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 1:52 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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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.
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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.
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Re: The Sex.Com Chronicles, by Charles Carreon

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

WHERE THE BODIES ARE BURIED

I had planned to take Karon Cohen’s deposition ever since I called her on my cellphone just before sunrise one morning in mid-summer 1999. I’d risen early after a few hours sleep on the couch in Gary’s living room. I went to the unused back bedroom, and dialed the Florida phone number I’d gotten from my private investigator Paul Nyland. As I gazed down into the overgrown garden behind Gary’s apartment, a suspicious Karon answered the phone. She asked how I had gotten her unlisted phone number. I was chatty and friendly, but she was dead serious, and asked quite a few other questions before she decided I really didn’t work for Cohen. Once she decided I was the lawyer for one of Steve’s enemies, she turned talkative, and entertained me for nearly an hour with Cohen stories.

She told me how Cohen had stolen her life savings from a brokerage account while he was in prison, forcing her to hire a lawyer to get it back. Cohen hadn’t forgiven her for daring to keep her own money, either. After he got out of prison, he stalked her for years. One time she discovered him sitting right next to her on a barstool in Florida. She didn’t recognize him at first, though, because he had grown long hair and a beard, and was wearing sunglasses. When she realized who he was, she left the bar and went back to her car. When she reached it, she discovered all four tires had been slashed. Cohen, she said, had kept turning up in unexpected places, causing her problems in myriads of ways, until she made a committed effort to disappear and cover her traces. She hadn’t heard from him in years.

Karon spoke with the honest accent of a lower-middle class southerner, sounding like someone who had never thought she was smart enough to outsmart Steve Cohen, and had just hoped she could outrun him. My phone call was an awkward reminder of a painful past, an opportunity to vent, and a reminder that Steve was still casting a shadow over her life. She was willing to give testimony, if the case required it, so long as her current whereabouts could be kept a secret from Cohen. She knew all about The French Connection, and the lawsuit by the software-makers. She had been there when Cohen was arrested for bankruptcy fraud. As for Sex.Com, she had never heard of it, or heard Steve talk about it. These were just the things I had hoped to hear from Karon, so I added her to the short list of people who had known Cohen back in the day, and weren’t either dead, bought off, or unwilling to talk.

I went across the street and bought coffee for both of us, and went back to the apartment to wake Gary with fresh java. Gary had a voracious appetite for positive information, and the news that I’d just chatted with Karon was better than breakfast. On that particular day, however, funds were still in short supply, so actually deposing Karon remained on the list of things we’d do when we got money. Now that Diestel and State Farm were on the case, the time had come. Diestel’s private investigator contacted Karon. She had suffered some health setbacks since we had spoken, and was less willing than before to give a deposition, but after some negotiation, she agreed to give a deposition at Volusia Court Reporters, in Daytona Beach, Florida.

I had only been to Florida twice before. During the summer of ’74, Tara and I had hitchhiked from Colorado to Florida, up to Michigan and back to Arizona, a rolling courtship we carried on in other people’s cars and houses, concluding in marriage back in our hometown of Tempe. During our trip through the south, a top-forty hit by David Bromberg haunted the airwaves, recounting the tale of a “sweaty, stinking trip through southern hell.” The song could have been our soundtrack. On our way to Mississippi to see Tara’s relatives, a cracker dry-fired a revolver in my face from a passing car, causing me to think I was imminently dead. So we skipped Mississippi and detoured to the beach in Pensacola, Florida. In Pensacola, we cooked fried shrimp and hush puppies, sang songs in the campground with a couple of young dudes, and tried to make love in a sleeping bag in our pup tent. David Bromberg was right -- even sex feels like work when you’re sweating that much. When we woke up, we turned our thumbs north, only to narrowly escape death in a nightmare ride on the wrong side of Green River in Tennessee with a crazy cracker who fortunately repented of his ways before raping Tara and killing me. We made it to Memphis alive, and after a day of bird watching in Audubon Park, continued hitchhiking north, getting a ride on the single bench seat of a blue 396 Chevy Ranchero next to a fat, slightly depressed, but utterly harmless, white boy. He did ninety all the way to Michigan, and it wasn’t too fast for me. I had returned to Florida only once, in the early nineties, to defend the deposition of an elderly plaintiff in an accounting malpractice case. That turned out depressingly enough. My client, a holocaust survivor who lost a bundle in Texas residential real-estate bonds, also lost his malpractice lawsuit, and died when he got my letter telling him he’d lost.

Florida, named “the flowery place” by Spanish explorers, has apparently been entirely taken over by developers who scrape off the vegetation, line the coasts with high-rise hotels, drain swamps, build homes on bogs, and cover the rest with a thick layer of asphalt and concrete. Daytona Beach is a car drive away from Orlando, so I scheduled myself to fly in the day before Karon’s deposition, after which I would drive to Miami and meet an investigative reporter specializing in Caribbean money scandals. The next morning I would fly out of Miami. When Ana gave me the tickets, I stuffed them in my briefcase without a second look.

At the Orlando airport, I rode a train from the flight terminal to the main airport. Disembarking from the train after sailing through the gleaming tunnel, I was momentarily surprised to be greeted by the most famed diplomats of the Magic Kingdom -- Mickey and Pluto. I suddenly remembered -- Disney owns Orlando! The airport was essentially an embassy manned by ‘toons, where life-size statues of Bugs Bunny, Elmer Fudd, Porky Pig, Daffy Duck, and the Tasmanian Devil remained on guard against an invasion of reality. The airport shops and restaurants were uniformly decorated with movie memorabilia, dulled by a thin layer of condensed cigarette smoke. Walt Disney himself, a stickler for pristine clarity, would have been livid to see the magic dimmed by a lack of white-gloved attention. For at least one jet-lagged lawyer, the unity of civic reality and Hollywood fantasy was existentially nauseating.

After a quick pint of cold beer, I walked to the rental car area. Diestel was standing in the Hertz line, litigation case in one hand, a soft suit-bag slung over his shoulder. He upgraded his rental to a sharp-looking gold Mustang GT without comment. My car was reserved with Avis, and I had no upgrades to apply, but the little blushes of jealously passed as I realized I didn’t care what I drove, as long as it had a CD player and was big enough to survive a collision with an SUV. In my plain vanilla four-door, I drove down two-lane blacktops, past white clapboard buildings, east toward the Atlantic coast.

Daytona is a little town with a big racetrack that lives for NASCAR. Walk into a bar during the off-season, and you have the entire floor to yourself, all four thousand square feet of it. As I entered one of these barn-like enclosures, the absence of the race fans was palpable. I missed them myself, and felt I should apologize for not being one. It required no imagination to visualize the place stuffed with hundreds of guys in race caps, jostling each other in a masculine fashion, swilling twenty-ounce cups of Bud Lite, shooting pool, and talking about fuel injection. This place was for them, I realized. The pert waitresses and sports bar decor made me thirsty, but I had no cause to linger. I could get swozzled in my hotel room on a six-pack of yuppie beer or some Stoli, for the price of two plastic cups of Lite. And in my motel room, I wouldn’t have to sit there like a bar-stool ornament while the bartender flipped from one cable sports channel to another, working his way through his cigarette slowly, one eye squinched against the smoke curling past his slick dark hair, until at last he deigned to ask me what I wanted, and painfully poured me a draft. One beer, extracted from the unwilling, consumed in my role as the unwanted, was all the southern hospitality I could stand.

After leaving the sports bar, I cruised the empty streets of Daytona briefly, looking for some “there” to experience or observe. Since my quest for something, anything to hold my attention, was utterly fruitless, I headed out to the motel row down by the beach, separated from the rest of Daytona by a long, watery inlet. I drove across a narrow bridge to the windswept coast, a narrow finger of land pointing south, looking vulnerable lying alongside the enormous Atlantic. Diestel and I had rooms at the same place, a circular concrete and glass high-rise with a big lobby, plush restaurant, and rooms overlooking the sloshing gray-green sea. Diestel and I had dinner together in the restaurant downstairs, mulled the next day’s prospect like the grizzled survivors we were, and retired early to our separate lodgings. Upstairs in my room, I got my materials organized for the next morning and went to bed early, teased into sleep by the murmuring ocean, barely audible through the sealed window-glass.

The next morning, Diestel, Dorband, Karon, and I met at Volusia Court Reporters. Karon said she wasn’t feeling well and wanted to finish quickly, so we started immediately.

Karon married Cohen in Las Vegas in 1990, moving from West Virginia with her adolescent son into a two story house on Via Pardal in Trabuco Canyon, where Cohen mysteriously enjoyed free rent. Chandra Boydstun, Cohen’s daughter from a previous marriage, joined them, and there on Via Pardal, all three were held prisoner by Cohen’s paranoia. They weren’t allowed to have visitors, and were forbidden to answer the door, to prevent the Sheriff from serving papers. Cohen used video surveillance to protect himself from unwanted intrusions. As Karon testified, “He had a camera set up in his office in the bedroom and he could see who was at the door. I mean, we could go in and out. But we wasn’t to answer the door to anybody. If you saw parcel post, something like that, he had to answer the door, he answered it himself.”

Cohen held multiple licenses to perform security and property-recovery business. He was licensed as a locksmith, a repossessor, a private investigator, and a contractor. He got into business repossessing cars through Action Auction, owned by a fellow named Heitz. Using his repossessor’s license, Cohen wormed himself into some sort of partnership with Heitz, but ruined Heitz’s relationship with the Highway Patrol. I related this with LA bankruptcy court filings that revealed Cohen’s use of YANTA (not a misspelling of YNATA, but rather another shell company) to buy and loot a towing company. Perhaps the YANTA name was a play on the Spanish word for tire, which is “llanta,” pronounced “yahnta.” The joke would be apt, because tires are made of rubber, so they bounce, and after some use, wear out. Karon had been officially designated in corporate filings as the Director of YANTA, and when I showed her the documents, she was not surprised, although she laughingly declared that she had nothing to do with the company, had never gone to a board meeting, and knew nothing about the company. It was just like Cohen, she explained, to include her in the paperwork without telling her.

Cohen never paid the bills -- they went straight to the trashcan. He had five telephone lines, but paid no phone bills, because they were billed to the names of other people. Cohen procured stolen cell phones from thieves and reprogrammed them with telephone numbers he plucked out of the air with a scanner from cars driving by on the freeway. He sold the hacked phones, that worked “free” until the cell phone companies disconnected them. Although this left some of Cohen’s buyers irate, he shrugged them off. I suspect many of his customers were happy with their purchases, and knew exactly what they were getting. Stolen cellphones are perfect communication vehicles for criminals, just like stolen cars are always used by experienced holdup men.

Despite knowing he was involved in illegal doings, Karon believed Cohen to be a lawyer. Early on in their relationship, he had shown her his suits, and his name in a book full of attorneys. He sometimes got up in the morning to go to court, to appear in his own cases, and sometimes to make appearances for other lawyers. Sometimes he would have papers laid out in the morning that were signed with Frank Butler’s name, but she couldn’t remember seeing Cohen actually forge the signature. Since the topic of Frank Butler had come up, I asked her if she had ever heard of Butler having a heart attack, as Butler had apparently sworn in a declaration filed by Cohen.

CARREON: Did you ever hear him say that Frank Butler had had a heart attack?

KARON: I don’t recall. Just that he’s out of the country one time. I don’t recall.


While Karon had no recollection of a heart attack by Frank Butler, she seemed genuinely bemused by my question about whether Steve himself had had a heart attack, as he had sworn in court filings.

CARREON: Did you ever know of Steve having a heart attack?

KARON: Steve Cohen?

CARREON: Yes.

CARREON: My husband? (In a tone of confusion)

CARREON: Yes.

KARON: No. I didn’t know he had a heart attack.

CARREON: Had you ever heard that he had a heart attack back in ‘87, like in maybe April or May of 1987? I know you didn’t meet him until a few years later but did he ever tell you ‘I had a heart attack back in ‘87?’

KARON: He didn’t tell me about that. I never heard anything about that.

CARREON: Did he ever go to a cardiologist or heart doctor?

KARON: Steve never went to the doctor. He’d go just because he could get prescriptions pills one time free. He had Kaiser insurance and he got the pills, brought them home and didn’t take them.


Life with Cohen was not very exciting: “He was always at home all day long. Every evening we went out to get the mail, out to eat. That was pretty much the regular routine all the time.” Another part of the routine was cleaning up after the sex parties Steve hosted at “The Club,” a suburban playhouse for swingers in the City of Tustin that Cohen once described to me as a business where he “got paid by rich guys to fuck their wives.” Well, in LA, that’s probably a job that needs doing.

The Club boasted a mailing list, newsletter, and all-night parties replete with finger food, drinks, lubes, and acres of rumpled sheets. Members of the club got free memberships to the French Connection BBS. Karon cleaned up with help from young Latinas, many of whom were shocked, and sometimes unwilling to clean up the wreckage of a gringo orgy. Disgusting! Somehow I doubt that Cohen provided rubber gloves. Eventually, neighbors complained, and the DA charged Cohen with running a house of prostitution. Apparently, Cohen didn’t tell the jury, as he told me, that he was in fact screwing women for cash, which would be prostitution, albeit it of the pleasant sort, and walked out of the courthouse a legally not-guilty man. The story had gone out on TV, though, and while Steve was proud of his visibility as a free love entrepreneur, Karon was humiliated, and lost the companionship of her son into the bargain. The young man returned to West Virginia rather than share a roof with a man who had been charged with running a whorehouse.

Eventually, the free ride came to an end. The cops came to the Trabuco Canyon house, looking to arrest Cohen.

KARON: He told me not to be scared. Because the police had come and surrounded the house and someone was ringing the doorbell. Which we couldn’t answer. He wouldn’t allow us. Then I guess they left. He tried to get in his car and leave. The way he was doing it was very suspicious, trying to sneak out. They surrounded the house and I saw him get arrested.

CARREON: They surrounded the house and then demanded he come out and he went?

KARON: He wouldn’t come out. They left and went down the road a little bit. He got in his car to take off and they got him.

CARREON: Oh. So he actually attempted to escape?

KARON: Yes.


After the arrest, the unhappy family moved out of Via Pardal, and Cohen hired Mike Mayock to fight the charges. At trial, Cohen was convicted of bankruptcy fraud and related crimes, and remanded to the custody of the Bureau of Prisons. Judge Keep denied Cohen’s request for bail pending appeal, prompting Cohen to call her a “cunt” on his way out of the courtroom. He immediately received a set of handcuffs and a yellow jumpsuit as a reward for his eloquence, and began serving his sentence at low-security Lompoc Federal Penitentiary, where according to Karon, Cohen pretty much had the run of the place.

CARREON: Did you have strange experiences regarding Mr. Cohen and his use of the telephones at Lompoc?

KARON: I called that Lompoc prison one night . . . and I told them my husband just got through calling me on the phone.

CARREON: About what time of night or day was this?

KARON: I don’t know. It was dark. I’m really not sure what time. Nine. Ten. I’m not sure. Eleven. It was dark. And they say there is no possible way. They are only allowed like five minutes a day on the phone and there is no way he could be on the phone and I said I know his voice, it was his voice and he was on the phone. So I guess eventually they went and checked and said he was in bed. Later he told me - when I went in to the last visit in Lompoc and told him it was over. I said “You’re not getting any better at this situation.” He laughed and said that they came to his room and he acted like he was sleeping when they come to check on him.


Inmate status posed no serious obstacle to Cohen’s larcenous schemes. When Karon married Cohen, she deposited the $75,000 death benefit from her first husband’s life insurance into an account in the name of Repossessor’s Inc. Without explaining how his creditors would attempt to seize Karon’s money, Cohen moved the account to a Shearson securities brokerage in North Carolina “to avoid creditors.” But when Cohen went to prison, Karon learned she had no signature authority on what she thought was her own account. When she called Shearson, they told her Cohen had removed her name from the account using a fax authorization. When she questioned him about it during a prison visit, he told her she didn’t know what she was talking about.

KARON: And I called the company myself. And they said, ‘I think it was faxed over, as far as I can remember’ and I go, like, he’s in prison! How can he be faxing you over information? So I told them, I threatened them with my attorney, that I wanted my money, and I wanted it back in my account. That’s how I had to pay my bills. He was in prison. If they didn’t -- he didn’t tell them about being in prison. I said if you don’t believe me you call Lompoc. I give the number and everything. He’s in prison, doing this from prison. Because I did not give him authority to do it.

CARREON: Did you get your money back?

KARON: After about two, three weeks, yes, threatening them.

CARREON: Who paid you? Shearson Lehman?

KARON: Uh huh. He later went on to tell me that well, when I come out of prison I won’t have any money. I told him that didn’t give you no right to take my money!


The Shearson caper was the last straw for Karon. She filed for divorce. I knew both Karon and her divorce lawyer had been sued in the RICO lawsuit that Cohen filed from prison. I thought Karon would recognize the RICO complaint, but she had never seen it before. She had never been served and knew nothing about the lawsuit that alleged she and various others conspired to “purloin” the French Connection.

Karon didn’t have to hear more than a few lines of the complaint before she declared confidently: “Basically what I think is happening here is he’s too embarrassed about what had happened and he’s trying to throw the blame on me...”

Even though Karon hadn’t seen this particular frivolous lawsuit, she was painfully familiar with Cohen’s tactics for hijacking the judicial process: “You have to miss work. You have to go to an attorney. Then he pulls up all kinds of stupid stuff in here you didn’t do, didn’t say, it didn’t happen, but he’s representing himself so it doesn’t cost him any fee. But a person like me, you’ve got to keep taking off work. You’ve got to pay your money. And it’s no fun. And the judge told me at one point. ‘He has the right as a citizen to sue whoever he wants,’ but he can keep throwing it out if it’s not true. So basically he can sue me all he wants or anybody else.”

Karon was very familiar with The French Connection, on which Cohen, under the screen name “Tammy,” played Systems Operator, “sysop” in bulletin board parlance. Karon had been a French Connection member, and regularly chatted with people online, but had never heard of Sex.Com. Her testimony confirmed my belief that Cohen had forged the French Connection screen printouts attached to the Sex.Com trademark application. Karon recognized Richard Klaus’s video of the interface, but had never seen the screen captures Cohen filed in support of the Sex.Com trademark application.

Karon recalled that Cohen did not easily surrender his hold on her, often calling from prison to urge her to keep The French Connection running. It was hers now, he told her, for everything she had done for him, and she should keep it going for the profit potential. Cohen was a true pioneer in the era of prison labor out-sourcing, but typically turned the concept on its head, getting a free person to work for a convict. Karon remembered: “he would call me from prison and have me on the line the whole time until it was finished.” But Karon couldn’t deal with the complexity of it all -- phone bills in the names of people she didn’t know, technical issues, and the whole mess. One day users started calling to say the system was down. Karon looked in the room where the computers had been stored, and the whole system was gone -- computers, modems, and all. I asked her if that made her feel better, but she had her own response to the disappearance:

CARREON: You probably breathed a sigh of relief?

KARON: I could care less.

CARREON: And after that you never logged on to The French Connection again in your life?

KARON: I didn’t want to log on to Steve, The French Connection, or anything that had to do with him.


As the deposition wound to a close, Diestel, Dorband, and I were all of the same mind. We had invaded Karon’s privacy long enough, and she had given us all she could. Dorband quickly abandoned his cross-examination when it became apparent that Karon was incapable of saying anything helpful to Cohen. In response to one of Dorband’s last questions, Karon explained how she came to give up on Cohen: “I gave him a chance, if he would go straight, and stop doing things like that. I could forgive for the past. But he just continued to do things illegal.”
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Re: The Sex.Com Chronicles, by Charles Carreon

Postby admin » Fri Jun 13, 2014 1:55 am

MY MIAMI

Diestel and I ate lunch together after Karon’s deposition. He was starting to trust me. It couldn’t hurt that Karon had proven several of my theories right. The encounter with one of Cohen’s most vulnerable victims tapped a vein of outrage. Diestel had far more sympathy for Karon than he had ever shown for Gary. He was angry. It showed in the way he ate his lunch, chomping with tenacious resentment. After lunch, Rich took off for the airport in his gold Mustang, and I hit the road in my four-door refrigerator.

I got onto I-95, the big traffic artery that drains straight down the leg of the state into Miami, siphoning traffic onto the counterclockwise arc of Biscayne Boulevard, a broad beachside motorway that tracks the curve of the shoreline. I rolled into town with the setting sun shining through the back window as my car hurtled east along the sweeping concrete curve. With light shining all around me, I smiled and took the exit ramp into Little Cuba. Because the weather is similar, I couldn’t help comparing Miami with LA, where I lived for ten years. LA never ends, it just sweeps around and loops back on itself like a never-ending snake of red and white lights, coming and going. People sleep and salve addictions in LA neighborhoods, but they don’t seem to live there. In LA, everyone is going somewhere, and nobody stays anywhere.

In Miami people are living, hanging out, walking down the streets. Young Cuban women wear tight dresses and high heels, walking like prizefighters, extending a challenge to which many a man feels compelled to rise. Sometimes the traffic moves so slowly, it feels like drivers are just taking a good look at the women, and no one seems to mind. Intrigued, I resolve on seeing the town later, and start looking for the office of the investigative reporter I’m there to meet. This guy has blown the lid off a couple of Caribbean money-laundering scandals. He’s not clear how he can help us, and I try to sound like I know what I’m talking about, but the idea of chasing Cohen’s offshore millions doesn’t appeal to me. In all my years of lawyering, I had only recovered large amounts of money from banks, insurance companies, and large corporations. I agreed with Willie Sutton -- one must go where the money is.

Gary thought he could seize Cohen’s offshore accounts, though, and he wanted me to talk to this guy to see what I could learn. The reporter confirmed what my online research had taught me -- the Caribbean has more swindlers than the beaches have crabs; the islands provide employment for a small army of English-style solicitors; and, the army of solicitors services the needs of thousands of corporations, each comprised of little more than a stack of papers, a mailbox, and a bank account. Not surprisingly, the solicitors have no interest in perforating the secrecy of their clients’ dealings. But there was a ray of hope, said the investigator. After the BCCI scandal, the British imposed the Proceeds of Crime Act on its protectorate nations in the Caribbean and, if you could find a lawyer to handle your concerns, the laws were on the books to help you track down and recover stolen millions. But that was a huge “if,” because most island solicitors refuse work that might make them unpopular in the few really good clubs and restaurants. On most islands, which are small by definition, being unpopular can be very uncomfortable. And should you suffer an accident, there are so few police to conduct an investigation.

The investigator had a date in a short while with his Colombian girlfriend, who didn’t speak English. When I asked if he spoke Spanish, he said no, that they actually had a language problem but in some ways, it was better that way. I understood. In Miami, it’s more about what youdo than what you say. With the investigator gone to make sign language with his Colombian girlfriend, I went back to my room, spread the entertainment weekly out on the apricot-colored bedspread and studied the ads. Looking for a nice, pleasant dive, I settled on “Churchill’s, A Sort of English Pub,” which seemed to host rowdy rock acts on Northeast Second Avenue. Big-city addresses on streets with small numbers are always interesting to investigate. I drove into the deserted downtown, leaving the cool air of the shore behind, directing the prow of my generic rental into a dark slice of unfamiliar city.

Approaching Second Avenue, the neighborhoods began to look run-down. Then there were young black guys standing in the bus lanes, offering a chance to score. This was the perfect place and the perfect vehicle in which to get my brains aired out, but I hoped my ponytail would mark me as a defense lawyer. Something worked, because even stopped at the lights, I wasn’t approached with baggies extended. The pervasive presence of the edgy entrepreneurs suggested to me that Churchill’s might be the real deal. Then I saw it up on the right -- a one-star dive in a cratered neighborhood, butt up against a row of crack houses.

Walking through the dimly lit doorway, I discovered the place was somewhere between beautiful and falling apart. Behind the big, oval bar, stood a tall gal with a wide mouth, red hair, a slightly insolent tilt to her head, and some flamboyant neck-gear. A big pile of refrigeration equipment hulked near the back wall. Two people sat on the far end of the bar. I sat down at the empty side, and ordered a Bass ale that the redhead quickly delivered in an icy glass. Swampy air flooded the place with a sticky scent that slowly made me feel slick with sweat. I slumped down in the chair and drew the night air and solitude around me. The spooky guys dealing drugs weren’t allowed to enter, but their eyes kept lancing through the doorway as they walked past.

Eventually, Plutonium Pie, a power trio, started up their equipment and blasted a few big chords from their five-foot Marshall stacks, followed by some guitar riffs that settled into my brain like acid splattered randomly across a steel plate. I ordered another Bass ale and settled back. As the band got going, I noticed the musicians shared similar features. All three had long wavy hair, black as coal. If I had to guess, I’d say they were descendants of the Dravidian people who inhabited the Indian subcontinent before the Aryans invaded.

Only five people including the barmaid and myself were watching this gig, but the Plutonium Pie people didn’t seem to notice as they blasted through a bunch of great-sounding original stuff. The drummer flailed the skins confidently, her hair a dark, penumbral halo around her young face. The bass player was always right where he’s supposed to be, and the guitarist stood like a calm, dark god, working the neck of his instrument, commanding platoons of power chords to destroy each other. Pretty soon I was dancing around like a fool next to the sprawling metal coils of disemboweled refrigeration equipment.

It continued that way for about an hour. Then the band took a break to go out on the back porch for some beer and conversation. I bought a round for all the band members. They started rolling joints with that self-assured manner musicians have, like smoking pot was their right in exchange for making music. The swampy night air out on the back porch was thick enough to eat. The porch ran the length of the back of the house, with makeshift shade-creating structures, all destroyed by the sun. Even in the dark, with the pot smoke drifting on the tepid breeze, everything felt sun-beaten. The wood was rough and splintery, the plastic frizzy, the cotton awnings frayed. There was even sunburned refrigeration equipment out there. I wondered idly if Churchill’s doubled as storage space for some air-conditioning repairmen, or if they never bothered to haul away the guts of their beer coolers after tearing them out. After the tea party, the Pie played another couple of tunes. Then it was 2 a.m. and time to close. By the time I left, I was tight with everybody, and made a mental note that Miami could be a nice place to self-destruct, if I ever had the inclination.

Back at the hotel, it was time to get myself organized, packed to go, and horizontal on the bed to catch downtime. I settled down, pulled out my plane ticket to see what time I had to be at the airport, and discovered that my plane was leaving in six hours from Orlando, the same place I flew into. Not Miami, where I was. Ana did not get this right. There was not even any point being very mad about it, because I had to save all my energy for a long night’s drive. I packed and checked out of the hotel the same night I checked into it.

My efforts to get back to Orlando turned out to be for naught. A few hours into the insane project, my eyes kept closing as I tried to keep my car between the fuzzy white lines. I pulled over in a restaurant parking lot and reclined the driver’s seat to get some rest. As warm daylight and morning traffic noises filled the car, my resolve to reach Orlando at any particular time dissolved like honey melting in the sun. Curled up behind the steering wheel, I abandoned myself to several more hours of luxurious, who gives-a-fuck oblivion. I had missed a plane, for the first time in my legal career. No worries. I was only going home.
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Re: The Sex.Com Chronicles, by Charles Carreon

Postby admin » Fri Jun 13, 2014 1:56 am

QUEEN OF LIES

The showdown with Barbara Cepinko had been a long time coming. Barbara owned Midcom, an Orange County personnel placement company for government contractors, from whose offices Cohen had faxed the forged letter to NSI. Gary had longed to sue Barbara and Midcom back when he hired me, but I had steadfastly refused to do it, seeing no sense in multiplying the number of our foes, or filing claims based on thin evidence. Searching for dirt in courthouse databases, Gary had discovered that Midcom, Barbara and Cohen were all being sued for sexual harassment in Santa Clara County by Tammy Robinson, a former Midcom employee. Robinson’s complaint was stuffed with juicy tidbits that rang true, like Cohen talking up Camp Wanaleia and making salacious remarks.

Hoping to find a lawyer who would do what I wouldn’t, Gary had me call Robinson’s lawyer to try and interest him in filing another suit against Barbara and Midcom, for conspiracy to aid in the theft of Sex.Com. He wasn’t interested. Midcom’s lawyer, Robin Offner of San Diego, had turned the Robinson case into a sinkhole of attorney-time, filing over a dozen discovery motions. Robinson’s lawyer wanted out of the case, and no more of Midcom.

Deposing Barbara had always seemed likely to generate conflict, so it was comforting to coast in behind the deposition subpoena Diestel had served on Cepinko in his capacity as Gary’s defense lawyer. I could have served my own subpoena, but didn’t want to invite flak. On the appointed day, Gary and I walked into the dusty brick Midcom office building on Tustin Boulevard in Anaheim, California. Midcom’s double doors were secured with keypad locks that Gary said were required by government regulations. We met Barbara in the white-walled Midcom conference room, windowless and devoid of decoration. The room was so sterile it seemed as if they’d stripped it just for us.

Barbara sat at the end of the conference table, lounging at her ease, looking a little frowsy, and altogether too comfortable. Diestel was setting up quietly. Dorband was absent, and in his stead appeared Robin Offner, an urbane young lawyer who rose to shake my hand. I sized him up -- medium height, wrapped in a dark sportcoat comfortably buttoned round a waist filled out by the good life. He had thick dark hair, a tanned face, dark eyes and brows, and soft lips that seemed pleased with themselves. Gary returned Offner’s offer of a handshake by sticking his arm out stiffly at shoulder level, leaning away from Offner, and sighting down the length of his arm with one eye. Sometimes Gary liked to play gangsta. Offner accepted the weird handshake without change of expression.

Barbara neither extended her hand nor rose from her chair, instead casting me a mischievous grin accented by a single bucked tooth. She and Cohen went back all the way to the days of The Club. In her late forties, with a figure that had certainly seen good days, Barbara seemed like a woman used to getting her way without excessive effort. Her blowsy demeanor suggested she’d look good with a martini in her hand.

We were ready to start when Robin told us that only one of Kremen’s lawyers could question his client. Robin’s position was ridiculous, but nothing in his appearance betrayed it. Barbara assumed the role of a captive damsel who would be happy to testify, once her dragon gave his permission. Diestel puffed annoyance at encountering bullshit so early in the day. Cohen was pulling the strings through Offner, and Gary’s anger was swelling on our side of the table.

We had to punch through. I pulled out my Rules of Civil Procedure, reviewed Rule 26, passed Robin the book, and told him it said nothing about how many attorneys could depose a witness. I then began intoning Judge Trumbull’s name ominously, as if her magical edicts were mine to dispense, telling Robin that the Judge clearly ruled in prior motions that all of Mr. Kremen’s attorneys were entitled to ask questions of witnesses. I explained that Mr. Diestel and I had completely different jobs requiring separate lines of questioning, and had to conduct separate examinations of Ms. Cepinko.

Clutching his pen in a hooked right hand, Gary wrote on a page of blank paper that he’d turned parallel to the edge of the table, like a lefty. He didn’t look up, but his torso swelled with waves of angry breathing, his features knotted up, and his eyes darted angrily. He was ratcheting himself into a rage. His body language said he would fire everyone if he did not get his way. I called for a break.

Diestel, Gary, and I headed out the push-button doors in a knot of turmoil. Standing in the powdery light pouring through the windows that lined the hallway, Gary was snorting, about to go postal with his bare hands and teeth. Diestel and I assuaged his concerns. Not to worry! We would both throw ourselves against the foe and get what we’d come there for. We would both question Cepinko -- no retreat! Diestel and I were in complete agreement -- we had to prevail. Making Robin Offner unhappy was no problem, especially when we considered the alternative.

When we got back in the room, Robin was more accommodating, and we quickly worked out a deal that allowed both Diestel and I to question his client. Diestel started questioning Barbara, and for a short time, Gary’s rage subsided to occasional emissions of steam, like a volcano itching to wipe out a small town. But brimstone was soon raining again as Diestel, unfamiliar with the Midcom facts, got bogged down in bookkeeping. During Diestel’s first break, Gary told me to take over. Tell Diestel to move aside. When I told Diestel what Gary had said, he shook his head with a bemused smile, and in a tone of mild disbelief, said, “You guys are really something.”

Getting a kick out of the obvious conflict on our side of the table, Barbara exuded amused skepticism as I faced her. I started with the paper record -- Cohen’s Midcom paychecks. Barbara gave Cohen some kind of job after he got out of Lompoc, but she couldn’t remember why she paid him $600 a week, plus a house and car allowance of $900 a month. Barbara said she’d hired Steve to answer phones, but also said he usually worked in the wee hours of the morning. When I questioned how often the phones rang at Midcom during those hours, she just laughed as if it were so funny that I would try and trip her up with those cute little lawyer tricks.

Barbara had seen the Sporting Houses stock certificates I showed her, bearing her name, but insisted they meant nothing, because they were worthless. Steve had made all Sporting Houses decisions, and spent all of the money. She had hosted Sporting Houses meetings in that very same room where we were sitting, but she had simply made the space available as a courtesy to Cohen. Barbara remembered Sex.Com vaguely as a subject only Steve understood or cared about. Yes, yes, Steve had told the Sporting Houses directors that Sex.Com was worth millions, and he wanted to buy it, but there was no money, and it was all so long ago. So very long ago. As she drifted ever farther from the probing point of my questions, she became as languid as Cleopatra gliding on the flooded expanse of the Nile, sliding effortlessly out of my reach.

Barbara had actually given me a lot of good ammunition on the corporate alter ego front -- it was obvious that from her viewpoint, Sporting Houses was a sham corporation that Cohen used for his exclusive benefit. But with her languid demurrals and coy deflections, Barbara had deprived me of the satisfaction of a good adverse interrogation. Like Cohen, she deceived with practiced ease, leaving the impression that the entire exercise has been a waste of time.

Trying to close with a good show, I made one last stab at disturbing her composure. In the Ashton-Tate case, Richard Klaus swore in his declaration that Cohen had taken him to the Midcom building, through the keypad-locked doors, showed him the Midcom computers, and told him they operated The French Connection. As a result, a judge had ordered Federal Marshals to seize Midcom’s hardware. Squinting slightly at Barbara, I asked if she knew Cohen had lied about her and violated her company’s security just to embellish a confidence spiel. Did she realize her old friend had invited disaster to her door? Barbara didn’t dispute Cohen’s responsibility for the raid. Back when it happened, she’d asked Steve if he’d brought the law down on her, and he denied it. When the Marshals came to seize the machines, she had to spend all day on the phone, until at last the Marshals left without the computers. Yes, she admitted, back then it was a big problem, but in retrospect, it was just more silly Steve stuff. She smiled.
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Re: The Sex.Com Chronicles, by Charles Carreon

Postby admin » Fri Jun 13, 2014 1:56 am

THE RUNAWAY STAGECOACH

Back in Oregon, Ana was learning the traditional lore of the subpoena clerk. Taking her work to heart, she served one witness after another, harvesting praise and ten dollars an hour -- better than the Santa Barbara library and not as dusty. The office was humming. Tara, resplendent in Nepalese silk clothing, long blonde hair shining, had settled into the new office I opened on East Jackson in Medford with Peter Carini. The move increased my floor-space by a factor of three, making it easy to work with my new staff.

Tara decorated the place in a Roman theme, and in the lobby we hung a large painting of a classical visage and an abstract banner. For a touch of pistolero-chic, we put out the big brown pigskin couch Tara shipped back from Guadalajara in the mid-nineties. We laid Tibetan rugs on the floor, and brought in our high-backed leather chairs, in Early Spanish Inquisitor style. We were getting respectable. Tara settled into her own office, where she tracked the gobs of cash we spent on investigation, service of process, deposition transcripts, copying, after-hours pizza, and sandwich runs.

Susanne and Ana shared an office with the filing cases and document binders. Susanne checked in to work regularly at one o’clock in the afternoon. She would show up, settle down at her desk and spend a little time pawing through her purse looking for a mirror or a Paxil, whatever. She was a great blonde creature with sleepy eyes, smiling, sad cheeks and gentle, pouting lips. Taking her station, talking into the telephone soft and low and deep, laughing that “huh, huh, huh” of hers that is knowing and wanton, conspiratorial. Sue enjoyed writing memos adorned with humorous asides, blending character sketches of the big players in the online skin trade with off-the-cuff comments about the personalities she was encountering in the subpoena enforcement project. She sometimes struck up email relationships with lawyers for witnesses or their attorneys, which often helped us to get the documents we wanted.

After Judge Ware reopened discovery in June 2000, we went after Cohen’s financial records with subpoenas propounded to his bankers, something you ordinarily wouldn’t do. But with Cohen begging for it by refusing to produce his own financial records, he left the door open for us to go directly to the source -- the moneychangers themselves. We were particularly interested in Sporting Houses records from the Las Vegas Wells Fargo, and those of Omnitec, from the Anaheim Hills branch, near San Diego. By August, we were receiving a steady stream of bank records that Ana scanned into PDF files and Tara filed in three-hole binders. We bought new shelves to hold the dozens of binders.

To be sure we got compliance from all of our subpoena-recipients, we kicked off “Operation Pushbroom.” Operation Pushbroom was named after the job of sweeping up after the horses in a rodeo parade. I saw a lot of rodeo parades as a child, since my nanny, Trini Noli, was part Apache, and her children loved horses. The parades would happen right downtown on First Street in Phoenix, a couple of blocks from my house, the cowboys wearing satin outfits with silver spangles, the child majorettes twirling their batons and tossing them high in the sky. Amid all this splendor, I noticed that the beautiful horses were crapping all over the street. Then I saw how the pushbroom people cleaned it up. They never walked past it -- they swept it all up in metal dustpans, dumped it into their rolling trashcans, then moved ahead to the next pile of crap.

Operation Pushbroom was based on the same principle -- give all the crap the same treatment, and don’t let any of it get past you. Ana listed all the witnesses on a big chart, marked them off the list when we received their documents, and narrowed the field to those few non-compliant witnesses who had to be compelled by court order. Nobody was permitted to fall through the cracks. Wells Fargo was looking for a crack to fall through. From the time we served them, Wells Fargo did nothing but delay. Ana and Sue spoke repeatedly with the Wells Fargo people, who would pull tricks like calling Ana with four or five people on the line at once, to interrogate her aggressively for the sake of intimidation. Everything Wells Fargo did was tentative. They always hedged their response, and were shameless about requesting one extension after another. I mean, it’s one thing to ask for extensions of time to produce voluminous archived documents, and quite another to simply dilate the time for response indefinitely, which was Wells Fargo’s established M.O.

In an effort to shut us down altogether, Cohen had Dorband file a motion to quash all of our subpoenas. He argued that our subpoenas were burdensome, because they directed the recipient to produce every document that in any way related to any person or business listed on a three-page list called Attachment “A.” Judge Trumbull denied Cohen’s motion to quash the subpoenas because none of the witnesses had objected to the burden of responding, and Cohen had no standing to seek relief from burdens that might be suffered by third parties.

Attachment “A” was a comprehensive document, as was the manner of its creation. Gary produced the list based on computer research, primarily using Google to drill down into records that frankly, I’m not sure were meant to be public knowledge. In those days Internet security was a topic of little attention, and people built websites with wide-open backends, as if they were parking their data on the dark side of an asteroid, where no one would ever run across it. Welcome to the world of the search engine! Gary searched for, discovered, and interpreted online documents that revealed the relationships that formed the infrastructure of Cohen’s online empire. By subpoenaing all documents discussing the people and businesses we knew were involved with Cohen, we forced Cohen’s secret associates to call their lawyers. It was probably because Attachment “A” was so thorough in tracking the net of Cohen-controlled money that Wells Fargo was at great pains to avoid releasing the documents in its possession.

Wells Fargo had been hiding behind Cohen’s motion to quash, so as soon as it was denied, I faxed Judge Trumbull’s order to Wells Fargo. Cohen then threw another hurdle in our path by sending out personal letters on his own stationery, threatening any bank that violated his privacy with civil liability. The letters infuriated Gary, who asked if he could send some personal missives of his own, but Wagstaffe and I wouldn’t let him.

Emboldened by Cohen’s letter, Wells Fargo continued stonewalling unto the eleventh hour. All Wells Fargo documents are electronically archived in Phoenix, Arizona, and were available for immediate production, but Ana and Sue were at their wits’ end. They had spent weeks talking with a lady in Phoenix named Barb Bakutis, a Wells Fargo document custodian. Her accomplice in The Big Stall was Felix Fierro, also officed in Phoenix. Sticking with my pushbroom, I sent the right letters to Barb and Felix, inviting them to schedule a conference call with Judge Trumbull’s calendar clerk. Pushing forward doggedly with mundane scheduling tasks makes a threat credible, and only credible threats induce adversaries to accede to your demands. As we talked about scheduling the hearing on a motion to compel production, I heard a sound in Barb’s voice that suggested she was eager to produce the documents, and was seeking clearance from some unnamed superior.

Just as Barb was about to crumble, our subpoena gun grievously misfired. I had filed a motion to compel compliance with a subpoena I’d served on Salt Lake attorney O. Bob Meredith, the fellow who took the credit for faxing out the press release announcing YNATA’s phony takeover bid for Starwood, the owner of Caesar’s Palace. I figured he would have some documents, and for about a month after I contacted him by phone, he repeatedly promised to produce everything he had, sometimes even saying he was “on his way to Kinko’s” right then. But he never sent anything. When he got my motion, O. Bob called Judge Trumbull’s clerk to object that the subpoena we had served was not enforceable, because he was in Utah, and the subpoena was “issued” from the Northern District of California. In a short ruling, Judge Trumbull refused to enforce a subpoena that hadn’t been “issued” by the district where the witness had been served. The terse ruling left me feeling sheepish, because she cited only one authority for her decision -- Wagstaffe’s book on Federal Civil Procedure. This ruling was a clear case of form triumphing over substance, because the courts don’t “issue” subpoenas at al -- lawyers do -- and correcting the error simply meant typing “Utah” on the subpoena instead of “Northern District of California.” But the Judge had ruled, so it was time to cope with the fallout.

O. Bob had revealed my error at a bad time, because the discovery completion deadline was looming uncomfortably near. If I had to deliver new subpoenas to all of the witnesses residing beyond the jurisdiction of the Northern District of California, it would be a costly fix for a technical oversight. The entire subpoena project was in danger of foundering. If O. Bob didn’t have to produce in response to a badly-worded subpoena, then all of the witnesses in the Eastern, Southern, and Central Districts of California, and those in all of the other forty-nine states, could also refuse production. With a single phone call, O. Bob had tied my tail in a knot.

Wells Fargo was going to take full advantage of the snafu if I didn’t fix it quickly. So, having indulged my sorrows for about fifteen stunned minutes after reading Judge Trumbull’s order, I called Ana to attention and we cranked out corrected subpoenas before we left the office. Fortunately, the dear child didn’t claim to have anything else to do that evening, and by the next morning, we had served corrected subpoenas on Wells Fargo. I called Barb Bakutis immediately to keep things moving.

As she had no doubt been coached by Cohen or Dorband, Barb raised the issue of the O. Bob ruling, but I was desperate, and mowed down her objections, reminding her that Wells Fargo had the prior subpoena over two months, that she had already located the documents, and that the new subpoenas I had just served accorded with the requirements of law in every respect. Admittedly, there was very little time left for Wells Fargo to produce documents, because they had delayed so long that the discovery cutoff was fast approaching. But that was their fault, I reminded her.

The Wells Fargo subpoena people are trained differently from bank tellers, who are supposed to give up the government-insured cash without a fuss. Maybe we should insure their records too, because as it is, they hold out as long as possible, hoping the party seeking records will go away, and providing documents only when actual court action appears imminent. The incentives are all on the side of non-production, and banks rarely get in trouble for not producing documents. To secure Wells Fargo’s compliance, I had to restart the mechanism of compulsion repeatedly.

Finally Barb called and told me she was ready to send the documents. I hardly dared believe it. I wanted to stop breathing, to make sure I didn’t screw something up. Before she ran the copies, she wanted a check for $700, for costs of copying the Anaheim Hills and Las Vegas bank records. I said I would fax her a copy of the check if she would please start copying the records immediately. She agreed, so I sent a letter confirming our agreement, and faxed a copy of the check.

She called back after she got the fax to ask how to deliver the documents. I suggested she ship them COD, so I wouldn’t have to send her a check. She thought a moment, and said that sounded fine. Ten minutes later, she called back to start the insanity all over again. She couldn’t send the documents to my office. She had to deliver them to the exact Kinko’s locations prescribed in my subpoenas -- Las Vegas records to the Kinko’s in Vegas, and Anaheim Hills records to a Kinko’s someplace in San Diego County.

Astonished, I asked her the obvious question. Weren’t all of the documents right there in Phoenix? Why then would she split them into two boxes, and ship one to a Kinko’s in Vegas and the other to a Kinko’s in San Diego, when she could send them all to my office? She just had to do it that way, she said. I sent her the seven-hundred dollar check via Fedex, crossed my fingers, and held my breath.
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Re: The Sex.Com Chronicles, by Charles Carreon

Postby admin » Fri Jun 13, 2014 1:56 am

INCIDENT AT CHULA VISTA

Chula Vista is south of San Diego, north of the Tijuana border. Gary and I had spent a night at a Budget Motel there on the way back from Ensenada, after the absurd circus of the Roman Caso / Sandman deposition. Chula Vista cops probably look at everyone like a suspect, and they took pointed note of my big, blue Cherokee as Gary and I rolled into the motel parking lot. The town looked boring as hell, we were tired, and we had beer for dinner. There was nothing to stay awake for, so we turned out the lights. As we lay in our separate beds, I fell asleep with Gary quipping occasionally about random issues.

Next morning, we breakfasted at a restaurant serving nothing but white flour pancakes anointed with colorful syrup, gleaming eggs, and bacon flattened under steel weights. This was no doubt the perfect welcome for persons fleeing poverty and low caloric intake in lands to the south. Stressed-out waitresses chucked plates on the sticky tables, and a snarly cashier gave me free steely silence with my change. When we left Chula Vista, I didn’t expect it would require any further attention from me, as it seemed to be falling in on itself quite nicely. I was wrong, though. Thanks to Steve Cohen, the name of Chula Vista is forever burned on my mind.

One day in September, returning to my office after spending the morning representing shackled men in green pajamas and plastic flip-flops, as I walked through the front door, Ana and Sue were excitedly shouting in unison, “Cohen stole the documents!” Turning to Tara, who seemed fairly calm, I saw her nodding with lifted eyebrows that told me that, yes, it was true, Cohen had stolen the documents. After a few moments, all three communicated the gist of the problem -- someone had gone to the Chula Vista Kinko’s, used Diestel’s credit card number to pay for all the copying of the Wells Fargo Bank documents, and walked off with both the copies and the originals! We had no Wells Fargo documents!

Standing in the hallway of my office, I screamed a couple of obscenities and Cohen’s name, and then suddenly, in the midst of shouting, felt myself overtaken by clear, calm thinking. I realized a great blessing had befallen us. It was just a question of whether we could properly take advantage of it. I cross-examined Sue quickly to confirm the key facts. She had talked to Diestel and the Kinko’s manager, and confirmed that Diestel had been in San Francisco when the documents were picked up at the Chula Vista Kinko’s by a man who looked a lot like Cohen, and told the copy clerk to charge the copies to the credit card number Diestel had previously provided by phone. It was a very smooth Cohen maneuver. Knowing all of the details of the copying arrangement, he used his knowledge to execute a last-minute gambit to upset a game I’d spent months putting together -- but I knew I could turn this to our advantage.

Most lawyers wouldn’t have agreed with my optimistic assessment of the likely outcome of Cohen’s theft. Viewed legalistically, Cohen had barely committed a misdemeanor, a theft of a copy job worth less than fifty bucks. Not exactly Court TV material. But any proper legal sorcerer would know that Cohen had committed an unforgivable sin against the very source of magic itself. Those documents had become the property of the court. They were evidence, the sacred ore from which legal alchemists extract the gold of truth. Not being a true initiate, Cohen did not sense the magnitude of his error. We could also easily infer that the documents contained damaging information, because he certainly didn’t need to steal his own bank records -- he was presumably free to look at them at any time. Thus, he must have been stealing them in order to prevent me from examining them, and there could be only one reason for that.

I went to work quickly, falling into prosecutor-mode. I needed a police report with witness statements, a description of the subject, a description of the stolen item, and an identification of me as the victim. Victims, as you no doubt have heard, have rights. Susanne got the Kinko’s manager on the phone. Our conversation went like this:

“Hi, this is Charles Carreon. I understand there is some problem with my copying job.”

“Well, yes sir, this guy came in and said he was one of the lawyers on the case and claimed the documents.”

“Did you see him yourself?”

“Yes.”

“You gave him the documents?”

“Yes.”

Pausing a moment to get the pitch of my voice just right, I launched the emotional javelin: “Well, my God, that’s a theft! Call the police!”

I literally held the receiver two inches from my mouth and screamed this into the phone, because I knew I needed to motivate the manager to make a police report, because without a police report, there is no crime. A police report is prepared by a cop, who is really a junior magistrate, a street judge. The courthouse judge never sees crimes that haven’t been worked up initially by a cop. In the mind of a judge, a crime that hasn’t been investigated by a cop essentially hasn’t happened. If you can’t get a cop interested, you’re definitely going nowhere with the courthouse judge. On the other hand, if there was a police report, it would provide prima facie confirmation that Cohen had committed another crime. I knew the Chula Vista police wouldn’t go to Kinko’s at the request of an Oregon lawyer, unless perhaps, I could also offer them free Winchell’s donuts, which seemed too complicated. It would be simpler to get the manager of Kinko’s to report a theft, which would definitely prompt a police investigation.

There was of course a hitch I could foresee, and I bet Cohen had, too. Nothing had been stolen from Kinko’s. They got paid for their copies, albeit with Rich Diestel’s credit card. Thus, Kinko’s couldn’t be the victim of the theft, in much the same way that NSI was not the victim of the theft of Sex.Com. While Cohen had certainly gotten copies at Deistel’s expense by impersonating him and using his credit card, that might be a little abstruse for the Chula Vista cops. Besides, Deistel wouldn’t want to appear as a “victim” on the police report. No victim, no crime. But since I had paid Wells Fargo $700 for the originals that Cohen also stole, I was the biggest loser here, and those documents were my property. I was a victim.

It is the victim’s prerogative to demand that the person who has committed a crime against them be prosecuted. While I did not expect that misdemeanor charges would ever be filed against Cohen, I intended to proceed along that road. One thing you’ll quickly learn in the criminal law business is that positive identification of the subject is key. It’s usually a climactic moment, when a victim or eye witness identifies the defendant from the witness stand, usually in terms of “that man sitting there next to the defense lawyer.” In almost every case where it happens, it is the most compelling, direct evidence. If a woman points to the defendant and says “He stole my purse,” conviction is certain unless the defense attorney can somehow dislodge the solidity of this identification from the jury’s mind. Of course, a surveillance video recording the defendant committing the crime is even more convincing.

Kinko’s, of course, had a security video, and thus we had undeniable evidence out there, and all we had to do was get our hands on it. Suddenly everything was falling into place. It was as if gold had fallen into a sack, and all I had to do was tighten it up. I had only one big worry, and one big question. I was worried that something might happen to that videotape before we got it. And I couldn’t help wondering how Cohen, who installed video surveillance at his Trabuco Canyon squat to monitor visitors, could have overlooked this hole in his plan? I wouldn’t be comfortable until I had my hands on the videotape.

Surveillance videos recording crimes in commercial locations often disappear, probably because business owners often think of crime on the premises as an embarrassment and potential source of liability. I learned this fact at some cost in a case where my client had been shot and her boss murdered in an attempted carjacking at a downtown LA gas station. We’d sued the gas station because there had been two prior murders on the premises, and they had no security guard. The surveillance video should have depicted my client, screaming for help, covered with the blood and brains of her dead boss, staggering into the gas station, her face ripped into hamburger by the blast of a twelve-gauge, sawed-off shotgun. But by the time I got on the case, three years after the shooting, there was no such videotape, nor were there any videos of the numerous shootings, assaults, robberies, and other crimes recorded among the forty or fifty police reports that recorded the sorry history of a hellish location in simple cop-speak. I lost the trial, and forty-seven thousand dollars in costs expended by my firm, after the jury concluded that while the gas station had certainly been negligent with regard to security, the attacker was such a bad man, that even an armed guard wouldn’t have deterred him. I would have won if I’d had that video.

So this time, securing the video was my first priority. During my first conversation with the manager, I had emphasized that he must pull the video from the machine immediately, copy protect it, and give it to the police as evidence when they interviewed him about the theft. He understood, and agreed to do everything I asked. With those wheels in motion, I made another call to Beth Ballerini, and she gave me the phone number for Jerry the videographer down in San Diego, who had recorded all of Cohen’s deposition testimony. I called Jerry and told him the problem. He was delighted to assist me, and said he would immediately make a copy of a video deposition of Cohen and deliver it to the Chula Vista police so that they could make a comparison between Cohen and the thief in the Kinko’s security video.

A day later, Sue told me that Detective King of the Chula Vista Police Department had called to say that, based on his comparison of the man in the Kinko’s security video with the video of Cohen at his deposition, he was “90% sure” they were both the same man. He had prepared a police report, recording this conclusion, and was making a copy of the security video for our own use. When it arrived though, the video was difficult to watch, because the Kinko’s security system actually had seventeen cameras recording a series of one-second images sequentially from each of the seventeen cameras. So images of Cohen were dispersed all over the tape, mingled with irrelevant shots of random people and copy machines. It took a video editor a few days to prepare the edited video, showing only images of Cohen in temporal sequence.

While we were waiting to receive the edited video, Diestel called to say he had received a large packet of Wells Fargo bank documents in a FedEx envelope without a sender’s address. The records appeared to be for Omnitec and other Cohen accounts. The sudden appearance of at least some of the Wells Fargo bank records was almost as disturbing as Cohen’s theft of them. I immediately concluded that Cohen, sniffing the criminal theft charge in the wind, had decided to undo the crime. If Diestel and I got our documents, after only a brief delay, then legally there was no theft, just a deviation from the delivery schedule. Cohen was attempting a pretty clever save, I thought. It hadn’t occurred to me that he might have planned to return the documents even before he stole them.

At last the edited videotape arrived. Sue and Ana were burning with excitement as they led me into their office, and turned on the old Mitsubishi TV. Their faces were filled with joy as Ana pressed play on the remote.

In a series of grainy black and white still pictures, Cohen appeared on the screen looking bored, wearing a sweatshirt and leaning against the cash register. We watched in silence as he claimed a bulky stack of documents, about a foot thick, and tucked it under one arm. We continued watching as he turned away from the counter and walked toward the exit. He pushed his way through the double doors, and they closed behind him. Good stuff, I thought to myself, and leaned forward to hit rewind so I could watch it again, but Sue held me back and said “Wait, watch this!” The doors then opened, and Cohen came back through them. He reached into the FedEx supply rack next to the door, pulled out one large, floppy FedEx envelope, tucked it under his arm with the stolen documents, and walked back out the door. That was obviously the FedEx envelope Cohen planned to use to send the documents on to Deistel. Laughter and high fives were spontaneously shared all around. Peter Carini checked in to see what all the ruckus was about, so we showed him the video and uncorked some red wine. It was absolutely the best short movie I had ever seen, although it helped to know the plot.
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Re: The Sex.Com Chronicles, by Charles Carreon

Postby admin » Fri Jun 13, 2014 1:57 am

THE PIPELINE

Gary and I were attempting what Machiavelli called the most difficult of all endeavors -- “to change the established order of things.” Changing the established order is almost impossible, because those most able to change it are comfortable with the existing system and have no incentive to seek change. This is why Gary’s efforts to enlist pornographers to overthrow Cohen always came to naught. They were used to living with Cohen as the god of Sex.Com, and had no desire to destabilize an arrangement that worked for them.

Wagstaffe and I filed Gary’s motions for summary judgment and preliminary injunction in August 2000, hoping for a swift adjudication, but Judge Ware didn’t cooperate. As the days of autumn blew by, Judge Ware delayed the hearing several times, and Gary, his funds dwindling rapidly, suffered like one sentenced to hang at dawn. The same messenger -- time itself -- could bring good or bad news. It was only a question of which came first. The cock’s crow would sound when his money ran out. The reprieve would come when Judge Ware said, “the domain is yours.”

Only Gary knew when he would run out of money, but for me the date had effectively arrived in August 2000, when Gary refused to pay any more fees, and fell behind on reimbursing me for litigation costs. Seeking to assure my future security apart from Sex.Com, I took on a drug case for the Federal Public Defender, and did a one-week trial in Eugene with Peter Carini as co-counsel. It was a big case, involving twenty pounds of meth, three delivery charges and two conspiracy counts, and it sucked up a lot of my time. Gary was furious, but contained his anger, since he knew that Wagstaffe’s loyalty would not survive any suspension of fee-payments, and therefore even my divided loyalty was valuable. Fortunately, the outcome of the Wells Fargo document subpoena brought good news that watered all of our hopes.

One day in late September, I was down in the Bay Area with Gary when Tara called me on my cell phone. She sounded happy, which always makes me happy, but it was more than mere domestic pleasantry. She was calling with really good news. She and Ana had deciphered the money flow from Sex.Com, and there was a lot, like really a lot. I asked her if she meant a whole lot, and she said yes, a whole lot. She was proud and happy that for once I was right about a case being worth something. Tara said that she had emailed me the flowchart she and Ana created, showing multiple money streams flowing into Cohen’s bank accounts. Every month, one Jordan Levinson would transfer at least $400,000 from his account at Union Bank in Fort Lauderdale to Omnitec’s Anaheim Hills Wells Fargo account. Gary and I read the memo and perused the charts later at his Montgomery Street office. We were very impressed with the clarity of the eleven-page memo, but the raw numbers commanded our special attention. Some months, Levinson wired as much as a million dollars to Cohen’s Omnitec account.

When I realized Sex.Com produced $400,000 per month, my mind flared into white heat, like a mound of coals injected by a bellows with a flood of fresh oxygen. I was exultant -- I would get paid! Memo to all legal staff: We have to win. The discovery of the huge cash flow, while nothing like the astronomical numbers totted off in Sex.Com’s press releases, was still big money for lawyers. It was a tremendous relief to know that there was a large flow of cash coming from Sex.Com, because my bet was on the continuing value of the name as a source of endless profits. This was the fall of 2000, and bad news about the deflating “New Economy” was beginning to roll in, so I was glad that the optimism of my early days on the case had been justified.

The good news from the Wells Fargo documents came just in time to replenish our motivation to write persuasive reply briefs that would compel Judge Ware to grant our motions for summary judgment and preliminary injunction. Judge Ware had given us more time than we had wanted, but the Wells Fargo documents made us grateful for the delay. When you added in the Kinko’s document theft, which highlighted the importance of the Wells Fargo records, we had a lot of new ammunition. By forcing us to store up energy to attack with accumulated momentum, Judge Ware had given us an opportunity.

Sun Tzu compares a force attacking with momentum to a raging flood tossing boulders like pebbles. A good way to generate a raging flood is to build a dam, then break it. Judge Ware’s slow docket dammed up our forces. The Wells Fargo documents were the waters rising behind the dam. The videotape of Cohen stealing the Wells Fargo documents would serve as our dynamite, to break the dam most dramatically. When momentum is with them, says Sun Tzu, even cowards fight bravely, and when it is against them, even brave men run.

The Wells Fargo documents recharged my personal momentum and drew it into a single focus. Before seeing the money memo, my obsession had been naïve, based on conjecture and faith, like Moses before he reached the river Jordan. But when I glimpsed the vast river of cash actually flowing from Sex.Com, I turned from a mere believer in vague future riches to the possessor of actual, objective knowledge of just how rich I might become.

Thus, toward the end of October, in a mood of resolve and quiet optimism, Tara, Ana, Sue and I packed boxes filled with three-ring binders of documents into the Camry, and headed south on I-5 to the Bay Area. Fiercer than we looked, our little foursome comprised the core contingent of Gary’s troops. Sue knew Cohen’s lies virtually by heart. Her copies of his depositions were feathered with yellow stickies, cross-referencing lies that often lay three and four levels deep. Tara had devised a total document management system that contained every piece of relevant paper in a growing library of three-ring binders. Ana could put a hand to any banking document or other business record that she had subpoenaed from anyplace in the world. I was a functional madman, as obsessed as any paranoiac with unraveling a complex plot that wasactually a fantastic reality. I could use my encyclopedic knowledge of Cohen’s lifetime of crime to prove that virtually every transaction in which he had ever engaged was a fraud.

We were scheduled to spend three days, from Saturday morning until Monday evening, in Wagstaffe’s office overlooking the San Francisco Bay Bridge. Modern lawyers get a lot of work done by locking themselves away in a silent skyscraper with a crew of colleagues. On the weekends, elevated offices lack food, co-workers, and excuses for distraction. Instead of halls filled with lawyers and staff, you have silent carpeting, empty doorways, ubiquitous office machinery, and the galley slave of the modern legal attack-ship -- an overtime secretary chained to her computer. The bright expanse of the world is sealed outside floor-to-ceiling windows that don’t admit a breath of air. The outside world is for ordinary people, and as we look down from our glass cellblocks, the child heart within us palpitates silently, held hostage by an omnipotent taskmaster. Entombed in such vast, silent warrens, the spirits of many lawyers drudge, wraithlike, attending to tasks that one law professor called alternately evil and inconsequential. When the game is afoot, however, the endless carpeted hallways, ringed with glass cages, become the staging bases for professional warriors who delight in conquest. Peering into each paper-cluttered office, amid the spill of open law books and the drafts of briefs in process, a warrior sees a forge, glowing with heat, gritty with dust ground from the sharpened blades of deadly intellectual weapons.

Jim Wagstaffe’s young associates, Pam Urueta and Michael Von Lowenstein, were two fine young liberal lawyers who liked to go home at reasonable hours. Fortunate in their careers, perhaps innately gifted, wise in their choice of schools and bosses, I liked them, but unencumbered by the burdens of hoarding cash to raise children, they had developed a different orientation on the law. Huddling in Michael’s office, assuring us that their legal work was nearly complete, it was evident that Pam and Michael were only there because Gary was Wagstaffe’s client, Wagstaffe was their boss, and Wagstaffe was joining us in the skyscraper over the weekend.

So it was with pleasure that the Oregon crew welcomed the arrival of Gary Kremen, the pivot of our personal history. He took one look at what Pam and Michael had thus far produced, and was immediately, silently seething. This is the danger of showing a demanding client an early draft -- they may tend to think that the work is inadequate, their case is foundering, and victory is in doubt. Much worse is the effect when one has been claiming that the work is nearly complete, as Pam and Michael had been. But Gary reacted efficiently. After blasting off a few rumbling voice mails to Wagstaffe, warning that things were looking a little sketchy on the Pam and Michael front, Gary crashed out on the conference room floor for a solid nap.

Soon Gary’s snores were resounding ominously down the hall. In the dim light of a San Francisco morning filtering through the floor-to-ceiling windows, the rise and fall of his capacious abdomen gave him the appearance of an unconscious leviathan beached on a foreign shore. Michael and Pam obsessed over this problem. Proclaiming earnestly that he needed to go home and sleep in his own bed, they tried to leverage Gary’s strange behavior into an excuse to escape the office, or at least to get rid of Gary, who had disturbed their procrastinations. Sue, Ana and I, however, might have been keeping guard over the tomb of King Tutankhamen, the way we protected Gary’s prostrate form. He would not be wakened or moved. Eventually, he would rise from oblivion and command us. That was the order of things.

The young associates upped the ante, calling their boss. When Wagstaffe called me to ask about the situation, I assured him there was nothing unusual going on with Gary. He needed his sleep. He was bothering no one. So with Wagstaffe’s blessing, Gary slept on. Michael fumed. I suggested to Michael and Pam that they dedicate themselves to producing a better brief before Gary woke up. I could feel the love.

Shortly thereafter, Gary woke up and started cracking his whip. When Wagstaffe arrived, Pam and Michael realized that their fate was sealed. Only an excellent brief would secure their exit from our intellectual prison. Gradually, they assumed an outwardly docile manner, funneling their aggression into their writing, as is appropriate, and the work product continued improving. With Gary demanding that Pam and Michael add more facts to their arguments, Sue was able to feed them relevant quotes, demonstrating her total mastery of Cohen’s testimony as she consulted her well-thumbed, cross-indexed transcripts of Cohen’s numerous depositions. Eventually, Michael even woke up to the need to cite the McCord case, where the California Supreme Court authorized judges to enjoin the theft of intellectual property. I was comforted to know that this controlling precedent, later cited by Judge Ware in his own opinion, would be included in our briefs.

While Pam and Michael nailed down the legal issues presented by forged titles and invalid trademarks, I dug into the financial documents. In their money memo, Tara and Ana had neatly summarized the recurring monthly transfers of hundreds of thousands of dollars from Levinson in Florida to Omnitec in Anaheim Hills. When I studied the memo closely for the first time, however, I suddenly realized something that was obvious, but had escaped my attention as a crucial fact. Cohen drained the Omnitec account every month. All the money flowed out via wire transfer to numbered accounts in Luxembourg and other offshore money havens.

The legal implications of this fact had escaped me until that very moment. Gary wanted to recover more than just Sex.Com; he wanted to freeze Cohen’s bank accounts, seize the Rancho Santa Fe mansion, and also grab a little house on the Mexican border that Cohen had stolen from an unfortunate man named Godinez. That was a tall order, and seemed unachievable until I realized that Cohen drained the Omnitec account every month. Until then, I hadn’t seen the single fact that would convince the judge to grant such a variety of unusual requests.

I grabbed the binder of bank documents and walked down the hall to talk to Wagstaffe. As I walked through his office door, he looked up from his computer and smiled with strong teeth, and his silvery-red beard bristled with energy. I sat down, showed Wagstaffe my summary of the Omnitec bank records, and asked him if he thought it would strengthen the argument for an asset freeze. He understood exactly what I was saying. The Omnitec account was simply an offshore pipeline. We could focus on the pipeline to provide the one thing that had been missing from our factual record -- convincing proof that Cohen was putting the stolen Sex.Com money offshore, out of reach of the U.S. courts. The bank records showed that Cohen had been putting his ill-gotten gains beyond the reach of U.S. law for years. At least thirteen million dollars, I calculated, had already disappeared from the country through the Omnitec Wells Fargo Account.

From the birth of a legal inspiration to the drafting of an admissible declaration can be a bit of a distance. As the hours of the last day of our three-day weekend ticked by, my declaration became compendious. I wanted to give Judge Ware and his clerks one place to find all of our financial evidence. I wanted to dramatically emphasize how Cohen had risen from rags to riches with only two tools -- Sex.Com and his criminal imagination. Because a judge can only order restitution of funds that can be traced to an unlawful source, I needed to establish that all of Cohen’s post-prison wealth was traceable to his theft of Sex.Com.

Most of the documents I planned to attach to the declaration were as familiar as old friends, and I was excited to introduce each one in the proper dramatic order. The divorce papers Cohen filed from prison “in forma pauperis” proved that he was broke in prison, and presumably was still broke when he left in 1995. Photographs of the Rancho Santa Fe property depicting Cohen’s mansion, pool, tennis court, and playhouse -- showed how rich he’d become in the last four years. The bank record of Omnitec’s $500,000 down payment on Cohen’s Rancho Santa Fe house showed Cohen using Sex.Com money for his personal benefit. An unsigned tax return subpoenaed from Cohen’s accountants showing less than $40,000 income for 1998 -- showed that Cohen lied to both the courts and the IRS about his wealth. Omnitec bank records referring to “Sex.Com DBA Omnitec,” and a bank officer’s handwritten notation that “Steve Cohen is Omnitec,” proved that Cohen, Omnitec and Sex.Com were an indivisible trinity. Statements from Cohen’s securities accounts and bank accounts subpoenaed from around the nation showed that, aside from a few hundred-thousand dollars, almost all of the Sex.Com money was offshore, having been funneled through Omnitec to foreign banks. To the pipeline argument, my last exhibit was Cohen’s check on the Omnitec account for seminar fees at “The Offshore Institute.”

During several hours of our third day of all-out effort, Wagstaffe and Gary sat shoulder-to-shoulder, huddled over the form of the proposed order we would submit to Judge Ware for signature. I didn’t need to be involved, because Gary had taken my advice to make the order his “wish list,” and had written up one that would have made Santa Claus sweat. The way it turned out, if Judge Ware signed it, Gary would immediately assume total control over Sex.Com and virtually all of Cohen’s property subject to U.S. legal control. Cohen could fight all he wanted, but if that order got signed, it was equivalent to assassinating his entire case in a single blow. Based on Cohen’s own confessions about the Dimmick letter, and the damning evidence I was putting in my declaration, both Wagstaffe and I believed we had the evidence to justify such an order, but lawyers still like to proceed incrementally, and don’t like to look greedy in front of the judge, so we would both have asked the judge for less relief. Gary wouldn’t let us do it. The wish-list idea had stuck, and we were stuck with it.

So we had to convince Judge Ware to give us the asset freeze. From the legal doctrine viewpoint, the hard pull was that Gary was a private individual, and the main case on freezing bank accounts to prevent “a dissipation of assets” before judgment was a federal case that allowed the Republic of the Philippines to freeze deposed dictator Ferdinand Marcos’s bank accounts to recover millions he and Imelda stole from the government during his years as a U.S. puppet dictator. Getting Judge Ware to apply this precedent had initially struck me as a long shot, because in the Marcos case, the plaintiff was a nation impoverished by a fallen tyrant, seeking restitution of hundreds of millions in stolen tax dollars. Gary, on the other hand, had filed a registration form to establish his rights to six letters and a dot, waited three years to sue, allowing Cohen to build up a hoard of Sex.Com cash, and could be characterized as an opportunist seeking a windfall. Worst of all, since Sex.Com had been under Cohen’s control for five years at this point, without proof that he was doing something to hide his money from seizure after judgment, there was no reason to seize his assets. For example, no judge would freeze Ford’s assets on behalf of a plaintiff who sued them for incinerating his family in a defective vehicle, because all judges believe Ford will be around to pay the judgment, even if only from a bankrupt estate. Putting seizure of assets ahead of a finding of liability is, after all, a bit draconian -- a lot like making an accused wait in jail until their case comes up for tria -- and as you know, the rich rarely have to do that. Cohen, of course, would insist that he should enjoy the same legal presumption of reliability and honesty as Ford Motor Company. I could hear Dorband saying it now -- “Of course Mr. Cohen will pay any judgment rendered against him! He has millions!”

That argument wouldn’t hold much water in the face of evidence that Cohen was spiriting money offshore at the rate of $400,000 a month. We could get that asset freeze order, because the Omnitec account was nothing but a pipeline for pumping cash offshore, and in fact, the vast majority of the Sex.Com money was already gone, and would never be recovered. By tracing Cohen’s rise from a broke ex-convict to a supernova in the pornography firmament, we made a common-sense argument that effectively traced all the funds to Sex.Com, and placed the injunctive relief lever firmly in Judge Ware’s hand.

On Monday afternoon, we had to call the courthouse to ask for permission to submit the Kinko’s security video as evidence. When Sue called and asked the clerk, she was asked to wait, then the clerk returned to ask what type of video it was. Sue explained that it was a security video of Mr. Cohen stealing subpoenaed bank records from Kinko’s. The clerk seemed surprised, and after a further delay, presumably to talk with the judge, returned to the phone call with considerably more animation to say that, yes, we could definitely file that video. Sue’s declaration attached the video, which included a clip of Cohen’s deposition for the sake of comparison, along with the police report recording Det. King’s “90%” estimate of the thief’s identity.

The vibes were getting positive around Wagstaffe’s office. Pam and Michael were allowed to depart with the sun still in the sky, leaving Wagstaffe to polish their draft. The Bay Bridge was cloaked in the encroaching dusk as we pushed up against the seven o’clock Fedex deadline. We were making seven copies of every document, and Wagstaffe’s copy machine was in constant operation as each written work reached final, was proofed, signed, and copied. One by one they stacked up in the back hallway of Wagstaffe’s office, waiting for the Fedex guy to arrive. The copy machine racketed on, producing seven reply briefs, seven proposed orders, seven copies of Sue’s declaration, and at last, seven copies of my declaration, revealing the marvelous, amazing, $400,000-per-month pipeline. The explosive videotape was taped into a manila envelope that we stapled to the last page of Sue’s declaration, and placed on top of the whole stack. If it had been a shooting war, we would’ve sealed it with a kiss and a short inscription, scrawled in lipstick, “To Cohen, with Love.”
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Re: The Sex.Com Chronicles, by Charles Carreon

Postby admin » Fri Jun 13, 2014 1:57 am

THE MAGICIAN AND HIS PHANTOMS

The day after we filed our massive reply briefs and declarations, Wagstaffe told me that he’d finally read through my declaration and voluminous exhibits with full attention, and was pleasantly surprised to see that we had convincingly proved all of Cohen’s sham companies were nothing other than Cohen’s corporate alter-egos. Wagstaffe thought I’d given Judge Ware good reason to “pierce the corporate veil,” under the alter-ego doctrine. He said he figured I was gathering up useful information with all of the discovery I was doing, but hadn’t realized it would end up being so comprehensive and convincing.

The alter-ego theory had assumed even greater importance for us when we realized that we had never sued Omnitec, because Cohen had obscured its significance quite effectively. The long-desired Wells Fargo bank records alone revealed the central role of Omnitec. No wonder Cohen stole them from Kinko’s. He had laundered the Sex.Com profits through five companies. Most of them were decoys, like Sporting Houses Management, Ocean Fund International and YNATA, that nominally “owned” Sex.Com. Others, like Omnitec and perhaps Sandman, were primarily bags of money that inflated as the money came in, then deflated to be sure that, as the YNATA name promised, they would “never amount to anything.”

The alter-ego doctrine is based on the reasonable proposition that a company has to operate on the same set of laws as a person, because at most, incorporation turns an inanimate stack of papers into a pseudo-human. A person can’t be allowed to immunize themselves from the consequences of their conduct simply by using a corporation to perform unlawful acts, so the doctrine holds that if a corporation is merely the alter ego of an individual, and has no true separate character, the acts of the corporation, and its legal liabilities, are binding upon that individual. Like many other legal doctrines, it rarely works as intended. For example, no court would pierce the corporate veil of the corporations that hooked children on cigarettes, or killed workers with asbestos, or despoiled countless acres of public lands with toxic waste. Such a result would be antithetical to the true purposes of our corporate system, which protects the individuals who drive our economic juggernauts from being judged too harshly when they occasionally steer us onto the reefs of mass misfortune. Someone has to run the world of industry, after all, and who but the rich would know how? While you may reject such a doctrine, the courts pretty much abide by it. On the other hand, amateur frauds like Omnitec that produce no apparent benefit for society are a fit subject for corporate piercing. This may seem ironic, because compared with Enron, that created money that never existed, Cohen’s business model was actually more legitimate -- at least the money he stole was real!

That real money, however, coursed its way through numerous illusory companies. We got the last piece to Cohen’s puzzle when we traced the flow of Sex.Com money to Omnitec’s Wells Fargo accounts, and thence to offshore banks. Omnitec’s role in the business was so central that Cohen probably created Ocean Fund, YNATA and other companies primarily to conceal its existence. By leading us down the Sandman’s trail, and in search of Vito Franko and Sir William Douglas, Cohen kept us barking up trees that held no treasures. Small wonder Cohen seemed amused by our efforts to unwind his twisted tales. Nevertheless, piercing Cohen’s serial deceptions was necessary to engineer his final defeat, because Gary had to defeat YNATA’s claim that it was a “bona fide purchaser for value.” To conceal the fact that YNATA’s acquisition of the domain was merely Cohen passing the domain from his right hand to his left, all Cohen had to do was contend that YNATA was actually owned by someone besides himself, to forge their signatures, and to procure their non-attendance at depositions. Since one who seeks to “pierce the corporate veil” in Federal court must prove by “clear and convincing evidence” that the doctrine applies, Cohen was hoping he could defeat our efforts to unmask his corporate alter-egos by propping up phantoms and charging Gary the expense of proving they were nonexistent. The burden was on us to prove that he was YNATA, and if we couldn’t produce such evidence, YNATA might prevail. It took a long time to dissolve all the phantoms. We just needed to keep Cohen talking. When someone is lying, there is no such thing as asking him too many questions.

The opportunity to get Cohen under oath one last time arose fortuitously. You may recall that Judge Trumbull ordered YNATA to either produce Sir William Douglas for deposition, or produce some corporate document to show that he was not in fact a YNATA corporate officer. This ruling must have delighted Cohen, who, seeing one more opportunity to forge his way out of trouble, had provided Dorband with the corporate resolution signed by several “officers” and YNATA’s “sole shareholder.” The resolution pointedly stated that Sir William Douglas had stopped working for YNATA the day before I served the notice to take his deposition. Besides Cohen himself, four imaginary persons had signed the resolution, which was just a few pages, and looked like a basic forgery project that had presented no challenge for Cohen. All this forgery was very good for us, I reminded myself, because winning in court is often based more on proving that your adversary is lying than proving that you are telling the truth. Thus the William Douglas story, tired as it was, continued to serve as a handy battering ram, cut from Cohen’s own corrupt timber.

When we insisted on deposing each of the signers of the resolution, Cohen played his position like a poker hand. He raised the bet. We wanted to poke holes in the YNATA corporate veil? We could pay for the right. During Christmas 1999, he’d tried to send me to Russia, Israel, Greece, and other distant lands with poor security. Now he found another use for hazardous venues. The corporate officers of YNATA were all in Caracas, Venezuela. Why could they not leave Caracas? Dorband explained that they could not obtain US entry visas. Why? Because they had all sold arms to Iran and Iraq in violation of the UN arms embargo. They were, in other words, gun runners, whom we would have to visit on their home turf in what was then the murder capital of the free world, a place where you could check into your hotel one night, and get hosed off the pavement before coffee the next morning.

Cohen’s Caracas gambit stimulated a round of soul-searching on the Kremen team. Gary was furious, and didn’t have the money to send me to Caracas, but he didn’t want Diestel to go alone. Diestel had his bags packed, and Wagstaffe thought he should go. If he didn’t, then Dorband could hold the depos, claim we’d had our shot at cross-examining the witnesses who would be unavailable for trial, and move to admit that un-cross-examined testimony at trial. That was a nasty prospect, but I argued that it was totally unreasonable to expect me to go to South America, and Gary to pay for it, after we had all three wasted our time and money traveling to Mexico for the sham “deposition” of Roman Caso, who discovered after his arrival that he was urgently required elsewhere. Gary backed my position, and we planted our heels. I wasn’t going to Caracas.

State Farm probably preferred having Diestel file a motion to compel YNATA to produce its officers for deposition in California over sending him to Caracas. It was certainly cheaper, and worth a try, so Diestel drafted and filed a declaration that recited the Roman Caso story to explain why we didn’t want to embark on another hegira through Latin America. We showed Judge Trumbull the resolution signed by the YNATA corporate insiders and asked, essentially, “What’s up with that?” YNATA can file declarations here, but its officers can’t abide the heat of our laws? YNATA submitted no supporting evidence for its inability to produce its officers for deposition in the U.S., aside from a note in Spanish from a purported Mexican lawyer.

Faced with yet another goofy international discovery scenario, Judge Trumbull considered the lessons of recent history, and concluded there was no need for Kremen’s lawyers to travel to Caracas and repeat a farcical experience. Ruling from the bench, she ordered YNATA to produce its officers in California, and to present a designated witness in San Diego to testify as to specified topics within YNATA’s corporate knowledge. Judge Trumbull was tired of Cohen’s game, and never ruled in his favor again. From what I could conclude, virtually all of the territory in her mind had been liberated by Kremen’s forces. Although it was not her job to determine the merits of Gary’s position, I suspect that, if Judge Ware had asked her for a thumbnail summary of Cohen’s case, she would have said, “Hang him.”

The depositions of imaginary people never happen. Although Judge Trumbull ordered the YNATA directors and officers to testify in the United States, they never came. Dorband’s bland letters responded to my demand that YNATA produce its officers as ordered by simply stating that Cohen could do nothing to procure their presence, nor could the corporate officers themselves travel here in violation of visa restrictions. It was all too convenient, and devilishly frustrating for Gary. Cohen appeared to be using the signatures of people allegedly in foreign countries to add an international glow to his forgeries, while shielding their origins from inquiry. Still, Dorband’s mask stayed in place, and the existence of YNATA’s officers was untested. To all appearance, Cohen was getting away with forgery again.

It was thus especially important that Judge Trumbull had also ordered YNATA to designate a witness to testify in California. The corporation didn’t need an entry visa to get in the country -- it was already present before the court. We could anticipate that, even if he were subpoenaed to testify at trial, Cohen would deny knowledge of YNATA’s activities, and characterize even his signature on the forged corporate resolution as the artifact of some clerical task to which he had accorded little attention. So it was essential to get some human being on the record who was authorized to testify for YNATA. Judge Trumbull had ordered the deposition to take place in San Diego, and the only question was who Cohen would find to occupy the witness seat in Beth Ballerini’s conference room. As the day for the deposition approached, Dorband wasn’t forthcoming about who that would be.

As November 4th, the date set for the deposition approached, Dorband temporized, avoiding phone calls, buying time. We had reached, and he knew it, that point in the hunt when the predators are closing in on the quarry, having kept it on the run for long enough to induce exhaustion. In the hunt, pursuers take turns keeping pressure on their prey, to deprive it of rest and drive it to collapse. Bob Dorband was tired. You could see it in his face, hear it in his voice. We, on the other hand, had sighted the pulsing jugular of cash, like a vein beating hard on the neck of our prey, Omnitec, a lumbering beast full of tasty blood and fat to appease our hunger. Cohen was too arrogant to pay attention to Dorband’s lagging stride. Playing the role of a mad genius who had planned for every contingency, he was not expecting any reversals. He didn’t realize that Bob Dorband had tired of fronting for a humongous liar, had stopped caring about the outcome, and was beginning to let the chips land where they might.

As the hail of lead that was daily trained in his direction took its toll, Bob’s writing lost its zip. Instead of sounding pithy and biting, his arguments seemed short and inadequate. He had bandied words well at the pleading stage, where only theoretical principles were at stake, but once we started to trade heavily in facts, he found that he could rarely cook up a convincing story from Cohen’s stock of lies. Cohen’s record of weird conduct had been thoroughly documented in the court’s records, so there was an inexhaustible source of evidence to support our claim that he was a lying crook who breathed deception. Dorband’s job had thus been reduced to that of the loyal courtier, insisting that the King certainly did have clothes, and of the finest.

Still, Bob fulfilled his role with dastardly aplomb to the bitter end. He never dropped his sword for an instant, never pled for quarter, and never betrayed a hint of despair, regardless of the odds against him. Dorband earned my resentful admiration as he slogged on through the fall of 2000. As the weeks stretched out and the frequency and intensity of our attacks steadily mounted, Bob kept up a stream of correspondence or avoided communications, as circumstances required, conceding nothing, disputing whatever was disputable, and scoffing at the purported significance of whatever he could not deny. His loyalty was manifest by the rigor of his efforts.

Clever advocates always keep silent about bad facts as long as possible, because the earlier you reveal them, the more likely it is that your adversary will use them against you. Following that rule, Dorband kept us in suspense about who YNATA would present as its witness on the fourth of November until a few days before the deposition. I shouldn’t have been surprised by Dorband’s disclosure that Cohen would appear as YNATA’s witness, but it seemed like such a bad move on Cohen’s part that I actually was. Then again, remembering how badly Roman Caso had performed as the Sandman designee, I figured Cohen probably knew better than to try using a puppet a second time. When Ana heard that Cohen would testify for YNATA at the deposition, she talked Gary into letting her accompany me as an assistant. I loved the idea, since Ana’s ability to keep paperwork organized had grown to the point where she did it better than anyone but her mom. Gary surprised me by deciding to skip the trip, and got a kick out of authorizing Ana to go in his place.

Ana’s presence at the deposition completely changed Cohen’s demeanor. Gone were the lewd comments, the sneers and jeers. I had less need of attitude as well, having finally gotten fully prepared to question him about the issues that would come up at trial. With my documents in chronological order, premarked with exhibit numbers in one big binder, I was ready to begin my march on the capital of Cohen’s deceptions -- YNATA. Although Cohen’s shell game had lost much of its mystery, the best time to ask questions is when you know the answers. Over a year after my first, vertiginous meeting with the master-deceiver, I had learned a great deal about Cohen’s affairs. Directed by Gary’s indefatigable research, our barrage of subpoenas had produced hard data that revealed the extent of the wealth Cohen controlled. I assumed that Cohen was fully aware of how much we knew, since we’d put it all into the documents we had already filed with Judge Ware. It was a far different situation than the one I’d faced the first time we met.

Cohen knew we had Levinson’s Union Bank records showing monthly deposits to Omnitec’s Wells Fargo account. He knew we had brokerage statements referring to “Omnitec, DBA Sex.Com,” and other financial documents that proved he owned Omnitec. He knew we had the loan file for his place in Rancho Santa Fe that proved he bought the house with Omnitec funds. He knew he had signed all those Omnitec checks and wire transfers. But when I showed Cohen these records, he seemed unaffected, and peeled off new lies like a series of hundred-dollar bills fresh from the mint. Cohen’s latest lies were intended to rebut the claims we’d made in our latest filing, by denying that all Cohen’s money came from Sex.Com.

Omnitec, Cohen explained, was “a bill-pay company,” and very little of the money in its accounts came from Sex.Com. The Wells Fargo Anaheim Hills records showed different, of course -- all the money came from Levinson, the Sex.Com bagman. Like most corporate criminals, Cohen would calmly trot out the latest lie, then fade into vagueness when asked to provide corroboration for his assertions. He couldn’t give details about Omnitec because he wasn’t there to testify on behalf of Omnitec. When I asked him to explain what YNATA knew about the financial affairs of Omnitec, its wholly-owned subsidiary, he refused on the grounds that he was bound by a confidentiality agreement that was conveniently located in Venezuela. Further, it would be a violation of Venezuelan criminal law to breach the confidentiality agreement. His memory was conveniently vague on all details. Diestel, sitting quietly to my right, shook his head in gentle disgust as the new lies befouled the room.

One question, and only one, provoked Cohen to depart from his script of wholesale denial and out-of-the-loop executive ignorance. After he agreed with me that YNATA derived its claim to ownership of Sex.Com from the rights of Steven Michael Cohen, I asked whether YNATA had any other basis for claiming ownership of the domain, if Steven Michael Cohen’s rights to Sex.Com were proven to be invalid. After Dorband declined Cohen’s request to answer the question for him, Cohen launched into a proclamation of his deep, abiding faith that Kremen had no rights, had no standing, and never would be found to have any rights. Therefore, he concluded, YNATA would never have to deal with the issue, and it was irrelevant.

Most people, not suffering from brain damage, recognize their signature on the documents they signed. It is a hard question to deny when your signature is staring up at you from the page and someone asks: “Did you sign this document?” But when I showed Cohen a dozen or more checks and wire transfers he’d signed on behalf of Omnitec, he refused to identify his own signature even once. He couldn’t remember when or why he signed the checks, assuming he’d signed them at all, which he declined to concede.

Cohen adhered to a disciplined act of self-obliteration. Committed to denying his role in any recent transactions involving Sex.Com, he nevertheless was forced to appear as a witness for a corporation whose workings he was at pains to conceal. In defense, he argued that in fulfilling his duties as YNATA’s designated witness, his personal knowledge was irrelevant. As YNATA’s designated witness, he officially knew nothing, and would gladly testify to it. His phantoms were meant to be the focus of your attention, and to them your attention was duly directed.
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