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

LAWSUIT!

My mentor Arnie Schwartz told me I would never be a trial lawyer until I was arguing to the jury, and I knew they were laughing at me, and I kept arguing anyway. I’ve had that experience. But I say you’re not a real lawyer until you’ve been unfairly sued for a large sum of money. I passed that milestone on February 15, 2000. It began with Bob Dorband taking control of my fax machine. It got that intense look it gets when it’s been possessed by the adversary, and out it came, a complaint filed in Portland Federal Court entitled Stephen M. Cohen v. Charles Carreon and Gary Kremen. The last pages came out of the fax machine. When I got to the prayer for relief, where Cohen claimed $50 Million in damages, it was a relief. The amount was so outlandish. If you say you’re going to kill me by shooting me with a .22, it’s believable, and it’s scary. If you say you’re going to kill me by dropping the Empire State Building on my head, it’s laughable. So I laughed.

I continued laughing as I read the allegations. Cohen alleged that Kremen and I had conspired, years before we ever met, to arrange the theft of the Sex.Com domain name. Then we had encouraged Cohen to steal it and develop the website to its present profitable state. Now, in the last stages of the plot, we were suing to acquire control of the fully developed asset.

I immediately knew the genesis of Cohen’s thinking. Kremen’s original business plan was a two-page document. The first page was just a scrawl of notes in Gary’s awkward hand. The second page showed initials, among them “CC,” next to some percentages. So Cohen concluded I was CC, had known Kremen since 1994, and as we say in Oregon, had been “lying in the weeds” for five years, waiting to bushwhack him. Or more likely, Dorband concluded there was enough evidence to claim the allegations were made in good faith, and planned to use the suit to drive a wedge between Gary and myself. If I wanted out, but just wasn’t saying it, this lawsuit was my exit vehicle. I could claim a conflict of interest and kiss Kremen goodbye, with my legal dignity intact. And that would get rid of the first lawyer who had really tried to move the ball.

Because the story was bogus, I wasn’t worried about liability, as long as I got my defense from the Oregon Professional Liability Fund (the “PLF”). The PLF insures me for legal malpractice, but Cohen’s claim wasn’t for malpractice. He was suing me for representing Gary Kremen, and for calling him a liar. He was alleging that I had “exceeded the bounds of zealous advocacy,” and strayed into defamation. While truth is a defense to defamation, insurance defense lawyers always hate it when they ask you a question like, “Did you say he was a thief?” and you say, “Yes.” Right away they think you were injudicious or something. I thought lawyers were supposed to call things by their true names. Liar, thief -- if the shoe fits, make ‘em wear it!

But throw me a frickin’ bone here! I was deprived of some important elements of a proper legal education. Most lawyers learn how to behave from watching their lawyer dads, or while hanging out with their lawyer uncles. I learned from watching 70s TV shows like “Judd for the Defense,” and “The Young Lawyers” (they had cool cars, sweet little blonde hippie chicks in trouble for clients, and sparred in court with conservative judges who nevertheless had a streak of fairness). If I had only once in my life been to a golf course, or a tennis court, or an athletic club frequented by lawyers and their families, I would have realized that a lawyer is not expected to be a fiery advocate in search of justice. A lawyer must cultivate a careful manner, and in all things, particularly public speech, refrain from the sort of bluntness that attracts attention.

So yes, my press release said that Cohen stole Sex.Com. And the PLF agreed to cover my defense. They assigned Portland attorney Susan Eggum to be my lawyer. I had learned about her recently after she had resolved a scandalous case involving unconscionable tactics used by attorneys hired by the PLF. She was receiving kudos in the media for her ethics and savvy. In Portland law, she was hot.

I met her in April, 2000. Susan was crisp, trim, with short black hair and a manner both attentive and extremely efficient. An air of sharpness and clarity surrounded her, but maybe it was just the Portland sunlight coming through the window of her office. We discussed the case, and I knew I was in good hands. She accepted my statements at face value, expressed sympathy for my situation, discussed strategy, and had me out of her office in less than an hour.

This type of crisp efficiency makes some women good lawyers. A man would have interviewed me for two hours, and then taken me out to a long working lunch where we could swap war stories. Women seem more interested in cutting to the chase. They don’t vibe to the drama and the hype, and tend to look at all legal tasks as chores. Maybe it’s this matter-of-fact attitude that makes women better at multi-tasking. Have you ever seen a woman simultaneously juggling a baby on her hip while sorting laundry, heating a baby bottle, telling the kids not to track mud into the kitchen, and all the while keeping an ear on the Oprah show? The art of doing all of these things is not doing them at once, but rather doing them in sequence really close together. When you put that kind of attention to lawyering, you get a final product like a meal that comes to the table with all of the ingredients prepared properly and presented at the right time. It is logical that nature would select for women with nervous systems well adapted to multi-tasking, since nature hamstrings them with the care of infants while making no countervailing provision for extra time to accomplish all the household tasks that also fall to her lot.

Men, on the other hand, enjoy cooperating with a group of other men to accomplish a single goal, such as chasing down a giraffe on foot for five days and stabbing it to death with sharpened poles. Or getting together a pack of dogs and chasing bears up trees, where you can shoot them with arrows. Given half a chance, men will paint their faces with blood and howl at the moon to announce their conquest over the foe. When this type of mentality is applied without additional refinement to the practice of law, you get a lot of guys trying to hammer every peg, whatever the shape, into the same damn hole. You get narrow issues pursued with monomaniacal zeal and a lack of comprehensive strategy. You get people who are sure of their case, and lose because they never bothered to think that the jury just might agree with the other guy’s view. You get a lack of empathy and a lack of insight.

This difference in temperaments has traditionally been resolved in the law by means of the lawyer/legal-secretary relationship. These relationships can be quite lovely and charming, sometimes to the chagrin of the lawyer’s spouse, who sees less of him than the secretary, and instead of presenting him with the rewards of work well done, gives him bills, kids to put through college, and a mortgage. Fortunately, lawyers are masters of concealment, so spouses are spared the pain of knowing how deeply these relationships go and how much of a bond develops. When I worked in L.A., I often referred to my secretary Victoria inadvertently as my wife, and referred to my wife Tara as my secretary. Indeed, it is not uncommon to meet a retired lawyer and his second wife, and discover that she was once his secretary, and that the young woman who put him through law school is no longer on the scene.

A good legal secretary has several of the qualities of the ideal girlfriend. She always listens to everything her boss says. She thinks he is charming, witty, urbane, and whatever nebbishy characteristics he has, are agreeable and endearing. She corrects his spelling, straightens his tie, and reminds him not to be late for court and appointments. She makes excuses for him and can provide convenient alibis on occasion, although only a rogue or a coward shifts his mistakes to his secretary. If, in addition, your secretary is also attractive, such that you have a living adornment sitting in your office to inspire the envious whispered admiration of other lawyers, it can be kind of like having a facsimile of a happy relationship. And it can be tremendously productive.

My wife is my legal secretary, and she has many of the characteristics of the perfect girlfriend. What I particularly like is the way she listens to me eagerly when I’m yelling about how we’ll get those blankety-blanks, watches approvingly as I smash my fist into my palm to demonstrate how severe justice will be visited upon the wrongdoers, and then hands me my dictaphone with a tape already in it and says, “Do you want to do it now?” This kind of relationship is stimulating on many levels, and when you’ve married your secretary, a strange thing happens. She begins to thrive on sexual harassment.
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Re: The Sex.Com Chronicles, by Charles Carreon

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

THE HAIL OF LEAD

As I mentioned earlier, Gary liked the fact that I carried around the “Art of War.” This book confronts the most difficult problem for a military strategist -- how to make people fight. Sun Tzu was well aware that soldiers are mostly just peasants in uniform, who don’t really want to get up one morning, march off to distant lands, leaving their wives, children and crops behind unattended, so that they can risk life and limb while trying to kill other peasants and burn down their villages, all for the apparent benefit of a lord who lives in a castle. Thus, Sun Tzu’s book is full of strategies about how to get people to fight, how to move them into a position where they have no choice, and how to give them the courage that is necessary to win. Soldiers lose courage when there are no victories, and lose resolve when the war drags on too long. As Sun Tzu says in one chapter, “I have heard of some campaigns that were clumsy and swift, but I have not heard of any campaigns that were lengthy and skillful.”

One evening in Gary’s apartment I was reading to him aloud from another strategy classic, Clausewitz’s “On War.” I came to a section where Clausewitz explained that, in order to induce surrender, it is necessary that every day bring the opponent news of a new defeat, and that there be no end in sight to the daily drumbeat of failure. Gary quickly seized this idea, and translated it into “Every day has got to be a bad day for Cohen.”

I coined the term “hail of lead” to describe a process of sustained attrition dedicated to two purposes. First, to build a favorable record of legal victories with the discovery judge. Second, to keep Bob Dorband so busy he couldn’t do discovery against us. To accomplish these goals, I deployed every weapon available in the discovery vault -- document demands, depositions, interrogatories and requests for admissions. Still, I needed Cohen’s help to make the strategy effective because when a party complies with discovery, it’s not as good a weapon, since there’s nothing to see the judge about. But if a party is non-compliant, like Cohen, and you can keep hauling his lawyer in front of the judge repeatedly, you can build a record of noncompliance, and even get the case dismissed. But the process is labor-intensive.

Victory in discovery is a multi-step process: first you send out the demand for discovery, second you follow-up with a series of letters and phone calls to show that the other guy isn’t responding, and third, you file a motion with the judge to compel them to comply with your demand. That’s like breaching the walls of the castle. Then there are three more steps, analogous to storming the breach, overwhelming the defenders, and securing control. The opposing party tries to plug the breach by filing an opposition, where he explains that his client is acting totally reasonable in refusing to respond to this ridiculous discovery demand. You go mano-a-mano now, writing and filing a reply brief to rebut these opposing contentions. Finally, you get to the hearing and ask the judge to declare you the victor. Since the rules of discovery are pretty liberal, you should almost always win. If you can’t get good at this game, give up civil law, because the good documents don’t come easy. In fact, give up trial law altogether, because unless the other guy is a total bumbler, you’re going to discover nothing that he doesn’t want you to. But if you get good at it, you will have the power to make every day a bad day for the other guy.

Now for the other purpose of the hail of lead: to keep Cohen out of our business. There were witnesses we didn’t want Cohen to contact, documents we didn’t want him to see. Most of these witnesses and documents pertained to the time period after Gary registered the name in May 1994, and before he filed suit in 1998.

When Gary registered Sex.Com, it was almost a lark. The sort of thing one nerd would say to another: “Guess what I did today? I registered Sex.Com with the Internic.” Standard response: “Good move, dude.” Net dollars earned: zero. It was that sort of thing. Gary didn’t see Sex.Com as a moneymaker in 1994, or he would have put it to work. How did Gary plan to make money in those days? He was one of many Stanford MBAs angling for venture capital in the boardrooms and computer labs of the Bay Area, where a saleable idea could garner millions in investment dollars. Using Online Classifieds, Inc. as his business moniker, Gary registered domain names for things other than sex, like Autos.com, Classifiedads.com, Jobs.com, and that sort of thing. Gary paid $2,000 to buy Match.com to create a dating site. An article in Forbes, the so-called “capitalist tool,” gave Gary a full write-up, showcasing him as a wunderkind whose bright idea could turn the profitless Internet into a cash proposition: present the classified ads section of your daily newspaper as an online product, and take bread right out of the mouths of Hearst Corporation and Rupert Murdoch. In 1994, this kind of bold idea launched careers.

Gary’s career had been launched. Online Classifieds, Inc. morphed into Electric Classifieds, Inc. With his Stanford degree and high-tech friends like Kevin Kunzelman and Peng Ong, Gary was able to garner venture capital financing from big names like Ron Posner, even roping in Aaron Alter of the famous Wilson, Sonsini law firm to do the corporate paperwork.

Electric Classifieds, Inc., the new corporation, took all of the assets of the old Online Classifieds, Inc. Kremen was for a time CEO of Electric Classifieds, Inc., and he directed the registration of new domain names, sometimes using fanciful corporate identities of non-existent companies as the name of the registrant. Dorband extracted this little nugget from Kevin Kunzelman at a deposition. Kevin, a former Electric Classifieds executive, didn’t intend to give Cohen any ammunition by saying this, but it definitely didn’t help our case. You see, Cohen argued, the business of registering speculative domain names was what Electric Classifieds was all about -- if it acquired all of Online Classifieds’ property, then it must have acquired Sex.Com. If Electric Classifieds had acquired Sex.Com, then Kremen could not sue for the loss of something he didn’t own. Certainly Electric Classifieds had shown no interest in filing suit, and was, effectively, defunct. It had changed its name to “Instant Objects,” and remained a California corporation with former CEO Mark Elchinoff as its Director. And the statute of limitations as to Electric Classifieds, Inc. had long since run. By this analysis, Cohen should get off scot-free.

There was only one way to avoid the problem, and that would be to contact all the upper-ups who had been involved with Electric Classifieds, Inc., and get them to swear that Gary had not given the company Sex.Com, but rather that it had remained his personal property. Of course, you can imagine this was a very delicate process. While Gary was absolutely certain he had not given Sex.Com to Electric Classifieds, we had only one declaration under oath to that effect, signed by his old friend Peng Ong. Peng, as Gary never tired of mentioning, was a billionaire, and had signed the declaration even before I got involved in the case. But the rest were wildcards. I mean, how do you go up to someone and say, “Hey could you swear under oath that I didn’t give you something worth millions of dollars?” The finest and most moral of persons might wonder at your motivation in asking such a question, and if even one demurred and said, “I better talk to my lawyer about that,” you might find your whole proposition going to hell in a handbasket.

We needed to nail down the ECI insiders, but not rile them up. And we sure didn’t want Cohen taking their depositions. He noticed the depositions of a Wilson, Sonsini attorney, and Peng Ong. Cohen teased that he knew Mark Elchinoff did not like Kremen. Indeed, Elchinoff and Kremen were not on good terms, and Gary didn’t want to ask him for a declaration. I had to give Gary the opportunity to contact the ECI insiders in the meantime, and keep Dorband from taking their depositions.

We made the field of battle so hostile for Cohen that he could only respond to our attacks. With the hail of lead we kept Dorband running for cover all the time. Gary took up the concept with a vengeance. It could be utilized at every turn. We sent out pointed discovery demands, followed up on them tenaciously, and always filed motions to compel. We sent out press releases, talked to reporters, dug up court records to expose more of Cohen’s criminal past, and contacted anyone who might hate Cohen to obtain their assistance. “I want more lead!” became Gary’s unvarying demand for action, not theory, for execution, not plans. In his mind, he was astride a fierce war-horse, spurring it from one gun-emplacement to the next, saber held high, urging each crew to fire a full load straight at the enemy ranks. Wreathed in the smoke of battle, rocked by each thunderous cannonade, Gary smiled with glee. He knew he had them on the run. That was a good time to fire more lead! And whenever the silence of the guns reminded Gary that Cohen might be enjoying a moment of peace, he’d rouse us to fire another volley with his one-word imperative -- “Lead!”
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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!”
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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