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, BEFORE:

CIV 02-2405-PHX-HRH Phoenix, Arizona March 12, 2008 8:33 a.m.

THE HONORABLE H. RUSSEL HOLLAND, JUDGE

REPORTER'S TRANSCRIPT OF PROCEEDINGS BENCH TRIAL VOLUME VIII A.M. Pages 1505 to 1611

Official Court Reporter: Linda Schroeder, RDR, CRR Sandra Day O'Connor U.S. Courthouse, Suite 312 401 West Washington Street, Spc. 32 Phoenix, Arizona 85003-2151 (602) 322-7249 Proceedings Reported by Stenographic Court Reporter Transcript Prepared by Computer-Aided Transcription

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1 2 3 4 5 6 For the Defendants: 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 For the Plaintiff:

A P P E A R A N C E S

Tiffany & Bosco By: Christopher Reed Kaup, Esq. 2525 East Camelback Road, 3rd Floor Phoenix, AZ 85016

Mariscal Weeks McIntyre & Friedlander By: Gary L. Birnbaum, Esq. Timothy J. Thomason, Esq. Scot L. Claus, Esq. 2901 North Central Avenue, Suite 200 Phoenix, AZ 85012

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 281 16 17 18 19 20 21 22 23 24 25 EXHIBIT NO.: 16 18 19 21 22 26 27 30 31 39 40 46 MALLERY, Richard LEMON, Boyd WITNESSES FOR THE PLAINTIFF:

INDEX OF WITNESSES Direct 1508 1584 1604 Voir Dire Cross 1548 1603 Redirect 1575

INDEX OF EXHIBITS

DESCRIPTION:

ID'D RECEIVED: 1511 1511 1511 1511 1511 1511 1511 1511 1511 1511 1511 1573 1511 1511 1511 1511 1511 1511 1511 1511 1511 1511 1511 1511 1573 1511

S&W Statement - Securities Matter S&W Statement - Securites Matter S&W Statement - Corporate Matter S&W Statement - Securities Matter S&W Statement - Corporate Matter S&W Statement - Securities Matter S&W Statement - Corporate Matter S&W Statement - Corporate Matter S&W Statement - Securities Matter S&W Statement - Corporate Matter S&W Statement - Securities Matter Email from Ray Gaston re Payment of Snell Bills S&W Invoice Matter 35854.0003RM Securities

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THE COURT:

This is the continuation of trial in We are ready for

Biltmore versus Thimmesch and others. Mr. Mallery, I believe. MR. KAUP: to the stand. Yes, Your Honor.

We call Richard Mallery

RICHARD MALLERY, PLAINTIFF'S WITNESS, SWORN DIRECT EXAMINATION BY MR. KAUP: Q. A. Q. A. Q. A. Q. A. Q. A. Q. A. Q. A. Q. Good morning, Mr. Mallery. Good morning. You're a shareholder at Snell & Wilmer? We don't have a corporation. I'm a partner.

How long have you been a partner at Snell & Wilmer? Been a partner since 1969, a member of the firm since 1964. When were you admitted to practice law? 1963. What is your primary area of legal practice? Real estate. How long has that been your primary area of legal practice? Late '60s. Have you practiced in other areas? Yes. Have you practiced -- Did you practice in other areas of

law in 1998? A. Yes. UNITED STATES DISTRICT COURT

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MALLERY - DIRECT 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.

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Did you practice in other areas of law in 1999 and 2000? Yes. What areas of law did you practice in 1999 and 2000 other

than real estate? A. Q. A. Q. A. Q. Indian law. Anything else? Did you say through 2007? No. Through 2000. I'm sorry. '99 and 2000.

In 2000, principally Indian and real estate. Now, were you the partner at Snell & Wilmer who originated

Visitalk as a client? A. Q. Yes. Do you recall when you first met any of the officers from

Visitalk? A. Q. A. Late June of 1999. How did that occur? I first met Mark Love, who was serving as a consultant to And Steve

Visitalk, and then he introduced me to Steve Best.

Best then introduced me to the other officers in Visitalk. Q. What matters -- What were the legal matters for which

Snell & Wilmer was engaged to assist Visitalk? A. Q. A. Q. Initially we were engaged to look at securities. Securities? Yes. What types of legal work were you -- was Snell & Wilmer UNITED STATES DISTRICT COURT

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MALLERY - DIRECT 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 engaged to do in the area of securities? A.

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Reviewing the work of Bryan Cave for Series A, B, and C and

helping to resolve any matters that needed to be resolved in connection with the prior stock issuances and the current one, which was Series C. Q. A. Did you do any work on those matters in 1999? Yes. I, first of all, I approached Mike Donahey, whose

area this is, and then served as a liaison with Steve Best on not only the securities but some other areas that he asked us to handle for Visitalk. We were retained on kind of a -- for And I was the person

projects when requested by Steve Best.

who would select the appropriate specialist at Snell & Wilmer to work on each of those projects. Q. Did you personally do any work on the securities matters

that you've just described? A. I was simply reviewing the work that was being done by Mike

Donahey and others within the law firm who were trying to kind of clean up some of the issues there. Q. Did you spend a substantial amount of time during the

period from the beginning of July of 1999 through the end of that calendar year working on the matters you just described for Visitalk? A. The -- Yes, in the various areas. I would -- Throughout

the -From June through, say, December, I was in a position UNITED STATES DISTRICT COURT

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of monitoring a lot of the work that was being done, and then, second, after that I became less involved as the lawyers handling those projects worked more and more -- They had their team, and I didn't have expertise in those areas, so I began to spend less and less time personally. Q. Do you recall having worked over 250 hours on the matters

you've just described between the beginning of July of 1999 through the end of that calendar year? A. I don't have the specific time records in front of me, but

if that's what you say my time amounted to, I have no reason to doubt it. Q. Could you look at Exhibit 16, sir, and before you are file

folders with exhibits. A. Q. Yes, I have it in front of me. Is that one of the Visitalk billing -- Is that one of

Snell & Wilmer billing statements for Visitalk? A. Yes. MR. KAUP: And, Your Honor, just to save time,

Exhibits 16, 18, 19, 21, 22, 26, 27, 30, 31, 39, 40, and 281 are all Snell & Wilmer billing statements, and they're in front of the witness, but I believe they're all stipulated to. MR. BIRNBAUM: THE COURT: No objection, Your Honor. Exhibit 16, 18, 19, 21, 22,

Very well.

26, 27, 30, 31, 39, 40, and 281 are admitted. MR. KAUP: Thank you, Your Honor.

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MALLERY - DIRECT 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. (BY MR. KAUP)

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You mentioned, sir, that there were certain

securities law matters that -- on which Snell & Wilmer was engaged. A. Q. Yes. Did you do any work relating to the problems with the Do you recall the phrase the Founders Warrants?

Founders Warrants in 1999? A. Yes, but again the same role, listening, trying to

comprehend what was going on, what had gone on before we got involved, and doing what I could to assist finding solutions to those problems but of course relying upon Mike Donahey who really had the expertise in this particular area. Q. What were the issues relating to the Founders Warrants on

which Snell & Wilmer worked during calendar year 1999? A. In the second half of July, we began to become -- we became

aware of the unanimous consent resolution that was signed by Peter Thimmesch and Mike O'Donnell. But based upon the

corporate records as we had received them from Bryan Cave and from the company, it appeared as though Mark Cardwell was a directer but had not signed the unanimous consent resolution for a meeting on September 12th. And there was a lot of due

diligence which Mike Donahey and his team had undertaken to figure out the status of Mark Cardwell during that period. And as I recall, it wasn't until late November that Mark Cardwell himself clarified that he was not a directer on September 12th, that he became a director on September 18th. UNITED STATES DISTRICT COURT

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MALLERY - DIRECT 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

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And that went a long way to affect making the record complete and accurate. And a lot of our concerns which we had during

late July, August, September, October had been resolved. Q. Aside from the issue of whether Mark Cardwell was a

director on September 12, was there any other work that Snell & Wilmer -- were there any other issues with the Founders Warrants which Snell & Wilmer addressed during the time period prior to the end of November of 1999? A. Yes. There was a letter in late July which started

exploring the options confronting the Board in order to solve the concerns with the Founders Warrants. And during that

period Mike Donahey and his team were kind of exploring the consequences of each one of those options. And the Board was

coming up with a learning curve itself because the Board had to decide what to do. And all of us were aware of the options.

All of us were aware of the misperception of Mike -- of Mark Cardwell and -- during that period. And it wasn't, as I said,

until late November that we actually realized that he was not a director. Q. What were the, aside, again, from the issue of whether

Mr. Cardwell was a director, what were the specific problems associated with the Founders Warrants as you understood them in 1999? A. I don't recall the specifics. I just recall the general

concern about when -- his status and whether that unanimous UNITED STATES DISTRICT COURT

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MALLERY - DIRECT 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 consent resolution was needed to be signed by him and the

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consequences for the stock that had been issued if the Founders Warrants had not been issued properly on September the 12th. don't -Q. off. A. Q. That's all right. But I don't recall the specifics. Was Snell & Wilmer -- I'm sorry. I didn't mean to cut you I

Was it Snell & Wilmer's job to review the Visitalk

corporate records and report to the Board its findings regarding the problems with the Founders Warrants? A. No. We were responding to the request of Steve Best, the We had great confidence in Steve Best. He's

general counsel. a fine lawyer.

And we reported on a daily basis to Steve Best.

Later it was Steve Best's decision to go to the Board for the ultimate decision. Q. Then let me break up that question. Was it the

responsibility of Snell & Wilmer to review the Visitalk corporate records in attempting to assist Visitalk in resolving the problems with the Founders Warrants? A. In response to the request of Steve Best, we looked at the We did our best, no pun intended, to help

corporate records.

him get the facts straight and then to work with him on a solution. But ultimately the Board made the decision on how to

approach the problem and what solution to take. Q. What documents did you review, sir, in the summer of 1999 UNITED STATES DISTRICT COURT

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MALLERY - DIRECT 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 relating to the legal issues which you described in your testimony? A.

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I reviewed Mike Donahey's initial letter to Steve Best in Then I reviewed

the middle of July, maybe July 14th or 15th.

some of the earlier drafts of a letter towards the end of July after we became aware of the Founders Warrants, you know, after we became aware of the problem that might exist with the Founders Warrants. I reviewed that letter and then discussed

that letter at length in a meeting at my home on -- at the end of July on a Saturday. Q. Sir, I may not have been clear with my question. I was

asking what documents did you review as part of the work you did for Visitalk during the fall of 1999? A. I think I just answered that. A letter in mid-July from

Mike Donahey and a draft of a letter from Mike Donahey at the end of July. Q. Did you review any of Visitalk's corporate records during

1999? A. No. Oh, with one exception. I did look at the unanimous

consent resolution. Q. A. Which unanimous consent resolution? The one that was dated September -- I don't remember, but

there was a unanimous consent resolution I looked at. Q. A. Are you familiar with the name Joe Richardson? Yes. UNITED STATES DISTRICT COURT

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MALLERY - DIRECT 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.

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Do you know whether Mr. Richardson had any relationship to

Visitalk in 1998? A. Q. I don't know specifically. Do you know whether Mr. Richardson represented Visitalk in

1998? A. Q. I understand he did. Did you ever speak with Mr. Richardson on matters relating

to Visitalk? A. Q. Not that I recall. What did you do, sir, to -- Well, take a step back. Do you recall that Peter Thimmesch and Michael O'Donnell had made certain claims relating to the alleged authorization of the Founders Warrants? A. As I recall, both Thimmesch and O'Donnell said they had a

meeting on September the 12th and that at that meeting the Founders Warrants were authorized and issued. recall. Q. Did you personally take any steps to validate that story of That's how I

Mr. Thimmesch and Mr. O'Donnell regarding the claimed authorization of the Founders Warrants? A. Q. No. That was Mike Donahey's responsibility.

Did you ever speak to Peter Thimmesch or Michael O'Donnell

regarding Visitalk's original corporate records? A. Not that I recall. I assumed that they had been prepared

by Bryan Cave. UNITED STATES DISTRICT COURT

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MALLERY - DIRECT 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. Q.

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Did you ever speak to Cynthia Thimmesch or Marcia O'Donnell

regarding Visitalk's original corporate records? A. Q. Not that I recall. Did you ever speak to Mark Cardwell about Visitalk's

original corporate records? A. Only once. There was a conference call at the end of July. Actually it was on November --

I think it was on July -- No.

It was in November -- I'm sorry -- November 24th when I asked Mark Cardwell the direct question what was your status with Visitalk, and he clarified that he was not a director on September the 12th. THE COURT: THE WITNESS: (BY MR. KAUP) Of 1998? Of 1998, yes.

Aside from that one statement, did you

discuss anything further with Mr. Cardwell regarding Visitalk's corporate records? A. Not that I recall. I was only interested in one thing,

whether he was or was not a director on September 12th, 1998. Q. Did you ever speak with Cynthia Thimmesch or Marcia

O'Donnell regarding any matters relating to the Founders Warrants? A. Q. Not that I recall. How often did you speak with Mr. Thimmesch from July of

1999 through the end of that calendar year regarding the Founders Warrants? UNITED STATES DISTRICT COURT

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MALLERY - DIRECT 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. On several occasions. I don't remember how many.

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How often did you speak with Mr. O'Donnell on that topic? Several occasions. I don't recall how many.

Did you speak with Mr. Cardwell during that period of time

on that topic? A. I only -- I'd only spoken with Mark Cardwell once, to the

best of my knowledge, and that was in a conference call on November 24th, 1998. And it was just that single question

would you please clarify your status with Visitalk on September 12, 1998. Q. But you do recall a meeting at your house with you and

Mr. Thimmesch and Mr. O'Donnell at which time the Founders Warrants were discussed? A. Yes. The reason -- I believe that Steve Best was also I was the primary care giver to my wife who was dying And I could not leave the And we

there.

of cancer, and we had her home. house on the weekends. met in the den.

So everybody came to my house.

And that's when we reviewed sort of the

substance of the letter that was dated I think it was July 28th. That's when we talked about the consequences of the

founders shares -- of the Founders Warrants and talked about the options confronting the Board which we knew had to be presented to the Board at its next meeting. Q. At that time did you discuss the -- whether the Founders

Warrants had been authorized and issued in September of 1998? UNITED STATES DISTRICT COURT

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MALLERY - DIRECT 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.

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I don't specifically recall, but that was certainly what --

that was the substance of the conversation. MR. KAUP: THE COURT: (BY MR. KAUP) Your Honor, may I approach? Yes. Mr. Mallery, I've given you copies of the Do you recall having been

transcripts of your deposition.

deposed in my office on November 22, 2005? A. Q. Yes. Do you remember taking the oath and agreeing to tell the

truth? A. Q. A. Q. A. Q. Yes. Could you look at Page 24 of your -- of the transcript. Volume I or Volume II? Volume I. 24? Page 24. At Line -- Beginning at Line 13, I asked you: actions are you aware of that any other lawyer at Snell & Wilmer took to validate Peter Thimmesch's or Mike O'Donnell's claims regarding the existence of the Founders Warrants?" Mr. Birnbaum interposed an objection. And then you answered: "Mike Donahey was the "What

responsible party for the due diligence on the securities project. I have complete confidence in him then and now that UNITED STATES DISTRICT COURT

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MALLERY - DIRECT 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. Yes. Did you ever speak to the Visitalk Board of Directors he did whatever was appropriate.

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The only direct contact that

I had that bears on this was in the context of a Board meeting in November of 1999 during which Mark Cardwell commented by telephone that he was not a director of Visitalk in September of 1998. That was the extent of my direct knowledge of any

fact relating to this Founders Warrants question." Now, that testimony was truthful, sir?

regarding these problems with the Founders Warrants? A. Yes. During a meeting on November 24th when I reported to

the -- when I asked -- when the question was asked of Mark Cardwell whether he was or was not a director. But I don't

recall specifically what I said at that meeting except for that one thing, confirming with Mark Cardwell he was not a director on September 12, 1998. what happened that day. Q. Now, the November 24, 1999, Board meeting, that was not the I just don't recall the specifics of

only Board meeting of Visitalk that you attended prior to Visitalk's bankruptcy on November 29, 2000, correct? A. Q. That's correct. How many Visitalk Board meetings do you remember having

attended? A. Q. I don't remember how many. Would it have been more than five? UNITED STATES DISTRICT COURT

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MALLERY - DIRECT 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 know. Did you ever become aware that Visitalk was having

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financial problems? A. Q. Certainly when they went into bankruptcy. When was it that you first discovered that Visitalk was

having financial problems? A. Q. A. Q. 100. A. Q. I don't recall the exact date. Would it have been in 2000? As I said, I don't recall the date. Sir, there is an exhibit folder in front of you for Exhibit Could you look at Exhibit 100 please. Yes, I have that. Did you see Exhibit 100 during the course of your

representation of Visitalk in 1999? A. I probably did. I don't recall specifically. Yes, I saw this. I think this

is the -- Wait a second. Q. A. Q. A. Q. A. Q.

Did you review it at that time? Yes. Could you look at the third page, sir. Yes. Do you see the paragraph with the ten in parentheses? Yes. Do you recall reviewing this portion of this document in

1999 which relates to when shares of stock were authorized to be issued to Mr. Thimmesch, Mr. O'Donnell, and Mr. Cardwell? UNITED STATES DISTRICT COURT

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MALLERY - DIRECT 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. Yes.

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Did you ever discuss the fact that this document reflects

that Visitalk authorized the issuance of one million shares to Mr. Cardwell on September 4, 1998, with Mr. Cardwell? A. I did not discuss this with him. I simply asked him during

the November meeting -- I mean, during the conference call on November 24th of 1999 whether he was a director at this time. Q. A. Q. Could you look at Exhibit 101 please. Okay. I've got it.

Did you see the first page of Exhibit 101 in -- during the

course of your representation of Visitalk in 1999? A. Q. sir. A. Q. I have it. Did you see the last page of Exhibit 101 during the course No. Could you look at the last page of this exhibit please,

of your representation of Visitalk in 1999? A. Q. No. Did you ever learn during the course of your representation

of Visitalk in 1999 that the original Visitalk stock transfer records reflected that Mr. Cardwell was issued one million shares of stock on September 4, 1998? A. Q. A. Yes. How did you come to learn that? That was -- That's what we were concerned about as we UNITED STATES DISTRICT COURT

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MALLERY - DIRECT 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 reviewed Mike Donahey's letter on July 28 of 1999.

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And that's

what we were talking about at the Board meeting on November 24th of 1999. That was the source of the confusion on the

issuance of the Founders Warrants. Again, we didn't represent Visitalk in 1998, and we were struggling to find out what really happened in 1998. Mike Donahey took the lead on that due diligence, and we finally did confirm that Mark Cardwell was not a director on September 4th. past. I think I'd been saying September 12th in the And

It's probably -- Maybe those dates should have been He didn't become a director until after

September 4th.

September 4th or September the 12th, according to Mark Cardwell. Q. Did you discuss with any of Visitalk's officers during 1999

the date on which Mr. Cardwell was issued shares of stock in Visitalk? A. I don't recall specifically when or what we said, but that

was certainly one of the concerns that we had starting when we -- starting when Mike Donahey discovered the confusion about Mark Cardwell's entrance into the firm in September of 1998, because these documents that came out of the Bryan Cave files and the corporate files were not consistent with what we learned in November of 1999. conversation about that. Q. There was what? I'm sorry? So, yes, there's a lot of

UNITED STATES DISTRICT COURT

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MALLERY - DIRECT 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. There was conversation about that, that the corporate

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records were inaccurate. Q. But also was there conversation about whether Mr. Cardwell

had become a shareholder on September 4, 1998? A. I don't recall talking about when he became a shareholder. I'm sure that

I was only focused on when he became a director.

that's something that Mike Donahey had very much in mind throughout his due diligence, and I was not -- I did not feel it was necessary to duplicate what he was doing. area of expertise, not mine. Q. Did anyone tell you during 1999 that the information on the That's his

stock certificate stub, which is the last page of Exhibit 101, was wrong in any respect? A. I don't recall specifically discussing the stub out of the

stock book. Q. Were you ever told during the time you represented Visitalk

that any of the lists of Visitalk's shareholders had information in them which was in error? A. Q. A. That was in the shareholder list? Lists of shareholders of Visitalk. I don't specifically recall discussing a list of

shareholders during that time frame. Q. Did you ever come to have an understanding that

Mr. Thimmesch and Mr. O'Donnell had taken the position that Mr. Cardwell did not become a shareholder on September 4, 1999? UNITED STATES DISTRICT COURT

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MALLERY - DIRECT 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. All I recall is we talked about his director status.

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I

don't recall discussing his stockholder status. Q. A. Q. A. Q. A. Q. Could you look at Exhibit 105 please, sir. Yeah, this is what I was referring to earlier. Do you recall having seen Exhibit 105 in 1999? Yes. Do you recall when in 1999 you first saw Exhibit 105? I don't recall the specific date. Do you see this document is captioned unanimous consent of

Board of Directors in lieu of special meeting? A. Q. A. Q. Yes. Do you understand what this document is? Yes. Did you have discussions with other lawyers at

Snell & Wilmer regarding the -- regarding this document during the fall of 1999? A. Q. Yes. What did you -- Did you have those discussions with

Mr. Donahey? A. I don't recall having a separate discussion with

Mr. Donahey, but at the meeting at my home on July 31st, we talked at length about when Mark Cardwell became a director, because of course if he had been a director, his signature was required on this document. If he was not a director, then his

signature was not required on this document. UNITED STATES DISTRICT COURT

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MALLERY - DIRECT 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. Q.

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What did you learn -- What did you learn from Mr. Thimmesch

and Mr. O'Donnell about this document during that meeting? A. I don't recall what I learned from either one of them that

day except this document says what it says, and they signed it. Q. Do you recall anything else about what they told you

relating to the claimed authorization and issuance of the Founders Warrants at that meeting at the end of July of 1999? A. Yes. They said they had a meeting, and although I'm not a

corporate lawyer, you usually don't document a corporate meeting of the Board with unanimous consent in lieu of a special meeting. You usually have minutes of a meeting if the And, again, I thought that Bryan Cave had

Board has a meeting. prepared this.

And I was a little mystified why they chose

this particular form to document a meeting of the Board, because this says in lieu of a special meeting. And both O'Donnell and Thimmesch told me they had a So I was a little mystified. I just did not

understand why they would select this form memorializing that meeting. It should have been minutes of the special meeting,

not a unanimous consent resolution in lieu of a special meeting. Q. Sir, could you look at Page 59 beginning at Line 5 of your

deposition transcript from November 22, 2005. A. Q. Page -Page 59, Line 5. UNITED STATES DISTRICT COURT

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MALLERY - DIRECT 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. I asked you, sir: "At that time did anyone at

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Visitalk ever tell you that there had been an actual meeting of Visitalk's Board of Directors at which Mr. Thimmesch and Mr. O'Donnell claimed to have issued the Founders Warrants to themselves?" And you answered "No." Now, that testimony was truthful, sir? Well, I was simply wrong in my response, because I was

aware that they had a meeting. Q. So, sir, it's now your testimony that in fact you did have

the discussion about the Founders Warrants regarding an actual meeting which you denied under oath previously that you had ever had? A. I did not recall that they had told me there was a meeting.

I do recall it now in the process of going through the preparation that I went through in order to prepare for this trial. Q. Ah, so through the preparation for your testimony, you've

now recalled that you did in fact have such a discussion? A. Yes. And the reason is I recalled the confusion I had

about looking at a unanimous consent resolution at the time when it should have been minutes of a special meeting to memorialize that moment on September 12, 1998. back to me, slow recall. Q. Could you look at Exhibit 15 please, sir. UNITED STATES DISTRICT COURT It just came

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MALLERY - DIRECT 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. 15? 15. One five? Correct. I don't have an Exhibit 15. I've got 16. Okay.

1528

Did you see Exhibit 15 during the time you were

representing Visitalk in the summer and the fall of 1999? A. Q. Yes. I got a carbon copy of this letter.

Did you have discussions regarding the matters contained in

this letter with anyone at Visitalk during that period of time? A. Q. A. Q. Yes. I talked to Steve Best about it.

What did you discuss with Mr. Best about this document? I don't recall the specifics at all. Did you personally do any work to -- on any of the matters

referenced in this letter, Exhibit 15? A. I don't recall. Mike Donahey was leading the due

diligence, and I have complete confidence he was doing a fine job. Q. A. Q. Could you look at Exhibit 112, please, sir. Yes. Did you see Exhibit 112 at any time during the summer of

1999? A. I don't recall seeing this draft of this letter during that

period. Q. Do you recall seeing another version of this document in -UNITED STATES DISTRICT COURT

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1529

I probably did, but I do not recall specifically when. But do you recall having reviewed a version of this

document which looked substantially like this document in July of 1999? A. Q. A. I probably did. I'm asking whether you recall having done that, sir. I don't recall specifically reviewing a draft that occurred I was very aware of the

either before this or after this.

substance of these letters, but I don't recall seeing this draft of this document. Q. Sir, did you ever see a -- Did you ever discuss this

document with Mr. Donahey in July of 1999? A. I discussed the substance covered by this document with

Mr. Donahey in July, and we discussed the substance in this document at the meeting at my home on July 31st. Q. Do you see the third paragraph of this document, sir, on

the first page it reads "As we understand it, in early November, 1998, after the closing of the company's offering of Series A Preferred Stock, Messrs. Thimmesch and O'Donnell authorized, pursuant to a resolution of the Board of Directors dated September 12, 1998, the issuance of the Founders Warrants in order to prevent dilution of their ownership percentages through the initial capital raising activities of the company"? Do you see that language? UNITED STATES DISTRICT COURT

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MALLERY - DIRECT 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. That's what it says.

1530

Was your understanding of the facts relating to that matter

consistent with what I just read in July of 1999? A. I don't recall specifically what I thought about that line We were struggling to find But that was in

in July of 1998 -- in July of 1999. out what actually happened. November of 1999. Q.

Finally we did.

This was a work in progress.

Did you, sir, at any time after July 28 of 1999 form a

conclusion that the Founders Warrants had been authorized and issued on a date prior to early November of 1998? A. Yes. I believe that after the November 24th conference

call where Mark Cardwell indicated that he was not a director, that then, at least as far as I was concerned, the unanimous consent resolution of September the 12th accurately reflected the truth of the corporate history that O'Donnell and Thimmesch had issued Founders Warrants on September 12, 1998, which gave some clarity and accuracy to the corporate history. Q. Did -- Prior to the Board meeting on November 24, 1999, did

you ever tell any of the directors of Visitalk other than Mr. Thimmesch or Mr. O'Donnell that the Founders Warrants had been authorized and issued in early November of 1998? A. I don't recall discussing this with any member of the I discussed it of course with Steve Best. Are you there?

Board. Q. A.

Could you look back at Exhibit 105, sir. Yes. UNITED STATES DISTRICT COURT

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MALLERY - DIRECT 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. Would you look at the last page please. Of -Exhibit 105. Okay. Do you see that the signatures of Mr. Thimmesch and

1531

Mr. O'Donnell appear on the page, and the page is dated as of September 12, 1998? A. Wait a second. Excuse me. Would you ask the question

again. Q. A. Q.

I see the signatures of Thimmesch and O'Donnell.

Do you see the date line reads as of September 12, 1998? Yes. Did you ever discuss with Mr. Thimmesch or Mr. O'Donnell

the date they signed this document? A. I don't specifically recall discussing the date they signed

this document with either one of them. Q. Did you ever discuss with anyone the date this document,

Exhibit 105, was prepared? A. I didn't discuss -- I don't recall discussing the date it

was prepared. Q. In formulating the conclusion regarding the date of

authorization and issuance of the Founders Warrants about which you previously testified, was it important for you to know the date on which Mr. Thimmesch and Mr. O'Donnell signed Exhibit 105? A. I relied upon the due diligence being conducted by Mike UNITED STATES DISTRICT COURT

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MALLERY - DIRECT 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 evidence. THE COURT: THE WITNESS: You may answer. Donahey.

1532

I didn't feel it was necessary to duplicate his work. And he led the due diligence.

I trusted him completely. Q.

Did you understand from Mr. Donahey whether the date on

which Mr. Thimmesch and Mr. O'Donnell signed Exhibit 105 had any bearing on when the Founders Warrants were authorized and issued? A. I don't recall specifically discussing that with Mike

Donahey, but I just as a matter of my own knowledge of corporate law, the issuance occurs when the warrants were authorized. That's how I've gone through -- That's the It's the date of

assumption I've had in all my career. authorization is the date of issuance. Q.

Did you ever tell the Visitalk Board of Directors that

there was no known documentary evidence to support the claims of Mr. Thimmesch and Mr. O'Donnell about the date on which the Founders Warrants were authorized? A. I don't recall -MR. BIRNBAUM: Objection. Assumes facts not in

I don't recall discussing any of the Mike Donahey would have

details with the Board of Directors.

been responsible for making the presentation and answering any questions. Q. (BY MR. KAUP) Did you ever tell the Visitalk Board of UNITED STATES DISTRICT COURT

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Directors that the action by unanimous consent, Exhibit 105, was ineffective as of October 22, 1999? A. I think I answered that question. I did not make any

presentation to the Board of Directors about the due diligence into the corporate history. responsibility. That was Mike Donahey's

And I was simply listening if I was there for

that presentation. Q. Do you know if Mr. Donahey ever conveyed to the Board that

there was no known documentary evidence to support the claims of Mr. Thimmesch and Mr. O'Donnell to the warrants? A. Q. I don't recall any specifics. Did you know whether Mr. Donahey ever told the Visitalk

Board of Directors that the action by unanimous consent, Exhibit 105, was ineffective as of the -- as of October 22, 1999? A. Q. A. Q. Again, I don't recall the specifics. Could you look at Exhibit 121 please, sir. Yes, I've got it. Did you see Exhibit 121 at any time during your

representation of Visitalk after November 24, 1999? A. Q. I probably did. I don't recall the specific date.

Do you see these are minutes of a special meeting of

Visitalk's Board of Directors dated November 24, 1999? A. Q. Yes. Do you recall attending this Board meeting? UNITED STATES DISTRICT COURT

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MALLERY - DIRECT 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.

1534

The answer is I don't recall specifically but -- that day,

but the minutes indicate that I was present. Q. On the first page, do you see the bullet point "Stephen

Best ratification"? A. Q. Yes. Do you see under that it says, "Dick Mallery reviewed

changes to Stephen Best's contract"? A. Q. A. Q. Yes. Do you remember anything about that? No. Could you look at Page 4 of this document, sir. Do you see the bullet point for Founders Warrants? Right. Do you see the next sentence reads "The background on the

Founders Warrants was explained to the Board"? A. Q. Yes. Who explained the background of the Founders Warrants to

the Board? A. I assume that Mike Donahey did, because he was also present

at the meeting. Q. What did Mr. Donahey say at the meeting regarding the

background of the Founders Warrants? A. Q. A. I don't recall the specifics. Do you recall anything, if not the specifics? I just recall that -- the conversations that we had at my UNITED STATES DISTRICT COURT

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MALLERY - DIRECT 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 home on July 31st. I assume that the substance of that,

1535

although it had been -- it had evolved, that that was the substance of what he presented. But they went into executive session, and I did not stay for the executive session. Q. Sir, I just want to -- I understand that now you remember a

meeting at the end of July in your living room that you didn't remember at the time of your deposition. about this document, sir, and that is -A. I don't know that I didn't remember that during the But I want to ask

deposition. Q. I want to ask about this document and what happened at this

meeting. What do you remember Mr. Donahey telling the Board of Directors at this meeting on November 24, 1999, regarding the background of the Founders Warrants? A. Q. I don't recall the specifics. Again, put the specifics aside. Do you recall anything he

said? A. I think that's what I tried to cover when I said I don't If I remembered anything he said, I

remember the specifics. would have mentioned it. Q. sir. A. Okay.

Could you look at the next page of this document,

Are you there? It depends upon which page you mean. UNITED STATES DISTRICT COURT

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MALLERY - DIRECT 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. Page 5. Yes. I'm sorry. Are you there?

1536

Do you see a little down from the center of the page the

words "The Board adjourned the meeting and reconvened 30 minutes later. The Board voted to approve the above course of

action relating to the 10th of December deadline to receive waivers. Mr. Hirschberg made the motion. The vote was unanimous"? Mr. Kaplan seconded

the motion.

Now, I understand, sir, that there was an executive session referenced on the last page, but what I want to know is were you present during the time that the events which I just read occurred during this meeting? A. Q. I don't recall. Do you recall anything else about this Board meeting other

than what you've already testified about -- Let me ask it this way. Do you recall anything else about this Board meeting on

November 24, 1999? A. Q. No. Did you ever review Visitalk meeting minutes and provide

input or revisions to the minutes before they were finalized? A. Q. I don't recall. Did you ever discuss with Mr. Donahey revisions that he was

making to the Board meeting minutes from November 24, 1999? A. Q. No, I don't recall. During the fourth quarter of 1999, you spoke with UNITED STATES DISTRICT COURT

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Mr. O'Donnell regarding his interest in having Snell & Wilmer do estate planning for himself and his wife, correct? A. Q. Yes. And you then referred him to Mr. Weiss in your firm to do

that work, correct? A. That isn't the sequence. MR. BIRNBAUM: finished his answer. THE WITNESS: I assume I can finish. May I describe the sequence?

Your Honor, the witness has not

First, Mike O'Donnell came and asked me to help him with his estate plan. planning lawyer. Second, I said I'd be happy to refer him to an estate planning lawyer but that I would need to discuss this with Steve Best. I called Steve Best and said, "Steve, in the past And I explained I was not an estate

our firm, as other firms, have helped a principal in a corporation with estate planning, but that's your decision as general counsel whether you do or do not want us to take on this responsibility. There are many fine estate planners in

Phoenix, and I'm happy to give you a list of three or four." And Steve Best said he would prefer if Snell & Wilmer helped Mike O'Donnell with his estate planning. And I

mentioned two options with the firm, and he selected David Weiss. Then I called Mike O'Donnell, reported on my UNITED STATES DISTRICT COURT

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1538

conversation with Steve Best, and introduced Mike O'Donnell to David Weiss. Q. (BY MR. KAUP) Now, Mr. Mallery, did you do work -- As part

of your work for Visitalk, did you work on some business strategy? A. No. I'm not a business advisor. I simply listened to

others talk about the business strategic and tactical options. And to the extent that I became aware of a legal issue connected with any of those potential strategies and tactics, I mentioned it to the officers or directors. Q. So is it your testimony you did no work on Visitalk's

business strategy during the time you represented the company? A. If I take that question literally, that is correct. I did

not do any work on business strategy.

But if my listening to

others talk about the strategies and being alert to legal issues is work, then, yes, I did do work. Q. A. Q. Could you look at Exhibit 27 please, sir. Yes, I have it. Do you see the billing entry for -- next to your initials

for the date September 22, 1999, on Page -- with the page Bates numbered VT006414? A. Q. A. Q. That was on September 29? September 22. Oh, September 22. I'm sorry. Yes.

Do you see you wrote "Conferences and work on business UNITED STATES DISTRICT COURT

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1539

strategy and tactical options regarding current and future projects. Planning session with P. Thimmesch regarding same.

Phone conferences with S. Best regarding same"? A. Q. Yes. Sir, first, what work did you do on business strategy and

tactical options for Visitalk about which you made an entry on September 22, 1999? A. I don't have any recollection of the specifics, but I do

know that both Thimmesch and Best were talking about possible business strategy and projects. And I listened to what they

were considering with -- as a lawyer trying to be alert to any legal issues presented by those strategies and projects. Q. But you see the references to the planning session with

Mr. Thimmesch and the phone conference with Mr. Best appear after the reference to the work on business strategy and tactical options that you've written that you did that day. So my question, sir, is the work you did on that day on the business strategy and tactical options was different from the phone conferences and planning session you had with Mr. Thimmesch and Mr. Best, correct? A. I don't really understand your question. If by work you mean my work as a lawyer, yes, I was working as a lawyer, counseling them on potential legal issues. But I'm not a business advisor, and my work was not as a business advisor. I have no expertise as a business advisor. UNITED STATES DISTRICT COURT

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1540

I was simply working with them as a lawyer listening to their proposed strategies and projects to see if there was a legal problem. Q. Did you actually do work on business strategies and

tactical options for Visitalk on September 22, 1999, other than listening to Mr. Thimmesch and Mr. Best? A. Yes. If I thought there was a problem, I didn't listen; I But all of my work was as a

spoke up and informed them. lawyer.

I do not have any expertise in business, and I

certainly don't have any expertise in a high-tech business. But as a lawyer, that's what I've done for over 40 years. tried to help people avoid problems. Q. What was the business strategy of Visitalk on which -- for I've

which you've written that you did work on September 22, 1999? A. Q. A. off. Q. That's fine. Do you see the billing entry for you dated September I have no recollection. What were the tactical options? I have no recollection. Sorry. I didn't mean to cut you

Do you see that you wrote "Conferences and work on current Phone conference with M.

and future strategies and tactics. O'Donnell regarding same.

Phone conference with P. Thimmesch

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MALLERY - DIRECT 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 already. time. regarding same. A. Q. Yes.

1541

Phone conference with S. Best regarding same"?

What work did you do on current and future strategies and

tactics of Visitalk on September 24, 1999? MR. BIRNBAUM: Your Honor, allow me to object at this

The question is not only duplicative, it's already been

answered, but it's also outside the scope of disclosure of Mr. Mallery's anticipated testimony as provided in the pretrial statement. MR. KAUP: THE COURT: MR. KAUP: Your Honor -Was this disclosed? Your Honor, all of these are matters

relating to the issues that are referenced in the joint pretrial regarding the Founders Warrants, the securities law issues. This is work that he was doing for Visitalk during a

period of time he said he's already testified all they were doing was work relating to the Founders Warrants and the securities law problems that have brought us here today. It

absolutely is fairly within that scope because his time entries are on -- presumably on these matters. MR. BIRNBAUM: Your Honor, it's Page 25 of the

pretrial statement for your reference. THE COURT: The time records have been admitted

Some of the questioning has touched on this subject.

We'll take the answer to this last question, but then let's UNITED STATES DISTRICT COURT

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MALLERY - DIRECT 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. move on to something else. Q. (BY MR. KAUP) Okay.

1542

Could you just read back the last question. I think I have it in my mind unless you want to get

refreshed. Q. A. Okay. If you feel comfortable answering --

I feel very comfortable saying the same thing I said to

your previous question, which is any time I use the word work in a statement for legal services from my firm for my time, I mean then -- and I have consistently followed this practice for four decades now -- I mean legal work. And that's all I did,

was listen and comment upon potential legal problems. And I don't have any recollection of the specific nature of that work. Q. A. Q. I just don't.

Could you look at Exhibit 281, please, sir. I've got it. Could you look at the page with the Bates numbers at the

bottom SWDS1483. A. Q. Okay. Do you see the billing entry next to your initials for

December 10, 1999? A. Q. Yes. Do you see it reads "Conferences and work over course of

day on M. Cardwell release, optional provisions, and restatement of corporate history. Negotiations with M.

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MALLERY - DIRECT 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 Cardwell and his lawyer T. Curzon and planning session regarding strategy and tactics. O'Donnell regarding same. regarding same.

1543

Phone conferences with M.

Phone conferences with J. Hirschberg Phone conferences

Research regarding same.

with S. Best regarding same. regarding Series C"? A. Q. Yes.

Phone conferences with M. Love

What work did you do on September 10, 1999, regarding the

restatement of corporate history? A. Q. I think you meant to say December 10. I'm sorry. December 10, regarding the restatement of

corporate history. A. Just getting the facts straight. I mean, by that point in

time, we knew that Mark Cardwell was not a director on September 12th, which was the key date for that unanimous consent resolution. And as a transactional lawyer who uses the word restatement to in effect clarify the accuracy of what has gone before, I've had a restatement of many different contracts that parties have asked me to prepare so that there would be a consistent record of their meeting of the minds. I'm very familiar, having clerked for a court, of the meaning of restatement. And all I was doing was helping to

restate the corporate history to reflect the truth, the accuracy of what happened on September 12th. UNITED STATES DISTRICT COURT And that is the

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MALLERY - DIRECT 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 duty of a lawyer, to get it straight. Q.

1544

I do appreciate that, Mr. Mallery, but what I asked is what

work did you do -A. Q. A. Q. I don't recall specifically --- in connection -- I'm sorry? I don't recall specifically. What work did you do on that date regarding the M. Cardwell

release? A. Q. I don't recall the specifics. What was the M. Cardwell release which you referenced in

this billing entry? A. Q. I assume it's the one he signed. What negotiations did you have with Mr. Cardwell and

Mr. Curzon on that date? A. I don't recall the specifics. Just clarifying what Mark

Cardwell told us was the truth on November 24, 1998 -- 1999. Q. A. Q. What did you clarify? That he was not a director on September 12, 1998. Anything else you clarified in the negotiations with

Mr. Cardwell and Mr. Curzon? A. I don't recall the specifics. I was only focused on his

status as a director. Q. What did you do in the planning session regarding strategy

and tactics that you had on that day? A. I don't recall the specifics. UNITED STATES DISTRICT COURT

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MALLERY - DIRECT 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. Do you recall anything about the planning session? Other than what this time entry says, I have no

1545

recollection. Q. day? A. Q. I have no recollection. Do you recall there was a meeting of Visitalk's What research did you do regarding the same topics on that

shareholders on December 27, 1999? A. Q. A. Q. Yes. You attended that meeting, didn't you, sir? Yes. Did you -- As part of your duties as a lawyer, were you --

was it necessary for you to take actions to prepare for that meeting? A. I don't recall that I had any preparation for that meeting

at all, but I don't recall the specifics. Q. A. Q. A. Why is it you attended that meeting on December 27, 1999? Because Steve Best invited me to attend. What was the purpose for your attendance at that meeting? Steve Best had a reason. I didn't ask him. He just

invited me to attend, and I did. Q. A. Q. Did Mr. Donahey also attend that meeting? I assume he did. Do you recall having discussed with Mr. Donahey the

upcoming shareholders meeting on December 27, 1999, before you UNITED STATES DISTRICT COURT

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MALLERY - DIRECT 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 actually got to that meeting? A.

1546

I don't recall any specific discussion with him before we

got to the meeting. Q. Did you discuss the upcoming meeting with Mr. Thimmesch or

Mr. O'Donnell before that meeting? A. Not that I recall. Steve Best was my only point of

contact. Q. Did you have meetings with Mr. Best prior to that meeting

on December 27, 1999, regarding matters that were going to be brought up at the meeting? A. Q. A. I don't recall. You participated in that meeting, didn't you, sir? Steve Best introduced me at the meeting. I don't recall

making any, other than identifying myself, I don't recall making a presentation. Q. A. Q. But you did participate in the meeting? I did attend the meeting. Could you look at Page -- of this exhibit, sir, 281 --

SWDS1488? A. Q. A. Q. Yes. And your billing entry for December 27, 1999. Yes. You see you spent seven and a half hours doing work for

Visitalk on that day? A. Yes. UNITED STATES DISTRICT COURT

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MALLERY - DIRECT 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.

1547

And you wrote "Conferences, work, research, and preparation

over course of day for special meeting of shareholders. Planning session with S. Best regarding same. conferences with J. Hirschberg regarding same. stockholder meeting materials and agenda. Phone Review of

Trip to Arizona

Biltmore and meetings with P. Thimmesch, M. O'Donnell, J. Hirschberg, S. Best, A. Kaplan, Mark Gaston, M. Turley, C. Thimmesch, and M. O'Donnell before and after stockholders meeting. Meetings with individual shareholders before and Participation in meeting. Strategic planning

after meeting.

session afterwards with J. Hirschberg regarding next phase of process." A. Q. Yes. Now, the information you put down in that billing entry was Are you there?

true and correct when you wrote it? A. Q. day? A. Q. I don't recall. What did you discuss with the officers of Visitalk before Of course. Now, what -- which stockholders did you meet with on that

and after that stockholders meeting? A. Q. I do not recall. Aside from what you've already testified about, do you

recall anything else about your participation in this meeting of Visitalk shareholders on December 27, 1999? UNITED STATES DISTRICT COURT

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MALLERY - DIRECT 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. BIRNBAUM: Q. A. Q. Good morning, Mr. Mallery. Mr. Birnbaum. I hope we don't take too much of your time. How are you today? A.

1548

The only thing I could add to this time entry is I recall

Steve Best introduced me at the meeting. Q. What do you recall you said after you were introduced at

the meeting? A. I don't have any recollection. Probably just said I was a

partner at Snell & Wilmer, and we were pleased to be representing Visitalk. MR. KAUP: Mr. Mallery. THE COURT: You may cross-examine. CROSS-EXAMINATION I don't have any further questions for

Let me start

toward the end.

Sometimes it's easy to remember that way.

You were asked a number of questions about a meeting that you say occurred at your house on July 31. that, sir? A. Q. Yes. Do you still have Exhibit 18 in front of you? That's some Do you recall

Snell & Wilmer time sheets. A. Q. Yes. Now, and, Mr. Mallery, we're about to go through a very The document apparently is stapled wrong.

lawyerly exercise.

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1549

So I'm going to ask you to look at Page 4, and then the entry I'm going to ask you about continues on Page 2 of the document. And I don't know whose fault that is, Your Honor, but apparently the time sheets are not in chronological order. Mr. Mallery I would like you just to take a look at the entry for July 31, 1998 on Page 4 -A. Q. A. Yes. -- at the bottom of the page. Right. THE COURT: '98 or '99? '99. I'm sorry, Your Honor. I got so

MR. BIRNBAUM:

confused about trying to explain the pages being out of order, I missed the year. Q. (BY MR. BIRNBAUM) Mr. Mallery, on the bottom it says,

"R.M. time entry for July 31, 1999." A. Yes, I have it, and I've read that as well as Page 2 where

it continues. Q. Well, let's follow along so the Court and everyone else can

follow this. At the end of Page 4, it says, "Meeting with Peter." And then the entry continues back at the top of what is Page 2 of the exhibit where it says, finishing Peter, "Thimmesch, Mike O'Donnell, Steve Best and Mike Donahey re same meeting with Steve Best afterwards re same." A. Yes. UNITED STATES DISTRICT COURT

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MALLERY - CROSS 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.

1550

Is that your contemporaneous recordation of your presence

at that meeting? A. Q. Yes. Now, I don't want to spend a lot of time on this next

question, sir, but do you recall at the time of your deposition that Mr. Kaup referred to that in fact this time sheet was marked as an exhibit by Mr. Kaup to your deposition? I

believe, Your Honor, to avoid a long discussion, it's Exhibit 30. Do you recall this being an exhibit to your deposition, sir? A. If you say so. Probably, yes. Your Honor, the deposition will be

MR. BIRNBAUM:

filed with the clerk and reflects that Exhibits 29 and 30 are the time sheets for this date, and they were marked by Mr. Kaup in his examination of Mr. Mallery. Q. (BY MR. BIRNBAUM) Okay. Let's move on to a different

subject.

And again, Mr. Mallery, I'm not going to take these I'm just trying to start with the

in any particular order.

most recent things that were discussed. The estate planning work that was discussed, there was only one question I wanted to ask you about that. You described the manner in which Michael O'Donnell came to you, and ultimately you called Mr. Best for essentially approval to represent Mr. O'Donnell in estate planning matters; UNITED STATES DISTRICT COURT

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MALLERY - CROSS 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 is that right? A. Q. Yes, that's correct. You didn't mention Mr. Thimmesch.

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Tell us the protocol

that occurred when Mr. Thimmesch came for his estate planning work? A. That protocol was exactly the same protocol. Steve asked

me to represent him. specialty.

I said I couldn't because that was not my Steve Best said, "You're Yes,

I called Steve Best.

doing it for Mike.

You understand the corporate history?

please do represent -- please have one of your estate planners represent Peter Thimmesch." And I again referred him to David Weiss simply because I felt he would be better prepared to counsel the other major shareholder on estate planning. Q. Moving on to another subject, trying to stay with the ones

that you were just asked about, do you recall your discussion with Mr. Kaup about the December 27, 1999, shareholders meeting? A. Q. it. That's correct. Mr. Kaup did not ask you this directly, sir, so let me do Did you ever suggest to anyone on that day or that meeting

that they would soon become a millionaire? A. Q. A. What? A millionaire?

Yes, sir. No, I -UNITED STATES DISTRICT COURT

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MALLERY - CROSS 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.

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How -- Now, I don't want you to limit yourself to the words

I just used that you just answered. A. Q. Get rich quick? No.

Do you recall saying anyone was about to get rich or

anything of that context? A. Q. No. You've told us you'd been at this job for about 44 years.

Have you ever, to the best of your recollection, made such a comment to anyone in connection with your representation of any client? MR. KAUP: THE COURT: THE WITNESS: investments, period. 401K. Objection. Overruled. The answer is I don't give opinions on I don't even pay attention to my own I don't -- I have Relevance.

I let a very fine advisor manage it.

no expertise at all in stocks at all.

I don't even give an

opinion in real estate, and that is an area where I've devoted myself, because obviously it's, you know -- I'm not a business advisor, and it's a dangerous game. Q. (BY MR. BIRNBAUM) Have you ever met a Mr. Richard

Rothwell? A. Q. Not that I recall. Do you recall ever speaking to a Richard Rothwell by

telephone or otherwise? A. No. UNITED STATES DISTRICT COURT

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MALLERY - CROSS 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.

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Do you recall any meeting of shareholders of Visitalk where

Richard Rothwell spoke and identified himself as Richard Rothwell? A. Q. No. So I presume, Mr. Mallery, you've never told Mr. Rothwell

he'd be a millionaire soon? A. Q. Certainly not. During the course of the December 27 meeting -- it's my

last question on this subject, sir -- do you recall in any way at all in your conversations with anyone, individual or group, suggesting that any person or group of persons would reap some type of financial benefit or reward from their investment in Visitalk? A. Q. No. Let's move on to another subject, then, sir. This Exhibit

281, do you still have that in front of you, sir? A. Q. Yes. Now, this is the December 10, 1999, time entry that you And you were specifically asked,

were asked about.

Mr. Mallery, about the concept of restating corporate history. Do you recall that? A. Q. Yes, very vividly. First I want to be clear about the answer you gave.

Actually restating corporate documents using that term, restatement of corporate documents, that's actually a common UNITED STATES DISTRICT COURT

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MALLERY - CROSS 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. thing for business lawyers to do, is it not? A. Yes.

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I've done that many, many times over the course of my

career, restated purchase agreement or restated -- I mean, we just restate it in order to get it all integrated into some kind of logically consistent whole. Q. In that context, the restatement of a corporate document is

a modification where you restate the original document, and then generally you're adding something to the document; is that correct? A. That's correct. MR. KAUP: Objection, Your Honor, relevance. He's

talking about restating corporate documents. Mr. Mallery wrote. THE COURT: (BY MR. BIRNBAUM)

That's not what

He wrote restating corporate history. You may inquire in that area on redirect. Thank you.

Mr. Mallery, so there's no misunderstanding, is there a difference between restating historic corporate documents and the term restating corporate history? A. Q. Not in my mind. Now, on December 10, you were involved, were you not, sir,

in this issue you discussed with Mr. Kaup about when Mr. Cardwell became associated with Visitalk and in what capacity? A. Q. I just inquired about being a director, yes. And there was a concern which you shared with others about UNITED STATES DISTRICT COURT

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