Civil Case Update

Freestone filed its Response and Brief in Opposition of Defendants' Motion to Dismiss for Failure to Join an Indispensable Party.  This document has a lot of legal jargon but it looks very well put together.  I need to consult with an attorney before I attempt to summarize it on this blog.  

Freestone also filed an Amended Complaint against Jennings, Feuerborn and Shultz.  I gave it a quick scan and compared it to the original Complaint and I found a very interesting addition that popped right out!  Apparently Freestone discovered that Larry Shultz fraudulently transferred a bunch of stock to hide it from the SEC and Freestone.  I think the SEC is going to be very interested in this new information.  I will analyze the Amended Complaint further and see if there is anything else.  Here is an excerpt from the Amended Complaint: 

“4.20   Defendant Shultz has intentionally and purposefully concocted and implemented multiple fraudulent conveyances and transfers of Plaintiff’s common stock. Defendant Shultz, undertook these fraudulent transfers in order to (i) circumvent, thwart, and avoid the proper reporting requirements relating to shareholders of Plaintiff that are “affiliates” of Plaintiff, as that term is defined under SEC Rule 501(b), promulgated pursuant to the Securities Act of 1933, as amended (i.e.; owners of 5% or more of the issued and outstanding stock of a fully reporting publicly held and traded company), (ii) avoid proper reporting to the United States Securities and Exchange Commission, as required on SEC Forms 3, 4, and 5, and (iii) attempt to disguise said fraudulent transfers of Plaintiff’s common stock, and make said transfers appear to be sales to bona fide purchasers, when in fact, said transferees were not bona fide purchasers. In implementing such fraudulent transfers of Plaintiff’s common stock, Defendant Shultz made seventeen (17) such fraudulent transfers of Plaintiff’s common stock to the following individuals: 1.) Mislynne Charles, 2.) Jon Dehan, 3.) Family Tree Investment Properties, 4.) Don Gold, 5.) Camilo S. Jorge, 6.) Emil S. Jorge, 7.) Larson Tech Ventures, 8.) Liquid Coal Associates, 9.) Robert Nicholson, 10.) Amin Ramji, 11.) Sally Shultz, 12.) Brian L. Shultz, 13.) Eric L. Shultz, 14.) Alexander L. Shultz, 15.) Jordan Shultz, 16.) Shultz Family 1989 Inter Vivos Trust, and 17.) Walter Stevens (“The Transferees”), totaling 5,875,000 shares. As further evidence of the fraudulent transfer of such stock transfers by Defendant Shultz to The Transferees, the addresses of The Transferees are listed as the home address of Defendant Shultz.  The Transferees are not “Protected Purchasers” (sometimes also referred to in other jurisdictions as “Bona Fide Purchasers”) as defined under Section 104.8303 of the Nevada Revised Statutes. Additionally, some of the individuals who comprise The Transferees are controlled by, or are indisputably related to, Defendant Shultz.

4.21    The actions of Defendant Shultz, as described in Section 4.20 above, are intentional violations of:

Sections 16(a) and 23(a) of the Securities and Exchange Act of 1934;

Sections 30(h) and 38 of the Investment Company Act of 1940;

SEC Rule 10b-1; and

SEC Rule 10b-5.

Additionally, any of the individuals who comprise The Transferees who had actual knowledge of Defendant Shultz’s intent to fraudulently transfer Plaintiff’s stock, are engaged in a conspiracy with Defendant Shultz to violate the above listed securities laws of the United States” (Case 3:10-cv-01349-O ; Pages 210 and 211).

WOW!  It’s amazing how many people are involved in this!  Maybe we will see more people included in the civil lawsuit.  It sure looks like Freestone is setting the stage for more legal action.      

-ESS Investor