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Shofar FTP Archive File: orgs/canadian/resistance.records/legal/Liberty_Lobby.990701


UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF COLUMBIA

IN RE:

LIBERTY LOBBY, INC.    ) Case No. 98-01046
               Debtor. )
                       ) Chapter 11
                       )

U.S. Bankruptcy Court
Washington, D.C.
July 1, 1999

H E A R I N G

Motion to Appoint Trustee
Motion for Survival of Freedom, Inc.
Motion to Appoint Chapter 11 Trustee

BEFORE: THE HONORABLE S. MARTIN TEEL, Judge

APPEARANCES:

PAUL PEARLSTEIN, ESQ.
On behalf of the Debtor

THOMAS STANTON, ESQ.
JOSEPH SCHULER, ESQ.

DARRELL CLARK, ESQ.
On behalf of the Legion for the Survival of Freedom, Inc.

SCOTT OSWALD, ESQ.
On behalf of Foundation for Economic Liberty

Proceedings Recorded by Electronic Sound Recording

Transcriber: JOHNSON TRANSCRIPTION SERVICE
7040 31st Street, N.W.
Washington, D.C. 20015-1402
(202) 362-6622

Recording Operator: Wayne Burwell

P R O C E E D I N G S

THE CLERK: The next matter is the matter of Liberty Lobby, Inc.,
Bankruptcy Case 98-1046. The matter before the Court is a motion to
appoint a trustee by Creditor Legion for Survival of Freedom, Inc.

[... transcript unrelated to Resistance Records]

A. There was a check that I wrote out shortly before our falling out,
probably around the first part of September, to Resistance Records.

Q. What's Resistance Records?

A. It's what you might call a white power music company that was then
based in Detroit and -- well, I take that back, based in California,
prior to that Detroit, and the FEL had a 60 percent share interest in
that.

Q. This is a corporation?

A. Yes.

Q. FEL held some shares in it?

A. Yes.

Q. Who else held shares in Resistance Records?

MR. PEARLSTEIN: I'd ask again for a foundation.

THE COURT: Sustained.

THE WITNESS: What does that mean?

THE COURT: If I sustain an objection, it means you don't answer the
question, you wait until another question is asked to you.

THE WITNESS: Okay.

BY MR. CLARK:

Q. Do you know who owned Resistance Records?

A. Yes.

Q. Who?

A. Do you mean at the check was written?

Q. Yes.

A. The FEL owned 60 shares out of 100 shares. Jason Snow, who is a
Canadian, owed 15 of the shares and I had purchased 25 of the shares.

Q. How much was the check that you wrote?

A. $26,000.

Q. Did Mr. Carto also own shares in Resistance Records?

A. No.

Q. I'll hand you what I've marked as Exhibit 9. It's labeled "Stock
Conveyance Guaranty." Have you seen this document before?

A. (Reviewing document.) This says No. 7 to me.

Q. No. 7. Have you seen this document before, Mr. Blodgett?

A. I've seen a copy of it, yes.

Q. Whose signature is that at the bottom?

A. Willis Carto's.

Q. Did Mr. Carto own any shares of Resistance Records?

A. Well -- no.

Q. Why did he write this -- do you know why he wrote this agreement?

A. Yes.

Q. Why is that?

A. Because this guy named Eric Fairburn (phonetic) was hired at
Liberty Lobby and was there for a couple months and he was fired and
as part of his severance, he -- I would say, you know, demanded some
shares. In any event, he got nine shares of resistance, which he later
sold to me, and in order to get the shares, he had to get this
conveyance certificate or whatever you want to call it.

Q. How did Mr. Carto get the shares represented in this guaranty?

A. I didn't say he -- well, okay. When he says "I own," I know what he
means is he's referring to FEL.

THE COURT: At the request of someone who counts, we're going to take a
recess.

(A brief recess was taken.)

THE CLERK: Mr. Blodgett, the Court wants to remind you, you have been
sworn and remain under oath.

THE WITNESS: Yes, sir.

THE CLERK: Does counsel want to address the Court on that matter?

MR. OSWALD: I would. Your Honor, my name is Scott Oswald and I
represent Blaine Hutzel, who is a witness in this case. The Court
Clerk has indicated that you have set this hearing for a continuance
for the 12th. I have a three-day jury trial starting in Rockville at
this point before Judge Rupp on that morning, beginning at 9:00 a.m.

Your Honor, in his personal capacity, Mr. Hutzel needs counsel. There
are some issues that have arisen, both indirectly and through hearsay,
which leads me to believe and I'll represent to the Court that he
needs counsel and Your Honor, I have spent a tremendous amount of time
with my client over the last two days to debrief him and to understand
where there may be potential and indeed privileged areas that clearly
need to be asserted on his behalf personally.

Therefore, Your Honor, I must object to the hearing scheduled on the
12th. I would ask the Court to either schedule a second hearing, if
Mr. Clark wants to call my client for another day, I think that would
be a possible solution, or moving it over.

At this point, Your Honor, given the amount of time that I have spent,
I think it's clear to the Court the amount of time I spent on this
case on behalf of my client, it would be grossly unfair and unjust to
him to require him to retain new counsel at this point in the process
at tremendous expense to him personally already. So again, I must
object and I ask the Court, in its discretion, to either allow the
hearing to go forward not on the 12th or to provide that Mr. Hutzel
will not be called on that morning when I cannot appear.

THE COURT: We'll go ahead and take further testimony and before we
adjourn, we'll address how we schedule this in light of those
comments.

BY MR. CLARK:

Q. When we adjourned, Mr. Blodgett, you were talking about Resistance
Records and the shareholders of Resistance Records. Let me hand you
what's been marked as Exhibit 8.

MR. CLARK: In the pile of papers, Your Honor, it's the eighth one
down, it's titled "Agreement" at the top.

BY MR. CLARK:

Q. Can you identify this for me, please?

A. That was an agreement between the Foundation for Economic Liberty
and Jason Snow, to purchase Jason Snow's -- of his 100 shares he held
at the time of the agreement, he sold 60 of them to the FEL.

MR. OSWALD: Your Honor, if I may, on behalf of FEL, who I am also
represent, I'm just wondering if there's a foundation for this at all,
whether he's ever seen this document, whether he's competent to
testify about its contents. I'd like to bring that to the Court's
attention and object on that basis.

BY MR. CLARK:

Q. Have you seen this document before?

A. Yes.

Q. Is this document in your possession?

A. I copy is. I negotiated the deal.

THE COURT: The objection is overruled.

MR. CLARK: I'd ask that Exhibit 8 be admitted into evidence.

MR. OSWALD: I think it's necessary to discuss what it is first, before
admitting it.

MR. CLARK: I believe he said it was an agreement to purchase shares.

THE COURT: The objection is overruled. Exhibit 8 is received into
evidence.

(Creditor's Exhibit No. 8, previously marked for identification, was
received in evidence.)

BY MR. CLARK:

Q. Whose signature appears at the bottom?

A. Blaine Hutzel.

Q. Who is Mr. Hutzel?

A. He's the bookkeeper for Liberty Lobby.

Q. What's the address on the bottom?

A. 130 3rd Street, S.E.

Q. Is that the Liberty Lobby Building's address?

A. Yes, sir.

Q. Are these the shares -- do you have any knowledge if these shares
that Mr. Carto was discussing in the stock conveyance guaranty are the
shares that are discussed in this agreement?

A. You're talking about this?

Q. Exhibit 7. The shares referenced in Exhibit 7.

A. Yes.

[... transcript unrelated to Resistance Records]

A. There was a check that I wrote out shortly before our falling out,
probably around the first part of September, to Resistance Records.

Q. What's Resistance Records?

A. It's what you might call a white power music company that was then
based in Detroit and -- well, I take that back, based in California,
prior to that Detroit, and the FEL had a 60 percent share interest in
that.

Q. This is a corporation?

A. Yes.

Q. FEL held some shares in it?

A. Yes.

Q. Who else held shares in Resistance Records?

MR. PEARLSTEIN: I'd ask again for a foundation.

THE COURT: Sustained.

THE WITNESS: What does that mean?

THE COURT: If I sustain an objection, it means you don't answer the
question, you wait until another question is asked to you.

THE WITNESS: Okay.

BY MR. CLARK:

Q. Do you know who owned Resistance Records?

A. Yes.

Q. Who?

A. Do you mean at the check was written?

Q. Yes.

A. The FEL owned 60 shares out of 100 shares. Jason Snow, who is a
Canadian, owed 15 of the shares and I had purchased 25 of the shares.

Q. How much was the check that you wrote?

A. $26,000.

Q. Did Mr. Carto also own shares in Resistance Records?

A. No.

Q. I'll hand you what I've marked as Exhibit 9. It's labeled "Stock
Conveyance Guaranty." Have you seen this document before?

A. (Reviewing document.) This says No. 7 to me.

Q. No. 7. Have you seen this document before, Mr. Blodgett?

A. I've seen a copy of it, yes.

Q. Whose signature is that at the bottom?

A. Willis Carto's.

Q. Did Mr. Carto own any shares of Resistance Records?

A. Well -- no.

Q. Why did he write this -- do you know why he wrote this agreement?

A. Yes.

Q. Why is that?

A. Because this guy named Eric Fairburn (phonetic) was hired at
Liberty Lobby and was there for a couple months and he was fired and
as part of his severance, he -- I would say, you know, demanded some
shares. In any event, he got nine shares of resistance, which he later
sold to me, and in order to get the shares, he had to get this
conveyance certificate or whatever you want to call it.

Q. How did Mr. Carto get the shares represented in this guaranty?

A. I didn't say he -- well, okay. When he says "I own," I know what he
means is he's referring to FEL.

THE COURT: At the request of someone who counts, we're going to take a
recess.

(A brief recess was taken.)

THE CLERK: Mr. Blodgett, the Court wants to remind you, you have been
sworn and remain under oath.

THE WITNESS: Yes, sir.

THE CLERK: Does counsel want to address the Court on that matter?

MR. OSWALD: I would. Your Honor, my name is Scott Oswald and I
represent Blaine Hutzel, who is a witness in this case. The Court
Clerk has indicated that you have set this hearing for a continuance
for the 12th. I have a three-day jury trial starting in Rockville at
this point before Judge Rupp on that morning, beginning at 9:00 a.m.

Your Honor, in his personal capacity, Mr. Hutzel needs counsel. There
are some issues that have arisen, both indirectly and through hearsay,
which leads me to believe and I'll represent to the Court that he
needs counsel and Your Honor, I have spent a tremendous amount of time
with my client over the last two days to debrief him and to understand
where there may be potential and indeed privileged areas that clearly
need to be asserted on his behalf personally.

Therefore, Your Honor, I must object to the hearing scheduled on the
12th. I would ask the Court to either schedule a second hearing, if
Mr. Clark wants to call my client for another day, I think that would
be a possible solution, or moving it over.

At this point, Your Honor, given the amount of time that I have spent,
I think it's clear to the Court the amount of time I spent on this
case on behalf of my client, it would be grossly unfair and unjust to
him to require him to retain new counsel at this point in the process
at tremendous expense to him personally already. So again, I must
object and I ask the Court, in its discretion, to either allow the
hearing to go forward not on the 12th or to provide that Mr. Hutzel
will not be called on that morning when I cannot appear.

THE COURT: We'll go ahead and take further testimony and before we
adjourn, we'll address how we schedule this in light of those
comments.

BY MR. CLARK:

Q. When we adjourned, Mr. Blodgett, you were talking about Resistance
Records and the shareholders of Resistance Records. Let me hand you
what's been marked as Exhibit 8.

MR. CLARK: In the pile of papers, Your Honor, it's the eighth one
down, it's titled "Agreement" at the top.

BY MR. CLARK:

Q. Can you identify this for me, please?

A. That was an agreement between the Foundation for Economic Liberty
and Jason Snow, to purchase Jason Snow's -- of his 100 shares he held
at the time of the agreement, he sold 60 of them to the FEL.

MR. OSWALD: Your Honor, if I may, on behalf of FEL, who I am also
represent, I'm just wondering if there's a foundation for this at all,
whether he's ever seen this document, whether he's competent to
testify about its contents. I'd like to bring that to the Court's
attention and object on that basis.

BY MR. CLARK:

Q. Have you seen this document before?

A. Yes.

Q. Is this document in your possession?

A. I copy is. I negotiated the deal.

THE COURT: The objection is overruled.

MR. CLARK: I'd ask that Exhibit 8 be admitted into evidence.

MR. OSWALD: I think it's necessary to discuss what it is first, before
admitting it.

MR. CLARK: I believe he said it was an agreement to purchase shares.

THE COURT: The objection is overruled. Exhibit 8 is received into
evidence.

(Creditor's Exhibit No. 8, previously marked for identification, was
received in evidence.)

BY MR. CLARK:

Q. Whose signature appears at the bottom?

A. Blaine Hutzel.

Q. Who is Mr. Hutzel?

A. He's the bookkeeper for Liberty Lobby.

Q. What's the address on the bottom?

A. 130 3rd Street, S.E.

Q. Is that the Liberty Lobby Building's address?

A. Yes, sir.

Q. Are these the shares -- do you have any knowledge if these shares
that Mr. Carto was discussing in the stock conveyance guaranty are the
shares that are discussed in this agreement?

A. You're talking about this?

Q. Exhibit 7. The shares referenced in Exhibit 7.

A. Yes.

[...]


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