UCI Report on Victory of the case related to farms in Brazil

–Arbitration victory against unethical lawyer, Antonio Augusto

Centering on the vision and foundation laid by True Parents, and through strong dedication of
blessed central families worldwide, the New Hope Project since starting in 1995 has reached
many important providential milestones and gave new hope to members. However, due to poor
management of the farms and lack of understanding of the Brazilian law and culture by the
Korean leaders who were in charge of the properties, many problems have occurred and are
threatening the very existence of the Association (AFUPM). Of all the many problems, this
report focuses on a situation that has been one of the most difficult to solve involving a most
unethical lawyer, Antonio Augusto de Souza Coelho, the victory attained in the arbitration case
against him, and ongoing issues to tackle.

Significance of the Arbitration Victory: Recovery of Association’s farms in Brazil

The final decision of a nearly two-year long arbitration related to the ownership of the
Association’s farms against Antonio was released on July 7, 2010 in Sao Paulo, Brazil. This is a
great victory because through the arbitration decision UCI was able to resolve one of the most
difficult problems related to the Association’s farms in Brazil. This is a remarkable
accomplishment because we can recover all the farms the unethical Antonio attempted to steal,
which is in total half of all of the Association’s farm land.

Some major points of the decision are as follows:

1) The agreement made between the Association and Antonio was not a non-cancellable
power-of-attorney given to Antonio, but a partnership agreement.
2) Although the agreement is valid, there was reciprocal breach of the agreement: Antonio
did not act in good faith through non-payment of sale proceeds and lack of expected
diligence in selling the properties; The Association breached by offering the lands subject
to this agreement as a guarantee to another party.
 3) Therefore, the reciprocal breach results in restoring both parties to the status prior to the
agreement, which means the sale of properties grounded on the breached agreement is
null and do not have any effect, even to third parties.

Procedures of Arbitration and progress

Arbitration, a form of alternative dispute resolution, is a legal technique for the

resolution of disputes outside the courts, wherein the parties to a dispute refer it to a
panel of 3 arbitrators, by whose decision they agree to be bound and cannot be appealed.
Both parties submitted their preliminary statements in 2008. During a hearing in front of
the panel of arbitrators in Sao Paulo in February, 2009, both parties presented evidence
and arguments over the validity of the contract on the Association’s farms and
responsibilities. Both parties submitted their final statements by the end of 2009 and the
arbitration panel made their final decision after thorough review in April 2010 and
released it on July 7, 2010.

History of the New Hope (Jardim) Project

On the 36th True Parents’ Day on March 1, 1995 (lunar calendar), True Parents announced the
“Sao Paulo Proclamation” that declared the beginning of the 2nd 40 year course, a period when
all members worldwide inherit True Parents’ victorious foundation and the children take on
responsibilities. As one concrete, practical plan for the above-mentioned proclamation, Father
issued the “New Hope Farm Proclamation” on April 3, 1995 at 5a.m. in front of leaders
representing the 160 nations of the world, at the New Hope Farm in Brazil as it was to become
the model of an ideal society and ideal nation.

The Brazil New Hope (Jardim) Project that was launched in 1995, centered on this vision of True
Parents, has been progressing, through countless ups and downs, for the past 15 years. The
Project began and operated under the direction of President Yoon Sang Kim.

Most of the rural land in Brazil was purchased during this time under the name of the Brazil
Family Association (AFUPM). Following the direction of True Father, President Kim purchased
as much land as possible. However, the process of purchasing these properties was very
disorganized, resulting in various problems. Such problems include: 1) sellers taking advantage
by selling the land at prices higher than market value; 2) purchasing and paying to sellers who
weren’t legal owners of the property; 3) non-registration of purchased property. To date, there
are still several properties where the title of the purchased property has not been properly
transferred and registered. Through this process, a total of more than 50 lots of farms with a total
size of over 90,000 hectares (approximately 222,300 acres) was acquired for approximately
R$35 million (approximately USD19.9 million).

History leading to the theft of the Association’s farms

On September 21, 2000, the Brazilian Government announced the creation of the National Park
of Serra da Bodoquena (“National Park”) with an area of 77,232 hectares (approximately
190,800 acres) and notified the Family Association that expropriation of land for the National
Park would include several farms (both whole and partial) of the Family Association. The farms
impacted by this announcement number about 10 with a combined total area of approximately
24,000 hectares (approximately 59,300 acres).

In 2003, the first penalty summons was issued for ITR (Brazil Rural land property tax) due to the
non-submission of certain registration documents, mainly geo-reference survey using satellite
coordinates, and declaration of permanent and legal preservation areas of one of the properties.
Initially the Jardim Project leaders did not understand the reason for this heavy tax and did not
respond. Only after when continuous subsequent summons was received was there a discussion
held through various group meetings in Jardim regarding the cause for it. Even after
understanding the reason for the tax, it was decided that because the Association had no
resources to pay for the geo-reference survey nor the tax, they would simply just not pay. No
formal responses were issued to the tax authorities regarding the ITR and subsequent notices
were just ignored.

By 2006, tax authorities had expanded their review to 8 farms and penalties plus interest
exceeded R$25 million (approximately USD$14.2 million). Tax and penalty are significantly
increased if a property is not properly utilized and the tax authorities determined these farms
were not being productive. Tax authorities gave the Association 1 year grace period to resolve
the matter and to submit the proper geo-reference survey and other documents, after which the
fines and interest would be reduced.

It was during this period of turmoil and confusion due to the National Park and ITR issues when
Antonio was first introduced to Joao Urias (then Director of Jardim Project) by Simao Ferabolli
(then and current President of Association) and Edivaldo Luis Francischinelli to resolve these
matters along with other outstanding issues. Edivaldo had existing relations with the Association,
but later turned out also to be a business partner of Antonio.

Antonio submitted a proposal dated November 14, 2006 to Joao with the following summary
terms:

 Representation of the Association to sue the Government and obtain payment for the
expropriated land

 Fee would be 10% of the recuperated value obtained from the Government

Joao signed the proposal but informed Antonio that his signature alone would not be binding,
and that the proposal has to be ratified by the President of the Association in Sao Paulo. But no
further decision was made on the proposal at that time.

Between November 2006 and January 2007, several farms were leased to Antonio and Edivaldo
at very low prices. The rationale behind the cheap leases was that since the farms the
Association purchased were sitting idle and unproductive, and thus were being assessed steep
penalties by the Government, these two individuals would do the Association a favor by leasing
the land and being productive with it. Properties leased include Figueira, Taboquinha, Curvelo,
and Rio Branco farms. More than 2,000 cows and over 1,100 calves were also lent with these
farms for these individuals to manage and the profits to be split. However lease payments were
only received initially and it turned out the cattle were sold off almost immediately without any
compensation to the Association.

Not recognizing Antonio’s true evil intention, the Korean leaders, Cesar Zaduski (then Director
of Jardim Project) and the Brazil Family Association succumb to Antonio’s further persuasion in
May 2007 to sign another contract that he drew up.

While stating that he would resolve all the problems of the Association, Antonio drafted the
contract with provisions favorable to him. According to the contract, Antonio had to use his best
efforts to attain the highest possible sale price. From the sale proceeds, the Association would be
entitled to receive R$130 (approximately USD$74) per hectare, free of the debts and expenses
used to solve various issues listed in the contract. Antonio would receive all net remaining
amounts. However, Antonio defined the term National Park, used throughout the agreement,
ambiguously as an area located inside the National Park as well as those in the surrounding area
of the National Park (total about 46,000 hectares or approximately 113,700 acres). He later used
this broad definition to justify his right to sell the properties that are not within the National Park
to himself. Along with the agreement, a supposed irrevocable power of attorney (POA) was also
granted to Antonio that gave him the power to sell the properties in the National Park area to
himself or a third party.

On May 18, 2007 the very broad POA and contract prepared by Antonio was signed by Director
Cesar. However, according to the articles of the Association, the contract and POA needed to be
ratified by the Board of the Association in order to make it valid. Antonio persuaded President
Simao to ratify the contract and POA. The Board of the Association drafted a letter on May 29,
2007, stating its concerns with the contract and requested Korean leaders to provide a formal
declaration approving the contract and to assume all responsibility for it. With President Yoon
Sang Kim’s signing of a formal declaration on June 1, 2007, the Board of the Association ratified
the contract on the same date.

With the POA in hand, Antonio started fiendish actions of transferring the Association’s
properties to himself without providing any reports. He transferred Rio Branco and Curvelo
farms to himself and initiated the process of transferring 8 additional farms including Figueira,
Taboquinha, La Harmonia farms which were included in the expropriation for the National Park.

In late 2007, after realizing that something was very wrong, Cesar attempted to cancel the
contract. However, Antonio responded that this was an irrevocable contract. In panic, President
Kim and Cesar agreed to a suggestion made by another lawyer David de Moura Olindo who had
been previously introduced to the Association by Juvenal Mazucato (another former and current
Director of Jardim Project) and had represented the Association. The suggested strategy by
David was for the Association to recognize legal fees due to David big enough to tie up Antonio
related lands as a form of guarantee. David then took advantage and sued the Association in total
of approximately R$10 million (approximately USD$5.7 million) for legal fees due. He would
also later testify on behalf of Antonio and against the Association during the Antonio Arbitration
hearing.

Korean and Japanese leaders’ request for Hyun Jin Nim’s help and UCI’s effort to solve
the problems

Facing such an irreparable situation in Brazil, Korean and Japanese leaders who were involved
with various aspects of Brazil (Pres Yoon Sang Kim, Rev. Joon Soo Yang, Rev. Myung Ki Shin,
Rev. Heung Tae Kim, former Continental Director Rev. Jung Soon Cho, and Rev. Hideo
Oyamada) asked for Hyun Jin Nim’s help. On July 2, 2008, in Asuncion, Paraguay, formal
written requests to True Parents were made by these leaders for Hyun Jin Nim’s assistance, upon
which True parents directed Hyun Jin Nim to step in and salvage the problems in Brazil. UCI
then became involved to address the situation.

To solve these problems, Hyun Jin Nim instructed a UCI team to first, tackle the issue involving
malicious Antonio and recover all the lands in Brazil. And second, to grasp a firm understanding
of the situation regarding taxes or fines and to find solutions using all possible means necessary
whether it be legal negotiation, political or social support.

To accomplish this mission, UCI first visited Brazil in July 2008 and conducted thorough
interviews with all personnel at the Association headquarter in Sao Paulo, Campo Grande, and
Jardim related to the New Hope Project and gathered as much material to formulate
comprehensive and systematic countermeasures.

As part of the first actions taken, UCI hired TozziniFreire, one of the finest law firms in Sao
Paulo Brazil, in July 2008 to address the case against Antonio and many other complicated legal
matters. As a result of our decisive action, a civil court judge in Sao Paulo granted a petition for
injunction against Antonio in August 2008, prohibiting him from exercising powers under the
contract to sell properties until the arbitration is resolved.

Most of the focus was then turned towards winning the arbitration because a decision made by
the arbitral tribunal would be final with no possible appeal. After collecting as much materials
available, UCI and Tozzini pored through documents to find evidence showing that Dr Antonio
violated the duty of good faith and his ethical duties as the Association’s attorney, and
strategized continuously in order to present the best arguments that would lead us to victory.

We were then able to enlist two very well respected law professors in Brazil and submitted their
opinions on two very technical aspects of the law that supported our case.

During the arbitration period, Antonio made an attempt to settle the case, offering to pay the
promised amount per hectare in exchange for him to keep the properties, which was of course
rejected by UCI.

Remaining tasks

On April 28, 2010, we were notified that the Arbitration panel had rendered a decision.
However, the decision was not released due to Antonio’s new claim that the arbitration process
was tainted. He filed a motion to disqualify the Chairman of the panel and the final decision, on
the ground that the Chairman had already leaked the panel’s decision to Clovis da Silva (UCI
appointed former director of Jardim Project) over a year ago. Because of the sensitive nature of
this case, the President of the Arbitration Association setup an independent panel to review
Antonio’s claim. On July 7, 2010, the independent panel dismissed Antonio’s claim and the
Arbitration Association released the April decision.

Although UCI was able to recover the properties Antonio attempted to steal from the Association
through the arbitration victory, there are still numerous problems related to the farms that need to
be resolved. Also, knowing Antonio through this process, he is not going to go away easily and
we expect further battles with him and his accomplices. In addition, we will still need to deal
with the government regarding the expropriated areas for the National Park.

Discovering problems related to the farms in Brazil is analogous to peeling layers of skin from
an onion. New problems have continuously been surfacing even after a long list of problems was
compiled. Five tax foreclosures totaling approximately R$31,500,000 (updated through
December, 2009), five tax administrative proceedings totaling approximately R$32,900,000
(updated through April, 2010), and former lawyers’ disputes involving David (R$10,000,000),
Wilson Francisco Fernandes (R$2,700,000), and Laura Cristina Ricci (R$600,000) still remain.
Also, there are other numerous problems which include foreclosure proceeding involving
R$70,000,000 and environmental issues involving New Hope Farm, Hotel Americano, and
Salobra Farm.

UCI has been establishing comprehensive and professional countermeasures to solve these
problems and has been systematically executing them in phases. It will still require countless
hours and resources to solve these problems going forward. However, it is ironic that at a time
when such a landmark victory was won in recovering over half of the Association’s properties, a
massive worldwide accusation is upon Hyun Jin Nim and UCI on the heels of the so-called
“hostile takeover” incident. Now that Rev. Dong Mo Shin and the International Unification
Church Headquarters have officially banned UCI and the Superior Council from assisting the
Brazil Family Association through legal measures, we only hope that they can responsibly
protect and maintain True Father’s legacy in Brazil.

We wish them the best.

July 12, 2010

UCI