Richard Bozulich
Kagawa 792-13
Chigasaki
Kanagawa 253
Japan
Tel: 011-81-467-573069
FAX: 011-81-467-573066
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION
----------------------------------------------------------------------
Richard Bozulich,
Plaintiff,
No. C-95 20678 RMW
-against-
James W. Connelley, Elwyn Berlekamp, Nathaniel Berkowitz,
Hartland Snyder, Martin Lowenstein, Anton Dovydaitis, Janis
K. Miller and Ishi Press International,
Defendants.
----------------------------------------------------------------------
DECLARATION OF SAMUEL H. SLOAN IN REPLY TO
THE DECLARATION OF HARTLAND SNYDER
----------------------------------------------------------------------
I, Samuel H. Sloan, declare:
1. I have seen and read various motion papers filed by defendants to this case. I incorporated The Ishi Press International in the State of Delaware in 1985. However, that corporation is not the same corporation which is a defendant to this suit, because the Ishi Press International here was incorporated in California in 1986.
2. I have read and studied and am thoroughly familiar with every document and paper which I have been able to obtain regarding Ishi Press International, a California Corporation. This comes to more than 300 pages of documents. I have read the articles of incorporation, the corporate bylaws, and the corporate minutes through November 1994, plus 124 pagers of documents submitted by Hartland Snyder as "shareholder records" to the Santa Clara County Superior Court, plus numerous contracts, agreements, letters and faxes exchanged between the parties to this action. As a result, I suspect that I am more familiar with the paperwork and documents pertaining to this corporation than anybody except for Mr. James W. Connelley. I have also had innumerable conversations with the principals and parties to this case. This has made me conversant with the facts and with the contentions advanced by the various sides.
3. Each of the defendants has submitted a virtually identical six page statement of facts pertaining to this corporation. I know enough about the history of this corporation and about California corporate law to state categorically that virtually none of it is true. With the exception of a few introductory statements, not even one complete sentence made by these defendants can be supported by documentary evidence.
4. At the outset, their pleadings state, " This action is but one of four different lawsuits brought by plaintiff ..... in his efforts to undo his own voluntary relinquishment of ownership and control over the affairs of Defendant Ishi Press International." When and where did this event occur? There is no documentary evidence in the papers to support this claim. In reality, this corporation started as essentially a partnership between James W. Connelley and Richard Bozulich. However, Richard Bozulich and the corporation in Japan which he controlled always had a majority of the outstanding shares of stock. Ishi Press International was set up as a vehicle primarily to distribute products produced by The Ishi Press, Inc. in Japan, which consisted primarily of books. Mr. Bozulich was quite happy to give Mr. Connelley a free hand to conduct the daily affairs of the American company. It is only relatively recently when it finally became apparent that Mr. Connelley was both stealing from the corporation and blaming Mr. Bozulich for the monumental losses which the corporation was suffering that Mr. Bozulich decided to take some action to stop this.
5. The next paragraph states: In 1989 when the company had annual sales of about $350,000, Ishi Press received an infusion of capital from Defendant Elwyn Berlekamp. Defendant Berlekamp joined Plaintiff and Defendant Connelley to make up the corporation's board of directors. Although Plaintiff remained chairman of the Board, he surrendered majority stockholder control as part of the price for new capital."
6. This is simply not true. The corporate minutes show that Elwyn Berlekamp was not first elected as a director until February 27, 1990. At that point, he had invested no capital in the company. The corporate minutes show that the first time that defendant Berlekamp was invited to invest in the company came at the directors meeting on October 5, 1990. At that time, the directors resolved to sell 4,000 shares of preferred stock at $1.25 per share to Elwyn Berlekamp. Since James W. Connelley owned 120,000 shares, Bozulich owned 100,000 shares and The Ishi Press, Inc., a company controlled by Bozulich, owned 75,000 shares, this sale of just 4,000 shares hardly involved a transfer of ownership and control of the corporation. Moreover, Elwyn Berlekamp was just one of five new equal investors. At the same meeting, the officers were also directed to sell 4,000 shares to David Matson, to Roger White, to The Ishi Press, Inc. and to The Connelley Group. All of these individuals and entities are stockholders in Ishi Press International to this day. David Matson and Roger White are long time acquaintances of Richard Bozulich and have no connection with either James W. Connelley or Elwyn Berlekamp. Roger White was later elected as a director of Ishi Press International at a meeting which took place on February 22, 1991.
7. In 1991, three new investors were allowed into the company. Nob Yoshigahara, a puzzle inventor in Tokyo associated with Richard Bozulich purchased 12,814 shares. Nathaniel Berkowitz purchased 10,000 shares. John Torode purchased 10,000 shares. Although the corporate minutes do not clearly indicate this, it appears that the purchase price was $ 1.25 per share. In addition, 1,000 shares were awarded to Arthur Snyder, the brother of Hartland Snyder "in recognition of his continuing valuable services to this corporation." This, the corporation now had 11 stockholders.
8. There were no further changes until 1993. The corporation continued to have four directors: Richard Bozulich, James W. Connelley, Roger White and Elwyn Berlekamp. However, around 95% of the total outstanding shares were owned or controlled by Richard Bozulich and James W. Connelley.
9. The first sign of serious trouble comes with the minutes of a meeting which took place on July 13, 1993. At that meeting, the directors resolved to issue two notes, one for $17,000 and the other for $90,000, to The Ishi Press, Inc. (Japan) in exchange for the rights to all debts owing from Ishi Press International, Ltd. to The Ishi Press, Inc. These minutes further authorized the sale of all of the capital stock of Ishi Press International, Ltd. to Elwyn Berlekamp and the sale of 71,795 shares series B preferred stock to Martin Lowenstein. These corporate minutes were signed by James W. Connelley and Elwyn Berlekamp but were not signed by Richard Bozulich.
10. It was at this point that a complete breakdown started to occur. It must be explained that Ishi Press International, Ltd. was a London, England corporation which had been set up as a wholly owned subsidiary of Ishi Press International, a California corporation. However, there is no mention of this transaction in the corporate minutes. Up until this time, all meetings of directors had been conducted under the supervision of law firm of Tomlinson, Zisko, Morosoli & Maser, 200 Page Mill Road, Palo Alto CA 94306. However, from this point on, that law firm did not participate in these meetings. It is also apparent that from this point on, Connelley started doing whatever he wanted without consulting Bozulich, a situation which has ultimately led to the current litigation.
11. The next and last meeting which took place before there was a complete breakdown in relations took place on September 1, 1993. These minutes are uneventful except that Timothy Tomlinson of the law firm of Tomlinson, Zisko, Morosoli & Maser was re-elected as Assistant Secretary of the corporation and Roger White was no longer listed as a director. Again, Bozulich did not sign the minutes.
12. As part of a tentative deal arranged by Hartland Snyder to try to bring about a settlement between Bozulich and Connelley, I was allowed to view the corporate minutes in mid-October, 1994. I was shocked to discover that the most recent corporate minutes in the minute book were for the meeting which took place on September 1, 1993, more than one year earlier. When I asked Connelley about this, he replied that he had "not gotten around to doing them yet", but that this didn't matter, because nothing much happened at those meetings anyway.
13. However, only about three weeks later, at the time of the special meeting of stockholders which took place on November 7, 1994, I was able to obtain a complete copy of the minutes and I found that a whole bunch of new minutes had been added, but that none of them had been signed. It was apparent that Connelley had been hard at work on his word processor to produce back dated corporate minutes. It was also apparent and obvious that these minutes were so slanted and skewed to Connelley's point of view that they had no value other than to express the opinions of Mr. Connelley. The first such meeting took place on September 29, 1993. It is noteworthy that Timothy Tomlinson apparently did not participate in this meeting, even though he had been elected corporate secretary only four weeks before.
14. What was quite obviously happening, which is apparent not only from these minutes but from the numerous other corporate documents I have seen, was that The Ishi Press, Inc. in Japan had been shipping products to both Ishi Press International in San Jose California and to Ishi Press International, (UK) Ltd. in England, on credit, but these corporations had been unable to pay the notes as they came due, which was usually nine months later. Although the minutes produced by Connelley states that the problems of The Ishi Press, Inc. (Japan) stem from the rising value of the yen, the actual problem was the high overhead of the Connelley operation in San Jose, which was spending at the rate of $14,000 per month on overhead, including more than $4,000 per month for Connelley's salary alone, on gross sales of less than $900,000 per year.
15. The main point is that as of the beginning of 1994, Nathaniel Berkowitz and Elwyn Berlekamp both had tiny amounts of stock in Ishi Press International. Even Nob Yoshigahara, a close personal friend of Richard Bozulich in Japan, held more shares than either of them. Thus, the claim that Plaintiff "surrendered majority stockholder control as part of the price for the new capital" is utterly false. Very little new capital was invested in Ishi Press International, a California corporation, and few shares in that corporation were purchased by Berlekamp and Berkowitz. However, where Berlekamp and Berkowitz apparently did make a significant investment was in a different corporation, namely Ishi Press International (UK), Ltd., which they owned entirely after having purchased it from Ishi Press International and which Bozulich never managed or controlled. Unfortunately for them, that corporation shortly thereafter became defunct.
16. In the next paragraph is the following statement: "Late in 1993, Plaintiff sent a letter, on Ishi Press letterhead, to a competitor, Sidney Yuan, in which Plaintiff threatened to kill him. The competitor circulated that letter among the prominent members of the GO community in the United States. Ishi's Board persuaded Plaintiff to resign as Chairman and to install Defendant Berkowitz as Chairman."
17. It can be demonstrably proven that this is not really what happened. According to Sidney Yuan, this letter arrived in January, 1994. However, Berkowitz became Chairman of Ishi Press International in December, 1993. Thus, these two events had no connection with each other. Also, Sidney Yuan states that he never circulated the letter. It is apparent that it was actually Hartland Snyder who circulated the letter.
18. The next paragraph states: "In early 1994 Berkowitz loaned $50,000 to the company, and these funds and additional funds from Ishi's cash reserves were used by Plaintiff to satisfy personal obligations."
19. Again, it can be demonstrably shown that this is not what happened. In the first place, Richard Bozulich has never had check signing authority over the bank accounts of Ishi Press International. Only James W. Connelley has had that authority. This, Bozulich could not simply draw the money out of the corporate bank accounts and spend it to satisfy personal obligations.
20. What really happened is that United Exporters, a company managed or controlled by Berkowitz, paid The Ishi Press (Japan) $50,000 for books and equipment which The Ishi Press (Japan) had previously shipped to Ishi Press International (UK) Ltd. It is to be recalled in paragraph 9 above that the Ishi Press International had issued notes totaling $109,000 in consideration of these shipments by Bozulich to the wholly owned subsidiary. Later on, Berkowitz and Berlekamp purchased that subsidiary. The $50,000 which Berkowitz had United Exporters pay was in settlement of this debt for this $109,000 in debt. The consideration which Berkowitz received for the payment of this $50,000 was the trade accounts receivable which were the primary assets of Ishi Press International (UK) Ltd. Thus, the payment of $50,000 was not a loan. It was a purchase. Unfortunately, according to Mr. Berkowitz, his employee in England, Tim Meyrick, later on stole all of the money. This was not the fault of Mr. Bozulich, as he had never hired or employed Mr. Meyrick in any capacity. Also, it is absurd to believe that Nathaniel Berkowitz, a shrewd and sophisticated businessman, would ever loan $50,000 to Ishi Press International, a corporation which was already deeply insolvent.
21. Next, the defendants state: "Late in 1994, when Plaintiff demanded more money from the company and its investors, including Defendants Berlekamp and Berkowitz, he was told that additional funds would not be contributed."
22. I have never seen any indication that Richard Bozulich ever demanded any funds at all from Elwyn Berlekamp or Nathaniel Berkowitz. To the contrary, I have seen innumerable letters from Berkowitz demanding that Bozulich pay him $50,000. In addition, I had a meeting with Berkowitz and Hartland Snyder in the office of Berkowitz at 1095 Market Street in San Francisco in October, 1994. At just the time of this meeting, a call came from Connelley stating that he absolutely had to have another $65,000 from whatever possible source to get through the Christmas rush. Every indication I have received shows that Connelley was calling again and again, always asking for more money. As soon as he would get it, he would spend it.
23. According to the figures provided by Connelley, the gross sales of Ishi Press International in 1994 was in the range of $900,000. Almost all of these sales came from goods shipped by The Ishi Press (Japan) and Richard Bozulich. Connelley would mark up the price by double or more and then sell them. And yet, he hardly ever paid Bozulich or, for that matter, any of the wholesale suppliers whom he did business with. Connelley also never paid royalties on any of the books which he published. When Bozulich "demanded money" as they claim, he was merely asking to be paid for the goods which he had shipped on credit or to be paid back the loans he had made to Ishi Press International.
24. It is obvious that a great deal of money had disappeared. Accepting the figure of $900,000 in sales as provided by Connelley and the figure of $14,000 per month in overhead, another figure provided by Connelley, there is still a lot of missing money since Bozulich, who produced, shipped and supplied almost all of the goods which were sold, was rarely paid. However, Connelley created a bookkeeping and accounting maze by writing his own computer program to keep the books and records of the corporation,. a program which nobody other than Connelley and possibly Janis Miller can understand. These are accounting records which Richard Bozulich is trying to get access to, access which is being denied by these defendants. However, from my very limited viewing of the records, even if the gets the records, he will get nothing useful, because the records are so convoluted and confused as to be unintelligible.
25. In the next paragraph, the defendants state: "In Spring 1995 Plaintiff launched a new company, Kaseido [sic] in Japan with new capital obtained by fraudulent means." What really happened is that because these defendants had made such a mess of the Ishi Press name, Bozulich decided to restart from scratch. However, the defendants, especially Hartland Snyder, were not about to let him do that, knowing that without the supply of books and other products from Richard Bozulich, Ishi Press International cannot survive in business. As a result, Hartland Snyder started writing letters to third parties exposing the foul deeds which he claims to have been committed by Bozulich and asking these third parties to disconnect themselves with Bozulich and align themselves with Hartland instead. This is the reason why Hartland claims that: "However, eventually the investors of Kaseido learned of Plaintiff's duplicity and fired him as president." Unfortunately, from the point of view of Hartland Snyder, this has not happened, because many of the people to whom he has been writing these letters are not the employers of Mr. Bozulich. Rather, Mr. Bozulich is the employer of them. Richard Bozulich is the owner of Kiseido.
26. Hartland Snyder became involved in this company as a stock broker and investment advisor. He placed ads in the Wall Street Journal and elsewhere and brought in Elwyn Berlekamp and Martin Lowenstein as investors. Presumably, he received a finder's fee or some other form of compensation. It is well known that a stock broker must provide an offering circular or prospectus to potential investors. During the period in question, Ishi Press International did have an offering circular, which was composed by Connelley. Here is, in part, what it said:
"10. Minority Interest and Control. Investors in this offering will hold a minority interest in the Company. As a group, Richard Bozulich and Ishi Press, Inc. presently control the company and its business affairs.
"Certain Transactions. The Company has an exclusive distribution contract granted to it by Ishi Press Inc. Ishi Press Inc. is controlled by Richard Bozulich, chairman of the board of directors of the company, and is the holder of 75,000 shares of the company's Preferred stock. The distribution contract requires the Company to purchase not less than $70,000.00 worth of Ishi Press, Inc.'s products per year and is subject to termination in the event such payments are not made.
"Ishi Press, Inc. may purchase Preferred stock in this offering and it is anticipated at the conclusion of this offering, Richard Bozulich and Ishi Press, Inc., as a group will control the company."
27. One of the claims which Hartland Snyder persistently makes is that Ishi Press International has some sort of monopoly over the products that The Ishi Press (Japan) produces and that no other company either in America or in Europe has the right to market those products. This is simply nonsense. The Ishi Press (Japan) has never granted an exclusive distribution agreement to anyone in Europe. In America, Ishi Press International had an exclusive agreement, but only so long as it purchased and paid for at least $70,000 worth of products per year. It is obvious that no such payments have been made for at least two years. Thus, the efforts by Hartland Snyder to stop Kiseido from distributing Go World magazine as well as books originally published by The Ishi Press (Japan) is clearly illegal.
------------------------
Samuel H. Sloan
VERIFICATION
I, Samuel H. Sloan, am not a party in the above entitled action. I have read the foregoing declaration and know the contents thereof. The same is true of my own knowledge, except as to those matters which are stated upon information and belief, and, as to those matters, I believe them to be true. I declare under penalty of perjury under the laws of California that the foregoing is true and correct.
December 11, 1995
--------------------------
Samuel H. Sloan
CERTIFICATE OF SERVICE
Samuel H. Sloan declares under penalty of perjury under the laws of California that he is not a party to this action and that on December 11, 1995 he served the within declaration by mailing a true copy of the same to:
Howard D. Neal
6200 Antioch Street, Suite 202
Oakland, California 94611
________________________
Samuel H. Sloan
DATED: December 11, 1995