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UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
BEFORE THE HONORABLE ARTHUR S. WEISSBRODT, JUDGE
In Re: ) Case No. 98-51326-ASW
) Chapter 13
)
HOWARD KEITH HENSON, )
) TRIAL
) Volume II
Debtor. ) Pages 180 to 362
)
)
) Monday, September 30, 2002
) San Jose, California
Appearances:
For the Debtor: Law Offices of Stanley A. Zlotoff
By: Stanley A. Zlotoff, Attorney at Law
300 South First Street, Suite 215
San Jose, California 95113
For Creditor Religious Moxon & Kobrin
Technology Center: By: Helena K. Kobrin, Attorney at Law
3055 Wilshire Boulevard, Suite 900
Los Angeles, California 90010
McPharlin, Sprinkles & Thomas
By: Elaine M. Seid, Attorney at Law
10 Almaden Boulevard, Suite 1460
San Jose, California 95113
Paul, Hastings, Janofsky & Walker LLP
By: Samuel D. Rosen, Attorney at Law
75 East 55th Street
New York, New York 10022-4597
Electronic Court United States Bankruptcy Court
Recorder: Clerk of the Court
LaKeska Blue and Liz Armendariz
280 South First Street, Room 3035
San Jose, California 95113
(408) 535-5003
Certified Electronic Palmer Reporting Services
Transcriber: P. O. Box 30727
Stockton, California 95213-0727
Proceedings recorded by digital recording;
transcript produced by federally-approved transcription
service. I N D E X
Witnesses:
Direct Cross Redirect Recross
Victoria Arel Lucas
By Mr. Zlotoff
(resumed): 183
By Mr. Rosen: 343
Exhibits: Received in Evidence
Creditor's Exhibits 1 - 14, 16 - 18,
20 - 22, 25, 27 - 37, 39 - 44, 46 - 48,
53 - 62, 65 - 69, 72, 73, 75 - 78,
80 - 84, 86, 88 - 100, 104, 107, 109,
111 - 116, 121, 122, 124 - 130,
133 - 135, 140 - 160, 164 - 168, 171,
173, 174, 177 - 180, 182, 183,
186 - 189, 191, 194 - 207, 209 - 213,
215, 216, 221, 222, 224 - 226,
239 - 234, 236, 238, 249 - 251,
253 - 256, 257, 258, 260 - 262,
264 - 270, 272 - 279, and 286: page 248
Debtor's Exhibits A and B: page 286
Debtor's Exhibits C and D: page 287
Debtor's Exhibit F: page 288
Debtor's Exhibits G and H: page 289
Debtor's Exhibit L: page 286
182
1 Monday, September 30, 2002 10:41 o'clock a.m.
2 P R O C E E D I N G S
3 THE CLERK: Please rise. This is the United States
4 Bankruptcy Court for the Northern District of California. Court
5 is now in session.
6 THE COURT: Good morning, ladies and gentlemen.
7 Please be seated.
8 This is the case of Keith Henson. May I have
9 appearances of counsel.
10 MR. ZLOTOFF: Stan Zlotoff for the debtor.
11 MR. ROSEN: For creditor Religious Technology Center,
12 Samuel D. Rosen, Paul, Hastings, Janofsky and Walker.
13 THE COURT: Good morning, counsel.
14 MR. ROSEN: Good morning, Your Honor.
15 MS. SEID: Elaine Seid, McPharlin, Sprinkles and
16 Thomas, also appearing on behalf of the creditor.
17 MR. ROSEN: And, Your Honor, Ms. Kobrin, as you can
18 see is not physically here. She's on her way, so we will note
19 her appearance as well.
20 THE COURT: Yeah.
21 Shall we call Ms. Lucas to the stand?
22 MR. ZLOTOFF: Yes. Why don't we do that, Your Honor.
23 Ms. Lucas.
24 VICTORIA AREL LUCAS, DEBTOR'S WITNESS, PREVIOUSLY SWORN
25 THE COURT: Good morning, Ms. Lucas. You were sworn
183
1 in yesterday. I remind you that you're under oath. You may
2 take the stand.
3 MR. ROSEN: Friday.
4 THE COURT: Oh, it was Friday. That's right.
5 That's fine. Thank you.
6 Go ahead, counsel.
7 MR. ZLOTOFF: Thank you, Your Honor.
8 THE COURT: For the record, it was Friday. Today's
9 Monday morning.
10 DIRECT EXAMINATION, resumed
11 BY MR. ZLOTOFF:
12 Q. Ms. Lucas, were you present with - with Mr. Henson at the
13 moment when he was served with RTC's lawsuit for copyright
14 infringement?
15 A. I don't remember. He was served so many times that I can't
16 remember all the specific instances.
17 Q. Do you know why he filed Chapter 13?
18 MR. ROSEN: Objection.
19 THE COURT: Overruled.
20 MR. ROSEN: Not only is it hearsay, it calls for
21 mind-reading.
22 THE COURT: No. It calls for a yes or no.
23 And you can answer it yes or no.
24 THE WITNESS: Yes.
25 BY MR. ZLOTOFF:
184
1 Q. What - what are the reasons, as you know them, of your own
2 personal knowledge?
3 MR. ROSEN: Objection.
4 THE COURT: Sustained.
5 BY MR. ZLOTOFF:
6 Q. Ms. Lucas, are you aware of someone named Grady Ward?
7 A. Yes.
8 Q. And who is Grady Ward?
9 MR. ROSEN: Objection, irrelevant.
10 MR. ZLOTOFF: Your Honor, it's relevant on the issue
11 of Mr. Henson's perceived need to file a Chapter 13. Grady Ward
12 is an individual similarly situated, we believe.
13 MR. ROSEN: I bet to differ.
14 MR. ZLOTOFF: In - in other words, someone who was
15 sued by RTC, filed bankruptcy.
16 MR. ROSEN: Your Honor, I not only beg to differ but I
17 must object most strenuously to counsel testifying about matters
18 that are not before you. The record in this case before you
19 consists of exhibits and any testimony that's been offered.
20 Counsel's testimony from the counsel table as to who Mr. Ward is
21 or what - that he was sued by RTC is not only irrelevant but it
22 is beyond this record.
23 If counsel wants to make that proposition and he
24 believes it's relevant, he ought to put somebody on the witness
25 stand.
185
1 MR. ZLOTOFF: Your Honor, -
2 THE COURT: The objection is simply does she know who
3 he is, and the objection's overruled.
4 BY MR. ZLOTOFF:
5 Q. Of your own knowledge -
6 THE COURT: Wait.
7 You can answer the question. Do you know who he is?
8 THE WITNESS: Yes.
9 BY MR. ZLOTOFF:
10 Q. Okay. Of your own knowledge, could you explain what you
11 know about Grady Ward and RTC?
12 MR. ROSEN: Objection. Calls for -
13 THE COURT: What's the relevance, counsel?
14 MR. ZLOTOFF: The relevance -
15 THE COURT: He filed for bankruptcy? Many people file
16 for bankruptcy. Why is it relevant to what you're trying to
17 prove in this case?
18 MR. ZLOTOFF: Because one of - because one of -
19 because I read the Eisen case, Your Honor. And one of the - one
20 of the - one of the key things, I think, is going to be why did
21 he file bankruptcy. There's an allegation that he didn't need
22 to file bankruptcy. And - and I'm going to show with this
23 testimony of Grady Ward that there was a legitimate reason to
24 file bankruptcy.
25 THE COURT: You're not showing it with the testimony
186
1 of Grady Ward, are you?
2 MR. ZLOTOFF: No.
3 MR. ROSEN: Nor, Your Honor, is he showing you any
4 bankruptcy filing by Mr. Ward.
5 MR. ZLOTOFF: I don't have to. That's not the point.
6 That's not the point. The point is generally what was known
7 about Grady Ward.
8 MR. ROSEN: Your Honor, with all due respect, what was
9 known about Grady Ward, to the extent it has any relevance, and
10 I see none, the proper inquiry would be what was known about
11 Grady Ward by Mr. Henson; to the extent that had anything to do
12 with the operation of his mind in filing a bankruptcy petition
13 in February of 1998. That's not this witness.
14 And, again, counsel is simply - it is very
15 transparent. Counsel is simply trying to put in through this
16 witness evidence which, if it came in at all, it would be
17 properly offered through Mr. Henson, who is not here.
18 MR. ZLOTOFF: Your Honor, -
19 THE COURT: Well, Mr. Zlotoff, I haven't decided
20 whether to let in any evidence about Grady Ward, but you've
21 established no foundation whatsoever. And on that ground I'm
22 not going to let any testimony in until you establish a
23 foundation. You haven't even established that she knows him.
24 You haven't established anything that would provide a basis for
25 me even to consider the testimony.
187
1 You said from her personal knowledge, which means
2 nothing. You haven't established a foundation. From what
3 people have told her? I have no idea what this is intended to
4 do -
5 MR. ZLOTOFF: Well, -
6 THE COURT: - and therefore the objection's sustained
7 at this point.
8 MR. ZLOTOFF: Well, but may I - may I try to establish
9 foundation, Your Honor?
10 THE COURT: Sure.
11 BY MR. ZLOTOFF:
12 Q. Okay. Of your own personal knowledge what do you know about
13 Grady Moore -
14 MR. ROSEN: Objection.
15 BY MR. ZLOTOFF:
16 Q. - Grady Ward?
17 MR. ROSEN: That's not a foundation.
18 THE COURT: That's not a foundation question.
19 BY MR. ZLOTOFF:
20 Q. Do you have - are you aware of Grady Ward's having been sued
21 by RTC?
22 MR. ROSEN: Objection. Relevance, no foundation,
23 calls for hearsay.
24 THE COURT: Overruled.
25 THE WITNESS: Yes.
188
1 BY MR. ZLOTOFF:
2 Q. Are you aware whether that happened - are you aware of the
3 timeframe when that happened?
4 MR. ROSEN: Objection. The same objection:
5 Relevance, foundation. She hasn't - counsel has not even
6 established were you aware of whether or not this is hearsay.
7 There's no basis - no foundation laid that this witness has any
8 firsthand knowledge even assuming relevance.
9 THE COURT: Sustained.
10 MR. ROSEN: A lot of people were aware of it.
11 THE COURT: Sustained.
12 BY MR. ZLOTOFF:
13 Q. How did you come to know of RTC litigation with Grady Ward?
14 A. I first heard about it from my husband and later I talked
15 with Mr. Ward. I met him and talked with him personally and
16 over the telephone.
17 Q. And what did you find out from Mr. Ward regarding litigation
18 with RTC?
19 MR. ROSEN: Objection. Calls for hearsay.
20 THE COURT: Sustained.
21 BY MR. ZLOTOFF:
22 Q. Did you find out that Mr. Grad- - Mr. Ward filed a
23 bankruptcy petition?
24 MR. ROSEN: Objection. Not only relevance, hearsay
25 and best evidence rule. Rule - Federal Rule of Evidence 1001 to
189
1 1007.
2 THE COURT: Sustained.
3 BY MR. ZLOTOFF:
4 Q. Was - at the point - are you aware of the time when Mr.
5 Henson filed his Chapter 13? Are you aware of the date when
6 that happened?
7 A. I believe the initial filing was in February of '98 and I
8 think it was reinstated in April or June of the same year.
9 THE COURT: If you would back up from the mic just an
10 inch you won't create the static.
11 THE WITNESS: Sorry. Sorry.
12 Is that better?
13 BY MR. ZLOTOFF:
14 Q. Are you aware of what bank accounts Mr. Henson had at the
15 time?
16 MR. ROSEN: Objection. No firsthand - no foundation.
17 This is hearsay, number one.
18 THE COURT: Overruled.
19 MR. ROSEN: And, number two, - Your Honor, may I just
20 state my objection for the record?
21 THE COURT: Sure.
22 MR. ROSEN: The best evidence of what bank accounts
23 Mr. Henson had at the time are the statements from the bank. It
24 doesn't have to coincide with the exact date of filing because
25 it never does, but if the question is what bank accounts Mr.
190
1 Henson had -
2 THE COURT: That wasn't the question.
3 MR. ROSEN: Yeah. He asked whether she was aware of
4 what bank accounts he had.
5 THE COURT: That's right. And the objection's
6 overruled.
7 BY MR. ZLOTOFF:
8 Q. How many bank accounts did he have at the point of
9 commencement of the bankruptcy -
10 MR. ROSEN: Objection.
11 THE COURT: Overruled.
12 THE WITNESS: He had an account at Wells Fargo which
13 was a joint account with me.
14 I'm sorry. How far do I have to get from this thing?
15 Is this good?
16 THE COURT: Probably about - I think that's good.
17 THE WITNESS: This is good? Okay.
18 BY MR. ZLOTOFF:
19 Q. Are you aware of your own recollection at this point how
20 much roughly was in that bank account at that time?
21 THE COURT: Which time, Mr. Zlotoff?
22 MR. ZLOTOFF: At or about the time when he filed, when
23 he commenced his Chapter 13 petition.
24 THE WITNESS: I have seen the papers, so that did
25 refresh my memory, and it seems to be correct to me that it was
191
1 around 1500.
2 MR. ROSEN: Objection. Move to strike it. The
3 witness had no independent knowledge of this on Monday - on
4 Friday.
5 MR. ZLOTOFF: And she refreshed her recollection, Your
6 Honor.
7 THE COURT: Overruled.
8 BY MR. ZLOTOFF:
9 Q. Are you aware of balances - the range of balances subsequent
10 to that date, let's say on through roughly August of that year
11 of 1998?
12 MR. ROSEN: Objection, best evidence rule. The best
13 evidence what the balances were at any given time or at any
14 month end cycle are the documents.
15 Your Honor, I must press this objection. I mean it is
16 so clear under Federal Rule of Evidence 101 to 107, she cannot
17 testify to this. And I - and I have a case right on point which
18 I - which I'm willing to give Your Honor as to what the best
19 evidence rule means. This is absolutely improper for the
20 witness to testify as to what a document - as to information
21 that's contained in a document.
22 MR. ZLOTOFF: First of all, I - I'm not asking about
23 terms of the document. I'm simply asking whether she has
24 independent recollection of balances, rough balances,
25 approximate balances during a certain period of time. I'm not
192
1 asking her to quote line and verse of a what particular balance
2 was.
3 MR. ROSEN: Excuse me, but -
4 MR. ZLOTOFF: Nonetheless I have bank balances and
5 I've given copies to Mr. Rosen. And these were documents he
6 subpoenaed, RTC subpoenaed. I have copies of them. I've given
7 him copies. They were in his book of evidence before, I think,
8 at 187 and 188.
9 And - and I'm prepared to give the witness -
10 THE COURT: You have to give it to my Deputy to mark
11 it the next in line, but then you can proffer it if you want.
12 MR. ZLOTOFF: Okay.
13 MR. ROSEN: Your Honor?
14 THE COURT: Wait a second.
15 MR. ROSEN: Sure.
16 THE COURT: It hasn't been proffered.
17 MR. ZLOTOFF: Yeah.
18 It would be O, I think.
19 THE CLERK: Yes.
20 (Creditor's counsel confer off record.)
21 THE CLERK: Mr. Zlotoff?
22 MR. ZLOTOFF: I'm sorry. What?
23 THE COURT: It's a statement, what do you - the
24 description -
25 MR. ZLOTOFF: A Wells Fargo statement - statements.
193
1 MR. ROSEN: Could we not show it - may I ask it not be
2 shown to the witness yet?
3 THE COURT: No, you may not.
4 Give it to the witness.
5 THE WITNESS: Thank you.
6 THE COURT: Mr. Zlotoff.
7 MR. ROSEN: Your Honor, may I see the original?
8 THE COURT: Do you have the original?
9 MR. ZLOTOFF: Do I have the original of the statement?
10 No, I do not. I believe duplicates are acceptable for Federal
11 Rules of Evidence, though.
12 MR. ROSEN: I object on two grounds to this, and this
13 is going to carry through because apparently from the folder I'm
14 assuming Mr. Zlotoff has other documents he's going to offer.
15 The first ground is that this is not on his witness
16 list. This Court has been extraordinarily gracious, and I can
17 go through every order of the Court respecting pretrial
18 proceedings that Mr. Zlotoff has not complied with. This one is
19 untenable.
20 This witness - this document was supposed to be on the
21 witness list in the joint pretrial order filed in March of 2001;
22 it was not. It was supposed to be on the witness list in
23 August; it was not. It was supposed to be delivered to us, as
24 Your Honor ordered an exchange of exhibits; it was not.
25 Your Honor has before you Mr. Zlotoff's witness list
194
1 of August 1, 2002. It is not on there. That's the first
2 objection.
3 The second objection is contrary to what Mr. Zlotoff
4 just said, that copies are admissible in lieu of originals, I
5 direct Your Honor's attention to Federal Rule of Evidence 1002.
6 I will read it since it's very short. "To prove the content of
7 a writing, recording, or photograph, the original writing,
8 recording, or photograph is required, except as otherwise
9 provided in these Rules or by an act of Congress."
10 I haven't heard anything from Mr. Zlotoff by way of
11 the "except as otherwise required." The rule is exactly
12 contrary to what Mr. Zlotoff just said.
13 THE COURT: First, is it in any of these volumes, this
14 already?
15 MR. ROSEN: Those are ours.
16 THE COURT: I understand. Is it in any of those
17 volumes?
18 MR. ROSEN: I think - I don't know if it was - no, I
19 think it was removed. It was originally - when we filed our
20 exhibit list, Your Honor, in March of 2001, before Mr. Henson
21 fled, we put in documents that we anticipated using if he were
22 on the witness stand. When it thereafter became apparent of
23 recent times that Mr. Henson was not appearing at trial, when
24 Your Honor was not going to let him testify, we then withdrew
25 documents that we did not need. And if - and they - and those
195
1 documents are not part of the exhibits, number one.
2 Number two, and even if they were, they're not on Mr.
3 Zlotoff's witness list. They never were.
4 THE COURT: How about addressing the issue of
5 prejudice?
6 MR. ROSEN: What is the number, by the way, that
7 counsel says is - this is our Exhibit Number 1?
8 MR. ZLOTOFF: It's either 1 - it was formerly 1- -
9 either 186, 187, or 188.
10 MR. ROSEN: Well, if Your Honor will give me a second,
11 I have them, as - as do you.
12 MR. ZLOTOFF: I don't have them in -
13 MR. ROSEN: 186 is a transcript of proceedings before
14 this Court of 1 - of July 10, 2002.
15 MR. ZLOTOFF: No, no, no. The former - in the former
16 trial binder -
17 MR. ROSEN: The former trial binders are withdrawn.
18 THE COURT: Wait a second. Gentlemen, I've told you
19 again. Now it's you, Mr. Zlotoff. You cannot address each
20 other. You can only address the Court.
21 I've asked you to address the question of prejudice.
22 That's to you, Mr. Rosen. What prejudice would - would there be
23 in admitting this bank record subject to a certification from
24 the bank that it's a valid record?
25 MR. ROSEN: Are you asking me, Your Honor?
196
1 THE COURT: Yes.
2 MR. ROSEN: The prejudice is we're in the middle of
3 trial. This is surprise. And I don't believe I have to show
4 prejudice in the face of a series of outstanding orders by this
5 Court which Mr. Zlotoff has not complied with.
6 I will start with the order which preceded the March
7 13, 2001 pretrial con- -
8 THE COURT: But he admits it's not on the exhibit
9 list, Mr. -
10 MR. ROSEN: And he admits that even as of the time he
11 was supposed to give his exhibits, a couple of weeks ago, he
12 didn't give it to us. And -
13 THE COURT: Do you have any prejudice to allege?
14 MR. ROSEN: Yes. Of course I have prejudice to
15 allege.
16 THE COURT: Well, then you should allege it.
17 MR. ROSEN: Okay. I will now have to deal with this
18 additional evidence. And I don't know how quickly I can deal
19 with it. I don't know if I'm going to need witnesses to deal
20 with it. I am prejudiced by the fact I don't have Mr. Henson
21 here to examine.
22 What if I have to call witnesses or offer additional
23 documents to - to refute this statement?
24 I'm also prejudiced by the fact that now I have to
25 deal with this in the context of 20 hours that Your Honor has
197
1 allocated. I have no idea if Your - if Your Honor admits this,
2 what additional time and witnesses and exhibits I am going to
3 have to offer to refute anything that's in there. That is
4 prejudice in the middle of trial and I would respectfully submit
5 that prejudice exists as a matter of law. It's not even an
6 issue when Your Honor has issued a series of specific orders
7 going back to early 2001, one after the other after the other on
8 exhibits, and Mr. Zlotoff has not complied.
9 THE COURT: The objection is overruled. The prejudice
10 - the prejudice that's alleged is purely speculative. This is
11 subject to providing a certified copy, and it should be done
12 promptly.
13 MR. ROSEN: Your Honor, to save ourselves some time on
14 this, is this going to be the same with respect to anything else
15 that Mr. Zlotoff pulls out of his bag that's not on his witness
16 list?
17 THE COURT: I rule on documents as they come in.
18 BY MR. ZLOTOFF:
19 Q. Do you have Exhibit O in front of you, Ms. Lucas?
20 A. Yes.
21 Q. Is this the bank account to which you had previously
22 referred?
23 A. Yes.
24 THE COURT: Do you want to make an offer of proof of
25 how you got this, Mr. Zlotoff?
198
1 MR. ZLOTOFF: I got this from the subpoenaed documents
2 of RTC from Wells Fargo Bank.
3 THE COURT: Do you deny that these were subpoenaed by
4 you from Wells Fargo Bank?
5 MR. ROSEN: I have no recollection. We don't if we
6 got -
7 THE COURT: But Ms. - what about Ms. Kobrin?
8 MR. ROSEN: I just asked her. She doesn't remember
9 either.
10 MR. ZLOTOFF: It was Mr. Hogan who subpoenaed them.
11 MR. ROSEN: Excuse me. I wasn't even involved in the
12 case at the time. But I don't know if these documents were
13 produced by Mr. Henson or by the bank. And I would have -
14 (Creditor's counsel confer briefly off record.)
15 MR. ROSEN: And I would have to make an inquiry. I
16 mean if counsel has a - this - I'm at a distinct disadvantage
17 because this occurred before I entered the case, so if counsel -
18 THE COURT: Not before Ms. Kobrin, who is sitting by
19 your left side, entered the case.
20 Do you want to enter your appearance? Could you enter
21 your appearance?
22 MS. KOBRIN: Your Honor, I have not memorized -
23 THE COURT: Could you enter your appearance, please?
24 MS. KOBRIN: Yes. Helena Kobrin from Religious
25 Technology Center.
199
1 I have not memorized what documents were produced by
2 whom. I can't answer -
3 THE COURT: And you have no recollection?
4 MS. KOBRIN: I've - I - looking at these documents, I
5 don't know which - what the source was.
6 THE COURT: Okay. Do you - do you... Do you know
7 whether they were produced by Wells Fargo or by Mr. Henson?
8 MR. ZLOTOFF: I know that they were produced by Wells
9 Fargo Bank because our - because Mr. Hogan or his office
10 delivered copies to me. Ms. -
11 THE COURT: Okay.
12 MR. ZLOTOFF: You know, -
13 THE COURT: The objection's overruled subject to
14 certification.
15 MR. ZLOTOFF: May I bring in copies of the subpoena
16 with all the documents attached that I received? Would that be
17 sufficient verification, Your Honor?
18 THE COURT: Frankly I would - if you could bring - I
19 think that that's okay, but I would have to look that up, Mr.
20 Zlotoff.
21 MR. ZLOTOFF: Okay.
22 THE COURT: So bring it with a case -
23 MR. ZLOTOFF: All right.
24 THE COURT: - if you're going to bring that.
25 MR. ZLOTOFF: Okay. Thank you, Your Honor.
200
1 Now the offer of proof is that these statements are
2 for the period June '98, July '98, August '98, with each
3 statement bearing a zero balance in the account.
4 BY MR. ZLOTOFF:
5 Q. Do you know why the balance was zero for all those three
6 months?
7 A. I can think of two reasons.
8 MR. ROSEN: I object, Your Honor. This is obviously
9 speculation. The question is does she know why. And if the
10 answer is yes, I'd ask counsel to provide a foundation before
11 the witness provides her speculation as to two reasons.
12 MR. ZLOTOFF: Your Honor, -
13 THE COURT: It does sound like speculation, -
14 MR. ZLOTOFF: Right.
15 &