Free Memorandum in Opposition - District Court of California - California

Case 3:07-cv-04762-PJH

Document 70-2

Filed 06/03/2008

Page 1 of 8

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

JOSEPH P. RUSSONIELLO United States Attorney THOMAS MOORE (ASBN 4305-O78T Assistant United States Attorney Chief, Tax Division 9th Floor Federal Building 450 Golden Gate Avenue, Box 36055 San Francisco, California 94102 Telephone: (415) 436-6935 HUONG T. BAILIE (NYBN 4035739) Special Trial Attorney 160 Spear Street, 9th Floor San Francisco, California 94105 Telephone: (415) 227-5123 ALLYSON B. BAKER (DCBN 478073) Trial Attorney, Tax Division U.S. Department of Justice Post Office Box 7238 Ben Franklin Station Washington, D.C. 20044 Telephone: (202) 202-353-8031 Facsimile: (202) 514-6770 Email: [email protected] IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION UNITED STATES OF AMERICA ) ) ) ) ) ) ) ) ) )

16 Plaintiff, 17 v. 18 19 20 21 22 23 24 25 26 27 28 CHARLES CATHCART et al. Defendants.

Civil No. 07-4762-PJH THE UNITED STATES'S INITIAL DISCLOSURES

Pursuant to Rule 26(a)(1) of the Federal Rules of Civil Procedure, defendant, the United States of America makes the following initial disclosures: I. Individuals The following individuals may have discoverable information that the United States may use to support its claims or defenses in this case:

Case 3:07-cv-04762-PJH

Document 70-2

Filed 06/03/2008

Page 2 of 8

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

A. The following individuals may have information relating to (I) the promotion, execution, mechanics, history, scope, and extent of any tax-fraud scheme promoted and/or organized by the defendants, including the 90% Loan programs, as those programs are described in the complaint and/or (ii) the role of any entity by or related to any defendant, including Derivium Capital, LLC, Derivium (USA), Inc., Veridia Solutions, BVL, Optech Limited, Whitco, in promoting and/or organizing any aspect of any tax-fraud scheme, including the 90% Loan programs, as those programs are described in the complaint: 1. Charles Cathcart c/o Eric Webb Bartsch & Webb 317 Rosecrans Avenue Manhattan Beach, California 90266 Scott Cathcart c/o David Bujannoff Porter , Jr. Wood & Porter 333 Sacramento Street San Francisco, CA 94111 Yuri Debevc 1483 Burningtree Road Charleston, SC 29412 Robert Nagy c/o Farley J. Neuman Tom Prountzos Jenkins Goodman Neuman & Hamilton LLP 417 Montgomery Street, 10th Floor San Francisco, CA 94104 Randolph Anderson Charleston, South Carolina Robert Brandenburg Charleston, South Carolina Mark Broadwater Charleston, South Carolina Jack Flader 157 Hong Lok East Hong Lok Hong Kok Yuen Po Nt. Hong Kong Chi-Hsu Hsin 321 Courthouse Road -2-

2.

3.

4.

5. 20 21 22 7. 23 24 25 26 9. 27 28 8. 6.

Case 3:07-cv-04762-PJH

Document 70-2

Filed 06/03/2008

Page 3 of 8

1 2 10. 3 4 5 11. 6 7 8 13. 9 10 11 12 13 16. 14 15 16 18. 17 18 19 20. 20 21 19. 17. 15. 14. 12.

Franklin Square, New York 11010-3936 Bryan Jeeves Jeeves Group of Companies Bahnhofstrasse 7 Schaan Lichtenstein Ron Jenkins Charleston, South Carolina Patrick Kelley Charleston, South Carolina David Lancaster California Clifford Lloyd 142 James St. S. Hamilton, Ontario, L8P 3A2 Jerry Pryor Charleston, South Carolina Catherine Sandifer London, England Jonathan Sandifer London, England Timothy Scrantom Montana Allison Skinner Charleston, South Carolina Franklin Thomason 11469 West Camdon Drive Casa Grade, Arizona 85222

21. To the extent not mentioned above, current or former employees of the following 22 companies with information relating to that company's involvement with the promotion, 23 organization, and/or execution of the 90% Loan programs, as those programs are described in the 24 complaint: 25 26 27 28 -3a. Scienda LLC Charleston, South Carolina

Case 3:07-cv-04762-PJH

Document 70-2

Filed 06/03/2008

Page 4 of 8

1 2 3 4

b. c. d. e.

Shenandoah Holdings, LLC (Nevada) Diversified Design Associates, Ltd. (South Carolina) Bancroft Ventures Limited Douglas, Isle of Man, British Isles Optech Limited 590 Madison Avenue, 31st Floor New York, New York 10022 Spencer Partners WITCO London, England Veristeel Nevada

5 6 f. 7 g. 8 9 10 11 h.

B. The following individuals may have information relating to the role of any banks, 12 investment banks, broker-dealers and/or other financial institutions in the promotion, execution, 13 and/or organization of any tax-fraud scheme promoted or organized by defendants, including the 14 90% Loan programs, as those programs are described in the complaint: 15 1. 16 17 2. 18 19 3. 20 21 4. 22 23 24 25 26 27 28 David Johansen Napa Valley, California Kevin Haase Janney Montgomery Scott, LLC Philadelphia, Pennsylvania George Gordon Wachovia Corporation Richmond, Virginia Robert Gooch Morgan Keegan and Company, Inc. Memphis, Tennessee

5. One or more individuals employed currently or previously by Wachovia Corporation with information relating to that company's involvement with the promotion, organization and/or execution of the 90% Loan programs, as those programs are described in the complaint. 6. One or more individuals employed currently or previously by Morgan Keegan and Company, Inc. with information relating to that company's involvement with the promotion, -4-

Case 3:07-cv-04762-PJH

Document 70-2

Filed 06/03/2008

Page 5 of 8

1 2 3 4 5 6 7 8 9 10 11 12

organization and/or execution of the 90% Loan programs, as those programs are described in the complaint. 7. One or more individuals employed currently or previously by Janney Montgomery Scott, LLC with information relating to that company's involvement with the promotion, organization, and/or execution of the 90% Loan programs, as those programs are described in the complaint.

C. The following individuals may have information relating to the false and/or fraudulent statements made by defendants, and/or any entities owned, operated, or affiliated with defendants in connection with their promotion, execution, and/or organization of the 90% Loan programs: 1. 2. Arline Baker Pennsylvania Chris Benigno Texas Ted Bush California Ellen Carrie Texas Robert G. Fisher Texas Donald Hancock Fair Oaks, California Hammond Texas Douglas Hartman California Members of the Newton Family Wyoming Daryl Paules Pennsylvania Richard Potempa Colorado -5-

13 14 15 4. 16 17 18 6. 19 20 21 8. 22 23 24 10. 25 26 27 28 11. 9. 7. 5. 3.

Case 3:07-cv-04762-PJH

Document 70-2

Filed 06/03/2008

Page 6 of 8

1 2

12. 13.

Robert Sablehaus Baltimore, Maryland Jing Li Sun California Jiong Sun California David Welch Menlo Park, California

3 4 5 15. 6 7 14.

II. Documents 8 The United States has the following categories of documents within its possession, 9 custody or control that it may use to support its claims or defenses in this case: 10 A. 11 B. 12 connection with the 90% Loan programs. 13 C. 14 90% Loan programs. 15 D. 16 the 90% Loan programs. 17 E. 18 defendants in connection with their promotion, execution and organization of the 19 90% Loan programs. 20 F. 21 defendants with the proceeds they received from the 90% Loan programs. 22 G. 23 H. 24 I. 25 J. 26 K. 27 28 -6The following publicly available documents: Lists of qualified advisors for Derivium Capital, LLC and its related entities. Documents reflecting defendants' customers' 90% Loan program transactions. Lists of customers who participated in the 90% Loan programs. Defendants' individual and corporate tax returns. Incorporation documents for companies founded by Charles Cathcart and/or other Incorporation documents for companies operated by and/or affiliated with Stock Loan Administration Agreements executed by defendants in connection with Investment and Loan Agreements executed by defendants in connection with the Master Loan Agreements executed by defendants and/or related entities in Defendants' promotional materials relating to the 90% Loan programs.

Case 3:07-cv-04762-PJH

Document 70-2

Filed 06/03/2008

Page 7 of 8

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

1. Court filings in the related cases referenced in Part No. 9 of the Parties' Joint Case Management Statement, filed December 28, 2007, Dkt. # 22. 2. Court documents from People of the State of California v. Derivium Capital, LLC, et al., Case No. 02AS05849. 3. News articles discussing Charles Cathcart, Derivium Capital, LLC, and/or the 90% Loan programs, as they are described in the complaint. III. Damages The United States is not seeking damages in this cases. IV. Insurance Agreements Insurance agreements are not applicable to this case.

February 25, 2008 Respectfully submitted, JOSEPH P. RUSSONIELLO United States Attorney

/s/ Allyson B. Baker ALLYSON B. BAKER Trial Attorney, Tax Division U.S. Department of Justice Post Office Box 7238 Ben Franklin Station Washington, D.C. 20044 Telephone: (202) 353-8031

-7-

Case 3:07-cv-04762-PJH

Document 70-2

Filed 06/03/2008

Page 8 of 8

1 CERTIFICATE OF SERVICE 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -8/s/ Allyson B. Baker ALLYSON B. BAKER Eric Webb Bartsch & Webb 317 Rosecrans Avenue Manhattan Beach, California 90266 [email protected] Attorney for Charles Cathcart Yuri Debevc (pro se) 1483 Burningtree Road Charleston, SC 29412 [email protected] Farley J. Neuman ([email protected]) Tom Prountzos ([email protected]) Jenkins Goodman Neuman & Hamilton LLP 417 Montgomery Street, 10th Floor San Francisco, CA 94104 Attorneys for Defendant, Robert Nagy David Bujannoff Porter , Jr. ([email protected]) Wood & Porter 333 Sacramento Street San Francisco, CA 94111 Attorney for Scott Cathcart IT IS HEREBY CERTIFIED that service of the foregoing has been made upon the following by depositing a copy in the United States mail, postage prepaid, and through e-mail, this 11th day of February, 2008.