Free Transcript - District Court of Arizona - Arizona

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA _________________ ) ) ) ) Plaintiff, ) ) ) vs. ) ) PETER THIMMESCH, et al., ) ) Defendants. ) ______________________________) BILTMORE ASSOCIATES, as Trustee for the Visitalk, Creditors' Trust,

CV 02-2405-PHX-HRH Phoenix, Arizona March 7, 2008 8:30 a.m.

BEFORE:

THE HONORABLE H. RUSSEL HOLLAND, JUDGE

REPORTER'S TRANSCRIPT OF PROCEEDINGS BENCH TRIAL VOLUME #5 A.M. Pages 805 to 926

Official Court Reporter: Elizabeth A. Lemke, RDR, CRR, CPE Sandra Day O'Connor U.S. Courthouse, Suite 312 401 West Washington Street, SPC. 34 Phoenix, Arizona 85003-2150 (602) 322-7247 Proceedings Reported by Stenographic Court Reporter Transcript Prepared by Computer-Aided Transcription

Case 2:02-cv-02405-HRH

Document 505

Filed 04/22/2008

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1 2 3 For the Plaintiff: 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 505 Filed 04/22/2008 Page 2 of 122 TIFFANY & BOSCO By: Christopher Reed Kaup, Esq. Andrew M. Ellis, Esq. Tracy Shelden Morehouse, Esq Robert A. Royal, Esq. 2525 East Camelback Road, 3rd Floor Phoenix, AZ 85016 For the Defendants: MARISCAL, WEEKS MC INTYRE & FRIEDLANDER, PA By: Gary L. Birnbaum, Esq. Timothy J. Thomason, Esq. Scot L. Claus, Esq. 2901 North Central Avenue, Suite 200 Phoenix, AZ 85012 A P P E A R A N C E S

807

1 2 3 4 SUSAN MALONE 5 MICHAEL DONAHEY 6 7 8 9 EXHIBIT NO.: 10 11 12 Exhibit No. 170 13 Exhibit No. 173 14 Exhibit No. 518 15 Exhibit No. 519 16 17 18 19 20 21 22 23 24 25 UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 505 Filed 04/22/2008 Page 3 of 122 Exhibit No. 520 Exhibit No. 521 Exhibit No. 169 Handwritten notes titled meeting 1-18-00 Fennemore Craig Letter from J. Lord to S. Best re: Mark Cardwell Fax from S. Stodghill to S. Best and M. Donahey Employment Application: Mark Cardwell new stock certificate prepared 9-15-98 Press release 9-17-98 Press release 9-3-98 DESCRIPTION: RECEIVED: INDEX OF EXHIBITS 829 864 808 820 828 WITNESSES INDEX OF WITNESSES DIRECT CROSS REDIRECT

836 836 844 909 917 910 911

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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 A Q A Q A Q A Q A Q

P R O C E E D I N G S (Called to the order of court at 8:30 a.m.) THE COURT: and gentlemen. Please be seated. Good morning, ladies

This is the continuation of trial in Biltmore

v. Thimmesch and others. We're still working with Mr. Donahey, I think, or are we through? MR. KAUP: Susan Malone. So I will call Susan Malone to the stand. And, Your We agreed to take a witness out of order,

Honor, Kimberly Erickson from the Bryan, Cave firm will be representing Ms. Malone. SUSAN MALONE, WITNESS, SWORN DIRECT EXAMINATION Good morning, Ms. Malone. Good, thank you. Thank you for coming. How are you employed? I'm a paralegal. With what firm? I'm a paralegal with the law firm of Bryan, Cave. How were you employed in the year 1998? Same, with Bryan, Cave. Paralegal with the firm? Yes. How are you?

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Q

Who -- did you work with a lawyer at Bryan, Cave named Joe

Richardson? A Q A Yes. What was your capacity in working with Joe Richardson? I was the paralegal for the Corporate Group. He was one of

the partners of the Corporate Group. Q During that period -- during 1998 did you come to hear of a

company known as Visitalk.com, Inc.? A Q A Q A Q A Yes. How did you come to hear about Visitalk? They became a client of the firm. Did you do any work relating to Visitalk? Yes. What type of work did you do relating to Visitalk in 1998? As I recall, they had already formed their corporation with

a form from the Corporation Commission and we amended their Articles and set up their minute books and did basic corporate work for them. Q Do you remember when you first started doing work for

Visitalk in 1998? A Only because I -- well, yes, I do, because I looked at my

billing memos from the deposition, but before that I did not remember. Q So from reviewing your billing memos or billing statements,

when did you first start doing work for Visitalk? UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 505 Filed 04/22/2008 Page 5 of 122

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A Q A Q

I believe in October or November of 1998. Have you heard of an individual named Peter Thimmesch? Yes. Did you -- do you understand whether Peter Thimmesch had a

role with Visitalk when you were doing work in 1998 for the company? A Q He was our client. Do you know what Peter Thimmesch's relationship was to

Visitalk? A Q He was part of the -- he was an incorporator. Did you understand that Mr. Thimmesch was an officer of the

company? A Q Yes. Did you hear about an individual named Michael O'Donnell in

1998 when you were doing work for Visitalk? A Q Yes. Did you understand Mr. O'Donnell to have a role with

Visitalk when you were doing work for the company in 1998? A Q Yes. What was your understanding about his role with the

company? A Q Officer, director, shareholder. Did you hear of an individual named Cynthia Thimmesch in

1998? A Yes.

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Q

Did you have any understanding as to whether Ms. Thimmesch

had any role with Visitalk when you were doing work for the company in 1998? A Well, I knew she was Peter Thimmesch's wife and one of the

shareholders -- or one of the officers, I'm sorry, one of the officers. Q A Q Did you ever hear of an individual named Marcia O'Donnell? I'm sorry? Did you ever hear of an individual named Marcia O'Donnell

in doing the work that you were performing for Visitalk in 1998? A Q No. When you worked for Visitalk in 1998, did you create any

organizational minutes for the company? A I can't remember if I prepared them. I know they were

prepared. Q Did you in 1998 prepare any minutes of the Visitalk board

of directors -- and now I'm just focusing on minutes of the directors' meetings? A Q No. When you were performing work for Visitalk, did you ever

see any minutes of any meetings of the Visitalk board of directors that were prepared prior to the commencement of Bryan, Cave's engagement? A No.

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MR. CLAUS: THE COURT:

Foundation. Overruled.

No personal knowledge.

The answer was "no"? THE WITNESS: BY MR. KAUP: Yes. Yes, the answer was no.

Ma'am, there are some folders in front of you Do you see the folder with Exhibit 100

which contain exhibits. in it? A Q Yes, sir.

Could you look at that document please, ma'am. Do you recall having seen Exhibit 100 in the fall of

1998 when you were doing work for Visitalk? A I don't really recall. I have seen it in my deposition. I

know it was in the minute book, but I -- I know it was prepared by someone in my office. Q That's what I know.

Do you recall whether you worked on the preparation of this

document Exhibit 100? A I think I may have reviewed them. We had a young associate

learning the craft, and I -- you know, because of my experience have been -- you know, was kind of reviewing his work for the practical part of the law. Q A Q A Q Would that young associate have been Chad Freed? That's correct. Did you ever discuss with Peter Thimmesch Exhibit 100? I don't recall. Did you ever discuss with Mr. O'Donnell Exhibit 100?

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A Q A Q

I don't recall. Did you ever discuss with Cynthia Thimmesch Exhibit 100? I don't recall. Could you take a moment to look at Exhibit 101, please, Could you take a moment to look at all four pages

ma'am? please. A Q A Q A Q

I have reviewed them. Do you know what the first page of Exhibit 100 is, ma'am? It's a stock ledger. For Visitalk? For Visitalk, yes. Did you assist in the preparation of the first page of

Exhibit 100? A Q A Q A Q A Q A Q A Q Yes. Do you see the column "Cert. No."? Yes. And then do you see the column "Date a-c-q"? Yes. Do you know what A-C-Q stands for? Acquired. Then do you see the shareholders' names? Yes. Do you see the row with "Cert No. 3"? Yes. And you see that the date acquired in that row is

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September 4, 1998, and the shareholders name is Mark Cardwell? A Q Yes, I see it. When you prepared this document, you understood that that

information -- did you understand that that information was accurate? MR. CLAUS: Foundation. THE COURT: Q BY MR. KAUP: Sustained. Relevance. Calls for hearsay.

Ma'am, when you prepared this document, did

you prepare this document based upon information you received from Mr. Thimmesch or Mr -- and Mr. O'Donnell. MR. CLAUS: THE COURT: THE WITNESS: Foundation. You may answer. I believe I got my instructions from Joe

Richardson or Chad Freed. Q BY MR. KAUP: And you said "instructions," ma'am.

I was asking about the information, the factual information necessary to prepare it. Did you receive the

factual information necessary to prepare it from either Mr. Thimmesch or Mr. O'Donnell? MR. CLAUS: THE COURT: THE WITNESS: Q BY MR. KAUP: Asked and answered. Overruled. No. Calls for hearsay.

Did you receive the factual information

necessary to prepare this from Mr. Richardson? UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 10 of 122

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A Q

Yes. Could you turn to the fourth page of this exhibit please, Do you know what the document on the fourth page of

ma'am.

this exhibit is? A It's a receipt for issuance of stock certificate and that's

my handwriting. Q Did you receive the information necessary -- from whom did

you receive the information necessary to prepare that, the fourth page of Exhibit -- of this exhibit? A Q A Q As I recall, I used the organizational minutes as my guide. And that would have been Exhibit 100? That's correct. In connection with your work on matters relating to

Visitalk in 1998, did you hear about the term "Founder's Warrants"? A Q Yes. I heard about them.

Did you ever speak to Mr. Thimmesch about the Founder's

Warrants? A Q No. Did you ever speak to Mrs. Thimmesch about the Founder's

Warrants? A Q I don't recall. Did you speak to Mr. Richardson about the Founder's

Warrants? A Yes. UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 11 of 122

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Q

What did you discuss with Mr. Richardson about the

Founder's Warrants? A Q I really don't remember. Could you look at Exhibit 105 please, ma'am. MR. CLAUS: exhibit number. MR. KAUP: MR. CLAUS: THE WITNESS: Q BY MR. KAUP: 105. Thank you. I'm sorry. I'm sorry, Mr. Kaup. I didn't hear the

I've looked at it.

Did you see Exhibit 105 during the fall of

1998 when you were working on matters relating to the Founder's Warrants? A Q A Q A Yes. Did you assist in the preparation of Exhibit 105? I don't recall. Do you know when Exhibit 105 was prepared? It was probably prepared sometime in October or November,

but I can't really be sure, other than I looked at my time records from my deposition. Q A Q In October or November of 1998? That's correct. Do you know where any of the information necessary to

prepare Exhibit 105 came from? A I believe it was discussed with Mr. Richardson,

Mr. Thimmesch, and Mr. O'Donnell; met with him or spoke with UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 12 of 122

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him on the phone and they discussed it. Q A Q Did you participate in any of those discussions? I don't recall. When you were working on matters relating to Visitalk in

the fall of 1998, did you ever see any notes regarding any meeting that was claimed to have occurred on September 12, 1998, relating to the Founder's Warrants? A Q I don't recall. When you were doing work for Visitalk in the fall of 1998,

did you see any documents of any kind prepared by Peter Thimmesch, Cynthia Thimmesch, Michael O'Donnell, or Marcia O'Donnell relating to the Founder's Warrants? A Okay. The second page of exhibit -- of this exhibit has my

handwriting on it, so I must have seen it and talked to Mr. Richardson about it, because that's what I have written down there. I just don't recall, because it was then years ago. Q And, Ms. Malone, I just want to make sure you understood my

question and I may not have made myself clear. What I want to ask, Ms. Malone, is when you were working on matters relating to Visitalk in the fall of 1998, did you ever see any documents prepared by the Thimmeschs or the O'Donnells relating to the Founder's Warrants? A Just this document, the second page with the handwritten

notes on it. UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 13 of 122

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Q A

But this was a document prepared by -We prepared it, but that's not my handwriting and it's not

Joe's, so I assume that it was Mr. Thimmesch or Mr. O'Donnell. Q But nothing other than -THE COURT: Wait. Wait. Wait one moment. I thought

I understood you a few moments ago to say that your handwriting was on page 2. THE WITNESS: THE COURT: else's. THE WITNESS: Q BY MR. KAUP: That's correct. My handwriting says "Keep Per JR2." And the rest of the handwriting is someone

Ms. Malone, just to be clear, the only

document that you have seen prepared by Mr. Thimmesch and Mr. O'Donnell relating to the Founder's Warrants is -- are the handwriting notations with the numbers in the -- in the -about the bottom third of the second page of Exhibit 105? MR. CLAUS: THE COURT: THE WITNESS: Q BY MR. KAUP: Leading. Asked and answered.

You may answer. Yes.

Ms. Malone, in front of you is Exhibit 283 -Number again, please? 283. Thank you. And that's in our Exhibit Book 7. Sorry for our rustling around here, Your

THE COURT: MR. KAUP: THE COURT: MR. KAUP: MR. CLAUS:

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Honor.

We're just trying to let Ms. Erickson see the exhibit. Thank you.

Q A Q

BY MR. KAUP: Yes, sir.

Are you there, ma'am?

Do you recognize this as a billing statement for Bryan,

Cave? A Q Yes. Could you turn to the eighth page from the front of this

exhibit -- I'm sorry, ma'am -- the thirteenth page. A Thirteenth page? THE COURT: MR. KAUP: What date does it have on it. It's the -- in the upper right-hand corner

it has January 25, 1999, and it begins with a billing entry dated December 2, 1998, for an R.C. Smith. THE COURT: THE WITNESS: Q BY MR. KAUP: Thank you. Got it.

Do you see below the billing entry for R.C.

Smith a billing entry for you dated December 5, 1998, and then below that a billing entry for December 8, 1998. A Q Yes. And do you see a reference in the December 5th entry,

"organizing minute book and preparing stock ledger"? A Q Yes. Would that have been the stock ledge that we looked at a

minute ago, Exhibit 101? UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 15 of 122

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A Q

Yes. So would this have been on the date that you did the work

preparing that stock ledger? A Yes. MR. KAUP: Your Honor, this exhibit has been

stipulated to, so we just ask that it be admitted. MR. CLAUS: THE COURT: MR. KAUP: THE COURT: MR. CLAUS: It's bee stipulated to? Very well. It's admitted by stipulation.

No further questions. You may cross examine. Thank you, Your Honor. CROSS EXAMINATION

Q

BY MR. CLAUS:

Good morning Your Honor.

Good morning, Ms. Malone. A Q A Q Good morning. How are you? Fine, thank you. Ms. Malone, you have been a paralegal for more than twenty

years, haven't you? A Q Yes, sir. And you've worked at Bryan, Cave for more than 20 years,

correct? A Well, actually I have only worked there for -- they

grandfathered me in in 1997, so, yes, they included eleven years that I worked at another law firm, so, yes, it's over? UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 16 of 122

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Twenty years. Q You have a lot of experience in something you called the

"practical part" of corporate law, don't you, ma'am? A Q Yes, sir. Mr. Freed is not in the room. You really meant to say

"important" part of the law, didn't you? A Q Yes, sir. Let me just ask you a simple question. You don't recall a

single solitary thing you did for Visitalk at this point in time other than what you may have seen in documents, isn't that right? A Yes. MR. CLAUS: Honor. I'm going to get some exhibits here, Your

May I approach? THE COURT: Yes. I'll have you refer to those.

Q

BY MR. CLAUS:

There's really only a couple of things I want you to take a look at and the first is Exhibit 101. that, please. Take a look at

And it will also be on your screen too if you Could you pull that up please.

want to look at the screen. Thank you.

You said you recognized the handwriting on the stock stubs that comprised pages -- I'll wait for the Judge? THE COURT: MR. KAUP: Go ahead. -- pages 2 through 4 of Exhibit 101 to be

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your handwriting? A Q Yes. If you look at the last page, that's a stock stub having

your handwriting that says the words "Mark Cardwell," correct? A Q Yes. And whatever information you used to put into this stock

stub came from the organizational minutes you testified, correct? A Q A Q Yes, sir. Organizational minutes that Bryan, Cave prepared? Yes. After Visitalk actually filed its Articles of

Incorporation? A Q Yes, sir. Have you ever seen a version of Exhibit 101 that has any

kind of signature on it? A Q A Q You mean the stock certificates. Correct? Oh, I don't remember. Is it true, ma'am, that you have absolutely no idea if any

of the information contained in Exhibit 101 is actually accurate? A Well, I actually have something to say in that it's our

policy at Bryan, Cave -- Mr. Richardson and I -- to date the stock certificates the date of incorporation if they don't have UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 18 of 122

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a meeting, because when would you date them. And so it's dated September 4th, because that's the date that they were incorporated. Q And so you just inferred from the date of incorporation

that that should be the date you put on the stock ledger and the stock certificate? A Q That's correct. But you don't have any idea if that date correlates with

the actual date that Mark Cardwell actually acquired shares, correct? A Q A Q Only from what I have read in my deposition. Could you look at the folder I put for 519, ma'am. I didn't have 519. Oh, I apologize. I'll grab it for you.

It's also on the screen, but it may be hard to read on the screen I will go back it real quick. A Q No. I see it.

Do you see this to be a stock certificate for Mark

Cardwell. A Q A Q A Q Yes. And what's the date, ma'am, on the stock certificate? September 15, 1998. September 15, 1998? Uh-huh. And is that stock certificate actually signed, ma'am? UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 19 of 122

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A Q

Yes. Thank you. And just so the Court is clear, you've never spoken

with Mark Cardwell, correct? A Q That's correct. So you didn't get any information about what is in the

stock ledger, Exhibit 101, what's in the organizational minutes from any conversations with Mark Cardwell, correct? A That's correct. THE COURT: number on it? THE WITNESS: MR. CLAUS: does. Yeah. This doesn't even look -It Does this certificate not have a date -- a

It may on the original, Your Honor.

If you look in the -- Mr. Baker is highlighting it. THE COURT: MR. CLAUS: I see it now. It looks like 44.

Do you want me to get the hard copy, Your

Honor? THE WITNESS: MR. CLAUS: Q BY MR. CLAUS: I would like to see the hard copy. Okay. You bet.

While you're looking, ma'am, have you ever

seen a document other than Exhibit 519 that bears any signatures representing the acquisition of shares by Mark Cardwell from visitalk.com, Inc.? A Q No, but this isn't a stock certificate that I prepared. No, I understand that, ma'am. UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 20 of 122

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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 Q A Q Okay.

No.

I appreciate that?

Thank you.

One last question, ma'am. Again, about the practical part of the law, you had

mentioned just a moment ago about protocols that Mr. Richardson had established. Do you remember you said that Mr. Richardson

had established protocols for corporate clients? A Q Right. Isn't one of the protocols that Mr. Richardson established

for his corporate clients that was in use by your corporate law department and used by you in 1998 was to prepare documents that are required to be signed and dated, so that if anybody ever needed to look back and see when a corporate act was done, they could go back and see a signed document? A Q Yes. And isn't that -- and you know as a corporate paralegal

with over twenty years of experience in the important part of corporate law, that minutes aren't required to be signed, correct? MR. KAUP: THE COURT: BY MR. CLAUS: Objection. Sustained. As your habit, routine, and practice in your Calls for a legal conclusion.

corporate law department for your work with Bryan, Cave, and specifically, your work for Visitalk, isn't the reason why you drafted unanimous -- or that the Unanimous Consent in Lieu of UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 21 of 122

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Special Meeting was signed -- or was prepared not because there wasn't a meeting, but because that document could be signed and dated? MR. KAUP: THE COURT: THE WITNESS: Objection. Foundation.

Overruled, if you understand the question. Thank you.

It's my understanding that when you have a Unanimous Consent, they didn't meet; that that's why it's a unanimous consent. They all have to agree to it. The statutes provide that the board of directors can meet -- can talk and discuss things; and as long as they resolve it and everybody agrees to it, then it's a resolution. It's been passed by the -But if they have a meeting, an actual meeting, then only the secretary would be required to sign the minutes. There's a difference between a consent, Unanimous Consent, and a meeting. Q BY MR. CLAUS: So in your understanding and as part of

Bryan, Cave's corporate practice, if the board of directors actually -- not a meeting, but actually meets, agrees, and resolves to do something, it was your -- part of your corporate practice to document that resolution and agreement with Unanimous Consents on the day the client told you that that resolution and agreement was reached, correct? MR. KAUP: Objection. Mischaracterizes her prior

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testimony. THE COURT: THE WITNESS: MR. CLAUS: Q BY MR. CLAUS: Well, you may answer. Can you repeat the question? Sure. So it was your practice in the corporate

department of Bryan, Cave that when clients came to you and told you that they had reached a resolution as a board of directors, an agreement on a date certain, it was your practice to prepare a Unanimous Consent that reflected A, the resolution; and B, the date upon which the clients told you that resolution was reached, correct? A Q A No. What is correct? We would prepare it and then date it as of the date it was

prepared or -Q A Q A The date -I'm sorry. I'm sorry. It was dated the date it was signed.

It was dated the date that the resolution was reached? No. That the Unanimous Consent was signed by all the That was usually the date we used. You know, if they all signed it on October 1st -- I

parties.

don't recall ever having someone tell me that we did this on such-and-such a date. Q A It's the date it was signed.

I understand, ma'am? Thank you. UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 23 of 122

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Q A Q A

And that was the direction that you received, ma'am? Yes. In this case? Yes. MR. CLAUS: Thank you. REDIRECT EXAMINATION

Q

BY MR. KAUP:

Just a couple quick followup questions,

Ms. Malone, and then you can go back to your work. Exhibit 519, you didn't prepare Exhibit 519? A Q No, sir. Is Exhibit 519 a form of stock certificate used by Bryan,

Cave in 1998? A No. I believe ours had an eagle on it, and it's not the

stock certificate Bryan, Cave uses. Q Prior to this morning, had you ever seen Exhibit 519

before? A No, sir. MR. KAUP: THE COURT: MR. KAUP: I don't have any further questions. Does anyone wish 519 be admitted? Your Honor, we had objected to it, and so, We don't have any

no, we would not agree to its admission.

foundation for it at this point, Your Honor. MR. CLAUS: It's a stock certificate signed by Peter

Thimmesch and Michael O'Donnell for Visitalk.com, Inc. MR. KAUP: They are not here now, Your Honor. And

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maybe after they get here and look at it, it would be admissible; but you know, not now, Your Honor. THE COURT: I think I agree with plaintiff's counsel.

We will need to talk to somebody else before we admit this. MR. CLAUS: THE COURT: Okay. Your Honor.

Thank you, ma'am. Who is next?

You may call your next witness. MR. KAUP: Honor.

We're going to recall Mr. Donahey, Your

MICHAEL DONAHEY, WITNESS, SWORN DIRECT EXAMINATION (cont'd) Q A Q Mr. Donahey, could you again look at Exhibit 142, please. I'm there. Do you have a page in that document which has the Bates

number SWDS0351? A Q Yes. Do you recall there was a time when Snell & Wilmer asked

Visitalk to sign a promissory note for attorneys' fees and costs owed in arrears by Visitalk to your firm? A I don't remember that, but that's what it looks like, based

on this e-mail. Q Did you personally have any discussions with any officers

of Visitalk about asking them to -- asking Visitalk to sign a promissory note to Snell & Wilmer? A I don't remember if I did or not. I very well may have.

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Q A Q

Could you look at Exhibit 154, please. Okay. I'm there.

Did you see Exhibit 154 at any time during your

representation of Visitalk? A Well, I think this is the same set of audited financials we This is a

discussed over the last couple of days -- oh, no. draft it looks like. Q

Do you see, sir, that on the first page, underneath the

words, "A Development Stage Company," it reads, "Period ended January 2, 1999, and Year Ended December 31, 1999"? A Q A I see that. So this is a draft of a different audit report? Well, I'm just basing my thought that it's a draft on the

fact that the Report of Independent Auditors is dated March-blank, 2000. Q And I --

And now you're looking on the third page, just for the

Court's reference? A But I thought we had an audit -Well, I'm a little bit confused, Mr. Kaup, because I thought we saw yesterday or the day before a Final Audit Report dated November 23, 1999. dated March-blank, 2000. So I'm hoping the audit report we were looking at yesterday or the day before was the final one, but. Q Let's try to alleviate that confusion, Mr. Donahey. UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 26 of 122 And this looks like a draft that's

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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 Q A Okay.

Could you look back at Exhibit 102. So this is a draft of not only the January 2, 1999,

but it's almost like a two-year audit -- a draft of a two-year audit. Q So do you see that Exhibit 154 and Exhibit 102 are

different documents covering different periods of time? A Well, it appears that way. I mean, I guess I would want to

scrutinize it for a while, if that's important, to see if that's the case, but it certainly appears that way. Q My question to you, sir, is do you recall seeing Exhibit

154 when you were working on matters for Visitalk? A No. I mean, I'm not saying I didn't, but I don't recall

seeing this. Q A Q Could you look at Exhibit 170, sir? I'm there. Do you recall there came a time when Mark Cardwell was

terminated by Visitalk? A Q I believe that's correct, yes. Why was Mr. Cardwell terminated by Visitalk? MR. BIRNBAUM: BY MR. KAUP: Objection. Foundation.

Do you know why Mr. Cardwell was terminated

by Visitalk? A Q I don't. Did you see Exhibit 170 while you were representing

Visitalk after January 21st of 2000? UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 27 of 122

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A

I very well may have.

I don't remember seeing it, but it

wouldn't have surprised me if I did. Q Do you recall from your representations of Visitalk

settlement negotiations with Mr. Cardwell and his legal counsel? MR. BIRNBAUM: Your Honor, I object just on the Does he recall that there were

grounds that it's ambiguous.

such or does he recall being in them? Q BY MR. KAUP: First, do you recall whether there were

settlement negotiations -- let me take a step back. Do you recall there was a dispute between Visitalk and Mr. Cardwell after Mr. Cardwell was terminated by the company? A Well, I don't know if I would characterize it was a I think, as I understood it, Mr. Cardwell thought he

dispute.

ought to be entitled to some severance. Q Do you recall what severance Mr. Cardwell thought he was

entitled to? A Q No. Do you recall that Mr. Cardwell hired a lawyer to represent

him relating to matters flowing from his termination by Visitalk? A Q A Yes. Do you recall that was Janet Lord? Yes. I think she has a different last name now, but that

was her name then. UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 28 of 122

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Q

Now, do you recall whether there were settlement

negotiations between Visitalk and Mr. Cardwell relating to his claim for severance? A I believe they were. I wasn't so much involved in the

settlement negotiations as I was in kind of documenting what the principals ultimately agreed upon, but I'm sure there were settlement negotiations. Q Did you participate in any settlement negotiations with

Mr. Cardwell? A Not that I recall. I remember the results of -- you know, the basic terms of the agreement being reported to, me and then, you know, endeavoring to document that. And I believe there was also a

meeting maybe at Fennemore Craig where, you know, each side was posturing and saying, you know, what their -- you know, how good their claim was or how good their side of any argument would be. But I don't remember participating in any settlement negotiations in terms of actual getting down to dollars. Q Did you participate in that meeting at Fennemore Craig

which the parties were posturing? A I remember -- when you say "that meeting," I mean there

were probably several meetings, most of which I didn't attend, but I remember a meeting where both sides were posturing. Q And it was at that meeting that Mr. Cardwell and Ms. Lord, UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 29 of 122

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as part of their posturing, asserted that the issuance of the Founder's Warrants was invalid, correct? A I don't remember that. I don't remember them saying the

issuance of the Founder's Warrants was invalid. Q Well, they asserted, sir, that the authorization and the

issuance of the Founder's Warrants was in violation of the duties of Mr. Thimmesch and Mr. O'Donnell to Mr. Cardwell, correct? A No. That's not the case. I do -- well, I'll leave it at

that.

But I'm confident that didn't happen. I remember in one -- I think it was during what I will

call the posturing meeting, you know, the -- Mr. Cardwell's counsel might list a whole bunch of possible claims that they would have or arguments that they could make, one of which was age discrimination, which seemed a little bit unusual to me, given that I think Mr. Cardwell was not much over 40. I remember at one point they said -- somebody said, "Well, maybe the release that we executed back in December isn't valid." And I mean that really caught my attention, because I couldn't image how that -- I mean that, to me, seemed as frivolous as an age discrimination claim by Mr. Cardwell, but I never heard any basis for why it might be invalid and it was never brought up again. MR. KAUP: Your Honor, may Mr. LoFredo approach?

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Q

BY MR. KAUP:

Mr. Donahey, we have given you what is marked

Exhibit 169. A Q Yes. Do you recall having seen Exhibit 169 when you were

representing Visitalk? A I don't remember -- well, it looks like my handwriting and

I'm confident it is my handwriting and the notes I would have taken. Q I mean, I don't remember taking the notes.

Do you see at the top is says, "Meeting 1-18-00 at

Fennemore Craig." A Q Yes. So these are your notes from the posturing meeting which

you just described, correct, sir? A Q A Yes. Yes.

Do you see at the bottom of the page -Well, I think -- I mean it's so long ago, I believe so, but But I

I mean it's been so long I'm not a hundred percent sure. have no reason to disagree with that. MR. KAUP: of 169.

Your Honor, we would move for the admission

I believe there is no stipulation as to it. MR. BIRNBAUM: THE COURT: We have no objection, Your Honor.

169 is admitted.

And while we are at it, what about 170? MR. KAUP: Your Honor, we will move for admission for I think that's more

this after we get to Mr. Cardwell.

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appropriate since he didn't have knowledge about it. THE COURT: Thank you. Thank you.

MR. BIRNBAUM: THE COURT: time.

Your Honor, we'll stipulate to 170. 170 is also admitted at this

Very well.

(Exhibit Nos. 169 and 170 admitted into evidence.) MR. KAUP: Q BY MR. KAUP: Very well. Mr. Donahey, if you look at the lower part of

the document in the left-hand side, you see what appear to be three stars? A Q Yes. And next to that you see in your handwriting the words

"Founder's Warrants release not enforceable." A Q Yeah. What is the "Founder's Warrants release" that you wrote

about? A Well, that's what I'm saying is somebody at the meeting in

their posturing had said they didn't think -- I mean, one of the possible -- it's not really so much a claim as it is just an assertion. You know, just like Mark Cardwell was terminated because of his age. Well, they said, well, the Founder's

Warrants release wasn't enforceable. And to me that -- that attracted my attention and that's why I would have put three stars right there to make UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 32 of 122

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sure that I came back to see what it was they were -- well, let me strike that. That just attracted my attention and I wanted to make a note of it. Q BY MR. KAUP: Do you see underneath those words the words,

"A-C-C filing." A Q I see that. What did you -- what were you referring to with those

words? A Q A I have no idea what that refers to. Does A-C-C refer to Arizona Corporation Commission? That's probably what it refers to but Arizona Corporation

Commission -- I don't know what it is that it's talking about. Q Did Ms. Lord articulate the basis for Mr. Cardwell's

argument why the Founder's Warrants release was not enforceable? A Well, let me back up. I'm not here to tell you that it was Mrs. Lord -Ms. Lord who said that. It may have been. I don't know.

I mean, there were a lot of people at the meeting, as you can see from the -- at the top. I usually try to list the And so there

attendees, at least the ones whose names I know.

were a lot of people there and I don't know who said that. And there was never a reason given that I can recall. I don't know. I mean Cardwell didn't get -- there was nothing UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 33 of 122

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that Cardwell got out of the first settlement in December.

In

other words, he was agreeing with the chronology that those at the September 12, 1998, meeting had asserted. He was, you know, giving up his -- he had the most to lose, frankly, by the -- if the sequence stated by the Thimmeschs and O'Donnells was correct. lose. He had the most to

And he released the company, kind of as a

belt-and-suspenders approach, and Mr. Thimmesch and Mr. O'Donnell. And so if I were going to try to attack the Founder's Warrants release, you might say, you know, Cardwell didn't receive any consideration. He got nothing in exchange for it.

And so that was my speculation, but I couldn't see any other way that they could possibly attack it. Now, that's giving you more -- I guess the answer is I never heard about it again, although I kept it in mind. And I

believe there's something in the final agreement with Cardwell that was executed some months later that confirms the validity of the December release. And I guess that's part of the reason I had three stars here is because I wanted to make sure whatever agreement we put in here, we reconfirmed the December release since they had brought it up evidently in this January 18th meeting. Q sir. Could you turn to the next page of this exhibit please, Could you read your handwriting at the very top of this UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 34 of 122

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page. A It says "problem" -W-slash is "with -- "securities

disclosures Class A." Q A Q Now, what did you mean by that language? I have no idea. Isn't it true, sir, that the issue raised about which you

were making notation was the fact that there had been no disclosure of the alleged right to the Founder's Warrants, because those warrants on the date of the sale to the Series A investors, in fact, had not been issued? A Well, no, but I'm not sure I -- could I have that read back

please or could you repeat it? MR. KAUP: Could you read that back please?

(Requested portion of the record read back by reporter.) THE WITNESS: Well, that doesn't make any sense at

all, because if there's a problem with the Cardwell Release, that has nothing to do with the disclosure to the Series A investors. In other words, to my knowledge Cardwell wasn't a Series A investor and these were two separate issues. I mean,

the Cardwell Release by itself -- you know, and the corrected sequence, didn't do anything to fix the problem with the disclosure to the Series A investors. In other words -- I mean, if you just fix one and not the other, that doesn't solve the problem. So the Cardwell

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Release related to the correct sequence of corporate actions and Cardwell waiving any breach of fiduciary duty or any right to participate in the Founder's Warrants. But that to me wasn't even the most important part. The most important part was getting the Series A investors to waive any claims they would have of the additional delusion going from 28 percent to 15 percent resulting from the non -resulting from the issuance of the Founder's Warrants. Q BY MR. KAUP: And I appreciate that, sir.

My question goes not to the Cardwell Release, but rather, sir, to the problem with securities disclosures about which you made notation. And, sir, it is true, is it not, that the reason you made this disclosure -- this notation was the problems relating to the failure to disclose the Founder's Warrants was discussed as a securities law problem at this meeting on January 18, 2000. MR. BIRNBAUM: Objection, Your Honor. This question

has just been asked and answered and it assumes facts not in evidence. But may I speak to that issue just for a second with

the Court's permission? Your Honor, as the Court is aware, there is an ethical obligation on counsel, even in cross-examination, not to just make up facts and ask whether they are true. Counsel needs to be able through subsequent evidence UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 36 of 122

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or testimony to support the assumed facts.

There is no

evidence in this case, there is no witness who will testify, and there is no disclosure of any of these matters that Mr. Kaup is making up and asking the witness about, trying to trap him into believing that there may be some support for it. I would request that counsel be limited in his examination to matters that he is prepared to make an offer of proof on and say, "Here is the witness who will testify to it." Now, Mr. Donahey is more than capable of protecting himself and has answered the questions as you have heard that these conversations did not occur. But the question itself is

improper, unless there is some witness who is going to say that such a conversation did occur, and there is no such witness in this case. Thank you for allowing me that, Your Honor. THE COURT: MR. KAUP: Mr. Kaup, let's go ahead. When you say, "Let's go ahead," move on

with the examination, Your Honor? THE COURT: If you think you have got a basis for

inquiring some further about this last subject, you may do it, but I think we're not gaining much ground. Q BY MR. KAUP: Do you remember anything else about the

January 18, 2000, meeting, sir? A No. I don't think so. You know, on that last point, let

me -- if the -- well, I'll just leave it at that. UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 37 of 122

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Q

Could you look at Exhibit 173 please, sir. THE COURT: I'm sorry. Before we go on, who was at Was that you or were you

this meeting as counsel for Visitalk? just sitting in? THE WITNESS:

Well, I'm just going by the notes of the

attendees at the top of the page, Your Honor, and I'll just tell you who's who. John Balitis was representing -- he was with Fennemore Craig. He was a litigator for Fennemore Craig. Jan Lord is also a litigator for Fennemore Craig representing Mark Cardwell, the third person. Alan Kaplan, as you have heard is one of the directors of Visitalk. Steve Best, the general counsel. Steve Stodghill is a lawyer from the Lynn Stodghill firm in Texas who was the primary employment lawyer representing Visitalk on the Cardwell matter. Scott McDonald was an associate general counsel -that's what his function was at Visitalk. that was his precise title. And then evidently I was there too. THE COURT: Q A Q BY MR. KAUP: I'm there. Do you recall having received Exhibit 173 in March of 2000 UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 38 of 122 Thank you. I don't know that

Could you look at Exhibit 173 please, sir.

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while you were representing Visitalk? A I -- let's see. Well, it says I was copied. I don't

remember receiving it, but I have no reason to think that I didn't. Q A Q A Q Would you look at the next page of this document, sir. The first page of the letter? The first page of the letter, yes. Yes. Do you recall having received or having read this letter

from the Lynn Stodghill firm on or about March 20, 2000? A Q I don't remember receiving it. The Lynn Stodghill firm was the employment firm about which

you just made reference a minute ago? A Correct. Well -- I guess I don't know enough about that

firm, but I believe Lynn -- I believe Steve was primarily an employment lawyer. I'm not here to tell you that it was, you know, solely an employment firm like Littler Mendelson, but they were the employment lawyers representing the company in the Cardwell matter. Q And you see on the third page of this exhibit, the second

page of the document, a signature line for Steven H. Stodghill? A Q ago? UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 39 of 122 I see that. That's the Steve to which you just made reference a minute

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A Q

Yes. Do you have any basis to dispute that you received a faxed

copy of this Exhibit 173? MR. BIRNBAUM: Objection. The witness has already

answered that he does not recall receiving the document. THE COURT: THE WITNESS: received it or not. You may answer. Well, I guess I don't know whether I I was copied on it, so I assume I did. I

don't remember receiving it. And if I didn't receive it, I don't know what I could tell you to prove that I didn't receive it. MR. KAUP: Exhibit 173. MR. BIRNBAUM: THE COURT: Objection. Foundation. Your Honor, we move for the admission of

It's admitted.

(Exhibit No. 173 admitted in evidence.) MR. KAUP: Q BY MR. KAUP: Thank you, Your Honor. Mr. Donahey, could you look again at the

second page of this exhibit. A Q Yes. And the second full paragraph of the letter, in the second

sentence of that paragraph, it begins, "First, as Mr. Donahey has explained --" A Q Yes. It goes on to say "-- to Janet Lord several times, the UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 40 of 122 Do you see that?

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company is unable under A.R.S. Section 10-640 to make payment in respect of its common stock (e.g., repurchase its common stock.)" Do you see that language? A I see that. THE COURT: help me find it. MR. KAUP: I apologize, Your Honor. It's in the I'm sorry. I don't see it. Would you

second full paragraph of the second page of the exhibit and it is the second sentence in that paragraph. THE COURT: MR. KAUP: self-explanatory." THE COURT: I see the problem. It's the first page of I'm with you How does the paragraph begin? "Most of our comments are

the letter, but the second page of the exhibit. now. MR. KAUP: Q BY MR. KAUP:

I apologize for the confusion, Your Honor. First, Mr. Donahey, you did, in fact,

explain to Ms. Lord that the company could not make payment in respect of its common stock to Mr. Cardwell, correct? A I don't remember doing that. I don't doubt that I did and

I think that would have been right, but I just don't remember telling her that after all these years. I don't dispute -- I mean I don't disagree. Q Why is it that you think it would be right? UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 41 of 122

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A

Well, it's been a while since I have looked at

A.R.S. 10-640, but there's -- it primarily relates to paying dividends -- this is for Arizona corporations -- can't pay dividends or repurchase stock if the sum of -- unless their assets equals more than their liabilities, plus the aggregate liquidation preferences payable to preferred stock. And so -- and let me restate that a little because I got that a little bit wrong. They can't repurchase common stock unless the assets of the company exceed -- the sum of the liabilities plus the liquidation preferences on the preferred stock. So in other words, for purposes of the calculation, A.R.S. 10-640, you would have to take Visitalk's assets and see if it's more than their liabilities, plus all the amount that had been paid to date on its preferred stock, which would be the aggregate liquidation preferences. And if that was negative, which it must have been at this time, then Visitalk couldn't repurchase stock or pay a dividend. Q Mr. Donahey, can you look at Exhibit 338, please, and that

is in Exhibit Notebook 8 -- never mind. We will pass on that. one. We covered that through another It's in

Could you look at Exhibit 56 please, sir.

Exhibit Notebook 2. A I'm there. UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 42 of 122

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Q A Q

Do you recall having received this e-mail from Ray Gaston? I don't recall receiving it. You see it's an e-mail dated August 3, 2000, to you; and

the subject is "June Financials and Cap Table." A Q I see that. Do you recall having reviewed the financial information

which was the attachment to this e-mail in August of 2000? A Q A Q A Q Do I remember it? Do you recall having reviewed it? No. Could you look at Exhibit 55 please, sir. 55. Thank you. I'm there.

Did you see Exhibit 55 at any time after July 21, 2000,

prior to Visitalk's bankruptcy on November 29, 2000? A I don't think so. I notice I'm not copied on it. I

remember seeing it in the context of our litigation, but I don't remember seeing this between when it was sent and the termination of our representation in November. Q Were you aware that Visitalk was contemplating filing

bankruptcy during the summer of 2000? MR. BIRNBAUM: evidence. THE COURT: THE WITNESS: Q BY MR. KAUP: Overruled. Not that I recall. Objection. Assumes facts not in

When was the first time you became aware that UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 43 of 122

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Visitalk was contemplating filing bankruptcy. A Well, I don't know how to answer that. I remember the -- I And I

believe they filed on -- I want to say July 29, 2000.

don't think I was taken by surprise when I heard they had filed, so I must have known that was -- you know, at least a possibility, but I don't think it was more than a -- more than a week or so before that that I was -I mean it's so long, I'm kind of speculating, frankly but I don't think in July that was something I would have known about. Q Could you look at Exhibit 58 please, sir. MR. BIRNBAUM: Your Honor, I think to avoid confusion,

the Court may take notice of the fact that either the witness misspoke or doesn't know the fact, but the bankruptcy filing is in November, not in July. THE COURT: I understand that. All right. Thank you.

MR. BIRNBAUM: THE WITNESS: THE COURT: THE WITNESS: THE COURT: THE WITNESS: MR. BIRNBAUM: THE WITNESS: Q BY MR. KAUP:

Oh, I'm sorry if I said July. You did. Okay. I'll try to be more careful.

What should you have said? I should have said November 29, 2000. Thank you, Your Honor. Exhibit 58? Are you there, sir?

Yes please.

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A Q

Yes. Do you see at the bottom of the page there's a reference

to -- there's an e-mail from you to Mr. Gaston and a reference to, "The financial statements you sent me refer to the 12-31 numbers as 'audited.'" A Q I see that. And, sir, isn't it true that your e-mail was responsive to

Mr. Gaston's e-mail, which is Exhibit 56, and in reference to the June financials he had attached to his e-mail of August 3, 2000? A Well, I guess I don't know for sure. I see the reference

to "audited" in the column December 31, 1999, so it could be, but -Q A Q And just -I can't tell you that. And just for ease of the Court's reference, could you

identify the page you were referring to just a minute ago when you mentioned the date in the column? A Well, I guess I'm looking in Exhibit 56 and there's the It says the December 31

column on the right on SW017416. numbers are audited.

That's the same on the next three pages.

Now, well I guess -- well, maybe they were audited by then. Earlier in this examination you showed me a draft audit

report dated March-blank and I don't know if that was finalized. So I guess I'm not being much help in confirming UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 45 of 122

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that -- I mean, he must have sent me something that -- well, of course I wouldn't have -- they must not have been audited or I would have -- wouldn't have told him to remove the reference to audited and he wouldn't have agreed to take it off. So to answer your question more directly, I don't know whether this preceded Exhibit 58. Q A Q "This." Correct. Well, if you look at the top of the first page of Exhibit You mean Exhibit 56?

56, you see it's dated August 3, 2000? A Q I see that. And if you look at the date of your e-mail on Exhibit 58,

you see it's August 7, 2000? A Q I see that. So Exhibit 56, you see, did precede your e-mail in

Exhibit 58, correct? A Oh, I'm not saying that 56 didn't precede it. And, you

know, the fact that I wouldn't have replied to Exhibit 56 and instead crafted a new e-mail also gives me some doubt that I was responding to Exhibit 56. I mean, I'm not saying that I wasn't. I just hate to

confirm something for you if I'm not sure about it. MR. KAUP: Could you look at Exhibit 59 please, sir.

And for the record, Your Honor, Exhibits 56 and 58 are stipulated. UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 46 of 122

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THE COURT:

Thank you.

56 is admitted by stipulation. 59 is admitted by stipulation. MR. KAUP: THE COURT: MR. KAUP: THE COURT: MR. KAUP: THE COURT: stipulation. Q A Q BY MR. KAUP: Yes. Do you see this is an e-mail from you to Mr. Gaston dated Mr. Donahey, are you at Exhibit 59? Yes, Your Honor. Thank you. And 58. 58 also? Yes. Very well. 58 is also admitted by

August 7, 2000? A Q That's what it looks like. You see in your e-mail you make reference to a need for an

escrow agent for the offering? A Q A I see that. What offering were you making reference to in this e-mail? Well, I don't know if it was -- I think we talked the other

day about the fact there were -- there may have been a Series F offering that I don't think was ever completed. It might have been that. convertible debenture offering. It might have been the I mean there could have been It's about

some other aborted offering that it's referring to.

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the time of the convertible debenture offering, I think, if my chronology is correct, so it could have been that but it's been so long, I can't say for sure. Q Why is it that you told Mr. Gaston that an escrow agent was

necessary for that offering? A I don't remember. Well -- and let me back up. I am not -- this doesn't I may have.

say I told him that he needed an escrow agent.

But this -- just to be perfectly precise, it was a conversation re: the need for an escrow agent. And, you know, I don't know

whether I told them they needed one or they felt they needed one or what, but I guess I -- the purpose of this e-mail is merely to give them a name of an escrow company that could serve as an escrow agent. Q Mr. Donahey, could you look at Exhibit 292, please.

Exhibit Notebook 7. A Q A Is that what I should have up here, Mr. Kaup? You should and I apologize if you don't. Oh, I'm sorry. MR. KAUP: I missed it. Okay. Here it is.

And, Your Honor, this document has

also been stipulated to. THE COURT: Q BY MR. KAUP: Thank you. It's admitted by stipulation.

Mr. Donahey, did you see Exhibit 292 in May

of 2000. MR. CLAUS: Your Honor, I apologize. I just don't

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know if this is a witness who entered the courtroom. recognize him. (Discussion had off the record.) MR. CLAUS: THE WITNESS: 2000? Q All right. Thank you. Sorry.

I don't

You're asking if I saw it in May of

I don't remember seeing it, but I'm pretty sure I did. Do you recognize Exhibit 292 as the final

BY MR. KAUP:

settlement agreement between Visitalk and Mr. Cardwell? A Yes. And just to be clear, there were two releases with Mr. Cardwell. There's the one in December when -- that related

to the Founder's Warrants, and then there's this one in 2000 which related to his departure from the company. Q Do you see at the bottom of the first page the heading

"Purchase of stock from Mr. Cardwell." A Q Yes. And then do you see a reference to "Cardwell would receive Do you see that?

$2.42 per share of stock sold." A Q Yes.

And at the top of that paragraph it says, "The company

agrees that it will procure one or more purchasers for a total of 500,000 shares of Cardwell's Visitalk stock." A Q I see that. What was -- how -- what was to be the total purchase price Correct?

of the shares of Mr. Cardwell's stock? UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 49 of 122

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A

Well, that would have been undetermined at this point in I understand that Visitalk ended up selling the stock

time.

for well in excess of $2.42. So I don't think at this point in time the purchase price would have been determined, although I suspect Visitalk must have thought that they could sell it for more than 2.42 a share. Q A Do you know what the actual price this stock was sold for? Well, I think some was sold for -- maybe it was in the 6's

and I think some was sold for 5 and -- I mean, I don't remember -I seem to recall that they ended up getting quite a bit more than 1.2 million for it, but I don't -- I just have it in my mind that some was sold at 6 and some was told as 5-something but I could be a little off. Q A And the reference is to "6" or "5-something" is $6 and $5? Yeah, like 6.75. 5.75. Something like that. And maybe

some sold for less. Q

I don't remember.

Did you ever have any concerns regarding this part of the

Cardwell Settlement Agreement? A Well, we talked yesterday about the broker issue. I don't

know if that rises to the level of a concern, but I mean I definitely wanted to look into that. And I think we concluded

and advised Steve Best that it was a risk and they decided to proceed despite that. UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 50 of 122

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And obviously, it was kind of a one-off type transaction, and so they thought the risk was pretty low but I think that -- when you say "concerns," I guess that maybe qualifies as a concern. That's my wife. MR. KAUP: THE COURT: BY MR. KAUP: Your Honor.

She's not going to be a witness. Understood.

Mr. Donahey, could you now look at Exhibit

Do you have it, sir? Yes. Did you ever see this e-mail from Mr. Gaston to Mr. Cooney? I don't believe I did, I mean up until our litigation. Did you ever discuss with Mr. Cooney -- well first. Do you know what Mr. Cooney's position with Visitalk

was in July of 2000? A I don't know what his title was. I would think of him as a

senior officer of Visitalk. Q Did you handle on behalf of Visitalk the Stock Purchase

Agreements related to the Mark Cardwell Settlement? A Well, I believe we prepared at least some of them. I don't

know that we handled all of them and -- or at least we prepared a form of one. So I can't say we did all of them. I know we

did at least some of them. Q Could you describe for the Court how mechanically the

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worked from the point in time after the agreement, which we've looked, at was signed; the mechanics through which you would prepare a Stock Purchase Agreement and the purchaser would pay consideration for stock and then stock certificates would be issued? MR. BIRNBAUM: THE COURT: Q BY MR. KAUP: Objection. Relevance.

Sustained.

You as a lawyer at Snell & Wilmer

participated in the transaction through which stock was sold and transferred to persons who purchased stock through the Mark Cardwell transaction, correct? A Well, I don't know. That may be overstating our role.

If somebody from Visitalk said, "Prepare a Stock Purchase Agreement for Mr. Smith to buy 100,000 shares at a certain price," I mean, I don't doubt we would have prepared a purchase agreement and sent it to Visitalk. That may have happened. But to say I participated,

maybe in the broadest sense, but I mean, our role was pretty limited. Q A Q Could you look at Exhibit 15 please, sir. I'm there. Do you see Exhibit 15 is a letter from you dated July 15,

1999, to Mr. Best? A Q Yes. You prepared this document? UNITED STATES DISTRICT COURT Document 505 Filed 04/22/2008 Page 52 of 122

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A

I'm sure I had an associate assist with it, but I

definitely participated in preparing it and I signed it. MR. KAUP: Your Honor, there's a stipulation for the

admission of Exhibit 15. THE COURT: MR. KAUP: Q BY MR. KAUP: It's already been admitted. Okay. I didn't realize that.

The information in this letter was true when

you prepared it, correct? A Well, yeah -- well, we were engaged the end of June or And as we have indicated in a letter that

early July, 1999.

went out a couple weeks later, you know, we were still getting our arms around the facts. And I'm talking about the July 28,

1999 Founder's Warrants letter. So it would have been our understanding of the situation based on, you know, being on the job for two weeks. Q Did you ever come to have an understanding that any

information contained in the July 15, 1999, letter was wrong? A Well, if you're asking me whether any of it turned out to

be wrong, I would want to read it right here and I'm happy to -- I'm happy to do it if you would like me to. Would you like me to do that? Q First, let me ask this, sir. Do you recall there being a time when you realized that information in Exhibit 15 was wrong? THE COURT: Can't you point him to something if you

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have it in mind? MR. KAUP: There's nothing in particular, Your Honor,

to which I would point him. THE COURT: the final go at it. MR. KAUP: Q BY MR. KAUP: This isn't discovery, Mr. Kaup. This is

You need to know where you're going, sir. Understood, Your Honor. Sir, look at page 4 of this document. Do

you see the paragraph which begins, "Failure to timely file Form Ds." A Q Yes. Visitalk never did file those Form Ds prior to the

conclusion of your representation of the company, correct? A That is not correct. One of the things -- I mean, this

letter is going through -- you know, we're on the job two weeks and it's obvious that they've got some real problems. And this

is, of course, not even dealing with the Founder's Warrants. This is just the securities issues and we inherited quite a mess. And so within two weeks we prepared this l