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Prominent atheist blogger converts to Catholicism

Leah Libresco, an atheist blogger, is converting to Catholicism.
By Dan Merica, CNN

Washington (CNN) – She went from atheist to Catholic in just over 1,000 words.

Leah Libresco, who’d been a prominent atheist blogger for the religion website Patheos, announced on her blog this week that after years of debating many “smart Christians,” she has decided to become one herself, and that she has begun the process of converting to Catholicism.

Libresco, who had long blogged under the banner “Unequally Yoked: A geeky atheist picks fights with her Catholic boyfriend,” said that at the heart of her decision were questions of morality and how one finds a moral compass.

“I had one thing that I was most certain of, which is that morality is something we have a duty to,” Libresco told CNN in an interview this week, a small cross dangling from her neck. “And it is external from us. And when push came to shove, that is the belief I wouldn’t let go of. And that is something I can’t prove.”

 

The ability to do something is not the license to do it. But without a moral compass, there are those whose only requisite is ‘can we or can we not get away with it’. That is not a moral compass.

The persistent attempts by the defendants to contort the law to bend it to their own purposes is the same bad faith modus operandi they consider perfectly acceptable. ‘Everyone does it’..? Really?

So you think its alright to declare yourselves bankrupt to stop the trial so that your fraud will not be exposed in public? Obviously you consider that fine, that’s why you are doing it.

(stats are for 1/2 day)

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Worddiamonds is a sincere, modest effort to simply publish the Bible in a new way for the internet. It’s truly stunning the lengths the defendants Steve Hall of Paul Allen’s Vulcan Capital, Ross Levinsohn of Yahoo, Nova Spivack et.al. have gone to, to prevent Worddiamonds from being developed and moving forward, even to the extent of having it dismantled, destroying its functionality for some bizarre notion that this would impel us to “freak out and throw more money at it” (Spivack).

This is the company that they stole all the development funds from and tried to publicly blame to cover their own efforts to simply cash in while publicly saving face, by appropriating Radar Networks- which they still own, in the form of Evri, ( although they are trying to force the courts to accept their declarations of bankruptcy.)

BECAUSE THEY THOUGHT THEY COULD GET AWAY WITH IT. We seemed to them so vulnerable and naive- a female president- so guileless, honest, so WEAK..that it would be like swatting away a miniscule ‘obstacle’ as they referred to us.

For  years these men have told us in every way they can think of, that we are worthless, that they could care less, that we are underserving of being treated with any consideration, that they have dignified us by stealing our funds and destroying our website, because it gave them the appearance of making a ‘soft landing’ by their peers, and an opportunity to get a tax write off on an $85 million dollar investment gain of another investment.

That they have value whereas our small company is a blip, so negligible, that their actions are perfectly justifiable as seen from their point of view, and that they will bury us with lawyers, delays, every trick in the legal book, as well as with slander, with that disparaging buzz, along with the multitude of lies with which they seem to believe everyone does business.

.                     .                .              .               .               .                .                .                   .                  .                 .

Is that true? Is this what happens in Silicon Valley? Wasting the courts time and limited budget.. it’s not just Worddiamonds they could care less about… why would an American register one of his yachts in the Cayman Islands? Is tax evasion by one of the richest Americans a good enough reason for fraud, as was perpetrated against Worddiamonds by Paul Allen’s Vulcan Capital just to gain a tax write-off on a capital gain of $85,000,000? It is evidence of this as well as other questionable practices that these defendants are so frightened will come to light. Tax evasion is just the tip of the iceberg.

 

 

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Defendant Ross Levinsohn has resorted to every delay tactic in the book to prevent public exposure of his insider dealings.

For example, Radar Networks declared for bankruptcy on Nov. 2, 2011, yet defendants Hall [Paul Allen’s Vulcan Capital] and Levinsohn waited until February 26, 2012- literally the eve of the trial- to assert bankruptcy claims and delay the suit at the last possible moment.

In an attempt to further disrupt the trial schedule, defendants now claim that after they liquidated Radar Networks and sold it to a company controlled by defendant Hall, they are nonetheless entitled to endemnity as directors and are therefore creditors of the corporation.

Having finally vaulted to his new position atop Yahoo, Mr. Levinsohn is testing this new position of power  by retaining new lawyers to embroil the case of fraud against himself, and others, in even more confusing, circuitous, legal semantics. This is done almost reflexively, as if truth were a concept of so little consequence, compared to his personal ambition and gain, that it could simply be brushed aside, and that there is nothing wrong with doing so. It is not enough to simply not be the initiator of fraudulent activities- if you go along with a fraud you in fact did not initiate, but colluded with- if you did not initiate a fraud but still went along with it- you in fact are as guilty of fraud as the original perpetrator(s).

Mr. Levinsohn’s new filing includes his complaint about having to spend so much money to prevent the trial of his fraudulent activities from going forward!

If successful, Mr. Levinsohn and Mr. Hall will have succeeded in lowering the bar of ethics and contributing to the decay of business standards which is crippling to the foundation of justice and laws needed to sustain a strong economy.

 

Despite defendants efforts, this case cannot be delayed indefinitely, and the true nature of the defendants conduct will eventually be aired before the public, which is nevertheless also on display by this latest filing.

This is not the first time those who have attempted to publish the Bible in a new way, have been persecuted, and many, martyred, as a result. And so it goes.

 

 

 

…

The continued attempts of the defendants to delay the trial proceedings, and to have evidence of their wrong-doing excluded from being presented in open court, is for the simple reason, that it clearly exposes their premeditated efforts of oppression with malice to wrongfully defraud those they considered incapable of withstanding their combined efforts to do so.

Worddiamonds is a small company with the modest goal of publishing the Bible in a new way.

The obvious and prolonged suffering the defendants continue to inflict in the face of the courts rulings and the evidence against them, captures what kind of men they really are. They are oblivious to the effects of their own cruelty against a small company they ganged up on, in the belief that we could easily be buried under of their combined onslaught of harassment, hacking, disparagement, slander, mocking, threats and lies. They are so invested in destroying us that their same strategy of bullying against all sound wisdom and legal requirments remains unchanged.

Their attorneys fury- visceral, personal anger, expressed towards us, so visibly demonstrated in the 3 days of deposition they conducted against Kate Paley and Worddiamonds- cannot be other than extensions of their clients attitudes.

Because any new publication of the Bible is accompanied by various forms of persecution we were prepared for some resistance…but, this has been truly overwhelming, life-threatening, and excruciating, and it seems, never-ending.

 

The response from defendants Ross Levinsohn of Yahoo and Steve Hall of Paul Allen’s Vulcan Capital, has been to delay, at every step of the way,  [ case # CIV494701 San Mateo County Superior Court ] this case from going forward, and to keep out evidence of their misdeeds from being aired in a public court of law.

Instead of taking responsibility their only thought is to shirk responsibility.

Again this week another new attempt on their part to delay the proceedings has been disallowed by the judge. [the next week they tried this same ploy to delay the trial going forward- see June 16 post].

We know from experience that these men consider themselves smarter and more clever than anyone else. Their arrogance and patronizing attitude which extends even to their view of the court system is wearying on everyone.

Their indifference to anyone’s interests beyond their own is remarkably consistent. It is the same indifference with which they carried out their fraudulent conveyance, the same sneering contempt with which they caused the theft and destruction of Worddiamonds for their own convenience and monetary gain, in the hopes this would somehow compel us to “freak out and throw more money at it” to somehow fix it.

Although Mr. Levinsohn saw what was going on, and said it was “evil”, he nevertheless threw in his lot with helping orchestrate the fraudulent conveyance, which could not have been accomplished without his complicity.

The defendants in this case truly cannot conceive of anyone else’s interests holding a candle to their exalted view of their own. They sincerely do believe their interests are far more important than other peoples. This is their world view, and they conduct themselves and treat others from this point of view.

They truly believe they are above being held accountable for anything or having to answer to anyone. They refuse  to take responsibility for their actions, and are affronted as well as dismissive towards anyone that dare ask them to do so, even a court of law.

Their continued attempts to stop the trial and keep the evidence out of the public view, more than anything, demonstrates this very attitude. The obvious and prolonged suffering they continue to inflict in the face of the courts rulings and the evidence against them really captures what kind of men they truly are. They are oblivious to the effects of their own cruelty- their deliberate ‘oppression with malice’ of others.

 

 

The defendants Ross Levinsohn of Yahoo and Steve Hall of Vulcan Capital claiming, in this case, to be creditors of a company they shut down and own themselves, was another ploy to stop the trial that would expose their misdeeds- their serious, fraudulent activities. Essentially Mr. Levinsohn and Mr. Allen ( owner of Vulcan Capital ) and Mr. Hall are in denial that they haven’t been able to get away with what they thought would be a slam dunk fraudulent conveyance.

and so have thrown in a claim that they are the one’s who need to be repaid for the fraud they conducted..sweet, huh?

They feel they can commit fraud, but, they don’t feel they can afford to be exposed for doing so.  Yet, what is unusual in this case, is the continued determination of M. Hall, Mr. Levinsohn, and Mr. Allen, to insist on pretending this is not what they have done, in the face of such overwhelming evidence to the contrary.

They have here gone so far as to put forth the argument, that if anyone has been defrauded, it is themselves, and they present themselves in all guileful sincerity as the parties to whom monies are owed.

It begs the question, how often has this worked for the defendants in the past, as they seem so startled and frustrated not to be getting away with it on this occasion? How many others have been bullied into silence, outspent and out maneuvered, threatened, maligned, slandered, in efforts to prevent anyone from ever being able to hold them accountable? Their efforts persist to this day. We are faced with their same fury and scorn as we try to hold them accountable at this present moment.

 

 

 

“There is no real development without integrity, that is- a love of truth” Frank Lloyd Wright

 

Silicon Valley has no adult supervision at this time. It would benefit from a few grown ups.

“You know neither me nor my Father. If you knew me, you would know my Father also” John 8:19

Here we go again- Silicon Valley at its sleaziest. Yet again Steve Hall of Paul Allen’s Vulcan Capital seeks to delay a court date that has been on the calender for months, saying he has been ‘sandbagged’..really? So, on the eve of anything meant to be discussed in an open court of law involving the fraud perpetrated by Mr. Hall and Ross Levinsohn, these defendants seek to stop the proceedings. This is your strategy, gentleman, to avoid facing the music and owning up to your seriously sleazy conduct?

 

After sandbagging the trial that had been scheduled for over 2 years from proceeding this past February, by all of a sudden declaring bankruptcy of a company they engineered the shutdown and sale of to themselves, again, on the eve of a court date now we are accused of sandbagging them by simply responding to their filing for bankruptcy? Mr. Hall and Mr. Levinsohn, what is wrong with both of you? This evidence has been available for your reveiw for over 2 years.

Are you both ostriches?

It’s business as usual for you both, that’s certainly clear.

 

 

DECLARATION OF EVAN MANDEL IN SUPPORT OF REPLY TO OPPOSITION TO MOTION TO DISMISS

I, Evan Mandel, declare:

1.I am an attorney licensed to practice law in the State of New York, and am a principal of the law firm of Mandel Bhandari , counsel for Kate Paley (“Paley”), a creditor herein, in connection with her lawsuit pending in the San Mateo County Superior Court, San Mateo County Superior Court, Case N. CIV 494701 (the “State Court Action”) against Radar Networks, the debtor herein (“Radar” or the “Debtor”), its directors, Ross Levinsohn, Steve Hall, and Noah Spivack (“Insiders” or “Defendants”), and Evri, Inc. (“Evri”) for fraud, fraudulent conveyance, breach of contract, breach of fiduciary duty, declaratory judgment, conversion and constructive trust.

In such capacity, I am personally familiar with each of the facts stated herein, to which I could competently testify if called upon to do so in a court of  law.

~

2.In connection with the State Court Action, the following facts and evidence were obtained in the course of discovery: a.Paley’s $3 million loan, plus interest, was payable on demand by Paley any time on or after September 30, 2009, unless new funding of $4 million was received by the Debtor, in which case the note would be automatically converted. See, Exhibit C to Declaration of Noah Spivack filed in support of the Debtor’s Opposition (“Spivack Decl.”). As of September 30, 2009, Radar had at least $1,002,557 cash on hand and an estimated value of $20,000,000. See Exhibit A (Financial Statement Compilation for the Nine Months Ended September 30, 2009).b.On June 25, 2009, Spivack wrote to Levinsohn explaining that “we need a minimum of 4M of new money,” which would result in “$3M from Kate [and] $4M+ from others.” See Exhibit B (June 25, 2009 email). The next day, Spivack explained further: “One wrinkle is that Kate’s note is due on 9/30/09. On that date, if she has not converted yet, she can request repayment. That would of course be bad. So we actually should convert her.” See Exhibit C (June 26, 2009 email).

~

c.For several weeks, Hall tried to convince Paley to voluntarily relinquish her right to get repaid on September 30, however, she refused. Radar sent Paley a document purporting to be a release and an extension of the maturity date of her loan, however, Paley did not sign it.

d.On September 15, 2009, Levinsohn’s company, Fuse, and Hall’s company, Vulcan, invested $842,192.42 and the Directors purported to convert Paley’s $3 million loan to equity. The State Court found that the conversion was improper.

~

e.On September 15, 2009, before she knew about the conversion, Paley wrote to Hall, whom she thought she could trust. She implored him to help her work things out with her investment and Word Diamonds. Paley asked Hall to help her communicate with Radar because “I do need to see [Radar’s Financials] as an investor and also regarding the handling of my second 3m investment as regards the Twine [] agreement.” Insidiously, the next day, Hall replied, “I am sure it is an oversight and something the company can rectify immediately.” See Exhibit D (September 15, 2009 email). Hall did not tell Paley that he had just implemented the scheme to convert Paley’s $3 million loan to equity. See Exhibit E (September 17, 2009 response from Hall).

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f.In March 2010, all of the Debtor’s assets were sold to Evri for approximately $1,125,000 in cash, plus shares in Evri representing a 3% – 5% stake in Evri. The sale to Evri was made despite a February 2010 offer by Intellectual Ventures to pay $2.75 million for Radar’s patents alone, plus a non-exclusive license to Radar to use the patents.

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g.On July 26, 2009, Hall introduced Radar’s CEO Spivack to Evri CEO Hunsinger, and Spivack immediately recognized the introduction for what it was: “I bet Steve Hall is plotting to acquire our assets at firesale price into Evri.” See Exhibit F. And that is precisely what Hall was plotting, and it is exactly what he did. Hall used confidential information about Radar’s business that he acquired as director and fiduciary of Radar to assist Evri in acquiring Radar’s assets at a price that was far below their fair market value. Spivack valued Radar’s assets as being “worth more than $20 million” in November 2009. See Exhibit G.

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h.In March 2010, Radar’s assets were sold to Evri for $1,125,000 in cash and 1,746,016 in Evri restricted shares. Depending on the valuation of Evri’s restricted shares, Evri was able to purchase substantially all of Radar’s assets for approximately $1,125,000.1

~

i.In seeking approval from the Evri Board of Directors to enter into negotiations to purchase Radar’s assets, Hunsinger explained that Hall had provided his insider’s perspective:

Working closely with Steve H to come to this conclusion, I strongly believe that Evri has an opportunity to acquire valuable assets and talent from Radar Networks on very attractive terms. . . . Given the target companies[‘] situation, Evri has significant leverage and we are uniquely positioned to execute a clean, pure equity deal obtaining significant option value on assets for a relatively low price.”

1 Defendant Levinsohn claims that his investment fund is “carrying [the Evri shares] at zero” but “to this day, it’s unclear what the total amount of consideration [Levinsohn’s investment fund] received as part of the purchase agreement for Radar’s assets is.” Exhibit Y (Levinsohn Deposition Transcript, 259:2-17.) .

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Exhibit H. Hall also provided Hunsinger with Radar’s confidential information as to whether Evri could poach Radar engineers. Exhibit I.

~

j.Obtaining Radar’s assets at a firesale price was not Hall’s only motive for wanting to drive Radar out of business. The Vulcan entity that had invested in Radar, Vulcan II, had realized a significant amount of taxable income, and Radar’s bankruptcy would permit Vulcan II to realize a total tax loss of its Radar investment. See Exhibit J (“[F]or months [Hall] has been saying Vulcan could use the write off, and now he’s happy to have the company shut down and take the write-off.”))

~

k.Indeed, in numerous private communications, Spivack and his COO accused Hall of (1) “letting [Radar] fall apart” so that Vulcan (or Evri) could “tak[e] over the assets” (Exhibit K); (2) having a plan to facilitate Evri’s acquisition of Radar at a “firesale price” (Exhibit L); (3) wanting to “drive [Radar] into bankruptcy and take our assets” (Exhibit M); (4) intentionally “starv[ing] [Radar], forc[ing] layoffs, and then corner[ing] us and forc[ing] a sale to Evri” (Exhibit M); and (5) Hall “wants us to fails so that Evri can get us in a wind down” (Exhibit N).

l.The sale to Evri enabled Hall to increase his ownership interest in Radar’s assets, obtain a tax advantage and reputational benefits. In 2006, Vulcan made its first investment in Radar. Hall holds a carried interest in the Vulcan investment fund that owned an equity position in Radar and a contractual right to receive profits generated by the fund. At the time of the transfer of Radar’s assets to Evri, Evri was, and still is, in effect a subsidiary of Vulcan. Vulcan has invested at least $36 million in Evri. Vulcan owns more than 90% of the issued and outstanding capital stock of Evri and Paul Allen controls Vulcan. In deposition, Hall freely acknowledged that Vulcan controlled Evri. Hall has personally invested in the Vulcan entity that manages Evri. (Exhibit O) (Vulcan Capital Venture Capital II LLC (“Venture II”) owns Evri; Venture II is managed by Vulcan Capital Venture Capital Management II LLC (“Management II”)). Hall has invested money in Management II.

m.Hall received substantial benefits from Radar’s sale of its assets to Evri. As a director and indirect owner of Evri, as a result of the asset sale, Hall obtained control of all of

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Radar’s assets and a greater ownership interest in such assets through his interest in Evri. Hall also received a major tax advantage from the asset sale: the Vulcan fund that owned Radar had realized approximately $85 million in taxable income as a result of at least one extremely successful investment; the dissolution of Radar that followed the asset sale allowed Vulcan to realize the tax loss that it suffered in its Radar investment; and that loss became a valuable deduction for the owners of the Vulcan fund that owned Radar. (Exhibit O) (Hall Dep. at 258:2-259:25.) In fact, Hall repeatedly told Spivack and other Radar personnel that he wanted Radar to go bankrupt so that he and Vulcan could obtain the associated tax benefits. (Exhibit J).

n.Radar’s assets were worth significantly more than $1.125 million, based on the February 2010 offer from Intellectual Ventures to pay $2.75 million for Radar’s patents, Spivack’s valuation of Radar at approximately $45 million to $50 million as of the fall of 2009 (Exhibit P); and Exhibit Q (“45M+ is reasonable”), and Vulcan’s willingness to pay more for Radar’s assets (Exhibit R) (Hall email to Paul Allen, the head of Vulcan that, at the time of the Intellectual Ventures offer, Vulcan was willing to pay more: “So we are in the middle of playing some hardball maneuvering to get this over the goal line without having to pay any more money for it.”); and Radar’s potential claim against Evri for violating Radar’s patents (Exhibit S (“[T]here is a potential lawsuit here. A big one, I think.”), (“They are violating many of our patents.”).)

o.Levinsohn’s sworn testimony in the State Court litigation is that anything that benefited Fuse’ Com Ventures VI fund also benefited him personally.Also,Levinson’ s “personal money” was at stake “in our fund,” i.e. ComVentures VI.

p.ComVentures loaned Radar $271,000 on November 30, 2009 and was one of Radar’s unsecured creditors. The Levinsohn Fund was also promised additional shares in Evri several months after the transaction for Radar’s assets closed. Indeed, The Levinsohn Fund received 381,595 “excess shares” of Evri’s common stock from the Asset Sale in June 2010, and 571,770 shares of Evri common stock in June 2011. Exhibit T (Corrected Levinsohn Decl. ¶31.) This additional payment to Levinsohn’s investment fund was not disclosed in the

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March 2010 Asset Purchase Agreement. Levinsohn also received a reputational benefit by orchestrating a pay-out to his investment fund and achieving a “soft landing” for his investment. Levinsohn was responsible for the loan being made and, as a result, was “out on a limb with [his] firm.” Exhibit U.

q.As for Spivack, he knew that unless Radar commanded a sale price in excess of $63 million, he and his management team would not be able to cash in their shares at all. See Exhibit V (“The preferred shareholders have up to $63 mm of liquidation preferences from the A and B rounds in place.”) In that same email, Spivack explains that even if the sale price to Microsoft (rather than Evri) is somewhere in the range of $40 million, unless the deal comes with a “management carve out” he and the other common stock holders will “get[] nothing.” Faced with the prospect of Radar’s investors making millions of dollars on their investments with Spivack “getting nothing” or Spivack making some money and the investors getting nothing, Spivack chose the latter option. In negotiations with Evri, Spivack’s primary concern was not maximizing shareholder value – it was fluffing his own golden parachute. In a November 4, 2009 email, Spivack told Hall that the main financial goal for “other investors” is to offer them just enough value to “get their votes and avoid liability issues.” But for himself, he was very specific: (i) a salary of $250,000; (ii) a six month severance package; (iii) 10% of equity in Evri with “some of it already vested at signing”; (iv) if less equity, then a higher salary; (v) a seat on the Evri board; and (vi) “to be able to monetize some of my Radar equity now, at the time of sale, to cash.” When Evri closed the deal, it offered him a salary of approximately $250,000/year, Spivack served as a consultant for approximately six months, and he was given a substantial amount of equity in Evri. Spivack believed this was payment for “keeping my mouth shut about what they did to us.” Exhibit W. The deal also included a payment to Lucid Ventures, Inc., which is an investment vehicle owned and operated by Nova Spivack. Exhibit X (Pl. Appx. C60, Spivack Dep. at 73:25- 76:4.) Lucid received $40,000 cash and 132,051 shares of Evri stock.

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I declare under penalty of perjury that the foregoing is true and correct, and that this declaration was executed on June 1, 2012 at New York, New York.

_________________________________ Evan Mandel

Part of the brief filed in response to the defendants continued attempts to accomplish the fraud they perpetrated knowingly and purposively and continue to try to push through, despite the sky high evidence against them. It was necessary for them to try to stop the trial to prevent this overwhelming evidence against them from seeing the light of day, and being heard in a court of law. Nevertheless, there is no way to keep it under wraps indefinitely.

*

*

REPLY TO OPPOSITION TO MOTION TO DISMISS

Kate Paley (“Paley”), the largest creditor herein, hereby replies to the oppositions filed by Barry Milgrom, Chapter 7 Trustee (“Trustee”), Radar Networks, Inc., the debtor herein (“Debtor”), and two of the Debtor’s directors, Ross Levinsohn1 (“Levinsohn”) and Steve Hall (“Hall”), to Paley’s Motion to Dismiss.

SUMMARY STATEMENT

The Debtor is a failed Silicon Valley company which ran through millions of dollars of investors’ money. In 2007, Paley made a $2 million investment in the Debtor pursuant to a convertible note which was subsequently converted to equity. In 2008, when the Debtor needed more money, it reached out to Paley and persuaded her to lend an additional $3 million under a convertible

1 The Levinsohn Opposition is purportedly supported by the Declaration of Ross Levinsohn. However, no declaration of Ross Levinsohn has been filed or served.

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Date: Time: Place:

Judge:

June 8, 2012 9:30 a.m. Courtroom 23rd 235 Pine Street, 23Floor San Francisco, CA

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note which was convertible to stock under specified circumstances. The Debtor converted the $3 million loan to equity without basis to do so in order to avoid having to repay the loan and then sold all of its assets to Evri, an entity in which Hall had an interest, in a transaction which benefited Hall, Levinsohn and Nova Spivack, the Debtor’s third director (collectively, the “Insiders”). Paley sued the Debtor, the Insiders and the buyer in State Court (the “State Court Litigation”) for damages for the wrongful conversion of her $3 million Note and for fraudulent transfer of the Debtor’s assets, as well as other claims for damages regarding her company Word Diamonds. Legal fees in the millions of dollars have been expended to bring the case to trial. Following summary judgment rulings in the State Court which were adverse to the Defendants — namely, that the conversion of Paley’s $3 million Note was improper and denying Levinsohn’s and Hall’s motions for summary judgment that they did not benefit from the asset sale (no such motion was filed by Spivack), the Insiders invoked the automatic stay on the eve of trial, approximately two months after the Debtor had filed its petition.

It is undisputed that the only asset in this case is the fraudulent transfer claim, i.e., that the March 2010 sale of the Debtor’s assets to Evri, pursuant to which the Insiders benefited, was a fraudulent transfer. Thus, it is undisputed that the merits of the fraudulent transfer claim provide the only potential for creditor recovery in this case. Despite that fact, under the opponents’ view, the Insiders must share equally with Paley even though the Insiders orchestrated, implemented and benefited from the improper conversion of Paley’s $3 million Note and the fraudulent sale to Evri. It is axiomatic that wrongdoers should not be rewarded for their wrongdoing. The opponents’ position that the Insiders are on equal footing with Paley as creditors of the Debtor is untenable.

Moreover, in contravention of his role as a fiduciary for creditors, the Trustee now seeks to decimate Paley’s claims by agreeing to settle the fraudulent transfer claim for $300,000, far below settlement offers which the Defendants have previously made to Paley, even though Paley is the largest creditor in the case. It is undisputed that the only other creditors are (a) three small unsecured creditors who are owed less than $19,000 in the aggregate, which Paley will pay as a condition of dismissal, and (b) the Insiders who orchestrated and benefited from the actions which are the subject of Paley’s State Court action, who have filed indemnity claims for defense costs in the aggregate

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amount of $2.3 million. The Trustee is silent as to how the proposed settlement could be approved over Paley’s objection, based on the fact that the Court is required to consider “the paramount interest of creditors and a proper deference to their reasonable views” in determining whether to approve a compromise.

The opponents argue that dismissal would be to the detriment of “other creditors” and would result in a “windfall” to a single creditor “who won the race to the courthouse.” Levinsohn Opposition. To the contrary, dismissal of the case would ensure that the creditors holding the $19,000 in general unsecured debt would be paid in full and that the fraudulent transfer claim is determined on the merits. There are no creditors racing to the courthouse. The only creditors whose interests are truly at stake here are Paley and the Insiders. The opponents argue that the Insiders’ claims are pari passu with Paley’s claims because there has been no formal challenge to the Insiders’ claims and because insufficient analysis has been made as to why the Insiders’ claims should be equitably subordinated. There are substantial grounds for equitable subordination of the Insiders’ claims as set forth below.

Paley is the creditor who will be most affected and prejudiced if this case remains in bankruptcy and the Trustee’s proposed settlement with the Insiders is approved over her objection, calling into question for whose benefit the Trustee is acting? In contrast, if the case is dismissed under the conditions proposed by Paley, no one will be harmed – the fraudulent transfer claim will be determined on the merits by a jury in the State Court and the Insiders and Evri will have full opportunity to present their defenses. There can be no practical harm to the Debtor which is no longer operating, as the Debtor has no assets with which to pay claims or with which to indemnify the Insiders for their legal fees defending their conduct.

Although the Debtor and the Insiders assert that the petition was filed for a legitimate purpose, it is clear from the Trustee’s intent to settle the fraudulent transfer claim over Paley’s objection that this bankruptcy case serves no purpose other than to provide the Debtor’s Insiders a chance to settle the fraudulent transfer claim on the cheap, which the Trustee is willing to do to the extreme prejudice of Paley. Under the circumstances, cause exists for dismissing the case.

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The Insider Indemnity Claims are Not Pari Passu with Paley’s Claims At the heart of this dispute is whether the Insiders’ indemnity claims are on equal footing with

Paley’s claim. The opponents assert that the Insiders’ claims are pari passu with Paley’s Note claim for a variety reasons, including (a) that there has been no formal challenge to the Insider claims, (b) that corporate officer indemnity claims are “typically treated as general unsecured claims”, and (c) it is unclear whether the indemnity claims are subject to equitable subordination under Ninth Circuit law, the Trustee citing In re First Alliance Mortg. Co., 471 F.3d 977, 1006 (9th Cir. 2006), and In re Pacific Express, 69 BR 112 (9th Cir. BAP 1986).

It is clear from the Trustee’s Opposition that the Trustee has given scant attention to the merits of the indemnity claims, let alone the scrutiny which insider claims require. In re Hartford Sands Inc., 372 F.3d 637 (4th Cir. 2004) (When a creditor is deemed to be an insider as defined in Bankruptcy Code Section 101(31), the level of scrutiny on the creditor’s proof of claim is higher); see also In re Pacific Express, 69 BR at 117 (burden of proof for subordination of claim is higher when the participant is a nonsider).

Notably, the filed indemnity claims are contrary to the Debtor’s own schedules and Statement of Financial Affairs (SOFA). In its SOFA, the Debtor declared “Radar has no assets at this time and believes its debt is limited to general unsecured debt of approximately $19,000.” In its Schedules, the Debtor represented that Hall, Spivack and Levinsohn had contingent claims having zero value. In contrast, the Insiders have filed indemnity claims for defense costs totaling approximately $2.3 million in the aggregate. The Trustee states that corporate officer indemnity claims are “typically afforded general unsecured status in most bankruptcy cases,” but fails to cite a single case so holding. Moreover, unlike chapter 11 claims, in which there is an incentive for the operating company to retain executives by honoring their indemnity claims, there is no such incentive in a chapter 7 liquidation.

Further, the Trustee asserts that it is unclear whether the Insider indemnity claims would be subject to equitable subordination under the First Alliance Mortg. and Pacific Express cases. Both cases cite the standard for equitable subordination under Bankruptcy Code Section 510(c), which is (1) that the claimant must have engaged in some type of inequitable conduct, (2) that the misconduct

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must have resulted in injury to creditors or conferred an unfair advantage on the claimant, and (3) that equitable subordination of the claim must not be inconsistent with provisions of the Bankruptcy Code.

Both First Alliance Mortg. and Pacific Express involved the issue of whether a non-insider, non-fiduciary’s claim should be equitably subordinated under Bankruptcy Code Section 510(c). In First Alliance, Lehman Bros. provided a secured warehouse line of credit to the Chapter 11 debtor, who in turn provided subprime loans under questionable practices. The creditors’ committee sought to equitably subordinate Lehman Bros. secured claim because of its knowledge of the debtor’s lending practices. The district court declined to equitably subordinate the claim because Lehman Bros. activities were undertaken at arms-length, in the normal course of business, without any contemplation of the debtor’s bankruptcy, and because its conduct did not deplete or otherwise adversely impact the debtor’s assets, and was not a contributing factor to the debtor’s bankruptcy, and was not related to their secured claims against the estate. See, In re First Alliance Mortg, 298 B.R. 652 (C.D. Cal. 2003) (setting forth District Court’s findings). The Ninth Circuit affirmed, In re First Alliance Mortg., supra 471 F.3d at 1006. Here in contrast, the indemnity claims are by insiders, the Insiders were intimately involved with the both the decision to improperly convert Paley’s note to equity and to sell substantially all of the Debtor’s assets to Evri in a transaction which benefited the Insiders, to pay virtually all claims other than Paley’s, including an unsecured loan from an insider affiliate received long after Paley’s made her convertible loan. Moreover, the Insiders’ indemnity claims are for defending against those improper actions, unlike the lender claims in First Alliance.

Pacific Express, supra, also involved the issue of whether non-insider claims were subject to equitable subordination, not because of inequitable conduct but because of an equity participation in the debtor. In that case, the debtor needed funding and entered into a loan participation agreement with a lender, creditors, former employees and shareholders, resulting in a loan participation agreement with 66 participants, in which an “equity sweetener” was added. The creditors’ committee sought to classify the loan as a stock transfer or alternatively to equitably subordinate the loan participants’ claims to unsecured claim, which the bankruptcy court did. The Bankruptcy Appellate Panel reversed because the objectors did not meet their burden of proof showing that the claimants

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engaged in inequitable conduct, even though the loan participation agreement placed them in a better position than other creditors. The BAP noted that there was no evidence of the type of overreaching, fraud or other conduct which would justify subordination of a non-insider’s claim, and that the committee had conceded that they did not “know of any inequity or inequitable conduct.” Id., at 118. Here, in contrast, the indemnity claims are by insiders and there is ample evidence of inequitable conduct by the Insiders which harmed Paley as a creditor, as discussed below.

Facts Showing Grounds for Equitable Subordination

Each of the following facts is supported by the Declaration of Evan Mandel filed in support of

this Reply (“Mandel Decl.”). Except as otherwise noted, all the references to exhibits herein are

exhibits attached to the Mandel Decl.:

oPaley’s $3 million loan, plus interest, was payable on demand by Paley any time on or after September 30, 2009, unless new funding of $4 million was received by the Debtor, in which case the note would be automatically converted. See, Exhibit C to Declaration of Noah Spivack filed in support of the Debtor’s Opposition (“Spivack Decl.”). As of September 30, 2009, Radar had at least $1,002,557 cash on hand and an estimated value of $20,000,000. See Exhibit A (Financial Statement Compilation for the Nine Months Ended September 30, 2009).

oOn June 25, 2009, Spivack wrote to Levinsohn explaining that “we need a minimum of 4M of new money,” which would result in “$3M from Kate [and] $4M+ from others.” See Exhibit B (June 25, 2009 email). The next day, Spivack explained further: “One wrinkle is that Kate’s note is due on 9/30/09. On that date, if she has not converted yet, she can request repayment. That would of course be bad. So we actually should convert her.” See Exhibit C (June 26, 2009 email).

oFor several weeks, Hall tried to convince Paley to voluntarily relinquish her right to get repaid on September 30, however, she refused. Radar sent Paley a document purporting to be a release and an extension of the maturity date of her loan, however, Paley did not sign it.

oOn September 15, 2009, Levinsohn’s company, Fuse, and Hall’s company, Vulcan, invested $842,192.42 and the Directors purported to convert Paley’s $3 million loan to equity. The State Court found that the conversion was improper.

oOn September 15, 2009, before she knew about the conversion, Paley wrote to Hall, whom she thought she could trust. She implored him to help her work things out with her investment and Word Diamonds. Paley asked Hall to help her communicate with Radar because “I do need to see [Radar’s Financials] as an investor and also regarding the handling of my second 3m investment as regards the Twine [] agreement.” Insidiously, the next day, Hall replied, “I am sure it is an oversight and something the company can rectify immediately.” See Exhibit D (September 15, 2009 email). Hall did not tell Paley that he had just implemented the scheme to convert Paley’s $3 million loan to equity. See Exhibit E (September 17, 2009 response from Hall).

oIn March 2010, all of the Debtor’s assets were sold to Evri for approximately $1,125,000 in cash, plus shares in Evri representing a 3% – 5% stake in Evri. The sale to Evri was made

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despite a February 2010 offer by Intellectual Ventures to pay $2.75 million for Radar’s patents alone, plus a non-exclusive license to Radar to use the patents.

oOn July 26, 2009, Hall introduced Radar’s CEO Spivack to Evri CEO Hunsinger, and Spivack immediately recognized the introduction for what it was: “I bet Steve Hall is plotting to acquire our assets at firesale price into Evri.” See Exhibit F. And that is precisely what Hall was plotting, and it is exactly what he did. Hall used confidential information about Radar’s business that he acquired as director and fiduciary of Radar to assist Evri in acquiring Radar’s assets at a price that was far below their fair market value. Spivack valued Radar’s assets as being “worth more than $20 million” in November 2009. See Exhibit G.

oIn March 2010, Radar’s assets were sold to Evri for $1,125,000 in cash and 1,746,016 in Evri restricted shares. Depending on the valuation of Evri’s restricted shares, Evri was able to purchase substantially all of Radar’s assets for approximately $1,125,000.2

oIn seeking approval from the Evri Board of Directors to enter into negotiations to purchase Radar’s assets, Hunsinger explained that Hall had provided his insider’s perspective:

Working closely with Steve H to come to this conclusion, I strongly believe that Evri has an opportunity to acquire valuable assets and talent from Radar Networks on very attractive terms. . . . Given the target companies[‘] situation, Evri has significant leverage and we are uniquely positioned to execute a clean, pure equity deal obtaining significant option value on assets for a relatively low price.”

Exhibit H. Hall also provided Hunsinger with Radar’s confidential information as to whether Evri could poach Radar engineers. Exhibit I.

oObtaining Radar’s assets at a firesale price was not Hall’s only motive for wanting to drive Radar out of business. The Vulcan entity that had invested in Radar, Vulcan II, had realized a significant amount of taxable income, and Radar’s bankruptcy would permit Vulcan II to realize a total tax loss of its Radar investment. See Exhibit J (“[F]or months [Hall] has been saying Vulcan could use the write off, and now he’s happy to have the company shut down and take the write-off.”))

oIndeed, in numerous private communications, Spivack and his COO accused Hall of (1) “letting [Radar] fall apart” so that Vulcan (or Evri) could “tak[e] over the assets” (Exhibit K); (2) having a plan to facilitate Evri’s acquisition of Radar at a “firesale price” (Exhibit L); (3) wanting to “drive [Radar] into bankruptcy and take our assets” (Exhibit M); (4) intentionally “starv[ing] [Radar], forc[ing] layoffs, and then corner[ing] us and forc[ing] a sale to Evri” (Exhibit M); and (5) Hall “wants us to fails so that Evri can get us in a wind down” (Exhibit N).

oThe sale to Evri enabled Hall to increase his ownership interest in Radar’s assets, obtain a tax advantage and reputational benefits. In 2006, Vulcan made its first investment in Radar. Hall holds a carried interest in the Vulcan investment fund that owned an equity position in Radar and a contractual right to receive profits generated by the fund. At the time of the transfer of Radar’s assets to Evri, Evri was, and still is, in effect a subsidiary of Vulcan. Vulcan has invested at least $36 million in Evri. Vulcan owns more than 90% of the issued and outstanding capital stock of Evri and Paul Allen controls Vulcan. In deposition, Hall freely acknowledged that Vulcan controlled Evri. Hall has personally invested in the Vulcan entity that manages Evri. (Exhibit O) (Vulcan Capital Venture Capital II LLC (“Venture II”) owns

2 Defendant Levinsohn claims that his investment fund is “carrying [the Evri shares] at zero” but “to this day, it’s unclear what the total amount of consideration [Levinsohn’s investment fund] received as part of the purchase agreement for Radar’s assets is.” Exhibit Y (Levinsohn Deposition Transcript, 259:2-17.) .

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Evri; Venture II is managed by Vulcan Capital Venture Capital Management II LLC (“Management II”)). Hall has invested money in Management II.

oHall received substantial benefits from Radar’s sale of its assets to Evri. As a director and indirect owner of Evri, as a result of the asset sale, Hall obtained control of all of Radar’s assets and a greater ownership interest in such assets through his interest in Evri. Hall also received a major tax advantage from the asset sale: the Vulcan fund that owned Radar had realized approximately $85 million in taxable income as a result of at least one extremely successful investment; the dissolution of Radar that followed the asset sale allowed Vulcan to realize the tax loss that it suffered in its Radar investment; and that loss became a valuable deduction for the owners of the Vulcan fund that owned Radar. (Exhibit O) (Hall Dep. at 258:2-259:25.) In fact, Hall repeatedly told Spivack and other Radar personnel that he wanted Radar to go bankrupt so that he and Vulcan could obtain the associated tax benefits. (Exhibit J).

oRadar’s assets were worth significantly more than $1.125 million, based on the February 2010 offer from Intellectual Ventures to pay $2.75 million for Radar’s patents, Spivack’s valuation of Radar at approximately $45 million to $50 million as of the fall of 2009 (Exhibit P); and Exhibit Q (“45M+ is reasonable”), and Vulcan’s willingness to pay more for Radar’s assets (Exhibit R) (Hall email to Paul Allen, the head of Vulcan that, at the time of the Intellectual Ventures offer, Vulcan was willing to pay more: “So we are in the middle of playing some hardball maneuvering to get this over the goal line without having to pay any more money for it.”); and Radar’s potential claim against Evri for violating Radar’s patents (Exhibit S (“[T]here is a potential lawsuit here. A big one, I think.”), (“They are violating many of our patents.”).)

oLevinsohn’s sworn testimony in the State Court litigation is that anything that benefited Fuse’s ComVentures VI fund also benefited him personally. Also, Levinson’s “personal money” was at stake “in our fund,” i.e. ComVentures VI.

oComVentures loaned Radar $271,000 on November 30, 2009 and was one of Radar’s unsecured creditors. The Levinsohn Fund was also promised additional shares in Evri several months after the transaction for Radar’s assets closed. Indeed, The Levinsohn Fund received 381,595 “excess shares” of Evri’s common stock from the Asset Sale in June 2010, and 571,770 shares of Evri common stock in June 2011. Exhibit T (Corrected Levinsohn Decl. ¶31.) This additional payment to Levinsohn’s investment fund was not disclosed in the March 2010 Asset Purchase Agreement. Levinsohn also received a reputational benefit by orchestrating a pay-out to his investment fund and achieving a “soft landing” for his investment. Levinsohn was responsible for the loan being made and, as a result, was “out on a limb with [his] firm.” Exhibit U.

oAs for Spivack, he knew that unless Radar commanded a sale price in excess of $63 million, he and his management team would not be able to cash in their shares at all. See Exhibit V (“The preferred shareholders have up to $63 mm of liquidation preferences from the A and B rounds in place.”) In that same email, Spivack explains that even if the sale price to Microsoft (rather than Evri) is somewhere in the range of $40 million, unless the deal comes with a “management carve out” he and the other common stock holders will “get[] nothing.” Faced with the prospect of Radar’s investors making millions of dollars on their investments with Spivack “getting nothing” or Spivack making some money and the investors getting nothing, Spivack chose the latter option. In negotiations with Evri, Spivack’s primary concern was not maximizing shareholder value – it was fluffing his own golden parachute.In a November 4, 2009 email, Spivack told Hall that the main financial goal for “other investors” is to offer them just enough value to “get their votes and avoid liability issues.” But for himself, he was very specific: (i) a salary of $250,000; (ii) a six month severance package; (iii) 10% of equity in Evri with “some of it already vested at signing”; (iv) if less equity, then a higher salary; (v) a seat on the Evri board; and (vi) “to be able to monetize some of my Radar equity now, at the

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time of sale, to cash.” When Evri closed the deal, it offered him a salary of approximately $250,000/year, Spivack served as a consultant for approximately six months, and he was given a substantial amount of equity in Evri. Spivack believed this was payment for “keeping my mouth shut about what they did to us.” Exhibit W. The deal also included a payment to Lucid Ventures, Inc., which is an investment vehicle owned and operated by Nova Spivack. Exhibit X (Pl. Appx. C60, Spivack Dep. at 73:25-76:4.) Lucid received $40,000 cash and 132,051 shares of Evri stock.

Based on the foregoing facts, Paley believes there are ample grounds to equitably subordinate the Insiders’ indemnity claims. It makes no sense for this Court to adjudicate those issues when the matter is ready to be tried before a jury in the State Court, and in fact, would have gone to trial but for the nondebtor Insiders’ invocation of the stay after their post-petition summary judgment motions were not successful. More importantly, the fact that the Insiders’ claims would be subject to equitable subordination confirms that Paley is the real creditor here and that the pendency of this bankruptcy case is harming, not serving, any legitimate creditor interest.

B.The Trustee’s Proposed Settlement Cannot Be Approved in Any Event

By the Trustee’s Opposition, the Trustee reveals that at the conclusion of the May 2, 2012 global settlement conference, at which all of the State Court litigants attempted unsuccessfully to settle the matter, the Trustee instead reached a settlement with the State Court Defendants – with no input from Paley – by which the Trustee agreed to settle the fraudulent transfer claim for $300,000 and withdrawal of the Insiders claims. As set forth in the Motion and Paley’s written proposal to the Trustee made before the Motion was filed, the Court must consider “the paramount interest of the creditors and a proper deference to their reasonable views” in determining whether to approve a settlement. Martin v. Kane (In re A & C Properties), 784 F.2d 1377, 1381 (9th Cir. 1986).

If the Insider claims are subject to equitable subordination, there can be no dispute that Paley holds 99% of the general unsecured claims and that it is her interests which are most affected by a settlement. Consequently, the law requires that her views on the settlement be afforded considerable weight. Paley objects to the proposed settlement because it is not in her best interests. In fact, she received a higher settlement offer from the State Court Defendants outside of bankruptcy. Paley believes that she will fare better by a determination on the merits – by prosecuting the fraudulent transfer claim in the State Court where she was ready to go to trial but for the Insiders’ invocation of the automatic stay two months after the Petition Date, and literally on the eve of trial.

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Paley’s view of the fraudulent transfer and self-dealing allegations are reasonable and supported by ample evidence. If Paley is wrong and she loses at trial, she is willing to take that risk. If there is no recovery on the fraudulent conveyance claim, there would be nothing to pay the Insiders’ indemnity claims in any event. The Trustee should not be permitted to supplant Paley’s view of what is in her best interests when she is the creditor whose interests are really at stake here. Moreover, if the Insider claims are subject to equitable subordination, as Paley submits, there is a serious issue as to whose interests the Trustee is serving here.

C. Conditions of Dismissal

Lastly, as set forth in the Motion, Paley proposes to pay the approximately $19,000 in general unsecured claims as well as the reasonable fees of the Trustee and his professionals, as a condition to dismissal of the case. On March 30, 2012, prior to filing the Motion, Paley made the same proposal to the Trustee and requested an estimate of the fees and costs of the Trustee and his professionals, which was never provided. See Declaration of Katherine D. Ray filed herewith. Given the Trustee’s attempt settle the fraudulent transfer claim for $300,000, to the extreme detriment and prejudice of Paley, Paley believes that fees incurred after the May 2, 2012 global settlement meeting, at which the settlement was purportedly reached, are unreasonable and should not be paid as a condition of dismissal.

WHEREFORE, Paley respectfully requests that the Motion be granted.

DATED: June 1, 2012

Doc# 30

GOLDBERG, STINNETT, DAVIS & LINCHEY A Professional Corporation

By:

/s/ Katherine D. Ray Attorneys for Kate Paley, Creditor

The Debtor is a failed Silicon Valley company which ran through millions of dollars of investors’ money. In 2007, Paley made a $2 million investment in the Debtor pursuant to a convertible note which was subsequently converted to equity. In 2008, when the Debtor needed more money, it reached out to Paley and persuaded her to lend an additional $3 million under a convertible

1 The Levinsohn Opposition is purportedly supported by the Declaration of Ross Levinsohn. However, no declaration of Ross Levinsohn has been filed or served.

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note which was convertible to stock under specified circumstances. The Debtor converted the $3 million loan to equity without basis to do so in order to avoid having to repay the loan and then sold all of its assets to Evri, an entity in which Hall had an interest, in a transaction which benefited Hall, Levinsohn and Nova Spivack, the Debtor’s third director (collectively, the “Insiders”). Paley sued the Debtor, the Insiders and the buyer in State Court (the “State Court Litigation”) for damages for the wrongful conversion of her $3 million Note and for fraudulent transfer of the Debtor’s assets, as well as other claims for damages regarding her company Word Diamonds. Legal fees in the millions of dollars have been expended to bring the case to trial. Following summary judgment rulings in the State Court which were adverse to the Defendants — namely, that the conversion of Paley’s $3 million Note was improper and denying Levinsohn’s and Hall’s motions for summary judgment that they did not benefit from the asset sale (no such motion was filed by Spivack), the Insiders invoked the automatic stay on the eve of trial, approximately two months after the Debtor had filed its petition.

It is undisputed that the only asset in this case is the fraudulent transfer claim, i.e., that the March 2010 sale of the Debtor’s assets to Evri, pursuant to which the Insiders benefited, was a fraudulent transfer. Thus, it is undisputed that the merits of the fraudulent transfer claim provide the only potential for creditor recovery in this case. Despite that fact, under the opponents’ view, the Insiders must share equally with Paley even though the Insiders orchestrated, implemented and benefited from the improper conversion of Paley’s $3 million Note and the fraudulent sale to Evri. It is axiomatic that wrongdoers should not be rewarded for their wrongdoing. The opponents’ position that the Insiders are on equal footing with Paley as creditors of the Debtor is untenable.

Moreover, in contravention of his role as a fiduciary for creditors, the Trustee now seeks to decimate Paley’s claims by agreeing to settle the fraudulent transfer claim for $300,000, far below settlement offers which the Defendants have previously made to Paley, even though Paley is the largest creditor in the case. It is undisputed that the only other creditors are (a) three small unsecured creditors who are owed less than $19,000 in the aggregate, which Paley will pay as a condition of dismissal, and (b) the Insiders who orchestrated and benefited from the actions which are the subject of Paley’s State Court action, who have filed indemnity claims for defense costs in the aggregate

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amount of $2.3 million. The Trustee is silent as to how the proposed settlement could be approved over Paley’s objection, based on the fact that the Court is required to consider “the paramount interest of creditors and a proper deference to their reasonable views” in determining whether to approve a compromise.

B.The Trustee’s Proposed Settlement Cannot Be Approved in Any Event

By the Trustee’s Opposition, the Trustee reveals that at the conclusion of the May 2, 2012 global settlement conference, at which all of the State Court litigants attempted unsuccessfully to settle the matter, the Trustee instead reached a settlement with the State Court Defendants – with no input from Paley – by which the Trustee agreed to settle the fraudulent transfer claim for $300,000 and withdrawal of the Insiders claims. As set forth in the Motion and Paley’s written proposal to the Trustee made before the Motion was filed, the Court must consider “the paramount interest of the creditors and a proper deference to their reasonable views” in determining whether to approve a settlement. Martin v. Kane (In re A & C Properties), 784 F.2d 1377, 1381 (9th Cir. 1986).

If the Insider claims are subject to equitable subordination, there can be no dispute that Paley holds 99% of the general unsecured claims and that it is her interests which are most affected by a settlement. Consequently, the law requires that her views on the settlement be afforded considerable weight. Paley objects to the proposed settlement because it is not in her best interests. In fact, she received a higher settlement offer from the State Court Defendants outside of bankruptcy. Paley believes that she will fare better by a determination on the merits – by prosecuting the fraudulent transfer claim in the State Court where she was ready to go to trial but for the Insiders’ invocation of the automatic stay two months after the Petition Date, and literally on the eve of trial.

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Paley’s view of the fraudulent transfer and self-dealing allegations are reasonable and supported by ample evidence. If Paley is wrong and she loses at trial, she is willing to take that risk. If there is no recovery on the fraudulent conveyance claim, there would be nothing to pay the Insiders’ indemnity claims in any event. The Trustee should not be permitted to supplant Paley’s view of what is in her best interests when she is the creditor whose interests are really at stake here. Moreover, if the Insider claims are subject to equitable subordination, as Paley submits, there is a serious issue as to whose interests the Trustee is serving here.

C. Conditions of Dismissal

Lastly, as set forth in the Motion, Paley proposes to pay the approximately $19,000 in general unsecured claims as well as the reasonable fees of the Trustee and his professionals, as a condition to dismissal of the case. On March 30, 2012, prior to filing the Motion, Paley made the same proposal to the Trustee and requested an estimate of the fees and costs of the Trustee and his professionals, which was never provided. See Declaration of Katherine D. Ray filed herewith. Given the Trustee’s attempt settle the fraudulent transfer claim for $300,000, to the extreme detriment and prejudice of Paley, Paley believes that fees incurred after the May 2, 2012 global settlement meeting, at which the settlement was purportedly reached, are unreasonable and should not be paid as a condition of dismissal.

WHEREFORE, Paley respectfully requests that the Motion be granted.

DATED: June 1, 2012

Doc# 30

GOLDBERG, STINNETT, DAVIS & LINCHEY A Professional Corporation

By:

/s/ Katherine D. Ray Attorneys for Kate Paley, Creditor

Do you want someone to run your company that, although not the initiator of undeniably fraudulent activities, went along with activities he knew to be fraudulent?

.

.