Avalon motion to direct ust to appt ch 11 tee.wpd

Transcription

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M. Vivienne Popperl, OSB #85305
Office of the U.S. Trustee
620 S.W. Main Street, #213
Portland, Oregon 97205
(503) 326-7656
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UNITED STATES BANKRUPTCY COURT
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FOR THE DISTRICT OF OREGON
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In re
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ENCOMPASS TELESERVICES, INC., )
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Case No. 07-31021-tmb11
UNITED STATES TRUSTEE’S
MOTION FOR ORDER
DIRECTING APPOINTMENT
OF CHAPTER 11 TRUSTEE
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The United States Trustee, Ilene J. Lashinsky, by and through her attorney, M.
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Vivienne Popperl, moves pursuant to 11 U.S.C. §1104(a) and (e) for an order directing
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the United States Trustee to appoint a Chapter 11 trustee. In support of this motion, the
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United States Trustee respectfully represents as follows:
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1. The Court has jurisdiction over this contested matter pursuant to 28 U.S.C.§157
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and 1334, and Local Rule 2100.1 of the United States District Court for the District of
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Oregon. This matter is a core proceeding as defined by 28 U.S.C.§157(b)(2)(A) and (O).
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2. Pursuant to 11 U.S.C. §307, the United States Trustee may raise, appear, and be
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heard on any issue in any case or proceeding under Title 11.
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3. This case was filed on March 22, 2007. The Debtor did not file complete
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schedules and statements. Based on the Debtor’s motion for an extension of time to file
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Page 1 -UNITED STATES TRUSTEE’S MOTION FOR ORDER DIRECTING
APPOINTMENT OF CHAPTER 11 TRUSTEE
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the missing documents, the Court entered an order directing that they be filed no later
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than April 19, 2007.
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4. The meeting of creditors pursuant to 11 U.S.C. §341(a) was originally scheduled
for April 27, 2007. It was rescheduled for May 4, 2007.
5. The Debtor is a closely held Subchapter S Oregon Corporation which was
incorporated in 1999.
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6. The Debtor operates customer call centers for its only client, T-Mobile.
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7. The Debtor has approximately 300 employees.
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8. The Debtor’s petition reflects that it is a small business. It filed certain
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information pursuant to 11 U.S.C. § 1116, including, 1) a balance sheet dated 12/31/2006,
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reflecting total assets of $3,074,427 and total liabilities of $5,256,740; and 2) a Statement
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of Cash Flows and Profit and Loss Statement for the period from January through
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December, 2006, reflecting net income of negative $2,778,082.
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9. In June, 2004, the Debtor filed suit in the United States District Court for the
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District of Oregon against Randall Scheets, a minority shareholder, alleging intentional
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interference with economic relations and breach of fiduciary duty, and requesting an
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injunction (the “Scheets Litigation”). Scheets answered and counterclaimed, alleging
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corporate fraud, self dealing and minority shareholder oppression. In October, 2004, the
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debtor agreed to make a written offer to purchase Scheets’ shares pursuant to O.R.S.
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60.952. The purchase has not occurred.
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10. Patrick Boyle is the Debtor’s majority shareholder, president and secretary. He
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is described as the Debtor’s financial advisor. See Exhibit 1, Third Party Defendants
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Michael A. Boyle and Patrick Boyle’s Response To Motion to Lift Stay, filed in the
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Scheets Litigation. He lists an address in Las Vegas, Nev.
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11. The Debtor’s Balance Sheet as of December 31, 2006 reflects loans to Patrick
Boyle of $292,250.28.
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12. Michael Boyle is Patrick Boyle’s son. He describes himself as an “on call”
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employee who assists with the operation of the business in times of need. Exhibit 1 and
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Exhibit 2, Declaration of Michael A. Boyle In Support of Motion To Strike Affidavits
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filed in the Scheets Litigation.
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13. The Debtor’s Balance Sheet as of December 31, 2006 reflects loans to Michael
Boyle of $41,320.64, as well as advances to Michael Boyle of $281,766.67.
14. At the Initial Debtor Interview (“IDI”) and Organizational Meeting conducted
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by the United States Trustee on April 4, 2007, Patrick Boyle stated that Michael Boyle
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was not an employee of the Debtor. Patrick Boyle also stated that the Debtor paid
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Michael Boyle approximately $200,000 in 2007 within 3 months of the filing of the
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Chapter 11 petition on March 22, 2007, purportedly on account of services provided by
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Michael Boyle in 2006.
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15. Affidavits filed by Scheets in the United States District Court allege that
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Patrick Boyle, assisted by Michael Boyle and others, planned the demise of the Debtor as
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a strategy to avoid payment to Scheets.
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16. Scheets’ affidavits also allege that the Debtor was in the process of
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transferring assets to third persons or entities controlled by the Boyles, and, in particular,
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that Michael Boyle was attempting to divert the Debtor’s only customer, T-Mobile, to a
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new entity, Colworx, a Nevada Coroporation owned solely by Michael Boyle’s wife.
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17. Jeff Graves, former site director of Savant Call Centers, Inc. (“SCCI”), an
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affiliate of the debtor, filed an affidavit in the Scheets Litigation in which he described
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accompanying Michael Boyle in January, 2007 to visit T-Mobile’s corporate offices in
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Bellevue, Washington. Graves recounted that Michael Boyle told T-Mobile
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representatives that he represented his father, Patrick Boyle; that the Debtor was sold to a
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holding company called Wellington-Pierce (“WP”); and that Patrick Boyle was a
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shareholder of WP and Michael Boyle was a member of WP’s board of directors. Graves
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further stated that Michael Boyle told the T-Mobile representatives that WP had
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requirements for the Debtor’s call centers and that the resources currently used by T-
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Mobile would no longer be available in as few as 6 months time.
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18. According to the Graves’ Affidavit, Michael Boyle suggested that T-Mobile’s
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future business could better be fulfilled by Colworx, which had recently purchased the
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assets of SCCI.
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19. Following the meeting, Graves stated that Michael Boyle told him that he
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would close the Debtor in Oregon, leaving it with no contracts, no employees and no call
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center. See Exhibit 3, Affidavit of Jeff Graves in Support of Randall Scheets’ Motion for
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Relief Under O.R.S. 60.952.
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20. John J. Cargal, third party defendant in the Scheets Litigation, and former
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Chief Executive Officer of the Debtor, also filed an affidavit in the Scheets Litigation
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testifying to two instances in which Patrick and Michael Boyle attempted to transfer the
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Debtor’s assets to other companies. The first was a failed attempt to transfer the Debtor’s
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assets to a Costa Rican company. The second entailed the creation of SCCI in mid 2003.
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Cargal stated that SCCI was formed as a stand alone entity controlled by an individual
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shareholder under the direction and control of Patrick and Michael Boyle. It was created
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with the full knowledge and direction of the Boyles to acquire assets of the Debtor.
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Cargal stated that SCCI opened its doors in 2003 in the same office park as the Debtor.
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21. In 2003, all of the Debtor’s clients, except T-Mobile, were transferred to
SCCI. See Exhibit 4, Affidavit of John Cargal.
22. In his Declaration filed in the Scheets Litigation, Michael Boyle
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acknowledged that the Debtor transferred its customers, other than T-Mobile, to SCCI.
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He acknowledged that he assisted in the establishment of SCCI, and recruited new
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customers for it. He also acknowledged that his family incorporated Colworx and that
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Patrick Boyle was considering using the name “Colworx” as a dba for the Debtor.
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Michael Boyle further acknowledged that Patrick Boyle is a minority shareholder and
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investor of WP and that Michael Boyle told representatives of T-Mobile that WP was
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interested in buying the Debtor.
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See Exhibit 2.
23. At the IDI, Patrick Boyle stated that he did not know who owned Colworx, but
stated that he might use the name as a dba for the Debtor.
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24. One of the creditors who attended the IDI was William N. Holmes,
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representing Holmes Royer, L.L.P. (“Holmes”), the debtor’s former accountant with a
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$147,528 claim against the debtor.
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25. Holmes stated that his firm was retained to provide litigation services to the
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Debtor in the Scheets Litigation. As part of its duties, his firm issued a compilation report
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regarding the debtor’s financial condition. Following issuance of the report, Holmes
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uncovered additional disturbing information which rendered the report unreliable.
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Holmes then withdrew the report.
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26. On March 28, 2007, the Debtor filed a motion requesting authority to borrow
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$150,000 from Patrick Boyle to be secured by a lien on the Debtor’s assets. Following a
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hearing at which it was represented that the loan was to come from a wealthy relative of
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Patrick Boyle, and testimony by the Debtor’s accountant, the Court allowed the Debtor to
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borrow up to $85,000 as a bridge loan with administrative expense priority to enable the
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Debtor to make payroll.
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27. The Debtor later informed the Court that the Debtor did not tap into the
allowed loan because T-Mobile agreed to pay its monthly bill early.
28. At a subsequent hearing, the Debtor again requested authority to borrow
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$150,000 to be secured by the Debtor’s assets. The Debtor represented that the wealthy
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relative declined to provide the funds, but that Michael Boyle would do so. After
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objection by the United States Trustee, Michael Boyle agreed to lend the money as a short
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term loan on an administrative expense basis. The Court approved this arrangement.
Legal Analysis
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The Court shall order the appointment of a Chapter 11 trustee
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(1) for cause, including fraud, dishonesty, incompetence or gross mismanagement
of the affairs of the debtor by current management, either before or after the
commencement of the case, or similar cause....;
(2) if such appointment is in the interests of creditors ...; or
(3) if grounds exist to convert or dismiss the case under section 1112, but the court
determines that the appointment of a trustee or examiner is in the best interests of
creditors and the estate.
11 U.S.C. § 1104(a). 1
Where the Court finds that cause exists, an order for the appointment of a trustee is
mandatory. Official Comm. Of Asbestos Pers. Injury Claimants v. Sealed Air Corp. (In
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re W.R.Grace & Co.), 285 B.R. 148, 158 (Bankr. D.Del. 2002). The categories
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enumerated in 11 U.S.C. §1104(a)(1) “cover a wide range of conduct” and, thus, are best
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described as illustrative, rather than exclusive. See In re Marvel Entertainment Corp.,
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140 F.3d 463,472 (3rd Cir. 1998)(quoting Committee of Dalkon Shield Claimants v. A.H.
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Robbins Co. 828 F.2d at 242).
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The party moving for the appointment of a Chapter 11 trustee bears the burden of
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proof by a preponderance of the evidence. In re Tradex Corporation, 339 B.R. 823,829
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(D.C.D.Mass. 2006). 2
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Determinations made pursuant to § 1104(a) of the Bankruptcy Code are fact
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11 U.S.C. §1104(e) provides that the United States Trustee shall move for the appointment of a
trustee under subsection (a) if there are reasonable grounds to suspect that current members of the
governing body of the debtor, the debtor’s chief executive or chief financial officer, participated in actual
fraud, dishonesty or criminal conduct in the management of the debtor or the debtor’s financial reporting.
The information filed in the Scheets Litigation and unfolding in the Chapter 11 case provides reasonable
grounds to suspect that the debtor’s chief executive officer participated in actual fraud, dishonesty or
criminal conduct in the management of the debtor or the debtor’s financial reporting. As a result, the
United States Trustee is required by statute to bring this motion.
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Although other cases provide that the burden of proof is by clear and convincing evidence, see In
re Marvel Entertainment Group, Inc., 140 F.3d 463,471(3d Cir. 1998), Sharon Steel Corp., supra, 871 F2d
at 1217, In re Cajun Electric Power Coop, Inc., 69 F.3d 746,749 (5th Cir. 1995), the United States Trustee
believes that Tradex is the better reasoned opinion particularly in light of its reliance on the United States
Supreme Court case of Grogan v. Gardner, 498 U.S. 279, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991).
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intensive and must be made on a case by case basis. In re Sharon Steel Corp., 871 F.2d
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1217, 1225 (3d Cir. 1989). In making its determination, the court may examine both pre-
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and post-petition conduct. In re Oklahoma Refining Co., 838 F.2d 1133, 1136 (10th Cir.
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1988).
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Courts have found “cause” to appoint a trustee when the debtor engaged in a
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history of questionable transactions with affiliated companies, Oklahoma Refining Co.,
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supra, at 1133; when the principal had an interest in a company attempting to acquire
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technology of the debtor, In re Embrace System Corp., 178 B.R. 112 (Bankr. W.D. Mich.
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1995); when continuation of management would result in serious conflicts of interest
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because of the debtor’s reluctance to collect money due the debtor from related
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companies, In re L.S. Good & Co., 8 B.R. 312 (Bankr. N.D. W.Va. 1980); when the
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principal of the debtor engaged in a kickback scheme with a company hired to provide
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management services for the debtor, In re Bibo Inc., 76 F.3d 256 (9th Cir. 1996).
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It is axiomatic that a debtor in possession is a fiduciary. As a fiduciary, the
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debtor in possession does not act in its own interest, but, like a trustee, must act in the
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best interest of the creditors of the estate. Commodity Futures Trading Comm. v.
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Weintraub, 47 U.S. 343, 354-55(1985). The willingness of courts to leave debtors in
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possession “is premised upon an assurance that the officers and managing employees can
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be depended upon to carry out the fiduciary responsibilities of a trustee”. Wolf v.
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Weinstein, 372 U.S. 633,651 (1963). If the debtor in possession defaults in this respect,
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stewardship of the reorganization effort must be turned over to an independent trustee. In
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re Savino Oil and Heating Co., 99 B.R. 518,526 (Bankr. E.D.N.Y. 1989).
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The information currently known from the Scheets Litigation points to a history of
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questionable dealings between Debtor’s current management and the affiliated companies
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of SCCI, Colworx and WP. See Exhibits 1 and 2. The son of the principal of the Debtor
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has an interest through his wife in Colworx, whose purpose vis a vis the Debtor has been
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variously described as a dba for the Debtor to attract staff, Exhibit 2; the buyer of SCCI’s
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assets; and the new provider of services to T-Mobile.
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Michael Boyle, an “on call employee”, received $200,000 shortly before the
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Debtor filed for Chapter 11 protection, apparently resulting in a shortfall of $150,000 in
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the Debtor’s cash flow necessitating short term loans to cover payroll during the Chapter
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11 case. The payment to Michael Boyle was not disclosed in the Debtor’s motion
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requesting authority to borrow money from Patrick Boyle to be secured by a lien on the
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Debtor’s assets. Both Patrick and Michael Boyle owe money to the Debtor. Their
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attempts to obtain a security interest in the Debtor’s assets instead of repaying the money
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they owe the Debtor reflect a serious conflict of interest and an improper attempt to gain
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control of the Debtor’s assets. Patrick Boyle’s decisions on behalf of the debtor in
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possession demonstrate that he is acting for the benefit of himself and his family rather
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than as a fiduciary for the debtor in possession.
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Wherefore, the United States Trustee respectfully requests that the Court enter an
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order directing the United States Trustee to appoint a Chapter 11 trustee or providing for
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such other relief as the Court may deem just and proper.
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Dated this 13th day of April, 2007.
Respectfully submitted,
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ILENE J. LASHINSKY
UNITED STATES TRUSTEE
/s/ M. Vivienne Popperl
M. Vivienne Popperl, OSB #85305
Attorney for the United States Trustee
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JOHN S . RANSOM, OSB #7426 5
E-mail : john@ransomblackman .co m
RANSOM BLACKMAN LL P
1001 S .W . Fifth Avenue, Suite 140 0
Portland, Oregon 97204-114 4
Telephone : [503] 228-048 7
Facsimile : [503] 227-598 4
Of Attorneys for Third-Party Defendant s
Michael A . Boyle and Patrick Boyle
UNITED STATES DISTRICT COUR T
DISTRICT OF OREGO N
ENCOMPASS TELESERVICES, INC . ,
an Oregon Corporation,
No . CV 04-821-H U
Plaintiff,
THIRD-PARTY DEFENDANT S
MICHAEL A . BOYLE AN D
PATRICK BOYLE'S RESPONS E
TO MOTION TO LIFT STA Y
v.
RANDALL LEE SCHEETS, ak a
RANDY SCHEETS,
Defendant .
RANDY SCHEETS,
Third-Party Plaintiff,
v.
SAVANT C .C .A ., INC ., aka SAVAN T
CALL CENTER ASSOCIATES, INC ., a n
Arizona corporation ; JOHN L . CARGAL ;
MICHAEL A . BOYLE ; and PATRIC K
BOYLE, and KAROL W . KERSH ,
Third-Party Defendants .
Page 1 -
THIRD-PARTY DEFENDANTS MICHAEL A . BOYLE AND PATRIC K
BOYLE'S RESPONSE TO MOTION TO LIFT STAY
Telephone : 503-228-048 7
Facsimile : 503-227-5984
Exhibit
1 Page
1 of
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LR 7 .1 Certificatio n
Attorney for third-party defendants and attorney for movant Randy Scheet s
("Scheets") have conferred in a good faith effort to resolve the dispute presented in thi s
response and supporting materials, and have been unable to do so .
THE EFFECT OF BANKRUPTC Y
As previously noted to this Court, Encompass has filed for bankruptcy protection .
Such a filing vests the property of the bankrupt corporation in a bankruptcy estate . I t
comprises, with few exceptions, "all legal or equitable interests of the debto r
[corporation] in property as of the commencement of the [bankruptcy] case ." 11 U .S .C .
§ 541(a)(1) . Such property "includes all kinds of property including tangible o r
intangible property [and] causes of action ." Mitchell Excavators, Inc . v. Mitchell ,
734 F .2d 129, 131 (2d Cir . 1984) . Section 541(a)(1) "has been construed to prevent
individual shareholders and creditors from suing to enforce a right of the corporatio n
when that corporation is in bankruptcy ." Cumberland Oil Corp . v . Thropp, 791 F .2 d
1037, 1042 (2d Cir . 1986) . "[W]hile normally the fiduciary obligations of officers ,
directors and shareholders `is enforceable directly by the corporation or through a
stockholder's derivative action, it is in the event of bankruptcy of the corporation ,
enforceable by the trustee .'" Mitchell Excavators, Inc . v . Mitchell, supra, 734 F .2d at 131 ,
quoting Pepper v . Litton, 308 U .S . 295, 306-07 (1939) .
MOTION IS OVER BROA D
Mr . Scheets' motion requests "that the stay be lifted and the case proceed agains t
the individual third-party defendants, Savant C .C .A ., Inc ., John L . Cargal, Michael A .
Boyle, Patrick Boyle, and Karol W . Kersh ." Motion at 2 . The third-party complaint i s
Page 2 -
THIRD-PARTY DEFENDANTS MICHAEL A . BOYLE AND PATRICK
RANSOM BLACKMAN LLP
Telephone :503-228-048 7
Facsimile : 503-227-598 4
Exhibit 1 Page 2 of
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replete with causes of action which are clearly derivative causes of action . In requestin g
this relief, Mr . Scheets has already violated the bankruptcy court automatic stay . Hi s
motion should be declared void as it is in violation of the stay .
BANKRUPTCY STAY MAY BE APPLICABL E
TO MICHAEL AND PATRICK BOYL E
Several courts have held that under specific circumstances non-debtors may b e
protected by the automatic stay — even though such protection may be temporary — if i t
contributes to the debtor's efforts to achieve rehabilitation . See, e .g., In re Johns Manville Corp ., 33 B .R . 254, 263-64 (Bkr .S .D .N .Y . 1983) ; In re Old Orchard Investmen t
Co ., 31 B .R . 599, 603 (Bkr .W .D .Mich . 1983) . Patrick Boyle is the sole director of th e
corporation and its financial advisor . Michael Boyle is an "on call" employee who assist s
with the operation of the business in times of need; this is one of those times . It may wel l
be that a stay will be sought to assist with the rehabilitation of the corporation .
MR . SCHEETS HAS ALLEGED NO "SPECIAL INJURY "
As noted previously, all of Mr . Scheets' claims are derivative rather than direct .
Oregon law is clear that a shareholder must have suffered a "distinct and separat e
special injury" to himself in order to state a direct claim . See, e .g ., Loewen v . Galligan ,
130 Or . App . 222, 228, 882 P .2d 104, 111 (1994) ; Weiss v . Northwest Acceptance Corp . ,
274 Or . 343, 348-49, 546 P .2d 1065, 1069-70 (1976) . "A special injury is establishe d
where there is a wrong suffered by the shareholder not suffered by all shareholders
generally or where the wrong involves a contractual right of the shareholders, such as a
right to vote ." Loewen v . Galligan, supra, 130 Or . App . at 228 . Causes of action tha t
allege a waste of corporate assets or a decrease in the value of the stock constitute claim s
Page 3 -
RANSOM BLACKMAN LLP
Telephone : 503-228-048 7
Facsimile : 503-227-598 4
Exhibit
1 Page 3 of
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of direct wrongs to the corporation and must be brought as derivative actions .
Kramer v.
Western Pacific Indus ., Inc., 546 A .2d 348, 353 (Del .1988) . All of Mr . Scheets '
pleadings are for wrongs to the corporation .
Since Mr . Scheets has plead no "special injury," lifting of the stay would onl y
continue litigation against the corporation which has filed for bankruptcy .
BANKRUPTCY COURT MAY DETERMINE VALU E
A bankruptcy court is especially suited to determine valuation . It will have t o
make determinations concerning ETI . One of those may be the valuation issue which i s
the subject of this litigation .
CONCLUSIO N
Mr . Scheets' motion is in violation of the bankruptcy stay . He should have filed a
motion for relief in the bankruptcy court prior to seeking relief in this Court . Now all h e
has done is sought a decision by this Court which may or may not be subject to a different
interpretation or ruling by the bankruptcy court . Since it appears this motion is i n
violation of the automatic stay, the debtor in possession may wish to bring a claim agains t
Mr . Scheets in bankruptcy . Material contained in Mr . Scheets' motion was released t o
The Oregonian which has caused further hardship to the company in its efforts to recruit
new employees and otherwise continue its business .
//
II
II
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II
Page 4 -
Portland, Oregon 97204-1144
Telephone : 503-228-0487
Facsimile : 503-227-598 4
Exhibit
1 Page 4 of
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We, therefore, request the Court deny Mr . Scheets' motion with leave to rene w
after the bankruptcy court has an opportunity to determine issues before it .
DATED the 9th day of April, 2007 .
Respectfully submitted ,
/s/ JOHN S . RANSOM
JOHN S . RANSO M
OSB #7426 5
[503] 228-048 7
Michael A . Boyle and Patrick Boyl e
Page 5 -
THIRD-PARTY DEFENDANTS MICHAEL A . BOYLE AND PATRICK
RANSOM BLACKMAN LLP
Telephone : 503-228-048 7
Facsimile : 503-227-598 4
Exhibit
1 Page 5 of
6
CERTIFICATE OF SERVIC E
I hereby certify that I served the foregoing THIRD-PARTY DEFENDANT S
MICHAEL A . BOYLE AND PATRICK BOYLE'S RESPONSE TO MOTION TO LIF T
STAY on the following attorney by causing to be e-mailed and mailed a full and correc t
copy thereof, contained within sealed envelopes, addressed as below stated, with firs t
class postage thereon prepaid, and deposited in the United States mail at Portland, Orego n
on the 9th day of April, 2007 .
Michael K . Kelley
Christopher G . Lundber g
Haglund Kelley Horngren & Jones LL P
101 S .W . Main Stree t
Suite 180 0
Portland, OR 97204-322 6
Joel Watkin s
Mikkelborg Broz Wells & Fryer, PLL C
1001 Fourth Avenu e
Suite 360 0
Seattle, WN 9815 4
Stephen F . Cre w
Ramis Crew Corrigan, LL P
1727 N .W . Hoyt Stree t
Portland, OR 9720 9
Matthew A . Levin
J . Matthew Donohu e
Markowitz, Herbold, Glade & Mehlhal ,
P .C .
1211 S .W . Fifth Ave ., Suite 300 0
Portland, OR 9720 4
Mark B . Comstoc k
Garrett Hemann Robertson P .C .
1011 Commercial N .E .
Suite 21 0
P .O . Box 74 9
Salem, OR 97308
/s/ JOHN S . RANSOM
JOHN S . RANSO M
OSB #7426 5
[503] 228-048 7
Michael A . Boyle and Patrick Boyl e
CERTIFICATE OF SERVICE
1001 S .W . Fifth Avenue, Suite 1400
Telephone :503-228-0487
Facsimile : 503-227-598 4
Exhibit 1 Page 6 of
6
JOHN S . RANSOM, OSB #7426 5
E-mail : johnransomb1ackman.com
RANSOM BLACKMAN LLP
1001 S.W. Fifth Avenue, Suite 140 0
Telephone : [503] 228-048 7
Facsimile : [503] 227-598 4
Of Attorneys for Third-Party Defendants
Michael A . Boyle and Patrick Boyle
UNITED STATES DISTRICT COURT
DISTRICT OF OREGON
ENCOMPASS TELESERVICES, INC ., ) No . CV 04-821-HU
an Oregon corporation,
)
)
Plaintiff,
)
) DECLARATION
) OF MICHAEL A. BOYLE IN
v.
) SUPPORT OF MOTION T O
) STRIKE AFFIDAVIT S
RANDY SCHEETS,
Defendant.
)
RANDY SCHEETS,
Third-Party Plaintiff, )
)
v.
)
)
)
SAVANT C.C.A., INC., aka SAVANT
.,
an
)
CALL CENTER ASSOCIATES, INC
Arizona corporation ; JOHN L. CARGAL ; )
MICHAEL A. BOYLE; and PATRICK )
)
BOYLE, and KAROL W . KERSH,
Third-Party Defendants .)
Page 1 -
DECLARATION OF MICHAEL A . BOYLE IN SUPPORT OF MOTION
TO STRIKE AFFIDAVITS Exhibit B
Page 1 of 6
Memo in support of Third-Party
rty Def.
Michael A . Boyle and Patrick Boyle' s
Motion to Strike Affidavits
BLACKMAN LLP
100 1 RANNSO Ft Avenue Suite 1400
:Portland,
22
87
TcIepbone: e~0 3. 828-0 487
Facsimile: 503-227-5984
Exhibit 2 Page 1 of
6
I, Michael A . Boyle, declare as follows:
1.
I am a third-party defendant in this matter, and have personal knowledge o f
plaintiff Encompass Teleservices, Inc .'s ("ETI") financial status and relationship wit h
T-Mobile . The following statements are true and correct and, if called upon, I coul d
competently testify to the facts averred herein.
2.
I am not a full time employee of ETI but, rather, am an "on call employee ."
My profession is design and usage of software as platform execution . Software I
designed is used by ETI . My family incorporated a company under the name "Colworx"
to market my software product . It has yet to be fully developed.
3.
I have read the affidavits of John J . Cargal and Jeff Graves . They are
replete with half truths, innuendo and falsehoods .
4.
Part of my reason for providing this declaration is to set the record straight .
Although pleadings have been filed under seal, information has been published by Th e
Oregonian which could only have come from persons associated with Mr . Scheets. The
publication of this information, much of which was incorrect, has caused tremendou s
difficulties for the continued viability of ETI . One would think it would be in the best
interests of Mr. Scheets to bolster the company so he could realize a generous return o n
his initial outlay .
5.
My father, Patrick Boyle, is the executive director of ETI . He assumed thi s
position when I gifted him my shares of stock in 2003 based upon client advice . T-Mobile
is the principal customer of ETI . He is also a small minority investor in a Florid a
corporation, a holding company, named Wellington-Pierce . Among other businesses, it
provides a management team for Professional Golf Association golfers .
Page 2 - DECLARATION OF MICHAEL A . BOYLE IN SUPPORT OF MOTION
Page 2 off)
Memo in support of Third-Party Def.
Michael A . Boyle and Patrick Boyle's
10oM. rimBAvenue suite O~bP
Portland, orc on 972b4 . 1144
Telephone: 03 . 228-048 7
Facsimile : 503 .227 . 5984
Exhibit 2 Page 2 of
6
6.
One year ago, ETI had over 1300 employees . As a result of the negative
publicity it has received, that number has been significantly reduced to under 300 .
Currently ETI is seeking to hire 150 new employees as a result of my ongoin g
negotiations with T-Mobile as my father's representative . I have dealt with T-Mobile fo r
seven (7) years and know its needs and many of the senior persons . They rely upon my
credibility when I represent ETI can perform .
7.
In my negotiations with T-Mobile, I did represent that Wellington-Pierc e
had expressed an interest either in hiring ETI or purchasing it . The company was losin g
money under its current model and a new client was needed . It would be irresponsible t o
not inform your client of changes in the model, however remote . Even if had become a
reality, ETI would not have been devalued as suggested by Mr . Graves' affidavit. ETI is
now and always has sought other revenue streams except when it was a sole source fo r
T-Mobile, but Mr . Scheets' campaign has made it nearly impossible.
8.
Reference is made in Mr. Cargal's affidavit to a Costa Rican trip made b y
myself and others . T-Mobile specifically requested ETI travel to Costa Rica to determin e
if ETI could provide its services from a "free trade zone" there cheaper than in the Unite d
States. I provided a report to T-Mobile in which I noted the savings would be about 40% .
T-Mobile decided it did not want us to move to Costa Rica as it would out source job s
which would otherwise be filled by Americans . We agreed with that decision .
9.
Mr. Cargal also speaks at length about the founding of Savant Call Centers ,
Inc . ("SCCI") . This is a remarkably despicable period in Mr . Cargal's life and hi s
characterizations are viewed through his biased and cloudy prism .
11
TO STRIKE AFFIDAVITS
Exhibit B
Page 3 of 6
Michael A. Boyle and Patrick Boyle' s
.BLAC
~cr
Avenue u1400
Portland, Ore on 9720-1144
Telephone :-503-228-048 7
Facsimile : 503-227-5984
1001 S.W.i
Exhibit 2 Page 3 of
6
10.
A division of T-Mobile requested ETI be its sole source . That meant ET I
had to disenfranchise its other customers . John Cargal, who was then an officer an d
employee of ETI, suggested the formation of a new corporation to be run by his frien d
Adam Clark and based in Arizona . Because I was concerned about the level of servic e
for ETI's now former customers, I assisted in the early stages establishment of SCCI .
I even recruited new customers for which I was paid commissions (I later returned thes e
commissions) . Unbeknownst to me or anyone at ETI, Messrs . Cargal and Clark diverted
virtually all of the revenue from SCCI to themselves . They purchased condominiums ,
leased cars, started a real estate business and, in Mr . Cargal's case, paid for his cocain e
habit. Mr. Cargal has signed a note to ETI for approximately $300,000 but an audit of th e
incomplete books reveals theft of $800,000 to $1,000,000 . Ultimately, ETI was forced to
purchase SCCI .
1 1 . When I confronted Mr. Cargal, he told me two years ago that he only ha d
five years to live . The money he stole, he said, went into an irrevocable trust for hi s
children . He said he was now working as an "interim CFO" for companies which neede d
cash infusions . He would guarantee the loan or purchase or whatever was necessary . He
had no intention of ever paying. He then received a percentage of the value of the loan o r
purchase . He told me he had no fear of jail, taxes, or lawsuits as he would be dea d
anyway.
12.
Mr. Cargal also informed me he had a source at The Oregonian . He implied
that this relationship could be used for or against ETI .
13.
Mr. Graves suggests that ETI was planning on moving to Spokane . This is
incorrect. Two years ago, ETI had a branch in Las Vegas . For a lot of reasons, that
Page 4 of 6
s
B
so-2 g 048
1o0I S .VY. ifth AYenue idle 140
Portland, ore on 972b4-1144 0
ac~simtle
Fe
Exhibit 2 Page 4 of
6
branch did not do well and was closed . At that time, ETI suggested to T-Mobile a
number of alternate sites for a branch . One of those was Spokane and marketing research
was done . Discussions about Spokane recently with T-Mobile only related to the openin g
of a branch there, not moving ETI there . If ETI returns to its former position in th e
industry, opening a branch in Spokane may become a reality . As for the use of the name
Colworx, my father liked the name and spoke with me about using it as a dba for ETI .
14.
Today, ETI is at a competitive disadvantage for hiring talented employees .
There is an increase in the competition in the Portland area for good employees . The
name ETI has been dragged through the mud as a result of this litigation and does no t
convey a promising image to a prospective employee . Today, young people "google" a
prospective employer to learn about it. A "google " for ETI does not present a pretty
picture . Using a new name as a dba, such as Colworx, may alleviate that competitive
disadvantage .
15.
Mr. Graves simply didn't understand what the conversations concerned .
He too was an ETI employee and was fired . When he attended a T-Mobile meeting i n
Florida, he was caught sending marijuana to himself by Federal Express . He continues to
use marijuana and his memory may be affected.
16.
He was also responsible for undermining the attempts of ETI to maintain it s
high quality of business . Mr. Graves, along with Bryan Nelson, former IT director o f
ETI, formed a competing company called Celerity Contact Center, LLC, while employe d
by ETI. They sought to obtain T-Mobile as a customer for Celerity while working at ETI .
In a letter to me and my father, they advised us they considered their "relationships wit h
T-Mobile USA Inc vitally important . . . ." It was this kind of internal sabotage which
Exhibit B
Page 5 of 6
l0f
s.w . Finn A ~ N40
Portland, ore on 97204. 1144
Telephone :303-228-0487
Facsimile: 503.227-5984
Exhibit 2 Page 5 of
6
resulted in ETI having great difficulty in maintaining its business . In addition o n
February 4, 2007, Bryan Nelson and Jeff Graves were caught on surveillance camera
breaking into the Beaverton location and they stole an unknown amount of equipmen t
that has yet to be recovered .
17.
Neither my father nor I have done anything to devalue the business but ,
rather, have done everything possible to maintain it and increase its business and wil l
continue to do so .
18.
Both my father and I are indispensable to the operation of ETI . We are
also indispensable to assist in the bankruptcy proceeding . Both of us are necessary for the
resuscitation of ETI as it wends its way through bankruptcy . Lifting the stay would onl y
interfere with our ability to achieve that goal by diverting our attention and energies .
I hereby declare that the above statements are true to the best of my knowledg e
and belief, and that I understand it is made for use as evidence in court and is subject t o
penalty for perjury .
Dated this 9th day of April, 2007 .
Page 6 - DECLARATION OF MICHAEL A . BOYLE IN SUPPORT OF MOTIO N
Exhibit B
Page 6 of 6
laoR
i A enueK
4O0p
Portland, ore on 972b4 1144
: 03-228-0487
Facsimile: 503-227-5984
Facsimile
Exhibit 2 Page 6 of
6
Michael K . Kelley, OSB No . 8537 8
[email protected]
Christopher Lundberg, OSB No . 94108
clundberg@hk-Iaw .com
HAGLUND, KELLEY, HORNGREN & JONES LL P
101 S.W . Main Street, Suite 180 0
Telephone : (503) 225-077 7
Facsimile : (503) 225-1257
Mitchell A. Broz, WSBA No . 1709 5
[email protected]
Jess G . Webster, WSBA No.1140 2
jgwebster@mikkelborg .com
Joel Watkins, WSBA No . 1095 7
jwatkins@mikkelborg .com
Admitted to practice pro hac vic e
MIKKELBORG, BROZ, WELLS & FRYER, PLL C
1001 Fourth Ave ., Suite 360 0
Seattle, WA 98154-113 0
Telephone: (206) 623-589 0
Facsimile : (206) 623-096 5
Attorneys for Defendant, Third-Party Plaintiff ,
Randy Scheets
DISTRICT OF OREGO N
Case No. 04-CV-821-H U
ENCOMPASS TELESERVICES, INC ., an
Oregon corporation,
Plaintiff,
v.
AFFIDAVIT OF JEFF GRAVES O F
SUPPORT RANDALL SCHEETS '
MOTION FOR RELIEF UNDER ORS
60.9521
RANDALL LEE SCHEETS, aka RANDY
SCHEETS,
Defendant .
RANDY SCHEETS ,
v.
SAVANT CALL CENTER ASSOCIATES ,
INC., an Arizona Corporation ; JOHN J .
1 Previously filed in support of Randall Scheets' Response to Plaintiffs Motion for Protective Order o n
2/20/07 (DId . #224)
AFFIDAVIT OF JEFF GRAVES OF SUPPORT RANDALL SCHEETS' MOTION FOR RELIEF UNDE R
ORS 60 .952
Exhibit
3 Page 1 of
10
Michael K. Kelley, OSB No . 85378
kelley©hk-law.com
Christopher Lundberg, OSB No . 9410 8
clundberg©hk-iaw .com
HAGLUND, KELLEY, HORNGREN & JONES LLP
101 S.W. Main Street, Suite 180 0
Telephone: (503) 225-077 7
Facsimile : (503) 225-125 7
Mitchell A. Broz, WSBA No . 17095
[email protected]
Jess G . Webster, WSBA No .11402
jgwebster@mikkelborg .com
Joel Watkins, WSBA No . 1095 7
jwatkins@mikkelborg .com
Admitted to practice pro hac vic e
MIKKELBORG, BROZ, WELLS & FRYER, PLL C
1001 Fourth Ave., Suite 360 0
Seattle, WA 98154-1130
Telephone : (206) 623-589 0
Facsimile : (206) 623-096 5
Attorneys for Defendant, Third-Party Plaintiff ,
Randy Scheets
DISTRICT OF OREGO N
Oregon corporation,
Plaintiff,
v.
SCHEETS,
Defendant .
RANDY SCHEETS ,
Third-Party Plaintiff ,
v.
Case No . 04-CV-821-H U
AFFIDAVIT OF JEFF GRAVES I N
SUPPORT OF RANDALL SCHEETS'
RESPONSE TO PLAINTIFF' S
MOTION FOR PROTECTIVE ORDE R
SAVANT CALL CENTER ASSOCIATES,
INC., an Arizona Corporation ; JOHN J .
AFFIDAVIT OF JEFF GRAVES IN SUPPORT OF RANDALL SCHEETS' RESPONSE TO PLAINTIFF ' S
MOTION FOR PROTECTIVE ORDER - 1
Exhibit 3 Page 2 of 10
CARGAL; MICHAEL A. BOYLE ;
PATRICK BOYLE, and KAROL W .
KERSH,
Third-Party Defendants .
STATE OF OREGON
)
COUNTY OF MULTNOMAM
)
ss .
I, Jeff Graves, declare under oath as follows :
I have personal knowledge of the matters recounted herein and am competent to mak e
this affidavit.
1 . I am an independent contractor and not an employee of Encompas s
Teleservices, Inc . (ETI) or Savant Call Center Associates, Inc . (Savant). On
December 10, 2006, I started work with Savant as its site director . In substance I
oversaw all of the day to day operations of Savant .
On January 10, 2007, I traveled to T-Mobile's corporate offices in Bellevue ,
Washington with Michael Boyle and Eric Christmann . Eric was then ETI's work
force management director and its primary contact with T-Mobile concernin g
contracts, invoices and billing . As stated, I was then Savant's site director . Two
meetings were scheduled then . One meeting concerned ETI and the othe r
concerned Savant. With the exception of Duke Whitman, two separate teams o f
TMMobile employees attended each meeting . Mike Boyle, Eric Christmann and I
attended the ETI meeting first with T-Mobile employees Patricia Mosberger ,
Duke Whitman, and Charlene McRay . Then Mike Boyle and I attended th e
AFFIDAVIT OF JEFF GRAVES IN SUPPORT OF RANDALL SCHEETS' RESPONSE TO PLAINTIFF' S
Exhibit 3 Page 3 of
10
Savant meeting with T-Mobile employees Duke Whitman, Janine Williams, Bra d
Hoffer, Matt Staneff, Tara Martin, and Andrew Hammer ; Eric Christmann did not
attend the meeting concerning Savant .
3 . The first meeting involved ETI . I was a bystander rather than an activ e
participant in this meeting . Mike Boyle explained to T-Mobile's representatives ,
led by Charlene McRay, Patricia Mosberger, and Duke Whitman, that he was n o
longer an employee, a shareholder, an officer or a director of ETI and that he
hadn't played any of these roles for several years . He stated that he was
attending the meeting as the representative of his father, Patrick Boyle, who wa s
a shareholder of ET! . Mike explained to T-Mobile's representatives that ETI had
been sold to Wellington-Pierce, a holding company, and that his father was a
shareholder of Wellington-Pierce and Mike Boyle was on the Board of Directors .
Mike explained to T-Mobile that Wellington-Pierce had other requirements for cal l
center services and that Mike was concerned that the call center resource s
currently used by T-Mobile may not be available within 18 months . Later in the
meeting he revised the timeframe to 12 months and then to 6 months . Mike
explained to the T-Mobile representatives that in order to keep the T-Mobil e
business at ETI, new lines of business were immediately required . I then
understood that T-Mobile's representatives possessed the authority to bring ne w
lines of business to ETI and to Invest in training and new call routing systems fo r
ETI. They forthrightly told Mike that they could provide ETI with the new lines o f
business they required to stay in business . Specific programs were mentioned ,
including "Business Care," "Tech I, First Tier Technical Support" and "Spanish" a
AFFIDAVIT OF,JEFF GRAVES IN SUPPORT OF RANDALL SCHEETS' RESPONSE TO PLAINTIFF' S
Exhibit
3 Page 4 of
10
Spanish language program that could employ 300 agents . Despite these offers
from TMMobile, Mike was unwilling to commit to keeping ETI open for a state d
period of time and continued to downgrade the opportunities of TMMobile at El l
for the remainder of the meeting . Mike instead proposed that all future busines s
would be fulfilled with a new company Mike had established named "Colworx "
that would operate in Spokane, Washington . Mike emphasized that the best
opportunity for T-Mobile was at Colworx instead of ETI in Beaverton .. Mike told
I -Mobile representatives that "if you like me, my core products and the
management team you have grown to love, then we can continue to do busines s
in Spokane at Colworx ." T-Mobile asked procedural questions about workin g
with Colworx and ETI, specifically how would a Quarterly Business Review wor k
with the two companies. Mike said that they would work with T-Mobile t o
address these transition issues . At this meeting Mike provided little information
to T•Mobile's representatives (oral or written) about Colworx, its principals, its
business model, its capital structure, employee and technical capabilities an d
provided no reason why they should shift their business from ETI to Colwor x
apart from their belief in Mike .
4. Following this meeting, Mike and I went to a meeting with Savant's counterpart s
at T-Mobile . As stated above, only Duke Whitman attended each meeting . A
purpose of the meeting between Savant and T-Mobile was to introduce me to m y
counterparts at T-Mobile . I was replacing Jeff Mason who, I understand, ha d
been employed by Savant since its inception and who had previously worked a t
ETI, Mr. Mason was a person who had the confidence of Savant's counterpart s
Exhibit 3 Page 5 of
10
at T-Mobile, and I was meeting them to reassure them that Savant coul d
continue to perform its contractual responsibilities with T-Mobile .
5. At the Savant meeting Mike again explained that he was not a shareholder ,
Director, or employee of Savant . At this meeting, Mike pitched Colworx to T .Mobile's representatives as a rebranding of Savant . Mike explained to T»Mobile
that the assets of Savants had been sold to Colworx . Mike told T-Mobile that he
was the sole principal of Colworx .
6. Following the meeting with Savant, and after we were on the road back t o
Portland, Mike called attorney Matt Levin to tell him what had occurred at th e
meeting . Mike told Matt that things didn't look good : "T-Mobile is shutting u s
down ." Mike, however, did not say to Mr . Levin that T-Mobile had actually
offered to support ETI and Savant with new lines of business . Mike also
requested of Mr. Levin to identify a legal means of acquiring and transferring th e
assets of the telephony switch equipment that was previously used in the ETI La s
Vegas call center. Mike explained to Mr . Levin that the switch was not an asse t
of ETI, but rather an asset of T-Mobile. Mike explained that he was hoping tha t
T.-Mobile would wash their hands of the asset by not paying the final invoice an d
then the asset would be available to Mike for Spokane Colworx .
7. Also on the drive back to Portland Mike informed me that he was not on th e
board of directors of Wellington-Pierce as he had stated to T-Mobil e
representatives and that he was sure that T.-Mobile would not find out .
8. At a later date Mike had told me later that his wife Larissa Boyle (formerly Lariss a
McKenna) held the stock or membership interests in Colworx and that th e
Exhibit 3 Page 6 of
10
company was a Nevada entity . Mike told me that Colworx is in his wife's nam e
for the purpose of "asset protection ." In his words, if he put control of Colworx i n
his wife's name, then "they can't touch me ." He said that "I'm going to shut down
'"TI and Savant in Beaverton and reopen in Spokane . I'm going to give it t o
them, no contracts, no people and no call center ." .He confirmed that he was
referring to Randy Scheets .
9. At a later date, Mike told me that he planned to bankrupt Savant and , personally
buy its assets out of the bankruptcy . First, he would fire and then rehire Savant' s
employees under Colworx, and reintroduce Savant to the world as Colworx . I n
my judgment the plan was impractical, unethical and unfair because Mike did no t
consider the impact of such a move on the lives of Savant's employees, some of
whom would lose substantial tenure under such a plan as well as claims t o
benefits that had accrued but not vested . Mike specifically told me he wa s
prepared to fire 400 people to go off to Spokane to start the business again, al l
for the sake of defeating Randy Scheets in this lawsuit .
Il l
!/ 1
10 . At a later date, I was present at a meeting with T-Mobile via conference call
where T-Mobile explained that they were no longer willing make future
Investments in ETI because Eli had no place in Colworx future, and they had n o
specific commitment from Mike to remain at ETI Beaverton .
JEFF GRAVES
State of OREGO N
County of MULTNOMAH
SIGNED AND SWORN before me this 20th of February, 2007 by Jeff Graves .
4~44
Print Name '
OFFICIAL SEA L
KRISTIN J BARNHAR T
NOTARY PUBLIO'OREGO N
COMMISSION NO. 410302
MY COMMISSION EXPIRES SEPTEMBERS, 201 0
My Commission expires '
AA..
2- 5" ID
Exhibit
3 Page
8 of
10
CERTIFICATE OFSERVICE
I hereby certify that I served true copies of the foregoing AFFIDAVIT OF JEF F
GRAVES IN SUPPORT OF RANDALL SCHEETS' RESPONSE TO PLAINTIFF' S
MOTION FOR PROTECTIVEORDER, on the following :
David B . Markowitz
Stephen Crew
Peter H . Glade
Ramis Crew Corrigan LLP
Matthew A. Levin
1727 NW Hoyt St .
Portland, OR 9720 9
Markowitz, Herbold, Glade & Mehlhaf, P C Facsimile: (503) 243-2944
1211 Sw Fifth Ave ., Suite 3000
Attorneys for John J . Cargal
Portland, OR 97204
Facsimile : (503) 323-910 5
Attorneys for Encompass Teleservices an d
Savant Call Center Associates
John S . Ranso m
Ransom & Blackman, LL P
1001 S .W. Fifth Ave ., Suite 1400
Portland, OR 97204-1144
Facsimile : (503) 227-5984
Attorneys for Patrick Boyle an d
Michael Boyle
Mark Comstoc k
Garrett, Hemann, Robertso n
1011 Commercial Street N.E.
P.O. Box 749
Salem, Oregon 97308-074 9
Facsimile : (503) 581-589 1
Attorneys for Karol Kersh
by faxing and mailing said true copies to them by regular U .S. mail, postage prepaid, on
the
Z0 of February, 2007.
Exhibit 3 Page 9 of
10
I hereby certify that I served true copies of the foregoing AFFIDAVIT OF JEF F
GRAVES IN SUPPORT OF RANDALL SCHEETS' MOTION FOR RELIEF UNDER OR S
60.952 on the following :
Stephen Crew
David B . Markowitz
Ramis Crew Corrigan LL P
Peter H. Glade
1727 NW Hoyt St .
Matthew A . Levin
Portland, OR 9720 9
Markowitz, Herbold, Glade & Mehlhaf, PC Facsimile : (503) 243-2944
1211 SW Fifth Ave ., Suite 300 0
Portland, OR 97204
Facsimile : (503) 323-910 5
Savant Call Center Associate s
John S . Ranso m
1001 S.W. Fifth Ave., Suite 1400
Facsimile : (503) 227-5984
Michael Boyle
by faxing true copies to them, on th e
Mark Comstoc k
1011 Commercial Street N .E.
P.O. Box 749
Salem, Oregon 97308-0749
Facsimile : (503) 581-589 1
Attorneys for Karol Kers h
of April, 2007.
AFFIDAVIT OF JEFF GRAVES OF SUPPORT RANDALL SCHEETS' MOTION FOR RELIEF UNDE R
ORS 60 .952
Exhibit 3 Page 10 of
10
Stephen F . Crew, OSB No, 7817 1
Ramis Crew Corrigan, LLP
1727 NW Hoyt Street
Portland, OR 97209
Telephone : 503 .222.4402
Facsimile : 5 03.243 .294 4
E-Mail : stevec@rccjawyers,co m
Attorney for John Carga l
DISTRICT OF OREGON
ENCOMPASS TELESERVICES, INC . ,
an Oregon corporation,
Plaintiff,
No . 04-CV-821-HU
AFFIDAVIT OF JOHN J. CARGAL
v.
RANDALL LEE SCIIEETS, aka RANDY
SCHEETS,
Defendant .
RANDY SCHEETS ,
v.
SAVANT CALL CENTER
ASSOCIATES, INC ., an Arizon a
corporation ; JOHN J . CARGAL;
MICHAEL A . BOYLE ; PATRICK
BOYLE ; and KAROL W . KERSH ,
Third-Party Defendants.
1- AFFIDAVIT OF JOHN J . CARGAL
Exhibit 4 Page 1 of
12
STATE OF OREGON
COUNTY OF MULTNOMAH
)
) Ss .
)
I, John J. Cargal, third-party defendant in the above-captioned action, declare under oat h
as follows :
1.
I am the former Chief Executive Officer of Encompass Teleservices, Inc . ("ETI"
or "Company") . I am competent to testify and have personal knowledge of the facts state d
herein.
2.
In November 2004, ETI attorney Stuart I . Teicher represented to the Court the ET I
had "recently discovered" my participation in the formation of a competing call center calle d
Savant C .C .A ., Inc. ("Savant" ), an Arizona corporation . A copy of Mr. Teicher's affidavit i s
attached . Although Mr. Teicher was not aware at the time, his representation to the Court that
the formation and operation of Savant was done without the knowledge of ETI management ,
particularly including Michael and Patrick Boyle, was incorrect . As set forth herein, Savant was
created with the full knowledge and direction of Ell management, particularly including Patric k
Boyle, Michael Boyle, Karol Kersh and the ETI' s accountant, Mr. William Holmes .
3.
I am aware of two separate instances were Eli affirmatively undertook to transfe r
its corporate assets and business to other companies . The first attempt involved the attempte d
transfer of business from ETI to Costa Rican company named Miridion . Messrs. Patrick and
Michael Boyle (the "Boyles"), along with T-Mobile employee, Heather Hawn (at the time ,
girlfriend of Michael Boyle) planned to divert ETI's business to a new call center owned and
operated by Miridion in Costa Rica. To that end, the three of them traveled to Costa Rica t o
Exhibit 4 Page 2 of
12
make a presentation to a governmental agency . Ultimately, T-Mobile rejected the proposal an d
as far as I know, the planned diversion of ETI business to Miridion was not implemented . I
know this because it was explained to me by Michael Boyle, Alfred Hernandez and Patrick
Boyle . It was further explained to me by Adam Clark after returning from Costa Rica wit h
Patrick Boyle .
4.
In 2002 and. 2003 Michael Boyle worked with Karol Kersh and William Holme s
to plan and implement the transfer of ETI business to a new entity that would be controlled by
the Boyles, It was Mr. Kersh's idea to start a new call center using entities legally separate fro m
one another . Discussions occurred with Michael Boyle, Karol Kersh, William Holmes an d
myself, regarding this plan in early to mid-2003 .
5.
In mid-2003, I received authorization and direction from Michael Boyle, Karo l
Kersh and William Holmes to proceed with the formation of a new entity to acquire assets an d
valuable contracts of ETI . Following their direction we formed Savant Call Centers, Inc . as an
Arizona corporation . Savant was not formed as a subsidiary or an affiliate of ETI . Mr. Kersh
suggested a "stand-alone" entity controlled by an individual shareholder who would follow th e
Boyles' directives to facilitate the diversion of ETI's business away from ETI into Savant, Unde r
Mr. Kersh's plan ETI would eventually go broke, and Savant, as a standalone entity, would the n
acquire the physical assets of ETI, Mr . Michael Boyle stated that he had no one he could trust t o
hold the stock of Savant After flying Mr . Adam Clark, a personal acquaintance of mine, up t o
the Portland area for interviews, Michael Boyle, William Ilolmes and Karol Kersh selected Mr.
Clark to be installed as a figurehead CEO of Savant, however, Mr . Clark was always subject to
the control of ETI management, particularly Michael Boyle . Mr. Clark was then employed in
Exhibit 4 Page 3 of
12
ETI's human resources office to hire employees who would eventually work for Savant .
Savant opened its doors in 2003 in the same office park as ETI, and ET' moved al l
6.
of its clients except T-Mobile Customer Care over
.
DATED this
to Savant,
et day of March, 2007 ,
SUBSCRIBED AND SWORN to before me this
'n
a i0AL 65AL
LYNN AlWPM
NOTMWY P, L-ORSRcN
4
COM.Mi tON
ay of
March, 2007 .
r1
JYPUBLIC
I 77
ommission Exp es :
~pIM414M •t,: r N+t~•,1C ►V :rlrY+l.., ~r rILYr. :::41
4- AFFIDAVIT OF JOHN J. CARGAL
Exhibit
4 Page 4 of
12
4
~~
GON
DISTRICT OF OREGO N
Oregon corporation,
Case No . CV-04-821-H U
AFFIDAVIT OF STUART I . TEICHER
IN SUPPORT OF PLAINTIFF'S FRCP
6(b)(1) MOTION TO ENLARGE TIM E
FOR ORS 60.952(6) OFFE R
Plaintiff,
v.
SCHEETS,
.
Defendant.
RANDY SCHEETS ,
Counterclaim Plaintiff,
v.
SAVANT C.C.A., Inc., alkla SAVAN T
CALL CENTER ASSOCIATES, INC ., an
Arizona Corporation ; JOHN L .
CARGAL; MICHAEL A . BOYLE ; and
PATRICK BOYLE ,
Counterclaim Defendants .
Page 1-- AFFIDAVIT OF STUART I . TEICHER
EXHIBIT J
Exhibit 4 Page 5 of
12
STATE OF OREGON
)
ss .
County of Multnomah
)
I, Stuart I . Teicher, being first duly sworn, do hereby depose and state as follows :
1.
I am a partner in the law firm of Sussman Shank LLP and I am one of th e
attorneys representing plaintiff Encompass Teleservices, Inc . ("Encompass") in th e
above-captioned action .
2.
1 have personal knowledge of the facts stated herein and I am competen t
to testify thereto .
3.
After Encompass initiated this action and after defendant Randal l
Lee Scheets filed his Amended . Answer, Affirmative Defenses and Counterclaim, a
decision was made by Encompass to pursue resolution of this action and Encompass '
relationship with defendant under the mechanism authorized by ORS 60 .952(6) . Unde r
that statute, Encompass would elect to purchase all of defendant's shares for their fai r
value by making a written offer stating the amount that Encompass would pay t o
defendant .
4.
In furtherance of Encompass' intention as described above, in August
2004 I engaged Gregory A . Gilbert, CFA, FASA, CBA and president of Corporate
Valuations, Inc., to appraise the value of defendant's ownership interest in Encompass .
Mr. Gilbert advised that he would require two weeks time after he received th e
necessary financial information regarding Encompass to prepare and complete a n
appraisal .
5.
In conjunction with engaging Mr. Gilbert, William N . Holmes, one of th e
principals of Holmes Royer LLP, Certified Public Accountants, was also engaged to
Page 2 — AFFIDAVIT OF STUART I . TEICHER
EXHIBIT
Exhibit 4 Page 6 of
12
prepare the financial information that is a necessary predicate for Mr . Gilbert's
appraisal.
6.
By the time of the October 14, 2004 Rule 16 conference in this action, I
understood that Mr . Holmes would need some additional time to complete his work . It
was for that reason that I requested, and the Court granted (without objection fro m
defendant), a twenty-eight (28) day extension of time for Encompass to make th e
statutory offer from October 25, 2004 to November 22, 2004 .
7.
Thereafter, on October 20, 2004, 1 was advised of new information whic h
had come to the attention of Mr . Holmes in the course of his work on this project .
Mr . Holmes had become aware of a potential and previously unknown financia l
relationship between Encompass and an entity known as Savant Call Cente r
Associates, Inc . ("Savant") . Mr . Holmes had discovered numerous complex, confusing ,
arid unusual transactions between the two entities that had to be examined, unraveled ,
and understood . By early November I was advised that Mr . Holmes had reached th e
conclusion that the financial statements of Encompass and Savant would almos t
certainly be required to be consolidated in order to accurately reflect Encompass '
financial condition .
8.
During the past several weeks I have been advised of two additional fact s
that have come to light in the course of Mr . Holmes' efforts . First, Savant's financia l
records are in disarray, incomplete, and/or not independently reliable . As a result, it ha s
been decided that Mr . Holmes must undertake extraordinary efforts, including obtainin g
third party verification of virtually all of Savant's financial affairs ' from its customers ,
financial institutions, and possibly its vendors . Only through this method will Mr . Holme s
Page 3 -- AFFIDAVIT OF STUART I . TEICHER
EXHIBIT 9
Exhibit 4 Page 7 of
12
be able to satisfy himself that, under applicable professional standards, the dat a
underlying the financial statements he is attempting to prepare for Encompass .(and
now, necessarily, Savant) will be sufficiently reliable to support an appraisal of the valu e
of defendant's ownership interest in Encompass .
9.
Second, during the past several weeks I learned that one of Encompass '
principals had apparently controlled Savant's financial affairs and had apparently use d
Savant for his own purposes. That individual's role in . Encompass has been terminated .
Thus, as of October 29, 2004, John L . Cargal is no longer an officer, director, employee ,
or shareholder of Encompass . As a result of the emerging facts regarding Mr . Cargal' s
involvement with Savant, I have withdrawn from his representation in this action and h e
is now represented by independent counsel .
10.
The combined effect of these previously unknown facts and circumstance s
is that Mr. Holmes will be unavoidably delayed in completing the preparation of th e
financial statements which are the predicate for .an appraisal of the value of defendant' s
shares . Mr. Holmes has been diligently working to prepare the necessary financia l
statements, but has reached the unavoidable conclusion that his work cannot be
completed before late December (approximately five or six weeks from now) even wit h
the continuous high level of effort he has devoted, and will continue to devote, to thi s
project .
11.
As noted above, Mr . Gilbert requires two weeks from the time he receive s
Encompass' financial statements from Mr . Holmes to prepare and complete a n
appraisal of the value of defendant's shares . In light of the present deadline .for
Encompass to make its offer, i.e., November 22, 2004, Mr. Gilbert had set aside the firs t
Page 4 — AFFIDAVIT OF STUART I . TEICHER
EXHIBIT I
two weeks of November within which to work on and complete this project . However ,
because of various other prior professional and personal commitments during the nex t
six weeks, Mr. Gilbert will not again have the required two-week period available t o
complete this appraisal of Encompass until the first two weeks of January 2005 .
12.
y
The combination of the previously unknown and extraordinar
circumstances relating to Savant, its potential financial relationship with Encompass, th e
poor quality of Savant's financial records, and the involvement of Mr . Cargal with
Savant, in conjunction with Mr . Gilbert's unavailability . until January 3, 2005, compel s
Encompass to request the sixty (60) day enlargement of time within which to make th e
statutorily authorized offer to purchase defendant's shares in Encompass for their fai r
value .
13.
These circumstances, which were unanticipated and previously unknown ,
have made it impossible for Encompass to utilize the statutory mechanism to resolv e
this matter within the time presently allowed . Therefore, it would be equitable for th e
court to grant Encompass ' Motion to extend the deadline for Encompass to make th e
statutory offer from November 22, 2004 to January 21, 2005 . Granting Encompass '
Motion for enlargement of time to enable Encompass to utilize the statutory offe r
mechanism will undoubtedly promote judicial efficiency in the resolution of this action ,
Il l
11 I
I1 1
I1 1
Il l
Page 5 – AFFIDAVIT OF STUART I . TEICHER
E
Exhibit 4 Page 9 of
12
and will certainly further the interests of Encompass and defendant in achieving the just ,
speedy, and inexpensive .determination of this action in the most efficient manne r
possible .
Dated this 19 th day of November .
SUBSCRIBED AND SWORN TO before me this 19th day of November ,
2004 .
Public for Orego n
idly ' ommission Expires : 07126/200 7
OFFICIAL SEAL
JOAN M HYLAND
F :ICLIENTS11543110081P•AFFIDAVIT OF SET TO SEAL DOCUMENTS .DO
C
NOTARY PUBLIC-OREGO N
COMMISSION NO . 370525
MY COMMISSION EXPIRES JULY 26, 200 7
1
1
4
Page 6 -- AFFIDAVIT OF STUART I . TEICHER
EXHIBIT Exhibit 4 Page 10 of 12
~
1
CERTIFICATE QF SERVIC E
2
I certify that on November 19, 2004, I served, by facsimile and first class mail ,
3
a full and correct copy of the foregoing AFFIDAVIT OF STUART I . TEICHER I N
4 SUPPORT OF PLAINTIFF'S FRCP 6(b)(1) MOTION TO ENLARGE TIME FOR OR S
5
60.952(6) OFFER to the interested parties of record, addressed as follows :
6
Mitchell A . Broz
Katie H . Knigh t
Mikkelborg, Broz, Wells & Frye r
1001 Fourth Avenue, Suite 360 0
Seattle, WA 9815 4
Facsimile Number: 206-623-0965
7
8
9
10
Bruce A . Rubi n
Miller Nash LL P
3400 US Bancorp Towe r
111 SW Fifth Avenu e
Portland, OR 9720 4
Facsimile Number: 503-224-015 5
11
12
13
14
15
Dated :
November 19, 200 4
16
17
18
19
20
21
22 .
23
24
25
26
Page 1 - CERTIFICATE OF SERVICE
SUSSMAN SHANK LL P
ATTORNEYS AT LAW
1000 SW BROADWAY. SUITE 140 0
PORTLAND. OREGON 97205. 308 9
EXHIBIT I
TELEPHONE (503) 227. 1111
Exhibit 4 Page 11 of
12
I hereby certify that I served true copies of the foregoing AFFIDAVIT OF JOHN J .
CARGAL, on the following :
David B . Markowitz
Stephen Crew
Peter H. Glade
Ramis Crew Corrigan LL P
Matthew A. Levi n
1727 NW Hoyt St.
J. Matthew Donohu e
Portland, OR 9720 9
Markowitz, Herbold, Glade & Mehlhaf, P C Facsimile : (503) 243-294 4
1211 SW Fifth Ave ., Suite 3000
Portland, OR 97204
Facsimile : (503) 323-910 5
Savant Call Center Associate s
John S . Ranso m
1001 S.W. Fifth Ave ., Suite 1400
Facsimile : (503) 227-598 4
Michael Boyle
by faxing true copies to them, on the
Mark Comstock
1011 Commercial Street N .E.
P.Q. Box 74 9
Salem, Oregon 97308-0749
Facsimile : (503) 581-589 1
Attorneys for Karol Kers h
of April, 2007 .
Esther Chan g
AFFIDAVIT OF JOHN J . CARGAL
Exhibit
4 Page 12 of
12
CERTIFICATE OF SERVICE
1
2
I hereby certify that on the 13th day of April, 2007, I served a copy of the foregoing
3
UNITED STATES TRUSTEE’S MOTION FOR ORDER DIRECTING
4
APPOINTMENT OF CHAPTER 11 TRUSTEE by mailing a copy of this document, by
5
United States first class mail, postage prepaid, and addressed to the following:
6
Encompass Teleservices, Inc.
111 SW 5th Ave Ste 4090
Portland, OR 97204-3648
Debtor
7
8
9
10
Steven M Berne
Harris Berne Christensen LLP
5000 SW Meadows Rd #400
Lake Oswego OR 97035
Attorneys for Employment Trends
11
12
I further certify that based on the Bankruptcy Court’s Electronic Case Filing
13
records, the following person(s) will be served electronically when the foregoing
14
document is filed with the Court:
15
16
# ROBERT J VANDEN BOS [email protected], [email protected]
# JOEL WATKINS [email protected]
17
18
19
20
ILENE J. LASHINSKY
UNITED STATES TRUSTEE
21
22
23
/s/ M. Vivienne Popperl
M. VIVIENNE POPPERL, OSB #85305
Attorney for the United States Trustee
24
25
26

Avalon motion to direct ust to appt ch 11 tee.wpd

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