NewLead Holdings and its CEO Michael Zolotas have been accused of contempt of court and spoliation of evidence by TransAsia Commodities, after the defendants failed to produce around 1,500 emails said to be pertinent to the ongoing court case.
London-based trader TransAsia seeks $6.2m in compensation over a failed agreement to buy 110,000 tonnes of coal from NewLead JMEG, a coal mining joint venture with NewLead Holdings. The coal was never delivered.
The civil case was filed by TransAsia in January 2015 against the defendants NewLead JMEG, its chief executive Jan Berkowitz and Michael Zolotas. Splash has covered the lawsuit extensively. Legal action was stayed against Berkowitz in October after he filed for bankruptcy a few days before he was due to be deposed in court.
TransAsia is now pushing for a default judgment in the case and has filed a motion to show cause that accuses the defendants of civil contempt and “multiple discovery failures, failure to institute a litigation hold and spoliation of evidence in direct violation of this Court’s Orders”.
Judge Charles E Ramos of the New York County Supreme Court ordered in early December that Zolotas’ computer hard drive must be handed over to experts with no deletions to undergo forensic analysis.
The device was to be searched for around 1,450 emails between Zolotas and his co-defendant Jan Berkowitz that were not produced previously by the NewLead Holdings CEO. Some were sent from Zolotas’ personal Yahoo email address, which is not within the purview of regulatory authorities, unlike his official NewLead email address.
In January, the plaintiff was told the emails could not be retrieved because they “do not reside on Mr. Zolotas’s hard drive”.
Five months later, the “missing” emails have still not been produced. The plaintiff’s counsel said it was informed in January “it was company policy not to allow employees to delete emails, and as such, the deletion function is turned off for everyone (Mr. Zolotas included)”.
The email retrieval work was undertaken by Epiq Systems, which informed the plaintiffs in February that defendants had granted access to only NewLead’s 2012 archive, omitting relevant documents and emails from January 1, 2013 to May 15, 2015.
The defendants’ counsel later explained this three-year gap was down to the fact that emails on Zolotas’ laptop had been archived only once, on December 31, 2012, rather than every 30 days, as was policy for everyone else at NewLead Holdings.
“Mr. Zolotas did not like being deprived of the ability to readily access all of his emails. All emails are within his “live” base, except for those that had been archived as described above”, defendants’ counsel George Chalos explained in an email to plaintiffs on February 18. His email was submitted to the court as an exhibit.
TransAsia’s counsel are adamant that the emails are not missing but have actively been deleted. When Epiq analysed all the data collected from NewLead Holdings, it found two emails archived on the company’s Domino server that were created by Zolotas in 2013 and one in 2014. Epiq’s search for Zolotas’ Yahoo emails revealed no emails were sent or received prior to October 2014, according to court documents.
However, during the month of August 2013 alone, Epiq located 1,339 emails where Zolotas was the sender, recipient or copied. TransAsia says it has 2,247 in its possession that were sent to, received by or copied to the NewLead CEO during the same month.
“It is thus clear that Defendants have deleted emails from the hard drive, in violation of the rules requiring a litigation hold and in violation of this Court’s Orders. The exact extent and nature of the spoliation remains unknown, however from the third-party discovery in this case, this office is in possession of thousands of emails that should have appeared on the Zolotas’ hard drive and are missing,” TransAsia’s counsel said in an affirmation filed with the court.
If TransAsia’s claims prove to be correct, the consequences could be grave for the defendants. On April 13 last year, Judge Ramos told the defence counsel during a court hearing regarding the discovery process: “This is very simple. You ask your client to produce whatever there is. Your client says, “This is all we got.” You get an affidavit signed by a client swearing to me that this is all there is, and if that affidavit is false, somebody goes to jail. It’s as simple as that.”
Most interestingly, TransAsia also included as an exhibit a letter from RAG Verkauf’s lawyers in response to an email sent by Zolotas on August 21, 2013. The law firm’s letter said Zolotas’ email included a contract for the sale of US steam coal to Mawest Resources on behalf of RAG Verkauf. The contract was dated January 11, 2013.
“On behalf of our client we herewith inform you, that this Contract was completely unknown to our client until Mr Elsner received it from you with your email of 21 August 2013. We want to further inform you that when questioned by our client, Mawest Resources LLC informed our client that they did not negotiate or sign this Contract, neither on their own nor on RAG Verkauf GmbH’s behalf,” the letter states.
TransAsia has alleged previously that NewLead JMEG signed the multimillion-dollar coal sales agreements to inflate its share price and to obtain credit from banks. The defendants have denied the allegations.