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 BANKRUPTCY TRUSTEE FINDS DAMNING EVIDENCE AGAINST FERTITTAS, PUSHES FOR SANCTIONS THIS FRIDAY

By: Rich Bergeron

Forbes dropped a gem of a story on their Web-site on September 13th about new claims leveled at the men who bankrupted Xyience. Allegations brought by the company's bankruptcy trustee, represented by Attorney Jon Backman, point to an effort to hinder the trustee in acquiring evidence in a case against Fertitta Enterprises, Zyen, and Zyen's General Manager William Bullard. What's worse, recent documents in the case reveal that company officials at Xyience and Fertitta Attorney Greg Garman hatched and executed a deceptive plot to hide or deny access to the most incriminating material.

Unfortunately, despite all this dedicated trust lawyer's hard work, the Forbes piece didn't even spell his name right. BACKMAN will ask the court for sanctions this Friday in what could be one of the most important hearings in the case so far.

One man mentioned repeatedly in the documents filed by the trustee recently is Michael Levy. Levy still works as a general manager of sorts at Xyience these days and goes by the title of Chief Financial Officer. Page 6 of a September 1, 2011 sanctions motion describes how Levy reacted to an inquiry about electronic data:

If it were a criminal case, Backman's claims could be considered obstruction of justice. Much of the controversy behind his bold claims is a direct result of the refusal of key parties to turn over critical evidence. A big issue arose when the company servers came into play. Suddenly these crucial servers containing countless emails were damaged after a system crash and would have to be repaired for 10-12,000 dollars. Constant delays seemed to plague the process by which Backman sought to seize and examine these servers and comb them for information pertinent to his case.

Despite the roadblocks thrown up by his adversaries, Backman did manage to find a few nuggets of gold while panning for truth. A company called PC911 handles much of Xyience's computer issues. A technician from PC911 named Chad Stone (and he's not smooth like Keith Stone) admitted to lying to support the case in a signed declaration. The admissions came during a subsequent deposition on May 4, 2011. The Trustee's Counsel called Stone's written declaration "Pure Fiction." Backman went as far as to suggest that if the legal system's design didn't protect Stone, Xyience computer specialist Devin Keays would have a case for defamation against Stone based on his false testimony about Keays. Keays was forced out of the company during Xyience's push to bankruptcy in early November of 2007. Stone falsely suggested Keays was the one to blame for the server issues.

According to the Trustee's September 1, 2011 motion:

During a Times Square meeting on November 15, 2007, within two weeks of Keays leaving the company, Adam Frank and Kirk Sanford told me personally that bankruptcy was the only solution for Xyience. Emails and other electronically stored information from this time frame is crucial to the trustee's case. If there are full backups of the servers available, they may contain some huge bits of communication between company officials like: Former Co-CEOs Adam Frank and Kirk Sanford; Zyen General Manager William Bullard; Fertitta Enterprises Owners Lorenzo and Frank Fertitta III; Fertitta Enterprises Lawyer Greg Garman; and CFO Michael Levy.

Eventually, the company that reportedly had possession of the drives and servers in question analyzed them, and another contracted company provided a detailed report of what they found. Upon looking at the resulting report, Devin Keays informed Backman that the company that checked the drives analyzed the wrong ones and did the work on drives the trustee already had all the information from. Apparently there was some kind of bait and switch game going on. Another Las Vegas based firm examined all the drives and found none of them had any signs of containing email server information. So the electronic information Backman initiated a campaign to discover was never even on the target drives company officials led him to. Was it a simple mistake or a bold-faced lie that led to these developments? The trustee's counsel asserts that it doesn't matter how the mishap occurred, because the evidence shows the company, their attorneys, Bullard and Levy all had a duty to preserve evidence pertaining to the bankruptcy and failed to do so. Backman calls his adversaries' behavior in the situation "by no means innocent or excusable."

Another snippet from the September 1, 2011 sanctions motion filed by Backman in the case explains further:

The motion further alleges that the principals involved in obscuring, eliminating, or inadvertently misplacing evidence in this scenario should essentially know better. At worst, they possibly engaged in this scheme intentionally, with the specific purpose of confusing and confounding the trustee's campaign to discover the truth behind the forced bankruptcy plot. Whatever the case, Backman requests compensation for being sent on the wild goose chase due to the responsibility of the named parties to protect and preserve the electronically storied information that is now unaccounted for. Backman asserts, "...defendants and their counsel repeatedly, routinely, unabashedly, and unapologetically have violated the discovery rules relating to electronically stored information as such rules are set forth in the Federal Rules of Civil Procedure and the controlling case law, and have been for many years."

The trustee's argument makes sense, especially considering the thorough support cases he cites. Whether or not his adversaries physically destroyed or "lost" the information by accident or on purpose, they had a defined duty to make sure the information could be made available for inspection. So, whatever happened to it and wherever it is isn't the point. The fact is the company and their attorneys had an obligation to retain it and provide it when requested to do so. Even if there's no smoking gun to show the disappearance of the information was willfully orchestrated by certain parties, it is incredibly suspicious that this block of communications conveniently vanished.

The primary perpetrators of the questionable conduct associated with the entire evidence debacle, according to Backman, were CFO Michael Levy, Attorney Greg Garman, and Zyen General Manager William Bullard. These individuals acted in a manner that made the server requests and other inquiries harder to fulfill, Backman reports in the September 1, 2011 sanctions motion:

An August 8, 2011 email from Attorney Garman attempts to justify the back story behind the missing evidence. He further explains that he personally participated in fruitless searches for pertinent records that Backman requested. The Garman letter is included as Exhibit 6 to Backman's September 1, 2011 sanctions motion. The final paragraph contains language that indicates how frustrated Garman is regarding the approach of the trustee's counsel. Garman appears to have let his emotions get the better of him when he concluded the letter with the following words:

Backman includes multiple lengthy exhibits with his motion, including snippets of deposition transcripts and other documents that lay a foundation for his claims. Part of one of the later exhibits is a peculiar letter from one of the only Xyience executives I invested any good faith in at the time just before the company changed hands and entered into the foreclosure and forced bankruptcy. William Underhill had a background in restaurant management and actually helped prosecute fraud in his former work experience. Xyience tapped him to take over the company just before the final collapse. He later resigned from the board with a shot across the bow at the tactics used to cause him to walk away so suddenly, and he sent the resignation email on Halloween, 2007. His "reluctant" formal resignation letter speaks volumes with hindsight being 20/20.

Backman's own communication to multiple Fertitta Enterprises lawyers--directed primarily at Joel Z. Schwarz (left)--stood out among the rest as the last exhibit to his motion. The date of the email is October 20, 2010. The tone of Backman's message is one of clear frustration with the way Schwarz and other members of his firm are actively trying to deceive him. Click here to view the most scathing paragraph of Backman's email.

It is clear the email is a result of pent up feelings of mistrust between the tireless underdog Illinois attorney and the big city Las Vegas law dogs at Gordon Silver who are playing on a home court. These same lawyers are likely hoping the judge won't throw the book at them this Friday. That's when he will likely hear more about allegations that these well trained legal eagles avoided their responsibilities to the rule of law and obstructed the trustee's formal inquiries at every turn. A hearing in Las Vegas at the bankruptcy court will allow both sides to present their arguments for or against sanctions to apply here.

Even my name made a cameo appearance in a list of emails said to be "not relevant" to the liquidation trustee's cases. Some of the documents leading up to this last sanctions request lay out the path of evidence perfectly. A previous sanctions motion filed by Backman on August 20, 2011 featured some potent charges and even more nuggets of gold. Exhibits G (an email from William Bullard to Lorenzo Fertitta) and H (an email between Bullard and both Fertitta brothers: Frank III and Lorenzo, Click Here For Part Two) were bombshell findings, and these are the emails that were actually discovered. One can only imagine what hasn't been found yet. Where there is smoke there is fire, and it certainly appears that these guys were ready to barbecue Xyience as soon as the coals were hot enough. The conditions were ripe. There was a way to "muzzle" Xyience Founder Russell Pike according to Bullard in that Exhibit H email message chain from August of 2007. If that's not convincing enough evidence that something's rotten in Denmark, consider the relevant portions of William Bullard's deposition transcript Backman included in Exhibit S.

Friday will be an intriguing day for the trustee if the judge on the case can see the clear pattern of deception involved here. It should be a slam dunk motion, barring any hometown cooking affecting the outcome.

The Wonderful Pom Return Bomb

10-main



Exhibit 1


Exhibit 2


Exhibit 3


Exhibit 4


Exhibit 5

The "Blue Pom" Pre-emptive Strike

1-main



1-1



1-2

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!

Donate To The Truth & Justice Legal Fund

Support A Great Cause: DONATE TO HELP FIGHT FRAUD

By: Rich Bergeron

Justice is not easy to obtain when you face as many adversaries as I do and the list of perpetrators keeps on growing. I have been engaged in some capacity in litigation designed to silence my work in three free states in this free country. Only one time has an injunction stood in the way that completely interrupted my efforts, and I'm not even a party to that case.

I recently broke off all settlement negotiations with the Xyience Liquidation Trustee's Counsel Jon Backman. I refused a $105,000 settlement offer because of a series of broken promises, constant changes to the plan of execution for the settlement proposed, and because $100,000 was unsecured AND in front of the shareholders I've been fighting for since the get go. I was offered $5,000 up front and told that was the maximum amount the trustee would allow. Then I was told I'd only get $2,500 up front and $2,500 when the deal was approved. That was not the way that "up front" payment was described when I initially agreed to this settlement.

I made my own changes in the end and told Mr. Backman that the only "deal" I would accept would be $6,000 paid by September 1, 2010. I knew the only way that deal would be done is if it was paid out by the TRUSTEE. I didn't want to even get involved in an unsecured claim, but if I did and I recovered even a fraction of what I was supposed to, the $6,000 should have been a much easier and less expensive option for the trustee to accept. Instead, they balked at the counter offer, and I vowed to fight on no matter what.

Because of my recent Open Letter to Jon Backman, some new developments have surfaced, and I have been getting lots of phone calls. I have blocked all of Mr. Backman's email addresses and told him if he wants to talk he can call me direct or send me a letter by postal mail. Either way, there is no chance of a future deal. I am convinced the trustee's attorney abused his charge and acted improperly to shield the lawyers involved in this fraudulent bankruptcy so he could get their approvals on certain aspects of the case. He also seems to be wanting to make sure these individual lawyers and firms get paid in full for their legal work designed to obscure the facts and insulate the worst of the worst perpetrators from culpability.

I am doing everything I can to bring this case back to the forefront. I also need to work to expose the latest developments and the stalling that precluded my decision to drop all hopes of a settlement. All a settlement would have solved would be to remove the estate from my counterclaims and the Rule 9011 motion still before the court and not yet heard.

Instead, Jon Backman will be among those I request in my next motion to be added to my amended 9011 motion for $150 million in sanctions related to the fraud, delay, and frivolous nature of the initial suit against me that started all this. Mr. Backman has gone as far as suggesting Rule 9011 could not possibly apply to him since he never filed a document in my case.

This is just another unfortunate example of an attorney who knows less about certain aspects of the law than I do. Either that, or he's just pretending not to know the nuances of Rule 9011. One of the principal reasons for Rule 9011 to be brought to bear in a case like this is due to DELAY perpetrated by an attorney and/or party, and the spirit of the rule is to serve as an abuse of process claim in the bankruptcy courts. It does not require an actual filing to be made by the offender and also regulates conduct or lack thereof that can be considered abuse of process or needless delay.

All the evidence is pointing to Mr. Backman making moves to intentionally delay me getting fair relief while at the same time allowing approval of all the billing for the attorneys who perpetrated the whole Xyience bankruptcy fraud. These attorneys aided and abetted all the USUAL SUSPECTS! Backman's protection of these lawyers is unacceptable and truly despicable considering his refusal to do anything significant to help me after I dumped a huge pile of evidence in his lap.

I met with Backman in Illinois in February, and I was paid $750 for travel, a payment that was generated very quickly by the trustee. Why the same trustee can't approve $6,000 flat when it was a $99,000 discount given to the estate under the circumstances, I just can't explain. The evidence I gave Mr. Backman was brought to bear against a great deal of the same usual suspects I'm pursuing in regards to sanctions.

Backman's adversary cases hit the docket years after my investigation began and utilized years of my research (including documentation) volunteered to him for no financial consideration whatsoever. I am sure he's recovered way more than $6,000 based primarily on evidence I gave him and avenues of research I pointed him toward. Yet, instead of working with me, Mr. Backman seems to be taking the word of some questionable characters with lots of skeletons hidden in their closets from the old days at Xyience before the Fertittas became involved.

Backman's behavior leaves me no choice now but to lump him in with my adversaries and fight this whole case on my own dime. As such, I need to generate some kind of a budget however possible. I ask anyone who can spare something toward my tireless efforts to donate what you can. Click on the donate button below to support my truth and justice fund. Stay tuned to this site for future updates, which will be more frequent than usual over the next few weeks.

I keep track of all my donations and will pay back every cent with interest upon earning any judgment.

The Xyience Remix

Hey all, I thought I'd throw together some theme music based on my current situation with Xyience. These are just a few clips that really came home. It's a great listen:

IS XYIENCE'S TURKEY COOKED?

XYIENCE’S NEXT CHAPTER

By: Rich Bergeron

Never in my wildest dreams did I ever expect to get invited to a UFC event after beginning my series exposing the ongoing mess over at Xyience, Incorporated. If I doubted that possibility while I was working on the story, I had no good reason to change my outlook after being sued by Xyience for $25 million in the 8th District Court of Nevada in July of this year.

Yet, I just got back from New York City where I stayed in a room on the 30th floor of the posh W Hotel in Times Square in order to attend a UFC event on Xyience’s dime. Even while this lawsuit hangs over my head, I was there at the fights and invited by Xyience to take it all in. I clearly didn’t imagine actually sitting in the stands in Xyience’s seats and seeing UFC 78 live. That happened. It doesn’t make any sense, but it happened. I even had a witness who saw the fights with me and met some of the Xyience folks. I brought a friend in the Web-site business from Newark, New Jersey where the Prudential Center Arena that hosted the fight is located. He can vouch for me that I really was there.

What began as a minor inquiry into a questionable situation at a supplement company has now blown up into a full-scale monster of a financial mess. A new chapter is unfolding, one much more intriguing and powerful than anything I have produced thus far. The latest infusion of capital and the circumstances surrounding the delivery of this deal is coming to light and looking extremely damning for the players who made it happen. What appears to be happening now is a situation in which the new investors are trying to bankrupt the company and write off the rest of the people who put in money early and stuck with this company from day one. All of this is resulting in a level of infighting that has left both sides now seeking to enlist my help.

No, I’m not dreaming, I keep telling myself. This is really happening.

First of all, the players who invited me to the Big Apple are Xyience CO-CEOs Adam Frank and former Global Cash Access Holdings Director Kirk Sanford. Both have some skeletons in their closet as far as their past business dealings, and both men are also dealing with a significant backlash due to the stock options they set themselves up with and the 600,000 shares they each acquired when they came on board the Xyience train. These guys contacted me and made it appear as if they wanted to put everything behind them. They kept telling me the lawsuit would be over and they just wanted to meet with me and talk about the future of the company. They even talked about hiring me on as an advisor to the board of directors.

Naturally, I don’t necessarily think it’s cool to be walking around with a $25 million lawsuit hanging over my head. I figured I’d hear them out and see what they’d bring to the table to end it. These guys acted like they were intent on really helping the company get cleaned up. Yet, over time and interaction with Frank and Sanford, I realized that my trip to NYC would be better off as a recon mission. I took the opportunity of our first lunch meeting to invite a new friend to our table who works for a company in NY that provides capital in situations exactly like the one Xyience is facing right now. Frank and Sanford seemed a bit miffed, but they accepted our new guest and soon were talking to him about the future more so than me.

They even wanted to know how soon and how much money they could get out of this company if they needed it. My friend told them of one instance when his company provided over $1 million in a 24-hour period for a California power company.

The tone of the conversation had Frank and Sanford maintaining over and over again that the company needs to be bankrupted. They also repeatedly mentioned the 340 investors they would have to buy out or appease if they chose another route. That’s when my friend suggested the “knock on doors” approach. Basically, that procedure involves going directly to investors and buying them out one by one.

When asked if the plan was to ultimately go public, Sanford was especially irked by my line of questioning pointing to the Fertittas favoring private companies over public ones. He finally explained that they would do whatever they had to do to make sure the company is the most profitable it can be.

When we concluded lunch, Frank and Sanford each plopped a $100 bill down on the table for me so I could get a ride to Newark for the fights. I told them I spent just about all the travel expenses they sent me for the trip on my suit, which was true. I went the extra mile to look professional only to arrive to find Frank and Sanford dressed like they were ready to go on a camping trip.

My first impression led me to believe both men were trying to take over Xyience for themselves and reap all the benefits with a much smaller group of investors than they currently have to deal with. Coupled with the Fertitta Enterprises contribution, it looks like Frank and Sanford are in position to be part of the company’s new regime whenever the current mess is sorted out. Yet, all their talk of cleaning up the company didn’t match up with what they told us they wanted to do next.

My friend and I spoke at length after Frank and Sanford left the restaurant. This potential investor/financier I had just met was eager to provide capital and help this company out of the current mess. One of the shareholders in the other camp trying to oust Frank and Sanford complained to me recently to let me know that the new leaders of Xyience just can’t seem to find the capital they need to keep the company out of trouble. Yet, I found it easy to find someone with enough capital to help, and here I am just a blogger with virtually no business and financing experience.

It is my humble opinion that Frank and Sanford don’t want to find new capital. They instead appear more willing to bankrupt the company, reconstitute it, and rake in the profits without having to share revenue with a huge pool of folks that bought in early when the company was looking a heck of a lot more successful than it looks now.

What also baffled me is that my friend found me by looking at my blogs about Xyience. The Xyience lawsuit claims that my stories made it practically impossible to find investors to put money into this company. Yet, I only made one phone call and found someone willing to offer up his company’s extensive coffers to help.

Later on, I reconnected with Adam Frank at the venue. My fellow Web-site entrepreneur friend met me there late after a whole lot of hassle trying to network with him and figure out where he was. I went to find Adam Frank in the Xyience suite they had for the fight, but I ended up spending most of the night in my seats. Frank was scarce for most of the evening, and even before my friend arrived he didn’t seem very talkative. It appeared to me that these guys had no plan as to how to deal with me. I had documents and paperwork in hand that I almost passed off to them in hopes of getting a deal done, but something held me back. Something was not right.

After watching the great card, I wasn’t able to locate Frank at all. I called him and asked if there was anything going on afterward, giving him one last chance to meet and negotiate. He never called back.

Having had no chance to do any real business as far as planning for the future, the trip became more valuable to me as an informal deposition. I was able to measure the commitment of these two men, and I found it lacking. As far as making sure there is really an effort to clean things up, I think I came away with the impression that the Xyience situation is only getting worse. I was disappointed in Frank and Sanford’s approach to things, and I am glad I had a business and financial expert by my side to get everything out of them in discussion. Had I been there alone, I wouldn’t have thought of half the questions to ask about the business aspects of the situation.

I ventured home via Laguardia Airport and set the stage for how to proceed. Such a big charade is par for the course with Xyience, as that is how I was told they attracted much of their initial investors. They get them to come to the fights, see the Xyience name associated with the big UFC event, and wine and dine people into chipping in. I have to admit, I was spinning my wheels thinking of how I could chip in after all was said and done and I was in the air on the way back to Boston.

My latest motion set to be filed soon in my lawsuit asked for $1 million before the trip. I figured I’d start the negotiations there, and I did so through some detailed emails explaining how I thought I could help from the inside. I even offered to have the contract structured over 2 years.

Putting all that out there wasn’t enough, though. I knew there also had to be an alternative plan, which would be to keep the lawsuit going. To me, I felt a bit disrespected by the whole process, because Frank and Sanford assured me the case against me was going to be over soon, and I told them I wanted it over and done with by the time I got to NYC. They lied to me. Then they told me they were going to give me $5,000 for travel, and they only gave me $500. On top of those red flags there was the affidavit Frank signed that is the centerpiece of the case against me:

Give that a read, and then tell me if this conversation I recorded with Adam Frank and Kirk Sanford makes any sense to you:



Whatever the possibility of me coming on board at Xyience, which I knew was probably pretty far fetched anyway, I still had a $25 million case hanging over my head.

To me it felt like someone pointing a gun at me telling me they’re not going to hurt me, but they never stop aiming it at my head while I talk to them. The lawsuit itself was like someone punching me in the head and then turning around and suing me for hurting their hand. It was always Xyience defaming me through subversive blogs that spouted complete bullshit and didn’t even include one shred of proof. I only printed the truth.

So, I decided to play hardball when I came back from my trip. I increased the asking amount in my motion for Rule 11 sanctions to $5 million in damages and financial sanctions against the plaintiff. I feel like a message needs to be sent here. Corporations can’t be permitted to crush innocent people under their feet. If I stand in the way of Xyience making a bright future possible for themselves it is only because I exposed the truth about what they were doing wrong. If my stories were lies the suit would be applicable and needed, but they were not lies.

BERGERON'S RULE 11 MOTION AGAINST JAMIE COGBURN, RUSSELL PIKE, AND XYIENCE, INC.

Whatever happens from here, I am in a promising position. What began as a skeptical public saying I had some grudge against Xyience has now resulted in lots of people starting to come out of he woodwork realizing I am right. Some of the more mainstream MMA press backed my reporting up with recent stories that confirmed what I wrote months ago. The general public is even starting to sniff out the truth. Blog comments I’ve read about the subject have featured most people giving me props for sticking to my guns.

However, I know I still ought to and need to do the right thing here. I need to carry this through to the end and make something good happen here with Xyience if I can. People on all sides have told me how damaging my pieces were to the company, and I am honestly sorry about how that might have affected the innocent folks there just doing their jobs. Yet, the ultimate purpose was always to do a great deed and expose the shady behavior so it could be fixed. Now it appears that the involved parties have vastly different ideas about what it will take to truly fix this broken company. The infighting threatens to destroy Xyience from within, and I'd hate to see that happen. Although it makes it easier for those attacking me to believe I have it out for Xyience, I really don’t. I have always wanted to see this company cleaned up and put back in line to be a great contributor to the MMA scene again like it once started out to be.

Stay tuned for more.

XYIENCE LAWYER JAMIE COGBURN TRIES TO SETTLE A CASE HE FILED AGAINST RICH BERGERON FOR "SODAS"

XYIENCE SHAREHOLDERS CONFERENCE LETTER

Fight News Unlimited recently received the following letter from one of our inside sources. We have been gathering new leads and hearing new rumors--such as the possibility Chuck Liddell may sue Xyience--to add to our series. Something is certainly peculiar with the lack of the Xyience name in recent advertising campaigns. The company's entire focus seems to have shifted to the Xenergy brand. Whatever the explanation for that tactic, the company is obviously up to something there. In addition to the following letter, dispatches and phone calls from Billy Pike (Russell Pike's autistic brother) have been coming in to sources and to Fight News Unlimited. Here is the most recent communication received from William Pike, Jr.:

"On 7/11/07, remor wrote:
Changed my mind! I wouldn't pay $5 for you co*@suckers to do anything...Give it up! You are worthless and useless and nobody wants your fu@#ing help you freaks! Why don't you paste this email on your site you fu&%up."

Certainly sounds like someone is a bit angry. At any rate, the following letter describes a shareholder's conference and mentions some interesting tidbits, giving the conference the aura of a forum to suck more funds out of the pockets of investors. Nobody really knows what Xyience has in mind as far as settling their debts, moving past the bevy of lawsuits they are involved in at the moment, and putting together an effective roadmap to go public. Whatever they have planned to get out from under their recent troubles, it is going to have to be a well-orchestrated, complicated, and comprehensive campaign to turn the sinking ship around. I wish all the current investors luck in receiving any real return on their investments.

XYIENCE SHAREHOLDERS' LETTER:

June 21, 2007

Dear Shareholders :

We are excited to hold the first Annual Investor Conference July 11th and
12th at the Red Rock Hotel & Casino in Las Vegas. As many of you know,
Xyience has gone through a number of changes in the past year both in terms
of leadership and shift in focus on business strategy with the launch of
Xenergy. As part of the new management team leading the company through its
next evolutionary phase, we wanted to take the opportunity to provide
shareholders with an update of the company's current status as well as
provide an overview of the long-term vision and strategic roadmap. On a
positive note, we are optimistic that the strength of our brand, the
reception of our products in the marketplace, and our relationship with the
UFC continues to bode well for the potential of becoming a leader in the
space. However, not unlike many start-up companies, we do continue to face
significant challenges -- both operationally and financially -- and we
believe this open communication is an important step in managing shareholder
expectations.

This conference will be a great opportunity for you to meet management, ASK QUESTIONS, and present concerns in smaller forums prior to The Annual
Shareholder Meeting which will take place sometime in the third quarter of
this year following completion of the Company's 2004-06 Financil Audit.

Wednesday, July 11th
------------------------------

Session #1 9:15 am - 10:45 am
Session #2 11:00 am - 12:30 pm
Session #3 1:00 pm - 2:30 pm

Thursday, July 12th
---------------------------

Session #1 9:15 am - 10:45 am
Session #2 11:00 am - 12:30 pm
Session #3 1:00 pm - 2:30 pm


We look forward to meeting you and the opportunity for you to learn more
about Xyience. Advanced reservation is required and ONLY current
shareholders are invited. Please contact Nina at 702-430-5400. Sessions are
limited to no more than 20 investors and they are on a first come , first
served basis.

Best Regards,

The Xyience Management Team