on which the Order was based. Accordingly the parties' September 7 submissions should address that question as well.
Quinn's motion to be dismissed as a defendant has been rendered moot by his appearance and Answer. His motion for a stay is denied. Final ruling on SEC's motion for a finding of civil contempt is further deferred, pending the parties' submissions on or before September 7, 1990 as to questions bearing on the imposition of criminal contempt citations.
This action is set for a telephonic status hearing at 8:45 a.m. C.D.S.T. on September 13, 1990 to discuss the future procedures dealt with in the new submissions. That arrangement will spare Ben-Veniste the expense of a trip to Chicago for such a purely procedural discussion.
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION SECURITIES AND EXCHANGE COMMISSION
THOMAS QUINN, CIVIL ACTION FILE
MICHAEL WRIGHT, No. 89 C 5942
ARTHUR PACKARD CONDIE,
HONORABLE MILTON I. SHADUR
TERRI LEE GRAFF,
GSS VENTURE CAPITAL CORPORATION, and
MAX, INC., Defendants
CITY OF PARIS:
COUNTRY OF FRANCE: ss:
AFFIDAVIT OF PHILIPPE CYWAN
I, Philippe Cywan, being duly sworn, hereby depose and say:
1. For more than one year I represented the interests of Mr. Thomas F. Quinn in connection with various legal matters in France and England. I make this affidavit at the request of Mr. Quinn's United States counsel, Richard Ben-Veniste, in order to bring to the Court's attention facts surrounding the transfer of some $ 75,000 from an account controlled by Mr. Quinn in November 1989. This affidavit does not constitute any waiver of the attorney-client privilege and is made only for the unique and limited purpose of responding to the Court's specific inquiry. I can assure the Court that the $ 75,000 was transferred for the purpose of safeguarding and preserving Mr. Quinn's assets.
2. The purpose of the $ 75,000 transfer was to engage Beechcroft Stanleys, a well-regarded firm of lawyers in London, England, and to assure them that funds necessary for fees and disbursements were on hand. The circumstances surrounding the need for payment are as follows.
3. Jenkins and Davies (J&D) is an English engineering company supplying specialized works and services to, among others, petroleum refinery construction contractors. At the time of Mr. Quinn's arrest in July 1988, he was the beneficial owner of approximately 92% of the shares of J&D, though the shares were still registered in the names of those from whom he had acquired them or who had acquired them on his behalf. A Mr. Davies is the managing director of J&D, and was, until the first quarter of this year, the minority shareholder of J&D.
4. In 1986, J&D executed a refinery construction contract as subcontractor to Chemical & Thermal Ltd. (C&T). The agreed contract price resulted in a substantial underpayment to J&D, however, principally because the required quantity of steam piping was far greater than shown on the original C&T drawings. It is fairly clear that the drawings were switched at some stage in the negotiations, and that J&D therefore has a good claim under the arbitration clause of the contract. Although the claim is for well in excess of $: 700,000, it is conservatively valued at around $: 600,000. C&T, which is a member of a substantial group of public companies, is believed to be solvent.
5. As the result of not being paid, J&D was in substantial financial difficulties, and, in particular, unable to finance the arbitration proceedings. The Beechcroft firm estimated fees and costs to total some $: 120,000, but it is my hope to come to a more reasonable arrangement with J&D's original advisors, who are a provincial firm of lawyers and a quantity surveyor, and who are both willing to act on a partial contingent fee basis.
6. Finisco is a trust company owned by a Geneva lawyer named Crosier. Sometime prior to Mr. Quinn's arrest, Finisco, acting on behalf of Mr. Quinn, loaned a total of $: 300,000 to J&D against the security of the assignment of its arbitration claim. By September 1988, the debt had risen to $: 350,000 with interest.
7. Although an assignment agreement relating to the arbitration claim had been executed, Mr. Crosier neglected to register it within twenty-one days, as required by the English Companies Act. Consequently, the charge was void as against creditors, and meanwhile the company had reached the stage of insolvency without having made a real start in prosecuting the arbitration claim.
8. When Mr. Crosier learned of Mr. Quinn's arrest, he took various steps on his own. He informed Mr. Davies that no further loans could be made, to which Davies responded that the company would be bankrupt unless Crosier agreed to allow the share capital of J&D to be increased so as to give Davies (or his nominee) a large majority in exchange for an insignificant capital contribution. Davies maintained that he could only obtain funds to keep the company going if he, and/or his new financier, had majority ownership of the company. Without Mr. Quinn's authorization, Crosier said that he agreed to the capital increase, though this was not carried out.
9. At this point I consulted with Mr. Quinn and received his authorization to try to recover what I could on the arbitration claim and to take what steps I could to protect J&D's assets and Mr. Quinn's stake therein.
10. After lengthy correspondence, meetings and discussions with Mr. Davies, a possible basis for agreement began to emerge. During this period I appointed the Beechcroft firm to act in Mr. Quinn's behalf. I obtained a report from Peat Marwick & Mitchell, the accounting firm, which made it clear that the only hope of salvaging something out of the J&D situation was to reach an agreement with Davies, which I accomplished.
11. I asked Mr. Quinn to arrange for funds to guaranty the Beechcroft that funds would be available to finance the salvage operation and the prosecution of this claim. This was the purpose of the $ 75,000 transfer, and the reasons why the funds were made to my order.
12. It is my intention to press the arbitration claim in the hope of arriving at a settlement in the region of $: 500,000.
13. None of the aforementioned actions were taken with any intent to transgress any legal restrictions in the United States and it is regrettable if they have been misunderstood and inconvenience thereby caused.
Subscribed and sworn to before me,
this day of , 1990.