Free Transcript - District Court of Arizona - Arizona

1 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Official Court Reporter: Elaine Cropper, RDR, CRR, CCP Sandra Day O'Connor U.S. Courthouse 401 West Washington Street, Suite 312, Spc. 35 Phoenix, Arizona 85003-2150 (602) 322-7245 Proceedings Reported by Stenographic Court Reporter Transcript Prepared by Computer-Aided Transcription United States District Court REPORTER'S TRANSCRIPT OF PROCEEDINGS BENCH TRIAL BEFORE: THE HONORABLE ROSLYN O. SILVER, JUDGE Cathleen Channel, Theresa Wharry, Stacie Hanson, Monique Nichols, ) ) ) Plaintiffs, ) ) vs. ) CV 03-0100-PHX-ROS ) Home Mortgage, Inc., an Arizona ) corporation conducting business in ) Arizona; Carl Brown; Molly Brown; ) Greg Brown; Jane Doe Brown, ) ) Phoenix, Arizona Defendant. ) September 18, 2007 ___________________________________) 8:43 a.m. UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA _________________

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 1 of 102

2 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 United States District Court CARL I. BROWN DIRECT EXAMINATION BY MR. SHIELDS DIRECT EXAMINATION (Continued) BY MR. SHIELDS DIRECT EXAMINATION BY MR. McGEE EXAMINATION Page Line I N D E X

5 84 87

11 1 17

E X H I B I T S
Received in Evidence

Number
1 3 6 7 8 9 10 11 11A-11D 12 13

Page
11 36 38 40 54 54 54 55 83 83 83

Line
6 6 20 4 18 18 18 22 23 23 23

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 2 of 102

3 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 United States District Court (Recess at 11:17; resumed at 11:38.) (Recess at 12:40; resumed at 1:20.) RECESSES

Page 44 87

Line 25 9

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 3 of 102

4 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 United States District Court A P P E A R A N C E S For the Plaintiff: JAMES BURR SHIELDS, II, ESQ. Law Office of James Burr Shields, P.C. 382 East Palm Lane Phoenix, AZ 85004-1531 602.307.0780/(fax) 602.307.0784 For the Defendants: JAMES M. MCGEE, ESQ. Law Office of James M. McGee P.O. Box 460 Cottonwood, AZ 86326 928.639.4747/(fax) 928.639.2190

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 4 of 102

5 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown) 1
10:17:42

P R O C E E D I N G S MR. SHIELDS: Your Honor. CARL I. BROWN called as a Witness herein, having been first duly sworn and/or affirmed by the Courtroom Deputy, testified as follows: COURTROOM DEPUTY: Please state your name and spell The plaintiffs now call Carl Brown,

2 3

10:17:44 10:18:16

4 5 6

10:18:22

7 8

your last name for the record, please. THE WITNESS: Brown, B-R-O-W-N, Carl, C-A-R-L. DIRECT EXAMINATION BY MR. SHIELDS: Q. A. Q. A. Q. A. Q. A. Q. Good morning, Mr. Brown. Good morning. You are married; correct? Yes. And your wife's name is Molly? What? And your wife's name is Molly? Yes. And your current address, sir, is 7798 North Foothills

10:18:26 10:18:31 10:19:08 10:19:10 10:19:11 10:19:11 10:19:13 10:19:14 10:19:16 10:19:16 10:19:18 10:19:18

9 10 11 12 13 14 15 16 17 18 19 20 21

Drive, Paradise Valley, Arizona; correct? A. Q. Well, it's North Foothills Drive South. Okay. So, again, for the record, and I'm reading from a

10:19:29 10:19:32

22 23 24 25

bank statement right now, 7798 North Foothills Drive South, Paradise Valley, Arizona. That's your address?

United States District Court

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 5 of 102

6 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown)
10:19:43 10:19:43

1 2 3

A. Q.

That's correct. And that was your address at all times while you were

involved with HMI; correct? MR. McGEE: in evidence. THE COURT: THE WITNESS: BY MR. SHIELDS: Q. A. Q. A. Q. How long have you lived there, sir? Three to four years. You've only lived there three or four years? That's correct. Now, if I make reference to HMI, you understand I'm Overruled. No. I don't think that is right. Objection. Your Honor, assumes facts not

10:19:49

4 5

10:19:52 10:19:54 10:19:57 10:19:59 10:20:00 10:20:03 10:20:06 10:20:09

6 7 8 9 10 11 12 13 14

talking about Home Mortgage, Inc.? A. Q. Yes, sir. Now, it's your position in this lawsuit, isn't it, that in

10:20:16 10:20:16

15 16 17 18

the 2001-2002 time frame you had no direct involvement with HMI; correct? A. Q. I can't remember. Let's see here. If you could take a look at your

10:20:27 10:20:34

19 20 21 22

deposition which is the thicker of the two booklets in front of you. MR. SHIELDS: THE COURT: May I approach? Yes.

10:20:49 10:20:51

23 24 25

United States District Court

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 6 of 102

7 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown)
10:20:51 10:20:56

1 2 3

BY MR. SHIELDS: Q. Mr. Brown, could you please take a look at the booklet It's right here.

dated October 4, 2006? A. Q. Here?

10:21:07 10:21:08

4 5 6

That's the booklet I'm going to be referring to.

I'm

going to ask you some questions about it. Mr. Brown, could you please turn to page 56. MR. SHIELDS: Your Honor, his deposition is attached

10:21:23 10:21:30

7 8 9 10

to the copy of all of your exhibits and just labeled Carl Brown, October 4, 2006, deposition. THE COURT: BY MR. SHIELDS: Q. A. Q. Are you with me, sir? Yes, sir. I'll tell you what. Do you recall giving a deposition in Are you on page 56? I have it.

10:21:40 10:21:41 10:21:53 10:21:55 10:21:56

11 12 13 14 15 16

my office in October of last year? A. Q. I don't remember the date but, yes, I was in your office. Right. And you were represented by Mr. Karow, your

10:22:02 10:22:05

17 18 19

attorney; correct? A. Q. Yes. In my conference room and we were asking you questions Do you recall?

10:22:09 10:22:09

20 21 22

about this lawsuit. A. Q. Yes, sir.

10:22:16 10:22:16

23 24 25

I'll tell you what.

I'll be me and you be you and let's Look at line 23. I asked

go over a couple of questions here.

United States District Court

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 7 of 102

8 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown) 1 2
10:22:32 10:22:34

you there, sir: HMI. A. Q. HMI?

Explain the nature of your involvement with

What was your answer? None. And then I said: You had no involvement whatsoever with

3 4 5

10:22:37 10:22:40 10:22:41

6 7 8 9 10 A.

And your answer? At that time -THE COURT: I'm sorry. I've just gotten here because What page are we

of the difficulty of getting through this. on? MR. SHIELDS: on line 23. THE COURT: Thank you.

10:22:49

11 12

We're on page 56, Your Honor, beginning

10:22:52 10:22:59

13 14 15

I heard the answers. BY MR. SHIELDS: Q. I asked you, again, beginning on line 25: You had no

10:23:01

16 17

involvement whatsoever with HMI? And your answer again was what? A. Q. None. And you understand that when you gave this deposition, you The same oath that you're under now?

10:23:05 10:23:08 10:23:09

18 19 20 21

were under oath; right? A. Q. Yes, sir.

10:23:16 10:23:16

22 23 24

Now, at all times you've been a 99 percent shareholder of

HMI; correct? A. Yes, sir. United States District Court

10:23:20

25

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 8 of 102

9 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown)
10:23:23 10:23:32 10:23:52 10:23:54 10:23:55

1 2 3 4 5 6 7

Q.

Take a look at Plaintiffs' Exhibit Number 1, please. MR. SHIELDS: If you could hand that to the witness.

Q. A. Q.

Do you have that document in front of you, sir? Yes, sir. And this is an Arizona State Corporation Commission Do you see corporate name to

document related to HMI; correct? the left? A. Home Mortgage, Inc.?

10:24:08

8 9

I don't know what it is.

I haven't read it thoroughly and

I didn't prepare it so I assume what you say is correct. Q. Okay. I'll avow to you that what I am saying is indeed This is information we obtained from the Arizona I just want to go through the document

10:24:14

10 11 12 13

correct.

Corporation Commission. with you, sir.

10:24:28

14 15

Do you see at the top Home Mortgage, Inc., is the corporation at issue, on page one? A. Page one is -MR. SHIELDS: THE COURT: MR. SHIELDS: May I approach, ma'am? Yes. Right here at the top, Mr. Brown. I

10:24:33 10:24:37 10:24:39 10:24:44

16 17 18 19 20 21

just want you to confirm, first of all, that these documents pertain to Home Mortgage, Inc. THE WITNESS: BY MR. SHIELDS: Q. And according to these documents, at that time you were Do you see that next to that Yes, sir.

10:24:52 10:24:52 10:24:52

22 23 24 25

the company's statutory agent.

United States District Court

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 9 of 102

10 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown) 1
10:25:09 10:25:09

heading Statutory Information, Agent Name, Carl L. Brown? A. Q. I see, yes. And then it shows your Paradise Valley address, the one

2 3 4

that I just established? A. Q. A. Q. A. Q. Yes. And then you as president and CEO; correct? Yes, sir. You're also secretary; correct? Yes, sir. And it says, if you look in the left-hand portion on page As of that date, through September

10:25:14 10:25:14 10:25:17 10:25:19 10:25:27 10:25:27

5 6 7 8 9 10 11 12

two date assigned, 11-1-02.

21, 2004, you were the secretary; right? A. Q. It says that. And then below that, that same time period was referenced,

10:25:44 10:25:45

13 14 15 16

November 1, 2002, through September 21, 2004, and during that time period you were the treasurer; correct? A. Q. It says that, yes. And then, finally, below that same time period referenced,

10:25:57 10:25:59

17 18 19 20

November 1, 2002, through November 21 -- excuse me, September 21, 2004, you were also the director; correct? A. Q. That's what this says. I understand. MR. SHIELDS: Exhibit Number 1. Your Honor, move for the admission of I didn't prepare this.

10:26:13 10:26:16 10:26:22

21 22 23 24 25

I just want to make it clear that the

foundation of -- any foundation objection that the defendants United States District Court

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 10 of 102

11 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown) 1 2 3
10:26:45 10:26:47 10:26:48 10:26:48 10:26:50

raise has been waived.

So the only inquiry is whether it's So for that

relevant and I believe it's clearly relevant.

reason I move for the admission of Exhibit Number 1. MR. McGEE: THE COURT: Objection, Your Honor. Overruled. Hearsay.

4 5 6 7 8 9 10 11 12

It's admitted.

(Exhibit Number 1 was admitted into evidence.) BY MR. SHIELDS: Q. Still right now as you sit here, having gone through this

lawsuit four a couple of years and been deposed twice and been shown numerous documents, I'm curious about something. Do you

still contend that you had no involvement in HMI during this 2001-2002 time frame? A. Q. A. Q. A. Q. I had absolutely no involvement. No involvement with the company? None whatsoever. You're not going to take that back during trial, are you? I don't understand your question. I'll move on. MR. SHIELDS: Now, Your Honor, I'm going to be

10:27:06 10:27:09 10:27:11 10:27:15 10:27:18 10:27:20 10:27:28

13 14 15 16 17 18 19 20 21

directing him to the debtor's examination and the subpoena duces tecum that's attached to that debtor's examination. THE COURT: MR. SHIELDS: Brown 8-4-03. THE COURT: Okay. Let me pull that out. And where will I find that? You will find that it's marked Carl

10:27:38 10:27:40

22 23 24

10:27:56

25

United States District Court

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 11 of 102

12 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown)
10:28:07

1 2

MR. SHIELDS: that deposition. MR. McGEE:

And I believe I have the original of

10:28:13

3 4 5 6 7

Your Honor, we would like to interpose an

objection at this point in time because that particular document that Mr. Shields refers to as a debtor's examination is not a debtor's examination. portions. It doesn't ask the relevant

Mr. Shields turned to a deposition. MR. SHIELDS: That's incorrect, Your Honor. In fact,

10:28:38

8 9 10 11 12 13 14

I was prevented on a couple of occasions -- this is based on memory from Mr. Karow from asking debtor's examinations questions and this Mr. Brown was represented during this deposition and this deposition was the result of a subpoena duces tecum to the statutory agent of HMI to produce various corporate records. THE COURT: It is what it is and based upon the

10:29:01

15 16 17

foundation that you've laid, it appears to be a debtor's examination. You may proceed. BY MR. SHIELDS: Q. Mr. Brown, do you recall showing up in my office the first

10:29:08 10:29:09 10:29:11

18 19 20 21 22 23

time for the debtor's examination with Mr. Karow in response to a subpoena in which I requested that you bring with you a whole bunch of records? A. Q. Yes. And that was the first time you and I had met; correct, United States District Court

10:29:25 10:29:26

24 25

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 12 of 102

13 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown) 1
10:29:29 10:29:32

sir? A. Q. Yes. The exhibits to the deposition are attached to the end.

2 3 4 5 6

What I would first like you to look at, sir, is the amended subpoena duces tecum which is at the end of the actual text of the deposition. MR. SHIELDS: And, Your Honor, it's marked as Exhibit

10:29:45

7 8

Number 1 to that deposition. THE WITNESS: MR. SHIELDS: THE COURT: What page number is that? May I show the witness, Your Honor? Exhibit A. I'm sorry. Counsel, I'm only That's the only

10:29:50 10:29:51 10:30:04 10:30:06

9 10 11 12 13 14

COURTROOM DEPUTY:

seeing the deposition of Molly Smith Brown. one that I am sewing seeing. MR. SHIELDS:

10:30:24

15 16 17 18

Let me give you the other one.

And let

me show you what I'm going to ask you about, sir. to start right here. BY MR. SHIELDS: Q. All right, sir.

We're going

10:30:50

19 20 21

Do you remember what prompted this

deposition was you being served with a document that you're now looking at called an amended subpoena duces tecum? A. Q. A. Q. I don't remember it. Do you recall being handed a document by a process server? No, I don't. You do recall attending this deposition and receiving -United States District Court

10:30:58 10:31:00 10:31:04 10:31:05

22 23 24 25

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 13 of 102

14 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown) 1 2
10:31:13 10:31:59

and me going over this subpoena duces tecum with you, don't you? A. Q. No, I don't. Turn to page five of the actual transcript, sir. Actually

3 4 5 6 7

on page six.

On page six I asked you, beginning on page five:

Did you turn over any documents to your attorney in preparation for your deposition today? A. Q. No, I did not. When I asked that you question in your deposition on line Do you see that?

10:32:37 10:32:40

8 9 10 11 12

five -- did you turn any documents over to your attorney in preparation for your deposition today -- what was you're answer? A. Q. A. Q. On line five? On line seven. On line seven, I don't understand I guess. What I want to know is before your deposition, sir, did

10:32:52 10:32:52 10:32:57 10:32:59

13 14 15 16 17 18

you turn over to your attorney the documents that we discussed during the deposition? A. Q. No. You didn't turn over to your attorney any documents prior

10:33:06 10:33:07

19 20 21

to your debtor's exam? A. Q. No. Okay. Let's go through your -- the question and answer, I asked you, sir, on line

10:33:14 10:33:15

22 23 24 25

page SIX, lines five through seven. five, page six:

Did you turn any documents over to your United States District Court

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 14 of 102

15 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown) 1
10:33:30 10:33:34 10:33:36

attorney in preparation for your deposition today? And what did you say? A. Q. Page six, what number? Page six, the question is on lines five and six and your

2 3 4 5

answer is on line seven. A. No. MR. SHIELDS: Your Honor, I'll just move on so long

10:33:46 10:33:50

6 7 8 9

as the record notes that the witness answered yes when that question was asked him during his debtor's examination. BY MR. SHIELDS: Q. Now turn to the subpoena duces tecum, Mr. Brown. It's the

10:34:01 10:34:03

10 11 12 13

final document after the text. your right hand. A. Q. A. Q. A. Q. What? That. Yes.

You are actually holding it in

10:34:11 10:34:12 10:34:16 10:34:16 10:34:21 10:34:22

14 15 16 17 18 19 20 21

Do you see that document?

It says amended subpoena duces tecum. Yes, sir.

Do you see that?

I just want to go over briefly a couple of the categories

of documents that were commanded of HMI to bring during this deposition; okay? A. Q. This deposition or the one earlier? The one that we're talking about right now which was in my

10:34:31 10:34:34

22 23 24

office, your debtor's examination on August 4. A. That's the one where you claim that I had a relationship United States District Court

10:34:42

25

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 15 of 102

16 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown) 1
10:34:48 10:34:50 10:34:52

with the judge? Q. A. Q. No. I remember that. You'll have a chance to provide your own testimony when Right now I'll stick with

2 3 4 5 6

your lawyer asks you questions. mine, though, okay? A. Q.

10:35:00 10:35:02

7 8 9

That's the only thing I remember about it. Well, despite what you recall, I just want to go over some

things with you; okay? A. Q. Fine. In Exhibit A to the subpoena duces tecum -- turn the

10:35:07 10:35:08

10 11 12 13 14 15 16

page -- I asked you to bring with you bank statements of all checking accounts belonging to Home Mortgage, Inc., or in which it has had any interest whatsoever, either alone or jointly, with any other person or persons or entities since January 1, 2001? A. Q. A. Q. Do you see? I see it but I don't remember it. Let's go to number 21. Yes, sir. I asked you to bring copies of all federal, state income Are you there?

10:35:34 10:35:38 10:35:48 10:35:48

17 18 19 20 21 22

tax for 2000, 2001, 2002, for HMI and each officer and each shareholder of HMI. A. Q. No, I don't. Do you see that? On 21? Do you want me to

10:36:03 10:36:03

23 24 25

It's item 21, sir, on the subpoena.

come show you? United States District Court

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 16 of 102

17 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown)
10:36:09 10:36:10 10:36:10 10:36:21

1 2 3 4 5 6 7 8 9 10 11 12

A.

I don't know anything about that. THE COURT: Please do.

BY MR. SHIELDS: Q. I'm directing you to request number 21 in the subpoena

that you were served with prior to your debtor's examination. Here was number one that we just went over requesting all of HMI's bank accounts. Now, 21 is right here at the top. We're

going to go through just a couple more of these.

Request 21 in

the subpoena asked you to bring with you copies of the federal and state income tax returns for 2000, 2001, 2002, for HMI, each officer of HMI and each shareholder of HMI. that there? A. Q. I see it. Let look now at 40. MR. SHIELDS: the subpoena itself. THE WITNESS: MR. SHIELDS: THE COURT: On page six? Yes. Mr. Shields, I'm going to allow you to Turn the page, please. And, Your Honor, I'm now on page six of Do you see

10:37:05 10:37:07 10:37:15

13 14 15 16

10:37:19 10:37:20 10:37:26

17 18 19 20 21

ask questions from over here so long as we can all hear you so you can show him where we are as we move along. MR. SHIELDS: BY MR. SHIELDS: Q. A. Do you see item 40, sir? Item four? United States District Court You bet. Thank you.

10:37:34 10:37:35 10:37:36 10:37:40

22 23 24 25

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 17 of 102

18 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown)
10:37:42

1 2 3

Q.

Four, zero, right here.

This item requests that you bring

with you all documents related to the repayment of loans by HMI to any of its shareholders or officers. A. Q. Yes, sir. And then item 44 requests that you bring with you all Do you see that?

10:37:55 10:37:56

4 5 6 7

documents related to all dividends paid to HMI shareholders since January 1, 2001. A. Q. Yes, sir. And then item 45, documents related to all amounts Do you see that?

10:38:06 10:38:06

8 9 10 11

representing return of capital paid to HMI shareholders since January 1, 2001. A. Q. Yes, sir. And then finally, 48, documents related to all conveyances Do you see that?

10:38:16 10:38:17

12 13 14

HMI has made since January 1, 2001. A. Q. Yes, sir. Now, in response to all of these requests, including those

10:38:27 10:38:28

15 16 17 18

that I just read to you -- you produced these documents, correct? A. No. I can't remember. THE COURT: MR. SHIELDS: And these documents are, for the record? These documents are the exhibits to his

10:38:42 10:38:43 10:38:45

19 20 21 22 23 24 25

deposition, which as established during the deposition itself, were the records brought by Mr. Brown and his counsel pursuant to the subpoena duces tecum. And I want to review these

records with the witness right now. United States District Court

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 18 of 102

19 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown)
10:39:05 10:39:05 10:39:06

1 2 3 4 5

THE COURT: BY MR. SHIELDS: Q.

Thank you.

Now, the first thing that you brought me was a certificate Do you see

of disclosure from the Corporation Commission. that? A. Q. No, I don't.

10:39:11 10:39:13 10:39:18

6 7 8 9

That's this document right here (Indicating).

Okay?

Then you brought me a Home Mortgage, Inc., sort of list of employees. A. Q. Do you see that?

10:39:32 10:39:41

10 11 12

I see it. And then you brought with you a tax return for HMI for

2001; correct? A. Q. A. Q. A. I don't know. I can't remember. It's right here.

10:39:52 10:39:54 10:39:57 10:39:59 10:40:01 10:40:04

13 14 15 16 17 18 19 20

Well, just look at the document.

Yes, I didn't prepare the document. I'm not asking you if you did. Therefore, I don't remember it. THE COURT: Well, Mr. Brown, answer the questions If their an objection, I'll deal with

that are asked of you. it. BY MR. SHIELDS: Q.

10:40:09 10:40:14

21 22 23 24 25

The only other document that you and your attorney brought The next document that you and your

with you -- excuse me.

attorney brought with you was a 2001 tax return for HMI. That's what this document is; correct, sir? United States District Court

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 19 of 102

20 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown)
10:40:31 10:40:31

1 2 3

A. Q. top? A.

I don't know. Do you see where it says Home Mortgage, Inc., right at the

10:40:34 10:40:36 10:40:38 10:40:39 10:40:40 10:40:41

4 5 6 7 8 9 10

I didn't prepare it. THE COURT: THE WITNESS: THE COURT: THE WITNESS: THE COURT:

I don't know. Does it say that?

Can you see it? I see it.

And what does it say? It says Home Mortgage. Thank you.

BY MR. SHIELDS: Q. And the business address of Home Mortgage at the time was

10:40:43

11 12

4742 North 24th Street, Suite 180 in Phoenix; right? A. Q. Yes, sir. And then, sir, the only other document you brought with

10:40:50 10:40:57

13 14 15 16 17

you pursuant to those requests was a statement from Guaranty Bank of Home Mortgage's settlement account that showed zero balance. THE COURT: MR. SHIELDS: BY MR. SHIELDS: Q. A. Q. A. Q. Do you see this, sir (Indicating)? Yes, sir. Do you recognize this bank statement? No, sir. Is that because still in your life -- have you ever seen a United States District Court Where is that? It's right after the tax return.

10:41:19 10:41:22 10:41:23 10:41:24 10:41:26 10:41:26 10:41:28 10:41:30

18 19 20 21 22 23 24 25

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 20 of 102

21 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown) 1
10:41:37 10:41:43

bank statement, sir? A. Q. Probably not. I take that back. You and your attorney brought one other

2 3 4 5

document with you and that's the bill of sale for the airplane; right. A. Q. A. Q. Do you remember that? I'm sorry.

10:41:54 10:41:56 10:41:57 10:41:58

6 7 8 9 10 11

I don't remember this document. Is that your signature, sir? Yes.

Where is the signature on this document, please? I see.

I'm

looking at it trying to find the document. last one. The bill of sale. MR. SHIELDS: BY MR. SHIELDS: Q. A. Q. A. Q. A. Q. A. Q. A. Q. For the airplane.

It's the

10:42:09 11:59:57 10:42:10 10:42:19 10:42:20 10:42:23 10:42:23 10:42:27 10:42:29 10:42:39 10:42:40 10:42:49 10:42:50

12 13 14 15 16 17 18 19 20 21 22 23 24 25

And, sir, whose signature is this right here? My signature. And what's written next to the signature? President. And that's of Home Mortgage, Inc.; right? Part time it was. And this document is dated February 26, 2003; correct? I don't know. I can't see the date.

Right here (indicating). That is the date. Now, before we move on, I just want to make sure that you

don't recall bringing with you or your attorney bringing with United States District Court

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 21 of 102

22 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown) 1 2
10:43:03

him any other documents to this debtor's exam responsive to those requests. A. I didn't bring any documents. If my attorney brought

3 4

them, then so be it. Q.

I didn't bring anything.

10:43:11

5 6 7

So there's not going to be any evidence in this case that

additional documents were furnished at the time of this deposition, is there, sir? A. Q. A. Q. A. Q. I don't know. Now, do you know what business HMI is in? Yes, sir, I know. What kind of business was HMI? Mortgage banking. It's true you have a lot of experience in the mortgage

10:43:18 10:43:26 10:43:31 10:43:32 10:43:34 10:43:35

8 9 10 11 12 13 14

banking industry; right? A. Q. What? Isn't it true that you have a great deal of experience in

10:43:39 10:43:39

15 16 17

the mortgage banking industry? A. Q. I guess you could say that. I don't know.

10:43:44 10:43:48

18 19 20

You've already explained you were 99 percent owner of HMI

while it was in existence; right? A. Q. Yes. And prior to owning HMI, you owned Carl I. Brown &

10:43:53 10:43:54

21 22 23

Company; correct? A. Q. Yes. And that was a mortgage company; correct? United States District Court

10:44:00 10:44:00

24 25

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 22 of 102

23 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown)
10:44:03 10:44:03 10:44:04 10:44:05

1 2 3 4 5

A. Q. A. Q.

Yes. And you sold that; correct? Yes. And you also owned another mortgage banking company called

Realty Home Mortgage Associates; is that correct? A. Q. That's correct. Now, put that document aside if you can. You can close that book. That document,

10:44:18 10:44:26

6 7 8

the whole deposition. A. Q. A. Q. A. Q. Okay.

10:44:33 10:44:39 10:44:45 10:44:49 10:44:51 10:44:52

9 10 11 12 13 14 15

Did you ever receive a salary from HMI? I don't remember. So as of right now you don't remember? I don't remember. Okay. Let's take a look at two different examples of Turn to the larger booklet, page 62. And, Your Honor, this is -Please come down here and show him so we

previous testimony.

10:45:01 10:45:03

16 17 18

MR. SHIELDS: THE COURT: can move on.

This is October 4, 2006? Yes, ma'am. Thank you. I'll just show him mine, Your Honor.

10:45:12 10:45:14 10:45:21

19 20 21 22

MR. SHIELDS: THE COURT: MR. SHIELDS:

Maybe it will be more expeditious. THE COURT: BY MR. SHIELDS: Q. I'm showing you, sir, page 62 of your deposition of United States District Court Yes.

10:45:25 10:45:25 10:45:26

23 24 25

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 23 of 102

24 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown) 1
10:45:31 10:45:31 10:45:34 10:45:36

October 4, 2006; okay? A. Q. Yes. I asked you when was the last time -THE COURT: MR. SHIELDS: starting at line 20. THE COURT: Go ahead. BY MR. SHIELDS: Q. I asked when you was the last time that you obtained from And what was your testimony? Thank you. What page are you on? I'm sorry. Your Honor, page 62 and

2 3 4 5 6

10:45:40 10:45:45 10:45:45 10:45:45

7 8 9 10 11

HMI any income. A. Q.

10:45:52 10:45:53

12 13 14

I never got any income. And I asked you again: You never received any money from

HMI and your answer? A. Q. No. Now, I want you to turn to the smaller -MR. SHIELDS: Honor. page 25. THE COURT: BY MR. SHIELDS: Q. And I asked you on line six, sir: In 2001 in connection What Go ahead. I'm on the debtor's exam again, Your I'm on

10:45:57 10:46:18 10:46:20

15 16 17 18 19

I'm just going to show you my copy, Mr. Brown.

10:46:35 10:46:35 10:46:36

20 21 22 23 24

with your role with Home Mortgage, Inc., were you paid? did you tell me? A. Yes. United States District Court

10:46:46

25

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 24 of 102

25 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown)
10:46:47 10:46:49 10:46:54 10:47:07

1 2 3 4 5 6

Q. A. Q.

How much were you paid? $15,000 a month. Thanks. Okay.

What did you tell me?

So, now, does looking back in your debtor's exam

refresh your memory that you were indeed paid a salary from HMI of approximately $15,000 a month? A. At that time, it may have been. I don't know. The dates Most of

10:47:20

7 8 9 10 11 12 13 14

are -- there are three different dates I met with you. the time I did not get paid.

Now, if that -- if at that time I

made a salary, it was for other things, not just for the HMI. It would have been for Realty Home Mortgage. been for Carl I. Brown & Company. It would have

I had several companies and

I don't know just exactly what the allocation was of the $15,000. To say it was for HMI would be a misnomer. MR. SHIELDS: exam, Your Honor. BY MR. SHIELDS: Q. The question solely pertained to HMI, Mr. Brown, because I I'm back on page 25 of the debtor's

10:48:01

15 16

11:59:57 10:48:05

17 18 19 20 21

asked you in connection with your role at Home Mortgage, Inc., were you paid from Home Mortgage, Inc., not these other companies and you respond yes. A. Q. A. Q. What was the date? Pardon me? What was the date? The date of your debtor's examination? United States District Court

10:48:17 10:48:19 10:48:20 10:48:21

22 23 24 25

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 25 of 102

26 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown)
10:48:25 10:48:28

1 2 3

A. Q.

What is the date of that particular question? In 2001 in connection with your role at Home Mortgage,

were you paid? A. I don't -- today I would say no. After six and a half

10:48:34

4 5

years, I could not say. Q. Did you ever at any time in connection with your

10:48:43

6 7 8

involvement with HMI deposit into your personal account any HMI money? A. Q. A. Q. A. Q. A. Q. None. Do you and your wife have bank accounts? My wife does. But you don't? No. During 2002 you didn't have a bank account? I can't remember that. In fact, I just want to make sure I'm not misunderstanding

10:48:55 10:49:04 10:49:09 10:49:10 10:49:11 10:49:16 10:49:18 10:49:21

9 10 11 12 13 14 15 16 17 18 19

something that you contend from the beginning of this lawsuit. Is it your testimony today that you've never reviewed a bank statement? A. Q. I don't remember that. I'm asking you right now as you sit here. Do you recall

10:49:34 10:49:35

20 21 22

ever in your life having reviewed -A. Q. I can't remember that. You don't remember having done it? I'm just trying to

10:49:41 10:49:46

23 24 25

make sure you're not recalling a question that I've asked in United States District Court

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 26 of 102

27 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown) 1
10:49:53 10:49:53 10:49:56

the past. A. Q. I don't remember. I'm not trying to badger you, sir. You don't remember ever seeing a bank statement ever in your life? A. Q. You may have or you may not have?

2 3 4 5

10:50:02 10:50:08

6 7 8

I don't remember. In 2002 HMI sold some of its assets to the McAfee;

correct? A. I don't remember that date. MR. SHIELDS: Your Honor, page 20. BY MR. SHIELDS: Q. Mr. Brown, on page 20, I asked you -- were you starting to I said I'm looking at the debtor's exam again, I'm going to approach if you don't mind.

10:50:15 10:50:23

9 10 11

10:50:32 10:50:36

12 13 14 15 16 17 18

tell me how things had changed at HMI during 2002. beginning on line 15: September of 2002? So I'm still unclear. Yes, sir.

What changed in You mentioned I'm trying to

What changed?

that it was almost closed as of September 2002. get a feel for what "almost closed" means. We were closing it down.

10:50:58

19 20 21

We were not soliciting business Everything had been

and we were not conducting business. transferred to McAfee.

10:51:05 10:51:08 10:51:10

22 23 24 25 A.

That's what you told me in your debtor's exam; right? I can't remember. THE COURT: what you told them? United States District Court Does that refresh your recollection of

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 27 of 102

28 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown)
10:51:14 10:51:14

1 2 3

THE WITNESS: THE COURT: at it again? THE WITNESS: THE COURT: incorrect? THE WITNESS: THE COURT: THE WITNESS: BY MR. SHIELDS: Q.

No, it doesn't. It doesn't. Did you need to take a look

10:51:18 10:51:19

4 5 6

I saw it in writing. And what do you think? Was that

10:51:28 10:51:28 10:51:29 10:51:29 10:51:31

7 8 9 10 11 12 13

I don't know. You don't remember? I don't remember.

Well, in 2002 HMI also sold its servicing portfolio to Do you remember telling me

Atlantic Mortgage and First Palm. that in your debtor's exam? A. Q. I may have told you that.

10:51:45 10:51:49

14 15 16 17

Well, just so you don't believe I'm making anything up, And this begins on page 21,

let's look at what you told me. line nine, Your Honor:

10:52:06

18 19 20

We had sold all of our servicing portfolio.

He, in

reference to some employee, had to give them the documentation that was with that sale. What were these entities again? Atlantic Mortgage Company I think, Fort Lauderdale, Florida, bought some of our servicing and First Palm. know where they were located. Do you remember telling me that? United States District Court I don't

10:52:16 10:52:18

21 22 23 24

10:52:26

25

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 28 of 102

29 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown)
10:52:28

1 2

A.

Yes.

And I'm saying I don't remember who and what and

where. Q. A. Okay. Is it still your position, though --

10:52:33 10:52:35 10:52:38

3 4 5 6

Because I didn't have anything to do with it. THE COURT: You gave specific answers at that time.

Is there some reason as to why the answers -THE WITNESS: THE COURT: I don't remember. Well, no. Let me tell you that I'm

10:52:44 10:52:45

7 8 9 10 11

reading this transcript and unless you tell me that the transcript is incorrect, you gave very specific answers. you tell me why you knew then and why you don't know now? THE WITNESS: THE COURT: THE WITNESS: THE COURT: I can't remember what I said then. Okay. Take a look at it and tell me. Can

10:52:57 10:52:59 10:53:01 10:53:03

12 13 14 15 16 17 18

I have taken a look at it. And is that -- as far as you're

concerned, is the information that is set forth there, is that incorrect? Did you not tell the attorney, Mr. Shields, what is

set forth there? THE WITNESS: I don't remember. In fact, that I don't know what

10:53:17

19 20 21 22

statement says we sold it.

That was not me.

they sold or where they sold it. sell it but I wasn't involved. BY MR. SHIELDS: Q. Okay.

I intimated that they did

10:53:29 10:53:30

23 24 25

So as you sit here today, you don't have any

recollection of HMI selling its servicing portfolio to Atlantic United States District Court

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 29 of 102

30 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown) 1
10:53:41 10:53:42 10:53:47 10:53:48

Mortgage; correct? A. Q. A. Q. That's correct. And that's despite what you told me at your debtor's exam? It is correct today. And in 2002 -- excuse me. And you don't have any

2 3 4 5 6 7

recollection of selling part of the servicing portfolio to First Palm either; correct? A. Q. None. And still as you sit here today, despite two depositions,

10:53:58 10:53:59

8 9 10 11 12

several court proceedings, you still claim that you don't have any knowledge of the HMI sale to McAfee during the fall of 2002? A. Q. A. No, I don't. You don't? I was not personally involved and I don't have any

10:54:14 10:54:15 10:54:16

13 14 15 16

recollection today of what transpired then. Q. Is it fair to say that your recollection in August of 2003

10:54:29

17 18

is better than your recollection now? A. of. They are both periods that I don't have any recollection I don't remember and I don't know what transpired. MR. McGEE: objection here. Your Honor, we would like to interpose an

10:54:32

19 20

10:54:47

21 22 23 24 25

I believe this case is all about the Las Vegas

office of HMI and the four ladies that are sitting over here as plaintiffs. And I believe Mr. Shields is or has been

brow-beating Mr. Brown over and over again when he says he United States District Court

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 30 of 102

31 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown) 1 2
10:55:22

can't remember anything, all of a sudden Mr. Shields expects him to remember something that he can't. THE COURT: Mr. Shields is conducting appropriate

3 4 5 6 7

cross-examination for the purpose of trying to impeach this witness, as I understand, which is relevant as to whether or not he had any connection with HMI as a larger corporation as it existed in Nevada. I have read the transcript. transcript. Mr. Brown has read the

10:55:44

8 9 10

He may answer it as he has, in the best way he

knows how under oath. You may proceed. BY MR. SHIELDS: Q. A. Q. A. Q. Why did HMI go broke? Bad management. Whose bad management? Probably Greg Brown. He was running it.

10:55:53 10:55:53 10:56:00 10:56:07 10:56:08 10:56:10 10:56:19 10:56:22 10:56:27

11 12 13 14 15 16 17 18 19 20 Q.

I'm going to show you your debtor's exam again, sir. MR. SHIELDS: Page 24, Your Honor. Do you

Why did Home Mortgage cease to conduct business?

see that on line six? A. Q. Yes. They were broke. My follow-up question: Mismanagement. Why did they go broke?

10:56:31 10:56:32 10:56:36 10:56:40 10:56:43

21 22 23 24 25

That's your answer, right, mismanagement? Whose mismanagement?

Then I asked you:

United States District Court

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 31 of 102

32 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown)
10:56:45 10:56:49 10:56:51

1 2 3 4 5

And what was your answer on line 12? MR. McGEE: THE COURT: Your Honor, we can't hear Mr. Shields. All right. Take a look at the testimony Do you have that in front of

that he gave on August 4, 2003. you? MR. McGEE: THE COURT: Yes.

10:56:59 10:57:01

6 7 8

What line and page?

He started on line six and he is

continuing through I believe at this point line 12. MR. McGEE: THE COURT: Go ahead. BY MR. SHIELDS: Q. When I asked you whose mismanagement, Mr. Brown, what did On which page, Your Honor? 24.

10:57:10 10:57:12 10:57:14 10:57:14 10:57:17

9 10 11 12 13 14

you tell me on line 12? A. Q. Mine and Greg's. I want to contrast what you told me at your debtor's

10:57:34 10:58:01

15 16 17 18 19

examination with some things that you told me at your deposition. I'm going to show you now just a couple excerpts

from your deposition in October; okay? A. Q. A. What was the date? October of 2006. Okay. THE COURT: deposition. Okay. That's the deposition, the smaller Page, line. Page 33.

10:58:12 10:58:14 10:58:17 10:58:18

20 21 22 23 24

10:58:22

25

MR. SHIELDS:

United States District Court

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 32 of 102

33 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown)
10:58:23

1 2 3

THE COURT:

Okay.

Come back down here.

What you'll And

need to do is try to speak so we can all hear you. Mr. McGee, if you can't hear, then let me know. MR. McGEE: THE COURT: BY MR. SHIELDS: Q. You're in the wrong booklet. I will do that, Your Honor. Page 33.

10:58:35 10:58:40 10:58:40 10:58:41

4 5 6 7 8

Thank you.

Let me just point to mine.

I think it will be easier. Page 33, line 10, you don't, I asked you, sir: remember a sale to McAfee. A. Q. A. Q. said: A. I don't remember. You told me: I heard about it; right? I suppose. What do you know about it? And you What did you tell me? You don't

10:58:48

9 10

10:58:58 10:58:59 10:59:02 10:59:04

11 12 13 14 15

Maybe I said that. And then I asked:

At that point, nothing; correct? That's correct. MR. SHIELDS: Your Honor, I'm going to read to the

10:59:09 10:59:42

16 17 18

witness an excerpt from Exhibit No. 4, affidavit of Greg Brown. THE COURT: Brown. BY MR. SHIELDS: Q. A. Q. Do you recognize that, sir, as Greg Brown's affidavit? No, I don't. I think both sides agree that it is. Can you please read paragraph six to yourself? United States District Court All right. Exhibit 4, affidavit of Greg

11:00:02

19 20

11:00:14 11:00:15 11:00:17 11:00:20 11:00:29

21 22 23 24 25

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 33 of 102

34 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown)
11:00:44 11:00:47

1 2 3

A.

What did you want me to read? THE COURT: Paragraph number six on page two at the

bottom of the page. MR. SHIELDS: THE COURT: And then it goes to the next page, sir. It reads: In September of 2002 Home

11:00:52 11:00:55

4 5 6 7 8 9 10 11 12 13 14 15

Mortgage sold its assets, other than its Phoenix office, including branch offices in other cities and the office equipment associated with those offices to McAfee Mortgage. that would be Greg Brown, handled the sale for Home Mortgage along with Home's attorney Jeffrey Zimmerman because McAfee would not deal with Carl Brown. Home Mortgage received I,

$800,000 from the transaction which was transferred to an account and it's listed and that's 02001373 at Bank One. I

understand that to be the account controlled by Carl and Molly Brown. Have you seen that? THE WITNESS: THE COURT: Yes. All right.

11:01:43 11:01:47 11:01:48 11:01:48

16 17 18 19 20

Now you can ask a question. BY MR. SHIELDS: Q. Is there anything in that paragraph which you believe to

11:01:50

21 22

be incorrect, meaning not accurate? A. Q. I don't know. Well, do you know whether or not his statement that: I

11:01:55 11:01:59

23 24 25

understand that to be an account controlled by Carl and Molly United States District Court

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 34 of 102

35 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown) 1
11:02:10 11:02:15

Brown, is that accurate? THE WITNESS: THE COURT: I don't know if it's accurate. And is it your understanding that your

2 3 4 5

son handled this transaction because McAfee would not deal with you? THE WITNESS: know. THE COURT: MR. SHIELDS: BY MR. SHIELDS: Q. During this period of time, you were still 99 percent Go ahead. Thank you, Your Honor. I've never heard that before. I don't

11:02:30

6 7

11:02:34 11:02:35 11:02:35 11:02:42

8 9 10 11 12

owner; right? A. I don't remember that. MR. SHIELDS: I'll tell you what, could you please

11:02:45 11:03:00

13 14 15

hand the witness Exhibit Number 3? BY MR. SHIELDS: Q. That's a thick exhibit. Sir, turn to the final page that

11:03:03 11:03:13

16 17 18

has the number in the bottom 0059. THE COURT: MR. SHIELDS: THE COURT: MR. SHIELDS: THE COURT: MR. SHIELDS: Last page? Yes, ma'am. 0059. This is Plaintiffs' Exhibit 3. Do you have that? While he's getting it, I would like to

11:03:20 11:03:21 11:03:22 11:03:24 11:03:27 11:03:30

19 20 21 22 23 24 25

move for the introduction of this document into evidence. United States District Court

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 35 of 102

36 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown)
11:03:35 11:03:36

1 2 3 4

THE WITNESS: MR. SHIELDS:

I have it. This is the asset sale between McAfee The foundation

and HMI and the foundation is clearly relevant. is now waived. THE COURT: No objection?

11:03:43 11:03:50 11:03:50 11:03:52

5 6 7 8 9 10

Its admitted.

(Exhibit Number 3 was admitted into evidence.) BY MR. SHIELDS: Q. On the final page, sir, do you see where seller, HMI, is Just

to receive $700,000 for its tangible personal property? tell me if you see it or not. A. Q. I see it.

11:04:01 11:04:08 11:04:35 11:59:57 11:04:36 11:04:41 11:04:42 11:04:44 11:04:48

11 12 13 14 15 16 17 18 19 20 21

And turn to the very first page of the document, sir, 001. THE COURT: He has it now.

BY MR. SHIELDS: Q. A. Q. A. When is this agreement dated, sir? I'm sorry. I didn't hear you.

What is the date of this agreement? September 17, 2002. MR. McGEE: Objection, Your Honor, to any reference

to this particular agreement because the seller is L. Gregory Brown, not Mr. Carl Brown. THE COURT: I'm going to allow some testimony on this

11:04:56

22 23 24

in view of the fact that Mr. Shield most likely is attempting to establish the relevancy. You may proceed. United States District Court

11:05:05

25

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 36 of 102

37 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown)
11:05:06 11:05:07

1 2 3

BY MR. SHIELDS: Q. According to this document, this transaction occurred on

September 17, 2002; correct? A. That's what this says. MR. SHIELDS: Could you please hand the witness

11:05:15 11:05:17

4 5 6

Plaintiffs' Exhibit Number 6? BY MR. SHIELDS: Q. A. Q. Do you recognize this document, sir? No. For the record, it is a $700,000 deposit into account Do you see that information?

11:05:19 11:05:40 11:05:42 11:05:42

7 8 9 10 11

02001373 on September 17, 2002. A. Q. Yes.

11:06:00 11:06:00

12 13 14 15

Then at the bottom there is some handwriting that says:

Confirmation of deposit, $700,000 into checking account 020013734, Carl I. and Molly Brown. A. Q. A. Q. A. Q. Yes, sir. And the date, again, September 17, 2002; right? Yes. That's what it says. Do you see that?

11:06:14 11:06:17 11:06:32 11:06:33 11:06:36 11:06:36

16 17 18 19 20 21 22

The same day the McAfee sale closed. What? That is the same day the McAfee sale occurred. Isn't that

correct? A. Q. I don't know. I wasn't involved in any of this.

11:06:41 11:06:45

23 24 25

Do you know where that $700,000 deposit into your account

came from? United States District Court

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 37 of 102

38 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown)
11:06:51 11:06:52 11:06:57

1 2 3 4

A. Q. A. that. Q.

Where it came from? Right. I would guess and say it came from McAfee. I don't know

11:06:59 11:07:01

5 6 7 8

Do you recognize that account number? MR. SHIELDS: And I'll just call this for brevity

sake, Your Honor, the '1373 account, the Bank One '1373 account. BY MR. SHIELDS: Q. A. Do you recognize that account number? I don't recognize any account number from a year or six I'm sorry.

11:07:10 11:07:10 11:07:11

9 10 11 12

years or seven years ago. MR. SHIELDS: Exhibit 7. Honor.

11:07:24

13 14 15 16

Could you please hand the witness

Again, move for the production of Exhibit 6, Your It's absolutely relevant. It

Foundation is waived.

couldn't be more relevant. THE COURT: MR. SHIELDS: It's admitted. Yes, ma'am. Exhibit 7. Excuse me. Exhibit 6.

11:07:36 11:07:40 11:07:43 11:07:47 11:07:47 11:07:49

17 18 19 20 21 22 23 24 25

And now we're on exhibit 7. (Exhibit Number 6 was admitted into evidence.) BY MR. SHIELDS: Q. Bypassing the first two pages of Exhibit 7, Mr. Brown,

because that's correspondence from the person who addressed our subpoena. So go to the third page. Do you see upper left-hand

corner, Molly S. Brown or -- or Carl I. Brown and then it's got United States District Court

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 38 of 102

39 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown) 1
11:08:18 11:08:19

your address? A. Q. Yes, sir.

Do you see that?

2 3 4 5

And then the account number, which is pretty much to the It has a bunch of zeros and then concludes with

right of that. 1373. A. Q.

Do you see that? I see it the. Turn to page 42 of that exhibit and the page numbers are

11:08:35 11:08:43

6 7 8

in the upper right-hand corner. A. What page are you on? MR. SHIELDS: I'll show you, sir.

11:08:59 11:09:02 11:09:04 11:09:04 11:09:24

9 10 11 12 13 14 15 16

Do you mind if I approach? BY MR. SHIELDS: Q. Here are the page numbers. Right now here's page 42. I

want to ask you some questions about that page.

Again, this is

your address, 7798 North Foothills Drive South, Paradise Valley; right? A. Q. A. Q. A. Q. Yes, sir. Pardon me? Yes. And this is Bank One and it's the 1373 account; correct? That's what this says. And then look below the account number. Do you see the

11:09:41 11:09:42 11:09:47 11:09:47 11:09:52 11:09:54

17 18 19 20 21 22 23

time period, September 7 through October 4, 2002? A. Q. Yes, sir. Now turn to the very next page. It will be page 43 of

11:10:01 11:10:04

24 25

United States District Court

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 39 of 102

40 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown) 1 2
11:10:23 11:10:25

Exhibit 7.

While he's doing that, before I forget, I want to

request introduction into evidence of this document. THE COURT: Exhibit 7 is admitted.

3 4 5

(Exhibit Number 7 was admitted into evidence.) BY MR. SHIELDS: Q. Look down there, sir, page 43, Exhibit 7, the entry for I'm going to point it out to you. Right here,

11:10:27

6 7 8

September 17.

do you see this? A. Q. I guess -- am I on the right page? Right here is what I am showing your attention to. I'm

11:10:49 11:11:05

9 10 11 12

going to put a little dot next to it; okay? want you to look at. A. Q. Oops. Wait a minute.

That's the line I

11:11:16 11:11:20 11:11:29

13 14 15 16

Let me find it again.

Page 43. THE COURT: At the top of the page you'll see the

numbers. THE WITNESS: BY MR. SHIELDS: Q. A. Q. Do you see the entry right there, deposit $700,000? Yes. This is your and Molly Brown's joint bank account with Okay. Page 43.

11:11:33 11:11:33 11:11:49 11:11:53 11:11:54

17 18 19 20 21 22

Bank One; correct? A. Q. A. I assume that is correct. I don't know that for sure.

11:12:05 11:12:07 11:12:10

23 24 25

Do you have any reason to doubt what the document says? I don't know. United States District Court

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 40 of 102

41 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown)
11:12:14

1 2 3 4 5 6

Q.

Given -- I want to give you a chance to reevaluate a We have the McAfee sale document dated September

little bit. 17.

We have a $700,000 deposit slip going into you and your

wife's joint checking account on that day, and now we have the bank statement itself which indicates that on that exact day $700,000 was deposited into that account. Here's my question with all of those three things in mind: Is it still your testimony that you have never received any money into your personal account from the McAfee transaction? A. That's still my contention. I wasn't even vaguely

11:12:38

7 8 9

11:12:50

10 11 12

involved in that transaction.

I didn't know who McAfee was. I wasn't involved.

If my wife received $700,000, so be it. Q.

11:13:12

13 14 15 16 17 18

You told me during your debtor's examination -- you can

put that away -- you not only told me about the McAfee transaction, when it occurred, how much, but you also told me during your debtor's examination that there were two payments, one of $700,000 from McAfee to HMI and another payment of $100,000 from McAfee to HMI. A. No, I don't. MR. SHIELDS: THE COURT: BY MR. SHIELDS: Q. Okay. We're talking about -- we're following up on the Debtor's exam, page 23, Your Honor. Please come down here and assist him. Do you remember telling me that?

11:13:36 11:13:46 11:13:59 11:14:00 11:14:10

19 20 21 22 23 24

McAfee sale. THE COURT: You just need to speak up as loud as you

11:14:15

25

United States District Court

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 41 of 102

42 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown) 1
11:14:18 11:14:18 11:14:19

can. MR. SHIELDS: BY MR. SHIELDS: Q. We are following up on the McAfee sale and I asked you: Thank you.

2 3 4 5

Did it -- beginning on line 12 -- meaning HMI -THE COURT: BY MR. SHIELDS: Q. Why don't we do this? I'll ask you the questions and you It will go a little faster. Did it, meaning Took a look at the transcript here.

11:14:29 11:14:30 11:14:47

6 7 8 9

tell me what your answer was.

11:14:52

10 11

Beginning on line 12 -- are you with me? HMI, receive some cash? Yes. A. Q. I was told that they did. Was it more than $100,000? What did you say? A. Q. I was told that it was more than $100,000. And then I asked:

11:15:06 11:15:06 11:15:08 11:15:10 11:15:11 11:15:14

12 13 14 15 16 17 18

Would Mr. Zimmerman also have any

documentation concerning that sale? And your answer? A. Q. I was told he did. And then I asked you: Do you consent to him releasing

11:15:18 11:15:20 11:15:22

19 20 21 22

that documentation to me? A. Q. A. That would be acceptable to me. Now -I wasn't involved in it. If you wanted to --

11:15:27 11:15:32 11:15:32

23 24 25

United States District Court

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 42 of 102

43 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown)
11:15:32 11:15:34

1 2 3 4 5 6 7

Q.

And then I asked -THE COURT: And did you, at any place that I have

missed here, ever say that you were told you weren't involved in this? The answers appear to be quite clear and specific and

there was nothing that you said at the deposition which would indicate that you were told and you were not involved. right or am I missing something? THE WITNESS: You are right, Your Honor, except that Am I

11:15:56

8 9

I am still surmising here that what I am saying I was told. THE COURT: THE WITNESS: THE COURT: BY MR. SHIELDS: Q. There's just a couple more lines I would like to direct Page 23, line 22, I continue a little bit. Well, did you say that anywhere here? No. Thank you.

11:16:06 11:16:08 11:16:09 11:59:57 11:16:10

10 11 12 13 14 15 16 17

your attention to.

Now, the sale to McAfee Mortgage, what did Home Mortgage receive in connection with that sale? What did you tell me? A. Q. A. I would expect it to be $700,000. And then the rest of your answer on the top of page 24. I don't understand. THE COURT: him at that time? BY MR. SHIELDS: Q. Right there. United States District Court Turn the page. What else did you tell

11:16:24 11:16:26 11:16:28 11:16:36 11:16:41

18 19 20 21 22 23

06:00:57 11:16:45

24 25

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 43 of 102

44 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown)
11:16:45 11:16:52

1 2 3

A. Q.

Okay.

It says that -- I am guessing -Quote your testimony, sir. I'll just do it

Wait, wait.

for you. However, it was paid over a period of two or three months. I think the last payment was made in January. A. Q. '03? Your answer? A. It was, like, $100,000 or something. THE COURT: THE WITNESS: THE COURT: I'm not saying -Yes. And then I asked you: The last payment was in January of Do you see that?

11:16:56

4 5

11:17:02 11:17:03

6 7 8

11:17:06 11:17:08 11:17:13 11:17:17 11:17:18

9 10 11 12 13 14

But did you say -- let's just make sure. It says yes. Hold on and let me ask the question and

then you can give me the answer. Did you say: Yes. It was, like, $100,000 or Is that what you said

11:17:21

15 16 17

something but it was $700,000 I think? at that time? THE WITNESS: THE COURT: BY MR. SHIELDS: Q. Yes. Go ahead.

11:17:33 11:17:36 11:17:36 11:17:37 11:17:39

18 19 20 21 22 23

Now I need to direct your attention -THE COURT: All right. We're going to take a break

for 20 minutes.

We're in recess until 25 minutes of 12. Thank you, Your Honor.

11:17:45 11:17:45

24 25

MR. SHIELDS:

(Recess at 11:17; resumed at 11:38.) United States District Court

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 44 of 102

45 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown)
11:38:09 11:38:14 11:38:15 11:38:15 11:38:16

1 2 3 4 5 6 7

THE COURT: All right. MR. SHIELDS: BY MR. SHIELDS: Q.

Please be seated. Mr. Shields? Yes, ma'am.

Mr. Brown, was it unusual during the 2002 time frame for

you to receive deposits into your checking account in the $100,000 range? A. Q. I don't remember. Would it be unusual for you to receive a deposit into your

11:38:33 11:38:33

8 9 10

checking account of $700,000? A. Q. Yes, it would be unusual but, again, I don't know. Now, you testified that back in 2003 your debtor's exam

11:38:43 11:38:48

11 12 13 14

that -- to the best of your recollection, that final payment from McAfee came around January 2003. A. Do you recall that?

11:39:03

15 16

I don't remember the date but I'm sure that's -- we did

receive $700,000. Q. Well, now I'm talking about the second payment of Wasn't there a second $100,000 payment from McAfee? I wasn't around to see it or know

11:39:09

17 18

$100,000. A.

11:39:16

19 20

I'm told there was.

about it. Q. Take a look at Exhibit Number 7, page 50, sir. And

11:39:20

21 22

Exhibit Number 7 is going to be in one of those yellow folders. THE COURT: MR. McGEE: Come down here and assist. Your Honor, if we can short-circuit some

11:39:36 11:39:46

23 24 25

of this stuff, the defense will stipulate to the United States District Court

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 45 of 102

46 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown) 1
11:39:56

admissibility -THE COURT: Well, Mr. Shields has the right and it's

2 3 4 5

also significant, as I mentioned before, for this court to judge the credibility. So he can ask the questions and I will

be interested in what the answers are. MR. McGEE: I have just wanted to offer the fact that

11:40:11

6 7 8 9 10

we would be willing to stipulate to the admissibility of the deposition testimony as it is so that Mr. Brown doesn't have to sit up there and say, "I don't remember," because he doesn't remember. THE COURT: Well, he can answer the questions that

11:40:27

11 12

are posed to him and we will continue as we have in the past. Go ahead. BY MR. SHIELDS: Q. Mr. Brown, I'm showing you page 50 of Exhibit 7 and I

11:40:33 11:40:33 11:40:33

13 14 15 16 17

would like you to direct your attention to this line that I placed a dot next to on November 12. A. Q. Yes, sir. That shows a $100,000 deposit going into your checking Do you see that?

11:40:49 11:40:49

18 19 20

account; right? A. Q. A. Yes, sir. Do you have any idea where that came from? No, sir. You can put that aside. MR. SHIELDS: I'm going to read you an excerpt from

11:40:55 11:40:56 11:40:59 11:41:13 11:41:14

21 22 23 24 25

United States District Court

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 46 of 102

47 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown) 1 2
11:41:24 11:41:25 11:41:28

Greg Brown's deposition, it's Exhibit 4, and I want you to tell me whether this is true. THE WITNESS: BY MR. SHIELDS: Q. I'll read it to you. Greg Brown says in paragraph five, On exhibit --

3 4 5 6 7 8 9 10

and now I'm quoting "I did not have authority to sign checks on behalf of Home Mortgage and was not involved in managing the finances of the company. It is my understanding that my

father, Carl Brown, and my mother, Molly Brown, managed the finances of the company." Do you agree with that provision? A. Q. I would say so. Then Greg Brown concludes that paragraph by saying, "I was Do you agree with that?

11:41:46 11:41:50 11:42:00

11 12 13 14

not a signatory on any bank account." MR. McGEE: THE WITNESS: THE COURT: offered for the truth. THE WITNESS: BY MR. SHIELDS: Q. Objection.

11:42:08 11:42:10 11:42:11

15 16 17 18

Your Honor, hearsay.

Say that again. Do you agree with it? It's not being

11:42:15 11:42:16 11:42:17

19 20 21 22

I didn't hear the question.

I'm sorry.

Do you agree that at no time during his affiliation with

HMI was Greg Brown a signatory on any HMI bank account? A. I don't remember. MR. SHIELDS: crystal clear. Ma'am 'I just want the record to be

11:42:26 11:42:38

23 24 25

Could you read back to me my question and United States District Court

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 47 of 102

48 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown) 1 2
11:42:47

answer in regards to the first portion of Greg Brown's affidavit, what I said? Right now I'm just talking to the court reporter, sir. THE COURT: MR. McGEE: Go ahead. There's no affidavits by Greg Brown. Can

3 4

11:42:52 11:42:53

5 6 7 8

we identify them by date, please, so we know which one we're talking about? MR. SHIELDS: March 6 affidavit. THE COURT: MR. SHIELDS: THE COURT: On page 2, correct, and paragraph five. Yes. Go ahead. That's all right. She's going The one I was just reading from was the

11:43:01

9 10

11:43:25 11:43:30 11:43:31

11 12 13 14 15

to read this back and you can listen to what was said and by whom. Go ahead. (Requested portion of record read: QUESTION: I'll read it to you. Greg Brown says in

11:43:39 11:43:39 11:41:28

16 17 18 19 20 21 22 23

paragraph five, "I did not have authority to sign checks on behalf of Home Mortgage and was not involved in managing the finances of the company. It is my understanding that my

father, Carl Brown, and my mother, Molly Brown, managed the finances of the company." BY MR. SHIELDS: Q. Do you agree with the provision? United States District Court

11:41:45 11:41:46

24 25

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 48 of 102

49 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown)
11:44:09 11:44:10

1 2 3

A.

No. THE COURT: Now, you said you agreed with it

previously.

Have you changed your mind? Yes.

11:44:15 11:44:15 11:44:26

4 5 6 7

THE WITNESS: BY MR. SHIELDS: Q.

So Greg wasn't being truthful in his affidavit about you

and Molly managing the finances of the company? MR. McGEE: THE COURT: THE WITNESS: THE COURT: Objection. Objection sustained. I don't know what -Well, I sustained the objection. I sustained it. Your

11:44:32 11:44:32 11:44:36 11:44:37

8 9 10 11 12

lawyer made an objection.

11:44:42 11:59:57 11:44:44

13 14 15 16

You may ask another question. BY MR. SHIELDS: Q. Is it your testimony that Greg Brown managed the finances

of the company? A. Q. Yes. How could he do that if he was not a signatory on any bank

11:44:50 11:44:51

17 18 19

account? MR. McGEE: Objection, Your Honor. Relevance.

11:44:56

20 21

There's another affidavit that clarifies that. THE COURT: Do you know? THE WITNESS: know. United States District Court No. I don't know. I said, no, I don't Overruled.

11:45:01 11:45:05 11:45:07

22 23 24 25

Case 2:03-cv-00100-ROS-MEA

Document 205

Filed 10/25/2007

Page 49 of 102

50 CV-03-0100-PHX-ROS, September 18, 2007 (Excerpt - Carl Brown)
11:45:13 11:45:17

1 2 3

BY MR. SHIELDS: Q. Was anyone a signatory on any HMI bank account besides you

and Molly? A. I don't remember. MR. SHIELDS: Can you please hand the witness

11:45:21 11:45:42

4 5 6

Plaintiffs' Exhibit 8 and while you're there, 9 and 10 as well. BY MR. SHIELDS: Q. Sir, open the folder that's marked Exhibit Number 8, This, is it not, is a statement from Home Mortgage's Do you see that?

11:45:52 11:46:19

7 8 9 10

please.

corporate operating account. A. Q. A. Q. 2002. A. Q. No. No.

11:46:52 11:46:58 11:47:05 11:47:05

11 12 13 14 15

Right here, sir. Yes.

Home Mortgage operating account.

This is for the time period August 31 to September 30, Do you see that? Yes, sir. There's no $700,000 deposit in that account during that

11:47:10 11:47:11

16 17 18

period of time, is there, sir? A. Q. A. Q. I would have to study it to look at it. Go ahead. It's two pages.

11:47:18 11:47:20 11:47:32 11:47:36

19 20 21 22 23 24

I don't see it. And according to this statement, this bank account had

zero dollars in it during the period of August 31 through September 30, 2002. A. D