Audio Transcript of Keith Henson's
Bankruptcy Case Hearing in Court
May 3,2001 Counsel for Keith Henson: Mr. Zlotoff
Counsel for RTC: Mr. Rosen and Miss Steed
Judge: His Honor Mr. Weissbrodt [This was conducted with the judge on speakerphone because he was out of town. There may be minor glitches in the transcript, the audio is on the web at http://dweeb.com/~bstone/ . hkh] ***************** May I have the appearance of for Keith Henson please. Stan Zlotoff for the Debtor and the Debtor is also present Your Honor. Samuel D. Rosen Paul, Hastings, Janofsky & Walker for creditors RTC. Judge: Gentlemen, does anyone wish to say anything that is not in the papers? Elaine Seed:Your Honor, Elaine Seed here, I am also present for the creditors Mr. Zlotoff: Yes your honor, I do. Judge: Go ahead Mr. Zlotoff. Mr. Zlotoff: Hi Your Honor,ah Judge: It's RTC's motion , so they would go first if they have anything to say that's not in the papers. Rosen: This is Mr. Rosen Your Honor, we have nothing to add to our written submission. Judge: Thank you ZLOTOFF: Your Honor, a lot of the points that allegedly refer to bias on your part, I think, were matters that were raised, or could have been raised three years ago when this case, when the first conflicts in this case developed, and in fact, there was one thing,early on, about three years ago, I believe, in which I believe the debtor filed a motion to set aside a dismissal and the court granted it. There were certain comments to the effect that RTC, that the Debtor was in desperate need of Chapter 13 protection, and that it appeared that RTC was out to crush the Debtor and so forth. In fact the RTC appealed to the BARP and the BARP heard their appeal on those issues. The reason I raise that is not just because, what you might call an argument regarding, an equitable argument against this kind of disqualification this far into the process. Not suggesting waiver or anything like that but rather to point out the huge imposition, the huge prejudice, not really to the debtor, but to the court, the court system here in having such a massive amount of files, I have no idea how many files are stored by the court, but in a case where there are 250 exhibits and a fifteen day trial and a judge, such as yourself, Your Honor, who has managed this for three years. And then because of a pick, because of a sudden dislike that the RTC has and to dump this on another judge who would have to pour through all these volumes of files strikes me as being not just prejudicial to the court, hugely inefficient to the system but given the kinds of things that have been pointed out completely trivial really. Part of the reason I alluded to in my papers is these people don't understand Chapter 13. They are in the business of using the courts, very skillfully , I don't take away anything from the skills of these counsels, they're very skillful. But this is a game , this is a game and that's fine but they don't understand Chapter 13 like I do and the court understands Chapter 13 and for them to want to take this court's time and 15 days and this courts' resources for the last three years and then drop this time bomb on some other judge when to do that is going to hugely impact a number of needy persons to use this court system legitimately for what this system was designed for which is to help people pay their debts, get a fresh start and for creditors to get some kind of payment is just a huge abuse and I don't think the court ought to sit by and tolerate this gamesmanship which is clearly what is behind this motion. It's one thing if the RTC wants to play by the rules that they have,I suppose, one might say, technically speaking, that's fine but this goes over the line. This is really sticking, kind of it's thumb out to the court and saying "We can run the court system, your honor, You can step aside, We don't like you, we'll move on to the next judge." I don't think it should be tolerated. The other thing I wanted to ah... A lot of this is so much smoke and mirrors that we really failed to address, or look at the central issues involved here. And really this case , at bedrock, is a simple case and there are two real discrete objective issues that the court may well rule upon and it may well be dispositive of the case and don't even have to get into the 250 exhibits, which are really, I think, if I am not mistaken, mostly all going to the issue of bad faith. For example the valuation of the Debtor's residence. It is a discrete issue that could be bifurcated. It is totally objective. There was a valuation done when the case was filed, three years ago;' there is a different value of appreciation now. It may be in dispute but it can be objectively determined and there is a legal issue about when you valuate ; at the beginning of the case or at the confirmation date. Again pretty much a straightforward issue. The case could well be disposed of by just determining that issue. The other issue that is a bedrock Chapter 13 issue is feasibility and that may be depositive. Mr. Henson was recently convicted in southern California of some misdemeanor which was based upon, as I understand it, a complaint filed buy RTC having to do with picketing their, you know. In any event, he was convicted and there is a sentencing on May 16 so there is a real serious issue of feasibility. Again, a very discrete, very objective issue. So what I am suggesting; I think it would be an utter abuse to drop this case on another judge when there may well be ways to, not even need to get into some of the issues the RTC concern may cause Your Honor to have to rule on things that the RTC believe you are biased about. By the way, in my papers I point out I don't think so. I think the RTC perceives bias only because it doesn't understand how Chapter 13 works, it doesn't understand the Super Discharge. It doesn't understand the volume of cases this court has to deal with, it doesn't appreciate that it is taking up so much of the court's time and I am sure the court was practically ready to keel over when it realized the huge waste of resources to deal with this basically straight forward uninteresting case. And so I think the court bent over backwards and may that's why the court, relying on instincts towards people towards settlement and thinking in terms of reasonableness in Chapter 13 failed to see that the RTC doesn't care about reasonableness. Thank you Your Honor. Rosen: May I respond? Judge: Thank you Mr. Zlotoff. Yes Mr. Rosen.
ROSEN: Let me start by saying your honor, that I deeply resent many of the comments Mr. Zlotoff has made. Those of his comments I don't deeply resent I reject and I disagree with. Number one: With all due respect Counsel. Please don't tell us, make accusations of gamesmanship. We have a law, we have a set of rules, we have a statute. We follow them. That's not gamesmanship, you don't and your client doesn't. One of the rules is you have an opposition to a motion you put it in the papers not you put in an opposition that says nothing but the Church of Scientology is bad and I'll save everything else for oral argument when the Judge says "Do you have anything else to add". Virtually every comment you've said here are comments that should have been but are not in your papers. So don't talk to me about gamesmanship. You're the one that doesn't follow rules. Second, even when it comes to such simple thing as reporting accurately an event. Mr. Henson was not convicted on a complaint by RTC. It is not quote some misdemeanor. he was convicted for a violation of California's anti-terrorism Statute. The sentencing is going to be, is set for May 16th. Mr. Henson is going away for a long period of time, hopefully, if the sentencing Judge, believes the views of the victims, for the maximum period o under the statute of one year. This is not some spitting on the sidewalk misdemeanor. This California , anti-terrorism statute, counsel, this is a hate crime in simple terms. RTC did not file any complaints. This complaint was filed by individual Scientologists who are not any part of RTC against Mr. Henson. He had his day in court and got convicted on a top count and if you want to talk about feasibility, I want to know why counsel is still sitting here knowing his client is going to jail; what does that have to do with feasibility? Next, counsel debuts now, an argument that we should have made this motion three years ago, that we developed a sudden dislike and those are his words, for the court. That is preposterous. There is nothing we could have filed three years ago, that would have said we were so prescient that three years from now that this court would make comments which we find offensive. Next, with respect to counsel's arguments for prejudice to the system by changing judges. All these debtors waiting for their cases to be handled, that's an interesting proposition except for one thing; the more important proposition of the integrity of the process. The integrity of the courts' processes, they do not yield to avenge(?)counsel because of the exegesis of a court's calendar. There is no prejudice to the system. I don't care how voluminous this file is. This case comes down to what Counsel himself has described as simple issues, valuation, feasibility etc. By casting the case that way counsel is in effect saying that any other Bankruptcy Judge can pick up this file and be up to speed on this case very quickly, because these issues are simple. So, on one hand the issues are simple but on the other hand to burden another judge, another court with these files is unfair. With all due respect to counsel the files are voluminous, they deal in the main with discovery motions we were obliged to make because the Debtor did not comply with the discovery rules. As we approach trial there is no reason for a judge who would take on this case to review on page of that. That is discovery, that is done. Whatever it is it is, whatever the orders were they are. Discovery is over, ready for trial. In fact any judge who took this over would probably have to do nothing more than read the motion we filed last September. That was precipitated the hearing, the setting of the hearing and be brought up to speed on recent developments including the conviction of Mr. Henson two weeks ago and his imminent incarceration. I rile at the notion of Counsel waving this flag that it would be unfair to the system to remove a judge who otherwise should be removed under 455. That is not a justification. Counsel revels in telling us that we don't understand Chapter 13 Law, My co-counsel sitting here Miss Seed would disagree with him. But you know what's more important is what I understand. I am sitting here looking at the wall behind the Judge's bench and it's got the Great Seal of the United States on it and every Federal Court I have ever been in whether it's bankruptcy court or a Federal District Court the rules of 455 apply. Justice does not yield to expediency. If a judge ought not hear a case he ought not hear a case regardless of whether there is going to be a burden on any other judge. So you're right Counsel, I don't know as much Chapter 13 Law as you do but you don't know as much 455 Law and basic tenets of Justice as I do. The next comment I want to make is a simple one and that is we have put forth in our papers what we consider to be a reasonable basis under 455, I cannot underscore or over emphasize the fact that my client, and I do not disclude counsel, my client and his counsel have the abiding feeling that the comments made by this court at the last hearing which really were the culmination of comments that were made last September and November , at which we did not move for disqualification/ But the comments that were made by this Court at the last hearing do not allow for any alternative other than disqualification. Thank you Your Honor. Judge Weissbrodt: Mr. Zlotoff do you wish to reply? ZLOTOFF: Just briefly Your Honor, For Mr. Rosen to be dead sure that Mr. Henson is going to jail for a year and then to say that he doesn't see how feasibility is any way implicated is just nonsense and just shows his lack of understanding of the process. No your Honor I conclude to you.... Judge Weissbrodt: Matter is under submission. Thank you for your arguments.