Chapter 3

Tuesday, January 9, 2029 (continued)...

Jim and Vic arrived shortly before we were due to begin, and Harry called to let us know he was stuck in traffic and would be a few minutes late. While waiting for Harry, Vic gave me hard copies of the two Non-Disclosure Agreements and a thumb drive containing electronic copies of the files for the agency’s lawyer to review. If approved, one was to be signed by the Thomas Domestic Agency and the second would be signed by my household staff. He told me he would prepare additional versions of the form for SIMC and the staff of each of our LLCs.”

I said, “Vic, I asked Jason for a recommendation for a bodyguard for me and for security guards for my new home and office. He suggested that I use the Huxx Security Agency for bodyguard services and the Clyde Protective Services for security guards for both my home and SIMC. Do you have someone better to suggest?”

“No, but I have a few clients who need security services, so I’ll ask them for a recommendation. I will also check out the firm Jason suggested you use for bodyguard services and the agency for security guards.

Harry had arrived as we were finalizing our talk. Once we were seated around my dining room table with mugs of coffee, Vic took charge of the meeting.

He said, “As I mentioned to each of you, the main purpose of this meeting is to discuss and plan the expansion of Carl’s business empire.”

I said, “It isn’t really an empire, Vic.”

Vic smiled and said, “I know, but I believe it will grow and become a major business. It will be major in influence, if not size, and a significant financial power.

“At this time, Carl has created SIMC and The Rattler, but he’s just started to set them up as operational businesses. Before he goes much further, I believe he needs to plan the growth of his businesses. Currently he plans to add two additional online newspapers, a research and writing group, and an investment company.

“Earlier, Carl mentioned providing financing for the two newspapers Steve and Karen would run, and to provide financing to Mary so she could create a research and writing group.

“Carl’s idea is good, but it has potential problems which he and I will discuss after this meeting.

We continued with the subject of how to expand my business activities.

After Harry and Jim left, Vic and I talked about his idea for structuring my businesses.

“Carl, you decided to turn ownership of the newspapers and research and writing group over to others because of the potential legal problems you felt would develop if you are sued?”

“Yes, that is why I decided to go with separate owners.”

“When I first learned of your idea, I agreed with you, but had a few concerns that I didn’t mention. Basically, it was a good way to set up your businesses. I have since learned further details of what you plan to do. There are major problems with doing things the way you described yesterday.

“The first problem is you have no control over those businesses. I believe the people you set up in those businesses would be loyal to you for a period of time. But, if you ever have unresolvable personal or professional differences with one of more of the owners, they could relocate their businesses elsewhere and not support your goals.

“The second and third problems are you would be opening yourself up to are: one or more criminal complaints of conspiracy and civil suits for conspiracy would probably follow.”

“To avoid these problems, Carl, I propose that you, Steve, Karen, and Mary set up three General Partnerships. Each of them would be a partner with you in one of the three partnerships. When you are ready to start the third newspaper, you can create another General Partnership. Once the General Partnership is formed, it would create an LLC. However, The Rattler is already an LLC, so all you would have to do is transfer ownership of The Rattler to the partnership you and Steve would own. The partnership between you and Karen and the one between you and Mary would each need to create an LLC.

“In forming the General Partnerships, I recommend that you and your partner enter into a written agreement that defines who is responsible for the LLC’s financial debts and the responsibilities each of you will assume in managing the LLC.

“Steve, Karen, and Mary would be the General Partner in their partnership with you. You would be their Silent Partner. You would provide the financing for each General Partnership and would own fifty-one percent of the partnership. For their time and effort in running the LLC, Steve, Karen, and Mary would each receive forty-nine percent ownership of their General Partnership.

“Your partners in the General Partnerships would be the public face of their LLC, and as General Partners, they would manage their LLC allowing others to believe they are the sole owner of the LLC.

“Each of the four LLCs would be located in your office building and would lease their office space from SIMC. The utilities and other support services will be provided by SIMC as part of the lease agreements. Since you and your partners will need to be aware of what all four LLCs are doing, you could hold meetings to discuss what each LLC is doing. The meetings could take place at SIMC or somewhere else.”

I thought about Vic’s suggestion and then said, “That sounds like a complicated structure to me, Vic. But I think it will be a better structure than what I was going to set up. I’m not sure how your structure would allow me to evade the problems inherent in my original idea.”

“Then let me clarify the reason for you. There are five elements to a conspiracy charge, which are Multiple People, Mutual Understanding, Willfulness, Overt Act, and Purposeful Act. If any of these elements are not present, then there is no conspiracy. I’m going to use The Rattler for my explanation.

“Multiple People means there has to be two or more people in the conspiracy. That element is true for The Rattler is a partnership of two equals, you and Steve. Equal in that you each choose to enter into a business agreement that created a plan to form and publish a newspaper.

“Carl, remember that your thoughts of what you intended to do with The Rattler were just a possibility that you considered. Don’t talk about those thoughts and stay with the guidelines of publishing articles to inform your readers about Invasion of Privacy. If you do that, then the only thing that can be proven is you and Steve started a newspaper to address Invasion of Privacy, and that will not prove you committed acts to support the charge of a conspiracy against any media outlet.

“Mutual Understanding means that in some way or manner, you and Steve came to a mutual understanding to try to execute an unlawful act. In this case, the partnership’s plan is to create and operate a newspaper. I would argue that carrying out a plan to create and publish a newspaper that prints articles about Invasion of Privacy is not an unlawful activity.

“Willfulness means you and Steve would have to willfully become a member of the conspiracy. I would argue that two people willfully consenting to enter into a business agreement to publish a newspaper does not satisfy that element.

“Overt Act means during the publication of the newspaper, you or Steve would have to knowingly commit at least one of the overt acts described by the formal charges. The overt act you or Steve are accused of knowingly committed must be an effort to carry out or accomplish some objective of the conspiracy.

“My response would depend on the overt acts you are accused of and what your accuser claims is the purpose of you and Steve publishing your newspaper. One of the things I would use to rebut their claims is the newspaper’s Mission Statement. In that statement, you clearly define the purpose of publishing information about Invasion of Privacy is you providing a service to your readers. I strongly suggest that you publish your Mission Statement in every issue of The Rattler.

“Purposeful Act means you and Steve must act with intent to commit your Overt Act.

“If you are ever charged with conspiracy in a criminal or civil suit, remember one key thing: you must have knowingly and purposely committed the acts identified for the purpose of harming the media outlet. As long as you stay with the purpose you defined in your Mission Statement, it will difficult for the conspiracy charge to be proven. So from now on, think of your purpose for publishing exposés as a service to your readers. Don’t comment on any thoughts that you may have had that are related to the consequences that your exposés may have on a media outlet.

“Assume that some media outlet learns of your General Partnerships and files a civil lawsuit claiming your four LLCs are committing acts of conspiracy and Invasion of Privacy. We previously discussed how I would structure my defense against Invasion of Privacy and now I explained how I would structure my defense regarding an accusation of Conspiracy.

“If two or more of your LLCs are accused of conspiring with each other in a criminal or civil suit, I would base your defense on there being nothing wrong with one person being the majority owner of multiple businesses and managing the activities of the businesses in a fashion where the businesses support each other. That is a very common business strategy in the commercial world.”

“Okay, Vic. For now, I will accept your word that we will be better off with your structure. Is there anything else that we need to address?”

“Let’s discuss your legal team, Carl. Harry and I have discussed this matter to determine the best representation we can offer you. My law office specializes in Invasion of Privacy lawsuits, which is my specialty, but my firm also provides other legal services. We need to separate your activities as the owner of SIMC to include SIMC’s ownership of your investment LLC from your activities as part owner of your General Partnerships.

“What I propose is, Harry represent SIMC and your investment company, while I represent the three newspapers and the writing group. That separates the legal problems you may have with your General Partnerships from SIMC and the legal problem SIMC may have from your General Partnerships. Harry and I can consult with each other privately, as needed, but publically SIMC will have separate legal representation from that of the General Partnerships, even though they are all represented by the same law office.”

“That seems okay to me, Vic, but how will you handle it if someone tries to link the services you and Harry provide me?”

“You and Harry will have an attorney-client relationship in regard to SIMC. You and I will have an attorney-client relationship in regard to your General Partnerships. The two relationships will be total separate at least in a legal sense. What Harry and I will do is conduct what you can think of as indirect consultations with each other. We will present each other with hypothetical questions. That will allow us to discuss the legal matters of SIMC and the General Partnerships without either of us violating the attorney-client relationship of the other. If we are not directly discussing the activities of the other’s client, no one can link the services Harry and I provide to you.”

“Okay. Just to clarify what I think you said, Harry will represent SIMC and my investment business and you will represent my four General Partnerships and their LLCs. Your consultations with each other will not violate the attorney-client relationships I have with you and Harry. Is that correct?”

“Yes, that is what I propose.”

“Okay, let’s go with that arrangement. Now where will Jim fit into this structure?”

“Jim owns and operates Conway Consulting. He will primarily support SIMC and your investment LLC in addition to his other clients. I think most of his efforts will be helping your investment company to find things in which to invest your money.

“Okay, I can see how he would fit there. What do I say to Steve, Karen, and Mary about this change?”

“Tell them that in this meeting, I told you there would be problems with what you planned to do that could result in legal problems for all of you, and I proposed this alternative to prevent that from happening.

“If they ask about the specific problems, tell them that the way things were structured could easily result in conspiracy charges being filed against them in a criminal court of law and against the four partnerships if they continued under your proposed business structure. The case would be difficult to win in court. Losing the case could result in major financial problems for all of you and possible prison time. That happens to be true, but would not happen until after you create a pattern of collusion, which could take years.”

“Won’t that happen with your structure?”

“Yes, I believe someone will eventually file conspiracy charges against you, but the end result will be different with my proposed structure. I have already told you about my defense against criminal conspiracy charges, and my defense would be essentially the same if one or multiple General Partnerships was involved. I would have to modify that defense if multiple partnerships are involved, but the end result would be basically the same.

“My structure provides the General Partnerships and their LLCs with a better legal defense. On the surface, it will appear that each LLC is privately owned. If someone files a conspiracy civil suit against any grouping of the four LLCs, then if necessary, we can reveal that you are a Silent Partner in the partnerships that own the LLCs with fifty-one percent ownership of each partnership. That makes you the controlling partner of the LLCs. Therefore, there is no conspiracy between multiple people, just one person in control of multiple LLCs and each LLC is being operated by the partnership’s Majority Partner.”

“As I said earlier, Vic, your proposed structure in confusing to me. It will take some time and a lot of discussions for me to understand all of the advantages of your proposed structure. I have always thought that it is stupid to pay an expert for advice, and then ignore what you are told. I trust your expertise, so let’s do things your way.”

Wednesday, January 10, 2029...

Jan called to let me know she had just received a copy of the contract that the title company had sent to her office by courier and she would be dropping it off to me in about half an hour. I called Vic to let him know I would be dropping the contract off at his office sometime this morning.

I called Steve, Karen, Bill, and Mary to let them know I needed to discuss the outcome of my meeting with Vic. I knew Mary and Bill would be busy with Bill’s clients, so I called them first. Mary said they wouldn’t be able to join us until after their office closed at five-thirty. I invited the two of them to come to a meeting this evening with Steve, Karen, and me at six o’clock. They accepted and I then called Steve and Karen. I told everyone that we would meet at my house at six and I would provide Chinese takeout for dinner.

After we ate, I started our meeting with, “I apologize for not being able to follow through with our current plans. Yesterday, Vic explained to me that there is a problem with our current structure that could be disastrous for all of us. The main problem he saw for us was criminal charges being filed against us. He also sees a strong possibility of conspiracy civil suits, which he said we would probably lose. I would have SIMC pay the financial award in a civil lawsuit like that, but it could put a major crimp in SIMC’s finances. If any of us were convicted in a criminal court, there would be little I could do if any of you were sent to prison other than pay for an appeal. Since I would a minority owner in your LLCs, there is a very good possibility that I would be in prison also.

“Vic proposed an alternate structure, which I decided was acceptable for all of us. What his structure does is for me to set up separate General Partnerships with each of you and whoever we decide on to run the third newspaper. You would be the General Partner and I would be the Silent Partner in each partnership with me owning fifty-one percent of each partnership. Each partnership would then create an LLC, one for each business; but that doesn’t limit the number of LLCs each partnership can create.

“I don’t fully understand all of what he described. He told me there were five elements to conspiracy and all five elements must be true for there to be a conspiracy. One of those elements is multiple people acting together to conspire against another party.

“The business structure Vic is proposing gives me control of each General Partnership. Vic said that my owning fifty-one percent of each partnership would be me having controlling interest in the four LLCs, so since it would essentially be four partnerships controlled by one person, there would be no collusion between the partnerships.

“He also talked about the other four elements of collusion and why those elements would not support collusion between me and my partner in each General Partnership, but I don’t recall everything he said. There is one thing that I do recall him saying, and that is the newspaper’s Mission Statement would be a key element in his defense strategy. All of our newspapers need to have a Mission Statement that defines our papers providing a service to our readers.

“As far as I am concerned, if we go with Vic’s structure, I would consult with each of you regarding our LLC. When we decided what was best for our partnership, I would be the one to officially made the overall management decisions. The three of you would be making the day-to-day decisions for the LLCs. Each of you will functionally operate your LLC as if you are the sole owners. The only control I intend to exert at that level is to ensure we coordinate our activities in supporting each other, which is what we agreed to do earlier.

Steve, Karen, and Mary were not happy with my explanation of Vic’s proposed business structure; however, they also trusted his judgement and none of us wanted to go to prison. As a CPA/Tax attorney specializing in corporate law, Bill must have understood why Vic wanted this structure set up, better than I did, for he was in favor of it. He tried to explain Vic’s structure and why it would be better for us. I didn’t understand Bill’s explanation better than Vic’s, but eventually we all agreed to go with Vic’s plan, even if we didn’t fully understand why it was better.

Thursday, January 11, 2029...

I had just finished breakfast and was expecting Jason to arrive soon when my phone rang.

“Carl Simmons, can I help you.”

“Morning, Carl, this is Barney Hart. Last night, I received word that your offer has been accepted. Do you have a preference as to who you want to use to inspect the office building?”

“I’m not familiar with the inspection companies, Barney. If you know of one that does good work at a reasonable price, go ahead and schedule the inspection with them. Did the seller’s agent indicate who they would use as a title company and have an estimated date for closing?”

“Yes, he uses Corinthian Title & Escrow, which is about fifteen miles north of Solana Beach in Carlsbad, and he estimated a closing date of around the twenty first of January.”

“Okay, Barney. For planning purposes, can the seller provide us with a current floor plan of the building; and if not, can we go in and take our own measurements?”

“I don’t know why the seller would have a problem with that, Carl, but I will ask the agent. Anything else?”

“Not for the moment, Barney. If you can get back to me as soon as possible, I would appreciate it. Bye.”

“Bye for now.”

Jason arrived while I was talking with Barney. I pantomimed drinking coffee and waved him to the kitchen. After hanging up, we greeted each other and I let him know that at the moment I had nothing scheduled for the rest of the day, but had to arrange for insurance for my new home and needed to apply for business licenses in Solana Beach.

I left Jason in the living room and headed to my office. I checked my online address book for the phone number of my insurance agent, Wallace Cullen, and called him.

“Morning, Wally. It’s Carl Simmons.”

“Hi, Carl, what can I do for you?”

“I am in the process of buying a new home and an office building, and will need to insure them.”