JEFFREY WITTENBERG (State Bar No. 250688) WITTENBERG …

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JEFFREY WITTENBERG (State Bar No. 250688)jeffrey~wittenberglawyers. cornWITTENBERG LAW APC401 Wilshire Boulevard, 12th FloorSanta Monica, California 90401

JAMES GOLDMAN (State Bar No. 57127)jgo1dman~rni1lerbarondess.cornMINH-VAN T. DO (State Bar No. 314201)[email protected] BARONDESS, LLP1999 Avenue of the Stars, Suite 1000

California 90067(310) 552-4400

Los Angeles,Telephone:Facsimile: (310) 552-8400Attorneys for Nominal Plaintiff MICHAEL REACH,DERIVATIVELY ON BEHALF OF OCEANTOWERS HOUSING CORPORATION

MICHAEL REACH, DERIVATIVELY ONBEHALF OF OCEAN TOWERS HOUSINGCORPORATION,

Plaintiff;

JOSEPH SPAHI; JOSEPH ORLANDO;JOSEPH INCAUDO; OMAR SPAHI;DOROTHEA SCHIRO; JANET FULADIAN;SElF ASCAR, individually and as Trustee of theAscar Family Trust, dated July 5, 2012; APEXINVESTMENTS GROUP LTD., dIbIaI APEXINVESTMENTS INC; CAVOUR PARTNERSLIMITED LLC; ENENSTEIN RIBAKOFFLAVINA & PHAM, A PROFESSIONALCORPORATION; PATRICK AMBROSE;SHELDON STEIN; LAZOU “KAY”YOSHIK.AWA; PETER ALEVIZON; andDOES I to 100, inclusive,

OCEAN TOWERS HOUSINGCORPORATION, a California Corporation,

CASE NO. SC124263 (Lead Case)(Related to SS027262)

Assigned for All Purposes to:Hon. Lisa Hart Cole, Dept. 0

NOMINAL PLAINTIFF’SSUPPLEMENTAL STATEMENT OFPOSITION ON OUTSTANDING VOTINGISSUES

Telephone:Facsimile:

(310) 295-2010(877) 352-2011

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SUPERIOR COURT OF THE STATE OF CALIFORNIACOUNTY OF LOS ANGELES, WEST DISTRICT

SANTA MONICA COURTHOUSE

v.

Action Filed:Trial Date:

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June 3,2015None Set

Defendants.

Nominal Defendant.

4082J8.I

NOMINAL PLAINTIFF’S SUPP. STATEMENT OF POSITION ON OUTSTANDING VOTING ISSUES

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1 SUPPLEMENTAL STATEMENT OF POSITION ON OUTSTANDING VOTING ISSUES

2 As Nominal Plaintiff Michael Reach ("Reach") has previously explained, Reach believes

3 that a continuance ofthe election to January 22, 2019 is unwarranted and highly prejudicial to

4 Ocean Towers Housing Corporation ("OTHC"). As the Court knows, the most recent special

5 assessment will cover the Receiver' s fees and expenses through January 15, 2019. That date was

6 selected because the election was scheduled to take place on December 19, 2019 and it was

7 assumed that the Receivership would remain in place for about a month after the election. If the

8 election is moved to January 22, 2019, then the Receivership will remain in place for an additional

9 month. This will likely require an additional special assessment, which is entirely unfair to the

10 OTHC shareholders, who will be extremely upset about that happening. The OTHC shareholders

11 were led to believe that, in light of the election, no further special assessments would be needed to

12 pay for the Receivership.

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The democratic process has been fair and lengthy. All shareholders have been provided

ample time to vote, and have been infonned by the Receiver and others that they should vote

notwithstanding receipt of a delinquency letter from the Receiver's counsel. In fact, many of

those. shareholders who received delinquency letters have voted.

Mr. Heller's email of Sunday, December 16 at 5:47p.m. (a copy ofwhich is attached

hereto) states that if all shareholders will be permitted to vote, then they must be notified of that.

Mr. Heller ignores the fact that 80% ofthe shareholders have already voted. The harm inflicted

on OTHC shareholders by way of an extension of the very costly Receivership is far greater than

21 going forward with the election on December 19 and counting the ballots submitted by 80% of the

22 shareholders.

23 The Court has repeatedly stated its desire to have OTHC return to self-governance as soon

24 as possible. That process can and should commence on December 19, 2018, at the currently

25 scheduled annual meeting at which time the ballots will be counted. The transition process from

26 the Receiver to the new Board will still take weeks to finalize, especially given the intervening

27 holidays.

28 Reach is concerned that the real reason why the Receiver wants to extend the election (and 408218.1 2

NOMINAL PLAINTIFF'S SUPP. STATEMENT OF POSITION ON OUTSTANDING VOTING ISSUES

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to extend it for a second time, and for more than a month) is not what it appears to be. As

explained in his email of December 16, Mr. Heller believes that the Receiver has made meaningful

progress in settlement with Mr. Spahi. But meaningful progress of any potential settlement with

Mr. Spahi is not grounds for extending the election at great cost to the OTHC shareholders.

Having said that, if the Court is nevertheless inclined to continue the election over Reach's

objection, then: (1) the election should be continued to first date after December 19, 2018 that is

feasible, but not later than January 8, 2019, one of the dates on which the Inspector of Elections is

available; and (2) the Court should require the Receiver to include a condition in the settlement

agreement that the Receiver is negotiating with Mr. Spahi that the settlement be approved by the

new board. The second condition is necessary to ensure the continuances (first, from November to

December; and then, from December to January) are not used to deprive the new board of what

would otherwise be its authority to decide whether and, if so, how to settle with Mr. Spahi.

As the Court may recall, the Receiver threatened to have the derivative claims realigned so

that he, rather than Nominal Plaintiff and his counsel, could prosecute them. The Receiver then

advised the Court, on November 7, 2018, that he had changed his mind and would leave the

claims the way that that they were, as derivative claims, at least until such time as a new board

was seated. However, the Receiver also advised the Court that he had commenced settlement

negotiations with Mr. Spahi and U.S. Bank by asking Mr. Spahi "just how much dollars he was

willing to discuss .... " (November 7, 2018 Reporter's Transcript, p. 27, lines 8-9.) Moreover, the

Receiver has conducted a limited forensic accounting with Court approval, and he told OTHC

shareholders that he has already uncovered serious red flags that the new Board will have to look

into. Knowing this, Receiver should not settle with Spahi without obtaining the new Board's

consent. Otherwise, it is a foregone conclusion that the Receiver's " settlement" will surely be

challenged at the trial and appellate court levels if the new Board determines that the Receiver's

settlement is unreasonable, and the settlement will result in even more litigation- not less.

Although the claims alleged by Reach are the primary subject of the settlement, Reach and

his counsel - despite all that they have accomplished in this case and despite the fact that the

Receiver is relatively new to this litigation- were excluded from the negotiations without any

4082 18. 1 3 NOMINAL PLAINTIFF'S SUPP. STATEMENT OF POSITION ON OUTSTANDING VOTING ISSUES

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explanation. The Receiver has refused to respond to requests from Reach's counsel regarding the

2 terms of the proposed settlement. The manner in which the Receiver commenced the settlement

3 discussions with Mr. Spahi (asking him what he was willing to discuss), settling without

4 completion of the forensic accounting or seeking or even permitting input from Reach and his

5 counsel - when combined with the stunning amount of Receivership fees and costs, and the

6 Receiver's decisions relating to the election process (e.g., seeking continuances, disqualifying

7 innocent shareholders for not paying all special assessments in full but permitting Spahi to vote

8 despite his failure to comply with the SLC's demand that he comply with his contractual

9 indemnification obligations) has caused Reach, his counsel, and a substantial number of OTHC

10 shareholders to be very skeptical as to whether the proposed settlement is simply a means to

11 ensure that the mounting Receivership fee and expenses will be promptly paid, as opposed to a

12 means to ensure that OTHC will receive fair compensation for the very substantial damages, fees,

13 and expenses that OTHC has suffered as a result ofSpahi and Orlando's appropriation ofOTHC

14 assets and other fraudulent conduct.

15 We recognize that the Court recently expressed its desire for the new Board to be presented

16 with a clean slate. The Court' s desire is understandable. However, to the extent that the Court

17 feels that a new, disinterested board is inherently incapable of dealing with the ligation, we most

18 respectfully disagree. We believe that it should be up to the OTHC shareholders, through a new,

19 disinterested board, to determine whether any settlement with Spahi and Orlando and other

20 litigation-related decisions are truly in OTHC's best interests.

21 Finally, Mr. Heller notes, in the e-mail he circulated on Sunday (December 16), that any

22 order permitting previously disqualified shareholders to vote would require a court order. That

23 may be the case, but it would also require a court order to continue the election. If the Court

24 intends to enter such an order, there is no reason to continue the election beyond January 8, 2019.

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1 The fact that Mr. Heller will be unavailable on that date is not a good reason to reject that date, as

2 Mr. Heller himself conceded at the hearing on December 13, 2018.

3 DATED: December 17, 2018 Resp ectfully submitted,

4 WITTENBERG LAW APC

5 MILLER BARONDESS, LLP

6 r~ 7 By:

8 James Goldman

9 Attorneys for Nominal Plaintiff

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James Goldman

From: Sent: To: Cc:

Subject:

Honorable Judge Cole-

Robert M. Heller <[email protected]> Sunday, December 16, 2018 5:48 PM [email protected] Aronson, Seth ([email protected]); Leu, Michelle C. ([email protected]); Varnen, Craig ([email protected]); [email protected]; Edward Nassirzadeh Esq ([email protected]); [email protected]; [email protected]; Steve Donell ([email protected]); [email protected]; [email protected]; James Goldman; Todd M. Lander; Jacob Lager RE: 18-12-15- NP Statement of Position on voting- JW Comments.DOCX

-Pursuant to OTHC's governing documents, the election is accompanied by an annual shareholder meeting. The Receiver would be the one to lead that meeting as well as oversee the election itself; -The Receiver is out of town the week between Christmas and New Year's and much of his staff will also be unavailable during that period; -I will be out of the country from 12/24 -1/11/19; -The Inspectors of Election are available to conduct the election in January only on January 8, 22, 23 or 24, 2019; -If the court wishes to permit all shareholders to vote (a position only now requested by nominal plaintiff), the Court would need to amend its prior Order re-instating shareholders who were disqualified because they are on an installment plan; -Further, if the Court amends the prior Order allowing all shareholders on an installment plan to now vote, then the Court may wish to have the Receiver inform all shareholders who were disqualified that they are also now qualified to vote. If all shareholders are going to be allowed to vote, they must be notified that they can vote; -Accomplishing this new course will take time. The Receiver believes that the most practical course of action to accomplish the above is to set the election for January 22, 2019 and the ballot cut-off for January 17, 2019 (the governing documents require all ballots be received five days before the election); and -Finally, there are rumors at OTHC that the balloting and election have been continued. Clarification should be provided to the shareholders as soon as possible.

In addition to the foregoing, the Receiver wishes to report to the court that meaningful progress has been made in global settlement negotiations with Mr. Spa hi and US Bank.

Please let us know if the Wednesday, lOam, court hearing is still going forward.

Thank you.

Robert M. Heller 1 Attorney At Law corpdisputes.com

FREEMAN FREEMAN & SMILEY, LLP

Tel: 310.255.61251 Fax: 310.255.6225

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From: James Goldman [mailto:[email protected]] Sent: Saturday, December 15, 2018 1:58PM To: [email protected] Cc: Aronson, Seth ([email protected]); Leu, Michelle C. ([email protected]); Varnen, Craig ([email protected]); [email protected]; Edward Nassirzadeh Esq ([email protected]); [email protected]; [email protected]; Steve Donell ([email protected]); Robert M. Heller; [email protected]; [email protected] Subject: 18-12-15 - NP Statement of Position on voting - JW Comments.DOCX

Your Honor:

Attached is a courtesy copy of a document that we will be filing on Monday.

James Goldman

MILLER I BARONDESSLU' 1999 Avenue of the Stars, Suite 1000 Los Angeles, CA 9006 7 Direct: 310-552-7569 Main: 310-552-4400 Mobile: 818-631-0177 Fax: 310-552-8400 [email protected] www.millerbarondess.com

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PROOF OF SERVICE

STATE OF CALIFORNIA, COUNTY OF LOS ANGELES

At the time of service, I was over 18 years of age and not a party to this action. I am employed in the County of Los Angeles, State of California. My business address is 1999 A venue of the Stars, Suite 1000, Los Angeles, CA 90067.

On November 17, 2018, I served true copies of the following document(s) described as:

NOMINAL PLAINTIFF'S SUPPLEMENTAL STATEMENT OF POSITION ON OUTSTANDING VOTING ISSUES

BY E-MAIL OR ELECTRONIC TRANSMISSION: Based on a court order or an agreement of the parties to accept service by e-mail or electronic transmission, I caused the document(s) to be sent from e-mail address [email protected] to the persons at the e-mail addresses listed in the Service List. I did not receive, within a reasonable time after the transmission, any electronic message or other indication that the transmission was unsuccessful. on the interested parties in this action as follows:

SEE ATTACHED SERVICE LIST

I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.

Executed on November 17, 2018, at Los Angeles, California.

4082 18. 1 6 NOMINAL PLAINTIFF'S SUPP. STATEMENT OF POSITION ON OUTSTANDING VOTING ISSUES

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SERVICE LIST Reach v. Spahi

Case No. SC124263 (Related to Case No. SS027262)

Seth Aronson, Esq, Michelle C. Leu, Esq. O'MELVENY & MYERS LLP 400 South Hope Street Los Angeles, CA 90071 Tel: (213) 430-6000 Fax: (213)430-6407 Email: [email protected] Email: [email protected]

Craig Varnen, Esq. David Siegel, Esq. Michael D. Harbour IRELL & MANELLA LLP 1800 Avenue of the Stars Suite 900 Los Angeles, CA 90067-4276 Tel: (3 1 0) 203-7550 Fax: (3 1 0) 203-7199 Email: [email protected]

[email protected] mharbour@irell. com

Edward A. Klein Paul D. Murphy David E. Rosen MURPHY ROSEN LLP 100 Wilshire Boulevard, Suite 1300 Santa Monica, California 90401-1142 Telephone: (31 0) 899-3300 Facsimile: (31 0) 399-7201 Email: [email protected]

pmurphy@murphyrosen. com [email protected]

C. Brent Parker, Esq. LAW OFFICE OF C. BRENT PARKER C B PARKER LAW, PC Manhattan Towers 1230 Rosecrans Avenue, Suite 600 Manhattan Beach, CA 90266 Telephone: (3 1 0) 586-2423 Fax: (31 0) 586-2455 Email: [email protected]

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Attorneys to the SPECIAL LITIGATION COMMITTEE OF THE BOARD OF OCEAN TOWERS HOUSING CORPORATION

Attorney for Defendant JOHN SPAHI

Attorney for Defendants JOHN SPAHI and JOSEPH ORLANDO

Attorneys for KAZOU "KAY" YOSHIKAWA, and JOSEPH INCAUDO, PATRICK AMBROSE


1 Edward Nassirzadeh, Esq. Attorney for Defendants APEX NASS LAW FIRM INVESTMENTS GROUP LTD., and

2 9454 Wilshire Boulevard, Suite 700 DOROTHY SCHIRO Beverly Hills, CA 90212

3 Tel: (31 0) 858-7755 Fax: (31 0) 858-2255

4 Email: ed(a),nasslawfirm.com

5 Jonathan E. Altman, Esq. Attorney for Defendants PETER ALEVIZOS MUNGER TOLLES and SHELDON STEIN

6 350 South Grand Avenue, 50th Floor Los Angeles, CA 90071

7 Tel: (213) 683-9100 Fax: (213) 687-3702

8 Email: ionathan.altman(a),mto.com

9 Robert Heller Attorney for Nominal Defendant (Real FREEMAN FREEMAN SMILEY Plaintiff) OCEAN TOWERS HOUSING

10 1888 CenturyParkEast, Suite 1900 CORPORATION and for RECEIVER Los Angeles. CA 90067 STEPHEN DONELL

11 Tel: (310) 255-6125 Fax: (31 0) 255-6225

12 Email: [email protected]

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JEFFREY WITTENBERG (State Bar No. 250688) WITTENBERG …

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