The CEO of NewLead Holdings Michael Zolotas has been ordered by a judge to produce his hard drive for forensic analysis in the ongoing court case brought by TransAsia Commodities against the shipping company.
Three of NewLead’s executives were also ordered to be deposed in court in New York.
“I’m sorry to say that my conclusion is that NewLead is playing a game with the Court,” said Judge Charles E Ramos, according to court documents from December 3 seen by Splash. He also alluded to his concerns that the defendant has been deliberately avoiding complying with discovery demands.
The judge ordered that Zolotas’ hard drive must be handed over to an expert with no deletions. The device will be searched for emails between Zolotas and his co-defendant Jan Berkowitz that were not produced previously by the NewLead Holdings CEO.
TransAsia in January filed a civil case against NewLead JMEG, its chief executive Jan Berkowitz and Michael Zolotas. The lawsuit, which Splash has covered extensively, is currently being heard at the Supreme Court of the County of New York.
The London-based trader 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 to the trader, which alleges that NewLead JMEG signed the multimillion-dollar sales agreements to inflate its share price and to obtain credit from banks. The defendants deny the allegations.
Zolotas produced 50 emails from his Yahoo email account during the discovery process earlier this year. Melissa Brill, the plaintiff’s counsel from law firm Cozen O’Connor, told the court that analysis of Berkowitz’s hard drive pointed to the existence of another 1,450 emails that were deemed relevant and non-privileged by the defence counsel.
“It seems incredible to me that Berkowitz’s hard drive yields 1,500 and Zolotas, you know, is 50,” the judge commented.
Brill alleged Zolotas was using a private email address to conduct the business of his publically listed company and deleted emails afterwards. Zolotas, Brill said, agreed in his deposition in October that such business would need to be conducted via an official email address, in line with US SEC rules. NewLead Holdings’ stock is traded on the over-the-counter OTC Pink marketplace.
The court hearing took an extraordinary turn when the plaintiff’s counsel made a new set of allegations of documentary fraud supposedly committed by Zolotas and Berkowitz.
Brill said that a search of Berkowitz’s hard drive revealed an email from him to Zolotas saying “Let’s alter the contract today”, as well as emails showing their plans to file a ‘frivolous’ counterclaim, and seven fraudulent versions of the sale contract with TransAsia.
Evidence was also found that the defendants were setting up “mere mirror companies” in offshore jurisdictions and employing specialists to “clean up” search results on the Internet, Brill added.
“I think it means that we are dealing with people who are not honest,” the judge commented.
Defence counsel George Chalos of Chalos & Co told the court there was no evidence of any fraud or deception in relation to the coal contract at issue.
The defence said that when NewLead JMEG was unable to supply its coal to TransAsia, it was Berkowitz who suggested he could buy the coal in the market and sell it on to TransAsia, effectively acting as a trader of coal before the mines NewLead JMEG had planned to acquire were operational.
“Berkowitz, we found out through the course of this litigation, didn’t have the coal,” Chalos told the court. “And he was not only pulling the wool over the plaintiff’s eyes, but our own guys’ eyes.”
Chalos said that NewLead’s stipulation of liability for breach of the coal contract claim demonstrated the company’s wishes to make the plaintiff whole.
The judge ordered NewLead’s investment relations/communications manager Elisa Gerouki, its claims manager Spyridon Theodoropoulos and its chief financial officer (CFO) Lena Despotopoulou to be deposed in New York.
The plaintiff had previously requested their depositions, and the defence had tried to arrange for them to be deposed by video link from Athens, after all three filed affidavits citing reasons why they could not attend a hearing in person.
The three NewLead executives claimed to be non-parties from the court case, stating in their affidavits they were employed by NewLead Shipping SA and NewLead Bulkers. But in court on December 3, the plaintiff’s counsel produced a HR handbook for new NewLead staff in which it states “Your basis of employment is with the NewLead Holdings, Limited.” Defence attorney George Chalos claimed not to have seen the document before it was produced in court.