Michael Zolotas, CEO of NewLead Holdings, has admitted deleting the “missing” emails pertaining to the ongoing dispute between his company and trader TransAsia Commodities, but is unlikely to be charged with contempt of court as the case drags on.
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 and the plaintiff has alleged there is “no evidence that NewLead JMEG actually owned or even had access to 100,000 tons of coal at any time”.
In early December, the court ordered Zolotas to hand over his computer hard drive to experts without deletions, in order to find around 1,450 “missing” emails between Zolotas and his co-defendant Jan Berkowitz, chief executive of NewLead JMEG. An earlier search of Berkowitz’s hard drive turned up the emails, but the correspondence seemed to have disappeared from Zolotas’ computer by the time it underwent forensic analysis.
In an affirmation filed on Friday at the Supreme Court of the State of New York, Zolotas claimed to have manually deleted several years’ worth of emails from his personal Yahoo email account in November 2014 after experiencing a “security breach”. The CEO claimed to have received an email in which it appeared his password for the Yahoo address had been changed by a unknown party.
Zolotas said the deletions were made “in order to protect third parties’ confidential and sensitive information ending up in the wrong hands”.
“There is no evidence that this happened,” Melissa Brill, attorney for plaintiff’s counsel Cozen O’Connor, told the court in New York on Tuesday.
“This fact that he deleted the emails – supposedly – in November of 2014 was never mentioned in this litigation, even though we have been here before your honour, moving to compel, moving to strike, orders, threats, and it has never been mentioned,” Brill told the court.
The civil case was filed by TransAsia in January 2015 against the defendants NewLead JMEG, Jan Berkowitz and Michael Zolotas. 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 moving to strike for a default judgment and for sanctions on the basis of the defendants’ repeated discovery failures, failure to institute a litigation hold and spoliation of evidence.
Based on the timing Zolotas gave in his affirmation, the email deletions happened three months after defendants were served with electronically stored information (ESI) discovery requests, and right after the court denied a motion for a discovery stay, Brill told the court.
Zolotas claims to have saved to his laptop “all important documents that I needed” but Brill said the laptop was searched and no such documents were found during the discovery process.
But Judge Charles R Ramos said Zolotas cannot be held in contempt of court for the deletions “because he’s already done it”. The judge said it was time to move on to the next stage and look at the consequences of destroying the evidence, and warned plaintiff’s counsel that accusations of evidence spoliation are a “serious business”.
NewLead’s system administrator Ioannis Lettas filed an affirmation in support of Zolotas’ security breach claims, but the plaintiff’s counsel asked the judge to disregard the documents because they are not sworn affidavits subject to penalty of perjury and do not state any of the facts as being true.
“Given the fact your client admits to destroying these emails at a time when a litigation hold would have been in effect, what else can I do?” Judge Ramos asked the defendants’ counsel.
Shanti Tuthill, who stood in as defense counsel in the absence of George Chalos, did not argue with the plaintiff’s assertions and stated the defense stands by its client’s affirmations.
Defense counsel declined to comment when approached after the hearing by Splash. Eric Freed, an attorney for the plaintiff, said: “We believe our motion is well founded and we look forward to receiving the court’s opinion.”
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, and has accused NewLead Holdings of stock manipulation, bank fraud and money laundering. The defendants have denied the allegations.