Beruflich Dokumente
Kultur Dokumente
TABLE OF CONTENTS
Page
I.
II.
III.
A.
B.
Facts Applicable to the Motion to Dismiss for Failure to State a Claim ................ 8
1.
2.
3.
4.
ARGUMENT .................................................................................................................... 15
A.
The Court Lacks Personal Jurisdiction Over Risen and HMHC .......................... 15
B.
C.
D.
The Court Should Dismiss Under Rule 12(b)(6) Because Plaintiff Fails
to Plead a Plausible Claim for Defamation or Other Related Torts ...................... 26
1.
2.
3.
4.
IV.
a.
b.
CONCLUSION ................................................................................................................. 40
TABLE OF AUTHORITIES
Page(s)
Federal Cases
Acosta Orellana v. CropLife Intl,
711 F. Supp. 2d 81 (D.D.C. 2010) ...........................................................................................40
Adelson v. Harris,
973 F. Supp. 2d 467 (S.D.N.Y. 2013), questions certified, 774 F.3d 803
(2d Cir. 2014) ...........................................................................................................................35
Algodonera De Las Cabezas S.A. v. Am. Suisse Capital, Inc.,
432 F.3d 1343 (11th Cir. 2005) ...............................................................................................22
Alternate Energy Corp. v. Redstone,
328 F. Supp. 2d 1379 (S.D. Fla. 2004) ..............................................................................17, 19
Ashcroft v. Iqbal,
556 U.S. 662 (2009) .....................................................................................................26, 34, 35
Atl. Marine Constr. Co. v. U.S. Dist. Ct. for W. Dist. of Tex.,
134 S. Ct. 568 (2013) ...............................................................................................................21
Baxter v. Palmigiano,
425 U.S. 308 (1976) .................................................................................................................38
Bell Atl. Corp. v. Twombly,
550 U.S. 544 (2007) .....................................................................................................26, 27, 35
Bell v. Associated Press,
584 F. Supp. 128 (D.D.C. 1984) ..............................................................................................37
Biro v. Cond Nast,
963 F. Supp. 2d 255 (S.D.N.Y. 2013)..........................................................................35, 36, 39
Brueggenmeyer v. ABC,
684 F. Supp. 452 (N.D. Tex. 1988) .........................................................................................32
Bryant v. Avado Brands Inc.,
187 F.3d 1271 (11th Cir. 1999) .................................................................................................8
Buckley v. N.Y. Times Co.,
338 F.2d 470 (5th Cir. 1964) ...................................................................................................16
ii
iii
Dowd v. Calabrese,
589 F. Supp. 1206 (D.D.C. 1984) ............................................................................................29
Earley v. Gatehouse Media Pa. Holdings, Inc.,
2013 WL 5466149 (M.D. Pa. Sept. 30, 2013) .........................................................................35
Edwards v. National Audubon Socy, Inc.,
556 F.2d 113 (2d Cir. 1977).....................................................................................................36
Egiazaryan v. Zalmayev,
2011 WL 6097136 (S.D.N.Y. Dec. 7, 2011) ...........................................................................35
Farah v. Esquire Magazine,
736 F.3d 528 (D.C. Cir. 2013) ......................................................................................... passim
Fetter v. N. Am. Alcohols, Inc.,
2007 WL 551512 (E.D. Pa. Feb. 15, 2007) .............................................................................30
Forbes v. Lenox Fin. Mortg. LLC,
2008 WL 2959727 (S.D. Fla. July 30, 2008) ...........................................................................22
Foretich v. Chung,
1995 WL 224558 (D.D.C. Jan. 25, 1995) ................................................................................28
Gertz v. Robert Welch, Inc.,
418 U.S. 323 (1974) .................................................................................................................34
Global Relief Found. Inc. v. N.Y. Times Co.,
390 F.3d 973 (7th Cir. 2004) ...................................................................................................29
Hakky v. Wash. Post Co.,
2010 WL 2573902 (M.D. Fla. June 24, 2010) ...................................................................34, 35
Hanks v. Wavy Broad., LLC,
2012 WL 405065 (E.D. Va. Feb. 7, 2012) ...............................................................................35
Hargrave v. Wash. Post,
2009 WL 1312513 (D.D.C. May 12, 2009), affd, 365 F. Appx 224
(D.C. Cir. 2010) .......................................................................................................................27
Harper v. Walters,
822 F. Supp. 817 (D.D.C. 1993), affd, 40 F.3d 474 (D.C. Cir. 1994) ....................................28
Heidbrink v. ThinkDirect Mktg. Grp., Inc.,
2014 WL 3585698 (M.D. Fla. July 21, 2014) .........................................................................16
Hemispherx Biopharma, Inc. v. MidSouth Capital, Inc.,
669 F. Supp. 2d 1353 (S.D. Fla. 2009) ..............................................................................21, 22
iv
Lohrenz v. Donnelly,
350 F.3d 1272 (D.C. Cir. 2003) .........................................................................................34, 36
Madara v. Hall,
916 F.2d 1510 (11th Cir. 1990) .........................................................................................18, 19
Manuel v. Convergys Corp.,
430 F.3d 1132 (11th Cir. 2005) ...............................................................................................26
Mason v. Smithkline Beecham Clinical Labs.,
146 F. Supp. 2d 1355 (S.D. Fla. 2001) ....................................................................................25
Mayfield v. NASCAR, Inc.,
674 F.3d 369 (4th Cir. 2012) ...................................................................................................35
McDowell v. Paiewonsky,
769 F.2d 942 (3d Cir. 1985).....................................................................................................33
McFarlane v. Esquire Magazine,
74 F.3d 1296 (D.C. Cir. 1996) .....................................................................................17, 34, 38
McFarlane v. Sheridan Square Press, Inc.,
91 F.3d 1501 (D.C. Cir. 1996) ...........................................................................................36, 39
McManus v. Doubleday & Co.,
513 F. Supp. 1383 (S.D.N.Y. 1981).........................................................................................38
Medico v. Time, Inc.,
643 F.2d 134 (3d Cir. 1981).....................................................................................................29
Metcalf v. KFOR-TV,
828 F. Supp. 1515 (W.D. Okla. 1992) .....................................................................................30
Meterlogic, Inc. v. Copier Solutions, Inc.,
185 F. Supp. 2d 1292 (S.D. Fla. 2002) ........................................................................23, 25, 26
Milkovich v. Lorain Journal Co.,
497 U.S. 1 (1990) .....................................................................................................................30
Moldea v. N.Y. Times Co.,
15 F.3d 1137 (D.C. Cir. 1994) .................................................................................................30
Moldea v. N.Y. Times Co.,
22 F.3d 310 (D.C. Cir. 1994) .............................................................................................30, 39
Montgomery v. eTreppid Techs., LLC,
2010 WL 1416771 (D. Nev. Apr. 5, 2010) ..............................................................................23
vi
vii
Silvester v. ABC,
839 F.2d 1491 (11th Cir. 1988) ...............................................................................................33
Spelson v. CBS, Inc.,
581 F. Supp. 1195, 1203 (N.D. Ill. 1984), affd, 757 F.2d 1291 (7th Cir. 1985) ....................31
St. Amant v. Thompson,
390 U.S. 727 (1968) .................................................................................................................34
Stern v. News Corp.,
2008 WL 10712037 (S.D. Fla. Aug. 26, 2008)........................................................................24
Tavoulareas v. Piro,
759 F.2d 90 (D.C. Cir. 1985), revd on other grounds, 817 F.2d 762
(D.C. Cir. 1987) (en banc) .......................................................................................................39
Tavoulareas v. Piro,
817 F.2d 762 (D.C. Cir. 1987) (en banc) ...........................................................................32, 35
Thomas v. News World Commcns,
681 F. Supp. 55 (D.D.C. 1988) ................................................................................................30
Van Dusen v. Barrack,
376 U.S. 612 (1964) .................................................................................................................23
Wai v. Rainbow Holdings,
315 F. Supp. 2d 1261 (S.D. Fla. 2004) ....................................................................................21
Waldbaum v. Fairchild Publns, Inc.,
627 F.2d 1287 (D.C. Cir. 1980) ...............................................................................................32
Walden v. Fiore,
134 S. Ct. 1115 (2014) .............................................................................................................20
Washington v. Smith,
80 F.3d 555 (D.C. Cir. 1996) ...................................................................................................30
Weinstein v. Friedman,
859 F. Supp. 786 (E.D. Pa. 1994) ............................................................................................24
Weyrich v. New Republic, Inc.,
235 F.3d 617 (D.C. Cir. 2001) .................................................................................................30
White v. Fraternal Order of Police,
909 F.2d 512 (D.C. Cir. 1990) .....................................................................................27, 28, 29
Windmere Corp. v. Remington Prods., Inc.,
617 F. Supp. 8 (S.D. Fla. 1985) ...............................................................................................24
viii
ix
PRELIMINARY STATEMENT
Plaintiff Dennis Montgomery brings this libel action against Pulitzer Prize-winning
author James Risen, who works and lives in the Washington, D.C. (D.C.) area, and his
publisher HMH, a Massachusetts company headquartered in Boston, arising from statements in
Chapter 2 (Chapter) of his book, Pay Any Price: Greed, Power, and the Endless War (the
Book), that report allegations that Montgomery perpetrated a fraud on the federal government
allegations widely published in articles as far back as 2008, that were never the subject of a
libel claim until now. The Court should dismiss or transfer to the district court in D.C. for the
following reasons:
First, this Court lacks personal jurisdiction over Risen and HMHC, which is merely a
holding company in Delaware. Risen resides in a Maryland suburb of D.C. and works for the
New York Times in its D.C. bureau. Montgomery does not assert general jurisdiction, and none
If the Court does not grant the relief above, it should grant the concurrently filed Special
Motion to Dismiss Under the Applicable Anti-SLAPP Statute.
1
exists here. The Court lacks specific jurisdiction over Risen because Risen did not expressly aim
the story about Montgomery at Florida and Florida was not the focal point of the tort or the brunt
of the alleged harm. Risen did not rely on Florida sources, gather information for the Chapter in
Florida, or even reference Florida. The focal point of the Chapter is D.C., where Montgomerys
reputation as a government contractor lies, where many of the sources are located, and where
Risen gathered documents, interviewed sources, and wrote the Chapter. Montgomery cannot
manufacture jurisdiction based on his own alleged contacts if any with Florida. Even if
Montgomery moved to Florida when he filed suit, by all accounts, he did not reside in Florida at
the critical time when the events took place, he was interviewed and the Book was published.
Second, the Court should dismiss or transfer for the independent reason that venue is
improper here. Montgomery failed to meet his burden to show proper venue because the bases
for venue he alleges a district where all defendants reside and a provision that applies only to
the federal government do not apply here. Since no substantial part of the events giving rise to
the claim occurred in Florida, venue is not proper here.
Third, even if venue is otherwise proper, the Court may transfer venue for convenience
of witnesses and parties. The Chapter focuses on D.C., and most of the critical witnesses and
documents are in the D.C. area. The military witnesses cited by Montgomery in Florida, even
assuming any have relevant knowledge, are not located in this district or within 100 miles. Thus,
the Court should transfer this action to D.C., where Risen and key witnesses are located.
Fourth, if the Court does not dismiss or transfer for the above reasons, Montgomerys
Amended Complaint should be dismissed because he fails to state a claim, as a matter of law,
under Rule 12(b)(6).
a)
privilege protects the Chapter, which accurately summarized official documents, including FBI
2
reports, court records, and statements in congressional records all of which alleged that
Montgomery rigged demonstrations and provided bogus software to the federal government.
b)
opinion and rhetorical hyperbole, not verifiable statements of fact. That the hoax Montgomery
allegedly perpetuated was crazy, that he was motivated by greed and accused of being a
con artist, are all subjective opinions protected by the First Amendment.
c)
Plaintiff, a limited-purpose public figure, has not and cannot plausibly plead
adequate facts to support actual malice or any other applicable standard of fault. Risen
interviewed Montgomery, published his denials, relied on reputable news articles and on official
records, including testimony of his former business partner, his former lawyer, and
Montgomerys own repeated invocation of the Fifth Amendment privilege against selfincrimination when asked in deposition whether his software was a fraud, and the 2013
Congressional testimony of John Brennan, now Director of the CIA, who testified that
Montgomerys software was determined not to be an accurate source of information.
d)
Montgomerys other tort claims are barred for the same reasons as the libel claims
and because he fails to plausibly plead facts to allege the elements of those claims.
II.
STATEMENT OF FACTS
Pay Any Price is a nine-chapter book that describes how the war on terror led to waste,
fraud, and abuse by U.S. government officials and the contractors who stood to gain from it.
Chapter 2 of the Book titled The Emperor of the War on Terror focuses on how, after the
terrorist attacks of September 11, 2001, government officials were willing to accept any
intelligence no matter how suspect that might prevent the next terrorist attack. In that
context, Risen recounts Montgomerys story retreading ground covered by previous media
reports, most notably a 2010 Playboy Magazine feature titled The Man Who Conned the
Pentagon (Playboy Article), which revealed the central allegations Montgomery now
challenges, and a 2011 New York Times article titled, Hiding Details of Dubious Deal, U.S.
Invokes National Security, which Risen co-authored (New York Times Article), attached as
Exhibits 1 and 2, respectively, to the Declaration of Laura Handman (Handman Decl.).
A.
Risen has no connections to Florida that would give rise to personal jurisdiction over
him. Risen is not a Florida resident; he resides in a Maryland suburb of D.C. and works for the
New York Times in its D.C. bureau. (Declaration of James Risen (Risen Decl.) 2, 3.)
HMH, the publisher of the Book, is incorporated in Massachusetts and has its principal place of
business in Boston. Its parent company, HMHC, improperly sued as HMH Holdings, Inc., is a
Delaware holding company and is not authorized to do business in Florida. (Am. Compl. 1518; Handman Decl. Exs. 3 and 4.)
Risen gathered documents and information, including about Montgomery, while working
in D.C. and Maryland. (Risen Decl. 2, 8.) Risen did much of the newsgathering for the
Chapter about Montgomery for his earlier New York Times Article, published February 19,
2011, which he co-authored with Eric Lichtblau, also in the D.C. bureau of the New York Times.
(Id. 8.) For the Chapter, Risen interviewed Montgomery by phone and email while
Montgomery lived in California and/or Washington State (Washington). (Id. 6.)
Nothing discussed in the Chapter took place in Florida. The two businesses with which
Montgomery was involved, eTreppid and Blxware, and which were the subject of Risens
reporting, were based in Nevada and Washington, respectively.2 When Montgomery became
involved with eTreppid, the Book says that Montgomery lived in Nevada. (Book at 35.) Key
events discussed in the Chapter took place in Nevada.3 At the time Montgomery was involved
with Blxware, the Chapter describes a demonstration of his software at a warehouse in Palm
Springs, California (id. at 52). Government officials mentioned in the Chapter who discussed
and took action based on Montgomerys software, were in the D.C. area at the CIA, Air Force,
the White House, and Congress (id. at 39, 51, 52, 53). The Chapter discusses the high-powered
D.C. lobbyist hired to secure contracts for Montgomerys software (id. at 38), the high-powered
D.C. lawyer who represented Gibbons (id. at 50), and the later litigation involving Montgomery
and his former partners in Nevada, California, Montana, and Washington.
Risen (and Lichtblau) interviewed key sources who are also potential witnesses
located in or near D.C., California, New York, and Washington by phone, email, or in person.
(Risen Decl. 8.) Past and current Government witnesses and documents are located in or
within a 100-mile radius of D.C., including current and former CIA, Air Force, and White House
officials with knowledge of Montgomerys software. (See Handman Decl. Ex. 27.) Key
officials in the D.C. area include Donald Kerr, then chief of the CIAs Science and Technology
Directorate; Joseph Liberatore, an Air Force official, who allegedly believed in Montgomerys
work; John Brennan, then head of the Terrorist Threat Integration Center, now CIA Director,
who passed on Montgomerys intelligence and then concluded it was inaccurate; George
Tenet, then CIA Director who a CIA source in Chapter 2 says allowed [scientists] to circumvent
the CIAs normal reporting and vetting channels, and rushed the raw material fed to the agency
by Montgomery directly to the president; Jose Rodriguez, head of the CIA Counterclaim
3
These include: a meeting with CIA officials (id. at 40, 41); a meeting with an Air Force colonel
(id. at 36); a dinner with a member of congress who became governor of Nevada, Jim Gibbons,
later cleared of bribery charges pressed by Montgomery (id. at 38-39); claims by Montgomery of
access to Predator drone information from Nellis Air Force base in Nevada (id. at 48, 51); and
his arrest for passing $1 million in bad checks at casinos in Nevada (id. at 52).
5
Center, who said Montgomerys intelligence was crazy; Paul Haraldsen, who led the Air Force
Special Investigation Inquiry into Montgomerys software; and Samantha Ravich, then advisor to
Vice President Dick Cheney, who pressed Montgomery for proof that his software worked.
(Risen Decl. 10, 11.) Other important witnesses are Michael Flynn, Montgomerys former
lawyer, who is located in California; Warren Trepp, Montgomerys former partner who is
located in Nevada; and Tim Blixseth, the ex-husband of Montgomerys former business partner,
who is located in Washington. (Id. 13.) None of Defendants key witnesses is in Florida. (Id.)
With the possible exception of one contact with a spokesperson at Special Operations
Command, Risen did not have any contact with Florida, whether by telephone, written communications, or in person, in either preparing the Chapter or in connection with the interviews he has
given to promote the Book. (Id. 9.) Neither the Chapter about Montgomery nor the television
and radio interviews promoting the Book mention Florida and, indeed, Montgomery did not give
Risen any reason to believe Montgomery had any connection to Florida. (Id. 14.) In
Montgomerys initial disclosures served after filing the lawsuit, he lists a number of witnesses
apparently located at MacDill Air Force Base in Tampa and Eglin Air Force Base near Pensacola,
with whom Montgomery claims to have worked at some point in time (Am. Compl. Ex. 13),
unbeknownst to Risen.
In fact, the first Risen and HMH heard of any specific connection with Florida was in the
Complaint, filed February 24, 2015, that alleged Montgomery is a citizen of Florida. (Compl.
6.); (Risen Decl. 7.) Montgomery did not allege that he resided or was domiciled in Florida
and still refuses to disclose his address for security reasons (Am. Compl. at 1 n.1), speculating
that the Book caused him, in effect, to be subject to a fatwah from terrorists who have
sworn to attack those assisting the U.S. military and Government. (Id. 21, 95, 254.)
Apparently, the basis for Montgomerys allegation of citizenship was that Montgomery
6
registered to vote in Florida from Washington by FedEx literally the day before he filed the
Complaint, and listed a temporary address at a hotel in Florida and claims to have since rented an
apartment at an undisclosed location. (Handman Decl. Ex. 5; Amended Compl. Ex. C 8, 9.)
Montgomery was a resident of Washington at the time the Book was published in
October, 2014; at most, he has only just moved to Florida. On September 12, 2013,
Montgomerys counsel stipulated to transfer of a defamation action filed against him from the
Central District of California to the Western District of Washington because Montgomery had
relocated to the State of Washington, was currently [a] citizen[ ] of the state of Washington,
and reside[d] in Yarrow Point, Washington.4 On June 10, 2014, a journalist wrote about
meeting Montgomery at his residence in Yarrow Point, Washington.5 On January 6, 2015, he
was under the care of a doctor in Seattle, Washington. (Am. Compl. Ex. 10.) On February 18,
2015, a Western District of Washington judge issued an order requiring Montgomery and his
wife to vacate their property in Yarrow Point by April 1, 2015.6 This order suggests that Montgomery actually resided in Washington when he alleged in his Complaint on February 24, 2015
that he was a citizen of Florida. (Compl. 6.)
Montgomery pleads in support of jurisdiction in Florida that the most recent commercial
opportunities for the Plaintiffs work were contract and projects made available through military
bases and Government facilities in Florida (Am. Compl. 4), but gives no specifics as to who,
what or where. Given Plaintiffs own allegations of ill health and continuing medical treatment
in Seattle, it is hard to imagine he resides in Florida or is actively pursuing any current
4
5
6
commercial opportunities in Florida. (Am. Compl. 13 & Ex. 10.)7 Plaintiff asserts that a
substantial portion of the harm occurred in Florida, because Florida is the third (3rd) largest
state by population, and Defendants knew or should have known of the large counterterrorism, military, and intelligence presence within the state of Florida because Risen is a
national security expert who has intimate knowledge of the U.S. Military. (Am. Compl. 5,
10, 11, 12.) By that logic, Florida, by virtue of its population and military and intelligence
installations, would have jurisdiction over every author of a book on national security whose
work enjoyed nationwide distribution. That is not the law.
B.
Montgomery has been the subject of extensive media coverage since at least November 1,
2006, when the Wall Street Journal ran a front-page story, titled Congressmans Favors for
Friend Include Help in Secret Budget, revealing that Montgomery had accused thenCongressman, subsequently Nevada Governor, Jim Gibbons of taking bribes from Warren Trepp,
Montgomerys former business partner at eTreppid Technologies (eTreppid). (Handman Decl.
Ex. 9.) 8 In a follow-up Wall Street Journal article, titled Nevada Governor Faces FBI Probe Into
Contracts, Trepp accused Montgomery of giving false testimony in their litigation over
He claims to have formed a Florida corporation in September, 2011, but the Legalzoom filing,
which Montgomery attaches to his Amended Complaint, lists Montgomery as a contact at a Palm
Desert, California address. (Am. Compl. Ex. 5.) As of 2012, the company referenced in Ex. 17
of the Amended Complaint was inactive. (Handman Decl. Ex. 10.)
8
The Court may consider documents subject to judicial notice, such as news articles and court
and congressional records, without converting this motion into one for summary judgment. N.
Atl. Marine, Ltd. v. Sealine Intl, Ltd., 2007 WL 5298433, at *4 (S.D. Fla. Mar. 29, 2007)
(Martinez, J.) ([t]he Eleventh Circuit has held that, when considering a 12(b)(6) motion to
dismiss, a court may take judicial notice of the public record, without converting the motion to
one for summary judgment) (citing Bryant v. Avado Brands Inc., 187 F.3d 1271, 1279-80 (11th
Cir. 1999)); Farah v. Esquire Magazine, 736 F.3d 528, 534 (D.C. Cir. 2013) (Judicial notice is
properly taken of publicly available historical articles on a Rule 12(b)(6) motion).
8
Montgomerys software. (Handman Decl. Ex. 11.) Montgomery exploited the media spotlight,
giving an exclusive interview to NBC News on May 11, 2007, in which he repeated the
explosive charge against Trepp and Gibbons. (Handman Decl. Ex. 12.) By creating the
controversy over whether Trepp bribed a public official to steer government contracts to
eTreppid, Montgomery invited media scrutiny of his work at eTreppid for the U.S. government.
Gibbons was ultimately cleared in 2008 with Associated Press quoting his lawyer as saying, It
should be crystal clear that the only persons who should be investigated or charged are those who
made false allegations of wrongdoing and who tried to fuel this investigation for their own private
purposes. (Handman Decl. Ex. 13; Book at 50.)
The allegations that Montgomery provided bogus software to the government were
published in an August 2008 Bloomberg News article, titled Yellowstone Club Divorcee
Entangled in Terrorist Software Suits. (Handman Decl. Ex. 14, at 1-2, 4-5, 9.) The article
summarized Trepps allegations in court records that Montgomery stole eTreppids computer
code that purportedly could sift through broadcasts from Qatar-based news network Al-Jazeera
and find embedded messages to terrorists, and quoted Montgomerys former attorneys charge
that the software was a sham. (Id.)
Then again in 2010, the Playboy Article revealed the central allegations Montgomery
now challenges. Its investigation claimed that Montgomery rigged software demonstrations and
sold the U.S. government sham noise filtering software to decode purported Al Qaeda
messages hidden in Al Jazeera broadcasts bogus intelligence that led the White House to
ground international flights and to consider shooting down transatlantic flights around Christmas
in 2003. (Handman Decl. Ex. 1.) Soon after, the Playboy Article explained, a French contractor
determined that not enough pixels existed in Al Jazeera broadcasts to include the hidden
messages and the CIA and White House soon concluded that they had been hoodwinked.
9
According to the Playboy Article, because of the secrecy surrounding the project, other
government agencies continued to contract with Montgomery until 2009.
Risen and Eric Lichtblaus 2011 New York Times Article, covered much of the same
material, but focused on the U.S. governments invocation of the state-secrets privilege to cover
up Montgomerys misdeeds and the governments gullibility. Notably, the New York Times
Article said that in Montgomerys deposition in November 2011, when asked if his software
was a complete fraud, he answered, Im going to assert my right under the Fifth Amendment.
(Handman Decl. Ex. 2, at 6.)9 Risen expressly acknowledges in the Book that he relied on the
Playboy Article and New York Times Article. (Book at 53.) The Book added Montgomerys
denials to the narrative, obtained after Risen interviewed him. (Id. at 33-34, 37, 51, 53).
Further, as catalogued in the Handman Declaration (Ex. 16), other reputable media outlets
published numerous news stories about Montgomery before release of the Book in October 2014.
These include a 2012 article in Defense News, Obamas Counterterrorism Czar Gave Bogus Intel
to Bush White House, in which the then-head of the CIAs Counterterrorism Center describes
Montgomerys software as crazy (Handman Decl. Ex. 17). These articles never retracted,
much less the subject of a lawsuit all track what Risen wrote in the Chapter. Montgomery now
brings suit to challenge publication of these facts after nearly seven years in circulation.
2.
As with his New York Times Article and prior media accounts, Risen primarily based the
Chapter on court records and other official documents. The Chapter refers to FBI interviews of
Warren Trepp, Montgomerys partner in the software venture, eTreppid, and its employees. The
Book expressly states that, according to court documents that include his statements to the FBI,
Montgomerys software was fake because Trepp later told the FBI that he eventually learned that
Montgomery had no real computer software programming skills. (Book at 37.)10 Similarly, the
Chapter accurately quotes statements in FBI reports in which an eTreppid employee Sloan
Venables began to suspect Montgomerys software was fake. Venables told the FBI that another
employee, Patty Gray, began to suspect that Montgomery was doing something other than what he
was actually telling people he was doing and added in his statement to the FBI that he knew that
Montgomery promised products to customers that he had not been completed or even assigned to
programmers. (Book at 48-49) (emphasis added).
Then, citing court documents, the Chapter states: Over the Christmas holidays [of
2005], Montgomery allegedly went into eTreppids offices and deleted all of the computer files
containing his source code and software development data, according to court documents.
(Book at 49) (emphasis added). Later, [a]ccording to court documents, [Trepp] told the FBI
that Montgomery had stolen the software eTreppid had used on secret Pentagon contracts but
[a]s federal investigators moved in to investigate the alleged theft of the technology, they heard
from Trepp and others that Montgomerys alleged technology wasnt real. (Id.) (emphasis
added). The Chapter correctly summarizes FBI reports contained in court records showing that
the technology wasnt real. (Id.)11
10
The FBI report contained in court records states, recently Trepp has found out that
Montgomerys skills may not be what he has purported them to be. Trepp cited a recent Air
Force Office of Special Investigation Inquiry, which determined that Montgomerys
programming skills were not what he alleged. (Handman Decl. Ex. 18 at Bates No. 00002)
11
An eTreppid employee, Gray said that on 21 Dec 2005 . . . she told Trepp that she had reason
to believe [Montgomery] had not written significant software for the company. (Handman
Decl. Ex. 18 at Bates No. 00121.) Another employee, Anderson also informed Trepp that
[Montgomery] was using open source to develop eTreppid Source Code, [Montgomery] was dishonest, and that he had suspicions that [Montgomery] was less technically competent than he
led people to believe. (Handman Decl. 18 at Bates No. 00123.)
11
The Chapter also recounts how Montgomerys later benefactor and business partner at
Blxware, Edra Blixseth, was going through an extremely bitter divorce, and Montgomery
became caught up in their legal battles. (Book at 52.) Mysteriously, government lawyers
sometimes sought to intervene in their court cases . . . to keep classified information stemming
from Montgomerys work with the intelligence community out of the public records. (Id.) In
those public court records, Edras ex-husband, Tim Blixseth, alleged the fraud in an affidavit,
stating: Montgomery and Edra Blixseth have engaged in an extensive scheme to defraud the
U.S. Government, a fraud [that] involves Mr. Montgomerys purported noise filtering
software technology, which does not exist, yet has been used repeatedly by Edra Blixseth and
Montgomery to commit financial frauds . . . .12 Michael Flynn, Montgomerys former attorney,
stated in an affidavit that, Based upon personal knowledge, and information and belief, Blxware
possesses no marketable technology, the technology as represented does not exist[.]13
The Book recounts that Montgomerys gambling and other debts led to bankruptcy and
his arrest for passing $1 million in bad checks. (Book at 34.) In that bankruptcy proceeding,
Flynn told Montgomery in a deposition: I know you conned me and you conned the U.S.
Government. . . . Youre a computer hacker and youre a fraud, Mr. Montgomery. (Handman
Decl. Ex. 15 at 230.)
The Book also expressly relies on congressional records to confirm that Montgomerys
software was fake. The Book explains that, [a]t the time of the Christmas 2003 scare, John
Brennan was the head of the Terrorist Threat Integration Center, which meant that Brennans
office was responsible for circulating Montgomerys fabricated intelligence to officials in the
highest reaches of the Bush administration. (Book at 47.) The Book states that, [i]n 2013, while
12
13
the Senate was considering whether to confirm Brennan to run the CIA, Sen. Saxby Chambliss, a
Georgia Republican who was vice chairman of the Senate Intelligence Committee, submitted a
written question to Brennan about his role in the intelligence communitys dealings with
Montgomery. (Id.) Indeed, Senator Chambliss written question titled Bogus Intelligence,
states that [m]edia reports indicate that when you led the Terrorist Threat Integration Center
(TTIC), you championed a program involving IT contractors in Nevada who claimed to intercept
al-Qaida targeting information encrypted in the broadcasts of TV news network Al Jazeera.14 The
written questions confirm in congressional records that not only [t]he media but documents we
have reviewed show, that CIA officials derided the contractors information, but nonetheless, you
passed it to the White House and alert levels ended up being raised unnecessarily. (Id.) (emphasis
added). Accurately quoting Brennans response, the Book states that, [i]n response: (1)
Brennan denied that he had been an advocate for Montgomery and his technology; (2) insisted
that the Terrorism Threat Integration Center was merely a recipient of the information and data,
which had been passed on by the CIA; (3) he included Montgomerys data in analytic
products; and (4) confirmed that Montgomerys purported software was determined not to be a
source of accurate information. (Book at 47) (quoting Brennan Response at 9) (emphasis added).
3.
The Book also explicitly relies on court records and FBI reports, in which Trepp also
described to federal investigators how eTreppid employees had confided to him that Montgomery
had asked them to help him falsify tests of his object recognition software when Pentagon
officials came to visit. (Book at 37.) Indeed, Trepp said that on one occasion, Montgomery
told two eTreppid employees to go into an empty office and push a button on a computer when
14
they heard a beep on a cell phone. (Id.) Then [a]fter he was in place in the field, he used a
hidden cell phone to buzz the cell phone of one the eTreppid employees, who then pushed a key
on a computer keyboard, which in turn flashed an image of a bazooka on another screen
prominently displayed in front of the military officers standing in another room, according to
court documents. (Id.) (emphasis added). Thus, [t]he military officers were convinced that
Montgomerys computer software had amazingly detected and recognized the bazooka in
Montgomerys hands. (Id.) The Book again includes Montgomerys denials. (Id. at 15, 37.)
Once again, the Book accurately describes the FBI report contained in court documents.15
4.
Complaint Allegations
15
Trepp recently learned that Montgomery would require eTreppid employees to falsify the
results of live demonstrations for its customers. Jesse Anderson, a programmer for eTreppid,
told Trepp that Montgomery would require Anderson and Jim Bauder, another eTreppid
employee, to go into an office at eTreppid while Montgomery was out in a nearby field with a
toy bazooka to demonstrate eTreppids recognition software capabilities. Montgomery
instructed Anderson and Bauder to go into a room and wait to hear a noise on their cell phone
and then instructed them to press a button on a computer keyboard that would display an image
of a bazooka on the computer screen viewed by the customers, including Department of Defense
employees. Trepp advised that the Department of Defense employees were at the demonstration
to make a judgment regarding the purchase of this technology. (Handman Decl. 18 at Bates No.
00002.) Employees confirmed these accounts in their interviews with the FBI. (Id. at Bates Nos.
00125, 00126.)
16
(Am. Compl. 120, 122, 124, 127, 181, 184, 202, 204, 206, 208, 210, 212, 214, 216, 218,
219, 221, 230, 232, 234, 236.)
14
challenges recitation of allegations former eTreppid employees made in FBI investigative reports
that Montgomery rigged demonstrations of his object recognition software. (Id. 122, 124.) He
takes issue with the statements that Montgomerys lawyer concluded that Montgomery was a
fraud, and that out of greed Plaintiff Montgomery create[d] a rogue intelligence operation
with little or no adult supervision which was crazy and that he was someone who has been accused of being a con artist. (Id. 110, 120; see id. 194.) The Amended Complaint states that
a retraction was requested after publication of the Book, but HMH rejected the request. (Id. 44.)
III.
A.
ARGUMENT
Plaintiff fails to allege facts under which this court could assert personal jurisdiction over
Risen or HMHC, improperly sued as HMH Holdings, Inc., the parent company. HMH, the
operational company, is not contesting jurisdiction. The court analyzes whether it has personal
jurisdiction over a nonresident defendant under a two-part test. Sculptchair, Inc. v. Century Arts,
Ltd., 94 F.3d 623, 626 (11th Cir. 1996). First, the court examines Floridas long-arm statute. Id.
Second, the court must determine whether sufficient minimum contacts exist between the
defendant and Florida such that jurisdiction over the defendant comports with traditional notions
of fair play and substantial justice under the Due Process Clause. Id. (quoting Intl Shoe Co. v.
Washington, 326 U.S. 310, 316 (1945)). Minimum contacts only exist when: (1) the contacts arise
from or relate to the cause of action; (2) the defendant purposefully avails himself of the privilege
of conducting activities within the forum, thus invoking the benefits and protections of its laws;
and (3) the defendants contacts within the forum demonstrate that he reasonably anticipated being
haled into court there. Id. at 631.
The plaintiff bears the initial burden. If the plaintiff establishes a prima facie case of
personal jurisdiction through the allegations of his complaint, the defendant may challenge those
15
allegations through affidavits, shifting the burden back to the plaintiff to prove jurisdiction.
Sculptchair, 94 F.3d at 627. If the defendant sustains its burden, the plaintiff must substantiate
the jurisdictional allegations by affidavits or other competent proof, not merely repeat allegations
in the complaint.
Here, Montgomery does not allege that general jurisdiction exists over Risen or HMHC
under Fla. Stat. 48.193(2), but, rather, attempts to assert specific jurisdiction, claiming that:
(1) [t]he Causes of Action and injuries occurred in Florida and worldwide; (2) some of the
most recent commercial opportunities for the Plaintiffs work were contracts and projects made
available through military bases and Government facilities in Florida; (3) a huge and
substantial portion of the nationwide harm has occurred in Florida; (4) he is currently a citizen
of Florida; (5) Defendants knew or should have known of Plaintiffs substantial ties to counterterrorism, military and intelligence contracts and intended on harming Plaintiff in Florida; and
(6) Defendants knew that if Plaintiffs reputation was harmed in Florida, the large military
presence in Florida would ensure that Plaintiff would lose jobs and not be hired for any more
jobs and contracts. (Am. Compl. 3-12.) These allegations are insufficient to establish
personal jurisdiction over Risen or HMHC17 under due process.
Nationwide circulation of a book and broadcast of interviews are insufficient to confer
personal jurisdiction.18 For jurisdiction to exist in Florida, Risen himself must have engaged in
17
Plaintiffs allegation that HMHC is the parent company and owner of the publisher is
insufficient, as a matter of law, to subject HMHC a Delaware company not authorized to
conduct business in Florida to personal jurisdiction in Florida. Indeed, Florida law is clear
that the relationship of parent-subsidiary alone is insufficient to confer personal jurisdiction over
the foreign parent corporation in the forum in which the subsidiary acts. Heidbrink v.
ThinkDirect Mktg. Grp., Inc., 2014 WL 3585698, at *3 (M.D. Fla. July 21, 2014) (collecting
cases). Plaintiff does not and could not allege facts sufficient to pierce the corporate veil to
subject HMHC to jurisdiction in Florida based on HMHs actions.
18
See Buckley v. N.Y. Times Co., 338 F.2d 470, 474 (5th Cir. 1964) (holding mere circulation
of national newspaper and sporadic news gathering by reporters on special assignment in the
16
forum do not satisfy due process); Alternate Energy Corp. v. Redstone, 328 F. Supp. 2d 1379,
1383 (S.D. Fla. 2004) ([U]nder Calder, the mere fact that allegedly libelous statements
appeared in a publication sold to Florida residents is not sufficient to give a defendant fair
warning that he may be haled into court here.).
19
The Court must assess Risens contacts with Florida separately from the publisher and holding
company. E.g., McFarlane v. Esquire Magazine, 74 F.3d 1296, 1300 (D.C. Cir. 1996) (The
writer is not the publisher; [the writers] contacts must be assessed separately.) (citing Keeton v.
Hustler Magazine, 465 U.S. 770, 781 n.13 (1984)).
17
and Congressional officials who were based in the D.C. area. Nothing in the Chapter about
Montgomery or Risens remarks on television and radio programs were specifically directed at
Florida and none of Risens information gathering (with the possible exception of one contact with
a Special Operations Command spokesperson) was conducted in Florida. (Risen Decl. 14.) The
brunt of the harm, if any, would be felt by Montgomery in the D.C. area, where government
intelligence and military officials make contracting decisions and evaluated his software, or in
Nevada20 or California where Montgomery lived and worked when the alleged fraud took place, or
California or Washington where he was living when he was interviewed by Risen, and/or
Washington where he was living when the Book was published at no critical time was he a
resident of Florida. Contrary to Plaintiffs allegation, the brunt of the harm could not occur in
Florida and Florida was not the focal point indeed, Risen was not aware of the Florida
connection Montgomery now claims. (Id. 7.)
The facts here have even less connection with the forum than those that have been found
inadequate to satisfy due process in other defamation cases. For example, in Madara v. Hall,
916 F.2d 1510 (11th Cir. 1990), the Eleventh Circuit affirmed dismissal of a defamation action
brought in Florida against singer Daryl Hall for his comments quoted in a nationally distributed
trade publication about working with plaintiff who, Hall said, was a small-time . . . guy and
Hall was bein screwed by him, basically. Id. at 1513. Hall had performed in Florida fewer
than eight times during the relevant timeframe. Although his musical recordings were widely
distributed in Florida and he was an investor in several limited real estate partnerships in Florida,
he had no agents or office there and the claims did not arise from those contacts. These facts
20
According to a May 2, 2015 letter filed in federal court in Arizona (Arpaio Litigation)by
Montgomerys counsel, Dennis Montgomery was previously a resident of Nevada for many
years and much of his work in the past occurred in Nevada. (Handman Decl. Ex. 22, at 8.)
18
persuaded the court that to subject [] Hall to the jurisdiction of a Florida court in this case would
offend due process. Id. at 1519.
In Revell v. Lidov, a professor based in Massachusetts authored an article he posted on a
New York website arguing that plaintiff, a former Associate Director of the FBI residing in
Texas, conspired with senior Reagan administration officials to refuse to stop a terrorist bombing
and to cover up the conspiracy. 317 F.3d 467, 469 (5th Cir. 2002). Plaintiff sued for libel in
Texas, and the Fifth Circuit affirmed dismissal for lack of personal jurisdiction distinguishing
Calder. It held that the forum was not the focal point of the article, where, as here, the author
did not know plaintiff resided in the forum, the article did not mention the forum, and no
newsgathering occurred in the forum. Id. at 473-75. Because the article was about the federal
governments alleged failure to stop terrorism and its cover up just as here where the Chapter
addresses fraud in federal government contracting concerning terrorism detection and a cover
up [i]f the article had a geographic focus it was Washington, D.C. Id. at 476.
Similarly, in Busch v. Viacom International Inc., a Texas district court found no personal
jurisdiction in Texas over Jon Stewart the host of The Daily Show whose interview with Risen
in New York is also a claim in this case (Am. Compl. 43, 139-141) because, as here, [t]he
piece was not directed at viewers of The Daily Show in Texas, but was broadcast nationwide.
477 F. Supp. 2d 764, 772-73 (N.D. Tex. 2007). Residence by the plaintiff in the forum state and
circulation of allegedly defamatory statements there were insufficient to confer jurisdiction. Id.21
Plaintiff also cannot create personal jurisdiction over Risen based on Plaintiffs own relationships to Florida, which are tenuous at best. As the Supreme Court recently made clear, the
21
See also Redstone, 328 F. Supp. 2d at 1383 (dismissing under Rule 12(b)(2) when there is no
indication that Defendant expressly aimed its publication at the state of Florida); Hoechst
Celanese Corp. v. Nylon Engg Resins, Inc., 896 F. Supp. 1190, 1195 (M.D. Fla. 1995)
(dismissing under Rule 12(b)(2) libel claim brought by a company headquartered in Florida
arising out of an interview in Ohio that circulated to subscribers in Florida).
19
plaintiff cannot be the only link between the defendant and the forum. Walden v. Fiore, 134 S.
Ct. 1115, 1122 (2014). Defendants suit-related conduct must have a substantial connection to
the forum; random, fortuitous, or attenuated contacts with persons affiliated with the State are
not sufficient, and plaintiffs own contacts with the forum cannot be decisive. Id. at 1121-23.
Here, Plaintiff claims jurisdiction in Florida because some of the most recent
commercial opportunities for the Plaintiffs work were contract and projects made available
through military bases and Government facilities in Florida. (Am. Compl. 4.) Even if these
allegations were true and his recent filings suggest his opportunities have been in Arizona, not
Florida22 and even if the key decision makers were actually in Florida and not in D.C., this is
precisely the logic rejected by Walden as impermissibly allow[ing] a plaintiffs contacts with
the defendant and forum to drive the jurisdictional analysis. Id. at 1125; Reynolds v. Intl
Amateur Athletic Fedn, 23 F.3d 1110, 1118 (6th Cir. 1994) (holding in libel action that no
jurisdiction existed over defendant based in England because plaintiffs Ohio residence was
merely fortuitous and plaintiffs action unilateral). Rather, personal jurisdiction must arise
out of contacts that the defendant himself creates with the forum. Walden, 134 S. Ct. at 1122
(citation omitted). Unlike Calder, Risens suit-related conduct had nothing to do with Florida.
Thus, this Court should dismiss the action as to Risen and HMHC for lack of personal
jurisdiction in Florida. Alternatively, the Court should transfer this action as to all defendants, so
the action may proceed in one court, to the U.S. District Court for the District of Columbia.
22
Based on Montgomerys own filings seeking to intervene in the Arpaio Litigation, his recent
job opportunities seem to have been with Sheriff Arpaio in Arizona, not Florida, until the
Arizona officials reached the same conclusion as the federal officials his intelligence was
junk. (Handman Decl. Ex. 23, ECF No. 1058, Mem. Law in Support of Mot. to
Recuse/Disqualify Judge G. Murray Snow under 28 U.S.C. 144, at 8 (May 7, 2015),
Emergency Petition for Writ of Mandamus for Recusal, ECF No. 9533074 (9th Cir. May 11,
2015), Order denying petition, ECF No. 15-71433 (9th Cir. May 12, 2015); see also Am. Compl.
Ex. 12, Sheriff Joe vs. Uncle Sam, The Atlantic (discussing sheriffs investigation of presiding
federal judges wife).
20
B.
Even if the Court does not dismiss or transfer for lack of personal jurisdiction over Risen
and HMHC, it should do so because venue in this District is improper. 28 U.S.C. 1406(a);
Fed. Civ. P. 12(b)(3). When a defendant objects to venue under Rule 12(b)(3), the plaintiff
bears the burden of showing that the venue selected is proper. Hemispherx Biopharma, Inc. v.
MidSouth Capital, Inc., 669 F. Supp. 2d 1353, 1356 (S.D. Fla. 2009). The court need not accept
plaintiffs allegations in the complaint as true if they are contradicted by the defendants
affidavits. Wai v. Rainbow Holdings, 315 F. Supp. 2d 1261, 1268 (S.D. Fla. 2004). When an
allegation is challenged, the court may then examine facts outside of the complaint to determine
whether venue is proper. Hemispherx Biopharma, 669 F. Supp. 2d at 1356.
[W]hether venue is wrong or improper is generally governed by 28 U.S.C. 1391.
Atl. Marine Constr. Co. v. U.S. Dist. Ct. for W. Dist. of Tex., 134 S. Ct. 568, 577 (2013). Venue
is proper in:
(1) a judicial district in which any defendant resides, if all defendants are residents
of the State in which the district is located; (2) a judicial district in which a
substantial part of the events or omissions giving rise to the claim occurred . . . ;
or (3) if there is no district in which an action may otherwise be brought as
provided in this section, any judicial district in which any defendant is subject to
the courts personal jurisdiction with respect to such action.
Id. 1391(b). When venue is challenged, the court must determine whether the case falls within one of the three categories set out in 1391(b). Atl. Marine Constr., 134 S. Ct. at 577. [I]f
it does not, venue is improper, and the case must be dismissed or transferred under 1406(a).
Id. Plaintiff invokes 1391(b)(1) and (e) (Am. Compl. 2), but neither applies. Montgomery
does not allege and cannot allege that Risen and the HMH Companies all reside in Florida
under 1391(b)(1) or that any is a government agency, officer, or employee under 1391(e).
(Am. Compl. 15-16; Risen Decl. 2, 3; Handman Decl. 3, 4.)
21
Nor could Montgomery plead venue under 1391(b)(2), which provides venue where a
substantial part of the events or omissions giving rise to the claim occurred. Only those acts
which were, in and of themselves, wrongful or had a close nexus to the wrong could form the
basis of proper venue. Forbes v. Lenox Fin. Mortg. LLC, 2008 WL 2959727, at *3 (S.D. Fla.
July 30, 2008) (quoting Jenkins Brick Co. v. Bremer, 321 F.3d 1366, 1372 (11th Cir. 2003)).
The events giving rise to the alleged libel did not take place in Florida and it is not the focal point
of the harm. (See III.A supra.) The only connections with Florida are Plaintiffs claim of
citizenship of very recent vintage, if that; a 2004 order for supplies from eTreppid in Reno to
MacDill Air Force Base outside this judicial district and alleged but unspecified recent
commercial opportunities. (Am. Compl. 4, 13 & Ex. 19.) But the venue statute protect[s]
defendants and thus require[s] courts to focus on relevant activities of the defendant, not of the
plaintiff. Jenkins Brick, 321 F.3d at 1371-72 (11th Cir. 2003); Hemispherx Biopharma, 669 F.
Supp. 2d at 1356-57 ([Plaintiff] focuses largely on its own activities and location, but the proper
focus of the venue inquiry is on the relevant activities of the Defendants.).
Finally, Montgomery could not invoke fallback venue under 1391(b)(3), because the
action may otherwise be brought in D.C. Algodonera De Las Cabezas S.A. v. Am. Suisse
Capital, Inc., 432 F.3d 1343, 1345 (11th Cir. 2005) ([V]enue may be predicated on
1391([b])(3) only when neither 1391([b])(1) or (2) are satisfied.). Venue in Florida is
improper, so the Court should dismiss or transfer venue to D.C. where venue is proper.
C.
Even if the Court does not dismiss or transfer the action for improper venue, it should still
transfer the action [f]or the convenience of parties and witnesses, in the interest of justice.
28 U.S.C. 1404(a). The purpose of transfer under 1404(a) is to prevent the waste of time,
energy and money and to protect litigants, witnesses and the public against unnecessary
22
inconvenience and expense[.] Van Dusen v. Barrack, 376 U.S. 612, 616 (1964). Transfer is
within the broad discretion of the trial court. Meterlogic, Inc. v. Copier Solutions, Inc., 185
F. Supp. 2d 1292, 1299 (S.D. Fla. 2002). Courts generally apply a two-part test: (1) whether the
action might have been brought in the proposed transferee court and (2) whether various factors
are satisfied so as to determine if a transfer to a more convenient forum is justified. Id. at 1299
(internal quotation marks omitted).
First, venue is proper in D.C. (See III.B supra.) Second, as explained below, the
interests of justice and the convenience of witnesses and parties strongly support transfer.
Meterlogic, 185 F. Supp. 2d at 1300 (listing factors); see also Cellularvision Tech. & Telecomm.,
L.P. v. Alltel Corp., 508 F. Supp. 2d 1186, 1189 (S.D. Fla. 2007). Indeed, none of the crucial
third-party witnesses can be forced to attend trial in this district.
Convenience of the Parties. The convenience of the parties weighs strongly in favor of
transferring this action to D.C. Defendants, all located outside Florida, will be inconvenienced
by being forced to litigate this case in Florida. In contrast, while Montgomery claims that he has
become a Florida citizen and resident, he refuses to disclose his address in the Amended
Complaint. (Am. Compl. 13.)23 On September 12, 2013, in support of transfer of an action
from California to Washington, Montgomerys counsel stipulated Montgomery was currently
[a] citizen[ ] of the state of Washington and reside[d] in Yarrow Point, Washington.24
Montgomery registered to vote in Florida from Washington by FedEx the day before he filed the
Complaint in this case, and listed a hotel address in Florida. (Handman Decl. Ex. 5.) Indeed,
23
Plaintiff violated Local Rule 5.4 by filing the address under seal, and doing so prevents
Defendants from verifying his address. Montgomerys credibility on such matters is
questionable; a federal judge found Montgomery committed perjury in a declaration supporting
an opposition to a motion for attorneys fees when he argued that California, not Nevada, was
the proper forum to resolve the fee dispute. Montgomery v. eTreppid Techs., LLC, 2010 WL
1416771, at *16 (D. Nev. Apr. 5, 2010).
24
(Handman Decl. Ex. 6.)
23
Montgomery resided in Yarrow Point, Washington probably as late as April 1, 2015. (Handman
Decl. Ex. 8, at 2.) Per his Amended Complaint, he is ill and under the care of a doctor in Seattle.
(Am. Compl. 13 & Ex. 10.) Thus, Montgomery may not have been a Florida resident when he
filed the case and may not be one now. When, as here, a plaintiff has chosen a forum that is not
its home forum, only minimal deference is required, and it is considerably easier to satisfy the
burden of showing that other considerations make transfer proper. Cellularvision, 508 F. Supp.
2d at 1189 (citing Piper Aircraft Co. v. Reyno, 454 U.S. 235, 255-56 (1981)).
Even if Montgomery, in fact, recently moved to Florida, the Court should still transfer.
Montgomery bears [t]he burden . . . to demonstrate that he changed his domicile to Florida; the
presumption is that it remained in his previous domicile. Jaisinghani v. Capital Cities/ABC,
Inc., 973 F. Supp. 1450, 1454 (S.D. Fla. 1997), affd, 149 F.3d 1195 (11th Cir. 1998). In Stern v.
News Corp., the Southern District of Florida transferred venue to New York when the plaintiff
a former New York resident also represented by Montgomerys attorney Larry Klayman
moved to Florida only two-and-a-half months before filing his suit in this court against a New
York-based publisher. 2008 WL 10712037, at *1 (S.D. Fla. Aug. 26, 2008). In Stern, the
defendants, witnesses, and events giving rise to the alleged libel occurred in New York and New
York law applied. Similarly, here, Risen and many witnesses are in D.C., D.C. law applies, and
none of the operative facts giving rise to the causes of action occurred in Florida.25
Convenience of Witnesses, Access to Proof. Important considerations under this factor
are whether these witnesses have actual knowledge about the issues in the case, where they are
25
See Weinstein v. Friedman, 859 F. Supp. 786, 789-90 (E.D. Pa. 1994) (transferring libel action
to S.D.N.Y. where plaintiff was domiciled in Israel, defendant book publishers and author were
located in New York, witnesses were in New York, and the cause of action arose in New York);
Windmere Corp. v. Remington Prods., Inc., 617 F. Supp. 8, 10 (S.D. Fla. 1985) ([W]here the
operative facts underlying the cause of action did not occur within the forum chosen by the
Plaintiff, the choice of forum is entitled to less consideration.).
24
located, and whether it will be more convenient for them if the action is in [the transferor state] or
[the transferee state]. Cellularvision, 508 F. Supp. 2d at 1190. In particular, [t]he convenience
of non-party witnesses is an important factor in determining whether a transfer should be granted.
Mason v. Smithkline Beecham Clinical Labs., 146 F. Supp. 2d 1355, 1361 (S.D. Fla. 2001).
The only material witness allegedly in this district or within 100 miles of it is
Montgomery himself, if he lives here at all.26 Montgomery lists over two dozen witnesses at
MacDill and Eglin Air Force Bases (Am. Compl. Ex. 13), located outside this district and
beyond this Courts subpoena power, so these witnesses do not weigh against transfer. In
contrast, many of the key third-party witnesses who have actual knowledge about the issues
are located in the D.C. area.27 (Risen Decl. 10-12; Handman Decl. Ex. 27.) Meterlogic, 185
F. Supp. 2d at 1301. If this action remains in Florida, these third-party witnesses could not be
compelled to attend trial in Florida, including crucial current and former CIA, Pentagon, and
White House witnesses. The possibility that a case may be tried where certain crucial witnesses
could not be compelled to attend is an important consideration. Poncy v. Johnson & Johnson,
414 F. Supp. 551, 556 (S.D. Fla. 1976) (citation and quotation marks omitted). The parties could
compel many of the third-party witnesses to testify in D.C. because they are located within a
26
Notably, notwithstanding Montgomerys claimed health issues, he chose not to bring this
action in Washington. Plaintiff has not submitted any medical reports that state that his health is
at imminent risk, his most recent doctors note from January 2015 said he was now in outpatient
PT, OT to work, and the doctors note indicating that he could not travel to testify is a year old.
(Am. Compl. Exs. 9, 10.) Whatever his current health, he is actively litigating in three
jurisdictions, including D.C. In addition to seeking to intervene in the Arpaio Litigation in
Arizona (Handman Decl. Ex. 23), on March 20, 2015, Montgomerys counsel, Larry Klayman,
asked the federal court in D.C. to take testimony of Montgomery in D.C. in camera and ex parte.
(Handman Decl. Ex. 24.) Just as it is convenient for Montgomery to appear in D.C. when
Klayman is the plaintiff, it would be convenient in this case, when Montgomery is the plaintiff.
27
Third-party witnesses who are not in D.C. are either in California, Nevada, or Washington, for
whom this District and D.C. are equally inconvenient.
25
100-mile radius of D.C. district court. (Risen Decl. 10, 11, 12.) Meterlogic, 185 F. Supp. 2d
at 1301.
The Public Interest. The public interest also heavily weighs in favor of transfer to the
D.C.28 Florida substantive law is not likely to apply, a factor in assessing the convenience of the
forum. See Poncy, 414 F. Supp. at 556 (holding that New Jersey federal court is a more
appropriate forum than this Court for applying substantive New Jersey law). For the reasons
more fully discussed in Defendants Renewed Special Motion to Dismiss under the Applicable
Anti-SLAPP Law, II.A, D.C. law not Florida law is most likely to apply.29 Applicability of
D.C. law is another reason favoring transfer to D.C.
D.
The Court Should Dismiss Under Rule 12(b)(6) Because Plaintiff Fails to
Plead a Plausible Claim for Defamation or Other Related Torts
If the Court does not dismiss or transfer for the reasons outlined above, it should dismiss
under Rule 12(b)(6). Although a court must take the well-pleaded factual allegations as true for
a Rule 12(b)(6) motion, legal conclusions are not entitled to the assumption of truth. Ashcroft
v. Iqbal, 556 U.S. 662, 664 (2009). Under Twombly and Iqbal, a plaintiff must provide enough
facts to state a claim to relief that is plausible on its face, rather than merely possible. Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007) (emphasis added); Iqbal, 556 U.S. at 695-96.
Where plaintiffs have not nudged their claims across the line from conceivable to plausible,
their complaint must be dismissed. Twombly, 550 U.S. at 570.
28
The public interest factors include: (1) the administrative difficulties flowing from court
congestion; (2) the local interest in having localized interests decided at home; (3) the familiarity
of the forum with the law that will govern the case; and (4) the avoidance of unnecessary
problems of conflicts of law or in the application of foreign law. Ins. Co. of N. Am. v. Levin,
2011 WL 1398473, at *4 (S.D. Fla. Mar. 28, 2011) (citation and quotation marks omitted),
report & recommendation adopted, 2011 WL 2610754 (S.D. Fla. July 1, 2011). See also
Manuel v. Convergys Corp., 430 F.3d 1132, 1135 n.1 (11th Cir. 2005).
29
Other states with a significant relationship to this action include Washington, California, and
Nevada, so if the Court decides D.C. law does not apply, it should apply the law of one of those
states, none of which have any substantive conflict as applied to Defendants 12(b)(6) motion.
26
Montgomerys claim should be dismissed under Rule 12(b)(6) because the challenged
statements in the Chapter are privileged under the fair report privilege. The privilege protects
against defamation suits where as here a publication accurately summarizes court records,
congressional records, and government investigative reports. It applies as long as the reports
were substantially accurate and fair, and concern a governmental proceeding, even if the
underlying information ultimately proves to be false. White v. Fraternal Order of Police, 909
F.2d 512, 527 (D.C. Cir. 1990).31 Whether the fair report privilege protects the publication is a
question of law that courts routinely decide on an initial pre-discovery motion by comparing
official records subject to judicial notice with the publication in suit. See note 8 supra.32
30
Farah, 736 F.3d at 534 (recognizing in affirming Rule 12(b)(6) dismissal that summary
proceedings are essential in the First Amendment area because if a suit entails long and
expensive litigation, then the protective purpose of the First Amendment is thwarted even if the
defendant ultimately prevails) (quotation omitted); Stewart v. Sun Sentinel Co., 695 So. 2d 360,
363 (Fla. 4th DCA 1997) ([P]retrial dispositions are especially appropriate because of the
chilling effect [libel] cases have on freedom of speech).
31
The fair report privilege of other potentially relevant states is similar, as is Floridas. Alpine
Indus. Computers, Inc. v. Cowles Publg Co., 57 P.3d 1178, 1186 (Wash. Ct. App. 2002),
amended, 64 P.3d 49 (Wash. Ct. App. 2003); Sahara Gaming Corp. v. Culinary Workers Union
Local, 984 P.2d 164 (Nev. 1999); Cal. Civ. Code 47(d), (e); Stewart, 695 So. 2d at 362-63.
32
See Hargrave v. Wash. Post, 2009 WL 1312513 (D.D.C. May 12, 2009), affd, 365 F. Appx
224 (D.C. Cir. 2010) (dismissing libel claim under Rule 12(b)(6) because report of plaintiffs
27
Here, the Book serves the critical function that the fair report privilege is designed to
protect: providing both a fair and accurate accounting of public proceedings as well as informed
commentary33 and thus advancing [t]he purpose of the privilege by promot[ing] public
scrutiny of governmental affairs.34 Indeed, the Book accurately summarizes witness statements
made in FBI investigative reports filed in court proceedings, quotes affidavits and deposition
transcripts and other filed court documents, and discusses the contents of congressional records.
Each of these plainly fall within the fair report privilege. See White, 909 F.2d at 527 (explaining
that privilege extends broadly to the report of any official proceeding, or any action taken by
any officer or agency of the government, including not only government proceedings
themselves, but also allegations or findings that prompt such proceedings) (citation omitted).
Courts routinely hold that reporting on court records, judicial proceedings, and discovery
documents, including affidavits and depositions,35 law enforcement investigations and reports,36
and congressional records and statements,37 is protected.
criminal testimony protected by fair report privilege); Q Intl Courier, Inc. v. Seagraves, 1999
WL 1027034, at *4-5 (D.D.C. Feb. 26, 1999) (dismissing libel claim on a pre-discovery motion
for summary judgment under fair report privilege); Foretich v. Chung, 1995 WL 224558, at *1-2
(D.D.C. Jan. 25, 1995) (dismissing on pre-discovery summary judgment motion libel claim
against news anchor for reporting allegations in judicial proceedings); Huszar v. Gross, 468 So.
2d 512, 513, 516 (Fla. 1st DCA 1985) (affirming dismissal of libel claim with prejudice because
newspapers statements protected by fair report privilege); Stewart, 695 So. 2d at 362-63
(affirming pre-discovery motion to dismiss libel claim or summary judgment where newspapers
statements protected by fair report privilege). Cf. Pierson v. Orlando Regl Healthcare Sys.,
Inc., 2010 WL 1408391, at *9-10 (M.D. Fla. Apr. 6, 2010) (dismissing libel claim for failure to
plausibly plead facts to overcome common-law qualified privilege), affd, 451 F. Appx 862, 864
& n.3 (11th Cir. 2012).
33
Coles v. Washington Free Weekly, Inc., 881 F. Supp. 26, 34 (D.D.C. 1995), affd, 88 F.3d
1278 (D.C. Cir. 1996).
34
Harper v. Walters, 822 F. Supp. 817, 823 (D.D.C. 1993), affd, 40 F.3d 474 (D.C. Cir. 1994).
35
See Q Intl Courier, 1999 WL 1027034, at *4 (privilege applies to report on civil complaint);
OBrien v. Franich, 575 P.2d 258, 260 (Wash. App. Ct. 1978) (reports on lawsuits covered by
fair report privilege); Lavin v. N.Y. News, Inc., 757 F.2d 1416, 1419 (3d Cir. 1985) (reports of
affidavits privileged); Sipple v. Found. for Natl Progress, 83 Cal. Rptr. 2d 677, 687-88 (Cal. Ct.
App. 1999) (report on deposition testimony privileged).
28
Moreover, the Book expressly reports on and refers to the government investigations,
congressional records, and court proceedings. See Dameron v. Wash. Magazine, Inc., 779 F.2d
736, 739 (D.C. Cir. 1985) (fair report privilege applies where apparent either from specific attribution or from the overall context that the article is quoting, paraphrasing or otherwise drawing upon
official documents or proceedings); Ditton v. Legal Times, 947 F. Supp. 227, 230 (E.D. Va. 1996)
(A publisher properly attributes a report if the average reader is likely to understand that the report
summarizes or paraphrases from the judicial proceedings.), affd, 129 F.3d 116 (4th Cir. 1997).
Montgomery has not and cannot plausibly allege that the Book is anything but a fair
and substantially accurate, White, 909 F.2d at 527, account of the findings and allegations in
the investigative reports, congressional records, and court proceedings.38 Indeed, Risen obtained
and published Montgomerys comments, making the report more than fair for purposes of the
privilege.39 Thus, Montgomerys claims are barred by the fair report privilege and the Amended
Complaint should be dismissed under Rule 12(b)(6).
36
See Medico v. Time, Inc., 643 F.2d 134, 139 (3d Cir. 1981) (fair report privilege applies to
report on FBI documents that express only tentative and preliminary conclusions that the FBI
has never adopted as accurate); White, 909 F.2d at 527-28 (privilege applies to report of D.C.
administrative committee); Global Relief Found. Inc. v. N.Y. Times Co., 390 F.3d 973 (7th Cir.
2004) (affirming dismissal; privilege applies to report of federal investigation into Islamic
charity for possible link to terrorism); Yohe v. Nugent, 321 F.3d 35, 44 (1st Cir. 2003) (articles
giving rough-and-ready summary of official statement by police protected by fair report
privilege); Law Firm of Daniel P. Foster, P.C. v. Turner Broad. Sys., Inc., 844 F.2d 955, 960 (2d
Cir. 1988) (statement by FBI official about execution of search warrant protected); Dowd v.
Calabrese, 589 F. Supp. 1206, 1217 (D.D.C. 1984) (report of DOJ investigation protected).
37
Crane v. Ariz. Republic, 972 F.2d 1511, 1517 (9th Cir. 1992) (secret investigation of House
Select Committee on Narcotics Abuse and Control was official proceeding under the privilege);
Chapin v. Knight-Ridder, Inc., 993 F.2d 1087, 1097 (4th Cir. 1993) ([A] fair and accurate report
of the public remarks of a member of Congress fits within the fair report privilege[.]).
38
See Yohe, 321 F.3d at 44 ([A]ccuracy for fair report purposes refers only to the factual
correctness of the events reported and not to the truth about the events that actually transpired.);
Coles, 881 F. Supp. at 31 n.3; Alpine Indus. Computers, 57 P.3d at 1187 (It is not necessary that
it be exact in every immaterial detail[.]).
39
See, e.g., Dorsey v. Natl Enquirer, Inc., 973 F.2d 1431, 1437, 1440 (9th Cir. 1992) (tabloid
did not exceed the degree of flexibility and literary license accorded newspapers in making a
29
2.
Statements of opinion that do not contain a provably false factual connotation are
protected under the First Amendment. Milkovich v. Lorain Journal Co., 497 U.S. 1, 20 (1990);
Moldea v. N.Y. Times Co., 22 F.3d 310, 313 (D.C. Cir. 1994) (Moldea II). In addition, an
opinion is also not actionable if it cannot be objectively verified as false or cannot reasonably
[be] interpreted as stating actual facts about the plaintiff. Milkovich, 497 U.S. at 18-20;
Washington v. Smith, 80 F.3d 555, 556-57 (D.C. Cir. 1996). Rhetorical language that is loose,
figurative [and] hyperbolic is also not actionable. Milkovich, 497 U.S. at 21.
Whether the allegedly defamatory statements are non-actionable opinion is a question of
law to decide on a motion to dismiss. Moldea v. N.Y. Times Co., 15 F.3d 1137, 1144 (D.C. Cir.
1994) (Moldea I). The court must analyze the challenged statements in their entirety, taking
into account both the immediate context and the larger social context in which they appeared.
See Moldea II, 22 F.3d at 314; see also Weyrich v. New Republic, Inc., 235 F.3d 617, 624 (D.C.
Cir. 2001); Thomas v. News World Commcns, 681 F. Supp. 55, 64 (D.D.C. 1988).
Here, Montgomerys allegation that Defendants said that government contractors,
including Montgomery, were motivated by greed40 and that crazy became the new normal in
the war on terror41 are non-verifiable statements of subjective opinion and rhetorical hyperbole
fair report by reporting that petition filed against entertainer said entertainer had AIDS; last
paragraph of report included entertainer statement that charge was an utter fabrication).
40
See Obsidian Fin. Grp., LLC v. Cox, 812 F. Supp. 2d 1220, 1233 (D. Or. 2011) (bloggers
statement plaintiff was greedy, was figurative, hyperbolic, imaginative, or suggestive), affd,
740 F.3d 1284 (9th Cir. 2014); Fetter v. N. Am. Alcohols, Inc., 2007 WL 551512, at *12 (E.D.
Pa. Feb. 15, 2007) (statement that the plaintiff was greedy, unreasonable, or foolish reflect
personal opinion and therefore do not constitute defamation); Metcalf v. KFOR-TV, 828 F.
Supp. 1515, 1530 (W.D. Okla. 1992) (statement that organizations were shams perpetrated on
the public by greedy doctors was protected opinion).
41
See Farah, 736 F.2d at 531 (affirming Rule 12(b)(6) dismissal of claims challenging satirical
speech and statements of opinion); Weyrich, 235 F.3d at 624 (statement that plaintiff experienced
30
that are non-actionable. (Am. Compl. 110, 181.)42 Moreover, read in its proper context,
statements that Montgomery has been accused of being a con artist (Am. Compl. 110)
(quoting Book at 32) are non-actionable opinion based on disclosed facts, including that
Montgomerys own former business partner, employees, and lawyer all accused him in court
records of being a con artist and a fraud.43 Thus, to the extent the statements are not protected
under the fair report privilege, Montgomery fails to state a claim based on these opinions.
3.
Plaintiffs claim fails for another, independent reason under Rule 12(b)(6):
Montgomery a limited-purpose public figure does not and cannot plausibly plead, as a matter
of law, actual malice (or, indeed, any other applicable standard of fault).
bouts of paranoia was protected opinion); Lieberman v. Fieger, 338 F.3d 1076, 1080 (9th Cir.
2003) (statement in Court TV interview that plaintiff, a psychiatric expert, is crazy, was
protected opinion); Serian v. Penguin Grp. (USA), Inc., 2009 WL 2225412, at *9 (N.D. W. Va.
July 23, 2009) (statement in national security book that plaintiff was very crazy was nonactionable subjective opinion[]); Rhodes v. Placer Cnty., 2011 WL 1302240 (E.D. Cal.
Mar. 31, 2011) (calling plaintiff a crazy flute player was [s]tatement[] of hyperbole); Rojas
v. Debevoise & Plimpton, 634 N.Y.S.2d 358, 362 (N.Y. Sup. Ct. 1995) (statement that plaintiff
was crazy protected opinion); Stepien v. Franklin, 528 N.E.2d 1324, 1327 (Ohio Ct. App.
1988) (same); Shaw v. Palmer, 197 S.W.3d 854, 857-58 (Tex. Ct. App. 2006) (same).
42
That Plaintiff is an incorrigible gambler (Am. Compl. 117-118) is also non-actionable
opinion where he was arrested for passing a million dollars in bad checks to a casino in Nevada
and had to declare bankruptcy. The FBI Report shows that he was a gambler and incorrigible
is a subjective assessment of his motivation that is opinion. (Handman Decl. 18 at Bates Nos.
00002, 00021-22); Fikes v. Furst, 61 P.3d 855, 864-65 (N.M. Ct. App. 2002) (statement that
plaintiff was pursuing a bizarre obsession was protected opinion).
43
See Spelson v. CBS, Inc., 581 F. Supp. 1195, 1203 (N.D. Ill. 1984) (statement that individuals
are cancer con-artists and practitioners of fraud, were opinion)), affd, 757 F.2d 1291 (7th
Cir. 1985); Yauncey v. Hamilton, 786 S.W.2d 854 (Ky. 1989) (acquaintance of suspected
murders statement to newspaper that suspect was a con artist was protected opinion); Quinn v.
Jewel Food Stores, Inc., 276 Ill. App. 3d 861, 866-67 (Ill. App. Ct. 1995) (employers evaluation
stating that plaintiff was a con artist was protected opinion).
31
a.
44
See, e.g., Clyburn v. News World Commcns, Inc., 903 F.2d 29, 32 (D.C. Cir. 1990) (finding a
public controversy, in which plaintiff became embroiled as public figure, because he was
associated with the mayor and lied to the press about his involvement in the death of a friend,
prompting the DEA, the U.S. Attorneys office, and the D.C. Police Department
investigat[ion]); Logan v. District of Columbia, 447 F. Supp. 1328, 1331 (D.D.C. 1978)
(holding plaintiff was a limited purpose public figure because he was arrested in connection with
a large undercover operation, accused of serious crimes, and voluntarily injected himself into the
operation by telling an undercover agent he had committed murder while trying to obtain a
position as a hit man); Brueggenmeyer v. ABC, 684 F. Supp. 452, 458 (N.D. Tex. 1988) (finding
plaintiff was a limited purpose public figure because the course of conduct in which [plaintiff]
engaged generated consumer complaints, government legal actions, BBB investigations, and
media attention).
32
no later than 2008 when Bloomberg, Playboy and other media outlets began reporting that
Montgomery had provided bogus software to the U.S. government to decode Al Qaeda messages
on Al Jazeera television. (Id. Exs. 1, 2, 7, 9, 11-14, 16, 17.)45 Third, Montgomery further
became a public figure because he sought out U.S. government contracts involving national
security even after he was subject to extensive media scrutiny, thus assuming the risk of further
public scrutiny about his alleged contracting fraud. See CACI Premier Tech., Inc. v. Rhodes,
536 F.3d 280, 295 (4th Cir. 2008) (government contractor became a public figure because,
when the U.S. military engaged [the contractor] to provide civilian interrogators at Abu
Ghraib, it surely knew when it accepted the interrogation work that it was potentially exposing
itself to the inhospitable climate of media criticism).46 Thus, he is unquestionably as a matter
of law a limited-purpose public figure regarding his alleged fraud on the government.
45
Indeed, a Twitter account that, by all indications, is the account of Dennis L. Montgomery at
Yarrow Point, Washington, bore as the banner the image of the title page of the 2010 Playboy
article, The Man Who Conned the Pentagon. Whether he posted the image himself, thereby
exploiting his own public figure status, or someone else set up the Twitter page, it underscores
that this controversy has become part of his public persona. A printout of the Twitter account as
of March 19, 2015 is attached to the Handman Declaration as Ex. 25.
46
See also McDowell v. Paiewonsky, 769 F.2d 942, 947-51 (3d Cir. 1985) (holding that architect
was limited-purpose public figure because he accepted government contracts and was subject to
previous media scrutiny about his work on public projects); Mosesian v. McClatchy Newspapers,
285 Cal. Rptr. 430, 439 (Cal. Ct. App. 1991) (president of company who was subject to media
attention in public debate about award of a public contract to company to put on horse-racing
event a limited-purpose public figure); Gleichenhaus v. Carlyle, 591 P.2d 635, 641 (Kan. Ct.
App.) (contributor to political campaign who later obtained government contract was a limitedpurpose public figure), affd in relevant part, 597 P.2d 611, 612-13 (Kan. 1979). Cf. Silvester v.
ABC, 839 F.2d 1491, 1495-97 (11th Cir. 1988) (finding jai alai fronton owners public figures by
entering a strictly regulated, high-profile industry in which there were few major participants
and [t]he potential loss of tax revenue because of corruption was public controversy).
33
b.
As a public figure, Montgomery is required to plead facts showing that Defendants acted
with actual malice by clear and convincing evidence, but he cannot plausibly do so.47 See Gertz
v. Robert Welch, Inc., 418 U.S. 323, 331-32 (1974); Clyburn, 903 F.2d at 33. The standard of
actual malice is a daunting one. McFarlane v. Esquire Magazine, 74 F.3d 1296, 1308 (D.C.
Cir. 1996). Plaintiff must plead that the speaker knew the statements were false or in fact
entertained serious doubts as to the truth when he made defamatory statements. St. Amant v.
Thompson, 390 U.S. 727, 731 (1968); Foretich v. CBS, Inc., 619 A.2d 48, 59 (D.C. 1993). A
plaintiff could support a defamation claim with allegations of facts evidencing that a defendant
was subjectively aware when the defendant published that the story was (1) fabricated; (2) so
inherently improbable that only a reckless person would have put [it] in circulation; or (3) based
wholly on an unverified anonymous telephone call or some other source that [defendant] had
obvious reasons to doubt. Lohrenz v. Donnelly, 350 F.3d 1272, 1283 (D.C. Cir. 2003) (citation
omitted). For [the actual malice] standard to be met, the publisher must come close to willfully
47
Even if Montgomery were not a public figure (which he is), the Complaint must be dismissed
because it cannot succeed on a negligence claim, the lower standard applicable to private-figure
plaintiffs. Phillips v. Evening Star Newspaper Co., 424 A.2d 78, 87 (D.C. 1980) ([T]he basic
standard of care in the District of Columbia for media defamation of private individuals . . . [is]
that of negligence.); see also Gertz, 418 U.S. at 347 (holding that states may not impose
liability without fault in libel cases brought by private plaintiffs). Montgomery cannot show
negligence, as a matter of law. As the Chapter reflects, Risen relied on articles previously
published in reputable publications, relied on official records and included Montgomerys
denials in the Chapter, and HMH relied on a reputable author all factors that show, as a matter
of law, not just no actual malice, but no negligence. See, e.g., Winn v. United Press Intl, 938 F.
Supp. 39, 45 (D.D.C. 1996) ([A] periodical that relies on articles from other reliable
publications is not negligent as a matter of law when it does not verify those articles with their
original sources.), affd, 1997 WL 404959 (D.C. Cir. 1997); Hakky v. Wash. Post Co., 2010 WL
2573902, at *6 (M.D. Fla. June 24, 2010) (dismissing libel claim against media company
because, in part, under Iqbal, Plaintiff failed to allege sufficient facts demonstrating negligence
. . . .).
34
blinding itself to the falsity of its utterance. Tavoulareas, 817 F.2d at 776. Montgomery cannot
clear this high hurdle, even at the pleading stage.
In the wake of Iqbal and Twombly, a plaintiff cannot state a claim simply by making
conclusory assertions of the elements of actual malice, which is all Montgomerys Amended
Complaint does. (Am. Compl. 53, 98, 162, 172.) Indeed, federal courts in Florida and across
the country now routinely dismiss defamation cases for failure to state a claim where, as here, the
plaintiff fails to plead allegations to make actual malice plausible. See Hakky, 2010 WL 2573902,
at *6-7 (dismissing libel claim under Rule 12(b)(6) where plaintiff failed to plausibly allege facts
to support actual malice); Parisi v. Sinclair, 845 F. Supp. 2d 215, 219 (D.D.C. 2012) (same).48
Because the Chapter expressly relies on previously published articles in reputable publications and
statements in official court records, FBI reports, and the Congressional Record, and includes
Plaintiffs denials, Plaintiff cannot plausibly meet the daunting standard of actual malice.49
48
See also Schatz v. Republican State Leadership Comm., 669 F.3d 50, 58 (1st Cir. 2012)
(dismissing libel complaint because none of [plaintiff's] allegations . . . plausibly suggest that,
given the articles reporting, defendant acted with actual malice); Mayfield v. NASCAR, Inc.,
674 F.3d 369, 377-78 (4th Cir. 2012) (dismissing libel claim where plaintiffs pleaded only
conclusory allegations of actual malice amounting to a mere recitation of the legal standard);
Adelson v. Harris, 973 F. Supp. 2d 467, 471 (S.D.N.Y. 2013) (dismissing libel claims under
Nevada anti-SLAPP law and Rule 12(b)(6) where statements were non-actionable opinion,
protected by fair report privilege, and evidence of actual malice was insufficient), questions
certified, 774 F.3d 803 (2d Cir. 2014); Biro v. Cond Nast, 963 F. Supp. 2d 255, 279-81, 284-85
(S.D.N.Y. 2013) (dismissing for failure to plausibly allege actual malice); Earley v. Gatehouse
Media Pa. Holdings, Inc., 2013 WL 5466149, at *6 (M.D. Pa. Sept. 30, 2013); Egiazaryan v.
Zalmayev, 2011 WL 6097136, at *8 (S.D.N.Y. Dec. 7, 2011); Diario El Pais, S.L. v. Nielsen Co.,
(US), 2008 WL 4833012, at *6-7 (S.D.N.Y. Nov. 6, 2008); Hanks v. Wavy Broad., LLC, 2012
WL 405065, at *12 (E.D. Va. Feb. 7, 2012); Pan Am Sys., Inc. v. Hardenbergh, 871 F. Supp. 2d
6, 17 (D. Me. 2012).
49
Parisi, 845 F. Supp. 2d at 219 (finding failure to plead actual malice when plaintiff cited
defendants book showing defendant took steps to verify the statements and relied on multiple
sources); Diario El Pais, S.L. v. Nielsen Co., (US), Inc., 2008 WL 4833012, at *6-7 (S.D.N.Y.
Nov. 6, 2008) (finding failure to plausibly plead actual malice when complaint showed defendant
took actions to ensure accuracy and thus it did not possess a subjective belief of falsity).
35
Indeed, the facts here, based on these documentary records, conclusively demonstrate an
absence of actual malice by Defendants, as a matter of law. The Book reflects that Risen
extensively interviewed Montgomery facts showing the absence of actual malice. See Parisi,
845 F. Supp. 2d at 218-19 (dismissing for failure to plausibly allege actual malice when
defendant interviewed plaintiff) (citing Lohrenz, 350 F.3d at 1283).50 The Book includes
Montgomerys denials throughout the Chapter. (Book at 33-34, 37, 51, 53.) This further
precludes a finding of actual malice. See Lohrenz, 350 F.3d at 1286 ([R]eporting perspectives
at odds with the publishers own tend[s] to rebut a claim of malice); Biro, 963 F. Supp. 2d at
288 (finding failure to plausibly plead actual malice when defendant printed plaintiffs denials).51
Reliance on previously published material from reputable publications also precludes
Montgomery from plausibly pleading actual malice, as a matter of law. See, e.g., Liberty Lobby,
Inc. v. Dow Jones, 838 F.2d 1287, 1297 (D.C. Cir. 1988) ([G]ood faith reliance on previously
published materials in reputable sources . . . precludes a finding of actual malice as a matter of
law.); Biro, 963 F. Supp. 2d at 279 (plaintiff could not plausibly plead actual malice because
defendants republished an article from The New Yorker, a reputable publication). Here, the Book
expressly cites the comprehensive Playboy Article and New York Times Article, which contain
50
See also Biro, 963 F. Supp. 2d at 288 (plaintiff failed to plausibly plead actual malice where
they had interviewed plaintiff and included denials); Loeb v. New Times Commcns Corp., 497 F.
Supp. 85, 93 (S.D.N.Y. 1980) (It cannot be said that the defendants conduct constitutes an
extreme departure from the standards of investigation and reporting ordinarily adhered to by
responsible publishers. Loeb himself was interviewed . . . .).
51
Montgomerys general denials do not establish knowledge or recklessness as to falsity. See
Edwards v. National Audubon Socy, Inc., 556 F.2d 113, 121 (2d Cir. 1977) (actual malice
cannot be predicated on mere denials, however vehement; such denials are so commonplace in
the world of polemical charge and countercharge that, in themselves, they hardly alert the
conscientious reporter to the likelihood of error); McFarlane v. Sheridan Square Press, Inc., 91
F.3d 1501, 1510-11 (D.C. Cir. 1996) (no actual malice even though plaintiff was not contacted
because Defendant] knew . . . that [plaintiff] had sued . . . for defamation based upon similar
allegations; [plaintiff] could reasonably expect [defendant] to deny any involvement regardless
of the facts.).
36
all the facts Plaintiff now challenges, facts first published in the 2008 article in Bloomberg News,
also a reputable publication. Plaintiff has not and could not allege that he had obtained
retractions or challenged any of these publications in a lawsuit. Reliance on these reputable
sources defeats actual malice.
Moreover, reliance on official reports or official sources, as Risen did here, cannot
constitute actual malice.52 No less a prominent official than the Director of the CIA, in
Congressional testimony, supported the claim that Montgomerys information was not accurate
or, as Senator Chambliss described it bogus.53 These official views echoed what Plaintiffs `
former business partner in eTreppid told the FBI and said in court records: the demonstrations
were rigged and the software non-existent. The court records include what Plaintiffs former
lawyer said: Based upon personal knowledge, and information and belief, Blxware possesses no
marketable technology, the technology as represented does not exist[.] (Handman Decl. Ex.
20.) The New York Times Article, co-written and expressly relied upon by Risen in the Book,
reported that Montgomery invoked his Fifth Amendment right against self-incrimination in his
deposition when asked if his software was a complete fraud, (Handman Decl. Ex. 2, at 6; Ex.
15 at 57-58, 60, 80-81, 188-191, 199-201, 273). In a civil case, an adverse inference that the
52
Bell v. Associated Press, 584 F. Supp. 128, 129, 132 (D.D.C. 1984) (no actual malice as a
matter of law where reporter relied on arrest report); Klayman v. City Pages, 2015 WL 1546173,
at *16-17 (M.D. Fla. Apr. 3, 2015) (granting motion for summary judgment, because, in part,
plaintiff could not prove actual malice when newspapers and authors relied on judicial opinions
and public filings in Florida Bar disciplinary proceedings); CACI Premier Tech., 536 F.3d at 292
(no actual malice as a matter of law where radio commentator relied on official reports about the
conditions set by government contractor that led to torture, rape, and murder at Abu Ghraib
prison); Peter Scalamandre & Sons, Inc. v. Kaufman, 113 F.3d 556, 562-63 (5th Cir. 1997) (no
actual malice as a matter of law where arson allegations were based on a police report); Church
of Scientology Intl v. Behar, 238 F.3d 168, 175 (2d Cir. 2001) (no actual malice as a matter of
law where author relied on sources including a police report).
53
In a 2012 article in Defense News, Jose Rodriguez, the man who had been in charge of the
CIAs Counterterrorism Center, said the Center had been skeptical, viewed the software as
crazy and passing it along to the White House ridiculous. (Handman Decl. Ex. 20.)
37
software was a fraud may be drawn from Montgomerys invocation.54 In the face of this adverse
inference and [i]n view of the vast number of objective sources who condemned Montgomery
as a fake, this Court should conclude as a matter of law that Defendants did not entertain
serious doubts that the gist of the Chapter was true. Levan v. Capital Cities/ABC, 190 F.3d
1230, 1244 (11th Cir. 1999) (reversing plaintiffs jury verdict on actual malice and entering
judgment for defendant), cert. denied, 528 U.S. 1198 (2000).
Moreover, given that the Book was the work of a highly reputable author the Amended
Complaint itself admits that Risen is a Pulitzer Prize-winning journalist, and a national
security expert (Am. Compl. 10, 14) who had published the same allegations in the New York
Times in 2011 without legal challenge Montgomery cannot plausibly plead that HMH was even
negligent, much less acted with actual malice, in relying on and publishing Risens work. See
Chaiken v. VV Publg Corp., 119 F.3d 1018, 1032 (2d Cir. 1997) (publisher may not be liable for
article if it relies upon the integrity of a reputable author and has no serious reason to question
the accuracy of the information provided by that author).55 Indeed, HMH would have no reason
to doubt Risen since other reputable publications had also published the same allegations for
years without legal challenge.56
54
See, e.g., Coquina Investments v. TD Bank, N.A., 760 F.3d 1300, 1310 (11th Cir. 2014) (In
civil cases, . . . the Fifth Amendment does not forbid adverse inferences against parties . . . when
they refuse to testify . . . .) (quoting Baxter v. Palmigiano, 425 U.S. 308, 318 (1976)).
55
See McManus v. Doubleday & Co., 513 F. Supp. 1383, 1390 (S.D.N.Y. 1981) (co-author and
publisher were entitled as a matter of law to rely on [authors] proven reportorial ability);
Pegasus v. Reno Newspapers, Inc., 57 P.3d 82, 93 (Nev. 2002) (newspaper did not act with
actual malice where there is no evidence that . . . anyone at [the newspaper] had any reason to
believe [the freelance reporter] would lie . . .).
56
Plaintiff does not allege any facts that would suggest that the publisher HMH acted with any
degree of fault. See McFarlane, 74 F.3d at 1303 (explaining that, because actual malice is a
question of each defendants subjective state of mind, absent respondeat superior, actual malice
will not be imputed from the author to the publisher). The Amended Complaint also does not
allege facts to suggest that Houghton Mifflin Harcourt Company, which Plaintiff alleges is
merely a holding company of the publisher (Am. Compl. 16), had anything to do with
38
Finally, the allegation that Defendants rejected Montgomerys request for retraction (Am.
Compl. 44) fails to plausibly plead actual malice, again as a matter of law, because it does not
prove the wrongful state of knowledge at the time of the initial publication. See Biro, 963 F.
Supp. 2d at 281-82, 286 (holding that defendants after-the-fact refusal to retract fails to
plausibly allege actual malice as a matter of law because a failure to retract occurs, by
definition, after publication, meaning that its probative value as to a defendants state of mind at
the time of publication is dubious at best.); Klayman, 2015 WL 1546173, at *15 ([T]hat
Plaintiff alerted Defendants after publication that he believed the statements were false and that
he wanted some kind of correction or retraction does not help Plaintiff to establish actual
malice.).57 Here, where there was no plausible allegation of error, the refusal to retract is only
further evidence of no actual malice. Tavoulareas v. Piro, 759 F.2d 90, 132 n.51 (D.C. Cir.
1985) ([T]he refusal may show that the publisher believed and still believes that the falsehood
was true.), revd on other grounds, 817 F.2d 762 (D.C. Cir. 1987) (en banc). In sum,
Montgomery fails to plausibly plead actual malice, or any other applicable level of fault, and the
Court should therefore dismiss the libel claim, with prejudice.
4.
Because Montgomerys defamation claim fails, so do [his] other tort claims based upon
the same allegedly defamatory speech. Farah, 736 F.3d at 540. [A] plaintiff may not use
related causes of action to avoid the constitutional requisites of a defamation claim. Moldea II,
22 F.3d at 319-20 (citing Cohen v. Cowles Media Co., 501 U.S. 663, 670 (1991)). The First
publication of the Book or is at fault in any way. This is an additional reason why the Amended
Complaint should be dismissed as to both HMH Companies.
57
See McFarlane, 91 F.3d at 1515 (McFarlane presents no authority, however, nor are we
aware of any, for the proposition that a publisher may be liable for defamation because it fails to
retract a statement upon which grave doubt is cast after publication.); N.Y. Times Co. v.
Sullivan, 376 U.S. 254, 286 (1964) (the Times failure to retract upon respondents demand . . .
is likewise not adequate evidence of malice for constitutional purposes).
39
CONCLUSION
For the foregoing reasons, defendants HMH Companies and Risen respectfully request
that the Court grant their motions: (1) to dismiss or transfer for lack of personal jurisdiction over
Risen and HMHC; (2) dismiss or transfer for improper venue; (3) transfer for convenience; or
(4) dismiss the complaint with prejudice under Fed. R. Civ. P. 12(b)(6).
58
For example, Plaintiff cannot show intent or that the statements were threats of civil assault,
and cannot show extreme and outrageous conduct, intent, or severe distress as to IIED. See
Acosta Orellana v. CropLife Intl, 711 F. Supp. 2d 81, 92 (D.D.C. 2010) (assault if (a) they act
intending to cause a harmful or offensive contact . . . or an imminent apprehension of such a
contact, and (b) the other party is thereby put in such imminent apprehension) (alterations
omitted); Jackson v. District of Columbia, 412 A.2d 948, 955 n.15 (D.C. 1980) (no liability for
assault for negligent or reckless behavior lacking the intent to commit an assault); Solers, Inc. v.
Doe, 977 A.2d 941, 948 (D.C. 2009) (dismissing for failure to state a claim because plaintiff
must show that the interference was intentional and that there was resulting damage to state a
tortious interference claim); Jung v. Jung, 791 A.2d 46, 50 (D.C. 2002) (To establish a claim for
intentional infliction of emotional distress, a plaintiff must prove that the defendant engaged in:
(1) extreme and outrageous conduct that (2) intentionally or recklessly caused (3) severe
emotional distress to another.).
40
41
CERTIFICATE OF SERVICE
I certify that on May 15, 2015, I filed this document with the Clerk of Court using
CM/ECF, which will serve this document on all counsel of record.
s/Sanford L. Bohrer
42
v.
JAMES RISEN, HOUGHTON MIFFLIN
HARCOURT PUBLISHING CO., MIFFLIN
HARCOURT CO., HMH HOLDINGS, INC.,
Defendants.
of Defendants' Motion to Dismiss or Transfer for Lack of Personal Jurisdiction over Risen and
Houghton Mifflin Harcourt Company, Dismiss or Transfer for Improper Venue, or Transfer
Under 28 U.S.C. 1404(a). Unless otherwise indicated, I make the following statements based
on my own personal knowledge, and if called as a witness, I could and would testify competently
to these facts under oath.
2.
I am a resident of Derwood, Maryland. I have worked for the New York Times in
I am not a Florida resident. I do not own or rent any real estate in Florida. I do
not maintain any records in Florida. I do not have a bank account in Florida. I do not pay, and
am not required to pay, taxes in Florida. I do not have any agents in Florida. I have not filed any
lawsuits in Florida.
4.
I am the author of Pay Any Price: Greed, Power, and the Endless War (the
"Book"). Defendant Houghton Mifflin Harcourt Publishing Co. published the Book on
October 14, 2014. Among other things, Chapter 2 of the Book is about Plaintiff Dennis L.
Montgomery.
5.
During my preparation of the Book, I did not believe that Montgomery had any
connection to Florida and Montgomery gave me no reason to believe that he had any connection
to Florida. Chapter 2, about Montgomery's efforts to sell software technology to the CIA and
the Pentagon, discussed events in Washington, D.C., Nevada, California, and Washington State,
but did not mention Florida.
6.
2012. I understood he was living in California and/or Washington State at the time. The
telephone number I had for him was a California exchange.
7.
Until I read the allegations of the complaint in this case, I had not been aware that
working in Washington, D.C. and Maryland. I conducted much of the newsgathering for
Chapter 2 about Montgomery in Washington, D.C. for a February 19, 2011 New York Times
article entitled Hiding Details of Dubious Deal, US. Invokes National Security, which I coauthored with Eric Lichtblau. Lichtblau also worked and continues to work in the Washington,
D.C. bureau of the New York Times. Lichtblau and I interviewed sources located in the
Washington, D.C. area, California, New York, Nevada and Washington State by phone, email, or
m person.
9.
With one possible minor exception, I did not have any contact with Florida,
Many of the past and current government officials who have knowledge of
Montgomery, his intelligence information and his reputation, and who either were interviewed or
otherwise referenced in Chapter 2, are currently, to the best of my knowledge, located in or
within a 100-mile radius of Washington, D.C., including:
a.
Current and former CIA officials, such as CIA press spokespersons and
Donald Kerr, then chief of the CIA's Science and Technology Directorate.
(Chapter 2 at 39, 40, 42, 43, 46.) Some of these current and former CIA
officials provided information to me showing that Montgomery's
technology was revealed to be a hoax.
b.
John Brennan, then head of the Terrorist Threat Integration Center, who,
in his confirmation for Director of the CIA, testified that Montgomery's
software "was determined not to be a source of accurate information."
(Chapter 2 at 47.)
c.
George Tenet, Director of the CIA at the time, who, the Book says,
"allowed [scientists] to circumvent the CIA's normal reporting and vetting
channels, and rushed the raw material fed to the agency by Montgomery
directly to the president." (Chapter 2 at 43-44, 46.)
d.
e.
f.
11.
intelligence information, and his reputation, are currently, to the best of my knowledge, located
within a 100-mile radius ofD.C., include Paul L. Haraldsen, who led the Air Force Special
Investigation Inquiry into Montgomery's software, and Jose Rodriguez, who was at the time in
charge of the CIA's Counterterrorism Center and has been quoted in a 2012 Defense News article
as saying the Counterterrorism Center viewed Montgomery's intelligence as "crazy." Aram
Roston, Obama 's Counterterror Czar, Gave Bogus Intel to Bush White House,
http://www.defensenews.com/article/20121001/C4ISR01/310010001 (Oct. 1, 2012).
12.
b.
13.
Other persons who have knowledge of Montgomery, his software, and his
reputation, and who were either interviewed or otherwise referenced in Chapter 2, are, to the best
of my knowledge, not located in Florida:
a.
b.
c.
d.
e.
f.
14.
The radfo and television interviews l have given to promote the Book following
publication also have not been conducted in Florida or by Florida media. The interviews, like
Chapter 2 in the Book, made no Teference to Florida.
Under 28 U.S.C. 1746, I declare under penalty of perjury that the foregoing is true and
correct.
Executed on May 13, 2015.
EXHIBIT 1
By Aram Roston
Page 1 of 10
Jan./Feb. 2010
By Aram Roston
The weeks before Christmas brought no hint of terror. But by the afternoon of December 21, 2003,
police stood guard in heavy assault gear on the streets of Manhattan. Fighter jets patrolled the skies.
When a gift box was left on Fifth Avenue, it was labeled a suspicious package and 5,000 people in the
Metropolitan Museum of Art were herded into the cold.
It was Code Orange. Americans first heard of it at a Sunday press conference in Washington, D.C.
Weekend assignment editors sent their crews up Nebraska Avenue to the new Homeland Security
offices, where DHS secretary Tom Ridge announced the terror alert. Theres continued discussion,
he told reporters, these are from credible sourcesabout near-term attacks that could either rival or
exceed what we experienced on September 11. The New York Times reported that intelligence
sources warned about some unspecified but spectacular attack.
The financial markets trembled. By Tuesday the panic had ratcheted up as the Associated Press
reported threats to power plants, dams and even oil facilities in Alaska. The feds forced the
cancellation of dozens of French, British and Mexican commercial flights of interest and pushed
foreign governments to put armed air marshals on certain flights. Air France flight 68 was canceled,
as was Air France flight 70. By Christmas the headline in the Los Angeles Times was "Six Flights
Canceled as Signs of Terror Plot Point to L.A." Journalists speculated over the basis for these terror
alerts. Credible sources, Ridge said. Intelligence chatter, said CNN.
But there were no real intercepts, no new informants, no increase in chatter. And the suspicious
package turned out to contain a stuffed snowman. This was, instead, the beginning of a bizarre scam.
Behind that terror alert, and a string of contracts and intrigue that continues to this date, there is one
unlikely character.
The mans name is Dennis Montgomery, a self-proclaimed scientist who said he could predict
terrorist attacks. Operating with a small software development company, he apparently convinced the
Bush White House, the CIA, the Air Force and other agencies that Al Jazeerathe Qatari-owned TV
networkwas unwittingly transmitting target data to Al Qaeda sleepers.
An unusual team arrived in Reno, Nevada in 2003 from the Central Intelligence Agency. They drove
up Trademark Drive, well south of the casinos, past new desert warehouses. Then they turned into an
almost empty parking lot, where a sign read "eTreppid Technologies." It was an attractively designed
building of stone tile and mirrored windows that had once been a sprinklerhead factory.
ETreppid Technologies was a four-year-old firm trying to find its way. Some of its employees had
been hired to design video games. One game under construction was Roadhouse, based on the 1989
movie in which Patrick Swayze plays a bouncer in a dive bar. Other programmers worked on
streaming video for security cameras.
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When the liaison team stepped into eTreppids office, the CIA man in charge introduced himself as
Sid but didnt give his last name. He was tall and in his 50s, with a well-ironed shirt, a paunch and a
mildly robotic politeness. We called him Sid Vicious, one eTreppid technician explained, because
he was anything but.
Sids team set up on the first floor in an unused office and had special cipher locks installed. Workers
carted in a heavy-duty paper shredder that could transform classified documents to dust in seconds.
They set up impenetrable safes with combination locks protected by privacy screens so bystanders
couldnt steal the code.
The CIA team was there to work with Dennis Montgomery, at the time eTreppids chief technology
officer and part owner. Then 50 years old, with a full head of gray hair, the street-smart Montgomery
stood at about five feet eight inches. Other eTreppid workers, hearing the buzz about the spooks in
town, peered through their blinds and watched as Montgomery worked at his desk at the north end of
the building. He wore his usual jeans and Tommy Bahama shirt.
He could be seen handing off reams of paper to Sid and the CIA. They would sit in the room and
review these numbers or whatever the heck Dennis was printing out, one former eTreppid employee,
Sloan Venables, told me. We called them Sids guys, and no one knew what the hell they did.
Montgomery called the work he was doing noise filtering. He was churning out reams of data he
called output. It consisted of latitudes and longitudes and flight numbers. After it went to Sid, it went
to Washington, D.C. Then it found its way to the CIAs seventh floor, to Director George Tenet.
Eventually it ended up in the White House. Montgomerys output was to have an extraordinary effect.
Ridges announcement, the canceled flights and the holiday disruptions were all the results of
Montgomerys mysterious doings.
He is an unusual man. In court papers filed in Los Angeles, a former lawyer for Montgomery calls the
software designer a habitual liar engaged in fraud. Last June Montgomery was charged in Las
Vegas with bouncing nine checks (totaling $1 million) in September 2008 and was arrested on a
felony warrant in Rancho Mirage, California. That million is only a portion of what he lost to five
casinos in Nevada and California in just one year. Thats according to his federal bankruptcy filing,
where he reported personal debts of $12 million. The FBI has investigated him, and some of his own
co-workers say he staged phony demonstrations of military technology for the U.S. government.
Montgomery has no formal scientific education, but over the past six years he seems to have
convinced top people in the national security establishment that he had developed secret tools to save
the world from terror and had decoded Al Qaeda transmissions. But the communications Montgomery
said he was decrypting apparently didnt exist.
He claimed he provided Cheneys office with new output data on terror that would
validate his work. He said the data, which had been encrypted in Al Jazeera, were the
keys
that allowed investigators to crack the liquid-bomb plot in London.
Since 1996 the Al Jazeera news network had been operating in the nation of Qatar, a U.S. ally in the
war on terror. Montgomery claimed he had found something sinister disguised in Al Jazeeras
broadcast signal that had nothing to do with what was being said on the air: Hidden in the signal were
secret bar codes that told terrorists the terms of their next mission, laying out the latitudes and
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The reason the whole thing worked was because Montgomerys CIA contact was with the agencys
Directorate of Science and Technology. Thats the whiz-bang branch of the intelligence service,
where employees make and break codes, design disguises and figure out the latest gadgets. S&T was
eventually ordered by CIA brass to reveal its source to small groups from other parts of the agency.
And when some experienced officers heard about it, they couldnt believe it. One former
counterterrorism official remembers the briefing: They found encoded location data for previous and
future threat locations on these Al Jazeera tapes, he says. It got so emotional. We were fucking
livid. I was told to shut up. I was saying, This is crazy. This is embarrassing. They claimed they
were breaking the code, getting latitude and longitude, and Al Qaeda operatives were decoding it.
They were coming up with airports and everything, and we were just saying, You know, this is
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Montgomery convinced Trepp he had invented a remarkable technology. He could compress data, he
said, a whole movie to just a fraction of the space it took up on a drive. He impressed his patron with
his demonstration, using software to highlight images from the 1939 film Gunga Din. It was enough
for them to launch their operation. Montgomery contributed his technological breakthrough, and
Trepp invested $1.3 million to start. Montgomery soon hired Sloan Venables, a video-game designer,
as one of his first employees. Venables had helped design the Ted Nugent Wild Hunting Adventure
video game. From the beginning, Venables realized things were odd and doubted Montgomery knew
much about software programming. One day at a Chinese restaurant at the same Eldorado Hotel
Casino, Montgomery told him about the time hed been abducted by a UFO. He told me about his
encounter with aliens, Venables says. He went to his uncles or grandfathers or great uncles barn
in the middle of the night, and a spaceship descended on him. They wanted him to go with them, and
he was abducted. Then he came back with extra knowledge. Venables started laughing at the story,
he says.
Montgomery was prone to temper tantrums, according to Venables. Once he hurled a steak at a
waitress. As volatile as he was at times, Venables says, he was at other times warm and confiding.
When Venables threatened to quit after Montgomery threw a can of grape soda at him, Montgomery
took Venabless dying mother to dinner. Every Friday he would take all his employees skeet and
trapshooting at a desert range.
Venables brought in a childhood friend to work at eTreppid. Jim Bauder, who was in his 20s, was
soon working on the video games eTreppid was trying to design. Bauder and Venables say
Montgomery ran the place, and they saw little of Trepp but were aware of his background. They also
say they saw Milken at eTreppid. I saw him come in once, and he had this entourage of five or six
people with him, says Bauder. They came walking down the hallway, and he looked at me and
smiled, introduced himself and then went on down the hall.
ETreppid landed its first big contract from General Electric in 2002 for use of its video compression
technology in gaming surveillance. The company eventually got a contract with the Air Force dealing
with aspects of video shot by unmanned Predator drones. Montgomery claimed his software could
automatically recognize weapons and faces. In 2004 the U.S. Special Operations Command gave
eTreppid a $30 million no-bid contract for compression and automatic target recognition.
Venables and Bauder acknowledge they cant be certain that no anomaly detection or pattern
recognition software existed, but they doubt it did. In fact, eTreppid workers later told the FBI they
thought Montgomery had developed little if any original software.
Montgomery and eTreppid did, over time, receive five patents for various inventions and theoretical
methods related to video and data. These included a method and apparatus for storing digital video
content provided from a plurality of cameras and a method and apparatus for detecting and reacting
to occurrence of an event. But Montgomery said these patents had nothing to do with his government
work, and they never seemed to lead to business or profit.
FBI reports indicate Montgomery rigged tests to make government officials think his software could
detect weapons in video streams. Apparently it was all part of Montgomerys claim to have developed
automatic target recognition software. Imagine how useful it would be if a computer could pick out
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Bauder says he helped once, unwittingly. He told his story to the FBI, and he told it to me. In his
demonstrations Montgomery often used a plastic toy bazooka that he said a computer could recognize
as a weapon. He would do the demonstration in scrubland behind eTreppids offices. Some military
guys were walking around the office, says Bauder. Montgomery suddenly came to him, he says,
and takes me back to his office. He closes the door and closes the blinds and was like, Need you to
do something for me. Dont worry; we are just doing a demo. Its all good. Bauder was concerned
about the secrecy. I was like, But whats with the doors and blinds? Montgomery looked up at
Bauder and told him it was okay. They would communicate via an open cell phone line. He told
Bauder to listen to the phone. When you hear the tone, I want you to hit the space bar on the
keyboard. Bauder, in other words, would be secretly communicating with Montgomery while the
military guys watched the supposed software demo on another computer.
Montgomery ran off to do his demonstration outside. Bauder watched the computer screen, seeing
what the camera saw. Montgomery held the toy bazooka in one hand while his other hand was hidden.
When Bauder heard the tone, he says, I hit the space bar. A little square encircled his image through
the camera on the screen. He was running around with the fake plastic bazooka. Bauder figured
Montgomery had rigged the computer screen so it seemed as if the square was tracking the bazooka.
In reality, the square was brought up on the screen when Bauder hit the space bar.
ETreppid needed security clearances to get classified contracts. In 2004 Venables was selected as the
firms facilities security officer. He flew to Baltimore for Department of Defense training. It was an
arduous process, with the Defense Security Service probing everyones background.
Montgomery received an interim secret clearance in May 2003, according to records later released
in a federal case. In February 2004 he got a top-secret clearance from the Defense Industrial Security
Clearance Office. At eTreppid, Montgomery appears to have taken a curious approach to secrecy.
Venables and Bauder say Montgomery had his own way of classifying items at the company. He had
rolls of 'classified' stickers, Bauder says, and he would just put them on random garbage.
The CIA was an eTreppid customer, as was SOCOM and the Air Force. Soon the Navy started
coming by. Montgomery said he had another filter to identify underwater submarines by scanning a
giant satellite photo of the ocean. Although Montgomery claimed he was using his software, Bauder
and Venables say he appeared to be doing it by eye.
The pattern recognition, anomaly detection and compression work were nice, but it was the Al Jazeera
stuffthe noise filteringthat had cash potential. Even though the CIA had abandoned
Montgomery in 2004 after determining the bar codes didnt exist, he and eTreppid continued to try to
sell it.
Trepp later told a judge in a federal lawsuit that hed asked the government for $100 million.
Montgomery has also cited that figure in sworn declarationsthough he also claimed Trepp wanted
$500 million for the decoding technology. He would tell his lawyers and investors that the money
was appropriated as part of the black budget. ETreppid did have powerful friends and lobbyists
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EXHIBIT 2
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been shutting off scrutiny of Mr. Montgomerys business for fear of revealing
that the government has been duped.
The Justice Department is trying to cover this up, Mr. Flynn said. If this
unravels, all of the evidence, all of the phony terror alerts and all the
embarrassment comes up publicly, too. The government knew this technology
was bogus, but these guys got paid millions for it.
Justice Department officials declined to discuss the governments dealings with
Mr. Montgomery, 57, who is in bankruptcy and living outside Palm Springs,
Calif. Mr. Montgomery is about to go on trial in Las Vegas on unrelated charges
of trying to pass $1.8 million in bad checks at casinos, but he has not been
charged with wrongdoing in the federal contracts, nor has the government tried
to get back any of the money it paid. He and his current lawyer declined to
comment.
The software he patented which he claimed, among other things, could find
terrorist plots hidden in broadcasts of the Arab network Al Jazeera; identify
terrorists from Predator drone videos; and detect noise from hostile
submarines prompted an international false alarm that led President George
W. Bush to order airliners to turn around over the Atlantic Ocean in 2003.
The software led to dead ends in connection with a 2006 terrorism plot in
Britain. And they were used by counterterrorism officials to respond to a bogus
Somali terrorism plot on the day of President Obamas inauguration, according
to previously undisclosed documents.
It Wasnt Real
Dennis would always say, My technology is real, and its worth a fortune,
recounted Steve Crisman, a filmmaker who oversaw business operations for
Mr. Montgomery and a partner until a few years ago. In the end, Im convinced
it wasnt real.
Government officials, with billions of dollars in new counterterrorism financing
after Sept. 11, eagerly embraced the promise of new tools against militants.
C.I.A. officials, though, came to believe that Mr. Montgomerys technology was
fake in 2003, but their conclusions apparently were not relayed to the militarys
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Special Operations Command, which had contracted with his firm. In 2006,
F.B.I. investigators were told by co-workers of Mr. Montgomery that he had
repeatedly doctored test results at presentations for government officials. But
Mr. Montgomery still landed more business.
In 2009, the Air Force approved a $3 million deal for his technology, even
though a contracting officer acknowledged that other agencies were skeptical
about the software, according to e-mails obtained by The New York Times.
Hints of fraud by Mr. Montgomery, previously raised by Bloomberg Markets
and Playboy, provide a cautionary tale about the pitfalls of government
contracting. A Pentagon study in January found that it had paid $285 billion in
three years to more than 120 contractors accused of fraud or wrongdoing.
Weve seen so many folks with a really great idea, who truly believe their
technology is a breakthrough, but it turns out not to be, said Gen. Victor E.
Renuart Jr. of the Air Force, who retired last year as the commander of the
militarys Northern Command. Mr. Montgomery described himself a few years
ago in a sworn court statement as a patriotic scientist who gave the government
his software to stop terrorist attacks and save American lives. His alliance
with the government, at least, would prove a boon to a small company,
eTreppidTechnologies, that he helped found in 1998.
He and his partner a Nevada investor, Warren Trepp, who had been a top
trader for the junk-bond king Michael Milken hoped to colorize movies by
using a technology Mr. Montgomery claimed he had invented that identified
patterns and isolated images. Hollywood had little interest, but in 2002, the
company found other customers.
With the help of Representative Jim Gibbons, a Republican who would become
Nevadas governor and was a longtime friend of Mr. Trepps, the company won
the attention of intelligence officials in Washington. It did so with a remarkable
claim: Mr. Montgomery had found coded messages hidden in broadcasts by Al
Jazeera, and his technology could decipher them to identify specific threats.
The software so excited C.I.A. officials that, for a few months at least, it was
considered the most important, most sensitive intelligence tool the agency
had, according to a former agency official, who like several others would speak
only on the condition of anonymity because the technology was classified.
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ETreppid was soon awarded almost $10 million in contracts with the militarys
Special Operations Command and the Air Force, which were interested in
software that Mr. Montgomery promised could identify human and other
targets from videos on Predator drones.
In December 2003, Mr. Montgomery reported alarming news: hidden in the
crawl bars broadcast by Al Jazeera, someone had planted information about
specific American-bound flights from Britain, France and Mexico that were
hijacking targets.
C.I.A. officials rushed the information to Mr. Bush, who ordered those flights to
be turned around or grounded before they could enter American airspace.
The intelligence people were telling us this was real and credible, and we had
to do something to act on it, recalled Asa Hutchinson, who oversaw federal
aviation safety at the time. Senior administration officials even talked about
shooting down planes identified as targets because they feared that supposed
hijackers would use the planes to attack the United States, according to a
former senior intelligence official who was at a meeting where the idea was
discussed. The official later called the idea of firing on the planes crazy.
French officials, upset that their planes were being grounded, commissioned a
secret study concluding that the technology was a fabrication. Presented with
the findings soon after the 2003 episode, Bush administration officials began to
suspect that we got played, a former counterterrorism official said.
The C.I.A. never did an assessment to determine how a ruse had turned into a
full-blown international incident, officials said, nor was anyone held
accountable. In fact, agency officials who oversaw the technology directorate
including Donald Kerr, who helped persuade George J. Tenet, then the director
of central intelligence, that the software was credible were promoted, former
officials said. Nobody was blamed, a former C.I.A. official said. They acted
like it never happened.
After a bitter falling out between Mr. Montgomery and Mr. Trepp in 2006 led
to a series of lawsuits, the F.B.I. and the Air Force sent investigators to
eTreppid to look into accusations that Mr. Montgomery had stolen digital data
from the companys systems. In interviews, several employees claimed that Mr.
Montgomery had manipulated tests in demonstrations with military officials to
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make it appear that his video recognition software had worked, according to
government memorandums. The investigation collapsed, though, when a judge
ruled that the F.B.I. had conducted an improper search of his home.
Software and Secrets
The litigation worried intelligence officials. The Bush administration declared
that some classified details about the use of Mr. Montgomerys software were a
state secret that could cause grave harm if disclosed in court. In 2008, the
government spent three days scrubbing the home computers of Mr.
Montgomerys lawyer of all references to the technology. And this past fall,
federal judges in Montana and Nevada who are overseeing several of the
lawsuits issued protective orders shielding certain classified material.
The secrecy was so great that at a deposition Mr. Montgomery gave in
November, two government officials showed up to monitor the questioning but
refused to give their full names or the agencies they worked for.
Years of legal wrangling did not deter Mr. Montgomery from passing supposed
intelligence to the government, according to intelligence officials, including an
assertion in 2006 that his software was able to identify some of the men
suspected of trying to plant liquid bombs on planes in Britain a claim
immediately disputed by United States intelligence officials. And he soon found
a new backer: Edra Blixseth, a onetime billionaire who with her former
husband had run the Yellowstone Club in Montana.
Hoping to win more government money, Ms. Blixseth turned to some
influential friends, like Jack Kemp, the former New York congressman and
Republican vice-presidential nominee, and Conrad Burns, then a Republican
senator from Montana. They became minority stakeholders in the venture,
called Blxware.
New Pitches
In an interview, Mr. Burns recalled how impressed he was by a video
presentation that Mr. Montgomery gave to a cable company. He talked a hell
of a game, the former senator said.
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Mr. Kemp, meanwhile, used his friendship with Vice President Dick Cheney to
set up a meeting in 2006 at which Mr. Kemp, Mr. Montgomery and Ms.
Blixseth met with a top Cheney adviser, Samantha Ravich, to talk about
expanding the governments use of the Blxware software, officials said. She was
noncommittal.
Mr. Flynn, who was still Mr. Montgomerys lawyer, sent an angry letter to Mr.
Cheney in May 2007. He accused the White House of abandoning a tool shown
to save lives. (After a falling out with Mr. Montgomery, Mr. Flynn represents
another party in one of the lawsuits.)
But Mr. Montgomerys company still had an ally at the Air Force, which in late
2008 began negotiating a $3 million contract with Blxware.
In e-mails to Mr. Montgomery and other company officials, an Air Force
contracting officer, Joseph Liberatore, described himself as one of the
believers, despite skepticism from the C.I.A. and problems with the no-bid
contract.
If other agencies examined the deal, he said in a December 2008 e-mail, we
are all toast.
Honestly I do not care about being fired, Mr. Liberatore wrote, but he said he
did care about moving the effort forward we are too close. (The Air Force
declined to make Mr. Liberatore available for comment.)
The day after Mr. Obamas inauguration, Mr. Liberatore wrote that government
officials were thanking Mr. Montgomerys company for its support. The Air
Force appears to have used his technology to try to identify the Somalis it
believed were plotting to disrupt the inauguration, but within days, intelligence
officials publicly stated that the threat had never existed. In May 2009, the Air
Force canceled the companys contract because it had failed to meet its
expectations.
Mr. Montgomery is not saying much these days. At his deposition in November,
when he was asked if his software was a complete fraud, he answered, Im
going to assert my right under the Fifth Amendment.
Barclay Walsh contributed research.
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EXHIBIT 5
EXHIBIT 15
)
)
)
Michael J. Flynn,
)
)
Plaintiff,
)
)
vs.
)
)
Defendants.
~~~~~--~~~~~~--)
800.669.1866
California.
APPEARANCES:
10
11
Attorneys at Law
12
BY:
13
14
suite 200
15
Denver, Colorado
16
(303) 298-1800
17
80202
18
19
Attorneys at Law
20
BY:
21
22
23
suite 100
24
25
(818) 883-4400
91367-6667
Page 2
YATES COURT REPORTERS
800.669.1866
CIVIL DIVISION
BY:
20 Massachusetts Avenue, NW
Room 7150
Washington,
(202) 514-4522
10
DC
20530
Also Present:
11
12
13
14
15
Government
16
videographer:
17
18
services
19
20
21
22
23
24
25
Page 3
YATES COURT REPORTERS
800.669.1866
2006.
BY
4
10:10:34
MR. CONANT:
Q.
MR. CROCKETT:
counsel?
BY
10
Q.
13
14
10:11:03
15
16
17
10:11:30
20
21
22
10:11:41
in evidence.
MR. CONANT:
Q.
Fifth Amendment.
Q.
18
19
MR. CROCKETT:
11
12
MR. CONANT:
10:10:44
"decoding programs."
A.
Fifth Amendment.
Q.
23
24
25
800.669.1866
3
4
10:11:56
Q.
10
11
BY MR. CONANT:
13
Q.
Go back to what?
15
Q.
Exhibit
Stephanie, what Plaintiff's exhibit are we
17
18
on right now?
19
THE REPORTER:
3.
20
MR. CROCKETT:
21
declaration?
MR. CONANT:
22
23
24
10:13:02
All right.
14
16
10:12:55
12
10:12:43
Fifth Amendment.
9
10:12:21
25
things.
Let me go -- can we go off the record here
for a second so
800.669.1866
BY MR. CONANT:
Q.
10:15:23
10
MR. FLYNN:
13
BY MR. CONANT:
15
16
17
Q.
Fifth Amendment.
18
MR. FLYNN:
19
MR. CONANT:
20
21
22
10:16:16
12
14
10:15:49
home.
11
10:15:37
10:15:07
Q.
All right.
All right.
I'm going to keep going.
Mr. Montgomery, turn with me
23
24
25
Page 60
YATES COURT REPORTERS
800.669.1866
10:41:49
10:41:57
10:42:13
Q.
A.
just --
Q.
A.
Q.
protective order --
MR. FLYNN:
MR. CONANT:
10
MR. FLYNN:
11
MR. CONANT:
12
MR. FLYNN:
All right.
Ask him if he gave -Let me
-- very specific intelligence
14
15
BY
17
MR. CONANT:
Q.
19
20
18
10:42:35
Don't go there.
13
16
10:42:23
BY
MR. CONANT:
Q.
21
22
23
decoding software, as
24
25
without compensation."
Page 80
YATES COURT REPORTERS
1
2
10:42:46
10
A.
--
Fifth Amendment.
Q.
11
MR. CROCKETT:
12
Go ahead.
13
THE WITNESS:
14
Hold it.
15
16
MR. CONANT:
17
THE WITNESS:
18
19
10:43:39
Q.
10:43:22
BY MR. CONANT:
Government this
10:43:14
10:42:58
MR. FLYNN:
That's fine.
okay.
BY MR. CONANT:
Q.
20
21
22
23
24
25
800.669.1866
13:38:52
questions.
Q.
Mr. Montgomery
A.
I'm listening.
Q.
--
I don't recall.
Q.
10
A.
No.
11
Q.
12
strike that.
were you trying -- I'm sorry.
13
14
13:39:25
16
17
19
13:39:43
Let me
strike that.
15
18
13:39:36
9
13:39:05
20
A.
Fifth Amendment.
Q.
21
22
23
A.
24
Amendment.
25
Q.
800.669.1866
Mr. Montgomery?
A.
3
4
13:39:52
Q.
software?
A.
Fifth Amendment.
10
Q.
11
12
13
Government?
A.
15
Fifth Amendment.
MR. CONANT:
16
13:40:35
14
13:40:18
Fifth Amendment.
13:40:04
All right.
17
18
Exhibit 15.
19
20
MR. CONANT:
21
MR. CROCKElT:
22
MR. CONANT:
23
email?
MR. FLYNN:
24
25
Try to get me to --
Ill
Page 189
YATES COURT REPORTERS
800.669.1866
1
2
13:41:40
BY
MR. CONANT:
Q.
A.
BY MR.
Q.
13:42:05
was Edra.
CONANT:
11
Q.
have no idea.
12
13
Blxware software?
14
A.
15
Q.
17
A.
Yes.
18
Q.
19
20
21
13:42:27
FLYNN:
10
16
13:42:18
13:41:50
referring to?
22
Q.
Any software.
23
A.
24
Q.
25
must have.
800.669.1866
2
3
13 :42: 38
Fifth Amendment.
Q.
terrorist attacks?
A.
Q.
A.
10
11
getting old.
MR. FLYNN:
13
Fifth.
14
BY MR. CONANT:
15
Q.
It's really
16
17
Mr. Flynn?
18
BY MR. CONANT:
19
Q.
20
A.
Yeah, it does.
21
22
23
24
13:43:13
Fifth Amendment.
12
13:43:01
13:42:54
13:42:47
A.
25
Q.
800.669.1866
13:51:16
A.
Q.
MR. FLYNN:
THE WITNESS:
MR. CROCKETT:
Q.
A.
Yeah.
10
Q.
11
12
13
15
17
A.
MR. CROCKETT:
BY
I don't either.
MR. CONANT:
Q.
19
A.
okay.
sorry.
Got it.
20
22
I don't know
18
21
13:51 : 55
Dennis.
16
13:51:47
14
13:51:42
BY MR. CONANT:
13:51:23
Q.
23
A.
Yeah.
24
Q.
25
800.669.1866
13:52:14
13:52:28
13:52:40
11
technology.
12
13
14
15
16
i den ti fi ed."
17
18
20
that.
21
BY MR. CONANT:
22
23
24
13:52:56
I interacted on a
10
19
13:52:51
25
Q.
Is that a true
that?
A.
800.669.1866
4
13:53:07
Q.
A.
13:53:42
13:54:29
read it.
Fifth.
I'm going to assert my right, Mr. Flynn,
under the Fifth.
10
MR. FLYNN:
11
MR. CONANT:
12
All right.
what~s
okay.
All right.
All right.
13
the reporter,
14
hand
going to be marked as
15
THE REPORTER:
16
MR. CONANT:
17
18
THE WITNESS:
19
13:54:11
8
9
okay.
to 20 again?
13:53:16
20
17.
17.
Thank you.
BY MR. CONANT:
Q.
All right.
21
This
22
23
24
25
agreement.
800.669.1866
14:29:29
THE WITNESS:
MR. FLYNN:
Blixseth to an extent.
THE WITNESS:
14:30:20
MR. FLYNN:
13
okay.
Yeah.
No, it isn't.
on the table.
MR. CROCKETT:
15
17
this.
THE WITNESS:
16
MR. CROCKETT:
12
14
You're outrageous.
10
11
14:30:07
conned the
14:29:48
14:29:37
There isn't.
BY MR. CONANT:
Q.
Mr. Montgomery,
18
19
second.
You recall signing a confession of judgment
20
21
22
23
A.
24
Fifth.
25
Q.
Do
Page 230
800.669.1866
15:15:10
A.
Q.
software?
A.
Q.
10
A.
I don't recall.
11
Q.
12
A.
That's correct.
14
MR. CROCKETT:
15
Q.
so in front of -- okay.
MR. FLYNN:
17
18
BY MR. CONANT:
19
20
BY MR. CONANT:
16
15:15:54
was it encoding --
BY MR. CONANT:
13
15:15:37
I don't recall.
MR. FLYNN:
15:15:27
don't recall.
15:15:22
Q.
21
A.
And
22
Q.
23
24
MR. CROCKETT:
25
conclusion.
800.669.1866
CERTIFICATE
OF
hereby certify:
That the foregoing deposition was taken
9
10
11
12
by me;
13
14
15
16
17
18
19
20
21
22
23
24
25
800.669.1866
EXHIBIT 15
)
)
)
Michael J. Flynn,
)
)
Plaintiff,
)
)
vs.
)
)
Defendants.
~~~~~--~~~~~~--)
800.669.1866
California.
APPEARANCES:
10
11
Attorneys at Law
12
BY:
13
14
suite 200
15
Denver, Colorado
16
(303) 298-1800
17
80202
18
19
Attorneys at Law
20
BY:
21
22
23
suite 100
24
25
(818) 883-4400
91367-6667
Page 2
YATES COURT REPORTERS
800.669.1866
CIVIL DIVISION
BY:
20 Massachusetts Avenue, NW
Room 7150
Washington,
(202) 514-4522
10
DC
20530
Also Present:
11
12
13
14
15
Government
16
videographer:
17
18
services
19
20
21
22
23
24
25
Page 3
YATES COURT REPORTERS
800.669.1866
2006.
BY
4
10:10:34
MR. CONANT:
Q.
MR. CROCKETT:
counsel?
BY
10
Q.
13
14
10:11:03
15
16
17
10:11:30
20
21
22
10:11:41
in evidence.
MR. CONANT:
Q.
Fifth Amendment.
Q.
18
19
MR. CROCKETT:
11
12
MR. CONANT:
10:10:44
"decoding programs."
A.
Fifth Amendment.
Q.
23
24
25
800.669.1866
3
4
10:11:56
Q.
10
11
BY MR. CONANT:
13
Q.
Go back to what?
15
Q.
Exhibit
Stephanie, what Plaintiff's exhibit are we
17
18
on right now?
19
THE REPORTER:
3.
20
MR. CROCKETT:
21
declaration?
MR. CONANT:
22
23
24
10:13:02
All right.
14
16
10:12:55
12
10:12:43
Fifth Amendment.
9
10:12:21
25
things.
Let me go -- can we go off the record here
for a second so
800.669.1866
BY MR. CONANT:
Q.
10:15:23
10
MR. FLYNN:
13
BY MR. CONANT:
15
16
17
Q.
Fifth Amendment.
18
MR. FLYNN:
19
MR. CONANT:
20
21
22
10:16:16
12
14
10:15:49
home.
11
10:15:37
10:15:07
Q.
All right.
All right.
I'm going to keep going.
Mr. Montgomery, turn with me
23
24
25
Page 60
YATES COURT REPORTERS
800.669.1866
10:41:49
10:41:57
10:42:13
Q.
A.
just --
Q.
A.
Q.
protective order --
MR. FLYNN:
MR. CONANT:
10
MR. FLYNN:
11
MR. CONANT:
12
MR. FLYNN:
All right.
Ask him if he gave -Let me
-- very specific intelligence
14
15
BY
17
MR. CONANT:
Q.
19
20
18
10:42:35
Don't go there.
13
16
10:42:23
BY
MR. CONANT:
Q.
21
22
23
decoding software, as
24
25
without compensation."
Page 80
YATES COURT REPORTERS
1
2
10:42:46
10
A.
--
Fifth Amendment.
Q.
11
MR. CROCKETT:
12
Go ahead.
13
THE WITNESS:
14
Hold it.
15
16
MR. CONANT:
17
THE WITNESS:
18
19
10:43:39
Q.
10:43:22
BY MR. CONANT:
Government this
10:43:14
10:42:58
MR. FLYNN:
That's fine.
okay.
BY MR. CONANT:
Q.
20
21
22
23
24
25
800.669.1866
13:38:52
questions.
Q.
Mr. Montgomery
A.
I'm listening.
Q.
--
I don't recall.
Q.
10
A.
No.
11
Q.
12
strike that.
were you trying -- I'm sorry.
13
14
13:39:25
16
17
19
13:39:43
Let me
strike that.
15
18
13:39:36
9
13:39:05
20
A.
Fifth Amendment.
Q.
21
22
23
A.
24
Amendment.
25
Q.
800.669.1866
Mr. Montgomery?
A.
3
4
13:39:52
Q.
software?
A.
Fifth Amendment.
10
Q.
11
12
13
Government?
A.
15
Fifth Amendment.
MR. CONANT:
16
13:40:35
14
13:40:18
Fifth Amendment.
13:40:04
All right.
17
18
Exhibit 15.
19
20
MR. CONANT:
21
MR. CROCKElT:
22
MR. CONANT:
23
email?
MR. FLYNN:
24
25
Try to get me to --
Ill
Page 189
YATES COURT REPORTERS
800.669.1866
1
2
13:41:40
BY
MR. CONANT:
Q.
A.
BY MR.
Q.
13:42:05
was Edra.
CONANT:
11
Q.
have no idea.
12
13
Blxware software?
14
A.
15
Q.
17
A.
Yes.
18
Q.
19
20
21
13:42:27
FLYNN:
10
16
13:42:18
13:41:50
referring to?
22
Q.
Any software.
23
A.
24
Q.
25
must have.
800.669.1866
2
3
13 :42: 38
Fifth Amendment.
Q.
terrorist attacks?
A.
Q.
A.
10
11
getting old.
MR. FLYNN:
13
Fifth.
14
BY MR. CONANT:
15
Q.
It's really
16
17
Mr. Flynn?
18
BY MR. CONANT:
19
Q.
20
A.
Yeah, it does.
21
22
23
24
13:43:13
Fifth Amendment.
12
13:43:01
13:42:54
13:42:47
A.
25
Q.
800.669.1866
13:51:16
A.
Q.
MR. FLYNN:
THE WITNESS:
MR. CROCKETT:
Q.
A.
Yeah.
10
Q.
11
12
13
15
17
A.
MR. CROCKETT:
BY
I don't either.
MR. CONANT:
Q.
19
A.
okay.
sorry.
Got it.
20
22
I don't know
18
21
13:51 : 55
Dennis.
16
13:51:47
14
13:51:42
BY MR. CONANT:
13:51:23
Q.
23
A.
Yeah.
24
Q.
25
800.669.1866
13:52:14
13:52:28
13:52:40
11
technology.
12
13
14
15
16
i den ti fi ed."
17
18
20
that.
21
BY MR. CONANT:
22
23
24
13:52:56
I interacted on a
10
19
13:52:51
25
Q.
Is that a true
that?
A.
800.669.1866
4
13:53:07
Q.
A.
13:53:42
13:54:29
read it.
Fifth.
I'm going to assert my right, Mr. Flynn,
under the Fifth.
10
MR. FLYNN:
11
MR. CONANT:
12
All right.
what~s
okay.
All right.
All right.
13
the reporter,
14
hand
going to be marked as
15
THE REPORTER:
16
MR. CONANT:
17
18
THE WITNESS:
19
13:54:11
8
9
okay.
to 20 again?
13:53:16
20
17.
17.
Thank you.
BY MR. CONANT:
Q.
All right.
21
This
22
23
24
25
agreement.
800.669.1866
14:29:29
THE WITNESS:
MR. FLYNN:
Blixseth to an extent.
THE WITNESS:
14:30:20
MR. FLYNN:
13
okay.
Yeah.
No, it isn't.
on the table.
MR. CROCKETT:
15
17
this.
THE WITNESS:
16
MR. CROCKETT:
12
14
You're outrageous.
10
11
14:30:07
conned the
14:29:48
14:29:37
There isn't.
BY MR. CONANT:
Q.
Mr. Montgomery,
18
19
second.
You recall signing a confession of judgment
20
21
22
23
A.
24
Fifth.
25
Q.
Do
Page 230
800.669.1866
15:15:10
A.
Q.
software?
A.
Q.
10
A.
I don't recall.
11
Q.
12
A.
That's correct.
14
MR. CROCKETT:
15
Q.
so in front of -- okay.
MR. FLYNN:
17
18
BY MR. CONANT:
19
20
BY MR. CONANT:
16
15:15:54
was it encoding --
BY MR. CONANT:
13
15:15:37
I don't recall.
MR. FLYNN:
15:15:27
don't recall.
15:15:22
Q.
21
A.
And
22
Q.
23
24
MR. CROCKETT:
25
conclusion.
800.669.1866
CERTIFICATE
OF
hereby certify:
That the foregoing deposition was taken
9
10
11
12
by me;
13
14
15
16
17
18
19
20
21
22
23
24
25
800.669.1866
EXHIBIT 16
Bogus analysis led to alert in 2003 - NBC Nightly News with Brian Willia... Page 1 of 2
Case 1:15-cv-20782-JEM Document 52-18 Entered on FLSD Docket 05/15/2015 Page 2 of 47
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By
Lisa Myers, Aram Roston and the NBC Investigative Unit
NBC News Investigative Unit
updated 6/27/2005 8:10:57 PM ET
WASHINGTON Christmas 2003 became a season of terror after the federal government raised the terror alert level from yellow to orange,
grimly citing credible intelligence of another assault on the United States.
"These credible sources," announced then-Secretary of Homeland Security Tom Ridge, "suggest the possibility of attacks against the homeland
around the holiday season and beyond."
For weeks, America was on edge as security operations went into high gear. Almost 30 international flights were canceled, inconveniencing
passengers flying Air France, British Air, Continental and Aero Mexico.
But senior U.S. officials now tell NBC News that the key piece of information that triggered the holiday alert was a bizarre CIA analysis, which
turned out to be all wrong.
CIA analysts mistakenly thought they'd discovered a mother lode of secret al-Qaida messages. They thought they had found secret messages on AlJazeera, the Arabic-language television news channel, hidden in the moving text at the bottom of the screen, known as the "crawl," where news
headlines are summarized.
Steganography suspected
U.S. officials tell NBC News that CIA experts technicians working for the Directorate of Science and Technology thought they had found
numbers embedded in the crawl signaling upcoming attacks; dates and flight numbers, and geographic coordinates for targets, including the White
House, Seattle's Space Needle, even the tiny town of Tappahanock, Va. What the analysts thought they had found was something called
"steganography" messages hidden inside a video image.
President Bush and Ridge were briefed on the Al-Jazeera analysis, U.S. intelligence sources say.
In an exclusive interview with NBC News, Ridge defended the government's actions, although he called the intelligence analysis "bizarre, unique,
unorthodox, unprecedented."
"Maybe that's very much the reason that you'd be worried about it, because you hadn't seen it before," recalls Ridge.
He says the administration had to take the suspected terror messages seriously, although "speaking for myself I've got to admit to wondering
whether or not it was credible."
Was he himself skeptical?
"Yeah, we weren't certain," says Ridge. "Still, in the context of everything else (intelligence chatter and a terror attack in Saudi Arabia), we could
not set it aside and dismiss it as not credible."
So the United States raised the alert level and canceled flights.
Critics question evaluation of the evidence
"I'm astonished," says author and intelligence expert Jim Bamford, "that they would put so much credibility in such a weak source of intelligence."
Bamford says the CIA shouldn't be criticized for considering the theory, but that analysts should have weighed how implausible it was.
"What you have to do is judge the intelligence versus what your actions are going to be. And this is the equivalent, basically, of looking at tea
leaves," Bamford says.
http://www.nbcnews.com/id/8380365/ns/nbc_nightly_news_with_brian_wil... 5/15/2015
Bogus analysis led to alert in 2003 - NBC Nightly News with Brian Willia... Page 2 of 2
Case 1:15-cv-20782-JEM Document 52-18 Entered on FLSD Docket 05/15/2015 Page 3 of 47
Intelligence sources say that even within the CIA, the analysis was a closely guarded secret. Still, they say, some top CIA officials who learned about
it were skeptical. Top officials at the Directorate of Operations, which conducts clandestine operations, and others who worked at the CIA
Counterterrorism Center, felt that the whole theory was implausible and was being taken far too seriously.
As discredited as the CIA's interpretation now is, experts say steganography is a valid subject for CIA analysis, and could be used by terrorists to
hide data in files on the Web, in still photographs or in broadcast television images.
"Steganography," says professor Nasir Memon of Polytechnic University in Brooklyn, N.Y., "is the art, if you will, of secret writing. And when two
parties want to talk to each other and not let anybody know they are indeed communicating, they would use steganography."
Memon is an expert in "steganalysis" using sophisticated software to locate hidden messages. He says such analysis is valuable but not always
reliable, because there are many "false positives." In general, he says, "it's not something I would bet the farm on because there is a significant
chance that it could be wrong."
TV networks commonly hide digital "watermarks" in their video broadcasts, a legitimate use of video encoding to pass along innocuous digital
information. The CIA's Al-Jazeera analysis is classified, and it is still unclear exactly what the CIA technicians were looking for in the network's
"crawl."
Ridge stands by alert
Regardless, Ridge told NBC News that the CIA analysis certainly did turn out to be wrong. He confirms there were no secret terror messages. He
also says there was no evidence that terrorists were actively plotting against aviation at the time.
But Ridge insisted it was not a mistake to raise the alert level or to cancel the flights.
"I think it was the right thing to do," he said.
Even if raising the alert level frightened a lot of people?
"We acted accordingly based on our best information and best conclusions and the information that we had at the time," Ridge said.
Ridge added that the faulty CIA analysis was a significant factor in raising the alert level, but not the only factor.
As for the CIA, a spokeswoman would not confirm or deny this report, but said it's the "agency's job to run all plausible theories to the ground,
especially when American lives could be at risk."
Lisa Myers is NBCs senior investigative correspondent and Aram Roston is an NBC investigative producer.
http://www.nbcnews.com/id/8380365/ns/nbc_nightly_news_with_brian_wil... 5/15/2015
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Nevada Gov. Jim Gibbons and his wife, Dawn, celebrate after the governor's inaugural oath of office at the state
capital in January.
Mr. Gibbons and Mr. Trepp have denied the claims or have said that the gifts weren't
improper because of their long personal friendship. Mr. Gibbons has said that he will
cooperate with any inquiry.
A spokeswoman for the governor said that his work in Congress to help Sierra Nevada
and eTreppid was part of a broader effort to back Nevada companies that were
contributing to national defense. She said these efforts had the support of other members
of the Nevada congressional delegation, including Sen. Harry Reid, a Democrat who is
now Senate Majority Leader.
"The funding requests for Sierra Nevada were in no way connected to the first lady's
small contract with them," said Melissa Subbotin, the governor's spokeswoman.
An executive with Sierra Nevada, Renee Velasco, said the contract with Mrs. Gibbons was
for a market survey and demonstration of a hand-held emergency-communications
device for sale to casinos and state and local governments; the effort was ended in
December 2004. She said the contract didn't present a conflict of interest. "Everything
was done by the book," she said.
http://www.wsj.com/articles/SB117521830609454045
3/11/2015
Page 3 of 5
DEFENSE CONTRACT
What's News: The wife of Nevada Gov. Jim
Gibbons was a consultant for Sierra Nevada, a
defense contractor that got federal work with the
help of her husband.
The History: Before becoming governor this year,
Mr. Gibbons was a member of Congress, on the
House armed services and intelligence
committees.
What's Ahead: Federal investigators, already
examining ties between Gov. Gibbons and
another Nevada defense contractor, eTreppid
Technologies, may study the Sierra Nevada
situation.
statement.
Still, the payments are likely to draw critics in Washington and Carson City, the state
capital. "Having a family member on the payroll of a company that benefits from a
congressman's actions is a poster-child conflict," said Ryan Alexander, president of
Taxpayers for Common Sense, a Washington nonprofit that studies special-interest
spending. She said that Mr. Gibbons "obviously should have recused himself" from
seeking federal appropriations for any of his wife's clients.
One of the military contracts that Sierra Nevada got in 2004 was $2 million for research
on a "helicopter autonomous landing system," to help pilots land in "brownouts" of
blowing sand, a technology several firms were seeking to develop for the Pentagon.
House records indicate that Mr. Gibbons asked for $4 million, and got $2 million in the
final bill. In a June 22, 2004, news release, he hailed the project and a separate $3
million for eTreppid as "cutting-edge technology being developed in Nevada to improve
our defense systems."
In the next fiscal year, the helicopter program gained the support of Sen. Reid as well,
and funding rose to $7 million, House records show. Sierra Nevada also was a
contributor to Sen. Reid. In a statement, a spokesman for Mr. Reid said that Sierra
Nevada is a large employer in his state and he is "proud to have supported" its work.
http://www.wsj.com/articles/SB117521830609454045
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copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.
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Page 1 of 2
November 3, 2008
Gov. Jim Gibbons of Nevada has been cleared by the Justice Department of any wrongdoing
in connection with an inquiry into whether he helped a friend win military contracts in
exchange for gifts, Mr. Gibbonss lawyer said.
The lawyer, Abbe D. Lowell, said the lead prosecutor in the case informed him on Friday
that no charges would be filed and that the investigation, related to Mr. Gibbonss work as a
congressman before he was elected governor in 2006, had been closed.
A Justice Department spokeswoman, Laura Sweeney, said the department would not
comment.
Mr. Lowell said that Mr. Gibbons, a Republican whose first term as governor has been
dogged by legal, political and personal troubles, would make a statement on Monday.
The investigation spanned 18 months, Mr. Lowell said, and began when a former staff
member of a technology company run by a friend of the governor made accusations of
influence peddling.
The former staff member, Dennis Montgomery, told news media outlets that his boss,
Warren Trepp, the owner of eTreppid Technologies, had given Mr. Gibbons money, casino
chips and a Caribbean cruise to help eTreppid win military contracts.
Mr. Lowell called the accusations ridiculous and hogwash and said, The governor does
not even gamble.
Neither the governor nor I, Mr. Lowell added, have any problem with the Justice
Department having to investigate allegations, even if they are crazy, because he is a highranking public official and he knows the world he lives in.
They handled it in a way and a speed that was up to them. Though we wish it were sooner,
they came to the right conclusion.
Mr. Lowell said Mr. Gibbons had cooperated in the investigation and in recent months had
been interviewed by Federal Bureau of Investigation agents.
http://www.nytimes.com/2008/11/03/us/03nevada.html?pagewanted=print
3/11/2015
Page 2 of 2
The investigation, Mr. Lowell said, might have been slowed by a civil lawsuit between Mr.
Montgomery and eTreppid, which was settled last month.
Blxware LLC, the company where Mr. Montgomery now works, said the terms of the
settlement were confidential, but the company, based in Bellevue, Wash., disclosed that the
agreement included a payment to Mr. Trepp as compensation for certain allegations made
against him in the news media. Blxware was a party in the lawsuit.
The closing of the investigation provides welcome news to Mr. Gibbons in a trying period.
A former cocktail waitress filed a lawsuit against him last month, alleging that he pushed her
and threatened to rape her after a night of drinking in Las Vegas just before the November
2006 election. Mr. Gibbons denied the accusation, and criminal charges were not filed.
Mr. Gibbons, 63, and his wife, Dawn, 54, began divorce proceedings this year after 22 years
of marriage. The news media in Nevada have made much of her accusation of adultery and
the disclosure of hundreds of text messages he sent to a woman he has said was a friend but
who Ms. Gibbonss lawyers suggest was a mistress.
A state employee filed a lawsuit last month claiming that she was removed from her post on
the belief that she had leaked the messages.
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The allegations proved to be "baseless, and there's not a shred of evidence that I did anything wrong," Gibbons
said at a news conference.
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"This certainly took a lot longer than I wanted to be resolved. I wish it would have been resolved a year ago, two
years ago," he said. "But this is good news, and it doesn't matter to me when the good news comes, even a day
before an election."
His attorney, Abbe Lowell, of Washington, said Sunday that the Justice Department told him Gibbons wouldn't be
charged. A law enforcement official close to the case, who spoke anonymously because authorities never officially
acknowledged the probe, confirmed the substance of Lowell's statement.
Gibbons, who was elected governor in 2006 after five terms in Congress, had steadfastly denied any wrongdoing
despite claims by Dennis Montgomery that eTreppid Technologies LLC founder Warren Trepp lavished Gibbons
with money and a Caribbean cruise in exchange for help winning contracts for his company.
Montgomery's credibility was put in doubt after a computer expert questioned the authenticity of e-mails
Montgomery claimed proved Gibbons was accepting gifts.
Gibbons said defending himself against the allegations cost about $200,000 in legal fees. He had to solicit
contributions to help cover those costs.
Asked if he would consider suing Montgomery now that the Justice Department and FBI have ended the
investigation, Gibbons said: "You know, some days you're harmed and the doors to the courthouse should remain
open. And let me say that my thoughts remain open."
An attorney for Montgomery, Mark Gunderson in Reno, didn't return a call seeking comment Monday.
The governor said he had been the target of "bogus charges trumped up by certain biased individuals," mentioning
the eTreppid case as well as a claim by a state Democratic Party official that he pressured a county assessor to
get an unwarranted property tax break.
A state Ethics Commission panel concluded in September that there was no evidence to support the tax break
claim.
Along with the federal investigation, Gibbons has seen his approval ratings drop following a budget crunch, a
messy divorce that is still pending and lawsuits involving his private and public activities.
Gibbons still faces a lawsuit from a woman claiming he threatened to rape her. He's also being sued by a
government staffer who claimed she was forced from her job because he thought she was leaking information
about his personal use of a state cell phone.
Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten
or redistributed.
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47
The intelligence reports fitted the suspicions of the time: al-Qaida sleeper
agents were scattered across the US awaiting orders that were broadcast in
secret codes over the al-Jazeera television network.
Flights from Britain and France were cancelled. Officials warned of a
looming "spectacular attack" to rival 9/11. In 2003 President Bush's
homeland security tsar, Tom Ridge, spoke of a "credible source" whose
information had US military bracing for a new terrorist onslaught.
Then suddenly no more was said.
Six years later, Playboy magazine has revealed that the CIA fell victim to an
elaborate con by a compulsive gambler who claimed to have developed
software that discovered al-Jazeera broadcasts were being used to transmit
messages to terrorists buried deep in America.
Dennis Montgomery, 56, the co-owner of a software gaming company in
Nevada, who has since been arrested for bouncing $1m worth of cheques,
claims his program read messages hidden in barcodes listing international
flights to the US, their positions and airports to be targeted.
The CIA took the information seriously, working with Montgomery at his
offices and paying him an undisclosed amount of money. The "intelligence"
Montgomery claimed to have found was passed on to the White House and
homeland security where it kickstarted an alert that bordered on panic.
According to Playboy, Montgomery's claims caused the cancellation of
British Airways and other flights supposedly mentioned in the codes.
http://www.theguardian.com/world/2009/dec/23/dennis-montgomery-cia-al-j... 3/8/2015
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Some officials were not at all surprised to hear the allegation that al-Jazeera
was involved. The then defence secretary, Donald Rumsfeld, later vilified
the station for "vicious, inaccurate and inexcusable" reporting of the US
invasion of Iraq.
For months, the source of the information was kept under wraps within the
CIA but once it became more widely known in the agency it immediately
came under question. Playboy quotes one former counterterrorism official
who attended a briefing on the source as being furious. He said: "I was
saying: 'This is crazy. This is embarrassing.' They claimed they were
breaking the code, getting latitude and longitude, and al-Qaida operatives
were decoding it. They were coming up with airports and everything, and
we were just saying: 'You know, this is horseshit!' "
Frances Townsend, a homeland security adviser to Bush, defended the
decision to work with Montgomery. "It didn't seem beyond the realm of
possibility. We were relying on technical people to tell us whether or not it
was feasible. I don't regret having acted on it," she told Playboy.
But the doubts began to prevail as Montgomery refused to reveal how he
was finding the barcodes, when no one else could, and he demanded
$100m for the software. The CIA also began to wonder why al-Qaida didn't
use emails and web pages to communicate with its agents.
More news
Topics
CIA
Al-Qaida
Air transport
Middle East and North Africa
Nevada
Al-Jazeera
http://www.theguardian.com/world/2009/dec/23/dennis-montgomery-cia-al-j... 3/8/2015
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Man that accused Governor Gibbons arrested - Henderson Clark County Li... Page 1 of 3
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Dennis Montgomery
http://www.examiner.com/article/man-that-accused-governor-gibbons-arrested 3/8/2015
Man that accused Governor Gibbons arrested - Henderson Clark County Li... Page 2 of 3
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He is on the docket to be arraigned in a Las Vegas court on August 17th. He has not
responded to e-mails or phone calls seeking a comment. Montgomery is a former chief
technical officer for the Reno-based software company e Treppid. E Treppid is a company
who has won military contracts for video compression and target recognition software.
During Gibbons reelection bid back in 2006, Montgomery accused the governor of
accepting bribes from e Treppid, to help them secure the military contracts they were then
awarded. Court papers showed that he alleged the governor took $100,000 worth of
casino chips and cash during a week long cruise in the Caribbean.
Later in 2007, the FBI opened an investigation into the bribe allegations. The Department of
Justice also investigated the allegations and subsequently cleared the governor of any
wrong doing. Reports of Montgomery having a gambling problem first surfaced back in
2006, after the federal government and the United States Air Force began investigating him
as part of an investigation they were doing into economic espionage and intellectual
property claims.
Warren Trepp, who is Montgomery's former business partner, told authorities back in 2006
that Montgomery borrowed somewhere north of $1.3 million. The money was in part to pay
off casino debts Montgomery had incurred in the amount of $300,000. This is according to
OSI, the Air Force's Office of Special Investigations. When Tripp made the allegations
against Montgomery, the two were locked in a dispute over the ownership of e Treppid
software that was being used by the military.
E Treppid was awarded a no-contract bid for a maximum value of $30 million dollars for
http://www.examiner.com/article/man-that-accused-governor-gibbons-arrested 3/8/2015
Man that accused Governor Gibbons arrested - Henderson Clark County Li... Page 3 of 3
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Ruben Sarmiento
http://www.examiner.com/article/man-that-accused-governor-gibbons-arrested 3/8/2015
Playboy undercover with Dennis Montgomery, who 'fooled CIA over Al-J... Page 1 of 2
Case 1:15-cv-20782-JEM Document 52-18 Entered on FLSD Docket 05/15/2015 Page 19 of
47
news.com.au
Technology
http://www.news.com.au/technology/playboy-goes-undercover-with-dennis-... 3/8/2015
Playboy undercover with Dennis Montgomery, who 'fooled CIA over Al-J... Page 2 of 2
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47
Playboy.
"We were testing some of the software. We were just looking at it to see if there was anything there," Joseph
Liberatore, an Air Force program manager, told the magazine.
Mr Montgomery has faced a number of lawsuits and last year was charged with bouncing nine checks worth a
total of one million dollars in Las Vegas.
Playboy ran the story online with a gallery of "military-themed nude pictorials".
- with AFP
http://www.news.com.au/technology/playboy-goes-undercover-with-dennis-... 3/8/2015
Page 1 of 3
Security
Related topics
98
63
A con man fooled US spooks into grounding international flights by selling them "technology" to decode
al-Qaeda messages hidden in TV broadcasts, it's claimed.
A long and highly entertaining Playboy article explains that in 2003, 50-year-old Dennis Montgomery was
chief technology officer at Reno, Nevada-based eTreppid Technologies. The firm began as a video
compression developer, but Montgomery took it in new and bizarre directions.
He reportedly convinced the CIA that he had software that could detect and decrypt "barcodes" in
broadcasts by Al Jazeera, the Qatari news station.
The Company was apparently impressed enough to set up its own secure room at the firm to do what
Montgomery called "noise filtering". He somehow produced "reams of data" consisting of geographic
coordinates and flight numbers.
In December 2003, it's claimed CIA director George Tenet was sufficiently sold on Montgomery's data to
ground transatlantic flights, deploy heavily armed police on the streets of Manhattan and evacuate 5,000
people from the Metropolitan Museum of Art.
Homeland Security secretary Tom Ridge told the press the terror alert was the result of "credible sources
- about near-term attacks that could either rival or exceed what we experienced on September 11".
In fact, according to evidence from his former lawyer, Montgomery, the "credible source", was a "habitual
liar engaged in fraud".
Montgomery worked with the CIA's Directorate of Science and Technology - its Q Branch - engaged in
exotic research and intelligence gathering. According to Playboy, one counter-intelligence official briefed
on the programme said: "We were fucking livid. I was told to shut up. I was saying, 'This is crazy. This is
embarrassing.'"
Eventually a branch of French intelligence helped the CIA prove that the Al Jazeera "messages" never
existed. Files were handed over to counter-intelligence to investigate the scam.
The FBI uncovered a series of frauds by Montgomery, who was a compulsive gambler. As well as his
"noise filtering" technology, he had rigged video software to convince officials it could detect weapons.
Following a dispute with eTreppid's financial backer, Montgomery took off with his "technology" and tried
to win more government contracts alone. By now though, the officials he was trying to sell to were part of
the FBI investigation. It reportedly "went nowhere", however.
By 2008, the financial dispute had come to court. Montgomery said he was still doing classified
government work, for $3m. In June this year however, his gambling led to personal bankruptcy, listing his
still-classified "technology" as a $10m asset.
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Frances Townsend, a homeland security adviser to Bush, said she did not regret having relied on
Montgomery's mysterious intelligence. "It didn't seem beyond the realm of possibility. We were relying on
technical people to tell us whether or not it was feasible," she said.
Spotlight
http://www.theregister.co.uk/2009/12/24/cia_montgomery/
3/8/2015
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Page 1 of 11
AP Photo/Matt York
Sheriff Joe Arpaio, during a 2012 press conference about his ludicrous birther investigation
The most
revealing part
of Phoenix
filmmaker
Randy
Murray's
recent
documentary
The Joe Show
was a strategy
meeting during
Sheriff Joe
Arpaio's 2012
re-election
campaign that
included
Arpaio, his top
flack, Lisa
Allen, Chief
Deputy Jerry
Sheridan, and
campaign
manager Chad
Willems.
The group huddled in the back of a Fountain Hills restaurant to discuss how to spin
Joe's negatives -- the misspending of more than $100 million, the deaths in the jails,
the scores of millions in lawsuit payouts -- for the public.
http://blogs.phoenixnewtimes.com/valleyfever/2014/06/joe-arpaio-investiga... 3/12/2015
Page 2 of 11
At some point, Arpaio's "birther" investigation came up. You know, the one in which
President Barack Obama's birth certificate gets investigated by both the Maricopa
County Sheriff's Office's Cold Case Posse, a nonprofit organization, and MCSO Deputy
Brian Mackiewicz, whom Arpaio flew to Hawaii as part of this snipe hunt, at a cost of
nearly $10,000 to taxpayers.
Arpaio's March 2012 press conference -- in which the sheriff and the Cold Case Posse's
"lead investigator," ex-used-car salesman Mike Zullo, declared Obama's birth certificate
to be a forgery -- was in the planning stage when the scene was filmed.
At the mere mention of the birther investigation and the future press event, Allen and
Willems practically rolled their eyes.
Willems called the birther probe "nuts."
Allen said the sheriff might as well go the press conference "in big ol' clown shoes."
Arpaio shrugged, literally.
"There ain't gonna be no damage control," Arpaio promised Willems. "You'll get more
money [in campaign contributions] than you'll know what to do with."
Wilier than the cartoon coyote, Arpaio had tapped into a nationwide right-wing antigovernment, anti-Obama feeding frenzy with his birther probe and with his tirades
against the U.S. Department of Justice, which was investigating him for abuse of power
and other issues and is now suing him in federal court.
"The DOJ is a hot item everywhere," Joe told his flunkies.
See, whenever Arpaio's never-ending political campaign sends out an e-mail blast
begging for loot from Obama-haters, it reels in contributions from retired, far-right
ofays all over the country.
Willems essentially admitted as much in another scene from the film.
"Now, with Arpaio going to battle with Barack Obama," Willems said, "it's meant
literally millions of dollars for his campaign."
As everybody knows, Arpaio was re-elected in 2012, but the investigation into Obama's
birth certificate continues apace, according to both Arpaio and Cold Case Posse
"commander" Zullo.
At the beginning of May, Arpaio mentioned the birther probe during a speech before a
group of Silicon Valley conservatives.
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Around the same time, he appeared on The Right Side, a conservative cable-access
show in Mountain View, California. He told host Chris Pareja that the inquiry into
Obama's birth certificate was going strong.
"I'm not done with that yet," Arpaio insisted. "People think I surrendered. No . . . I'm
trying to find out who's behind it now. That's the key. You can always have a crime to
investigate, but I think you would like to know who did it."
The sheriff said he was after whoever created this "forged, fraudulent document,"
meaning a computer scan of the president's long-form birth certificate, released by the
White House in April 2011.
Arpaio's statements have paralleled assurances from Zullo during periodic interviews
with Florida pastor/radio host Carl Gallups that new revelations concerning the Obama
birth certificate are on the way.
Critics of birthers regularly mock Zullo's vague pronouncements on Gallups' show as
never resulting in any "new" finds.
Why, even the information disclosed during Arpaio's two birther-themed press
conferences in 2012 were a rehash of debunked conspiracy theories.
But during a February interview with Gallups, Zullo caused an Internet kerfuffle when
he told Gallups' audience that there were now two investigations: the original birther
one and an offshoot of the birther probe, this one a criminal investigation.
Moreover, the second investigation was using two MCSO detectives and, presumably,
county money.
"I don't know how this is all going to play out," Zullo said. "I know that [in] the criminal
investigation that we're working on now, Sheriff Arpaio has dedicated resources and
two full-time Maricopa County Sheriff's Office detectives."
He added, "These are seasoned pros [who] are working this. These are the guys that go
hunt down the really bad guys."
Zullo promised to release "universe-shattering" results of these investigations in March,
a deadline Zullo since has extended indefinitely.
Blogger Mitch Martinson of arizonaspolitics.com was the first to query the MCSO on
Zullo's claim, and the first to report that Sheriff's Office spokesman Brandon Jones
kinda-sorta had confirmed it.
http://blogs.phoenixnewtimes.com/valleyfever/2014/06/joe-arpaio-investiga... 3/12/2015
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"We have two sheriff's detectives assigned to look into other issues surrounding the
birth certificate," Jones told Martinson, in a blog item posted February 10. "However,
they are not investigating the birth certificate issue itself."
Later, Jones walked back his comments to Martinson, sending the blogger an e-mail,
which Martinson used in a screen shot to a follow-up post.
"Mitch, I was misinformed," Jones stated. "The detectives are not working on anything
regarding the birth certificate. Not even surrounding. Mr. Zullo was incorrect: They are
working on other serious cases not even related."
Who were these two detectives, what were they up to, and why is Zullo, a mere posse
member, privy to it?
Based on information given to me by longtime sources, the two detectives mentioned
are Brian Mackiewicz, the same deputy who made a taxpayer-funded run to Hawaii in
May 2012, and Sergeant Travis Anglin, once a lieutenant with the notorious Maricopa
Anti-Corruption Effort who was demoted after an MCSO investigation into his private
security company and its use of MCSO detectives.
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My sources -- one of whom is a former detective with the MCSO's Special Investigations
Division and is well-acquainted with SID and those in it -- say Anglin and Mackiewicz
were involved in an odd investigation dating back to October 2013.
Moreover, they say, the deputies have used as a confidential informant a notorious
scammer in the Seattle area.
What have they been investigating? According to my sources, Mackiewicz, Anglin, and
the informant are focused on U.S. District Court Judge G. Murray Snow, the Justice
Department, and a bizarre conspiracy theory that the DOJ and Snow have conspired to
somehow "get" Joe Arpaio.
The person who purportedly convinced Arapio of this paranoid fantasy, the sources say,
is computer fraudster Dennis L. Montgomery, the subject of a 2010 Playboy expos
titled "The Man Who Conned the Pentagon."
In that article, investigative reporter Aram Roston detailed how, in the wake of the 9/11
attacks, Montgomery snookered the CIA, the White House, the Department of
Homeland Security, and the Air Force into believing he had software that could decode
secret messages to terrorists, supposedly embedded in broadcasts of the Al Jazeera
Media Network.
As crazy as this now sounds, Roston, using unsealed court documents, reported that
eTreppid Technologies, the Nevada software company Montgomery co-owned, scored
multimillion-dollar contracts for computer software touted by Montgomery.
In fact, Roston wrote, the United States went to Code Orange, the DHS' second-highest
terror alert, in 2003 based on data supplied to the CIA by Montgomery.
International flights were delayed, sometimes canceled, because of Montgomery's work.
Based on Montgomery's "intelligence gathering," Homeland Security Secretary Tom
Ridge told reporters at the time about the threat of "near-term attacks" that could "rival
or exceed" those of 9/11.
"Montgomery calls the work he was doing noise filtering," Roston wrote. "He was
churning out reams of data he called output. It consisted of latitudes and longitudes
and flight numbers."
This data was given to then-CIA Director George Tenet, according to Roston, and
"eventually ended up in the White House."
There was one big problem, Roston reported: "The communications Montgomery said
he was decrypting apparently didn't exist."
http://blogs.phoenixnewtimes.com/valleyfever/2014/06/joe-arpaio-investiga... 3/12/2015
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Roston wrote that Montgomery's eTreppid colleagues questioned his computer skills.
Company employees also claimed that Montgomery had faked demonstrations of
weapons-recognition software for representatives of the U.S. military.
With the help of a "branch of the French intelligence services," the CIA finally got wise
to Montgomery, realizing that there were no secret messages to bad guys in the Al
Jazeera broadcasts.
Montgomery left eTreppid, wrote Roston, and went on to work for software companies
backed by a wealthy heiress; to accuse Nevada Governor Jim Gibbons of taking a bribe
(Gibbons later was cleared of wrongdoing); to lose big at a Rancho Mirage, California
casino ($422,000 in one day); and to declare bankruptcy.
Now, Montgomery lives in Yarrow Point, Washington, a short drive from downtown
Seattle.
My sources report that MCSO detectives Anglin and Mackiewicz have spent a lot of time
this year in Seattle with Montgomery, who, the sources say, has convinced the sheriff
that he has information suggesting an anti-Arpaio conspiracy between Judge Snow and
the DOJ.
These sources say there is no report number assigned to the case, that Arpaio himself is
running it, and that the investigation has been financed with funds for confidential
informants, RICO funds.
Montgomery has been assigned a "confidential informant number" or "control
number," the identity of which is known only to Arpaio, a few MCSO brass, and those in
Special Investigations, according to my sources, who claim Montgomery has been paid
about $100,000 to date by the MCSO.
The situation gives Arpaio and the MCSO a degree of deniability because the
department is allowed to keep the identities of confidential informants secret in most
instances.
Though there should be MCSO paperwork associated with such payments, it would
show a payment to a control number, not a name.
The MCSO's official policy on "informant management" states that control numbers
must be maintained in a confidential-informant log "monitored by the [Special
Investigations Division] commander or his designee."
It further states that all informant files be kept in a "secured area within the SID."
The policy notes that the MCSO "will protect these sources through all available and
reasonable legal means."
http://blogs.phoenixnewtimes.com/valleyfever/2014/06/joe-arpaio-investiga... 3/12/2015
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Such "informant files" are retained as "permanent records" of SID, "unless the division
commander determines that the records may be purged."
My sources say Mackiewicz has received, to date, $50,000 in overtime pay and Zullo
has gotten about $5,000 in payments.
Zullo's role is unclear, though he currently is involved in the investigation, according to
these sources, as well as the perpetual birther probe.
Additionally, they say the MCSO made about a $50,000 purchase of computer
equipment for Montgomery sometime this year from a store in Washington state.
According to the MCSO's policy regarding "Undercover and Investigative Funds
Accountability," an expenditure of up to $6,000 for undercover and investigative work
can be approved by a division commander.
Anything over $6,000 must be approved by a bureau commander.
As for funds specifically paid to confidential informants, the reins are even tighter.
Payments to a CI of more than $300 must be approved by a division commander "prior
to the expenditure of the funds," according to the MCSO's informant-management
policy.
The amount of money involved in detectives Anglin and Mackeiwicz's Seattle quest has
raised red flags with MCSO accountants, I've been told.
These same MCSO accountants reportedly have expressed concern internally about the
procurement of the computer equipment, excessive CI payments, the amount of
overtime involved, and the money spent on airfare and stays in Seattle.
In several broadly worded public-records requests sent to the MCSO in February, I
asked for any and all e-mails traded among the players involved, as well as any and all
records regarding MCSO employees' trips to Seattle, payments of informant funds to
Dennis Montgomery, and Mackiewicz's overtime requests.
In each case, I was advised by MCSO spokesman Jones that "this is an ongoing
investigation . . . no records can be released at this time."
In March, I called Zullo at his home phone number. I asked him about the work he was
said to be doing with Montgomery.
He claimed not to know what I was talking about. When I pressed him, he said all such
inquiries should go through the MCSO.
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"I have no comment to make, especially to the New Times," he told me before hanging
up.
The opportunity to question Arpaio about the Montgomery caper came as he munched
on cheese at a recent fundraiser for embattled Arizona Attorney General Tom Horne at
the University Club in Phoenix.
I asked the sheriff about Montgomery and the work that my sources tell me he has done
for the MCSO.
At first, he played dumb, asking if I meant County Attorney Bill Montgomery.
"No, Dennis Montgomery," I replied. "The computer guy in Seattle who is helping you
investigate Judge Snow and the DOJ. You are investigating Snow and the DOJ, aren't
you?"
As he hit the cheese platter again, Arpaio looked over his shoulder at me with a grin.
But he said nothing.
I kept after him, asking why deputies Mackiewicz and Anglin had spent so much time in
Seattle.
"I dunno, maybe they like the weather up there," he said over his shoulder, "or the snow
crab."
True to form, the sheriff was cagey, but there was no denial.
The ex-Special Investigations source I know tells me that the joke around Arpaio's
office is that Montgomery's referred to as "Snowden," after Edward Snowden, the
American computer geek responsible for a massive 2013 leak of classified documents
from the National Security Agency that exposed Orwellian surveillance programs run
by the U.S. government.
"[Montgomery] says he worked for the CIA on a project called Hammer [and] collected
data similar to Snowden's," the source says. "[Montgomery] claims he can prove there
was a conspiracy between [U.S. Attorney General] Eric Holder and Judge Snow . . . a
conspiracy against Arpaio."
Montgomery, who is middle-aged and stocky with a shock of white hair, is no Snowden.
Whatever you think of Snowden, at least the information he released generally has been
confirmed as legitimate.
As with the gibberish Montgomery reportedly gave the CIA in the early 2000s, he has,
according to my sources, produced many printouts for the MCSO that seem off point,
with dates going back to 1999 and earlier.
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Obviously, that's long before Arpaio took up the cause of illegal immigration, long
before he was investigated or sued by the DOJ, and long before he became the subject
of the ACLU's big racial profiling lawsuit Melendres v. Arpaio.
One source informs me that at least one underling told Arpaio recently that what
Montgomery provided the MCSO is worthless, that Joe is getting played -- which
caused the sheriff to erupt into a fit of anger.
When Montgomery was approached by a freelance reporter on behalf of New Times in
April, he was nonplussed.
Montgomery came to the door of his Yarrow Point home, a cell phone at his ear, talking
to someone about computer equipment.
The reporter identified himself, and Montgomery asked for a card, which the reporter
presented.
"I really don't wanna talk to you," Montgomery said, ending his call.
"Okay, about Phoenix . . .," the reporter began.
"No comment," Montgomery shot back.
"Arizona . . .," the reporter started again.
"No comment," Montgomery repeated. "Who sent you up here?"
"Phoenix New Times," the reporter explained.
"Yeah," growled Montgomery.
"Have you done any work for Joe Arpaio?" the reporter asked.
"I, I, I have no comment," Montgomery said, moving away. "I'll call you later. I'll think
about it."
Montgomery went back into his house and shut the door, ending the conversation on a
mysterious note.As with Arpaio, there was no denial.
Is Dennis Montgomery Joe Arpaio's Snowden? I cannot say absolutely.
But it's not far-fetched to think that Arpaio would investigate any powerful public
official. He continues to investigate the president. He and now-disbarred former
County Attorney Andrew Thomas investigated Superior Court judges perceived to be
thwarting their anti-undocumented-immigrant policies.
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Page 10 of 11
That is, it fits a pattern cultivated over his reign of more than 20 years.
Among Arpaio's bogus investigations have been:
One targeting former Arizona Attorney General Terry Goddard for alleged bribery.
The probe began in 2007 and didn't seem to end until Goddard left office.
One that brought the 2008 indictment of then-county Supervisor Don Stapley on 118
criminal counts related to his allegedly not properly disclosing sources of income. All
counts were dismissed ultimately.
An infamous December 2009 RICO suit brought by Arpaio and Thomas against the
entire Board of Supervisors, various county employees and certain Superior Court
judges. Supposedly, they all were part of a conspiracy involving the county's new court
tower. The suit was a disaster that finally got dismissed by Thomas himself.
A probe resulting in the filing of false bribery charges in 2009 against former Superior
Court Judge Gary Donahoe. Arpaio and Thomas ginned up these charges as retaliation
against Donahoe for adverse rulings and to make Donahoe vacate a hearing that Arpaio
and Thomas didn't want to take place.
And now Judge Snow, who in 2013 found the MCSO guilty of racial profiling and
assigned a monitor to make certain that Arpaio was obeying court orders on reforming
and re-educating deputies so that the agency does not profile Latinos or any other
minority again?
As for Holder, the DOJ remains engaged in a lawsuit accusing Arpaio of abuse of power
and prejudiced policing.
At age 82, the sheriff faces the ignominy of ending his law enforcement career as a
disgraced political colossus.
All -- in his mind -- because of Snow and the DOJ.
Why not attempt an investigation aimed at discrediting his perceived nemeses?
Though there never will be any pink handcuffs in Snow's or Holder's future, Arpaio's
racist, wing-nut supporters would consider it an act of bravery that their hero is
investigating federal officials getting in the way of keeping despised Latinos in their
place.
Meaning more money in the sheriff's perpetual re-election kitty and proving that bogus
investigations continue to pay off.
http://blogs.phoenixnewtimes.com/valleyfever/2014/06/joe-arpaio-investiga... 3/12/2015
Page 11 of 11
My dream, of course, is that Snow blows a gasket and perp-walks the aged autocrat.
We'll see.
Rick Anderson in Seattle contributed to this story.
http://blogs.phoenixnewtimes.com/valleyfever/2014/06/joe-arpaio-investiga... 3/12/2015
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POINT OF VIEW
ROBERT MCMILLAN
Hillary Clinton Says Her Email Was Secure; She Can't Know
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EXHIBIT 19
EXHIBIT 20
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)
)
Debtors.
)
_________________________________________________________________
AFFIDAVIT OF MICHAEL J. FLYNN
__________________________________________________________________
I, Michael J. Flynn depose and state that I have personal knowledge of the facts
contained in this affidavit, unless stated to be based upon information and belief. Where facts
are stated to be based on information and belief, I believe them to be true and accurate to the best
of my knowledge.
1. I am an attorney licensed in Massachusetts appearing in this matter pro hac vice on
behalf of Timothy Blixseth.
2. Attached hereto as Exhibit 1 is a true and correct copy of a financial statement of
Edra Blixseth dated August 15, 2008, two days after CIP Yellowstone Lending, LLC, (CIP
YC) loaned Edra Blixseth $35 Million Dollars (the Predatory Loan) on August 13, 2008
represented by two 48 day promissory notes secured by Community assets she received from
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the Blixseth Marital Settlement Agreement (MSA) on August 13, 2008. The secured
Community assets are Porcupine Creek, (PC), and the Family Compound at the
Yellowstone Club, (YC). I first received Exhibit 1 from Gary Peters shortly before the
commencement of phase 1 of the AP 14 trial. I am informed and believe that this document
was subsequently recovered from the Edra Blixseth computers in the possession of Jory Russell,
(hereinafter the Russell computers). On said financial statement, Edra Blixseth (EB) records
the current market value of PC to be $207 M; the Family Compound at $40 M; Farcheville
at $63 M; and the YC to be $500 M, for a total of $ 810 M.
Family Compound these assets are owned by BGI. EB states her Net Worth, based on her
sole ownership of BGI, on Exhibit 1 as $849.5 M, and her projected net cash flow for 12
months at $40. 4 M, derived from PC, YC, Big Springs Realty, Blixware and BFI
revenues. As hereinafter recited, I believe that Exhibit 1 may be based, in part, both on the
control exercised by SB and his entities based on the Predatory Loan; and the lending
advisory control exercised by SB in the planning and implementation of the Predatory Loan.
3. Attached hereto as Exhibit 2 is a true and correct copy of a Post -Settlement
financial statement dated July 15, 2008. I am informed and believe that Exhibit 2 was recovered
from the Russell computers and that the Post-Settlement reference relates to EBs financial
status after the scheduled closing on the MSA based on the division of marital Community assets
based on the executed MSA on June 26, 2008, which closing was originally scheduled for July
3. 2008; and which closed on August 13, 2008. I am informed and believe based upon emails
recovered from the Russell computers that Exhibit 2 or a similar financial statement was given to
Samuel Byrne (SB), and or Cross Harbor Capital Partners, (CHC), and / or CIP YC, before,
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on, or after July 15, 2008. I believe based on recovered documents from the Russell computers,
and inferences derived from said documents that there are deleted or destroyed documents from
the Russell computers that may be in the possession of SB or his entities, CIP YC and CHC; and
that said deleted documents may relate to Exhibit 2, or a similar version thereof, as part of the
Deal between EB and SB to use the $35 M Predatory Loan to plan, implement and transfer
control of the YC to SB and CHC. Exhibit 2 states an EB Net Worth of $1.3 B based on a
YC value of $900 M. I believe that the $900 M Post- Settlement value on the YC may be
based on the Total Net Value Credit Suisse appraisal method, previously condemned by the
court in its Interim Order.
4.
Cross Harbor Capital Partners dated August 1, 2008, approximately two weeks before the MSA
and Predatory Loan closing. Exhibit 3 states on p. 3 that CHC has RECEIVED All divorce
settlement related documents; required Detailed, updated financial statements for EB (the
inference is that EB had previously provided financial statements and updates were needed);
required All underwriting materials provided to PEM, Archer and other Potential Sources of
Capital establishing that CHC required complete and thorough knowledge and possession of
All documents relating to EBs financial status based on her submissions to other lenders (the inference, coupled with several emails, is that Exhibit 2 had been submitted to other lenders
and was also possessed by CHC before the closing). Significantly, CHC required full
recognition of its existing rights through the execution of the previously agreed upon Letter
Agreement. I am informed and believe that said Letter Agreement has not been recovered
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from the Russell computers and remains concealed or destroyed. Exhibit 3 states on p. 4 that
CH Will control distributions of YC working capital. This establishes SB control over
the YC as a component of the Predatory Loan. Exhibit 3 also establishes SB and his entities
assumption of a position as a Lending Advisor to EB as contained in numerous statements in
their Discussion including: (i) who, why, the amount, and how to Secure additional financing
from Archer Capital Management ($55.1MM,net) and how it gets paid; (ii) the sale of
Farcheville and to whom and how to distribute the proceeds and make Additional EB
Investment directly into YC with the CH estimates to cover current accounts payable and
projected operations through 10/31/2008"; and the planning of a YC Preferred Equity Offering
and YC Governance based on a detailed joint venture essentially controlled by SB and his
entities with detailed provisions subsequently contained in the Agreement to Form. Exhibit 3
states that based upon the SB and CHC analysis, planning, and implementation control
mechanisms, early stage analysis indicates future net cash flow to EB of $600 + MM.
The compelling inference, particularly based upon the last representations of CHC is that SB /
CHC were using their insider Predatory Loan position as of August 1, 2008 to take
complete control of YC with full knowledge of EBs financial position, and representing a $600
M net cash flow to EB in order to obtain control. I am informed and believe that based upon
existing case law, and related facts inferred from existing emails and documents recovered from
the Russell computers, that documents remain concealed or destroyed relating to said
representations by CHC; and that SB and CHC made said representations, specifically the $600
M net cash flow to EB, based upon concealed and / or destroyed documents with knowledge
of EBs financial status based upon her liabilities disclosed in Exhibits 1 and 2; and contained in
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Attached as Exhibit 4 is an email chain between EBs consultant Jim Goldfarb, Jory
Russell and EB lawyers from the Liner law firm handling the Predatory Loan transaction,
stating that as of July 21, 2008, ten days before the creation of Exhibit 3, CHC was able to
exercise control over EBs lending status with PEM through the CHC mortgage on the
Family Compound, which is not reflected on the July 15, 2008 financial statement prepared with
Goldfarb and Liner just six days before. The only lien listed is LeMond. According to Exhibit
1, after the closing on August 13, 2008, CHC owned a first mortgage ($13 M), LeMond a second
($13.5 M) and CHC a third ($22 M) for a total of $48.5 M on the Family Compound then valued
at $40 M. The inferences are that there exist emails between either the Liner lawyers and / or
Goldfarb on the one hand, and the SB lawyers on the other, during the period between June,
2007 - the date of the LOI to sell the YC to SB and the present, particularly in the summer of
2008, which emails have not been recovered - or produced before phase 1 of the trial.
6. Attached as Exhibit 5 is a internal MEMORANDUM dated September 5, 2008,
by and among SB and CHC principals and lawyers, circulated just weeks after the CHC
Predatory Loan, based on an analysis of the Credit Suisse Predatory Loan, and inferring that
said analysis predated the CHC Predatory Loan, based upon other emails and documents.
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Significantly, the MEMORANDUM is dated just 4 days after EB had already defaulted on
September 1, 2008 on an interest payment inserted into the Predatory Loan thereby causing an
almost contemporaneous event of default on the promissory note and deed of trust. Exhibit 5
contains graphs planning and implementing total control over the YC and EB based on her
already defaulted loan status; but more importantly its control is based on their pre-planned
default" of YC under the Credit Suisse loan by making their Predatory Loan to transfer control
and ownership from Tim Blixseth to EB.
Restrictions on Change of Control (Sections 5.19) That Section refers to the Credit Suisse
Predatory Loan requiring that BGI or Tim Blixseth must at all times directly or indirectly
control the YC; and own, directly or indirectly, 51 % of the YC , and then references a
proposed Executive Committee controlled by CHC as being a breach of the Credit Suisse loan.
Exhibit 5 then states: Note that while the 51% ownership test will be met as to YC and YD,
this is not the case now with respect to Big Sky Ridge, LLC. I believe that the effect of CHCs
own analysis is an admission that CHC knew when it made its Predatory Loan to EB it was
creating a default on the Credit Suisse loan permitting it to put the YC into bankruptcy; and
CHC knew that EBs financial status was such based on Exhibits 1-3 and subsequent Exhibits
herein that she would default as of September 1, 2008 thereby obtaining complete control over
the YC. Mr. Blixseth requires the production pursuant to his subpoena to CHC and SB of all
emails and documents relating to Exhibit 5.
7. Attached as Exhibit 6 is the loan closing document reflecting complete control by
CHC of the use of virtually all of the Predatory Loan proceeds.
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8.
Attached as Exhibit 7 is an email chain between EB, and SB and others, starting on
March 11, 2008, just two weeks before SB terminated the YC sale on March 26, 2008, and
while EB had her agent Gary Peters were negotiating with SB to make their own deal with SB.
EB writes: Thanks so much for the follow-up. I will wait to hear from you what you come up
with both in regard to your (and group) interest in moving forward on something and/or
CrossHarbor/Sam. The March 25, 2008 email between TB and SB references SBs bankruptcy
plan. The Harris, Arenson, Kidd email dated October 15, 2008, a month before the YC
bankruptcy filing demonstrates CHC control with its agent, DLC, based on DLCs plan. Two
days later, SB tells his agent, Joseph Harris that SB is going to write the plan tonight to solve
the entire YC debacle. It could be brilliant. Harris then says it is possibly evil and it could be
worth over a billion dollars....I hope it includes the dip and filing by Friday. There are no
emails and documents in which Byrne sent the evil plan. Just 4 days before said emails, on
October 21, Chris Wright, a present member of the ad hoc Committee, having votes on the
Liquidating Trust, emailed EB stating But right now we arent even mentioning bankruptcy or
a DIP loan. Upon information and belief, I believe said not mentioning refers to a plan
between CHC and SB not to disclose to the members the planned bankruptcy reflecting control
over all aspects of the planned filing by CHC; and the complete relinquishment by EB who
states: thats a good point....i dont care you all decide the when of this. Based on this email
chain and other emails referencing emails that have been destroyed or concealed, including the
unproduced Letter Agreement referenced in Exhibit 3 hereto, I believe that both SB and CHC
are in possession of emails and documents relating to a separate deal between EB and SB and
CHC which occurred between March 11, 2008 and the CHC Predatory Loan. The compelling
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inference is that EB gave up control and ultimately ownership to SB and CHC of over $700 M in
assets based on the values in Exhibit 1 of the YC and PC for a Predatory Loan of $35 Million
Dollars. In addition to the $600M net cash flow to EB representations made in Exhibit 3, the
compelling inference is that Samuel T. Byrne made undisclosed promises to EB for her to
forfeit over $650 Million Dollars of Blixseth marital Community assets.
9. Attached as Exhibits 8 through 11 are true copies of emails representing just a
sampling of numerous emails containing evidence that: (a) EB planned to falsely accuse Tim
Blixseth, and hit him from all sides and obtain control of the YC in violation of Los Angeles
Superior Court Orders now merged into the final judgment of divorce; (b) EB and SB
misleading the B shareholders; (c) an email with an unrecovered attachment with EB stating
never tell that I am sending you all this as part of EBs interference with Los Angeles Superior
Court orders now merged into the final judgment of divorce. To my knowledge we have not
recovered the missing attachment. These issues relating to bad faith collusion between EB and
SB are now on appeal.
10.
Attached as Exhibit 12 is an email whereby Byrne and DLC are agreeing that EB
committed perjury before this court regarding issues relating to CHC and DLC control of the
YC.
As seen above in Exhibits 1 - 3, SB and CHC did in fact obtain control over the YC
through the SB Predatory Loan; and thus, SB and DLC knew she was committing perjury in
order to have this Court approve their bankruptcy plan including the Liquidating Trust to sue
Tim Blixseth.
bad faith and exculpation, and Tim Blixseths rights to cross-claim against SB, CHC and
Credit Suisse, al of which issues are now on appeal.
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11.
and make a separate deal with SB on March 21, 2008, five days before SB terminated the YC
sale, and in violation of Los Angeles Superior Court Orders and in contradiction of her sworn
testimony to said Court on that same date that she was not interfering with the sale. These issues
are now on appeal relating to SB exculpation and bad faith.
12.
Attached as Exhibits 14 and 15 are two fabricated Grand Jury Target Letters.
Upon information and belief, these letters were fabricated by Dennis Montgomery acting in
collusion with his partner, EB; and used by EB with the media and SB after January 15, 2008,
the date the YC sales contract was signed. They were used by EB to interfere with and
ultimately to kill the YC sale in violation of Los Angeles Superior Court Orders, now merged
into the Final Judgment.
13.
Upon information and belief, the following facts and events contained in the
following chronology are true. This chronology relates to the Target Letters and how they
were used to interfere with the YC sale by TB to SB. The chronology also relates to the EB and
Dennis Montgomery relationship and how that relationship impacts the current case issues,
including the computer hacking by Montgomery into Tim Blixseths and Michael Flynns
computers throughout these proceedings thereby interfering with the attorney client relationship
warranting dismissal of all of the claims against Tim Blixseth. This Court previously denied said
motion but new evidence is emerging relating to said computer hacking. Finally, the
chronology relates to the pattern of fraudulent loans procured by Edra Blixseth to finance a plan
to obtain control of the YC, including the fraudulent Wachovia loan as it relates to
Montgomerys technology, now publicly exposed as involving a massive fraud on the U.S.
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government. The fraudulent technology is owned by EBs company, Blxware. The Blxware
valuation on EBs financial statements is approximately $22 M. This is fraudulent. Based upon
personal knowledge, and information and belief, Blxware possesses no marketable technology,
the technology as represented does not exist, it was subject to an injunction when EB pledged it
to Wachovia; and Ms. Blixseth knew throughout the period in which she submitted loan
applications and financial statements to the various lenders that the purported Blxware
technology did not exist, and that Montgomery was engaged in computer hacking for her benefit
. EB paid Montgomery almost $6 Million dollars between April, 2006 and February, 2009 for
non-existent technology, which raises the inference that it was paid to perform computer
hacking.
March 1, 2006:
The FBI raided Dennis Montgomerys house searching for certain noise
filtering and compression software and hard drives he took from
eTreppid Technologies, and alleged classified information, involved in
then pending litigation in Reno, NV. Later, in June, 2007, when
Montgomery was subpoenaed to produce certain bribery emails before
a Washington D.C Grand jury, which he claimed proved that Warren
Trepp bribed NV Governor Gibbons, Montgomery took the boxes of
software and hard drives to EBs residence, Porcupine Creek. The
compelling inference is that Montgomery took approximately 23 boxes
filled with hard drives from eTreppid to conceal his fraud on the U.S.
government over the previous several years, because the hard drives may
have proved Montgomerys lack of source codes with respect to
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EB attempted to get the U.S. Gov to buy the software using her purported
political contacts with Cheney and others in the Bush Administration in
order to obtain a government contract. EB isolated Tim Blixseth from the
deal. Cheney and the Bush Admin rejected EB and Montgomery. EB
then planned and implemented a media campaign against Gibbons and
the Republicans through her contacts at the Wall Street Journal and
NBC in order to pressure the Bush White House using Montgomerys
fabrication of two purported bribery emails allegedly evidencing
Warren Trepps bribery of Gibbons to get government contracts. These
are the same media contacts, EB and Montgomery contacted when she
used the fake Grand Jury Target Letters to kill YC sale in March, 2008.
The FBI in DC later concluded (in 2009) that Montgomery fabricated the
emails and dropped the investigation of Gibbons and Trepp. EB
employed the law firm of Skadden Arps to deal with the bribery email
Grand Jury and the required production of the bribery emails. The same
law firm represented Credit Suisse in the Montana bankruptcy
proceedings
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in early November 2006, the weekend before the elections. The WSJ
published a front page article on Nov. 1, 2006 just before November
elections in which Gibbons was running for Nevada governor. The WSJ
later published two more articles based on the alleged bribery using
Montgomery documents. Said evidence supports EBs use of the media to
get what she wants. In March - April, 2008 as supported by the emails
attached hereto, she used the media to attack Tim Blixseth resulting in
damages to the YC.
December, 2006:
April, 2007:
EB learned TB had made a tentative deal with Sam Byrne (SB) to sell
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July
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based on their sworn affidavits that the YC was appraised at 1.2 Billion.
This was based on the Total Net Value appraisal method. Klar admitted
dealing with LeMonds counsel, who was then suing Tim Blixseth and the
YC. Klar knew LeMonds interests were adverse to the marital
community.
August 14, 2007:
During this time frame, SB informed Robert Sumpter that he knew about,
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and /or had seen, and /or had possession of the fake Target Letters.
Sumpter called TB and told him of the SB conversation relative to the fake
target letters. TB immediately called SB and demanded an explanation and
source of the letters. SB initially refused to disclose, and upon being
pressed, stated that EB has read them over the phone to SB. SB told TB
that this was a big problem as he was obligated to advise his lenders which
could kill the deal. SB sought adjustments and reduction in price. SB
advanced plan to put the YC into bankruptcy.
March, 2008:
EB borrowed $5 Mil from Wachovia Bank; and $8 Mil from First Bank &
Trust. The Wachovia loan documents evidence extensive and intentional
fraud including affirmative falsehoods about her involvement in litigation
adversely impacting her financial status. EB also directly concealed the
fact that the collateral she pledged for the loan was in fact subject to a
preliminary injunction in the concealed litigation. EB and her lawyers and
bookkeeper, Jory Russell used financial statements claiming an $800 M
net worth based on the TNV appraisal method while negotiating with
Byrne to put YC into bankruptcy.
EB sent Gary Peters to meet with SB in his Boston office to make a separate
deal while she appeared in divorce court on that very day testifying that she
was not interfering with the sale; and was again ordered not to interfere with
the sale.
SB terminated the YC. Sale. Two days later EB planned a massive media
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March, 2009:
June 24 - July 8, 2009: EBs bookkeeper, Jory Russell was caught under oath destroying Edras
files on two computers. Later, some of the files are forensically
recovered and provide evidence of concealed or destroyed documents.
See below.
September October, 2009:
October, 2009:
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December, 2009:
TB and his technology expert continue to recover deleted emails from the
Russell computers, including Exhibit 3 to this Affidavit.
On May 14, 2009, on the motion of Western Capital Partners, this Court ordered
the 2004 exam of Jory Russell, Edra Blixseths primary financial assistant. Pursuant to said
Order, Russell was ordered to produce electronic and paper documents including complete
copies of computer hard drives and other electronic storage media relating to Edra Blixseth as
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On June 13, 2004 Russell was served with a subpoena requiring his attendance on
June 23, 2009 for examination under oath; and the production of all documents, emails,
financial records and statements, bank records relating to Edra Blixseth; and specifically
including complete copies of computer hard drives and other electronic storage media which
contain any and all accounting, email, and financial information relating to Edra Blixseth in
Russells possession as described in the subpoena and in the Order incorporating the Motion.
16.
Within a day or two after receiving the subpoena, Russell spoke to both Gary
Deschenes, Ms. Blixseths personal bankruptcy lawyer, and to Edra Blixseth. (Tr. 11.1.09, p.
30, L. 18-20. He informed them that he had received the subpoena, that he possessed documents
stored on computers responsive to the subpoena; and that I was printing off the documents.
(Id p. 30 L. 11 to p. 33, L. 11). Russell testified that during the week before his attendance I
would read the subpoena and then print out responsive documents including emails. (Id p. 35 L.
8-15). He printed out about a foot and a half of responsive documents before he ran out of
paper. (Id. P. 36 L. 12-16). He had possession of two computers containing materials responsive
to the subpoena, a lap top and a desktop, but only printed from his desktop before the June 24,
2009 exam. (Id. P. 38 L. 8-12)
17. Mr. Deschenes did not file a motion to quash or for a protective order.
18. Mr. Deschenes did not represent Russell at any time in these matters. He represented
Edra Blixseth at all times material herein. Thus, at no time did his instructions to Russell as
recited herein fall within the attorney client privilege.
19. Russell first testified on June 24, 2009. That volume was designated Vol. 1 in the
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Edra Blixseth bankruptcy proceedings. There are also two additional volumes of his testimony
in the Edra Blixseth bankruptcy dated July 8, 2009 and August 5, 2009; and designated Vol. II
through III. There is a fourth day of deposition taken on November 1, 2010 in AP 14. In this
Affidavit, each volume is designated by date. In the June 24, 2009 examination, as he later
admitted on July 8, 2008, neither he, nor Mr. Deschenes, nor Ms. Blixseth, disclosed his then
possession of either the lap top or the desk top, or the foot and a half of documents he had
printed out from the desktop, although he knew they were in his possession and responsive to
the Courts Order. (Tr. 8.8.09, p. 13 L. 7 to p. 14, L. 16). He also knew there was a scheme in
place to conceal the computers and the responsive documents orchestrated by Mr. Deschenes.
Id. P. 13 - 30. See specifically Tr. 8.8.09 at p. 15, L. 21 to p. 18 L. 18 for the possession and
non-production of the subpoenaed documents. As hereinafter recited, Russell only produced
about 4" of documents from his wifes computers which were virtually the entire subject of his
short 52 page deposition permeated with attorney client privilege assertions designed to conceal
the un-produced computers and documents.
20. On the night of June 23, 2009, in preparation for his deposition, Russell picked up
Mr. Deschenes at the airport and drove him to Ms. Blixseths estate, Porcupine Creek.
According to Russell, he informed Mr. Deschenes and Edra Blixseth that evening that he had in
his possession in the trunk of his car the lap top and a bankers box with about a foot and a
half of documents that he had printed out during the previous week from his desktop. In his
July, 8 2009 testimony, he swore that there were different documents on his desktop and lap top
that were subject to the subpoena; that he only printed from his desktop; and the lap top and
desktop were not synched. Tr. 7.8.09, p. 23, L 14 - 22.
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21.
On the night of June 23, 2009, Mr. Deschenes then requested Russell to give them
the lap top and the printed documents because I was told that was not my property. Tr. 7.8.09,
p. 35 L. 3 -22. The desktop was still at his home; (Tr. 11.1.09, p. 51 L. 24-25; from which he
had printed about a foot and a half of documents that he knew were responsive but he gave to
Mr. Deschenes and Edra Blixseth the evening before his deposition on June 24th; but now
wasnt sure if the computers were synched; or who told him not to produce the documents and
computers, Mr. Deschenes or Ms. Blixseth. Tr. 11.1.09 p. 38 L. 8-15; p. 52, L. 4 to p. 54 L. 24.
22.
testimony between July 8 and November 1. He admits that he was at Porcupine Creek, one or
two days before Mr. Deschenes arrived printing off documents off Edra Blixseths printers that
were also not produced on June 24th, but were supposedly part of the foot and a half. Tr.
11.1.09 p. 55, L. 14-25. But in his November 1 testimony, he said that he had told Blixseth and
Deschenes on the night of June 23, 2009 before his deposition that the stack of documents
representing the foot and a half in the bankers box from his trunk were from the lap top.
Tr. 11.1.09, p. 54, L. 7 to P. 55 L. 13. In his three days of testimony after June 24, 2009, July 8,
August 5 and November 1, 2009, Russell gives conflicting testimony on what he destroyed and
when. On August 5, 2009, he testified that he destroyed everything pertaining to Edra Blixseth
on the desktop; and I deleted copies of everything that were on Edras lap topor yeah,
Edras lap top, the lap top that I was using. Tr. 8.5.09 280:10 to 282: 1.
23.
The first mention of being accused of theft of the documents came up in Mr.
Deschenes presence. Tr. 11.1.09 , p. 56 L. 5-20. Russell testified he had no recollection of any
plan to shut down his deposition the following day being discussed but he remembers a John
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Roselli showing up at his deposition to put his deposition on hold.. Tr. 11.1.08 p. 57, L. 14 to
p. 59 L. 5. The next day he deleted documents off his desktop. Tr. P. 59, L. 6-11. Mr. Russell
then asked for a break. Id at p. 61, L. 18.
24.
Russell relied on Mr. Deschenes not to produce the documents or the computers
on June 24 at his deposition. Tr. 66 L. 3 to p. 67 L. 3. Neither Russell, nor EB, nor Mr.
Deschenes disclosed on June 24, 2009, that just a month before that, on May 19, 2009, five days
after the court order, EBs business partner, Montgomery, delivered a server at Porcupine
Creek, called the Blxware/Blixseth.com and related domain names containing thousands of
emails, and with what Russell now claims contains everything from both computers in his
possession. Tr. 11.1.09. That server has never been produced; and apparently, has
disappeared..
25.
Russell also destroyed two USB hubs by throwing them in the garbage
containing accounting software provide by Pat Yarborough, EBs bookkeeper, and also
documents responsive to the Western Capital subpoena that were on the lap top. Tr. 11.1.09 p.
70 L. 10 to p. 71, L. 13.
26.
In his July 8th testimony, Russell admitted destroying documents off both the lap
top and desktop and that they were not synched. Tr. 7.8.9, p. 38, L. 11 to p. 39, L. 18.
27.
He also stated that on the night of June 23, he then proceeded to print out more
documents from the lap top that evening while in the presence of Mr. Deschenes and Ms.
Blixseth, and after printing for some time, he stopped. At some time during this entire episode
of spoliation, he also put additional documents on a USB hub which he filled; and later threw in
the garbage.. Tr. 11.1.09 p.70, L. 10 top p. 81 L. 13. It is unknown what happened to the
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printed documents printed out the evening of June 23, 2009; and the chain of custody of the
foot and a half is unknown..
28.
At the June 24, 2009 exam, Mr. Deschenes engaged in what can only be called an
intentional charade using Russell as a dupe. Neither Russell or Mr. Deschenes ever mentioned
the two computers, or the foot and a half of documents given to him the night before by
Russell, or the 3' of documents printed out the night before from the lap top given to Blixseth /
Deschenes that evening. Instead, Mr. Deschenes had Russell produce about 4 inches of
emails mostly relating to attorneys, which he claimed were from his wifes computer, which
Deschenes then asserted the attorney client privilege on. (Tr, 6.24.09 pp. 1-51). The production
of the 4" of printed documents from the wifes computer constitutes an admission that Russell,
Mr. Deschenes and EB had a duty to produce the other computers and printed documents.
29.
Mr. Deschenes then carried on this Roselli charade in the context of the 4" of
produced documents, the attorney client privilege, and a privilege log in what is shocking
deception relating to the subpoenaed computers, the subpoenaed foot and a half of documents
that Russell actually possessed, all given to him the night before while using the 4" of
documents as a cover, and the subsequent destruction of the contents of the computers the
following day. Tr. 6.24.09 p. p. 4o to 50. Specifically, under the cover of the 4" of emails
relating to the attorney client privilege and not providing the non- privileged documents, with
Western Capitals lawyer who were demanding that they be given to the court reporter at the
June 24th deposition, Mr. Deschenes stated at p. 46 L. 10-12:
No. Were not going to give them to you today because of the other deal. We dont
want to have these things produced if were....
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The other deal is the Roselli charade. The compelling inference is that Mr. Deschenes knew
that the entire June 24th charade with Roselli , and the 4" of documents produced after Russell
had produced everything the night before, was a cover for the violation of the subpoena and the
court order in order to give Blixseth and Russell time to destroy evidence, which he admittedly
did. The Western Capital lawyers heard Edra Blixseth state words to the effect that Sam is ok
with the deal inferring that Sam Byrne was the source of funding to buy out the Western
Capital note. Additionally, EBs partner, Dennis Montgomery, apparently then in conflict
with EB, on June 25, 2009, the day after the deposition, called Tim Blixseth and told him that
the Roselli intrusion into the deposition was a charade to destroy evidence off the computers,
which Mr. Blixseth immediately reported to her trustee, Mr. Samson. Montgomery also texted
TB during that time frame that they engaged in the foregoing conduct so they could buy time to
erase emails. Without this tip from Montgomery, it is unlikely that the concealment of the
computers and subsequent destruction would have been uncovered.
30. The evidence suggests that the Rosselli / Byrne charade of buying off Western
Capital Partners was a scheme to buy time to conceal and destroy evidence. According to
Russell in a conversation with the affiant, and according to Montgomery in a conversation with
TB, Byrnes Vice-president, Matthew Kidd was present at Porcupine Creek throughout the June
24, 2009 deposition and subsequent meetings. The inference and circumstantial evidence is that
there was no real intention to pay Western Capital Partners. Following the suspension of the
deposition, Russell admittedly spent the next day destroying documents on his desktop and
his lap top. (Tr. 7.8.08 p. 23 L. 14 - p. 24 L. 12; Tr. 8.5.09, supra). Contrary to his testimony on
November 1, 2009 that he only printed from his desktop, (see above), on July 8, 2009 he had
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Beginning on at least June 18, and continuing on June 22, and 23, 2009, at least
three days after informing Mr. Deschenes and Ms. Blixseth of what he was doing to respond to
the subpoena, Russell may have also began deleting, concealing or destroying electronically
stored files.
32.
Between the date of the Courts Order on May 14, 2009 and June 24, 2009, Russell
had possession, custody and control of at least the lap top computer and the desktop computer
containing hundreds of thousands of electronically stored documents relating to Edra Blixseth
and required to be produced pursuant to the subpoena. Neither he, nor Mr. Deschenes, nor
Ms. Blixseth complied with the courts order or the subpoena. At the time he only took
advice from Mr. Deschenes. And Ms. Blixseth.
33. According to his testimony, Mr. Russell was the Vice President of Business
Development for Ms. Blixseths software company, Blxware, and the Director of Business
Operations for Edra Blixseth personally, who took direction from Edra Blixseth on all
matters. (Tr. 11.1.09 p.25 L3-4). Russell had not worked for Ms. Blixseth for about 3 or 4
months before the deposition; but he still possessed the lap top computer and the desk top
computer containing materials sought in the subpoena. (Id p.32 L. 3-20).
34. . Russells testimony as to who owned, and /or had the right to possess the lap top
computer as of June 24, 2009, and the instructions he received from Mr. Deschenes and Ms.
Blixseth on these issues evidences concealment, destruction and obstruction; ( Id 37-57).
35 . The Russell testimony is very specific that one or both of them told him not to
produce either the foot and a half of documents or the lap top for his deposition the following
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day; (Id. 52 L. 9-25) ; and that the documents (Id 56 L. 9-12) was [sic] no longer my
property and I shouldnt have it. (Id. L. 19-21). Gary Deschenes specifically told him that the
lap top was not Russells property the night before he was obligated by Court order to produce
copies of its hard drive. Mr. Deschenes knew that the Order to produce copies made both
the actual ownership and possession of the lap top irrelevant because copies were required,
and regardless of who had the right to possess the laptop - Ms. Blixseth or Russell, he obstructed
the discovery process. The fact that the destruction of material on the computers occurred the
next day nails the coffin shut on their collective intent.
36.
Neither the desktop or lap top computers belonged to Ms. Blixseth. They
belonged to YCW and Blxware. No objection or motions to quash were filed by either entity.
Russell was properly in possession of both. They each contained material required to be
produced. . Russell printed out the entire foot and a half from the desktop which did not belong
to Ms. Blixseth. Russells conflicting testimony as to what computers from which he printed
unproduced documents evidences concealment and mens rea. Mr. Deschenes did not represent
either Blxware or YCW.
37. Prior to the night of June 23, 2009, neither Ms. Blixseth, nor Mr. Deschenes, nor
Blxware, nor YCW , or its Trustee, or anyone representing EB, had requested the turnover of the
computers, or any documents relating to Edra Blixseth, notwithstanding Russells direct, routine
and consistent assistance for the previous nine months in assisting Blixseth and her lawyers in
finding documents and providing them to her lawyers, including Mr. Deschenes, and also to Mr.
Byrne and his lawyers and to the lawyers in the YC bankruptcy. (Exhibits to Russell deposition
and emails sought to be destroyed by Russell which have been forensically retrieved from the lap
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Signed under the pains and penalties of perjury this 13th day of January, 2010 under the
laws of the United States.
28
EXHIBIT 27
Based upon information known to Defendants as of this date, the following individuals
are potential witnesses or are likely to have discoverable information that Defendants may use to
support their defenses:
1. Dennis Montgomery.
1
Subjects of Discoverable Information: the factual basis for his claims and asserted
damages in the Complaint, including, but not limited to: whether the software he
provided to the federal government was a hoax; whether he staged phony
demonstrations of his software to government officials; whether he was an
incorrigible gambler; Montgomerys residences in Nevada, California, Washington,
and Florida; Risens interview of Montgomery; employment or contractor positions
and opportunities from 2008 to the present; information about Montgomerys
interview with Lisa Myers from NBC News about Gibbons; Montgomerys health
claim of damages.
2. Brenda Montgomery.
Subjects of Discoverable Information: the Montgomery residences in Nevada,
California, Washington, and Florida; Montgomerys health claim of damages.
3. James Risen. Risen may be contacted through Defendants counsel, Davis Wright
Tremaine LLP.
Subjects of Discoverable Information: newsgathering regarding Chapter 2 of Pay Any
Price: Greed, Power, and the Endless War (Chapter 2); Risens reliance on court
records, reputable news reports, interviews with sources, including Montgomery, for
statements about Montgomery; Risens belief in the truth of the statements in Chapter
2 about Montgomery.
4. Bruce Nichols, Senior Vice President, Trade & Reference at HMH. Nichols may be
contacted through Defendants counsel, Davis Wright Tremaine LLP.
Subjects of Discoverable Information: information regarding HMHs editorial review
of Chapter 2 on Montgomery and information about Risens independent contractor
status.
5. John Brennan, Director of the CIA, former head of the Terrorist Threat Integration
Center, located in or near Washington, D.C.
Subjects of Discoverable Information: the Terrorist Threat Integration Centers use of
Montgomerys information and decision to pass Montgomerys information on to
senior government officials; senior government officials use of Montgomerys
information; and the basis for testimony in his confirmation hearings for Director of
the CIA that Montgomerys software was determined not to be a source of accurate
information. (Chapter 2 at 47.)
6. Jose Rodriguez, former head of the CIA Counterterrorism Center, located in or near
Washington, D.C.
Subjects of Discoverable Information: information showing that Montgomerys
software was revealed to be a hoax, and that the Counterterrorism Center very
skeptical of Montgomerys intelligence and viewed it as crazy.
2
7. Saxby Chambliss, former U.S. Senator and vice chairman of the Senate Intelligence
Committee, and relevant former staff members.
Subjects of Discoverable Information: information regarding written questions
Senator Chambliss sent Brennan in his confirmation hearings about Montgomerys
intelligence and documents the senator and staff reviewed showing that CIA
officials derided Montgomerys information and that Montgomerys intelligence was
bogus.
8. George Tenet, former Director of the CIA, located in or near Washington, D.C.
Subjects of Discoverable Information: information showing that Montgomerys
software was revealed to be a hoax; that senior government officials considered
shooting down passenger jets based on the software; and that Tenet allowed
[scientists] to circumvent the CIAs normal reporting and vetting channels, and
rushed the raw material fed to the agency by Montgomery directly to the president.
(Chapter 2 at 43-44, 46.)
9. Samantha Ravich, former advisor to Vice President Dick Cheney, located in or near
Washington, D.C.
Subjects of Discoverable Information: information about her meeting with
Montgomery about his software, and information showing that Risen interviewed her.
(Chapter 2 at 51.)
10. Frances Townsend, former counterterrorism official on the National Security Council.
Subjects of Discoverable Information: information showing that Townsend discussed
with a National Security Council lawyer that the president had authority to shoot
down airplanes believed to be terrorist threats and that Townsend considered whether
it might have been time to exercise that authority in late 2003 based on
Montgomerys intelligence. (Chapter 2 at 45.)
11. Current and former staff members, U.S. Senate Select Committee on Intelligence.
Subjects of Discoverable Information: information showing that committee staff
contacted the CIA about Montgomerys technology and the CIA was very skeptical
of it at the time.
12. Current and former CIA officials, located in or near Washington, D.C.
Subjects of Discoverable Information: information about working with Montgomery
regarding his purported software and the use of Montgomerys information;
information showing that that the purported software was fake; and that senior
government officials considered shooting down passenger jets based on the software.
13. Current and former U.S. Special Operations Command officials.
20. Aram Roston, former Playboy and Defense News reporter, located in Washington,
D.C.
Subjects of Discoverable Information: information regarding the Playboy and Defense
News articles about Montgomery and his software, including, but not limited to,
whether those articles were subject to retraction.
21. Michael Flynn, Montgomerys former lawyer, located in California.
Subjects of Discoverable Information: information showing that Montgomerys
software was revealed to be a hoax; that Montgomery staged phony demonstrations of
his software to government officials, that Montgomery was a fraud and conman; and that he provided information to Risen before publication. (Chapter 2 at
36.)
22. Tim Blixseth, located in Washington.
Subjects of Discoverable Information: his belief that Montgomerys software was not
real; his observation of a demonstration of Montgomerys software in Palm Springs,
California; and information showing that he provided information to Risen before
publication. (Chapter 2 at 50-52.)
23. Edra Blixseth, Montgomerys former business partner in Blxware, located in
California.
Subjects of Discoverable Information: Blixseths business dealings with Montgomery
and information showing that Montgomerys software was revealed to be a hoax.
(Chapter 2 at 50-52.)
24. Paul L. Haraldsen, Special Agent, Air Force Office of Special Investigations.
Subjects of Discoverable Information: information regarding the investigation by the
Air Force Office of Special Investigations into Montgomerys software at eTreppid.
25. Thomas A. Smith, Special Agent, Air Force Office of Special Investigations.
Subjects of Discoverable Information: information regarding the investigation by the
Air Force Office of Special Investigations into Montgomerys software at eTreppid.
26. Michael A. West, FBI Special Agent.
Subjects of Discoverable Information: information regarding the FBI investigation
into Montgomerys software at eTreppid
27. Warren Trepp, Montgomerys former partner in eTreppid.
Subjects of Discoverable Information: interviews with the FBI and Air Force Office
of Special Investigations discussing the phony demonstrations Montgomery staged
for government officials and his belief that Montgomerys software was not real.
28. Sloan Venables, former e-Treppid employee.
Subjects of Discoverable Information: interviews with the FBI and Air Force Office
of Special Investigations discussing the phony demonstrations Montgomery staged
for government officials and his belief that Montgomerys software was not real.
29. Patty Gray, former e-Treppid employee.
Subjects of Discoverable Information: interviews with the FBI and Air Force Office
of Special Investigations discussing the phony demonstrations Montgomery staged
for government officials and her belief that Montgomerys software was not real.
30. Jesse Anderson, former e-Treppid employee.
Subjects of Discoverable Information: interviews with the FBI and Air Force Office
of Special Investigations discussing the phony demonstrations Montgomery staged
for government officials and his belief that Montgomerys software was not real.
31. James Bauder, former e-Treppid employee.
Subjects of Discoverable Information: interviews with the FBI and Air Force Office
of Special Investigations discussing the phony demonstrations Montgomery staged
for government officials.
32. Joseph Liberatore, Air Force official, located in or near Washington, D.C.
Subjects of Discoverable Information: information about the government contracts
Montgomery received from the Air Force, and information regarding Montgomerys
purported software. (Chapter 2 at 52.)
33. Donald Kerr, former chief of the CIAs Science and Technology Directorate any
Deputy Director of National Intelligence, located in or near Washington, D.C.
Subjects of Discoverable Information: information regarding Montgomerys
purported software. (Chapter 2 at 42.)
34. Jim Gibbons, former member of the House Intelligence Committee and Governor of
Nevada.
Subjects of Discoverable Information: information regarding Gibbons early
advocacy for Montgomerys software; Montgomerys charges of bribery against
Gibbons in connection with the sale of Montgomerys software (from which Gibbons
was cleared); and the email Montgomery allegedly fabricated to support his
allegations against Gibbons. (Chapter 2 at 38-39, 49-50.)
6
35. Abbe Lowell, former Congressman Jim Gibbons attorney, located in Washington,
D.C.
Subjects of Discoverable Information: Montgomerys charges of bribery against
Gibbons in connection with the sale of Montgomerys software (from which Gibbons
was cleared); and the email Montgomery allegedly fabricated to support his
allegations against Gibbons. (Chapter 2 at 50.)
36. Porter Goss, former chairman of the House Intelligence Committee, former CIA
Director, located in or near Washington, D.C.
Subjects of Discoverable Information: meetings with Gibbons to discuss eTreppid and
Montgomerys technology. (Chapter 2 at 39.)
37. Letitia White, a lobbyist, located in Washington, D.C.
Subjects of Discoverable Information: information regarding her work for eTreppid to
obtain government contracts for Montgomerys software. (Chapter 2 at 38.)
38. Any individual disclosed by Plaintiff Dennis Montgomery as a potential witness or
person who may have discoverable information in this matter.
Defendants reserve the right to amend or supplement the foregoing response with the
names and addresses of additional individuals likely to possess discoverable information that
may be used to support Defendants defenses and whose identities may be revealed during the
course of discovery.
B.
Based upon information known to Defendants as of this date, the following categories of
documents or tangible things in Defendants possession, custody or control may be used to
support their defenses:
1. Exhibits attached to Defendants motion to dismiss or transfer for lack of personal
jurisdiction, motion to dismiss or transfer for improper venue, motion to transfer
under 28 U.S.C. 1404(a), motion to dismiss for failure to state a claim, and special
motion to dismiss. (ECF Nos. 25, 25-1 to 25-24, 26)
2. Documents Risen relied upon to write Chapter 2 and the 2011 article in the New York
Times about Montgomery, which include: court records; news reports; emails with
sources; emails among and between individuals mentioned in Chapter 2; emails with
Lichtblau; interview notes; and other documents obtained in newsgathering. These
documents are being retained by Risen and/or Davis Wright Tremaine LLP.
7
Computation of Damages
Insurance Agreement
HMH Companies insurance agreement relevant to this proceeding is attached hereto and
hereby produced under Fed. R. Civ. P. 34.
CERTIFICATE OF SERVICE
I certify that on April 24, 2015, I served this document on all counsel of record by email.
s/Micah J. Ratner
10
EXHIBIT 1
By Aram Roston
Page 1 of 10
Jan./Feb. 2010
By Aram Roston
The weeks before Christmas brought no hint of terror. But by the afternoon of December 21, 2003,
police stood guard in heavy assault gear on the streets of Manhattan. Fighter jets patrolled the skies.
When a gift box was left on Fifth Avenue, it was labeled a suspicious package and 5,000 people in the
Metropolitan Museum of Art were herded into the cold.
It was Code Orange. Americans first heard of it at a Sunday press conference in Washington, D.C.
Weekend assignment editors sent their crews up Nebraska Avenue to the new Homeland Security
offices, where DHS secretary Tom Ridge announced the terror alert. Theres continued discussion,
he told reporters, these are from credible sourcesabout near-term attacks that could either rival or
exceed what we experienced on September 11. The New York Times reported that intelligence
sources warned about some unspecified but spectacular attack.
The financial markets trembled. By Tuesday the panic had ratcheted up as the Associated Press
reported threats to power plants, dams and even oil facilities in Alaska. The feds forced the
cancellation of dozens of French, British and Mexican commercial flights of interest and pushed
foreign governments to put armed air marshals on certain flights. Air France flight 68 was canceled,
as was Air France flight 70. By Christmas the headline in the Los Angeles Times was "Six Flights
Canceled as Signs of Terror Plot Point to L.A." Journalists speculated over the basis for these terror
alerts. Credible sources, Ridge said. Intelligence chatter, said CNN.
But there were no real intercepts, no new informants, no increase in chatter. And the suspicious
package turned out to contain a stuffed snowman. This was, instead, the beginning of a bizarre scam.
Behind that terror alert, and a string of contracts and intrigue that continues to this date, there is one
unlikely character.
The mans name is Dennis Montgomery, a self-proclaimed scientist who said he could predict
terrorist attacks. Operating with a small software development company, he apparently convinced the
Bush White House, the CIA, the Air Force and other agencies that Al Jazeerathe Qatari-owned TV
networkwas unwittingly transmitting target data to Al Qaeda sleepers.
An unusual team arrived in Reno, Nevada in 2003 from the Central Intelligence Agency. They drove
up Trademark Drive, well south of the casinos, past new desert warehouses. Then they turned into an
almost empty parking lot, where a sign read "eTreppid Technologies." It was an attractively designed
building of stone tile and mirrored windows that had once been a sprinklerhead factory.
ETreppid Technologies was a four-year-old firm trying to find its way. Some of its employees had
been hired to design video games. One game under construction was Roadhouse, based on the 1989
movie in which Patrick Swayze plays a bouncer in a dive bar. Other programmers worked on
streaming video for security cameras.
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When the liaison team stepped into eTreppids office, the CIA man in charge introduced himself as
Sid but didnt give his last name. He was tall and in his 50s, with a well-ironed shirt, a paunch and a
mildly robotic politeness. We called him Sid Vicious, one eTreppid technician explained, because
he was anything but.
Sids team set up on the first floor in an unused office and had special cipher locks installed. Workers
carted in a heavy-duty paper shredder that could transform classified documents to dust in seconds.
They set up impenetrable safes with combination locks protected by privacy screens so bystanders
couldnt steal the code.
The CIA team was there to work with Dennis Montgomery, at the time eTreppids chief technology
officer and part owner. Then 50 years old, with a full head of gray hair, the street-smart Montgomery
stood at about five feet eight inches. Other eTreppid workers, hearing the buzz about the spooks in
town, peered through their blinds and watched as Montgomery worked at his desk at the north end of
the building. He wore his usual jeans and Tommy Bahama shirt.
He could be seen handing off reams of paper to Sid and the CIA. They would sit in the room and
review these numbers or whatever the heck Dennis was printing out, one former eTreppid employee,
Sloan Venables, told me. We called them Sids guys, and no one knew what the hell they did.
Montgomery called the work he was doing noise filtering. He was churning out reams of data he
called output. It consisted of latitudes and longitudes and flight numbers. After it went to Sid, it went
to Washington, D.C. Then it found its way to the CIAs seventh floor, to Director George Tenet.
Eventually it ended up in the White House. Montgomerys output was to have an extraordinary effect.
Ridges announcement, the canceled flights and the holiday disruptions were all the results of
Montgomerys mysterious doings.
He is an unusual man. In court papers filed in Los Angeles, a former lawyer for Montgomery calls the
software designer a habitual liar engaged in fraud. Last June Montgomery was charged in Las
Vegas with bouncing nine checks (totaling $1 million) in September 2008 and was arrested on a
felony warrant in Rancho Mirage, California. That million is only a portion of what he lost to five
casinos in Nevada and California in just one year. Thats according to his federal bankruptcy filing,
where he reported personal debts of $12 million. The FBI has investigated him, and some of his own
co-workers say he staged phony demonstrations of military technology for the U.S. government.
Montgomery has no formal scientific education, but over the past six years he seems to have
convinced top people in the national security establishment that he had developed secret tools to save
the world from terror and had decoded Al Qaeda transmissions. But the communications Montgomery
said he was decrypting apparently didnt exist.
He claimed he provided Cheneys office with new output data on terror that would
validate his work. He said the data, which had been encrypted in Al Jazeera, were the
keys
that allowed investigators to crack the liquid-bomb plot in London.
Since 1996 the Al Jazeera news network had been operating in the nation of Qatar, a U.S. ally in the
war on terror. Montgomery claimed he had found something sinister disguised in Al Jazeeras
broadcast signal that had nothing to do with what was being said on the air: Hidden in the signal were
secret bar codes that told terrorists the terms of their next mission, laying out the latitudes and
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The reason the whole thing worked was because Montgomerys CIA contact was with the agencys
Directorate of Science and Technology. Thats the whiz-bang branch of the intelligence service,
where employees make and break codes, design disguises and figure out the latest gadgets. S&T was
eventually ordered by CIA brass to reveal its source to small groups from other parts of the agency.
And when some experienced officers heard about it, they couldnt believe it. One former
counterterrorism official remembers the briefing: They found encoded location data for previous and
future threat locations on these Al Jazeera tapes, he says. It got so emotional. We were fucking
livid. I was told to shut up. I was saying, This is crazy. This is embarrassing. They claimed they
were breaking the code, getting latitude and longitude, and Al Qaeda operatives were decoding it.
They were coming up with airports and everything, and we were just saying, You know, this is
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Montgomery convinced Trepp he had invented a remarkable technology. He could compress data, he
said, a whole movie to just a fraction of the space it took up on a drive. He impressed his patron with
his demonstration, using software to highlight images from the 1939 film Gunga Din. It was enough
for them to launch their operation. Montgomery contributed his technological breakthrough, and
Trepp invested $1.3 million to start. Montgomery soon hired Sloan Venables, a video-game designer,
as one of his first employees. Venables had helped design the Ted Nugent Wild Hunting Adventure
video game. From the beginning, Venables realized things were odd and doubted Montgomery knew
much about software programming. One day at a Chinese restaurant at the same Eldorado Hotel
Casino, Montgomery told him about the time hed been abducted by a UFO. He told me about his
encounter with aliens, Venables says. He went to his uncles or grandfathers or great uncles barn
in the middle of the night, and a spaceship descended on him. They wanted him to go with them, and
he was abducted. Then he came back with extra knowledge. Venables started laughing at the story,
he says.
Montgomery was prone to temper tantrums, according to Venables. Once he hurled a steak at a
waitress. As volatile as he was at times, Venables says, he was at other times warm and confiding.
When Venables threatened to quit after Montgomery threw a can of grape soda at him, Montgomery
took Venabless dying mother to dinner. Every Friday he would take all his employees skeet and
trapshooting at a desert range.
Venables brought in a childhood friend to work at eTreppid. Jim Bauder, who was in his 20s, was
soon working on the video games eTreppid was trying to design. Bauder and Venables say
Montgomery ran the place, and they saw little of Trepp but were aware of his background. They also
say they saw Milken at eTreppid. I saw him come in once, and he had this entourage of five or six
people with him, says Bauder. They came walking down the hallway, and he looked at me and
smiled, introduced himself and then went on down the hall.
ETreppid landed its first big contract from General Electric in 2002 for use of its video compression
technology in gaming surveillance. The company eventually got a contract with the Air Force dealing
with aspects of video shot by unmanned Predator drones. Montgomery claimed his software could
automatically recognize weapons and faces. In 2004 the U.S. Special Operations Command gave
eTreppid a $30 million no-bid contract for compression and automatic target recognition.
Venables and Bauder acknowledge they cant be certain that no anomaly detection or pattern
recognition software existed, but they doubt it did. In fact, eTreppid workers later told the FBI they
thought Montgomery had developed little if any original software.
Montgomery and eTreppid did, over time, receive five patents for various inventions and theoretical
methods related to video and data. These included a method and apparatus for storing digital video
content provided from a plurality of cameras and a method and apparatus for detecting and reacting
to occurrence of an event. But Montgomery said these patents had nothing to do with his government
work, and they never seemed to lead to business or profit.
FBI reports indicate Montgomery rigged tests to make government officials think his software could
detect weapons in video streams. Apparently it was all part of Montgomerys claim to have developed
automatic target recognition software. Imagine how useful it would be if a computer could pick out
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Bauder says he helped once, unwittingly. He told his story to the FBI, and he told it to me. In his
demonstrations Montgomery often used a plastic toy bazooka that he said a computer could recognize
as a weapon. He would do the demonstration in scrubland behind eTreppids offices. Some military
guys were walking around the office, says Bauder. Montgomery suddenly came to him, he says,
and takes me back to his office. He closes the door and closes the blinds and was like, Need you to
do something for me. Dont worry; we are just doing a demo. Its all good. Bauder was concerned
about the secrecy. I was like, But whats with the doors and blinds? Montgomery looked up at
Bauder and told him it was okay. They would communicate via an open cell phone line. He told
Bauder to listen to the phone. When you hear the tone, I want you to hit the space bar on the
keyboard. Bauder, in other words, would be secretly communicating with Montgomery while the
military guys watched the supposed software demo on another computer.
Montgomery ran off to do his demonstration outside. Bauder watched the computer screen, seeing
what the camera saw. Montgomery held the toy bazooka in one hand while his other hand was hidden.
When Bauder heard the tone, he says, I hit the space bar. A little square encircled his image through
the camera on the screen. He was running around with the fake plastic bazooka. Bauder figured
Montgomery had rigged the computer screen so it seemed as if the square was tracking the bazooka.
In reality, the square was brought up on the screen when Bauder hit the space bar.
ETreppid needed security clearances to get classified contracts. In 2004 Venables was selected as the
firms facilities security officer. He flew to Baltimore for Department of Defense training. It was an
arduous process, with the Defense Security Service probing everyones background.
Montgomery received an interim secret clearance in May 2003, according to records later released
in a federal case. In February 2004 he got a top-secret clearance from the Defense Industrial Security
Clearance Office. At eTreppid, Montgomery appears to have taken a curious approach to secrecy.
Venables and Bauder say Montgomery had his own way of classifying items at the company. He had
rolls of 'classified' stickers, Bauder says, and he would just put them on random garbage.
The CIA was an eTreppid customer, as was SOCOM and the Air Force. Soon the Navy started
coming by. Montgomery said he had another filter to identify underwater submarines by scanning a
giant satellite photo of the ocean. Although Montgomery claimed he was using his software, Bauder
and Venables say he appeared to be doing it by eye.
The pattern recognition, anomaly detection and compression work were nice, but it was the Al Jazeera
stuffthe noise filteringthat had cash potential. Even though the CIA had abandoned
Montgomery in 2004 after determining the bar codes didnt exist, he and eTreppid continued to try to
sell it.
Trepp later told a judge in a federal lawsuit that hed asked the government for $100 million.
Montgomery has also cited that figure in sworn declarationsthough he also claimed Trepp wanted
$500 million for the decoding technology. He would tell his lawyers and investors that the money
was appropriated as part of the black budget. ETreppid did have powerful friends and lobbyists
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EXHIBIT 2
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been shutting off scrutiny of Mr. Montgomerys business for fear of revealing
that the government has been duped.
The Justice Department is trying to cover this up, Mr. Flynn said. If this
unravels, all of the evidence, all of the phony terror alerts and all the
embarrassment comes up publicly, too. The government knew this technology
was bogus, but these guys got paid millions for it.
Justice Department officials declined to discuss the governments dealings with
Mr. Montgomery, 57, who is in bankruptcy and living outside Palm Springs,
Calif. Mr. Montgomery is about to go on trial in Las Vegas on unrelated charges
of trying to pass $1.8 million in bad checks at casinos, but he has not been
charged with wrongdoing in the federal contracts, nor has the government tried
to get back any of the money it paid. He and his current lawyer declined to
comment.
The software he patented which he claimed, among other things, could find
terrorist plots hidden in broadcasts of the Arab network Al Jazeera; identify
terrorists from Predator drone videos; and detect noise from hostile
submarines prompted an international false alarm that led President George
W. Bush to order airliners to turn around over the Atlantic Ocean in 2003.
The software led to dead ends in connection with a 2006 terrorism plot in
Britain. And they were used by counterterrorism officials to respond to a bogus
Somali terrorism plot on the day of President Obamas inauguration, according
to previously undisclosed documents.
It Wasnt Real
Dennis would always say, My technology is real, and its worth a fortune,
recounted Steve Crisman, a filmmaker who oversaw business operations for
Mr. Montgomery and a partner until a few years ago. In the end, Im convinced
it wasnt real.
Government officials, with billions of dollars in new counterterrorism financing
after Sept. 11, eagerly embraced the promise of new tools against militants.
C.I.A. officials, though, came to believe that Mr. Montgomerys technology was
fake in 2003, but their conclusions apparently were not relayed to the militarys
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Special Operations Command, which had contracted with his firm. In 2006,
F.B.I. investigators were told by co-workers of Mr. Montgomery that he had
repeatedly doctored test results at presentations for government officials. But
Mr. Montgomery still landed more business.
In 2009, the Air Force approved a $3 million deal for his technology, even
though a contracting officer acknowledged that other agencies were skeptical
about the software, according to e-mails obtained by The New York Times.
Hints of fraud by Mr. Montgomery, previously raised by Bloomberg Markets
and Playboy, provide a cautionary tale about the pitfalls of government
contracting. A Pentagon study in January found that it had paid $285 billion in
three years to more than 120 contractors accused of fraud or wrongdoing.
Weve seen so many folks with a really great idea, who truly believe their
technology is a breakthrough, but it turns out not to be, said Gen. Victor E.
Renuart Jr. of the Air Force, who retired last year as the commander of the
militarys Northern Command. Mr. Montgomery described himself a few years
ago in a sworn court statement as a patriotic scientist who gave the government
his software to stop terrorist attacks and save American lives. His alliance
with the government, at least, would prove a boon to a small company,
eTreppidTechnologies, that he helped found in 1998.
He and his partner a Nevada investor, Warren Trepp, who had been a top
trader for the junk-bond king Michael Milken hoped to colorize movies by
using a technology Mr. Montgomery claimed he had invented that identified
patterns and isolated images. Hollywood had little interest, but in 2002, the
company found other customers.
With the help of Representative Jim Gibbons, a Republican who would become
Nevadas governor and was a longtime friend of Mr. Trepps, the company won
the attention of intelligence officials in Washington. It did so with a remarkable
claim: Mr. Montgomery had found coded messages hidden in broadcasts by Al
Jazeera, and his technology could decipher them to identify specific threats.
The software so excited C.I.A. officials that, for a few months at least, it was
considered the most important, most sensitive intelligence tool the agency
had, according to a former agency official, who like several others would speak
only on the condition of anonymity because the technology was classified.
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ETreppid was soon awarded almost $10 million in contracts with the militarys
Special Operations Command and the Air Force, which were interested in
software that Mr. Montgomery promised could identify human and other
targets from videos on Predator drones.
In December 2003, Mr. Montgomery reported alarming news: hidden in the
crawl bars broadcast by Al Jazeera, someone had planted information about
specific American-bound flights from Britain, France and Mexico that were
hijacking targets.
C.I.A. officials rushed the information to Mr. Bush, who ordered those flights to
be turned around or grounded before they could enter American airspace.
The intelligence people were telling us this was real and credible, and we had
to do something to act on it, recalled Asa Hutchinson, who oversaw federal
aviation safety at the time. Senior administration officials even talked about
shooting down planes identified as targets because they feared that supposed
hijackers would use the planes to attack the United States, according to a
former senior intelligence official who was at a meeting where the idea was
discussed. The official later called the idea of firing on the planes crazy.
French officials, upset that their planes were being grounded, commissioned a
secret study concluding that the technology was a fabrication. Presented with
the findings soon after the 2003 episode, Bush administration officials began to
suspect that we got played, a former counterterrorism official said.
The C.I.A. never did an assessment to determine how a ruse had turned into a
full-blown international incident, officials said, nor was anyone held
accountable. In fact, agency officials who oversaw the technology directorate
including Donald Kerr, who helped persuade George J. Tenet, then the director
of central intelligence, that the software was credible were promoted, former
officials said. Nobody was blamed, a former C.I.A. official said. They acted
like it never happened.
After a bitter falling out between Mr. Montgomery and Mr. Trepp in 2006 led
to a series of lawsuits, the F.B.I. and the Air Force sent investigators to
eTreppid to look into accusations that Mr. Montgomery had stolen digital data
from the companys systems. In interviews, several employees claimed that Mr.
Montgomery had manipulated tests in demonstrations with military officials to
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make it appear that his video recognition software had worked, according to
government memorandums. The investigation collapsed, though, when a judge
ruled that the F.B.I. had conducted an improper search of his home.
Software and Secrets
The litigation worried intelligence officials. The Bush administration declared
that some classified details about the use of Mr. Montgomerys software were a
state secret that could cause grave harm if disclosed in court. In 2008, the
government spent three days scrubbing the home computers of Mr.
Montgomerys lawyer of all references to the technology. And this past fall,
federal judges in Montana and Nevada who are overseeing several of the
lawsuits issued protective orders shielding certain classified material.
The secrecy was so great that at a deposition Mr. Montgomery gave in
November, two government officials showed up to monitor the questioning but
refused to give their full names or the agencies they worked for.
Years of legal wrangling did not deter Mr. Montgomery from passing supposed
intelligence to the government, according to intelligence officials, including an
assertion in 2006 that his software was able to identify some of the men
suspected of trying to plant liquid bombs on planes in Britain a claim
immediately disputed by United States intelligence officials. And he soon found
a new backer: Edra Blixseth, a onetime billionaire who with her former
husband had run the Yellowstone Club in Montana.
Hoping to win more government money, Ms. Blixseth turned to some
influential friends, like Jack Kemp, the former New York congressman and
Republican vice-presidential nominee, and Conrad Burns, then a Republican
senator from Montana. They became minority stakeholders in the venture,
called Blxware.
New Pitches
In an interview, Mr. Burns recalled how impressed he was by a video
presentation that Mr. Montgomery gave to a cable company. He talked a hell
of a game, the former senator said.
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Mr. Kemp, meanwhile, used his friendship with Vice President Dick Cheney to
set up a meeting in 2006 at which Mr. Kemp, Mr. Montgomery and Ms.
Blixseth met with a top Cheney adviser, Samantha Ravich, to talk about
expanding the governments use of the Blxware software, officials said. She was
noncommittal.
Mr. Flynn, who was still Mr. Montgomerys lawyer, sent an angry letter to Mr.
Cheney in May 2007. He accused the White House of abandoning a tool shown
to save lives. (After a falling out with Mr. Montgomery, Mr. Flynn represents
another party in one of the lawsuits.)
But Mr. Montgomerys company still had an ally at the Air Force, which in late
2008 began negotiating a $3 million contract with Blxware.
In e-mails to Mr. Montgomery and other company officials, an Air Force
contracting officer, Joseph Liberatore, described himself as one of the
believers, despite skepticism from the C.I.A. and problems with the no-bid
contract.
If other agencies examined the deal, he said in a December 2008 e-mail, we
are all toast.
Honestly I do not care about being fired, Mr. Liberatore wrote, but he said he
did care about moving the effort forward we are too close. (The Air Force
declined to make Mr. Liberatore available for comment.)
The day after Mr. Obamas inauguration, Mr. Liberatore wrote that government
officials were thanking Mr. Montgomerys company for its support. The Air
Force appears to have used his technology to try to identify the Somalis it
believed were plotting to disrupt the inauguration, but within days, intelligence
officials publicly stated that the threat had never existed. In May 2009, the Air
Force canceled the companys contract because it had failed to meet its
expectations.
Mr. Montgomery is not saying much these days. At his deposition in November,
when he was asked if his software was a complete fraud, he answered, Im
going to assert my right under the Fifth Amendment.
Barclay Walsh contributed research.
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EXHIBIT 5
EXHIBIT 15
)
)
)
Michael J. Flynn,
)
)
Plaintiff,
)
)
vs.
)
)
Defendants.
~~~~~--~~~~~~--)
800.669.1866
California.
APPEARANCES:
10
11
Attorneys at Law
12
BY:
13
14
suite 200
15
Denver, Colorado
16
(303) 298-1800
17
80202
18
19
Attorneys at Law
20
BY:
21
22
23
suite 100
24
25
(818) 883-4400
91367-6667
Page 2
YATES COURT REPORTERS
800.669.1866
CIVIL DIVISION
BY:
20 Massachusetts Avenue, NW
Room 7150
Washington,
(202) 514-4522
10
DC
20530
Also Present:
11
12
13
14
15
Government
16
videographer:
17
18
services
19
20
21
22
23
24
25
Page 3
YATES COURT REPORTERS
800.669.1866
2006.
BY
4
10:10:34
MR. CONANT:
Q.
MR. CROCKETT:
counsel?
BY
10
Q.
13
14
10:11:03
15
16
17
10:11:30
20
21
22
10:11:41
in evidence.
MR. CONANT:
Q.
Fifth Amendment.
Q.
18
19
MR. CROCKETT:
11
12
MR. CONANT:
10:10:44
"decoding programs."
A.
Fifth Amendment.
Q.
23
24
25
800.669.1866
3
4
10:11:56
Q.
10
11
BY MR. CONANT:
13
Q.
Go back to what?
15
Q.
Exhibit
Stephanie, what Plaintiff's exhibit are we
17
18
on right now?
19
THE REPORTER:
3.
20
MR. CROCKETT:
21
declaration?
MR. CONANT:
22
23
24
10:13:02
All right.
14
16
10:12:55
12
10:12:43
Fifth Amendment.
9
10:12:21
25
things.
Let me go -- can we go off the record here
for a second so
800.669.1866
BY MR. CONANT:
Q.
10:15:23
10
MR. FLYNN:
13
BY MR. CONANT:
15
16
17
Q.
Fifth Amendment.
18
MR. FLYNN:
19
MR. CONANT:
20
21
22
10:16:16
12
14
10:15:49
home.
11
10:15:37
10:15:07
Q.
All right.
All right.
I'm going to keep going.
Mr. Montgomery, turn with me
23
24
25
Page 60
YATES COURT REPORTERS
800.669.1866
10:41:49
10:41:57
10:42:13
Q.
A.
just --
Q.
A.
Q.
protective order --
MR. FLYNN:
MR. CONANT:
10
MR. FLYNN:
11
MR. CONANT:
12
MR. FLYNN:
All right.
Ask him if he gave -Let me
-- very specific intelligence
14
15
BY
17
MR. CONANT:
Q.
19
20
18
10:42:35
Don't go there.
13
16
10:42:23
BY
MR. CONANT:
Q.
21
22
23
decoding software, as
24
25
without compensation."
Page 80
YATES COURT REPORTERS
1
2
10:42:46
10
A.
--
Fifth Amendment.
Q.
11
MR. CROCKETT:
12
Go ahead.
13
THE WITNESS:
14
Hold it.
15
16
MR. CONANT:
17
THE WITNESS:
18
19
10:43:39
Q.
10:43:22
BY MR. CONANT:
Government this
10:43:14
10:42:58
MR. FLYNN:
That's fine.
okay.
BY MR. CONANT:
Q.
20
21
22
23
24
25
800.669.1866
13:38:52
questions.
Q.
Mr. Montgomery
A.
I'm listening.
Q.
--
I don't recall.
Q.
10
A.
No.
11
Q.
12
strike that.
were you trying -- I'm sorry.
13
14
13:39:25
16
17
19
13:39:43
Let me
strike that.
15
18
13:39:36
9
13:39:05
20
A.
Fifth Amendment.
Q.
21
22
23
A.
24
Amendment.
25
Q.
800.669.1866
Mr. Montgomery?
A.
3
4
13:39:52
Q.
software?
A.
Fifth Amendment.
10
Q.
11
12
13
Government?
A.
15
Fifth Amendment.
MR. CONANT:
16
13:40:35
14
13:40:18
Fifth Amendment.
13:40:04
All right.
17
18
Exhibit 15.
19
20
MR. CONANT:
21
MR. CROCKElT:
22
MR. CONANT:
23
email?
MR. FLYNN:
24
25
Try to get me to --
Ill
Page 189
YATES COURT REPORTERS
800.669.1866
1
2
13:41:40
BY
MR. CONANT:
Q.
A.
BY MR.
Q.
13:42:05
was Edra.
CONANT:
11
Q.
have no idea.
12
13
Blxware software?
14
A.
15
Q.
17
A.
Yes.
18
Q.
19
20
21
13:42:27
FLYNN:
10
16
13:42:18
13:41:50
referring to?
22
Q.
Any software.
23
A.
24
Q.
25
must have.
800.669.1866
2
3
13 :42: 38
Fifth Amendment.
Q.
terrorist attacks?
A.
Q.
A.
10
11
getting old.
MR. FLYNN:
13
Fifth.
14
BY MR. CONANT:
15
Q.
It's really
16
17
Mr. Flynn?
18
BY MR. CONANT:
19
Q.
20
A.
Yeah, it does.
21
22
23
24
13:43:13
Fifth Amendment.
12
13:43:01
13:42:54
13:42:47
A.
25
Q.
800.669.1866
13:51:16
A.
Q.
MR. FLYNN:
THE WITNESS:
MR. CROCKETT:
Q.
A.
Yeah.
10
Q.
11
12
13
15
17
A.
MR. CROCKETT:
BY
I don't either.
MR. CONANT:
Q.
19
A.
okay.
sorry.
Got it.
20
22
I don't know
18
21
13:51 : 55
Dennis.
16
13:51:47
14
13:51:42
BY MR. CONANT:
13:51:23
Q.
23
A.
Yeah.
24
Q.
25
800.669.1866
13:52:14
13:52:28
13:52:40
11
technology.
12
13
14
15
16
i den ti fi ed."
17
18
20
that.
21
BY MR. CONANT:
22
23
24
13:52:56
I interacted on a
10
19
13:52:51
25
Q.
Is that a true
that?
A.
800.669.1866
4
13:53:07
Q.
A.
13:53:42
13:54:29
read it.
Fifth.
I'm going to assert my right, Mr. Flynn,
under the Fifth.
10
MR. FLYNN:
11
MR. CONANT:
12
All right.
what~s
okay.
All right.
All right.
13
the reporter,
14
hand
going to be marked as
15
THE REPORTER:
16
MR. CONANT:
17
18
THE WITNESS:
19
13:54:11
8
9
okay.
to 20 again?
13:53:16
20
17.
17.
Thank you.
BY MR. CONANT:
Q.
All right.
21
This
22
23
24
25
agreement.
800.669.1866
14:29:29
THE WITNESS:
MR. FLYNN:
Blixseth to an extent.
THE WITNESS:
14:30:20
MR. FLYNN:
13
okay.
Yeah.
No, it isn't.
on the table.
MR. CROCKETT:
15
17
this.
THE WITNESS:
16
MR. CROCKETT:
12
14
You're outrageous.
10
11
14:30:07
conned the
14:29:48
14:29:37
There isn't.
BY MR. CONANT:
Q.
Mr. Montgomery,
18
19
second.
You recall signing a confession of judgment
20
21
22
23
A.
24
Fifth.
25
Q.
Do
Page 230
800.669.1866
15:15:10
A.
Q.
software?
A.
Q.
10
A.
I don't recall.
11
Q.
12
A.
That's correct.
14
MR. CROCKETT:
15
Q.
so in front of -- okay.
MR. FLYNN:
17
18
BY MR. CONANT:
19
20
BY MR. CONANT:
16
15:15:54
was it encoding --
BY MR. CONANT:
13
15:15:37
I don't recall.
MR. FLYNN:
15:15:27
don't recall.
15:15:22
Q.
21
A.
And
22
Q.
23
24
MR. CROCKETT:
25
conclusion.
800.669.1866
CERTIFICATE
OF
hereby certify:
That the foregoing deposition was taken
9
10
11
12
by me;
13
14
15
16
17
18
19
20
21
22
23
24
25
800.669.1866
EXHIBIT 15
)
)
)
Michael J. Flynn,
)
)
Plaintiff,
)
)
vs.
)
)
Defendants.
~~~~~--~~~~~~--)
800.669.1866
California.
APPEARANCES:
10
11
Attorneys at Law
12
BY:
13
14
suite 200
15
Denver, Colorado
16
(303) 298-1800
17
80202
18
19
Attorneys at Law
20
BY:
21
22
23
suite 100
24
25
(818) 883-4400
91367-6667
Page 2
YATES COURT REPORTERS
800.669.1866
CIVIL DIVISION
BY:
20 Massachusetts Avenue, NW
Room 7150
Washington,
(202) 514-4522
10
DC
20530
Also Present:
11
12
13
14
15
Government
16
videographer:
17
18
services
19
20
21
22
23
24
25
Page 3
YATES COURT REPORTERS
800.669.1866
2006.
BY
4
10:10:34
MR. CONANT:
Q.
MR. CROCKETT:
counsel?
BY
10
Q.
13
14
10:11:03
15
16
17
10:11:30
20
21
22
10:11:41
in evidence.
MR. CONANT:
Q.
Fifth Amendment.
Q.
18
19
MR. CROCKETT:
11
12
MR. CONANT:
10:10:44
"decoding programs."
A.
Fifth Amendment.
Q.
23
24
25
800.669.1866
3
4
10:11:56
Q.
10
11
BY MR. CONANT:
13
Q.
Go back to what?
15
Q.
Exhibit
Stephanie, what Plaintiff's exhibit are we
17
18
on right now?
19
THE REPORTER:
3.
20
MR. CROCKETT:
21
declaration?
MR. CONANT:
22
23
24
10:13:02
All right.
14
16
10:12:55
12
10:12:43
Fifth Amendment.
9
10:12:21
25
things.
Let me go -- can we go off the record here
for a second so
800.669.1866
BY MR. CONANT:
Q.
10:15:23
10
MR. FLYNN:
13
BY MR. CONANT:
15
16
17
Q.
Fifth Amendment.
18
MR. FLYNN:
19
MR. CONANT:
20
21
22
10:16:16
12
14
10:15:49
home.
11
10:15:37
10:15:07
Q.
All right.
All right.
I'm going to keep going.
Mr. Montgomery, turn with me
23
24
25
Page 60
YATES COURT REPORTERS
800.669.1866
10:41:49
10:41:57
10:42:13
Q.
A.
just --
Q.
A.
Q.
protective order --
MR. FLYNN:
MR. CONANT:
10
MR. FLYNN:
11
MR. CONANT:
12
MR. FLYNN:
All right.
Ask him if he gave -Let me
-- very specific intelligence
14
15
BY
17
MR. CONANT:
Q.
19
20
18
10:42:35
Don't go there.
13
16
10:42:23
BY
MR. CONANT:
Q.
21
22
23
decoding software, as
24
25
without compensation."
Page 80
YATES COURT REPORTERS
1
2
10:42:46
10
A.
--
Fifth Amendment.
Q.
11
MR. CROCKETT:
12
Go ahead.
13
THE WITNESS:
14
Hold it.
15
16
MR. CONANT:
17
THE WITNESS:
18
19
10:43:39
Q.
10:43:22
BY MR. CONANT:
Government this
10:43:14
10:42:58
MR. FLYNN:
That's fine.
okay.
BY MR. CONANT:
Q.
20
21
22
23
24
25
800.669.1866
13:38:52
questions.
Q.
Mr. Montgomery
A.
I'm listening.
Q.
--
I don't recall.
Q.
10
A.
No.
11
Q.
12
strike that.
were you trying -- I'm sorry.
13
14
13:39:25
16
17
19
13:39:43
Let me
strike that.
15
18
13:39:36
9
13:39:05
20
A.
Fifth Amendment.
Q.
21
22
23
A.
24
Amendment.
25
Q.
800.669.1866
Mr. Montgomery?
A.
3
4
13:39:52
Q.
software?
A.
Fifth Amendment.
10
Q.
11
12
13
Government?
A.
15
Fifth Amendment.
MR. CONANT:
16
13:40:35
14
13:40:18
Fifth Amendment.
13:40:04
All right.
17
18
Exhibit 15.
19
20
MR. CONANT:
21
MR. CROCKElT:
22
MR. CONANT:
23
email?
MR. FLYNN:
24
25
Try to get me to --
Ill
Page 189
YATES COURT REPORTERS
800.669.1866
1
2
13:41:40
BY
MR. CONANT:
Q.
A.
BY MR.
Q.
13:42:05
was Edra.
CONANT:
11
Q.
have no idea.
12
13
Blxware software?
14
A.
15
Q.
17
A.
Yes.
18
Q.
19
20
21
13:42:27
FLYNN:
10
16
13:42:18
13:41:50
referring to?
22
Q.
Any software.
23
A.
24
Q.
25
must have.
800.669.1866
2
3
13 :42: 38
Fifth Amendment.
Q.
terrorist attacks?
A.
Q.
A.
10
11
getting old.
MR. FLYNN:
13
Fifth.
14
BY MR. CONANT:
15
Q.
It's really
16
17
Mr. Flynn?
18
BY MR. CONANT:
19
Q.
20
A.
Yeah, it does.
21
22
23
24
13:43:13
Fifth Amendment.
12
13:43:01
13:42:54
13:42:47
A.
25
Q.
800.669.1866
13:51:16
A.
Q.
MR. FLYNN:
THE WITNESS:
MR. CROCKETT:
Q.
A.
Yeah.
10
Q.
11
12
13
15
17
A.
MR. CROCKETT:
BY
I don't either.
MR. CONANT:
Q.
19
A.
okay.
sorry.
Got it.
20
22
I don't know
18
21
13:51 : 55
Dennis.
16
13:51:47
14
13:51:42
BY MR. CONANT:
13:51:23
Q.
23
A.
Yeah.
24
Q.
25
800.669.1866
13:52:14
13:52:28
13:52:40
11
technology.
12
13
14
15
16
i den ti fi ed."
17
18
20
that.
21
BY MR. CONANT:
22
23
24
13:52:56
I interacted on a
10
19
13:52:51
25
Q.
Is that a true
that?
A.
800.669.1866
4
13:53:07
Q.
A.
13:53:42
13:54:29
read it.
Fifth.
I'm going to assert my right, Mr. Flynn,
under the Fifth.
10
MR. FLYNN:
11
MR. CONANT:
12
All right.
what~s
okay.
All right.
All right.
13
the reporter,
14
hand
going to be marked as
15
THE REPORTER:
16
MR. CONANT:
17
18
THE WITNESS:
19
13:54:11
8
9
okay.
to 20 again?
13:53:16
20
17.
17.
Thank you.
BY MR. CONANT:
Q.
All right.
21
This
22
23
24
25
agreement.
800.669.1866
14:29:29
THE WITNESS:
MR. FLYNN:
Blixseth to an extent.
THE WITNESS:
14:30:20
MR. FLYNN:
13
okay.
Yeah.
No, it isn't.
on the table.
MR. CROCKETT:
15
17
this.
THE WITNESS:
16
MR. CROCKETT:
12
14
You're outrageous.
10
11
14:30:07
conned the
14:29:48
14:29:37
There isn't.
BY MR. CONANT:
Q.
Mr. Montgomery,
18
19
second.
You recall signing a confession of judgment
20
21
22
23
A.
24
Fifth.
25
Q.
Do
Page 230
800.669.1866
15:15:10
A.
Q.
software?
A.
Q.
10
A.
I don't recall.
11
Q.
12
A.
That's correct.
14
MR. CROCKETT:
15
Q.
so in front of -- okay.
MR. FLYNN:
17
18
BY MR. CONANT:
19
20
BY MR. CONANT:
16
15:15:54
was it encoding --
BY MR. CONANT:
13
15:15:37
I don't recall.
MR. FLYNN:
15:15:27
don't recall.
15:15:22
Q.
21
A.
And
22
Q.
23
24
MR. CROCKETT:
25
conclusion.
800.669.1866
CERTIFICATE
OF
hereby certify:
That the foregoing deposition was taken
9
10
11
12
by me;
13
14
15
16
17
18
19
20
21
22
23
24
25
800.669.1866
EXHIBIT 16
Bogus analysis led to alert in 2003 - NBC Nightly News with Brian Willia... Page 1 of 2
Case 1:15-cv-20782-JEM Document 52-18 Entered on FLSD Docket 05/15/2015 Page 2 of 47
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By
Lisa Myers, Aram Roston and the NBC Investigative Unit
NBC News Investigative Unit
updated 6/27/2005 8:10:57 PM ET
WASHINGTON Christmas 2003 became a season of terror after the federal government raised the terror alert level from yellow to orange,
grimly citing credible intelligence of another assault on the United States.
"These credible sources," announced then-Secretary of Homeland Security Tom Ridge, "suggest the possibility of attacks against the homeland
around the holiday season and beyond."
For weeks, America was on edge as security operations went into high gear. Almost 30 international flights were canceled, inconveniencing
passengers flying Air France, British Air, Continental and Aero Mexico.
But senior U.S. officials now tell NBC News that the key piece of information that triggered the holiday alert was a bizarre CIA analysis, which
turned out to be all wrong.
CIA analysts mistakenly thought they'd discovered a mother lode of secret al-Qaida messages. They thought they had found secret messages on AlJazeera, the Arabic-language television news channel, hidden in the moving text at the bottom of the screen, known as the "crawl," where news
headlines are summarized.
Steganography suspected
U.S. officials tell NBC News that CIA experts technicians working for the Directorate of Science and Technology thought they had found
numbers embedded in the crawl signaling upcoming attacks; dates and flight numbers, and geographic coordinates for targets, including the White
House, Seattle's Space Needle, even the tiny town of Tappahanock, Va. What the analysts thought they had found was something called
"steganography" messages hidden inside a video image.
President Bush and Ridge were briefed on the Al-Jazeera analysis, U.S. intelligence sources say.
In an exclusive interview with NBC News, Ridge defended the government's actions, although he called the intelligence analysis "bizarre, unique,
unorthodox, unprecedented."
"Maybe that's very much the reason that you'd be worried about it, because you hadn't seen it before," recalls Ridge.
He says the administration had to take the suspected terror messages seriously, although "speaking for myself I've got to admit to wondering
whether or not it was credible."
Was he himself skeptical?
"Yeah, we weren't certain," says Ridge. "Still, in the context of everything else (intelligence chatter and a terror attack in Saudi Arabia), we could
not set it aside and dismiss it as not credible."
So the United States raised the alert level and canceled flights.
Critics question evaluation of the evidence
"I'm astonished," says author and intelligence expert Jim Bamford, "that they would put so much credibility in such a weak source of intelligence."
Bamford says the CIA shouldn't be criticized for considering the theory, but that analysts should have weighed how implausible it was.
"What you have to do is judge the intelligence versus what your actions are going to be. And this is the equivalent, basically, of looking at tea
leaves," Bamford says.
http://www.nbcnews.com/id/8380365/ns/nbc_nightly_news_with_brian_wil... 5/15/2015
Bogus analysis led to alert in 2003 - NBC Nightly News with Brian Willia... Page 2 of 2
Case 1:15-cv-20782-JEM Document 52-18 Entered on FLSD Docket 05/15/2015 Page 3 of 47
Intelligence sources say that even within the CIA, the analysis was a closely guarded secret. Still, they say, some top CIA officials who learned about
it were skeptical. Top officials at the Directorate of Operations, which conducts clandestine operations, and others who worked at the CIA
Counterterrorism Center, felt that the whole theory was implausible and was being taken far too seriously.
As discredited as the CIA's interpretation now is, experts say steganography is a valid subject for CIA analysis, and could be used by terrorists to
hide data in files on the Web, in still photographs or in broadcast television images.
"Steganography," says professor Nasir Memon of Polytechnic University in Brooklyn, N.Y., "is the art, if you will, of secret writing. And when two
parties want to talk to each other and not let anybody know they are indeed communicating, they would use steganography."
Memon is an expert in "steganalysis" using sophisticated software to locate hidden messages. He says such analysis is valuable but not always
reliable, because there are many "false positives." In general, he says, "it's not something I would bet the farm on because there is a significant
chance that it could be wrong."
TV networks commonly hide digital "watermarks" in their video broadcasts, a legitimate use of video encoding to pass along innocuous digital
information. The CIA's Al-Jazeera analysis is classified, and it is still unclear exactly what the CIA technicians were looking for in the network's
"crawl."
Ridge stands by alert
Regardless, Ridge told NBC News that the CIA analysis certainly did turn out to be wrong. He confirms there were no secret terror messages. He
also says there was no evidence that terrorists were actively plotting against aviation at the time.
But Ridge insisted it was not a mistake to raise the alert level or to cancel the flights.
"I think it was the right thing to do," he said.
Even if raising the alert level frightened a lot of people?
"We acted accordingly based on our best information and best conclusions and the information that we had at the time," Ridge said.
Ridge added that the faulty CIA analysis was a significant factor in raising the alert level, but not the only factor.
As for the CIA, a spokeswoman would not confirm or deny this report, but said it's the "agency's job to run all plausible theories to the ground,
especially when American lives could be at risk."
Lisa Myers is NBCs senior investigative correspondent and Aram Roston is an NBC investigative producer.
http://www.nbcnews.com/id/8380365/ns/nbc_nightly_news_with_brian_wil... 5/15/2015
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Nevada Gov. Jim Gibbons and his wife, Dawn, celebrate after the governor's inaugural oath of office at the state
capital in January.
Mr. Gibbons and Mr. Trepp have denied the claims or have said that the gifts weren't
improper because of their long personal friendship. Mr. Gibbons has said that he will
cooperate with any inquiry.
A spokeswoman for the governor said that his work in Congress to help Sierra Nevada
and eTreppid was part of a broader effort to back Nevada companies that were
contributing to national defense. She said these efforts had the support of other members
of the Nevada congressional delegation, including Sen. Harry Reid, a Democrat who is
now Senate Majority Leader.
"The funding requests for Sierra Nevada were in no way connected to the first lady's
small contract with them," said Melissa Subbotin, the governor's spokeswoman.
An executive with Sierra Nevada, Renee Velasco, said the contract with Mrs. Gibbons was
for a market survey and demonstration of a hand-held emergency-communications
device for sale to casinos and state and local governments; the effort was ended in
December 2004. She said the contract didn't present a conflict of interest. "Everything
was done by the book," she said.
http://www.wsj.com/articles/SB117521830609454045
3/11/2015
Page 3 of 5
DEFENSE CONTRACT
What's News: The wife of Nevada Gov. Jim
Gibbons was a consultant for Sierra Nevada, a
defense contractor that got federal work with the
help of her husband.
The History: Before becoming governor this year,
Mr. Gibbons was a member of Congress, on the
House armed services and intelligence
committees.
What's Ahead: Federal investigators, already
examining ties between Gov. Gibbons and
another Nevada defense contractor, eTreppid
Technologies, may study the Sierra Nevada
situation.
statement.
Still, the payments are likely to draw critics in Washington and Carson City, the state
capital. "Having a family member on the payroll of a company that benefits from a
congressman's actions is a poster-child conflict," said Ryan Alexander, president of
Taxpayers for Common Sense, a Washington nonprofit that studies special-interest
spending. She said that Mr. Gibbons "obviously should have recused himself" from
seeking federal appropriations for any of his wife's clients.
One of the military contracts that Sierra Nevada got in 2004 was $2 million for research
on a "helicopter autonomous landing system," to help pilots land in "brownouts" of
blowing sand, a technology several firms were seeking to develop for the Pentagon.
House records indicate that Mr. Gibbons asked for $4 million, and got $2 million in the
final bill. In a June 22, 2004, news release, he hailed the project and a separate $3
million for eTreppid as "cutting-edge technology being developed in Nevada to improve
our defense systems."
In the next fiscal year, the helicopter program gained the support of Sen. Reid as well,
and funding rose to $7 million, House records show. Sierra Nevada also was a
contributor to Sen. Reid. In a statement, a spokesman for Mr. Reid said that Sierra
Nevada is a large employer in his state and he is "proud to have supported" its work.
http://www.wsj.com/articles/SB117521830609454045
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copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.
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Page 1 of 2
November 3, 2008
Gov. Jim Gibbons of Nevada has been cleared by the Justice Department of any wrongdoing
in connection with an inquiry into whether he helped a friend win military contracts in
exchange for gifts, Mr. Gibbonss lawyer said.
The lawyer, Abbe D. Lowell, said the lead prosecutor in the case informed him on Friday
that no charges would be filed and that the investigation, related to Mr. Gibbonss work as a
congressman before he was elected governor in 2006, had been closed.
A Justice Department spokeswoman, Laura Sweeney, said the department would not
comment.
Mr. Lowell said that Mr. Gibbons, a Republican whose first term as governor has been
dogged by legal, political and personal troubles, would make a statement on Monday.
The investigation spanned 18 months, Mr. Lowell said, and began when a former staff
member of a technology company run by a friend of the governor made accusations of
influence peddling.
The former staff member, Dennis Montgomery, told news media outlets that his boss,
Warren Trepp, the owner of eTreppid Technologies, had given Mr. Gibbons money, casino
chips and a Caribbean cruise to help eTreppid win military contracts.
Mr. Lowell called the accusations ridiculous and hogwash and said, The governor does
not even gamble.
Neither the governor nor I, Mr. Lowell added, have any problem with the Justice
Department having to investigate allegations, even if they are crazy, because he is a highranking public official and he knows the world he lives in.
They handled it in a way and a speed that was up to them. Though we wish it were sooner,
they came to the right conclusion.
Mr. Lowell said Mr. Gibbons had cooperated in the investigation and in recent months had
been interviewed by Federal Bureau of Investigation agents.
http://www.nytimes.com/2008/11/03/us/03nevada.html?pagewanted=print
3/11/2015
Page 2 of 2
The investigation, Mr. Lowell said, might have been slowed by a civil lawsuit between Mr.
Montgomery and eTreppid, which was settled last month.
Blxware LLC, the company where Mr. Montgomery now works, said the terms of the
settlement were confidential, but the company, based in Bellevue, Wash., disclosed that the
agreement included a payment to Mr. Trepp as compensation for certain allegations made
against him in the news media. Blxware was a party in the lawsuit.
The closing of the investigation provides welcome news to Mr. Gibbons in a trying period.
A former cocktail waitress filed a lawsuit against him last month, alleging that he pushed her
and threatened to rape her after a night of drinking in Las Vegas just before the November
2006 election. Mr. Gibbons denied the accusation, and criminal charges were not filed.
Mr. Gibbons, 63, and his wife, Dawn, 54, began divorce proceedings this year after 22 years
of marriage. The news media in Nevada have made much of her accusation of adultery and
the disclosure of hundreds of text messages he sent to a woman he has said was a friend but
who Ms. Gibbonss lawyers suggest was a mistress.
A state employee filed a lawsuit last month claiming that she was removed from her post on
the belief that she had leaked the messages.
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The allegations proved to be "baseless, and there's not a shred of evidence that I did anything wrong," Gibbons
said at a news conference.
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"This certainly took a lot longer than I wanted to be resolved. I wish it would have been resolved a year ago, two
years ago," he said. "But this is good news, and it doesn't matter to me when the good news comes, even a day
before an election."
His attorney, Abbe Lowell, of Washington, said Sunday that the Justice Department told him Gibbons wouldn't be
charged. A law enforcement official close to the case, who spoke anonymously because authorities never officially
acknowledged the probe, confirmed the substance of Lowell's statement.
Gibbons, who was elected governor in 2006 after five terms in Congress, had steadfastly denied any wrongdoing
despite claims by Dennis Montgomery that eTreppid Technologies LLC founder Warren Trepp lavished Gibbons
with money and a Caribbean cruise in exchange for help winning contracts for his company.
Montgomery's credibility was put in doubt after a computer expert questioned the authenticity of e-mails
Montgomery claimed proved Gibbons was accepting gifts.
Gibbons said defending himself against the allegations cost about $200,000 in legal fees. He had to solicit
contributions to help cover those costs.
Asked if he would consider suing Montgomery now that the Justice Department and FBI have ended the
investigation, Gibbons said: "You know, some days you're harmed and the doors to the courthouse should remain
open. And let me say that my thoughts remain open."
An attorney for Montgomery, Mark Gunderson in Reno, didn't return a call seeking comment Monday.
The governor said he had been the target of "bogus charges trumped up by certain biased individuals," mentioning
the eTreppid case as well as a claim by a state Democratic Party official that he pressured a county assessor to
get an unwarranted property tax break.
A state Ethics Commission panel concluded in September that there was no evidence to support the tax break
claim.
Along with the federal investigation, Gibbons has seen his approval ratings drop following a budget crunch, a
messy divorce that is still pending and lawsuits involving his private and public activities.
Gibbons still faces a lawsuit from a woman claiming he threatened to rape her. He's also being sued by a
government staffer who claimed she was forced from her job because he thought she was leaking information
about his personal use of a state cell phone.
Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten
or redistributed.
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47
The intelligence reports fitted the suspicions of the time: al-Qaida sleeper
agents were scattered across the US awaiting orders that were broadcast in
secret codes over the al-Jazeera television network.
Flights from Britain and France were cancelled. Officials warned of a
looming "spectacular attack" to rival 9/11. In 2003 President Bush's
homeland security tsar, Tom Ridge, spoke of a "credible source" whose
information had US military bracing for a new terrorist onslaught.
Then suddenly no more was said.
Six years later, Playboy magazine has revealed that the CIA fell victim to an
elaborate con by a compulsive gambler who claimed to have developed
software that discovered al-Jazeera broadcasts were being used to transmit
messages to terrorists buried deep in America.
Dennis Montgomery, 56, the co-owner of a software gaming company in
Nevada, who has since been arrested for bouncing $1m worth of cheques,
claims his program read messages hidden in barcodes listing international
flights to the US, their positions and airports to be targeted.
The CIA took the information seriously, working with Montgomery at his
offices and paying him an undisclosed amount of money. The "intelligence"
Montgomery claimed to have found was passed on to the White House and
homeland security where it kickstarted an alert that bordered on panic.
According to Playboy, Montgomery's claims caused the cancellation of
British Airways and other flights supposedly mentioned in the codes.
http://www.theguardian.com/world/2009/dec/23/dennis-montgomery-cia-al-j... 3/8/2015
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Some officials were not at all surprised to hear the allegation that al-Jazeera
was involved. The then defence secretary, Donald Rumsfeld, later vilified
the station for "vicious, inaccurate and inexcusable" reporting of the US
invasion of Iraq.
For months, the source of the information was kept under wraps within the
CIA but once it became more widely known in the agency it immediately
came under question. Playboy quotes one former counterterrorism official
who attended a briefing on the source as being furious. He said: "I was
saying: 'This is crazy. This is embarrassing.' They claimed they were
breaking the code, getting latitude and longitude, and al-Qaida operatives
were decoding it. They were coming up with airports and everything, and
we were just saying: 'You know, this is horseshit!' "
Frances Townsend, a homeland security adviser to Bush, defended the
decision to work with Montgomery. "It didn't seem beyond the realm of
possibility. We were relying on technical people to tell us whether or not it
was feasible. I don't regret having acted on it," she told Playboy.
But the doubts began to prevail as Montgomery refused to reveal how he
was finding the barcodes, when no one else could, and he demanded
$100m for the software. The CIA also began to wonder why al-Qaida didn't
use emails and web pages to communicate with its agents.
More news
Topics
CIA
Al-Qaida
Air transport
Middle East and North Africa
Nevada
Al-Jazeera
http://www.theguardian.com/world/2009/dec/23/dennis-montgomery-cia-al-j... 3/8/2015
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http://www.theguardian.com/world/2009/dec/23/dennis-montgomery-cia-al-j... 3/8/2015
Man that accused Governor Gibbons arrested - Henderson Clark County Li... Page 1 of 3
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Dennis Montgomery
http://www.examiner.com/article/man-that-accused-governor-gibbons-arrested 3/8/2015
Man that accused Governor Gibbons arrested - Henderson Clark County Li... Page 2 of 3
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He is on the docket to be arraigned in a Las Vegas court on August 17th. He has not
responded to e-mails or phone calls seeking a comment. Montgomery is a former chief
technical officer for the Reno-based software company e Treppid. E Treppid is a company
who has won military contracts for video compression and target recognition software.
During Gibbons reelection bid back in 2006, Montgomery accused the governor of
accepting bribes from e Treppid, to help them secure the military contracts they were then
awarded. Court papers showed that he alleged the governor took $100,000 worth of
casino chips and cash during a week long cruise in the Caribbean.
Later in 2007, the FBI opened an investigation into the bribe allegations. The Department of
Justice also investigated the allegations and subsequently cleared the governor of any
wrong doing. Reports of Montgomery having a gambling problem first surfaced back in
2006, after the federal government and the United States Air Force began investigating him
as part of an investigation they were doing into economic espionage and intellectual
property claims.
Warren Trepp, who is Montgomery's former business partner, told authorities back in 2006
that Montgomery borrowed somewhere north of $1.3 million. The money was in part to pay
off casino debts Montgomery had incurred in the amount of $300,000. This is according to
OSI, the Air Force's Office of Special Investigations. When Tripp made the allegations
against Montgomery, the two were locked in a dispute over the ownership of e Treppid
software that was being used by the military.
E Treppid was awarded a no-contract bid for a maximum value of $30 million dollars for
http://www.examiner.com/article/man-that-accused-governor-gibbons-arrested 3/8/2015
Man that accused Governor Gibbons arrested - Henderson Clark County Li... Page 3 of 3
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Ruben Sarmiento
http://www.examiner.com/article/man-that-accused-governor-gibbons-arrested 3/8/2015
Playboy undercover with Dennis Montgomery, who 'fooled CIA over Al-J... Page 1 of 2
Case 1:15-cv-20782-JEM Document 52-18 Entered on FLSD Docket 05/15/2015 Page 19 of
47
news.com.au
Technology
http://www.news.com.au/technology/playboy-goes-undercover-with-dennis-... 3/8/2015
Playboy undercover with Dennis Montgomery, who 'fooled CIA over Al-J... Page 2 of 2
Case 1:15-cv-20782-JEM Document 52-18 Entered on FLSD Docket 05/15/2015 Page 20 of
47
Playboy.
"We were testing some of the software. We were just looking at it to see if there was anything there," Joseph
Liberatore, an Air Force program manager, told the magazine.
Mr Montgomery has faced a number of lawsuits and last year was charged with bouncing nine checks worth a
total of one million dollars in Las Vegas.
Playboy ran the story online with a gallery of "military-themed nude pictorials".
- with AFP
http://www.news.com.au/technology/playboy-goes-undercover-with-dennis-... 3/8/2015
Page 1 of 3
Security
Related topics
98
63
A con man fooled US spooks into grounding international flights by selling them "technology" to decode
al-Qaeda messages hidden in TV broadcasts, it's claimed.
A long and highly entertaining Playboy article explains that in 2003, 50-year-old Dennis Montgomery was
chief technology officer at Reno, Nevada-based eTreppid Technologies. The firm began as a video
compression developer, but Montgomery took it in new and bizarre directions.
He reportedly convinced the CIA that he had software that could detect and decrypt "barcodes" in
broadcasts by Al Jazeera, the Qatari news station.
The Company was apparently impressed enough to set up its own secure room at the firm to do what
Montgomery called "noise filtering". He somehow produced "reams of data" consisting of geographic
coordinates and flight numbers.
In December 2003, it's claimed CIA director George Tenet was sufficiently sold on Montgomery's data to
ground transatlantic flights, deploy heavily armed police on the streets of Manhattan and evacuate 5,000
people from the Metropolitan Museum of Art.
Homeland Security secretary Tom Ridge told the press the terror alert was the result of "credible sources
- about near-term attacks that could either rival or exceed what we experienced on September 11".
In fact, according to evidence from his former lawyer, Montgomery, the "credible source", was a "habitual
liar engaged in fraud".
Montgomery worked with the CIA's Directorate of Science and Technology - its Q Branch - engaged in
exotic research and intelligence gathering. According to Playboy, one counter-intelligence official briefed
on the programme said: "We were fucking livid. I was told to shut up. I was saying, 'This is crazy. This is
embarrassing.'"
Eventually a branch of French intelligence helped the CIA prove that the Al Jazeera "messages" never
existed. Files were handed over to counter-intelligence to investigate the scam.
The FBI uncovered a series of frauds by Montgomery, who was a compulsive gambler. As well as his
"noise filtering" technology, he had rigged video software to convince officials it could detect weapons.
Following a dispute with eTreppid's financial backer, Montgomery took off with his "technology" and tried
to win more government contracts alone. By now though, the officials he was trying to sell to were part of
the FBI investigation. It reportedly "went nowhere", however.
By 2008, the financial dispute had come to court. Montgomery said he was still doing classified
government work, for $3m. In June this year however, his gambling led to personal bankruptcy, listing his
still-classified "technology" as a $10m asset.
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Frances Townsend, a homeland security adviser to Bush, said she did not regret having relied on
Montgomery's mysterious intelligence. "It didn't seem beyond the realm of possibility. We were relying on
technical people to tell us whether or not it was feasible," she said.
Spotlight
http://www.theregister.co.uk/2009/12/24/cia_montgomery/
3/8/2015
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Page 1 of 11
AP Photo/Matt York
Sheriff Joe Arpaio, during a 2012 press conference about his ludicrous birther investigation
The most
revealing part
of Phoenix
filmmaker
Randy
Murray's
recent
documentary
The Joe Show
was a strategy
meeting during
Sheriff Joe
Arpaio's 2012
re-election
campaign that
included
Arpaio, his top
flack, Lisa
Allen, Chief
Deputy Jerry
Sheridan, and
campaign
manager Chad
Willems.
The group huddled in the back of a Fountain Hills restaurant to discuss how to spin
Joe's negatives -- the misspending of more than $100 million, the deaths in the jails,
the scores of millions in lawsuit payouts -- for the public.
http://blogs.phoenixnewtimes.com/valleyfever/2014/06/joe-arpaio-investiga... 3/12/2015
Page 2 of 11
At some point, Arpaio's "birther" investigation came up. You know, the one in which
President Barack Obama's birth certificate gets investigated by both the Maricopa
County Sheriff's Office's Cold Case Posse, a nonprofit organization, and MCSO Deputy
Brian Mackiewicz, whom Arpaio flew to Hawaii as part of this snipe hunt, at a cost of
nearly $10,000 to taxpayers.
Arpaio's March 2012 press conference -- in which the sheriff and the Cold Case Posse's
"lead investigator," ex-used-car salesman Mike Zullo, declared Obama's birth certificate
to be a forgery -- was in the planning stage when the scene was filmed.
At the mere mention of the birther investigation and the future press event, Allen and
Willems practically rolled their eyes.
Willems called the birther probe "nuts."
Allen said the sheriff might as well go the press conference "in big ol' clown shoes."
Arpaio shrugged, literally.
"There ain't gonna be no damage control," Arpaio promised Willems. "You'll get more
money [in campaign contributions] than you'll know what to do with."
Wilier than the cartoon coyote, Arpaio had tapped into a nationwide right-wing antigovernment, anti-Obama feeding frenzy with his birther probe and with his tirades
against the U.S. Department of Justice, which was investigating him for abuse of power
and other issues and is now suing him in federal court.
"The DOJ is a hot item everywhere," Joe told his flunkies.
See, whenever Arpaio's never-ending political campaign sends out an e-mail blast
begging for loot from Obama-haters, it reels in contributions from retired, far-right
ofays all over the country.
Willems essentially admitted as much in another scene from the film.
"Now, with Arpaio going to battle with Barack Obama," Willems said, "it's meant
literally millions of dollars for his campaign."
As everybody knows, Arpaio was re-elected in 2012, but the investigation into Obama's
birth certificate continues apace, according to both Arpaio and Cold Case Posse
"commander" Zullo.
At the beginning of May, Arpaio mentioned the birther probe during a speech before a
group of Silicon Valley conservatives.
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Around the same time, he appeared on The Right Side, a conservative cable-access
show in Mountain View, California. He told host Chris Pareja that the inquiry into
Obama's birth certificate was going strong.
"I'm not done with that yet," Arpaio insisted. "People think I surrendered. No . . . I'm
trying to find out who's behind it now. That's the key. You can always have a crime to
investigate, but I think you would like to know who did it."
The sheriff said he was after whoever created this "forged, fraudulent document,"
meaning a computer scan of the president's long-form birth certificate, released by the
White House in April 2011.
Arpaio's statements have paralleled assurances from Zullo during periodic interviews
with Florida pastor/radio host Carl Gallups that new revelations concerning the Obama
birth certificate are on the way.
Critics of birthers regularly mock Zullo's vague pronouncements on Gallups' show as
never resulting in any "new" finds.
Why, even the information disclosed during Arpaio's two birther-themed press
conferences in 2012 were a rehash of debunked conspiracy theories.
But during a February interview with Gallups, Zullo caused an Internet kerfuffle when
he told Gallups' audience that there were now two investigations: the original birther
one and an offshoot of the birther probe, this one a criminal investigation.
Moreover, the second investigation was using two MCSO detectives and, presumably,
county money.
"I don't know how this is all going to play out," Zullo said. "I know that [in] the criminal
investigation that we're working on now, Sheriff Arpaio has dedicated resources and
two full-time Maricopa County Sheriff's Office detectives."
He added, "These are seasoned pros [who] are working this. These are the guys that go
hunt down the really bad guys."
Zullo promised to release "universe-shattering" results of these investigations in March,
a deadline Zullo since has extended indefinitely.
Blogger Mitch Martinson of arizonaspolitics.com was the first to query the MCSO on
Zullo's claim, and the first to report that Sheriff's Office spokesman Brandon Jones
kinda-sorta had confirmed it.
http://blogs.phoenixnewtimes.com/valleyfever/2014/06/joe-arpaio-investiga... 3/12/2015
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"We have two sheriff's detectives assigned to look into other issues surrounding the
birth certificate," Jones told Martinson, in a blog item posted February 10. "However,
they are not investigating the birth certificate issue itself."
Later, Jones walked back his comments to Martinson, sending the blogger an e-mail,
which Martinson used in a screen shot to a follow-up post.
"Mitch, I was misinformed," Jones stated. "The detectives are not working on anything
regarding the birth certificate. Not even surrounding. Mr. Zullo was incorrect: They are
working on other serious cases not even related."
Who were these two detectives, what were they up to, and why is Zullo, a mere posse
member, privy to it?
Based on information given to me by longtime sources, the two detectives mentioned
are Brian Mackiewicz, the same deputy who made a taxpayer-funded run to Hawaii in
May 2012, and Sergeant Travis Anglin, once a lieutenant with the notorious Maricopa
Anti-Corruption Effort who was demoted after an MCSO investigation into his private
security company and its use of MCSO detectives.
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My sources -- one of whom is a former detective with the MCSO's Special Investigations
Division and is well-acquainted with SID and those in it -- say Anglin and Mackiewicz
were involved in an odd investigation dating back to October 2013.
Moreover, they say, the deputies have used as a confidential informant a notorious
scammer in the Seattle area.
What have they been investigating? According to my sources, Mackiewicz, Anglin, and
the informant are focused on U.S. District Court Judge G. Murray Snow, the Justice
Department, and a bizarre conspiracy theory that the DOJ and Snow have conspired to
somehow "get" Joe Arpaio.
The person who purportedly convinced Arapio of this paranoid fantasy, the sources say,
is computer fraudster Dennis L. Montgomery, the subject of a 2010 Playboy expos
titled "The Man Who Conned the Pentagon."
In that article, investigative reporter Aram Roston detailed how, in the wake of the 9/11
attacks, Montgomery snookered the CIA, the White House, the Department of
Homeland Security, and the Air Force into believing he had software that could decode
secret messages to terrorists, supposedly embedded in broadcasts of the Al Jazeera
Media Network.
As crazy as this now sounds, Roston, using unsealed court documents, reported that
eTreppid Technologies, the Nevada software company Montgomery co-owned, scored
multimillion-dollar contracts for computer software touted by Montgomery.
In fact, Roston wrote, the United States went to Code Orange, the DHS' second-highest
terror alert, in 2003 based on data supplied to the CIA by Montgomery.
International flights were delayed, sometimes canceled, because of Montgomery's work.
Based on Montgomery's "intelligence gathering," Homeland Security Secretary Tom
Ridge told reporters at the time about the threat of "near-term attacks" that could "rival
or exceed" those of 9/11.
"Montgomery calls the work he was doing noise filtering," Roston wrote. "He was
churning out reams of data he called output. It consisted of latitudes and longitudes
and flight numbers."
This data was given to then-CIA Director George Tenet, according to Roston, and
"eventually ended up in the White House."
There was one big problem, Roston reported: "The communications Montgomery said
he was decrypting apparently didn't exist."
http://blogs.phoenixnewtimes.com/valleyfever/2014/06/joe-arpaio-investiga... 3/12/2015
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Roston wrote that Montgomery's eTreppid colleagues questioned his computer skills.
Company employees also claimed that Montgomery had faked demonstrations of
weapons-recognition software for representatives of the U.S. military.
With the help of a "branch of the French intelligence services," the CIA finally got wise
to Montgomery, realizing that there were no secret messages to bad guys in the Al
Jazeera broadcasts.
Montgomery left eTreppid, wrote Roston, and went on to work for software companies
backed by a wealthy heiress; to accuse Nevada Governor Jim Gibbons of taking a bribe
(Gibbons later was cleared of wrongdoing); to lose big at a Rancho Mirage, California
casino ($422,000 in one day); and to declare bankruptcy.
Now, Montgomery lives in Yarrow Point, Washington, a short drive from downtown
Seattle.
My sources report that MCSO detectives Anglin and Mackiewicz have spent a lot of time
this year in Seattle with Montgomery, who, the sources say, has convinced the sheriff
that he has information suggesting an anti-Arpaio conspiracy between Judge Snow and
the DOJ.
These sources say there is no report number assigned to the case, that Arpaio himself is
running it, and that the investigation has been financed with funds for confidential
informants, RICO funds.
Montgomery has been assigned a "confidential informant number" or "control
number," the identity of which is known only to Arpaio, a few MCSO brass, and those in
Special Investigations, according to my sources, who claim Montgomery has been paid
about $100,000 to date by the MCSO.
The situation gives Arpaio and the MCSO a degree of deniability because the
department is allowed to keep the identities of confidential informants secret in most
instances.
Though there should be MCSO paperwork associated with such payments, it would
show a payment to a control number, not a name.
The MCSO's official policy on "informant management" states that control numbers
must be maintained in a confidential-informant log "monitored by the [Special
Investigations Division] commander or his designee."
It further states that all informant files be kept in a "secured area within the SID."
The policy notes that the MCSO "will protect these sources through all available and
reasonable legal means."
http://blogs.phoenixnewtimes.com/valleyfever/2014/06/joe-arpaio-investiga... 3/12/2015
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Such "informant files" are retained as "permanent records" of SID, "unless the division
commander determines that the records may be purged."
My sources say Mackiewicz has received, to date, $50,000 in overtime pay and Zullo
has gotten about $5,000 in payments.
Zullo's role is unclear, though he currently is involved in the investigation, according to
these sources, as well as the perpetual birther probe.
Additionally, they say the MCSO made about a $50,000 purchase of computer
equipment for Montgomery sometime this year from a store in Washington state.
According to the MCSO's policy regarding "Undercover and Investigative Funds
Accountability," an expenditure of up to $6,000 for undercover and investigative work
can be approved by a division commander.
Anything over $6,000 must be approved by a bureau commander.
As for funds specifically paid to confidential informants, the reins are even tighter.
Payments to a CI of more than $300 must be approved by a division commander "prior
to the expenditure of the funds," according to the MCSO's informant-management
policy.
The amount of money involved in detectives Anglin and Mackeiwicz's Seattle quest has
raised red flags with MCSO accountants, I've been told.
These same MCSO accountants reportedly have expressed concern internally about the
procurement of the computer equipment, excessive CI payments, the amount of
overtime involved, and the money spent on airfare and stays in Seattle.
In several broadly worded public-records requests sent to the MCSO in February, I
asked for any and all e-mails traded among the players involved, as well as any and all
records regarding MCSO employees' trips to Seattle, payments of informant funds to
Dennis Montgomery, and Mackiewicz's overtime requests.
In each case, I was advised by MCSO spokesman Jones that "this is an ongoing
investigation . . . no records can be released at this time."
In March, I called Zullo at his home phone number. I asked him about the work he was
said to be doing with Montgomery.
He claimed not to know what I was talking about. When I pressed him, he said all such
inquiries should go through the MCSO.
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"I have no comment to make, especially to the New Times," he told me before hanging
up.
The opportunity to question Arpaio about the Montgomery caper came as he munched
on cheese at a recent fundraiser for embattled Arizona Attorney General Tom Horne at
the University Club in Phoenix.
I asked the sheriff about Montgomery and the work that my sources tell me he has done
for the MCSO.
At first, he played dumb, asking if I meant County Attorney Bill Montgomery.
"No, Dennis Montgomery," I replied. "The computer guy in Seattle who is helping you
investigate Judge Snow and the DOJ. You are investigating Snow and the DOJ, aren't
you?"
As he hit the cheese platter again, Arpaio looked over his shoulder at me with a grin.
But he said nothing.
I kept after him, asking why deputies Mackiewicz and Anglin had spent so much time in
Seattle.
"I dunno, maybe they like the weather up there," he said over his shoulder, "or the snow
crab."
True to form, the sheriff was cagey, but there was no denial.
The ex-Special Investigations source I know tells me that the joke around Arpaio's
office is that Montgomery's referred to as "Snowden," after Edward Snowden, the
American computer geek responsible for a massive 2013 leak of classified documents
from the National Security Agency that exposed Orwellian surveillance programs run
by the U.S. government.
"[Montgomery] says he worked for the CIA on a project called Hammer [and] collected
data similar to Snowden's," the source says. "[Montgomery] claims he can prove there
was a conspiracy between [U.S. Attorney General] Eric Holder and Judge Snow . . . a
conspiracy against Arpaio."
Montgomery, who is middle-aged and stocky with a shock of white hair, is no Snowden.
Whatever you think of Snowden, at least the information he released generally has been
confirmed as legitimate.
As with the gibberish Montgomery reportedly gave the CIA in the early 2000s, he has,
according to my sources, produced many printouts for the MCSO that seem off point,
with dates going back to 1999 and earlier.
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Obviously, that's long before Arpaio took up the cause of illegal immigration, long
before he was investigated or sued by the DOJ, and long before he became the subject
of the ACLU's big racial profiling lawsuit Melendres v. Arpaio.
One source informs me that at least one underling told Arpaio recently that what
Montgomery provided the MCSO is worthless, that Joe is getting played -- which
caused the sheriff to erupt into a fit of anger.
When Montgomery was approached by a freelance reporter on behalf of New Times in
April, he was nonplussed.
Montgomery came to the door of his Yarrow Point home, a cell phone at his ear, talking
to someone about computer equipment.
The reporter identified himself, and Montgomery asked for a card, which the reporter
presented.
"I really don't wanna talk to you," Montgomery said, ending his call.
"Okay, about Phoenix . . .," the reporter began.
"No comment," Montgomery shot back.
"Arizona . . .," the reporter started again.
"No comment," Montgomery repeated. "Who sent you up here?"
"Phoenix New Times," the reporter explained.
"Yeah," growled Montgomery.
"Have you done any work for Joe Arpaio?" the reporter asked.
"I, I, I have no comment," Montgomery said, moving away. "I'll call you later. I'll think
about it."
Montgomery went back into his house and shut the door, ending the conversation on a
mysterious note.As with Arpaio, there was no denial.
Is Dennis Montgomery Joe Arpaio's Snowden? I cannot say absolutely.
But it's not far-fetched to think that Arpaio would investigate any powerful public
official. He continues to investigate the president. He and now-disbarred former
County Attorney Andrew Thomas investigated Superior Court judges perceived to be
thwarting their anti-undocumented-immigrant policies.
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Page 10 of 11
That is, it fits a pattern cultivated over his reign of more than 20 years.
Among Arpaio's bogus investigations have been:
One targeting former Arizona Attorney General Terry Goddard for alleged bribery.
The probe began in 2007 and didn't seem to end until Goddard left office.
One that brought the 2008 indictment of then-county Supervisor Don Stapley on 118
criminal counts related to his allegedly not properly disclosing sources of income. All
counts were dismissed ultimately.
An infamous December 2009 RICO suit brought by Arpaio and Thomas against the
entire Board of Supervisors, various county employees and certain Superior Court
judges. Supposedly, they all were part of a conspiracy involving the county's new court
tower. The suit was a disaster that finally got dismissed by Thomas himself.
A probe resulting in the filing of false bribery charges in 2009 against former Superior
Court Judge Gary Donahoe. Arpaio and Thomas ginned up these charges as retaliation
against Donahoe for adverse rulings and to make Donahoe vacate a hearing that Arpaio
and Thomas didn't want to take place.
And now Judge Snow, who in 2013 found the MCSO guilty of racial profiling and
assigned a monitor to make certain that Arpaio was obeying court orders on reforming
and re-educating deputies so that the agency does not profile Latinos or any other
minority again?
As for Holder, the DOJ remains engaged in a lawsuit accusing Arpaio of abuse of power
and prejudiced policing.
At age 82, the sheriff faces the ignominy of ending his law enforcement career as a
disgraced political colossus.
All -- in his mind -- because of Snow and the DOJ.
Why not attempt an investigation aimed at discrediting his perceived nemeses?
Though there never will be any pink handcuffs in Snow's or Holder's future, Arpaio's
racist, wing-nut supporters would consider it an act of bravery that their hero is
investigating federal officials getting in the way of keeping despised Latinos in their
place.
Meaning more money in the sheriff's perpetual re-election kitty and proving that bogus
investigations continue to pay off.
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Page 11 of 11
My dream, of course, is that Snow blows a gasket and perp-walks the aged autocrat.
We'll see.
Rick Anderson in Seattle contributed to this story.
http://blogs.phoenixnewtimes.com/valleyfever/2014/06/joe-arpaio-investiga... 3/12/2015
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POINT OF VIEW
ROBERT MCMILLAN
Hillary Clinton Says Her Email Was Secure; She Can't Know
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EXHIBIT 19
EXHIBIT 20
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)
)
Debtors.
)
_________________________________________________________________
AFFIDAVIT OF MICHAEL J. FLYNN
__________________________________________________________________
I, Michael J. Flynn depose and state that I have personal knowledge of the facts
contained in this affidavit, unless stated to be based upon information and belief. Where facts
are stated to be based on information and belief, I believe them to be true and accurate to the best
of my knowledge.
1. I am an attorney licensed in Massachusetts appearing in this matter pro hac vice on
behalf of Timothy Blixseth.
2. Attached hereto as Exhibit 1 is a true and correct copy of a financial statement of
Edra Blixseth dated August 15, 2008, two days after CIP Yellowstone Lending, LLC, (CIP
YC) loaned Edra Blixseth $35 Million Dollars (the Predatory Loan) on August 13, 2008
represented by two 48 day promissory notes secured by Community assets she received from
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the Blixseth Marital Settlement Agreement (MSA) on August 13, 2008. The secured
Community assets are Porcupine Creek, (PC), and the Family Compound at the
Yellowstone Club, (YC). I first received Exhibit 1 from Gary Peters shortly before the
commencement of phase 1 of the AP 14 trial. I am informed and believe that this document
was subsequently recovered from the Edra Blixseth computers in the possession of Jory Russell,
(hereinafter the Russell computers). On said financial statement, Edra Blixseth (EB) records
the current market value of PC to be $207 M; the Family Compound at $40 M; Farcheville
at $63 M; and the YC to be $500 M, for a total of $ 810 M.
Family Compound these assets are owned by BGI. EB states her Net Worth, based on her
sole ownership of BGI, on Exhibit 1 as $849.5 M, and her projected net cash flow for 12
months at $40. 4 M, derived from PC, YC, Big Springs Realty, Blixware and BFI
revenues. As hereinafter recited, I believe that Exhibit 1 may be based, in part, both on the
control exercised by SB and his entities based on the Predatory Loan; and the lending
advisory control exercised by SB in the planning and implementation of the Predatory Loan.
3. Attached hereto as Exhibit 2 is a true and correct copy of a Post -Settlement
financial statement dated July 15, 2008. I am informed and believe that Exhibit 2 was recovered
from the Russell computers and that the Post-Settlement reference relates to EBs financial
status after the scheduled closing on the MSA based on the division of marital Community assets
based on the executed MSA on June 26, 2008, which closing was originally scheduled for July
3. 2008; and which closed on August 13, 2008. I am informed and believe based upon emails
recovered from the Russell computers that Exhibit 2 or a similar financial statement was given to
Samuel Byrne (SB), and or Cross Harbor Capital Partners, (CHC), and / or CIP YC, before,
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on, or after July 15, 2008. I believe based on recovered documents from the Russell computers,
and inferences derived from said documents that there are deleted or destroyed documents from
the Russell computers that may be in the possession of SB or his entities, CIP YC and CHC; and
that said deleted documents may relate to Exhibit 2, or a similar version thereof, as part of the
Deal between EB and SB to use the $35 M Predatory Loan to plan, implement and transfer
control of the YC to SB and CHC. Exhibit 2 states an EB Net Worth of $1.3 B based on a
YC value of $900 M. I believe that the $900 M Post- Settlement value on the YC may be
based on the Total Net Value Credit Suisse appraisal method, previously condemned by the
court in its Interim Order.
4.
Cross Harbor Capital Partners dated August 1, 2008, approximately two weeks before the MSA
and Predatory Loan closing. Exhibit 3 states on p. 3 that CHC has RECEIVED All divorce
settlement related documents; required Detailed, updated financial statements for EB (the
inference is that EB had previously provided financial statements and updates were needed);
required All underwriting materials provided to PEM, Archer and other Potential Sources of
Capital establishing that CHC required complete and thorough knowledge and possession of
All documents relating to EBs financial status based on her submissions to other lenders (the inference, coupled with several emails, is that Exhibit 2 had been submitted to other lenders
and was also possessed by CHC before the closing). Significantly, CHC required full
recognition of its existing rights through the execution of the previously agreed upon Letter
Agreement. I am informed and believe that said Letter Agreement has not been recovered
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from the Russell computers and remains concealed or destroyed. Exhibit 3 states on p. 4 that
CH Will control distributions of YC working capital. This establishes SB control over
the YC as a component of the Predatory Loan. Exhibit 3 also establishes SB and his entities
assumption of a position as a Lending Advisor to EB as contained in numerous statements in
their Discussion including: (i) who, why, the amount, and how to Secure additional financing
from Archer Capital Management ($55.1MM,net) and how it gets paid; (ii) the sale of
Farcheville and to whom and how to distribute the proceeds and make Additional EB
Investment directly into YC with the CH estimates to cover current accounts payable and
projected operations through 10/31/2008"; and the planning of a YC Preferred Equity Offering
and YC Governance based on a detailed joint venture essentially controlled by SB and his
entities with detailed provisions subsequently contained in the Agreement to Form. Exhibit 3
states that based upon the SB and CHC analysis, planning, and implementation control
mechanisms, early stage analysis indicates future net cash flow to EB of $600 + MM.
The compelling inference, particularly based upon the last representations of CHC is that SB /
CHC were using their insider Predatory Loan position as of August 1, 2008 to take
complete control of YC with full knowledge of EBs financial position, and representing a $600
M net cash flow to EB in order to obtain control. I am informed and believe that based upon
existing case law, and related facts inferred from existing emails and documents recovered from
the Russell computers, that documents remain concealed or destroyed relating to said
representations by CHC; and that SB and CHC made said representations, specifically the $600
M net cash flow to EB, based upon concealed and / or destroyed documents with knowledge
of EBs financial status based upon her liabilities disclosed in Exhibits 1 and 2; and contained in
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Attached as Exhibit 4 is an email chain between EBs consultant Jim Goldfarb, Jory
Russell and EB lawyers from the Liner law firm handling the Predatory Loan transaction,
stating that as of July 21, 2008, ten days before the creation of Exhibit 3, CHC was able to
exercise control over EBs lending status with PEM through the CHC mortgage on the
Family Compound, which is not reflected on the July 15, 2008 financial statement prepared with
Goldfarb and Liner just six days before. The only lien listed is LeMond. According to Exhibit
1, after the closing on August 13, 2008, CHC owned a first mortgage ($13 M), LeMond a second
($13.5 M) and CHC a third ($22 M) for a total of $48.5 M on the Family Compound then valued
at $40 M. The inferences are that there exist emails between either the Liner lawyers and / or
Goldfarb on the one hand, and the SB lawyers on the other, during the period between June,
2007 - the date of the LOI to sell the YC to SB and the present, particularly in the summer of
2008, which emails have not been recovered - or produced before phase 1 of the trial.
6. Attached as Exhibit 5 is a internal MEMORANDUM dated September 5, 2008,
by and among SB and CHC principals and lawyers, circulated just weeks after the CHC
Predatory Loan, based on an analysis of the Credit Suisse Predatory Loan, and inferring that
said analysis predated the CHC Predatory Loan, based upon other emails and documents.
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Significantly, the MEMORANDUM is dated just 4 days after EB had already defaulted on
September 1, 2008 on an interest payment inserted into the Predatory Loan thereby causing an
almost contemporaneous event of default on the promissory note and deed of trust. Exhibit 5
contains graphs planning and implementing total control over the YC and EB based on her
already defaulted loan status; but more importantly its control is based on their pre-planned
default" of YC under the Credit Suisse loan by making their Predatory Loan to transfer control
and ownership from Tim Blixseth to EB.
Restrictions on Change of Control (Sections 5.19) That Section refers to the Credit Suisse
Predatory Loan requiring that BGI or Tim Blixseth must at all times directly or indirectly
control the YC; and own, directly or indirectly, 51 % of the YC , and then references a
proposed Executive Committee controlled by CHC as being a breach of the Credit Suisse loan.
Exhibit 5 then states: Note that while the 51% ownership test will be met as to YC and YD,
this is not the case now with respect to Big Sky Ridge, LLC. I believe that the effect of CHCs
own analysis is an admission that CHC knew when it made its Predatory Loan to EB it was
creating a default on the Credit Suisse loan permitting it to put the YC into bankruptcy; and
CHC knew that EBs financial status was such based on Exhibits 1-3 and subsequent Exhibits
herein that she would default as of September 1, 2008 thereby obtaining complete control over
the YC. Mr. Blixseth requires the production pursuant to his subpoena to CHC and SB of all
emails and documents relating to Exhibit 5.
7. Attached as Exhibit 6 is the loan closing document reflecting complete control by
CHC of the use of virtually all of the Predatory Loan proceeds.
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8.
Attached as Exhibit 7 is an email chain between EB, and SB and others, starting on
March 11, 2008, just two weeks before SB terminated the YC sale on March 26, 2008, and
while EB had her agent Gary Peters were negotiating with SB to make their own deal with SB.
EB writes: Thanks so much for the follow-up. I will wait to hear from you what you come up
with both in regard to your (and group) interest in moving forward on something and/or
CrossHarbor/Sam. The March 25, 2008 email between TB and SB references SBs bankruptcy
plan. The Harris, Arenson, Kidd email dated October 15, 2008, a month before the YC
bankruptcy filing demonstrates CHC control with its agent, DLC, based on DLCs plan. Two
days later, SB tells his agent, Joseph Harris that SB is going to write the plan tonight to solve
the entire YC debacle. It could be brilliant. Harris then says it is possibly evil and it could be
worth over a billion dollars....I hope it includes the dip and filing by Friday. There are no
emails and documents in which Byrne sent the evil plan. Just 4 days before said emails, on
October 21, Chris Wright, a present member of the ad hoc Committee, having votes on the
Liquidating Trust, emailed EB stating But right now we arent even mentioning bankruptcy or
a DIP loan. Upon information and belief, I believe said not mentioning refers to a plan
between CHC and SB not to disclose to the members the planned bankruptcy reflecting control
over all aspects of the planned filing by CHC; and the complete relinquishment by EB who
states: thats a good point....i dont care you all decide the when of this. Based on this email
chain and other emails referencing emails that have been destroyed or concealed, including the
unproduced Letter Agreement referenced in Exhibit 3 hereto, I believe that both SB and CHC
are in possession of emails and documents relating to a separate deal between EB and SB and
CHC which occurred between March 11, 2008 and the CHC Predatory Loan. The compelling
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inference is that EB gave up control and ultimately ownership to SB and CHC of over $700 M in
assets based on the values in Exhibit 1 of the YC and PC for a Predatory Loan of $35 Million
Dollars. In addition to the $600M net cash flow to EB representations made in Exhibit 3, the
compelling inference is that Samuel T. Byrne made undisclosed promises to EB for her to
forfeit over $650 Million Dollars of Blixseth marital Community assets.
9. Attached as Exhibits 8 through 11 are true copies of emails representing just a
sampling of numerous emails containing evidence that: (a) EB planned to falsely accuse Tim
Blixseth, and hit him from all sides and obtain control of the YC in violation of Los Angeles
Superior Court Orders now merged into the final judgment of divorce; (b) EB and SB
misleading the B shareholders; (c) an email with an unrecovered attachment with EB stating
never tell that I am sending you all this as part of EBs interference with Los Angeles Superior
Court orders now merged into the final judgment of divorce. To my knowledge we have not
recovered the missing attachment. These issues relating to bad faith collusion between EB and
SB are now on appeal.
10.
Attached as Exhibit 12 is an email whereby Byrne and DLC are agreeing that EB
committed perjury before this court regarding issues relating to CHC and DLC control of the
YC.
As seen above in Exhibits 1 - 3, SB and CHC did in fact obtain control over the YC
through the SB Predatory Loan; and thus, SB and DLC knew she was committing perjury in
order to have this Court approve their bankruptcy plan including the Liquidating Trust to sue
Tim Blixseth.
bad faith and exculpation, and Tim Blixseths rights to cross-claim against SB, CHC and
Credit Suisse, al of which issues are now on appeal.
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11.
and make a separate deal with SB on March 21, 2008, five days before SB terminated the YC
sale, and in violation of Los Angeles Superior Court Orders and in contradiction of her sworn
testimony to said Court on that same date that she was not interfering with the sale. These issues
are now on appeal relating to SB exculpation and bad faith.
12.
Attached as Exhibits 14 and 15 are two fabricated Grand Jury Target Letters.
Upon information and belief, these letters were fabricated by Dennis Montgomery acting in
collusion with his partner, EB; and used by EB with the media and SB after January 15, 2008,
the date the YC sales contract was signed. They were used by EB to interfere with and
ultimately to kill the YC sale in violation of Los Angeles Superior Court Orders, now merged
into the Final Judgment.
13.
Upon information and belief, the following facts and events contained in the
following chronology are true. This chronology relates to the Target Letters and how they
were used to interfere with the YC sale by TB to SB. The chronology also relates to the EB and
Dennis Montgomery relationship and how that relationship impacts the current case issues,
including the computer hacking by Montgomery into Tim Blixseths and Michael Flynns
computers throughout these proceedings thereby interfering with the attorney client relationship
warranting dismissal of all of the claims against Tim Blixseth. This Court previously denied said
motion but new evidence is emerging relating to said computer hacking. Finally, the
chronology relates to the pattern of fraudulent loans procured by Edra Blixseth to finance a plan
to obtain control of the YC, including the fraudulent Wachovia loan as it relates to
Montgomerys technology, now publicly exposed as involving a massive fraud on the U.S.
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government. The fraudulent technology is owned by EBs company, Blxware. The Blxware
valuation on EBs financial statements is approximately $22 M. This is fraudulent. Based upon
personal knowledge, and information and belief, Blxware possesses no marketable technology,
the technology as represented does not exist, it was subject to an injunction when EB pledged it
to Wachovia; and Ms. Blixseth knew throughout the period in which she submitted loan
applications and financial statements to the various lenders that the purported Blxware
technology did not exist, and that Montgomery was engaged in computer hacking for her benefit
. EB paid Montgomery almost $6 Million dollars between April, 2006 and February, 2009 for
non-existent technology, which raises the inference that it was paid to perform computer
hacking.
March 1, 2006:
The FBI raided Dennis Montgomerys house searching for certain noise
filtering and compression software and hard drives he took from
eTreppid Technologies, and alleged classified information, involved in
then pending litigation in Reno, NV. Later, in June, 2007, when
Montgomery was subpoenaed to produce certain bribery emails before
a Washington D.C Grand jury, which he claimed proved that Warren
Trepp bribed NV Governor Gibbons, Montgomery took the boxes of
software and hard drives to EBs residence, Porcupine Creek. The
compelling inference is that Montgomery took approximately 23 boxes
filled with hard drives from eTreppid to conceal his fraud on the U.S.
government over the previous several years, because the hard drives may
have proved Montgomerys lack of source codes with respect to
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EB attempted to get the U.S. Gov to buy the software using her purported
political contacts with Cheney and others in the Bush Administration in
order to obtain a government contract. EB isolated Tim Blixseth from the
deal. Cheney and the Bush Admin rejected EB and Montgomery. EB
then planned and implemented a media campaign against Gibbons and
the Republicans through her contacts at the Wall Street Journal and
NBC in order to pressure the Bush White House using Montgomerys
fabrication of two purported bribery emails allegedly evidencing
Warren Trepps bribery of Gibbons to get government contracts. These
are the same media contacts, EB and Montgomery contacted when she
used the fake Grand Jury Target Letters to kill YC sale in March, 2008.
The FBI in DC later concluded (in 2009) that Montgomery fabricated the
emails and dropped the investigation of Gibbons and Trepp. EB
employed the law firm of Skadden Arps to deal with the bribery email
Grand Jury and the required production of the bribery emails. The same
law firm represented Credit Suisse in the Montana bankruptcy
proceedings
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in early November 2006, the weekend before the elections. The WSJ
published a front page article on Nov. 1, 2006 just before November
elections in which Gibbons was running for Nevada governor. The WSJ
later published two more articles based on the alleged bribery using
Montgomery documents. Said evidence supports EBs use of the media to
get what she wants. In March - April, 2008 as supported by the emails
attached hereto, she used the media to attack Tim Blixseth resulting in
damages to the YC.
December, 2006:
April, 2007:
EB learned TB had made a tentative deal with Sam Byrne (SB) to sell
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July
2007:
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based on their sworn affidavits that the YC was appraised at 1.2 Billion.
This was based on the Total Net Value appraisal method. Klar admitted
dealing with LeMonds counsel, who was then suing Tim Blixseth and the
YC. Klar knew LeMonds interests were adverse to the marital
community.
August 14, 2007:
During this time frame, SB informed Robert Sumpter that he knew about,
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and /or had seen, and /or had possession of the fake Target Letters.
Sumpter called TB and told him of the SB conversation relative to the fake
target letters. TB immediately called SB and demanded an explanation and
source of the letters. SB initially refused to disclose, and upon being
pressed, stated that EB has read them over the phone to SB. SB told TB
that this was a big problem as he was obligated to advise his lenders which
could kill the deal. SB sought adjustments and reduction in price. SB
advanced plan to put the YC into bankruptcy.
March, 2008:
EB borrowed $5 Mil from Wachovia Bank; and $8 Mil from First Bank &
Trust. The Wachovia loan documents evidence extensive and intentional
fraud including affirmative falsehoods about her involvement in litigation
adversely impacting her financial status. EB also directly concealed the
fact that the collateral she pledged for the loan was in fact subject to a
preliminary injunction in the concealed litigation. EB and her lawyers and
bookkeeper, Jory Russell used financial statements claiming an $800 M
net worth based on the TNV appraisal method while negotiating with
Byrne to put YC into bankruptcy.
EB sent Gary Peters to meet with SB in his Boston office to make a separate
deal while she appeared in divorce court on that very day testifying that she
was not interfering with the sale; and was again ordered not to interfere with
the sale.
SB terminated the YC. Sale. Two days later EB planned a massive media
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March, 2009:
June 24 - July 8, 2009: EBs bookkeeper, Jory Russell was caught under oath destroying Edras
files on two computers. Later, some of the files are forensically
recovered and provide evidence of concealed or destroyed documents.
See below.
September October, 2009:
October, 2009:
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December, 2009:
TB and his technology expert continue to recover deleted emails from the
Russell computers, including Exhibit 3 to this Affidavit.
On May 14, 2009, on the motion of Western Capital Partners, this Court ordered
the 2004 exam of Jory Russell, Edra Blixseths primary financial assistant. Pursuant to said
Order, Russell was ordered to produce electronic and paper documents including complete
copies of computer hard drives and other electronic storage media relating to Edra Blixseth as
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On June 13, 2004 Russell was served with a subpoena requiring his attendance on
June 23, 2009 for examination under oath; and the production of all documents, emails,
financial records and statements, bank records relating to Edra Blixseth; and specifically
including complete copies of computer hard drives and other electronic storage media which
contain any and all accounting, email, and financial information relating to Edra Blixseth in
Russells possession as described in the subpoena and in the Order incorporating the Motion.
16.
Within a day or two after receiving the subpoena, Russell spoke to both Gary
Deschenes, Ms. Blixseths personal bankruptcy lawyer, and to Edra Blixseth. (Tr. 11.1.09, p.
30, L. 18-20. He informed them that he had received the subpoena, that he possessed documents
stored on computers responsive to the subpoena; and that I was printing off the documents.
(Id p. 30 L. 11 to p. 33, L. 11). Russell testified that during the week before his attendance I
would read the subpoena and then print out responsive documents including emails. (Id p. 35 L.
8-15). He printed out about a foot and a half of responsive documents before he ran out of
paper. (Id. P. 36 L. 12-16). He had possession of two computers containing materials responsive
to the subpoena, a lap top and a desktop, but only printed from his desktop before the June 24,
2009 exam. (Id. P. 38 L. 8-12)
17. Mr. Deschenes did not file a motion to quash or for a protective order.
18. Mr. Deschenes did not represent Russell at any time in these matters. He represented
Edra Blixseth at all times material herein. Thus, at no time did his instructions to Russell as
recited herein fall within the attorney client privilege.
19. Russell first testified on June 24, 2009. That volume was designated Vol. 1 in the
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Edra Blixseth bankruptcy proceedings. There are also two additional volumes of his testimony
in the Edra Blixseth bankruptcy dated July 8, 2009 and August 5, 2009; and designated Vol. II
through III. There is a fourth day of deposition taken on November 1, 2010 in AP 14. In this
Affidavit, each volume is designated by date. In the June 24, 2009 examination, as he later
admitted on July 8, 2008, neither he, nor Mr. Deschenes, nor Ms. Blixseth, disclosed his then
possession of either the lap top or the desk top, or the foot and a half of documents he had
printed out from the desktop, although he knew they were in his possession and responsive to
the Courts Order. (Tr. 8.8.09, p. 13 L. 7 to p. 14, L. 16). He also knew there was a scheme in
place to conceal the computers and the responsive documents orchestrated by Mr. Deschenes.
Id. P. 13 - 30. See specifically Tr. 8.8.09 at p. 15, L. 21 to p. 18 L. 18 for the possession and
non-production of the subpoenaed documents. As hereinafter recited, Russell only produced
about 4" of documents from his wifes computers which were virtually the entire subject of his
short 52 page deposition permeated with attorney client privilege assertions designed to conceal
the un-produced computers and documents.
20. On the night of June 23, 2009, in preparation for his deposition, Russell picked up
Mr. Deschenes at the airport and drove him to Ms. Blixseths estate, Porcupine Creek.
According to Russell, he informed Mr. Deschenes and Edra Blixseth that evening that he had in
his possession in the trunk of his car the lap top and a bankers box with about a foot and a
half of documents that he had printed out during the previous week from his desktop. In his
July, 8 2009 testimony, he swore that there were different documents on his desktop and lap top
that were subject to the subpoena; that he only printed from his desktop; and the lap top and
desktop were not synched. Tr. 7.8.09, p. 23, L 14 - 22.
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21.
On the night of June 23, 2009, Mr. Deschenes then requested Russell to give them
the lap top and the printed documents because I was told that was not my property. Tr. 7.8.09,
p. 35 L. 3 -22. The desktop was still at his home; (Tr. 11.1.09, p. 51 L. 24-25; from which he
had printed about a foot and a half of documents that he knew were responsive but he gave to
Mr. Deschenes and Edra Blixseth the evening before his deposition on June 24th; but now
wasnt sure if the computers were synched; or who told him not to produce the documents and
computers, Mr. Deschenes or Ms. Blixseth. Tr. 11.1.09 p. 38 L. 8-15; p. 52, L. 4 to p. 54 L. 24.
22.
testimony between July 8 and November 1. He admits that he was at Porcupine Creek, one or
two days before Mr. Deschenes arrived printing off documents off Edra Blixseths printers that
were also not produced on June 24th, but were supposedly part of the foot and a half. Tr.
11.1.09 p. 55, L. 14-25. But in his November 1 testimony, he said that he had told Blixseth and
Deschenes on the night of June 23, 2009 before his deposition that the stack of documents
representing the foot and a half in the bankers box from his trunk were from the lap top.
Tr. 11.1.09, p. 54, L. 7 to P. 55 L. 13. In his three days of testimony after June 24, 2009, July 8,
August 5 and November 1, 2009, Russell gives conflicting testimony on what he destroyed and
when. On August 5, 2009, he testified that he destroyed everything pertaining to Edra Blixseth
on the desktop; and I deleted copies of everything that were on Edras lap topor yeah,
Edras lap top, the lap top that I was using. Tr. 8.5.09 280:10 to 282: 1.
23.
The first mention of being accused of theft of the documents came up in Mr.
Deschenes presence. Tr. 11.1.09 , p. 56 L. 5-20. Russell testified he had no recollection of any
plan to shut down his deposition the following day being discussed but he remembers a John
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Roselli showing up at his deposition to put his deposition on hold.. Tr. 11.1.08 p. 57, L. 14 to
p. 59 L. 5. The next day he deleted documents off his desktop. Tr. P. 59, L. 6-11. Mr. Russell
then asked for a break. Id at p. 61, L. 18.
24.
Russell relied on Mr. Deschenes not to produce the documents or the computers
on June 24 at his deposition. Tr. 66 L. 3 to p. 67 L. 3. Neither Russell, nor EB, nor Mr.
Deschenes disclosed on June 24, 2009, that just a month before that, on May 19, 2009, five days
after the court order, EBs business partner, Montgomery, delivered a server at Porcupine
Creek, called the Blxware/Blixseth.com and related domain names containing thousands of
emails, and with what Russell now claims contains everything from both computers in his
possession. Tr. 11.1.09. That server has never been produced; and apparently, has
disappeared..
25.
Russell also destroyed two USB hubs by throwing them in the garbage
containing accounting software provide by Pat Yarborough, EBs bookkeeper, and also
documents responsive to the Western Capital subpoena that were on the lap top. Tr. 11.1.09 p.
70 L. 10 to p. 71, L. 13.
26.
In his July 8th testimony, Russell admitted destroying documents off both the lap
top and desktop and that they were not synched. Tr. 7.8.9, p. 38, L. 11 to p. 39, L. 18.
27.
He also stated that on the night of June 23, he then proceeded to print out more
documents from the lap top that evening while in the presence of Mr. Deschenes and Ms.
Blixseth, and after printing for some time, he stopped. At some time during this entire episode
of spoliation, he also put additional documents on a USB hub which he filled; and later threw in
the garbage.. Tr. 11.1.09 p.70, L. 10 top p. 81 L. 13. It is unknown what happened to the
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printed documents printed out the evening of June 23, 2009; and the chain of custody of the
foot and a half is unknown..
28.
At the June 24, 2009 exam, Mr. Deschenes engaged in what can only be called an
intentional charade using Russell as a dupe. Neither Russell or Mr. Deschenes ever mentioned
the two computers, or the foot and a half of documents given to him the night before by
Russell, or the 3' of documents printed out the night before from the lap top given to Blixseth /
Deschenes that evening. Instead, Mr. Deschenes had Russell produce about 4 inches of
emails mostly relating to attorneys, which he claimed were from his wifes computer, which
Deschenes then asserted the attorney client privilege on. (Tr, 6.24.09 pp. 1-51). The production
of the 4" of printed documents from the wifes computer constitutes an admission that Russell,
Mr. Deschenes and EB had a duty to produce the other computers and printed documents.
29.
Mr. Deschenes then carried on this Roselli charade in the context of the 4" of
produced documents, the attorney client privilege, and a privilege log in what is shocking
deception relating to the subpoenaed computers, the subpoenaed foot and a half of documents
that Russell actually possessed, all given to him the night before while using the 4" of
documents as a cover, and the subsequent destruction of the contents of the computers the
following day. Tr. 6.24.09 p. p. 4o to 50. Specifically, under the cover of the 4" of emails
relating to the attorney client privilege and not providing the non- privileged documents, with
Western Capitals lawyer who were demanding that they be given to the court reporter at the
June 24th deposition, Mr. Deschenes stated at p. 46 L. 10-12:
No. Were not going to give them to you today because of the other deal. We dont
want to have these things produced if were....
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The other deal is the Roselli charade. The compelling inference is that Mr. Deschenes knew
that the entire June 24th charade with Roselli , and the 4" of documents produced after Russell
had produced everything the night before, was a cover for the violation of the subpoena and the
court order in order to give Blixseth and Russell time to destroy evidence, which he admittedly
did. The Western Capital lawyers heard Edra Blixseth state words to the effect that Sam is ok
with the deal inferring that Sam Byrne was the source of funding to buy out the Western
Capital note. Additionally, EBs partner, Dennis Montgomery, apparently then in conflict
with EB, on June 25, 2009, the day after the deposition, called Tim Blixseth and told him that
the Roselli intrusion into the deposition was a charade to destroy evidence off the computers,
which Mr. Blixseth immediately reported to her trustee, Mr. Samson. Montgomery also texted
TB during that time frame that they engaged in the foregoing conduct so they could buy time to
erase emails. Without this tip from Montgomery, it is unlikely that the concealment of the
computers and subsequent destruction would have been uncovered.
30. The evidence suggests that the Rosselli / Byrne charade of buying off Western
Capital Partners was a scheme to buy time to conceal and destroy evidence. According to
Russell in a conversation with the affiant, and according to Montgomery in a conversation with
TB, Byrnes Vice-president, Matthew Kidd was present at Porcupine Creek throughout the June
24, 2009 deposition and subsequent meetings. The inference and circumstantial evidence is that
there was no real intention to pay Western Capital Partners. Following the suspension of the
deposition, Russell admittedly spent the next day destroying documents on his desktop and
his lap top. (Tr. 7.8.08 p. 23 L. 14 - p. 24 L. 12; Tr. 8.5.09, supra). Contrary to his testimony on
November 1, 2009 that he only printed from his desktop, (see above), on July 8, 2009 he had
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Beginning on at least June 18, and continuing on June 22, and 23, 2009, at least
three days after informing Mr. Deschenes and Ms. Blixseth of what he was doing to respond to
the subpoena, Russell may have also began deleting, concealing or destroying electronically
stored files.
32.
Between the date of the Courts Order on May 14, 2009 and June 24, 2009, Russell
had possession, custody and control of at least the lap top computer and the desktop computer
containing hundreds of thousands of electronically stored documents relating to Edra Blixseth
and required to be produced pursuant to the subpoena. Neither he, nor Mr. Deschenes, nor
Ms. Blixseth complied with the courts order or the subpoena. At the time he only took
advice from Mr. Deschenes. And Ms. Blixseth.
33. According to his testimony, Mr. Russell was the Vice President of Business
Development for Ms. Blixseths software company, Blxware, and the Director of Business
Operations for Edra Blixseth personally, who took direction from Edra Blixseth on all
matters. (Tr. 11.1.09 p.25 L3-4). Russell had not worked for Ms. Blixseth for about 3 or 4
months before the deposition; but he still possessed the lap top computer and the desk top
computer containing materials sought in the subpoena. (Id p.32 L. 3-20).
34. . Russells testimony as to who owned, and /or had the right to possess the lap top
computer as of June 24, 2009, and the instructions he received from Mr. Deschenes and Ms.
Blixseth on these issues evidences concealment, destruction and obstruction; ( Id 37-57).
35 . The Russell testimony is very specific that one or both of them told him not to
produce either the foot and a half of documents or the lap top for his deposition the following
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day; (Id. 52 L. 9-25) ; and that the documents (Id 56 L. 9-12) was [sic] no longer my
property and I shouldnt have it. (Id. L. 19-21). Gary Deschenes specifically told him that the
lap top was not Russells property the night before he was obligated by Court order to produce
copies of its hard drive. Mr. Deschenes knew that the Order to produce copies made both
the actual ownership and possession of the lap top irrelevant because copies were required,
and regardless of who had the right to possess the laptop - Ms. Blixseth or Russell, he obstructed
the discovery process. The fact that the destruction of material on the computers occurred the
next day nails the coffin shut on their collective intent.
36.
Neither the desktop or lap top computers belonged to Ms. Blixseth. They
belonged to YCW and Blxware. No objection or motions to quash were filed by either entity.
Russell was properly in possession of both. They each contained material required to be
produced. . Russell printed out the entire foot and a half from the desktop which did not belong
to Ms. Blixseth. Russells conflicting testimony as to what computers from which he printed
unproduced documents evidences concealment and mens rea. Mr. Deschenes did not represent
either Blxware or YCW.
37. Prior to the night of June 23, 2009, neither Ms. Blixseth, nor Mr. Deschenes, nor
Blxware, nor YCW , or its Trustee, or anyone representing EB, had requested the turnover of the
computers, or any documents relating to Edra Blixseth, notwithstanding Russells direct, routine
and consistent assistance for the previous nine months in assisting Blixseth and her lawyers in
finding documents and providing them to her lawyers, including Mr. Deschenes, and also to Mr.
Byrne and his lawyers and to the lawyers in the YC bankruptcy. (Exhibits to Russell deposition
and emails sought to be destroyed by Russell which have been forensically retrieved from the lap
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Signed under the pains and penalties of perjury this 13th day of January, 2010 under the
laws of the United States.
28
EXHIBIT 27
Based upon information known to Defendants as of this date, the following individuals
are potential witnesses or are likely to have discoverable information that Defendants may use to
support their defenses:
1. Dennis Montgomery.
1
Subjects of Discoverable Information: the factual basis for his claims and asserted
damages in the Complaint, including, but not limited to: whether the software he
provided to the federal government was a hoax; whether he staged phony
demonstrations of his software to government officials; whether he was an
incorrigible gambler; Montgomerys residences in Nevada, California, Washington,
and Florida; Risens interview of Montgomery; employment or contractor positions
and opportunities from 2008 to the present; information about Montgomerys
interview with Lisa Myers from NBC News about Gibbons; Montgomerys health
claim of damages.
2. Brenda Montgomery.
Subjects of Discoverable Information: the Montgomery residences in Nevada,
California, Washington, and Florida; Montgomerys health claim of damages.
3. James Risen. Risen may be contacted through Defendants counsel, Davis Wright
Tremaine LLP.
Subjects of Discoverable Information: newsgathering regarding Chapter 2 of Pay Any
Price: Greed, Power, and the Endless War (Chapter 2); Risens reliance on court
records, reputable news reports, interviews with sources, including Montgomery, for
statements about Montgomery; Risens belief in the truth of the statements in Chapter
2 about Montgomery.
4. Bruce Nichols, Senior Vice President, Trade & Reference at HMH. Nichols may be
contacted through Defendants counsel, Davis Wright Tremaine LLP.
Subjects of Discoverable Information: information regarding HMHs editorial review
of Chapter 2 on Montgomery and information about Risens independent contractor
status.
5. John Brennan, Director of the CIA, former head of the Terrorist Threat Integration
Center, located in or near Washington, D.C.
Subjects of Discoverable Information: the Terrorist Threat Integration Centers use of
Montgomerys information and decision to pass Montgomerys information on to
senior government officials; senior government officials use of Montgomerys
information; and the basis for testimony in his confirmation hearings for Director of
the CIA that Montgomerys software was determined not to be a source of accurate
information. (Chapter 2 at 47.)
6. Jose Rodriguez, former head of the CIA Counterterrorism Center, located in or near
Washington, D.C.
Subjects of Discoverable Information: information showing that Montgomerys
software was revealed to be a hoax, and that the Counterterrorism Center very
skeptical of Montgomerys intelligence and viewed it as crazy.
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7. Saxby Chambliss, former U.S. Senator and vice chairman of the Senate Intelligence
Committee, and relevant former staff members.
Subjects of Discoverable Information: information regarding written questions
Senator Chambliss sent Brennan in his confirmation hearings about Montgomerys
intelligence and documents the senator and staff reviewed showing that CIA
officials derided Montgomerys information and that Montgomerys intelligence was
bogus.
8. George Tenet, former Director of the CIA, located in or near Washington, D.C.
Subjects of Discoverable Information: information showing that Montgomerys
software was revealed to be a hoax; that senior government officials considered
shooting down passenger jets based on the software; and that Tenet allowed
[scientists] to circumvent the CIAs normal reporting and vetting channels, and
rushed the raw material fed to the agency by Montgomery directly to the president.
(Chapter 2 at 43-44, 46.)
9. Samantha Ravich, former advisor to Vice President Dick Cheney, located in or near
Washington, D.C.
Subjects of Discoverable Information: information about her meeting with
Montgomery about his software, and information showing that Risen interviewed her.
(Chapter 2 at 51.)
10. Frances Townsend, former counterterrorism official on the National Security Council.
Subjects of Discoverable Information: information showing that Townsend discussed
with a National Security Council lawyer that the president had authority to shoot
down airplanes believed to be terrorist threats and that Townsend considered whether
it might have been time to exercise that authority in late 2003 based on
Montgomerys intelligence. (Chapter 2 at 45.)
11. Current and former staff members, U.S. Senate Select Committee on Intelligence.
Subjects of Discoverable Information: information showing that committee staff
contacted the CIA about Montgomerys technology and the CIA was very skeptical
of it at the time.
12. Current and former CIA officials, located in or near Washington, D.C.
Subjects of Discoverable Information: information about working with Montgomery
regarding his purported software and the use of Montgomerys information;
information showing that that the purported software was fake; and that senior
government officials considered shooting down passenger jets based on the software.
13. Current and former U.S. Special Operations Command officials.
20. Aram Roston, former Playboy and Defense News reporter, located in Washington,
D.C.
Subjects of Discoverable Information: information regarding the Playboy and Defense
News articles about Montgomery and his software, including, but not limited to,
whether those articles were subject to retraction.
21. Michael Flynn, Montgomerys former lawyer, located in California.
Subjects of Discoverable Information: information showing that Montgomerys
software was revealed to be a hoax; that Montgomery staged phony demonstrations of
his software to government officials, that Montgomery was a fraud and conman; and that he provided information to Risen before publication. (Chapter 2 at
36.)
22. Tim Blixseth, located in Washington.
Subjects of Discoverable Information: his belief that Montgomerys software was not
real; his observation of a demonstration of Montgomerys software in Palm Springs,
California; and information showing that he provided information to Risen before
publication. (Chapter 2 at 50-52.)
23. Edra Blixseth, Montgomerys former business partner in Blxware, located in
California.
Subjects of Discoverable Information: Blixseths business dealings with Montgomery
and information showing that Montgomerys software was revealed to be a hoax.
(Chapter 2 at 50-52.)
24. Paul L. Haraldsen, Special Agent, Air Force Office of Special Investigations.
Subjects of Discoverable Information: information regarding the investigation by the
Air Force Office of Special Investigations into Montgomerys software at eTreppid.
25. Thomas A. Smith, Special Agent, Air Force Office of Special Investigations.
Subjects of Discoverable Information: information regarding the investigation by the
Air Force Office of Special Investigations into Montgomerys software at eTreppid.
26. Michael A. West, FBI Special Agent.
Subjects of Discoverable Information: information regarding the FBI investigation
into Montgomerys software at eTreppid
27. Warren Trepp, Montgomerys former partner in eTreppid.
Subjects of Discoverable Information: interviews with the FBI and Air Force Office
of Special Investigations discussing the phony demonstrations Montgomery staged
for government officials and his belief that Montgomerys software was not real.
28. Sloan Venables, former e-Treppid employee.
Subjects of Discoverable Information: interviews with the FBI and Air Force Office
of Special Investigations discussing the phony demonstrations Montgomery staged
for government officials and his belief that Montgomerys software was not real.
29. Patty Gray, former e-Treppid employee.
Subjects of Discoverable Information: interviews with the FBI and Air Force Office
of Special Investigations discussing the phony demonstrations Montgomery staged
for government officials and her belief that Montgomerys software was not real.
30. Jesse Anderson, former e-Treppid employee.
Subjects of Discoverable Information: interviews with the FBI and Air Force Office
of Special Investigations discussing the phony demonstrations Montgomery staged
for government officials and his belief that Montgomerys software was not real.
31. James Bauder, former e-Treppid employee.
Subjects of Discoverable Information: interviews with the FBI and Air Force Office
of Special Investigations discussing the phony demonstrations Montgomery staged
for government officials.
32. Joseph Liberatore, Air Force official, located in or near Washington, D.C.
Subjects of Discoverable Information: information about the government contracts
Montgomery received from the Air Force, and information regarding Montgomerys
purported software. (Chapter 2 at 52.)
33. Donald Kerr, former chief of the CIAs Science and Technology Directorate any
Deputy Director of National Intelligence, located in or near Washington, D.C.
Subjects of Discoverable Information: information regarding Montgomerys
purported software. (Chapter 2 at 42.)
34. Jim Gibbons, former member of the House Intelligence Committee and Governor of
Nevada.
Subjects of Discoverable Information: information regarding Gibbons early
advocacy for Montgomerys software; Montgomerys charges of bribery against
Gibbons in connection with the sale of Montgomerys software (from which Gibbons
was cleared); and the email Montgomery allegedly fabricated to support his
allegations against Gibbons. (Chapter 2 at 38-39, 49-50.)
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35. Abbe Lowell, former Congressman Jim Gibbons attorney, located in Washington,
D.C.
Subjects of Discoverable Information: Montgomerys charges of bribery against
Gibbons in connection with the sale of Montgomerys software (from which Gibbons
was cleared); and the email Montgomery allegedly fabricated to support his
allegations against Gibbons. (Chapter 2 at 50.)
36. Porter Goss, former chairman of the House Intelligence Committee, former CIA
Director, located in or near Washington, D.C.
Subjects of Discoverable Information: meetings with Gibbons to discuss eTreppid and
Montgomerys technology. (Chapter 2 at 39.)
37. Letitia White, a lobbyist, located in Washington, D.C.
Subjects of Discoverable Information: information regarding her work for eTreppid to
obtain government contracts for Montgomerys software. (Chapter 2 at 38.)
38. Any individual disclosed by Plaintiff Dennis Montgomery as a potential witness or
person who may have discoverable information in this matter.
Defendants reserve the right to amend or supplement the foregoing response with the
names and addresses of additional individuals likely to possess discoverable information that
may be used to support Defendants defenses and whose identities may be revealed during the
course of discovery.
B.
Based upon information known to Defendants as of this date, the following categories of
documents or tangible things in Defendants possession, custody or control may be used to
support their defenses:
1. Exhibits attached to Defendants motion to dismiss or transfer for lack of personal
jurisdiction, motion to dismiss or transfer for improper venue, motion to transfer
under 28 U.S.C. 1404(a), motion to dismiss for failure to state a claim, and special
motion to dismiss. (ECF Nos. 25, 25-1 to 25-24, 26)
2. Documents Risen relied upon to write Chapter 2 and the 2011 article in the New York
Times about Montgomery, which include: court records; news reports; emails with
sources; emails among and between individuals mentioned in Chapter 2; emails with
Lichtblau; interview notes; and other documents obtained in newsgathering. These
documents are being retained by Risen and/or Davis Wright Tremaine LLP.
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Computation of Damages
Insurance Agreement
HMH Companies insurance agreement relevant to this proceeding is attached hereto and
hereby produced under Fed. R. Civ. P. 34.
CERTIFICATE OF SERVICE
I certify that on April 24, 2015, I served this document on all counsel of record by email.
s/Micah J. Ratner
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