drummond crime fraud response

{B2062211}

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

DRUMMOND COMPANY, INC.,

Plaintiff ,

vs.

TERRENCE P. COLLINGSWORTH, individually and as agent of Conrad & Scherer, LLP; and CONRAD & SCHERER, LLP,

Defendants .

)))))))))))))

Case No. 2:11-cv-3695-RDP

Contains information designated as

“Confidential Information” under the

Protective Order.

DRUMMOND COMPANY, INC.’S BRIEF REGARDING THE ISSUES AND

QUESTIONS RAISED BY THE COURT ON SEPTEMBER 3, 2015

William Anthony Davis, III (ASB-5657-D65W) Sara E. Kropf H. Thomas Wells, III (ASB-4318-H62W) LAW OFFICE OF SARA KROPF PLLC

Benjamin T. Presley (ASB-0136-I71P) 1001 G St. NW, Suite 800 STARNES DAVIS FLORIE LLP Washington, DC 20001 P.O. Box 59812 (202) 627-6900 Birmingham, AL 35259 (205) 868-6000 fax: (205) 868-6099

Attorneys for Drummond Company, Inc.

FILED 2015 Sep-29 PM 06:02

U.S. DISTRICT COURT

N.D. OF ALABAMA

Case 2:11-cv-03695-RDP-TMP Document 393 Filed 09/29/15 of 43

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TABLE OF CONTENTS

TABLE OF AUTHORITIES.................................................................................................................. iii

ARGUMENT .......................................................................................................................................1

I. APPLICATION OF THE CRIME-FRAUD EXCEPTION TO COLLINGSWORTH. .................3

II. APPLICATION OF THE CRIME-FRAUD EXCEPTION TO CONRAD & SCHERER ..............4

A. There is no legal basis for separating Conrad & Scherer from Mr. Collingsworth for purposes of the crime-fraud exception. ..........................5

B. There is sufficient evidence to independently justify the application of the crime-fraud exception to the firm. .............................................................13

1. Conrad & Scherer is deemed to have knowledge of the payments to Blanco, El Tigre and Samario as a matter of law. .....................13

2. Conrad & Scherer is equally responsible for the fraud on this Court. .............................................................................................17

C. If this Court has any doubt as to the application of the crime-fraud exception to Conrad & Scherer, it should conduct an in camera review of documents to determine whether there is a prima facie case of the firm’s involvement in the crimes and fraud at issue.............................................19

III. THE CRIME-FRAUD EXCEPTION APPLIES TO COMMUNICATIONS IN OTHER

LITIGATION INVOLVING DEFENDANTS. ...................................................................22

A. Misrepresentations in other litigation ........................................................22

B. Allegedly privileged communications from these state-court cases are “related to” the crimes and fraud here. ......................................................23

IV. DEFENDANTS’ CRIMES AND FRAUD ARE CERTAINLY NOT “OVER AND FIXED” –THEY ARE CONTINUING..........................................................................................26

CONCLUSION...................................................................................................................................35

CERTIFICATE OF SERVICE ...............................................................................................................36


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TABLE OF AUTHORITIES

Cases Page(s)

American Cent. Life Ins. Co. v. First Nat’l Bank,90 So. 294 (Ala. 1921).........................................................................................................7

Beck v. Deloitte & Touche, Deloitte, Haskins & Sells, Ernest & Young, L.L.P.,144 F.3d 732 (11th Cir. 1998) .............................................................................................9

Byrne v. Nezhat,261 F.3d 1075 (11th Cir. 2001) ...........................................................................................6

Chevron Corp. v. Salazar,275 F.R.D. 437 (S.D.N.Y. 2011) .......................................................................................12

Chudasama v. Mazda Motor Corp.,123 F.3d 1353 (11th Cir. 1997) ...........................................................................................6

Connecticut Fire Ins. Co. v. Commercial Nat. Bank of San Antonio,87 F.2d 968 (5th Cir. 1937) .................................................................................................3

Cox v. Adm’r U.S. Steel & Carnegie, 17 F.3d 1386 (11th Cir.) opinion modified on reh’g, 30 F.3d 1347 (11th Cir. 1994)................................8, 11, 20, 21

CPR Assoc., Inc. v. Se. Penn. Chapter of Am. Heart Ass’n,No. CIV. A. 90-3758, 1992 WL 229296 (E.D. Pa. Sept. 9, 1992) ......................................6

Craig v. A.H. Robins Co.,790 F.2d 1 (1st Cir. 1986)..................................................................................................24

Curtis, Collins & Holbrook Co. v. United States,262 U.S. 215 (1923).............................................................................................................7

Curtis v. Innerarity,47 U.S. 146 (1848).............................................................................................................11

Dussouy v. Gulf Coast Inv. Corp.,660 F.2d 594 (5th Cir. 1981) ...............................................................................................8

Elle v. Babbitt,259 Or. 590, 488 P.2d 440 (Or. 1971) ...............................................................................12

Fed. Deposit Ins. Corp. v. Braemoor Associates,686 F.2d 550 (7th Cir. 1982) .............................................................................................12


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First Ala. Bank v. First State Ins. Co., Inc.,899 F.2d 1045 (11th Cir. 1990) ...........................................................................................8

Grand Union Co. v. United States,696 F.2d 888 (11th Cir. 1983) ...........................................................................................12

Gutter v. E.I. Dupont De Nemours,124 F. Supp. 2d 1291 (S.D. Fla. 2000) ...................................................................... passim

Haines v. Ligget Group,975 F.2d 81 (3d Cir. 1992).................................................................................................21

Helton v. AT & T Inc.,709 F.3d 343 (4th Cir. 2013) .............................................................................................17

In the Matter of Grand Jury (OO-2H),211 F. Supp. 2d 564 (M.D. Pa. 2002) ................................................................................25

In re Chevron Corp.,633 F.3d 153 (3d Cir. 2011)...............................................................................................20

In re Grand Jury (G.J. No. 87-03-A),845 F.2d 896 (11th Cir. 1988) .............................................................................................3

In re Grand Jury Investigation (Schroeder),842 F.2d 1223 (11th Cir. 1987) ...............................................................................3, 24, 25

In re Grand Jury Investigation,974 F.2d 1068 (9th Cir. 1992) ...........................................................................................20

In re Grand Jury Proceedings in Matter of Fine,641 F.2d 199 (5th Cir. 1981) .............................................................................................12

In re Grand Jury Subpoena,No. 10-127-02, 2012 WL 5587438 (E.D. Pa. Nov. 13, 2012)...........................................20

In re Grand Jury Subpoenas,144 F.3d 653 (10th Cir. 1998) ...........................................................................................24

In re Harmon,435 B.R. 758 (Bankr. N.D. Ga. 2010) .................................................................................6

In re Impounded Case (Law Firm),879 F.2d 1211 (3d Cir. 1989).............................................................................................13


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In re Sealed Case I,676 F.2d 793 (D.C. Cir. 1982) .............................................................................................3

In re Sealed Case,754 F.2d 395 (D.C. Cir. 1985) ...........................................................................................25

McAndrew v. Lockheed Martin Corp.,206 F.3d 1031 (11th Cir. 2000) .......................................................................................8, 9

Smith v. Grand Bank & Trust of Florida,193 F. App’x 833 (11th Cir. 2006) ......................................................................................5

Strang v. Bradner,114 U.S. 555, 5 S.Ct. 1038 (1885).....................................................................................14

Tindall v. H & S Homes, LLC,757 F. Supp. 2d 1339 (M.D. Ga. 2011) .............................................................................20

United States v. Moazzeni,906 F. Supp. 2d 505 (E.D. Va. 2012) ................................................................................25

United States v. One Parcel of Real Estate,852 F. Supp. 1013 (S.D. Fla. 1994) ...................................................................................12

United States v. Suarez,820 F.2d 1158 (11th Cir. 1987) ...........................................................................................1

United States v. Zolin,491 U.S. 554, 109 S. Ct. 2619 (1989)................................................................................20

Winant v. Bostic,5 F.3d 767 (4th Cir. 1993) .................................................................................................12

Wolters Kluwer Fin. Serv. v. Scivantage,564 F.3d 110 (2d Cir. 2009).................................................................................................6

Xanadu of Cocoa Beach, Inc. v. Zetley,822 F.2d 982 (11th Cir. 1987) .....................................................................................15, 16

Statutes and Rules Page(s)

Ala. Code § 10A-8-3.05(a) ............................................................................................................10

Ala. Code § 10A-8-1.03.................................................................................................................10

Ala. Code § 10A-8-3.01(1) ............................................................................................................10


vi{B2062211}

Fed. R. Civ. P. 11(c)(1)....................................................................................................................6

Fla. Stat. Ann. § 620.615 ...............................................................................................................16

Fla. Stat. Ann. § 620.8102(6).........................................................................................................10

Fla. Stat. Ann. § 620.8104 Comments ...........................................................................................10

Fla. Stat. Ann. § 620.8301(1).........................................................................................................10

Fla. Stat. Ann. § 620.8305(1).........................................................................................................10

Other Authorities Page(s)

3 William Meade Fletcher, Fletcher Cyclopedia of the Law of Private Corporations § 790 (1994)....................8, 9, 17

18B Am. Jur. 2d Corporations § 1497 ..........................................................................................17

Mechem, A Treatise on the Law of Agency, 2d ed. vol. 2, § 1802 (1982).......................................9

Partnership Law & Practice § 8:34 (2014) .....................................................................................9

Wright & Miller, 8B Fed. Prac. & Proc. Civ. § 2177 (3d ed.)......................................................17


1{B2062211}

We begin by noting that the privilege is not a favored evidentiary concept in the law since it serves to obscure the truth, and it should be construed as narrowly as is consistent with its purpose.

United States v. Suarez, 820 F.2d 1158, 1160 (11th Cir. 1987). Despite Defendants’ contentions

that the attorney-client privilege and work-product doctrines are so “sacrosanct” as to be

essentially impenetrable, see, e.g., Doc. 391 (Sept. 1-3 Hrg. Tr.) at 762, neither privilege is

favored under the law as they are both in derogation of the most sacred principle of the courts:

the search for the truth. Drummond has been attempting to discover the truth about Defendants’

witness payments for over four years, only to be met with obfuscation and outright lies. What is

worse, this Court has been lied to repeatedly during that time.

The Court has already heard evidence on the crime-fraud issue, and Drummond submits

it is more than enough to invoke the crime-fraud exception. The Court did not request re-

argument as to whether a prima facie showing has been made concerning the crime-fraud

exception as it applies to Mr. Collingsworth, so Drummond does not present such argument

herein. Rather, Drummond writes to respond to the specific questions asked by the Court:

1. Assuming the Court finds the crime-fraud exception applicable to Mr. Collingsworth, what steps should be taken in terms of review and production of documents? Doc. 391 (Sept. 1-3 Hrg. Tr.) at 753:19-754:4.

2. Assuming the Court finds the crime-fraud exception applicable to Mr. Collingsworth, how does that impact claims of privilege relied upon by Conrad & Scherer? Id. Alternatively, if a prima facie showing has not been made lifting the privilege as to Conrad & Scherer, has the lower threshold showing been made such that an in camera review should be done to assist the Court in determining whether a prima facie showing can be made as to the law firm? Id. at 754:5-15.

3. Assuming the crime-fraud exception applies, to either or both Defendants, how does that impact the review of allegedly privileged documents from other litigation where similar misrepresentations have been made? Id. at 754:16-23.

4. And finally, the Court requested Drummond to respond to Defendants’ contention that the alleged crimes or fraud at issue are “over and fixed.” Id. at 769:16-18.

Most of the questions posed by the Court deal with whether the crime-fraud exception


2{B2062211}

should be applied to Mr. Collingsworth (the agent), but not Conrad & Scherer (the principal).

There is no dispute that the numerous representations regarding the scope of Defendants’ witness

payments were made by and on behalf of both Defendants.1 There is also no question that those

representations were categorically false.2 The question to be answered as it relates to Conrad &

Scherer’s fraud on the court is: under the law, did Conrad & Scherer, an artificial legal entity,

“know” those representations were false? The answer is a resounding, “Yes.”

There is no factual or legal basis on which to draw a line between the Defendants for

purposes of the crime-fraud exception. The undisputed evidence, discussed in detail below,

establishes that Collingsworth acted as an agent and partner of Conrad & Scherer at all times

relevant to the crime-fraud inquiry. Indeed, Collingsworth continues to act in that capacity to

this very day, and Conrad & Scherer has done absolutely nothing to separate itself from him. On

September 17, 2015, Collingsworth and Conrad & Scherer served Drummond with an

application for a sixty day extension of time in which to file a petition for certiorari with the

United States Supreme Court in the Balcero case. Ex. 1. In that petition, Collingsworth and

Conrad & Scherer will ask the highest court in this country to reverse this Court’s dismissal of

the Balcero case. In doing so, Collingsworth and Conrad & Scherer will rely on an appellate

record that, because of the very fraud at issue, is completely devoid of any evidence that the

witnesses in that case were paid hundreds of thousands of dollars.

Collingsworth was and still is Conrad & Scherer’s designated agent for the purpose of the

1

Doc. 389 (Sept. 1-3 Hrg. Tr.) at 199:23-200:1 (““Q Now, again, this brief, like everything else in this case, every other filing has been filed on behalf of both defendants, correct, yourself and Conrad & Scherer? A [Mr. Collingsworth] It appears to be so, yes.”).

2 Doc. 372 (June 15, 2015 Hrg. Tr.) at 12:21-13:5 (with respect to the representations that there were only three witnesses paid in the Drummond cases and it was only in response to a security threat, “we now know that those representations were categorically false”); Doc. 390 (Sept. 1-3 Hrg. Tr.) at 454:3-4 (“THE COURT: . . . That’s the accurate way, I think, to characterize it. It’s not a mistake. It was a misrepresentation.”).


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Balcero case, and through this agency relationship Conrad & Scherer is still seeking to gain a

tremendous financial reward. “The rule then to be applied is that the principal cannot take the

benefit of his agent’s act without taking also the burdens resulting from the agent’s knowledge

and intentions.” Connecticut Fire Ins. Co. v. Commercial Nat. Bank of San Antonio, 87 F.2d

968, 969 (5th Cir. 1937) (citations omitted).

I. APPLICATION OF THE CRIME-FRAUD EXCEPTION TO COLLINGSWORTH

The Court first requested briefing on the following question: “First, if I decide the crime-

fraud exception applies with respect to Mr. Collingsworth, what steps should I take after that?”

Doc. 391 (Sept. 1-3 Hrg. Tr.) at 753:19-21. The answer is relatively straightforward. All

allegedly privileged documents and communications in any way related to Defendants’ witness

payment scheme, and their representations to Drummond, this Court, and other courts about such

payments, should be reviewed in camera to identify documents that “relate to” the crimes and

fraud at issue.3 In re Grand Jury (G.J. No. 87-03-A), 845 F.2d 896, 898 (11th Cir. 1988)

(citation omitted). Whether a document or communication is “related to” a crime or fraud should

not be interpreted “restrictively.” In re Grand Jury Investigation (Schroeder), 842 F.2d 1223,

1227 (11th Cir. 1987). “Furthermore, the determination whether the requested material is

sufficiently related to the [crimes and fraud] must take into account that [Drummond] does not

know precisely what the material will reveal or how useful it will be.” Id. (citing In re Sealed

Case I, 676 F.2d 793, 814 n.83 (D.C. Cir. 1982)).4

All documents “related to” witness bribery, suborning perjury, and Defendants’ fraud on

3 As stated previously, the specific crimes at issue are witness bribery and suborning perjury. The fraud at issue is the egregious fraud on Drummond and the Court perpetrated by the Defendants in both Balcero and this case.

4 Drummond previously briefed the issue of what “related to” – i.e., the second prong of the Schroeder test – means in the context of the crime-fraud exception. Doc. 355 at 13-21. Drummond does not reiterate those arguments here, but rather incorporates them by reference.


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Drummond and the Court should be produced to Drummond over Defendants’ work product and

attorney-client privilege objections. Examples of documents that “relate to” the crimes and fraud

at issue include the following:

! All documents and communications “relating to” payments to witnesses, as well as documents and communications relating to the allegations, testimony and credibility of those witnesses. This includes communications between Collingsworth and third parties, such as Secure Pointe, Albert van Bilderbeek and litigation financiers;

! All documents and communications “relating to” Ivan Otero and Francisco Ramirez and their dealings with witnesses (or their families, lawyers, agents, representatives or intermediaries);

! All documents and communications “relating to” the disclosure or non-disclosure of witness payments in Balcero and this defamation case;

! All documents and communications up to November 17, 2014 “relating to” the disclosure or non-disclosure of the payments to El Tigre and Samario. This includes communications between Collingsworth and his counsel in this case, and specifically includes all communications concerning the redaction of documents to hide these payments as well as communications regarding the “deps in the can” email which was printed by Conrad & Scherer on June 25, 2014 and provided to counsel;

! All documents and communications up to January 9, 2015 “relating to” the disclosure or non-disclosure of the payments to Blanco. This includes communications between Collingsworth and his counsel in this case.

II. APPLICATION OF THE CRIME-FRAUD EXCEPTION TO CONRAD & SCHERER

The Court next requested briefing on the issue of whether a sufficient showing has been

made to invoke the crime-fraud exception as it relates to Conrad & Scherer, or, alternatively,

whether a sufficient showing has been made to trigger an in camera review to inform the Court’s

decision on whether the crime-fraud exception applies as to the law firm. First, there is no

precedent for the proposition that, in the crime-fraud context, the hornbook law of agency no

longer applies. Rather, the knowledge, intent, and actions of Mr. Collingsworth (Conrad &

Scherer’s designated agent) are, as a matter of law, also the knowledge, intent, and actions of


5{B2062211}

Conrad & Scherer for purposes of the crime-fraud analysis. Second, even if the Court were

inclined to look beyond Mr. Collingsworth, the evidence reflects substantial involvement by

numerous other members of Conrad & Scherer in the witness payments at issue, and the true

scope of the payments (which Conrad & Scherer undisputedly misrepresented to Drummond and

this Court) is apparent from the firm’s own business records. Third, at the very least, there has

been a sufficient showing as to Conrad & Scherer to merit an in camera inspection to inform the

Court’s decision as to application of the crime-fraud exception.

A. There is no legal basis for separating Conrad & Scherer from Mr.

Collingsworth for purposes of the crime-fraud exception.

Defendants will no doubt repeat their refrain that “[b]ad faith cannot be imputed to the

law firm, which is a separate party in this case,” Doc. 364 at 2, and therefore the application of

the crime-fraud exception to Collingsworth has no bearing on whether it also applies to the firm.

See also

Defendants are wrong for a multitude of reasons.

As a threshold matter, none of the cases Defendants cited in support of this proposition

address the crime-fraud exception. Doc. 282 (Defs’ Corrected Responses to Drummond’s

Proposed Findings of Fact) at pp. 224-226. Two of the cases do not even discuss the imputation

of bad faith to a firm for actions of one of its partners. The two cases that do contain such a

discussion involve law firms or partners in the practicing context, not as parties: 5

5 Even in the context of practicing attorneys and sanctions (as opposed to the applicability of the crime-fraud exception to an attorney and law firm involved as parties to a litigation), the Eleventh Circuit has found significant in the analysis of the bad faith of the law firm that the violating attorney “was the only attorney from the firm involved in” the case and “was terminated from the firm during the litigation.” Smith v. Grand Bank & Trust of Florida, 193 F. App’x 833, 838-39 (11th Cir. 2006). This is a far cry from the facts of this case, as numerous Conrad & Scherer attorneys and employees were involved in the payments to Balcero witnesses, and Mr. Collingsworth is still Conrad & Scherer’s designated agent for prosecuting the Balcero case. Notably, despite Defendants’ argument to the contrary, courts in the Eleventh Circuit have imputed the bad faith misconduct of a


6{B2062211}

Byrne v. Nezhat, 261 F.3d 1075, 1123 (11th Cir. 2001), held that sanctionable conduct by an attorney cannot automatically be imputed to that attorney’s client where there was no evidence that the client knew that her attorney was pursuing a frivolous or baseless claim. There is no discussion whatsoever of the imputation of bad faith to a law firm based on the conduct of one of its partners. This is also inconsistent with the law of the crime-fraud exception, which can be applied to vitiate the attorney-client privilege even if the client did not know the attorney was engaging in a crime or fraud. See pp. 12-13, infra.

Chudasama v. Mazda Motor Corp., 123 F.3d 1353, 1371 (11th Cir. 1997), reversed terminating sanctions against a defendant because the district court failed to recognize that compliance with the discovery requests at issue was literally impossible for Mazda. There is no discussion whatsoever of the imputation of bad faith to a law firm based on the conduct of one of its partners.

Wolters Kluwer Fin. Serv. v. Scivantage, 564 F.3d 110, 114 (2d Cir. 2009), affirmed a sanction against a senior partner representing the plaintiff for the improper use of a Rule 41 voluntary dismissal and disregard of a Protective Order, but reversed the imposition of sanctions against the firm because the district court did not make a finding that the firm acted in bad faith.

CPR Assoc., Inc. v. Se. Penn. Chapter of Am. Heart Ass’n, No. CIV. A. 90-3758, 1992 WL 229296, at *11 (E.D. Pa. Sept. 9, 1992), again in the practicing context, the court found that neither the attorney (Mr. Wiles) nor his firm (Stevens & Lee) should be sanctioned under Rule 37 or the court’s inherent power because the court did not find that they had acted in bad faith. The court did impose sanctions against Wiles under Rule 11, but noted that “Defendants do not seek Rule 11 sanctions against the law firm of Stevens & Lee.” Id. at *5.6

Defendants have not cited any authority holding that Collingsworth’s actions and knowledge are

not attributable to the firm for purposes of the application of the crime-fraud exception.

lawyer to his law firm in the practicing context. See In re Harmon, 435 B.R. 758, 765 (Bankr. N.D. Ga. 2010) (“In light of the Local Bankruptcy Rules and based on the parties’ testimony, the Court finds that Ms. Hong and Mr. Black acted in bad faith and that their actions should be imputed to the Semrad law firm.”). But as this Court has recognized, the issue of Conrad & Scherer’s bad faith for purposes of sanctions is not yet before the Court. The Court is determining the crime-fraud exception, and deciding what additional documents can be discovered and used to inform the Court’s future analysis of Conrad & Scherer’s bad faith. Doc. 390 (Sept. 1-3 Hrg. Tr.) at 464:15-465:6 (“THE COURT: . . . Mr. Collingsworth [was] kind of the one running the show, even on behalf of the parties. MR.

WELLS: On behalf of the firm. THE COURT: Yes, the parties, the firm and himself. Now, that does implicate the firm. I understand your point there. That may implicate the firm as far as crime-fraud. It may not implicate the firm as far as sanctions. I just don’t know. But we’re not there yet. What I’m trying to do is bifurcate this process where we decide crime-fraud first, and if you’re entitled to that discovery, that informs you better about your argument about sanctions. . . .”).

6 The CPR Assoc. case was also decided prior to the 1993 amendments to Rule 11, which now provides that “[a]bsent exceptional circumstances, a law firm must be held jointly responsible for a violation committed by its partner, associate, or employee.” Fed. R. Civ. P. 11(c)(1) (emphasis added).


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Indeed, such a proposition is wholly contrary to well-established principles of agency. It

is hornbook law that the knowledge and intent of an agent who commits a fraud while acting in

the line and scope of his agency are imputed to the principal. See Curtis, Collins & Holbrook

Co. v. United States, 262 U.S. 215, 222-24 (1923) (knowledge and intent of agent who secured

fraudulent titles was imputed to his principal regardless of whether, “as between him and the

company, in securing fraudulent titles for the company, he was violating his instruction”);

Gutter v. E.I. Dupont De Nemours, 124 F. Supp. 2d 1291, 1312 (S.D. Fla. 2000) (knowledge and

intent of agents was fully imputable to their principal, Dupont, in finding the crime-fraud

exception applied to Dupont); American Cent. Life Ins. Co. v. First Nat’l Bank, 90 So. 294, 294

(Ala. 1921) (“[W]hen, in the course of his employment, an agent acquires knowledge or receives

notice of any fact material to the business he is employed to transact, his principal is deemed to

have notice of such fact.”). Mr. Collingsworth committed the underlying acts that form the basis

for the application of the crime-fraud exception – witness payments and misrepresentations to

this Court – while acting within the line and scope of his employment at Conrad & Scherer.

Accordingly, a finding that the crime-fraud exception applies to Collingsworth means that it also

applies to Conrad & Scherer. Id.

The Gutter case illustrates exactly why Defendants’ argument to the contrary is

unavailing.

Defendants’ new

position that Mr. Collingsworth’s conduct cannot be imputed to Conrad & Scherer for purposes

of the crime-fraud exception is not only unsupported, it is irreconcilable with the exact opposite

position Defendants argued to this Court a year ago.


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Similar to Conrad & Scherer in this case, the defendant in Gutter – Dupont – argued that

the knowledge and fraudulent intent of both its in-house counsel and its outside attorneys could

not be imputed to it for purposes of the crime-fraud exception:

DuPont argues that the Special Master erred by setting forth “theories” of potential fraud based on erroneous legal principles of imputed knowledge. Specifically, DuPont contends that the Special Master’s discussion of the imputation of [DuPont’s outside counsel at Alston & Bird, LLP]’s knowledge and of in-house counsels’ knowledge to other attorneys and to DuPont, as discussed on pages 13 – 15 of the October 13, 1998 Report and Recommendation, is legally flawed.

Gutter, 124 F. Supp. 2d at 1309. Relying on basic principles of agency, the Gutter court rejected

this argument, and held that the crime-fraud exception applied to allow discovery of DuPont’s

purportedly privileged communications and documents:

Under basic agency principles, the acts of a corporation’s agents are considered to be those of a single legal actor. McAndrew v. Lockheed Martin Corp., 206 F.3d 1031, 1036 (11th Cir. 2000) (citing Dussouy v. Gulf Coast Inv. Corp., 660 F.2d 594, 603 (5th Cir. 1981)). Generally, “a corporation (principal) will be vicariously responsible for the wrongful acts of its employees (agents) when the acts are: (1) related to and committed within the course of employment; (2) committed in furtherance [of the business] of the corporation; and (3) authorized or subsequently acquiesced in by the corporation.” Cox v. Administrator United

States Steel & Carnegie, 17 F.3d 1386, 1406–07 (11th Cir. 1994) (discussing respondeat superior liability under RICO). Thus, a corporation is charged with constructive knowledge, regardless of its actual knowledge, of all material facts of which its officer or agent receives notice or acquires knowledge while acting within the course of employment and within the scope of his or her authority, even though the officer or agent does not in fact communicate the knowledge to the corporation. See 3 William Meade Fletcher, Fletcher Cyclopedia of the Law

of Private Corporations § 790 (1994). The law conclusively presumes that the agent has disclosed the knowledge or information to his or her principal, and charges the principal accordingly. Id. One of the justifications advanced for this rule is that “the agent, while acting within the scope of his agency is, as to matter embraced within the agency, the principle himself or the alter ego of the principal. See Holmes, The Common Law, 232 (1890).” First Ala. Bank v. First State Ins.

Co., Inc., 899 F.2d 1045, 1061 n.8 (11th Cir. 1990). Courts impose constructive knowledge upon a principal to avoid the injustice which would result if the principal could have an agent conduct business for him and at the same time shield himself from the consequences that would ensue from knowledge of conditions or notice of the rights and interests of others had the principal


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transacted his own business in person. See id. (citing Mechem, A Treatise on the

Law of Agency, 2d ed. vol. 2, § 1802 (1982)). The knowledge necessary to adversely affect the corporation need not be possessed by a single corporate agent; the cumulative knowledge of several agents can be imputed to the corporation. 3 Fletcher, Fletcher Cyclopedia at § 790. Without such an interpretation, “corporations could avoid the adverse implications of the rule by restricting the intracorporate flow of information.” Id.

Id. See also Beck v. Deloitte & Touche, Deloitte, Haskins & Sells, Ernest & Young, L.L.P., 144

F.3d 732, 736 (11th Cir. 1998) (“[T]he knowledge of a corporate officer whose fraud or

misbehavior brings short-term gain to the corporation, or merely injures a third party, is imputed

to the corporation, even if the officer’s misbehavior ultimately causes the corporation’s

insolvency.”); McAndrew v. Lockheed Martin Corp., 206 F.3d at 1039 (“[T]he original purpose

of the corporate entity fiction was to expand rather than shrink corporate responsibility by

making a corporation answer for the negligent acts of its agents. [. . .] The fiction was never

intended to prohibit the imposition of criminal liability by allowing a corporation or its agents to

hide behind the identity of the other.”) (citations omitted).

Although often discussed by courts in the context of corporations, these same principles

of agency apply equally to a partnership such as Conrad & Scherer. See United States v. A & P

Trucking Co., 358 U.S. 121, 126-27 (1958) (finding the same principles applicable to corporate

criminal liability for acts of their agents apply to partnerships: “The business entity cannot be

left free to break the law merely because its owners, stockholders in the Adams case, partners in

the present one, do not personally participate in the infraction. . . . We hold, therefore, that a

partnership can violate each of the statutes here in question quite apart from the participation and

knowledge of the partners as individuals.”); Partnership Law & Practice § 8:34 (2014) (“Because

each partner is a general agent of the partnership, a partner’s knowledge is treated, in most cases,

as knowledge by the partnership. If a partner acts for the partnership with knowledge, that


10{B2062211}

knowledge is imputed to the partnership. . . . [K]nowledge acquired while a partner, even if not

‘then present to his mind,’ is imputed to the partnership.”) (emphasis added).7

Assuming that the crime-fraud exception applies to Collingsworth, the undisputed

evidence establishes that Collingsworth was, at all relevant times, acting in the line and scope of

his authority as a partner at Conrad & Scherer. Doc. 282 at ¶ 76 (undisputed that Collingsworth

has been the Managing Partner of the firm’s Washington, D.C. office since 2008); Doc. 390

(Sept. 1-3 Hrg. Tr.) at 413:8-21; 414:17-24. The firm specifically delegated to him the authority

to prosecute Balcero. Id. at 423:17-21 (“Q. And you said that you delegated to Mr.

Collingsworth responsibilities in that case primarily, to be primarily responsible? A. More than

primary, but, yes, he ran the case. It was his case.”); id. at 424:19-21 (“Q. Mr. Collingsworth

was given that authority by you as managing partner and by the law firm? A. Yes, sir.”). He

was therefore unquestionably acting within the scope of his agency when paying witnesses, and

concealing those payments, in his prosecution of the Balcero case. Collingsworth was acting for

the benefit of the firm by prosecuting claims against Drummond which, if successful, will result

in a financial benefit for the firm. Id. at 423:1-16; 425:3-6. In that capacity, Collingsworth

offered, confirmed and facilitated payments to witnesses, including Blanco, Samario and El

Tigre, and he therefore indisputably possessed knowledge of the fact that Blanco, Samario and El

Tigre were paid. That knowledge is also the knowledge of Conrad & Scherer, which as an entity

can only act through its agents.

7 Indeed, the partnership acts of both Florida and Alabama explicitly state that principals of agency apply to partnerships. Fla. Stat. Ann. § 620.8104 Comments (“The principles of law and equity supplement RUPA unless displaced by a particular provision of the Act. [. . .] These supplementary principles encompass . . . the law of agency”); see also Fla. Stat. Ann. § 620.8301(1) (“Each partner is an agent of the partnership for the purpose of its business.”); Ala. Code § 10A-8-3.01(1) (same); Fla. Stat. Ann. § 620.8305(1) (partnership liable for the misconduct of its partners acting in the ordinary course of business); Ala. Code § 10A-8-3.05(a) (same); Fla. Stat. Ann. § 620.8102(6) (knowledge of a partner is “effective immediately” as knowledge of the partnership); Ala. Code § 10A-8-1.03 (same).


11{B2062211}

Moreover, Conrad & Scherer has done absolutely nothing to separate itself from

responsibility for Mr. Collingsworth’s actions as its agent. To the contrary, Conrad & Scherer is

still allowing Mr. Collingsworth to act as its agent in continuing to prosecute the Balcero case in

the highest court in the land. Regardless of whether the Court believes Conrad & Scherer had its

head buried in the sand previously, it is now indisputably aware of Mr. Collingsworth’s conduct

in Balcero and in this case, but it is still maintaining, and hoping to benefit from, the agency

relationship.8 A “principal cannot ratify a transaction of his agent in part, and repudiate it as to

the rest.” Curtis v. Innerarity, 47 U.S. 146, 162 (1848); see also Cox v. Adm’r U.S. Steel &

Carnegie, 17 F.3d 1386, 1409 (11th Cir.) opinion modified on reh’g, 30 F.3d 1347 (11th Cir.

1994) (“A reasonable jury could infer that the Union’s failure to act, after having been placed on

notice of the negotiators’ betrayal by the allegations, constituted ratification of their

misconduct.”).

Under these circumstances, Conrad & Scherer “is charged with constructive knowledge,

regardless of its actual knowledge, of all material facts of which its officer or agent receives

8 See Doc. 390 (Sept. 1-3 Hrg. Tr.) at 425:3-12 (“Q. And Mr. Collingsworth and you and other members of the firm were going to benefit in the event there had been a recovery [in Balcero]? A. That’s right. Q. But in the event Mr. Collingsworth does something wrong, it is not the firm or you. It’s only Mr. Collingsworth. Is that what you’re saying? A. Sir, with respect to sanctions and bad faith? Q. Yes. A. Yes, that’s exactly right.”).


12{B2062211}

notice or acquires knowledge while acting within the course of employment and within the scope

of his or her authority, even though the officer or agent does not in fact communicate the

knowledge to the corporation.” Gutter, 124 F. Supp. 2d at 1309. Stated differently,

“[k]nowledge of or consent to an illegal act may be imputed to a partnership or corporation only

when the knowledge was obtained or the consent given by an agent acting within the scope of his

employment and for the benefit of the partnership or corporation.” United States v. One Parcel

of Real Estate, 852 F. Supp. 1013, 1039 (S.D. Fla. 1994) (citing Grand Union Co. v. United

States, 696 F.2d 888, 891 (11th Cir. 1983)). Applying these well-settled legal principles to the

facts, a finding that the crime-fraud exception applies to Collingsworth necessarily means that it

also applies to the firm.9

Finally, federal courts uniformly hold that the crime-fraud exception is not defeated by

the claimed or actual ignorance of the crime or fraud by one holder of the privilege. For

example, the crime-fraud exception applies even where an attorney is totally ignorant of the

client’s intent to commit a crime or fraud. See In re Grand Jury Proceedings in Matter of Fine,

641 F.2d 199, 203 (5th Cir. 1981) (crime-fraud exception applies to pierce the attorney-client

privilege “regardless of whether the attorney knows his client’s true motivations”). Similarly,

the crime-fraud exception applies where a lawyer commits a crime or perpetrates a fraud without

the knowledge of his or her client. Chevron Corp. v. Salazar, 275 F.R.D. 437, 452 (S.D.N.Y.

2011) (“[E]ven though the privilege belongs to the client, it may be pierced by wrongdoing of

9 Other federal circuit courts are in accord. See Winant v. Bostic, 5 F.3d 767, 775 (4th Cir. 1993) (“Therefore any fraud committed by Bostic while carrying out the ordinary course of the partnership’s business is imputable to Page who is thus liable for damages to the same extent that Bostic is.”); Fed. Deposit Ins. Corp. v. Braemoor Associates,686 F.2d 550, 557 (7th Cir. 1982) (“This is not to say that the actual violation of the Illinois Banking Act was authorized; we accept the district court’s finding that the other venturers did not know of any such violation. But section 13 of the Uniform Partnership Act requires only that the partner who commits the wrong be acting with the authorization of his partners when he does so - not that the violation itself be authorized, see Elle v. Babbitt, 259 Or. 590, 488 P.2d 440, 446-47 (1971) - and Paul Bere was acting with that authorization when he committed the violation; he was not off on some frolic of his own.”).


13{B2062211}

the attorney, even without the knowledge or intent of the client.”) (collecting cases); In re

Impounded Case (Law Firm), 879 F.2d 1211, 1213-14 (3d Cir. 1989) (“It is not apparent to us

what interest is truly served by permitting an attorney to prevent this type of investigation of his

own alleged criminal conduct by asserting an innocent client’s privilege with respect to

documents tending to show criminal activity by the lawyer. On the contrary, the values

implicated, particularly the search for the truth, weigh heavily in favor of denying the privilege

in these circumstances.”); see also Doc. 355 at Section I. Conrad & Scherer cannot defeat the

application of the crime-fraud exception by claiming ignorance of crimes or fraud perpetrated by

Collingsworth – the Managing Partner of its Washington, D.C. office.

It is undisputed that Mr. Collingsworth and Conrad & Scherer made innumerable

misrepresentations to this Court regarding their witness payments. The only question is: who

knew what and when. To allow Conrad & Scherer, an artificial legal entity, to disclaim the

knowledge of its designated agent would be to turn the law of agency and imputed knowledge on

its head. For all of these reasons, a finding that the crime-fraud exception applies to

Collingsworth necessarily equates to a finding that it applies to Conrad & Scherer.10

B. There is sufficient evidence to independently justify the application of the

crime-fraud exception to the firm.

Assuming for the sake of argument that more than Mr. Collingsworth’s knowledge must

be shown to apply the crime-fraud exception to Conrad & Scherer, there is nevertheless

overwhelming independent evidence warranting its application to the firm.

1. Conrad & Scherer is deemed to have knowledge of the payments to

Blanco, El Tigre and Samario as a matter of law.

As explained supra in Section II-A, the law conclusively presumes that whatever

10 Indeed, if Conrad & Scherer were the sole defendant, the law certainly would not exonerate the partnership for the misconduct that has occurred here.


14{B2062211}

knowledge Collingsworth acquires regarding firm business while acting in the line and scope of

his duties as a partner in the firm is imputed to the firm. See Strang v. Bradner, 114 U.S. 555,

561, 5 S.Ct. 1038 (1885) (denying a discharge in bankruptcy to two innocent partners of a

fraudulent businessman because “if, in the conduct of partnership business, and with reference

thereto, one partner makes false or fraudulent misrepresentations of fact to the injury of innocent

persons who deal with him as representing the firm, and without notice of any limitations upon

his general authority, his partners cannot escape pecuniary responsibility therefor upon the

ground that such misrepresentations were made without their knowledge”). But Collingsworth

was not some rogue agent. He explicitly informed the firm who he was paying and how much.

And the firm executed upon those instructions. The undisputed facts show that in May 2011,

when the payments to El Tigre and Samario were being set up, Mr. Collingsworth gave Bill

Scherer – Conrad & Scherer’s Managing Partner – and his son “Billy” Scherer (also a partner)

written notice that Samario and El Tigre were being paid. Doc. 174-6 (the “deps in the can”

email). Bill Scherer billed time in the Balcero case for reviewing this written notification. Doc.

390 (Sept. 1-3 Hrg. Tr.) at 421:9-422:12.11 Billy Scherer commissioned a legal memo on the

propriety of paying witnesses, which he received five days after his receipt of the “deps in the

can” email. Doc. 391 (Sept. 1-3 Hrg. Tr.) at 705:18-707:6.

The firm’s Chief Financial Officer and Firm Manager – Richard Drath – was also

provided with this written notification of the payments to El Tigre and Samario. Doc. 174-6.

11

Defendants have withheld hundreds, if not thousands, of documents relating to witness payments on claims of privilege or work product. Drummond fully expects that those documents will further belie Defendants’ claim that they paid witnesses for “security,” and will instead show that they were paid for the substance of their testimony against Drummond.


15{B2062211}

see also Doc.

390 (Sept. 1-3 Hrg. Tr.) at 436:12-19 (“A. [. . .] They are firm expenditures that were approved.

[. . .] the firm has paid those as part of its business.”). 12

Yet, Defendants claim the fact that the firm was paying over $30,000 a year to El Tigre

and Samario was of so little consequence that it did not even register with Bill Scherer. They

then extrapolate that incredible position to argue that the firm, as a legal entity, had no

knowledge of these payments, and therefore could not have known the representations to this

Court concerning the payments were not true. . This

finds no support in the law.

“Knowledge of or notice to a partner pertaining to a ‘matter concerning partnership

affairs’ is imputed to the partnership.” Xanadu of Cocoa Beach, Inc. v. Zetley, 822 F.2d 982, 985

12 Other Conrad & Scherer employees involved in processing the monthly payments to El Tigre and Samario include Victoria Ryan (Mr. Collingsworth’s former “Legal Assistant” at Conrad & Scherer), Doc. 174-5, Susanna Tellez, id., Janette Perez, id., Lorraine Safarti, id., and Catherine Salomon. Id.; see also Doc. 390 (Sept. 1-3 Hrg. Tr.) at 440:6-7 (identifying Catherine Salomon as “an employee . . . in the accounting department” at Conrad & Scherer).


16{B2062211}

n.1 (11th Cir. 1987) (quoting Fla. Stat. Ann. § 620.615). Not only did Mr. Collingsworth know

that El Tigre and Samario were being paid, but at least two other partners of the firm did as well:

Managing Partner Bill Scherer and his son, Billy Scherer. The firm CFO was also informed in

writing of the payments, and approved the payment of firm funds on a monthly basis for years.

Defendants have not provided, and likely cannot provide, the Court with any legal authority

finding that a partnership is able to disclaim the knowledge of its partners and other agents in

circumstances like these.

For substantially the same reasons, the firm is also deemed to have knowledge of the

payments to Blanco. Again, acting in the scope of his agency in prosecuting Balcero,

Collingsworth arranged, facilitated and confirmed at least three payments totaling $120,000 to

Blanco, and Collingsworth received written notification of each of those payments. See Doc.

174-20; Doc. 342-20.

And other Conrad & Scherer lawyers, employees and

agents (who were also members of Defendants’ litigation team in Balcero) were indisputably

aware of the payments to Blanco at the time they were being made, including

; see also Doc. 342-20 at CS_TC 12447 (Leete emailing Ivan Otero confirmation of the


17{B2062211}

$60,000 payment to Blanco in September 2011).13

“The knowledge necessary to adversely affect the corporation need not be possessed by a

single corporate agent; the cumulative knowledge of several agents can be imputed to the

corporation.” Gutter, 124 F. Supp. 2d at 1309 (citing 3 Fletcher, Fletcher Cyclopedia at § 790).

Thus, the firm is presumed to have knowledge of the payments to Blanco, as well.

Finally, it is not as if the knowledge of these payments only existed in the heads of a few

lawyers (although that is sufficient in and of itself to impute the knowledge to the firm). The

proof of all of these payments is found in the firm’s own business records. See Helton v. AT & T

Inc., 709 F.3d 343, 356 (4th Cir. 2013) (“because corporations are charged with knowledge of

information known to their officers and because officers are charged with knowledge of

information in corporate books and records, corporate entities also have constructive knowledge

of the contents of their records”); 18B Am.Jur.2d Corporations § 1497 (“Directors have been

regarded as chargeable with knowledge of facts which the corporate books and records disclose.

Indeed, they have a duty to consult such books and records.”); see also Wright & Miller, 8B Fed.

Prac. & Proc. Civ. § 2177 (3d ed.) (“In answering interrogatories, a party is charged with

knowledge of what its agents know, or what is in records available to it”).

For all of these reasons, it would be contrary to foundational legal principles to allow

Conrad & Scherer to disclaim knowledge of payments made by its agents, using its funds, and

documented in its business records, and thereby avoid the ramifications of the fraudulent conduct

that has occurred.

2. Conrad & Scherer is equally responsible for the fraud on this Court.

13 Christian Levesque is a senior associate at Conrad & Scherer, , and counsel of record in Baloco, Balcero and Melo. Susanna Tellez is Collingsworth’s administrative assistant. Lorraine Leete was a member of Defendants’ litigation team whose salary was paid by Conrad & Scherer. Ex. 4.


18{B2062211}

The fraud on this Court started in Balcero and has continued throughout this case, to this

very day. With respect to Balcero, it is undisputed that Defendants did not disclose their

payments to Gelvez, Duarte and Charris until after those witnesses provided their trial testimony

and after discovery had closed. Doc. 282 at ¶ 93. It is also undisputed that the payments to

Blanco, El Tigre and Samario were never disclosed. Id. at ¶ 94.

That fraud continued in this case, wherein every pleading filed by the Defendants has

been filed on behalf of both Defendants, and the representations in those pleadings were made by

both Defendants.

. And until January 9, 2015, every interrogatory response in this case was signed by

Collingsworth on behalf of both himself and Conrad & Scherer. Doc. 282 at ¶ 77. Between July

1, 2013 and November 17, 2014, both Defendants falsely represented on dozens of occasions, in

both discovery responses and pleadings, that they had been “open and clear” about their witness


19{B2062211}

payments and that only three witnesses had been paid. Doc. 243 at ¶¶ 115-458.14 As explained

above in Section II, Conrad & Scherer is conclusively presumed to have knowledge of the fact

that Samario, El Tigre and Blanco were paid, and therefore the firm knew that the statements in

their pleadings and interrogatory responses were utterly false. Under these facts, both

Collingsworth and the firm are responsible for the fraud perpetrated on this Court.

Furthermore, although both Bill Scherer and Billy Scherer received written notification in

May 2011 of the payments to El Tigre and Samario, it is now known that both of them reviewed

the same email again in June 2014, at which time Billy Scherer provided it to counsel in this

case. Docs. 389 & 390 (Sept. 1-3 Hrg. Tr.) at 195:7-197:12; 397:22-398:12; 407:5-408:6.

Nevertheless, Conrad & Scherer still continued misrepresenting to this Court and other courts

that neither El Tigre nor Samario had been paid. At the absolute least, and as explained in the

next section, the Court should conduct an in camera review of all allegedly privileged

communications surrounding this time period in making its determination of the application of

the crime-fraud exception to the firm.

C. If this Court has any doubt as to the application of the crime-fraud exception

to Conrad & Scherer, it should conduct an in camera review of documents to

determine whether there is a prima facie case of the firm’s involvement in the

crimes and fraud at issue.

Both the United States Supreme Court and the Eleventh Circuit hold that in camera

review of documents is appropriate to determine whether the crime-fraud exception applies in

cases where the district court has doubt as to whether the proffered evidence of the crime or

fraud is sufficient to make a prima facie showing. The Supreme Court has held that “a lesser

evidentiary showing is needed to trigger in camera review than is required ultimately to

14 As explained infra in Section IV, Defendants only recently admitted that these representations were false when they drastically changed their story from “parsing” discovery requests to “I forgot” for Mr. Collingsworth and “we never knew” for Conrad & Scherer.


20{B2062211}

overcome the privilege. The threshold we set, in other words, need not be a stringent one.”

United States v. Zolin, 491 U.S. 554, 572, 109 S. Ct. 2619 (1989). Citing Zolin, this Circuit has

defined the threshold showing that warrants in camera review:

Before engaging in in camera review to determine the applicability of the crime-fraud exception, the judge should require a showing of a factual basis adequate to support a good faith belief by a reasonable person that in camera review of the materials may reveal evidence to establish the claim that the crime-fraud exception applies. Once that showing is made, the decision whether to engage in in camera review rests in the sound discretion of the district court.

Cox, 17 F.3d at 1417 (quoting Zolin, 491 U.S. at 572) (internal citations and quotation omitted).

“Clearly, a lesser evidentiary showing is needed to trigger in camera review than is

required to ultimately overcome the privilege.” Tindall v. H & S Homes, LLC, 757 F. Supp. 2d

1339, 1353 (M.D. Ga. 2011) (holding that “the evidence produced by Plaintiff illustrates a

suspect time-line” suggesting that there may have been fraudulent transfers, and that this was all

that was needed to justify in camera review); see also In re Chevron Corp., 633 F.3d 153, 167

(3d Cir. 2011) (“However, even if the party seeking to invoke the crime-fraud exception to the

attorney-client privilege cannot make out a prima facie case sufficient to overcome the privilege,

it still may be entitled to have a court make an in camera review of the documents in issue to

determine if those documents and the evidence placing the documents in context establish the

applicability of the crime-fraud exception to the privilege.”); In re Grand Jury Investigation, 974

F.2d 1068, 1073 (9th Cir. 1992) (“There is an important difference between showing how

documents may supply evidence that the crime-fraud exception applies and showing directly that

the exception applies. This difference results in a considerably lower threshold for conducting in

camera review than for fully disclosing documents.”); In re Grand Jury Subpoena, No. 10-127-

02, 2012 WL 5587438, at *4 (E.D. Pa. Nov. 13, 2012) (holding that the Zolin standard for in

camera review is “significantly lower” than the prima facie showing needed to apply the crime-


21{B2062211}

fraud exception).

In analyzing whether this lower threshold has been met, this Court should not consider

any of the Defendants’ explanations of their conduct. As explained by the Gutter court, “the

decision to engage in in camera review involves a more lenient standard of proof than the

determination to apply the crime/fraud exception,” and “[f]or this purpose, the court may

consider only the presentation made by the party challenging the privilege.” 124 F. Supp. 2d at

1306 (citing Haines v. Ligget Group, 975 F.2d 81, 96 (3d Cir. 1992)).

Simply put, the evidence before this Court is unquestionably “adequate to support a good

faith belief by a reasonable person that in camera review of the materials may reveal evidence to

establish the claim that the crime-fraud exception applies” to the firm. Cox, 17 F.3d at 1417

(emphasis added); see also pages 13-19, supra. Therefore, in camera review of documents

relating to the firm’s involvement in the crimes or frauds at issue is warranted.

With respect to the fraud perpetrated by the Defendants, this Court has recognized that

“

” Doc. 311-2 (Collingsworth

Dep.) at 351:22-25. At present, none of the Defendants’ communications with their counsel in

this case have been submitted to the Court for in camera review. Drummond did serve a

subpoena on Mr. Smith and his firm, however, commanding the production of those

communications to this Court for its review. Ex. 2. Those communications will play a crucial

role in shedding light on who knew what and when they knew it. Specifically, to the extent those

communications discuss the scope, nature and extent of Defendants’ witness payments, they

clearly “relate to” the fraud at issue, and bear directly on Collingsworth’s claim that he “forgot”

about the payments, as well as the firm’s claim that it was completely unaware of them and that


22{B2062211}

it “moved Heaven and Earth” to disclose their witness payments “just as soon as we could.”

Doc. 390 (Sept. 1-3 Hrg. Tr.) at 392:23-393:1. Accordingly, Drummond respectfully submits

that this Court’s in camera review should include communications between Defendants’ and any

of their counsel between January 1, 2013 and January 9, 2015, and requests entry of an order

directing the Defendants to produce those communications to the Special Master for his review.

III. THE CRIME-FRAUD EXCEPTION APPLIES TO COMMUNICATIONS IN OTHER LITIGATION

INVOLVING DEFENDANTS.

The Court also asked the parties to brief whether the application of the crime-fraud

exception in this litigation requires the disclosure of Defendants’ communications with counsel

in other litigation. The answer is yes.

In at least two other state-court cases, Defendants have made misrepresentations to the

court and opposing parties about their payments to Colombian witnesses. Any communications

they had with counsel in those cases about witness payments fall within the crime-fraud

exception for two reasons. First, Defendants’ misrepresentations in other cases were intended to

cover up the criminal or fraudulent activity here and are therefore “related to” that activity.

Second, courts—including in this Circuit—routinely apply the exception to order disclosure of

purportedly privileged communications in other litigation.

A. Misrepresentations in other litigation

The first state-court case is in California. In that case, Mr. Collingsworth and Conrad &

Scherer allege that Dole Food Company collaborated with Colombian paramilitaries. See

Emperatriz Marina Mendoza Gomez, et al. v. Dole Food Company, Inc., et al., Case No.

BC412620 (Los Angeles County Superior Court).

In May 2014, Defendants represented to the California court that the contention that

Defendants had paid witnesses was “scandalous” and “completely false and malicious.” Doc.


23{B2062211}

243-20 at 11-12 (Defendants’ May 30, 2014 filing in Dole). Defendants went on to state that

they had provided “security assistance” to “family members of three of the many witnesses in

the Drummond matter.” Id. (emphasis added). Of course, as the Court is well aware,

Defendants knew that every Balcero witness who had testified against Drummond had received

payments, not just three of them.

The second state-court case is in Florida. It was filed by Conrad & Scherer against a

former partner of the firm. Conrad & Scherer, LLP v. William J. Wichmann, et al., Case No. 09-

011600(5) (Circuit Court of the 17th Judicial Circuit, Broward County, Florida). On September

23, 2014, Conrad & Scherer filed a brief in the case. Doc. 243-25 (Conrad & Scherer’s Sept. 23,

2014 filing in Wichmann). Included with that filing was the sworn affidavit of Mr.

Collingsworth purporting to explain the payments made to witnesses in the Drummond cases.

In that filing Conrad & Scherer represented to the Florida court that Defendants had made

payments only to Charris, Duarte, Gelvez, Halcon and Claudia Balcero. Id. at ¶¶ 20-26 (pages

155-158 of 325). After describing the payments to Charris, Duarte, Gelvez, and Halcon, Mr.

Collingsworth falsely testified that Claudia Balcero was the “final individual who received

security measures.” Id. As of the date this declaration was signed and submitted to the Florida

state court, however, Defendants had been making monthly payments to Samario and El Tigre

for more than three years, and they had offered, facilitated and confirmed at least three payments

to Jaime Blanco from Albert van Bilderbeek. Moreover, these representations were made by

Conrad & Scherer to the Florida court more than 3 months after Bill Scherer, Billy Scherer, and

Conrad & Scherer’s outside counsel had all located the “deps in the can” email proving these

representations were false.

B. Allegedly privileged communications from these state-court cases are

“related to” the crimes and fraud here.


24{B2062211}

To order disclosure under the crime-fraud exception, the Eleventh Circuit requires that

the privileged communications be “related to the criminal or fraudulent activity established under

the first prong” of the exception’s test. In re Grand Jury Investigation, 842 F.2d at 1227.

According to the Eleventh Circuit, “the requirement that the legal advice must be related to the

client’s criminal or fraudulent conduct should not be interpreted restrictively.” Id. Significantly,

efforts to conceal a crime or fraud are “related to” the wrongful activity. See, e.g., In re Grand

Jury Subpoenas, 144 F.3d 653, 660 (10th Cir. 1998) (crime fraud exception “does apply if the

assistance was used to cover up and perpetuate the crime or fraud.”); Craig v. A.H. Robins Co.,

790 F.2d 1, 4 (1st Cir. 1986) (“[C]ontinuing fraudulent misrepresentation and cover-up vitiates

not only any attorney-client privilege but also any work product immunity.”).

The misrepresentations in these two state-court cases are part of Defendants’ scheme to

“cover up and perpetuate” the fraud here—that is, Defendants’ scheme to hide the true extent of,

and reason for, their witness payments. Had Defendants told the truth in the other cases—that

they had paid every single Balcero witness rather than just a few of them—then their

misrepresentations in this case would have been laid bare. Moreover, the misrepresentations in

the Dole and Wichmann cases mirror the misrepresentations here (that Defendants had paid only

three witnesses and that the payments were for “security”), demonstrating that those

misrepresentations are “related to” the fraud in this case. In re Grand Jury Investigation, 842

F.2d at 1227. Because the fraud in those cases is related to the fraud alleged here, the Court

should conclude that any communications with counsel about witness payments in those cases

fall within the crime-fraud exception.

The Eleventh Circuit has never limited the crime-fraud exception only to permit

disclosure of privileged communications between a party and its counsel in the current litigation.


25{B2062211}

As noted above, In re Grand Jury Investigation requires only that the privileged communications

be “related to the crime or fraud” at issue. 842 F.2d at 1228. The focus of the inquiry, then, is

whether the legal advice is related to the alleged crime or fraud, not whether the advice was

offered during the course of the litigation before the court.

The Gutter case is once again illustrative of this point. 124 F. Supp. 2d 1291. In that

case, the defendant (DuPont) failed to disclose certain expert soil analysis in litigation in Georgia

federal court. In a second piece of litigation in Hawaii state court, DuPont produced the analysis.

The Gutter court applied the crime-fraud exception and ordered the disclosure of DuPont’s

communications with its counsel relating to the soil analysis in the prior two pieces of litigation.

Id. at 1294, 1316-17. The court expressed no concern with the fact that the documents being

produced were from litigation other than the one directly before the court.15

Cases from other jurisdictions follow Gutter’s approach and regularly order the

disclosure of documents from litigation other than the one in which application of the crime-

fraud exception has been requested. See, e.g., In re Sealed Case, 754 F.2d 395, 401 (D.C. Cir.

1985) (applying crime fraud exception to order disclosure of defendant’s privileged

communications from prior civil litigation to government in grand jury investigation, concluding

that defendant “had committed an ongoing fraud in litigation in which it was represented by” a

specific law firm); United States v. Moazzeni, 906 F. Supp. 2d 505 (E.D. Va. 2012) (applying

crime fraud exception and ordering disclosure of defendant’s privileged communications from

prior bankruptcy litigation to government in grand jury investigation); In the Matter of Grand

Jury (OO-2H), 211 F. Supp. 2d 564, 565, 567 (M.D. Pa. 2002) (applying crime fraud exception

15 The Gutter opinion noted that “DuPont was adequately put on notice that the prima facie case of fraud included the full range of findings by the Hawaii Circuit Court and Supreme Court as well as their incorporation of evidence from the [Georgia] case.” Id. at 1307. Likewise, here, Defendants have been on notice that their representations in these other cases are part of Drummond’s argument concerning the scope of their fraudulent scheme. See, e.g., Doc. 243 (Drummond’s Proposed Findings of Fact), at ¶¶ 359-67 (Dole litigation) and ¶¶ 438-51 (Wichmann case).


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and ordering disclosure of defendant’s privileged communications from prior civil litigation to

government in grand jury investigation).

There is no reason to draw a distinction between Defendants’ communications with

counsel in this litigation that sought to conceal these witness payments and Defendants’

communications with counsel in other litigation that sought to do the same thing. Such a

distinction is not supported by the law in this Circuit and would only serve to allow Defendants

to benefit from their wrongdoing.

To be clear, Drummond is not requesting all of Defendants’ communications with

counsel in these other cases. Rather, Drummond requests only those communications with

Defendants’ counsel related to (1) Defendants’ direct or indirect payments to Colombian

witnesses, or (2) the disclosure of these witness payments to opposing counsel or to the court.

These categories of communications are “related to” the ongoing fraud or crimes that Drummond

has alleged in this litigation and therefore fall squarely within the crime-fraud exception.

IV. DEFENDANTS’ CRIMES AND FRAUD ARE CERTAINLY NOT “OVER AND FIXED” – THEY

ARE CONTINUING.

The final post-hearing briefing question identified by the Court is whether Defendants’

crimes and fraud are “over and fixed.” Doc. 391 (Sept. 1-3 Hrg. Tr.) at 769:16-18. They are not.

Defendants would have this Court believe that as soon as they “discovered” that El Tigre,

Samario, and Jaime Blanco had been (and in the case of El Tigre and Samario, were still being)

paid, they made full disclosure of the true facts. ;

Doc. 390 (Sept. 1-3 Hrg. Tr.) at 417:3-9. The record evidence proves otherwise.

As the Court is well aware, the “deps in the can” email unequivocally shows that El Tigre

and Samario were paid, and were being paid on a monthly basis. Putting aside the undisputed

fact that Conrad & Scherer’s Managing Partner (Bill Scherer), its CFO, and Billy Scherer (Bill


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Scherer’s son who is another partner in the firm) all received this email in May 2011 when the

payments were being set up, both Bill Scherer and Billy Scherer reviewed this email again in

June 2014. Bill Scherer testified that Billy Scherer located this email when searching for witness

payment documents to produce in the Wichmann action pending in Florida state court, and

immediately sent it to counsel in the defamation case.

; Doc. 390 (Sept. 1-3 Hrg. Tr.) at 397:16-398:12; 418:24-419:21.16

Despite this, in the months that followed, Defendants continued misrepresenting in this

case that El Tigre and Samario had not been paid, see Doc. 282 at ¶¶ 368-451, while

simultaneously representing that “[i]n an amazing show of audacity, Drummond’s counsel, in

accusing Mr. Collingsworth of fraud on the Court, is itself attempting to mislead the Court.” Id.

at ¶ 396. Furthermore, on September 23, 2014, Conrad & Scherer represented to the Florida

court in the Wichmann matter that no payments had been made to El Tigre and Samario. Id. at

¶¶ 438-451. It was not until after Parker Waichman produced the “deps in the can” email to this

Court’s Special Master for in camera review that the truth finally started to come out. Id. at ¶¶

452-454. But even then, it was not the whole truth.

In November 2014, Defendants finally produced the “deps in the can” email to

Drummond, and amended their prior false interrogatory responses to state that El Tigre and

Samario had been paid. Id. at ¶ 454; Doc. 174-7. But there was no disclosure that Jaime Blanco,

too, had been paid. In fact, in these amended interrogatory answers, Defendants claimed that

there was merely a discussion of payments to Blanco, but no actual payments. Doc. 174-7.

16

The Court’s in camera review should reveal who else received a copy of this email and communicated with Mr. Scherer about it around June 2014, which will be very instructive on the extent to which Defendants’ misrepresentations and non-disclosure were immediately “fixed.”


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This Court’s in camera review should shed light on this

issue.

Also, when Defendants finally disclosed the El Tigre and Samario payments in this case,

they improperly stamped the interrogatory responses and all documents revealing this fact as

“Confidential” under this Court’s Protective Order. Doc. 212 at 9; Doc. 174-7. So while

Defendants were making partial disclosures in this Court, their improper claims of

confidentiality allowed them to continue their misrepresentations to other courts on the same

subject. The representation in the Wichmann case was made just two months before these

interrogatory responses were signed, but the Wichmann court was not informed that Conrad &

Scherer’s September 2014 filing was false. Drummond has not seen any filing in the Wichmann

case, even to this day, revealing that El Tigre or Samario were paid.

Similarly, in the Dole case, Defendants represented in May 2014 that the only witnesses

to have been paid were Charris, Duarte, and Gelvez. Defendants did not “fix” that

misrepresentation to that court until June 2015, after this Court learned of the misrepresentation

and indicated its intention to call the Dole judge. On June 15, 2015, this Court held a hearing

during which the representation to the Dole court was discussed, and this Court made clear that it

was “categorically false.” Doc. 372 (June 15, 2015 Hrg. Tr.) at 12:21-13:5. This Court then

asked for the name and telephone number of the Dole judge. Id. at 22:19-23:6. Three days later,

Defendants finally fessed up to the Dole court that they had misrepresented the scope of their

witness payments. Doc. 283-6 (June 18, 2015 Dole Filing) at 13. This is yet another example of


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Defendants continuing in their misrepresentations until they are forced to disclose the truth.

Even after Defendants began disclosing to this Court that more witnesses had been paid

than previously represented, Defendants continued to misrepresent the reasons for their non-

disclosure. Once it was known that El Tigre, Samario, and Blanco had been paid, revealing that

Defendants had been lying to Drummond and this Court for years, Drummond filed a renewed

motion for sanctions in February 2015. Defendants’ response to this motion was simply a

continuation of the fraud.

Defendants repeatedly represented that the reason they never disclosed the payments to

El Tigre and Samario prior to November 17, 2014 was because they deliberately “interpreted”

discovery requests and this Court’s Orders to exclude those payments:

Mr. Collingsworth was slicing too close to distinguish between the direct payments Conrad & Scherer made to assist witnesses in this dangerous environment and the ‘indirect’ payments made either through Otero, who had sole discretion on the matter, or the van Bilderbeeks as assisted by Mr. Collingsworth. . . .

As the parties entered the April 2014 hearing on Drummond’s motion for sanctions, defendants had outstanding objections to Drummond’s definition of “payments” and, thus, the scope of which payments were discoverable had not been settled. If Drummond had attempted to meet and confer on defendants’ objections, rather than leapfrogging to a motion for sanctions, the parameters of which “payments” were discoverable could have been clarified much earlier. Because it did not meet and confer or file a motion to compel, however, those parameters were still unclear during the April 2014 hearing.

And, because those parameters were still unclear, when defendants stated in their

opposition to the motion for sanctions that they were “in full compliance with

the Court’s discovery order,” Doc. 114 at 2, they were—based on their

interpretation of “payments to witnesses” as direct payments by either Conrad

& Scherer or Mr. Collingsworth to a witness or a witness’s family.

It was not until the Court issued its October 15, 2014 Order on Privilege Logs that Drummond’s definitions of “payments to witnesses” and “Colombian witnesses” became the operative definitions in the case. Accordingly, as soon as humanly possible following issuance of the October 15, 2014 Order, defendants produced documents in accordance with the new definitions of “payments to witnesses” and “Colombian witnesses.”


30{B2062211}

[. . .]

Prior to this extremely broad definition being adopted in the Court’s October 15, 2014 Order, defendants had a good faith basis for objecting on this ground and

construing “payments to witnesses” narrowly as only those payments flowing

directly from Conrad & Scherer to a witness or a witness’s family.

Doc. 187 at 3, 19-20 (emphasis added).

Not once in their opposition brief did Defendants make the incredible assertion that

Collingsworth simply “forgot” about the payments, or that Conrad & Scherer was totally

oblivious. Indeed, Defendants’ claim was that they intentionally interpreted the discovery

requests not to call for disclosure of this information, and it was not until this Court’s October

15, 2014 “sea change” Order that there was any obligation for these disclosures. If Conrad &

Scherer did not know about the payments, as they now claim, it is factually impossible for the

October 15, 2014 Order (Doc. 151) to have been any sort of “sea change.”

The fraud continued in Defendants’ surreply to Drummond’s renewed motion for

sanctions, wherein they continued to represent that their nondisclosure of payments to El Tigre

and Samario was not a result of Mr. Collingsworth’s selective amnesia or Conrad & Scherer’s

lack of knowledge, but rather due to their interpretation of discovery requests and this Court’s

orders: “Drummond certainly cannot claim that defendants merit the ultimate sanction of a

default judgment because they have failed to go back and correct statements that, while accurate

at the time they were made, have since become ‘false’ based on subsequent discovery rulings

made by this Court.” Doc. 210 at 9.

In advance of the September 1-3 hearing, this Court directed the parties to exchange

proposed findings of fact, with the goal of narrowing the disputes of fact to be resolved at the

hearing. Surely it would be at this point that the facts behind Defendants’ fraudulent

concealment would be made known to the Court. They were not. In their Corrected Response to


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Drummond’s Proposed Findings of Fact, Defendants again repeatedly represented that the reason

for their nondisclosure was that they were “parsing” or “narrowly interpreting” orders and

discovery requests. See Doc. 282 at ¶ 81 (“Mr. Collingsworth interpreted this interrogatory

literally to only include direct payments by defendants to witnesses, not to their family members.

To the extent Mr. Collingsworth’s narrow interpretation resulted in responsive information not

be[ing] produced, such information has been supplemented and the record corrected.”); at ¶ 89

(“to the extent Mr. Collingsworth’s narrow interpretation of discovery requests and reliance on

objections resulted in responsive information not be[ing] produced, such information has been

supplemented and the record corrected. Mr. Collingsworth did not intend to mislead the Court.”);

at ¶ 312 (“Defendants did not interpret Drummond’s third interrogatories and requests for

production as including payments made to Ivan Otero for the benefit of a witness’s family”); at ¶

401 (“UNDISPUTED that payments made to Blanco or payments made to the families of El

Tigre and Samario had not been disclosed. Mr. Collingsworth simply made a mistake in parsing

discovery requests too finely. But, when the Court issued its October 15, 2014 Order clarifying

and broadening the scope of discovery, Mr. Collingsworth and Conrad & Scherer supplemented

any and all discovery responses and privilege logs necessary to fix the problem and come into

complaint [sic] with the Court’s Order.”) (emphasis added).

In explaining why their response to Drummond’s interrogatory in this case requesting

disclosure of witness payments was not false, Defendants claimed:

! Mr. Collingsworth interpreted this request literally (as written) to include only payments made directly to witnesses or their families (or to paramilitaries or their families) without carefully considering that other, potentially responsive witnesses existed. And, documents reflecting such payments (made directly to the families of Charris and Duarte) had already been produced. Defendants did not interpret this interrogatory as including payments made to Ivan Otero for the benefit of a witness’s family. . . . To the extent Mr. Collingsworth’s narrow interpretation and/or reliance on objections resulted in responsive information not


32{B2062211}

be[ing] produced, such information has been supplemented and the record corrected. Id. at ¶ 303.

! The representation [that all witness payments had already been disclosed] is not false based on defendants’ reasonable (and literal) interpretation of the interrogatory. Id. at ¶ 304; see also ¶ 305 (same).

The word “forgot” does not appear once in Defendants’ Reponses to Drummond’s Proposed

Findings of Fact. And nowhere in that filing did Conrad & Scherer disclaim knowledge of the

payments to El Tigre and Samario.

But if the testimony presented by the Defendants during the September 1-3 evidentiary

hearing is to be believed, all of the above explanations are unequivocally false. According to

that testimony, Defendants were not “parsing” or “narrowly interpreting” discovery requests.

Collingsworth failed to remember, and no one at Conrad & Scherer knew, that El Tigre and

Samario had been paid approximately $100,000:

Q When you did disclose payments, whether in response to this interrogatory or some other request, you didn’t disclose the payments to El Tigre or Samario, did you?

A As I’ve already testified and expressed regret for in January of 2013 when we did answer the question regarding family members, we initially disclosed only the payments to Charris, Gelvez, and Duarte.

Q And that’s because you forgot?

A By then I had, yes.

Q So from January 2013 -- let me ask you this. How far before January of 2013 did you forget?

A I can just only repeat: I don’t really know.

Q I think we can agree from at least January of 2013 through midway through 2014, you say you forgot that you were paying El Tigre and Samario, right?

A It did not cross my mind, yes.

Q And so we don’t have to trudge through all of them right here right now, you will agree that any time you made a representation either in a discovery response,


33{B2062211}

sworn declaration, statement to this Court, that it was only three witnesses that had been paid, that’s because you forgot about El Tigre and Samario?

A We can say that, as I previously testified, I replicated the mistake by primarily cutting and pasting and going forward, and I just did not think about it again.

Q Since you had forgotten, I guess you were not thinking about the payments and thinking, you know what, these are subject to some sort of outstanding objection in Balcero; therefore, I can say I produced all responsive nonprivileged, nonobjectionable documents. You didn’t go through that mental process, did you?

A When I initially produced the documents in January of 2013 for Gelvez, Charris, and Duarte, I thought I had produced all responsive documents on that issue.

Q And you were not asserting an objection over the payments to the family members anymore?

A Clearly not. We had resolved our meet-and-confer process and I provided the information about the three witnesses that I had the information on and that I was clear on.

[. . .] BY MR. WELLS:

Q So for every disputed representation in this proposed findings of fact that repeats this verbatim language -- and I can tell you, it’s a lot of them – that’s not really the reason you didn’t disclose it; it’s because you forgot; that’s what the facts are?

MR. NIEWOEHNER: Your Honor, we have an objection. There are multiple bases in what -- I think you mentioned the libel case.

THE COURT: His question is this. And let me rephrase his question, but I understood his question, but it may be helpful for the record to rephrase it. Starting in January of 2013 when the objection was withdrawn after the meet and confer and there was an agreement to answer the interrogatory, to the extent that on multiple occasions you did not disclose El Tigre and Samario, it was because you forgot, not because of some then pending objection?

THE WITNESS: That’s correct, Your Honor, and I’ve testified to that.

Doc. 389 (Sept. 1-3 Hrg. Tr.) at 164:19-166:8 & 168:11-169:5.

So this Court is once again left in the position to decide which of Defendants’

irreconcilable factual representations is true. Of course, the simplest inference from the evidence


34{B2062211}

is that neither explanation is true, and that Defendants were intentionally concealing these

payments. As this Court astutely noted at the close of the evidentiary hearing, a finding that Mr.

Collingsworth’s “I forgot” excuse is not credible means that the Defendants’ fraud on this Court

is continuing to present day:

THE COURT: I hear what you’re saying. What about I forgot. Because that’s going on now. He didn’t get on the stand and say, you’re right; my hand was in the cookie jar, but I put all the cookies back in. He said the reason I didn’t disclose this is I forgot. Why isn’t that a continuing fraud on the Court if I discredit that testimony and say there is no way he forgot.

MR. McNEIL: Because it’s not continuing.

THE COURT: Sure it is. It’s continuing right now. He is misrepresenting to me in this hearing the basis for nondisclosing in the first place. He presumably will get on the stand at trial and give exactly the same testimony under oath, and if he is asked why he didn’t disclose these payments or why he misrepresented information about these payments: I simply forgot about those two payments; I would have made the disclosures if I had remembered.

Why isn’t that continuing all the way to trial? And now we have to step behind the curtain and see is that really what occurred here. Is he using counsel or using the work product doctrine to carry out a fraud that has been going on for a while and still is ongoing in at least some form and fashion now.

Doc. 391 (Sept. 1-3 Hrg. Tr.) at 767:4-768:1.

Defendants’ crimes and fraud are nowhere near “over and fixed.” Defendants are still

paying witnesses. They are still giving inconsistent and irreconcilable explanations to this Court

about why they fraudulently concealed their witness payments. Perhaps most importantly,

Defendants are still pressing their false claims in the highest court in this land relying on a record

in Balcero that is marred by their fraud.

Two weeks after Defendants’ counsel represented to this Court that Defendants’ crimes

and frauds were “over and fixed,” Doc. 391 (Sept. 3, 2015 Hrg. Tr.) at 769:14 (“MR. MCNEIL: .

. . it is over . . . it is fixed”), Defendants filed an application for an extension of time to petition


35{B2062211}

the United States Supreme Court for a writ of certiorari in Balcero. Ex. 1.17 The record that will

be presented to the Supreme Court is devoid of any evidence of the hundreds of thousands of

dollars paid to every witness upon whose testimony the judgment on appeal was based. The

Supreme Court will be presented with the testimony of Jaime Blanco, which has now been

proven to be perjury. As this Court observed:

THE COURT: . . . And even if, assuming arguendo, the payments in Colombia were not for the purpose of suborning perjury and even if they were not for the purpose of procuring testimony, i.e. bribery, there was a fraudulent misrepresentation to the Court, arguably, because there was an indication when those witness statements were being put into the record and relied upon, that they were not -- that there was not any compensation related to them.

In fact, just the question posed to Mr. Blanco, have you received any threats or promises; I have not received any threats. Have you received a promise of -- and I don’t have the language. . . . And he said no, none of any kind whatsoever; no, no kind whatsoever.

Doc. 391 (Sept. 1-3 Hrg. Tr.) at 762:25-763:15.

Defendants’ crimes and frauds are not “over.” And their fraud was not voluntarily

“fixed” – Defendants were simply caught. Their contention to the contrary should be given no

weight in this Court’s determination of the applicability of the crime-fraud exception.

Conclusion

Drummond respectfully submits that it has met its burden of showing a prima facie case,

making the crime-fraud exception applicable to both Defendants. Drummond respectfully

requests that the Court undertake an in camera review of Defendants’ allegedly privileged

documents for the purpose of determining which documents “relate to” the prima facie crimes

and frauds and therefore which should be produced to Drummond and incorporated into this

Court’s determination of sanctions.

17 And on the very same day Defendants told this Court that their crimes and fraud are “over” and “fixed,” they filed a petition for certiorari with the United States Supreme Court in Baloco, asking the Supreme Court to overturn this Court’s dismissal of that case.


36{B2062211}

Respectfully submitted,

/s/ H. Thomas Wells, III /s/ Sara E. Kropf William Anthony Davis, III (ASB-5657-D65W) Sara E. Kropf H. Thomas Wells, III (ASB-4318-H62W) LAW OFFICE OF SARA KROPF PLLC

Benjamin T. Presley (ASB-0136-I71P) 1001 G St. NW, Suite 800 STARNES DAVIS FLORIE LLP Washington, DC 20001 P.O. Box 59812 (202) 627-6900 Birmingham, AL 35259 (205) 868-6000 fax: (205) 868-6099

Attorneys for Drummond Company, Inc.

CERTIFICATE OF SERVICE

I hereby certify that on September 29, 2015, I electronically filed the foregoing with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following:

Special Master T. Michael Brown, Esq. Ms. Carly Miller, Esq. Bradley Arant Boult Cummings, LLP One Federal Place 1819 Fifth Avenue North Birmingham, Alabama 35203 [email protected] [email protected]

Robert Spotswood William K. Paulk SPOTSWOOD SANSOM & SANSBURY, LLC One Federal Place 1819 Fifth Avenue North, Suite 1050 Birmingham, Alabama 35203 [email protected] [email protected]

Walker Percy Badham, III Badham & Buck, LLC 2001 Park Place, Suite 500 Birmingham, AL 35203 [email protected]


37{B2062211}

/s/ H. Thomas Wells, III H. Thomas Wells, III (ASB-4318-H62W)


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