PLAINTIFF'S BRIEF IN OPPOSITION TO DEFENDANT HARRIS'S MOTION TO COMPEL DISCOVERY AND FOR SANCTIONS FOR FAILING TO DISCLOSE
CIVIL DOCKET FOR CASE #: 1:06-cv-02568-CC Doc 26 filed 04 Jan 08
Date Filed # Docket Text
01/04/2008 26 RESPONSE in Opposition re 23 MOTION to Compel Discovery MOTION for Sanctions filed by Securities and Exchange Commission. (Black, Alana) (Entered: 01/04/2008)
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION Civil Action No. 1:06-CV-2568-CC (N.D. Ga.)
SECURITIES AND EXCHANGE COMMISSION,
Plaintiff,:
v. CONVERSION SOLUTIONS HOLDING CORPORATION and RUFUS PAUL HARRIS : a/k/a PAUL RUFUS HARRIS, Defendants.
PLAINTIFF'S BRIEF IN OPPOSITION TO DEFENDANT HARRIS'S MOTION TO COMPEL DISCOVERY AND FOR SANCTIONS FOR FAILING TO DISCLOSE
Plaintiff, Securities and Exchange Commission ("Commission") files this Brief in Opposition to Defendant Rufus Paul Harris's Verified Motion to Compel Discovery and Motion for Sanctions for Failing to Disclose ("Motion to Compel Discovery and for Sanctions for Failing to Disclose").
INTRODUCTION
Defendant Harris has not conferred with Plaintiff's counsel as required by Fed.R.Civ.P. 37(a)(2) with regard to his Motion to Compel Discovery and for Sanctions for Failing to Disclose. Moreover, Harris's motion does not meet the procedural requirements of N.D.Ga. 37.[1]. Were the court to reach the merits of Harris's motion in spite of these defects, it should nonetheless deny the motion because it rests on a misunderstanding of the relevant law and a misstatement of the relevant facts.
PROCEDURAL POSTURE
The Complaint in this matter was filed on October 24, 2006. [1] On October 26, 2006, the Court issued an Order to Show Cause, Temporary Restraining Order, Order Prohibiting Destruction of Documents, and Order Expediting Discovery. On November 4, 2006, Harris was served with the Summons and Complaint, along with other associated documents. Harris's Answer to the Complaint was thus due to be filed not later than November 24, 2006. Conversion was served with the Summons and Complaint, along with other associated documents, through its registered agent for service of process, Harvard Business Services of Lewes, Delaware, on October26, 2006. Conversion's Answer to the Complaint was thus due to be filed not later than November 15, 2006.
[1] On the same day, the Securities and Exchange Commission exercised its statutory authority under Section 12(k) of the Securities Exchange Act of 1934 [15 U.S.C. §781(k)] to suspend trading in the securities of Conversion Solutions Holding Corp. for a ten-day period. The trading suspension was never part of the instant lawsuit, and this brief does not address various issues raised by Defendant Harris concerning it.
On November 7, 2006, this Court entered a preliminary injunction against Harris based on his consent. In the same order, the Court provided that Plaintiff could continue to take expedited discovery. On November 16, 2006, Plaintiff filed the returns of service of process for both Harris and Conversion with the Court. Thereafter, on November 16, 2006, Plaintiff applied to the Clerk for an entry of default as to Conversion. On November 17, 2006, the Clerk entered a default as to Conversion. On November 28, 2006, Plaintiff applied to the Clerk for an entry of default as to Harris. On November 29, 2006, the Clerk entered a default as to Harris.
On April 24, 2007, Harris filed with the Court a document styled "Defendant Conversion Solutions Holding's Answer and Defenses to Complaint for Injunctive and Other Relief'. On May 11, 2007, Plaintiff moved to strike this Answer. Subsequently, on May 15, 2007, Harris moved that the Clerk's entry of default be set aside and filed another Answer. On October 30, 2007, the Court granted Plaintiff's motion to strike the Answer and denied Harris's motion to set aside the entry of default as to himself individually and as to Conversion. On November 7, 2007, Harris filed a "Motion for Reconsideration/Rehearing of the Court's October 30, 2007 Order Entered by This Court" and a related Motion for Enlargement of Time to File Supplemental Affidavits. On November 16, 2007, Plaintiff filed a brief opposing both the motion for reconsideration and the motion for enlargement of time. On December 17, 2007, Harris filed two documents: a "Verified Motion to Compel Discovery and Motion for Sanctions for Failing to Disclose" and a "Supplemental Affidavit in Support of Motion for Reconsideration and in Opposition to Plaintiffs Motion for Default Judgment and Supporting Memorandum of Law."
FACTS
Defendant Harris appeared, under subpoena, for his own deposition on October 30, 2006. Because Harris was over six hours late for his deposition, he returned to continue his testimony on November 1, 2006.
In addition to Mr. Harris, Plaintiff has deposed seven other witnesses pursuant to the expedited discovery authorized by this Court's October 26 and November 7, 2007 Orders. Defendant Harris was provided with advance notice of each of these seven depositions; however, he did not attend any of them, not even those conducted locally in Atlanta or telephonically, which he presumably could have attended at little or no cost. The following table shows the depositions that Defendant Harris was provided notice of, but failed to attend:
Date of Notice Deposition Date Witness Location
10/26/2006 - 11/2/2006 (postponed from 10/31/2006 at request of counsel for witness) Benjamin Stanley Atlanta, GA
10/27/2006 (call-in instructions provided 10/30/2006) 10/31/2006 Janet McGrath, Euroclear Bank New York, NY (telephonic)
10/31/2006 (call-in instructions provided 11/1/2006) 11/3/2006 Frank Cristiano, Fidelity Management & Research Co. Boston, MA (telephonic)
12/11/2006 - 1/9/2007 Darryl S. Horton Detroit, MI
12/11/2006 - 1/10/2007 Thomas Benson Detroit, MI
6/18/2007 - 6/26/2007 James P. Gee Atlanta, GA
9/11/2007 - 10/18/2007 Michael D. Alexander Fort Worth, TX
To Plaintiff's knowledge, Defendant Harris has not conducted any type of discovery in this case. To date, Plaintiff has not received notice of a single deposition, subpoena for documents, request for admission, or interrogatory by Defendant Harris. Moreover, to the best of Plaintiff's knowledge, Mr. Harris has not ordered any transcripts from the court reporting firm that transcribed the depositions taken by Plaintiff.
Defendant Harris claims in paragraphs 3 and 4 of his Motion to Compel Discovery and for Sanctions for Failing to Disclose that he conducted a "Rule 26 meeting" with counsel for Plaintiff on November 3 and 6, 2006. This claim is false. Harris has represented himself pro se throughout this lawsuit. Accordingly, counsel for Plaintiff has accepted and responded to numerous phone calls and e-mails from him at various times. These communications have varied widely in content [2]; however, none of them bore any resemblance to a conference pursuant to Fed.R.Civ.P. 26(f) to develop a discovery plan.
[2] Harris called counsel for Plaintiff on a number of occasions to discuss various proposals to "put assets into" Conversion Solutions. On May 9, 2007, Harris e-mailed counsel for Plaintiff concerning an apparently fraudulent deal in which an unidentified third party had offered to "place" with Conversion Solutions "U.S. Treasury Check Number(s) in denominations of $500M, totaling $2B." A copy of counsel for Plaintiff's reply e-mail to Harris, quoting his entire original message, is attached as Exhibit A to this Brief. In paragraph 9 of the Supplemental Affidavit he filed with the Court on December 17, 2007, Harris made the following bizarre, false allegation: "At one point during the negotiations, I supplied $2,000,000,000.00 in treasury checks to Alana Black and her assistant, I asked Alana to work with me and place them into CSHD to fund it and she stated that she would talk with the higher up's [sic] and contact me back. She never made the return call or followed up." This slanderous, baseless claim appears to be a reference to the May, 2007 e-mail exchange between Harris and counsel described above and attached as Exhibit A.
Next, Defendant Harris appears to claim in paragraph 4 of his Motion to Compel that counsel for Plaintiff offered to send him copies of all evidence gathered concerning the case, from whatever source, including trading records and free copies of all deposition transcripts. This claim is false.
In paragraph 9 of his Motion, Harris claims that counsel for Plaintiff "tricked him into a default situation" by negotiating with him. This claim is false. As discussed above, counsel for Plaintiff has spoken with Harris on numerous occasions throughout the case. During several of these discussions, Harris attempted to raise the issue of settlement. However, none of these conversations were meaningful or substantive settlement discussions. Moreover, counsel for Plaintiff never provided Harris with any assurance that Plaintiff would not seek entry of default if he failed to file an Answer.
In paragraph 11 of his motion, Harris claims that counsel for Plaintiff "seized the records of the Defendant" and would not grant him access to those records. This claim, too, is false. Plaintiff has not obtained any evidence in this case from criminal authorities, through seizure or otherwise.
It is possible, but not likely, that counsel for Plaintiff could have helped Defendant Harris understand these factual misstatements, had he conferred with her concerning the Verified Motion to Compel Discovery and Motion for Sanctions for Failing to Disclose before filing it. However, Harris did not confer with counsel for Plaintiff, and does not appear to have made any attempt to do so. Accordingly, counsel for Plaintiff learned of Harris's Motion only when it was filed.
LAW
Rule 26(a) of the Federal Rules of Civil Procedure sets forth certain required disclosures for parties in civil litigation before the federal courts. This court's local rules specify that the initial disclosures required by Fed.R.Civ.P. 26(a)(1) must be made at or within (30) days after the appearance of a defendant by answer or motion. N.D.Ga. 26.1(A).
Plaintiff has found only one case where a defendant sought sanctions against a plaintiff for failure to make disclosures under Fed.R.Civ.P. 26(a) after entry of default against the Defendant pursuant to Rule 55. In that case, the court found plaintiffs to have no obligation to make Rule 26(a) disclosures in light of the entry of default. See Porter v. Brancato, No. Civ. A. 96-2208-KHV, 1997 WL 150050, at *1 (D. Kan. Feb. 24, 1997). Rule 37 of the Federal Rules of Civil Procedure governs motions to compel disclosure or discovery. It requires that any motion to compel Rule 26(a) disclosure include a certification "that the movant has in good faith conferred or attempted to confer with the party not making the disclosure in an effort to secure the disclosure without court action." Fed.R.Civ.P. 27(a)(2)(A).
This district's local rules further specify that any motion to compel disclosure or discovery shall:
(1)Include the certification of counsel with regard to the duty to confer required by Fed.R.Civ.P. 37(a)(2)(A)(B); (2)Quote verbatim each disclosure, interrogatory, deposition question, request for designation of deponent, or request for inspection to which objection is taken; (3)State the specific objection; (4)State the grounds assigned for the objection (if not apparent from the objection); and (5)Cite authority and include a discussion of the reasons assigned as supporting the motion.
N.D.Ga. 37.1(A)(1-5). Furthermore, "[t]he motion shall be arranged so that the objection, grounds, authority, and supporting reasons follow the verbatim statement of each specific disclosure, interrogatory, deposition question, request for designation of deponent, or request for inspection to which an objection is raised." N.D.Ga. 37.1(A).
ARGUMENT
Harris's Motion should be denied, because he has not complied with the requirement of Fed.R.Civ.P. 37(a) that he certify he has in good faith conferred or attempted to confer in an effort to secure the disclosures without court action.
If the Court nonetheless reaches the merits of Harris's motion, it should be denied because Plaintiff had no obligation to make Rule 26(a) disclosures in light of the entry of default. See Porter v. Brancato, No. Civ. A. 96-2208-KHV, 1997 WL 150050, at *1 (D. Kan. Feb. 24, 1997).
CONCLUSION For the reasons discussed above, Plaintiff asks that the Court deny Defendant Harris's Verified Motion to Compel Discovery and Motion for Sanctions for Failing to Disclose.
This 4th day of January, 2008.
Respectfully submitted,
Alana R. Black Senior Trial Counsel Georgia Bar No. 785045 E-mail: blacka*sec.gov COUNSEL FOR PLAINTIFF Securities and Exchange Commission 3475 Lenox Road, N.E., Ste. 500 Atlanta, Georgia 30326-1232 Tel: (404) 842-7600 Fax: (404) 842-7679
Exhibit A
Black, Alana R. From: Black, Alana R. Sent: Wednesday, May 09, 2007 9:49 AM To: Rufus Paul Harris Cc: Hicks, William P. Subject: RE: Legal concerns
Mr. Harris, Thank you for your e-mail. I would be happy to talk with you about the pending case or about the potential deal described in your e-mail.
While I obviously cannot provide you with any legal advice, one big potential danger is that the treasury checks and other materials described in your e-mail could be forged or fraudulent. If so, then I would like to turn over information about them to the appropriate officials.
Please give me a call at 404-842-7678 to discuss. Thanks. Alana Black
Original Message From: Rufus Paul Harris [mailto:harris*cshd.us] Sent: Wednesday, May 09, 2007 5:02 AM To: Black, Alana R. Subject: Legal concerns Importance: High Do you have a problem or concern if I, Rufus Paul Harris proceed with the following potential client? If you have no legal concerns and everything is verified would the SEC be interested in arranging a meeting about possible placement with CSHD?
The Client is holding the following documents: (1) 2-page Safekeeping Receipt (dated 7 May 2007) which appears to be: on the letterhead of Federal Reserve Bank of New York; signatured stamped by the Federal Reserve's Chairman and Vice Chairman red-ribbon stamped and sealed by the Federal Reserve holding the following basic data: U.S. Treasury Check Number(s) in denominations of $500M, totaling $2B; Custodial Account No.; Account Name: (matches the Name of One (1) of the Two (2) Members of the Special Purpose Company Client; and, Fed Screen Registration Codes: (a) Access, (b) Security & (c) ID Number (2) 1-page Reserved Funds Letter (dated 7 May 2007) which appears to be: (a) on the letterhead of Federal Reserve Bank of New York; (b) signatured stamped by the Federal Reserve's Chairman and Vice Chairman (c) red-ribbon stamped and sealed by the Federal Reserve (d) addressed to the Special Purpose Company Client; (e) holding the following basic data: U.S. Treasury Check Number(s) in denominations of 4$500M, totaling $2B; and, Custodial Account No.; (f) confirming the following:
(1) said $2B U.S. Treasury Checks have been reserved for up to Three (3) Years; and, (2) said Checks may be verified by "responsible bank inquiry". (3) 2-page Statement of Authority (dated 7 May 2007) which appears to be: on the letterhead of Federal Reserve Bank of New York; signatured stamped by the Federal Reserve's Chairman and Vice Chairman red-ribbon stamped and sealed by the Federal Reserve addressed to the Special Purpose Company Client; confirming the following: U.S. Treasury Check Number(s) in denominations of $500M, totaling $2B; Custodial Account No.; that the Special Purpose Company has FULL signatory/authority over said Checks; that said Checks are free and clear of any taxes, levies or duties.... that the account of the Special Purpose Company may be verified by "responsible bank inquiry" and confirmed by "Grey Screen" ONLY to the institution designated by the Special Purpose Company; that the Federal Reserve performed ALL political, economic and financial due diligence and affirm, "with full bank authority" thall ALL laws have bee complied with good, clean. cleared funds of non-criminal origin and legally earned.... that ANY copy of said instrument/Statement of Authority will be valid and legal as the original, which was issued in "full faith and trust" of the Federal Reserve Bank of New York. (4) 1-page Confidential Memo (dated 7 May 2007) which appears to be: on the letterhead of Federal Reserve Bank of New York; signatured stamped by the Federal Reserve's Chairman and Vice Chairman red-ribbon stamped and sealed by the Federal Reserve holding the following data:
(1) U.S. Treasury Check Number(s) in denominations of
Name of the Special Purpose Company; and, "Screening Procedures": (a) Access Code: <> (b) Security Code: <> (c) Related Code: <> (d) Net Code: <> (e) Additional Access Code: <> CUSIP: SWIFT Code: <> Screening Code: <> ISIN: Command Code: <> DTC: UWRTR: (f) Follow Screen Instructions as (1) Option 1: (for reserving/blocking
of the "specific" instrument; Option 2: Option 3: (g) If any of the above Options is NOT selected, the "specific" instrument will go off screen. Rufus Paul Harris
CERTIFICATE OF SERVICE
I hereby certify that on this 4th day of January, 2008, I mailed by United States Postal Service the preceding BRIEF IN OPPOSITION TO DEFENDANT HARRIS'S MOTION TO COMPEL DISCOVERY AND FOR SANCTIONS FOR FAILING TO DISCLOSE to the following non-CM/ECF participants:
Rufus Paul Harris a/k/a Paul Rufus Harris 383 Clear Creek Road, N.W.Adairsville, Georgia 30103-5934
Conversion Solutions Holdings Corporation c/o Registered Agent Harvard Business Services 16192 Coastal Highway Lewes, DE 19958
Alana R. Black Counsel for Plaintiff Georgia Bar No. 785045 U.S. Securities and Exchange Commission Atlanta District Office 3475 Lenox Road, N. E., Suite 1000 Atlanta, Georgia 30326-1232 Tel. No. (404) 842-7678 blacka*sec.gov
no exhibits were available where i found this..
-------------------- Of the People, by the People and For the People. Posts: 27745 | From: USA | Registered: Sep 2003
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posted
Greetings Tex and All, good to see the battle continues over here
Happy New Year
D42
-------------------- Bill Gates, Donald Trump and James Dean, Willie Nelson, John Lennon and Neil McCoy Posts: 1102 | From: Sometimes Honolulu, Sometimes Laguna Beach, today in the Valley | Registered: Aug 2006
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posted
The question I would really like an answer to is, Why did the SEC allow cshd to keep "trading" after the 10 day halt? Rufus asked for it to be halted.If The SEC thought this was all 'FRAUD" WHY, OH WHY, is it still "trading"??????
AND
Where is their proof of the "dump"? Are we as shareholders allowed answer's to these questions?
Posts: 360 | Registered: Aug 2006
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In August 2005, management became aware of the unauthorized issuance of approximately 243,842,000 shares of our common stock (the “Wrongfully Issued Shares”) to various entities and individuals for services and gifts, whereupon these entities and individuals attempted to sell the Wrongfully Issued Shares in the open market. Our current officers and directors had no relationship with the entities and individuals that issued the Wrongfully Issued Shares.
In September 2005, we filed a civil action (the “Pino Litigation”) in the District Court of Oklahoma County, Oklahoma, styled Bancorp International Group, Inc. v. Mario A. Pino, an individual, Sam Deeb, an individual, Jean Carlos Medina, an individual, Charles Weller, an individual, Barkev Kibarian, an individual, Felica Morales, an individual, Clearstock, Inc., a Texas corporation, DealFlo, L.L.C., a New York Limited Liability Company, The Grace Trust, a foreign trust, Global Consulting Group, a Maryland corporation, Intelligent Message Distributors, a Nevada corporation, and Wall Street Group, L.L.C., a Arizona limited liability company (the “Defendants”), Case No. CJ-2005-7459 (the “Civil Litigation”), seeking the return of the Wrongfully Issued Shares and the Defendants’ receipt of proceeds from the sale of those shares.
In the Civil Litigation we alleged that Mr. Pino individually and through various affiliated entities and co-conspirators, including the Wall Street Group, L.L.C., prepared or possessed 20 or more common stock certificates purportedly representing 235,000,000 shares of our common stock, the previously referred to Wrongfully Issued Shares, that were distributed to various individuals and entities, including the other Defendants. We could not determine if, in addition to the 235,000,000 shares, any additional shares were wrongfully issued.
it just gets worse from there....
the company is actively trying to resolve the issue and get trading again...
-------------------- Of the People, by the People and For the People. Posts: 27745 | From: USA | Registered: Sep 2003
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posted
Either way, the SEC sure doesn't seem to want this case to go to court. I can sure understand their stance, but if their case is so good, why not just let RPH have his day. Before you say it...I know they don't have to due to the default.
I guess I'm not a neutral party here due to my CSHD holdings.
Posts: 1028 | From: Georgia | Registered: Jul 2005
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quote:Originally posted by glassman: nope, it trades on the grey sheets every day, the trades may or may not be clearing i dunno...
BCIT? they have had trades on about three different days since Sep 20005.
the comapny even sued the "shareholders" to determine who had what shares and where they bought them...
the case was dismissed before discovery was completed...
I was talking about the fact there were illegal shares sold through brokers, and they were shorted.
Posts: 854 | From: Alpharetta, GA | Registered: Mar 2006
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quote:Originally posted by glassman: nope, it trades on the grey sheets every day, the trades may or may not be clearing i dunno...
BCIT? they have had trades on about three different days since Sep 20005.
the comapny even sued the "shareholders" to determine who had what shares and where they bought them...
the case was dismissed before discovery was completed...
I was talking about the fact there were illegal shares sold through brokers, and they were shorted.
one of the reasons i got into this one was because i saw what you are claiming. it appears to me to be true...
about the time it first hit 1.40$ the short became so obvious it was like a lighthouse. the squeeze was forced by retail demand, and possibly an even much bigger short player who wanted to get it to 3$ to begin shorting from there... this play was magnificent in it's insanity...
the SEC getting involved SO FAST just makes the play even more insane. they may have set a record for acting quickly on this one, which just makes me even more skeptical than i already am.
just about that time ( the first 1.50$) the webTV people got ahold of it along with sourstreet and stockfruit... they represented a major short interest that got burned badly, when it ran to 3$. that just fed more fuel to the "online war" that was waged all over the internet...
somebody should make this into a movie, showing dozens of boiler room typist all over the country ar war with each other...
the question of legal and illegal shorting is very blurry. for along time i believed that shorting pennies is illegal etc.
what i have come to conclude as result of this and a couple other plays that i have followed very closely for a long time is that shorting isn't illegal even in NAKED form.
it is an affront to our sensibilities, and it should be illegal, but it is just plain not illegal..
an SEC lawyer has recently been quoted in court saying if it (NS) is to be stopped? congress will have to act. that's pretty clear....
it's not illegal.
the brokers own the DTCC...
the DTCC is simply keeping a tally. the brokers are ultimately responsible, and they allow big customers to do as they please...
the term SRO applies here.. self regulating organisations..
that is IMO the biggest reason that Social Secutirty cannot be privatised... can you imagine how broke seniors would be if their SS went into to the market every month? then the borkers would all be called to testify before congress.. etc. etc..
the feeding frenzy would make a lion pride on a buffalo look like kindergartners in Catholic School.
-------------------- Of the People, by the People and For the People. Posts: 27745 | From: USA | Registered: Sep 2003
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quote:Originally posted by milliam: Either way, the SEC sure doesn't seem to want this case to go to court. I can sure understand their stance, but if their case is so good, why not just let RPH have his day. Before you say it...I know they don't have to due to the default.
I guess I'm not a neutral party here due to my CSHD holdings.
He had "his day" and chose instead to not follow procedure. Of course it's fine with the SEC to get the default: means less man-hours for them. But obviously they have been prepared to go to court--they filed the suit in the first place.
posted
Hey Glass...I'm just reading your post and cracked up out loud. This is Hilarious because of its truthfullness. Maybe the movie name can be...WallStreet 2.5, the R.P.H. Story. R.P.H. can be played by Tom Hanks.
quote:Originally posted by glassman:
quote:Originally posted by Igor R:
quote:Originally posted by glassman: nope, it trades on the grey sheets every day, the trades may or may not be clearing i dunno...
BCIT? they have had trades on about three different days since Sep 20005.
the comapny even sued the "shareholders" to determine who had what shares and where they bought them...
the case was dismissed before discovery was completed...
I was talking about the fact there were illegal shares sold through brokers, and they were shorted.
one of the reasons i got into this one was because i saw what you are claiming. it appears to me to be true...
about the time it first hit 1.40$ the short became so obvious it was like a lighthouse. the squeeze was forced by retail demand, and possibly an even much bigger short player who wanted to get it to 3$ to begin shorting from there... this play was magnificent in it's insanity...
the SEC getting involved SO FAST just makes the play even more insane. they may have set a record for acting quickly on this one, which just makes me even more skeptical than i already am.
just about that time ( the first 1.50$) the webTV peopl
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