Free Opening Brief in Support - District Court of Delaware - Delaware

Case 1:04-cv-00389-***-MPT

Document 57-3

Filed 11/15/2005

Page 1 of 3

EXHIBIT B

{D0007919:1 }

Case 1:04-cv-00389-***-MPT

Document 57-3

Filed 11/15/2005

Page 2 of 3

Case 1:04-cv-00389-***-MPT

Document 57-3

Filed 11/15/2005

Page 3 of 3

investigated many assertions which have turned out to be unsubstantiated rwnors. however, Debtors and Creditors' Committee continue to pursue their investigation into various claims.

a. Debtors and Creditors' Committee are currently investigating the potential for recovery of certain claims against Charles E. Edwards and other Non-Debtor Affiliates, including claims to ofSEC Actio~ and loans and recover See Section VIl.C.3., Settlement collect pre-petition Phoenix Liti~ation. certain other transfers. -

b. Debtors and Creditors' Committee anticipate that a variety of preferential and fraudulent conveyances of Debtors' property were made prior to the Petition Date. An investigation of such conveyances, and potential recoveries under section 544, 547, 548, 549 and 550 of the Bankruptcy Code is currently underway including an investigation by Creditors' Committee's forensic accountant. c. Debtors and Creditors' Committee {including Creditors' Committee's forensic accountant) are also investigating other potential claims against third parties, including claims arising under theories of fraud, malpractice, conspiracy, breach of fiduciary duty , conversion and RlCO.
d.

Revenues Recoverable for Improper End User Common Line Charges

On October 31, 1997, the Uruted States Court of Appeals for the District of Col\UDbia Circuit held that the FCC had erred in allowing LECs to assess End User Common Line ("EUCL ") charges against IPPs during the period before the FCC's EUCL charge rnJes applied to both IPP and LEC pa)"phone divisions. The Debtors, along with numerous IPPs across the country are pursuing reimbursement from the LECs for improperly assessed EUCL charges. Debtors' claims against the LECs have been conservatively estimated to exceed $1,042,000.
e.

Other Lawsuits

Debtors are plaintiffs in approximately fifteen lawsuits pending in Georgja, North Carolina, Texas, Florida and California. These lawsuits are for unrelated contract claims against Location O",'Ders and other causes of action. The amounts in conU"oversyfor these casesaverage betVll.een $5..000 and $25,000 per case. At this stage in the litigation, neither the likelihood of Debtors prevailing nor the probable recoveries, ifany, from these lawsuits, can be predicted.

7.

Joint VentureInvestments
a.

NYLT

On December 10. 1998. ETS invested approximately $500.000 in a corporation called New York Local Telephone Company ("NYLT'.). The shareholders ofNYLT are PSA (30%). Denton Jones (64%) and Larry Ginsburg (6%). Pursuant to preliminary information available to Debtors, NYL T was formed to operate as a competitive local exchange carrier ("CLEC") and provide dial tone to Debtors and other payphone service providers. Existing management of

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