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Scientology Crime Syndicate

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO EASTERN DIVISION

HUGH BRIAN HANEY, Plaintiff,

v.

BRYAN J. ZWAN & DIGITAL LIGHTWAVE, INC., Defendants.

Case No. C2-97-1218

Judge Edmund A. Sargus, Jr. (Magistrate Judge Mark Abel)

AMENDED COMPLAINT SECURITIES FRAUD

Jury Demand Endorsed Hereon

Plaintiff by its attorneys, the Law Office of Eric L. Brown Co., L.P.A., for its amended complaint against Defendants avers as follows.

I. THE PARTIES

1. Plaintiff is, and at all times mentioned in this amended complaint was, a resident of Franklin County, Ohio and a citizen of Ohio.

2. Upon information and belief, Defendant Digital Lightwave, Inc., is a corporation organized and existing under the laws of the State of Delaware with its principal place of business located at 601 Cleveland Street, Fifth Floor, Clearwater, Florida 34615 and does business in the State of Ohio and in this district.

3. Upon information and belief, Defendant Bryan Zwan ("Defendant Zwan") is a citizen of Florida whose address is 601 Cleveland Street, Fifth Floor, Clearwater, Florida 34615.

II. JURISDICTION AND VENUE

4. This Court has jurisdiction over the subject matter of the claims alleged herein pursuant to 28 U.S.C. ~~ 1331, 1332, and 1367, and 15 U.S.C. ~~29(b), 77aa, and 78j(b) and 17 C.F.R. 240.10b-5. The amount in controversy, exclusive of interest and costs, exceeds $75,000.

5. Venue is proper under 15 U.S.C. ~ 77aa.

III. NATURE OF THE ACTION

6. Plaintiff H. Brian Haney is seeking rescission and damages

as the result of a fraudulent scheme or device by Defendants which caused him to transfer for $2.5 million his 49% ownership interest in Defendant Digital Lightwave, Inc., valued at approximately $235 million, and to forego his rights to reacquire the same.

IV. STATEMENT OF FACTS

7. At all times mentioned in this amended complaint, Defendant Zwan was the controlling shareholder, the president and chief operating officer of Defendant Digital Lightwave, Inc., a Delaware corporation ("New Digital"), and its predecessor Digital Lightwave, Inc., a California orporation ("O1d Digital") (collectively, New Digital and Old Digital are hereinafter referred to as "Digital"), and in doing the things alleged in this amended complaint was acting both individually and in his capacity as president and chief operating officer of Digital.

8. At all times mentioned in this amended complaint, the principal product or products of Digital have been certain advanced computer systems that provide information concerning the performance of lightwave telecommunications networks and transmission equipment (hereinafter referred to collectively as the "SONET Testers")

9. Unless otherwise noted in this amended complaint, all conversations and discussions described herein between Defendant Digital and its representatives, including Defendant Zwan and Al Zwan, on the one hand, and Plaintiff and his representatives, including Emil S. Colucci, on the other hand, took place on the telephone when Plaintiff and his representatives were located at 3656 Paragon Drive, Columbus, Ohio 43228.

10. On November 16, 1993 Defendant Zwan, together with a representative named "Charmaine" of the organization known as the Church of Scientology visited Plaintiff in Columbus at the Scientology organization's place of business at 30 North High Street, Columbus, Ohio. After many hours of discussion, Plaintiff agreed in principle (a) to donate an additional $100,000 to the Church of Scientology's "Superpower" project; and (b) personally and through companies owned by him, to invest in Digital a maximum of $5 million through a stock purchase and a line of credit (the "Line of Credit") in exchange for a 50% ownership interest in Digital. Defendant Zwan invited Plaintiff to visit Digital's offices at 1811 Centinela Avenue, Santa Monica, California 90404 ("Digital's California Offices") 11. On November 21, 1993, Defendant Zwan gave Plaintiff and his financial and legal advisers a tour of Digital's California Offices. During such tour, Defendant Zwan stated to Plaintiff that he was an expert in telecommunications patent applications, that Digital's SONET Tester technology was proprietary and patentable, and that he would shortly prepare and file a patent application with respect to the SONET Tester; Defendant Zwan also forecast to Plaintiff that Digital would be able to capture a significant share of the $200 million per year market for SONET Testers for the years 1995, 1996 and 1997, that Digital would sell 100 SONET Testers for a total of $1,950,000 total sales in 1994, with the first such sales to occur in March 1994, and that the maximum amount Digital would need to borrow from Plaintiff under the Line of Credit would be $2 million.

12. On December 2, 1993, Plaintiff and Defendant Zwan executed a stock purchase agreement (the "Stock Purchase Agreement") providing for the purchase by Plaintiff from Defendant Zwan of 4,900 shares of common stock of Digital for $2 million. In addition, Plaintiff agreed to provide as much as $3 million to Digital under the Line of Credit. At the time, Defendant Zwan owned 100% of the 10,000 outstanding shares of capital stock of Defendant Digital, and Plaintiff's purchase was a purchase of a 49% ownership interest in Defendant Digital.

13. The Stock Purchase Agreement contemplated a closing date of January 10, 1994, conditioned on, among other things, delivery by Defendant Zwan by such date an opinion of special patent counsel to the effect that some or all of the essential elements of the SONET Tester were patentable by Digital. Defendant Zwan was unable to deliver such patent opinion by January 10, 1994, and Plaintiff and Defendant Zwan agreed to postpone the closing date of the Stock Purchase Agreement until February 10, 1994.

14. On or about February 8, 1994, Defendant Zwan delivered an opinion of special patent counsel Cushman Darby & Cushman expressing, in effect, no opinion concerning the patentability of the SONET Tester. Plaintiff and Defendant Zwan agreed to postpone the closing date of the Stock Purchase Agreement until May 31, 1994.

15. Digital relocated its corporate offices and headquarters to 601 Cleveland Street, Fifth Floor, Clearwater, Florida 34615 ("Digital's Florida Offices") during the first three months of 1994.

16. On May 2, 1994, Plaintiff caused Great American Fun Corp., an Ohio corporation wholly owned by him ("GAF Corp."), to lend Digital the sum of $1 million.

17. On June 2, 1994, Digital forecast to Plaintiff sales of 125 SONET Tester units in 1994 for a total of $3,000,000 total sales in 1994, with first sales to occur in August, 1994, and that the maximum borrowings Digital would need to make from Plaintiff would be $3 million. 18. On June 2, 1994, Plaintiff caused GAF Corp. to 1 end Digital the sum of $1,130,917.81. On June 20, 1994, Plaintiff caused GAF Corp. to enter into Commercial Loan Notes 001 and 002 (the "Commercial Loan Notes"), each in the amount of $l.S million and each secured by a security agreement (the "Security Agreements") granting GAF Corp. a security interest in Digital's assets and establishing the Line of Credit in a maximum amount of $3 million.

19. On June 21, 1994, Plaintiff and Defendant Zwan executed a new stock purchase agreement (the "New Stock Purchase Agreement") , providing for the Line of Credit and for purchase by Plaintiff of 4,900 shares of Digital common stock owned by Defendant Zwan, representing a 49% ownership interest in Defendant Digital, for the sum of $500,000. Defendant Zwan had requested, and Plaintiff agreed, that in lieu of paying an additional $1.5 million for the 4,900 shares of Digital common stock as originally agreed in the Stock Purchase Agreement, Plaintiff arrange a loan of $1.5 million to Logical Magic, Inc., a company owned by Defendant Zwan by Great American Fun (HK) Ltd., a Hong Kong company who 1 ly owned by Plaintiff ("GAF HK") (the "LMI Note")

20. In the New Stock Purchase Agreement, Plaintiff and Defendant Zwan agreed that the balance of the Line of Credit was to be made available to Digital as approved by the Board of Directors of Digital against a business plan.

21. On June 21, 1994, Defendant Zwan transferred 4,900 shares of Digital common stock to Plaintiff, and Plaintiff paid Defendant Zwan the sum of $500,000.

22. Also on June 21, 1994, Plaintiff and Defendant Zwan and Defendant Digital entered into a shareholders' agreement (the "Shareholders' Agreement") which, among other things, restricted the disposition of shares of Digital, the issuance of new shares and instruments convertible into shares, the incurrence of indebtedness by Digital, paYment of dividends, management of Digital, and which gave Plaintiff the right to examine and copy any of Digital's records or documents.

23. On June 21, 1994, Plaintiff was elected to the Board of Directors of Digital and with Defendant Zwan was one of only two authorized directors. As required by the Shareholders' Agreement, and by Board re solut ion dated June 21, 1994, both authorized directors of Digital were required to approve: (a) the operating budget of Digital; (b) incurrence of debt outside the operating budget; (c) reinvestment of earnings or retained earnings; (d) compensation of Defendant Zwan.

24. On June 21, 1994, Defendant Zwan stated to Plaintiff that the SONET Tester could not be sold or shown to potential customers until a patent application was filed to protect Digital's proprietary technology in the SONET Tester, however Defendant Zwan stated the patent application would be filed within a few weeks. Such statements were false, and upon information and belief were known by Defendant Zwan to be false at the time they were made.

25. The basis for Plaintiff's belief that Defendant Zwan knew the statements were false is that in its registration statement, as amended (the "Digital Registration Statement") filed with respect to the initial public offering of Digital stock made February 5, 1997 (the "Digital IPO"), which reflects substantial sales of the SONET Testers starting in the first quarter of 1996, Digital admitted that it does not rely on patents to protect its proprietary rights in its products, does not hold any patents, that patents on its core technologies may never be granted, and that its success will be largely dependent on its reputation for technology, product innovation, affordability, marketing ability and response to customers' needs, rather than upon patents.

26. Upon information and belief, the motivation for Defendant Zwan's false statement that a patent application had to be filed prior to any sales of the SONET Testers was to permit Defendant Zwan to falsely explain the lack of sales by Digital as a consequence of patent law procedure, when in fact Digital could have sold SONET Testers during 1994. Defendant Zwan wanted an excuse not to generate sales while Plaintiff was a shareholder of Digital, thereby causing Plaintiff to fear for the safety of his investment and undervalue his Digital shares, as part of a fraudulent scheme or device by Defendant Zwan to obtain the benefit of Plaintiff's $5 million investment but thereafter to acquire for himself the 49% ownership of Digital purchased by Plaintiff.

27. On or about September 29, 1994, Digital appointed Al Zwan, Defendant Zwan's brother, its Chief Financial Officer and VicePresident of Operations without consultation with Plaintiff or action by the Board of Directors, in violation of Digital's corporate By Laws.

28. By letter dated October 12, 1994, from Al Zwan to Emil S. Colucci, Plaintiff's financial adviser and representative ("Mr. Colucci"), Digital told Plaintiff it had reorganized to be structured to initiate sales and delivery, stated that sales efforts for the SONET Testers were underway, that the patent application would be filed on or about December 5, that the SONET Testers could soon thereafter be shown to customers and initial orders for the SONET Testers were anticipated in December, 1994, and January, 1995.

29. On October 17, 1994, Plaintiff travelled to Clearwater, Florida and visited Defendant Zwan at Digital's Florida Offices. On such date, Defendant Zwan and Plaintiff visited together a headquarters of the Church of Scientology known as "FLAG", at 210 South Ft. Harrison Avenue, Clearwater, Florida. There Defendant Zwan, in the presence of the President of FLAG named "Mary" told Plaintiff that a serious problem had arisen in their business relationship. Defendant Zwan stated that Plaintiff's wife Linda Mrva Haney was expelled from the Church of Scientology and unless Plaintiff caused his wife to repair her standing with the Church of Scientology by following prescribed steps, she would remain in effect excommunicated and Plaintiff would have to become "disconnected" from his wife, meaning divorced, or Defendant Zwan could no longer be associated with Plaintiff in business. Mary confirmed Defendant Zwan' s statement. Plaintiff told Defendant Zwan and Mary that he would not divorce his wife to please the Scientologists.

["Mary" is probably Mary Voegeding]

30. On November 2, 1994, Digital forecast to Plaintiff that it would sell zero SONET Tester units in 1994, but that it would sell 200 such units in 1995 for a total of $9,400,000 total sales in 1995_, with first sales to occur in January, 1995, and the maximum borrowings Digital would need to make from Plaintiff would be $3,550,000.

31. On January 3, 1995, Al Zwan informed Mr. Colucci that Digital had replaced their previous Controller and had hired a new, inexperienced, Controller, without consultation with Plaintiff.

32. Because of the failure of Digital to deliver the agreed upon patent opinion, its failure to file its patent application (most recently when scheduled on December 5, 1994), its failure despite its forecasts to make any sales at all of the SONET Testers during 1994; because of its unauthorized appointments of Defendant Zwan's brother as Chief Financial Officer and Vice President of Digital, and its unauthorized appointment of a new, inexperienced, Controller; because of Digital's repeated increases in its forecasted borrowings from Plaintiff, its failure to timely make its interest payments under the Line of Credit, and its failure to timely submit its financial statements and cash flow forecasts; and because of Digital's generally uncooperative behavior, Plaintiff contacted Digital on January 4, 1995, and requested that his financial representative visit Digital to review its books and records.

33. On January 4, 1995, Plaintiff also requested that Defendant Zwan personally guarantee the Line of Credit, reminded Digital of its obligation to prepare a business plan anticipating further draws against the Line of Credit subject to the approval of the Board of Directors, and requested that Defendant Zwan transfer 100 additional shares of Digital to Plaintiff as additional security.

34. On January 11, 1995, Defendant Zwan and Digital refused to permit Mr. Colucci to inspect Digital's books and records. On such date, Defendant Zwan told Plaintiff in a telephone call that no one associated with Plaintiff could visit Digital's offices because of the problems between Plaintiff's wife and the Church of Scientology. 35. On January 11, 1995, and on other dates during January, 1995, Plaintiff and his representatives placed telephone calls to Defendant Zwan to obtain information concerning Digital's business operations. On January 11, 1995, Defendant Zwan refused to speak to Mr. Colucci and failed to return the other telephone calls made to him by Mr Colucci and Plaintiff.

36. On January 11, 1995, Al Zwan told Mr. Colucci in a telephone call that the patent application might be ready "next week" if Defendant Zwan were not distracted by a search for additional financing.

37. On January 23, 1995, Digital forecast to Plaintiff that it would sell 200 SONET Tester units in 1995 for a total of $8,920,000 total sales in 1995, with first sales to occur in April, 1995, and the maximum borrowings Digital would need to make from Plaintiff would be $4,300,000 (the "January 23, 1995, Forecast") This amount was substantially in excess of the Line of Credit and was explained in the forecast by Digital's failure to make the sales it had previously forecast, which, in turn were supposedly dependent upon the patent application being filed.

38. Upon information and belief, the January 23, 1995, Forecast contained false information and was intended by Defendant Zwan to deceive Plaintiff. The purpose of the January 23, 1995, Forecast was to scare Plaintiff into believing that it was not possible for Digital to make the predicted sales of the SONET Testers without additional substantial amounts of money beyond the $S million contemplated by Plaintiff and to fear for the safety of his investment. Defendant Zwan sought thereby to cause Plaintiff to undervalue his Digital shares, as part of a fraudulent scheme or device by Defendant Zwan to obtain the benefit of Plaintiff's $5 million investment but thereafter to acquire for himself the 49% ownership of Digital purchased by Plaintiff.

39. The reasons for Plaintiff's belief that the January 23, 1995, Forecast was intentionally deceptive are that, as set forth above, Digital subsequently admitted that patents were not essential to its business, and that, as shown by Digital's financial statements for 1996 in the Registration Statement, Digital in fact made substantial sales of the SONET Testers as soon as Defendant Zwan acquired Plaintiff's 49% ownership of Digital.

40. In efforts to help Digital raise additional capital, Plaintiff arranged contacts for Digital with U.S. West, a major telecommunications company, and the Geneva Company, a high technology venture capital firm, with the expectation that either or both would consider an investment of several million dollars in the SONET Testers. Upon information and belief, Defendant Zwan never pursued such referrals.

41. On January 25, 1995, Al Zwan stated to Mr. Colucci that his questions concerning Digital's finances were trivial. On January 30, 1995, Mr. Colucci asked Digital to provide additional financial information concerning Digital' s operations so Plaintiff could evaluate Digital's business, but never received the information requested.

42. On January 31, 1995, Al Zwan and Defendant Zwan met with Plaintiff, Mr. Colucci and counsel to Plaintiff at the GAF Corp. offices at 3656 Paragon Drive, Columbus, Ohio (the "January 31, 1995, Meeting"). During the January 31, 1995, Meeting, Plaintiff explained to Defendant Zwan why he had requested additional security, including 50% stock ownership, from Digital and Defendant Zwan before authorizing further borrowings from the Line of Credit.

43. During the January 31, 1995, Meeting, Defendant Zwan reiterated to Plaintiff that Digital's operations would require substantial amounts of money beyond the Line of Credit. Plaintiff asked Defendant Zwan why sales of the SONET Testers could not be made to generate cash for Digital's operations as Digital had originally forecast. Defendant Zwan again stated that sales could not be made until the patent application for the SONET Testers was filed. Plaintiff told Defendant Zwan that before additional amounts were advanced under the Line of Credit, Plaintiff wished Digital to file its patent application, appoint Mr. Colucci as Digital's Chief Financial Officer, to permit a review of the SONET Testers by an expert, to schedule quarterly Board of Directors meetings, and to cooperate with Plaintiff in showing the SONET Testers to prospective investors. Plaintiff also requested that Defendant Zwan permit Plaintiff to acquire sufficient additional shares in Digital to exercise control.

44. During the January 31, 1995, Meeting, Defendant Zwan took Plaintiff aside and falsely stated to him that because Plaintiff's wife had been expelled by the Church of Scientology, and because Plaintiff refused to divorce his wife, Plaintiff could not remain a shareholder of Digital. Defendant Zwan stated that the good will of the Church of Scientology was vital to him personally and vital to the success of Digital and that Plaintiff's refusal to rid himself of his wife jeopardized Digital's future. Defendant Zwan falsely stated to Plaintiff that if Plaintiff remained a shareholder of Digital, the company would fail and Plaintiff would lose his entire investment up to that time of $4.4 million.

45. Upon information and belief, Defendant Zwan's statements to Plaintiff on October 17, 1994, January 11, 1995 and January 31, 1995, concerning the impact of his wife's Scientology problems on Plaintiff's relationship with Digital were false, and known by Defendant Zwan to be false at the time they were made. The purpose of such false statements was to provide an excuse for Digital's failure to provide Plaintiff the information he had requested to evaluate the performance of his $5 million investment and to provide a purported justification for asking Plaintiff to relinquish his entire ownership interest in Digital. Defendant Zwan sought thereby to cause Plaintiff to undervalue his Digital shares, as part of a fraudulent scheme or device by Defendant Zwan to obtain the benefit of Plaintiff's $5 million investment but thereafter to acquire for himself the 49% ownership of Digital purchased by Plaintiff.

46. The basis for Plaintiff's belief is that according to the Digital Registration Statement, immediately prior to the Digital IPO, Defendant Zwan owned 88.8% of Digital's shares, and after the Digital IPO remained owner of 77.9% of Digital's shares because he had acquired Plaintiff's 49% interest in Digital, and that Defendant Zwan offered to pay no more than $2.5 million for Plaintiff's shares on January 31, 1995, which had a market value on November 3, 1997, of approximately $235 million, and that, as set forth above, Defendant Zwan repeatedly failed to provide information to Plaintiff to enable Plaintiff to correctly evaluate his investment.

47. In fact, upon information and belief, the Church of Scientology was not vital to Digital's future. The basis for this belief is that there is no disclosure whatever of the Church of Scientology's importance to Digital in the Digital Registration Statement.

48. At no time from June 21, 1994 through February 9, 1995, did Defendant Zwan deliver an opinion of special patent counsel, nor did he provide a copy of Digital's patent application, nor did he provide Plaintiff with a business plan or operating budget as contemplated by the Stock Purchase Agreement, the New Stock Purchase Agreement and the Shareholders' Agreement. 49. Believing that his entire investment of $4.4 million in Digital was at risk if he did not accede to Defendant Zwan' s requests, on February 9, 1995, Plaintiff granted Defendant Digital an option to purchase his 4,900 shares of Digital common stock representing 100% of Plaintiff's stock in Digital and a 49% ownership interest in Defendant Digital (the "Haney Shares Option") The option price was $2.5 million, of which $1.605 million could be made by repayment of the LMI Note together with interest (the "Haney Shares Option Exercise Price"). By its terms, the Haney Shares Option could be exercised until August 25, 1995 (the "Haney Shares Option Expiration Date")

50. At no time during the negotiations with Plaintiff for the Haney Shares Option did Defendant Zwan disclose to Plaintiff that he was at the same time negotiating with other investors for rights to participate in the Digital I PO. If Plaintiff had known that Defendant was negotiating with other inve s tors for rights to participate in the Digital IPO, he would not have granted the Haney Shares Option.

51. Upon information and belief, Defendant Zwan did conduct such negotiations with other investors prior to the date the Haney Shares Option was granted because over the next few months Digital did in fact grant numerous such options to other investors and concealed the fact from Plaintiff.

52. Specifically, as set forth in the Digital Registration Statement, on March 17, 1995, Digital granted an option, exercisable solely in the event of the Digital IPO to purchase $150,000 worth of Digital shares at a price equal to 50% of the Digital IPO price per share to Michael Baum and George Murgatroyd; on June 19, 1995, Digital granted a similar option with respect to $400,000 worth of Digital shares at a price equal to 1% of the Digital IPO price per share to Stanley P. Zurn; on June 22, 1995, Digital granteda similar option with respect to $30,000 worth of Digital shares at a price equal to 50% of the Digital IPO price per share to Edward F. Guignon; on June 23 1995, Dig.ital granted a similar option with respect to $30,000 worth of Digital shares to Paul J. Hedlund; on July 12, 1995, Digital granted a similar option with respect to $21,000 worth of Digital shares to Margaret A. Guignon (the "March July 1995 Digital IPO Options")

53. Once the Haney Shares Option was granted, even though Plaintiff remained owner of 49% of the shares of Digital anda member of the Board of Directors, Digital became even less cooperative and informative than before. Digital failed to make its interest payments on the Line of Credit on a timely basis for the months of January, February, March, April, and May, 1995. Al Zwan refused to communicate with Mr. Colucci although Mr. Colucci called him in an effort to obtain information concerning Defendant' s business on six occasions in March and April, 1995.

54. When Defendant Zwan and Digital failed to provide monthly financial and operational information to Plaintiff as required, Plaintiff wrote to Defendant Zwan on June 30, 1995, reminding him of his obligation to provide Plaintiff with monthly financials and interest payments, and requesting a written summary of Digital's operating progress every two weeks.

55. By letter dated July 3, 1995, Defendant Zwan sent to Plaintiff the Digital May, 1995, financial statements (the "Digital May 1995- Financial Statements"), together with a memorandum summarizing Digital's outstanding loans (the "3 July 1995 Outstanding Digital Notes Memorandum") . Neither the Digital May 1995 Financial Statements nor the 3 July 1995 Outstanding Digital Notes Memorandum reveal the fact that Digital had granted any of the March July 1995 Digital IPO Options.

56. On behalf of Digital Al Zwan sent a letter, dated August 21, 1995, to Plaintiff stating that enclosed were minutes of Digital Board of Directors meetings signed by Defendant Zwan for the following dates in 1994: July 28, October 20, November 30, December 17, and December 19; and, in addition, the following dates in 1995: January 23, January 24, January 30, February 27, April 6, April 27, May 15 and July 14; and minutes of a November 30, 1994 Annual Digital Shareholders Meeting; and requested Plaintiff's signature to all of them (the "August 21 1995 Digital 1994 and 1995 Minutes") None of such minutes disclose or authorize the March - July 1995 Digital IPO Options, or disclose that Defendant Zwan was planning and negotiating the Digital IPO.

57. At no time did Defendant disclose the March - July 1995 Digital IPO Options to Plaintiff. Plaintiff learned of the March July Digital IPO Options when he read the Digital Registration Statement in September, 1997. Upon information and belief, the reason Al Zwan refused to communicate with Mr. Colucci was because Digital did not wish to disclose to Plaintiff, and wished to conceal from Plaintiff, the fact that Digital was planning the Digital IPO. Upon information and belief, the reason Defendant Zwan failed to provide financials and operating summaries as required, the reason none of the Digital May 1995 Financial Statements, the 3 July 1995 Outstanding Digital Notes Memorandum, and the August 21 1995 Digital 1994 and 1995 Minutes disclose or authorize the March - July 1995 Digital Options is because Digital did not wish to disclose to Plaintiff, and wished to conceal from Plaintiff, the fact that Digital was planning the Digital IPO . Defendant Zwan intended thereby that Plaintiff would undervalue his shares in Digital.

58. On August 14, 1995, Defendant Zwan requested that Plaintiff extend the Haney Shares Option Expiration Date from August 25, 1995 to October 16, 1995 and the Haney Shares Option be modified so that it could be exercised by Defendant Zwan in addition to Digital (the "First Haney Shares Option Amendment"). In negotiating the First Haney Shares Option Amendment in telephone conversations with Plaintiff, Defendant Zwan did not disclose the March - July 1995 Digital IPO Options to Plaintiff. Plaintiff would not have agreed to the First Haney Shares Option Amendment if he had been aware of the March - July 1995 Digital IPO Options because he trial report Minton ./. Weber etc

trial report Minton ./. Weber etc

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trial report Minton ./. Weber etc

27 Mar 2001

Tilman Hausherr <tilman@berlin.snafu.de>

I was at the trial Minton v. Weber today. The scientologist attorney asked for more time, then rather for an extension to submit another filing so he doesn't have to appear in Berlin again.

The court will decide later today whether such a response is needed at all. The reason was that Minton's attorney had submitted a brief that the opposing attorney said he had received on the 20th. Because of that, he said that more research was needed. Minton's attorney said that it isn't right that they first print their accusations, and then do their research.

In german trials the court usually indicates what it thinks of the lawsuit, and then oral briefs are made about the topic.

The court said:
- there is no indication that Minton has been involved in shady movements of billions of dollars ("Milliardengeldschiebereien")
- he did do the debt buy-back
- no evidence that he helped hide any money
- scientology isn't a "citizens organisation" ("Bürgerinitiative") that can't be expected to do some research. (The background is that according to Minton's attorney, scientology had done a LEXIS-NEXIS search but had somehow ignored the facts contained in some articles) While the court wouldn't say that scientology has an "intelligence service", it called scientology a large organisation with enormous possibilities, so it has to listen to the response of Minton, and it should have known of the parliament report.

Many of the oral allegations of the scientology attorney were similar to what has been claimed on ars, e.g. that Minton has Caberta on a string, that he bribed her, that he set up money laundering foundation for Abacha, and that he was "sure" that Greenland was also there to funnel money into foreign countries.

Minton's attorney explained that scientology is doing a "perverse" campaign against Minton, based on the policies of scientology founder Hubbard, that Caberta is actually not even investigated for bribery, only for "Vorteilsnahme" which is something less. The scientology attorney explained that they don't know what she got the money for (i.e. what the exchange was), but that they will research it and prove it. He disliked that Minton's attorney had used that P-word and said that his criminal complaint against Caberta was not pervert, but that Caberta's office is a mess that has to be cleaned up. He said that the complaint in Switzerland was for real, but didn't explain why they could only provide some translation of it. He claimed that because Minton attacked scientology, scientology is allowed to attack Minton (the "right to answer"). That one can "return coins with notes". No need to do research first. Minton's attorney said that there isn't such a right to reply because it has nothing to do with his attacks on scientology, and Minton e.g. never spoke in Zehlendorf (a district in Berlin where FREIHEIT was distributed). Scientology's attorney said that it doesn't have to *prove* that Minton bribed Caberta, that this is the job of the state attorney's office. That there are 100 negative reports about Minton and only 3 that show his side.

Tilman

-- Tilman Hausherr [KoX, SP5.55] Entheta * Enturbulation * Entertainment tilman@berlin.snafu.de http://www.xenu.de

Resistance is futile. You will be enturbulated. Xenu always prevails.

Find broken links on your web site: http://www.snafu.de/~tilman/xenulink.html
The Xenu bookstore: http://www.snafu.de/~tilman/bookstore.html

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E-Mail Fredric L. Rice / The Skeptic Tank
their quartely tax filings and they couldn't correct thier [sic] quarterly tax filings because they didn't do payroll audits.

This guy is now holding Course admin. Has had goten [sic] busted out of Treasury but never Comm Ev'd due to staledated justice. He did purchase FPRD auditing regarding the Finance areas and got the auditing in the HGC.

Tina Hall comes on as Treas Sec in Dec 88. The records dramatically worsened when Tina went on with regards to Treasury audits. She consistantly filed all the returns late, thus accumulating more penalties and interest. All filings under her had been inaccurate.

She wrote a cheque for just over $7,000 made out to her, signed by her as one signatory, and forged another signatory's signature. This cheque was cashed and supposedly used for payroll, per Tina. However, over $1,000 is not accountable in that week's pay as it was $1,000 less than the amount of the cheque. It has not actually been verified as of yet, whether that money did actually go to staff pay. The string are not fully pulled on this, and an audit needs to be done to pull this right down.

In the last few months, several blank signed cheques have been found in Treasury all of which had Tina's signatures.

1989 filings are bozo. Never done a payroll audit and cannot match their tax filings figures to their pay records. They have currently, conveniently lost about half of their original payroll records for 1989.

We have ordered that an all hands search for these records occurs tomorrow and we are making the EC responsible for finding them. It will be intereting [sic] to find out who is hiding these records and what they don't want found out.

Other persons who worked in Treasury during 1989 as follows.

Henry Rodriquez. Came into Treasury in Jan 89 as Dir RAM. He left Treasury in August 89 and then took a lower post in bookstocks. Henry was never qualled to be in Treasury, nor for that matter, to be on staff. He has a criminal history of theft. His own business was closed down by the IRS, This was the person put in charge of payroll audits and tax filings for LA Org. He never made one single payroll audit balance and never got the tax filings done in time.

He was being routed out a few weeks ago and he blew the org. He is disaffected now and will not answer phone calls.

Vicki Nelson was Dir Disbursements in 1989. She screwed up records, lost some of the records and could not properly add

[new page] -4-

figures. She also put on the Bills Summary as Bills owing, a piece of promo from a telex directory for EU. This was not a bill at all, but a promo piece. She paid the bill and now has the org listed in the EU telex directory!!!!

In 1988 alone, LA Org paid out approximately £40,000 in tax interest and penalties due to late filings.

In 1989 they almost lost their right to sell books by having their license lifted due to their late filings and payments.

The above is the overview based on stringpulll [sic] back. So the PT shortage in the bank accounts are based mainly on he [sic] above screw ups on amounts being deposited etc. In order to get specifics a payroll audit needs to be done. Before this can occur, the missing 89 records must be found immediately.

Further data with regards to the 4th quarter 89 is that, the new Treas Sec, Sean (last name) has not paid any payroll withholding taxes since w/e 23 November 89. He he [sic] didn't know how to make the payments so he just stuffed the cash in the safe along with unpaid Book Commissions. He is totally green and unhatted.

The Sales Tax also wasn't paid for the 4th quarter and we are making the FBO figure out the amounts owed and she is fully reponsible [sic] for getting these paid in the morning along with unpaid 4th quarter payroll taxes.

I have briefed the Cont Finance Dir and the PAC Finance Dir on the filings etc as above and demanded cooperation at NCC to get ethics immediately applied and the Comm Evs going up lines. The FBO's Comm Ev is already on lines. The other EC members are IP on being put together and to be on lines.

I have requested immediate Sec checks of the EC members of NCC. Will also liaise with SC OSA US to get RBs done on EC of the org on being put together and to be on lines.

I have a separate report to follow regarding the amounts we have now deduced as owing for the 4th quarter based on the figures arrived at by the Treas Sec and FBO. They will be verified by separate audits to be done by the ATF as needed.

ML,

Dan [END]

Best wishes,

Andreas Heldal-Lund, Nunsteinvegen 9, N-4056 Tananger, Norway
Pho: +47 90 04 32 99 Fax: 90 32 35 46 E-mail: ahl@xenu.net
home.sol.no/~spirous www.xenu.net www.hedning.no/hedning
---------------------------------------------------------------
"If anyone can show me, and prove to me, that I am wrong in
thought or deed, I will gladly change. I seek the truth, which
never yet hurt anybody. It is only persistence in self-delusion
and ignorance which does harm." -- Marcus Aurelius

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