Trial - Collard Testimony

I 11HUTHEIZI131EZE1FAH intiffs: For the Pl; GUIDO J. Eequire JAMES A. POHNSON, Esquire EEMMEE, up EEMMEE, rue. 250 West Iratt Street Baltimor MD 21201 For the Dei ndante: DAVID E. Esquire BOOTH, Eequire CURTIS OOTH, Esquire COWDREY, IOMPSON KARSTEN, P.A. 130 N. We ingten Street Easten, M: yland 21601 013mm IN THE CIR IT COURT FOR TALBOT COUNTY, MARYLAND CORPORATION, et el Plaintiff ve. Case Number OT PAUL P. RAKOWSKI: EE., et a1 Defendint OFFICIAU PARTIAL TRANSCRIPT OF PROCEEDINGS Eeeten, Maryland Manday, August 15, 2005 BEFORE: THE HONORAEYE RAYMOND E. BECK, SR. APPEARANCES: FUR-I334 112??h?201318232 FAH 4107'83832? JDHH [3142?030 BONNIE CHAMBERS Official Ceurt CQurt H?uae Eastcn, For the Defi E. DEMETRIDUS MILES AND 10 Light 3r 21222 Baltimare, THOMAS TOL 295 Bay St P.O. Bax 1 Easton, Mm: Maryland' ndants: ON ROBBINS, JR., Esquire G. KAQURIS, Esquire 2.c. reet, 12m Floor HERT ALSPACH, Esquire eat, Suite One (Cant.) 3.194 F311 410183832? JDHH WEIUECI TH. WI John Collard VOIR DIRE EXAMI5 3 PAGE DIRECT CROSS REDIRECT RECEDSS 21 F'Eml 1mm JDHH 4 PROCEEDINGS MR. POVCARELLI: Your Honor with the Court's permission I'd like to call our next witness. THE Yes, sir. MR. Pi CARELLI John Collard. John Collard. JOHN CDLLARD the Witness, prmiuced on behalf of the Plaintiff, having first been duly worn, was examined and testified as follows: MR Pm CARELLI May I begin, Your Honor? THE Yes, sir. DIRECT EXAMINATION BY MR PDHCAHELLI: State .our full name please. A Many Ime is John Collard. Mr 'C-?lard what do you do for a living? A I am professional-consultant and turnaround manager. I run company by the name of Strategic Management PartI-rs, Inc. based in Annapolis, Maryland. We go into company as the interim CEO. It could he the president, it cu?ld he the COD, essentially irrespective of what the title I called we normally run the company for an interim period time. These companies are often in trouble. We tr, to keep them out of bankruptcy. I 5400-531 435} Flint-12094 11f?Tf2013 18:?l'r'fliIIS? 5 What it your position in Strategic Management Partners? A I?m thy Chairman. I?m also the President of the company, CEO. And isgthere a way to describe your specialty? A companies that as management. in value we try I thin; Whe the best way to describe it is we run in trouble. I call that turnaround the company is heading or deteriorating turn that into a positive direction. I call it turnarou management. any experience i' A Yes. 1 MR. qualified as an (inaudible). THE cc: him, have questions c: MR. BY MR. Let's. corporate goverfa about your educaf And it! Esplaig offer him at l;dDi?g those responsibilities do you have corporate governance? ?do. for us what corporate governance is. Objection, Your Honor. Until he?s ixpert. Your Honor. I don?t believe he can All right. When you want to give an expert then I?ll ask Defense if they qualifications. CARELLI Very well. gbefore we get into the definition of nce and turnaround let's talk a little bit ion and your background. remiss-ass FCIFIH EDIE-1 11HUTHEU1318232 FAH north of Chicagu; Illinois. And d'i you go to college? A Yes. I Did yni graduate? A In lBiL. I have degrees in financial management architectural iineering. Both are Bachelor's degrees. studied with (i iudible) Fuller. Where Lid yeu obtain these degrees? A I'm smiry at Southern Illinois University. Did obtain any post graduate or do any continuing educ-iion after graduating from college? A I've sane some post graduate work at the University of Illinois. Both their Champagne, Urbana and Chicago campuseag I've taken courses for the certified turnaround proteasional review course at Northeastern University in Buiton. And I've also gone to the J.L. Kellogg Graduat=58chool of Management at Northwestern studied and A theory, merger and University. aoguisition them y. And yai mentiened the University of Illinois as 410733832? JUHH U1EHUEU 6 A Okay. Did ymi graduate from high school? A Yes. When where? A In 19:: at Glenbrook High School. It's a suburb I FEHGPDI- LEE-EH i? EBB-II 11f?Tf2?1313233 FAH 410733832? 7 some post gradu.?e work that you did. What was the area of study? I A I toovgsome general courses. Some of which were, most of which w=?e management, program management type course, managem=?t type courses. I did not pursue and get an advanced deg-?e. the Wu?k that you did at Northeastern University in Boston? 7 A Yes. That in what field? A It?s it's a certified turnaround professional review course. ?hat's a program that's put together by essentially the Eurnaround Management Association. The Turnaround Manaq%ment Association in the late 1980s determined that $ecause companies were beginning to have problems with gwferning and companies were getting into trouble that a Jrsignation would be beneficial. Much like a CPA or a cart tied fraud examiner or others that have the three letter designation. So they put together a governing body. They cal Sit the Association of Turnaround, or pardon mer the ??sociation of Certified Turnaround Professionals. it's only purpose, that only purpose is for certifying turns?ound professionals. There's an all day exam, I think i!s 10 hours. It?s three parts. And in order to gualif.?for that one needs to qualify by having NEEDED Wt LEIGH-EH 11HUTHEU1318233 FAH five professiona references where executive, CED, engagement and certified turner When A I beli And te specialist are A Less-t it?s just 300, 2 me, there are me exact number tod was about 290. Descri world starting a A Inr af Chicago for so as an operationa name change a co became the Trans holding company. million dollars entities worldwi do financial but references, and five additional you have gone into a company as a senior resident, etcetera, in a turnaround like vs a minimum ten years experience. I am a und professional. you receive your certification? ve the year was 1995. 1 us how many certified turnaround ere in the world? an 300. I don?t know the exact number but 5, 290, something of that nature. Pardon added all the time. So I don't know the y. The last time I heard the number it for us your experience in the business ter your graduation from college. er I graduated in 1969 I went to work in pany by the name of Union Tank Car Company auditor. Union Tank Car Company had a ple of years after I joined them and Union Corporation. They are a diversified At that time there were about $800 revenue. And had something like 150 e. So as an operational auditor I didn?t I would do operational auditor. We would UEUHUEU FURL-121194- 11f?lf2013 18:JDHH 0215000 9 go in and deterrfne systems and procedures like audits and why something wrong. I then was promoted to Financial Analyst doing ing and acquisition like activity for them. We would so to a particular company that was being considered for .gguisition. We would do analysis as to the valuation, was worthy, should it be added, tier structure for t. ing purposes, etoetera. And we did a number of acgui-ftions at Trans Union. Through my career I've done over acquisitions totaling almost a billion dollar in trans-ition activity. After leaving, pardon me, at TranS 'irporation I was transferred from their headquarters in Colorado. I wa-; soon found out call assistant had been doing. went into busin=0 time and was a five years, sol; What year period? A I adv Led clients on acquisition and merger type work. I also anFised them in simulation modeling, parametric mode :ng. When I say simulation and parametric modeling we're noking at a multiple set of variables that I 1-EIIHJ-BB1 FORM 339-1 11mw20131szss FHA 4101183832? 022E030 10 might affect a cimpany or what's going on within a company. work for Securit- Did strategic pl Those types of activities. Did Pacific, National Bank, for HUD, for Kessler and Company Mortgage bankers. A number of different Cli??tt through that period. And after that five year period of time what did you do? A I joinid Martin Marietta Corporation, now part of Lockheed Martin,?in 1978. Actually in Orlando, Florida. A search consultan: head hunter found me and they moved me down to Orlando, Florida. And I spent ten years of my career with Martin going through a number of different roles. When I his in Orlando I was an analyst. I think my actual title was; 0 I?m st; A My act; Manager of Busir And at that time this was iss Development. before the adver3 of the PC, there was something called remote computingiservioea. In other words there would be a computer locate: in Orlando, Florida, but through the telecommunicatic;s lines we might have a terminal in this courtroom. The actual computing was done a 1,000 miles away. We would to work on it here. We were selling those kinds of service? at the time. I ran for a period of time the communicatie network. Which was a worldwide communications JFtwork for the Martin Marietta Data Systems PEHGHZI I HERE mm HEICITHEIME 18:34 FAH JDHH UESHUSU II 1 Corporation. Itiwas a subsidiary of Martin Marietta. I 2 then became, the2 I was transferred to corporate 3 headquarters heri in Bethesda, Maryland. They named me as dtin Marietta. I was the youngest director 4 a director of Ma 5 ever been named ro Martin Marietta Corporatien. In Martin 51. That is an officer position within 5 Marietta when ya say director you join what they call a 7 classified payre horporatien. Yen gc director, executive Martin Marietta 9 director, vice esident, president of a division and then 10 president of Mar in. When I ran as a director, I ran commercial eperaiiens in, pardon me, here in the Bethesda 12 area. I took ovir commercial operations. They were doing 13 about $21 millio; dollars in revenue annually and they were 14 losing about $2.i million dollars. Certainly a 15 deteriorating di ision. In one year as their in essence 16 CEO or COO of ruining that division for Martin I turned 17 that around, we 13 year. We did 19 dollar positive 20 division. Grew turned around SC: 22 are a division CE 23 them all togetheg. One was a hospital information system which was a troubled 25 contract. We tl ned that into a positive of nature. So PENIS-AD- I 1-311-531-EQE- 11f?Tf20131823-1 F311 410133832? ?Edf?E? most of my work around troubled one way or the foroe, I believe that reported to State. division of Mart billion dollar a5 And that was to commercial systeu with the federal decided to go fC; named an Eseoutis Marietta I was When 3 and what did yor, A I was Corporation. I maybe it's, Virginia, Corporation at billion dollars in Washington we, I joined as a Er also deputy to 1 Who at t' they. Washir. I worked on a task ithere were eight of us on the task force :Norm Augustine, iat time was the president of the systems 1n Marietta. That was approximately a vision of that $6 billion dollar entity. atudy should the systems group go intD ?st named a Vice President. D.C. headquarters. lat time was doing approximately $1.2 The systems division located about and $800 million dollar division. Eoutive Direotor and Vice President. president of systems division, about a 12 former Under Seoretary Df Computer Soienoes I was - 18:?masses? .IEIHH 025mm 13 $200 million dol!ar entity. And I was given the opportunity to parsue a program, this was a federal government procd ement for the Treasury Department. It?s called TMAC. Triasury Multi User Acquisition Contract. It was for the pure ase of computer equipment, communications, software, etcete agreement with A: contract and thai executed CBC andiATeT delivered on that contract. shortly thereaftw time? A I forn Pardon me, incorporated in myself and we gef Strategic Manage corporation incc years, run that company; job within that either a CEO or call on a Fridaj And wh: I for 18 years, That contract I negotiated the teaming That team won a $1.8 billion dollar contract was, once left at have you been doing since that point in rd Strategic Management Partners, Inc. ied Strategic Management Partners, not the '988. That's my firm. My partners are ms, along great. I incorporated in l989, jent Partners, Inc. is a Maryland 50 since that time, 17 depending .e of the entity. But we go in normally tny. It's not uncommon for me to get a night and sign a contract over the weekend FRIEND I 1% ?999 FDFIM EBBGEEHCIECI 14 and Monday morniag walk in I've been hired by the board and my first dutf longer leave. that point forwa; also advise the community when t: of this nature. they also consul worth what we entity? Does it forward? Would sorts of And yo line of work? A Yes, sir. In you: A Pardon Management Partni Probably 25 years. around work for through the husi Have 3 A I have Could A There Workouts magasir? is to say to the former CEO, you are no And I run the company from an uncommon occurrence. I and private equity more money into companies -nk we're paying for it? IE it a viable 'have a viable plan? Is it worth moving it be worth our investment? We do those i and have for 17 or 18 years. ve been doing that for 17, 18 years, that re 17 or 18 years. I?ve been doing turn received any awards or recognition iess community? gou tell us about that? a magazine called Turnarounds and that follows the turnaround industry. It 11201'22013 13:35 FAH 410182832? JDHH 0000 0212030 15 I i 1 has every year iat they call the top 12 outstanding I 2 turnaround firm-{in I assume it's the nation but it could 3 be the world. ?id they list the top 12. We have been 4 named, StrategiI'Management Partners have been named to i . . . 5 that list tWice,iin 1993 and in 1995. I am a past chairman 5 of the Turnarou i Management Association. That group, the 7 Tornaround Mana-iment Association was founded in the very 3 late 1970s and is now grown to almost 8,000 members around 9 the world. Mosl of them are in North America and in the 10 United States. h?m a past chairman. I served on the standards The ACTP Standards Committee, 12 which 13 What'aithat stand for? 14 A ACTP 1% the Association of Certified Turn Around 15 Professionals. at is a governing body that looks after the 16 certified calledlcertified turnaround professional, the CTP 17 designation thauiI mentioned. The standards committee is 13 in charge of oVeyseeing the curriculum that when they give I 19 course work and Ehere is testing for the CTPs there are six i H) of is on the collittee. Three are professionals in the i 3 community, three- are academics, they are doctors. One I i 22 specialization i in lawr both business and bankruptcy. 23 One is in UCC. ihe other is in tax and accounting. The I 24 third is in manetement of turnaround companies. I still I 25 serve on that cuimittee. I?ve been inducted in the PEHEAEI I 1mm Fara-12094 11f?lf2013 18:410?83832? JDHH 0233030 Seuthern Illindia been named a bus Management Asses contribution te still held my tc that it. teaching in the A I have: Tell Ll A In the the farmer partner at mine appreaimately 5E were te invest i the farmer Yuges contrasted with teach western, Ir: techniques of tt equity capital I going into fermej understand pref: eur varied busiI' we put tegether And we put that Have 16 University Alumni Hall ef Fame. I?ve nation has awarded me the eutstanding ness leader of the year. The Turnareund the eerperate renewal prefessien. And I seeret clearance frem Martin. I think an designed any usurses or done any usineaa field? about that. 'mid 1990s I had the eppertunity te ge te A eempanies that had nut yet privatized in avia Slovenia. At that time Werld Bank United States and Nerth American, areund management and equity er private ?vesting. You understand that when you are Seviet Union and Eastern Bleek they dun?t They don't understand what we learn in Se it's a ene week stand up course. course, iegether te go into and then taught it in 1- 1-m1 FUFIH 18:35 FAH 410733832? JDHH 17 1 Russia. It was aught in Moscow and a couple of other 2 cities. That ccirse is now today taught throughout the 3 Soviet Union, th oughout the former Soviet block countries, 4 Eastern Europe, uanada, North America, China. And in fact 5 we were honored in our course work, Boris Yeltsin who was 7 honored the court 3 profession in Russia called anti?crisis management. Where 10. called it anti?cgisis management. The significance of that 5 still president that Soviet Republic at that time, work that we had done by naming a in this country call it turn around management, they in Russia is who it?s named a profession they can teach it 12 in the universit'es. So the universities throughout Russia 13 took our course iurriculum, they?ve gone and developed it a 14 little more to ti 15 catalyst in that 16 Did yr 17 A Europes London were one of the investors in our 13 which is based 19 fund in Yugoslaxia. We did some of the transferring of 20 that course mate ial that we had done for World Bank in 3 taking it to otter parts of the world, Eastern Europe and 22 in Canada, etcetrra was funded by European Bank for 23 reconstruction :gd development. So we?ve done work for 24 them. We had oranged the course but we've done 33 work for them a& well. 1-520-531-6569 11f?'r'f20131823l3 FAH 410183882? USUIGED 18 Any etger ceurse design er teaching? A We did I'm kind ef at a grey area here. For the Bankrupt bankruptcy law, delegatienr we an outline te te" cf eur eutlines I hesitate te sa: did seme werk th? is ar within the need within the have leans that I get seme treuhle respensihle fer When I say in ti paying. facilitater tc 1? (inaudible) they might receil situaticns te u: they recever en What a presidential ad" and we cendensed it and did seme lean werkeut cemmunity. are treuhled. It leelu i-ach lean werkeut efficers, iy Review Cemmissien, Beris Yeltsin's rStifiEd hefere them and then they wished iarden me the bankruptcy law refermed ch seme ef their peeple. They teek seme teaching. it?s a much breader ceurse but we YES, The ether werk that we did is there iTurnareund Managers Asseciatien WE saw a The bankers whe i Pick any bank and they?ve lean and there's seme efficer that is that lean that's in treuhle. nenperferming. Semehedy is net hank might lese their meney er tcgether a ceurse, rather it's taught it and I?m a certified derperate rnareund and treuhled situatiens and hew hew they werk with peeple in these erstand turnaround management and hew de hese assets. periencelr if anyr de yeu have as