Free Statement - District Court of Arizona - Arizona

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STEVE BROWN & ASSOCIATES, LLC
1414 EAST INDIAN SCHOOL ROAD, SUITE 200 PHOENIX, A RIZONA 85014 (602) 264-9224

Steven J. Brown (#010792) [email protected] Steven D. Nemecek (#015219) [email protected] Attorneys for Trustee UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA DIANE MANN, Trustee; et al., CIV-02-2099-PHX-RCB Plaintiffs, v. GCTR GOLDER RAUNER, L.L.C., a Delaware limited liability company; et al., Defendants. In re: LEAPSOURCE, INC., Debtor. DIANE MANN, Trustee, Plaintiff, v. ICG GROUP, INC., an Arizona corporation; MICHAEL MAKINGS and MARCIA MAKINGS, husband and wife, Defendants. consolidated with CIV-02-2325-PHX-RCB BK-01-9020-PHX-JMM Adv. No. 02-1202

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STATEMENT OF FACTS IN SUPPORT OF MOTION FOR PARTIAL SUMMARY JUDGMENT (RE: COUNT III)

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Plaintiff/Trustee Diane Mann states the following facts in support of her Motion for Partial Summary Judgment (Re: Count III): 1. The business known as ICG provides consulting services to large corporations to help

them integrate their financial and accounting systems. Makings Dep. Vol. 1 (Ex. 1 hereto) at 11:825, 18:16-19:2. 2. The ICG business was founded in approximately 1990. Defendant Michael Makings

("Makings") was one of the two co-founders. ICG was owned by Image Consulting Group, Inc., later changed to ICG Consulting, Inc. At all times prior to the year 2000, Makings was ICG Consulting, Inc.'s 50% shareholder, one of its two directors, and its president. Makings Dep. Vol. 1 (Ex. 1 hereto) at 15:23-17:15, 18:2-15. 3. On January 1, 2000, Debtor purchased the ICG business from ICG Consulting, Inc. for

$10 million. Debtor paid $5 million in cash (including $2.5 million to Makings and $2.5 million to his partner) and delivered $5 million worth of promissory notes, including the $2.5 million Promissory Note to ICG Consulting, Inc. that is the subject of this claim ("the Note"), which it assigned to Makings. Makings Dep. Vol. 1 (Ex. 1 hereto) at 133:20-134:11, 138:8-19, Ex. 355 (1/1/00 APA) § 2.2, Ex. 359 (1/1/00 Note). 4. After that purchase, Debtor hired Makings as an employee with a starting annual salary

of $360,000. Makings also became a shareholder of Debtor. Makings c ontinued to operate the ICG business, integrated the business into a division of Debtor, and did sales and marketing for Debtor on other accounts unrelated to ICG. In October 2000, Debtor made Makings its chief operating officer, and Makings became heavily involved in Debtor's operations. On or before February 27, 2001,

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Debtor officially made Makings its CEO and a director. (Though as early as February 15, 2001, Makings executed documents indicating he was the CEO and a director of Debtor.) Makings Dep. Vol. 1 (Ex. 1 hereto) at 12:5-15:22, 21:19-22, 39:19-40:18, 42:2-6, 98:12-17, 142:13-143:4, 203:19-209:14, Exs. 360, 365-67. 5. In January 2001, Makings accelerated the entire balance owed on the Note, $2.5

million plus interest, due to Debtor's default. Makings Dep. Vol. 1 (Ex. 1 hereto) at 197:16-198:12, 200:11-23, Exs. 102, 103. 6. In early March 2001, Makings began planning a re-acquisition of ICG and began

negotiating with Debtor for the re-acquisition of ICG. On March 16, 2001, Makings incorporated a new entity: Defendant ICG Group, Inc. Makings created ICG Group, Inc. for the sole purpose of reacquiring and operating the ICG business. At all times Makings has been ICG Group Inc.'s sole shareholder and sole director. Makings Dep. Vol. 1 (Ex. 1 hereto) at 10:15-11:7, 137:16-25, 187:17-23, 209:21-210:19, Ex. 368; Makings Dep. Vol. 2 (Ex. 2 hereto) at 273:14-276:6. 7. On March 20, 2001, Makings formally resigned as the chief executive officer and a

director of Debtor. On March 29, 2001, Debtor's board of directors accepted Makings' resignation as a director, which it characterized as effective on March 22, 2001. Makings Dep. Vol. 2 (Ex. 2 hereto) at 272:2-6, 279:10-25, Ex. 373. 8. By Asset Purchase Agreement dated and signed on March 23, 2001--a week before

Debtor's board accepted Makings' resignation--Debtor "sold" its ICG division to ICG Group, Inc. According to the Agreement, the "purchase price" for that transfer consisted almost entirely of ICG Group, Inc.'s forgiveness of the $2.5 million unsecured Note that Debtor owed to Makings, which he

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had allegedly assigned to ICG Group, Inc. just for this purpose. According to Makings' expert, Debtor owed Makings $2,748,526 on the Note when the Agreement was executed. Makings admits that he "traded" the Note, in part, for his former business, ICG. Makings Dep. Vol. 1 (Ex. 1 hereto) at 150:9-23, Ex. 103, 359, 363; Makings Dep. Vol. 2 (Ex. 2 hereto) at 278:20-279:7, 281:9-17, Ex. 372 (3/23/01 APA) § 2.2; Expert Report of Edward M. McDonough (Ex. 3 hereto) at 28. 9. According to Makings' expert, the fair market value of the ICG business at the time of

the transfer was $2,510,000. Expert Report of Edward M. McDonough (Ex. 3 hereto) at 40. 10. Pursuant to the Asset Purchase Agreement, the ICG assets were transferred to ICG

Group, Inc. on March 30, 2001. Makings Dep. Vol. 2 (Ex. 2 hereto), Ex. 372 (3/23/01 APA) § 2.1. 11. ICG Group, Inc. still owns and operates the ICG business, under the name ICG

Consulting. Makings Dep. Vol. 1 (Ex. 1 hereto) at 9:20-25. 12. According to Makings' expert, Debtor's liabilities exceeded its assets by $2,237,000

at the time of the transfer. Expert Report of Edward M. McDonough (Ex. 3 hereto), Ex. H11. 13. hereto) ¶ 2. DATED February 2, 2006. STEVE BROWN & ASSOCIATES, LLC The Estate has $134,123.67 in current assets. Declaration of Diane Mann (Ex. 4

By /s/ Steven J. Brown #010792 Steven J. Brown Steven D. Nemecek 1414 East Indian School Road, Suite 200 Phoenix, Arizona 85014 Attorneys for Trustee

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ORIGINAL of the foregoing filed Via ECF this 2 nd day of February, 2006.

ONE COPY *hand-delivered this 2 nd day of February, 2006. Clerk of the Court *The Honorable Robert C. Broomfield U.S. District Court, District of Arizona 401 W. Washington Phoenix, Arizona 85003 Copies mailed this 2 nd day of February, 2006 to: Merrick B. Firestone Veronica L. Manolio RONAN & FIRESTONE, PLC 9300 East Raintree Drive, Suite 120 Scottsdale, AZ 85260 Attorney for Defendants ICG Group, Inc, Michael Makings, and Marcia Makings Kevin A. Russell David S. Foster Patrick E. Gibbs LATHAM & WATKINS, LLP Sears Tower, Suite 5800 Chicago, IL 60606 Attorneys for GCTR Golder Rauner, L.L.C. et al Don P. Martin Edward A. Salanga QUARLES & BRADY STREICH LANG, LLP One Renaissance Square Two North Central Phoenix, AZ 85004-2391 Attorneys for GCTR Golder Rauner, L.L.C. et al

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Richard A. Halloran Jon Weiss LEWIS & ROCA, LLP 40 North Central Phoenix, AZ 85004-4429 Attorneys for Defendants David Eaton and AEG Partners LLC John Bouma James R. Condo Patricia Lee Refo SNELL & WILMER LLP One Arizona Center 400 East Van Buren Phoenix, AZ 85004 Attorneys for Defendant Kirkland & Ellis Leo L. Beus Scot C. Stirling Steven E. Weinberger Kevin Breger BEUS GILBERT PLLC 4800 North Scottsdale Road Suite 6000 Scottsdale, AZ 85251 Attorneys for Individual Plaintiffs and Trustee

/s/ Gina Ortega Gina Ortega

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