Notes from the Lightspeed hearing in East St. Louis (November 12, 2014)
I showed up at the courthouse about 10 minutes before scheduled time. After running through security and running an item back out to the car, finally got to the courtroom with 2-3 minutes to spare. I met Dan Booth and Jason Sweet at the door there, looking for the same room. Dressed in sharp clean black suits they were cordial and friendly. They looked like, and acted like, a team. Before the case they were pretty guarded around me, not knowing who I was, why I was there, and having their focus on the task on hand. After the typical courtesy dance for who’s opening the door for whom, Dan grabbed the door and all three of us headed in side by side.
The door opened in the back of the courtroom, typical wooden bench style seating for a courtroom with a solid row on the back wall, 5-10 rows ahead of the door, and then the counselor’s area and Judge’s bench. JBL 10 inch speakers mounted on the wall — two at least, 60 inch TVs mounted at the front of the gallery and monitors galore at the counselor’s tables. (They had a pretty sweet tech setup up front for presentations as well… but I’m quickly heading off topic. Sorry folks, I’m a nerd, not a legally inclined individual, these are the things I notice.)
Promptly on entering we were notified by a court official that the hearing before us was still going on, they’re running late, and it’d be 15-20 minutes until the Lightspeed Media case was up. Booth and Sweet grabbed the front pew near where they planned to sit for their hearing. I grabbed the pew right behind them hoping to gleam anything off of them ahead of time — but alas, the sound system was a bit loud for me to overhear them then. At the time that I sat, Comcast’s attorney was already present in my row as well — Andrew Toennies. There was a bit of small talk between Booth, Sweet, and Toennies, a few jokes, but fairly quiet as the case ahead of us came out from chambers. Just a few small whispers between them after while the other case wrapped up.
Five minutes later enough folks filed out of the Judge’s chambers that I almost wondered if he had a TARDIS hidden back there. Judge David Herndon was one of the last out, with a small grin on his face he made a wisecrack to a few of the folks nearby (joke obviously unrelated to the case at hand). It was nice to see a bit of personality out of the Judge, whom I’ve usually seen to be a pretty stoic bunch. Overall I’d say that he was formal and very businesslike in his overall conduction, but he had a warmth/”jovial” air about him. I could tell he was someone you sure didn’t want to get on the wrong side of, capable of a stern dressing down if needed — but I also thought he easily could be someone that a child could be comfortable testifying in front of as well. A healthcare case, in a settlement phase, continued with some status related stuff for the next 5-10 min that I didn’t pay too much attention to. (But hey, I have the next hearing date/time, and that the judge thanked the parties for working so well together through this phase and that it was a refreshing change of pace.)
About 1:10, as the above hearing occurred, Duffy and Hansmeier entered the room. Paul Duffy had a navy suit on with light blue shirt, slight wrinkling in the trousers. His face looked very “worn” or tired… I didn’t get a great look but I wasn’t positive that he’d shaved that morning. Shorter, a little pudgy, had definitely seen better days (As we’d say here in the Midwest, “Rode hard and hung up wet.”). Paul Hansmeier had a decently sharp navy suit, white or light pink shirt I think and tie. Very cleanly shaved, he was taller with an athletic build. He almost reminded me of what T.J. Oshie (St. Louis Blues hockey player) would look like with a white collar haircut- I was surprised by how young he looked in person, striking me as anywhere from late twenties to mid-thirties. He maintained a very professional appearing and calm demeanor throughout the day. The two made a beeline for the back bench real near where the aisle to the tables was, sat, looked at their phones or ahead and didn’t talk- not to anyone else, or each other.
Around 1:20, the case ahead of the feature presentation ended. After at least 15 other people gathered their paperwork and equipment and departed, there were a few seconds of awkward pause. The judge looked around, realized his clerks and recorders had stepped away after the last adjournment. He made a small joke about being abandoned, but invited the parties forward to occupy the counselor’s area to prepare for when his assistance was ready again. “Let the record show we’re in open court for Lightspeed Media vs Anthony Smith et al”… this is where the action gets fast, my scribbles go from illegible to worse, and my hands cramp as Judge Herndon did a very good job of making sure things moved along and there weren’t really any large pauses.
After calling the case name and number, he asks the attorneys to identify themselves. Paul Hansmeier, Paul Duffy… The judge notes this table seems a man short. Duffy responds that John Steele was delayed by a snow storm and should be there in 5 minutes. While it was cold in the MO/IL areas at the time, and some places had a dusting of snow the day before, the Judge seemed a bit skeptical but continued. Booth, Sweet, Toennies… and after introductions finished and just a few seconds for court staff to do their thing… here comes Mr. John Steele. Sharp black suit and white shirt, he walked and talked as if determined or confident. As he approached his table, the judge asked him where the storm was, Denver he replied, and explained the plane had an issue with icing. From the original 1:00 time, two were ten minutes late and looking somewhat ragtag, and the other was twenty five minutes or so late. Not a great start for Prenda — while there wasn’t an obvious outward reaction from Judge Herndon, that’s not the sort of thing that typically goes unnoticed either.
Judge announces we’re here to talk about a motion for contempt and a motion for sanctions for obstructing discovery. After figuring out which microphone would be used and if he’d sit or stand, Daniel Booth takes the lead for presenting their side on this, sitting in front of a microphone at his table.
Daniel Booth starts by pointing out that there’s two types of contempt being heard here — one for misrepresentation, and one for obstruction to evidence. Regarding the misrepresentation, he points out the plaintiff’s attorneys’ lying about their relationship to Prenda law and each other, and their ability to pay. Judge Herndon interrupts here and asks “So it’s that they haven’t paid.” Booth replies that during their first time before the Judge he had added more to the existing sanctions, and they still haven’t paid. Then Prenda said they couldn’t pay. Prenda’s attorneys had made pleadings which the judge rejected and said they should pay anyway. Booth points out the 7th District appeal in which Prenda had managed to post bond has wrapped up, so his side renewed the motion for contempt. The issue, Booth states, is they haven’t complied. At all. Or remotely looked like they were attempting to comply.
Booth explained how he and his partner had done discovery, and found that Prenda law had received millions in the past. Prenda could post bond in the 7th District but haven’t paid these sanctions at hand here. The attorneys should have gotten over $600,000 from Prenda in 2012 — Steele and Hansmeier at least. Steele and Hansmeier said they weren’t “interested” (in the legal sense) in Prenda, but kept collecting funds from them anyway.
So, Booth and Sweet felt that it was their duty to follow through on this to ensure the court’s orders were complied with. They showed in their filings that the attorneys could pay, and showed the attorney’s relationships to Prenda. Booth pointed out that Prenda said they didn’t get notice of the filings, but he could show that Steele signed a slip on the 10th. (I didn’t get the month, or which filing mentioned here). Booth also mentioned that John Steele and Paul Hansmeier told Prenda what insurance company to use.
The Judge took this opportunity to ask Booth if the audited accounting statements from the CPA were correct. Booth pointed out that they hadn’t seen those reports as they were filed under chamber. Judge Herndon then asked “Where is the money?” Booth replied that they knew it went from account to account, many of those quickly opened and shuttered, and that the paper trail has been too long/too fast to reach the end of it. Booth mentioned that he thinks they moved or continued to move the funds in particular after hearing the discovery point that would reveal them. The defendant’s evidence substantiated that the parties in question once had millions, they say they can’t pay and don’t have money, but no rebuttal they’ve offered shows why.
Judge Herndon then asked about the second motion at hand, concerning obstruction of evidence discovery. Booth stated that Prenda et al obstructed discovery from the plaintiffs. Prenda repeatedly ignored requests from Booth Sweet, rebuffed, and/or refused. Booth explained that Prenda’s team also claimed no receipt, tried to quash due to that, but that claim was found frivolous by Judge Herndon. They’ve attempted to quash the third party discovery requests with motions, Booth stated, and the judge denied those as well. Booth then explains that despite this Duffy sent the motion to quash to JC Morgan Bank as if it wasn’t rejected. Steele sent an order to Sabadell bank — sent a copy of a stay of fine to the bank to convince Sabadell it was a stay of discovery. Then Hansmeier also tried to quash orders and was rejected. Plaintiffs still haven’t received direct discovery, Booth points out, and have only received some third party discovery.
I’m not sure that Booth was finished, but in the natural pause of arguments Judge Herndon then turned to ask John Steele “Why did you suggest the orders were stayed?” The response, as you might imagine, was a rather indignant “I NEVER!!!” type response. I’ll note right now that unfortunately all of the Prenda attorneys approached the front podium to address the judge, so I couldn’t see their faces as they made their arguments. The voices, however, were pretty telling. John Steele always maintained a borderline desperate/indignant tone throughout most of the hearing- while I’ve got a bit of bias in this case I tried to listen with a neutral ear to write everything as correctly as I could. Throughout the case, more and more, when he spoke I continued to get the feeling you have when a child makes a denial and as a parent you’re thinking “Methinks thou doth protest too much.” (Sorry for the misquote Shakespeare.)
After his initial denial, John Steele requested permission to approach the front, popped up, and moved fairly quickly to the podium. Speaking quickly, almost with an edge of panic, he started to explain… Steele stated he called the bank, asked “Did you receive any requests?”, and then they asked for copies of any orders that had been made relating to the discovery. He then asked to address other issues that Booth and Sweet brought up, and seemed to continue before the Judge granted permission. (I may have just missed that.) Steele says that Booth and Sweet can’t say that he had millions when the sanctions were placed, Steele has his personal bank statement from that month that shows that he had just two thousand in the bank at that time. (I personally wondered at that time, what’s to say he only had one bank at that time?) Steele states the real issue here is “Can we pay?” The judge said make a payment by 4/1. Steele had to have his sister and friend pay on his behalf, still owes them, and still doesn’t have the money to pay the sanctions. Booth and Sweet are making wild accusations, Steele claims. Yes, “we” had professional insurance Steele stated (unclear from my notes if “we” was clarified). But, Duffy is the only owner of Prenda, and we (Steele/Hansmeier I assume) offered to show them who we used for our insurance.
Steele continues his plea pointing out they got discovery, they published his wife’s SSN, what more does Booth Sweet need? Booth and Sweet will just keep trying to get more sanctions. I brought home money before the sanctions, sure, (insert more woe is me plea), then I faced lots of sanctions. Booth and Sweet, Steele says, can’t show that Steele had “millions at the time the court ordered the sanctions.”
Judge Herndon then asks “Is that your complete response, or are there other arguments?” Taking the invitation, Steele states he hasn’t obstructed discovery, he hasn’t received motions, and that Booth and Sweet have used these tactics in other cases. Steele claims he has nothing to hide, and if Booth and Sweet have to proof he had millions they’ve have attached that to their motions. Steele says he’s got proof that they don’t have that proof. To replace proof, Steele claims, Booth and Sweet make accusations, and Booth and Sweet know he doesn’t have it.
Judge Herndon replies by asking “Do you know what the CPA talked about” by omitting disclosures in his statements, etc. Steele asked if the Judge was asking him — but before Steele was answered Paul Hansmeier asked permission to address this issue.
Hansmeier states that his understanding is that the CPA statements conforming with GAAP need to have appraisals on homes for the mortgages, etc., accrued taxes, encumbrance, etc… if the CPA omits even one that’s boiler plate language. (Personal thought — then why the language “substantially all?”) Hansmeier said footnotes would show further explanations, it doesn’t say that they failed to disclose assets.
Judge Herndon then asks Hansmeier if he knows what an offshore account is. Hansmeier indicates he does. Judge asks “Do you or your wife have any?” Hansmeier states they do not. Judge asks if they have ever had any, again no. A few more questions, double checking, being very thorough to leave no wiggle room that the Hansmeiers might have an offshore account. The Judge then asks Hansmeier if Hansmeier showed the Judge a bank statement, that’d be from his only bank, right? Hansmeier indicates it would be. The Judge states that he could have more accounts. Hansmeier replies yes he could, but he doesn’t. Hansmeier points out that banks keep good records and have lots of info.
Hansmeier asks to make two arguments and is allowed. First, he points out that the motions at hand are highly individualized, and that what is “mine is mine”. Hansmeier says he had a very successful 2011 and 2012, but 2013 was disastrous both personally and professionally for him. Hansmeier stated he bought a house near Jul 2013, which turned out to be a very bad time to do so. Second, Hansmeier states that the burden of proof here should be on Booth and Sweet. Booth and Sweet moved, so it’s their burden. Booth and Sweet think there’s money but Booth and Sweet can’t show that there is/was. It’s their duty to show, Hansmeier claims, and states that they haven’t even gotten to information that he could rebut.
Immediately after that, Hansmeier made the first sign that team Prenda may be turning on their own. Regarding the discovery obstruction, Hansmeier makes the point that Booth and Sweet didn’t show that he did anything wrong. Booth and Sweet show that Duffy and Steele aimed at banks, but not him. Hansmeier says that in the motions they say “plaintiff counsel” but make individual claims.
Paul Duffy decides to take the next turn at the podium. Duffy says the first claim is that he sent the quash order to Chase Bank, that there’s no admissible evidence that Duffy did that, that if Duffy did that it was in error, and that Duffy doesn’t know why Chase bank hasn’t responded. Duffy claims he doesn’t have money, and he doesn’t know where Booth and Sweet’s information came from or if it has been properly authenticated. Duffy claims he didn’t work with Steele or Hansmeier in 2011 or 2012, so he didn’t get paid then. Booth and Sweet can’t show that Duffy made money.
Judge Herndon then asked Duffy if he had any offshore accounts. Duffy responded “Not to my knowledge.” The Judge quickly inquired about that not quite solid answer — my chicken scratches here are illegible but I know he stated a little more solidly then he doesn’t.
Judge Herndon then asked Duffy for his history, especially when he was first related to Steele/Hansmeier. Duffy, while looking back at his cohorts, roughly replied “November 2011 till January 2013”, with a bit of hesitation in his voice. Judge asked when did he split ways, and Duffy indicated that January 2013 was the end. Duffy stated the “California matter” kept them from proceeding.
My notes are missing a bit of detail here — I believe (but may be wrong) that the Judge asked about moving banks. Duffy may have volunteered this for some reason that evades me. But Duffy then stated that in his experience Fifth Third bank was not easy to work with. Duffy also then stated that Duffy and Steele made the decisions relating to where Prenda kept their accounts.
At this point, John Steele asks if he can approach. Judge Herndon replies “Well, I wanted to ask you… do you have any offshore accounts?” Steele responds he wouldn’t even know how to open one, and he has not one penny overseas. He was using pretty big denial words here. Judge Herndon then asks Steele if Sabadell Bank has a Caribbean Branch. Steele replies not that he knows of, and that he only worked with the Miami Beach branch. Steele proceeds to be adamant that all of his funds were detailed in what he filed under seal. He asks permission to give the judge affidavits that his sister and friend had paid for him (previously mentioned- judge didn’t immediately take them but eventually did.) Steele states that he has no offshore accounts to his knowledge.
Judge Herndon asks “So you have only one account?” and Steele states “At that time.” He explains that after he moved from Sabadell, he’s had two thousand or less. Judge Herndon points out that Steele keeps mentioning $2,000, and asks Steele if that’s his figure of choice. Steele replies it’s just a number in his head, the value fluctuates monthly. Steele then points out he bought a house on March 15, 2013, and had no sanctions at that time. Three months later he was hit by a big sanction from Judge Wright. Steele says the important thing here is that that “we” didn’t mislead court. Booth and Sweet allege, when they haven’t seen, and rhetorically asks “How can they say we had the money?” Steele says Prenda didn’t make millions, it’s a law firm. Prenda gave the money to clients, employees, and then “ourselves.”
Judge Herndon then asks Mr. Booth to “wipe up”. I don’t know if that was a figure of speech or intentional use.
Booth stated he took exception to what Steele said. Steele mentioned tax returns, Booth and Sweet asked for those but still haven’t received them. Booth stated that Prenda was trying to change the issues. The issue wasn’t offshore accounts, but candor to the court. Prenda still hasn’t answered where the money went, Booth states, and says that the Judge shouldn’t have had to ask them, he should have known if they had complied with his orders. Prenda still hasn’t provided GAAP compliant statements and so forth. Prenda stated they didn’t have time to respond, but they didn’t bring that up. They started their cases with legitimate clients, Booth states, and then moved to creating fictional clients and suing for the…
Steele couldn’t contain himself. Judge Herndon, though, didn’t even look at him and waved towards Steele as if shooing off a fly.
Booth brings up the Wright judgment and the findings there. Based on the conclusions there about taxes and offshore accounts — if Prenda has offshore, Booth and Sweet think they may very well never comply. They only brought this subject up in the first place to help consider what types of sanctions may be appropriate in this case.
Booth then says he believes it is their burden to show their inability to comply with his order, and that he’s fascinated by their answers. Booth wonders why Duffy tells Steele where to put Prenda money. He wonders why Duffy didn’t get money like Steele and Hansmeier, when he owns Prenda. Booth wonders why the continued various statements of not being related to Prenda, and why Steele’s personal credit card statements show that Prenda paid them. Evidence suggests connections Booth concludes.
Judge Herndon then finally asks to receive Steele’s affidavits. While Steele is there, he can’t help himself, he makes another brief passionate plea… Once again states that he has no offshore accounts. Steele says that he did the accounting for Steele|Hansmeier, and told Duffy where he did business. Steele says he did work for Prenda, and Prenda reimbursed those costs, that’s why they paid the CC bill.
After this, several “Thank you Gentlemen” and “Thank you, your Honor’s, the hearing was over.
Being a computer nerd and a legally inexperienced person following this saga, take my opinions with a grain of salt. And perhaps a few shots too. My overall impression was that Booth and Sweet had their information together, their game plan together for what points to emphasize in the hearing before they got there, and were well equipped for the points that Prenda attempted to make. The Prenda attorneys all three seemed to be speaking as individuals, not as a team, even nipping at each other a bit. Steele did most of the talking for Prenda during the hearing, and while he was animated and passionate in his tone of voice, his structure seemed circular and rambling to the legal novice that I am. He looped back at points, he jumped away and came back, and just generally didn’t seem to know where he was going. In past experience of people speaking, it tends to be the debate pattern of someone who may not have prepared enough (or at all.) I was pretty surprised. I could easily follow Booth’s legal arguments, his flow and direction, and didn’t feel he was repeating anything without purpose. Hansmeier was the only person who I felt did the same on Prenda’s side — and that perhaps was because he didn’t spend that much time speaking, mostly answering questions. While I don’t think Prenda used an extremely loaded gun against their own feet this time, they sure didn’t do themselves any favors from what I saw.
I got the pleasure to talk with Booth and Sweet later in the day, I’ll say they’re really great down to earth guys — even easy for a bumbling nerd like me to talk to. Great senses of humor, very diverse interests from music to comics to sports and such, and very well versed. When we took notes afterwards, they seemed to note basically the same things as I had (noting a bit better the significance of a few bits). Jason Sweet twice during discussions attempted to fire Dan Booth and hire me, but after the second attempt Mr. Booth noticed our drinks were empty and decided to head for record stores before Mr. Sweet could execute on his hilariously wrong ideas. Sigh, I always seem to miss opportunities that way… But I’m really glad I got this opportunity to sit in on the hearing today. It definitely gives a better context of the parties involved to see the personalities in actual action than trying to read them through the words of a transcript.
SJD — 11/19/2014
Right when I was ready to publish the notes, I have become aware that despite being apparently disgusted by the Prenda parties’ conduct, Judge Herndon nonetheless denied both motions:
The arguments raised by Smith and the records cited in support thereof leave this Court with a high degree of suspicion as to the representations Lightspeed’s Counsel have previously made to this Court. The Court does not believe that Lightspeed’s Counsel have conducted themselves in a professional manner. However, suspicion is not a sufficient basis for a finding of contempt. Ultimately, Smith has failed to meet his burden of demonstrating that Lightspeed’s Counsel is in contempt of this Court’s orders. Accordingly, the Motion for Contempt (Doc. 135) is DENIED.
With regard to the Motion for Sanctions for Obstructing Discovery (Doc. 153), once again the Court is highly suspicious of the alleged conduct. However, the evidence presented by Smith does not present sufficient basis for a finding of obstruction and/or the imposition of sanctions. Further, although the explanations provided by Duffy and Steele are questionable, they are not so inherently implausible as to establish sanctionable conduct. Accordingly, the Motion for Sanctions for Obstructing Discovery (Doc. 153) is DENIED.
Herndon’s repulsion was obvious from the last sentence of the order:
Hopefully, this will put an end to this ugly and distasteful chapter in the annals of litigation for this case and this district with these attorneys.
9 responses to ‘Notes from the Lightspeed hearing in East St. Louis (November 12, 2014)’
Whoever did this recap did a superlative job, thank you.
Excellent play – by – play. Much appreciated.
It is very sad that these clown are still able to hide their funds and simply lie to the court about their ability to pay. Thank you everyone for your efforts in taking down Prenda.
Don’t forget that a DOJ/IRS investigation is still ongoing. It’s a good thing that it has been slow: allowed the defense to get something (the bond). Seems that the remainder of the loot is going to the Uncle Sam’s coffers.
In addition, Duffy and Steele are about to be disbarred.
Wasn’t thinking of that. Thanks.
Where are they facing disbarment? I know Wright ordered referral to various places, but I haven’t seen any action come of it yet. 😦
I can’t tell from the Judge’s penning if he’s irritated with Prenda, or just everyone here. Either way it’s pretty obvious he’s really not happy with Prenda at minimum, and it would be in their best interests to take actions to ensure they don’t need to appear before him again.
DBS here- thanks all for kind words, but I didn’t think I did a great job compared the usual work of the people I see commenting on it. 🙂 I certainly tried. Thank you SJD for cleaning it up and posting it, sorry it took me so long to get it over to you. If anyone has any questions I’ll be glad to answer the best I can. Saw a few spots I know I wasn’t too clear.
I love how the soon to be ex wife of Diffy just posted she’s getting 7k of plastic surgery on Facebook. She even used #coldhardcash. Post your email and I will send you the screen shot. Have another drink soon to be ex Duffy, you are a great source of information when you’re platered.
email@example.com Thank you!