Unites States v. Pokerstars, et al

Filing 270

DECLARATION of AUSA Jason H. Cowley in Support re: 237 MOTION For (1) the Entry of a Proposed Stipulated Order of Settlement Between the United States and Certain Absolute Poker-Affiliated Entities and (2) the Interlocutory Sale of All Assets of Those Entities. MOTION For (1) the Entry of a Proposed Stipulated Order of Settlement Between the United States and Certain Absolute Poker-Affiliated Entities and (2) the Interlocutory Sale of All Assets of Those Entities.. Document filed by United States Of America. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C)(Cowley, Jason)

Exhibit C

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IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

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In re: Application of Madeira Fjord AS, its
bankruptcy estate, for an Order to Conduct
Discovery for Use in a Foreign Legal Proceeding,
Pursuant to 28 U.S.C. § 1782

Civil Action No.:- - - - -

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DECLARATION OF THOMAS STEEN BRANDI
Thomas Steen Brandi declares pursuant to 28 U.S.C. § 1746:
I.

I am a citizen of Norway, residing in Oslo.

2.

1 respectfully submit this declaration in sup_tl)rt of the application of the

bankruptcy estate (the "Estate') of Madeira Fjord AS ("Madeira"), pursuant to 28 U.S.C. § 1782,
for an Order directing that Robert Ronald Janusz ("Janusz") produce certain documents and
submit to deposition testimony in the Northern District of Illinois for use in the Madeira
bankruptcy proceeding pending in Oslo, Norway.
3.

I am an attorney and senior partner in the insolvency, restructuring and

investigation department of Advokatfirmaet Selmer DA ("Selmer"), one ofNorway's largest law
firms. I have continuously practiced law in Norway since 1997. I am regularly appointed by
Norwegian courts to serve as trustee/liquidator in bankruptcy proceedings, head of the debt
negotiations committee in debt settlement proceedings, and/or investigator in respect of
insolvency and asset tracing matters. My practice also includes assistance with financial
restructurings, mergers and capital transactions.

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4.

Madeira was organized as a Norwegian corporation in or about January 2007. On

or about May 10,2011, Madeira was declared bankrupt by Oslo byfogdembete (the "Norwegian
Bankruptcy Court") pursuant to a proceeding identified as No. 11-076587KON-OBYFI1:
Madeira Fjord. See Exhibit A. In addition, by the same order, I was appointed insolvency
administrator of the Estate. See Exhibit A.
5.

In addition, I have been appointed the sole director and Chainnan of a Portuguese

entity called Avoine- Servico de Consultadoria e Marketing, Lda ("Avoine"), which is a
subsidiary of Madeira.
6.

I am vested with the power and authority to control and operate Madeira and

A voine, and their respective subsidiaries and predecessors.

Brief History of Madeira and Related Entities and Transactions
7.

According to the infonnation gathered by the Estate thus far, Madeira is a holding

company possessing certain rights and interests in an internet poker site known as "Absolute
Poker." The corporate_ structure of the entities comprising and/or related to Absolute Poker is
very complex and convoluted. In addition, the many transactions associated with the assets of
Absolute Poker are abstruse. But based on Madeira records found in Norway, the following
facts appear to be true:
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In 2006, the company SGS (BVI) Inc. ("SGS") was the parent company in

the corporate structure of an internet gambling site known as "Absolute Poker." SGS
was owned by approximately 250 US shareholders.
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During or about 2006 are-domicile process of the ownership of"Absolute

Poker" began. The process was initiated through the sale ofthe shares in SGS's
subsidiary Absolute Ente1tainment SA ("AE") to Tokwiro Enterprises ENRG

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("Tokwiro"), a Canadian sole proprietorship owned by former Indian Chief, Joseph
Tokwiro Norton. Then, in 2007, SGS acquired 98% of the stock of Avoine, and
transferred to Avoine the majority of SGS's assets (including all Absolute Poker
intellectual property, as well as SGS's shares in certain of its subsidiaries- i.e., Fiducia
Exchange Ltd. ("Fiducia"), Momentum Technologies Inc. ("Momentum") and Panora
Tech Belize Inc. ("Panora")- for a nominal purchase price. Then, as the next step in a
"mirror image merger," the shareholders ofSGS exchanged their stock for Madeira stock.
As a result, the 250 American shareholders ofSGS had become owners of Madeira,
which owned Avoine, the assets of which were all the operating assets of the Absolute
Poker business. At that point, SGS (then a shell) was dissolved.
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Later in 2007, Avoine sold the majority of its assets, including its shares in

Panora, to AE (then owned by Tokwiro) for $250 million against two promissory notes of
$125 million each. Each of the notes called for AE to make monthly interest and
installment payments to Avoine, each payment in an amount exceeding $1. 7million. The
sales agreements contain clauses pursuant to which Avoine was given security in the
assets and the shares until the purchase price was paid in full. In September 2008 the
parties entered into a separate security agreement (the "Security Agreement").
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Then, in December 2008, Madeira/A voine initiated a pmported

"rescission" of the $250 million sale of assets and shares from Avoine to AE.
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Thereafter, it appears that A voine executed an instrument called an

Exercise of Secured Creditors Rights (the "Exercise Agreement"), by which Avoine
instructed Tokwiro to transfer the assets and shares in AE (and thus the "Absolute Poker

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assets") to an entity called Blanca Games Inc. ("Blanca"), subject to Avoine's continuing
security interest in the assets.
8.

To the best of my knowledge based on Norwegian records, almost none of the

payments due under the notes given as part of the 2007 sale to AE have been paid to Avoine;
and Avoine has also received none of the "license" payments due as a result of the pmported
"rescission" transaction. Thus, it appears that, in connection with the above-summarized
transactions, the significant assets of Avoine - which were valued in 2007 at $250 million and
which were developed with capital supplied by about 250 innocent U.S. shareholders- have
simply been misappropriated by those persons controlling the involved entities.
9.

Based on the forgoing there may be basis to assert substantial claims on behalf of

Madeira as well as on behalfof Madeira's subsidiaries including Avoine.
Robert Ronald Janusz
10.

Upon information and belief, Janusz is a resident ofthe Northern District of

Illinois residing at 2n035 Indian Knoll, West Chicago, Illinois 60185-1779.
11.

At all relevant times, until the commencement of the Madeira bankruptcy

proceeding in May 2011, Janusz appears to have been the chief executive and chairman of both
Madeira and Avoine. In that capacity, he was intimately involved in all of the transactions
described above.
12.

Janusz possesses substantial and exclusive knowledge of the business and

structure of Madeira and its subsidiaries and predecessors that is not obtainable from other
sources.

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13.

Additionally, upon Janusz's initiative and instruction, Madeira "loaned"

$3,125,000 to Universal Business Management Group, an entity operated and controlled by
Janusz.
14.

Pursuant to the Norwegian Bankruptcy Act 1, Janusz has an obligation as a former

chairman of the board of directors of Madeira to inform Madeira and the administrator of the
Estate about Madeira's business operations and economic conditions and to assist it in the
procurement of correspondence, vouchers and other documents of importance to the bankruptcy
proceedings.
15.

Before seeking judicial a<>sistance by means of this application under 28 U.S.C.

§ 1782, the Estate has made several attempts to establish contact with Janusz, in order to obtain

the necessary documentation and information by informal and efficient means. See Exh. B
hereto.
16.

Unfortunately, despite his statutory and fiduciary duties to cooperate with me as

Trustee of the Estate, Janusz has failed and refused to respond to our inquiries.

As translated unofficially, Article 101 of the Norwegian Bankruptcy Act states: "The
Debtor's Obligation to Furnish Information etc. After the bankruptcy decree has been pronounced, the
debtor is obliged to provide the bankruptcy court, the executive trustee, the other trustees and the auditor
with all and any information about his financial conditions and his business conduct before and during the
bankruptcy. The debtor shall also assist in procuring correspondence, accounting vouchers and other
records of importance to the proceedings, and furnish all necessary assistance to secure the assets of the
estate and determine the extent of its obligations. The debtor shall also to the necessary extent assist the
executive trustee in connection with compliance of the information duty of§ 85 first paragraph litra 8.
The rules of§ 18 second paragraph will similarly apply. The revenue authorities shall at the request of the
bankruptcy court or the executive trustee furnish information about the debtor's capital and income.
Regarding the accounting officer and the auditor's duty to assist the rules of§ 18a will similarly apply."

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The Requested Discovery
17.

The discovery Madeira seeks from Janusz include documents and testimony

relevant to the identification of assets and obligations related to the administration of the Madeira
bankruptcy estate.
18.

Madeira also seeks information regarding the corporate structure of the various

entities related to Madeira.
19.

Madeira also seeks information regarding the purchase, sale and transfer of stock

and assets related to Madeira, including those related to "Absolute Poker".
20.

The documents and testimony requested by Madeira are set forth in the proposed

subpoena (attached hereto as Exhibit C), are narrowly tailored and seek only information
relevant to the Madeira bankruptcy proceeding.
The Madeira Bankruptcy
21.

The Norwegian Bankruptcy Court has taken no action to preclude Madeira from

seeking documents and testimony from Janusz. I am also not aware of any rule or order of the
Norwegian courts that would be violated by Madeira's discovery requests.
22.

The purpose of the Norwegian bankruptcy proceeding is to marshal the assets of

the debtor for orderly distribution to creditors. The proceedings in the Norwegian Bankruptcy
Court are similar to those in the United States. The Norwegian Bankruptcy Court will review
and admit evidence and hear testimony from witnesses in connection with the administration and
liquidation of a bankruptcy estate.
23.

I have reviewed Local Rule 26.4 in this District, which states "Where an

interested person requests to take the testimony or statement of any person pursuant to 28 U.S.C.
§1782 for use in a proceeding in a foreign or international tribunal, notice to the parties before

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the foreign or international tribunal must be provided except where the requesting party shows
cause why notice could not be given." Notice of this application pursuant to 28 U.S.C. §1782
has been given to the Norwegian Bankruptcy Court, and to all persons who have filed claims as
creditors of the Estate, pursuant to the notice requirements applicable to proceedings in that
court.

l declare under penalty of perjury under the laws of the United States of America that the
foregoing is true and correct.

Norway
Executed on February 29, 2012, in Osl~o,.

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Tholas Steen Brandi, as trustee

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