01 Unraveling the Tangled Web of Realauction Ownership

REALAUCTION BANKRUPTCY AND OWNERSHIP SERIES A collection of public documents from a recent patent infringement action and related bankruptcy proceedings that show who really owns Realauction.com.

Unraveling the Tangled Web of Realauction's Ownership and Finances Selected Portions of Trial Transcripts Grant Street Group v. Realauction

Description: This document contains a formal offer of proof, selected trial testimony, and other evidence that was presented to the Court in a recent patent trial to show that Realauction.com, LLC is controlled by Jonathan Politano of Gulf Group. Historically, Mr. Politano was one of the most active purchasers of tax certificates in Florida. Mr. Politano exercises control through two British Virgin Islands entities, Adila Enterprises, Inc. and Hatchett Development, Ltd., one of which is purportedly an equity investor in Realauction and the other a purported lender (See Tab 6 - Realauction's customers, Tab 7 - Funding from Gulf Group, Tab 8 Realauctions 2013 year-end financial statements). Note: These documents were obtained from Grant Street Group, Inc. v. Realauction.com, LLC, Case No. 2:09-cv-01407-MRH, a patent infringement action in the United States District Court for the Western District of Pennsylvania and from In re Realauction.com, LLC, Case No. 13-28260-RBR, a bankruptcy proceeding in the United States Bankruptcy Court for the Southern District of Florida.

Document 1 of 5

1

UNRAVELING THE TANGLED WEB OF REALAUCTIONS OWNERSHIP

The relationship between Realauction.com, LLC (Realauction), one of the largest online auctioneers of Florida tax certificates, and Gulf Group, Inc. or Gulf Group1 was the subject of repeated wrangling between the attorneys in a recent patent trial in Pittsburgh, Pennsylvania. Attached are copies of portions of the trial transcripts and certain exhibits that were submitted in the trial that relate to this issue. (Tabs 1-8).

Tab 1 is a proffer (i.e., offer of proof) that was presented to the Court by attorney Thomas Birsic of K&L Gates, one of the lead attorneys for the plaintiff. The proffer cites a document produced by Realauction that shows several millions of dollars of transactions involving investments and loans and payments by and to Mr. [Jonathan] Politano [of Gulf Group] going back as early as October 18, 2004. Tab 1 at Page 206, Lines 21-25 to Page 207, line 1.

More specifically, the document shows that Gulf Group provided the initial $100,000 capital contribution that was used to start Realauction in 2004. Tab 1 at Page 207, Lines 1-3. These cash infusions were initially characterized as investments on Realauctions books, but were later reclassified as loans. Tab 1 at Page 207, Lines 10-12. However, Realauction did not make any interest payments on the loans from 2004-2011. Tab 1 at Page 207, Lines 18-19.

In 2011, the investments were rolled into a loan on the books of Realauction from a British Virgin Islands entity called Adila Enterprises, S.A. Tab 1 at Page 207, Lines 20-23. An operating agreement, that was purportedly executed on January 1, 2011, indicates that the owners of Realauction are Lloyd McClendon, Marc Thomashaw, and another British Virgin Islands Company called Hatchett Developments, Ltd. Tab 1 at Page 208, Lines 1-3. Conversely, the financial statements of Realauction indicate that Adila -- not Hatchett -- is the controlling shareholder. (Tab 8). There appears to be little, if any, publicly available information about Adila and Hatchett, other than the fact that they both share the same British Virgin Islands mailing address.2

As noted in Tab 1, Marc Thomashaw, Realauctions CFO, testified during discovery that he has no information allegedly about Hatchett except that it is represented by a lawyer from Ecuador named Enrique Torbay, who he has not met and never spoken to. Tab 1 at Page 208, Lines 4-7. Mr. Torbay is listed as a managing member of Realauction. Tab 1 at Page 208, Lines 8-11.

Tab 1 also cites testimony of Mr. Thomashaw that he received the documentation for the multi-million dollar Adila loan shortly before his deposition in October of 2011 and he had never seen the document before it was sent to him by some mysterious person named Jos from 1 Collectively, the terms Gulf Group, Inc. or Gulf Group refer to a group of companies that are controlled by one of the largest investors in tax certificates in Florida. 2As will be shown in Who are Hatchett and Adila? (Document No. 3 of this Series), Adila, Hatchett, and Gulf Group are all represented by the same attorney, Ozzie Schindler of Greenberg Traurig, LLC.

2

Ecuador. Tab 1 at Page 208, Lines 12-17. Mr. Thomashaw purports to have no knowledge of Adila except that Torbay is somehow connected to Adila. Tab 1 at Page 208, Lines 18-19.

Astonishingly, in subsequent communications to the plaintiffs attorneys and to the Court, Realauctions attorneys have represented that no one from Realauction or its attorneys have communicated with principals from Adila or Hatchett (i.e., entities that purportedly have a majority interest in Realauction) except through their attorneys!3

The proffer also notes that Realauction and Gulf Group used the same accountant. Tab 1 at Page 209, Lines 7-17. Realauctions accountant testified that he had never met, spoken to, or communicated with Mr. McClendon, except in connection with a subpoena that was served in the patent infringement lawsuit. Tab 1 at Page 209, Lines 9-14.

Tabs 2-3 include portions of Mr. McClendons trial testimony. During the trial, Mr. McClendon confirmed that he has only a 15% interest in Realauction. Tab 2 at Page 209, Lines 16-18.

Later, Mr. McClendon was questioned about receiving over $2.6 million in funds from Gulf Group, including the initial $100,000 that was used to start Realauction in 2004. Tab 3 at Page 41, line 25 to Page 46, line 25. Even after Mr. McClendon was presented with Realauctions own financial records documenting large fund transfers between Realauction and Gulf Group (Tab 7), he continued to deny under oath that the Company had ever received any funding from Gulf Group or its principal, Jonathan Politano.

Mr. McClendons testimony was contradicted by deposition testimony from Realauctions CFO, Marc Thomashaw. Presented with the same document, Mr. Thomashaw described it as a loan that was made by an investor from Gulf Group. Tab 4 at Segment #13 (Page 38:10 to 39:10).

The 2004 Tax Certificate Sale Guidelines and Procedures, which were published by The Florida Tax Collectors Association in cooperation with the Florida Department of Revenue, states: Tax collectors shall not allow bidders to control or attempt to conduct the sale or interfere with its conduct. Tab 5 at Paragraph No. 13.

Tab 6 includes a list of Realauctions tax certificate, foreclosure, and tax deed clients.

Tab 8 includes Realauctions Balance Sheet as of December 31, 2012, which shows the current balance of loans from Adila to Realauction exceeds $2.8 million and Realauctions Profit & Loss Statement for December 31, 2012, which shows current interest payable from Realauction to Adila of $500,000. Tab 8 (Trial Exhibit P-194).

3These representations will be substantiated in Who Owns Realauction? (Document No. 2 of this Series).

1IN THE UNITED STATES DISTRICT COURT

OF WESTERN PENNSYLVANIA

GRANT STREET GROUP, INC.,a Pennsylvania corporation,

Plaintiff,

vs.

REALAUCTION.COM, LLC.,a Florida limited liabilitycompany,

Defendant.

CIVIL DIVISION

No. 09-1407

_____________________________

Transcript of JURY TRIAL held JUNE 7, 2013United States District Court, Pittsburgh, Pennsylvania

BEFORE: HONORABLE MARK R. HORNAK, DISTRICT JUDGE

APPEARANCES:

For the Plaintiff:

For the Defendant:

Court Reporters:

Patrick J. McElhinny, Esq.Christopher M. Verdini, Esq.Thomas E. Birsic, Esq.K&L Gates, LLP.210 Sixth AvenuePittsburgh, PA 15222

David S. Brafman, Esq.Jacqueline M. Arango, Esq.Akerman Senterfitt222 Lakeview AvenueSuite 400West Palm Beach, FL 33401

Karen M. Earley, RDR-CRRJulie Kienzle, RMR-CRR6260 U.S. Courthouse700 Grant StreetPittsburgh, PA 15219412-201-2660

Proceedings reported by mechanical stenography.Transcript produced by computer-aided transcription.

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

205

THE COURT: Okay.

Mr. McElhinny, who is going to make the offers of

proof?

Do you want to do Gulf Group first and prosecution

history?

MR. McELHINNY: Mr. Birsic.

THE COURT: Mr. Birsic.

MR. BIRSIC: Your Honor, as Your Honor knows, the

Court and the parties have been dealing with a variety of

evidentiary issues during the trial, which I will refer to as,

for lack of a better shorthand term, the Gulf Group evidence

issues, and those would be matters that have been precluded as

a result of Judge Ambrose's order dated September 25, 2012 --

THE COURT: 484 order.

MR. BIRSIC: -- related to Gulf Group and Jonathan

Politano.

I just want, for purposes of the record, because as

Your Honor knows, as the case is preceded, we tried to toe the

line there and not have to stop at every occasion when this

subject came up.

I thought for purposes of the record, this might be

an opportunity to briefly summarize some of the testimony and

the documents that we would have sought to admit had that

order not been in place.

I think the best way to organize that is for us to

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

206

start and try to proceed by witness.

We would have called and elicited testimony and

documents from Mr. Thomashaw, who was the CFO of RealAuction

and a 30(b)(6) deponent.

We would have entered evidence and testimony from

Mr. Thomashaw's depositions in this case under oath on June

28th, 2011 and October 18, 2011.

We would have sought to admit Trial Exhibits P-51,

P-387, P-116, P-86, P-359, P-56, P-87, P-88, P-90, P-427,

P-89, P-153, P-429, and P-424.

For purposes of brevity, I won't go into what each

of those exhibits are because they are a lot of financial

statements that were discussed during that deposition.

I would say as a purpose of just brief summary of

what we believe the facts that would be established through

that testimony and the documents are as follows:

That P-154, which is a document that would reflect

QuickBooks printed out by Mr. Thomashaw from the books and

records of RealAuction dated October 17, 2011, based on his

testimony would show that under the designation of the heading

in the QuickBooks, RA Partners, that those entries for loans

and financial transactions really related to Gulf Group, Inc.

and Mr. Jonathan Politano, and that they would show several

millions of dollars of transactions involving investments and

loans and payments by and to Mr. Politano going back as early

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

207

as October 18, 2004, including on October 18, 2004, the

initial $100,000 capital contribution that was shown on the

books and records of RealAuction.

That ledger will show that from October 18, 2004,

through and including the time period of September 2011,

millions of dollars of transactions, including a deposit on

July 19, 2007 of $925,000 alone and many, many deposits

throughout that entire time period.

The facts and testimony from Mr. Thomashaw will

also show that although these were described initially on the

books, these cash infusions by Gulf Group as investments,

later Mr. Thomashaw attempted to characterize them as loans.

We went through each of the P&L statements that the

company RealAuction produced from 2004 until 2011 with

Mr. Thomashaw, and we showed there was not one indication on

any P&L of any interest payment being made on any alleged loan

by Gulf Group or Mr. Politano.

The implication in our proffer on that would be

that those were investments and not loans.

The evidence would also show, specifically Trial

Exhibit 50, they will reflect that the Gulf Group investments

were re-characterized and rolled into a loan on the books of

RealAuction called Adila.

We will show through Trial Exhibit 96, an operating

agreement that was dated as of January 1, 2011, which showed

mmulhollSticky NoteMarked set by mmulholl

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

208

that the owners of RealAuction are Lloyd McClendon, Thomashaw

and some entity called Hatchet Development, LTD, which is a

British virgin Island company.

We would show through Mr. Thomashaw's testimony,

that Mr. Thomashaw has no information allegedly about Hatchet

except that it is represented by a lawyer from Ecuador named

Enrique Torbay, who he has not met and never spoken to.

We would show through Trial Exhibit 86 that

Mr. Torbay is listed as a managing member of RealAuction on

the -- as of the 2010 limited liability filing with the State

of Florida as of January 5, 2010.

We would then show the loan from Adila for several

million dollars also has been documented and the documentation

showed up and Mr. Thomashaw identified it, although he said he

received it shortly before his deposition in October of 2011

and he had never seen the document before it was sent to him

by some mysterious person named Jos from Ecuador.

Mr. Thomashaw has no knowledge of Adila except that

Torbay is somehow connected to Adila.

We would also show through Mr. Thomashaw that cash

outflows from RealAuction to Gulf Group of large sums starting

in or about the time periods after our lawsuit was filed in

this case.

With respect to additional evidence, we would have

called Mr. Ronald Rubin through his deposition testimony as

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

209

taken in this case. Mr. Rubin is a partner in the accounting

firm of Binstock.

We would have sought to admit through his testimony

Trial Exhibits P-146, P-446, P-65, P-55, P-456, P-67, P-147,

P-69, P-148, P-50, P-371, P-81, P-79, P-80, P-378, P-372,

P-394, P-448, P-150, P-396, P-393, P-417, P-56, P-116, P-66.

The testimony -- our summary of the testimony that

we believe we would have entered through Mr. Rubin's

deposition was that since the inception of RealAuction, he has

served as the outside accounting firm for RealAuction,

although he has never met, spoken, or communicated with Lloyd

McClendon except in connection with a subpoena that our law

firm served on him in this litigation for documents and

records related to RealAuction.

We would show that Mr. Rubin has served as the

outside accountant to Joseph Politano and Gulf Group companies

for more than 15 years.

We will show through Mr. Rubin's testimony and

documentary evidence that he took direction and instructions

from Joseph Politano regarding the characterization and

treatment of entries on the balance sheets, profit and loss

statements, and other books and records of RealAuction over

the years, including specifically moving amounts from accounts

of capital accounts under the names of Polo Holding and Gulf

Group on the books and records for RealAuction into a loan

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

210

under the name of Adila.

Mr. Politano also personally directed Mr. Rubin as

to how to account for amounts of accrued interest on the Adila

loan.

We would then have also elicited the following

additional testimony from Mr. Harrington during the course of

the proceeding:

That prior to the first online tax certificate

auctions in Florida conducted by Grant Street in 2004,

Mr. Harrington met with Gulf Group and Jonathan Politano to

demonstrate the proposed software at the request of Florida

tax collector to preview and explain the new upcoming auction

format for the tax certificate sales.

During that meeting, Gulf Group asked

Mr. Harrington to modify the software system in several

respects, including a modification that would have allowed

multiple bidders when there were multiple bidders all

represented by the same entity, in this case, Gulf Group, when

the only bids submitted on a particular tax certificate, no

matter what the bid level, were all based coming from an

affiliated entity that by default, that certificate would be

sold at the highest interest rate, 18 percent, rather than the

actual interest rate's bid.

Mr. Harrington refused to allow that modification

in the system.

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

211

We would also show Gulf Group sued Grant Street and

the tax collectors for two of the four counties in attempting

to stop the automatic tax computer-mediated tax auctions from

going forward in 2004.

We would show after the 2004 auction, Gulf Group

endorsed RealAuction and RealAuction issued a no lawsuit

guarantee from institutional investor bidders such as Gulf

Group as part of its marketing and sales efforts.

We will also have entered into evidence that during

the conversation between Lloyd McClendon and Myles Harrington

on March 15, 2004, that Mr. McClendon specifically told him he

had worked extensively with Gulf Group.

We would have also introduced through

Mr. Harrington P-146, which was the document -- that didn't

have anything to do with Gulf Group. That has already been

discussed. We won't make that part of this proffer.

We would also offer testimony on this subject from

Mr. Yorty, the following additional testimony would have been

elicited from Mr. Yorty:

That in 2002, in the County of Miami-Dade where

Mr. Yorty was eventually the tax collector, there was a

scandal involving bribery and bid rigging in connection with

tax certificate sales and there were approximately 20 members

of the tax collector staff, who were indicted and implicated

in accepting gifts and other inappropriate amounts and

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

212

accommodations from certain institutional bidders and that

Mr. Politano was implicated in that.

THE COURT: Was he indicted?

MR. BIRSIC: We would have shown Mr. Politano -- a

Civil Action was brought by the State of Florida against

Mr. Politano and Gulf Group alleging violations of the Unfair

Trade Practices Act in connection with the improper gifts to

tax collectors associated with that.

THE COURT: What would have been the outcome of the

suit?

MR. BIRSIC: That was settled.

THE COURT: I take it he was not indicted for

criminal charges?

MR. BIRSIC: He was not indicted, no.

We would have brought out from Mr. Yorty that Lloyd

McClendon did extensive work with Gulf Group.

THE COURT: Whoa. Whoa. Did extensive work with

them in that he worked for them, interacted with them?

MR. BIRSIC: He worked for them extensively in

connection with providing real estate and other information on

the delinquent tax properties so that the bidders such as Gulf

Group would have that information in a form of their business

in terms of bidding on the various properties.

We would have called Eric Benson through deposition

testimony. Mr. Benson is the member and a founder of the Tek

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

213

Group, which is the group that Mr. McClendon went to develop

the auction platform used to compete with Grant Street, and we

would have brought out through that testimony that before

Mr. Benson set up the Tek Group, Mr. Benson worked for many

years with one of Mr. Politano's companies.

That's a fair summary of the evidence that we would

have adduced under this issue.

We would have offered relevance on three broad

areas. First, willfulness. We believe that this is -- these

facts are important to establish what RealAuction's frame of

mind was at the time that they learned of our patent and their

behavior in terms of entering this business, copying our

auction site without concern of our patent or intellectual

property rights.

This ground for relevance has been briefed heavily,

Your Honor, so I am not sure I'm going to say much more on

this, and it also goes to motive to harm Grant Street Group,

particularly because our theory would be that Mr. Politano

sponsored Mr. McClendon in this business as a way of

maintaining control.

One other point through Mr. Harrington's testimony.

We would have brought out that RealAuction's platform allows

the modification, that Mr. Politano requested of

Mr. Harrington and Grant Street refused to accommodate.

We also believe it was relevant to damages

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

214

concerning the explanation for the pricing strategies or lack

of strategies that RealAuction has had.

Finally, we think, as we previously noted, that

counsel for RealAuction and in this proceeding particularly

through opening statements has used Judge Ambrose's order not

only as a shield but as a sword to wrongfully mischaracterize

Mr. McClendon, Mr. McClendon's motivations for getting into

the business, so we think that was an additional ground for us

to be able to enter this evidence.

THE COURT: A couple questions.

I understand substantively, putting aside relevancy

or the application of the rules of evidence, I understand

substantively how willfulness is a substantive issue in the

case and, therefore, is a matter of consequence as to which

relevant evidence should be admitted.

Tell me under the infringement theory or the damage

theory the Court has allowed in the case how the motive of

either RealAuction or Gulf Group or Mr. Politano or anybody

else, how motive is -- is substantively a matter of

consequence in the action?

MR. BIRSIC: Well, I'm not exactly sure what the

Court is asking. Let me take a crack at it.

I think you saw through cross-examination of our

damages expert Mr. Hofmann, there was much discussion about

the fact that the tax collectors would have wanted the lower

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

215

pricing and that RealAuction has been able to sustain lower

pricing in they have gotten along fine at the lower pricing

levels, when, in fact --

THE COURT: Which is an eight million dollar

question as I understand Mr. Verdini's handiwork at the end.

MR. McELHINNY: I think it's 12.

THE COURT: 12, if it's the higher lost profits.

It's a question of eight to twelve million dollars when I

understood Mr. Verdini's artistic endeavors at the end of the

redirect.

MR. BIRSIC: Our theory is simply that this is a

competitor who is sponsored and really set up by the largest

institutional bidder on these tax certificates and has not

disclosed its interest in this company any point along the

way.

So what you have --

THE COURT: Other than in response to your

subpoenas and deposition questions, they're not publicly

talking about it.

MR. BIRSIC: No. It's not revealed in RFPs that

RealAuction files, for good reason, because as we pointed out

in our prior motion papers, we believe there are directives

from the State Treasury Department in Florida that make

conflicts of interest like this inappropriate.

THE COURT: As a matter of substantive patent law,

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

216

not getting into whether there is sufficient record evidence

to do it, but as a matter of substantive patent law, could an

entity standing in the shoes of Gulf Group or Mr. Politano

been named as a defendant in this action?

MR. BIRSIC: I -- at the time the action was filed,

we had no knowledge of the specifics here, a general -- really

this was in many respects surprising to us, but I don't

believe so because their fingerprints, except as I describe

are, no where -- they don't even acknowledge --

THE COURT: The reason I ask is I grew up, as

counsel may have figured out, not as a patent lawyer, but as a

labor lawyer.

One of the things we learn about is the Joint

Employer Doctrine and that is on the face of things Susie

works for the Ajax Company, but when you dig into it, you find

out the paycheck says Ajax, W2 and employment contract says

Ajax Company, but you learn that the Acme Company is running

the show.

In employment law Ajax isn't left off the hook but

Acme enjoins the matter. I did not know whether under the

substantive law of patent infringement claim does a similar

doctrine exist.

MR. BIRSIC: I'm going to ask Mr. McElhinny if he

has anything to add on that. I do not know the answer.

THE COURT: That makes two of us.

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

217

MR. McELHINNY: I would have to think about it a

little bit more. I think there would be some theories for

inducing infringement, theories about joint infringement,

which might particularly, interestingly in this case on the

'099. We would have to look into it a little bit. This is

not information we uncovered as erected until after the close

of discovery.

MR. BIRSIC: The only other issue we have that

closes the book on our proffer for the Gulf Group, Your Honor,

as you also know during the course of Mr. Harrington'S

testimony, we had the issue of over whether we would be

permitted through Mr. Harrington to develop a fact that Grant

Street Group made an information disclosure.

THE COURT: Let's put a hold on that. Let's take

care of the first proffer first. There are a number of things

we need to accomplish with that.

MR. BIRSIC: That's it.

THE COURT: One question relative to that, when I

was watching I believe Mr. Hofmann's testimony, listening to

it, I can't recall whether this was -- I'm confident it was a

slide Mr. Verdini put up but I'm not certain of that.

I'm almost certain it came up during cross of

Mr. Hofmann or redirect, and there were on the entire screen,

left side and right side, there were excerpts of the

deposition transcript of Mr. Thomashaw, which the Court

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

218

thought could be fairly read as saying we have no idea how we

set our prices or why we set them the way we do. We don't

look at it. We don't think about it.

Is that in evidence?

MR. BIRSIC: No, Your Honor, not yet. That's part

of the Thomashaw deposition that we decided to hold for either

rebuttal or depending upon how the evidence goes, when

RealAuction puts their case in.

THE COURT: Mr. Brafman, this is not to exhaust

your opportunity to speak on this. I have a question at the

moment.

Do you anticipate that Ms. Rinke is going to

testify because you call her to the stand?

MR. BRAFMAN: At this point we do expect that, Your

Honor.

THE COURT: Do you expect that to occur in the

first phase of your case rather than the last end of rebuttal?

When you get going on Monday before you are done, Ms. Rinke is

going to testify?

MR. BRAFMAN: Yes, but not on Monday.

THE COURT: Sometime between Monday and Wednesday?

MR. BRAFMAN: Yes.

THE COURT: Is she coming live or by deposition?

MR. BRAFMAN: Live.

THE COURT: Okay.

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

219

Back to Mr. Birsic. First, as to matters that

occurred during opening statement, Court has already ruled, I

have ruled that I have not ruled any of the things that you

mentioned or other things may not be completely fair game for

impeachment depending on the testimony from Mr. McClendon or

other witnesses called by RealAuction and under the Federal

Rules styles things that are impeachment also are coming in

substantively. We'll see that one way or the other.

I understand the argument on willfulness. I think

if I went back and read Weinstein and all the other folks that

write the evidence treatises that will tell me while I'm to be

attentive to the development of the record, unless we have a

pro se party, I'm not responsible for the development of the

record. I'm to be attentive to it.

So, I'm looking at Rule 103 of the Federal Rules of

Evidence, particularly Federal Rule of Evidence 103(a)(2)

which says: A party may claim error in a ruling to admit or

exclude evidence only if the error affects a substantial right

of the party and (2), if the ruling excludes evidence, a party

informs the Court of its substance by an offer of proof,

unless the substance was apparent from the context.

So, obviously there has been a motion in limine

which Judge Ambrose ruled on at 484.

I have, subject to the rulings I made relative to

fair game on cross-examination and impeachment, have generally

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

220

affirmed that ruling or accepted it as the applicable law of

the case, as has obviously Grant Street because that is why

you are making the proffer.

Here is the question if you know at this point,

Mr. Birsic. Have each of the documentary exhibits that you

identified, have each of them been individually ruled upon as

to admissibility?

MR. BIRSIC: I haven't checked, Your Honor, but I

think --

THE COURT: That makes two of us.

MR. BIRSIC: I will check. I think the answer is

probably yes, because I think each one of these, as I

indicated, is right on this issue and I'm sure they objected

based on the motion in limine.

THE COURT: Here is what I think we need to do. I

take that answer, Mr. Birsic, as, at minimum, colorably

fulfilling your obligation to make a record subject to you

examining it in the context of my obligation to facilitate

making of a record.

I think what we need to make sure is in the record

is that each of the exhibits you just proffered is if it

hasn't been offered before and there's been a ruling in a

written order from Judge Ambrose as to any of the other ones

out of the presence of the jury, you need to move their

admission and then Mr. Brafman or Ms. Arango has to state

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

221

whether there is an objection.

I think in order on those documents, in order to

confirm the state of the record and to comply with Federal

Rule of Evidence 103, and so that I don't end up in Chief

Judge Rader's doghouse, I think we need to do that if this

goes to Washington.

In terms of your prose explanation of the

anticipated testimony from each of the witnesses who you have

identified by name, you have identified on the record whether

you would anticipate calling them as a live witness in court

or whether you would rely on a deposition that has been taken.

Consistent with the Federal Rules of Evidence, I do

find that you have informed the Court of the substance of the

testimony and evidence that would be offered by those

witnesses as witnesses and you have in the Court's judgment

fulfilled your obligation to preserve a claim or error.

I know I don't get the final word on those things,

but I would have no basis on the record now to ask you to do

more.

Mr. Brafman, putting aside for a moment the

documentary exhibits, which Mr. Birsic on Monday outside of

the presence of the jury will either confirm have each been

ruled on because they were proffered and there was an

objection and Judge Ambrose ruled on them, or if that has not

occurred, he will out of the presence of the jury offer the

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

222

ones he elects to offer and at that time, you'll have an

opportunity to object or not object to their admission.

Based on the prose statements would you object, and

we'll take them one at a time?

To the extent Grant Street, as plaintiff, proffered

testimonial evidence from Mr. Thomashaw from his June 28, 2011

and October 18, 2011 depositions, which in sum and substance

would be direct testimony as outlined by Mr. Birsic, what

would be the position of RealAuction as to its admissibility?

MR. BRAFMAN: We would object, Your Honor.

THE COURT: Basis of your objection?

MR. BRAFMAN: Basis of the objection are the

grounds that we opposed or filed our motion in limine on Rules

402 and 403, and we oppose on the basis that motion has

already been granted.

THE COURT: Would by the RealAuction's position

that the sum and substance of Mr. Thomashaw's anticipated

testimony as explained by Mr. Birsic was in all respects

subsumed in the matters before the Court and the ruling on the

motion in limine?

MR. BRAFMAN: I believe so, Your Honor.

THE COURT: Okay. I will affirm that ruling on the

testimony subject to us seeing what happens on the exhibits.

As to Mr. Ronald Rubin, were his testimony to be

proffered by deposition and the proffer -- and the testimony

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

223

through deposition excerpts was in sum and substance that

which was outlined by Mr. Birsic in his proffer, what would be

the position of RealAuction?

MR. BRAFMAN: We would object on the same basis.

THE COURT: And the same objections as stated to

Mr. Thomashaw?

MR. BRAFMAN: Yes.

THE COURT: Is it RealAuction's position that the

sum and substance of Mr. Rubin's testimony as outlined by

Mr. Birsic was subsumed in the matters that were before the

Court in its disposition of the motion in limine on this

topic?

MR. BRAFMAN: Yes.

THE COURT: Okay. The Court will affirm that

ruling and would have sustained the objection for the same

reasons set forth in the motion in limine.

As to the testimony of Mr. Harrington, not the

testimony that has occurred but the proffered testimony as

outlined by Mr. Birsic a few moments ago, if Mr. Harrington

testified live in court and the sum and substance of his

testimony was as proffered and outlined by Mr. Birsic, what

would be the position of RealAuction, Mr. Brafman?

MR. BRAFMAN: We would object on the same basis as

in our prior motion in limine.

THE COURT: Is it RealAuction's position that the

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

224

sum and substance of Mr. Harrington's proffered testimony was

subsumed in its entirety within the motion in limine and the

ruling on that motion?

MR. BRAFMAN: Yes, Your Honor.

THE COURT: Court would affirm that ruling and

would sustain the objection for the same grounds as set forth

in the motion in limine.

Subject in each case to the examination of the

rulings on the exhibits to the extent there are any that have

not been ruled on.

As to Mr. Yorty, Mr. Brafman, while he was

testifying live in court, if he testified in sum and substance

as proffered by Mr. Birsic a few moments ago, what would the

position of RealAuction have been?


in our prior motion in limine.

THE COURT: Is it the position of RealAuction that

the sum and substance of Mr. Yorty's testimony as set forth by

Mr. Birsic in his offer a few moments ago was subsumed in its

entirety within the matters before the Court and ruled upon in

the motion in limine?


THE COURT: Court would affirm that ruling and

would have excluded Mr. Yorty's testimony on that point for

the reasons set forth by Judge Ambrose.

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

225

Finally, had deposition excerpts from the

deposition of Mr. Eric Benson, who has been identified as the

founder of the Tek Group been in sum and substance as outlined

by Mr. Birsic a few minutes ago, what would have been

RealAuction's position on the admissibility of that testimony?


our prior motion in limine.

THE COURT: Mr. Brafman, is it RealAuction's

position that the sum and substance of that testimony from

Mr. Benson had been the subject of and was subsumed in its

entirety in the motion in limine and the order granting that

by Judge Ambrose?


THE COURT: Court will affirm that ruling and would

uphold the objection to that testimony at this point as to the

case of each of these subject to a proffer that would be made

and specifically as to rebut or impeachment or on

cross-examination and in that case specific proffered

testimony or exhibits will be considered by the Court on its

own merits in the context of rebuttal or in the context of

impeachment or cross-examination.

Mr. Birsic, in terms of completing the record under

Federal Rule of Evidence 103(a)(2) on this point, we haven't

gotten to the prosecution history and subject to an

examination of the exhibits, is there anything else you think

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

226

the Court needs to put on the record at the moment?

MR. BIRSIC: No, Your Honor.

THE COURT: You had a proffer on another issue?

MR. BIRSIC: We do, Your Honor.

As you know during the live testimony of

Mr. Harrington, we sought to admit or adduce facts that Grant

Street made an information disclosure submission during the

proceedings that were the second reexamination of the '063

patent by the PTO and that that submission was then in the

form of Exhibit 204.

The examiner Mr. Escalantay (phonetic) indicated,

took the submission and indicated at the bottom as part of the

public record of the second reexamination that he had

considered, those are his words, not mine, all materials --

except those that he lined through, and then he lined through

on our information submission all of the references and the

materials that we submitted that he did not consider.

That is part of the public record of the second

reexamination and we sought through Mr. Harrington simply to

say we made a submission of all these materials in connection

with that second reexamination proceeding and here's what was

part of the public record.

Now, I know we have argued this and I don't mean to

rehash it because I think Your Honor has it under advisement

and we do have another crack at this as Your Honor continues




Plaintiff,

vs.


Defendant.

CIVIL DIVISION

No. 09-1407

_____________________________



APPEARANCES:

For the Plaintiff:

For the Defendant:

Court Reporters:





2I N D E X

DIRECT CROSS REDIRECT RECROSSPLAINTIFF'S WITNESS:

Kenneth Farmer (Video) 49

Lloyd McClendon 64 157 213 221

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

209

official auction clock maintain sync.

Do you see that?

A. Yes.

Q. Was this a discussion of some problem that Lee County was

experiencing with their official auction clock?

A. I think they noted that the official auction clock was not

keeping current time.

Q. And then you said: RealAuction could not duplicate the

issue. Please send us an example of when and where the

problem occurs, right?

A. That's true.

Q. So, here's at least one instance where a county had a

problem and you had a discussion with an auction clock, right?

A. I stand corrected. There is one instance of somebody

saying the auction clock is -- mentioning the auction clock.

Q. I just want to confirm so that we all understand that you

currently have a 15 percent ownership in RealAuction, correct?

A. Yes, sir, that's correct.

Q. It's also correct, is it not, that on two occasions, you

have authorized the filing of reexamination requests of the

'063 patent, correct?

MS. ARANGO: Objection, Your Honor. I hate to say

this but can we request a sidebar.

THE COURT: We'll go to sidebar.

(Sidebar discussion held as follows:)




Plaintiff,

vs.


Defendant.

CIVIL DIVISION

No. 09-1407

_____________________________



APPEARANCES:

For the Plaintiff:

For the Defendant:

Court Reporters:





12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

38

LLOYD McCLENDON, a witness having been previously sworn,

testified as follows:

THE COURT: You remain under oath, Mr. McClendon.

Make yourself comfortable.

Mr. Birsic, I believe there was just some final

wrap-up that you had.

MR. BIRSIC: A few question, Your Honor.

RECROSS-EXAMINATION (Cont.)

BY MR. BIRSIC:

Q. Mr. McClendon, at the end of the day yesterday, we were

talking about the no-lawsuit guarantee that RealAuction issued

to tax collectors as early as October of 2004 as part of its

selling effort and to refocus the questioning, I want you to

take a look at Exhibit 199 that was admitted at the end of the

day yesterday.

Do you have a copy in front of you?

A. I have no copies in front of me.

Q. I'll give you a copy.

Put it up on the screen.

To orient ourselves, this is a copy of the memo or

an e-mail that Ms. Mia Ahmed sent on October 14 to

representatives of the Broward County Tax Collector's Office,

correct?

A. Yes, sir.

Q. Let's go down to the bottom. Let's see who Ms. Ahmed was,

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

39

see her signature line.

Ms. Ahmed was the director of sales and marketing

with RealAuction at the time.

Correct?

A. Ms. Ahmed was a part-time telemarketer but using the title

director of sales and marketing, correct.

Q. You were aware she was using the title director of sales

and marketing, right?

A. Yes, absolutely.

Q. Let's go up to the third line, third paragraph where it

says: Here are some basic points about RealAuction.

So, she says: Here are some basic points about

RealAuction which set us aside from our competitors.

The last one she mentions is this no-lawsuit

guarantee.

Correct?

A. Yes, sir.

Q. She says: RealAuction is the only company that has

endorsements from some of the largest tax buyers in the

country that will back us with a no-lawsuit guarantee.

That is what she was telling tax collectors,

correct?

A. Yes, sir.

Q. And the large tax buyers being referred to here are Gulf

Group and Bank Atlantic, correct?

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

40

A. Yes, I believe those were two of them, yes, that's

correct.

Q. And isn't it true that as early as of October of 2004, at

or about the time this no-lawsuit guarantee is being made by

Ms. Ahmed of RealAuction, Gulf Group or its owner, Jonathan

Politano, provided funding to RealAuction in the amount of

100,000, correct?

A. No, I don't recall -- no, I don't think that's correct.

Q. So you deny that RealAuction received funding from Gulf

Group, from Mr. Politano to help it start up the business?

A. I deny receiving $100,000 from Gulf Group, yes.

Q. How about my next question. You deny that RealAuction

received funding from Gulf Group or Mr. Politano to help start

up the business?

A. I don't believe we have ever received any funds from Gulf

Group.

Q. And so -- but do you deny that Gulf Group --

A. I --

THE COURT: One at a time.

Mr. Birsic, ask your question --

BY MR. BIRSIC:

Q. Did you have something further? I thought you were

finished.

A. Continue. I'm sorry.

Q. So your denial on that subject is complete, correct?

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

41

A. I don't believe we have ever received -- I don't

believe we received funds in 2004 from Gulf Group, no.

Q. Well, my question was, okay, but it's true that you

received from Gulf Group or Mr. Politano hundreds of thousands

of dollars in funding to RealAuction at various times

throughout 2006 and into 2011, correct?

A. I know we received short-term funding during some of the

multiple lawsuits so, yes, I know we have.

Q. And that totaled hundreds of thousands of dollars,

correct?

A. I don't know the total.

Q. Now, isn't it true --

MR. BIRSIC: Your Honor, I seek to cross the

witness on Exhibit 154.

THE COURT: Why don't you begin by asking him if he

can identify it, Mr. Birsic.

MR. BIRSIC: I will, Your Honor.

MS. ARANGO: Your Honor, may I have a copy, please.

THE COURT: I think that's a good idea.

MR. BIRSIC: I have another copy.

BY MR. BIRSIC:

Q. Mr. McClendon, can you take a minute and take a look at

Exhibit 154.

A. Yes, sir.

Q. Do you recognize these as the financial records of

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

42

RealAuction.com from the account QuickReport as of from

January 1, 2006 through January -- October 17, 2011?

A. I couldn't say. I have never seen them before, no.

Q. So you don't recognize these as your own financial

records?

A. I have never seen these before. It appears to be

QuickBooks reports from our company, but I have never seen

them before, no.

Q. Do you recognize Mr. Thomashaw -- who is Mr. Tom

Thomashaw, he's your CFO, right?

A. He's the CFO, correct.

Q. Do you recognize his handwriting in the upper left-hand

corner on the first page?

A. No, sir.

Q. Can you go to the second to the last page.

Do you recognize that as Mr. Thomashaw's

handwriting?

A. No, sir.

Q. So, it's your position that you don't recognize these

documents and you can't authenticate them as your own

financial record; is that correct?

A. I'm saying I have never seen the report before and I don't

recognize his handwriting. I'm not disputing that they're not

ours, I'm saying I have never seen them before.

Q. But whether or not you've seen them before, do you agree

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

43

that these are the financial records of RealAuction as

maintained in the ordinary course of business?

A. Yes, I would probably agree, yes.

MR. BIRSIC: Seek to admit, Your Honor.

THE COURT: Ms. Arango?

MS. ARANGO: Your Honor, I would object.

Relevance. There's no contradiction of testimony, so I don't

believe that there's any basis under 613 or any other rule of

evidence to allow their admission.

THE COURT: Ms. Kienzle, can you read back the last

question and answer.

(Whereupon, the previous question and answer were read.)

THE COURT: Overruled. Admitted.

MR. BIRSIC: Could you please publish the first

page of 154, please.

Go to the top.

BY MR. BIRSIC:

Q. Are you familiar with your QuickBook accounting system

that you use at RealAuction?

A. I understand we use QuickBooks. I don't -- I'm not a user

of the system, no.

Q. But you do see that at the top here this says

RealAuction.com QuickBook Report.

Correct?

A. Yes, sir.

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

44

Q. Can you go to the second to the last page.

You're at the second to the last page,

Mr. McClendon?

A. Yes, sir.

Q. This identifies, does it not, long-term liabilities:

Stockholder loans under something called RA Partners.

Do you see that?

A. Yes, sir.

Q. Can you zoom back and go up to the handwriting at the top.

Do you see where it says Gulf, 16 percent?

A. Yes, sir.

Q. Do you know if that is Mr. Thomashaw, your CFO's

handwriting?

A. No, I don't know.

Q. You don't recognize that?

A. No.

Q. Go down further to the first line entry.

Do you see that entry for October 18, 2004 for

$100,000?

A. Yes, sir.

Q. You deny that this is an amount that was provided to you

by Gulf Group or Mr. Politano, correct?

A. Yes, sir.

Q. Can you go down and scroll down.

Do you see the rest of these amounts?

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

45

Let's go down and look at the 2006 amounts.

So the amounts in 2006, do you deny that these

amounts were provided to you by Gulf Group?

A. Yes, sir.

Q. Go down to the 2007 amounts.

Do you see these amounts?

A. Yes, sir.

Q. On the dates that are indicated?

A. Yes, sir.

Q. Do you deny that these amounts were provided to you by

Gulf Group or Mr. Politano?

A. Yes, sir.

Q. Go down to the next group for 2008 through 2011.

So this is showing some amounts, loan from 2008

through 2011.

Do you deny these amounts were provided to you by

Gulf Group or Mr. Politano?

A. Yes.

Q. There's a middle column that says Decreases. It seems

that there's some repayments here. One repayment of the loan

on July 19, 2007, $925,000.

Do you see that?

A. Yes.

Q. Do you deny that's a repayment to Gulf Group and/or

Mr. Politano?

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

46

A. I don't know the specifics about the -- I don't know the

specifics about the repayment, no.

Q. So you just don't know one way or the other?

A. No, I really don't.

Q. Would that be inconsistent with what your testimony is

concerning the level of funding that you received from Gulf

Group or Mr. Politano?

A. I'm sorry, can you say that again.

Q. I said, is this a payment to somebody in this amount,

$925,000 in 2007, is that inconsistent with your understanding

of amounts that you received from Mr. Politano or Gulf Group?

MS. ARANGO: Objection. Vague.

THE COURT: I think it's argumentative.

You can rephrase, Mr. Birsic.

Sustained, Ms. Arango.

BY MR. BIRSIC:

Q. Can we go to the next page.

Continuing on here now, these are all payments in

2011 and it says: Gulf Group Holding and AC.

I believe that's correct, right?

A. Yes.

Q. Now, do you accept that those are payments to Gulf Group?

A. It says: Payments to Gulf Group. I don't believe we have

ever written a check to Gulf Group. I don't know what this

is. I don't.

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

47

Q. So you deny any knowledge of these financial statements,

correct?

A. Yes, I don't have personal knowledge about it, no.

Q. Last question.

So, isn't it true that at the time that Ms. Ahmed

was making her statements about the no-lawsuit guarantee, you

knew you had the endorsement for that no-lawsuit guarantee

from Gulf Group in your pocket, right?

A. No. I knew that we weren't performing the objectionable

items that all the investors were interested in, which were

the three items that I mentioned yesterday, so, it was

impossible that we would be sued for the same reason.

Q. Well, Gulf Group was the company that sued Grant Street

and several of the tax collectors to stop the 2004 auctions,

correct?

MS. ARANGO: Objection. Relevance. We're getting

outside the scope.

THE COURT: Overruled.

THE WITNESS: They did file a lawsuit asking for

certain relief, that's correct.

MR. BIRSIC: No further questions, Your Honor.

THE COURT: Thank you, Mr. Birsic.

Mr. McClendon, you may step down. Thank you very

much.

Mr. Brafman.

Marc Thoma shaw October 18, 2011 Deposition Designations Played June 13, 2013

~ment #1 (Page 5:08 to 5:171

08 Q Good morning, Mr. Thomashaw?

09 A Good morning.

10 Q My name is Tom Birsic.

11 I'm one of the lawyers representing Grant

12 Street Group in this litigation, and I'm going to be

13 asking you questions today concerning the case.

14 First, could you state, for the record,

15 your full name and your current employer?

16 A Marc David Thomashaw. ReaiAuction.Com,

17 LLC.

Segment #2 (Page 6:11 to 6:13)

11 Q Could you state your current position and

12 title with ReaiAuction.Com, LLC?

13 A I'm the Chief Financial Officer.

Segment #3 (Page 7:23 to 9:05)

23 Q Now, throughout the course of the

24 questioning today I will be referring to

25 ReaiAuction.Com, LLC either as ReaiAuction.Com, LLC or

00008:01 ReaiAuction for a shorthand; is that understood and

02 acceptable?

03 A Yes.

04 Q If at any time you believe that I'm

OS referring to an entity other than ReaiAuction.Com,

06 LLC, the defendant in this case, will you so indicate

07 on the record so that we can be clear about your

~-----. ..; "" TRIAL EXHIBIT f .:

~ J~2S ~

08responses?09AYes.10QThankyou.11Now,isitcorrectthatyoupreviouslygave12depositiontestimony,underoath,inthiscase,on13June28,2011?14AIbelievethatwasthedate,yes.15QOkay.Andatthattimeyourealizedthat16youwereunderoathandunderpenaltyofperjury,17correct?18AYes,that'scorrect.19QAndyourecognizethatyou'reunderoath20todayforallofyourresponses,correct?21ACorrect.22QYouindicatedthatyourcurrenttitleand23positionwithRealAuctionisChiefFinancialOfficer,24correct?25AThat'swhatmytitleis,yes.00009:01QHowlonghaveyoubeenassociatedwith02RealAuction?03AIwouldsaysince2007,althoughIdidsome04parttimeworkpriortothatwiththecompany,forthe05company.Segment#4(Page9:18to11:03)18QMr.Thomashaw,whendidyoustartdoingany19realworkofanynaturewithRealAuction?20AIbelieveitwasin2006.That'stothe21bestofmymemoryatthispoint.That's,youknow,

22overfiveyearsago,so23QWhenin2006,thefirsthalfof2006?24AIdon'tremembertheexacttimeframe.25Itwassometimeinthatarea.Itcould00010:01havebeeninthemiddle.02Asbestcase,narrowingitdown,asfaras03datesgo.04QSoyourbestrecollection,atthistime,is05thatyoufirststartedtoworkwithRealAuction,in06anycapacity,inthemidnineteen,ormid2006,07correct?08ACorrect.09QOkay.Andwhatexactlywereyoudoingfor10thematthattime?11AIwouldjusthelpoutwithsomeQuickbooks12work,openingdata,youknow.13Iwasworkingatthetimeforanother14company,andthiswasjusthelpingout.15QWhenyousayhelpingout,enteringdatain16Quickbooks,wouldthatbeenteringfinancialdataand17informationinthebooksandrecordsofRealAuction,18atthetime?19AItwould.Itwouldbeenteringjournal20entriesor,youknow,postingexpensechecks,things21ofthatsort.22QOkay.AndwhenyousayQuickbooks,isit23correctthatQuickbooksisaformofaccounting24softwarethatyouutilize,byRealAuction?25AThat'scorrect.

00011:01QOkay.Isthattypicallyhowyouasthe02ChiefFinancialOfficeradministerthefinancial03affairsofRealAuction,throughQuickbooks?Segment#5(Page11:07to11:25)07AThat'swherethefinancialdataisreported08andrecordedforthecompany.09QFairenough.Soit'scorrectthatthe10financialdataforRealAuctionisrecordedandstored11inaQuickbookssoftwarepackage?12AThatwouldbecorrect.13QAndhasthatalwaysbeenthecasesince14yourfirstinvolvementwithRealAuction,beginningin15mid2006?16AIcouldtellyouthatsinceIhadany17involvementdirectlywithRealAuctionandthe18financials,theonlysetofbooksorsoftwarethatwas19usedwasQuickbooks.20QWhendidyouassumeyourdutiesand21responsibilitiesasChiefFinancialOfficerfor22RealAuction?23AIwouldsaythatthatwassometimein2008,24rightinthebeginning,asfarasbeingofficially25titled.Segment#6(Page12:22to13:13)22QIn2007,woulditbefairtosaythatyou23wereperformingthesametasksthatyouperformasthe24ChiefFinancialOfficercurrently?

25AIwouldsaytheyweresimilar.Idon't00013:01rememberifthey'reexactlythesame.02AtthispointIdoalot.There'smore03peopleintheoffice,sothere'smoreresponsibility.04QFairenough.In2007,wasthereanyother05employeeatRealAuctionwhodealtwiththefinancial06affairsofthecompany,intermsofkeepingtrackof07expensesandrecordingfinancialdata?08AIdon'tbelieveso.09QWereyouthepersonatRealAuction,during102007,whowasresponsibleforrecordingfinancial11data?12AThatwouldbeintoQuickbooks,that13wouldbecorrect.Segment#7(Page14:22to14:24)22QOkay.Now,astheCFOofRealAuction,are23youultimatelyresponsibleforallthefinancial24affairsofRealAuction?Segment#8(Page15:02to15:09)02AI'mresponsibleforallthebookingofall03thedata.04QAreyoualsoisthereanyoneelse05involvedforthebookingoffinancialdata?06ANo.07QDoyouexclusivelyexecuteanybookingof08entriesoffinancialdataforRealAuctionastheChief09FinancialOfficer?

Segment#9(Page15:12to15:15)12AThat'scorrect.13QOkay.Andhasthatalwaysbeenthecase14sinceyoustartedworkingwithRealAuction?15AIwouldsayyes.Segment#10(Page29:11to29:23)11QMr.Thomashaw,I'mshowingyouwhatwe've12markedforidentificationasRealAuctionExhibit13number1,whichconstitutesacopyofPlaintiffGrant14StreetGroup,Inc.'sAmendedNoticeofContinuationof15Rule30(b)(6)depositiondirectedtoRealAuction.Com,16LLC.17Haveyouhadachancetotakealookat18Exhibit1?19AThisisthefirsttimeI'mseeingthis.20QTakeamomentandtakealookatit.21Ihavesomequestionsforyouregarding22pagetwo,butyou'recertainlywelcometoreviewthe23entireexhibit?Segment#11(Page29:24to31:24)24AOkay.25QHaveyouhadachancetolookitover,00030:01generally?02AI'velookedatpagetwo.Ididn'ttakeit03homeandmemorizeit.Ijustscannedoverit.04QHaveyouseenthisnotice?

05AThisisthefirsttimeI'veseenthis06specificnotice.07QOkay.Doyouknowthatyouhavebeen08designatedasthecorporatedesigneeofRealAuction,09forpurposesofrespondingtocertainareasofinquiry10setforthinthenotice?11AYes,butthere'ssomeareasherethatI12believearesupposedtobecoveredbyouraccounting13firm.14QAndthatwouldbeBinstock?15AThat'scorrect.16QSothereareonlycertainareasofinquiry17thatyouaredesignatedasthecorporatedesigneefor18RealAuction,correct?19AIcouldgiveyouasmuchinformationon20theseareasasI'mawareof,buttheremightbemore21detailsthatIdon'thave.22QOkay.Isitcorrectthatyouarethe23corporatedesigneeforRealAuctionforpurposesof24respondingtoitemBonpagetwo,entitledAreaof25Inquiry17?00031:01AYes.02QAreyoualsothecorporatedesigneeforthe03purposesofrespondingtoquestionsconcerning04paragraphConpagetwo?05AYes.06QAndthatwouldbeAreaofInquiry19?07AThatwouldbe.08QAndareyoualsothecorporatedesigneefor

09purposesofrespondingtocertainaspectsof10subparagraphA,particularlydetailsrelatingtothe11accountingtreatmentofinterestpayments,accruals,12andthedetailsofallloansmadetoRealAuction,13includingloansmadebyprincipalsandrelatives14thereof?15MR.BRAFMAN:I'mgoingtoclarifyand16respondtothatquestion,Mr.Birsic.17Mr.Thomashawisnotthe30(b)(6)18witnessontheaccountingtreatmentof19interestandaccruals,butheiswith20respecttotheloans.21QSoyouarethecorporatedesigneeforthat22aspectofsubparagraphAthatrelatestothedetails23ofallloansmadetoRealAuction,correct?24AThat'scorrect.Segment#12(Page34:22to37:21)22QMr.Thomashaw,I'mgoingtoshowyouwhat23we'vemarkedforidentificationasRealAuction24depositionExhibitnumbertwo,whichisamultiple25pagedocumentcomprisedofexhibitsthatwereprovided00035:01tousbyyourcounselbeforethedeposition.02I'daskifyoucanreviewthisexhibitand03identifyitforus?04AI'mfamiliarwiththis.05QAndthisisacopyofthematerialsthat06youprintedfromtheRealAuctionQuickbooks,tomake07availableforthedepositiontoday?

08AIbelieveyouhaveacopy.Thisisthe09actualprintout.10QSowhatisExhibit2istheactualprintout11thatyoumadefromtheQuickbooksofRealAuction,12correct?13AThat'scorrect.14QAndtherearecertainhandwritingonthis15exhibit,forexample,intheupperrighthandcorner16onthefirstpage,there'sahandwrittennotationthat17appearstoread,sixteenpercentAdilainterest;do18youseethat?19AAdila.20QAdila?21AUhhuh.22QOkay.Iapologizeforthepronunciation.23I'mphonicallychallenged.24IfImispronounceanythingduringthe25courseofthisdeposition,it'sunintentional,andI00036:01meannooffense;doyouunderstandthat?02AIunderstand.03QOkay.Soisthatyourhandwritinginthe04upperlefthandcorner?05AUhhuh.06QAndthereissomehandwrittennotationon07therightaroundthenumbers,itlookslikesome08additionbeingperformed,correct?09AUhhuh,that'scorrect.10QIsthatyourhandwritingaswell?11AYes.

12QOkay.Andatthebottomofpageone13there'ssomehandwriting,confidentialdashattorneys14eyesonly.15Isthatyourhandwriting,oristhatyour16counsel?17AThat'snotmine.Idon'tknowwhoseitis,18butit'snotmine.19QOkay.Solet'sgothrough,onpagetwo.20There'snohandwriting,exceptthe21confidentialattorneyseyesonlydesignationatthe22bottom,correct?23AUhhuh.24QExcept,let'sjustsee.25Onpagetwothere'snohandwritingexcept00037:01that.02Pagethree,Idon'tseeanyhandwriting,03withtheexceptionoftheconfidentialdesignation.04Onpagefourofthisexhibit,atthetop05there'ssomehandwritingintheupperlefthand06corner;doyouseethat?07AYeah,Iwrotethat.08QWhatdoesitsay?09AItsaysMarc,twelvepercent.10QAndwhatdoesthetwelvepercentreferto?11ATheinterestrate.12QOkay.Thenextpage,somehandwritingat13thetop.Isthatyours?14AYes.ItsaysLloyd,twelvepercent.15QLloyd,twelvepercent?

16 A Correct.

17 Q Next page, what is that; I don't know, is

18 there any handwriting on the top of that? 19 A No.

20 Q Pardon?

21 A The answer is no.

Segment #13 (Page 38:10 to 39:10)

10 Q Next page, there's some handwriting at the 11 top that says, Gulf, and there's some other writing. 12 Did you --

13 A Sixteen percent.

14 Q Is that your handwriting? 15 A Yes.

16 Q So you wrote Gulf on this, sixteen percent?

17 A Right.

18 Q Correct; and what does this page reect, 19 as you understand it?

20 A A loan that was made by an investor from

21 Gulf Group.

22 Q Okay.

23 A And they got a certain interest rate on

24 their investment, for loaning money.

25 Q Okay. So you went into the Quickbooks and

00039:01 researched information concerning loans from Gulf 02 Group, correct?

03 A I researched all loans that were made,

04 because there's no way I could remember when all these

05 loans were made over the years, and this way it was

06 just printed out for your knowledge, and this way it

07 would be easier for you.

08 Q Okay. So then the last page, does that

09 also reect Gulf Group loan information? 10 A It looks like a continuation, yes.

TAX CERTIFICATE SALE GUIDELINES Al~D PROCEDURES

2004 TAX CERTIFICATE SALES

PREAMBLE

The Florida Tax Collectors Association, through its Select Committee on Tax

Certificate Sales, in conjunction with the Department of Revenue has developed the

following guidelines and procedures regarding tax certificate sales. These guidelines

have been developed to (l) answer many of the questions that have been raised in past

years regarding the proper method for conducting a sale, (2) establish statewide

uniformity for tax certificate sales, and (3) address some of the problems that many

counties face in conducting orderly sales. You are strongly encouraged to follow these

guidelines as closely as possible when conducting your 2004 ta:x certificate sale.

We hope these guidelines help everyone to better understand tax certificate sales

and will result in more uniform, competitive and successful sales in 2004.

TA-X CERTIFICATE SALE GUIDELINES

1. Definitions: For purposes of defining the terms used in these guidelines, a "bidder"

means a person who actually appears at the tax certificate sale to bid on tax certificates .

A "registrant" is a person, whether a natural person, corporation, partnership, trust,

pension plan, etc., who registers at the sale, whether in person or through an agent. A

single bidder may represent many registrants (clients) through an agency relationship.

2. Agents: A bidder is entitled to appear at the sale as an agent for any one or more

persons. The tax collector should obtain from the agent the Tax I.D. number or social

security number of each of the age.nt's clients. A separate deposit should be required for

each of the agent's clients.

3. Deposits: Tax Collectors should require a reasonable deposit from each person

registered at the sale, whether the registrant appears at the sale or is represented by an

agent. It is recommended that the deposit be an amount sufficient to pay for costs

associated with the re-advertising and reselling of the tax certificate(s). If a successful

bidder does not timely pay for the certificate(s) on which he was awarded the bid, his

deposit should be forfeited and the bid canceled. Upon the cancellation of a bid, the tax

collector shall resell the certificate(s) the following day or within 10 days of the

cancellation ofthe bid.

4. Identification of Registrants: The tax collector can use any reasonable type of

identification system for identifying all of the registrants at a sale. This system can

utilize numbered cards, identification numbers or any other reasonable identification

method. Placards attached to a stick or any extension should not be used when they

interfere with other bidders' line of sight to the auctioneer.

5. Assistance bv Local Law Enforcement: It is recommended that you request your

local sheriffs department provide a deputy sheriff to attend the sale in uniform, at least at

the start of the sale and especially if you anticipate the possibility of having disruptive

bidders at the sale. Local sheriff's departments are encouraged to provide uniformed

officers to attend the sales.

6. Beginning the Sale: The sale should begin on the date and at the location advertised

and at approximately the time advertised. Once begun, every effort should be made to

conduct the sale daily without any extended closures (except for weekends). The tax

collector should not begin the sale on June 1, sell only one or a few certificates, and then

close the sale for more than one day. The tax collector should use discretion in

determining how late each day the sale will be conducted; that time can vary but should

be announced at the beginning of each day.

7. Order of Sale: Tax Certificates shall be sold in the order in which they appear on the

tax roll. Certificates shall not be sold out of order even if a bidder request that it be done.

8. Sell Individually: Tax Certificates shall be sold one by one and not in blocks. That

is, a certificate representing one parcel of property as it appears on the tax roll shall be

separately auctioned. Groups or blocks of certificates shall not be auctioned together

even if there is no objection from the bidders. For those certificates that are low-priced,

for example, $150.00 (the tax collector has the discretion to set this dollar amount at

$100.00 or $50. 00) or less, the tax collector will inquire if there will be any competitive

bidding on any of these certificates. If the answer is no, the ta,'\ collector will strike off

the group of certificates to the county. If the answer is yes, the bidders may bid on an

individual parcel within the range and that parcel will be auctioned off individually. No

bid is to be accepted on a block of certificates. As long as the tax collector offers the

low-priced parcels in numerical order and accepts bids on those parcels in that order, and

sells certificates individually on the parcels in that order, i~ is not considered a sale of tax

certificates in blocks.

9. Homestead Property and Propertv in Litigation: Tax Sale Certificates which must

be struck off to the county pursuant to Subsection 197.432(4), (homestead of less than

$100. 00) or tax roll items that are currently in tax assessment litigation prohibiting the

sale of a certificate, shall be left in sequence as they appear on the tax roll but do not have

to be described by the tax collector. When the tax collector comes to one of these

certificates or items, he may either skip the parcel, say "struck off the county at 18%" or

"no sale, in litigation" but the numerical order of the certificates or items must be kept in

sequence.

10. Identifving Certificates: The tax collector should describe each parcel by use of

some reasonable identification such as the sequence number published in the paper, the

tax roll LD. number or other identifying number. Tax collectors are not required to read

the legal description of the property covered by a tax sale certificate.

11. Bids: Each certificate shall be awarded to the person who will pay the taxes

interest, costs, charges and will demand the lowest rate of interest not in excess of the

maximum rate allowed by law. The tax collector may accept bids in even increments and

in fractional interest rates of one-quarter of 1 percent only. If there is no buyer, the

certifi~ate shall be issued to the county at the maximum rate ofinterest allowed by Jaw.

12. Rotational Bidding: Rotational bidding is a violation of the law. Rotational

bidding means any system, procedure or behavior, established or encouraged or allowed

to be established or encouraged, whereby two or more bidders at the sale, or any bidder

together will the tax collector, prevent or attempt to prevent free, open and competitive

bidding on each and every tax sale certificate. For example, ordered, sequences,

cooperative behavior by any two or more bidders, or by any bidder and the tax collector,

whereby certificates are allocated among the bidders at rates higher than what could

otherwise be obtained through free, open and competitive bidding could be classified as

rotational bidding. If a tax collector observes any type of rotational bidding, the tax

collector should take whatever measures are necessary to prevent the occurrence or

continuance of rotational bidding. These measures may include removing the bidder who

attempts to disrupt a sale. Comments such as "It's my tum", "This one's mine", "Let

providing disclosure to persons who are successful bidders; and who after two years

apply for a ta"X deed, and who at the courthouse public auction obtain multiple tax deeds,

for the purpose of resale to multiple purchasers. A seller oflots in property subdivided or

prcposed to be subdivided into 50 lots or more is required to be registered with the

Department of Business and Profession;! Regulation, Division of Florida Land Sales,

Condominiums, and Mobile Homes. Also, if a certificateholder purchases 5 certificates

in sub.:Evision that ccn:c::;:3 25 cr nore lots, and eventually obtained 5 tax deeds, he

would be subject to the provisions of section 498.022, Florida Statutes, regarding

standards for transacting land sales. Therefore, it is recommended that, when purchasing

certificates on lots or parcels in a subdivision, the Department ofBusiness and

Professional Regulation, Division of Florida Land Sales, Condominiums, and Mobile

Ho:nes be contacted at (850) 488-1631 to ascertain youuesponsibility with regard to

subsequent sales transactions of lots in that_ subdivision.

Realauctions Tax Certificate, Foreclosure and Tax Deed Auction Clients

1

TAX CERTIFICATE CLIENTS Florida (County Tax Collector)

1. Columbia County https://columbiafl.realtaxlien.com

2. Dixie County https://dixiefl.realtaxlien.com

3. Duval County https://duvalfl.realtaxlien.com

4. Escambia County https://escambiafl.realtaxlien.com

5. Flagler County https://flaglerfl.realtaxlien.com

6. Gadsden County https://gadsdenfl.realtaxlien.com/

7. Gilchrist County https://gilchristfl.realtaxlien.com

8. Hendry County https://hendryfl.realtaxlien.com

9. Hernando County https://hernandofl.realtaxlien.com

10. Lee County https://www.leetaxsale.com

11. Levy County https://levyfl.realtaxlien.com

12. Manatee County https://manateefl.realtaxlien.com

13. Orange County https://orangefl.realtaxlien.com

14. Palm Beach County https://palmbeachfl.realtaxlien.com

15. Polk County https://polkfl.realtaxlien.com

16. Putnam County https://putnamfl.realtaxlien.com

17. Santa Rosa County https://santarosafl.realtaxlien.com

18. Sarasota County https://sarasotafl.realtaxlien.com

19. Seminole County https://www.seminoletaxsale.com

20. Suwannee County https://suwannee.realtaxlien.com

21. Taylor County https://taylorfl.realtaxlien.com

22. Walton County https://waltonfl.realtaxlien.com


2

Arizona (County Treasurer)

1. Coconino County https://www.coconinotaxsale.com

2. Pinal County https://www.pinaltaxsale.com

3. Yavapai County https://www.yavapaitaxsale.com Colorado (County Treasurer)

1. Adams County https://www.adamstaxsale.com

2. Arapahoe County https://www.arapahoetaxsale.com

3. Archuleta County https://www.archuletataxsale.com

4. Denver City & County https://www.denvertaxsale.com

5. Douglas County https://www.douglascotaxsale.com

6. Grand County https://www.grandtaxsale.com

7. Mesa County https://www.mesataxsale.com

8. Morgan County https://www.morgantaxsale.com

9. Park County https://www.parktaxsale.com

10. Weld County https://www.weldtaxsale.com Illinois (County Treasurer)

1. Cook County https://www.cooktaxsale.com Maryland (County Tax Collector)

1. Charles County https://charlescountymd.realtaxlien.com

2. Harford County https://harfordcountymd.realtaxlien.com Nebraska (County Treasurer)

1. Douglas County https://www.douglastaxsale.com

3


New Jersey (County Tax Collector)

1. Borough of Red Bank https://www.redbanktaxsale.com

2. City of Linden https://www.lindentaxsale.com

3. City of Trenton https://www.trentontaxsale.com

4. Evesham Township https://www.eveshamtaxsale.com

5. Neptune Township https://www.neptunetaxsale.com

6. Township of Toms River https://www.tomsrivertaxsale.com FORECLOSURE AND TAX DEED AUCTION CLIENTS Florida (County Clerk of Courts)

1. Bay County Foreclosure Sales

visit http://www.bay.realforeclose.com/

2. Brevard County Tax Deed Sales

visit http://www.brevard.realforeclose.com

3. Broward County Foreclosures Sales

visit http://www.broward.realforeclose.com

4. Charlotte County Foreclosures and Tax Deed Sales

visit http://www.charlotte.realforeclose.com/

5. Citrus County Foreclosure Sales and Tax Deed Sales

visit http://www.citrus.realforeclose.com

visit http://www.citrus.realtaxdeed.com

6. Duval County Foreclosures Sales and Tax Deed Sales

visit http://www.duval.realforeclose.com

visit http://www.duval.realtaxdeed.com

7. Escambia County Foreclosures Sales

visit http://www.escambia.realforeclose.com

8. Hendry County Foreclosures and Tax Deed Sales (Coming Soon)

visit http://www.hendry.realforeclose.com (web site not functional)

9. Hillsborough County Foreclosures Sales

visit http://www.hillsborough.realforeclose.com

4


10. Indian River County Foreclosures Sales

visit http://www.indian-river.realforeclose.com

11. Lake County Tax Deed Sales

visit http://www.lake.realtaxdeed.com

12. Lee County Foreclosures Sales and Tax Deed sales

visit https://www.lee.realforeclose.com

visit https://www.lee.realtaxdeed.com

13. Manatee County Foreclosures and Tax Deed Sales

visit http://www.manatee.realforeclose.com/

14. Martin County Foreclosure Sales

visit http://www.martin.realforeclose.com

15. Marion County - Foreclosure Sales

visit http://www.marion.realforeclose.com

16. Miami-Dade County Foreclosures Sales and Tax Deed Sales (May 2013)

visit http://www.miamidade.realforeclose.com

17. Okaloosa County Foreclosures Sales

visit http://www.okaloosa.realforeclose.com

18. Orange County Foreclosures Sales and Tax Deed Sales (Coming Soon)

visit http://www.myOrangeClerk.realforeclose.com

visit http://www.Orange.realtaxdeed.com

19. Osceola County - Tax Deed Sales

visit http://www.osceola.realtaxdeed.com

20. Pasco County Foreclosures Sales

visit http://www.pasco.realforeclose.com

21. Pinellas County Foreclosures Sales and Tax Deed Sales

visit http://www.pinellas.realforeclose.com

visit http://www.pinellas.realtaxdeed.com

22. Polk County Foreclosures Sales and Tax Deed Sales

visit http://www.polk.realforeclose.com

visit http://www.polk.realtaxdeed.com

5


23. Sarasota County Foreclosures Sales

visit http://www.sarasota.realforeclose.com

24. Volusia County Foreclosure Sales (May 2013) and Tax Deed Sales (June 2013)

visit http://www.volusia.realforeclose.com

visit http://www.volusia.realtaxdeed.com

25. Walton County Foreclosures and Tax Deed Sales

visit http://www.walton.realforeclose.com

Michigan (Treasurers Office)

1. Wayne County Foreclosure Sales

No website

12:15 PM

04/09/13 Accrual Basis

ASSETS Current Assets

Realauction.com, LLC Balance Sheet

As of December 31 , 2012

Checking/Savings BOA Regular Checking BOA Regular Savings US Bank Regular Checking

Total Checking/Savings

Total Current Assets Fixed Assets

Accumulated Depreciation Computer Equipment Furniture & Equipment Leasehold Improvements Office & Computer Equipment Office Furniture Phone System Equipment

Total Fixed Assets Other Assets

Accumulated Amortization Website Construction-Asset

Total Other Assets

TOTAL ASSETS LIABILITIES & EQUITY

Liabilities Long Term Liabilities

Accrued Interest Long Term Liabilities

Dec 31, 12

152,293.25 202,334 .30

8 ,1 92.62

362,820 .17

362,820.1 7

-41 2,966.00 290, 118 .16

33,525.67 43 ,9 77.14 48,266.61 17,319.75 28,184.55 48 ,425.88

-2,078,4 70.00 2,129,516.91

51 ,046.91

462,292.96

150 ,043.48

Loans -Adila Enterprises, SA. 2,625,000.00 Total Long Term Liabilities

Total Long Term Liabilities

Total Liabilities Equity

Capital Stock Capital Stock-Adila Enterprises Capital Stock-LLC partners Capital Stock-Lloyd

Total Capital Stock Retained Earnings Net Income

Total

Documents

01 Unraveling the Tangled Web of Realauction Ownership