Kelley Lynch Email TO IRS, FBI, DOJ, and Treasury Re. Kory's January 14, 2005 Proposed Mediation Document

From: Kelley Lynch <kelley.lynch.2010@gmail.com>
Date: Tue, Oct 28, 2014 at 7:41 PM
Subject: Leonard Cohen - Proposed Meditation Document (Revised in conversations)
To: "irs.commissioner" <irs.commissioner@irs.gov>, Washington Field <washington.field@ic.fbi.gov>, ASKDOJ <ASKDOJ@usdoj.gov>, "Division, Criminal" <Criminal.Division@usdoj.gov>, MollyHale <MollyHale@ucia.gov>, nsapao <nsapao@nsa.gov>, fsb <fsb@fsb.ru>, "Doug.Davis" <Doug.Davis@ftb.ca.gov>, Dennis <Dennis@riordan-horgan.com>, rbyucaipa <rbyucaipa@yahoo.com>, khuvane <khuvane@caa.com>, blourd <blourd@caa.com>, Robert MacMillan <robert.macmillan@gmail.com>, a <anderson.cooper@cnn.com>, wennermedia <wennermedia@gmail.com>, Mick Brown <mick.brown@telegraph.co.uk>, woodwardb <woodwardb@washpost.com>, "glenn.greenwald" <glenn.greenwald@firstlook.org>, lrohter <lrohter@nytimes.com>, Harriet Ryan <harriet.ryan@latimes.com>, "hailey.branson" <hailey.branson@latimes.com>, "stan.garnett" <stan.garnett@gmail.com>, sedelman <sedelman@gibsondunn.com>, JFeuer <JFeuer@gibsondunn.com>, "kevin.prins" <kevin.prins@ryan.com>, Stuart Fried <sfried@gispc.com>, dfriedman@gispc.com, mcbow <mcbow@aol.com>, zia.modabber@kattenlaw.com, mtailelman@ftllp.com, ken <ken@clevelandcpa.com>, rwest0@gmx.com, Sherab Posel <poselaw@gmail.com>, bdeixler@kbkfirm.com, Paul Burger <paul@sohoartists.co.uk>
Cc: Jeffrey Korn <jeffkornlaw@live.com>

Hello IRS, FBI, DOJ, and FTB,

Please find below the meditation notes Kory provided DiMascio & Berardo on January 14, 2005.  This memorandum was cc'd to Ira Reiner and Kevin Prins.  I was advised that Reiner would handle the litigation.  My lawyers, Cohen, and Kory all told me that they were going after ALL of Cohen's representatives (including Grubman, McBowman, Cleveland, Greenberg, Westin, and others).  I was told first in a civil matter and then criminal matters.  I was asked to testify that Cohen was defrauded by his representatives  I was not advised that I would be asked to testify that I approved their conduct.  I was advised that Cohen and Kory felt I was also defrauded by Cohen's representatives.  I have copied most parties in who were mentioned in this document.  This document, once revised re my notes, will be attached to my Motion being filed with Judge Hess.  

I have copied Jeffrey Korn in as a courtesy.  He is listed as attorney of record.  I have also copied Greenberg's lawyer, Westin, Stuart Fried, Don Friedman, Ken Cleveland, and others, as a courtesy.  

That's it for now.  Let me know if you have any questions.  I've also attached this as a word document.  Kory's original document will be attached to this document with my notes.  My notes are my personal opinions, what I witnessed, and address the evidence.

All the best,

Kelley

MEMORANDUM

To:                  Dianne DiMascio, Esq., David Berardo, Esq., and Dale Burgess, CPA

From:              Robert Kory

CC:                  Ira Reiner, Esq., Kevin Prins, CPA

Re:                  Cohen v. Lynch, et al.

                        Open Accounting, Tax Issues, and Legal Issues

Date:               January 14, 2005

NOTE:  Kelley Lynch comments in bold red.  Kelley Lynch did not agree to Kory’s terms re. the Memorandum or much of what is alleged.  It just appears to be some basis for a fabricated and fraudulent narrative and potential defense to allegations related to criminal tax fraud involving Leonard Cohen. 

Following is a summary of issues in anticipation of our conference call at 3PM today to discuss steps toward mediation of the above matter.  Needless to say, the information in this memo is preliminary and provided in the context of settlement negotiations.  It should not be construed as an admission as to any matter referenced herein.  It shall also not be admissible at trial should a settlement not be forthcoming.

I.                     Accounting

A.       Cash Flow Analysis - Cohen

·         Need documentation re. 5 unidentified transactions re. Traditional Holdings totaling $464,000 from Greenberg.  Lynch never received this documentation.

·         Need documentation re. 6 unidentified transactions re. The Cohen Family Trust totaling $245,000 from Greenberg.  Lynch never received this documentation; is unaware of any Cohen Family Trust account; and is unclear if this refers to the Cohen Family CRT.

·         Royalty summary since 1997

·         Publishing (sold through 1997)

·         Writer’s

·         Artist record (sold through 2001)

·         Has Cohen (and his entities) been paid all royalties due to him?  Lynch has not received this information; the entities are not Cohen’s; and her royalty/IP interest has yet to be addressed.

·         1996 and 1997 analysis of Cohen Family trust assets moved from Dean Witter to Greenberg.  Lynch is unaware of any Leonard Cohen assets (Dean Witter account was not part of any trust and this account was opened, after Lynch and her husband referred Cohen to Bud Talbot (Dean Witter), long before the CRTs or family trust (for probate purposes) were created.

B.       Cash Flow Analysis – Lynch

·         Information re. Lynch’s bank accounts, brokerage accounts, investments, real property, etc. in order to determine what Lynch received from Cohen entities and how funds used.  These are not Leonard Cohen’s entities and this information was not required.  An accounting related to these entities that included assets, liabilities, equity, etc. was required.  The IP assets owned by BMT should have been valued.  All corporate distributions, pursuant to the corporate books and records should have been addressed, all income confirmed on K-1s should have been included, all shareholder loans or advances re. these entities (based on ownership interest in the IP) should have been included.  That would include, but is not limited to, Leonard Cohen’s loans/expenses re. TH totaling approximately $6.7 million and the interest due thereon now approximating $4.0 million. 

·         Bank statements

·         Checks and wires

·         Deposit records

·         Telephone transfers

·         Real property ownership

·         What are management fees due from Traditional Holdings and how do those fees relate to the commission arrangement?  The management fees to Lynch (for promissory note payments, taxes, etc.) total $20,000 per year and $20,000 per month.  Westin confirmed the $240,000/year amounts in his March 2002 letter that Cohen acknowledged receiving.  The $20,000/month together with the $24,000 in the operating agreements total $44,000/year and relate specifically to the repayment of Lynch’s promissory note.  Prins failed to address these amounts on the fraudulent expense ledger.  Cohen confirmed that the $20,000/year amount in the management fee was accurate but has apparently taken the position that the second $20,000/month amount was a typo even though it’s on a separate payout dates.  The TH corporate distributions, management fees, etc. have nothing whatsoever to do with Lynch’s commission fees for her services as Cohen’s personal manager.  Her ownership interest in TH, BMT, Old Ideas, LLC have nothing whatsoever to do with her fees for services rendered as Cohen’s personal manager. 

·         Does Kelley Lynch have an “equity interest” in Leonard Cohen i.e., anything he has created?  Is that “equity claim” continuing as to assets or rights sold after termination?  Yes, pursuant to the corporate books, records, agreements, stock units, notarized documents, Lynch’s Indemnity Agreement, all memorandum and documents, and tax returns, Lynch has an equitable ownership interest in TH, BMT, and Old Ideas, LLC.  These interests do not belong to Leonard Cohen.  The non-revocable BMT assignments date relate to contracts dating back to 1967.  These documents were transmitted to Leonard Cohen’s legal representatives, as were the corporate books for TH-BMT-LCI, in or around October 2004.

·         Did Kelley Lynch have any rights to take funds from personal accounts?  Cohen Family Trust investment accounts?  Leonard Cohen deposited royalty income related to record royalties, book publishing, etc. into his personal account.  The answer to this question is YES.  Lynch has no idea why Prins took the position that she was not entitled to commissions on royalties deposited into Cohen’s personal account when she was entitled to 15% commission on gross income.  Furthermore, Lynch is in possession of at least one email wherein Cohen confirms that she received a commission related to his personal account in the fall of 2004.  This issue has now caused serious problems with respect to payments Lynch received and that is precisely why she continues to request a 1099 from Leonard Cohen personally for the year 2004, etc.  The non-revocable assignments date back to contracts from 1967.  Lynch is unaware of any Cohen Family Trust investment account other then the two charitable remainder accounts Greenberg maintained for Cohen. 

·         How do the parties reconcile their intentions as to Kelley Lynch compensation in light of the conflicting and incomplete documentation related to Traditional Holdings, LLC, Blue Mist Touring [Company], Inc. and LC Investments, LLC and aborted CAK bond financing transaction?  There is nothing conflicted as it relates to Lynch.  Lynch owns 15% of BMT, including the IP assigned, and has a 99.5% ownership interest in TH.  The ownership interest in TH is irrelevant due to the fact that Lynch and Cohen both signed the Annuity Agreement.  That Agreement, and the corporate records, reflected that loans/advances were acceptable but had to be repaid (and Cohen signed this document acknowledging this) within 3 years at 6% interest.  Lynch handled no corporate, accounting, tax, financial, or investment matters so this question does not apply to her.  The assets were formally assigned to BMT; Cohen dictated the specific language compensating Lynch for her work on behalf of the corporation (and those assets) and NOT on his behalf; LCI collected royalties re. assets owned by BMT and failed to repay those amounts to BMT; Cohen owns LCI 100% but K-1s have been transmitted to State of Kentucky (2003, 2004, 2005) indicating that Lynch has an ownership interest and received $0 income during those years; and Lynch had nothing to do with the aborted CAK bond deal.  See Leonard Cohen’s declaration in the CAK litigation after he personally decided not to pursue that deal and chose instead to pursue an IP deal with Sony.

·         Which company owns what assets?  BMT owns the assets.  Nothing was assigned to LCI or TH and, according to Cohen’s Complaint, the entity was not unwound and the assignments/assets were not formally removed after they were formally transferred.

·         Were any asset transfers valid and enforceable under applicable corporate law?  If so, which one(s)?  The corporate records reflect the intention of both parties; the assignments were non-revocable and signed by both Lynch and Cohen; Cohen dictated the language in the minutes compensating Lynch; the assets were not removed from BMT or transferred to another entity; and if this was not valid, for some obscure reason Lynch does not understand, then she was fraudulently induced and defrauded.  Lynch did not prepare tax returns and repeatedly advised Cohen, including in emails with Westin copied in, that she did not handle IRS, tax, accounting, corporate matters, loan documents, etc. 

·         How were assets sold by Traditional Holdings to Sony?  Is Lynch asserting transaction invalid and should be rescinded?  Internal Revenue Service, and other tax authorities, should answer this question.  Lynch’s lawyers explained this situation like this:  BMT owns all assets; LCI, LC, and possibly others, collect royalties related to assets owned by BMT, and TH sold assets it does not own.  IRS opinion has been requested by Lynch. 

·         How to explain Cohen and Lynch participation in multiple conflicting asset transfers?  One way is to look historically at what unfolded, the deals that were being pursued, all legal and other documentation, corporate books and records, federal and state tax returns, agreements, understandings, emails between all parties, Westin’s March 2002 letter to Cohen (that failed to address Blue Mist), Neal Greenberg’s lawsuit and his understanding, and speak to all representatives involved in these deals and the structures, etc.  Richard Westin worked for Leonard Cohen and Lynch gave him limited power of attorney to form Traditional Holdings, LLC.  She and Cohen also consented to permit Westin to draft her Indemnity Agreement (that Cohen agreed she should receive, directed Wesitn to prepare, and which was signed by both parties). 

·         What are Kelley Lynch compensation rights, if any, under LC Investments and ongoing writer’s royalties?  LCI collects royalty income on behalf of assets owned by BMT.  Therefore, Lynch owns 15% of all IP.  After Cohen inquired, Westin wrote and confirmed that he felt Lynch should have a 15% ownership interest in LCI.  This created problems due to the SOCAN internal policies that arose when CAK/Koppleman demanded a bankruptcy proof entity.  Cohen signed the Terms & Conditions letter re. CAK and this issue was addressed therein.  LCI was created for the sole purpose of pursuing the CAK bond deal.  Cohen aborted that deal.  It was his personal decision and this is addressed in the declaration he submitted to the court in connection with the CAK litigation.  Cohen and Lynch agreed that, due to the SOCAN internal problems, LCI could collect her share of IP per the non-revocable assignments. 

·         How to reconcile aborted bond financing involving CAK in 1999 and various entities?  See Cohen’s declaration in the CAK litigation matter and speak to Charles Koppelman, his representatives, Peter Lopez’s former partner, and other representatives, as well as all paperwork related to that matter.  Also, see Stuart Bondell and Bob Bowlin at Sony.  They can explain why the did not want Cohen to pursue the CAK deal.  Cohen evidently felt comfortable paying his CAK settlement amounts with TH assets although they are not TH expenses. 

C.       Lynch compensation – rights under Traditional Holdings (Kory Doc labels this as “B” – Lynch has corrected lettering throughout document)

·         How does Lynch right in 15% commission paid at closing reconcile with other rights to ongoing compensation?  Lynch’s fees for her commission as personal manager have nothing whatsoever to do with her ownership interests in BMT, TH, Old Ideas, LLC, and/or possibly other entities. 

·         Sales price represents discounted value of royalty stream?  Yes, the TH deal was present day valued.  Lynch did not demand complex stock sales that leveled the playing field and reduced potential buyers to essentially Sony Music.  Lynch and Greg McBowman met with Cohen, sat at his picnic table, and discussed why he should NOT sell the IP.  The CAK bond deal was far more attractive and afforded the possibility of retaining ownership interest in the IP.  The transaction fees Cohen personally incurred would have been far less burdensome.  Those fees are his and he chose to abort the CAK bond deal and pursue the 2001 Sony sale.  The discounted sales price should be addressed re. Lynch’s ownership interest in IP and by the IRS and other tax authorities.  Asset valuations remain at issue.

·         Does payment of commission on closing satisfy 15% commission rights as to all revenues from those assets?  No.  See the Sony Deal Memorandum and other documents.  There remain other outstanding amounts due this entity.  These comments relate specifically to Traditional Holdings, LLC.  What assets?  The assets owned by BMT and sold by TH?

·         What is Kelley Lynch due under the Management Agreement?  Read the agreement.  $20,000/month; $20,000/year.  See Westin’s March 6, 2002 letter that Cohen confirmed receiving.  See corporate records re. other distributions and the profit/loss sharing – commensurate with ownership interest in TH. 

·         Is the Management Agreement valid and enforceable.?  Yes or Lynch was defrauded and fraudulently misled.  IRS and other tax authorities should also weigh in on this agreement.  Everything that does not benefit Cohen was evidently a typo or mistake.  Cohen is very clear in his Complaint (where he conjured up a fabricated narrative to address these issues) that he is the alter ego who engaged in self-dealing and, now, theft and further tax fraud.  The IRS/FTB refunds have been challenged as fraud.

·         Was Kelley Lynch authorized to make loans? 

·         To herself?

·         To Leonard Cohen?

As set forth in the Operating Agreement, Traditional Holdings was authorized to issue loans to its members, Cohen and Lynch, as long as the loans were paid back before the annuity obligations commenced.   See also Annuity Agreement.  See also Greenberg and Westin’s ongoing confirmations that Lynch, as an owner, had every right to receive a shareholder loan.  Cohen was aware of all shareholder loans and he was aware that his lawyer was to prepare all promissory notes.  Nevertheless, there is evidence of what is a loan, distribution per corporate records, etc. so the loan amounts should not be at issue.  Cohen’s lawyer, Richard Westin, planned to recharacterize the nature of all shareholder loans.  Lynch and Cohen privately agreed that they would hire a third party accountant to prepare a complete accounting related to their agreement; her compensation of 15% dating back to 1988; BMT; non-revocable assignments; TH; LCI; Old Ideas; shareholder loans/advances/expenses; etc. and monies Lynch expended on behalf of Adam Cohen and Lorca Cohen that would include fees for Adam Cohen’s publicist and independent record promoters. 

D.      Lynch duties and obligations under Traditional Holdings. (Kory Doc labels this as “C” – Lynch has corrected.)

·         What were and are Kelley Lynch’s fiduciary duties to Leonard Cohen?  Kelley Lynch’s fiduciary duties were to Traditional Holdings, LLC – not the alter ego, Leonard Cohen.  Traditional Holdings (and Lynch/Cohen) had an obligation to abide by the terms of the corporate books, records, ownership interests, distributions pursuant to these records, and the agreements and understands related to the Annuity Agreement.  That agreement provided for an annuity to Leonard Cohen beginning on or around January 2011.  Cohen signed that Agreement which clearly states that he was entitled to loans/advances that had to be repaid within 3 years at 6% interest.  Cohen understood that his personal tax lawyer, or possibly another legal representative, would prepare promissory note and loan documents.  Lynch did not handle this type of legal documentation.  Leonard Cohen’s loans at this time total approximately $6.7 million.  The interest on those loans now approximates $4.1 million.  Leonard Cohen owes TH approximately $11 million.  Pursuant to the Annuity Agreement all annuity payments may be withheld until Cohen repays his loans with interest.  They have not been repaid.  Additionally, Leonard Cohen’s personal tax lawyer extinguished the annuity obligation from the federal tax return in 2003 and moved the annuity amount (approximately $4.8 million) into the capital accounts.  The capital accounts are owned, respectively, 99.5% by Lynch and .5% by Cohen.  Lynch’s lawyers and accountants brought this to her attention in the fall of 2004.  Lynch cannot address the federal tax returns; handled nothing have to do with IRS or tax matters and has no answers for why this was handled in this manner.  Her promissory note was evidently extinguished in 2002.  Lynch’s lawyers brought this, and other tax matters, to her attention in the fall of 2004.  Lynch cannot address the tax returns and does not understand them.  During Lynch’s 2012 trial, Cohen testified in the following manner.  Lynch has no idea what mistake was made, what Westin rectified, and/or why Cohen was compensated for the alleged mistake.

PD:  Now, you were aware that 99.5% of that Company was owned by Ms. Lynch, correct?

Cohen:  That was a mistake and it was rectified by the lawyer who drew up the papers.  And in arbitration a substantial sum of money was awarded me for his mistake.

PD:  And that lawyer’s name?

Cohen:  Richard Westin.

PD:  And you had arbitration with him?

Cohen:  That’s correct.  RT 287

PD:  And, in fact, you had actually taken money from that account to buy homes, correct?

Cohen:  Yes, I had.

PD:  You took money from that account to buy a house for your son, correct?

Cohen:  That’s correct.

PD:  To buy a house for your girlfriend, correct?

Cohen:  Yes.

PD:  Okay.  So you – it’s fair to say that you did take money from that account?

Cohen:  That’s correct, yes.

PD:  You were aware enough about that account to know that you could take money from that account?

Cohen:  That’s correct.  RT 288

·         Did she have a duty to convey Greenberg’s letters warning about the dangers of overspending?  These letters were read to Cohen; placed on his desk in the office she permitted Cohen to use; and Cohen was gravely insulted by Greenberg’s preposterous assertions.  Cohen was well aware that he was pursuing a 3^rd IP deal; delivering a new studio album (for which he was paid $1 million advance in fall of 2004); planed to tour and was contractually obligated to do so; would make a tremendous amount of money on merchandising in connection with the tour; Lynch was negotiating a multi-million lithograph deal; he planned to deliver a new book; etc.  Cohen did not want Greenberg to be alerted to the $1 million “Dear Heather” advance he received in fall of 2004; advised Lynch and others not to discuss their compensation arrangements with Greenberg or others; and did not want Greenberg or others to know of his potential income.  Lynch has no idea why and refuses to speculate about Cohen’s motives.  The letters Greenberg sent contained very specific IRS warnings that remain relevant (and not laughable unlike his cover-your-ass statements as Cohen has now grossed approximately $50 million touring since 2008).  Those IRS warnings address the dangerous level of Leonard Cohen’s borrowing from TH; the fact that IRS could view his loans advances/expenditures as disguised salary; and the fact that IRS could view this deal as Cohen’s involvement in self-dealing.  Lynch has asked IRS for a formal opinion.  Cohen did not overspend, according to what he told her, and he found Greenberg’s letters offensive. 

·         Does she have a duty to document loans?  No.  Lynch did not handle loan or legal documents; was clear with Cohen about this (in emails with Westin copied in), and Greenberg had the specific distribution or withdrawal amounts – not Lynch.  Leonard Cohen seems to believe he had no obligations to these entities or Lynch.  It is astounding.  There was and remains no fiduciary obligation on Lynch’s part until the year January 2011 when all shareholder loans had to be repaid.  The annuity obligation was extinguished from the tax return two years before Cohen filed his retaliatory lawsuit and he was not entitled to payments until he repaid his loans/expenditures with interest.  That amount now totals approximately $11 million.  Due to the fact that Cohen refuses to address this situation, Lynch now views those amounts as evidence of embezzlement, etc. 

·         Personal property that may have been purchased with Cohen’s funds i.e. jewelry.  Lynch’s personal property is NOT at issue.  Corporate assets are NOT “Cohen’s funds.”  He continues to argue alter ego.  However, this statement explains why LAPD detectives came to Lynch, advised her that Beverly Hills Jewelry & Loans contacted them to discuss Lynch, etc.  Lynch then phoned Beverly Hills Jewelry & Loans and was advised by the manager, Anthony, that LAPD lied to Lynch.  LAPD contacted Beverly Hills Jewelry & Loans.  The loans were NOT in Lynch’s name as someone else took them to the shop.  They were relatively MINOR amounts and Lynch showed LAPD the receipts.  Lynch and LAPD discussed Cohen’s tax fraud.  LAPD then told Lynch that they were investigating a jewel thief in her neighborhood, wanted to be certain the jewel thief never sold her jewelry, and asked her to contact them if she or the teenagers heard anything – admonishing her not to place herself in harm’s way.  Lynch scanned their card and emailed it to the IRS Commissioner’s Staff; testified about the situation during her 2012 trial; and has never heard anything so insane in her entire life.  Lynch initially asked these detectives if something had happened to her son.  Lynch has asked IRS, FBI, DOJ, and others, to investigate this situation as it is unconscionable. 

PD:  Now, at any time after your business relationship with Mr. Cohen ended, did the police, either federal or state, ever question you for fraud?

KL:  No.  I had an unusual encounter where LAPD showed up at my house, lied to me, sand said there was a jewel thief in my neighborhood and that they were investigating this jewel thief and they would like to see receipts for jewelry I may have pawned to make sure a jewel thief didn’t sell them. 

PD:  Okay.  Ms. Lynch,  if you could just focus on the questions I ask.

KL:  Well, that was law enforcement, right?  RT 460-461

·         Any loan agreements on behalf of Cohen at CNB or any other institution signed by Lynch and subsequent use of proceeds.  Cohen should provide evidence rather than asking this type of question and provide agreements re. his loans from TH, etc.  Furthermore, there is evidence that Cohen asked her to assist Adam Cohen in paying off his house and asked her to obtain loan documents from CNB so that he could do this.  Adam Cohen’s representatives and others were handling these matters, when she no longer represented Adam Cohen, and emails exist documenting that fact.  Furthermore, see POA. 

·         Analysis of credit card charges made by Lynch to Cohen credit cards and paid by Cohen:  Citibank 1, Citibank 2, and Amex.  Cohen should provide the statements and there should be, as agreed to previously (re. the accounting) an analysis of all credit card expenses Lynch paid related to Leonard Cohen, Adam Cohen, Lorca Cohen, and others that are Cohen’s personal expenses.  Additionally, Adam Cohen had an additional card on Lynch’s Amex account so that should be analyzed.  Finally, the $75,000 payment deposited to Cohen’s account re. Amex charges should be analyzed as well.  All communications with Cohen and Amex should be investigated by IRS, DOJ, and FBI with an eye towards fraud.  Leonard Cohen and Kelley shared credit cards, had additional cards on one another’s accounts, Lynch frequently paid for his expenses on her personal card, and at least one of his children had an additional card on her account.  Leonard Cohen has lied excessively about all of this and appears to have engaged in inconceivable fraud. 

·         Assets owned or controlled by Lynch or Lynch’s parent’s which could form the basis of restitution fund.  Cohen owes Lynch millions.  Lynch has NO ASSETS since Cohen willfully bankrupted her and destroyed her life but is not the “author of her misfortunes.”  He merely resembles a common thief, fraud, and con artist and the activity with respect to Lynch is not poetic but unlawful.  Lynch’s parents have NOTHING to do with this situation and they most certainly did not hide Cohen’s monies in off-shore accounts as he fraudulently accused them and slandered them.  Cohen, on the other hand, had off-shore account with Loyens & Volkmaars, appeared to have a document (possibly a bearer bond) related to R&M Productions that Lynch saw ONCE in a file on his desk, had a Swiss bank account that he advised Lynch he personally opened, and may be thinking of himself and his own tactics.  When he had these accounts, and publishing deals signed with the Loyens & Volkmaars accounts, Cohen had a U.S. green card and was a resident.  IRS should definitely investigate all of this and review the 1977 tax memo prepared for Cohen advising him that he did not have to pay taxes in U.S., Canada, or Greece (where he had residences) but cautioning him not to have a green card.  Lynch provided the IRS with that document. 

E.       Reconciliation of Cohen Accounts - Lynch Accounts (Kory Doc labels this as “C”)  NOTHING FOLLOWS

F.     Tax (Kory Doc labels this as “D”)

·         Actual income received by entity compared with reported income reported on income tax returns, including analysis of sources of all income reported on returns:  Cohen, Lynch, LCI, Traditional Holdings.  Cohen fails to address LC Productions (now BMT), Blue Mist, Old Ideas, possibly other entities, the non-revocable assignments, all contracts re. IP dating back to 1967; all royalty statements and contracts related to the IP dating back to 1967; etc.  Lynch didn’t handle tax returns or tax matters and has nothing to say about those issues.  She was clear with Cohen about that fact.  Where’s the analysis? 

·         Actual monies paid to Lynch compared with reported monies paid and taken as business expenses on tax returns.    Should be – actual assets owned by all entities; asset valuations – including re. BMT IP and non-revocable assignments; all royalty agreements and income; a separate analysis of all expenses/income/loans , etc. re. each individual entity, loan documents supporting loans between these entities; tax returns; actual monies reported; corporate business expenses vs. personal expenditures such as Leonard Cohen’s personal transaction fees re. the TH deal; etc.

·         Actual tax payments v. required payments (all entities).  IRS and other tax authorities will have to answer this question once the corporate accountings are properly completed.  Cohen refuses to provide Lynch with the information, including with respect to corporations she has an ownership interest in (as supported by the corporate records and tax returns) and refuses to permit her to inspect the records.  Cohen has now taken the legal position that the fraud domestic violence related orders prohibit Lynch from contacting the Registered Agent of at least one entity that transmitted tax information to IRS and State of Kentucky indicating that Lynch was a partner. 

·         Impact to the Cohen entities and to Lynch if Cohen agrees to “forgive” the debt, if any, owed by Lynch to Cohen or Cohen entities.  The entities are NOT Cohen’s entities but he views them as an extension of himself and continues to argue alter ego.  Cohen is in NO POSITION to FORGIVE corporate debt and should review corporate books, records, operating agreements, and the Annuity Agreement he personally signed.  He should also address his “loans” or expenditures totaling approximately $6.7 million and the interest that has now accrued approximating $4 million in interest.  The approximate total of loans/expenditures Cohen owes TH is now $11 million.  Lynch refuses to enter into any discussions about forgiving loans.  IRS should address this situation and Cohen’s unconscionable conduct with respect to corporate entities and corporate governance.  See Greenberg and Westin’s position re. the impact to TH:  Cohen’s level of borrowing was dangerous to the structure; IRS could view that level of borrowing as an indication that Cohen engaged in self-dealing, etc. 

·         Impact of phantom income to Lynch from profit allocations without distributions from Traditional Holdings.  Lynch has attempted to address this serious issue but Cohen and his representatives refuse to respond.  Lynch has asked IRS to provide her with a formal opinion.

·         Impact, if any, the distributions and “loans” from the trusts have on tax free/tax deferred status of the trusts.  I assume this refers to the two charitable remainder trusts Ed Dean helped create for Cohen re. the Stranger Music, Inc. restructuring.  Lynch has NO IDEA what loans Kory is referring to; had nothing to do with the CRTs; and those accounts were maintained by Greenberg.  Lynch had no control over Greenberg and had no imput into this situation.  The IRS should answer Kory’s question about the impact on tax free/tax deferred status of the trusts and review Ed Dean’s comments re. the assignment of personal service contracts to the CRTs as well as the restructuring of Stranger Music, Inc. and Marty Machat’s letters confirming that he/Machat & Machat owned 15% of Stranger Music, the assets, and transmitting Machat & Machat’s final $30,000 payment to Carter/Irving Trust.  According to prosecutor Sandra Jo Streeter, this issue “annoys” Leonard Cohen.  According to Lynch and Steven Machat this is part of her case as Cohen failed to apprise her of Machat & Machat’s 15% ownership interest in SMI when he sold it to Sony/ATV.  Lynch has now provided the evidence Steven Machat requested in this email: 

From: <smachat@gmail.com>
Date: Wed, Feb 8, 2012 at 9:26 PM
Subject: Hi
To: Kelley Lynch <kelley.lynch.2010@gmail.com>


I need the stranger papers as I am about to sue those 2 evil liars. Cohen and his Satin, Kory.

Please get it to me tomorrow.

I can not keep waiting.

Thanks and be safe.
Sent from my Verizon Wireless BlackBerry

https://www.scribd.com/doc/57415308/Kelley-Lynch-s-Conversation-With-Steven-Machat-Leonard-Cohen-and-Phil-Spector

Lynch personally believes that these emails with Steven Machat, and this transcript sent to Michelle Rice in response to her fraudulent February 11, 2014 email to Lynch re. the Boulder order, may have led to her arrest and probably were Cohen’s motive for involving LAPD’s TMU.  This transcript was concealed from Lynch’s jurors although Streeter repeatedly referred to this email thread.  Michelle Rice, as Lynch’s lawyer pointed out, lied about a material fact to Lynch in that email and copied in IRS, FBI, Treasury, Ron Burkle, and Dennis Riordan.  She did not, as she testified, hit reply all because DOJ was not cc’d.   See excerpts of Steven Machat’s book below that Lynch believes are accurate. 

·         Potential tax liability to Lynch for failing to report all of the monies received from Cohen entities (assuming she failed to report all the income).  Fascinating statement particularly given the fact that Cohen was not Lynch’s husband, has no legal right or access to her tax records, and Kory qualifies this outrageous statement by saying “assuming she failed to report all the income.”  Furthermore, the entities are NOT Leonard Cohen’s and he continues to argue alter ego.  Lynch’s taxes are paid but she believes Cohen should address why his tax lawyer failed to report the income from the 2001 Sony sale on the TH returns, etc.  And, why Cohen failed to transfer the $1 million he personally received to TH, etc.  What has Cohen failed to report to IRS?  Did he report his TH loans/interest to IRS as disguised salary?  How about the monies he received in LCI that he failed to transfer to BMT?  Etc.

·         Impact on all parties of Traditional Holdings failure to report sale to Sony, or manner in which sale treated (delta of $5 million basis and $8 million sale price may be consumed in fees paid to third parties).  Lynch has no obligation to discuss the manner in which ANY TH tax return was handled.  She did not handle IRS, tax, or accounting matters and was clear with Cohen, Westin, and others about that fact.  The TH tax returns should have been amended but IRS has advised Lynch that they have not been.  Lynch has no idea what the delta of anything is here.  She believes Cohen’s tactic was as follows:  Six months PRIOR to receiving the default judgment (and there is NO IRS HOLDING re. that judgment) Cohen’s accountant, according to Kory’s declaration in response to her motion to vacate, filed Cohen’s 2005 tax return with a fraudulent theft loss (that has been vigorously challenged with IRS and FTB), and amended his 2004 and 2003 returns showing a carry-back.  Lynch assumes Cohen took the $8 million; showed a fraudulent theft loss of approximately $5 million; and deducted his personal transaction fees (paid by TH) and therefore shoed $8 million less $5 million = $3 million - $3 million personal transaction fees = $2 million; less the $1 million advance he received in 1999 (that should have been deposited to TH) = $1 million less the $500,000 he paid on that amount after he took the prepayment as a loan in 1999 = $500,000 less God knows what else they have done.  This is merely Lynch’s assumption having studied the returns; read through the IRS website; read many many documents on this type of situation – including IRS legal documents; etc.  Lynch believes Cohen’s 2003, 2004, and 2005 tax returns are evidence of further criminal conduct.  Cohen has now received approximately $700,000 (according to the IRS binder presented to her lawyers during her 2012 trial) in fraudulent refunds.  He advised IRS, if he submitted the necessary “theft loss” form that he was not pursuing third party recovery and provided them with the complaint proving he perjured himself and lied to IRS.  When Kory submitted his declaration, in response to her motion to vacate the fraud judgment, Lynch realized Cohen also obtained a refund from FTB.  Lynch has challenged this entire situation, and the fraud refunds, with IRS and FTB as fraud and evidence of a an attempt to obstruct justice, criminal racketeering, theft, etc.  OR, perhaps based on Kory’s statements Cohen used the “delta of $5 million basis.”  Lynch has no idea what this means and has asked for a formal IRS opinion on this situation.  See all IRS federal tax returns.  Was Lynch unwittingly exposed to tax fraud by the EGO MANIAC.  This is not mere alter ego.

NOTE:  KORY’S ON ORIGINAL DOCUMENT (that will be attached) IS INCOHERENT.

G.    Legal [Kory Doc II]

·         Lynch compensation – Intention of parties.

·         What is the compensation arrangement between Cohen and Lynch for Kelley Lynch’s services?

·         What is the commission arrangement?  Lynch received 15% of Cohen’s gross income (regardless of the source) from approximately 1996 onwards.  Due to the fact that she worked as Cohen’s personal manager (see testimony where Cohen acknowledges hiring her as his “manager” in 1988), Cohen agreed that when they completed the planned accounting that he would compensate her for the additional fees she was due.  He has now also withheld commissions for services rendered.  Evidently, LA Superior Court promotes slave labor.

·         Did she have a duty to discuss ambiguities in Management Contract with Leonard or his representatives?  Lynch discussed the Management Agreement with Cohen when she read it to him over the phone; Cohen’s representative prepared it and explained it in follow up documents; and there was NO AMBIGUITY until Cohen attempted to defraud Lynch further

·         What is Kelley Lynch’s obligation as to annuity?  Did she have a duty to preserve assets in order to pay annuity?  Does dissipation of assets constitute anticipatory breach?   This memorandum was prepared in 2005.  The annuity obligation was extinguished from the federal tax return in 2003; Cohen took the loans and caused to be expended his personal transaction fees and testified that he understood he could and did; and his loans with interest now approximate $11 million and have NOTHING whatsoever to do with Lynch.  Lynch had NO duty to preserve anything with respect to Cohen’s loans/expenses.  He dissipated those funds.  See corporate records; management agreement; profit sharing; and federal tax returns for the answers.  Lynch has asked IRS for a formal opinion on this unconscionable situation – including the TH 1099 re. Cohen’s dissipation of funds and wasted assets.  As for anticipatory breach?  Well, Kory advised Lynch and her advisers that Cohen planned to role TH back into LCI.  Ken Cleveland, not all that long ago, advised Lynch that his would be illegal.

H.   Greenberg duties and potential liability [Kory Doc D, page 4)

·         Duty of Greenberg to safeguard funds. Did he know or should he have known about improper dissipation of Cohen’s assets?  In Cohen Family Trust?  Traditional Holdings?  Lynch has no idea what Greenberg’s duties were.  The TH assets are NOT Cohen’s assets and this is further evidence that he views himself as the alter ego of these corporate fictions which he clearly does not feel are separate from himself personally.  Lynch has no idea what Cohen Family Trust Kory is referring to.  He must mean the two CRTs Lynch addressed above. 

·         Impact of Greenberg not maintain records expected to be maintained in the ordinary course of business (i.e. loan documentation including notes and loan agreements, wire instructions).  It was never Lynch’s understanding that Greenberg handled loan documents or had to be provided with loan documents.  It was her understanding that Westin would prepare loan documents based on information provided to him by Greenberg.  Greenberg is the individual who had this information and Lynch had no obligation to obtain it, maintain it, or ask Westin to prepare loan documents for that matter.  This was not her job and she was not Greenberg or Westin’s messenger boy or assistant.  Lynch does not believe the loan documents are the issue.  Lynch believes the loans themselves, which had to be repaid (as Cohen understood) are the issue.  As for wire transfers – yes, Lynch believes Greenberg had a duty to maintain that information. She also believes he had an obligation to provide yearly profit and loss statements to Lynch and other financials.  Greenberg also failed to provide Lynch, as requested, a schedule of all upfront fees and commissions re. TH.  Cohen hired Greenberg and Greenberg worked for Cohen – not Lynch.

·         Impacting of Greenberg not accurately reporting “true” condition of the trusts.  Lynch has no idea what Greenberg reported re. the two CRTs.  All CRT statements were provided to Cohen since they were established in 1996.  Lynch had nothing to do with them and asked Greenberg not to co-mingle TH with Cohen’s CRTs, etc.  She also has never heard that Greenberg didn’t report the “true” conditions of the CRTs to Cohen.

·         Loans were apparently treated as unimpaired assets.  Lynch has no idea how Cohen’s withdrawals from the CRTs were handled and is not interested.  She has nothing to do with the CRTs or Greenberg’s management of those assets.  Westin and Greenberg continuously advised Cohen and Lynch that the TH shareholder loans were assets of TH.  For some reason, Cohen believes they are his personal assets which further supports the position that he views himself as the alter ego of TH.  No mention of BMT or LCI or the assets owned by BMT and how those assets were handled.

·         Ongoing and even recent Greenberg emails to Cohen showing $5 million value in TH.  These emails, as agreed with all parties (including Cohen), were not financial statements.  TH financial statements were placed on Cohen’s desk and reviewed – together with CRT statements, corporate bank statements, etc. – by Cohen routinely.  These emails were a courtesy and were requested in part due to the misunderstanding between Cohen and Greenberg re. a meeting they vaguely planned which Lynch never understood to be an actual scheduled meeting in Los Angeles.  These emails documented the value of the TH assets including the outstanding shareholder loans.  Lynch does not have the exact figures of the corporate loans, distributions in accordance with corporate records and her management agreement, annuity agreement, etc. and had has asked IRS to confirm their positions on these matters.  Greenberg, as he had done since 1996 when Cohen hired him, provided monthly financial statements that were reviewed by Leonard Cohen.  The Greenberg monthly emails did not take into consideration Cohen’s personal transaction fees in the amount of approximately $3 million.  Cohen personally signed and faxed Greenberg authorization to make those payments.  Greenberg then provided Lynch with a checkbook in order to make THOSE PAYMENTS.  Lynch did not request a checkbook from Greenberg.  Copies of those checks exist somewhere and Greenberg should have that fax.  The fax does not include payments to CAK of $200,000; Westin of $100,000; IRS of $500,000 re. the $1 million prepayment; but Cohen has confirmed in his complaint – that these are his personal expenses. 

·         Failure by Greenberg to make sure that Cohen was aware of two cautionary letters about spending, particularly in view of monthly positive emails directly to Chen and failure to mention in phone calls.  Greenberg’s warning letters could have also been EMAILED to Cohen since they were so URGENT.  However, Lynch personally reviewed those letters with Cohen and he was pissed off that Greenberg questioned his personal expenditures and found his statements insulting particularly in light of the future income he anticipated.  He advised Lynch NOT to discuss his future income with Greenberg , the $1 million Sony advance re. “Dear Heather,” third IP deal; lithograph deal; etc.  Lynch had to address some of this with Greenberg because she assured him that Lynch and Cohen planned, as she believed was true, to repay all loans with interest.  Evidently Cohen had no such plan and bankrupted Lynch, stole her share of IP, and withheld commissions due her once he understood she planned to report his tax fraud and unconscionable conduct with respect to her to IRS.  He also failed to serve her his fabricated lawsuit and continues to LIE to Judge Hess.  LA Superior Court evidently condones lies, fraud, and perjury – in all matters related to Lynch and the judges themselves have engaged in lies with respect to her; attempted to extort monies from her; and helped Cohen defraud Lynch.  Lynch remains unconvinced that this conduct is legal and has asked DOJ to investigate all matters related to Lynch before LA Superior Court and determine whether LA Superior Court and the City Attorney attempted to extort monies from her, and others, re. the fraudulent domestic violence order.  Lynch has no idea what calls Kory is referring to.

I.       Westin duties and potential liability [Kory Doc E, page 4)

·         Duty of Westin to set up Traditional Holdings in manner that includes elementary mechanisms to safeguard funds?  Did he know or should he have know about improper dissipation of Cohen’s assets?  TH assets are NOT Cohen’s assets.  Leonard Cohen understood, and Westin/Greenberg explained these matters to Cohen on conference calls Lynch was party to, the TH structure, etc.  Cohen understood shareholder loans were acceptable; the TH shareholder loans had to be repaid prior to the annuity obligation; his loans – per the Annuity Agreement – had to be repaid within 3 years with interest.  Cohen’s loans/expenditures are assets of TH but he continues to view himself as the alter ego.  It was not Lynch’s understanding that Westin created TH as an alter ego for Cohen and Westin repeatedly warned Cohen that the IRS could allege self-dealing, etc. if corporate governance was not adhered to.  Richard Westin had no obligation to safeguard funds.  Leonard Cohen personally hired Greenberg and Greenberg, according to Cohen, was the “trusted guardian of” his assets.  Having said that, Neal Greenberg had no duty to prevent Cohen from taking shareholder loans or expending monies re. TH (or any other entity from what I heard).  Nor did Greenberg prevent Cohen from repaying his loans, withdrawals, and expenses from the so-called Greenberg accounts.  In fact, Greenberg’s IRS dangers letters addressed the need for Cohen to repay his loans.  Lynch personally assured Greenberg and Westin that, when the future deals closed, she would repay any shareholder loans (NOT corporate distributions pursuant to corporate records and the management agreement), would be repaid.  Leonard Cohen is the party responsible for his loans, withdrawals, and expenses.  He had an obligation, at least with TH, to repay these with 6% interest within 3 years.  This is all Lynch knows about Westin’s alleged duty to safeguard funds.  Even loan documents are absurd because Greenberg allegedly provided Cohen with the information, used in his complaint, giving Cohen a bottom line figure on amounts Cohen deposited into his personal account (over $2 million); Cohen personally set forth his personal transaction fees re. TH (at $3 million); Cohen personally received $1 million in 1999; Cohen signed a promissory note in the amount of $355,000 or $340,000 (removed from Lynch’s office when he removed the corporate files; as is true for the fully signed TH management agreement; Lynch’s fully signed promissory note; Lynch’s fully signed Indemnity Agreement; fully signed non-revocable assignments; etc.)

·         Impact of Grubman firm’s notes about dangers of Kelley Lynch theft.  Stuart Fried/Grubman personally wrote Lynch that no such note/letter exist so this is a very serious false accusation.

·         Significance of role as ongoing tax preparer (i.e. knowledge, duty to assure loan documentation in place, entity not impaired, etc.)  Richard Westin prepared the 2001, 2002, and 2003 tax returns.  Lynch cannot address these returns because she has no tax expertise and is not clear about the returns themselves and they make no sense to her.  Her lawyers and accountant brought certain issues to her attention but Lynch has no idea what is on the returns; what should be on the returns; why Westin handled things as he did; or what he was required to do.  Richard Westin had NO DUTY to document loans.  Leonard Cohen had a duty to advise Richard Westin of all share holder loans and expenditures and request Westin (or another legal representative) prepare promissory notes.  Certain promissory notes were prepared for LCI but Lynch has no idea what they related to – at all.  Lynch does not plan to guess or speculate.  She didn’t prepare them, was under no obligation to, and has nothing whatsoever to do with them.

·         Did he know about loans, and failure as to preparation of loan documentation by Greenberg?  Lynch has no idea what Westin knew.  Lynch provided Westin with Greenberg statements, copies of checks, and other information.  Greenberg had information related to all distributions and withdrawals/loans.  Lynch did not have an obligation to maintain that data.  She provided Westin, Cleveland, and others, with the specific information they requested – as a courtesy in most instances.  Westin and Greenberg knew how to contact one another.  All withdrawals should have appeared on Greenberg’s TH monthly financial statements.  They were sent to Westin.  Lynch has no idea what those monthly financial statements contained because she no longer has access to them.  Lynch has certain 2005 statements that indicate assets belonging to TH in the amount of approximately $5 million.  Lynch also has no idea if the shareholder loans had to be reported on the tax returns and did not handle tax returns or tax prep, accounting, financial statements, etc.

·         Liability for Management Agreement that is manifestly filled with errors.  Why?  Westin prepared it.  Lynch reviewed it with Cohen over the phone.  He agreed to it.  She and he, at some point, both signed it, and she placed a fully executed copy in the corporate file.  Cohen removed the corporate files from her offices when he and his daughter removed all property he felt was his.  Lynch was only able to locate a copy she personally had signed.  There are no errors in the Management Agreement but it is very convenient that it is now so ambiguous although Westin refers to the reason for the $240,000 yearly distributions in his March 6, 2002 letter both Lynch and Cohen acknowledged receiving.  Since Cohen agreed to these payments Lynch is unclear WHAT errors there are in the document.

·         Liability for attack on Cleveland when Cleveland attempted to raise issues as to inadequacy of records.  See Lynch and Westin emails, with Cohen copied in, on this matter.  There was NO ATTACK on Cleveland.  The record keeping related, as Cohen understood, to Jen Brown (a friend of his daughter who handled Cohen’s bookkeeping after Jean Ransick retired and before Cleveland addressed the record keeping when he was hired and Jen Brown was let go).  Lynch and Westin’s January 2012 emails, with Cohen copied, in address the issues at that time.  Based on Cohen’s position re. TH, his loans/expenditures, etc. Sony was evidently correct to issue Cohen the 1999 $1 million 1099 and 2001 $7 million 1099.  Westin should not have corrected those 1099s because Cohen has now taken the legal position that he engaged in self-dealing and is the alter ego.   TH has issued a legitimate $8 million 1099 to Cohen and Lynch has asked IRS and DOJ to address Kory’s letter to IRS advising them that the fraudulent restraining orders prevents TH from transmitting federal tax information to Cohen or prevents Cohen from transmitting IRS required documents to Lynch.

J.       Other Issues

·         Claim by Cohen of fraud in the inducement against Greenberg, Westin, Grubman, McBowman, and Lynch for failure to advise Cohen that discounting royalties for sale was ill advised and would serve only to create transaction fees.  Lynch has no idea what this means and Grubman (Arthur Indursky, Stuart Fried, and Don Friedman were specifically mentioned), McBowman, Westin, Greenberg, and Lynch did NOT create Cohen’s transaction fees or personal expenses and this was NOT the reason Cohen gave for demanding complex stock deals and pursuing IP sales, aborting the CAK deal, etc.  Lynch cannot address discounting royalties for sales but she and Cohen, because she discussed this with him and others, both understood that the assets had to be present day valued – therefore, discounted.  Period.  Lynch has no idea what anyone else discussed personally with Cohen re. discounted royalties.

·         Impact of Cohen selling his royalty rights (because he thought he was out of money) as compared to had he maintained those streams of income.  Cohen pursued the deals because he wanted to, didn’t believe in the future of the music industry due to the internet and downloading, and had the ability to maintain the IP if he closed the CAK deal.  He chose not to, met with Lynch and Arthur Indursky, and explained his interest in pursuing the 2001 Sony deal.  Cohen personally had Lynch phone Stuart Bondell/Sony back to tell him that he would pursue this deal with Sony IF they gave him a prepayment in the amount of at least $1 million.  They did and it was wired into Cohen’s personal bank account and never transferred to TH.  It became the subject of an IRS audit.  Lynch just found McBowman’s memorandum on this clearly advising Westin that he recalled Cleveland proposing to handle the prepayment as a loan.  Lynch, with Westin copied in on the email, advised Cohen that she had no idea how it should have been handled and reminded him that she handled NO TAX or ACCOUNTING matters, loans, loan documents, etc.  See Cohen’s CAK declaration and Terms & Conditions. Cohen understood precisely what income was generated from the royalties; he obsessed over weekly sales figures; understood his royalty rates; knew precisely when royalty payments were made throughout the year; checked his personal and corporate bank records on a DAILY BASIS; and is a liar. 

·         Damage for lost profits, transaction fees, theft losses, negative tax consequences.  Lynch assumes this relates to TH, and not Cohen’s CRTs, and has no idea about lost profits because she has not received profit/loss statements; the transaction fees are Leonard Cohen’s personal expenses; there was no theft loss apart from Cohen’s embezzlement of approximately $6.7 million in TH assets and interest in the amount of approximately $4 million (totaling $11 million in embezzled assets), and Lynch has no idea what Kory is talking about since Cohen benefitted from his wrong-doing and has now received substantial IRS and FTB refunds by taking the position that he is the alter ego who engaged in self dealing and presenting documents to LA Superior Court, and others, replete with fraudulent misrepresentations, perjured statements, concealment, etc.

·         Liability for advisors who failed to show Cohen his income stream of $600,000 annually.  This is another bald-faced lie.  Cohen personally signed his declaration in the CAK litigation matter AND the Terms & Conditions which confirmed precisely the royalty Cohen generated and needed to continue generating to proceed with the $5.8 million bond securitization deal.  Cohen also reviewed the schedules and other data Greg McBowman and others frequently provided us with re. royalty income, etc. Lynch knows this for a fact as she had to review this information with Cohen approximately every 5 minutes because he micro-managed these deals and drove her utterly insane. 

·         Lynch’s unwillingness to live on $90,000 (15% of $600,000).  This is an insane statement.  IRS needs to audit Cohen accounts, dating back to 1967 (per non-revocable BMT assignments, etc.), Cohen tax returns (he testified that he compensated Lynch with 10% of gross income from 1988 until she increased it to 15% because Cohen testified that SHE handled those matters); all corporate records, stock units, agreements, etc. 

·         Advisors cooperation with Lynch and apparent lack of consultation with Cohen.  Obscene.  Lynch was not Mata Hari, these individuals worked for Cohen, he personally hired them, and they did not cooperate with Lynch without consulting Cohen.  KEEP IN MIND THAT THESE ARE MEDIATION DOCUMENTS AND POINTS.  ALSO KEEP IN MIND THAT IN ORDER TO MEDIATE LYNCH WAS OFFERED 50% COMMUNITY PROPERTY; HER OWNERSHIP IN 15% COMMUNITY PROPERTY WAS ACKNOWLEDGED, COHEN AGREED TO PAY HER THE ENTIRE 15% COMMISSION (FOR HER SERVICES AS HIS PERSONAL – NOT BUSINESS – MANAGER DATING BACK TO 1988 WHEN HE HIRED HER ON GROSS INCOME.  AND, KEEP IN MIND THAT THERE WERE DISCUSSIONS WITH LYNCH’S REPRESENTATIVES RE. $10,000/MONTH WALKING AROUND MONEY FOR LYNCH.  LINDSEY TOLD LYNCH KORY SPOKE TO HIM ABOUT $2,000/MONTH WALKING AROUND MONEY FOR HER PARENTS.  LYNCH REFUSED AND ALSO THOUGHT THERE COULD BE ISSUES RE. INSURANCE FRAUD. 

·         Lynch’s representatives also told her that they were advised, by Kory, that he was being nice to Richard Westin as a ruse and tactic.  He used this on others, like Ken Cleveland, because Lynch and her representatives were advised that Cohen planned to go after Cleveland.  Lindsey repeated this to songwriter, Mike Elizondo, who repeated it to Cleveland.  Lynch was also advised that she had a cause of action against every one of Cohen’s representatives and Cohen/Kory would help her with those claims if she testified for Cohen and mediated on his side.  Lynch and her representatives were also advised that Cohen/Kory planned to go after ALL OF HIS REPRESENTATIVES first in a civil matter and then criminal.  Perhaps that explains IRA REINER.  Lynch was advised that he was brought in as the litigator because Kory is not a litigator.  Lynch advised her lawyers that if they were so impressed with REINER she should hire GARCETTI.  If not, they should figure out how to properly represent her.  She then fired them and was briefly represented by Mike Taitelman, Bert Deixler, and Zia Modabber. 

K.     Procedural (III on Kory doc, page 5)

·         Agreement to mediate – Cohen and Lynch

·         What form of agreement?

·         How to address issues raised in this memo and other issues to be identified?

·         How to exchange information?  Lynch gave everything to IRS.  Anyone interested in the evidence should contact IRS Commissioner’s Staff in Washington, DC.

·         How to reach consensus as to facts?

·         Selection of mediator.

·         Other issues.

·         prevents TH from transmitting federal tax information to Cohen.

·         prevents TH from transmitting federal tax information to Cohen.

L.     Agreement to mediate – Greenberg Westin, Others (Kory doc, III B, C, & D)

·         When and how to provide notice of claims?

·         What form of agreement?

·         Schedule:

·         Meditation agreement by January 21

·         Meeting at D&B – January 21 with Cohen and Lynch present to endorse final agreement and secure full cooperation.  Lynch repeatedly advised D&B that she would not sit in a room with Leonard Cohen.  D&B advised Lynch, in her last meeting with them, that they were figuring in a settlement figure for her exposure to criminal tax fraud and confirmed that Cohen’s tax fraud was criminal.  She also has this in writing from D&B.  Lynch fired them.

·         Preliminary and verbal notice to Greenberg and Westin by January 19.

·         Formal written notice to Greenberg and Westin by January 24.

·         Mediation target date – 90 days or less from date of mediation agreement.

·         Lynch decided to share this information with Boies Schiller, who were representing Neal Greenberg, and provided them with three huge boxes of evidence to review.  When they returned them, Lynch dropped them off for Bert Deixler to review.  Deixler called Kory and DiMascio & Berardo.  Lynch heard that Deixler discussed loans with Kory but is unclear if they discussed when Cohen would repay his approximately $6.7 million in TH assets with 6% interest to TH.  Mike Taitelman advised Lynch that he contacted Kory, advised him he wanted Lynch protected, and told Lynch Kory advised him that if she did what they wanted, they would say Lynch was used by Cohen’s representatives as a pawn; otherwise; they would say she orchestrated this mess.  Lynch met with Zia Modabber and Alan Friedman.  They confirmed that Lynch had never once schedule a performance, etc.  on behalf of Cohen.  They also discussed the need for an accounting.  Alan Friedman took notes.  Zia later emailed Lynch that he had a conflict and advised her to contact his former partner, Rick Krantz.  Lynch, in the alternative, contacted Ron Burkle and began copying him in on her emails documenting everything she has gone through since reporting Cohen’s tax fraud to IRS on April 15, 2005.

March 6, 2002 – Draft

See KL notes to Richard Westin

and Cohen comnments.  Faxed to RW.

Dear Leonard,

I have now reviewed all the documents that were forj,warded me in order to prepare the Traditional Holdings return. I would like to point out that I did not notice any sloppy record keeping and all the documents were delivered to me in a timely manner.

I would like to review thes structure of TH at this time because it is ornate you may need further  and clarification. I will start at the beginning. TH came about as the result of Neal and myself being approached by Kelley at your request to search for a tax structure that would benefit you with respect to the Sony royalty buyout.  At that time, you were looking at ordinary income that would have been taxed at the rate of 47%. Traditional Holdings purchased your royalty buy-out properties using a private annuity. A private annuity is a contract under which a person sells property in exchange for deferred payments that end when the seller dies. The deferred payments are payments to you (which I will address later in this letter) and it is these deferred payments that allow the tax to be deferred. The payments cease upon your death. Private annuities have been around for decades and are not controversial.

In the year 2011, you will begin receiving about $38,000 a month for the remainder of your life. You will then pay taxes yearly on this amount at whatever the tax rate is on ordinary income.

You have therefore saved tremendously in taxes because you avoided the ordinary income tax of approximately $3.5 million in the year of the sale and will pay taxes as you receive your deferred payments. In the interim, your money is invested and if well managed it is also growing.

All monies you take from TH until 2011 need to be documented as loans. This is why some confusion arose for Kelley in the year 2001 with respect to your personal tax return payment. Neal made the decision that the funds should come from TH and Kelley then contacted me in order to determine what paperwork, if any, was required. I had to prepare a note that was to be placed in the file with a copy of the return. It is important to have these “loans” documented by notes.

RW will prepare all loan documents.  He is also handling matters related to the Sony 1099.  RW and KC will discuss who will prepare the LCI and BMT returns. 

To reiterate, TH obtained the properties with a private annuity in order to defer taxes. Kelley had to be brought in, and agreed to do so in order to help you, because you need a third party’s involvement so that this transaction is not viewed as your selling something to yourself. The third party should not be a relative of yours therefore Kelley was selected. We had Kelley sign a promissory note in the amount of $245,000 to TH which shows that she invested in TH. She

is to receive $24,000 a year for the first 17 years, then $31,250 a year, which allows her to repay the note; and, $20,000 a year which allows her to pay taxes on the amount she has received.

It complicates things for Kelley and possibly eats into her lifetime gift tax exemption that would benefit her children.

RW – advised that the promissory note payments total $44,000/year.  Addressed in corporate books and management agreement.  Cohen, RW, and NG have discussed the profits to be allotted to me and this will be addressed in writing.  Indemnity Agreement should be placed in corporate file. 

It is possible that estate taxes will change in the future and Kelley will not suffer any penalties. To summarize, Kelley was brought into this situation in order to help you accomplish a beneficial tax structure.

Leonard asked if I would be responsible for payments on the promissory note in the event he died.  Westin said no.

At this time, Kelley needs to begin repaying the note to TH. She must pay $24,000 debt service on the note this year so that the entity remains legitimate.  The way we anticipated handling this was to allocate $240,000/year of TH profits to Kelley each year which allows her to pay the taxes on the income that has created for Kelley.

RW will advise KL how taxes will be handled on thos $240,000/year allocation.  He will prepare all necessary tax documents. 

Unfortunately, because Kelley did not make the $24,000 payment in 2001 (she was not aware that she had to do so), this may create hardship for her with respect to taxes. In order to resolve this situation, I propose that Kelley be allocated the sum of $___________________ for the years 2001 and 2002. Out of this amount, Kelley will pay the note (by writing a check to TH) and pay the taxes she incurs by receiving these monies from TH, which we will call a fee for

the sake of simplicity.

It is often the case that once a structure has been established and taken out of the realm of theory, it takes time for all parties to understand what its function is and how it operates. I have basically raised three points here: (1) that a private annuity has been established in order to defer taxes; (2) you will eventually begin receiving monthly payments and until that time, all withdrawals from TH need to be documented as loans; (3) Kelley’s participation was essential and requires a yearly payment to her which allows her to repay the note and the taxes she incurs because of the payment.

On a separate note, I am giving some thought to your gift tax situation. I understand that you are giving Adam approximately $42,000 a year in support.  This cancels out the possibility of gift him $11,000 a year (which is now the yearly gift amount) with respect to the property you have purchased. I also understand that Anjani Thomas has been given sums possibly in excess of

$11,000 permitted yearly gift and need to rethink how the loan to her for the house should be handled.

LC asked RW to address gifts to Lorca – including mortage payment he makes on the Melrose property.  Chudd’s firm advised that Cohen should have a lease with Lorca - $55/sq. foot.  Cohen decided against this.

I would like to take some time and review the larger picture of your gifts with Kelley - this would include your voluntary monthly gift to the children’s mother which comes to $45,600 per year.

Kelley has advised me that you would like to know if there is some way for you to give gifts to your children in a manner that does not create a gift tax. This is something Reeve Chudd and I need to think through.

Since my involvement in your tax planning, several entities have been created: two charitable remainder trusts (which I understand Neal will address with you separately), and Traditional Holdings. These three entities - the two charitable remainder trusts and TH are really the essence of your tax and estate planning.

Last year was a very complex year but going forward everything should be quite

smooth and uncomplicated.

Richard

Cohen asked Westin if I could be compensated with 15% of LCI (as was the case with BMT). Westin advised that I should have been.

Westin advised us that TH bypasses Cohen’s estate.  The only entity assigned to Cohen’s revocable family trust (probate) is LCI. 

Followed up with Greenberg on memo he is preparing re. charitable remainder trusts.  He will speak directly to RW re. Cohen’s withdrawals from those accounts.  

SCHEDULE OF

FACTUAL ALLEGATIONS & STATEMENTS

NEAL GREENBERG AMENDED COMPLAINT

I, Kelley Lynch, agree with the following factual statements and was a witness to much of what was addressed in Neal Greenberg’s Amended Complaint (Denver District Court, Case No. Case 1:05-cv-01233-LTB).  Therefore, Neal Greenberg and I are in agreement with respect to the following facts.  See Neal Greenberg Amended Complaint & Exhibits attached hereto and made a part hereof.  Kelley Lynch opposes all statements raised in Greenberg’s Complaint and not contained in the following excepts taken directly from the Amended Complaint.  See Amended Complaint attached hereto and made part hereof.

Dated:  23 October 2014

___________________________________

Kelley Lynch

Neal Greenberg. Vs. [HEADING]

Denver District Court, Case No. Case 1:05-cv-01233-LTB

Judge Lewis Babcock

Defendant Leonard Cohen (“Cohen”), a noted recording artist, acting directly on his own behalf, and through his agent and attorney, Robert Kory (“Kory”), has threatened to take or has taken, improper and unlawful actions, including bribery and intimidation of a witness, subornation of perjury, defamation …

Cohen’s extortion scheme was eventually exposed by Lynch and ultimately frustrated …

Cohen has made clear that he asserts rights over certain investment funds that belong to Traditional Holdings, LLC (“Traditional Holdings”), a dissolved Kentucky entity that was managed and 99.5% owned by Lynch and 0.5% owned by Cohen.

From the early 1990s, impressed with a new strategy used by other Hollywood celebrities to cash in on their future revenue streams from IP rights and increase short-term income (called a “Pullman
 or “Bowie” bond, after the artist David Bowie who first used it), Cohen … worked aggressively with advisors, including Greg McBowman, to auction off portions of his IP to the highest bidder. 

Lynch arranged for Cohen to have a first meeting with Greenberg in 1996 to discuss Cohen’s investment options for the proceeds from the anticipated First Sony Sale.

During this meeting, and at Cohen’s request, Greenberg suggested ways in which Cohen could structure the investment of his proceeds from the First Sony Sale so as to reduce tax consequences and generate substantial income.

Cohen worked with, and began to be represented by, a creative tax attorney and law professor from the University of Kentucky, Richard Westin (“Westin”).  Cohen also had other advisors and consultants working with Lynch on his business, music and tax matters, including Greg McBowman … Ken Cleveland, as well as Stuart Fried and other attorneys at the law firm of Grubman Indursky & Schindler, P.C.

Ultimately, Cohen decided to transfer some of the income from the First Sony Sale into charitable remainder trusts. On October 30, 1996, Cohen established three trusts: the Sabbath Day Charitable Trust (the "Sabbath Day Trust"), the Cohen Family Charitable Trust (the "Cohen Family Trust"), and the Cohen Remainder Trust (the "Remainder Trust") (collectively, the “Trusts”).

Cohen … repeatedly withdrew large amounts of the Trusts’ assets. On repeated occasions, TAS notified Cohen (both directly, when possible, and per instruction through Lynch) that Cohen was spending more than recommended from the Trusts, and thus, was draining down the Trusts’ principal.

On one such occasion, on April 13, 2001, Greenberg, on behalf of TAS, wrote to Cohen:  “I am writing to you to discuss the income withdrawals you’ve received from your portfolio and to provide you with some helpful guidelines for the future. When we originally constructed your portfolio in 1997, you may remember that we had extensive conversations about how much you required for your annual living expenses.”

In or about 1999, Cohen put more of his IP up for auction. In 1999, Sony and Cohen … negotiated for a second sale of IP to Sony for about $8 million (the "Second Sony Sale").  The artist royalties to be sold were represented by Cohen as being held by another … entity, Blue Mist Touring Co., Inc. ("Blue Mist").  Cohen was the Chairman, President, and majority shareholder of Blue Mist, owning 425 shares, while Lynch was the Assistant Secretary and minority shareholder of Blue Mist, owning 75 shares, or 15% of the company.

Cohen asked Westin, and in the spring of 2000, Greenberg, to provide advice about how to invest the anticipated proceeds from the Second Sony Sale and minimize the sale’s tax burden.

Cohen leapt at this opportunity to minimize his tax burden [via Traditional Holdings, LLC], just as he had explored all possible means of reducing his taxes in years past, such as by seeking a tax credit for donating his papers to a Canadian museum [University of Toronto], and using artifices in dealing with Sony to avoid paying any Canadian taxes (as a Canadian citizen) on his royalty income earned in Canada.

Westin’s proposed plan had the following basic components: a limited liability company – which eventually became Traditional Holdings – would be created. Blue Mist would transfer certain IP assets to Traditional Holdings in exchange for a deferred annuity, to be paid to Cohen beginning in about 10 years. Traditional Holdings would then sell the assets it received from Blue Mist to Sony. The tax plan prevented Cohen, the annuitant, from owning more than a de minimis interest in Traditional Holdings.  Therefore, Cohen would own less than 1%, and another person – who ultimately was Lynch – would own the remaining LLC interest (more than 99 percent).

Westin outlined this proposal to Cohen and Lynch both orally and in a series of letters and other written communications between October 2000 and December 2000. See, e.g., Exh. 1 attached.

In these written communications, Westin explicitly warned Cohen that since the annuity plan gave significant transactional control to Lynch, and also potentially placed tax and other burdens upon her as majority shareholder, the plan would work only if Cohen and Lynch maintained (as they had in the past) a long-term relationship of personal and professional trust which would secure their mutual obligations as manager of the obligor (Lynch) and annuitant (Cohen). See, e.g., Exh. 2 attached.

Cohen carefully reviewed, understood, and signed off on the ownership structure of Traditional Holdings – including the fact that Lynch would own 99 percent of Traditional Holdings’ membership interests, so as (among other reasons explained by Westin) to avoid any suggestion of self-dealing.

First, Cohen reviewed the Traditional Holdings Articles of Organization, and reviewed and executed the Traditional Holdings Operating Agreement, which set forth in detail the entity’s ownership structure and managerial procedures. See Traditional Holdings Articles of Organization and Operating Agreement (Exh. 3 attached).

Second, Cohen participated, at his request, in conference calls with Westin and Lynch and/or Greenberg during which the structure was carefully reviewed.

Third, Cohen talked about the structure of Traditional Holdings privately with Lynch, including when he forced her to discuss it with him while he took a bubble bath.

Fourth, in addition to several explanatory faxes he received from Westin describing Traditional Holdings, Cohen communicated specific questions, through Lynch, relating to Traditional Holdings’ ownership and transactional structure, which questions Westin answered in a letter written directly to Cohen on December 4, 2000, and faxed (as with his prior memos) directly to Lynch and Cohen. See, Exh. 2.

Moreover, regardless of whether Lynch owned 1 percent or 100 percent of the shares of Traditional Holdings, Cohen knew or should have known that she had or came to have authority – through a durable power of attorney and pursuant to her role as Traditional Holdings’ manager – to act, and give directions, on Traditional Holdings’ and on his own behalf. See, e.g., Exh. 3.

Likewise, no matter who owned the majority of shares of Traditional Holdings, the obligation to fulfill a deferred annuity obligation to Cohen remained the same. Thus, Cohen's interests in the firm (the long term annuity payments) were identical, no matter how his purported ownership interest in the assets were held and invested in the interim.

In December 2000, Westin created Traditional Holdings as a Kentucky limited liability company. Lynch was named as the initial manager in the Articles of Organization, and both Cohen and Lynch were appointed as managers in the Operating Agreement. Id. Also in December 2000, Cohen signed a Private Annuity Agreement with Traditional Holdings which document sets forth Traditional Holdings’ annuity obligations to Cohen. See, Private Annuity Agreement (Dec. 7, 2000) (Exh. 4 attached). Lynch signed the Private Annuity Agreement on Traditional Holdings’ behalf. Westin maintained, and continues to maintain, that the company and its annuity contract with Cohen are legitimate under prevailing interpretations of the federal tax code.

To purchase her ownership interest in Traditional Holdings, Lynch was required to submit to Traditional Holdings a promissory note for $240,000. It was agreed that Lynch would receive a salary and/or distributions from Traditional Holdings sufficient to pay down the $240,000 promissory note and to cover tax liabilities. See, Exhs. 2 and 3.

As set forth in the Operating Agreement, Traditional Holdings was authorized to issue loans to its members, Cohen and Lynch, as long as the loans were paid back before the annuity obligations commenced. See, Exh. 3.

In April 2001, the Second Sony Sale was completed. The gross proceeds of the Second Sony Sale were approximately $8 million, less certain identified costs, expenses, and holdbacks for undelivered work.

Of these proceeds, Cohen had already requested and received $1 million as an advance in November 1999. Cohen was well aware of this $1 million advance because it became the subject of a tax dispute with the Internal Revenue Service in 2002.

Of the remaining proceeds of the Second Sony Sale, [certain] amounts were paid to cover the costs involved in closing and negotiating the Second Sony Sale:

$350,000 Grubman Indursky & Schindler, P.C. (attorneys for Cohen)

$333,750 McBowman Consulting Group (consultants for Cohen)

$30,450 Epstein Backer & Green, P.C.

$1,101,250 Stranger Management (commissions to Lynch's company)

Kelley Lynch comments in bold:  The following amounts, as confirmed in Cohen’s Complaint, should have been fully addressed in Neal Greenberg’s Amended Complaint.  Cohen’s Complaint, Clause 61, confirms that transaction fees related to the 1^st and 2^nd Sony deals totaled approximately $4.7 million and listed the following amounts:

$1.2 million – Stranger Management

$350,000 – legal fees (Grubman, Indursky firm)

$350,000 – consultant fees (Greg McBowman)

$500,000 – for federal income taxes and penalties due on Sony’s $1 million advance paid on the sale in 1999.

$100,000 – Richard Westin legal fees

$200,000 – Leonard Cohen’s settlement fees re. failed CAK bond deal

Additionally, Cohen withdrew approximately $592,000 as a “shareholder loan” from the Traditional Holding account to purchase homes for his son and girlfriend.  The Greenberg Complaint confirms that $2,084,518 belonging to Traditional Holdings, LLC was deposited into Leonard Cohen’s account.  Leonard Cohen also personally received $1 million advance on the Traditional Holdings, LLC 2001 sale and failed to transfer this amount to the corporate entity.  The above expenses, loans, income and deposits total:  $6,376,518.00.  In addition to this, a Promissory Note was prepared and signed by Leonard Cohen.  That Promissory Note addressed an additional approximate amount of $355,000 Leonard Cohen owed Traditional Holdings bringing the total to:  $6,626,518.00 with interest in the amount of 6% per annum. 

None of these listed expenses had anything to do with either the formation of the annuity plan or

with Traditional Holdings’ dealings … Westin did receive a modest fee for his work on the Traditional Holdings documents, and for consulting with Sony on Cohen and Traditional Holdings’ behalf. 

Agile Group [sent] official monthly statements to Cohen at the Larchmont Address (the record address for Traditional Holdings) setting forth the performance of the Traditional Holdings’ funds invested in the Agile Safety Fund. See, e.g., Exhibit 6 (example of monthly statements sent by independent outside administrator). In addition, Agile Group, LLC sent monthly letters to Cohen which, as a courtesy, summarized the deposits into and withdrawals from the Agile Safety Fund by Traditional Holdings. Id. (example of monthly summaries sent by Agile Group, LLC).

No sooner had Traditional Holdings been funded, however, than Cohen – just as he had done with the Trusts’ assets from the First Sony Sale, and notwithstanding Greenberg’s prior warnings about draining down investment money – began to dissipate the Traditional Holdings funds, jeopardizing his own long-term annuity interests, as well as the company’s legitimacy. Greenberg and others were immediately alarmed by Cohen's desire and tendency to treat this company like his own personal piggybank, out of which he could borrow or take distributions against his annuity benefits.

For example, almost immediately after the funding of Traditional Holdings, Cohen took out a loan for $50,000. This was followed, during 2001 and 2002 alone, by several loans to Cohen … to cover tax liabilities, houses for Cohen's son and his current girlfriend, and living expenses. These 2001-2002 loans to Cohen –amounting to over $1 million – were deposited directly into Cohen’s personal bank account at City National Bank in Beverly Hills, California.

In March 2002, Greenberg [spoke to] Cohen directly by telephone, Cohen “admitted he was spending too much and seemed a little shaken when [Greenberg] reminded him how much he had just spent on gifts to friends."

Lynch repeatedly assured Agile Group, LLC and TAS that the loans from Traditional Holdings were being properly documented with Westin’s assistance. Cohen’s tax attorney, Westin, also was aware of and in regular communication with Lynch [Cohen, Greenberg, and Cohen’s other representatives] concerning the shareholder loans and other aspects of the affairs and management of Traditional Holdings.

The March 5, 2002 Traditional Holdings Board Meeting Minutes, prepared at Westin’s direction, state “that the level of borrowing was undesirable and [the members] expressed their assent that further borrowing was discouraged, even though the borrower’s [Cohen’s] credit and collateral were good.”

Cohen, however, gave no sign that he had any intention of abating his spending habits. In an e-mail to Lynch dated March 4, 2002, Cohen thanked Lynch for “keeping [him] informed,” and instructed her to “give lots of money to everyone.”

Because these shareholder loans were to be repaid, and because it was necessary to protect the entity’s integrity for tax purposes, these shareholder loans were properly characterized, on Cohen’s tax attorney Westin’s advice, as Traditional Holdings assets when calculating the entity’s value.

Lynch, on Cohen’s behalf, sent e-mails to Colorado in response to Greenberg’s warnings, defending the loans, giving assurances that all of the loans were proper and documented, and assuring that they would be paid off when Cohen received the money from another, upcoming Sony transaction. 

In October 2004, Cohen and Lynch had a major falling out, the details of which remain unknown to Plaintiffs. As a result of this falling out, the Third Sony Sale – which appeared to be on the verge of consummation – never happened.

On October 21, 2004, Cohen personally contacted Greenberg by e-mail and informed him that Lynch was “busy with other aspects of [his] career,” and therefore, Cohen had “relieved her of all financial responsibilities.” Cohen further stated that Lynch “need not be copied on your statements or reports,” and that Cohen's new accountant would “be in touch.” 

 On October 22, 2004, Cohen sent another e-mail to Greenberg stating that Lynch “no longer represents me,” and directing Greenberg not to “respond to any of her instructions.” 

On or about October 24, 2004, Cohen again communicated directly with Greenberg by e-mail, stating that his business address was no longer the Larchmont Address or Keniston Address. With allegations flying fast and furious from Cohen – and later Kory – that Lynch was acting without due authority from Cohen, remarkably, a request to change Cohen's record address was left on Plaintiffs’ general voice mailbox by Anjani Thomas. Only later did Plaintiffs learn the identity of Ms. Thomas – Cohen’s current girlfriend, and Kory’s ex-wife.  Thus, Plaintiffs demanded an original signature from Cohen on a document verifying the new address

Given Lynch’s position as manager and 99.5% owner of Traditional Holdings, and learning of the apparent schism between Lynch and Cohen, Agile Group, LLC became concerned about whose directions as to the Traditional Holdings account it was legally obligated to follow. On October 24, 2004, Agile Group, LLC communicated with Westin – Cohen's attorney who had created Traditional Holdings – and inquired: “Does Leonard in your view have equal authority over the accounts that we manage? What if there are contradicting directive on those accounts that we manage? For example if KL says 'take money out' and LC says don’t take money, what is your view . . . .” Westin confirmed that because Cohen held a membership interest in Traditional Holdings, Agile Group, LLC could share information with him about Traditional Holdings’ investments. Westin could not, however, answer the issue of conflicting directives, and instead referred Agile Group, LLC to Traditional Holdings' governing documents (drafted by Westin), which documents provided little, if any, guidance on the issue. 

At or about this same time (October 22-24, 2004), Cohen phoned Greenberg. Cohen said that he thought Lynch had been taking money from Traditional Holdings without Cohen's authorization. He claimed that Lynch was using the money to support a gigolo and to fund shopping sprees at Neiman Marcus, and suggested that Lynch and Westin may have colluded to defraud him.  When Greenberg reminded Cohen that Westin had warned Cohen in 2000 that "the biggest risk" from Westin's tax avoidance plan “was that Lynch would own his [the] assets and he would have lost control,” Cohen stated that he recalled that initial warning. 

According to Lynch, however, Cohen regularly visited his management offices, often in Lynch’s presence, and reviewed and discussed his mail with her, all of which was kept on his desk to facilitate such review, including all correspondence, reports, and statements from the Agile Safety Fund’s independent, outside administrators, and from Plaintiffs.

Cohen then turned to his agent and attorney Kory to deal with Lynch, Westin, and Plaintiffs.

Based on these checks, Agile Group, LLC calculated that, of the loan money withdrawn from Traditional Holdings:

a. $2,084,518 had been deposited into Cohen’s own personal bank account;

b. Lynch personally had outstanding loans of approximately $293,000, which loans she represented had been disclosed to and sanctioned by Cohen;

Her abrupt termination frustrated Lynch's ability to make good on any loans through her share of receipts from the Third Sony Sale, the "Dear Heather" album, a pending sale of original lithographs, or other sources, and left her in a precarious financial position …

In November 2004, Lynch was asked by [Cohen] to appear without the benefit of counsel at a meeting with Cohen, Kory, and …  Greenberg, Glusker law firm acting as legal counsel for Cohen, and to sign certain legal documents related, inter alia, to unwinding Traditional Holdings on the spot [settle with Cohen].  Lynch refused to do so without benefit of counsel, and subsequently received advice from a variety of legal, accounting and tax professionals, including but not limited to Mike Taitelman, Dale Burgess, Dianne DiMascio, and an IRS officer named Betzer, that she was wise not to sign, because such action could have been fraudulent. 

[NOTE:  Lynch did not receive this specific advice from IRS Agent Betzer.  Lynch spoke to Agent Betzer on April 15, 2005 and thereafter about the allegations re. Leonard Cohen’s tax fraud and numerous corporate entities.  Agent Betzer first advised Lynch to bring this matter into the IRS with an attorney and then later instructed her to contact the IRS fraud unit.]

Lynch claimed that she had substantial, unsatisfied interests in Cohen's business entities and/or intellectual property. If Cohen were to attempt to recover money from Lynch, she would likely assert counterclaims alleging that Cohen owes her, and has never paid, substantial amounts of money; and, according to Lynch, and upon information and belief, such possible improprieties included, but were not limited to, the retention by Blue Mist and other persons or entities of IP that should have passed through Traditional Holdings to Sony, the failure to reference or disclose the annuity obligation, loan obligations, and other important matters on Traditional Holdings’ corporate tax returns, and Cohen’s failure to properly document Traditional Holdings’ transactions.

Because any attempt to recover money from Lynch was likely to be both futile and treacherous, Cohen, Kory, and other unnamed co-conspirators (including Steve Lindsay, Betsy Superfon, and John Doe Nos. 1-25) … conspired ...

Thus, for example, although the attorneys and accountants involved in the Second Sony Sale structured and received hefty fees for that transaction, which Kory charged were excessive, Cohen and Kory decided not to pursue any of those persons because they would not be easy targets, and because many of them – principally Sony and its law firm and advisors –continued to do business with Cohen profitably. Instead, Cohen and Kory decided to go after Plaintiffs, none of whom had any role whatsoever in that Sony transaction and/or received any benefit therefrom. 

[NOTE:  In a Memorandum Kory provided to Lynch’s lawyers, Ira Reiner and Kevin Prins, he raised issues related to fraud in the inducement against members of the Grubman firm and Greg McBowman.  Kory advised Lynch’s lawyers that they were considering going after Ken Cleveland.  Kory also advised Lynch that she had a cause of action against every one of Cohen’s representatives and they would assist her with those claims if she provided testimony against Cohen’s representatives and advisers.]

He [Leonard Cohen] told Greenberg to "be a man" and contact his insurance company.  “Please do talk to the insurer. A great deal of suffering can be avoided.”

Cohen with affirmative support from Kory, Steve Lindsay and Betsy Superfon, and John Doe Nos. 1-25, all acting toward a common end and each for his or her own purposes, began to direct an extortion scheme …

Cohen and Kory indicated that, unless Plaintiffs obtained insurance funds … Cohen would go out on tour to promote his new album, and would give interviews to reporters in which he would state or insinuate that he was touring because he had been bankrupted by the improprieties of his financial advisors.

Cohen and Kory knew full well that, from Plaintiffs’ perspective, once a celebrity were to raise such allegations of fraud and breach of duty against them, the damage would already be done, no matter the ultimate outcome.

Cohen and Kory began to pressure Lynch to assist in the extortion scheme against Plaintiffs. Specifically, they requested that she falsely testify … Cohen sought to obtain … testimony from Lynch knowing that the testimony would be false. 

Lynch's cooperation in Cohen’s extortion scheme was critical. Cohen believed that he could not only use Lynch as a witness against Plaintiffs, but could also buy or coerce her silence as against himself at the same time.

Thus, Cohen pressed for private "mediation" as an alternative to a public lawsuit, knowing full well that with Lynch's cooperation and silence, many of the critical documents concerning Cohen's financial affairs – documents that indubitably show … his aggressive tactics to avoid taxes at all costs, and his desire to capitalize on and benefit from all of his intellectual property during his lifetime to fuel an extravagant lifestyle – would not be the subject of discovery

Thus, by deliberate misrepresentations and omissions of critical facts … Cohen could knowingly and deliberately misrepresent his objectives and sophistication as an investor, his long history of aggressive tax management, his long history of exploitation of his IP for immediate gain and profit, his profligacy …

For example, Cohen affirmatively misrepresented to Plaintiffs that Lynch had simply forged his signature on various documents, knowing full well that she had not done so, or had signed with his full authority (as borne out by his subsequent actions – such as purporting to state claims based on agreements with TAS bearing his signature, and revoking a power of attorney bearing his signature that he acknowledged executing).

Cohen likewise falsely asserted that at no time had he authorized any of the shareholder loans from Traditional Holdings, and made various accusations against Lynch for which he had no basis in fact …

As one example, he claimed never to have known, prior to November 2004, that Lynch was the majority shareholder of Traditional Holdings, thereby implying that he had been deceived by Plaintiffs and Westin.  He also denied receiving information about Lynch's role as managing the obligation to pay his annuity, and denied ever receiving any information from Plaintiffs other than some monthly email summaries, even though he was easily able to retrieve Plaintiffs’ other written warnings, reports and correspondence from [Lynch’s] own Keniston office address in 2004, and was reported by Lynch to have regularly visited the office, reviewed his mail, and discussed Traditional Holdings' loans and his other accounts with her on a regular basis.

In particular, starting in March 2005, Cohen began to assert that Plaintiffs were responsible for the loss of $8 million, which figure included many millions of dollars which they knew Cohen had, in fact, received and previously spent in support of his own extravagant lifestyle.

… according to Lynch and others, he was prepared to admit or agree with Lynch that she owed Cohen nothing.

Having garnered the support of Lynch's then-attorney, Dianne DiMascio (“DiMascio”), Cohen felt

confident enough in January 2005 to misrepresent to Plaintiffs’ counsel, through Kory, that Lynch was then of the view that she, along with Cohen, was a victim of the misconduct of Plaintiffs and Westin.

Cohen and Kory continually sought to purchase or coerce Lynch’s cooperation

In a demand letter from Kory to DiMascio, Kory wrote:  I want to reemphasize my position that I am willing to work with you as part of a settlement between Mr. Cohen and Ms. Lynch in going after Westin’s and Greenberg’s insurers as a source of restitution.

Thereafter, on January 11, 2005, Kory wrote to DiMascio, telling her that [Ira Reiner believed] “properly framed letters to Greenberg and to Westin would cause their insurance companies to show up.”

Lynch declined to attend the meeting in person. Instead, DiMascio went to the meeting on Lynch’s behalf in early February 2005, after which she reported to Lynch: “[Cohen and Kory] want your cooperation in pursuing [the Plaintiffs] and Richard Westin. In this regard, they seem to want you to acknowledge that you knew that Neal [Greenberg] and Richard [Westin] wanted to defraud Leonard and that you approved their conduct.”

Repeatedly, from at least November 2004 through April 2005, Kory made known

to Lynch, directly, through counsel, through Steve Lindsay (the father of Lynch’s youngest child

and one of Cohen’s record producers), through Lynch’s accountant Dale Burgess, through

accountant Mike Taitelman, and through others among her friends and relatives, that he had

extraordinary negotiating authority from Cohen to "forgive" any obligations of Lynch, to treat

them as a gift, to make additional payments to her or her family members (including disguised as

"palimony" on the pretext that Cohen is the father of one of her children), to make good on

Lynch's shares of IP rights or legal entities, or even to dedicate a hefty percentage to her of

whatever funds could be extorted from Plaintiffs and other advisors with her cooperation.

Kory tried to do this directly in late spring 2005 when he met Lynch for lunch and tried to persuade her to work with Cohen to “go after” Plaintiffs [and all of Cohen’s representatives].

Cohen and Kory also worked indirectly.  For example, they recruited Lynch’s erstwhile friend and longtime “friend” of Steve Lindsay, Betsy Superfon, a person of some notoriety due, among other reasons, to her entrepreneurship in the telephone sex trade. On numerous occasions, Kory [and Cohen] used Lindsay and Superfon to try to “broker” deals with Lynch …

In one such conversation, in May 2005, Superfon, according to Lynch, called Greenberg “the kingpin” and a “criminal” and pleaded with Lynch to cooperate with Cohen for “[her] heart, [her] health, and [her] kids” and recommended that Lynch “get out of this.”  Superfon promised that she could “settle this for [Lynch] immediately,” and stated that “Leonard and Kory [are] trying to get you out of this situation.”

When Lynch requested a settlement agreement in writing during a later conversation, Superfon, according to Lynch, stated that when she asked Kory to fax Lynch a settlement, Kory said “you can’t fax this kind of a deal. It has to be discussed.”  [Superfon advised Lynch that she personally believed the deal they were offering was illegal.]

Through Lindsay, Superfon and other friends, relatives and acquaintances, Cohen and Kory delivered the message that giving in to Cohen’s wishes would be in Lynch’s best interest.

When these tactics to draw Lynch into his extortion scheme proved futile, Cohen and Kory – according to Lynch – turned to far more aggressive means to obtain her cooperation.  Indeed, as heard by other witnesses, Cohen and Kory vowed to “crush her,” and planned to use restraining orders and other means to prevent her from serving as a credible witness regarding both Cohen's affairs and in regard to the scheme into which they had tried without success to draw her.

Consistent with that vow and plan, and according to Lynch and other witnesses, and on information and belief, Cohen and Kory's tactics to terrorize, silence, or disparage Lynch have included, inter alia, the following:

a. contacting City National Bank, where Lynch, Lynch’s son .., all had personal banking accounts, and convincing City National Bank to put a freeze on … their accounts;

b. alleging that Lynch's father and mother were depositing funds for Lynch in secret offshore bank accounts … ;

c. threatening Lynch that she would go to jail if she did not cooperate, and having her younger son's father, Steve Lindsay, who was also Cohen’s record producer, repeat these threats in the child's presence;

d. threatening to “go to child services,” encouraging Steve Lindsay to file legal action to remove Lynch’s younger (and his) son from her custody, and submitting affidavits (from Kory and Superfon) supporting that effort;

e. in a coordinated fashion with Lindsay’s child custody petition, encouraging or directing Steve Lindsay to call in a warning to the LAPD (not related to Traditional Holdings, but on some other, unknown pretext) that caused a police team to descend, guns drawn, on Lynch's home, resulting in her being handcuffed and taken involuntarily, in her bathing suit, to a hospital psychiatric ward and medicated without her consent, before being released the next day, during which time Kory attempted to persuade Lynch’s older son, Rutger, to sell Lynch’s house and provide $3 million; and

f. paying two paroled convicts to make [false] statements [about Lynch’s older son].

These and other tactics brought Lynch to the point of … financial ruin.

Cohen’s scheme to force Plaintiffs into a contrived mediation without discovery or publicity might have succeeded, had not Lynch refused to cooperate. Instead, she made the unilateral decision to provide to Plaintiffs' legal counsel a variety of documents and other information that they might not have otherwise seen … See, e.g., Facsimile Message from K. Lynch to S. Posel (March 17, 2005) (Exh. 11 attached).

Fortunately, Lynch [permitted Boies Schiller to review] not only historical files, but also the details of Cohen and Kory's illicit offers made to her through attorney DiMascio, through accountant Dale Burgess, and through other intermediaries, and shared every detail of Cohen and Kory's attempts to negotiate with or threaten her in order to obtain … testimony ...

Cohen and Kory continued to heighten their efforts to bribe or coerce Lynch into giving … testimony … without knowing that Lynch had already exposed their scheme …

Cohen and Kory alleged that Plaintiffs “proposed the sale of Cohen's ‘illiquid assets,’ including Cohen's various royalty interests,” and contended that “Cohen was convinced by [Greenberg] of the financial necessity to sell off his royalty interests during his lifetime . . . .”

Cohen and Kory alleged that Plaintiffs were liable for “actual damages of at least $8 million,” which was an amount even greater than the total proceeds of the Second Sony Sale. In fact, Cohen and Kory made this allegation with full knowledge that Cohen had already received at least $1 million in advance of the Sale closing, that the gross proceeds had been reduced by specific costs and charges, that were well over $1 million had been paid out to third parties to cover closing costs from the Sale, and that Cohen had received at least $2 million of the remainder into his own personal bank account.

Cohen reviewed the Traditional Holdings governing documents (detailing that arrangement), that he repeatedly received and understood both oral and written explanations of this very fact, and that [Lynch was not] behind the formation or structure of Traditional Holdings.

Thereafter, on June 3, 2005, Plaintiffs provided Kory, as promised, a draft complaint … with extensive documentary support … The draft complaint also revealed to Cohen and Kory, for the first time, that Lynch and others had already exposed the extortion scheme. In particular, the draft complaint demonstrated that Plaintiffs were aware of Cohen’s scheme to use economic compensation, emotional intimidation, and other forms of undue pressure to coerce Lynch to provide … testimony …

At all relevant time periods stated herein, Kory acted, at a minimum, as an agent, attorney, joint venturer, and/or co-conspirator of Cohen …

Cohen and Kory knew that the false, disparaging, and defamatory press release was not made in furtherance of any lawful objective or within the scope of the litigation commenced by Plaintiffs, and that the intended recipients were not involved in or closely connected with the litigation.

As a result of Cohen and Kory’s improper and unlawful conduct, the false, disparaging and defamatory press release was immediately published on, inter alia, the following interactive and other websites:

(a) www.leonardcohen.com (the official Leonard Cohen website, which has a link to the chat room for the Leonard Cohen files, where the statement was published);

(b) http://www.cmumusicnetwork.co.uk/daily/050616.html (states that “Kory told CMU” and then quotes the Cohen and Kory press release);

(c) http://xrrf.blogspot.com/2005/06 leonard-cohen-mr.-big.html (referencing the quoted statement as “released by Leonard Cohen’s lawyer” and referring to it as the “Attorney Robert Kory Statement”);

(d) http://blogs.theage.com.au/malcontent/archives/2005/06/leonard_cohen_s.html (also referencing the quoted statement as “released by Leonard Cohen’s lawyer” and referring to it as the “Attorney Robert Kory Statement”; also later reported by MalContent to have been “emailed by

an industry rep to MalContent”); and

Leonard Cohen sued by investment company, alleging civil conspiracy, extortion

June 2005

Musician and legend Leonard Cohen is being sued by a Colorado investment company Agile Group, which alleges Cohen and another person threatened to irreparably damage Agile's reputation in order to extort millions of dollars from Agile and its insurer. The case is related to claim by Cohen that Agile bears responsibility for the alleged misappropriation of Cohen's invested funds by Cohen's former manager. Read it here.

Don's ask me why, but Cohen's classic, Everbody Knows comes to mind.

A statement released by Leonard Cohen's lawyer points to the truth of this sad state of affairs:

ATTORNEY ROBERT KORY STATEMENT 
IN RESPONSE TO AGILE GROUP SUIT 
INVOLVING LEONARD COHEN

"The suit filed by the Agile Group Monday, June 6, 2005 is completely 
consistent with Agile's reckless disregard for its client and his 
investments.

We had hoped to reach an out-of-court settlement with Agile that 
returned to Mr. Cohen some portion of the retirement money the firm was 
authorized to administer on his behalf. Instead, in the middle of 
negotiations to determine Agile's responsibilities to Mr. Cohen to 
compensate him for money lost under their management, Agile launched a 
surprise attack in an effort to besmirch the reputation of one of its 
notable clients.

Agile repeatedly failed to alert Mr. Cohen to true account balances 
while allowing improper and unauthorized withdrawals by Cohen's former 
business manager. In doing so Agile failed to protect Mr. Cohen's 
interests and retirement savings and knowingly misled him by providing 
inaccurate financial reports.

We will of course file a counter suit that lays out in detail how Agile 
acted in a reckless way that violated the firm's fiduciary 
responsibilities towards Cohen and consequently resulted in the loss of 
Mr. Cohen's retirement savings."

·         Posted by: Adrian du Plessis at June 14, 2005 08:07 PM

 (e) http://bcbr.datajoe.com/app/ecom/pub_print_article.php?id=58402 (the website for the Boulder County Business Report, published in Colorado, which references Kory’s posting of the statement on Cohen’s website, and re-publishes the statement).

181. In addition, Cohen made false, disparaging, and defamatory statements and republished

false, disparaging and defamatory e-mails to a reporter for an industry publication known as MacLeans, knowing that the statements would be immediately published by MacLeans to the general public via the internet and other print publications. The MacLeans article, published via the internet on August 17, 2005.  SEE ATTACHED.  [Excerpt:  Cohen wrote (Greenberg) in November 2004 … “Face up to it, Neal,” the email continues, “and square your shoulders:  You were the trusted guardian of my assets, and you let them slip away . . . Restore what you lost, and sleep well.” In his sign-off, Cohen delivered as much a piece of advice as his own philosophy: “Put this behind you and it will dissolve.”]

The wrongful conduct described herein was attended by circumstances of fraud, malice, willful and wanton behavior, and bad faith.

Consistent with their prior threats, Cohen and Kory have knowingly published or caused to be published false information concerning [Lynch and possibly others] in the public domain …

The false, disparaging, and defamatory press release and other statements are not protected by any statutory or common law privilege because the statements were not made in furtherance of any objective of litigation, either lawful or otherwise, and because the intended and actual recipients of the statements were not involved in or closely connected with the litigation.

The … statements, and other defamatory statements, were communicated to and understood by third parties to be defamatory, and have harmed [Lynch and possibly others] reputation in the community.

Cohen and other co-conspirators not currently named as Defendants herein (including Robert Kory, Steve Lindsay and Betsy Superfon) committed one or more unlawful acts in furtherance of these common goals and objectives.

The unlawful goals and objectives of the conspiracy included inter alia the following:  (a) The extortion and/or attempted extortion of money or property from Plaintiffs and their insurers [and others, including Lynch] in Colorado [and elsewhere] to recover alleged losses sustained by Cohen as the result of his own exorbitant spending habits, his own neglect and mismanagement of his financial, legal and personal affairs … The making of substantial threats, that were reasonably likely to induce [Lynch and possibly others] that the threats would be carried out, and would cause

significant economic hardship or damage to the reputation [of Lynch and possibly others] with the intent to induce [certain parties] to perform acts against their will; The offering of benefits [to properly compensate Lynch with respect to her ownership interest in numerous corporate entities; for services rendered; and so forth] to a witness and/or members of the witness’ family with the intent to influence the witness to testify falsely or unlawfully withhold truthful testimony; The use of threats, acts of harassment, or acts of harm or injury to persons [including Kelley Lynch] or property, directed to or committed upon a witness and/or members of the witness’ family to intentionally attempt and/or actually influence the witness to testify falsely or unlawfully withhold truthful testimony;  The intentional attempt to induce a witness to testify falsely or unlawfully

withhold truthful testimony; The generation and dissemination of a false, disparaging and defamatory press release and other similar statements to third persons with the knowledge, intent, and directive that such statements be disseminated by media publication and the internet throughout [the world].

Cohen’s conduct described herein was attended by circumstances of fraud, malice, and willful and wanton behavior.

Cohen and the other co-conspirators not currently named as Defendants herein (including Robert Kory, Steve Lindsay and Betsy Superfon) knowingly conducted or participated, directly or indirectly, in such enterprise through a “pattern of racketeering activity” … The acts of racketeering activity which Cohen and the unnamed co-conspirators, and the enterprise committed, attempted to commit, conspired to commit, solicited, coerced or intimidated others to commit included, inter alia: (a) Mail fraud;  (b) Wire fraud; (c) Interference with commerce by threats; (d) Criminal extortion; (e) Bribing a witness; (f) Intimidating a witness;  (g) Tampering with a witness.  [The witness is Kelley Lynch]

The predicate acts described herein formed a pattern of racketeering activity, were related to the conduct of the enterprise, and were related to each other as part of the common plan …

Cohen and his agents and attorneys have engaged, and are continuing to engage, in a continuous and relentless pattern of malicious and unwarranted conduct, as described more fully herein [and in Lynch’s legal documents in various related matters and elsewhere].

Judge Babcock’s December 5, 2005 order dismissing Robert Kory from this case [due to lack of personal jurisdiction] contains the following statements.  The tactics and purported thuggery Judge Babcock refers to are ongoing and ineffective:  They tried to compel Ms. Lynch to participate in their project by, among other tactics, having her arrested on false pretenses and initiating proceedings to deprive her of her children. The Amended Complaint does not indicate that this purported thuggery was effective.”

RE:  JUDGE LEWIS BABCOCK’S ORDER

Only the above allegations or statements in Neal Greenberg’s Amended Complaint are factual. 

UNITED STATES DISTRICT COURT, D. COLORADO.

GREENBERG ASSOCIATES. INC. v. COHEN

(D. Colo. Dec 05, 2005)

Decided December 5, 2005

GREENBERG ASSOCIATES. INC., d/b/a Agile Advisors, Inc. a Delaware corporation, TACTICAL ALLOCATION SERVICES, LLC, d/b/a Agile Allocation Services, LLC, a Delaware limited liability company, AGILE GROUP, LLC, a Delaware limited liability company, GREENBERG ASSOCIATES SECURITIES, INC., d/b/a Agile Group, a Delaware corporation, and NEAL R. GREENBERG, a Colorado resident, Plaintiffs, v. LEONARD COHEN, a Canadian citizen residing in California, ROBERT KORY, a United States citizen residing in California, KELLEY LYNCH, a United States citizen residing in California, and JOHN DOE, Numbers 1-25, Defendants.

Civil Case No. 05-cv-01233-LTB-MJW.

United States District Court, D. Colorado.

December 5, 2005

---

ORDER

LEWIS BABCOCK, Chief Judge

The defendant Robert Kory moves for dismissal of all claims against him on the alternate grounds that I have no personal jurisdiction over him, Fed.R.Civ.P. 12(b)(2), and that the plaintiffs have failed to state a claim against him, Fed.R.Civ.P. 12(b)(6). The motion is adequately briefed and oral arguments would not materially aid its resolution. For the reasons stated below, I find and conclude that I have no personal jurisdiction over Mr. Kory and I GRANT the motion pursuant to Rule 12(b)(2).

Because Mr. Kory has contested the Court's jurisdiction, the plaintiffs have "the burden of proving jurisdiction exists." Wenz v. Memery Crystal, 55 F.3d 1503, 1505 (10th Cir. 1995). *22 "Where, as in the present case, there has been no evidentiary hearing, and the motion to dismiss for lack of jurisdiction is decided on the basis of affidavits and other written material, the plaintiff need only make a prima facie showing that jurisdiction exists." Id.

In resolving factual questions:

The allegations in the complaint must be taken as true to the extent they are uncontroverted by the defendant's affidavits. If the parties present conflicting affidavits, all factual disputes must be resolved in the plaintiff's favor, and the plaintiff's prima facie showing is sufficient notwithstanding the contrary presentation by the moving party. However, only the well-pled facts of plaintiff's complaint, as distinguished from mere conclusory allegations, must be accepted as true.

Id. (citations omitted).

I. Allegations The allegations of the Amended Complaint are substantially the following. In 1997, the defendant Leonard Cohen, a resident of California, retained the plaintiffs, directed by the plaintiff Neal Greenberg and headquartered in Boulder, Colorado, to create for him charitable trusts and to manage the assets placed into those trusts. (Throughout the Amended Complaint and their briefs, the plaintiffs refer to themselves individually and in the aggregate as "Greenberg." They do not reveal the nature of their relationships to each other. I have attempted to be as precise as the pleadings and the record will allow.) Mr. Cohen allegedly drew extravagant sums from the trusts, depleting the principal amounts and impeding the plaintiffs' efforts successfully to invest the funds in profitable ventures. The defendant Kelley Lynch, Mr. Cohen's manager, oversaw and had power of attorney over, all of Mr. Cohen's financial dealings. Mr. Greenberg allegedly repeatedly warned Ms. Lynch and Mr. Cohen that Mr. Cohen was spending too much and that, absent a change of habit, he would become destitute. *33 In October, 2004, Mr. Cohen and Ms. Lynch allegedly parted ways and began to issue competing directives to the plaintiffs. They each blamed the other for Mr. Cohen's financial distress. Mr. Cohen claimed that Ms. Lynch had deprived him of substantial sums of money. Thereafter, Mr. Cohen and Mr. Kory, Mr. Cohen's personal attorney and a California resident, allegedly conspired to extort the lost sums from the plaintiffs by tarnishing the plaintiffs' reputation, asserting spurious claims, and coercing a settlement from the plaintiffs' insurance carrier. This they intended to accomplish by using Mr. Cohen's fame as a prominent recording artist to publish defamatory statements about the plaintiffs to the press. They tried to compel Ms. Lynch to participate in their project by, among other tactics, having her arrested on false pretenses and initiating proceedings to deprive her of her children. The Amended Complaint does not indicate that this purported thuggery was effective.

Mr. Kory sent an allegedly defamatory demand letter to Mr. Greenberg's attorney, wrongly accusing the plaintiffs of fraud and various breaches of fiduciary duty. After the plaintiffs filed this lawsuit, Messrs. Cohen and Kory allegedly published defamatory statements on Mr. Cohen's web site, blaming the plaintiffs for the lost monies, asserting that the plaintiffs had wrongfully permitted Ms. Lynch to withdraw unauthorized sums, and asserting that the plaintiffs had provided Mr. Cohen with fraudulent accounting records. Mr. Cohen and Ms. Lynch now dispute entitlement to the funds remaining in the trusts. Each seeks immediate acquisition of the funds.

Mr. Kory allegedly submitted to the jurisdiction of this Court by his purposeful and repeated written and telephonic communications with the plaintiffs and his direction of Mr. Greenberg's activities, performed in Colorado. Additionally, Mr. Kory allegedly reserved a *44 conference room at the Denver International Airport and scheduled a meeting, which he, Mr. Greenberg, Mr. Cohen, and Mr. Greenberg's counsel were to attend. Messrs. Kory and Cohen allegedly failed to appear for the meeting, which Mr. Greenberg attended.

II. The record

A. Kory affidavit

Mr. Kory has provided two affidavits replete with refutations of the plaintiffs' jurisdictional allegations. He is licensed to practice law in California, where he resides and has his law practice. He last traveled to Colorado in 1985 or 1986 for a ski vacation. He has no business or property interests in Colorado.

In the fall of 2004, Mr. Cohen retained Mr. Kory to investigate suspected losses from an entity denominated Traditional Holdings, LLC ("Traditional"), which the plaintiff, Tactical Allocation Services, LLC ("Tactical") managed for Mr. Cohen under Mr. Greenberg's direction. In the ensuing weeks, Mr. Kory contacted Tactical's Boulder, Colorado office on two or three occasions. Tactical responded by sending information about Mr. Cohen's accounts to Mr. Kory in California. Thereafter, Mr. Kory communicated predominantly with Tactical's legal counsel, Sherab Posel, whom Mr. Kory believed to be resident in New York. Though he engaged in at least one email exchange with representatives of Tactical located in Boulder, Mr. Kory communicated Mr. Cohen's asserted legal claims against Tactical and related requests for information to Mr. Posel, who responded on letterhead imprinted with New York addresses.

In April, 2005, Mr. Kory and Mr. Posel scheduled a mediation for June 5, 2005, which was to occur in Colorado. Mr. Kory reserved a conference room at a hotel near the Denver airport in anticipation of that meeting. After Mr. Posel disputed the veracity of Mr. Cohen's *55 claims and threatened litigation, Mr. Kory cancelled the room reservation in Colorado and remained in California.

B. Barnett affidavit

Timothy Barnett, Tactical's Vice President who works in Boulder, has produced correspondence — emails and letters — between Mr. Kory and representatives of the plaintiffs in Colorado and New York. Numerous emails and letters between Mr. Kory and Mr. Barnett throughout the period beginning in November, 2004 and ending in June, 2005 addressed Mr. Kory's requests for information about the accounts that Tactical managed for Mr. Cohen and Tactical's efforts to comply with those requests. Contrary to Mr. Kory's assertion, these communications number in the dozens. Many of the communications indicate that copies were sent to Mr. Greenberg and Mr. Posel, among others. Emails exchanged on December 15 and 16, 2004 detailed plans for a conference call involving Messrs. Kory, Barnett, and Posel. The three set up another conference call in March, 2005. Other emails reference telephone calls between Mr. Kory and Mr. Barnett and calls and conversations between Mr. Kory and Mr. Posel.

In an April 10, 2005, twenty-seven page demand letter to Mr. Posel, Mr. Kory asserted claims against "the Agile Group, Neal Greenberg and his partners" on Mr. Cohen's behalf. Mr. Kory made repeated references to the "several telephone conversations and e-mails regarding" the claims that he and Mr. Posel had previously exchanged. He invited a further response from Mr. Posel. Thereafter, Mr. Kory and Mr. Barnett exchanged emails only discussing the scheduling of a mediation meeting for June 5, 2005. Mr. Posel and Mr. Kory continued to communicate in writing about Mr. Cohen's allegations. On June 4, 2005, Mr. Kory wrote to Mr. Posel by email cancelling the mediation, but making no reference to the lawsuit that the plaintiffs had purportedly *66threatened. In a June 9, 2005 email, Mr. Kory expressed surprise at the contents of a draft complaint that Mr. Posel had sent him the day before.

By letter on June 2, 2005, Mr. Kory sent to Mr. Barnett two checks for deposit in Mr. Cohen's accounts. On June 7, Mr. Barnett responded in writing, noting that Mr. Cohen had terminated his relationship with the plaintiffs.

III. Discussion

"To obtain personal jurisdiction over a nonresident defendant in a diversity action, a plaintiff must show that jurisdiction is legitimate under the laws of the forum state and that the exercise of jurisdiction does not offend the due process clause of the Fourteenth Amendment." Far West Capital, Inc. v. Towne,46 F.3d 1071, 1074 (10th Cir. 1995). Because, as set forth below, I conclude that the Colorado long-arm statute does not reach Mr. Kory, I need not consider the constitutional question. The plaintiffs argue that Mr. Kory has submitted to jurisdiction in Colorado by the "commission of a tortious act within this state." Colo. Rev. Stat. § 13-1-124(1)(b). Colorado courts have held that the tort provision of the long-arm statute may be satisfied either 1) when tortious conduct occurs in Colorado, or 2) when tortious conduct initiated in another state causes injury in Colorado. Wenz, 55 F.3d at 1507; Classic Auto Sales, Inc. v. Schocket, 832 P.2d 233, 235-236 (Colo. 1992).

The plaintiffs first argue that Mr. Kory committed tortious conduct in Colorado. Directing into Colorado communications by which a tort is committed constitutes conduct sufficient to satisfy the statute if the tort is completed by the plaintiff's receipt in Colorado of the communications. Id. at 236; Broadview Financial, Inc. v. Entech Management Services Corp., *77859 F. Supp. 444, 448 (D. Colo. 1994). However, merely communicating with a person resident in Colorado is, in itself, insufficient to bring a defendant within the reach of the Colorado statute. Archangel Diamond Corp. v. Lukoil, ___ P.3d ___, 2005 WL 3097588 (Colo. 2005).

Mr. Kory's several communications with Mr. Barnett concerned Mr. Kory's attempts to elicit information from Mr. Barnett that would prove useful to Mr. Cohen. Though the plaintiffs feel that Mr. Kory solicited their cooperation in bad faith — Mr. Kory used much of the information the plaintiffs provided to construct claims against them, even as he repeatedly commended them for their diligence — the gravamen of their claims against Mr. Kory is that he conspired to defame them and to extort money from them by asserting frivolous claims. Mr. Kory directed to Mr. Posel in New York, and not to Mr. Barnett in Colorado, the communications by which he allegedly accomplished those torts. The plaintiffs have not argued — nor does it appear from the record — that the exchange of information and documents between Mr. Kory and Mr. Barnett was tortious. Nor could the plaintiffs premise liability on Mr. Kory's later-reneged reservation of a conference room in Colorado. I am left to determine whether the plaintiffs have suffered an injury in Colorado as a result of Mr. Kory's allegedly tortious acts. Wenz,55 F.3d at 1507. Tortious-activity jurisdiction obtains under the statute when "the injury itself" occurs in Colorado. McAvoy v. District Court, 757 P.2d 633, 635 (Colo. 1988).

Further, the injury in the forum state must be direct, not consequential or remote, and loss of profits in the state of plaintiff's domicile is insufficient to sustain long-arm jurisdiction over a nonresident defendant. Hence, when both the tortious conduct and the injury occur in another state, the fact that plaintiff resides in Colorado and experiences some economic consequences here is insufficient to confer jurisdiction on a Colorado court.  Amax Potash Corp. v. Trans-Resources, Inc., 817 P.2d 598, 600 (Colo.Ct.App. 1991) (citations *88 omitted).

The plaintiffs argue that Mr. Kory directed the injurious consequences of his wrongful activity toward Colorado because they, who have an office here, were the intended recipients of the harm. They cite D D Fuller CATV Const., Inc. v. Pace,780 P.2d 520(Colo. 1989) for the proposition that Mr. Kory could, therefore, have reasonably anticipated being haled into court in Colorado. However, they have not addressed the prior question where the injury occurred. Nothing in the record, Mr. Barnett's correspondence from Colorado included, appears to demonstrate that the plaintiffs suffered an injury in Colorado. Indeed, the only business the plaintiffs are alleged to have lost was transacted with Mr. Cohen, who resides in California. Accordingly, it is ORDERED that

1) Robert Kory's motion to dismiss pursuant to Fed.R.Civ.P.12(b)(2) [13] is GRANTED; and

2) the plaintiffs' claims against Mr. Kory are dismissed.

EXHIBIT

MACLEAN’S ARTICLE

August 17, 2005

A 'devastated' Leonard Cohen

The Canadian music icon is broke and the lawsuits are flying. It's a sordid tale involving allegations of extortion, SWAT teams, forcible confinement, tax troubles and betrayal.

KATHERINE MACKLEM

I said there's been a flood
I said there's nothing left
-- Leonard Cohen, from The Letters, on his album Dear Heather

Take an iconic artist, mix in missing millions, hints of tantric sex, a lawsuit replete with other salacious details, and a ruptured relationship with a long-time, trusted associate, and you've got the makings of a Hollywood blockbuster. Except in the case of Leonard Cohen, it's a true tale, with the bizarre twist of a Tibetan Buddhist suing a Zen Buddhist, Cohen. For the 70-year-old poet, singer and songwriter, it's a nasty, rapidly escalating legal battle that on the one hand accuses him of conspiracy and extortion, and on the other has him accusing both his highly trusted personal manager and long-time financial adviser -- the Tibetan Buddhist -- of gross mismanagement of his financial affairs. The case exposes not only private details of Cohen's finances, but also a dramatic tale of betrayal. 

The conflict, which Cohen and others have tried to keep out of public view, has left him virtually broke -- he's had to take out a mortgage on his house to pay legal costs -- and facing a multi-million-dollar tax bill. But the artist, who is soon to release a new album with his collaborator -- and current girlfriend -- Anjani Thomas, is today remarkably calm about the potentially embarrassing conflict. Still, when he discovered last fall that his retirement funds, which he had thought amounted to more than $5 million (all figures U.S.), had been reduced to $150,000, he wasn't so sanguine. "I was devastated," Cohen says. "You know, God gave me a strong inner core, so I wasn't shattered. But I was deeply concerned."

So far, only one formal court filing involving Cohen has been made. In June, Boulder, Colo.-based Neal Greenberg, Cohen's investment adviser of almost a decade, launched a hyperbole-laden claim in Colorado against Cohen, who lives in both Los Angeles and Montreal. The suit accuses Kelley Lynch, who was Cohen's manager and is also named in the suit, of siphoning money from the songwriter. It also accuses Cohen and his lawyer Robert Kory of conspiracy, extortion and defamation. It alleges the two, in an attempt to recover at least some of Cohen's lost money, threatened to besmirch Greenberg's reputation and concocted a plan to force Greenberg to give Cohen millions of dollars.

The suit paints an almost preposterous picture of Cohen as an artist who led a lavish celebrity lifestyle and then turned bitter and vindictive when he discovered the money had run out. For example, the suit quotes Lynch describing how Cohen demanded she discuss business matters while he soaked in a bubble bath, and how later he was somehow involved in calling a SWAT team to her home, where she was handcuffed and forcibly taken to a psychiatric ward while in her bathing suit.

None of the allegations have been proven in court. Cohen is expected to file a countersuit this week. More lawsuits are likely to join the fray. And Lynch, who has sent turgid, raw and wrathful emails hither and yon, is threatening to sue just about everyone.

The conflict was triggered last fall when Cohen was tipped off by an insider that a lot of money was missing from his accounts. All that remained of his retirement savings was the $150,000, funds that today he can't get at as a result of the tangled legal web he finds himself in. Greenberg's suit portrays the soulful songwriter as an artist who paid little attention to his financial affairs and so was easily duped by a conniving personal manager. Cohen says he tried quietly, and confidentially, to find out from his various managers where the money had gone. Cohen calls the case "a tragedy," suggesting he was exploited by trusted advisers. He uses words like "greed, concealment, and reckless disregard," and says firmly he did nothing wrong. "I can assure you, within reason, I took every precaution except to question the fidelity of my closest associates."

Untoil Cohen fired her last fall, Kelley Lynch had been his personal manager for almost 17 years. Back in 1988, she'd been working as an assistant to his then-manager, who died that year. Because she was knowledgeable about Cohen's business affairs and recording contracts, he had her take over. Over the years, the two developed a personal and professional relationship. Fifteen years ago, they had a brief affair. "It was a casual sexual arrangement. It was mutually enjoyed and terminated," he says. "I never spent the night." The end of the affair didn't affect their bond. "We were very, very close friends," Cohen says today. "I liked her immensely. Our families were close -- she was helpful when I was raising my daughter; I employed her father." He even named her in his living will, giving her the power to decide, in certain circumstances, if he would live or die. He handed her vast powers of attorney. He trusted her implicitly. And he believed the relationship was mutual. "She wrote dozens of emails to me, thanking me for my help. We used to correspond regularly, relentlessly." He says that in 2004, while he was recording his most recent album, Dear Heather, with a small team at his home-recording studio, Lynch would come by almost daily. "People were very tight. Kelley was taking care of business, I was producing the album. It was all taking place in this little duplex and the garage that was converted into a studio. Kelley would come over, and I would generally prepare lunch for everyone."

The cosy arrangement was shattered one day last October when a young man, the boyfriend of a casual employee of Lynch, spoke to Cohen's daughter, Lorca, who owns an art deco furniture store and who lives downstairs from her father in the L.A. duplex he owns. "Your father really ought to look into his accounts, because he might be surprised at what he finds," he said. Lorca told him that her father trusted everyone involved and that besides, "he's about to retire, anyway." As Cohen senior tells the story, the young man replied, "He won't be able to retire."

Alarmed, Lorca called her father, who was in Montreal. Within a couple of days, he returned to Los Angeles and immediately went to his bank. There he discovered, as he puts it, "improprieties." Lynch had linked her American Express bill directly to his personal chequing account, he says, and just days before his visit to the bank, he'd paid a $75,000 Amex bill on her behalf. He never learned what purchases the card had been used for, but says the credit card company reimbursed him. Cohen immediately removed Lynch's signing powers on the accounts. The next day, Cohen told Lynch she no longer had access to the bank accounts and he fired her. That afternoon, Cohen says the bank notified him that Lynch went to a different branch and attempted to withdraw $40,000 from one of his accounts. He then called a lawyer and brought in a forensic accounting firm, Moss-Adams, which, in an investigation of all of Cohen's holdings, discovered "massive improprieties." In all, the accountants discovered about $8.4 million had over time disappeared from his holdings, Cohen says. His retirement funds had been virtually depleted.

Neal Greenberg, a banker with a thriving investment firm, had been brought in by Lynch to manage Cohen's money in 1996, two years after Cohen went up Mount Baldy to study to be a Rinzai Zen Buddhist monk. But now, he was worried. Over two decades, Greenberg had built a successful company, the Agile Group, and managed more than half-a-billion dollars of other people's money. He enjoyed, as he says in his suit, a "spotless professional reputation." And suddenly, here was Leonard Cohen, not just a prized client but one with a high profile, suggesting that Greenberg was party to the disappearance of Cohen's retirement savings.

Over the years, he says, he warned Cohen that his funds were being rapidly depleted, but it seemed the artist paid no heed. And now, Cohen and his lawyer, Kory, claims the Greenberg suit, were threatening "that Cohen would go out on tour to promote his new album and give interviews to reporters in which he would insinuate that he was touring because he had been bankrupted by improprieties by Greenberg and other financial advisers." Greenberg must have envisioned his business and his career in absolute tatters. He sued.

Greenberg's lawsuit lays out the business background to the dispute. Cohen's success as a singer and songwriter generated millions in royalties, the suit says, and in the 1990s, Lynch, as Cohen's trusted personal manager, began to investigate auctioning his intellectual properties, including copyrights to his song catalogue and continuing royalties for his songs. Lynch, along with a tax consultant named Richard Westin, arranged two deals for Cohen's properties. The transactions were eventually completed, one in 1997, the other in 2001, with Sony Music. From the first sale, about $5 million was transferred to trusts that Greenberg had been enlisted to manage and that would protect Cohen from an upfront tax hit. Greenberg says he invested the proceeds wisely, making lots of money for the trusts. But Greenberg also claims that Cohen's "consistent and prolific spending" to support "his extravagant 'celebrity' lifestyle" eroded the gains he had made on his client's behalf.

The second sale of Cohen's intellectual property, in 2001, was for $8 million. With Westin, Lynch put that money into a newly formed company named Traditional Holdings LLC that also was intended to shield Cohen's earnings from a major tax hit. Lynch was named as owner of 99.5 per cent of the company, leaving Cohen holding just 0.5 per cent. Greenberg alleges that Cohen, well aware of the structure and its dangers, signed off on it. Westin had explained to Cohen, the suit says, that "the plan would only work if Cohen and Lynch maintained (as they had in the past) a long-term relationship of personal and professional trust." Traditional Holdings could also issue loans to its owners, Lynch and Cohen.

As soon as the new company was in place, "Greenberg was immediately alarmed by Cohen's desire and tendency to treat this company [Traditional Holdings] like his personal piggy bank," the lawsuit alleges. It goes on to claim Cohen took a $1-million advance on the second sale of assets to Sony, Lynch took a commission of $1.1 million, and fees for lawyers and accountants ate up another $714,000. And then, over the next few years, Lynch regularly borrowed money from the Traditional Holdings account in amounts of tens of thousands of dollars, sometimes for herself, sometimes acting for Cohen. The lawsuit claims that while Greenberg sent a monthly email statement to Cohen, it was always Lynch who told Greenberg to release the loans.

The Greenberg suit claims Lynch, always acting as Cohen's agent, told Greenberg what to do regarding the funds. For instance, Lynch instructed Greenberg to send Cohen the monthly email status reports, but Greenberg says she directed him to leave out day-to-day activities and the status of Traditional Holdings loans. Because the loans were to be repaid, Greenberg included them in the statements as assets, which meant that it appeared as though nothing had been taken out.

Greenberg, who declined to comment for this article, claims in his suit he repeatedly stressed to Cohen that his spending was seriously draining his investments. In one warning letter, Greenberg told Cohen that Traditional Holdings had only $2.1 million left. Considering how quickly the money was leaving the account, Greenberg wrote, "I think you should consider your situation quite desperate." It's not clear if Cohen ever received this letter. On this, Cohen and Greenberg agree: they say many of Greenberg's attempted communications with Cohen were intercepted by Lynch.

On other points, Cohen disagrees. He was vitally interested in his financial affairs, he says. "It wasn't that I wasn't involved -- on the contrary, I took great pains to pay these professionals well and to solicit their advice and to follow it," he insists. "And, I was receiving a report every month from Neal Greenberg indicating that my retirement savings were safe." Cohen insists he was not made aware that Lynch had been named the majority owner of Traditional Holdings; instead, he says that in an early description of the company's structure, he had been told that his two children, Lorca and Adam, would be its principal owners. He says he was shocked to learn that Lynch had almost complete ownership. The mistake Cohen admits to is that "I paid close attention to everything except the possibility that my closest associate would embrace any irregularities in the discharge of her duties."

Cohen also says he learned only recently that the two sales of his intellectual property to Sony were unnecessary. He understands now that those properties earned roughly $400,000 a year, before taxes. That was plenty for him to support what he calls his modest lifestyle. Cohen accuses Lynch of creating the deals in order to boost her own income. He paid her 15 per cent of his income, which generally earned her $90,000 a year, he says. With the sales of his intellectual property bringing in revenue in the millions, it boosted her income to seven figures.

Greenberg's lawsuit becomes more disturbing as it describes what happened after Cohen realized he'd lost millions of dollars. Greenberg says Cohen pressured him to go after his firm's insurance company for the money to repay him. "Be a man," Cohen told Greenberg, the suit says. By threatening his reputation, it appeared to Greenberg that Cohen, on Kory's advice, had decided to target Greenberg's and his insurance company's deep pockets. Then, alleges the lawsuit, Cohen and Kory began to pressure Lynch to join them in "their extortion scheme." From November 2004 to April 2005, the lawsuit says, Kory repeatedly let Lynch know, sometimes directly, sometimes through friends or other intermediaries, that Cohen was ready to "forgive" Lynch's obligations to him, and that she in fact could receive a hefty cut of "whatever funds could be extorted from Greenberg and other advisers with her co-operation."

Greenberg's suit alleges that when Lynch refused to participate, Kory and Cohen vowed to "crush her." It goes on to say their "tactics to terrorize, silence, or disparage Lynch" included threatening her that she would go to jail, and "paying two paroled convicts to make statements that they had observed Lynch's older son brandishing a gun and threatening to kill someone."

Lynch's response, to all of this has been bitter, scattered and in some cases difficult to comprehend. In a rambling exchange of emails with Maclean's last week, she denied any wrongdoing. She also declined to discuss the Agile Group's lawsuit, describing it as "bogus" and "slanderous," while promising to file her own complaints against Cohen and other principal players in the case. She added her phone had been disconnected because she lacked money to pay the bills.

In the meantime, she's been showering Cohen and others with invective-laden emails that alternately voice misery and hurl accusations at friends and former colleagues. Many of these lament losing custody of her 12-year-old son, Ray, to his father, music producer Steve Lindsay. A few devolve into the outrightly bizarre. One missive, sent July 17 and obtained by Maclean's, invites Greenberg in highly explicit terms to Lynch's home for an evening of tantric sex. "First I want to study the inner channels with you," it says. "Why not -- let's see who is better at tantric sex -- you or me."

So troubling have the messages become that several people who know Lynch fear she's become unhinged. "I'm afraid she's suicidal," says Lindsay, her ex-husband, adding that in his judgment she's been acting erratically for the better part of a year. Cohen too sent Lynch a message last fall spelling out his concern in verse: You can't tell the difference between a threat / and a helping hand, he wrote. You can't tell the difference between a threat / and a solemn warning / from one of the few people / who still cares about you and your family.

Lynch's apparent troubles have had punishing legal consequences. Lindsay has obtained a temporary restraining order that prevents her from visiting her son. Tara Cooper, a former employee of a greeting card company Lynch started while still in Cohen's employ, has taken out a similar order after alleging that Lynch sent threatening emails and harassed her by phone. And two of her creditors -- upscale department stores Neiman Marcus and Bergdorf Goodman -- have filed collections claims against her in Los Angeles Superior Court.

This is the mess that Leonard Cohen -- a man many believe floats a few inches above the ground -- finds himself in. These days, he's Zen-like. In the course of a long interview by phone from his home in Los Angeles, the man sometimes called the poet laureate of pessimism sounded almost bemused. "What can I do?" he asks. "I had to go to work. I have no money left. I'm not saying it's bad; I have enough of an understanding of the way the world works to understand that these things happen."

His first choice of action when he learned his money was gone, he says, was to not do anything. Aware of how painful litigation could be, he says he wanted no part of it. "I said, 'I can walk away with nothing.' I said, 'Let me start again. Let me start fresh at 70. I can cobble together a little nest egg again.' " But he ran into a glaring, immediate problem: had he done nothing, he would have legally been responsible for the funds that had gone missing. And on that money, he'd owe millions in taxes, a sum he no longer had.

His next step, "his second-best choice," was to negotiate with his advisers about the missing money. He approached Lynch, asking her to open her books. "She resolutely and unconditionally refused to open her books to any scrutiny whatsoever and instead began a bizarre email campaign to discredit me in some kind of way, which has gone all over the place," Cohen says, adding that he's launching a lawsuit this week with great reluctance. "I don't want anybody hurt. It's not my nature to pursue and to contend with people that way." Cohen says all he wants is to find out where the money went. "I'm not accusing her of theft," he says of Lynch. Still, his countersuit will likely describe how money was removed from his accounts.

Cohen appears to have been blindsided by Greenberg's lawsuit. He insists that he and Kory were in the midst of mediation with Greenberg when the financial adviser's lawsuit was suddenly and unexpectedly filed. He says the mediation had been confidential, at Greenberg's urging, as he feared for his reputation. In an email to Greenberg, Cohen urges him to make good. "Dear Neal, I believed in you. I depended on you," Cohen wrote in November 2004. "When things went wrong, does it make any sense that you would make your warnings available to the only person in the cosmos who had an interest in deceiving me? A single, simple email informing me that my accounts were being emptied would have been enough. I answered EVERY SINGLE EMAIL you ever sent me. Fortunately, I have them all.

"Face up to it, Neal," the email continues, "and square your shoulders: You were the trusted guardian of my assets, and you let them slip away . . . Restore what you lost, and sleep well." In his sign-off, Cohen delivered as much a piece of advice as his own philosophy: "Put this behind you and it will dissolve." There's an irony here, that a man who has struggled much of his life to distance himself from the material world now, at 70, finds himself in an intense battle with it. Still, he's not defeated. "This has propelled us into incessant work," he says of himself and Thomas. He exudes optimism about their new CD. "It's one of the best albums I've heard." It's not closing time quite yet. 

With CHARLIE GILLIS and BRIAN D. JOHNSON

http://www.leonardcohenforum.com/viewtopic.php?t=4283

KELLEY LYNCH AGREES WITH THE FOLLOWING ASSERTIONS IN STEVEN MACHAT’S BOOK:

Gods, Gangsters & Honour by Steven Machat

Leonard was desperate to get rid of this two managers, Judy Berger and Mary Martin, who he believed had stolen the rights to his songs and records early on in his career.  Even back then, Cohen was convinced that women were ripping him off.  He signed an agreement, and when he wanted to get rid of the contract, he accused everyone of ripping him off.  You could say it became repeat behaviour.  My father duly got rid of Berger and Martin, set up a new company called Stranger Music for Cohen and agreed to manage Leonard for 15% as well as 15% of Stranger.  The idea of the company was twofold:  one, to maintain ownership of the copyrights duly created; and two, to minimise Leonard’s exposure to American tax, just like any other rich individual trying to minimise their tax liabilities.  

I’ve no problem with people trying to avoid tax, but as the years have passed, I couldn’t help but smile at the apparent contradiction between Leonard’s public persona and his private business arrangements.  This was a supposedly devout Buddhist with no interest in material possessions, who was all the same happy to put his trust in business managers and companies he created with his knowledge and consent whose sole aim was to minimise tax liability.  

Leonard then sold Stranger Music for a small fortune and I’ve seen nothing from Cohen.

Cohen controlled his copyright, not my father.  The irony was that Cohen had total control over my father …  Do you know what happened to the $400,000 worth of bearer bonds in my father’s office?  Bearer bonds are just unregistered bonds or paper money that are used to conceal ownership and, with it, tax liabilities.  Cristini told me (who knows if this is true?) that he had found the bonds in my father’s office hours after he had died but the next day they disappeared.

Cohen denied any knowledge of these bonds.  I was unsure if they existed or were part of my father’s schemes cooked up to conceal Leonard’s money.  

Cohen said:  “Steven, you remember the 1988 tour?  Flemming extorted $100,000 from me.  He wanted 20% managerial commission, in addition to his promoter’s fees.  He thought he was doing extra work for me and wanted me to pay him.”

Far from being the poet of the spirits, Leonard was a hustler using Buddhism as a facade.  

The next time I would see Leonard … We’d just seen The Hand That Rocks The Cradle where Rebecca De Mornay plays the psychopathic nanny who stalks this family.  Who should walk along but Cohen, who was holding hands with DeMornay, his girlfriend at the time.  Cohen was extremely uncomfortable because he knew he had stolen from me and it was clear he couldn’t get away quick enough.  Neither could my son, because he took one look at DeMornay and ran.  He was terrified because he thought she was the nanny in the film!

It was clear that Leonard was also wary of me because, I guess, he thought I might be planning to sue him.

Lynch had been sending out long and bizarre emails to his friends, journalists, and the authorities denouncing Leonard for a million and one sins, which would have worried me if I was their target.

The whole scheme was so ridiculous [Leonard Cohen’s attempts to limit his liabilities on the deals] from the start.  All Leonard had to do to avoid U.S. taxes was tear up his green card, and stop living in and using the U.S. as his base.  

It’s no secret that Leonard has also made a killing on the art market by selling his paintings, plus his touring of the last two years … If that’s true, it doesn’t really tally with the clear implication from Cohen that he is a man who has been robbed of everything.

Leonard told me before I left that he had actually offered Kelley a settlement …

It’s clear that Cohen and his lawyers want to heap the blame on Kelley’s shoulders for more than just revenge.  Because Cohen’s pension assets were cashed in … ahead of schedule they are liable to tax so they need to establish that this situation is her fault.  The penalties could actually be greater than the tax itself.  

Leonard has cast himself into a hell of his own making.  

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