25 authority to enter the settlement agreement, and they cite

1 to -- and, I'm sorry, in paragraphs 57 and 60.

2 the deeds. They cite to New York debtor/creditor law which 3 require the state court approval of any sale or disposition 4 of personal property. 5 The settlement agreement is not a sale of the 6 assignor's assets.

7 contemplates the transfer of the HCHK funds from one 8 fiduciary to another fiduciary under the express supervision 9 of this Court. The funds will sit in a trustee custodial 10 account pending this Court's decision on the trustee's alter 11 ego claims. 12 Similarly, the objectors in paragraph 58 cite to a 13 provision of New York debtor/creditor law concerning the 14 authorization of the assignee to sell, compromise, or 15 compound any claim or debt belonging to the estate.

16 Your Honor, the assignee is not selling or compromising any 17 claims belonging to the assignors.

18 contrary. 19 There's no release provision.

20 agreement, the assignee made it required that all interested 21 parties of the estates received notice of the proposed 22 settlement, and all parties' rights are expressly reserved 23 and preserved pursuant to the no-prejudice paragraph in 24 paragraph 8. 25 In addition, in paragraph 61, the objectors

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1 criticize the assignee for not providing notice and 2 opportunity to be heard.

3 creditors with the opportunity to be heard in this Court. 4 Following entry of the expedited hearing order, notice to 5 these creditors were provided and a certificate of service 6 was filed to that effect. 7 Lastly, Your Honor, I want to note, consistent 8 with counsel previous brought up, that the authority issue 9 is actually addressed in the deeds and at Section 4F which 10 says that the assignee has the right to settle any and all 11 disputes. That's precisely what we're doing here, Your 12 Honor. 13 There's been several discussions with the trustee

and his counsel following entry of the TRO. As a result of those discussions, the assignee determined in his business judgment to enter into this settlement as opposed to litigating the request for an injunction and the issues raised in the adversary complaint, provided that the transfer of the funds to the control of the trustee would be subject to this Court's ultimate adjudication of the issues raised in the adversary complaint.

Your Honor, the assignee believes that the settlement agreement should be approved and is beneficial to creditors as the issues raised by the trustee in his complaint has to be resolved or adjudicated in one form or

1 another. The settlement avoids costly litigation but at the 2 same time preserves parties' rights to contest the trustee's 3 claims should they wish to do so. 4 For these reasons, the assignee respectfully 5 submits that the 9019 motion should be approved.

6 stop there and ask if the Court has any questions about my 7 presentation this afternoon. 8 THE COURT: I do not have any questions.

9 you. 10 MR. JARECK: Thank you, Your Honor. 11 MR. PASTORE: May I approach, Your Honor? 12 THE COURT: Yes, you may. 13 MR. PASTORE: Thank you, Your Honor. 14 THE COURT:

15 MR. PASTORE: Yeah. 16 THE COURT: -- for the record, please? 17 MR. PASTORE: Of course.

18 Pastore from Pastore LLC.

19 Melissa McClammy.

20 the room in the back. 21 We represent several of the creditors of the HCHK 22 entities. And if Your Honor would like, I could read it. 23 They're difficult to pronounce in numbers.

25 THE COURT: The record is fine. Thank you.

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Ho Wan Kwok - July 11, 2023 129 MR. PASTORE: Great. Thank you. Your Honor, I represent creditors who, despite innuendo and statements, believe that they're bona fide creditors of these entities, loaned money, and are legitimate creditors. I have no personal relationship with them, no history with them, no history with the movement, no relationship to anything that's gone on here. I'm dropping into a play that I know has had many acts, and I only see a piece of it. And I respect that and understand it. But from our perspective, I'm here because there's creditors whose rights are being abridged by a settlement that we think is ultra vires or illegal. I think counsel for the assignee highlighted it. This is a motion to compromise. And the New York law makes clear, we just read it, that the assignee is not free to compromise -- paragraph 58, I believe, of our objection -- without court approval under New York law. And there's a reason for that. The assignee is not a creature unto himself. The assignee operates under the direction of the New York court. Very respectful of the TRO. I understand the need to freeze the money. I understand the need to be very careful. But someone has to supervise and legitimatize the assignee's compromise. He does not get to unilaterally act on his own belief. He has to seek approval in New York

1 court. And because of that, this settlement agreement is 2 unlawful, because no such approval was sought. 3 And from our perspective, someone has to validate 4 the assignee's belief that he could disenfranchise these 5 creditors without any investigation, any information, simply 6 disenfranchise creditors that he has a fiduciary obligation 7 to serve and protect under the New York law. 8 Now, let's be clear.

9 the creditors of the HCHK entities, assuming they're bona 10 fide -- and I have to assume it. And I've investigated it. 11 Best I know, they're legitimate creditors.

12 claims. Good faith monies loaned.

13 disenfranchised by this arrangement. 14 And the assignee has had to report to no one as to 15 why he's doing that. He's getting immunized for doing it. 16 He's getting \$550,000 for doing it.

17 \$400,000 for doing it.

18 suggest he's acted in the best interest of the creditors 19 he's sworn to protect? 20 As a result, the agreement as structured by the 21 trustee and the assignees is illegal, ultra vires.

22 Court has authority to stay the New York action.

23 don't think this Court has the authority to tell the New 24 York court you must approve this assignment in this action 25 by the assignee.

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1 I think that's for the New York court to 2 determine. And if the New York court so determines it, the 3 settlement could proceed. But absent that, someone has to. 4 It can't -- the assignee is not free to do this under New 5 York law simply on its own volition. 6 With respect to the, you know, someday maybe we'll 7 have a finding of alter ego, maybe we will, maybe we won't. 8 But I don't think that's strong enough for this Court simply 9 to ignore the plain strictures of the New York law.

10 may be a finding someday of alter ego, and if that's the 11 case, ultimately, these monies will be transferred.

12 until then, it doesn't justify just ignoring the law. 13 So our view, Your Honor, is that this settlement 14 should not be approved as it's structured.

15 vires. It's illegal.

16 followed. 17 We intend, if the case proceeds, to intervene in 18 the case and protect our creditors' rights.

19 good-faith creditors of this entity and this money.

20 intend to try to hold the assignee to his sworn duty to 21 protect the rights of the creditors, my clients. 22 If you have any questions, Your Honor, I'm happy 23 to answer them. That's the position of the creditors that 24 we represent. 25 THE COURT:

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Ho Wan Kwok - July 11, 2023 132 moment. MR. PASTORE: Okay. THE COURT: Thank you. MR. PASTORE: Thank you, Your Honor. THE COURT: Does anyone else wish to be heard on the motion to compromise? MR. SHERMAN: Your Honor, may I be heard? My name is Joshua Sherman. I filed a limited objection. THE COURT: Yes. MR. SHERMAN: I just wish to state that -- THE COURT: Why don't you come up to this podium, please -- MR. SHERMAN: Thank you, Your Honor. THE COURT: -- so it'll be easier. Thank you. MR. SHERMAN: Your Honor, I just wish to state that I agree with the arguments made by the Himalaya creditors. But in addition, I just wanted to state that my own claim, I believe, is administrative in nature. I described it in my letter to the Court. The trustee and the assignee have not argued otherwise. Therefore, if the Court is inclined to approve the settlement, my claim should be included among the authorized assignee actions in a proposed order. Thank you. THE COURT: Okay. Thank you. MR. ARCARO: Your Honor, good afternoon. Gregory

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Ho Wan Kwok - July 11, 2023 133 Arcaro appearing on behalf of G News Operations, LLC. Similar to counsel's objection, my client entered into a management agreement with the assignee and prepaid rent and other expenses pursuant to that management agreement. The proposed order and settlement agreement provides for the termination of that management agreement but does not provide for the fallout of that, which is the recoupment of the funds outlaid by my client.

I heard trustee's counsel say that the objection to a motion to compromise is not the proper place to assert claims, but the trustee put that issue squarely before the Court when it proposed a payment of certain administrative -- what I would consider to be administrative claims as part of the settlement but does not propose a mechanism to pay my client, simply requesting that a mechanism be included so that my client can submit a claim and, if proved up, be paid along with other administrative claims and asserts that it stands on equal footing to all the other proposed payments in the settlement agreement, specifically in phase three, but could also come in phase two when the trustee is authorized to advance the assignee to pay certain expenses, could come either way in either section of the settlement agreement but should be a specific reference to how that claim is to be addressed. Thank you, Your Honor.

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1 THE COURT: Thank you. 2 MS. BARANOWSKY: Good afternoon, Your Honor. 3 Kelliane Baranowsky with Green & Sklarz on behalf of G Club 4 Operations, LLC.

5 Pillsbury Winthrop on behalf of the same entity. 6 MS. FORNOS: May I approach, Your Honor? 7 THE COURT: Yes, please. 8 MS. FORNOS: Thank you. 9 THE COURT: Good afternoon. 10 MS. FORNOS: Good afternoon, Your Honor.

11 Fornos of Pillsbury Winthrop on behalf of G Club Operations. 12 Your Honor, we had filed a notice, and the frame -- the way 13 that the trustee has framed that notice is all about 14 avoiding producing documents.

15 Operations has produced documents, not just the 300 that we 16 mentioned when we were last before the Court but also over 17 100,000 documents that we produced this morning.

18 are more that we will produce because we will comply with 19 the Court's order prior to July 14th. 20 The issues that we are presenting to the Court is 21 that the trustee cannot simply walk in, assume alter ego, 22 assume substantive consolidation, and take hold of all 23 documents in the possession of HCHK.

24 Technologies -- and there are multiple entities.

25 issue for us is HCHK Technologies.

Ho Wan Kwok - July 11, 2023 135 administrative and managerial position with respect to our IT. HCHK does not have the authority to transfer those rights and documents to the assignee. And the assignee does not have rights to just turn that over to the trustee. And the trustee can't just do an end-run around discovery and just say, oh, I'm just going to take all these documents, ignoring privilege, ignoring contractual rights. And that is the reason that we have filed the notice. We respectfully ask that the Court take notice that we will produce documents, but G Club has to have access to their documents, review them, account for privilege, and we will produce what is responsive. The trustee doesn't get to just take everything irrespective of privilege rights and responsiveness. Does the Court have any questions on this issue, Your Honor? Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 135 of

THE COURT: I just -- the only thing I think you said that I believe I knew but I want to make sure I understand is your notice is only -- the notice that you filed on behalf of G Club Operations relates only to the HK -- HCHK Technologies entity, correct? MS. FORNOS: Yes, Your Honor. That is correct.

And, Your Honor, we don't take a position -- we defer to other counsel to address the settlement. The issue is that Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 136 of

1 the proposed order as currently drafted bypasses a number of 2 rights and due process rights that affect G Club Operations. 3 Those rights start with the concept that the settlement 4 agreement assumes alter ego, assumes substantive 5 consolidation, and assumes that the trustee can just take 6 hold of all of our documents and do an end-run around the 7 discovery process. 8 That's the concern, and that's why we are flagging 9 that the proposed order should be modified.

10 that the Court agrees with the settlement, the proposed 11 order should be modified to protect our rights. 12 THE COURT:

13 Technologies, though.

14 document that assigned all of their rights and title and 15 interest and claims and assets to the assignee, right? 16 We're not disputing that? That happened? 17 MS. FORNOS: Your Honor, yes. 18 THE COURT: Okay. 19 MS. FORNOS:

20 clarify this.

21 objected. The TRO was entered before any dates would have 22 come up in state court to file position statements.

24 THE COURT: No, no. I understand that.

25 talking about even before the TRO, though.

1 case was commenced in New York was because somebody in 2 control at HCHK Technologies signed a document assigning 3 over all of its everything to the assignee.

4 right? 5 MS. FORNOS: Yes, Your Honor.

6 that the process was finished.

7 THE COURT: No, no.

8 believe that. I'm just saying that's what happened, right? 9 So the assignee comes into this case in New York and has 10 assigned to him as the assignee all of these entities, 11 assets and -- for the benefit of creditors, right?

12 the assignee's role would be to take everything in the -- 13 from those entities and turn them into cash and pay 14 creditors. That's what was supposed to happen. 15 MS. FORNOS:

16 intent. But to be clear, the assignee steps into the shoes 17 of -- if all of that is proper under New York law -- 18 THE COURT: Yeah. 19 MS. FORNOS:

20 done and everybody was afforded the opportunity to be heard 21 with that process, assuming all of that takes place, the 22 assignee takes the -- would arguably take the shoes of HCHK 23 Technologies and step into the shoes of those contracts. 24 And under those contracts, the assignee would still be bound 25 by those agreements.

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1 contain confidentiality provisions and specific provisions 2 that prevented the assignee or HCHK from just transferring

4 THE COURT: Okay. 5 MS. FORNOS:

6 THE COURT:

7 and I apologize if you did, and I just didn't see it -- 8 where in the agreements between G Club Operations and HCHK 9 Technologies there's this confidentiality provision? 10 MS. FORNOS:

11 master services agreement.

12 counsel for the trustee was provided not only with the 13 master services agreement originally in the original 14 production of the 300 documents, the Court may recall that 15 the Court specifically asked me about HCHK at the last

17 THE COURT:

18 provisions, right, and whether the members had any -- I'm 19 not talking about HCHK. I'm talking about G Club right now. 20 You were talking about -- I said is there any contractual 21 basis upon which a member would have a belief that their 22 information would remain confidential. 23 MS. FORNOS: Your Honor, I will answer that.

25 THE COURT: Sure. Go ahead.

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Ho Wan Kwok - July 11, 2023 139 MS. FORNOS: -- issues. There's the membership agreements and the membership rights. And the Court properly raised that issue last time, and we did look into it and determined that we do have the ability to provide it subject to the protective order, which is what we discussed with the trustee and resolved that. THE COURT: Okay. MS. FORNOS: This confidentiality issue that we're talking about is a separate issue. This is our entire IT system. This is all of our email communications. This is Microsoft 365. THE COURT: Right. MS. FORNOS: This is -- THE COURT: But you have to have some agreement with HCHK regarding that. MS. FORNOS: And that contains a confidentiality agreement with respect -- THE COURT: Okay. That's what I'm asking. MS. FORNOS: -- to all of our -- THE COURT: Okay. MS. FORNOS: -- all of our information. And that does exist, and we have provided a copy of that agreement to the trustee -- THE COURT: Okay. MS. FORNOS: -- multiple times and have copied him

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1 on communications with HCHK demanding this information back. 2 And accordingly, Your Honor, the way the proposed 3 order is structured right now does not take into account -- 4 THE COURT:

5 what information are you talking about?

6 software if they were controlling your systems? 7 MS. FORNOS: It's IT.

8 applications, Your Honor. 9 THE COURT: Okay. Okay. 10 MS. FORNOS:

11 notice that the trustee cannot just do an end-run and just 12 step in and say I'm going to just take everything. 13 THE COURT:

14 trustee's saying, I don't know.

15 the trustee's saying.

16 you're -- you are asserting on behalf of G Clubs (sic) 17 Operations that there is an agreement between G Club 18 Operations and HCHK Technologies in which there's a 19 confidentiality provision with regard to the information 20 that HCHK manages on behalf of G Club Operations?

22 MS. FORNOS: Correct, Your Honor. 23 THE COURT: Okay. 24 MS. FORNOS: That's correct. 25 THE COURT:

Ho Wan Kwok - July 11, 2023 141 to the trustee, is what you've said. MS. FORNOS: Yes. THE COURT: And you're saying that -- are you saying that it should never be turned over, or you need it back? What are you saying with regard to the information that is in the agreement between G Club and HCHK aside from the members that we talked about already? MS. FORNOS: Yes. That all information should be returned to G Club so that G Club can perform review, determine responsiveness, produce what's responsive, and withhold privileged information. THE COURT: Okay. Thank you. That's what I wanted to be clear about. MS. FORNOS: Thank you, Your Honor. MS. CLAIBORN: Again, Holley Claiborn for the U.S. Trustee. I think I'm the last of the objecting parties to present to the Court today. The U.S. Trustee filed a limited objection to the settlement. It's at ECF 1978, and it takes issue with three things. I'm going to take the easiest of it first, and I'm going to go back into the more substantive discussion. The easy part has to do with the trustee's use of the funds that he gets if the Court approves the settlement and what people should know about that. And the U.S. Trustee took the position that we should have some greater transparency with Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 141 of

1 respect to that and some guard rails to know what's going to 2 happen. 3 The U.S. Trustee proposed that the monthly list of 4 what gets paid be filed by the trustee.

5 is on board with that.

6 for an expense that exceeded \$25,000 that there be given an 7 opportunity for the U.S. Trustee and the committee to weigh 8 in on whether or not that that was an appropriate expense. 9 And the trustee has pushed back and asked for that be 10 increased to \$50,000. 11 I don't think I heard any argument other than that 12 it's more efficient to have a threshold of \$50,000.

13 the problem really is, is that we don't really know what the 14 trustee's going to be doing with the money.

15 have some sort of mechanism to assure ourselves that an 16 expense that's significant is properly before the parties to 17 know what's happening before it happens. 18 So the U.S. Trustee thought that the \$25,000 19 marker was a better threshold for what would be a reasonable 20 threshold for knowing what's going to happen in advance of 21 it happening. So the U.S. Trustee would like that to be the 22 threshold at which the trustee has to take into 23 consideration the opinion of the U.S. Trustee and the 24 committee. And to be clear, to the extent that the U.S. 25 Trustee has a problem with the proposed expense, it's the

1 U.S. Trustee's burden to come back to the Court to take it 2 up with the Court. 3 Going back to the other two issues that the U.S. 4 Trustee raised in the objection. They are important issues. 5 And they are issues of some significance right now in courts 6 across the nation, including the Second Circuit. 7 The proposed settlement agreement includes two 8 provisions that work hand in hand with each other. 9 Paragraph 13 of the proposed order provides for a channeling 10 injunction, and paragraph 14 of the proposed order provides 11 for an exculpation.

12 be written. And there is no dispute that they actually do 13 intend to protect the assignee and his professionals from 14 claims of others who are not the debtors, the debtor's 15 estate, or claims by the trustee. 16 The definition of who is protected is referred to 17 as the assignee, but it does, for clarification -- and -- 18 reference not only the assignee, Mr. Hofmeister, but several 19 professionals. So it's a group.

20 who made the presentation today on behalf of the assignee, 21 the firm of Cole Schotz. 22 The exculpation that is included in the order and 23 the settlement agreement is absolutely within the purview of 24 this Court to decide if it's appropriate. And it's the U.S. 25 Trustee's position that it's not appropriate, because it's a

1 functional equivalent of an improper non-consensual release 2 of a third-party claim. 3 Stepping back from that for a minute.

4 trustee were to be proposing that the trustee wants to 5 release the estate's claims against the assignee and his 6 professionals, the trustee has the capacity to do that.

7 that's not what the language proposed says. 8 The language proposed goes far beyond that.

9 talks about any liability to any person or entity and then 10 goes on to talk about the various different conduct.

11 included, for example, in that conduct that is not protected 12 and reserved is criminal conduct.

13 government agency wanted to take steps to pursue criminal 14 charges, those would arguably be barred by the exculpation 15 language that's in the proposed order. 16 The U.S. Trustee doesn't believe that the proposed 17 language for exculpation meets the standards that the Second 18 Circuit has articulated recently in the Purdue Pharma case. 19 None of the factors that are cited in that case, and there 20 are seven of them, appear to have been met by the proposed 21 motion and settlement terms.

22 whether or not it actually has the ability to approve that 23 release, because it affects the claims of not just this 24 estate but of third parties who are not here and are not 25 subject to the subject matter of this Court and this

1 jurisdiction. And you may have claims that have not been 2 articulated or presented to this Court. 3 Even to the extent that this Court determines for 4 some reason that the Purdue Pharma factors have actually 5 been met, the Purdue Pharma decision recently issued by the 6 Second Circuit makes it very clear that this Court does not 7 have the actual authority to finally approve the proposed 8 channeling injunction and the exculpation, because any 9 findings it would make would just be proposed findings that 10 would have to be approved and blessed and adopted by the 11 District Court.

12 proceeding, and it violates the opinion of the United States 13 Supreme Court in Stern v. Marshall to the extent it's asking 14 this Court to just bypass and adopt full jurisdiction, 15 because it doesn't have it. 16 THE COURT: So wait a minute.

17 that question, because I'm not sure I follow you.

18 doesn't have core jurisdiction to decide a motion to -- for 19 settlement under this -- in this case because why? 20 MS. CLAIBORN: I'll be more specific. 21 THE COURT: Okay. 22 MS. CLAIBORN:

23 jurisdiction to approve the channeling injunction and the 24 exculpation because together they comprise a non-consensual 25 release of third-party claims that do not belong to this

Ho Wan Kwok - July 11, 2023 146 estate. That -- THE COURT: So but -- MS. CLAIBORN: That determination about jurisdiction -- THE COURT: But you're taking about jurisdiction, so -- you're talking about jurisdiction, so we -- I just want to be -- MS. CLAIBORN: So my argument is -- THE COURT: I just want to make sure I understand your position clearly. MS. CLAIBORN: My argument is twofold. One, that we don't think that the factors articulated in the Purdue Pharma decision -- THE COURT: That I get. I -- MS. CLAIBORN: -- have been met. THE COURT: The Seventh Circuit -- the seven factors haven't been met. MS. CLAIBORN: Correct. THE COURT: But even if they have, I can't decide them anyway, because they're not core -- MS. CLAIBORN: You don't have final approval authority. THE COURT: -- they're not core proceedings, and they'd have to be referred to the district court? MS. CLAIBORN: Correct. Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 146 of

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1 THE COURT:

2 correct, which I don't know if you are or not, because I 3 haven't studied what you just said until -- I didn't 4 appreciate what you're saying until now, can I enter 5 proposed findings of fact and conclusions of law under Rule 6 7052? 7 MS. CLAIBORN: You can.

8 has to ultimately weigh in on that. 9 THE COURT: I understand. Okay. All right. 10 MS. CLAIBORN:

11 THE COURT: I'm just asking. 12 MS. CLAIBORN:

13 issues of the exculpation provision -- 14 THE COURT: Yep. 15 MS. CLAIBORN: -- and the channeling injunction. 16 The other thing that I want to point out is that 17 there is no statutory authority for this Court to approve a 18 channeling injunction outside the confines of the plan. 19 That issue is a big issue, and it stops this channeling 20 injunction request in its tracks.

21 THE COURT:

22 for that all the time in -- I actually have -- the Chapter 7 23 trustee is asking for those, and no one's raising an issue 24 about channeling injunctions and no statutory authority. 25 And I -- and in Chapter 11 cases when there aren't plans

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Ho Wan Kwok - July 11, 2023 148 confirmed yet. And where does 542(g), I think, say that it has to be in connection with a plan? I'm not sure it does. There's been a lot of controversy over that, hasn't there? MS. CLAIBORN: There has been, Your Honor. And it's 524(g). THE COURT: What did I say, 42? MS. CLAIBORN: Yeah. THE COURT: I said it backwards? MS. CLAIBORN: That's okay. THE COURT: 24(g). Sorry. MS. CLAIBORN: So the point is that the authority to impose that restriction on others is found only in that section. And courts have determined that that section does authorize channeling injunctions outside the concept of the specific language that's in there that refers to asbestos cases. That said, there is no case law that we're aware of that authorizes the Court to impose this channeling injunction outside the confines of a plan. All of the case law determines the appropriateness of a channeling injunction in the confines of an actual plan. THE COURT: Okay. MS. CLAIBORN: So it's the U.S. Trustee's position that this Court does not have authority to do -- THE COURT: There's no statutory authority to --

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1 MS. CLAIBORN: Correct. 2 THE COURT: -- to allow that. Okay. 3 MS. CLAIBORN: Correct. 4 THE COURT:

5 for you to just articulate that. I wasn't exactly sure. 6 But that -- now I understand what you're saying. 7 MS. CLAIBORN:

8 if it were scaled back to the idea that the trustee wants to 9 release the assignee and his professionals for claims that 10 the estate may have against them, that's within the 11 trustee's purview.

12 authority to ask this Court to bless releases of claims held 13 by third parties against the assignee and his professionals. 14 And so we're asking the Court to deny that part of 15 the settlement agreement with respect to the two provisions, 16 because they have to be read in harmony with each other.

17 that's 13 and 14 in the proposed order, and we would ask 18 that those be stricken from the proposed order to the extent 19 that the Court approves the actual settlement agreement 20 that's before the Court. 21 THE COURT: Okay. Thank you. 22 MS. CLAIBORN: Thank you. 23 THE COURT: Any response from the trustee? 24 MR. DESPINS: Yes, Your Honor.

25 is would it be possible to take a ten-minute recess, so we

Ho Wan Kwok - July 11, 2023 150 can discuss -- THE COURT: Yes. But actually, before we do, is there anybody else that has an objection that hasn't been heard? And who are you representing, Attorney Moriarty? MR. MORIARTY: The debtor, Your Honor. And -- THE COURT: Which debtor? MR. MORIARTY: Ho Wan Kwok. THE COURT: Mr. Kwok? MR. MORIARTY: Mr. Kwok. THE COURT: He's -- MR. MORIARTY: I'm not objecting. THE COURT: He isn't -- MR. MORIARTY: I just want to state for the record that the debtor does not take any position on the settlement agreement or the motion. THE COURT: Okay. MR. MORIARTY: And that is it. Okay? THE COURT: Okay. Thank you. All right. Yes, let's take a ten-minute break -- recess. Court is in recess until 4 p.m. MR. DESPINS: Thank you. THE COURTROOM DEPUTY: All rise. Court is in recess until 4 p.m. (Recess from 3:51 p.m. to 4:05 p.m.) Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 150 of

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1 THE COURTROOM DEPUTY: All rise.

2 Bankruptcy Court for the District of Connecticut is back -- 3 is now in session. 4 THE COURT: Please be seated. 5 Okay. We took a recess a little before -- around 6 3:50-ish, I guess, Trustee Despins.

7 now? 8 MR. DESPINS:

9 reached an agreement with the assignee which I think 10 resolves a lot of the issues that were raised regarding 11 exculpation and channeling.

12 follows. 13 The trustee will release any estate cause of 14 action against the assignee and/or his professionals.

15 we obviously -- you know, I don't have to tell you this. 16 You know it better than I do.

17 subject to Your Honor's approval.

18 such claims, but we would be releasing them as part of the 19 settlement. 20 And as far as channeling, there wouldn't be a 21 broad channeling injunction that concerned the U.S. Trustee, 22 but rather there would be basically the Court being placed 23 into the gatekeeper function, meaning that anyone who wants 24 to assert a claim against the assignee or his professionals 25 with respect to his role as assignee and the assignment for

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Ho Wan Kwok - July 11, 2023 152 the benefit of the creditor must first file such claim before this Court so that the Court can determine whether that cause of action was released by the trustee pursuant to the release that we would be giving.

And by the way, that release would only be given if Your Honor approves, you know, the third stage of the settlement, which is if Your Honor approves the alter ego or equitable ownership claims that the trustee has brought forward. If that's not approved, all of -- all bets are off. There's no release. There's no gatekeeper function by the Court. This would all be done in the third phase of this process.

But, again, the trustee would release only estate claims against the assignee and his professionals. There would be a provision and -- you know, the assignee is okay with this subject to reviewing the language, his counsel reviewing the language. But the concept would be that any claims against the assignee or his professionals must first be brought before this Court so that the Court may determine whether those claims are subject to the release.

Because this -- as you know, the issue whether people have direct claims or not in this context is very murky. And we don't want people to be suing all over the place until Your Honor determines, yes, that's a direct claim not subject to the trustee release; go ahead and you

1 can sue whoever you want. We hope that will not happen. 2 But the point is that that right is protected. 3 But the Court would play a gatekeeper function. 4 We believe there's plenty of support for giving the Court 5 jurisdiction to do solely that.

6 precluded from bringing the other claims; they're just -- 7 there's just one step, which is they need to start with this 8 Court so the Court can protect its jurisdiction, i.e. did -- 9 are these claims derivative claims or are they claims that 10 are direct and not derivative.

11 be made by this Court, the Court that approved -- or if Your 12 Honor approves it, that would approve the settlement. 13 So that's the -- I think that resolves that issue. 14 My colleagues will address other issues raised by other 15 claim creditors or alleged creditors.

16 me, I think that resolves a -- an issue in a way that's 17 favorable to the estate but also that should make the Court 18 comfortable that you have the jurisdiction and power and 19 that it's appropriate to issue such -- that type of order. 20 The only point -- before I cede the podium to my 21 colleague, I would just say, Your Honor, every time people 22 who -- whose name starts with a G -- and I don't mean a 23 first name, but a company starts with a G appears in court

here, putting themselves at -- or asking for -- the Court for protection, I would be very concerned that we need to

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1 see how the dust settles on these things.

2 what's what, what happened.

3 concerned about any attempt to derail this or for people 4 saying, well, I want a special deal as well. 5 First of all, it's important to understand that 6 the relief that the assignee and his professionals are 7 getting, they're getting that only if Your Honor determines 8 that this -- these entities are alter egos of the debtor. 9 If not, they're not getting that.

10 will be free to say, oh, I'm an admin creditor of the 11 estate; let me explain to you why.

12 at that time. 13 But this is not today the proper (indiscernible) 14 or process to have the claims of people who would like to be 15 recognized as admin -- eventual admin claimants.

16 the proper context. 17 But I'll -- on that note, Your Honor, I'll cede 18 the podium to my colleagues. 19 THE COURT:

20 you just explained as a resolution of the release issues and 21 the exculpation issues.

22 limit the release language to say that the trustee will 23 agree only estate claims against the assignee are released

25 MR. DESPINS: And his professionals. Yes.

Ho Wan Kwok - July 11, 2023 155 THE COURT: Go ahead. I'm sorry. What? MR. DESPINS: And his professionals. THE COURT: And his professionals. Okay. And that if any party has a claim -- what they believe is a claim against the assignee and his professionals, they have to bring that claim before this Court? MR. DESPINS: Or file a motion before the Court saying I want to be authorized to bring that claim in -- wherever they want to bring it, in New York state court, and let me explain to the Court why that claim that I have -- this is the creditor speaking now -- is not covered by the release that the trustee gave to the -- to these folks. THE COURT: Then how do these creditors know that? How are they going to know that? MR. DESPINS: Well, in the notice that they would get -- again, this only happens in the third phase. If Your Honor rules that these entities are alter egos of the debtor, at that point there would be a notice given that says that any -- and we can work on the language -- but that any creditor that believes that they have such a claim need to file first a motion with this Court to be authorized to bring any such claim. That's a minimum -- you know, frankly, in terms of due process, it -- it's a very light impediment to them Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 155 of

exercising their rights and -- because, at the end of the

1 day, it's very likely that all these claims are derivative 2 claims and, therefore, that we own those claims.

3 why it's important to have that gatekeeper function, Your 4 Honor. 5 THE COURT:

6 you are successful and the motion to compromise is granted, 7 how does the proposed order at this point address that

9 MR. DESPINS:

10 THE COURT:

11 MR. DESPINS:

12 Your Honor. But, basically, I would say ignore the sections 13 that -- on exculpation on channeling that you have before 14 you now. We will submit one provision that says the 15 trustee -- if the Court grants the relief, we call that 16 the -- in the dispositive motion, meaning the summary 17 judgment or whatever motion we bring -- the trustee will 18 release, add that point, all claims against the assignee and 19 his professionals. 20 And the Court will, at that point, enter an 21 order -- or, you know, of course, subject to Your Honor's 22 consent, would enter an order saying that any creditor 23 wishing to assert a claim against the assignee or his 24 professionals must first file a motion before this Court to 25 be authorized to do so, so that the Court can determine

Ho Wan Kwok - July 11, 2023 157 whether the claims to be asserted are claims that are derivative, meaning that are still owned by the estate, or a direct claim of these creditors, something along those lines. Again, I hesitate to give too much language, because counsel for the assignee has not reviewed this language. But those are the concepts, Your Honor. So, obviously, we need to submit a new order to Your Honor. You know, there's no doubt about that. THE COURT: All right. But for right now, your proposal addresses the United States Trustee's objections? MR. DESPINS: Well, no. THE COURT: Oh, she's shaking her head. MR. DESPINS: No, I don't -- I said that we resolved this with the assignee. THE COURT: It doesn't resolve it with the U.S. Trustee. Okay. MS. CLAIBORN: It does resolve the U.S. Trustee's concerns with response to the release. The estate is authorized to propose a release of whoever it wants to release. And it's up to the Court as to whether or not that's appropriate. We're not arguing that point. What we were arguing about was whether or not you could release other claims that belong to third parties who are not the estate Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 157 of

1 and not the debtor.

2 with by language and can be resolved. 3 The issue as to the proposed mechanism for the 4 Court to be a gatekeeper, I don't have any authority to 5 consent to that at this point.

6 and discuss it with the U.S. Trustee and circle back to the 7 Court and to the parties. 8 MR. DESPINS:

9 away from the channeling injunction where it was mandatory 10 that any claims be brought here for -- on the merits. 11 Basically, it's solely a gatekeeper function.

12 that there are precedents for courts doing that, so. 13 But, anyway, if I could have my colleague address 14 other -- I mean, unless you have other questions, Your 15 Honor. There are other objectors, and that raises -- raised 16 issues. And I'd like my colleague to address these points 17 if possible. 18 THE COURT:

19 other questions.

20 moment, but that doesn't mean I might not, depending upon

22 MR. DESPINS:

24 THE COURT: Okay. Thank you. 25 MR. LUFT: Your Honor, may I approach?

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Ho Wan Kwok - July 11, 2023 159 THE COURT: Yes, please. MR. DESPINS: Actually, Your Honor, there's one point I -- this is purely procedural before Mr. Luft comes up. Mr. Goldman asked me whether the committee could have a review right regarding the fees of the assignee's professionals, and that was agreed to. THE COURT: With the assignee as well? MR. DESPINS: Just the assignee's professionals. Because the assignee, there's nothing to review. It's a -- meaning the -- THE COURT: No, but you -- MR. DESPINS: Yes. THE COURT: But the -- MR. DESPINS: They agreed to that, Your Honor. THE COURT: Yeah. MR. DESPINS: I apologize. I didn't understand your question. The second point is that Mr. Luft accurately described the provision saying that the funds would be invested in treasuries. That's the current version. But we need to modify that -- and, again, the assignee has agreed to this -- to provide that we can also keep it in the trustee Section 345 accounts. Because, to make a long story short, after we told the bank that we were going to take the money and invest it in treasuries, they said, well, you know, guess what, we'll

Ho Wan Kwok - July 11, 2023 160 offer you 4.95 percent, which is just like a quarter point or half a point less than treasuries. And that's in a 345 account. So we decided to -- THE COURT: You mean U.S. Bank offered you that? Is that what you're saying? MR. DESPINS: No. A bank -- THE COURT: Oh. MR. DESPINS: -- but not U.S. Bank. Not this U.S. Bank. But the bank that holds the other trustee accounts in the case. THE COURT: Okay. Got it. MR. DESPINS: And they've agreed to give us -- THE COURT: The estate trustee accounts. MR. DESPINS: -- 4.95 percent, which is pretty -- it's not marketing for them, but that's a pretty high interest rate. And it's a Section 345 account. So the U.S. Trustee is happy. So the point is that we need to modify that section to allow for the money to be deposited in such accounts. But that -- those are the only two procedural points I wanted to make. THE COURT: Okay. Thank you. MR. LUFT: Thank you, Your Honor. Avi Luft again from Paul Hastings on behalf of the Chapter 11 Trustee. I will try to be brief, because I realize it is getting late. Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 160 of

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1 I will go in order in which it was discussed. 2 Your Honor, with regard to the comments made by the -- what 3 I've referred to as the Himalaya objectors, I want to focus 4 just on two things really.

5 there was there any discussion of the Iridium factors or 6 that, in fact, this is not in the best interest of the 7 debtor's estate. And that's really what we're here for on a 8 9019 settlement. 9 In fact, I didn't hear that from anybody.

10 be honest, I think that really is where the analysis should 11 be focused. 12 Beyond that, Your Honor, I do want to just 13 comment. There was a lot of language thrown around about 14 people being "completely disenfranchised" and suggestions 15 that they won't be able to have claims.

16 this settlement is structured, Your Honor. 17 To the extent the trustee prevails in the 18 adversary proceeding with regard to either alter ego and/or 19 equitable ownership, to the extent people are valid 20 creditors of the HCHK entities, then they will have an 21 opportunity to bring claims in this case subject to the 22 trustee making his application to reopen the deadline for 23 filing claims, which is already provided for in the order. 24 And to the extent the trustee is to lose, then the money is 25 returned to the assignee.

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Ho Wan Kwok - July 11, 2023 162 worse off. So all this language with regard to people being disenfranchised or losing claims just isn't true. And I think in the papers that they filed, the reality kind of is there. There's a reference to the fact that what they really think is unfair is that in the New York state court case they would have only been competing with other creditors of HCHK, but if the trustee is to prevail on his alter ego claims then they will be subject -- equal with the other creditors of the debtor. But that's actually quite fair, Your Honor. If we are right that HCHK entities are alter egos of the debtor, then creditors of one -- of one aspect of the debtor's estate is -- should be treated the exact same as creditors of other aspects of the estate. So with that, Your Honor, unless you have questions, I'll move on to the others. THE COURT: I have no questions. MR. LUFT: Thank you. With regard to Mr. Sherman's statement, he made a brief reference that we did not specifically disagree with him that his claim is an admin claim. Your Honor, what I said in my opening statement was that I thought it was premature to deal with what -- these claims. And just so we're clear, I would not take the fact

Ho Wan Kwok - July 11, 2023 163 that I did not get into the details as to whether or not it is an admin claim as any type of agreement that it is. I think when the time and the place is right, it could be submitted. It could be considered. THE COURT: Well, when would the time and the place be right? I'm just asking. MR. LUFT: Yeah, Your Honor. That's completely fair. I think, should we prevail on the adversary proceeding and it is determined that we are -- that the HCHK assets are part of the debtor's estate, then I think any creditors of the debtor, whether through HCHK or otherwise, here I think Mr. Sherman or whoever else, can come forward and say I have a claim, and they can assert it. THE COURT: But what if it's an administrative claim? MR. LUFT: Your Honor, in terms of the timing, I still think that would probably be the right time just because prior -- THE COURT: Okay. I'm just asking, because there is -- MR. LUFT: No, it's completely fair. THE COURT: Okay. Go ahead. MR. LUFT: Look, Mr. Sherman's free to raise it to us now. We can talk about it. I just don't think it has any bearing on the settlement. Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 163 of

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1 As I -- the only thing I'll finish with is, to the 2 extent we were to lose, then the money would go back to the 3 assignee, and then he would have to make the judgments, 4 which is why I time it to awaiting that judgment. 5 With regard to G News, I'll simply say, look, 6 there is no obligation because you settle a claim with one 7 party to settle all claims that any party may have.

8 this is a settlement that was reached -- with the assignee 9 and the trustee. That's whose claims are being addressed. 10 I don't think the fact that that is happening in 11 any way prejudices G News.

12 claim at the appropriate time. 13 Finally, with regard to G Club, I just want to 14 make a few comments.

15 creditor, Your Honor.

16 grounds they are objecting to this settlement. 17 I will note specifically there was no mention with 18 regard to the language I highlighted which is in their 19 proposal in paragraph 6 of their notice that we may only 20 look at documents pertaining "only to the HCHK entities." 21 As I said, the inclusion of that language which they added 22 and which they did not address now very likely could create 23 a null set of what documents the trustee may see.

24 think it's appropriate.

25 with regard to it.

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1 With regard to this idea that HCHK controls all 2 their emails and all their IT, I'll note that despite what 3 is now going on seven, perhaps eight, months this -- this 4 notice was the first time we've heard that HCHK -- or in the 5 last weeks the first time we've heard that HCHK's emails 6 were, in fact, all controlled by a third party and that HCHK 7 ran it all. We've never heard that from G Club when they 8 had -- were asked to produce their documents for months. 9 They now raise privilege and confidentiality 10 issues. I don't see how they can do that.

11 object when the assignee was sent the documents.

12 didn't seem to have a problem with HCHK having their 13 documents. And they didn't seem to have an objection to the 14 idea of the assignee selling it all to G News and letting 15 them have all their documents. 16 You know, I think to the extent there ever was any 17 privilege or confidentiality concerns, of which I have 18 questions, those are -- in my view have been waived.

19 seems that everyone else is allowed to see these documents. 20 It'd be appropriate for the trustee. 21 Finally, with regard to the notion your -- the 22 Court asked questions with regard to the MSA and what 23 provisions you asked.

24 produced to us along with the other documents.

25 no provision in the MSA was highlighted to us.

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1 was shown to us.

2 indicating what was being allegedly violated or otherwise. 3 Again, I think the most appropriate thing is to 4 let the trustee, just like the assignee, put them in the 5 same position. Let them have the documents of HCHK.

6 them use it for -- to the extent they need to review it.

7 there are G Club documents included within that, then that 8 was always the case. It didn't seem to be a problem before. 9 It shouldn't be a problem now. 10 Your Honor, if you have any questions, I'm happy 11 to answer them. 12 THE COURT: I have no questions. Thank you. 13 MR. LUFT: Thank you, Your Honor. 14 THE COURT: Anyone else wish to be heard? 15 MR. GOLDMAN: Thank you, Your Honor.

16 for the committee.

17 the settlement the trustee has proposed.

18 alacrity and aggressiveness with which the trustee has been 19 able to halt the state court proceedings and bring the 20 assets that were subject to those proceedings when the -- 21 within the protective umbrella of the Chapter 11 process. 22 And these are assets that could have been -- could have 23 evaded the reach of the estate.

24 determined to be property of the estate yet, but at least 25 they've come before the Court for that determination.

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1 Of course, this Court has the exclusive 2 jurisdiction over property of the estate, and I would submit 3 exclusive jurisdiction to determine what is property of the 4 estate. And that's what this settlement does.

5 assignee mentioned, this is just a forum-shifting settlement 6 which actually channels whatever claims there were in the 7 assignment proceedings into this Court, preserves all the 8 claims that could be asserted.

9 disenfranchised. 10 You know, we -- as to the estate release, that's a 11 business judgment standard.

12 if it means approving the entire settlement. 13 On the gatekeeping function, I think it's a common 14 feature for courts to apply when a direct claim is dressed 15 up -- well, rather a derivative claim is dressed up as a 16 direct claim. And so this type of gatekeeping function is 17 commonly utilized so that creditors aren't able to do that, 18 and the Court will be the ultimate arbiter of what is a 19 direct claim and what is a derivative claim so that those 20 derivative claims dressed up as direct claims can't just go 21 off in various courts filing suit until the Court at least 22 determines that they're legitimately direct claims. 23 So with that, the committee does support the 24 settlement as modified in the way that has been articulated 25 to the Court.

Ho Wan Kwok - July 11, 2023 168 THE COURT: Okay. Thank you. MR. GOLDMAN: Thank you. MR. PASTORE: May I approach, Your Honor? THE COURT: Yes, you may. MR. PASTORE: I know it's late, so I'll be brief. I have deep respect for my good friend, Mr. Goldman, and -- but I wanted to highlight one word he just used, which is "halt." THE COURTROOM DEPUTY: I'm sorry. I need your name. I didn't get that name. MR. PASTORE: Oh, I'm sorry. Joseph Pastore for the -- THE COURTROOM DEPUTY: Thank you. MR. PASTORE: -- HCHK creditors. THE COURTROOM DEPUTY: Thank you. MR. PASTORE: Halt. I think that's an important word. So what we have here is we have no finding of alter ego, no finding that any of the creditors are worthy of impugnment, but we're going to halt a proceeding in New York without anyone finding that what -- the assignee was in the best interest of those creditors he was assigned to protect, which is the New York court's role, and then tell those creditors that they can't bring any lawsuits against the assignee for his actions unless it's approved by this Court. I think always a fan of the due process clause, Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 168 of

1 always a fan of, you know, findings of -- conclusions of law 2 and findings of fact. You have none of that here.

3 clients' rights are all being disenfranchised, clearly. 4 At a minimum -- we do appreciate the U.S. 5 Attorney's objections to the injunction.

6 had to be said for sure. And I think I said it.

7 minimum, we'd request the right to look at any proposed 8 order changing that language and comment on it if necessary. 9 Thank you, Your Honor. 10 THE COURT: Thank you. 11 MR. JARECK: Your Honor, one final? 12 THE COURT: Yes. Yes. Go right ahead. 13 MR. JARECK:

14 Schotz PC, on behalf of the assignee.

15 actually perfect timing, because my comment deals with what 16 Mr. Pastore said earlier in his presentation that this 17 settlement is ultra vires and violates New York law. 18 And when saying that, he cites to his own brief, 19 paragraph 58, which is, again, another section from the New 20 York debtor and creditor law.

21 judge may, upon application of the assignee, authorize the 22 assignee to sell, compromise, or compound any claim or debt 23 belonging to the estate of the debtor." 24 Again, Your Honor, this is a complete mis-cite. 25 This is not what we're doing. We're not selling.

Ho Wan Kwok - July 11, 2023 170 compromising. We are simply shifting the funds to another fiduciary under the control of this Court. Thank you, Your Honor. THE COURT: Thank you. MS. FORNOS: Your Honor, may I approach? THE COURT: Yes. MS. FORNOS: Just briefly, Your Honor. G Club Operations has not waived any of its rights. As the Court may recall, I specifically mentioned the issue of HCHK at the last hearing. I teed it up. I also contacted Mr. Jareck on June 19th regarding this issue and return of our confidential information. I also contacted Mr. Jareck and Mr. Lutz as well on July 5th and provided them a copy of the master services agreement. Our position is very simple. We can address the proposed order in the way that the Court feels appropriate. The issue is simply that the trustee cannot just do an end-run around discovery and step into the shoes of a company that hasn't even been determined to be an alter ego, hasn't been substantively consolidated with this estate, and all of a sudden step in and say these are all our documents now, we can -- get to have them. So we respectfully request that the Court consider our request that they -- that the trustee does not get a right to do that. Rather, they should be returned to G Club Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 170 of

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1 Operations so that G Club Operations can review for 2 responsiveness and privilege and produce accordingly.

3 you, Your Honor. 4 THE COURT: Thank you. 5 MS. FORNOS: Any other questions from the Court? 6 THE COURT: No. Thank you. 7 MS. FORNOS: Thank you, Your Honor. 8 THE COURT:

9 controversy was filed both in the main case at ECF Number 10 1936 and in the Adversary Proceeding 23-5013 at ECF Number 11 25. And our local rules of bankruptcy procedure require 12 that any motion to compromise in an adversary proceeding 13 also be filed in the main case so that notice and service of 14 the motion to compromise is provided to all parties. 15 The motion -- the notice and service of the motion 16 and the hearing on the motion was properly made as 17 established by the record in the main case and in the 18 adversary proceeding and the certificate of services -- the 19 certificates, excuse me, of service that relate to the 20 motion in the main case and the motion in the adversary. 21 The parties -- certain parties filed objections to 22 the motion to compromise, all of whom have appeared at this 23 hearing today, including the Himalaya parties represented by 24 Attorney Pastore, Attorney Sherman representing himself with 25 regard to a claim of -- that he is entitled to an Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 172 of

1 administrative claim from the HCHK parties.

2 News filed an objection again asserting that there is -- G 3 News has a right to an administrative claim and requests a 4 mechanism be implemented for administrative claims.

And then counsel for G Club Operations filed notice which counsel has articulated, and the concern is that the trustee is entering into this settlement agreement in order to obtain documents through discovery that it might not be able to obtain until G Club Operations has its documents returned from the HCHK Technologies entities. And then G Club can undertake its review of those documents and determine what, if any, of those documents can be produced subject to whatever privilege G Club could try to assert.

But I remind G Club and the trustee that apparently with regard to the other discovery sought against G Club -- and I'm not saying that this settlement is discovery, but that's the view of G Club Operations -- that the protective order and confidentiality provisions and orders already in place in the main case apparently have addressed the issues that the Court raised with regard to the pending motion to -- for contempt and to compel the production of documents from G Club.

Also, the United States Trustee filed a limited objection. I understand the limited objections of the United States Trustee. And Mr. Kwok through his counsel,

Mr. Moriarty, has taken no position on the motion to compromise. Apparently -- it's more than apparent.

on the record, the trustee has agreed to limit the releases set forth in the -- any order on the motion to compromise to estate -- an estate release.

occur if the third stage of the settlement is reached.

that will only happen after the Court makes a ruling on whether or not the alter ego claims and -- are decided in favor of the trustee. Because the discussions and representations and suggestions made on the record by the trustee and other counsel, including the Office of the United States Trustee and the creditors' committee and counsel for the assignee, are somewhat different than proposed before the hearing, I'm going to continue this hearing but solely for a week and only to see what the proposed order approving a settlement looks like with the changes noted on the record today.

parties' objections have been noted for the record.

no need for any further objection by any of the parties who filed objections. And the Court isn't going to consider any further objections. But I will order the trustee's counsel to revise that proposed order along the lines that were stated on the record today and serve it on all objecting parties.

1 like that done by 5 p.m. on July 13th so that when we come 2 back here to a hearing next week I know what, if any, 3 problems there may be with regard to the provisions of a 4 proposed order approving the settlement. 5 I am not ruling on whether -- right at this moment 6 on whether this motion to compromise is granted or not 7 granted. I am suggesting that the parties need to have some 8 discussions about the proposed order.

9 look at proposed order and, with it, the revisions as noted. 10 And then next week, I will either say that the 11 matter is ripe for decision, I will decide, or I will insist 12 that, I suppose, other things could be included in the 13 order. But I'm not ruling at this time.

14 review everyone's pleadings, and I will review them in the 15 light of the arguments that were made during the hearing 16 today. 17 But the hearing itself with regard to the 18 substantive motion, the relief sought in the motion and the 19 objections, there'll be no need for any further hearing.

20 want to see what this order looks like, and I want to 21 understand it. 22 So, Trustee Despins, when your office serves the 23 order on everyone at 3 p.m. -- I'm sorry, 5 p.m. on the 24 13th, I'd like you to put it on the docket of the main case 25 and the adversary proceeding as well.

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1 Court time to review it and prior to the continued hearing, 2 which we will schedule -- there are already other matters 3 scheduled in the case and the adversary proceedings on July 4 18th starting at 12 p.m.

5 continue the hearing solely with regard to the proposed 6 order. And I will schedule it for 2 p.m. 7 And the reason I say 2 p.m. is because, right now, 8 on next week's calendar, the original pretrial conference in 9 the Genever Holdings vs. AIG Property Casualty adversary 10 proceeding is scheduled.

11 two days of -- or possibly two days of evidentiary hearing 12 with the -- in the AIG adversary proceeding starting 13 tomorrow, there's no need for a pretrial conference next 14 week. I'll know what's going on.

15 bring the parties into the court on a pretrial conference 16 when that's not necessary. 17 So this -- so the hearings on -- in the main case 18 on ECF 1936, the motion to compromise, and the hearing in 19 Adversary 23-5013 on ECF 25, motion to compromise, are 20 continued to July 18th at 2 p.m.

21 a formal scheduling order with regard to the filing and 22 service of the revised proposed order, because I'm ordering 23 it on the record. 24 Does anybody have any question about that? 25 MS. CLAIBORN: Just one question, Your Honor.

1 a party has a problem with the proposed order, is there a 2 deadline by which the Court would like comments? 3 THE COURT:

5 MS. CLAIBORN: No, I know.

7 THE COURT:

8 file a written response by 5 p.m. on Friday, July 14th. 9 MS. CLAIBORN: Thank you. 10 THE COURT:

11 parties that are -- I'm going to entertain any kind of 12 written response is going to be parties that have already 13 filed an objection.

14 objection is already beyond the deadline, number one. 15 Number two, this hearing next week is not -- we're 16 not going to go over the same issues we've already gone 17 over. I've gone -- we've gone through them.

18 the parties' respective positions, and I'll rule based -- at 19 some point, whether it be at the hearing, after the hearing, 20 whatever I see with regard to your revised proposed order 21 and any responses.

22 to those issues. 23 Does anyone have any questions? 24 MR. PASTORE: Just a quick statement.

25 settlement conference in federal court in New Jersey at

Ho Wan Kwok - July 11, 2023 177 2 p.m. that day. Ms. McClammy can handle this hearing. I just wanted the Court to know. No disrespect, but I will be -- THE COURT: That's fine. Thank you. MR. PASTORE: Yeah. THE COURT: I appreciate that. MR. PASTORE: Yeah. MR. DESPINS: Your Honor, do you have any flexibility as to the time? For example, could it be later, like maybe 3:30 or 4:00? THE COURT: Sure. I mean, if that's what people want to do. But you've got to get everybody's agreement on that. MR. DESPINS: Oh, well -- THE COURT: If everybody agrees, that's fine. I mean, I'm not going to go later than 4 p.m., though. The court staff -- I have no idea what everybody's going to say. Maybe they'll be -- maybe there won't be a problem. But the court staff -- I -- you know, I -- they like to go home at night, which I can understand. MR. ARCARO: Your Honor, just one question for the Court. THE COURT: Yes. MR. ARCARO : To the extent that the revised order that's submitted to the Court -- we -- there's no -- Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 177 of

Ho Wan Kwok - July 11, 2023 178 THE COURT: It's going to be docketed, so Case 22-50073 Doc 2119 Filed 08/24/23 Entered 08/24/23 12:37:49 Page 178 of

everybody that has an appearance will get it via -- I'm not sure if that was your question. But you will get it via CM/ECF.

MR. ARCARO: My question is that Your Honor is giving the opportunity to file a response to that proposed order.

THE COURT: By Friday at -- July 14th at 5 p.m. MR. ARCARO: If no response is filed, are objections considered waived?

THE COURT: No. Your objections will still be considered. I haven't ruled yet, right?

MR. ARCARO: Your Honor, thank you. Thank you.

THE COURT: So sorry if that wasn't clear. I will consider everyone's objections.

MR. ARCARO: Very well. Thank you. THE COURT: But I want to see how this revised proposed order is going to look given what we all talked about -- I didn't talk about it, but what you all talked about today and what your presentations were on your respective objections.

MR. ARCARO: Thank you very much. THE COURT: So, no, it's not -- you're not waiving any objection that has been timely filed. They will be considered.

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1 MR. ARCARO: Very well. 2 THE COURT:

3 revised proposed order as well. 4 MR. ARCARO: Very well. Thank you, Your Honor. 5 THE COURT: Okay? Thank you. 6 All right.

7 probably later today or -- not today, tomorrow that that 8 pretrial conference next week in the AIG adversary will just 9 be continued to a date to be determined. 10 THE COURTROOM DEPUTY: Okay. 11 THE COURT: Okay? 12 THE COURTROOM DEPUTY: Yes. 13 THE COURT:

14 evidentiary hearing with the AIG adversary proceeding at 10 15 a.m. tomorrow. Is that correct? 16 MR. DESPINS: That's correct, Your Honor. 17 THE COURT: Okay.

18 the matters on today's calendar.

19 is adjourned. Thank you, all. 20 IN UNISON: Thank you, Your Honor. 21 THE COURTROOM DEPUTY: All rise.

22 adjourned.

1 I, CHRISTINE FIORE, court-approved transcriber and 2 certified electronic reporter and transcriber, certify that 3 the foregoing is a correct transcript from the official 4 electronic sound recording of the proceedings in the 5 above-entitled matter.