IP NO: Station Casinos, AKA Red Rock Resorts (RRR) Not Worth The Investment

By: Rich Bergeron

LOOKING OUT FOR NUMBER ONE

Frank and Lorenzo Fertitta were set to make out like bandits, raiding their cash cow corporation once again for a massive amount of funds with a single scheme. The "Red Rock Resorts" IPO was the talk of the town and Wall Street for a little while, but the brothers pulled back at the last second after feeling the shellshock of heavy market losses in late January.

Anyone who might be thinking about investing in this latest Fertitta financial scheme should also pull back.

This IPO debacle is par for the Fertitta course. If you know the real history of the Fertitta family, you know these folks are the type of people who ruthlessly screw over other people to make all their money. From the card tables to the boardroom, the Fertitta brothers have a knack for separating honest people from their savings and fortunes.

The only "offering" the public really gets in buying Red Rock Resorts stock is an offer to help the Fertitta brothers set themselves and their kids up with more voluminous, ridiculous, ludicrous wealth. And at the end of the day, the Fertittas will still run the whole Station Casinos show. And when the Fertittas run the show, history proves that they always pay themselves first.

According to BloodyElbow.com, the main beneficiaries of a Red Rock Resorts IPO would be two generations of the Fertitta family:

"...all net proceeds will go towards reorganizing the corporate structure, including an acquisition of Fertitta Entertainment LLC. It's expected that Frank and Lorenzo Fertitta will each take home $112.5 million while trusts for their six children will receive $53 million. Additional stock sales included in the IPO could net the brothers even more."

Obviously, I have my own reasons for not trusting the Fertittas. They spent an awful lot of money on lawyers trying to prove they had nothing to do with the bogus $25 million suit against me that I successfully defeated over the course of six years of representing myself in their home courts. Yet, at the same time, the injunctions secured against me prevented me from writing the truth at the beginning of that case. That allowed the Fertittas to take Xyience out from under all the honest investors in the company who thought the Fertittas would help the company and set them all up for life once the long-awaited Xyience IPO came around.

Instead of the Fertittas doing the right thing, they used fall guys to take care of themselves and stole Xyience with what the bankruptcy trustee called a "loan to own" scheme. The casino barons simply pumped a little money into their shady acquisition, sat on their stolen nest egg for a few years, and sold the whole operation off to a Texas company for way more than it was worth.

BUYER BEWARE

Wall Street regulators and speculators would also be naive to forget that Station Casinos went public before, only to find a way to allegedly underbid shareholders in reclaiming the brand as a private corporation a few years later. This is not to mention all the other small maneuvers and manipulations pulled off by these casino barons to line their own pockets and take care of their friends and family.

Dig just beneath the surface of the amusement park the Fertittas built over the bodies of their financial kills, and you will find enough skeletons to fill a cemetery. Rather than physical bodies that an "old school" mobster might leave, these new school gangsters leave broken hopes and dreams, other people paying their tabs and countless fighters on the UFC roster who are constantly and consistently underpaid and under-appreciated if they fail to "put on a show." Even banks end up feeling screwed over after agreeing to do business with these brothers and their associates.

The Fertittas and Station Casinos have a lengthy history of being involved in deals that allegedly favor them (and their friends and relatives) only to degrade and devalue their distant or direct partners at the same time. To call them duplicitous is too nice in this context, and to call them devious is also too much of a compliment. Yet, throughout the patterns of their business transactions, they seem to leave a ton of people on the other end feeling cheated, right down to the casino patrons who get comped by management just so they can lose their life savings trying to win back what's already lost. "The house always wins" is a concept that is well known and fabulously executed in the Fertitta family business acumen. Just take a gander at their litigation history:

Lawsuit over 2001 "sweetheart deal" (Station Casinos made $1.7 million on sale to former executive and family friend Blake Sartini):

"Station Casinos failed to negotiate the sale of Southwest Gaming to [Blake] Sartini at arm's length, according to the suit. The company also failed to appoint a committee of independent directors to negotiate the deal or retain a financial valuation expert to determine whether the terms of the sale were fair to the company, the suit said. The board also failed to seek independent, third-party bidders for Southwest Gaming or otherwise shop around the company for the highest possible price, it said."  

Back in 1998, investors accused Station Casinos principals of wasting company assets by paying a $54 million "breakup fee" to Crescent Real Estate Equities. Crescent, owned by billionaire Richard Rainwater, initially agreed to pay $1.7 billion to acquire the locals casino chain, but the deal went sour. The resulting fallout culminated with a federal lawsuit. Instead of getting roughly $18 per share in a buyout by Crescent, Station Casinos investors obviously felt shafted in having to foot the bill for another Fertitta family financial flop.

Station Casinos ended their first stint as a publicly traded company with a $5.77 billion buyout in 2007, which resulted in another slew of investor lawsuits. A few years, and around $6.5 billion in debt accumulation followed before the Fertittas put the chain through a very favorable bankruptcy process. As Donald Trump admitted to doing during his recent presidential run, the Fertittas "took advantage of the laws" in buying the bulk of the company's assets back on the other side of the bankruptcy (with the help of Deutsche Bank) for pennies on the dollar ($772 million).

The bankruptcy process victimized a long list of people (including a Texas Teachers' Pension Fund) who put money on the prospect of the Fertitta brothers building the brand into a bigger entity than their founding father Frank Junior could have ever imagined. Bondholders left in the cold by the massive bankruptcy filing sued, looking back at that 2007 leveraged buyout as the beginning of the end for the company. They filed their claims before the bankruptcy became imminent:

"The ... defendants are not acting gentlemanly,’’ the lawsuit charges. The suit alleges: "The exchange offers unfairly, disloyally and without bondholders’ consent, deny plaintiff and the entire class of similarly situated bondholders the ability to take advantage of the bond tender offers. Plaintiffs’ bond holdings will be subordinated to the newly issued bonds and, as a result, will likely be rendered worthless as the specter of Station Casinos’ insolvency approaches.’’

According to bankruptcy paperwork, the bondholders also made serious accusations that the Fertittas and their partners engaged in insider dealing with the buyout in 2007:

The buyout cost Station Casinos $4.17 billion in costs to purchase stock and incur new debt of $1.6 billion.
The filing says the buyout provided approximately $500 million in payments for insiders, nearly $300 million of which went to the Fertittas, including Chairman and Chief Executive Officer Frank Fertitta III and brother and Vice Chairman Lorenzo Fertitta. The insiders' ownership stake rose to 25 percent. 

The Xyience bankruptcy suspiciously went down under "Fertitta Enterprises" ownership just before Station Casinos officially declared bankruptcy. It appeared like the Fertittas were testing the waters by casually steering a canoe down the bankruptcy river first, waving on the giant paddleboat to follow.

At some point it seems like this family figured out that making money off their various schemes required having really great lawyers on hand to fight inevitable lawsuits, get around business and financing laws, and avoid the loss of their gaming licenses. After all, associations with criminals or criminal enterprises are supposed to disqualify certain individuals from even being involved in gaming:

Nevada Revised Statutes NRS463.0129 state: “The continued growth and success of gaming is dependent upon public confidence and trust…that gaming is free from criminal and corruptive elements.”

It's hard to believe these brothers could ever be involved in gaming when you consider their involvement in the USA Capital scandal. The former President and COO of that company earned a 12-year prison sentence for fraud perpetrated there. Some of that fraudulent activity allowed the Fertittas to benefit directly through shady loan schemes providing millions in capital to Fertitta Enterprises. Fertitta Enterprises GM Bill Bullard was a gung-ho, pit-boss-type of mover and shaker for USA Capital before Joseph Milanowski's fraud brought the company crashing down. 

According to the Las Vegas Review Journal: "The Fertitta family, founder of Station Casinos in Las Vegas, had $17 million invested in USA Capital and got it all back when one of their attorneys was on the oversight committee...The attorney then resigned from the committee." One scheme Bullard orchestrated prompted lawyers to draw up a diagram to explain it:

   

Bullard was even audacious enough to address company investors and tell them: "The longer this thing goes on (in bankruptcy court), the more the attorneys are going to get paid." 

Deutsche Bank, one of the main partners in the current Station Casinos conglomerate, is also facing recent scrutiny for alleged illegal dealings. The bank agreed last year to pay more than $2 billion in penalties to US and British authorities after admitting to rigging global interest rates. Deutsche Bank is also the subject of two ongoing criminal investigations in the United States. The bank is also facing allegations of supporting the money laundering activities of Russian clients.

On top of all this, the Fertittas willfully supported the violation of federal gaming laws by allowing "Full Tilt Poker" to advertise in association with UFC events. These in-cage and on-screen plugs obviously sent more customers to a Web-site that was not only shut down for operating illegally in the United States, but it was also later determined to be a Ponzi Scheme. The Fertittas, who also pursued online gambling through legal channels in the wake of the poker site crackdown, obviously should have known Full Tilt was always operating outside of federal gambling laws. Ray Bitar, one of the founders of Full Tilt Poker, struck a deal on various charges in 2013 that included bank fraud, money laundering and illegal gambling. Station Casinos principals and a few of their associates launched "Ultimate Poker" the same year Bitar made that last deal.  

The arrest of Bitar in 2011 also came at a time when the UFC was working on a deal to double down on their sponsorship arrangement with Full Tilt Poker. Reports in the wake of the Full Tilt bust additionally indicated that Station Casinos had their own plans to unite with Full Tilt in anticipation of favorable federal regulation regarding online gaming. Instead, Station Casinos tried and failed to do it themselves with Ultimate Poker. Even as the first and only operator in the niche for a short while, the profits made by Ultimate Poker were scarce, especially since only Nevada residents could legally use the site. 

During the Xyience debacle, the Fertittas also had peculiar connections to people disgraced by a scandal at Global Cash Access. One of the GCA flunkies, Kirk Sanford, ended up being the co-CEO of Xyience during a time when the company's collapse was inevitable. I had a meeting with Sanford and the other co-CEO Adam Frank before UFC 78: Validation in Newark, New Jersey. The two executives authorized full payment for my trip from Cape Cod, Massachusetts to meet with them and talk about the future in New York City just before the event in November of 2007. 

During that fateful sit-down, Sanford consistently maintained that the plan for Xyience was to go "scorched earth" on the investors. He also indicated this was the direction the Fertittas wanted to go with the situation. Throughout the holiday season that year, the supplement company that helped put the UFC on the map laid off multiple employees on the way to a particularly ugly bankruptcy, which was purposely orchestrated by the principals at Fertitta Enterprises. 

THE STATION CASINOS AND UFC UNION FIGHT

The Culinary Union in Las Vegas managed to emerge in recent years as particularly sharp thorns in the side of the Fertittas, thanks in part to their wing of researchers and writers outlining the shady history and strange bedfellows associated with Station Casinos. The union also famously contacted performers scheduled to come to Red Rock Casinos and discouraged them from doing so, among many other public protests and stunts. Now, the union is even trying to shut down the latest Station Casinos IPO attempt.

Their tactics of relentless and expensive campaigns to degrade the opposition begs the question: why would you want to work--even under favorable union conditions--for such underhanded individuals and their manipulative, wheel-greasing friends? I imagine the answer is the same one given by Willie Sutton when someone asked him why he robbed banks: "Because that's where the money is." UFC President Dana White responded to union attacks once by claiming the Station Casinos union deal would represent a $10 million per-year benefit for the culinary union itself.

I even wrote an article myself at one point wondering aloud why the union would squawk so much about the rights of UFC fighters if they weren't doing anything to actually create a fighters' union. Though some recent anti-trust suits against the UFC are working their way through the courts, these are being brought by fighters on the roster. The Culinary attacks on the UFC came out of left field in the context of what they were trying to do with organizing Station Casinos. My article basically asked the union bosses to put up or shut up in a little more nuanced terms. Much to my surprise, the union did make a play to attract interest in the fighter union concept last year, but not much has been done since then to make the dream a reality beyond a Web-site with no recent updates:

The way the UFC brass treats some fighters and the poor pay rate prospects earn leaves too many competitors paying out of their own pockets to compete as professionals. Bills and expenses can bleed a fighter dry of any potential profits, and the lifelong negative effects of the injuries and stress of intense training and physical combat can be debilitating after retirement. The message sent by the UFC to many of their most hard-working young fighters is callous: working hard at your craft is worthless to your bosses if you can't entertain the fans when you step into the cage at an official UFC event. In the old school days of the Wild West, this mentality is the equivalent of the villain making his victim dance by shooting bullets at his feet. It was put on a show or die back then, and it's put on a show or forget about making a decent living now.

DON'T BUY IT!

The Fertittas have become exceedingly talented when it comes to putting on a "show" of their own. They pretend to be honest, upstanding citizens in the public eye while behind the scenes they keep ruining lives as a means of lining their own pockets. The Red Rock Resorts IPO is yet another example of the Fertitta family making it look like they want to help other people make money when it's really their own bottom line they are ultimately and primarily concerned about.

As long as this family is involved as managing partners of this proposed RRR stock, they are free to execute the same scams and schemes they've used in the past to unjustly enrich themselves. My guess, based on years of investigation into Fertitta dealings, is that this family will make sure in the end that they will collect the highest dividends, even if the stock itself ends up being worth less than the paper it's printed on. That's how they roll, and the evidence and history doesn't lie.

Fertittas Walk Away From Xyience & Xenergy With Big Red Buyout

By: Rich Bergeron

Inside sources at Xyience, Incorporated broke the news to me last week that the company would soon be sold off to Big Red, based in Austin, Texas. Employees will apparently not be receiving severance packages, and early indications are that the beverage company buying out the brand will not seek to enter into the supplement business. This means only the Xenergy line of energy drinks will remain under the Xyience label. I held off on publishing the news immediately due to a promise of more intelligence if I let it go a few days. Then, the Las Vegas Review Journal forced my hand today with THIS REPORT.

The sudden washing of their hands of the former supplement giant known for sponsoring Chuck Liddell in happier days is par for the Fertitta course. It comes as no surprise that Lorenzo and Frank would bail on the company in this fashion. It certainly is ironic, though. It was actually disgraced Xyience Founder Russell Pike who originally came up with the idea to hype up the Xenergy line in the hopes of selling it to a major bottling outfit. Pike wanted Pepsi or Coke to come in with a multi-million dollar offer to take over Xenergy and transform it into a wholly unique company. The Fertittas obviously fell short of that lofty goal (maybe it had something to do with something Dana White once said), possibly banking on their Galveston, Texas roots and other family connections in Texas to ink the new deal that allows them to walk away from this boondoggle.

Other whispers from the final days of the Fertitta-run Xyience indicate that marketing studies showed Xenergy is being sold to more mainstream non-UFC-fans than ever. This reality also means the end of UFC sponsorship deals with Xyience and Xenergy.

One thing the company managed to do well over the last few years is in the realm of building distribution agreements for their sugar-free energy drink. Since the heady "Monica" days at Xyience, Xenergy's always been easier for the company to market than the supplement lines. Insiders who are aware of the Fertitta walkout point to profitability, or lack thereof, as an issue for the whole conglomerate. Lorenzo Fertitta in particular, one of the principles at Fertitta Enterprises (which holds the official, albeit obscured, ownership position over Xyience), is reportedly growing tired of losing $5 million a year.

This is the end of another monumental scam for the Fertittas, who just barely escaped serious liability in a lawsuit brought against them by the U.S. Trustee in bankruptcy court. The scheme that drove Xyience just far enough into the ground for the billionaire casino barons to take the whole thing over is now officially in the rear view mirror of their Rolls Royce. The roadmap's been painfully obvious to people like me from the very beginning, but somehow the local boys made good managed to avoid culpability and accountability for the mess they ultimately left behind by their selfish actions throughout the whole process. Let's not forget the hundreds of innocent shareholders who saw their investments turn to dust thanks to the way the Fertittas swept in and turned the whole operation into another sad example of vulture capitalism.

Though I took some small consolation from Fertitta Attorney Greg Garman telling a judge at my final hearing that my reporting has caused his clients multiple headaches with the gaming authorities in Nevada, it is even more comforting to know the Fertittas never could get Xyience buzzing again under their leadership. Maybe they will finally come to realize they would have been better off doing everything above board. I know, fat chance on the "Come to Jesus" moment ever happening for these scum-of-the-Earth con artists.

The bottom line is there won't be any former Xyience investors waiting for the final closing of this deal to cash in on what they put their life savings behind so many years ago. The Fertittas will be another couple of fat cats getting fatter when they deposit the final checks that bail them out from this disaster they constructed and created out of sheer, callous greed. Perhaps it will all go to pay for another yacht, another private jet, or another summer getaway they can jet off to when everyday life gets too real. Whatever the final sale price is, it is a crying shame that none of it will go to the honest folks who actually put the brand on the map with their hard-earned money from decades of the kind of hard work the Fertittas themselves will never be able to relate to. Whoever said liars and cheaters never win probably never met Lorenzo and Frank Fertitta III.

We'll have more details as they come to light on this blockbuster transaction.  

Settling For Nothing: Fertitta Enterprises Gets Off With Slap on The Wrist For Bankruptcy Fraud

By: Rich Bergeron

      It always amazes me to see how much history repeats itself. Nearly the same scene that's depicted in the photo above unfolded at the Fertitta-owned Red Rock Resort and Casino recently. This time around, the banquet featured the entire current crop of Xyience employees celebrating a new settlement agreement to end the company's bankruptcy battle with the trustee's counsel Jon Backman.

    The settlement is disappointing when you look at how long the proceedings dragged on and how much promise there seemed to be in taking the Fertittas to trial. My own relationship with Mr. Backman was sometimes contentious. I often asked him what could be done for the shareholders.  He always told me they would probably recover very little or next to nothing. I pressed my own motion to suspend the bankruptcy before Backman took the case on for Trustee David Herzog.

     There were times Backman seemed to be doing whatever it took to seek justice while at other times I saw the stereotypical lawyer in him. Eventually I grew to understand he was in a tough position, but he amassed a catalog of evidence that began to build momentum leading up to the trial. He won a sanctions motion that he now has to scrap his rewards for to get a lowball settlement approved. Apparently, Backman didn't want to take his chances fighting the case in court, and he eviscerated his chances to prove that case in the settlement motion.

     Reading some of those sentences came as a real shock to me. The language had the tone of someone writing with a gun to his head. I attended a hearing in Las Vegas where Backman wiped the floor with his opposition: Attorney Greg Garman. The tide seem to be turning in the case, and my own experience with Garman led me to believe he really had no idea why his clients should have to pay for stealing the company out from under the shareholders. He knew the law, but he he didn't seem to know the case that well. He certainly didn't grasp the real circumstances that made this bankruptcy a borderline criminal conspiracy.

     Paying out anything to the trustee came at a price for the Fertittas, I suppose. I wouldn't doubt the negotiations featured discussions on how the settlement motion would be written to absolve the Fertittas and their employees of all possible implications of guilt or culpability. Just like the gangsters in suits depicted in the photo above, the Fertitta brothers have to appear respectable and spotless in the public eye while running their rackets behind the scenes.

   Mr. Backman seemed ready for trial recently, and he let me know at one point that I'd probably read about it in the papers before he could tell me how it was going. He didn't quite get that one right, because I'm the one writing about what happened rather than reading about it anywhere. If I weren't around, the Fertittas might have slipped this one right under the radar. That's unfortunate, but it's the world we live in. Thanks to people who continue to look the other way and let crooks be crooks, crime really does pay for gangsters in business suits these days. Just take a few hours and sort through this blog someday. Research the Fertitta bloodline. 50 cent was over at Floyd Mayweather's gym Tuesday being a ham for the cameras, but if he really wanted to find out how to be a gangster he should have been talking to Lorenzo and Frank Fertitta III. From their machine gun-toting security details to their stubble-ridden tough-guy mugs, these guys are the picture of organized crime in Las Vegas evolved to a totally new dimension.

   It really is depressing to see a company stolen right out from the investors who built it, but even more disgusting is how the Fertittas are planning to fold Xyience into Zuffa. They are literally and figuratively driving it like they stole it.

Russell Pike (parody)

     The company's current PR staff even made it a point to disavow any connection to the company's original founder, Russell Pike, when Pike was recently convicted of Tax Evasion to the tune of owing an estimated $1.5 million to Uncle Sam. Pike will be sentenced in July. By then, the Fertittas will be making millions emulating his original model of doing business: sponsor the UFC's fighters and the UFC to sell more low-rate supplements and other assorted overpriced items. The only thing they didn't do that Pike did was seek investors. The Fertittas and their insider friends wanted all the spoils for themselves. The UFC brass wanted a supplement company tied to the organization for a long time. Now they have one.

Xyience "Round 2" will flash the new marketing model at us all on free television soon by posting the Xyience logo back in the middle of the mat once again on May 5th for the UFC on Fox 3 card. It will be the first time the company's held that position on the mat since I helped expose how the Fertittas created a false bidding war for the middle of the mat space. Xyience defaulted on a multi-million dollar payment plan for that ad space while they were steaming toward bankruptcy, and the Fertittas had to know the company couldn't meet the terms of such a deal when they put ink to paper on it.

Money coming out one Fertitta pocket and going back into another would be a common theme through the case, and I kept finding new areas where the Fertittas found ways to pay themselves without any intention of their moves ever being made public. Yet, even when I exposed much of this behavior, they managed to get away with it all and did not even have to suffer a real civil penalty. These guys have become the kings of insider dealing, influence peddling, and lawyering up to beat the band.

      Lorenzo and Frank Fertitta managed to erase billions in Station Casinos debt through the bankruptcy courts, and they bought all their over-leveraged properties back for a bottom dollar bid at the tail end of the process. They used Xyience as a trial run, an experiment of sorts. It wasn't long before the lesson learned came to be: bankruptcy can be extremely profitable if you play the game correctly. I arrived in Vegas on my last trip out during a time period where Station Casinos was still on the way out of bankruptcy. They were advertising a car a day give-away. Later on I read some reorganization paperwork that showed Station Casinos simply defaulted on the payments to the dealerships involved. The dealerships no doubt wrote off the losses as part of their insurance program, and the folks with the free cars made out like bandits. It's the kind of magic that can only happen in Las Vegas.



This is why the Fertittas themselves are very rich individuals who always make the Forbes list. This is what business-suited gangsters do. There's nothing better than selling something you got for free. As casino owners, the Fertittas must maintain a resolute appearance as upstanding young men who are law-abiding citizens. Billions of dollars could literally be at risk if they were ever caught up in any kind of criminal charges. Bankruptcy fraud seemed like a fair charge when I first levied it against them with a motion to suspend the bankruptcy. Their juice and my lack of an attorney led to a judge paying my motion no heed. The Fertittas steamrolled the company through bankruptcy with relative ease. It was like a bank robbery broadcast on national television where a million tips come in because everyone knows the robbers. Yet, nobody gets cuffed in the long run. Nobody is told to pay for their transgressions or provide any relief to those who suffered through these long years hoping something tangible would come out of the court process.

 I currently have a motion seeking $150 million in relief for sanctions against a wide array of parties implicated in the bankruptcy. There has never been an appropriate hearing on that motion, and it would require a ton of testimony to do it right. It's not a task I take lightly, and it would be a gargantuan effort to bring that hearing to fruition. Still, I am determined to do what it takes to play my part in this and provide whatever shred of justice I can.

Xyience Bankruptcy Hearing Yields No Decision On Sanctions For Now: Lorenzo Fertitta Suit May Be In Pipeline

By: Rich Bergeron

CLICK HERE FOR AN ARTICLE ON THE LATEST LEGAL WRANGLING IN THE LAS VEGAS REVIEW JOURNAL

An adversary case filed in Nevada bankruptcy court by the trustee's counsel for Xyience against Fertitta Enterprises, Zyen, and Zyen's General Manager William Bullard is suddenly getting very interesting. A contentious hearing Friday, October 30th in the case addressed a sanctions request for discovery violations. The hearing gave way to suggestions from Trustee's Counsel Jon Backman that Lorenzo Fertitta could be named in an entirely new future complaint as a result of what his recent, last-ditch discovery efforts uncovered.

Bankruptcy Judge Lloyd King seemed to take some limited interest in the sanctions motion and made some remarks indicating he agreed with Backman's factual take on the situation. Still, he made no final decision on the motion and asked for supplemental briefs from both sides regarding the procedural technicalities involved. Judge King also indicated that a follow up hearing featuring witness testimony would likely have to be held to determine the direction and breadth of any sanctions that could possibly apply. The judge also later set a proposed trial date for the existing case in April, 2012.

Despite what Backman described as harsh conditions for collecting evidence, he explained to Judge King that what he did find so late in the game changed the whole direction of his case. Backman argued that the lack of cooperation from his adversaries made the case far more difficult to deal with. The real tragedy, he explained, is the evidence that's just impossible to uncover. "We're never going to see those emails," Backman lamented about a situation in which he sought official Xyience email servers his adversaries somehow could not produce despite rigorous attempts to force them to. "There's nothing left to compel production of."

The complicated scenario that led to the sanctions request left both sides in the legal wrangling claiming the other was being unreasonable. A previous article previewing this hearing explains the nuances of the trustee's claims. Missing and now impossible to recover email communications are at the center of the controversy. A Fertitta right hand man of sorts, William J. Bullard, became public enemy number one for Attorney Backman at Friday's hearing.

Bullard is the General Manager of Zyen, LLC, formed as a Fertitta Enterprises subsidiary to provide a loan to Xyience. Once in the chief lien position over Xyience, the Fertitta side company quickly foreclosed on the debt. Zyen then became Manzen and assumed control of Xyience after the company declared bankruptcy in early 2008. Manzen was actually a combination of the Fertitta group (Zyen) and a company made up of four individuals named Manchester Consolidated. The combined parties coordinated to enter into a payment program in order to allow Manchester to appear to be buying the company out of bankruptcy. The monthly payments from Manchester eventually stopped coming in, giving control of Xyience back to Fertitta Enterprises once again.

To add another layer of intrigue to the complicated scheme, Machester Consolidated consisted of a total of four people with two of them being former executives of Cott beverages. Cott is the manufacturer of Xenergy. Had the bankruptcy resulted in another ownership group acquiring the company, Cott might not be guaranteed a chance to continue doing business creating the company's popular drink product that touts itself as the official energy drink of the UFC.

Friday's hearing discussed emails, some of which were only discovered after the trustee had to resort to delivering a subpoena to Gordon Biersch, a brewery and restaurant chain also owned by the Fertittas and managed by Bullard. Due to what he described as a painstaking process, Backman eventually did get a hold of some crucial emails, including one he described as "one of the hottest smoking guns I've ever seen in litigation." Fittingly called Exhibit G, the email between Bullard and Lorenzo Fertitta mentioned a $150 million offer for the purchase of Xyience from the Cott Corporation. The date of the email was aligned very closely with the first $12 million in financing the Fertittas provided to Xyience to gain control of it down the line.

The offer, if company officials capitalized on it, could have helped Xyience shareholders recover some value for their shares. Instead, it seems the Fertittas were intent on locking the shareholders out at the first opportunity they could, refusing to hold scheduled shareholder meetings and neglecting to pay the first interest payment on their loan with company funds. Hundreds of shareholders lost nearly all hope of any recovery when the Cott offer morphed into a scheme involving former Cott executives and their associates pretending to purchase the company for $15 million as a "stalking horse bidder" in the bankruptcy.

Coincidentally, I have a pending motion in these proceedings under my own adversary case which seeks $150 million in relief to be granted to shareholders burned by a campaign to silence my reporting that was trying to bring the whole Fertitta scheme to light. At the time I filed that motion I had no idea this smoking gun of an email existed, but it certainly fits a pattern I've described time and again for my readers here and at xyiencesucks.com in intricate detail.

Traditional mainstream media surrounding the sport of MMA and the world of finance is really missing the boat when it comes to the meat of this story. Yet, even a publishing entity that painted the Fertittas in a more positive light in the past picked up this vein of the tale surrounding Backman's sanctions request. Forbes Magazine didn't afford the trustee's attorney the courtesy of spelling his name correctly in the piece, and the author falsely asserted there is formal mediation involved in the case, but they did make an attempt to tell the story's most important points.

Forbes didn't send anyone to the actual hearing, though. None of the local papers had reporters there, either. It was not hard to find a seat in the courtroom. This is a story that's still unfolding in a controlled environment of sorts, so damage control for the Fertittas and the UFC so far has been fairly limited.

Backman is on track to make this case into much more of a spectacle if he indeed names Lorenzo Fertitta in any future complaint. The subpoena of Gordon Biersch's email server information led Backman to some documents he professed to never seeing before, documents that could pinpoint Lorenzo Fertitta's role in the conspiracy to bankrupt Xyience and defraud the company's shareholders and creditors.

"Whole cases can turn on single documents," Backman reminded the judge in open court on Friday. Getting a hold of the evidence that turned his case in a completely new direction added enormous excess costs for Backman to absorb on a case he took on contingency. These very documents, had Backman acquired them earlier, could have allowed the estate to make much more progress in the complicated litigation surrounding the estate at a much earlier date in the process. Instead, Backman now has to backtrack and reflect on the countless hours of wasted time spent chasing down company email servers he could never actually obtain.

The destruction, loss, and/or failure to preserve these servers and hard drives sought by Backman leaves a gaping hole in the case. The frustrating scenario caused irreparable damage that Backman had some trouble fully quantifying for the judge Friday. During much of his argument before the court, Fertitta Attorneys Gregory Garman and Joel Schwarz busily took notes, whispered to each other, and appeared to be genuinely agitated by the accusations against them and their clients. There really isn't much hard evidence of a driven, purposeful campaign to destroy the evidence in question, but the situation is about as suspicious as it could possibly be.

Attorney Garman explained away the accusations from Garman as "outrageous" and personally referred to Exhibit G sarcastically with the same "smoking gun" label Backman applied to it. Garman provided a basic timeline and list of efforts he personally undertook to assist the trustee in finding evidence. He vehemently disputes the claims that his actions constituted the hindering of Backman's discovery efforts. Instead, he explained that he did everything in his power and his clients assisted to the best of their abilities to voluntarily provide every shred of evidence they possibly could. Garman, at one point citing his high blood pressure, seemed clearly disturbed that his reputation might take a hit because of this case. Deep into one of his rants about how cooperative and misunderstood he is, he actually had to apologize when he almost uttered my name instead of Backman's.

Even though Garman is an expert litigator and an excellent speaker, Backman's accusations and evidentiary support are clearly bothersome for the Gordon Silver attorney. During my own past interactions with Garman he's come across as overly concerned about how others perceive him professionally. He told me himself at one point earlier this year that he considers the Fertittas one of his least significant clients, but at this point the task of protecting them and their associates seems to be causing him some "xtreme" stress. He even asked the judge for a recess and extra time afterward to argue more points surrounding his purported cooperation with the discovery process that he felt Backman misrepresented. Traditionally, a lawyer bringing a motion introduces it, the opposition gets a chance to refute the claims, and the moving attorney gets the final word. Garman's protests led to another round of back and forth at this hearing, and it seemed to expose the attorney's nervousness.

My personal impression of Garman's tactics--though certainly swayed by my intimate knowledge of the case and his basic character--left me convinced that he is running out of confidence on this one. He let the judge, Backman, and the few in attendance at the hearing see him sweat Friday. Backman, even when he was at a loss for words, came across as perpetually relaxed in his tone, speaking with the conviction of someone who knows he is right.

Backman wore a sharp suit that seemed a little too big for him Friday, but he filled the courtroom with the authority in his voice. He called the evidence debacle "one of the most egregious discovery violations I've ever seen." He seemed to have trouble even fathoming a world where sanctions would not apply to what his opposition's been caught in the middle of. Judge King conceded that there was no question he had the power apply sanctions, but he also said he wanted to know "the source" of that power. There are multiple categories and tiers of sanctions based on certain litigation behavior. Whatever stream of relief is applicable here will be best suited to become the basis for a formal order on the matter. Judge King seems to be thinking ahead about not wanting his order appealed if he sides with Backman.

Backman described the discovery difficulties as a "shocking development" in the case and confessed, "I want this case to be over." He further explained he had no vendetta or personal issues with Garman or his clients. "A serious mistake was made here," he stated plainly at one point.

Garman, in his second crack at a response to the charges against him and his clients, reported that he'd never been engaged in "such contentious litigation." He called Garman's strategy a "fabricated emergency." He insisted Backman's allegations did not mesh with the established record in the case and that he and his clients "did comply" with the discovery process. "I took this case exceptionally seriously," he said before listing off a series of numbers quantifying how many documents were turned over to Backman and when. He argued that some of the same emails Backman recovered from the Gordon Biersch subpoena were volunteered by other defendants in the case on previous occasions.

Garman went on to contend that he's gone out of his way to try to offer Backman concessions in the wake of the discovery mess. He told the court he was willing to expand the discovery process and allow further depositions of key witnesses but Backman refused these options. Garman also spent a considerable amount of time harping on the $150 million Cott offer being insignificant since it never actually materialized.

The question Garman seemed to miss in his explanation of the multi-million dollar Cott purchase offer is why it went away so fast after a meeting between Xyience insiders and the Cott folks in Canada. The deal didn't dissolve for no reason. There's no witness testimony as of this point in this litigation that adequately gives the exact reason why the $150 million offer came off the table and why it's not suspicious that people associated with Cott ended up with an ownership interest in the company anyway. Still, Garman insisted that if there was any conspiracy involved in this case it was "a conspiracy in the light of day" and his clients were open and honest about their intentions and actions.

The record simply doesn't reflect Garman's explanation as the full truth. The shifty approach to discovery adds more suspicion to what's already a clear-cut case of deceptive practices involved in the takeover and bankruptcy of Xyience by the Fertitta group. Garman also made the mistake of calling Former Xyience Co-CEOs Adam Frank and Kirk Sanford cooperating witnesses in Backman's case. Backman clarified that while Sanford and Frank agreed to provide information and evidence without the need for subpoenas and settled their own adversary cases, they are still "co-conspirators" in the case and will be treated accordingly.

Perhaps the most pretentious portion of Garman's argument on Friday was his framing of Backman as being dishonest for not holding up his end of a bargain struck at a previous hearing to split the costs of restoring computer drives that were reportedly destroyed by a system crash at Xyience. The agreement between attorneys came to pass only because the drives were represented to Backman as the ones with the company's crucial email servers contained within them. It turned out the drives were essentially worthless once they were restored and did not contain any email records whatsoever. So, essentially Garman wants full payment on a debt for services provided that were wholly misrepresented by him and his clients.

Judge King admitted not even bothering to read previous filings I presented to the court when it came time for hearings regarding those matters. I came into Friday's hearing not expecting him to give Backman much more of a fair shake. He surprised me when he picked up on a nuance neither side considered up to that point.

Focusing on Bullard's lack of record preservation related to his emails, Judge King pointed out that Bullard was savvy enough to know that being on Xyience's board of directors would require him to fulfill certain fiduciary responsibilities including keeping accurate records. Yet, at the same time, Bullard insisted that he did not save certain material because he did not anticipate being named in litigation. Bullard pointed to the liability issues he would be embroiled in as his reason for not wanting to be on Xyience's board as a formal member. So, the evidence shows Bullard purposely avoided being held accountable for accurate record keeping at one point and yet he still claims not keeping and volunteering crucial emails was an honest and innocent mistake.

Garman did not seem to have any adequate explanation for that reality. He later wondered aloud why both sides were spending so much money on a sanctions motion and requested a trial date at "the earliest possible date." Depending on how dueling summary judgment motions end up impacting the case once they are heard in December, the two sides will face each other at trial the week of April 9th, 2012. Before then, Backman will pursue some other serious evidence issues through additional motions for relief.

It's clear that Backman's approach has Garman flustered and desperate for a rush to judgment before the case gets out of hand. His clients are in a precarious position at this point, and it's not looking like conditions will ever improve. The Fertitta attorney was clearly off his game on Friday, apparently the result of knowing that the longer this case goes on, the worse he and his clients will look in the end.

Xyience, UFC, Fertitta, Station Casinos, MMA, Internet Gambling Update

The Headline in the Las Vegas Sun Article Says it All:

CULINARY PICKS A FIGHT WITH UFC TO GET AT STATION

It is an article by J. Patrick Coolican, a writer I haven't followed that closely. I don't think I've ever seen him in any byline for a story regarding the Brothers Fertitta. Here he starts right off by sending readers to www.unfitforchildren.org, a site set up by Culinary Union insiders to illustrate how vulgar Dana White really is.

If you like Coolican's work, I highly recommend an earlier vintage of Fertitta/UFC History from the archives of our own investigative work:

ARE STRIKEFORCE'S DAYS NUMBERED?

FULL TILT POKER FIASCO MAKES UFC BRASS GUILTY BY ASSOCIATION

Xyience Bankruptcy Trustee Finds Damning Evidence Against Fertittas, Pushes For Sanctions This Friday

If you want a unique perspective on fighter sponsorship Ben Fowlkes has the best recent piece on the subject:

THE TRUTH ABOUT FIGHTERS AND SPONSORS

Hardy's UFC Life Xtended Due to Xyience Sponsorship Deal

By: Rich Bergeron

Dan "The Outlaw" Hardy is a true Xception to the so-called "three strikes rule" often used to Xpell fighters from the UFC when they suffer three straight losses in the octagon.

Hardy's losing effort in the main event of UFC Live 5 against Chris "Lights Out" Lytle was his 4th loss in a row, something Dana White usually responds to by releasing a fighter as quickly as possible. Yet, when Hardy went down in the third-round by submission, the decision to keep or cut Hardy was left out of the Baldfather's hands. Instead, Lorenzo Fertitta saved the day for Hardy with a single tweet. The MMA media quickly set about analyzing and criticizing the UFC for not letting Hardy go, but none of the major outlets seemed to be able to figure out the real reason (see image at left) Dan Hardy is being retained as a UFC fighter. None of the pundits in either the print or television sports media bothered to take a moment to ask, "Why did Lorenzo Fertitta make the call to keep Hardy instead of Dana White?"

The fact is, Dan Hardy's Xyience sponsorship is what really kept him from getting cut. See that UFC label on the Xenergy fruit punch can above that Hardy is prominently featured on? There's got to be at least hundreds of thousands of those cans either in circulation or yet to be distributed by Xyience. It doesn't take Sherlock Holmes to figure out that Xyience is owned by Fertitta Enterprises, and the Fertitta brothers are of course the majority owners of the UFC. Xyience-sponsored fighters are company men in more ways than one. They can do no wrong, especially in this case where Hardy is literally the face of Xyience's popular Xenergy brand. Another Xyience-branded fighter claimed recently that about 85-percent of MMA fighters are using performance enhancing drugs.

Hardy's fight against Chris Lytle turned out to be a landmark last fight for Lytle, who told Hardy at the weigh in that he intended to retire after the match. Lytle specifically told Hardy he wanted to make it a good battle to go out on, which obviously called for plenty of toe to toe action. Hardy obliged and tried to outbox a former pro boxer, which didn't work out in his favor despite a few bright spots. The whole fight just seemed too happy and magical for Lytle when the smoke cleared. Stories after the fight centered around Lytle ending his career on a high note. Other fighters were forced to take notice and told to try to follow Lytle's example of how to retire properly. It seemed Hardy was in a lose-lose situation going into the fight. If he beat Lytle up he'd spoil the legend's leaving the league on good terms. If he lost he risked getting cut, or at least that's what he must have imagined his fate would be. Hardy actually seemed surprised that he wasn't voted off the island after the loss, and he hinted at his own possible retirement in promising to take some time off to reinvent himself.

John "Doomsday" Howard was quick to call foul at the three strikes rule causing him to lose his job when Hardy was allowed to stick around after losing four consecutive fights. The double standard even led Howard to challenge Hardy on YouTube. Howard's last three fights were long battles against Matt Brown, Thiago Alves, and Jake Ellenberger. If Howard had been sponsored by Xyience, would he still be working in the octagon? Maybe so, but after the cut it's a bad idea for him to call out a company man like Dan Hardy and expect the UFC brass to bite.

Hardy's good fortune didn't end with Lorenzo's decision to keep him around. He also netted a $65,000 fight of the night bonus. Hardy's loss by submission also gave Lytle the chance to bolster his retirement fund with $130,000 in bonus money, adding a submission of the night bonus to his half of the fight of the night honors. Looking back it all just seems too perfect, almost as if the fight was fixed.

Only Hardy's genuine disappointment gave the impression that he really did do his absolute best to win the fight. He even hinted in his post-fight commentary that he was glad the UFC was going to give him "one more fight." Just in case he loses that next opportunity to prove himself he let it be known he was going to take his $65k back to the UK and go on hiatus for a while. This, of course, will give Xyience plenty of time to sell off their remaining fruit punch "collector cans" of Xenergy featuring Dan Hardy's face on them.

The boxing game helped coin the phrase "tomato can" to represent an easy opponent to beat. Dan Hardy's losing streak is starting to make "Xenergy can" sound like the best MMA equivalent of that label. He might even cause other Xyience sponsored fighters to refuse to have their faces plastered on future Xenergy cans for fear of the whole streak representing a Xyience curse akin to the Madden NFL and Sports Illustrated cover curses that plagued other sports teams and players in the past. Whatever happens next, look for the preferential treatment of Hardy to persist as long as fruit punch Xenergy is still on store shelves.

The Wonderful Pom Return Bomb

10-main



Exhibit 1


Exhibit 2


Exhibit 3


Exhibit 4


Exhibit 5

The "Blue Pom" Pre-emptive Strike

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1-1



1-2

The Lennon Tapes

The following tape is from a conference call held with all Xyience employees who could attend by phone or in the room about what John Lennon, the Xyience, Incorporated President, called a distraction....emails to all employees about the company's past, it's history, and the $25 million suit against me all based on lies...

I just wanted to talk to Lennon, hear it straight from him. I actually told him if I didn't talk to him in person, I'd be talking to him in front of a judge, or something to that effect. Turns out that came true, and that's when we first spoke face to face. Those tapes will come later. For now, listen to Lennon sell the troops a few loose lines about who I am and what I do. The meeting starts about 9 minutes into the recording.

The Dark Tower Vs. The House That Truth Built

By: Rich Bergeron

The First Epistle to Timothy in the New Testament (1 Timothy 6:10) contains the phrase, "The love of money is the root of all kinds of evil."

This past Monday morning I was invited to the dimly-lit 9th floor of 3960 Howard Hughes Parkway in Las Vegas where the posh firm of Gordon Silver's law offices are located. Lined by tall, stocky palm trees, the path to this ivory tower is a masterpiece of construction in itself. Standing in the shadows of the building housing the legal powerhouse that employs my main adversary in the pending Xyience bankruptcy case, I probably should have been at least mildly intimidated. Instead, a reserved sense of calm righteousness enveloped me as I entered the elevator and said to my fellow passenger, "9, please."

Having spent almost a full month in Las Vegas when I only planned at first to stay a few days, this type of meeting didn't seem probable or even possible when my arrival flight touched down at McCarran Airport on the morning of February 9th. Yet, all of a sudden there I was sitting across from Gregory Eugene Garman, a managing partner of the firm. The meeting room was darker than the lobby, and the dozens of sleek, black leather chairs ringing the gigantic marble conference table were a stark reminder that I was in the belly of a great financial beast. A director of the firm sat next to Garman, said little, and furiously jotted down notes as we talked.

The first order of business was a bit of paperwork: an agreement Garman requested I sign confirming I knew he was not consenting to having our conversation recorded. I dutifully signed it and told both men I had no intention to record the session.

The subject of this little gathering was to hash out a compromise on an injunction proposed by Garman due to my dedicated and somewhat overzealous campaign to leave no stone unturned in a search for the truth behind the scandal that led to the downfall of Xyience, Incorporated. This is a story I've devoted more than four years of my budding journalism career to, and it's one that also kicked off my experience as a pro-se attorney. The latest in a long line of judges who had a chance to impact this case at one stage or another ruled at our last hearing that we should coordinate to create an agreeable order he would then make final edits to. Instead of compromise, Garman seemed more intent on making ultimatums and veiled threats he made a point to characterize as simple realities of the situation. It was obvious to me that my reaction to these tactics frustrated this "Super" lawyer who was likely used to getting his way with other clients who required the services of their own high-powered and high-priced attorneys at meetings just like this one.

The bulk of the time we spent across from one another featured no compromising of any sort, though. Instead, it was more like a debating contest. He toed the party line of the clients who paid him hourly wages to make them look spotless while I rattled off challenges to their credibility and character for him to explain away. Though he purported to have all the answers pointing to his clients being good citizens acting above board in all their business activities, I still managed to elicit some responses that revealed there were many aspects of his clients' operations I seemed to know more about than he did.

The most poignant moment for me, though, was when Garman confessed to being offended by the way I painted him in this blog and elsewhere. Before it was torn down by a biased judge's order in an unrelated case in Indianapolis, I started a Web-site called ScarletLawyer.Com featuring a page devoted to Garman. Garman's head-shot photo with a dark red "L" emblazoned on his forehead was a key fixture of that site. He now makes it a point at hearings to call out that effort of mine as somehow relevant to the current proceedings. The truth is, as he explained in the meeting, the site being gone now doesn't change the fact that he took the photo, the underlying description of his tactics, and many of my other methods of undermining his reputation personally.

I didn't apologize for my actions, as there was no need to. I simply smiled and pointed out how he had characterized me on the stand at the prior hearing as a "professional plaintiff" even though I've never sued anyone to initiate any case. Though part of me felt flattered to be called a professional in a field I consider myself more of an amateur in, I have never actually been a plaintiff at all. I've only ever been categorized as a "counter-plaintiff" which is rarely ever even referred to using that term. The more widely accepted label for someone who brings a cross-complaint is "counter-claimant."

Garman explained to me at one point that the Fertittas--who currently own the re-organized Xyience--are by no means his biggest clients. I took that statement to mean that he had bigger fish to fry and this case was just a nuisance to him. Still, he had a strong list of demands laid out in what he planned to put in his injunction order draft. These stipulations sought to afford his clients the "ultimate" protection he felt he could honestly argue for, even though my experience so far taught me that many of the constraints he was seeking were patently unconstitutional under the circumstances.

For one, Garman wanted all of he documents I testified to acquiring on the sly from Xyience to be returned promptly. If I wouldn't comply, he intimated his clients would press criminal charges. "You'll just have to prosecute me," I finally told him near the end of the meeting when he brought up his plan to go that route for the final time.

Another wild request he made was that I cease all contact with all past, present, and future Xyience employees. When I pointed out some shareholders I maintain regular contact with could be classified as past employees, he said he could carve the shareholders out of the equation. Still, I knew if I were going to go back to writing as he said he wanted me to do, I would have to talk to past employees who were not shareholders at some point. This was yet another demand on the list that I could not agree to.

The most heinous request of all was that I cease contact with all UFC fighters. At the first mention of that request I laughed out loud. I explained I sometimes talk to UFC fighters once a week as part of my work at unlimitedfightnews.com, and barring me from speaking to these individuals would prevent me from doing my job. He later floated the possibility of wording the injunction so that I would only be restricted from discussing Xyience with these fighters. Again, I knew speaking to certain UFC fighters would be crucial to any creative project on this story in the future, so I refused to agree to that condition as well.

Though we often drifted off point and argued the merits of our respective cases outside the injunction issues, we kept circling back to the documents more than any other topic. I think Mr. Garman expected me to be Xtremely intimidated by his insinuation that I could be prosecuted for what he classified as "theft" of that "proprietary" material. He used an analogy of giving me the key to his house and me robbing it, which would most likely still result in criminal charges. The only problem with his logic, I explained, is that it was not as if I took the only copies of these documents off the system. I also have not leaked the documents or used them in any fashion to cause any damage to the company. I simply retained them for background like off the record information obtained from a source. And, I only obtained the documents because I have sources inside the company, sources who know what I stand for and that I seek the truth behind the ongoing corruption there.

The meeting ended when it became strikingly clear that there would be no "middle ground" we could reach and no compromise on the crafting of an injunction that could be made between us. I reminded both men across the table from me at the close of our discussion that I have come this far with very little help and no comparable legal fees to what Garman was getting for his efforts. I re-iterated that he was being paid to present his clients' perspective while I was paying out of my own pocket to put mine on the table. I explained this to illustrate the fact that I had no motivation to lie or make up facts to protect me. My mission is simply grounded in uncovering the truth.

Before we parted ways, we stood in the lobby for a few awkward moments as Garman sighed and took on a look of utter frustration. I seized on that moment to explain I simply had to use the few advantages I had in this situation. Though I did confess to having a certain level of respect for the fact that my opponent was just trying to do his job, that didn't change the fact that I was still undaunted even after going through the gauntlet of all the veiled threats and harping on potential legal remedies they could seek against me if I didn't comply with Garman's demands.

It could all be chalked up as another two billable hours I paid nothing out of pocket for that his clients would likely have to pay hundreds for, which may be no sweat for billionaires, but at this point it certainly must be adding up. I left the dark tower a bit frustrated myself, especially since I'd gone to the meeting expecting the possibility of an actual compromise. Though I did manage to get a formal explanation from the other side regarding every aspect of the case I could think to ask about, I imagined a more productive outcome. Still, I could not be upset or disappointed at all in the long run. Looking back, I could only smile knowing I was never, ever expected to get this far by anyone at the outset of all this litigation. I was sued for $25 million by a corporation, and I didn't have a lick of legal experience when the case was dropped in my lap. I had no money to hire a lawyer then and little hope of winning any judgment or settlement if I fought the case myself.

To even be sitting across from those two lawyers and be treated like a real "professional" attorney was a victory in itself, and it was hard for me not to see it that way. I was every bit the fool for a client back in March of 2007, but four years of the school of legal hard knocks changed my life and the way this story is now perceived by those who take the time to read all about it. Some people put themselves through law school by waiting tables, but I did it through a total immersion experience I will never regret going through. The house that truth built started with one brick, and the cement of my resolve to see it through helped me stack new bricks on top of that foundation. One by one I built that house from nothing into something solid, something respectable, and something my opponents in their luxurious penthouse offices seemed at least for one fleeting moment to envy.

I suppose the journey I've taken is the true embodiment of the old adage "if you want something done right, do it yourself." Having come this far in actual and figurative miles, there is no possible way I can see any stumbling block as a setback. Instead, I see all difficulties now as opportunities, obstacles that will just need a little time and effort to overcome. So, come what may, I'm ready for whatever I need to face and prepared to do whatever it takes to keep up the good fight.

I hope to leave Las Vegas a little better off than the way I found it when I arrived. I hope to stem the flow of corruption by closing up a few streams off the river of scandal that runs through this town. Win or lose, these battles must be fought with all the resources I can possibly bring to bear if the war is ever to be won in any respect. And though the odds are still stacked against me, this is a war that most certainly can still be won.

Xyience President John Lennon Running Scared From Rich Bergeron's Questions

John Lennon (pictured above), Xyience's newly-minted president, took the opportunity to hold a conference call this past Monday. It was his 90th day with the company I've been studying, researching, and following for years. I began my investigation back in 2006, but my "crusade" has never enjoyed the kind of constant flow of information that exists right now. John Lennon seems to think he knows me, but he won't even talk to me. I've sent him emails, left him a message on his cell phone, and I let him know if he has nothing to hide there's nothing to worry about.

Still, John Lennon won't talk to me. He'd rather talk about me behind my back it seems. He began his 90-day celebratory call with the Xyience staff by talking about me being a "distraction" to the company. Well, the frivolous $25 million lawsuit filed against me to start this process has been nothing but distracting. I am also told Mr. Lennon tried to sell a complete lie to the entire Xyience staff attending the meeting yesterday. He said to all these employees that I am on the losing end of my case in bankruptcy court. This only proves how ignorant he really is about the whole Xyience debacle I'm wrapped up in right now.

I just settled a small portion of the case, something called a Rule 9011 claim, with the liquidation trustee for the Xyience Estate. There's no gag order on that settlement, and Mr. Lennon should know this. His lawyers obviously aren't being up front with the guy about who I am and what I've done in the case. I have a $175,000 request for summary judgment still on the table in the BK courts, and that's on top of the settlement I've already made with the trustee.

The Rule 9011 Motion itself is going to be up for an amendment hearing on February 20th in Las Vegas. New names and facts will be presented to the court if I am allowed the chance to improve that request. That sanctions motion asks for $150 million from all the inter-connected players in the scam to bankrupt and bleed out Xyience.

If I am on the losing end of this case as Mr. Lennon says I am, how come I never had to write a single check to Xyience? How come their demand for $25 million went down to $84,000 before the bankruptcy even ensued? How come they never paid the guy who sued me for them in the first place?

The reality is simply too much for these folks to accept, so they create their own fantasy world and try to live in it. I am now even hearing that they are contemplating filing a new lawsuit against me because I've sent email blasts to Xyience employees exposing the truth. So sue me, I say. I'd like to see how they plan to try to make any charges stick. I'd like to see how they handle things when they crash and burn yet again trying to hold me accountable for doing an altruistic deed. What I don't want to see is the company and their employees suffer needlessly because the brass doesn't know how to do damage control or talk straight with an investigative reporter like me.

All I asked Mr. Lennon to do was pick up the phone and give me a call. I gave him the option to avoid any complications if he was just willing to make one phone call. I even gave him the on or off the record option. I just wanted to get some honest answers to some important questions. Instead of realizing he had nothing to hide and should have no fear of talking to me, it seems like he and the rest of Xyience's upper management went into pure panic mode.

Sue me if you will, Xyience. Sue me once, sue me twice. Sue me up, sue me down. Sue me around the world in 80 days and six ways to Sunday. Just remember what all this started with and who really escalated things to this point of no return. A man who is afraid to make a simple phone call to me in order to answer a few questions is now the leader of a company with a history of corruption. He's gone ahead and made assessments about me and issued false statements of fact behind my back about my character instead of being a man about things and talking to me one on one. At some point people have to start asking what is there to hide? Why the secrecy and fear?

Either way, I have front row seats for this whole show. The leaks I already benefit from at the company give me an advantage I never had before. I also have a tremendous library of evidence I may or may not have to publish here to set the record straight. This is all in addition to another revelation involving the actual product Xyience is selling, where it actually came from, and what's actually in it. As always, stay tuned!

Xtreme, Xplosive, Xtensive New Developments

By: Rich Bergeron

The X-pense report is going to be huge on this one. Lawyers will be crawling all over the Matrix. The situation at Xyience is becoming more concerning lately. The Usual Suspects are spawning new usual suspects. The con is cloning itself. I have more ins than ever.

I'm doing some digging and coming up with nuggets of gold. I'm freaking out upper management with my bold approach to fact finding, but the truth is an incredible thing. The more they crack down, the larger the cloak of secrecy over future communications becomes. The best information comes by way of secret transmission.

Lawyers come and lawyers go. Maybe a case of theirs lives on if they're lucky. Storytellers and writers always live forever, though, as soon as their work goes to print. The muck is thick, and it must be raked from time to time. I try to rake with as much tact as possible, intermingled with as much independence as the law allows me to exercise. If history repeats itself, I'll have to rake a lot more. It's what I do. Stay Tuned!

NOT SO "TRUST" WORTHY AFTER ALL (PART 2)

By: Rich Bergeron

David R. Herzog is the Liquidation Trustee for the Xyience, Inc. bankruptcy I am embroiled in out in Las Vegas, Nevada. He and I have had limited personal interaction by email and never met in person. Instead, Herzog left the meeting and conversing up to an assistant of sorts who takes care of all the details in complex cases like the Xyience saga.

Jon Backman (at left) is Herzog's counsel, and so far he's handled much of the grunt work for Herzog regarding the bankruptcy and several adversary cases filed against those who allegedly defrauded the company in past years.

I met with Backman myself this past February, and I shared a great deal of information and evidence with him. He used some of the paperwork I provided him to prosecute his cases against some of the perpetrators who swindled Xyience along the way. We worked well together while it lasted, and as we tried to hammer out a settlement, I provided a few more clues and some important insight. Over time, though, it appeared to me that Backman was stringing me along, promising to take action to help me only to fail to follow up on multiple occasions.

For instance, Backman agreed time and again that the company's initial $25 million case against me should be dismissed, starting with his first contact with me in December of 2009 (CLICK ON IMAGE BELOW TO SEE FULL SIZE):



It should have taken Backman just a few hours time to draw up a motion for dismissal, serve it, file it, and get a hearing. Instead, he apparently did nothing but ignore my case. After a while, I started to understand the reality of the situation and that this guy might not be the kind of champion lawyer he seems to want to pretend to be when he needs something.

I decided I would have to file first to get Backman and Herzog to take me seriously, as Backman insisted the maximum amount Herzog would settle for would be $5,000. Even when I agreed to that amount, though, Backman never showed me as much of a draft of any pleading. He also never provided a draft of any agreement that stipulated our terms or any written timeline for any realization of such a settlement. The communication was all only by email and by phone. Nothing with a signature. It is a prime example of flat out, pure legal delay. Backman and Herzog simply sat on this case like all the lawyers before them did.

THE BEGINNING OF THE END

Eventually, I broke off communication completely with Backman. I told him I was going to block all his email accounts, and I dropped off his radar for a while. Meanwhile I compiled the legal documents it would take to blow this case wide open. During my time formulating these crucial filings, I decided it would be a good time to give Mr. Backman one last opportunity to save face for his own sake and for the estate's benefit. I sent him an email message telling him a few hints about my plans to file new material and offering one last chance for a civil conversation if he wanted to call me. Not long after I sent the message, he called. We compromised yet again (The first settlement was supposed to pay out $5,000 to drop the estate from the counterclaim and the sanctions motion claims), and Backman made another new offer:

Thanks Rich. Have you filed your amended defamation claim? If so, would you email it to me?

Do you want to do a settlement as follows:

1. I pay you $5,000 for the Rule 9011;

2. I dismiss the claims against you;

3. You are allowed to pursue the remaining defamation claim against the company (which I would defend, and perhaps we could settle down the road).

If so, then I would recommend such a resolution to the trustee.


Jon


I accepted these terms, and I made it clear I wanted Backman to move on it as soon as he could. He sent the above email to me on November 4, 2010, and we continued being civil and trying to work things out for almost two more weeks until I began to realize more pressure needed to be applied to get Backman to do anything on my case. I knew I needed to file my latest pleadings and affidavits. So, I sent Backman and Herzog everything by email first, on November 15th, although I didn't have digital copies of the exhibits for the summary judgment motion and had to send those by snail mail.

Here's most of what went out to both Backman and Herzog that day:

Xyience Case Brief in Support of Summary Judgment By Rich Bergeron


Affidavit in Support of Summary Judgment in Bergeron vs. Xyience Bankruptcy Case


Designation of Evidence For Motion For Summary Judgment


Motion For Summary Judgment


Affidavit In Support of Motion to Amend Sanctions Motion in Bergeron vs. Xyience Bankruptcy case


Xyience Case Motion to Amend Rule 9011 Sanctions by Rich Bergeron



I expected at least some kind of backlash from Mr. Backman of course, as much of the pleading material involves descriptions of my frustration with this attorney's behavior in support of fellow attorneys I'm seeking sanctions against. Instead of getting an immediate missive from the man himself, though, I was fortunate enough to get an email meant for him from the guy he was supposed to be representing: Liquidation Trustee David R. Herzog. The intercepted communication, obviously sent to me by accident, apparently never even made it to Backman's inbox. Since it was unrelated to settlement negotiations it is both admissible in court and ripe for publication, so here it is:

Gee Jon, and here I thought you were pursuing all these claims. Oh sorry I forgot, your not nearly the atty that Rich Bergeron believes he is; oh yes he is a legend in his own mind. Here is my concern, how do we get rid of this frivilous garbage without you spending gobs of time. I'm sure he doesn't comply with local rules if they are anything like the Northern District. You always told me he was crackpot, these pleadings prove it.

David

I SHOT RIGHT BACK WITH THIS:


David,

Disrespect will get you nowhere.

You probably didn't realize you sent this to me as well.

This "crackpot" gave your counsel a lot of information and
documentation on Xyience. This information helped win your cases. Mr.
Backman still doesn't even seem to know what my case is all about,
though. Neither do you.

I'm glad you just gave me more evidence that he's defamed me as well.

Not too smucking fart for a guy who's supposed to be a REAL attorney.

Good Day,

Rich

HE RESPONDED LATER (NOTE HIS MIS-SPELLING OF HIS OWN COUNSEL'S NAME) BY WRITING:

Sir,

Making threats to us does not resolve the situation. Bachman has made tremendous efforts in pursuing the litigation against the Fertitas and the other wrongdoers. Your disparaging remarks against him in your pleadings are reprehensible. What more can we do but vigorously pursue this litigation. I apologize to you for calling you a "crackpot" but let him have the peace to do his work undistracted by your litigation.

David Herzog

AFTER A FEW MORE BACK AND FORTH EXCHANGES HERZOG GAVE UP ARGUING:

Rich,

I don't want to bicker with you further, do what you think you need to do.

David

BACKMAN'S THOUGHTS ON THE LIQUIDATION TRUSTEE'S ACCIDENTAL FOOT IN MOUTH EPISODE WERE EVEN MORE REVEALING AND INTRIGUING UNDER THE CIRCUMSTANCES:

Rich ---

Apparently, David inadvertently sent the email to you when he meant to send it to me. Like I, he is quite distressed by what you have written in your motion to amend the sanction motion, and in the summary judgment counterclaim, both of which will distract my attention from critical matters in the Zyen/Fertitta case. I restrained my tongue because I know that getting into arguments with you about the damage you are doing to the case is pointless. But David was venting his frustration, thinking he was writing to me, but inadvertently sending it to you.

As for your comment that the remarks are slanderous, they are not because David did not publish them to anyone. They went solely to you.

David tells me that you and he exchanged further emails, but I have not seen them, so I can't comment. If you share them with me, then I will do so.


Jon

=====================================

Rich ---

I do not care whether you believe me. I did not receive David's email until you sent it to me. In fact, even when David emailed me to tell me of his error, he did not send me the email he had sent to you. As for Rule 9011, it has nothing to do with an email between an attorney and his client.

That being said, I regret that the events of today have occurred because, as you know, I have attempted to move past fighting with you, and have just accepted that you are going to do what you do --- and say what you say --- regardless of what I say. I did not like either of your motions, but I'll deal with them. There really is nothing for us to discuss about them: you have attacked my integrity, but I am a big boy and can take it. You should do the same with David's email to you and just let it go.

We'll speak soon I'm sure.



Jon

=====================================

Rich ---

I have to run to a meeting, but for the record, I never called you a crackpot. As I have told you, I believe that you are abusing the legal system with some of your pleadings, and I believe that, to some extent, because you are smart and hard-working, but severely misdirected, you can be dangerous. But I do not view you as a crackpot, and would not have used that term in describing you.

We'll speak soon.



Jon


FINALLY, BACKMAN DECIDED TO PLAY HARDBALL AND GIVE ME AN ULTIMATUM (WHICH I REFUSED TO BACK DOWN OR CAVE IN TO), OBVIOUSLY PUTTING HIS AND HERZOG'S OWN SELF-INTERESTS AHEAD OF THE ESTATE'S:

Rich ---

I don't know what you are trying to pull, but there is zero chance that the Trustee would settle your Rule 9011 claims, but let you bring a Rule 9011 motion against us the day after we paid you. We'd have to be out of our minds to do that, because then we'd be paying you $5,000 for nothing. At this point, we have not filed anything in your case, so you have no basis to file a Rule 9011 motion against either of us. In fact, if you did so, then you'd be subject to severe sanctions. And I am not going to file a settlement motion, or anything else, until you have signed an agreement saying that you will not pursue Rule 9011 motions against David or me. That was always the deal, and you know it.

Bottom line, and no further discussion: If you insist on retaining the right to pursue a Rule 9011 motion against the Debtor, the Trust Estate, David or me, then there is no settlement --- period. This is not negotiable. And if you do not accept it by 5:00 p.m. my time this evening, then our discussions are at an end, and we will cease responding to your email or speaking with you any further.



Jon

And now, because Backman and Herzog never volunteered any pleadings or demonstrated any general effort to move this case in any real direction, they use this fact as a sword against me. They claim this means they are not subject to Rule 9011 Sanctions, but they neglect to consider how liable they are for general sanctions. The problem with their backwards logic is I know the law.

The sanctions motion is not strictly a Rule 9011 motion. The motion asks the court to initiate its own ability to sanction offending parties. The pleading asks the court to provide sweeping relief for those injured by the blatant abuses of process and incessant delays wrapped up in the case. Backman and Herzog perpetrated much of the most recent delay, and at this point there is no reason not to name them to the amended motion for sanctions if I am given a chance to amend that motion.


I'LL SEE YOU IN COURT

Well, since I live thousands of miles away from the venue I won't actually see anyone in court, but I will seek a hearing and ask to appear by telephone. At that point there should be another item on the docket describing the events I've shared here. All the attorneys I've faced thus far in my budding pro-se career in law have demonstrated an extreme lack of integrity when backed into a corner. So many lawyers and people who can afford to hire them seem to live on that timeless threat, "I'll see you in court." Most of us who can't afford to engage a lawyer or don't have enough time or energy to become one end up forced to negotiate or backpedal or compromise our own integrity to deal with people who drop this threat on others with impunity.

I couldn't afford any type of legal assistance, and I wasted a lot of time trying to find it when I felt overwhelmed by this case in the early days. I did it myself, and so far that's been the best decision I've made. I don't think I'm the best lawyer on the planet or anywhere close to it. I don't think I'm a better lawyer than Jon Backman or most lawyers in practice in this country.

If I had to give my honest opinion of how good a lawyer I really am, I'd have to say I suck at it. But, then again, I don't want to be a lawyer anyway. I never did want to be one. I was forced to.

The real issue is not what kind of lawyer I am, but what kind of person I am. I'm honest, and painfully so. Some might say this high level of integrity means I could never be a proficient lawyer. Again, I don't mind, because I don't want to be an attorney anyway.

As my own legal representative, I have no attorney/client privilege. I have virtually no chance of being in front of the same judge again on another case. I won't have to face the opposing lawyer in another case, either. I don't have to make deals or play nice or rack up huge fees to fatten my paycheck. The pay is virtually non-existent and highly dependent on a favorable outcome(which has taken me longer than three years to get anywhere close to), but the work is meaningful and the victims are worth fighting for. More than anything the work I do requires a sincere and earnest sacrifice of my time for the benefit of the greater good. I have to be selfless by very nature just to keep doing it without reward or much in the way of sustainable funding. There's no guarantees, no quick fixes, and no great hope of full recovery at this rate. Yet, someone has to step up and try to do this work, anyway, and I don't see anyone else in line waiting to do it for me.

The initial shareholders of this company were swindled out of their investments. Many of them lost college funds, family trusts, and retirement savings as a result. The Fertittas promised to keep the company viable by taking their chief lien position with the help of a "private investment group." Instead, they killed the company, with help from their friends and associates. I took up the story a long time ago and tracked these transgressions from day one up to the present. I watched it all happen and warned others that it would happen before it did. I did an ominous amount of work for a microscopic amount of money. When you are in that position there is simply no time for greed or corruption to kick in if the effort is to remain true and sincere. You have to always focus on the long term, the goal to take back what was stolen from all those shareholders and their families.

I've done about as good as anyone could expect of an amateur lawyer. I've come to learn a great deal about the way the legal system works and doesn't work. I've seen how the system breaks down those who aren't willing to conform to its strict guidelines and rules. You have to be willing to get a little antiquated with your format and writing style if you want to be a halfway decent attorney, and I've spent more than a few all-nighters figuring that out the hard way. Today I'm better off because I kept trying, and I have a more compelling life story as a result of this struggle, but the journey has still been painful. The fight that rages on is still stressful and agonizing. The work never seems to get any easier.

Nobody in it for the wrong reasons could ever get this far, and one day Mr. Herzog and Mr. Backman might figure that out. They can underestimate me and dismiss my efforts as confused and misdirected all they want right now, but the truth will speak for itself in the long run. I didn't do this for fame and fortune. I don't have a greedy bone in my body.

I don't work for free to stroke my ego. I don't keep plugging away for hours on end with this work thinking it's a get rich quick scheme. I don't do this because it's my job. I do it because I am proud of it, I believe in it, and nobody else is in any position to do it the right way and with the right intentions in mind. My motives are pure and my conscience is clear.

I can't pretend to know what thoughts are going through the minds of Backman and Herzog at the moment or what their actual motivations and driving factors are. However, I do know that--no matter how much better than me they think they are at lawyering--their apparent character flaws will not be washed away by technicalities and nuances of process. I will expose these flaws here and everywhere else I think it's relevant to do so, and not just because I can or I think it makes me look better in comparison. I'll do it because it needs to be done, and it's simply the right thing to do.