The Sex.Com Chronicles, by Charles Carreon

For the sake of ornament and illumination.

Re: The Sex.Com Chronicles, by Charles Carreon

Postby admin » Fri Jun 13, 2014 1:49 am

VICTORY IN THE NORTHWEST

In Spring, 2000, I had fought defensive discovery battles with Dorband, opposed NSI’s summary judgment motion, defended Gary’s deposition, served offensive discovery on Cohen, and was trying to get Rich Diestel up to speed on the case. But I had been unable to conduct discovery, because Dorband had run out the discovery clock with his decoy depositions. I had filed a motion to reopen discovery, but until it was granted, which didn’t happen until May 5th, I had to find new ways to hurl lead at Cohen. On March 7, 2000, I filed three complaints in Portland District Court naming Gary as an “intervenor” in cases Cohen had filed against Voice Media, Ron Levi’s company, and two other porn operators, Myriad Corporation and National A-1 Enterprises. The Portland Federal courthouse is an amazing new monolith notable for polished granite, stainless steel and water sculptures adorning the pillars with continuous rivulets flowing behind panes of glass. It is beautiful but austere, and although adorned with inspiring maxims of justice, is resolutely devoid of warmth. There is no law library for the use of attorneys, which strikes me as an oversight, as if the judges had forgotten that lawyers traditionally use books to prepare their cases. The law library in the Multnomah County Circuit Court, just up the street, is always jammed.

I’d only handled one case in the Portland Federal Courthouse -- a heroin case in front of Judge Redden. The detective who directed the search of my client’s house was a big dark-skinned Latino who wore a suit, cowboy boots, and a ponytail about as long as mine. He had a powerful manner, and had talked my client into allowing a search of his house; however, the heroin had been seized from a detached shed in the back yard. I moved to suppress the heroin on the grounds that my client had given consent to search the house, but not the shed. At the suppression hearing I needed to establish that any search outside of the house was beyond the scope of my client’s consent, so I asked each of the detectives whether they had the right to dig in the backyard. Each one responded they didn’t think so. Finally, the third time I asked the question, Judge Redden squinted and looked over at me asking, “What was dug up in the backyard?” I chimed back, “Oh, nothing, Your Honor. I was just asking it as a sort of ‘Supreme Court Question’ in order to illustrate the rule of law.”

Judge Redden’s wizened features transformed themselves into a mask of sudden distaste, as if he had bitten down on a worm and wasn’t pleased about it. “Just stick to the facts,” he said, “and don’t get into anything” -- here he paused as if he didn’t often speak the word -- “metaphysical.” Nevertheless, he understood the legal problem, and amazingly, so did the prosecutor, who cut us a deal for 27 months. Hell of a lot better than the seven years my client was looking at.

Gary often described me as a guerrilla fighter. When we went to Portland, we each met with our insurance defense lawyers about the Cohen v. Carreon and Kremen lawsuit. I went and saw Susan Eggum, and Gary met with his lawyer, Steve Kraemer. Later Gary told me what he told Kraemer. “I told him that he and his firm were like the American army. The American army is good for a lot of things. They can win a lot of battles. But a guerilla is the best fighter for other types of battles. Mao was a guerrilla fighter, and Charles is like Mao. And I think he’s perfect for the job.” Gary had a way of saying things that made me feel all mushy inside.

Early on when I began work on the case, I had suggested to Gary that we could do something clever with all of those other lawsuits that Cohen was filing against people, claiming that their adult websites infringed on his “trademark” in Sex.Com. With discovery shut down in the main action, it was time to open up another front in the war. Cohen had filed nine of these lawsuits in Portland Federal Court, and three of them were still pending. Cohen was deliberately racking up these litigation victories in order to announce to the world that, since he was winning trademark lawsuits in federal court, he must have a trademark in Sex.Com. An excellent strategy, because Cohen often sued the weak and defenseless, far from their homes in a venue convenient to his own lawyers -- Portland, home of the Duboff firm.

Lawsuits generally must be filed in one of two places: where the defendant lives, or where the wrongful act occurred. Because the Internet is everywhere, it has made it a lot easier to file lawsuits a long ways from where defendants live. Since a trademark infringement on the Internet is visible around the world and in all fifty states, plaintiffs have concluded that lawsuits for Internet trademark infringement can be filed anywhere. For years collection lawyers in California would sue on debts outside of the county where the defendant lived, making it likely that defendants would simply default. The practice was outlawed by the California legislature in the Unruh Act. Similarly, Cohen won most of his Portland lawsuits by default, and even those who contested these cases rarely did so vigorously, so he was continuing to rack up victories.

It was not helpful to our case that Cohen was collecting these trademark judgments with such ease. I told Gary he had a right to intervene in those lawsuits, because under Rule 23 of the Federal Rules of Civil Procedure, a plaintiff may intervene in a lawsuit if they are so situated that, as a practical matter, their rights will be affected by any judgment entered in the case. It seemed obvious to me that every time Cohen got a court judgment saying he had a trademark in Sex.Com, it weakened Gary’s claim. Still, I had never filed a suit in intervention, and didn’t know anyone who had. In California, intervention is mainly used to attack voter initiatives, like that crazy anti-Mexican law that required nurses and teachers to rat out their patients and students to the Immigration and Naturalization Service if they discovered that they were “illegal aliens.” In a case like that, “illegal aliens” are unlikely to file suit, so the nurses association might start the lawsuit. The teachers would then be allowed to intervene, because as a practical matter, their rights would be affected if the law is put into effect. Finally, the right-wing cranks want to get in on the act, so the Citizens for Safe Borders may be allowed to intervene in support of the constitutionality of the law. As a practical matter, the judge faced with a proposed intervention must ask, “Does the proposed intervenor have an interest in the outcome of this case?”

Usually, the intervening plaintiff wants to intervene and do something. But I wanted to intervene and halt Cohen’s lawsuits so they would not proceed to judgment until after we won Kremen’s lawsuit against Cohen. So I was requesting a “stay,” the magic word that describes a case that is neither dismissed nor allowed to proceed, but remains in suspense pending the outcome of another case. The argument for a stay was simple. The only person with a right to sue over rights deriving from Sex.Com was Gary Kremen. It wasn’t fair to allow Cohen to sue people over the trademark to Sex.Com if he was not the true owner. Furthermore, there is the important “judicial economy” argument, which is basically, “judge, why spend all this time figuring out whether Cohen has a trademark? All you have to do is wait till we win this case down here in San Jose, and you’re not going to have to decide anything, because this case is going to go away.” Finally, there is the argument that the courts shouldn’t come up with different results about the same topics. The Portland courts shouldn’t be issuing judgments in Cohen’s favor when a California court might find Cohen had no right to even file such a lawsuit. This is called “avoiding the risk of inconsistent adjudications.”

Judge John Jelderks, a magistrate judge in Portland, ended up hearing the matter as to all three cases. He set a hearing for April 5, 2000, in one of those huge Portland federal courtrooms, even more impressive than the lobby, with walls as high and thick as a castle, windows like slits set close to the ceiling, and enough milled, joined, sanded and polished wood to account for vast tracts of missing rain forest. We hooked up with Mike Essler and Jim Buchal, lawyers for Levy and Myriad, respectively, who were defending against two of Cohen’s lawsuits. When we went to the hearing, Gary was wearing one of the innumerable dowdy sweatshirts that comprise the entirety of his wardrobe above the waist, and strutting like a Hapsburg grenadier looking for a fight. He amused himself by telling Bob Dorband he was going to sue him.

I had assured Gary that I knew how this would be handled, Oregon-style. All the judges who had these cases on their dockets were going to get together and talk about it over coffee. Then they would send all the cases to one guy, and let him or her decide them. We had a good case for allowing intervention, but I hadn’t predicted victory. So in that atmosphere of uncertainty and hope that seems to kick up like a high wind when you get too many lawyers together, we listened closely as Judge Jelderks told us what he had to say. Indeed, he told us, the judges to whom these cases were assigned, (who were all Article III judges) had gotten together, and to their surprise, discovered that virtually every judge had one of these Sex.Com cases, and none of them had known about the other ones. I got the impression that this was like each judge discovering there was a bedbug in his bed. The Article III judges had passed all the cases to Judge Jelderks to resolve.

After hearing arguments from Bob Dorband that required the deft application of fallacious reasoning, and some counter-argument from me, as well as a plea from Mike Essler to just stay the case and not rule on whether we had a right to intervene, Judge Jelderks ruled that Gary had a right to intervene, and stayed the cases pending resolution of Kremen v. Cohen. This ruling was the beginning of some real anti-Cohen momentum, emanating from the right place -- the bench.

A few weeks later, Judge Janice Stewart, following Judge Jelderks’ lead, issued a lengthy opinion staying the Cohen v. Carreon and Kremen lawsuit. Judge Stewart’s opinion observed that Kremen was an Internet pioneer who registered the Sex.Com domain name and claimed that he would have made a “woman-friendly” website had it not been stolen by plaintiff Cohen. Judge Stewart came down heavily on the issue of judicial efficiency, finding that many of Cohen’s allegations would have to be resolved in Kremen v. Cohen anyway. Finally, she concluded there was some possibility that the action was filed “merely to annoy and harass Mr. Kremen and his attorney.” It was a sweep. Cohen was no longer able to use the Portland Federal courthouse as a staging base. I got out the trumpets and flags, and broadcast the victory in an email to all the lawyers on Gary’s team using a bold subject line, all in caps -- “VICTORY IN THE NORTHWEST!”
admin
Site Admin
 
Posts: 17175
Joined: Thu Aug 01, 2013 5:21 am

Re: The Sex.Com Chronicles, by Charles Carreon

Postby admin » Fri Jun 13, 2014 1:50 am

THE SUBPOENA POWER

Several times Gary had told me something scary. “When discovery is reopened, I want to serve a hundred subpoenas.” Generally, serving a hundred subpoenas could be seen as abusive, excessive, and just plain crazy. Particularly if you’re subpoenaing banks and other financial institutions to obtain financial records. You stir up an entire hornet’s nest. Banks have subpoena departments with lawyers and paralegals in them, and outside lawyers too. The records you’re going after belong to their customers, who make money for them, unlike lawyers who heckle them with subpoenas for financial records. Banks have no reason to like you, no reason to be nice to you, and no desire to give you anything but what the law absolutely requires. If they don’t comply, you have to get the judge to compel them to, and that ordinarily requires filing one motion per subpoena, so if you had a hundred non-complying witnesses, you might have to file a hundred motions. Reverting to our magic-metaphor, in a worst-case scenario, we’d have a hundred minor demons screaming to get out of their cages. Sort of like a prison riot in hell, where all the inmates have lawyers. Ugly.

Additionally, it’s very hard to get a court to order a bank to produce financial records except in cases where the lawyer is trying to collect a judgment. Cohen, of course, was different. I could subpoena his financial records and succeed in getting them. And why is that? Well, let’s return to that classical tactical blunder, filing the counter-claim against Kremen. In the counter-claim, Cohen alleged he had suffered $9 Million in damage due to Kremen’s statement to Wired Magazine that he had stolen Sex.Com. When someone says they have lost profits, and they’re going to have to prove it in court, you need to get financial documents to show how and why they lost the money. But Cohen was refusing to produce his tax returns, even though he had offered a couple of Schedule “C’s” as proof of his prior use of Sex.Com in his initial discovery disclosures. That was his second mistake. You can’t use a part of something as proof and then hide the rest, which is something to remember before you pull out a document. If page one of your document looks good, and page three looks bad, you’re probably best off avoiding this whole document, or at least not using it to prove your case. Since Cohen had put his financial income in issue, I doggedly harped on his refusal to produce tax returns, working it like a lever to pry open the door of financial secrecy. And when Judge Ware reopened discovery in May, 2000, I bent to the task of preparing and serving over a hundred subpoenas in less than ninety days, many to Cohen’s banks.

Serving subpoenas is an occupation with a dark past. In the old days, getting served with a subpoena was a very bad thing, because you could end up missing more than time off work. Witnesses didn’t even get witness fees, much less respect. Subpoena is a Latin word combining the prefix “sub” meaning “under,” and “poena,” meaning “pain.” Under pain of what? You might think it meant “under pain of law,” thus giving you the alternative of either showing up or suffering pain. But this is not what it meant.

Pain was not an alternative. Rather, it was part of the methodology of interrogation. Many of the early courts were ecclesiastical courts, run by Jesuit or Dominican or Benedictine priests prosecuting crimes like witchcraft, heresy, blasphemy, and bestiality. In cases like these, with souls at stake, capital punishment after a proper confession was the prosecutor’s idea of a good plea bargain. Certainly it was inarguably preferable to being burned alive, dunked to death, or slammed into an iron maiden until your feet turned to jelly. These were big cases. Witnesses were sinful, ever since their parents did it in the Garden of Eden, and Satan was everywhere, conspiring with witches to frustrate God’s plan. Accordingly, no one could be trusted who had not been tortured, at least a little.

The levels of torture administered were three. For women and the weak-hearted, it was generally deemed sufficient to take them on a guided tour of the torture chamber, allowing them to walk across the blood-spattered floors, look at the implements that glowed red-hot in the torturer’s forge, and hear the cries of foolish souls who refused to admit their wrongs or attempted to hide the misdeeds of others. The second stage of torture was the use of the “strappado,” a leather strap that would be tied around the wrists behind the back, and used to raise the witness several feet above the floor. The witness would then be dropped and stopped a few feet short of the floor, dislocating the shoulder. Questioning would then be conducted. When an adequate witness statement was obtained, the physician would put the arms back in the sockets, and the witness would be good as new, unless they had a torn rotator cuff or some trivial injury like that. Finally, the third stage of torture was the real deal, the breaking of bones, the searing of flesh, the rack, the thumbscrew, and all the other instruments of persuasion that the medieval mind could devise. So the subpoena has an unpleasant origin, and the word still reeks of coercion. Which reminds me of a story I once heard about interrogation techniques.

It seems that during the Clinton era, the President, who was fond of contests of skill, decided to determine by means of a contest, which was the greatest police agency in the world: the CIA, the FBI, or the LAPD. Three identical rabbits were released into three identical wooded areas, and each police agency was told to bring the rabbit into custody. The FBI surrounded the wooded area with armoured vehicles, fired automatic weapons and incendiary grenades for several hours, while keeping vigilant watch over the wooded area to make sure that nothing escaped. All small floppy things attempting to escape the conflagration were forced back into the flames. After the wooded area had been reduced to fine ash, they declared the rabbit terminated.

The CIA hired operatives in their wooded area, conducting clandestine interviews of rocks, trees, other vegetation and numerous friendly forms of wildlife. After months of networking, the operatives established contact with the rabbit, who turned out to be a double agent working for the CIA. When Clinton was informed of this fact, the investigation was terminated.

The LAPD, deploying their forces from a nearby doughnut shop, surrounded the wooded area with SWAT vehicles and squad cars. Wearing flak jackets and paramilitary gear, and accompanied by uniformed officers, the LAPD operatives entered into the wooded area with a show of overwhelming force. All animals encountered were called “asshole,” and forced to kneel on the grass. The sounds of scuffling, beating, squealing, howling and barking issued from the wooded area for several hours. After some time, a squad of uniformed officers emerged from the wooded area, dragging a handcuffed, hog-tied bear, missing patches of fur and hanging its defeated head, while muttering sullenly, “Okay, I’m a rabbit, I’m a rabbit...” So they might’ve been wrong, but a bear is a big, dangerous animal, and they got him off the streets.

Well, Gary’s one hundred subpoenas might have yielded no more benefit than the efforts of the three elite police agencies. Indeed, fully half of the time our private investigators and process servers discovered nothing more than just how many Internet companies concealed their locations with fake addresses and maildrops. But I was about to unveil a secret weapon. It was a supercomputer that had recently been shipped in from Asia. It stood over five feet tall, had natural language programming, a sweet telephone voice, and long black hair down to her knees. She was my daughter, Ana, the subpoena clerk.
admin
Site Admin
 
Posts: 17175
Joined: Thu Aug 01, 2013 5:21 am

Re: The Sex.Com Chronicles, by Charles Carreon

Postby admin » Fri Jun 13, 2014 1:50 am

ROMANCING THE WITNESSES

I told you about my wife, the perfect legal secretary. We’ve been married since August 2, 1974, when we tied the knot in front of a Tempe, Arizona justice of the peace with Tara wearing leather lederhosen, and me in a funky t-shirt. We had three kids, Josh, Maria and Ana. Daddy was already in law school by the time Ana got to talking, so she has grown up in an environment where law students and lawyers come tramping in and out of the house, carrying their bottles of beer and stacks of paper. Our kids remember hilarious family moments in our bright blue Santa Monica kitchen, when hopped-up poet-lawyers brandished knives, tequila bottles, and hastily-crafted rhymes to the sounds of punk rock. All three kids logged scores of weekend hours in Los Angeles high-rise law offices, pretending to be receptionists, copy assistants, and secretaries, while consuming the abundance of traditional West-L.A. takeout food -- awesome lox, bagel and cream cheese brunches, trays of cold sandwiches, and gourmet pizza loaded with everything but anchovies. So spending weekends with daddy cranking out legal paper wasn’t really so bad. It gave them an idea of what work is like in the big wide world.

Of the three, Ana was the only teacher’s pet. Only due to her do I know how nice it is to have a really great parent-teacher conference in grade school. I certainly had none in my own childhood, and the first two followed my lead, much to Tara’s chagrin. Her mom was an elementary school principal. The difference between the two older kids and Ana, at least with respect to school deportment, was so notable that when Ana finally entered Ashland High in Oregon, the teachers asked her, disbelieving, whether she was really related to Maria and Josh. These two young pioneers had cut a swath through the school that has never been forgotten. Josh brought the baggy pants craze to Ashland, resulting in the expenditure of innumerable unnecessary yards of cloth, the sort of waste that drives Oregonians crazy. Maria takes her Mexican heritage so seriously that when one of her schoolmates, a proto-Nazi whose father was the head of the local college’s criminology department, started talking trash about Mexicans and “poor people,” she felled him with a clean right cross, while, interestingly, her teacher made no move to stop her. She was called to the principal’s office and issued a criminal citation by a police officer that was summoned to the scene. The slight flush of pride that filled her face when she told me the story abruptly turned to pallor when I reprimanded her in the sternest tones, telling her I was deeply disappointed. She had acted like a Nazi herself, I told her, attacking a person physically for mere words. She got the point, and ultimately delivered an apology to the young man. Maria performed the terms of her juvenile probation bravely, and the incident became a part of local legend, cementing her position in the community as a notorious bad girl.

So how was Ana different? Oh, how about saintly? Until the age of 19, which you’ll note is after the matters addressed in this book, her mouth could safely have been used as a butter storage device. She got herself into Stanford as a President’s Scholar, the only school she bothered to apply to, by wowing them with her unique resume. What’s on that resume? Well, no high school grades, that’s for sure, because this kid is a middle school dropout. She went to high school for a couple of months, until she decided her siblings were right, but decided to express it a little differently, leaving under her own power. She had done the same in middle school when she concluded her teachers were trivializing the important business of learning. She was particularly shocked when she was criticized for doing more than a project required.

After we moved up to Oregon in 1993 from L.A., Ana hadn’t been in middle school more than three weeks before she came up with a great alternative to public education. She asked if she could go on a six-week meditation retreat at the Tibetan-Buddhist temple just up the road from our house. The retreat started every day at 7:00 a.m. and ended at 9:00 p.m. She would be the only middle schooler on the retreat, since everyone else was an adult and most probably over 30, except for the instructors- some handsome young Tibetan boys who had mastered the art of “psychic heat.” I’m really not supposed to tell much more because this is esoteric knowledge that is cloaked behind a veil of secrecy. I never even got to see the little tiny skimpy mini-skirt type uniforms people wear when they train in generating the psychic heat. These skimpy uniforms are intended to make you cold, which isn’t difficult when the retreat takes place in an unheated barn-like structure in the dead of winter in the Siskiyou mountains of southern Oregon.

Well, I always thought Ana had been studying too hard, and this seemed like just the sort of break she needed. In all seriousness, I told her that she could go to the retreat, and that I would wake her up every morning in time to get there, but she had to promise that when she got enlightened, she would enlighten me first, before all the other beings whom she would thereafter bless with Buddha wisdom. She took the deal, and I performed my part getting her there on time every day. She turned out to be the star performer at the event, inspiring the rest with feats of flexibility and endurance in performing difficult exercises that left others in tears. When the six weeks had ended, Ana had grown four inches, and was barely beginning to work up a sweat on this meditation stuff. She had a radiant smile, a firm step, and a long black whip-like braid that reached the middle of her thighs. This kid was on.

After the retreat was over, her return to school was brief. Somehow those middle school teachers didn’t impress her when they came up with assignments such as writing a paper on five things you hope to do, giving as an example “to grow beautiful nails.” So it wasn’t long before she was back at home again, keeping an expanded meditation schedule and plenty of hours with the computer studying Princeton Review high school materials on CD Rom. I bought her a 12-hour series of videotapes on how to become a superstar student, and she absorbed their contents avidly. Tara and I could help her with some of the work, but after Algebra, we weren’t much help with the computer-generated math problems.

People projected a nun-like character on Ana, and she didn’t consider it a compliment years later when everyone thought it so natural that she be working in a library. Still, her bookish ways were notable, and extended to the Tibetan language. She studied with a monk at the temple, and also with Alan Wallace, the well known author and speaker on the subject of Tibetan Buddhism.

From Thanksgiving 1999 until March 2000, Ana studied at the Rangjung Yeshe Institute in Kathmandu, Nepal. Tara had a good time watching over her and reprising her role of twenty years earlier, as an international hippie with the considerable advantage of a functioning debit card. The girls originally planned to stay around six months, which got shortened to three when they decided they wanted better food, air and healthcare than is available in Kathmandu.

From my end, the hectic work schedule was wearing me out, and working so close to Gary was turning me into a wraith. I needed help with the paperwork. The filing was massive, and I couldn’t blame the other side either. I was generating the paper blizzard. Keeping the books for litigation costs was a headache. Hiring temps for a couple of hours at a time wasn’t cutting it. I needed my woman back. Tara and Ana didn’t need much prompting, and on March 1, 2000, they returned in brightly-colored Mongolian garb, bringing paintings, statues, and best of all, themselves.

Tara soon had the books under control, accounts reconciled, and the bills sent out. She next turned her hand to the filing, and corralled the paper blizzard in colored binders on a shelf with document lists, exhibit tabs, etcetera, exactly like they do in the big L.A. firms, because that’s where Tara had worked. She has a rigorous code of professional discipline that sums up like this: “Your work will be done perfectly, whether you like it or not.” She regards my methods of organization as the flailings of an amateur. She brought order to the case.

Ana started off as a cabin girl on our little litigation frigate, and was quickly promoted to handle the subpoena gun. The gun analogy is apt because the whole goal of subpoena serving is simply to hand the witness the subpoena. You only have to do it once. It’s like chucking a harpoon into a whale. After the hook is set, they gotta come. Witnesses trying to avoid being served have engaged in every conceivable evasive maneuver. If you want to learn the meaning of avoidance, be a process server.

Filling out a subpoena is a detail job. In addition to the case name and number, you have to state the name and address of the witness, describe the documents you want them to produce, and state a time and place for production. To find current addresses, Ana used online searches and private investigators. Gary composed a most extensive list of documents, the infamous “Attachment A.” For the place of production, usually lawyers designate the office of a court reporter, but that’s expensive. I decided Kinko’s was a good enough place for the witnesses to produce documents. It was easy, I told Ana, to find a Kinko’s within a few miles of virtually any witness, using the Kinko’s website store-locator. All of this information was integrated into the subpoena by a mind that had no prior experience with banks, private investigators, paralegals or clerks. The subpoenas appeared in her hands, and I signed them. Then she fired them off.

It was a classic example of the old saw in action: “On the Internet, no one knows you’re a dog.” In the Sex.Com litigation, no one knew Ana was a newly-minted “subpoena clerk.” She soon was expert at generating a subpoena to anyone, for anything, and knew the process servers by first name. Her faxes flew fast and far, and were discussed with all seriousness. Soon she was skilled at getting those witnesses tagged. Then came the job of reeling them in.

Tight follow-up on every subpoena we served was an absolute necessity. A shamefully large number of people will simply blow off a subpoena. Ana would call each witness, and with her delicate voice, follow up earnestly and simply. Her first big success was Washington Mutual in San Diego, where she befriended the document paralegal to such an extent that the young lady started calling her for legal advice.

Washington Mutual was where Cohen got his home loan. When you’ve got a lot of money, you’ve got to do something with it, and Stephen Michael Cohen was no exception. With some of his Sex.Com profits, he bought a house in San Diego County, in a development called Rancho Santa Fe. When you apply for a home loan, you put your best foot forward in terms of assets, income, and corporate ownership, etcetera. In Cohen’s case, this meant providing a list of bank and securities accounts, and declaring his ownership of “Omnitec, dba SEX.COM,” a company whose bank accounts were also revealed in the loan file. The loan file showed Cohen bought the house for $3.1 Million. He paid $500,000 down, and borrowed the rest from WaMu on the strength of his other assets -- bank and securities accounts held in his own name, and the names of Omnitec, Sand Man International, Ocean Fund International, and other companies. Cohen had come far since he walked out of prison in 1995.

As soon as Ana got fresh records, she copied them for me and faxed and emailed them to Gary. Usually, they’d come faxed back a few hours later, marked with numerous jabbing arrows pointing to circled account numbers, directing us to “subpoena this!” “Follow the money,” Gary would chant, echoing Deep Throat. Armed with Gary’s prime directive -- if it’s relevant, subpoena it, cost be damned -- we knocked on door after door, tracking down Cohen’s financial trail.

The Washington Mutual loan file was like a map directing us to the important places to subpoena. It told us what doors to knock on, and generally indicated the amount of funds likely to be found in each of the accounts. There were accounts at Citibank, Charles Schwab, and Royal Alliance. The biggest ones at the San Diego Wells Fargo Bank, where Omnitec dba Sex.Com had accounts. Within days of receiving the Washington Mutual records, Ana was faxing new subpoenas to a half dozen private investigators to serve on Cohen’s other banks.

Ana could get a lot of records on her own, but there were a lot of hard cases out there in the witness world, and those people got passed on to Sue Whatley, an amply appointed tall, blonde, Oregon lawyer with a husky voice made more so by continued application of Salem menthol tobacco smoke. Sue’s demeanor is languid in the extreme. Her eyes often do not open more than half way, preferring to look downward. She has a degree in music, can entertain at the piano all night, and a gentle laugh tinged with amused cynical delight. She was the Mata Hari of the subpoena team.

Sue’s gift was inveigling her way into the minds and hearts of the witnesses. Talking with recalcitrants, smoothing the way with personal interchanges, and easy, playful emails. Her communications are peppered with personality. She sought to accomplish by wile and seduction what could not be accomplished straightforwardly, and often succeeded. Watching her working the witnesses was like watching someone reeling in a big deep-sea fish. You couldn’t always tell which way it was going to go, watching the correspondence and hearing the updates, but then often enough she’d get the documents. One of her big scores was Steve Ramusevic, the accountant for Sporting Houses who gave us copies of the original stock certificates, board of directors information, tax returns, and correspondence concerning the attempted purchase of a Nevada brothel as phase one of the Camp Wanaleiya project. Sue smoothed communications with banks, who had their own lawyers and wanted to talk to a lawyer. What she couldn’t cajole, seduce or wheedle out of the witnesses, it fell to me to obtain.

I was the last link in the chain. By the time a witness was dealing with me, romance had clearly failed, and there was only one way left to go -- to Kinko’s, where I would be happy to have the documents copied at my expense, or to court, where one would be beaten briskly about the head and shoulders with an expensive club.

And little by little, all through the summer and into the Fall of year 2000, the documents began to pour in from state agencies, banks, accountants, courts, telecommunications providers, securities brokerages and law offices, an insane flow of records that began to fill binders, which began to fill shelves. The meaning-to-volume ratio of these documents was not necessarily very high. There might be only two or three pages of useful information out of several hundred, if you were just looking at what you could prove with them in the case. The people in my office were becoming Cohen connoisseurs, beginning to appreciate the nuances and twists of his various deceptions. Each successful subpoena foray expanded an ever-widening circle of inquiry that was creating a three dimensional view of Steve Cohen’s long-time pursuit of deceptive business activity, in various states, under various business names. This was the gift we received from the witnesses for all of our labor in romancing them. We got to see the full picture of Stephen Michael Cohen, a picture more clear and detailed than anyone had ever seen.

The biggest danger from studying Cohen so intensely was that you might lose heart in your ability to defeat him. After all, studying the record, you could see he had come out on top again and again. If you thought too long about it, you might hypnotize yourself into defeat, so I made a rule for everyone in our office, that no one could say anything admiring about Cohen. No one should ever speak of his schemes with wonder or amazement, but we should always remind ourselves that he was a thief, a liar, and a conman, and that we would defeat him. It was a joyless inoculation, but a necessary one. One must not fall prey to the enemy’s glamour, although one is free to learn from it.
admin
Site Admin
 
Posts: 17175
Joined: Thu Aug 01, 2013 5:21 am

Re: The Sex.Com Chronicles, by Charles Carreon

Postby admin » Fri Jun 13, 2014 1:51 am

“SOME CAT IN THE ISLANDS”

As the entire business world briefly knew in June 1999, Sir William Douglas, speaking as Chairman of the Board, announced that Ocean Fund International was offering to buy the entire Caesar’s Palace operation of seven hotel-casinos for $3.6 Billion. Craig Bicknell reported this development in the June 15, 1999 edition of Wired News in an article entitled “Sex.Com’s Pipe Dream.” In his article, Bicknell established that the owners of Caesar’s Palace said the offer came out of left field, and weren’t taking it seriously. Bicknell traced the origin of the offer to an attorney in Salt Lake City named O. Bob Meredith, who said he worked part-time for Ocean Fund, but “couldn’t say who sent the message,” because “my Alzheimer’s is acting up.” Elsewhere in news reports, Meredith denied acquaintance with Sir William, referring to him as “some cat in the Islands.”

One year later, I still didn’t know if Sir William was Ocean Fund’s Chairman. And Gary didn’t let me forget it. I needed to work with this crazy aspect of the case. To unravel Cohen’s web of fairytales, I had to show each one to be an invention, for which no evidence existed. And how do you expose a lie? My favorite method is to assume the lie is true, and then push for proof of other things that must therefore also be true.

For months, Gary and I only speculated about the identity of Sir William Douglas. Then, in December, 1999, in his relentless drift net searches of the Internet, Kremen pulled up an odd fish. An article in a London newspaper indicating that Sir William Douglas did exist, and in fact was the retired Chief Justice of the Island of Barbados. Further, that a London tabloid had published a retraction of a prior article reporting that Sir William was associated with Ocean Fund and Sex.Com. Apparently, Sir William had threatened to sue for libel. Thus, it seemed unlikely he had anything to do with Ocean Fund.

But put that aside. To expose the lie, let’s assume Sir William really was the Chairman of the Board of Ocean Fund. He would be a “party witness,” and Ocean Fund, as his employer, would be required to produce him for deposition. So I served Bob Dorband with a notice of deposition in December, 1999, which he studiously ignored, choosing instead to dispatch his flotilla of decoys. Discovery closed in the beginning of 2000, and when it was reopened in May of 2000, I filed a motion to compel Sir William’s deposition.

The motion was extremely simple. I told Judge Trumbull that Douglas appeared to be an officer of one of the defendant corporations, had made statements concerning the profitability of Sex.Com and Cohen’s role in managing the website, and thus Ocean Fund should be required to produce him. In response, Bob Dorband filed a similarly brief opposition supported by a one-line sworn statement by Stephen Michael Cohen that Douglas was not an officer of the corporation.

In my reply brief, I focused my fire exclusively on Cohen’s veracity. Drawing richly from files which I had recently obtained from the Bankruptcy Courts in Los Angeles and Denver, I made the most of the surprising whoppers that Cohen had told the Court in those proceedings. The core argument in my reply brief read like this:

“Cohen’s declaration simply cannot be believed. His record as a liar stretches back too far and he will say anything that he believes will buy him time to carry on his criminal shenanigans. Mr. Cohen once submitted a declaration in United States Bankruptcy Court in Colorado stating that he had suffered a major heart attack, in an unsuccessful effort to get his personal bankruptcy reinstated . . . . On a second occasion, in August, 1988, Cohen impersonated a lawyer named ‘Frank Butler,’ and... filed a declaration [stating] that ‘Frank Butler’ had suffered a major heart attack on September 4, 1988, and had thus missed a filing deadline.”

My reply brief contrasted Cohen’s deposition testimony with statements made in his declaration and the further statements attributed to him by Sir William in the Ocean Fund press releases. At deposition, Cohen said he hardly knew Sir William at all. This conflicted with Douglas’ statement in the Ocean Fund press release: “Stephen and I have an excellent and longstanding working relationship.” I was wearing a grin as I finished up the brief:

“Cohen... has failed to carry his burden of showing that Douglas is anything other than what the press releases say he is: President and Chairman of the Board.”

When Judge Trumbull held her hearing on the motion, Bob Dorband played it cool, as if I should admit I was chasing a phantom. Shrugging and frowning in my direction, he argued I was just trying to send Ocean Fund on a wild goose chase, and knew full well that Sir William Douglas had nothing to do with the company. At times like this, the law seems not only to generate irony, but actually to be fueled by it. There was Bob, arguing I knew Douglas had nothing to do with the company, without saying his own client had generated a phony press release. And there was I, who in truth believed that Douglas had nothing to do with Ocean Fund, earnestly contending that he was its CEO.

Judges sometimes appreciate, and comment upon, the ironic postures the advocates strike when vying for strategic advantage, but Judge Trumbull didn’t. She just looked at the evidence before her, which showed Douglas to be the CEO of Ocean Fund. The only person contradicting it was someone the evidence showed to be a bald-faced liar who filed false declarations with nary a second thought. She ordered Ocean Fund to either produce Douglas or to provide me with official corporate documents, sufficient to establish that Douglas had nothing to do with Ocean Fund.

Well, by this point, I was confident that Cohen would provide us with a document that would obviate the necessity of producing Sir William for deposition. It was just too easy. And on June 28, 2000, in came the fax. There were three pages, purporting to be the official corporate minutes of YNATA, Ltd., successor corporation to Ocean Fund, stating that on June 21, 2000, the company resolved “that Sir William Douglas is not an Officer or Director or in any way involved with YNATA Ltd. . . . that the Director and Officers of the Corporation hereby represent that they have no contact whatsoever with Sir William Douglas....” The document was entitled “Joint Action of the Directors and Officers” of YNATA, and had four signatures: “Derek Taylor, President; Fernando Rodriguez, Director and Senior Vice-President; Roman Caso, Secretary and Vice-President; and Stephen M. Cohen, Vice-President.” The fax also included another document, called “Action of the Sole Shareholder Without a Meeting,” bearing the signature of “Rodolfo Gomez-Aguila,” appointing Fernando Rodriguez as the Sole Director of the corporation. Rodriguez, in turn, had appointed all of the officers who made the resolution that the company had nothing to do with Sir William Douglas. It was a document set up like a shell game, a sort of automatic-buck-passing device with lots of moving parts. “Ah,” I thought, “more nonexistent people to depose!”

Gary was not particularly pleased when I announced that my solution to the shell game was to notice the depositions of all these imaginary Latinos plus the token Anglo, Derek Taylor, to prove that they did not exist either. Gary disagreed. He wanted to attack the corporate documents by presenting them to Judge Trumbull with the argument that they were “obvious forgeries.” Problem was, they weren’t. The corporate setup seemed convoluted, and the resolution of the Douglas deposition crisis a little too convenient, but I saw nothing in it that would cause Judge Trumbull to immediately conclude that the documents were forgeries. Although it frustrated Gary immensely, the only solution I saw was to call Cohen’s bluff again. That didn’t happen for another couple of weeks, when Cohen showed up to give another three days of deposition, after having been legally dragged, hog-tied and complaining, back to Beth Ballerini’s office on Kettner Boulevard.

And what of the real Sir William? I located his phone number in France through a British private investigator with Caribbean experience. I called Sir William twice, but he never picked up the phone. Further research showed that Sir William was the kind of judge Cohen would have to respect -- as Chief Judge of Barbados, Sir William had refused Britain’s request to extradite Ronnie Biggs, the perpetrator of The Great Train Robbery of 1963, in which Biggs and his accomplices made off with $7.2 million pounds. A big lie leaves lots of room for nuance.
admin
Site Admin
 
Posts: 17175
Joined: Thu Aug 01, 2013 5:21 am

Re: The Sex.Com Chronicles, by Charles Carreon

Postby admin » Fri Jun 13, 2014 1:51 am

IN THE BELLY OF THE BEAST

Until Judge Trumbull ordered him to attend another day of deposition, Cohen refused. Even then, the number of hours to be expended in deposition was set precisely -- three days, six hours per day, starting at 9:00 a.m., July 11, 2000. Dorband even tried to keep me from asking any questions at all, filing a motion for protective order, saying that I had asked all the questions that I should be able to ask on behalf of Gary as a plaintiff, and that only Diestel, who was defending against Cohen’s counter-claims, should be able to ask questions. Judge Trumbull turned aside this request, and said that Gary’s lawyers could spend the time as they chose. Still, I was complimented by the singular emphasis on my role.

Three days is a lot of time to spend with anyone, but as my first deposition of Cohen had shown, it was very likely to be unproductive from one viewpoint -- getting the truth. Going to Cohen to get the truth would be the ultimate fool’s errand. Why not go to the Mojave to get water, or the Yukon for coconuts? No, there simply wasn’t any truth there to get, and yet the time need not be wasted, for in engineering a tyrant’s fall, you find his weak point in his strength. Cohen’s rigid refusal to disclose anything meaningful about his business dealings led to his downfall. How symbolic it was when we saw the toppled statues of Stalin and Lenin gazing blankly skyward in former Red Square. Their steel bodies, inflexible and unchanging, unable to right themselves, were the mute prisoners of history. Like those rigid sculptures, Cohen’s lies had the look of life, but lacked the vital, breathing substance. Once toppled, they too would lie helpless -- defeated once, defeated forever.

Cohen wasn’t stupid -- his gigantic statues weren’t easy to topple, because they weren’t solid, they were evanescent. He denied everything, revealed nothing, and continued generating deniable disinformation. A helicopter gunship deposition was about to take place, but with a twist. Rather than trying to blow away the structure of lies, we were going to hose it down with concrete, day after day. That process would generate the stiff, attackable structure that could then be toppled and destroyed.

Cohen wasn’t about to tell us the truth, so it almost didn’t matter what his answers were, as long as they were somewhat definite. Then there would be contradictions, absurdities, non-sequiturs. Through detailed, extensive questioning, we would generate a database of lies. For every question, we would demonstrate, there was more than one answer. Once Cohen’s statue of lies was unveiled, it would be recognized as a monstrosity . . . no one would mistake it for the truth. Made static, its structural incongruities revealed, we would reduce it to shards with a single blow of the mallet.

We had recently picked up a new addition to the legal team, Jim Wagstaffe. He co-authors an influential treatise on federal civil litigation that serves as the encyclopedia for California attorneys on federal law. He also fit the description of appropriate co-counsel that was suggested by another attorney Gary and I had talked to: “The guy who goes golfing with the judge.” I don’t know if Judge Ware golfs, and Wagstaffe is more of a basketball guy, but when Wagstaffe recounted the tale of how he had sat right next to Judge Ware at dinner after Wagstaffe had spent the day teaching him and other federal judges how to do their job, Gary and I knew we had our man.

Wagstaffe joined the case in June, 2000. Gary and I called him “the Wagger,” since it was his job to bear our standard and wave the flag. We agreed that he would be our figurehead, and argue all of the motions before Judge Ware, whom he assured us would immediately take notice of his entry into the case. Wagstaffe can cut a charming figure when you’re in step with him. He has a shock of hair tinged somewhere between whey and copper. He has a high forehead, strong nose, and large teeth that looked like they would comfortably snap oak twigs as big around as your thumb. He usually wore a herringbone or other woven sportcoat, from which he could have removed the dandruff a little more often. This minor tonsorial oversight was the one indication that Jim was actually wound a little tight. He gives the impression of being a dynamo of mental activity, citing code sections, procedural rules, and precedent setting cases in a steady stream, punctuating his speech with comforting asides like “As you know,” or “With which you are certainly familiar.”

Wagstaffe appreciated the degree of strategy required to catch a wily character like Cohen. He approached legal issues with zeal and relish, which would shine through an ear-to-ear grin gleaming with those fabulous choppers. And, as long as Gary didn’t get crazy in his face, Wagstaffe could tolerate Gary’s antics.

On September 5, 2000, Jim, Gary and I had a victory lunch right after Judge Trumbull handed us five discovery motion wins. I thought I had seen everything, but I had never seen a client take his lawyers out to lunch by scoring some backstreet burritos in a restaurant hidden away inside a drugstore, and then taking the lawyers to enjoy their repast al fresco on the grass in a public park. I was churning inside my skin until I realized that Wagstaffe was totally okay with it. He was munching his burrito gamely, and managing not to waste too much mental energy on one of Gary’s silly jokes about how this whole place should be re-zoned for a toxic waste site.

At Cohen’s deposition, Wagstaffe did a superb job of asking detailed questions, and insisting on specific answers. At the time, it probably seemed to Cohen that the Wagger was getting nothing, but we were compiling our database of lies and inconsistencies. Later, Sue Whatley became well-versed in the minutiae of Cohen’s testimony, making it possible to find an impeaching quote to contradict almost anything Cohen chose to say. Wagstaffe couldn’t get a coherent story out of Cohen about how Sex.Com had been handed from one shell corporation to another. Cohen would keep squinting, shaking his head, and explaining one wrinkle after another, nearly always ending with the answer that all documents to record the transactions had been lost, or were confidential.

Cohen also had an exasperating habit of running the clock by lecturing the lawyers on how to do their job, while complaining that they were doing it very badly. Wagstaffe usually just let him run on, as did I, since interrupting would just cause Cohen to go on longer, but Rich Diestel always fell into this trap. Cohen completely flummoxed him, and Diestel resorted to counter-lecturing with the addition of many “sirs,” to punctuate his sermons with gravity. At times like this, I would just feel sorry for Beth Ballerini. She betrayed no emotion, as still as porcelain, only her fingers moving.

Toward the end of the second day of Cohen’s deposition, it had become apparent that we weren’t any closer to proving that the shell companies were Cohen’s “corporate alter ego,” nor had we shown any direct connection between the companies and the theft of Sex.Com. These companies -- Ocean Fund International Ltd., it’s successor YNATA, and Sandman Internacional -- could get off scot-free with Sex.Com and all its revenue if we failed to prove that they were Cohen’s shells. We didn’t know anything about these corporations. We didn’t know if YNATA was a holding company dealing in valuable commodities and negotiable instruments, as its Articles of Incorporation stated, or whether Sandman really operated a server farm in Mexico where the Sex.Com website was hosted, as Cohen had testified. Cohen had refused to testify about these companies except to release a few teasers. Nor would he produce any documents about these companies, claiming they were not under his control. Without any documentation to show that they were really Cohen’s alter-egos, i.e., companies that were financially identical with his own person, it would be difficult to obtain a judgment against these companies.

So the night after the second day of deposition, I worked on my laptop and created two discovery demands, one for YNATA, and the second for Sandman. The notice of deposition to YNATA required it to designate someone to testify about particular issues, and to produce for deposition the phantom directors, officers and sole shareholder who had officially disclaimed having any relationship with Sir William Douglas. The notice of deposition for Sandman Internacional required the company to present a designated witness to testify as to specified matters. When I finished it, I slept soundly, but not very long.

During the last day of our three-day session, I was going to ask questions for the last three hours. It went pretty well until the last few minutes. Gary had been sitting there silently for three days, and it was killing him. Dorband objected to a question I asked Cohen about whether he was using Sex.Com in “interstate commerce.” Questioning started bogging down, and then Gary decided to help, telling me, “Yeah, we don’t need to go into that.” Dorband took the opportunity to interject, “Your client just indicated he doesn’t want to spend time on this issue.” I looked at Dorband intensely and asked, “You know what?” Then I turned to Gary and pointed my finger at him and said, “He should be quiet.” Gary looked like I had slipped a hand grenade between his lips. He swallowed. He said, “Okay.” He looked like the grenade was going off, deep inside a secret bunker. You could see him containing the explosion. Dorband got in his dig, “Is there some dissension in the ranks?” I concluded my questioning, and then passed the witness to Diestel.

I’ll say this for Gary, I had hurt his feelings with that remark, and badly. But I apologized as soon as the deposition was over, and we never discussed it again. We still had lots of work to do.
admin
Site Admin
 
Posts: 17175
Joined: Thu Aug 01, 2013 5:21 am

Re: The Sex.Com Chronicles, by Charles Carreon

Postby admin » Fri Jun 13, 2014 1:51 am

PARLEY

When do people parley? On the eve of destruction, when there’s one general dressed in a blue uniform, and another dressed in a red uniform, and they each have 100,000 soldiers massed at their backs, ready to go at each other with muskets, bayonets, cannon, and cavalry. So, just before the sword comes down and the cannons roar, and the horses rage forward, everything stops on a dime, and the two parties get together in a tent on a hill to sit down and have tea. Lives can be saved, fortunes rescued, death avoided and honor protected from discredit. Settlement hides a hundred errors of strategic judgment.

For many lawyers, not to fight the battle is their entire goal. So parley has a long and honorable tradition. I come from the tradition that says you should always settle if you’re going to lose, but if you’re going to win, settlement should come very dearly for the other side. After having boxed Cohen’s ears for three days with three lawyers, and having served him deposition notices that showed we were going after his corporate alter-egos, Cohen should be thinking, “Is it time to settle?”

I wanted to sit down and take the man’s temperature. To find out how he felt, and whether, in some safe, secure war-room, far back from the front lines, General Cohen had decided he was ready to throw in the towel.

Cohen had the same idea. I was out in the hallway, and he was loitering in the doorway, sending me these shruggy sort of looks, lightly smiling, the looks that a couple of months later he supplemented with the statement, “You could have been my lawyer,” and “it’s too bad we didn’t meet before all this.”

So I said, “Where you going for dinner?”

He responded, “I don’t know, where are you going?”

Pretty soon, I’m proposing the idea of having dinner with Cohen to Gary, and he’s like, “Why would we want to do that?”

I explained to Gary that it wasn’t necessary that we say anything at all, if we were afraid of giving up some advantage. We could just listen. If we kept our ears open, we would probably learn some things. He quickly agreed. So, an hour or so later, I was drinking wine and ordering dinner with Gary to my right, Dorband across from me, and Cohen to my left. The restaurant is called Rainwaters, downstairs from Beth’s office on Kettner. Very good food, and very good drinks. We had a couple of bottles of red wine, and everyone seemed to be eating with a hearty appetite.

Cohen’s pitch was simple. He had thought that Gary was bullshit, but after talking to Gary for a little while and seeing how we’d been conducting the litigation, he realized that Gary was an old-timer, going back to the beginnings of the Internet, having the hard-wired knowledge that makes the difference between the pioneers and the come-latelys. Sex.Com, he explained, was on the decline. Revenues were down. It was playing itself out. The future was telcom in Mexico, and that’s where Sandman was firmly positioned. He’d cut Gary a check for $500,000, and give him an interest in Omnitec, which controlled Sandman. I’d be in on it too. We’d all make bank together.

Dorband is going along with anything. He’s just glad the bullets have stopped flying, and he can eat his steak. I would swear his forebears are Austrian, the kind of guys who could combine tea and trench warfare, stab you with a bayonet or ask “one lump or two?”

Then the strange chemistry started to line up. Cohen was talking almost exclusively to me. Gary was talking almost exclusively to Dorband. Pretty soon, Gary pulls out the statements from his securities account and is showing Dorband the current value of his stock portfolio. He wouldn’t even show it to me, but he showed it to Dorband, to show him how much money was available to fight this war.

Meanwhile, Steve and I decide to take a walk outside below the antique street lights. While we’re out there, he raises his offer to $700,000. I don’t have to play it cool. The number’s too low. Fifteen percent of $700K I can do in my head. A mere $90 grand. Well it was better, as we say in Oregon, than a poke in the eye with a sharp stick.
admin
Site Admin
 
Posts: 17175
Joined: Thu Aug 01, 2013 5:21 am

Re: The Sex.Com Chronicles, by Charles Carreon

Postby admin » Fri Jun 13, 2014 1:52 am

ON THE TRAIL OF THE SANDMAN

On the last day of Cohen’s deposition in San Diego, I handed him the deposition notices, one for YNATA and one for Sandman. Those deposition notices commanded the defendant corporations to identify and produce witnesses to testify as to “specified matters.” This is the most important kind of discovery that you can use to get to the bottom of things when you’re dealing with a corporate defendant. They are called “30(b)(6) notices,” because they are authorized by Federal Rule of Civil Procedure 30(b)(6), which was enacted to prevent squirrelly corporate defendants from engaging in games of Tweedledydum and Tweedledydee with plaintiffs who were saddled with the responsibility of establishing that a corporation “knew” or “did” something. Because, as we know or should know, corporations have no real existence, and are what we call “creatures of statute.” Corporations do not exist, except to the extent that the law gives them life. The courts long ago ruled that a corporation is a “person” within the meaning of the United States Constitution. But finding a person who is “authorized” to speak for the corporation can be a long and difficult process in litigation. Buck-passing is a way of life in corporate organizations, and it gets worse when the company gets sued. Nobody wants to be the corporate fall-guy.

The theory behind Rule 30(b)(6), is that a corporation must have an ascertainable position in the litigation. It must know what it has done. It must know what it believes. Where it used to be necessary to take the deposition of high-level “control persons” within a corporation in order to establish what the corporation “knew” or “did,” it is now only necessary to propound a 30(b)(6) notice, and the corporation is saddled with the obligation of designating a person to speak for the corporation, to tell what the corporation “knew” or “did.” And their word shall be the word of the corporation.

By propounding 30(b)(6) notices to YNATA and Sandman, I had tapped a large stake into the heart of each of these Cohen alter-egos. It was going to take a lot of vampire-hunter type pounding to actually nail the stakes into their chests, but I was going to do it, no matter how crazy it got. Sandman was the first vampire in the crypt, and Dorband agreed to allow the deposition of this Mexican company, assuming we were willing to go to Mexico. Cohen had proposed Tijuana for the venue, but after the well-remembered assassination of a Mexican presidential candidate there, I insisted on Ensenada, about 60 miles south.

Cementing my reputation as a guy who would drive incredible distances to do crazy things, I decided to drive to the Ensenada deposition from my home in Oregon, picking up Gary along the way, since he wanted to be at the deposition. There was method to my madness, since I intended to drop off my royal blue Grand Cherokee Jeep in L.A., where a charity would pick it up and give me a tax write-off. Gas prices had gone sky-high, and I figured the Ventura County Rescue Mission could afford fillups better than I. I’d drop it off on the way back from Ensenada, and Gary and I would fly back to our respective destinations, departing from Burbank International for San Francisco and Oregon.

So I fired up the old rig early one morning a couple of days before the day of the deposition and drove to San Francisco. I arrived at Gary’s office around noon, but it was hell getting him out of there, and we found ourselves stuck in Silicon Valley rush hour. We kept driving all night until we reached National City, south of San Diego. On the way, Gary exhibited his latest weird trip . . . talking with Cohen on his cell phone. Cohen was teasing Gary, driving him crazy, feeding him ideas, playing with his mind. In the dark, south on I-5, I kept hearing Gary’s cell phone ring. It’s Cohen again. And again. In National City, we stayed in a fleabag hotel, and prepared for the trip to Ensenada the next morning. Gary was interested in impressing everybody but me. From his point of view, I was his partner, who slept on the couch.

Next morning we had to cross the U.S. border, buy Mexican insurance, and drive about sixty kilometers of toll road to Ensenada. Although we were running a little bit behind, Gary wanted to eat breakfast, so we had to do that. When we got to the hotel in Ensenada, the deposition had been underway for an hour. Being late is never really a good idea. In addition to the Sandman designee deposition, we’d also agreed to take the deposition of Roman Caso, Vice-President of YNATA Corporation and one of the people who had signed the resolution denying any relationship between YNATA and Sir William Douglas. Diestel had decided that it was more important that I be present for the deposition of Roman Caso than for that of the Sandman designee, who had turned out to be Stephen Michael Cohen. Sandman turned out to be a corporation owned wholly by himself and his wife, based on Mexican incorporation documents that Cohen produced and I was able to decipher. Cohen’s testimony consisted of a smug lecture about the true meaning of Federal Rule 30(b)(6). He and I fenced extensively about the difference between “personal” and “corporate” knowledge. It was mildly amusing.

The real surprise came when Roman Caso sat for deposition. As soon as he realized he was being videotaped, he expressed his complete consternation, and protested that he had business to do, had been waiting all day, and could not be expected to do this sort of thing. Speaking in Spanish, he said Cohen had lured him there by saying it was for some sort of negotiation. He claimed to have no knowledge that a deposition had been scheduled. Admittedly, in Mexico they rarely are. Speaking Spanish, I attempted to explain the situation, while Cohen tried to placate him, also in Spanish, by calling me a “pinche pendejo,” which is essentially “fucking asshole.” Caso was having none of it. He looked at Cohen with suspicion and anger, stating “I’m not sure who’s the asshole here.” Then, he stormed out. Shortest deposition I’ve ever attended.

Like Ronald Reagan, one of Gary’s heroes, Gary had slept through the action. After getting his breakfast, the whole business of taking depositions was too much for him. When I returned to the parking lot, Gary had one leg poking out the passenger window of the Cherokee while the warm Baja sun baked his bones. We could smell the sea and hear the rattling of the dry beach grass. The trail of the Sandman lead nowhere.
admin
Site Admin
 
Posts: 17175
Joined: Thu Aug 01, 2013 5:21 am

Re: The Sex.Com Chronicles, by Charles Carreon

Postby admin » Fri Jun 13, 2014 1:52 am

THE HILLS OF RANCHO SANTA FE

On our way back from Ensenada to L.A., where we were to catch our return flights to San Francisco and Oregon, Gary decided we should stop and see Cohen’s mansion in the hills of Rancho Santa Fe, south of San Diego. I didn’t feel any need to do this, especially given the fact that we were driving north on the 405 freeway with planes to catch at the end of our trip. But Gary overcame my resistance, of course, and we took the Rancho Santa Fe exit. Since we were going to be doing what I call a site inspection, I stopped and bought a disposable camera that took panoramic pictures. If Cohen’s house had cost $3 Million, I figured it must be quite a spread, and I wanted a record.

The next thing was finding the house. We had the address -- 17427 Los Morros Road, but needed better directions. Gary had the answer. He would call his pal Bob, who was holding the fort back at Gary’s house on Third Street in San Francisco, and have him look at the address on Maps.com. The only problem with this plan was bad cellular phone reception. My phone wasn’t doing anything, and Gary’s phone was barely working. So there we were, on Gary’s cell phone to Bob, driving around in the hills trying to follow Bob’s directions as he read them off a computer screen, all the while losing signal while we looped and dipped through the coastal terrain. The neighborhood was impressive. All of the names were in Spanish, like Flores Drive, or Santa Maria Way. Finally, after about six calls to Bob and the same number from him calling back, we managed to find the place. It was tucked away in a large orange grove, and there was a big SUV parked in a horseshoe driveway. An agricultural road went up the east side of the property, so Gary and I hiked in that direction. From there we could see the tennis court, the large swimming pool, super-deluxe playhouse, and the enormous central residence. I couldn’t get good photographs from the road, so I climbed up into a eucalyptus tree to get a better shot. Gary was scared we would get busted. We waited with bated breath as a farm laborer drove by in a truck. We got our pictures, headed back to the road and found our way back to the freeway without further help from Bob.

Gary had been right about going to see it. The concrete experience of seeing Cohen’s wealth was provoking and inciting. You could see all he had that we didn’t have, because we hadn’t won the case yet. Everything became concretized. It took shape in physical reality. We knew we could get there with the right moves.

If you look at the distance on the map from Rancho Santa Fe to Burbank, California, where we were catching our planes, it really doesn’t look that far. That’s because they don’t show you all the cars stopped on the freeway. The 405 freeway is the subject of at least one punk rock homage that I have listened through, and painfully. This strip of freeway, particularly the part that runs between San Diego and Los Angeles, is brutal. The smog is thick and unrelenting. At the wrong time of day, between 2:00 and 7:00 p.m., your average speed can’t get much better than 5 mph in the tough spots, 50 mph when it’s going great, and 20 mph on average. Everybody’s talking on their cell phones in their cars, the heat haze and the smog is rising all around, and you feel less than anonymous. If you died of a heart-attack in your car, people would just drive around you.

Eventually, I spotted the familiar landmarks. TRW. The Herbalife building. The gigantic donut near the airport. Las Tijeras Boulevard, that’s “the scissors” for those of you who don’t speak the native language.

Around Fox Hills, aka “Black Beverly Hills,” it became obvious that it was time to get onto the surface streets. Gary concurred, being an old southlander himself, and we got onto Sepulveda Boulevard. Pushing forward, I gassed up at the Chevron on Olympic and Sepulveda, where I remember a lady once survived a shooting because of a leather jacket and a small caliber bullet. We bought sodas and other liquids and proceeded north through the heat toward Burbank. I got there in time for Gary’s plane, and was making frantic phone calls to the Rescue Mission I would give my Cherokee to, hoping they could pick it up before my plane arrived. Gary seemed to be experiencing some remorse at leaving me there with this situation, but his plane had to go, and we had what passed for a personal moment.

The young lady from the Mission that I talked to on the telephone understood me perfectly. I do redneck real good. When the tow truck driver arrived, it was almost as if he had come from Oregon. Poor people helping poor people. I gave him the car, took the receipt, signed over the title, and said sayonara to the big beast that had tailed the Sandman all the way to the edge of the sea.

I had no time for sentimental goodbyes. Inside the Burbank airport, everything was okay. My plane was leaving on time, and I was leaving with it. I bought a couple of magazines, stood in line and caught the big bird back to Oregon.
admin
Site Admin
 
Posts: 17175
Joined: Thu Aug 01, 2013 5:21 am

Re: The Sex.Com Chronicles, by Charles Carreon

Postby admin » Fri Jun 13, 2014 1:52 am

ON DYING GROUND

Sun Tzu says there are nine kinds of grounds on which battles may be fought. For example, there is ground of contention, which would be beneficial to either side able to seize it. There is light ground, which is when you enter shallowly into enemy territory, intersecting ground, which gives access to a well-trafficked location, and heavy ground, which is deep inside enemy territory. There is also bad ground, like mountain forests, steep defiles and marshes, and dying ground, where Sun Tzu says, “you will survive if you fight quickly and perish if you do not.” Sun Tzu gives particular advice for the conduct of military activities on the various grounds. On light grounds, do not linger; on bad ground, keep going; on heavy ground, plunder. On dying ground, there is just one thing to do -- fight.

As frightening as it sounds to be on dying ground, the old adage is, “put them on dying ground, and they will live.” Sun Tzu explained:

“If they fall into dying ground, then everyone in the army will spontaneously fight. This is why it is said, ‘Put them on dying ground, and then they will live.’”

From May 18 until August 21, 2000, we were on dying ground.

I’d always told Gary, from the very beginning, that it was risky to fight with NSI over the property issue, because if we lost it, Cohen would say that what’s good for the goose is good for the gander, and since it wasn’t property, he couldn’t steal it. And on May 18, 2000, directly on the heels of the court’s order granting summary judgment for NSI, Dorband filed a motion for judgment on the pleadings (“MJOP”) arguing precisely that. The third amended complaint started out with ten claims for relief. We were down to three claims -- conversion, unfair business practices, and declaratory relief. The new tort of domain name theft was proving maddeningly difficult to define in established legal terms. Dorband had moved the judge to dismiss conversion and declaratory relief, attacking conversion first, and using the force of its collapse to take down the declaratory relief claim. Then he would direct a motion at the last remaining claim, for unfair business practices, and the game would be over. There were excellent reasons for this two-step strategy.

The Federal Declaratory Relief Act allows the federal courts to sort out disputes between people and companies even before grounds for a damage lawsuit arises. For example, you can sue an insurance company for declaratory relief if they threaten to refuse to defend you in a lawsuit, even though arguably, you haven’t suffered any damage yet from their refusal to defend. Pleading a claim for declaratory relief is about as simple as saying, “I am the plaintiff, this is the defendant, and we have a dispute I want the court to resolve with a legal judgment.” The only hitch is, declaratory relief cannot operate in a vacuum. The court can only adjudicate your rights if you have some rights to maintain; otherwise, the court will dismiss the case for lack of a “case or controversy.”

If declaratory relief provides no independent source of legal rights, why bother putting it in your complaint? Because it allows the judge great flexibility in fashioning a remedy, allowing him or her to make any order that “justice requires.” Now that’s nifty -- justice with a scalpel. In our case, we needed an order declaring Gary to be the owner of Sex.Com, and directing NSI to transfer the registration into his name. The source of Gary’s rights was his ownership of personal property that had been stolen. The injury to his property rights could best be remedied by a declaration establishing Gary’s ownership and directing NSI to deliver possession of Sex.Com to its rightful owner.

Dorband didn’t quarrel with the basic proposition: “The declaratory claim, by its own terms, arises from plaintiff’s alleged ‘ownership and possession’ of the Sex.Com domain name.” Based on the ruling for NSI, Dorband argued, it was clear that the law of conversion didn’t provide a remedy for Gary’s loss, and since declaratory relief gave him no additional rights, Gary’s declaratory relief claim was meaningless. As Dorband put it: “If a domain name cannot be converted under California law, it stands to reason that whatever the defendants did... it does not amount to an invasion of a legally protected interest under California law....” Dorband also had an excellent fall-back argument. Under the declaratory relief act, the court can exercise discretion not to decide a legal issue, especially a novel issue under state law. So if his argument was not sufficiently convincing to clinch an affirmative win for Cohen, Dorband invited the judge to avoid the issue: “Based on the Court’s recognition that the issue of applying an ancient legal remedy (conversion) to a modern intellectual property concept (domain names) is essentially a determination better left to the State of California, the Court should decline to exercise its discretion.”

Judge Ware had observed in his order granting NSI summary judgment that unfair business practices laws provided a remedy for the theft of intangible property interests, such as business goodwill. But that wouldn’t help much, because if Gary’s claim was for loss of business goodwill, it had no value. Gary had never built a website and had no customers, so he had no good will and lost nothing when Cohen took the registration for Sex.Com. The judge might call Gary’s interest in Sex.Com a “mere expectancy” of future earnings, “too remote” to give rise for a claim of damages. He might end up with an acknowledged, but worthless piece of theoretical property.

So we were entering a narrow pass. At times like this, the mind concentrates, and the past dissolves. If you think about all the time you’ve sunk into the case, and how it’s maybe just a hair’s breadth away from being lost, you can’t think. But if you let yourself go, the fear of imminent destruction will bear you along on a wave of energy. Like shooting the rapids in a rubber raft, moves come to you instinctively, you process the information and steer the right course. Pushed relentlessly forward, the moments bore me along on a swift current. I needed to put the information together, and use Wagstaffe’s people to assemble our most impressive product yet. Since they had only recently joined the case, they knew nothing about the facts, and were still getting up on the law. The opposition to this motion was our first project together, and we worked smoothly to integrate our thoughts and writing. It was exhilarating to have them share the intellectual adventure of the case, and the additional firepower was more than welcome.

Argued as a matter of pure legal theory, the motion was surgically clean. There was no evidence to consider, there were no facts to weigh. There were just abstract issues to decide, let the chips fall where they may. If the law decrees that a thief must go free, then free he must go, and it is the judge’s duty to dismiss him. Plaintiffs go home disappointed every day from the courthouse. It’s no great heartbreak for the average judge, and no surprise that the wealthy often emerge victorious.

Most lawyers, looking at the motion, would not even try to think of a way to bring Cohen’s character into issue, but we had to do it. We had to get some moral suasion going. We had to argue that courts do not sanction thievery, and that where necessary, the law must be stretched and fashioned to respond to new threats to ancient rights.

But in response to a motion for judgment on the pleadings, you’re not supposed to submit any evidence. How could I bring in evidence about Cohen’s past, so the judge could understand that Cohen was a thief, and he should not get the assistance of the court to pull off the theft? Judge Ware had to understand that Cohen was a bad man with a clever lawyer! How could I do it? I decided to submit only a narrow category of documents which are “judicially noticeable.” Court records are always judicially noticeable. Convictions, divorce decrees, bankruptcy filings, declarations filed in litigation, and statements made on the record by judges, are all judicially noticeable, because their accuracy is inherently reliable. As it happened, within the narrow category of judicially noticeable documents, Cohen had generated a plethora of damning records.

In January 2000, I compiled a stack of documents about Cohen I called “The Big Book of Evil Deeds.” It was about two inches thick. I created it for a special occasion that I haven’t discussed yet, that is, when Cohen filed an ethics complaint against me with the Oregon State Bar. Everyone has heard that lawyers are supposed to obey certain ethical rules. Nobody has any idea, of course, what these rules might be, since as the old lawyer joke says, lawyers are replacing rats in lab experiments these days, in part because there are some things even rats won’t do. Lawyers seem to be willing to do any damned thing, from saying toxic waste dumping is ecologically beneficial to making a stolen election a fait accompli. What is it that lawyers can’t do? Well, according to Cohen, I couldn’t do press releases that call him a thief.

When someone makes an ethics complaint to the Oregon State Bar, an ethics investigator immediately sends you a letter with a copy of the complaint, and you get two weeks to respond.

My response to the Bar was essentially this: “I did nothing wrong, and before you get all involved with this, consider the source.” With my letter, I enclosed the Big Book of Evil Deeds, which included copies of Cohen’s conviction for bankruptcy fraud, phony declarations he signed under the name of Frank Butler, the RICO complaint Cohen filed against his wife and her lawyers, and copies of the Oregon RICO lawsuit he had recently filed in Portland against Gary and myself. The Big Book, more than a ream of spiral-bound paper, weighed in at nine pounds, and was certain to receive an honored spot on the ethics investigator’s credenza. Cohen responded to the Big Book in a letter saying it just showed how unethical I was, that when confronted with serious allegations, I would just throw more mud. The ethics complaint died a natural death a few months later.

The Big Book of Evil Deeds, however, became a hot item. Gary loved it, and I had Kinko’s cranking out dozens of copies. I sent them to journalists who appreciated solid documentation to back up their stories on this amazing con man, Steve Cohen.

When the time came to file opposition to the MJOP, I pulled out the Big Book and began work on the second edition. Since January, we had obtained the files of two bankruptcies Cohen had filed in Denver and L.A. We had also obtained records showing that Cohen had incorporated a slew of California and Nevada companies. And I had plucked a beauty of a quote from Judge Judith Keep, denying his request for bail pending sentencing after the jury had convicted him of bankruptcy fraud: “You have lied to the Courts.” The Big Book became a slimmed-down and more substantive packet for Judge Ware entitled Plaintiff’s Request for Judicial Notice (the “RJN”). The RJN provided evidence of four relevant facts:

(1) Cohen had established a pattern of theft by deception and forgery,

(2) Cohen had repeatedly lied to the courts,

(3) Cohen had never claimed prior to 1993, that he had used Sex.Com as a service of the French Connection; and,

(4) Cohen had admitted that Sex.Com was personal property, and thus was barred from disputing that claim.


Although past crimes and conduct are generally not relevant to a court proceeding, the intelligent advocate will try to find ways to fit into the exceptions. Three exceptions applied here. First, past convictions for crimes involving deception are always relevant to a party’s credibility, so the bankruptcy conviction was relevant to Cohen’s entire denial of liability. Second, when past actions add up to a pattern of deceptive conduct, they are admissible to show the deception was part of a conscious plan, not mere happenstance. Third, under the doctrine of “judicial estoppel,” a party cannot “play fast and loose” with the courts by taking inconsistent positions in different cases. For example, in the Portland trademark infringement cases Cohen filed sworn affidavits saying Sex.Com was his personal property; accordingly, he should be “estopped,” i.e., prevented, from disputing that the name was property. And when he stated in his 1986 Denver bankruptcy that he owned no trademarks, copyrights or other intellectual property, that should bar him from now claiming that he used Sex.Com as a trademark since 1979.

The RJN framed the issues as a dispute between a convicted con man who used the law to make his thefts more secure, and a brilliant dot-commer who was playing it straight. Should Cohen get the benefit of his cynical manipulation of the legal system, which had continued nearly unchecked for decades? The answer seems obvious. With that moral argument in place, we just needed to give the judge some case precedent finding it unlawful to appropriate intangible property without the owner’s permission. And that intangible property had to be unprotected by trademark, copyright, or other legal basis. If we could do that, we would be in a good position, because Judge Ware had specifically said, at the status conference in early May 2000, that he would allow Gary to have his “day in court” against Cohen, even though he was granting summary judgment for NSI. Judge Ware wanted to do the right thing, but beyond the moral argument, we needed some support in case law.

Because Dorband was attacking the declaratory relief claim by way of the conversion claim, we wanted to support it by showing we had a valid unfair business practices claim. A California appellate case from 1951 called McCord v. Plotnick, supported this position solidly. The court decided McCord on the basis of a U.S. Supreme Court case called International News Service v. Associated Press. This must have been considered a “high tech” case in its own day. Plaintiff alleged that every day, the Associated Press would buy the plaintiff’s newspaper, and using a newfangled device called a telegraph, would transmit the contents of plaintiff’s newspaper to defendant, who would use it to publish defendant’s paper. When plaintiff sued for unfair competition, the Associated Press objected that the news articles were not copyrighted, that they were publicly distributed, so they were not confidential, and thus plaintiff had no claim. The argument was rejected by the Court:

“If that which complainant has acquired fairly may be sold fairly at a substantial profit, a competitor who is misappropriating it for the purpose of disposing of it to his own profit and to the disadvantage of complainant cannot be heard to say that it is too fugitive or evanescent to be regarded as property. It has all the attributes of property necessary for determining that a misappropriation of it by a competitor is unfair competition because it is contrary to good conscience.”

This language from International News, quoted by McCord, was vitalizing to our case. It provided a good model for the judge to chart his own course in the wilderness of new technology and clever schemes. The Supreme Court’s analysis that theft of evanescent assets is an unfair business practice, seconded by the state courts in McCord, gave us the substance we needed to hang on to the declaratory relief claim. McCord also struck a positive moral tone, supporting the argument that Cohen’s exploitation of the legal system should not be tolerated any longer. While some might have doubted whether Gary’s registration of Sex.Com was something he had acquired “at substantial cost,” few could doubt that it could be “sold fairly at a substantial profit.” And unless we wanted to encourage thievery, that profit should not go to a thief.

We cited another case that had a technological twist, and lightened the brief with a touch of humor. In Downing v. Municipal Court, a fellow who had been selling slugs to cheat the San Francisco parking meters filed suit to prevent the prosecutor from charging him with vending machine theft. The slugs didn’t cheat vending machines, the swindler argued, because the parking meter wasn’t a vending machine, since it dispensed no product, and the privilege of parking a car for a few hours wasn’t “property.” The judicial response to this argument was dismissive:

“The fact that a new machine has been invented, and a new means, method or scheme devised to evade a lawful condition for its use does not destroy the effect of the law.”

Since the theft of Sex.Com was an unfair business practice under the dual authority of International News and McCord, rather than falling with the conversion claim, the declaratory relief claim should remain standing, because it was separately supported by the unfair business practices claim.

On August 21, 2000, Judge Ware’s opinion was filed. The conversion claim was out, but declaratory relief stayed in, because said the judge, it was “at least” supported by the unfair business practices claim. On dying ground, we lived.
admin
Site Admin
 
Posts: 17175
Joined: Thu Aug 01, 2013 5:21 am

Re: The Sex.Com Chronicles, by Charles Carreon

Postby admin » Fri Jun 13, 2014 1:53 am

BECOMING THE ENEMY

In his discussion on “becoming the enemy,” Minamoto Musashi advised warriors to consider the enemy’s perspective. My copy of Musashi’s strategy, “The Book of Five Rings,” was a classic of tasteless publishing. Someone with a twisted sense of humor had defaced the venerable work with a cover photograph of a paranoid-looking businessman in a Burberry coat, wielding a copy of the Wall Street Journal as his weapon, sizing up a hulking samurai in lacquered armor, wearing a helmet adorned with flapping banners. It must have been printed during the Reagan era, when the yen was way up, our national self-image was in the toilet, and all things Japanese were enviable. Man, that was an ugly cover! One day, in a last ditch-attempt to procrastinate work a little longer, I pulled out my knife and excised the goofy picture from the cover in a frenzy of distaste. On the procrastination front, the gambit was highly successful. The project must have consumed at least five minutes and a foot of packing tape. The crude facelift also improved the book’s utility, since I now wasn’t afraid to be seen reading it in public. One day, sitting in an airport bar while working on Gary’s case, I read this section:

“Even a burglar caught in the act is thought to be formidable when he blockades himself in the house. But if you put yourself in his position, you will see that he feels helpless, that everyone in the world is against him. He who is blockaded himself is like a pheasant, while he who is waiting outside is like a hawk.”

Reflecting on Cohen’s situation, I realized that he had locked himself into a fortress. Although he looked and acted secure, one thing was sure -- he was in there, and he wasn’t leaving. A siege would seem to be the obvious solution, but Sun Tzu advised against costly, time-consuming sieges only as a last resort. The prize tends to be destroyed in the course of a siege. Many castle walls, once breeched, give access only to a ruin full of suicides. To abort this process, a siege must somehow be reasonably swift. Caesar Borgia developed a swift method of concluding a siege using focused firepower. He set up a cannon, and fired one cannonball after another at the castle walls, always at the exact same spot. The wall caved in within a day, Borgia’s troops stormed through the breech, and the cruel and innovative Italian added another jewel to his crown of conquests.

I figured it could be so with Cohen. Since we had State Farm on our side, providing additional firepower, we could afford a Borgia-style siege. We just had to keep blasting away at the same spot, until it caved in. The weak point in Cohen’s fortress was his refusal to disclose his financial records. Confident in his strategies, unaware that stone walls can be breeched, Cohen was satisfied to ignore our continuing assault. Cohen didn’t worry that it might provoke suspicion to hide behind a cloak of confidentiality and forgetfulness at depositions, to refuse to produce documents in response to our demands, and to rely almost entirely on witnesses who were either dead or living abroad. He apparently didn’t realize that it was suspicious to live in a crime capital like Tijuana and do business exclusively through international corporations with straw-man directors and confidentiality agreements guarding their financial records. He must have figured that if big, mainstream companies could set up foreign subsidiaries, invoke confidentiality and the Fifth Amendment to avoid producing damaging information, and use bogus shelters to avoid taxes, why couldn’t he? This argument, however, would merely put Cohen on the same level as Enron with a smaller capital base, and would not make his conduct lawful.

Like the Republicans say, it’s all about defining your adversary. Perhaps without realizing it, Cohen allowed us to define him as the kind of person who receives an abbreviated version of civil justice. By resisting our discovery so resolutely, he demonstrated that his claims were unworthy of thorough consideration. They deserved to be terminated with a sharp blow of judicial impatience. Though he denied it to himself and the court, Cohen was identifiably cast from a mold that has turned out large numbers of offshore-based intellectual-property thieves who play corporate shell games, disobey court orders, conceal assets, and use scorched-earth litigation tactics to exhaust their foes. Trial judges have developed a special body of law for disposing of these atavistic characters. When presented with enough evidence to prove that a party is a bad-faith litigant, exploiting the system, a judge can simply ignore their arguments and enter judgment against them. Where the basis for dismissal is a history of egregious discovery abuse, the appellate courts won’t second-guess the trial judge’s decision. This doctrine is a blunt instrument for dispatching litigants who hire criminally stupid lawyers willing to clog the courthouse with faux lawsuits in exchange for an hourly fee. With his history of “lying to the courts,” and his current position as a rogue pornographer exploiting a stolen domain name to reap undeserved profits, Cohen was easy to define as a classic intellectual property thief who should go directly to jail, without passing “Go.”

Being averse to sieges, Sun Tzu advised luring enemies out of their fortified castles by attacking something or someone precious to them. Thus, proper samurai houses -- basically a shed with a good conference room -- were often burned by their owners, and were designed to evoke no attachment. But it’s one thing to be detached about losing your house, and quite another to remain calm as the enemy attacks friends and relations.

In May 2000, Diestel served subpoenas on Cohen’s ex-wives Karon and Susan, and Susan’s daughter Chandra. Gary and I had served a subpoena on Midcom, where Cohen worked in a cubicle next to Lee Fuller during the exact time period when Cohen stole Sex.Com. We also subpoenaed Fuller and Midcom’s owner, Barbara Cepinko. We subpoenaed some of Cohen’s other confidantes dating back to the Tustin sex club, the French Connection, and the prison years. Each of these people knew about Cohen’s dealings with Zolp, Sporting Houses, Ghiglieri Fine Arts, and one would assume, Cohen’s acquisition of Sex.Com. As soon as he found out we’d served these people, Cohen would try to contact them. It probably wouldn’t be a lot of fun to get one of those phone calls from Cohen. Just imagine if one of your friends buried stolen loot in your back yard and swore you to secrecy. Then one day, the sheriff called and asked to take a look around your property. That wouldn’t be fun.

By mid-May, Cohen had identified Diestel’s additional firepower as the source of the subpoenas that his friends and relations were receiving, and was busy plugging leaks. Toward the end of May, we were closing on the date for Karon Cohen’s deposition in early June, when Cohen unveiled a new strategy -- a peace initiative. Just as we were getting ready to sink in our knives, Cohen offered Diestel a dismissal of all Cohen’s counterclaims against Gary. If we allowed Cohen to dismiss his claims against Gary, Diestel would be off the case, thus nullifying all the effort we’d spent getting State Farm onboard and bringing Diestel up to speed. Cohen’s entire counterclaim would have caused us only to chase our tail instead of spending time building our case. It would be far more satisfying, and productive of good results in court, to kill Cohen’s counterclaims on the merits, rather than allow him to withdraw them. If he’d thought farther ahead, Cohen would have dismissed his counterclaims before Diestel filed Gary’s answer, because now that Diestel had filed an answer, Dorband needed Diestel’s agreement or court approval to file a dismissal.

Peace sounded great to Diestel, of course, so I had to ask him. Was Cohen intending to dismiss the counterclaims permanently, with prejudice? Since Dorband hadn’t specified, I assumed he was offering to dismiss the claims without prejudice, which would allow Cohen to refile the case at any time. I was right -- that was all that Cohen was offering, and I wasn’t buying. Cohen’s tactics reminded me of Slobodan Milosevic’s peace proposals, which he used to rest his soldiers and build up supplies before launching another offensive. We could not afford a Bosnian peace accord, I told Gary, who agreed that any truce offered by Cohen would be a trick. I called Diestel immediately, and wasn’t surprised by his response. As a California state court litigator, where a dismissal never requires “leave of court,” and anything that clears the calendar is a good thing, my idea to oppose dismissal seemed topsy-turvy. Proving that he wasn’t in it just for the money, Diestel didn’t understand why I wanted to abort the peace process. He asked quizzically, “What can I do if he wants to dismiss his counterclaim?”

In an excited tone of voice, I said, “You can object! You can demand a dismissal with prejudice or no dismissal at all! You can demand that he pay your attorney’s fees as a condition of dismissal!” Those things are all available under Federal Rule of Civil Procedure 41, and Diestel wasn’t surprised to hear that we could block Cohen’s exit. It was just counter to his experience to frustrate an adversary’s attempt to surrender. He could have cited Sun Tzu’s exhortation: “Never fight an enemy who is going home.” I would have responded, however, that Sun Tzu did not advise against fighting enemies who are pretending to go home. Still, Diestel wasn’t ready to assume that Cohen was planning to blithely dismiss his counterclaims one day and re-file them at leisure. So I argued another point -- what difference did it make if Cohen dismissed the counterclaims at this point, when he still had the Portland federal lawsuit pending against both myself and Gary? We had to oppose this here, now.

On the Friday before the week when Karon Cohen’s deposition was to take place in Florida, since Diestel remained uncertain about how to respond to the peace proposal, I sent him a letter demanding a strategy meeting with Jose Guillermo of State Farm. Meanwhile Dorband, who undoubtedly realized that Diestel’s delay meant he wasn’t going to dismiss, filed an ex parte motion to dismiss the counterclaims, and a follow-on motion to quash all of the subpoenas Diestel had served on Cohen’s friends and relatives. Of course, Dorband filed his papers at 2:45 on Friday, June 2nd. This was a bit of a shock, because a Rule 41 motion to dismiss claims or counterclaims should not be filed ex parte, and must be filed as a “noticed motion,” giving the opposing party two weeks to file a response. An emergency motion provides a very short, uncertain window for response, and allows the judge to essentially grant the “ex-parte” request instantly.

I wanted Diestel to at least use that short, uncertain window for response that had opened on the evening before the weekend. On Monday, June 5th, Diestel could have filed an opposition, but he hadn’t. I couldn’t wait any longer, so at 6:30 a.m. on Tuesday, June 6th, I flew into San Francisco, arriving in Diestel’s office at 10:00 a.m. There’s nothing like stating your requests in person. I wanted an opposition filed, in writing, to prevent this ex-parte motion to dismiss from being granted. We haggled amiably as he agreed to call Judge Ware’s clerk and tell her that he would be opposing Cohen’s ex parte motion to dismiss and quash subpoenas. Diestel called the clerk on his speaker phone, and she told us something that saved my weekend. The judge had already denied Cohen’s ex-parte motions, ordering Cohen to refile the motion to dismiss as a regular noticed motion, and referring his motion to quash subpoenas to Judge Trumbull for decision. How surprising -- all the obstacles to taking Karon’s deposition had dissolved. Judge Trumbull’s calendar was so backed up there was no danger of her deciding a motion before Karon’s June 9th deposition.

The threat of peace had been scuttled, at least for the moment. While it is not always true that everything your opponent wants will injure your case, when you are dealing with a wily and dedicated foe like Cohen, represented by a skilled and able mercenary like Dorband, you can be virtually certain that anything they want to do has been efficiently designed to injure your case, and you should frustrate all of his efforts.

The way this story turns out demonstrates the correctness of this assumption. Dorband re-filed the motion to dismiss the counterclaims, putting it on the regular motion calendar. Diestel opposed the motion, arguing that the case should be dismissed with prejudice, or only after Cohen paid all Gary’s defense costs. At the hearing, Judge Ware was ready to give everyone what they wanted. He would grant Cohen’s request for dismissal, and grant Gary’s request to make it with prejudice. Diestel was surprised, and I was not, when Dorband reversed course and withdrew his motion to dismiss during oral argument, over a month after he had started the entire drama. This maneuver didn’t please Judge Ware, but Dorband cited precedents that allowed him to change position at the eleventh hour, and Judge Ware stayed his hand. Cohen’s counterclaims against Gary were allowed to stand.

This was of course what Gary and I had earnestly desired. Not that Gary enjoyed being the target of Cohen’s frivolous counterclaims, but they were the key to keeping State Farm in the case, and we couldn’t do without State Farm. Gary wanted State Farm to destroy Cohen’s counterclaims completely, not have them dismissed by stipulation so Cohen could hide them in the closet and then pull them out again whenever he found it convenient. Wagstaffe suggested that Diestel attack the counterclaims using California’s new “anti-SLAPP” law. “SLAPP” is short for a “Strategic Lawsuit Against Public Participation,” the type of lawsuit developers might file to punish a group of homeowners with legal fees and threats of humongous liability for opposing a local land-grab. To halt the filing of these anti-free-speech lawsuits, the California legislature enacted an anti-SLAPP law that allows judges to quickly dismiss meritless lawsuits filed to interfere with Constitutionally-protected free speech. Cohen’s bloated claim for nine-million dollars in damages resulting from Gary’s statement to Wired magazine was clearly a SLAPP suit. Indeed, the very idea that Cohen, an ex-con running a porn site from a Mexican safehouse, could even be defamed was kind of a hoot.

At that time, though, the anti-SLAPP law was a bit newfangled for Diestel, and since it would be costly to file, State Farm wasn’t moving in that direction. Tactically, however, it was an excellent time to attack Cohen’s counterclaims, because Cohen’s eagerness to dismiss, alternating with his refusal to accept a dismissal with prejudice, had raised questions in Judge Ware’s mind about his motive for filing the counterclaims in the first place. The innumerable shades of grey that had enshrouded the case for years were beginning to sort themselves into clear areas of black and white.
admin
Site Admin
 
Posts: 17175
Joined: Thu Aug 01, 2013 5:21 am

PreviousNext

Return to Belles Lettres

Who is online

Users browsing this forum: No registered users and 2 guests