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,

No.

CV 02-2405-PHX-HRH Phoenix, Arizona March 12, 2008 1:00 p.m.

BEFORE:

THE HONORABLE H. RUSSEL HOLLAND, JUDGE

REPORTER'S TRANSCRIPT OF PROCEEDINGS BENCH TRIAL VOLUME 8 p.m. Pages 1612 to 1739

Official Court Reporter: Candy L. Potter, RMR, CRR Sandra Day O'Connor U.S. Courthouse, Suite 312 401 West Washington Street, Spc 36 Phoenix, Arizona 85003-2151 (602) 322-7246 Proceedings Reported by Stenographic Court Reporter Transcript Prepared by Computer-Aided Transcription

Case 2:02-cv-02405-HRH

Document 490

Filed 03/17/2008

Page 1 of 128

1613

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 UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 2 of 128 For the Defendants: Mariscal Weeks McIntyre & Friedlander By: Gary L. Birnbaum, Esq. Timothy J. Thomason, Esq. Scot L. Claus, Esq. 2901 North Central Avenue, Suite 200 Phoenix, Arizona 85012 For the Plaintiff: Tiffany & Bosco By: Christopher Reed Kaup, Esq. 2525 East Camelback Road, 3rd Floor Phoenix, Arizona 85016 A P P E A R A N C E S

1614

1 2 3 4 5 6 7 8 9 10 11 12 13 128 14 15 157 16 518 17 18 19 20 21 22 23 549 24 25 UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 3 of 128 Document dated 7-28-99 1710 520 521 522 540 New Employee Information Sheet dated 9-15-98 9-17-98 Press Release 9-3-98 Press Release Visitalk.com advertising brochure 2-24-99 e-mail to Peter Thimmesch from Cindy Thimmesch re Addition of Shares for Employee Options 1652 1645 1644 1647 Fax from D. Litt to S. Best 1694 Rescission Offer 2,400,000 shares of Series A Preferred Stock $0.125 to 0.25 per share 1681 EXHIBIT NO. DESCRIPTION INDEX OF EXHIBITS IDENT RECEIVED WITNESS: BOYD LEMON By Mr. Kaup By Mr. Claus I N D E X DIRECT 1616 1628 CROSS REDIRECT RECROSS

1650

1615

1 2 3 4 5 6 7 555 8 9 10 11 12 563 13 14 15 567 16 17 18 19 20 606 21 22 23 24 25 UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 4 of 128 638 Goldman Sachs and Wit Soundview Information Sheet 8-8-00 Confidential Information Statement 1703 1676 604 570 1-1-01 Statement of Financial Affairs of Visitalk.com 12-13-99 letter from Visitalk to Allen and Catherine Adler and attachments 4-99 Visitalk.com Visit and Evaluation 1733 564 11-29-99 letter to Susan Cole from Alan Kaplan 12-2-99 Release of Claims of Susan Cole 1730 1669 556 Memorandum to Members of the Board of Directors of Visitalk.com, Inc. dated 10-18-99 Memorandum to Visitalk.com, Inc. from Snell & Wilmer dated 10-18-99 regarding SEC reporting and compliance requirements EXHIBIT NO. 553 DESCRIPTION 10-18-99 memorandum to the Members of the Board of Directors and Officers of Visitalk.com, Inc. INDEX OF EXHIBITS IDENT RECEIVED

1717

1722

1729

1673 1656

DIRECT EXAMINATION - BOYD LEMON

1616

1 DIRECT EXAMINATION 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BY MR. KAUP: Q. Mr. Lemon, we left off on the -- a question relating to the Let me just go
13:00:41

Cardwell Settlement and stock sale transaction. back to that and ask that question again.

Can you provide further explanation for the Court regarding your opinion that Snell & Wilmer fell below the standard of care in connection with advising the Board regarding the Cardwell Settlement transaction? A. Yes. Two points. First of all I reviewed the memorandum by Shirley Nagy in which -- she was an associate at Snell & Wilmer, and she said, in substance, that it may very well be that Visitalk, in order to lawfully engage in the transaction that consisted of the Cardwell Settlement would have to be a licensed securities broker dealer. MR. CLAUS: Move to strike, Your Honor, for violating
13:01:38 13:01:05

courts order in limine, page 7. THE COURT: Overruled.
13:01:52

You may answer. THE WITNESS: I am assuming for purposes of this And if she is correct, that

testimony that she is correct.

should have been disclosed to the Visitalk Board of Directors as a material point, in that they would be violating the law if she was correct in her conclusion. UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 5 of 128
13:02:12

DIRECT EXAMINATION - BOYD LEMON

1617

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

Secondly, the settlement consisted of Mr. Cardwell selling 500,000 shares of his stock in Visitalk to third-party investors. Those -- and he received $1.2 million for it, and

the corporation, pursuant to the Settlement Agreement, received -- I've forgotten how much, but some portion of the consideration that was paid for the stock. Presumably those investors would have purchased their stock if it was available from Visitalk. And so Visitalk would
13:02:45

have obtained all of the consideration for the stock, including the $1.2 million that went to Mr. Cardwell. Therefore, in my opinion, Visitalk -- or rather, the Settlement Agreement with Cardwell, in effect, gave away a corporate opportunity to obtain additional funds from investors, a usurpation of a corporate opportunity. THE COURT: My memory is they got a million dollars -That's a give away?
13:03:40 13:03:09

Visitalk got a million dollars. THE WITNESS: No.

But Cardwell got a million too.

They could have gotten that too if they had issued their own treasury stocks in these investments. So they got -- instead of getting 2.2 million, they got a million. Because presumably the investors wouldn't care
13:03:56

who they got the stock from, they just wanted to buy Visitalk stock. And they would have paid the same price to Visitalk. That should have been disclosed by Snell & Wilmer who participated in the preparation of the Settlement Agreement to UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 6 of 128
13:04:23

DIRECT EXAMINATION - BOYD LEMON

1618

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

the Visitalk Board of Directors. THE COURT: disclosed? THE WITNESS: That entering into this transaction was
13:04:40

What exactly is it that they should have

usurping a corporate opportunity for Visitalk to get an additional $1.2 million in the sale of its stock. BY MR. KAUP: Q. Mr. Lemon, finally in the area of advice, matters relating

to advice to the Board of Directors, could you explain further for the Court your opinion that Snell & Wilmer fell below the standard of care with respect to advising the Board regarding the need to hire an expert on technology? A. Yes. By -- by the Summer of 2000, Visitalk had been doing
13:04:59

business for nearly two years, and had virtually no -generated virtually no revenue. They'd gone through, I don't
13:05:33

know the exact number, but 30 or $40 million that they had raised. And still apparently, based upon the testimony that

I've read, had no reasonable expectation of generating significant revenue in the foreseeable future, the reasonably foreseeable future. It certainly would be material to future investors whether this product that they had was going to generate a profit. MR. CLAUS: Move to strike, Your Honor. Materiality
13:06:17 13:05:58

is an issue of securities law, a term defined under securities UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 7 of 128

DIRECT EXAMINATION - BOYD LEMON

1619

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

law, for which this expert admitted in his deposition he was not competent. MR. KAUP: It may be defined under securities law, but

I don't think he's giving an opinion as to whether it meets the definition of "material" under the securities law. It's also
13:06:30

defined under state law and common notions of what is important. THE COURT: not over the line. MR. CLAUS: THE WITNESS: Here again I think this one gets up to if But let's proceed. Thank you, Your Honor. Therefore it seem to me that it would
13:06:46

have been prudent advice to give to the Board of Directors to hire an expert who could determine whether or not the company, in effect, had a viable -- commercially viable product, so that if it did not, it would not be making at least implied representations to the -- to future investors that the company would turn a profit in the foreseeable future. In fact, such an investigation was done just, as I recall, a few days or weeks before the bankruptcy was filed, and the expert determined to the contrary, that it was not -- that they did not have a commercially viable product that would earn a profit in the foreseeable future. In any event, I think it was below the standard of care for Snell & Wilmer not to advise the Board of Directors to have such an investigation done to determine whether this UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 8 of 128
13:08:04 13:07:40 13:07:13

DIRECT EXAMINATION - BOYD LEMON

1620

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

company had a reasonable chance of making a profit. THE COURT: Are you under the impression, sir, that

Snell & Wilmer was providing business advice to Visitalk? THE WITNESS: They may have been, but that's not the The answer is I don't know, I
13:08:30

basis of any of my opinions.

guess would be the short answer. BY MR. KAUP: Q. Mr. Lemon, based upon the materials that you reviewed, did

lawyers from Snell & Wilmer communicate directly to members of the Board of Directors? A. Yes. And in fact, communicated directly to the Board on They attended at least two Board meetings
13:08:48

several occasions.

that I'm aware of in 1999, one in August and the November 24th, 1999 Board meeting, at which the Founder's Warrants were discussed and action taken with respect to them. And there was a memo from one of the Snell & Wilmer partners, Mr. Pulaski, regarding the Founder's Warrants that was, as I understand it, delivered to the Board of Directors. I think that was dated November 2 of 1999. So they did have significant communication with the Board of Directors. Q. Is that part of the basis for the opinions that you just
13:09:30 13:09:08

gave regarding the advising the Board? MR. CLAUS: MR. KAUP: No disclosure, Your Honor. Your Honor, it's -- this is directly
13:09:47

UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 9 of 128

DIRECT EXAMINATION - BOYD LEMON

1621

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

in -- at least having spent a minute looking through this directly in the rebuttal report of Mr. Lemon, and I believe that it -- this is also part of what he testified to in his deposition, and I believe there may be references to it in the original report. MR. CLAUS: THE COURT: Briefly, Your Honor. No, no, please.
13:10:08

You may answer. THE WITNESS: Yes, that was one of the factors that I
13:10:17

considered in reaching my opinion. BY MR. KAUP: Q. In connection with the work you've done on this engagement,

have you formed an opinion as to whether Snell & Wilmer fell below the standard of care as to representation of the Thimmeschs and O'Donnells personally at the same time they were representing Visitalk? A. Q. Yes. What is that opinion? MR. CLAUS: THE COURT: THE WITNESS: Foundation. You may answer. In my opinion they fell below the
13:10:50 13:10:40

standard of care and breached their fiduciary duty to Visitalk because they had a conflict of interest in representing both Visitalk on the one hand and the Thimmeschs and O'Donnells on the other hand. UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 10 of 128
13:11:06

DIRECT EXAMINATION - BOYD LEMON

1622

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

BY MR. KAUP: Q. Could you explain further the basis for your opinion on

that point? A. Yes. Start according to Mr. Weiss' testimony. Mr. Weiss
13:11:23

being a partner of Snell & Wilmer I think in the trusts or estate planning department. He gave -- he started giving

estate planning advice to the O'Donnells and Thimmeschs in the Fall of 1999 and continuing into early 2000, I believe. The by far most significant asset of the Thimmeschs and the O'Donnells consisted of the Founder's Warrants, assuming that they were validly issued. And it would have been
13:11:54

in the best interests of Visitalk to treat those Founder's Warrants as compensation, because then it would have been -MR. CLAUS: supplemental report. Your Honor. THE COURT: was disclosed? MR. KAUP: MR. CLAUS: compensation. MR. KAUP: Your Honor, the -- at J, opinion J on page Your Honor -And he's not qualified as a tax expert on
13:12:27

Your Honor, not in his report, not in his This has never been disclosed,
13:12:19

Mr. Kaup, is this beyond any report that

4 says, Snell & Wilmer had a conflict of interest in giving estate planning advice involving Visitalk securities to Mr. Thimmesch and Mr. O'Donnell. This conflict of interest
13:12:45

UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 11 of 128

DIRECT EXAMINATION - BOYD LEMON

1623

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

constituted a breach of fiduciary duty by Snell & Wilmer to Visitalk, as well as performance below the standard of care. That's the opinion portion. And the report goes on

and at significantly more length at J in the -- in the actual opinions -- I mean, in the explanation portion of the report. So I believe this has been fairly and fully disclosed. MR. CLAUS: It's telling that Mr. Kaup isn't reading
13:13:03

to you from the report where Mr. Lemon talks about a compensation analysis that he allegedly performed. He didn't.
13:13:21

He's not competent to, he's not competent to testify to it here. THE COURT: Did you do any analysis of this

compensation question? THE WITNESS: I read about the issue in the
13:13:31

depositions, in the deposition of Mr. Weiss, who discussed the difference between whether it was a distribution or a compensation, and if it's a distribution it's not taxable -- or rather -- yes, it's not taxable to the individuals. If it's

compensation it is taxable to the individuals but it's deductible by the corporation. He explained all that. I'm
13:13:53

assuming that he explained that part of the law accurately. And if that's the case, then Snell & Wilmer had a conflict of interest in representing both sides. THE COURT: Wait. Before you go on. Are you -- are
13:14:08

you also assuming that it would, in fact, be to Visitalk's UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 12 of 128

DIRECT EXAMINATION - BOYD LEMON

1624

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

advantage to treat the Founder's Warrants as compensation? THE WITNESS: I'm not assuming -- well, I'm assuming

that when Mr. Weiss says that it would be deductible to the corporation under those circumstances, that that is an advantage to the corporation. THE COURT: be? THE WITNESS: MR. CLAUS: Well, it would be a tax advantage. He's even getting it wrong, Your Honor. It's not disclosed,
13:14:40 13:14:31

Assuming -- and you understand it may not

He's getting Mr. Weiss' testimony wrong. Your Honor. It's not fair.

THE COURT:

I think we've pursued it as far as it

needs to go, Mr. Kaup. BY MR. KAUP: Q. Aside from the -- as part of your opinion regarding the
13:14:53

conflict of interest relating to the estate planning advice to the Thimmeschs and the O'Donnells, is your opinion based -- on that based on anything other than the compensation versus distribution analysis that you've referenced in Mr. Weiss' deposition? A. Yes. It's also based on the -- on the fact that there's a
13:15:22

conflict, because it certainly would be in the best interests of O'Donnell and Thimmesch that the warrants be valid and remain in effect, whereas it might be in the best interests of the corporation to have the Founder's Warrants invalid or not UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 13 of 128
13:15:44

DIRECT EXAMINATION - BOYD LEMON

1625

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

in effect, or rescinded. Q. Did you also form an opinion as part of your work in

connection with this case that Snell & Wilmer fell below the standard of care with respect to working with assisting Peter and Thimmesch (sic) as to breaches of their fiduciary duties? A. Yes. MR. CLAUS: THE COURT: THE WITNESS: BY MR. KAUP: Q. Can you give the Court that opinion and the explanation Foundation, Your Honor. You may answer. The answer is yes.
13:16:31 13:16:22

underlying that opinion? A. Yes. In my opinion they were assisting

Thimmesch -- Mr. Thimmesch and Mr. O'Donnell to breach their fiduciary duty to the corporation by helping them cover up the backdating of the Founder's Warrants, that is the unanimous written consent for the issuance of the Founder's Warrants. Snell & Wilmer, of course, did not do the backdating themselves, but they assisted in covering them up by not disclosing them in the offering documents that they prepared in connection with the Kaplan letter regarding the A Series shareholders and in connection with the rescission offer -- or not the Rescission Offer, but in connection with the Updated Confidential Information Statement that was sent out to the C Series shareholders. UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 14 of 128
13:17:38 13:17:14 13:16:48

DIRECT EXAMINATION - BOYD LEMON

1626

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

By not disclosing the backdating of the unanimous written consent and therefore the potential invalidity of those warrants, they were assisting the individuals to cover up that backdating. Q. In connection with your work in this proceeding, did you
13:18:07

also formulate an opinion as to whether Snell & Wilmer fell below the standard of care with respect to attempted releases sent to Series A investors? A. Yes. They fell below the standard of care -MR. CLAUS: THE COURT: BY MR. KAUP: Q. What is that opinion? MR. CLAUS: securities opinion. THE COURT: BY MR. KAUP: Q. A. What is that opinion, sir? They fell below the standard of care in assisting, again,
13:18:54

Calls for a yes or no, Your Honor. Mr. Kaup.

13:18:30

Foundation, Your Honor.

And calls for
13:18:42

Go ahead.

withholding of information from the shareholders with respect to these disclosures that I have -- that I have already discussed. And they sent out, for example, the Kaplan letter, which in my opinion was misleading in not disclosing the true facts about the Founder's Warrants and the consequences to the UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 15 of 128

13:19:20

DIRECT EXAMINATION - BOYD LEMON

1627

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

corporation with respect to potential claims of shareholders. Q. Sir, did you formulate an opinion about whether Snell &

Wilmer fell below the standard of care with respect to statements made by Mr. Mallery at a shareholders' meeting in December of 1999? A. Q. Yes. What is that opinion? MR. CLAUS: THE COURT: THE WITNESS: Foundation. You can answer. Based upon the testimony of Mr. Mallery
13:20:01 13:19:53

that I read, his deposition testimony -- I'm sorry, not Mr. Mallery. Mr. Rothwell in his deposition, Mr. Mallery at

that meeting told the shareholders, the A shareholders that they shouldn't worry about the information that was set out in Mr. Kaplan's letter because soon they would all be millionaires or they would all be rich or something to that effect. In my opinion that is below the standard of care. Attorneys customarily do not make such statements. make statements like that. Salesmen
13:20:30

And it was a statement that no
13:20:54

lawyer could give a valid opinion on or give any assurances on to shareholders. And in my opinion lawyers -- reasonable lawyers would not have made a statement like that, particularly since this is a man who is a senior partner of a prestigious law firm, and the shareholders are likely to place credence in what he says. UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 16 of 128

13:21:22

CROSS-EXAMINATION - BOYD LEMON

1628

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

MR. KAUP: Mr. Lemon. THE COURT: MR. CLAUS: MR. CLAUS:

I don't have any further questions for

You may cross-examine. Thank you, Your Honor. Good afternoon, Mr. Lemon. Good afternoon. Good afternoon, Your Honor. CROSS-EXAMINATION
13:22:03

THE WITNESS: MR. CLAUS:

BY MR. CLAUS: Q. Mr. Lemon, I want to start off with a statement you made on
13:22:27

direct that Snell & Wilmer had a duty to report to the Board. Do you remember you said that? A. Q. Yes. You also testified that you reviewed the trial testimony
13:22:39

that had been sent to you by Mr. Kaup of last week; correct? A. Q. I did, yes. You did not have an opportunity to review Mr. Mallery's

trial testimony that he gave today; correct? A. Q. That is correct. So you are not aware, sir, that Mr. Mallery testified under
13:22:51

oath today that he was directed by the Board of Directors of Visitalk.com to report to Stephen Best; correct? A. I believe he also testified to that in his deposition. I read it somewhere.
13:23:13

So

I was -- I was aware of that. Q.

You also testified on direct today that the only deviation UNITED STATES DISTRICT COURT

Case 2:02-cv-02405-HRH

Document 490

Filed 03/17/2008

Page 17 of 128

CROSS-EXAMINATION - BOYD LEMON

1629

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

that is required to that protocol -- well, first, you agree that that is a protocol that exists in corporations that you represent, that when general in-house counsel is directed to report to you, that it is appropriate in most circumstances to report your findings, your conclusions and your opinions to general in-house counsel; correct? A. Q. In most circumstances I would agree with that, yes. And you testified under oath today that the only deviation
13:23:36

to that acceptable protocol is when, quote, serious securities violations are discovered, end quote; correct? A. Q. A. Q. That is what I said, yes. You are not, sir, a securities expert; correct? That is correct. You are not independently competent to opine as to what
13:24:13 13:23:54

constitutes a, quote, serious securities violation, end quote; correct? A. I am not here to tell the Court what the law is with

respect to securities, or any other law. Q. Could you please answer my question, sir? You agree that
13:24:28

you are not independently competent to inform the Court through an opinion today what constitutes a, quote, using your words, serious securities violation, end quote; correct? A. It doesn't matter whether I'm competent, it would not be But, no, I am not

appropriate expert testimony anyway. competent to do that.

13:24:50

UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 18 of 128

CROSS-EXAMINATION - BOYD LEMON

1630

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.

And I assume that you are not familiar with Mr. Best's

deposition testimony or the testimony of Mr. Mallery in court today that on those occasions where Mr. Mallery or other lawyers at Snell & Wilmer approached the Board directly, it was done so at the behest and with the permission of Mr. Best; correct? A. Q. I'm aware of that. You talked about claims in your direct examination, and you
13:25:14

talked about claims that you believed that shareholders of Visitalk might have against Visitalk. A. Q. Yes. In order to be a valid claim, would you agree that the Do you recall that?
13:25:35

claim has to be probable? A. Q. A. Q. A. Q. Yes. Measurable? Yes. There has to be a likelihood of its assertion? A reasonable likelihood, yes. But today didn't you testify on direct that, quote, there
13:26:07 13:25:49

was no way to predict whether there would be a lawsuit or not, end quote, by any Visitalk shareholder as a result of any alleged claim? A. Q. A. Your question is did I say that? Yes. Yes, I said that. UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 19 of 128

13:26:22

CROSS-EXAMINATION - BOYD LEMON

1631

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.

The fact of the matter, sir, that through your

investigation of this matter, you have not identified a single investor who refused to invest in Visitalk as the result of any conduct of my client, Snell & Wilmer; correct? A. I don't understand your question. Refused to invest in
13:26:44

Visitalk? Q. I'll ask it -- I'll ask it more slowly and I'll try to ask

it more easily. You have not identified anyone who refused to invest money in Visitalk due to alleged conduct of my client, Snell & Wilmer; correct? A. Q. That's true. You have not identified, sir, a single advertiser who
13:26:57

refused to advertise on Visitalk.com's website due to alleged conduct of my client, Snell & Wilmer; correct? A. Q. That's true. You have not identified a single institution who refused to
13:27:22

loan money to Visitalk as the result of alleged conduct of my client Snell & Wilmer; correct? A. Q. Yes. You mentioned that you were aware of a single claim
13:27:37

asserted by a shareholder and a single lawsuit brought by a shareholder on direct examination. A. Q. Yes. That is a Mr. George Hovde; correct? UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 20 of 128
13:27:54

Do you remember that?

CROSS-EXAMINATION - BOYD LEMON

1632

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.

Yes. Mr. Hovde, H-O-V-D-E, was a Series C investor; correct? I don't recall. Because you never bothered to look at the lawsuit that
13:28:15

Mr. Hovde filed; correct? A. Q. That's correct. It was immaterial to me.

You never bothered to even determine whether Mr. Hovde

filed his lawsuit prior to bankruptcy or after bankruptcy; correct? A. Q. That's right. And so you are not aware, sir, are you not, that
13:28:28

Mr. Hovde's lawsuit, filed post petition, had absolutely nothing to do with Founder's Warrants or integration; correct? A. I never -- I don't think I ever said it did. I have no
13:28:51

knowledge as to what the allegations in his lawsuit were. Q. I'm going to try and go through your opinions in an orderly The first opinion you offered today had to do Do you recall that?

fashion, sir.

with the Founder's Warrants authorization. A. Q. Yes.

Would you agree, sir, that many of your opinions, but

13:29:11

certainly your first opinion that you offered in court today, assumes as a fundamental predicate that the Founder's Warrants were not authorized by a meeting of the Board of Directors on September 12, 1998? A. No, I would not agree with that. UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 21 of 128
13:29:34

CROSS-EXAMINATION - BOYD LEMON

1633

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.

Well, sir, you testified on direct examination that Snell &

Wilmer breached its duty of care because it did not inform the Board of Directors that the Founder's Warrants were not authorized on September 12th, 1998. correct? A. Q. Yes. And the reason you gave for that testimony was due to the You testified to that;
13:29:58

fact that a meeting didn't occur, but instead a unanimous consent was signed, and you even gave a date on November 10, 1998; correct? A. I never said that a meeting did not occur. I have no idea
13:30:17

whether a meeting occurred or not. But I did testify -- the rest of your question is correct, or accurately describes my testimony. Q. Well, isn't it true, sir, that you admit that if a duly
13:30:35

called meeting of the Board of Directors occurred, at which Michael O'Donnell and Peter Thimmesch attended as the only directors, and at which time Mark Cardwell was not a shareholder, then the decision to authorize the Founder's Warrants to Peter Thimmesch and Michael O'Donnell would have been a valid authorization? A. If it had not been followed up by a backdated unanimous
13:30:56

written consent, I would agree with that. Q. Sir, that's not my question. You have admitted that if a
13:31:16

duly called meeting of the Board of Directors occurred on UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 22 of 128

CROSS-EXAMINATION - BOYD LEMON

1634

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

September 12, 1998, at which Michael O'Donnell and Peter Thimmesch attended as the only directors, and at which time Mark Cardwell was not a shareholder or director, then the decision to authorize the Founder's Warrants to Peter Thimmesch and Michael O'Donnell was a valid authorization on September 12, 1998; correct or not? A. In the absence of -MR. KAUP: THE COURT: Objection, Your Honor. Woe, woe, one at a time, please.
13:31:49 13:31:37

I didn't hear you. MR. KAUP: I was just saying, now he's asking

Mr. Lemon for the types of legal conclusions that he was objecting were improper for him as opposed to testimony on the standard of care. THE COURT: question. Go ahead. BY MR. CLAUS: Q. You hadn't given your answer, sir. My question called for
13:32:14

I don't think that was essentially the

13:32:04

you to either say correct or incorrect. A. Q. I can't answer it that way. Well, sir, let me have you look at what will be on your

screen, and I can give you a hard copy if you prefer, but I think given size of the text it will be easier for you to read it on the screen. UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 23 of 128
13:32:37

CROSS-EXAMINATION - BOYD LEMON

1635

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.

The screen is fine. Okay. Could you please pull up, David, 316 of Mr. Lemon's

deposition, line 11. Did I ask the following questions and did you give the following answers, sir, commencing at line -- actually it looks like 11-and-a-half. Question: Yes. Assume that it was a duly called
13:32:52

Board of Directors meeting, assume that a decision was made at the Board of Directors meeting on September 12, 1998, to authorize the issuance of 7.65 million Founder's Warrants to Peter Thimmesch and Michael O'Donnell at an exercise price of 13 and a half cents per share. Assume that as of September 12,
13:33:07

1998, Mark Cardwell was neither a director nor a shareholder. Based on those assumptions, do you have an opinion as to whether or not the Founder's Warrants were validly authorized? Answer: I still think it would have been a breach of But you asked, would they Under -- I
13:33:46 13:33:29

the terms of the Series A Offering. have been validly authorized.

So I'm sorry.

believe under those facts that you've asked me to assume, it would have -- they would have been validly authorized. Did I ask that question and did you give that answer? A. Yes, you read it correctly. MR. BIRNBAUM: Mr. Claus, I think you gave the wrong
13:34:08

UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 24 of 128

CROSS-EXAMINATION - BOYD LEMON

1636

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

page reference for the record. MR. CLAUS: are paginated. apologize. MR. KAUP: And Your Honor, for -- under the rule of
13:34:17

I'm sorry, it's because of the way these I

Page 317, line 11, through 318, line 2.

completeness, I think Mr. Claus need to read the next three lines of the -- of the deposition. THE COURT: MR. CLAUS: Please do it. Sure. And you -13:34:32

And you -- that was my question: Answer: laws. Question:

But they would have violated the securities

And you don't know, sir -- say that again.

They would have violated the securities laws? Do you want me to read, answer, witness nods, Mr. Kaup? MR. KAUP: BY MR. CLAUS: Q. A. Q. A. Q. Should I ask again, sir, you're not a securities expert? I don't think you need to ask that again. Because you're not -I'll answer it if the Court wants me to. Well, based upon the rule of completeness that Mr. Kaup
13:35:07 13:34:45

No need to read about the nod.

asked about. Sir, so do you know, sir, what the word "percipient" UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 25 of 128
13:35:17

CROSS-EXAMINATION - BOYD LEMON

1637

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

means? A. Q. Yes. You know what the phrase "personal knowledge" means;

correct? A. Q. Yes. I want to make sure I understand something about the
13:35:32

assumptions that you've made for your testimony. It's true, sir, that you know that Peter Thimmesch has testified that a meeting actually occurred on September 12, where he and Michael O'Donnell, as the only directors of Visitalk.com and the only shareholders, agreed to authorize Founder's Warrants in the amount of $7.65 million; correct? A. Q. I know he testified to that. And do you know that Cynthia Thimmesch testified at page
13:36:10 13:35:52

32, line 3 through line 13, that a meeting actually occurred on September 12, 1998, where the Founder's Warrants were authorized by Peter Thimmesch and Michael O'Donnell; correct? A. Of course I don't know the page and line numbers, but I

know that she testified in substance to that, yes. Q. A. Q. Did you review Miss Thimmesch's trial testimony? Very briefly. So are you aware, sir, that she testified under oath in
13:36:30

this courtroom that a meeting occurred on September 12, 1998, for approximately two hours in the O'Donnells' garage where the amount and terms of Founder's Warrants were agreed upon by UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 26 of 128
13:36:52

CROSS-EXAMINATION - BOYD LEMON

1638

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

Mr. Thimmesch and Mr. O'Donnell as the only directors and shareholders of Visitalk.com, Inc.? A. Q. Yes. And you know, sir, I take it, that Michael O'Donnell
13:37:06

testified at page 291, lines 8 through 292, lines 5 of his deposition, that a meeting actually occurred on September 12, 1998, in his garage, where he and Peter Thimmesch, as the only directors and shareholders of Visitalk.com, Inc., authorized the issuance to themselves of Founder's Warrants in the amount of 7.65 million shares; correct? A. Q. A. Q. Yes. Did you review Mr. O'Donnell's testimony? Yes. And so you're aware, sir, that Mr. O'Donnell testified in

13:37:32

trial as well that such a meeting took place at such a time when such events occurred; correct? A. Q. Correct. And I take it that you know that Marcia O'Donnell testified

13:37:42

on page 27, line 14 through 28, line 3 of her deposition that a meeting actually occurred on September 12, 1998, in her garage, while her children were playing and being tended to by a babysitter, where Peter Thimmesch and Michael O'Donnell, as the only directors and shareholders of Visitalk dot-com Inc., authorized the issuance to themselves the Founder's Warrants; correct? UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 27 of 128
13:38:21 13:37:57

CROSS-EXAMINATION - BOYD LEMON

1639

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.

Correct. Did you review Miss O'Donnell's testimony in trial? I believe so, briefly. Did you see, sir, that she confirmed that such a meeting
13:38:30

took place at such a time at such a place and at such subject matter in this Court under oath? A. I don't recall that I confirmed that. But I would expect

that she did. Q. What I'd like you to do for me, sir, is I'd like you, given
13:38:45

your knowledge of the words "percipient" and the phrase "personal knowledge," I would like for you to identify for me a single percipient witness with personal knowledge who testified that a meeting did not occur on September 12, 1998, where Peter Thimmesch and Michael O'Donnell, as the only directors and shareholders of Visitalk.com, Inc., authorized to themselves -Are you okay, Mr. Schweigert? MR. SCHWEIGERT: MR. CLAUS: I'm not sure what. THE COURT: BY MR. CLAUS: Q. I'll start over. I'd like for you to identify for me a single percipient witness with personal knowledge who says that a UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 28 of 128 Let's go ahead. I apologize.

13:39:10

Mr. Schweigert was laughing at something,
13:39:27

13:39:34

CROSS-EXAMINATION - BOYD LEMON

1640

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

meeting did not occur on September 12, 1998, where Mr. Thimmesch and Mr. O'Donnell authorized for themselves Founder's Warrants in the amount of $7.65 million. A. Q. There was no such witness to my knowledge. In fact, sir, not only did every single percipient witness
13:39:59

with personal knowledge testify that such a meeting occurred, but you're aware that Joseph Richardson testified under oath that Mr. Thimmesch and Mr. O'Donnell actually told him that a meeting did occur on September 12, 1998, where Mr. Thimmesch and Mr. O'Donnell did authorize the grant of Founder's Warrants to themselves; correct? A. Q. A. Q. A. Q. That's correct. He testified to that in his deposition; correct? Yes. And he testified to that in this courtroom; correct? Correct. Did you read, sir, in Mr. Richardson's deposition or trial
13:40:33 13:40:22

testimony, the reason that Mr. Richardson gave for documenting the meeting in the form of a unanimous consent rather than meeting minutes? A. I recall reading, and I'm not sure whether it was his trial
13:40:52

testimony or his deposition testimony, that he said that he wanted -- he did that because he wanted their signatures on a document verifying the issuance of the -- or rather the authorization for the Founder's Warrants. And I think he said
13:41:11

UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 29 of 128

CROSS-EXAMINATION - BOYD LEMON

1641

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

something about they were all over the map or something like that in describing how -- how it happened. Q. Because under Arizona law, sir, meeting minutes do not need

to be signed, do they? A. Q. That's correct. Now let's talk about the other half of the equation, okay,
13:41:29

Mark Cardwell. You know, sir, that Mr. Mark Cardwell testified in his deposition that he was not involved in Visitalk at all until September 15, 1998; correct? A. Q. Correct. And you know, sir, from reviewing Mr. Cardwell's deposition
13:41:47

that he testified under oath that he did not receive shares in Visitalk until he became involved with Visitalk as an employee on September 15, 1998; correct? A. Q. Yes. And sir, Mr. Cardwell further testified that in order to
13:42:04

determine the precise date he did independent research to determine his status. A. Q. Do you recall that?
13:42:23

I don't recall that. Could you bring up page 31 of Mr. Cardwell's deposition,

please? Page 31, line 10. clear in your mind? Answer: Because of contemporaneous documentation. UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 30 of 128
13:42:55

Question:

Why is September 15 so

CROSS-EXAMINATION - BOYD LEMON

1642

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

You know, I have done a fair amount of research nailing that down. Is your recollection refreshed now, sir, that Mr. Cardwell testified that he had done independent research to verify the date he began his involvement with Visitalk.com, Inc.? A. I don't see the word "independent" in there. But he says
13:43:12

he did a fair amount of research. Q. A. Q. A. Q. A. Q. A. Mr. Cardwell reviewed payroll records; correct? That's what he says, yes. You have not done that, sir; correct? Correct. Mr. Cardwell reviewed press releases; correct? Yes. You have not done that, sir; correct? I'm not sure. I may have seen a press release, but I'm not
13:43:38 13:43:27

sure. Q. Mr. Cardwell, having done that research, having looked at

those documents, and knowing when he became a shareholder, testified under oath that he was not a shareholder of Visitalk.com, Inc. until September 15, 1998; correct? A. Q. Correct. And you know, sir, Mr. Peter Thimmesch, Michael O'Donnell,
13:43:58

Marcia O'Donnell, and Cynthia Thimmesch all have also testified that Mr. Cardwell did not become a director or shareholder of UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 31 of 128
13:44:23

CROSS-EXAMINATION - BOYD LEMON

1643

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

Visitalk.com, Inc. until September 15, 1998; correct? A. I recall him testifying that he was not a shareholder on But I don't

September 4th, as the corporate documents reflect.

remember if they actually specified September 15th at the date. Q. Did you review the testimony -- trial testimony of
13:44:48

Mr. O'Donnell and Mrs. Thimmesch and Mrs. O'Donnell where they testified categorically that Mr. Cardwell was not a shareholder at the time that the meeting occurred in the O'Donnell's garage where the Founder's Warrants were authorized for issuance to Peter Thimmesch and Michael O'Donnell? A. Q. Yes. Could you please -May I approach, Your Honor? Thank you. When I approached Mr. Lemon, I noticed that you have a yellow piece of paper, and I've seen you referring to that. Could you please tell me what that yellow piece of paper is with writing? A. I know it's not an exhibit in this case.
13:45:51 13:45:10

They're some notes that I made last night to remind me of
13:46:11

the issues that I would be testifying on so that I didn't forget anything. Q. I would ask you, sir, to answer my questions to the best of And if you cannot and need to refer to your

your recollection.

notes, could you please tell me? A. Sure. UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 32 of 128
13:46:24

CROSS-EXAMINATION - BOYD LEMON

1644

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.

Thank you. I haven't referred to my notes as a matter of fact at all

during your examination. Q. Thank you, sir. Could you please look at Exhibit 521? First, it's true -- it is also going to come up on your screen but you have it in front of you. It's true, is it not, sir, that you did not consider Exhibit 521 prior to rendering the opinions you have offered in this matter? A. Q. I don't recall if I did or did not. Well, sir, you identified the data and material you
13:47:04 13:46:32

considered in making your opinion in Exhibit C to your expert report; correct? A. Q. A. Q. I did, yes. Exhibit 521 is not identified on Exhibit C; correct? I don't know. Let me ask you this, sir: If Exhibit 521 is not identified
13:47:28

in Exhibit C, is it safe for me to assume, pursuant to Rule 26 of the Federal Rules of Civil Procedure, that you did not consider Exhibit 521 in reaching the opinions that you have offered in the trial of this matter? A. It would be safe to assume that I did not consider the
13:47:51

actual document, yes. Q. Thank you, sir. UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 33 of 128
13:48:10

CROSS-EXAMINATION - BOYD LEMON

1645

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. I do.

Could you look, please, now at Exhibit 521? Do you see that the headline is Visitalk.com is founded and announces initial private offering. that? A. Q. A. Q. I see that. And the date for release of September 3, 1998? Yes. And the text under the headline is, Peter Thimmesch and
13:48:30

Do you see

Michael O'Donnell announce the formation of Visitalk.com, which will host a voice and video communications website over the internet. Do you see that, sir?
13:48:42

Mr. Cardwell is not identified anywhere in the body of
13:48:53

Exhibit 521; correct? A. Q. Correct. I've also given you, sir, Exhibit 520. Could you please

look at Exhibit 520? A. Q. Yes. Again, sir, you did not consider Exhibit 520 prior to
13:49:14

rendering the opinions you have offered in the trial in this matter; correct? A. Q. I don't think so. And again, sir, if you had considered Exhibit 520, it would
13:49:32

have been, or at least should have been identified in Exhibit C UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 34 of 128

CROSS-EXAMINATION - BOYD LEMON

1646

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

to your expert report; correct? A. Q. Correct. Sir, you agree that a factual issue that bore upon some of

your opinions, you would at least admit that a factual issue was, when did Mark Cardwell become a shareholder and director of Visitalk, would you agree with that? A. Q. Of course. And sir, you put it away, but I'd like you to take a look
13:49:52

at it now. I know you've never seen it and you haven't considered it in rendering your expert opinion, but if you just look at the date, the headline, and the first sentence, can you tell me when Visitalk announced the addition of Mark Cardwell as Chief Technology Officer and principal stockholder? A. Q. They announced it in this press release on September 17th. And when -- I'm asking you to look at the third word. When
13:50:32 13:50:10

did they announce his addition as Chief Technology Officer and principal stockholder? A. Q. On September 17. Thank you, sir. Would you agree, sir, that Exhibit 520, if it had been provided to you by Mr. Kaup, would have at least assisted you to some degree in sorting out the factual issues that you were wrestling with in reaching the opinions that you have offered today? UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 35 of 128
13:51:14 13:50:52

CROSS-EXAMINATION - BOYD LEMON

1647

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.

To a very minor degree. Well, sir, let's look at Exhibit 522. You agree, sir, that another one of the factual issues

that you're wrestling with is whether a meeting actually occurred on September 12, 1998; correct? A. Q. Yes. Sir, you did not consider Exhibit 522 before rendering the
13:51:36

opinions you've offered today; correct? A. Q. That's correct. I don't believe I've seen this before. I'd like you to look, Do you see
13:51:54

Well, sir, again, it's in evidence.

please, at the right-hand column of the first page. the headline that says, Visitalk.com milestones? A. Q. Yes.

First I'd like you to look at the first date, September 3, Do you see that?
13:52:18

1998. A. Q.

Yes. And the text is, Visitalk.com, incorporates in Phoenix, Do you see that?

Arizona. A. Q. Yes.

You know through your investigation for your expert

13:52:26

opinions in this case, that that is a correct recitation of a historical fact; correct? A. Q. That's my best recollection, yes. Now I'd like you to look at the third entry, September 24, Do you see that?
13:52:47

1998, first investment received.

UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 36 of 128

CROSS-EXAMINATION - BOYD LEMON

1648

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.

I see that. You know from your review of the voluminous records

identified in exhibit -- or attachment C to your report, and the deposition testimony -- you can just leave it -- that that is a correct recitation of historical fact; correct? A. Q. I don't recall. Well, sir, look at the next entry, June 21, 1999, Do you see that?
13:53:04

Visitalk.com Beta site launches. A. Q. Yes.

You know from your review and investigation in this matter,

13:53:24

so that you could prepare and tell the Court competent, expert opinions, that that recitation of a historical fact is true; correct? A. Q. I don't know. Well, sir, let me have you look at the October 5th entry.
13:53:39

October 5, 1999, Ernst & Young executive Jeffrey Hirschberg joins the Visitalk.com Board of Directors. Surely through your review of the material that you were provided by Mr. Kaup you're able to tell me that that is a correct recitation of historical fact; right? A. I recall that he joined the Board sometime in October of I don't recall the exact date. I have no reason to
13:54:02

1999.

believe that's not correct. Q. Okay. We skipped the second entry. And the second entry
13:54:19

is -- and I'd like you to read it to the Court, please. UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 37 of 128

CROSS-EXAMINATION - BOYD LEMON

1649

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.

Starting with the date or just the -Starting with the date, sir. September 12, 1998, first Board of Directors meeting,

paren, Peter Thimmesch and Michael O'Donnell, close paren. Q. First, sir, who that we've just been talking about is
13:54:37

omitted from the parenthetical expression in that entry? A. Q. I'm sorry, who what? What person that we've just been talking about is omitted

from that parenthetical expression? A. Everyone except Peter Thimmesch and Michael O'Donnell, but
13:54:52

I assume you mean Michael Cardwell. Q. Correct, sir. And the date of September 12, 1998, is

expressed in Exhibit 522; correct? A. Q. It is. Sir, would you agree again that had Mr. Kaup provided you
13:55:05

with Exhibit 522 it would have at least assisted you to some degree in sorting out the factual issues that you were analyzing for the expert opinions you would render in this case? A. I don't think so, because it appears that this document was
13:55:23

created sometime in 1999, not near the dates -- the date of September 12. Q. Oh, so you didn't read or wasn't told about Debra Kuhns'

testimony; is that right? A. I don't recall. UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 38 of 128
13:55:44

CROSS-EXAMINATION - BOYD LEMON

1650

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.

So you're not aware, sir, or you don't remember that

Miss Kuhns testified that this document, Exhibit 522, was prepared at a time before Snell & Wilmer began its representation of Visitalk.com, Inc.? A. I remember that testimony. I didn't know she was talking
13:56:04

about this document. Q. If she was talking about this document, assume that, sir,

that she was talking about Exhibit 522 -- I'll ask the question again. If Mr. Kaup had provided you with Exhibit 522 under the assumptions that we have set forth, would you agree, sir, that Exhibit 522 would have at least assisted you to some degree in sorting out the factual issues that you were analyzing for the rendition of your expert opinion in this case? A. I don't think so, because Mr. Thimmesch and Mr. O'Donnell
13:56:37 13:56:18

were telling people in 1999 that they had a meeting on September 12 of 1998. This is just another statement of that.

So I don't think it really adds anything. Q. Could you take a look at Exhibit 540, please, sir? Sir, you did not consider Exhibit 540 in rendering your opinion, did you? A. Q. A. Let me read it. Sure. I don't recall seeing this before. UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 39 of 128
13:57:46 13:56:55

CROSS-EXAMINATION - BOYD LEMON

1651

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.

Starting with the sentence, when, when -- in the body of

the e-mail, when the two of you approved the plan before, between the two of you owned 100 percent of the shares therefore were the only stockholders, period. First, did I read that correctly, grammatical mistakes and all? A. Q. Yes, you did. Sir, you were not aware when you rendered your expert
13:58:14

opinion in this case that an e-mail was dispatched on February 24, 1999, that confirmed that when the stock option plan was approved, Peter Thimmesch and Michael O'Donnell were the only two shareholders and owned 100 percent of the stock in Visitalk.com, Inc.; correct? A. Q. That's correct. And let me ask you, sir, based upon your review of the
13:58:51 13:58:31

documents in this case, what date was the 1998 stock option plan approved by the Visitalk Board of Directors? A. Q. The evidence suggests that it was approved on September 12. The same date that the Founder's Warrants were authorized,
13:59:26

at least according to Mr. Thimmesch, Mr. O'Donnell, Mrs. Thimmesch, Mrs. O'Donnell, Joe Richardson and Mark Cardwell; correct? A. Q. Yes. Let me ask you again, sir, had Mr. Kaup provided you with

Exhibit 540, would you agree, sir, that Exhibit 540 would at UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 40 of 128

13:59:46

CROSS-EXAMINATION - BOYD LEMON

1652

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

least have assisted you in some degree in analyzing the factual issues that serve as a predicate for your expert opinion in this case? A. I don't think it helps at all, because it's talking about
14:00:02

employee options. Q. Sir, this e-mail states that on the date the stock option

plan was approved, Peter Thimmesch and Michael O'Donnell were the only two shareholders in Visitalk.com, Inc.; correct? A. Q. A. Q. A. Q. Oh, it is helpful for that issue, yes, yes. Thank you. I was thinking of another issue. Exhibit 518, sir, I think is in front of you. I'm sorry, exhibit what? Exhibit 518. You did not consider Exhibit 518 before rendering the opinions you have offered in this matter; correct, Mr. Lemon? A. Q. That's correct. And again, as you established earlier, the date on which
14:00:52 14:00:27

Mr. Cardwell became a shareholder has at least some bearing on the factual predicate for your opinions in this matter; correct? A. Q. One of the factors, yes. Could you please look, sir, at the bottom of the first page
14:01:11

of Exhibit 518? A. Yes, I see it. UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 41 of 128
14:01:29

CROSS-EXAMINATION - BOYD LEMON

1653

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. A. Q.

Do you see original hire date? I do. What is the date given? October 1, 1999. At the bottom of the page, sir, on Exhibit 518, original It's highlighted on your screen, as a matter of
14:01:38

hire date. fact. A.

Oh, what I said is -- it says in a different place October But original hire date at the bottom,
14:02:02

1, 1999, is hire date. it says 9-15-98. Q. A. Q. And this -It looks like an 8.

This is an employee information sheet from Mark S.

Cardwell, correct? A. Q. It looks like it, yes. Sir, again, had Mr. Kaup provided you with Exhibit 518
14:02:22

prior to asking you to render an expert opinion in this case, would you admit that Exhibit 518 would have assisted you in some degree in analyzing the factual predicate for the opinions you have offered in court? A. Q. In a very minor way. I want to skip now, sir, to your opinion regarding the
14:02:40

claim that Snell & Wilmer should have advised Visitalk to, quote, contract with a technically qualified independent third party to investigate and advise whether Visitalk had a UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 42 of 128
14:03:17

CROSS-EXAMINATION - BOYD LEMON

1654

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

commercially viable product.

Okay?

In your deposition, sir, you actually provided me with what you consider to be a definition of an independent third party; correct? A. Q. I don't recall. Well, you testified, sir, that an independent third party
14:03:43

was not an employee, was not a shareholder, and was not a director. A. Do you recall that, sir?

I recall that, and I recall modifying that to include from
14:04:08

the exclusion investors. Q. A. Q. Investors? Yes. So someone other than a shareholder who was also an

investor? A. Q. is? A. Q. A. Q. Yes. He was the CEO of Visitalk in bankruptcy; correct? Correct. Did anyone tell you that Rick Rothwell testified in this
14:04:36

Yes. First, sir, let me ask you, do you know who Rick Rothwell

14:04:19

courtroom on March 4, at page 340, line 9 of his testimony that day, that Visitalk had a commercially viable product even at the time it filed for bankruptcy protection? A. I recall him testifying to that. I don't recall whether it
14:05:00

UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 43 of 128

CROSS-EXAMINATION - BOYD LEMON

1655

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

was in his deposition or whether it was in his trial testimony. Q. Well, sir, let's get back to -- you would agree, sir, that

Mr. Rothwell was not a director of Visitalk prior to the time Visitalk filed bankruptcy protection; correct? A. Q. That's correct. And he was not an employee of Visitalk prior to the time
14:05:23

Visitalk filed for bankruptcy protection; correct? A. Q. Correct. Now, let's get back to that independent technically Page 67 of your deposition, sir, you
14:05:36

qualified third party.

said -- you provided me with a different definition, page 67, line 1. You're in Mark Cardwell's deposition. up one -- there you go. Question: So would you characterize Mr. Kaplan and
14:06:08

That's why.

Go

Mr. Hirschberg as being, comma, using your words, quote, independent, end quote? Answer: No. When I use the world "independent" I'm

talking about someone who is not associated with Visitalk, not a stockholder, director, employee. Did I ask that question and did you give that answer? A. Q. Yes. Did anyone tell you prior to you rendering your opinions in
14:06:28

this matter who Michael DeAddio was? A. Yes. UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 44 of 128
14:06:51

CROSS-EXAMINATION - BOYD LEMON

1656

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. A.

Who told you who Michael DeAddio was? I don't recall. Who is Michael DeAddio, sir? He, as I recall, was a representative of one of the
14:07:09

investment banking houses that was trying to raise money for Visitalk. Q. A. Q. A. Q. I don't remember which one.

That's your recollection? That's my best recollection at this time. Well, sir, I think you have Exhibit 604 in front of you. Yes. You did not consider Exhibit 604 prior to rendering your
14:07:41

opinions in this matter; correct? A. Q. I believe that's correct. Sir, take a look at the first page. Keeping in mind your belief that an independent third party should have been asked to evaluate Visitalk.com, what's the title of the first page of Exhibit 604? A. I'm -- I don't know what you're considering to the first You mean the title page?
14:08:32 14:08:04

page. Q. A. Q.

The page that has at the bottom SW005830. Visitalk.com Visit and Evaluation. You did not know who Mr. DeAddio was before you offered

your opinion; correct? A. Q. You mean in my deposition or my report? Correct. In your report or at your deposition. UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 45 of 128
14:08:55

CROSS-EXAMINATION - BOYD LEMON

1657

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.

I don't recall. Because when I asked you at your deposition who Mr. DeAddio

was, you said, I believe he was one of the kick the tire guys. Didn't you say that? A. Q. A. Q. I think I remember saying that, yes. But that was Mr. DelBianco, wasn't it, sir? Yes, yes. An Italian last name admittedly, but as far as you know,
14:09:13

Mr. DelBianco is not the same as Mr. DeAddio; correct? A. Q. I assume he's not. So let me ask you again, sir, you did not know who
14:09:34

Mr. DeAddio was prior to authoring your report or giving your deposition testimony; correct? A. Q. Not by name, no. Now, Mr. DeAddio -- let's go back to your definition of Mr. DeAddio, to your knowledge, was not a
14:09:48

independent, sir.

shareholder of Visitalk.com; correct? A. Q. A. Q. I don't know. You don't know if he was? No. You don't know -- well, I'm hoping you do know, Mr. DeAddio
14:10:02

was not a director of Visitalk.com? A. Q. I do know that. And as far as you know, Mr. DeAddio was not an employee of
14:10:16

Visitalk.com; correct? UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 46 of 128

CROSS-EXAMINATION - BOYD LEMON

1658

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.

Correct.

I mean, I'm assuming he's not.

Not that I know

the names of all of the employees. up as an employee. Q.

But it certainly never came

You didn't even know, sir, that Exhibit 604 existing when
14:10:30

you rendered your opinion in this matter; correct? A. I knew that the investment banking houses had made some

investigation and evaluation of Visitalk. Q. A. Goldman Sachs and Wit Soundview; correct? Yes. But I did I know about this specific report? Q. No.
14:11:02

And sir, you don't know whether or not Mr. DeAddio ever

worked for Goldman Sachs or Wit Soundview; correct? A. Q. No, not -- not without reading this. You certainly don't know that Mr. DeAddio -- and this is
14:11:24

going to sound odd, I'm warning you in advance, it will have two negatives in it, so listen carefully. You don't know, sir,

that Mr. DeAddio was not a technically qualified competent person to evaluate Visitalk.com's products, services and technology; correct? A. Q. Correct, I don't know that. Could you turn, please, sir, to the -- I believe it's the
14:11:45

fourth page, section 1.6, Summary Recommendation. When you rendered your opinion that Snell & Wilmer fell below the standard of care because it did not advise Visitalk to have a qualified independent third party evaluate UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 47 of 128
14:12:23

CROSS-EXAMINATION - BOYD LEMON

1659

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

the commercial viability of Visitalk.com's product, you did not know that Mr. DeAddio stated in section 1.6 of his report, my overall opinion is quite positive with regard to Visitalk as a company and its potential for investors. But, I still consider No
14:12:47

this venture akin to buying an internet lottery ticket.

matter what the potential or how positive the review, a company at this stage of maturity in the internet market faces serious and significant risks. These risks cannot be foreseen

completely at this time, and a certain level of risk will always exist even in established internet companies. So, this
14:13:07

is most definitely a case of, quote, let the buyer beware, end quote. That being said, I believe the question on everyone's mind would be if I am willing to personally invest in this venture. The answer is yes. Note that I do have a good
14:13:27

appetite for risk.

But, this investment is not for anyone who

cannot afford to lose the entire investment in a very short period of time. First, did I read that correctly? A. Q. Yes. At the time you offered your opinion and testified in this
14:13:42

courtroom that Snell & Wilmer fell below the standard of care because it did not have an independent third party evaluate the commercial viability of Visitalk's products and services, you were not aware of Mr. DeAddio's summary recommendation in UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 48 of 128
14:14:04

CROSS-EXAMINATION - BOYD LEMON

1660

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

summary 1.6; correct? A. Q. That's correct. You also don't know, sir -- strike that. Go to page 9, please. A. Q. A. Q. Thank you. Section 2.4.
14:14:41

This exhibit does not have page numbers on it. It's SW005838 at the bottom.

I apologize, sir. I have it.

Do you see there, sir, that there is an evaluation of

Visitalk's revenue model? A. Q. That's what it appears to be, yes. You did not consider the text in section 2.4 before
14:15:01

rendering your opinion in this matter that Snell & Wilmer fell below the standard of care because it failed to advise Visitalk to have an independent third party evaluate the commercial viability of Visitalk's products and services; correct? A. Q. 10. Correct. Go to the next page, sir, under 2.4, section 2.4.2 on page Do you see there is a box for projected revenue? Could you please highlight the whole box, please? A. Q. I see that. Do you see, sir, that for the year 2003 revenue was
14:15:47 14:15:21

projected to be $930,493,080? A. I see that number in there under projected revenue for

2003. Q. And do you see, sir, that the cost of sales is also UNITED STATES DISTRICT COURT Case 2:02-cv-02405-HRH Document 490 Filed 03/17/2008 Page 49 of 128
14:16:06

CROSS-EXAMINATION - BOYD LEMON

1661

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

identified as being a $40,243,826? A