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EXHIBIT "38"1

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UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF OHIO

WESTERN DVISION AT CINCINNATI

5 GLC, LIMITED6 Plaintiff,7 Vs. CASE NO. 11-010308 CRABTREE, et al.,9 Defendants.10

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13 APPEARANCES:14 James C. Frooman, Esq. and Matthew Horwitz, Esq. on behalf of15 Plaintiff:16 Frank DeBorde, Esq. on behalf of Unsecured Creditors Committee:17

18 BE IT REMEMBERED the above entitled hearing came on19 to be heard on the 30th day of March, 2011, before the Honorable20 Jeffrey P. Hopkins, Judge.21

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TRI COUNTY COURT REPORTING513-732-1477

Tri-County Court Reporting


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2 WITNESS3 Jim Burritt

Direct ExaminationBy the Court

Plaintiff Exhibit Numbers1, 2 and 3

2I N D E X

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31 COURTROOM DEPUTY: March 30, 2011. Case Number2 11-01030, GLC, Ltd. versus Crabtree, hearing on motion for3 preliminary injunction;4 THE COURT: Okay, Mr. Frooman, I am ready for you if5 you are ready to proceed?6 MR. FROOMAN: Good morning, Your Honor. Let me first7 introduce who I've got with me today and then I really would8 like to just bring the Court up to speed on some discussions,9 developments, negotiations that might streamline things for us

10 this morning.11 THE COURT: Tell me first though about notice. I12 thought, perhaps, from your pleading that we might even see the13 Crabtrees here today.14 MR. FROOMAN: Yeah, that's exactly right. That would15 have been what I got to next. And, Your Honor, what we did is16 had everything filed. I had it electronically served on a17 gentleman name of Dave Duffield Thursday evening, I think it18 was roughly about three or four o'clock after it had been filed19 and immediately called Mr. Duffield. Mr. Duffield is known to20 us to be the attorney for Mr. and Mrs. Crabtree. We talked21 about the pleadings, everything was electronically served, we22 talked to him about potential resolutions. We, the next day,23 filed the motion for expedited hearing and I, of course, sent



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41 the motion and the order over to him, and we talked again on2 Friday. We had a number of discussions yesterday including a3 discussion last night at roughly, I think it was, 4:15 in which4 Mr. Duffield participated and three other attorneys and, I5 believe, Mr. Crabtree was even on the phone. And so we have6 discussed not only the motion and this hearing but a resolution7 in considerable detail, including a discussion this morning8 before we came over here.9 So there's no question of notice, there's no question

10 that they had ample opportunity to be here and I think it's11 mostly based on where I think we are now that they've decided12 not to come today.13 With that said, Your Honor, with me today is my14 partner, Matt Horwitz.15

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THE COURT: Mr. Horwitz.MR. FROOMAN: Mr. Jim Burritt, the chief

17 restructuring officer with Mainstream management and his18 associate Lori Rueber, also with Mainstream management. Mr.19 Frank DeBorde is, of course, counsel for the unsecured20 creditors committee.21

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THE COURT: Welcome back, Mr. DeBorde.MR. DeBORDE: Thank you, Your Honor.



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51 THE COURT: Welcome all others. And I didn't catch2 Lori. What was it?345

MR. FROOMAN: Rueber. R-u-e-b-e-r.THE COURT: Okay. She's mentioned in the pleadings.MR. FROOMAN: Yes, Your Honor. She's the one that put

6 the lion's share of that work into that financial analysis, the7 Exhibit 3.8 Your Honor, I know as you always do, you've reviewed9 the pleadings, you've probably already spent some time looking10 at the exhibits too. The gist of the pleading is fairly11 simple, there's some shenanigans going on. And I was prepared12 to proffer a good bit of evidence and have Mr. Burritt and Ms.13 Rueber provide some testimony and offer considerable evidence.14 I had them even prepare to secure some testimony from Mr.15 Crabtree as if on cross examination. I'm happy to review all16 that with you to the extent you'd like but maybe it makes more17 sense not to waste too much of this Court's time and let you18 know where I think we are on an agreed order.19

20THE COURT: Okay.MR. FROOMAN: Mr. and Mrs. Crabtree are prepared to

21 accept an agreed order in essentially the form that we22 submitted it to this Court with the following caveat. They23 want to present a budget to us within a week that would except



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61 from the injunction certain expenses, what I'll characterize2 for lack of a better term, as just their reasonable and3 necessary living expenses and money to retain counsel. We've4 agreed to give them that week to get the budget to us and,5 assuming that they can get a reasonable budget that seems6 reasonable to us, we would then submit within the week a7 revised order that would except out these expenses that they've8 presented to us and that we've agreed to.9 We've also agreed to allow them to use up to

10 $5,000.00 for legal fees to retain counsel over this next week.11

12 In the event that they don't get us a budget or we13 can't reach an agreement on the specifics of the budget, the14 order would still be in place until further order of this Court15 but we would expect them then to request, and we would16 certainly not contest and agree to, an expedited hearing to17 consider some modification to that order. I do not expect that18 that hearing would be in the nature of a preliminary injunction19 as we were prepared to go forward with today but, instead,20 would be focused on the budget that they're proposing and what21 ought to be included within that budget.22 There's also some talk of a potential third23 alternative and that is we don't reach an agreement, they don't



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71 request an expedited hearing but Mr. and Mrs. Crabtree,2 instead, file what they're telling us would be a Chapter 113 bankruptcy which, of course, certainly would be their option.4 THE COURT: Okay.5 That's where we are today. I don't have yet prepared6 the revised order but I would do that first thing when I got7 back to my office, circulate it to everybody and then upload it8 to the Court.9 THE COURT: Alright, so the order would go on today.

10 You don't have any reason to believe that there would be11 further dissipation of assets or maybe secreting of assets in12 the interim period even with the order in place?13 MR. FROOMAN: If I understand the question correctly,14 Your Honor, you're asking do I have reason to believe that Mr.15 Crabtree wouldn't honor an order issued by this Court? In16 fairness I don't know that I'm in a position to answer that17 question.18 THE COURT: Who is counsel for Mr. Crabtree?19 MR. FROOMAN: I will explain it to you the way it was20 explained to me because it was not clear on the call last21 night.



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81 THE COURT: The other three attorneys were not ... I2 thought maybe Mr. DeBorde was on board on the conference all,3 in other words, or it was someone else?4 MR. FROOMAN: Mr. Duffield has been known to us to be5 Mr. Crabtree's attorney for quite some time. Mr. Duffield is6 not licensed in this court, he's not a bankruptcy attorney, and7 he has told us that he will be transitioning the case to8 somebody else. Early on, last Friday, he was joined in some9 of our discussions by another attorney, I believe in

10 Huntington, by the name of Brian Conaty.11 I thought Mr. Conaty might be taking over. He is apparently an12 associate, not in the same firm but a peer of Mr. Duffield's13 with some bankruptcy experience. But we learned last night14 that he doesn't intend to be the attorney in these proceedings.15 There are two other attorneys that were involved in the16 discussions, both last night and this morning, Marshall17 Sadling, S-a-d-l-i-n-g, and a Joe Caldwell, C-a-l-d-w-e-l-l.18 Part of the reasons we couldn't agree even on a retainer is19 because they haven't decided yet who it is that's going to.be20 representing the Crabtrees.21 THE COURT: These individual attorneys are all from22 different firms or are they associated together?



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91 MR. FROOMAN: I can't tell you I know the answer with2 certainty but I believe with a fair amount of confidence that3 none of them are in the same firm. I don't know at the end of4 the day who will be representing Mr. Crabtree. If I had to5 guess it would be either Mr. Sadling or Mr. Caldwell and I6 don't believe they are in the same firm. And that's the best I7 can tell you because, as we discussed it last night, we weren't8 sure who was speaking on behalf of the Crabtrees.9 THE COURT: Okay. Mr. DeBorde, you're here. If you10 would like to have some introductory remarks that would be11 fine.12 MR. DeBORDE: Thank you, Your Honor. Frank DeBorde on13 behalf of the unsecured creditors committee.14 I suppose we are still proposed counsel. We have now15 passed the twenty-day objection period and submitted an order16 so hopefully we'll be official counsel very soon.17 THE COURT: Okay.18 MR. DeBORDE: We are, obviously, very supportative19 and believe that the entry, the order that has been requested20 is essential to the administration of this bankruptcy case and21 to the recovery of the unsecured creditors in this case. We22 paid a lot of money to Mr. Burritt's firm to do the forensic23 accounting which forms the basis of the preliminary injunction



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101 motion. We alluded to that in the initial hearing and we2 expect that the untangling of all the different webs will be3 very extensive and I think even with respect to the different4 entities that were named as defendants. Part of the problem is5 we don't really know what Mr. Crabtree has, where it is and,6 you know, what might be dissipated. So given that the motion7 was just filed, we do know that if it is dissipated that we are8 in big trouble. And so we are very pleased that an agreed9 order will be tendered even if it is just for the limited

10 period of time suggested.11 In response to the question about counsel. The only12 thing I would be able to add is I think that one of the reasons13 why they couldn't really articulate who they wanted to retain,14 is they weren't quite sure what they were going to do, they15 weren't quite sure whether they were going to defend this16 action or just simply file bankruptcy. And whether that's two17 different lawyers or whatever it is I'm not quite sure but I18 suspect it probably is.19 But nonetheless, I think with this resolution it20 gives them an opportunity to try to tell us what they need to21 spend. We're not willing to have that be discretionary at22 their whims under the circumstances of this case and we will23 certainly try to be reasonable and cooperative.



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121 imposing an injunction under Rule 65 of the Federal Rules of2 Civil Procedure. Given the nature of the proceedings here3 today, I would feel uncomfortable entering an agreed order when4 counsel is not here and not on the phone and not representing5 the fact that, as you've suggested, I have no reason to doubt6 your presentation, I'm certain that it's accurate, but in order7 to protect the record here I think it's imperative that the8 Court have you present some evidence to support the Court9 entering an order of the nature of which has been negotiated10 with the Crabtree's attorney, whoever that might be.11 MR. FROOMAN: I understand that, Your Honor, and12 we're prepared to do so.13

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THE COURT: Thank you, sir.MR. FROOMAN: By way of general background, and I

15 know you know some of this and I'll move through the general16 quickly. GLC, Limited, Inc. is a West Virginia corporation17 that was formed on March 24, 2004. Its principal place of18 business if 402 State Street in Proctorville, Ohio 45669. The19 sole shareholders of GLC, Limited, Inc. are Gregory L. and20 Linda L. Crabtree. Mr. Crabtree is also or was also the former21 president, the chief executive officer and the chairman of the22 board of directors. His wife, Linda Crabtree, was the vice-23 president, secretary and also a member of the board.



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131 On February 21, 2011 they resigned those officer and2 director positions. They did so in a letter, they did so3 voluntarily. And since then they've no longer been involved in4 the operations of GLC whatsoever but they do remain the sale5 shareholders.6 GLC, as far as the business itself, it's what we've7 referred to as a retail liquidation company. The name GLC or8 the initials GLC stand for Global Liquidation Center. And what9 they did is they purchased at wholesale consumer products,

10 primarily products, and then sold those at retail. They had11 five warehouses. There were three in Huntington, West12 Virginia; two in Columbus, Ohio and there were a number of13 retail stores, some of which were closed pre-petition. There14 is one in Proctorville, Ohio; Huntington, West Virginia; Nitro15 West Virginia; Lasage, West Virginia; Pigeon Forge, Tennessee;16 Newport, Tennessee and Milan, Indiana. There were also two17 specialty stores, Your Honor, Dan's Sporting Goods in18 Huntington, West Virginia. That's a business that GLC, Limited19 Purchased in 2009 for, and the records aren't abundantly clear,20 but it may be $468,000.00. There's also another related21

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THE COURT: What was the purchase price?MR. FROOMAN: As I say, it's not a clear, but we

23 believed there was $468,000.00 that was paid either at closing



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1 or over a period of time. I'm not sure that that was the2 called for purchase price. What I understand is that's roughly3 what was paid.4 And then there's Trustworthy Hardware Stores. That's5 in Proctorville, Ohio. That was not a business that was6 purchased. Instead, that was a business that GLC started again7 in 2009 and, as Mr. Burritt when he testifies would explain it,8 that business was started from a leased location in order to9 provide employment for Mr. Crabtree's son-in-law. They went

10 out and purchased inventory roughly in the amount of11 $50,000.00. Then they bought a warehouse. And when I say12 bought, that's where things get a little bit foggier. In fact,13 the warehouse was bought by Mr. and Mrs. Crabtree but at least14 $74,000.00 of the purchase price was paid by GLC, Limited, Inc.15 But that's the hardware store.16 The business moved along and, Your Honor, in roughly17 June of 2007 and certainly much more into 2008 and thereafter18 GLC began raising funds for its operations for the purchase of19 goods, and this was through private investors. And as we've20 footnoted in every pleading I think we've filed to date, when21 we use the term 'investor' we don't necessarily mean it to be22 any necessarily equity connotation but merely more of a23 descriptive term. I think these investors, at least from their



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151 perspective, thought they were loaning money to GLC. And most2 of them thought they were loaning for specific purchases of3 goods that were presented to them. For instance, an investor4 might have been told we need a million dollars to purchase5 these toasters and we expect to turn those over promptly and6 you'll get a return of anywhere from thirty-three percent to7 over a hundred percent return on your investment in something8 between three months and a year.9 THE COURT: What kind of paper supported these

10 exchanges? I couldn't make that out reading the pleadings.11

12 Honor.MR. FROOMAN: And there's a reason for that, Your

It was all across the board. We have some handwritten13 notes, there are some form agreements that were used in cases.14 I believe there's some situations where there's not15 particularly much of a paper trail at all. Mr. Burritt and Ms.16 Rueber could speak to that to a much greater extent. The other17 reason that you don't have some of the paperwork was mostly out18 of concern and fairness to some of the investors. We could19 have started redacting documents but we didn't want to file20 with this Court some of the documents that included their names21 and amounts. Initially when I drafted the adversary proceeding22 we did have attached as exhibits some of the form documents and



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161 then decided that that may not be fair to those investors to2 put their names out there in the public domain at this point.3 THE COURT: Okay, but at some point that information4 is going to be made available?5 MR. FROOMAN: Absolutely, Your Honor, and it has to6 be. But my point is I think I took a lot of different forms7 too.8

9THE COURT: I understand.MR. FROOMAN: But there was one early investor in

10 particular who had invested something in the area of11 $5,400,000.00 and over the period of his investment had12 received something over $13,100,000.00 in repayments. The13 business analysis that was prepared by Mainstream Management,14 there's a chart in there and it's something I included in our15 adversary proceeding that I thought was particularly telling.16 During the period from 2007 through 2010 there was investor17 money of $81,916,000.00. And incredibly during that same time18 period the inventory purchases were only $11,793,000.00, a19 $70,000,000.00 difference. During that same time period sales,20 2008, were only $606,000.00. In 2009 sales were only21 $1,606,000.00 and in 2010 sales were only $3,742,000.00. So22 during this period where they raised $81,000,000.00 and they



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171 had inventory of $11,700,000.00 they had sales of only2 $5,900,000.00.3 And if I can stop there and talk a little bit more4 about the sales and this is something that Mr. Burritt and Ms.5 Rueber could talk to in much more detail. The sales themselves6 are somewhat troubling because the way that GLC prepared its7 tax returns is sales were reported from the various stores,8 combined and reported on the tax return. And yet when9 Mainstream Management went in and tried to re-create these

10 records the numbers they came up with for sales in 2008 it11 appears that GLC may have over-reported its sales by12 $8,000,000.00 and in 2009 GLC may have over-reported its sales13 by $4,000,000.00. And, of course, there's no logical14 explanation as to why a company would over-report its sales and15 there is at least some speculation that, in fact, they didn't16 over-report their sales at all, the sales that were reported17 from the stores were entirely accurate. That's what showed up18 in their tax returns. It's just that the cash never made it to19 the books of GLC. That, Your Honor, is a speculation. We20 don't have evidence for that but what we do know is that we've21 got $8,000,000.00 in sales that are really unaccounted for in22 2008 and $4,000,000.00 of sales that are unaccounted for in23 2009.



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181 What we've also learned is that investors were2 investing and receiving anywhere in the range of fifty to3 seventy percent or more on average for returns of six months,4 or being paid back over six months to a year. And, of course,5 the inevitable was going to have to happen with this kind of6 cash going out and paying the incredible and exorbitant7 interest rates, eventually they were going to run out of8 investors and not be able to continue to pay the kind of9 returns that they had promised, particularly in light of the

10 sales figures that they were reporting. And at the end of the11 day they weren't able to do it and the ad hoc committee, which12 later became the unsecured creditors committee, then asked Mr.13 Burritt to become involved. He did become involved. And as I've14 reported, Mr. and Mrs. Crabtree soon thereafter resigned their15 positions.16 Interestingly, they resigned on February 21, 2011 and17 on February 18, 2011, three days earlier, Mr. and Mrs. Crabtree18 formed a new business, something they call Bargain Buys, LLC.19 It has the same post office box and street address as GLC,20 Limited, Inc. and the organizers are listed as Mr. and Mrs.21 Crabtree.22 Let me tell you a little bit what Mainstream23 Management has done since becoming involved in December of



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191 2010. Mr. Burritt initially became involved in December of2 2010 and on January 28, 2011 he was3 THE COURT: May I stop you? I apologize for4 interrupting but do we know of any potential transfers of5 assets, funds, anything, to this new entity that's been6 created?7 MR. FROOMAN: No, Your Honor. I think, of course, you8 know where I'm going with my partner, and Ron described it to9 me, I think very succinctly, what worries him is we don't know

10 what we don't know. And I think that's a fair ... particularly11 with regard to the Crabtrees. We don't know what assets they12 have, we don't know where they are, we don't know what13 transfers they're making and, of course, it's in large part the14 reason for this emergency motion.15 THE COURT: Okay, so we freeze any activity going16 forward but we don't know what happened prior to the moment the17 order goes on.18

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MR. FROOMAN: We don't.THE COURT: And as I recall from our initial first

20 day orders, wasn't there some thought that there would be some21 early discovery? I know the Crabtrees were supposedly being22 fairly cooperative with debtors' counsel in terms of providing23 information to both debtors' counsel and the creditors



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201 committee counsel. What's the thought with regard to2 depositions of the Crabtrees to see if we can't discover some3 information as to the assets?4 MR. FROOMAN: Your Honor, there is another individual5 who has been very cooperative with us and, in fact, you're6 aware that we have an agreed order for his 2004 Examination and7 a substantial production of documents. And we're working with8 him in that regard.9 The Crabtrees are a little bit more difficult. Not

10 because they're refusing to cooperate. I don't have any reason11 to believe that they would not have agreed similarly to produce12 information. The problem with the Crabtrees is they don't have13 any records to speak of. Mr. Burritt and Ms. Rueber, they've14 already been through all of that. And that's what's resulted15 in what we've been able to file as Exhibit 3 today. There are16 literally thousands and thousands, maybe as many as I've17 estimated nine thousand pages of Excel spreadsheets where Mr.18 Burritt, Ms. Rueber and others in their offices have done19 incredible amounts of work to try to recreate or rebuild the20 GLC, Limited's records, and a lot of information coming from21 the Crabtrees. But the problem is even if they're willing to22 cooperate, I don't know that they're going to have the records23 we're going to need.



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211 THE COURT: Certainly they have bank accounts and2 other information which information can be traced.3 MR. FROOMAN: Yes, Your Honor, and we would expect to4 get that information immediately.5 THE COURT: I'm not going to try your case for you so6 I'm assuming you're going to take all of the activities7 mentioned and others that the Court hasn't thought of.8 MR. FROOMAN: Well, we will do that promptly and9 that's certainly the intent. But, again, in light of these

10 very real and dyer concerns we thought order first, freeze the11 assets, and discovery second.12

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THE COURT: Alright, so my apology for interrupting

MR. FROOMAN: No, Your Honor. I want to be15 responsive. Thank you.16 So I was talking, Your Honor, about the work that's17 been done by Mainstream Management, Mr. Burritt and Ms. Rueber.18 The records of GLC, Limited were really in a disarray and that19 suggests that they were simply allover the place, but that's20 really not enough. In a lot of cases records just simply didn't21 exist. They used, I think it was, Quicken, I often confuse22 Quicken and Quick Books, but they used one of those two23 software packages but they didn't use it right. What they did



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221 is they merely kept track of expenses for purposes of reporting2 on their tax returns and no other double entry accounting at3 all for the period of its existence in 2004 through the4 present. At one point they relied on an outside bookkeeper.5 Later they had an inside bookkeeper but no one with any6 particular qualifications or expertise, certainly nothing from7 which you could get a good feel of the financial condition of8 the company. There were over twenty bank accounts, I've heard9 the number twenty-eight bank accounts that GLC, Limited had10 used during the time period and none of those bank accounts had11 ever been reconciled with the exception of four accounts being12 reconciled but not until 2010, December 2010.13 Mainstream Management has done, really I hope I can14 do justice to the amount of work that they've put into this.15 They started with interviewing people involved. They've16 interviewed both Mr. and Mrs. Crabtree, they interviewed the17 external accountant, they interviewed the internal bookkeeper,18 they interviewed other employees. They went out and inspected19 the warehouses and all of the retail stores, I believe with the20 exception of the one in Milan, Indiana which they knew they21 were going to be closing. The warehouses are something I'm22 told. The inventory in there is almost unmanageable, not just



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231 by the volume of inventory but by the way it's maintained or2 maybe not maintained.3 The business analysis that was filed talks about pallets4 full of mayonnaise that's beyond its expiration date by a5 couple of years. That's probably a good example of the types6 of un-saleable materials that's in this warehouse, these7 warehouses. There are certainly some saleable materials but8 you've got to weed through it all to get there. And it really9 suggests buying that was out of control with no business plan

10 or no concept of how you're going to sell it or even if you're11 going to sell it. And that would certainly be consistent, Your12 Honor, with a plan merely to buy something in order to attract13 investors to put their money into the business.14 In addition to the interviews and the inspections,15 they reviewed the tax returns and they, of course, reviewed all16 of the bank records. NOw, they, of course, didn't get those17 form GLC, Limited, they went back to the banks themselves and18 were able to secure, not entirely ... some banks didn't have as19 good of records as they would have liked, but they were able to20 secure to a great extent bank statements, cancelled checks,21 deposit slips, wire transfer records, everything that a bank22 keeps. They got those from all of these bank accounts for all23 of these years. There was an Edward Jones Investment Account



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241 and they were able to track down the records from them. They2 also sent confirmations to the investors. Through interviews3 with the Crabtrees, they were able to determine who were the4 investors as opposed to who were vendors or suppliers. And, of5 course, it makes a big difference is you're making payments out6 to the investors, it's not an expense of the business. If7 you're making payments to the vendors, it's an expense. They8 had to determine who was who and they did that. Then they sent9 out confirmations to the investors and had them send back some

10 summary of what they had put into the business, what they got11 back from the business and what documents they had to support12 it. Now, of course, that wasn't the perfect response. They13 didn't get everything they wanted but they were able to take14 these investor confirmations and compare them to the bank15 records that they were able to secure.16 Ms. Rueber has flooded me with emails of Excel17 spreadsheets, pdf documents that went into this rebuild of the18 financials for GLC, Limited. Your Honor, I sent one of them to19 my secretary and asked her to print it out for me naively20 thinking she was going to bring back to me the document. The21 Excel spreadsheet was over fourteen hundred lines long and over22 twenty-six columns long, and had I printed it it would have



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251 been over nine thousand pages. There's a lot of work that went2 in here.3 The Quicken records or Quick Book had 133,0004 entries. They went through them all. Amazingly their debits5 were within a couple dollars of balancing to their credits.6 And I say amazingly, I'm an accountant by early in my trade and7 given what these records were like I find it quite incredible8 they were able to put that together.9 So at the end of the day what you have is you have

10 the Exhibit 3, the business analysis. And while it's a long11 way from perfect it's a pretty good summary of the financial12 condition of the company today. And that allows us then to go13 back and revisit the summary of the investor money raised of14 $81,000,000.00 and the summary of the inventory purchased of15 $11,700,000.00 at a time when they had sale of roughly, I think16 over those three years, of $5,942,000.00 if I remember my17 numbers right. I'm sorry, $5,954,000.00. And by the way18 losses in every single one of those years, Your Honor. And it19 begs the question, of course, what really was going on in this20 company and I would suggest to Your Honor there's only one21 conclusion. I don't want to use the term ponzi scheme but22 certainly there is a lot of explaining that Mr. Crabtree is23 going to have to do and I'm sure we'll be digging into that.



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261 Now, we've characterized the various claims as breach2 of fiduciary duty, unjust enrichment, we've got preference3 claims although I suspect they're more likely fraudulent4 conveyance claims under either 548 or state law, and we've also5 asked for the imposition of a constructive trust.6 The big concern at this point, of course, is that7 whatever he's got, however he got it, that it be frozen8 wherever it is. We don't intend to starve the man. That's the9 reason we asked for this budget. And, in fact, Your Honor, when

10 I talked to Mr. Duffield the first time last Thursday I told11 him exactly that, I said our intent is to maintain the status12 quo. We don't expect the man not to be able to go out and buy13 groceries, we don't expect the man not to be able to pay his14 utility bills while discovery in this case is ongoing. I had15 asked them that he provide us information of what those numbers16 are so we can except that out from the injunction. Hopefully17 over the next week we'll be able to get that reasonable budget18 and put on an order that both maintains the status quo and19 protects the creditors in this case and allows him to live, pay20 his ordinary and necessary living expenses, retain counsel,21 until we can get to the end of this case.22 THE COURT: Well, I mean, the record thus far23 suggests that there may be something of concern in that regard.



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271 I mean, to ask the question more bluntly, are the Crabtrees2 living beyond their means continually? I mean, are there3 several homes or is it one home that's very expensive, are4 there other items and assets that would be of concern that the5 debtor or the Crabtrees at this point have not come forward6 with a budget that would be agreeable?7 MR. FROOMAN: Your Honor, it's a difficult question8 to answer. Let me answer it this way. We have heard in the9 worst form of hearsay I might add, that there's safes in the10 Crabtrees' home that have millions of dollars. We've heard11 those kinds of things in lots of cases before. I don't have any12 reason to believe that's true or not true. The Crabtrees are13 not living in what anyone might describe as a Taj Mahal. I14 don't have any reason to believe that the Crabtrees are living15 well beyond what somebody might say ordinary means. We just16 don't know what we don't know. Do I believe that assets are17 being dissipated? Your Honor, I don't know what he's doing18 with the assets. And what's troublesome is that when I first19 talked to Mr. Duffield on Thursday I asked the very questions20 that you're asking me now and he keeps poor mouthing Mr. and21 Mrs. Crabtree. He says he doesn't have anything. He's got these22 rental properties and he's got the dog/pet wash, and he's got23 two retail stores, one in Lasage and one in Huntington I think.



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291 exactly the business rebuild was prepared, Ms. Rueber would be2 able to provide more detail on that.3 THE COURT: Okay, I'd be interested in hearing a bit4 of testimony. It doesn't have to be extensive, just so the5 record is fixed and we have that to support the injunction.6 MR. FROOMAN: Thank you, Your Honor. We would then7 call Mr. Jim Burritt.8 THE COURT: If you will step forward and be sworn.9 (Witness duly sworn)

10 COURTROOM DEPUTY: State and spell your name for the11 record.12 THE WITNESS: My name is Jim Burritt, J-i-m13 B-u-r-r-i-t-t.14

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THE COURT: Thank you, Mr. Burritt. Just a moment.DIRECT EXAMINATION

BY MR. FROOMAN:Q Good morning, Mr. Burritt. As you know what we're

18 going to do is try to streamline some of the evidence this19 morning and build a sufficient record for purposes of the20 requested relief. You've stated your name. How are you21 employed, Mr. Burritt?2223

A

Q

I'm employed by Mainstream Management.And what's your position with Mainstream Management?



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A Managing director.What is the business of Mainstream Management, what's

the company do?A Mainstream Management is a professional services

5 firm. We have roughly ninety associates in the organization.6 The common thread that runs through all of our work is we work7 with troubled companies. We really have three different8 practices. We have what we call our corporate renewal practice9 which includes the turn-around restructuring business which is

10 what this case is certainly all about. We also have an11 operations improvement practice and then we have a transaction12 advisory services practice.13 Q And roughly how many professionals are employed with14 Mainstream Management?15 A Of the ninety people, at least eighty would be16 professionals.17 Q And Mr. Burritt, what's your role in this case?18 A I am the chief restructuring officer for GLC,19 Limited.20 Q And how did you come to be the chief restructuring21 officer for GLC, Limited?22 A In early December I was contacted by counsel for the23 ad hoc committee and given some information about the issues



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311 surrounding GLC. Over the course of roughly a week I think2 there were three different interview processes that took place3 with counsel and the ad hoc committee at which point in time4 they made a selection on engaging our firm.

QA

And you say that was roughly December of 2010, right?Yes.

Q At the time you first became involved in theengagement, what were Mr. and Mrs. Crabtree doing? Were theyinvolved still in the business?

A Absolutely. Mr. Crabtree has always been much more11 heavily involved in the day to day operations of the business12 but at the time that our engagement began the first time that13 we met with the Crabtrees, which was December 8, 2010, they14 both were actively involved in the business on a day to day15 bases.16

17

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202122

QA

And did that change at some point, Mr. Burritt?It did. I believe it was February 21st , late February

anyway, the Crabtrees chose to resign their positions with GLC,Limited.

Q And since that date, who's been in charge of the dayto day operations for GLC, Limited?

A I've got that responsibility.



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321 I want to talk a little bit more in detail about GLC2 and some of the information that I reviewed with Judge Hopkins3 during what I'll refer to as the proffer. Before we do that4 just more generally. You heard the proffer that was presented5 to the Court. Was that accurate?6

7Yes, it was.

Q Let's back it up a little bit and help build the8 record if we can. When you became involved as the chief

restructuring officer, actually as early as December 8th whenyou first met with the Crabtrees, can you tell us what you,what Mainstream Management did in order to get your handsaround the business of GLC, Limited?

A Sure, I'd be happy to. The interesting part abouttaking an active role in managing a retail company in earlyDecember is you're right in the middle of the Christmas season.So we had two primary goals in the very early stages. Thefirst was not to shoot ourselves or the business in the foot bytaking some kind of drastic actions that would in any way harmthe retail sales of the business during that very importantbuying period.

The second thing that we did though was we ... andwhenever we go into an organization we believe we're able tohave really immediate impact on making good results but in any



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331 business that we go into where we've had no association prior2 there's a period of time where you have to learn. And so our3 goal was to allow the business to operate in a reasonable4 fashion from the retail standpoint and to learn strategically5 what the issues were that GLC was confronted with so that by6 January 1st we kind of got through the Christmas rush, that we7 would be in a position to make very good, sound, strategic8 business decisions for the business going forward.9 Q And so in December, before that January 1st target

10 date, what type of work did you do in order to get a better11 understanding of GLC and its business operations?12 A Sure. Any number of things. We visited all of the13 retail locations to try and understand what was happening in14 those locations. And, of course, we had a concern about15 security, we had a concern about cash control, we had a number16 of, I think what you would just call, typical business concerns17 that we wanted to understand. We visited all the warehouses to18 make certain that we knew what was there, where the warehouses19 were located, we wanted to be comfortable that there was20 security in those locations and that the assets of the company21 would remain under control. So we did those things. The other22 thing that we did was we began implementing business procedures23 that we thought were really necessary to start gaining some



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1 A I spoke with Mr. Crabtree every day. I mean, I was2 there in Huntington, he was there and we talked about the3 business and what was going on. We went through the litany of4 what had transpired, where the business was at, and then we5 were trying to understand if there was a strategy going6 forward, what that might have looked like.7 Q Did you have the opportunity to review the books and8 records of GLC such as they were?9 A That's a great point. We would have loved to have

10 been able to review the books and records of GLC.11 Unfortunately there was virtually no paper. There was, as you12 had suggested, the organization did use Quick Books which is a13 fine accounting system. It's not highly complex but it works,14 it's very capable, it's probably all that they needed. But as15 you indicated, they didn't use it in the way that it was meant16 to be used, there was no journal entries, no credits and debits17 here. It was really just a big long check book register.18 So while it was complex in nature the task that we19 started working through was really a very simple cash20 accounting, cash in/cash out.21 Q And in order to do that cash accounting, what bank22 account records or cash account records did you have to look23 to?



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1 Well, as you alluded to earlier, there was a fairly2 significant number of bank accounts that the organization had3 opened and closed over the years. We went back to all of those4 accounts and we went to the bank directly, we got the5 statements, copies of the monthly statements, we got copies of6 cancelled checks, we got copies of deposit tickets, we got7 copies of wire transfers. And so between what they had done in8 Quick Books, which was roughly a hundred and thirty thousand9 lines, there was enough information there by dollar amount, by

10 the date, and in some cases even an associated note with a name11 or purchase of, those types of comments where we were able to12 go back and reconstruct, if you will, validate the information13 in Quick Books through the bank records.14 Q Have you kind of summarized for us the work you did15 in December in order to try to get your hands around what was16 going on?17

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A Yes.Q Let's talk a little bit about what you learned. What

type of entity is GLC, Limited?A It's a corporation.Q And did you learn when it was incorporated?A What we discovered was that it was incorporated in

March of 2004. We had been told that it was incorporated in



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371 2008 by the owners but 2004 was the actual date that it was2 incorporated.3

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And you've already told us the sole shareholders wereGregory and Linda Crabtree, right?

A Correct.Q You told us what their positions were. What you

7 haven't done is what was the business of GLC? I don't think Iasked you that.

A Well, GLC was a seller of goods that other peopledidn't really want anymore in all reality. The products thatthey sold were things that had been pulled off of the shelvesfrom other retailers or that had been closed out through otherretailers and GLC bought those goods with the idea of reselling

14 them. The selling was done through really two different15 avenues, retail stores and then they also had a wholesale16 business. And the wholesale business would include smaller, if17 you will, retail operations that would buy things from them.18 They also sold items through auctions and then they conducted19 what they referred to as asset swaps where it was simply a20 transfer of goods from ... you had something I thought I needed21 and I had something you thought you needed and so we just22 simply transferred assets.



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381 So it was a retail/wholesale operation. They had two2 specialty stores, they have a sporting goods store which ...3 Let me stop you there and maybe it would be easier4 for the Court if I referred you to Exhibit 1. May I, Your5

6Honor?

THE COURT: You may. Approach the witness at your7 liberty.8 MR. FROOMAN: Do you have it on your screen there,9 Your Honor?10 THE COURT: I have it. We're good.11

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QMR. FROOMAN: Thank you, Your Honor.Mr. Burritt, can you please identify for us Exhibit

I?A This is a high level organization chart that I put

together with Mr. Crabtree in an effort to try and understandwhat entities made up GLC, Limited.

Q Can you walk us through this and tell us what didmake up GLC, Limited?

A Sure I would be happy to. The box on the lower20 level, far left, the six global liquidation retail centers were21 retail stores located in Pigeon Forge, Tennessee; Newport,22 Tennessee; Lasage, West Virginia; Proctorville, Ohio, Nitro,23 West Virginia and one other location, Milan, Indiana was the



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391 other location. The sporting goods stores, a single sporting2 goods store purchased by the company in 2009, it is somewhat of3 a typical retail sporting goods outlet. Their primary business4 though is with teams more so than the consumer off the street.5 The Trustworthy Hardware Store is a business that the Crabtrees6 started also in 2009. It's a very small, local hardware store,7 maybe a couple thousand square feet that their son-in-law was8 running. And then the last component of the business are the

warehouses which contained all of the inventory and assetsother than those located in these retail stores.

Q Let me back up a little bit. On the retail stores,were some of those stores closed after you became the chiefrestructuring officer?

A Yes.QA

Which stores did you close?We've closed all of the stores now except for Dan's

17 Sporting Goods Store and the retail location in Nitro, West18 Virginia.19 Q And let's talk just briefly about Dan's Sporting20 Goods. The Judge had a question as to what the purchase price21 was for that business. Do you have some knowledge of that22 issue?



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A It was an interesting question. I believe that the2 purchase price was roughly a half million dollars but there are3 no documents to support the purchase of this business.4 Q And on what basis then do you state that you believe5 the purchase price was roughly a half million dollars?6 A Through conversation with Mr. and Mrs. Crabtree. I7 had a conversation with Mr. Duffield, Mr. Crabtree's attorney,8 on this. And through the individual, a gentleman by the name9

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of Greg Rouse that the business was purchased from.Q Were you able to find any banking records that

supported the actual price that was paid?A

QNo.On the hardware store, you indicated that was started

14 by GLC and that it's operated by the son-in-law, right?15

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2223

AQA

Correct.Where does that store operate from?402 State Street in Proctorville, Ohio.

Q Is that property that is leased or was leased orpurchased by GLC, Limited?

A That property was leased.when they moved into that.

It was a vacant building

QA

There's also a hardware warehouse, isn't there?There is.



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2Q

A

41Can you tell the Court about that hardware Warehouse?Well, it is a building that is maybe two blocks away

3 from the leased hardware store, it's about five thousand square4 feet in total size. We had questioned Mr. Crabtree several5 times about the purchase of that, the hardware store warehouse,6 and he had indicated all along that that was a part of another7 entity that they have and that it had no involvement with GLC,8 Limited. What we've discovered consequently and Mr. Crabtree9 and his counsel have told us that they made a mistake in saying10 that and the hardware warehouse was actually purchased with GLC11 money.12

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And roughly how much?What we see is $74,000.00.When you say see, where do you see this?Sorry. It is in the general ledger system. I mean

16 there is a direct line item that references in the notes,17 "Purchase of hardware store warehouse, $74,000.00."18 Q So this building was purchased for $74,000.00 of GLC,19 Limited money but is not titled in the name of the company, is20 that right?21

22A

Q

That is correct.And how is that building titled?



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1 A What I've been told is it's in the name of Greg and2 Linda Crabtree personally.3 Q And we talked a little bit about the various4 warehouses. What's the condition of those warehouses? You5 visited them, right?6 A I have. We've now collapsed the warehouses so that7 we could control the expenses. We have two warehouses in8 Huntington and one in Columbus, Ohio today. I almost can't9 describe how unorganized the warehouses are. If you were to

10 take a 70,000 square foot warehouse and have racking in it that11 goes three racks high, it is just absolutely packed full of12 inventory. None of it is categorized, none of it is13 catalogued, there is no inventory control system that would14 tell you that we have coffee pots on rack 3, row 2, aisle 5.15 There's no control system for any of it.16 The first time I visited the Huntington warehouse17 which is really the primary location with most of the assets,18 you couldn't even walk down the aisles. There were so many19 boxes that there was no way you could get fork lifts down them20 to get to anything. You couldn't even walk through the aisles.21 So it's just completely unorganized and just very cluttered.22 Q Have you been able to ascertain to what extent the23 contents of that warehouse is either saleable or un-saleable?



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1 A Well, I'll give you an example. There were 7,800,2 rough number, 7,800 appliances. These could be anything from3 the little mini refrigerators on through full size4 refrigerators, ovens, microwaves, cooling refrigerators, those5 types of things. We thought that was going to be a good asset6 for us to be able to sell. And what we found out was that only7 about twenty percent of the items that when they came in8 worked. They were all items that had been returned by the way.9 There was none of this that was new product. These were items10 that had come from Wal-Mart, they had come from Target, they11 had come back from Sears, a number of large retail locations12 where they were just simply returned, then they go back to a13 distribution center and then they sell these items to somebody.14 And so consequently we went through 7,800 appliances and15 plugged them in to see what would work and what wouldn't. And,16 you know, today I think we have roughly 400 of the17 refrigerators, little mini refrigerators, that we know operate.18 The rest of the items were scrap and so we scrapped them for19 scrap value.20 Q You mentioned GLC Enterprises. If I could refer you21 to Exhibit 2. Mr. Burritt, can you please tell us what is22 Exhibit 2?



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441 A Well, at the same time that we put together the2 organization chart on Exhibit 1 we did the same thing for GLC3 Enterprises which is really just a DBA business for Greg and4 Linda Crabtree.567

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Q Alright, when you say we, who did you work with onthis?

A I'm sorry, I was sitting with Mr. Crabtree as we putthe documents together.

Q Alright, thank you. And can you walk us through the10 organization document for GLC Enterprises?11 A Well, what we were trying to understand is what12 assets belonged to GLC, Limited. And so as we constructed this13 document Mr. Crabtree advised us that he had a number. We14 never did get to how many houses or apartment complexes or15 apartments. But he had a number of rental properties. So16 that's the first box under GLC, Limited. In 2010 there was a17 purchase of a combination car and pet wash. Typical kind, pull18 into a car wash and spray with a hose and I guess you do the19 same thing with pets. That's located in Proctorville, Ohio, by20 the way, just down the street from the hardware store and the21 hardware store warehouse. And then the hardware store22 warehouse was the other asset that they had referenced was a23 part of GLC Enterprises.



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1 And that's the same hardware store warehouse you2 previously discussed, right?3

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QCorrect.GLC Enterprises then is what?

A Well, it appears to be assets owned by Greg and LindaCrabtree or at least in their name.

Q Thank you. I'd like you to next take a look and talk8 to you a little bit about what we've marked as Exhibit 3.

MR. FROOMAN: Judge, would a paper copy help you at10 all?11 THE COURT: I'm good, I can see it right here, Mr.12 Frooman, thank you.13 MR. FROOMAN: Thank you, Your Honor.14 Q Can you identify for us Exhibit 3?15 A This is the financial analysis that we completed to16

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rebuild, if you will, the financial records of GLC, Limited.Q And when you say we, what was your role in the

preparation of this document?A Well, I was responsible for requesting the document

20 and provided a small amount of assistance, if you will, to the21 team from Mainstream. My colleague who is here, Ms. Rueber,22 really is the one who had the ultimate responsibility for23 pulling this together.



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1 So if you have more questions about the detail of how2 this was put together she would be the one to talk to?3 Yeah, I mean~ I can speak to a high level but if4 there's specific questions about the detail Lori has a lot more5 information than I do.

Q Thank you. Mr. Burritt, why was this financialanalysis prepared?

A We had no foundation with which to work from the GLCfinancial documents. We just didn't have any information thatwe felt was credible that provided us with a platform, if youwill, to understand what had happened and what was happening inthe business.

Q This is your effort then to rebuild the financialstatements of the company?

A That's correct.Q If we need more detail we'll talk to Ms. Rueber but

17 could you discuss and explain to the Court generally how this18 document was prepared?19 A Sure, be happy to. It goes back to our earlier20 testimony. The process was very complex because of the lack of21 information and because of the 133,000 plus line items within22 the Quick Books system. But what we did is we went back to the23 financial records that did exist in the company, that being the



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47Quick Books system. We pulled out, if you will, all of the

2 sources of cash, the incoming cash, we pulled out all of the3 outgoing cash, cash out, and we simply then looked at each4 transaction. And the way that we ended up needing to look at5 that was by pulling, again, all of the bank records, the6 monthly statements for each of the accounts, copies of checks7 that had cleared, deposit tickets, wire transfers, all of the8 associated documents that would support the incoming and9 outgoing cash of the company.

10 As that was done, the spreadsheets that you11 referenced that then contained all of this information were put12 together. And, if you will, this is a very high level summary13 and kind of a bubbling up of all of that information.14 Q You make the reference to what I referenced. And, of15 course, I just referenced it as a proffer. So what you're16 presenting, Mr. Burritt, is evidence. Can you tell us roughly17 how many Excel spreadsheets or pdf documents provide the18 support for this, if you know?19 A I quite honestly don't know. I can speak more to the20 amount of time that people put into the project but as far as21 the number of pages I really don't know.22 Q If you can speak to the ...



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481 THE COURT: Can I interject here, Mr. Frooman? You2 are doing a fine job of making a record but I would really like3 us, if we can, to hone in on the reason why the injunction is4 warranted giving me the specifics of and a basis upon which to5 impose the injunction. The injury, I think, has been6 sufficiently described in terms of we've got here an enterprise7 that had no controls and we clearly have funds coming in8 unaccounted for. What I'd really like to know about though is9 lack of evidence showing where the funds went and giving me, in

10 other words, a basis upon which to enjoin the Crabtrees from11 further transfers of any of the assets that they have, only12 subject to the budget that yet has been proposed.13 MR. FROOMAN: Thank you, Your Honor. I'll jump14 forward and do just that.15 Q Having completed this financial analysis, did you16 have some conclusions as to the investor money that was17 discussed on page 22 of Exhibit 3?18 A Well, the conclusion is that there is no correlation19 between the money that came in from investors and the way that20 funds were spent through GLC. So if you will, there's no way21 that you can tie $81,000,000.00 that came in to $6,000,000.0022 in sales and $11,000,000.00 in inventory purchases. You know,23 we looked at a number of public companies that fit into a



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1 similar space trying to rationalize, if you will, the numbers2 of, whether they be gross profits or cost of goods sold or3 something that would help us understand all of this, and4 there's just no correlation between the amount of money that5 came in and what was spent on inventory and then, again, on6 sales.7 Now, I also discussed during the proffer the fact8 that the sales for 2008 appeared to be overstated by9 $8,000,000.00 and the sales for 2009 appear to be overstated by10 $4,000,000.00. Are you familiar with those facts?11

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A Yes.Q On what basis did you conclude that the sales seemed

to be misstated?A Again, I hate to keep going back to kind of the same

thing but it goes back to what we saw in the financial recordsof the company, the ones that existed, providing us withinformation on in-store sales.

Q Is there some explanation for ... I'm sorry, that's abad question. Have you talked to Mr. Crabtree about these

20 concerns, these issues?21 A Yes.22 Q And how does he respond?



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50A Mr. Crabtree is not big on detail. He's not a person

2 whose mind runs to the financial sides of things and he really3 can't explain it. He references the external accountant was the4 person who pulled all this information together and that he5 trusted the work that she did.6 Q Is it fair to say that there are millions upon7 millions of dollars that appear to be unaccounted for?8

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Yes.You've asked Mr. Crabtree about that?Yes.Do you have any reason to believe that there were

12 monies paid to or on behalf of the Crabtrees by GLC13 Enterprises?14

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By GLC Enterprises or GLC, Limited?I'm sorry, GLC, Limited. Thank you.Yes, we do. We've seen, I don't remember the exact

17 number, but maybe five hundred different entries where money18 was paid directly to Crabtrees, cars were purchased, property19 was purchased beyond the hardware store warehouse that we've20 already talked about. Some items, there's a boat dock, there's21 a houseboat. The notes in the general ledger system were22 better than we would have expected and so there's these five



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511 hundred different items that clearly show money that came out2 of GLC and went directly to the Crabtrees.3 Q And then there's the unaccounted for sales, the4 missing cash if you will?5

6AQ

Correct.You understand that an injunction, what we're

7 requesting today is an effort to maintain the status quo and8 freeze the Crabtree's assets?9

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A Yes.Do you feel that's necessary?Yes.

QA

Q Why?A We don't know what the Crabtrees have. At each turn

that we've made in our dealings with them I think it's fair tosay we've been disappointed by what we've ended up learning.We've been told one thing and after diligence and effort, whatwe've discovered is something completely opposite. And Mr.Crabtree, Mr. and Mrs. Crabtree have taken a very modest salaryout of this business over the last couple of years. But eventhough their lifestyle is not what you would refer to asglamorous it certainly is greater than what a person that hastaken the salary that they have out. And so there's just I

23 think there's, in my mind, there's a huge number of questions



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521 that are still unanswered. There are concerns that we have2 about these properties that they've already told us about. We3 can see going back through the records where the purchases have4 been made with GLC, Limited funds. It just is a worry, I5 think, on my part in the position that I hold that if we don't6 get control of these, if we aren't cautious in every step that7 we take that they could disappear.8 MR. FROOMAN: Your Honor, unless you have any other9 further questions or information you'd like, I would be

10 complete.11 THE COURT: Okay, thank you, Mr. Frooman. Just one12 question, Mr. Burritt, if I may ask. Do you in your forensic13

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accounting work with GLC, Limited, have you been able toascertain the funds coming in through these creditor/investors,where those funds were deposited and, perhaps, we talked alittle bit about, perhaps, where some of those funds went, buthow about the funds coming in and any controls in that area?

A We do see that in the documents, Your Honor. We were19 able to track back, of the $81,000,000.00 that came in, we've20 been able to place all but about $3,000,000.00 with specific21 investors. So we think, you know, it's not perfect yet and22 we're still waiting for a little bit of information, but we



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531 feel very good about that information that we're able to tell2 what investors, what amount, what date, that type information.3 THE COURT: So you've seen a pattern, in other words,4 of the funds coming in from investors and then being paid out5 to other earlier investors according to the terms of the6 agreements between those investors and the Crabtrees?78

A That is correct.THE COURT: And so the bank accounts seem to support

9 this. Were they using specific bank accounts for this purpose?10 You've indicated Mr. Crabtree was not a detail person so I'm11 wondering how this all was promoted and continued on.12 A There were several bank accounts that were used as13 the primary vehicles, if you will, to get cash back to other14 investors, we can see that quite clearly. There were other15 parties that also advised Mr. Crabtree on what to pay, how much16 to pay, who to pay it to and when it should be paid. So the17 fact that Mr. Crabtree isn't the most detail oriented person in18 the world, he had some assistance, if you will, in kind of19 working through these issues.20 THE COURT: Were there commissions being taken for21 some of these investments by the Crabtrees or some other form22 of compensation being paid from funds coming in before they23 actually went out?



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541 A What I can tell you is that there are documents,2 handwritten documents, that would indicate that there was a3 profit sharing, is the term that they were using, where funds4 were split, if you will, from the investor money coming in.5 THE COURT: Alright, thank you, Mr. Burritt, for6 answering the Court's questions. Mr. Frooman, I turn to you to7 see if you have any follow-up as a result of the Court's8 questions.9

10

MR. FROOMAN: I don't, Your Honor.THE COURT: Mr. DeBorde, did you have any inquiry of

11 Mr. Burritt?12

13

MR. DeBORDE: No. No questions, Your Honor.THE COURT: Thank you, sir. Okay, Mr. Burritt, you

14 may step down.15 MR. FROOMAN: Your Honor, we do have Ms. Rueber here16 if the Court has further questions, if they feel the summary17 provided by Mr. Burritt as to how Exhibit 3 was prepared is18 insufficient, she could provide more detail. If not, I would19 tender it as a summary pursuant to Rule of Evidence 1006 I20 think.21 THE COURT: I think you may be correct but I am not22 going to look at the rule book at this point. The Court is23 satisfied that the record has been made in order to support the



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551 order imposing an injunction on any further transfers of assets2 or other property by the Crabtrees based upon the proffer that3 you've given, Mr. Frooman, as well as the testimony and other4 evidence of record.5 Did you want to make a motion for the admission of6 any of your exhibits? We've gone through a couple of them. I7 don't know how many of them we actually went through.8 MR. FROOMAN: I think, Your Honor, I would. There9 were just three exhibits. Exhibit 1 was the GLC, Limited, Inc.

10 organizational structure; Exhibit 2 was the GLC Enterprises11 structure and Exhibit 3 was the GLC, Limited, Inc. financial12 analysis. If we could move those three exhibits into evidence13 please.14 THE COURT: I'm assuming there's no objection from15 you, Mr. DeBorde?16 MR. DeBORDE: No, Your Honor.17 THE COURT: No objection then the exhibits as18 proffered, Exhibits 1 through 3, will be admitted into evidence19 ad become part of the record.20 Alright, you've tendered an order already.21 MR. FROOMAN: I need to tender a new order consistent22 with the discussions we had with Mr. Crabtree's attorneys this



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561 morning, something that gives them that budget they'll be2 presenting to us within the week.3 THE COURT: But in the meantime they will be enjoined4 from transferring ...5 MR. FROOMAN: Immediately. The order that we expect6 to tender is exactly identical to what's already been uploaded7 with the Court. We're going to add another paragraph that says8 that they'll provide a budget to us within a week and that we9 will then submit a new order that excepts from this broader10 injunction those what we expect to be necessary living expenses11 and also the $5,000.00 that they're permitted to, up to12 $5,000.0013 THE COURT: And that's per week or is that just for14 one week?15 MR. FROOMAN: It's just for one week, Your Honor. If16 they don't get us a budget or we can't agree on one within one17 week, it's going to be incumbent on them to request an18 expedited hearing from this Court or they've also indicated19 they might just file bankruptcy and that's certainly his20 prerogative.21 THE COURT: Okay, I've got the three options22 presented at the top of the hour so I understand completely23 where we might be. Mr. DeBorde?



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571 MR. DeBORDE: Your Honor, just one follow-up point.2 It is always possible that the agreed order will not be agreed3 on since we're dealing with multiple different parties, so we4 may have a different order other than an agreed order to5 present. But I'm hopeful we will have the agreed order because6 that's what they told us they would do but they also were very7 equivocal about who represented Mr. Crabtree. So I just wanted8 to throw that out there as being a possibility.9 And the second issue is .,.

10 THE COURT: In other words then, before we jump to11 that, you and Mr. Frooman are of the same mind? We don't have12 any disagreement between you with regard to the contents of the13 order and what's going to be frozen?14 MR. DeBORDE: Correct.15 THE COURT: It's just that we may need to have one of16 three or four different counsel that has been engaged in17 discussions with the debtors' counsel on the Crabtree's18 agreement, is that right?19 MR. DeBORDE: Correct. It's an agreed order between20 the plaintiff.21 THE COURT: It would be the Court's sense that I'm22 not comfortable entering what ... unless they agree, I don't23 know that we should call it an agreed-order. The Court is more



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581 comfortable entering an injunction based upon the record that's2 before the Court which I think supports clearly the need for an3 injunction preventing the Crabtrees from transferring other4 assets. So you may attempt presenting an agreed order if you5 would like and if it doesn't come into fruition then we'll6 simply enter an order of the sort that's been described by Mr.7 Frooman.8 MR. DeBORDE: That certainly takes care of that9 issue, Your Honor. I appreciate it. The second issue is we

10 anticipate the need for, obviously, a lot of information,11 accounting, expedited discovery. We're going to wait until12 they do hire counsel. If they don't then we may be moving on an13 expedited basis for that information. We'll deal with that as14 we get to it. But I just wanted to alert you that that ... and15 the Court had the same questions we do, which is, you know,16 what exactly are we enjoining here, where is it and there's17 really no way to get that information without taking that next18 step.19 THE COURT: Okay. Thank you, Mr. DeBorde. Mr.20 Frooman, before we adjourn today's hearing, the question that21 entered the Court's mind when we first began our discussions is22 has the federal authorities or state authorities on the



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591 criminal side been engaged in any further inquiry along these2 lines?3 MR. FROOMAN: I don't really know the answer to that,4 Your Honor. We have not gone out of our way to alert any5 criminal authorities. We have considered it and we just don't6 know. I can tell you, again rumor, is that there is some7 investigation going on but nobody has yet approached us asking,8 you know, with a warrant or subpoena or whatever they do on9

10

that side of the law. I don't know the answer to that. Wehave considered making an inquiry our self. I'm not, frankly,

11 certain to whom you make that inquiry. Not that I couldn't dig12 a little further and find out but I won't be surprised if and13 when it happens.14 THE COURT: Let's do this though so the Court's fears15 along those lines are allayed to a certain degree. I am16 concerned that when the order is put on that there may be17 the equivocal nature of the discussions with the Crabtree's18 counsel gives the Court cause for great concern here to be19 frank. And I would really like to involve the United States20 Trustee Program in this case and I would invite your21 conversation with Ms . Kent so that she's aware of the Court's22 concerns of the potential that there may be a need for them to23 intercede, at least, and remind the Crabtrees of the penalties



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601 of bankruptcy fraud and the potential for referral to the2 criminal authorities if, indeed, the Court does put down an3 order that enjoins them from dissipating assets and for some4 reason the Court's order is ignored or disregarded.5 MR. FROOMAN: Thank you, Your Honor. I'll make sure I6 call Ms. Kent immediately after this hearing.7 THE COURT: Alright, I do appreciate it. I look8 forward to your order as soon as it hits the Court's incoming9 ECF system and I'll put down an order that enjoins the

10 Crabtrees from further transferring assets wherever they may be11 and of whatever nature they may be.12 MR. FROOMAN: Thank you very much, Your Honor. We13 appreciate the time this morning.14

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THE COURT: Thank you, sir. We're adjourned.

HEARING CONCLUDED



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611 CERTIFICATE23 STATE OF OHIO4 SS5 COUNTY OF CLERMONT:67 I, Janet Atkins, court reporter and Notary Public for8 the State of Ohio, duly qualified and commissioned, do hereby9 certify that the foregoing transcript was by me duly

10 transcribed from an audio compact disc and that the same is11 true and correct as transcribed.12 I further certify that I am not counsel,13 attorney, relative or employee of any of the parties hereto, or14 in any way interested in the within action, and that I was at15 the time of taking said deposition a Notary Public for the16 State of Ohio.17 IN WITNESS WHEREOF, I have hereunto set my hand and18 Notarial seal at Cincinnati, Ohio this 4th day of April, 2011.19

20 sis Janet Atkins21 My commission expires22

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24 January 29, 2016 Janet Atkins25 Notary Public - State of Ohio26



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