Breach of Child-Support Agreement

Abstract
In November 2002, the Plaintiff reserved 50,000 of his K2000 shares to be used by the Defendant as collateral against any child-support debt that he would have accumulated up until 2004 (and beyond).
In 2004, the Defendant`s misuse of that collateral breached 1) the "usage mandates" associated with the collateral and 2) subverted the cornerstone premise of the couple`s property division agreement.

Relevant Chronology
The following is the Plaintiff`s account of events that are relevant to this claim...EXPAND CONTRACT

1997: Knowledge 2000 Founded...EXPAND CONTRACT

The Plaintiff founded K2000 in Sedona, Arizona, and raised $1.5 million investment capital from 40+ individual investors. He then orchestrated the development of an internet-based eLearning technology and a product based on it. The Plaintiff worked 14 hour days to bring the company to life.

2000: Divorce...EXPAND CONTRACT

Sadly, in part driven by her alcoholism, the Defendant and the Plaintiff were divorced in April 2000. The Plaintiff gave his wife their home, their stock portfolio, and almost everything except his 51% stake in K2000 so that he could maintain corporate voting control.
Shortly after that the Plaintiff`s health started to deteriorate.
Divorce Documents
The following are divorce-related documents

Divorce Decree ...EXPAND CONTRACT
Property Division Agreement...EXPAND CONTRACT
Exhibit A & B of Property Division Agreement...EXPAND CONTRACT
Scroll down to view Exhibit B
Exhibit C & D of Property Division Agreement...EXPAND CONTRACT
Scroll down to view Exhibit D
Alternative Dispute Resolution...EXPAND CONTRACT
Miscellaneous...EXPAND CONTRACT
See page 5 and 6 for "Alternative Dispute Resolution Conference Recommendation"

2001: Prostate Cancer...EXPAND CONTRACT

In January 2001, the Plaintiff was diagnosed with serious prostate cancer and underwent a radical prostatectomy on the 31st January, 2001 at Cottonwood Hospital, Cottonwood, Arizona. Because his sons had been devastated by the divorce, the Plaintiff initially kept the seriousness of his health condition from them, rather than imposing on them the additional shock that they might soon lose their father.
Thereafter, the Plaintiff realized that he would have to hand over the running of K2000, and return to his native Australia to get support from his family during his declining health, and to get free healthcare.

2001-2002: Preparing K2000 for Transition...EXPAND CONTRACT

In order to ensure the Company would be sustainably profitable into the future, in February 2001 the Plaintiff dedicated the next 18 months 1) to establishing a permanent presence on the Internet search engines to ensure that potential customers could discover and download the company`s product, and 2) to producing the design documents for the next version of the Company`s eLearning technology (ELP).
By mid 2002, the Plaintiff had achieved both goals with the establishment of an upward trend in product sales that continued for next 10 years and beyond.

Nov.2002-mid.2003: Transition...EXPAND CONTRACT

Getting Personal Affairs in Order...EXPAND CONTRACT

Before leaving to return to Australia, the Plaintiff embarked on the process of "getting his personal affairs in order". He addressed the following personal issues:

Child Support Obligation...EXPAND CONTRACT

In anticipation of having no cashflow during 2003 while he transitioned back to Australia, and driven by his desire to maintain his (his sons`) 51% share position in K2000 at least until 2004, the Plaintiff offered to provide the Defendant with 50,000 K2000 shares as collateral until 2004. With an understanding that it was in the best interest of her sons, she agreed with this arrangement, and it was sanctioned by the court as an Alternative Dispute Resolution (for text click here and scroll to page 5-6 Item 3).
The court left it up to the Defendant and the Plaintiff to work out the details of how the shares were to be consummated and used to mitigate the Plaintiff`s past and future child-support obligations.
The Plaintiff prepared an unsigned share certificate for 50,000 shares and inscribed on the back of the certificate the process for their consummation and how they were to be used to payoff the Plaintiff`s child-support obligations (see Child-Support Share Certificate & Usage Mandates).
Reservation Order
He then submitted the following reservation order to register 50,000 of his K2000 shares in her name to be used as collateral against any child-support debt that he had accumulated up until 2004. . See following Reservation Order...EXPAND CONTRACT

In 2017, the Plaintiff discovered that this order was ignored by Ted Foley. This act was one of the critical elements of the Share Elimination Fraud aimed at eliminating all interest of the Plaintiff`s K2000 shares in K2000`s business assets.

Fitting Solution
The Plaintiff felt that this was fitting child-support solution because he knew that he was not going to have any cash flow in 2003, and if he passed on, the Defendant would have in hand the required child-support funds for their children without having to deal with any probate issues related to his death.

Notification Email
Before resigning from K2000 in early November 2002, the Plaintiff sent the following email to the Defendant...EXPAND CONTRACT

As can be seen in the email the Plaintiff informed the Defendant:

that he had reserved 50,000 of his K2000 shares as collateral for his child support obligation and that she could "sell all or part of the stock in order to satisfy the balance of the debt";
AND
that he "was also in the process of transferring 1M shares of K2000 stock into the names of Tony and Mat" (their son`s).

Mailed K2000 Share Certificate
The Plaintiff followed the email with a mailing containing an unsigned K2000 stock certificate for 50,000 shares made out to “Wendy Heald” (the Defendant) with the backside inscribing the process and conditions for consummation of the shares signed [Child-Support Share Certificate & Usage Mandates] ...EXPAND CONTRACT

OBTAINED IN AUGUST, 2017 BY THE PLAINTIFF`S ELDER SON FROM THE DEFENDANT`s COMPUTER
[scroll down to view Usage Mandates]

The Defendant received the mailing. Because we had agreed on the consummation process and terms of use (Usage Mandates) she did not raise any issues and simply filed the certificate.

Share Transfer...EXPAND CONTRACT

The last consideration that the Plaintiff addressed was the transfer of his K2000 shares to his sons. He prepared 1) the following transfer orders to be executed and filed in the Company`s records, and 2) each order`s share certificate...EXPAND CONTRACT

Share Transfer Order Sheets

TRANSFER ONE MILLION K2000 SHARES TO ANTHONY WALKER TRUST...EXPAND CONTRACT
Associated Share Certificate...EXPAND CONTRACT
TRANSFER ONE MILLION K2000 SHARES TO MATHEW WALKER TRUST...EXPAND CONTRACT
Associated Share Certificate...EXPAND CONTRACT
TRANSFER 250,000 K2000 SHARES TO ANTHONY WALKER RETIREMENT TRUST...EXPAND CONTRACT
Associated Share Certificate...EXPAND CONTRACT
TRANSFER 250,000 K2000 SHARES TO MATHEW WALKER RETIREMENT TRUST...EXPAND CONTRACT
Associated Share Certificate...EXPAND CONTRACT

In 2017, the Plaintiff discovered that all of these orders were also not executed by Ted Foley. This act was another of the critical elements of the Share Elimination Fraud aimed at eliminating all interest of his K2000 shares in K2000`s business assets.

Handover of K2000...EXPAND CONTRACT

Around the first week of November 2002, the Plaintiff met with Ted Foley to resign from K2000. At that meeting, the following topics were covered.

Prostate Cancer Disclosure
At the meeting, the Plaintiff`s informed Ted Foley that he had been battling prostate cancer since early 2001, and that he was going to have to leave the Company, and return to Australia where he had family support. Ted Foley`s surprising response was "We're all going to die soon" [He was in his mid-70s]
Resignation Letter
At the meeting, the Plaintiff delivered a letter of resignation to Ted Foley addressed to the K2000 board...EXPAND CONTRACT
Transition Knowledge Transfer CDs
At the meeting, the Plaintiff provided Ted Foley with the three prepared "Transition Knowledge Transfer" CDs containing technical and marketing documents needed for a smooth transition.
Efficient Learning Systems
At the meeting, Ted Foley and the Plaintiff discussed the merits of creating Efficient Learning Systems (ELSco) to develop and market products based on ELP, while K2000 concentrated on the future development and marketing of ELP...EXPAND CONTRACT
The Plaintiff emphasized that because the original investors had financed the development of ELP, it was the K2000 board`s fiduciary duty to make every effort to ensure that they realized a return on that development investment. He solemnly promised that the K2000 board would meet their fiduciary duty with respect to ELP.
The Plaintiff reminded him of the letter that K2000 counsel had previously sent to all of K2000 board members on the matter of fiduciary responsibilities of corporate officers, when the Plaintiff had originally proposed the idea about a year or so before.
At the end of the meeting, he gave the Plaintiff his verbal guarantee that the fiduciary responsibilities of all of the K2000 board members would be scrupulously observed in this matter.
With that guarantee, the Plaintiff was totally satisfied that his extensive knowledge of business matters would enable a restructuring that would protect the interests of all K2000 shareholders.
Share Registry Instructions-- With respect to adjustments required to the K2000 Share Registry, the Plaintiff provided Ted Foley with the following...EXPAND CONTRACT
- Instructions Sheet -- The Plaintiff provided the following instructions sheet to Ted Foley...EXPAND CONTRACT
- Four Share Transfer Order Sheets -- The Plaintiff provided Ted Foley with four Share Transfer order sheets related to the transfer of his K2000 shares to his sons (see Share Transfer Order sheets above). An associated signed share certificate was paper-clipped to each transfer order sheet.
- Child-Support Collateral Share Reservation Order Sheet -- In addition, the Plaintiff provided Ted Foley with an order sheet for the reservation of 50,000 of his K2000 Shares in the name of Wendy Heald (see Reservation Order above).

Plunder of K2000...EXPAND CONTRACT

In the next few months Ted Foley founded a new company called “Efficient Learning Systems” (ELSco).
Then, despite record sales of the K2000`s flagship product, he 1) processed an insolvency action on K2000, 2) transferred K2000`s business assets into ELSco, and 3) hired his son-in-law.

Share Exchange Deal ("Conversion" of K2000 shares into ELSco shares)...EXPAND CONTRACT

Ted Foley then offered to all K2000 shareholders an exchange of their K2000 shares for ELSco shares. He excluded the Plaintiff`s shares from the offer.
The important detail about this exchange deal was the obvious fact that each K2000 shareholder who participated in the exchange OWNED the K2000 shares that they were converting, and they received ELSco shares as a result of the process. As will be explained below, this detail is relevant to the Defendant`s Title Claim.

1st Qtr 2003: Return to Australia...EXPAND CONTRACT

The Plaintiff returned to Australia, established a residence, and registered with the Health Care system. During that year he concentrated on his health issues, and as anticipated did not pay any child-support .

2004: Assumed Consummation of Reserved Child-Support shares...EXPAND CONTRACT

Because at the beginning of 2004, the Plaintiff still had outstanding child-support debt owed to the Defendant, he was therefore precluded per their agreement from canceling the reservation of the 50,000 K2000 Child-Support shares to the Defendant. Accordingly, he assumed that the Defendant had consummated the shares on or about 1st January, 2004 and had used the shares by selling some or all of them to mitigate his child-support debt. Had it been otherwise, the Plaintiff is sure that he would have been contacted.

2004: Child-Support Collateral Deliberations...EXPAND CONTRACT

With respect to the 50,000 K2000 Child-Support Collateral shares, the following events occurred early in 2004:

Contact to Consummate 50,000 K2000 Child-Support shares...EXPAND CONTRACT
Around the beginning of 2004, the Defendant contacted Ted Foley to consummate ownership of the shares.
- Ted Foley Claims No Knowledge of Reservation
  From emails the Plaintiff exchanged with her in 2017 (he still has them), the Plaintiff understands that Ted Foley told her that he did not know anything about reserved Child-Support shares. He told her this in spite of the fact that the Reservation Order was included in the Share Registry Instructions Sheet provided to him during the handover of K2000.
- Missed Share Exchange Deal Deadline -- He also informed her that those shares had missed the Share Exchange Deal deadline in 2003.
- Perilous Risk of Discovery -- At this point, the Plaintiff believes that Ted Foley realized that, if nothing was done, she would surely contact the Plaintiff about the issue and that her contact with him would almost certainly lead to his uncovering of the Share Elimination Fraud.
- Offer to "Convert" -- To prevent that possibility, the Plaintiff believes that Ted Foley offered to "convert" her 50,000 K2000 Child-Support Collateral shares for 23,500 ELSco shares. The Plaintiff later learned in 2017 that so keen was Ted Foley to progress the deal that he actually transferred those shares from his own account (resulting in a cost of over $100,000 incurred by him at payout), which avoided the need for issuing new shares requiring the need to draft up resolutions for a corporate transaction (see Source of Conversion Shares).
  That the negotiation process and the resulting Conversion Deal was based on the 50,000 K2000 Child-Support Collateral shares is evident from the following
  - The Defendant`s Acknowledgement -- Discovered by the Plaintiff`s eldest son In August 2017, a September 2012 email from the Defendant to Ted Foley relates that she directly tells him "Thanks, Ted... and for allowing me to convert the shares"...EXPAND CONTRACT
  - 23,500 is a Calculated Number -- It is highly likely that the Defendant and Ted Foley arrived at the 23,500 number based on a relevant calculation involving 50,000 [i.e., it wasn`t just plucked out of thin air];
- Effective Blocking Strategy -- Knowing that the Defendant would be using the shares contrary to the "Usage Mandates" stipulated on both the Child-Support Share Certificate & Usage Mandates and the Reservation Order, Ted Foley knew that she would be committing a fraud against the Plaintiff and therefore she would need to hide it from the Plaintiff.
Disregard Obligation to Sell ...EXPAND CONTRACT
At the beginning of 2004, under the intent expressed in the Child-Support Share Certificate & Usage Mandates and the Reservation Order, the Defendant was empowered to consummate and sell the reserved 50,000 K2000 Child-Support "collateral" shares.
Because those shares were specifically sanctioned by the court under the Alternative Dispute Resolution (for text click here and scroll to page 5-6 Item 3, and under the Usage Mandates detailed on the 50,000 K2000 Child-Support share certificate (see Child-Support Share Certificate & Usage Mandates above), the Defendant had an obligation to use the 50,000 K2000 Child-Support shares to fully or partially retire the Plaintiff`s child-support debt (e.g., by selling them immediately).
At that time, she made the decision not to honor her obligation to fully or partially retire the Plaintiff`s child-support debt by, as required, immediately consummating them and selling enough of them to retire all or part of his child-support debt.
Disregard Obligation to Report to the Arizona Division of Child-Support...EXPAND CONTRACT
In addition, even though the Defendant had not attempted to consummate and sell the shares, she still had an obligation to report the above decision to the Arizona Division of Child-Support so that the event could be recorded and an evaluation made with respect to its impact on the Plaintiff`s child-support debt.
Instead, she chose not to report this decision to the Arizona Division of Child-Support.
Her decision resulted in the Plaintiff`s child-support debt continuing to accrue with interest (ultimately for over a decade).
Disregard Obligation to Report to the Plaintiff...EXPAND CONTRACT
In addition, because she knew that she was acting contrary to the agreed Usage Mandates detailed on the 50,000 K2000 Child-Support share certificate (see Child-Support Share Certificate & Usage Mandates above), she had an obligation to discuss her decision with the Plaintiff. But she had the following two compelling motivations for NOT reporting her decision to the Plaintiff.
Protecting Double Financial Benefit -- Such a disclosure would have eliminated the possibility of realizing the double financial benefit from the accrual of the Plaintiff`s child-support debt in addition to the ELSco share appreciation. (The Plaintiff believes that success in this gambit was calculated under the expectation that the Plaintiff would pass on). Nevertheless, that double financial benefit was indeed realized.
Protecting Against Discovery -- The Plaintiff also believes that by this time she was aware of Ted Foley`s perfidy and that she would lose the Conversion Deal if the Share Elimination Fraud was discovered by the Plaintiff.
For the above reasons the Plaintiff believes that she chose not to notify him of her decision that she intended to use the shares contrary to their intended purpose as defined in the Child-Support Share Certificate & Usage Mandates.

2005: Conversion of K2000 Shares to ELSco Shares...EXPAND CONTRACT

"Conversion Deal" -- In November, 2005 the Defendant formally consummated the Conversion Deal by signing the following agreement with Ted Foley...EXPAND CONTRACT

OBTAINED IN AUGUST, 2017 BY THE PLAINTIFF`S ELDER SON FROM THE DEFENDANT`s COMPUTER

Acknowledgments: Conversion & Complicity
Although the agreement above makes no mention of the 50,000 K2000 Child-Support shares, and deals only with the transfer of the 23,500 ELSco shares to the Defendant and Ted Foley`s retention of voting rights, the above Child-Support Collateral Deliberations leave no doubt that the conversion of the 50,000 K2000 Child-Support shares was the central premise of the agreement.
In addition two acknowledgments, 1) that the shares had been "converted" ("Thanks, Ted... and for allowing me to convert the shares"), and 2) that she had "helped" Ted Foley in matters related to his K2000 dealings (i.e., related to his expropriation of K2000`s business assets) were made in the following emails exchanged in September 2012.
"Wendy: Thanks. You helped more than you might think. Ted" ...EXPAND CONTRACT

Contravention of Purpose
The Defendant entered into this agreement despite the fact that it entailed a deliberate contravention of the intended purpose of the 50,000 K2000 Child-Support collateral shares. It was an abrogation on her obligation to use the shares to fully or partially retire the Plaintiff`s child-support debt.
Instead, the Defendant used the shares to make a personal investment in ELSco.

2005: Failure to Report Conversion of K2000 Shares to ELSco Shares...EXPAND CONTRACT

Failure to Notify
As indicated above, the Defendant failed to notify the Arizona Division of Child-Support and the Plaintiff of her decision NOT to honor the "Usage Mandates" stipulated on back of the Child-Support Share Certificate.
Second Opportunity to Report -- But, with respect to the signing of the Conversion Deal, the Defendant had a second opportunity to report her actions to the relevant parties. Because it impacted the following, she had an obligation to report this transaction to each of the following parties:

Arizona Division of Child-Support -- In order for an assessment to be made of the impact of this transaction on the Plaintiff`s child-support debt, the Defendant had an obligation to notify the Arizona Division of Child-Support.
Instead, she intentionally chose not to report it and to allow the Plaintiff`s child-support debt to continue to accrue on their systems.
Plaintiff -- To compound her perfidy, she also chose not to inform the Plaintiff of the transaction, thus denying him the opportunity to assess the circumstances and formulate appropriate response actions.

Denied Opportunity to Discover Additional Frauds
In 2017, the Plaintiff uncovered additional frauds, each related to the expropriation of K2000`s business assets. These were devised to entirely eliminate the Plaintiff`s interest in those assets in order to enrich the perpetrators of those frauds, and all were encouraged by the expectation that the Plaintiff would soon pass on.
If, in 2005, he had known the details of the above described Conversion Deal, he would have been immediately able to discover these frauds and been able to initiated appropriate legal action.
For example, the fact that the Conversion Deal involved a "conversion" of 50,000 K2000 shares for 23,500 ELSco shares (rather than 50,000) would have immediately raised red flags that would have called out for the Plaintiff`s investigation.

2004-2011: Assumption that the Plaintiff`s Child-Support Debt was settled...EXPAND CONTRACT

In the period between 2004-2010, the Plaintiff accepted that everything had gone to plan and the Defendant had used the 50,000 K2000 Child-Support collateral shares to extinguish his child-support debt, having been contacted neither by the Arizona Child-Support Agency nor the Defendant nor Ted Foley.
Because in 2002, he had set his affairs such that, if anything went wrong, he would have been notified by at least one of these parties.

2011: Notification of Accrued Foreign Child-Support Debt...EXPAND CONTRACT

In 2010, the Plaintiff was contacted by the Australian Government Department of Child-Support and notified that he owed a sizeable child-support debt to the Defendant. The Australian Child Support agency informed the Plaintiff that his child support obligation to the Defendant had continued to accrue since 2003.

Stonewalling...EXPAND CONTRACT

The Plaintiff repeatedly tried to contact the Defendant and Ted Foley, but neither responded. The Plaintiff now believes that neither of them responded because they feared that it would lead to the Plaintiff`s discovery of the Child-Support Fraud and the Share Elimination Fraud.

Assumption of consummated Child Support Collateral Shares...EXPAND CONTRACT

Based on the Reservation Order, the Plaintiff had expected the 50,000 K2000 Child-Support collateral shares had been transferred into the Defendant`s name back in 2004, and that she had fulfilled the "Usage Mandates" stipulated on both the Child-Support Share Certificate & Usage Mandates and the Reservation Order and had sold them and used the proceeds to retire the Plaintiff`s child-support debt as required by those "Usage Mandates".

Ownership Title Transferred to the Plaintiff`s Sons...EXPAND CONTRACT

Because the Defendant had not used the 50,000 K2000 Child-Support collateral shares to retire his child-support debt, then under the Disposal clause in the ReservationOrder, the shares would have been transferred into their sons' names, which was in some ways a reasonable outcome because they would be worth substantially more than the child-support debt.

Appealing to the Australian Government Department of Child-Support...EXPAND CONTRACT

The Plaintiff informed the Australian Government Department of Child-Support about the collateral that he had provided in 2004 to cover his child-support debt and requested that they contact the Arizona Division of Child-Support about it. Their heartless response was that they knew nothing about it and that the Plaintiff would have to start payments on the debt or they would seize his bank accounts.
The Plaintiff was obliged to start payments, all be it very modest monthly payments, which led him to drop further investigation.

Unaware of "Conversion Deal"...EXPAND CONTRACT

At this point, the Plaintiff never had any reason to suspect that the Defendant had acquired any ELSco shares. He was totally unaware of the Defendant`s "Conversion Deal " to convert the 50,000 K2000 Child-Support collateral shares into 23,000 ELSco shares.

2017: Discovery of Child-Support Collateral Fraud...EXPAND CONTRACT

In August 2017 whilst working on his mother`s computer, the Plaintiff`s eldest son discovered documents and emails related to this lawsuit. These enabled the Plaintiff`s discovery of a set of critical findings:

ELSco-John Wiley Stock Purchase Agreement...EXPAND CONTRACT
Of particular relevance to this lawsuit, the Plaintiff acquired a copy of the ELSco-JohnWiley Stock Purchase Agreement. From the following "ELSco Capitalization Table" on Page 50 of this document and the following old copy of the K2000 Share Registry from 2002 that the Plaintiff already had in his possession, he was able to determine the ELSco shares acquired by K2000 shareholders through the Share deal in 2003.
- ELSco Capitalization Table...EXPAND CONTRACT
- K2000 Share Registry...EXPAND CONTRACT
From a comparison of these two documents, the Plaintiff identified the following findings from which he was able to draw some conclusions
- An ELSco Share Entry for the Defendant -- From an examination of this table, the Plaintiff was very surprised to discover that the Defendant had received 23,500 ELSco shares.
- Elimination -- No Share Entry for either the Plaintiff or his sons.
- K2000 Shareholders had received ELSco Shares in varying Proportions...EXPAND CONTRACT
  - Non-Favored K2000 Shareholders -- This largest set of K2000 shareholders received a significantly reduced ownership position in K2000`s business assets via the 2003 Share Exchange Deal.
    On average these shareholders had their ownership position in these assets reduced by two thirds.
  - Favored K2000 Shareholders --This set of K2000 shareholders received an equivalent ownership position in K2000`s business assets via the 2003 Share Exchange Deal.
  - Ted Foley -- Ted Foley`s ownership stake in K2000`s business assets stake went up by a multiple of around 30 times his K2000 stake.
  - K2000 Board Members -- The other members of the K2000 board also enjoyed significant gains in their financial stake in K2000`s business assets.
"Conversion Deal" Agreement...EXPAND CONTRACT
As a significant breakthough in uncovering the Child-Support Fraud, the Plaintiff`s eldest son also discovered a copy of the agreement related to the Conversion Deal, between the Defendant and Ted Foley.

Communications with the Defendant...EXPAND CONTRACT

From emails between the Defendant and Ted Foley (see the Defendant`s Acknowledgement email), the Plaintiff realized that she had acquired the 23,500 ELSco shares through the use of the 50,000 K2000 child support collateral shares.

The Plaintiff now had something tangible to which the Defendant would be obliged to respond. The Plaintiff`s exchanged a series of emails with the Defendant concerning those ELSco shares, starting on 20th August, 2017.

During their exchange of emails, she made the claim that Ted Foley had "given" her those ELSco shares and that they had nothing to do with the 50,000 K2000 child support collateral shares. She claimed this in spite of having thanked Ted Foley ("Thanks, Ted... and for allowing me to convert the shares") in the Defendant`s Acknowledgement emails (September 2012).

She contacted Joe Richardson (originally K2000`s lawyer) whom the Plaintiff discovered had transitioned from providing his legal services to K2000 to later providing them to ELSco.

Defendant`s Email to Joe Richardson...EXPAND CONTRACT

From: wendy [mailto:wpheald@gmail.com]
Sent: Tuesday, October 31, 2017 9:07 AM
To: Joseph P. Richardson
Subject: Knowledge 2000 and Efficient Learning Systems

Dear Joe …

My name is Wendy Heald and Jonathan F. Walker is my now ex-husband.

I am hoping you and/or someone in your firm might be able to provide information concerning Knowledge 2000 shares of stock as well as Efficient Learning Systems shares of stock.

John Walker gave to me a certificate of 50,000 shares of Knowledge 2000 stock in 2002. I am still in possession of that original share certificate. It is not numbered and I do not believe that I ever received notice from Efficient Learning Systems about the opportunity to exchange K2K shares for ELS shares. Can you tell me if it was ever registered on the books of Knowledge 2000? (Copy attached).

Secondly, Would you please tell me if those shares were exchanged for the 23,500 shares that Ted Foley transferred to me in July-August 2006? (copy of cover letter, share certificate and Agreement attached).

Thirdly, as I recall, because I missed the opportunity to exchange the K2K shares for ELS shares, I have a dim recollection that Ted Foley gave me the 23,500 shares out his own pocket, are you able to verify that?

Many thanks for any assistance you might be able to provide in this matter.

Sincerely,

Wendy Heald
282 El Camino Grande
Sedona, AZ 86336
(928) 300-1395 (cell phone)

...EXPAND CONTRACT

CONCLUSION:

In this email, the Defendant confirms that she did received his Child Support Collateral Mailing, but never received notification of ELSco exchange. If she had not received the paperwork for the Share Elimination exchange, then this would be the first indication that Ted Foley had purposely not recorded the reservation of the 50,000 K2000 shares on the company books. This supports the Share Elimination Fraud claim.

Joe Richardson Reply to Defendant`s Email ...EXPAND CONTRACT

From: Joseph P. Richardson <jrichardson@gblaw.com>
Date: Tue, Oct 31, 2017 at 3:04 PM
Subject: RE: Knowledge 2000 and Efficient Learning Systems (file # 7413-0)
To: wendy <wpheald@gmail.com>

Dear Wendy: As you know, all of the outstanding shares of Efficient Learning Systems, Inc. (ELS) were sold to John Wiley & Sons, Inc. by the shareholders in later 2012. The corporate books and records of ELS were maintained in the corporation’s offices in Sedona prior to the sale, and I do not have copies of those records, other than drafts of various documents that reside on our computers. I did look through those drafts in preparing this email to you, and I believe that following statements are accurate, but they are based on drafts and on memory. I have no information about what happened to the Knowledge 2000, Inc. books and records. With that caveat, the following is what I know or recall about Knowledge 2000, Inc. and ELS.

1. Knowledge 2000, Inc. As far as I am aware, Jonathan Walker did not deliver to Knowledge 2000, Inc. or Ted Foley or anyone else a copy of the stock certificate for K2000 shares that accompanied your email. As of June or July 2012, the ownership of Knowledge 2000, Inc. as reported to me was that ELS owned 2,702,933 shares (54.42%), Jonathan Walker owned 2,350,000 shares (46.45%) and two other individuals owned an aggregate of 6,500 shares. The total shares outstanding was 5,059,433 shares. At a shareholders meeting on July 30, 2012, ELS voted the shares it held in favor of a proposal to dissolve Knowledge 2000, Inc., and Jonathan Walker voted his shares against the proposal. I recall, too, that Foley sent emails to Jonathan Walker at least twice prior to the shareholders meeting to ask whether he wanted to purchase ELS’s shares for a nominal price (I think the offer was $10.00 in total). He did not respond to the emails. According to the records of the Arizona Corporation Commission, the dissolution of Knowledge 2000, Inc. was completed on August 6, 2012.

As far as I know, no funds were available to be distributed to creditors or shareholders at the time of the dissolution. According to documents in our files, Knowledge 2000, Inc. had, as of December 31, 2010 (the date of the most recently compiled financial statements (in draft form) of K2000), total assets of $55,149 (comprised of amounts owed to K2000 by its founder) and total liabilities of approximately $370,000, including payroll tax liabilities.

Finally, I do not recall that Efficient Learning Systems ever offered an exchange of K2000 shares of shares of ELS. I remember that ELS offered to potential investors (including holders of K2000 shares) shares of ELS shares for some price per share (I do not recall that price, but let’s say $1.50 for discussion purposes). I recall the offer being that if a K2000 shareholder wanted to purchase ELS shares, he or she could pay the purchase price in cash and in K2000 shares, at a ratio of 2-to-1. So, a share of ELS stock could be purchased for $1.50, and payment could be made by tendering $1.00 of cash and assigning one share of K2000 stock to ELS. That is how I recall ELS becoming a holder of K2000 shares. That said, this transaction was probably 10 years ago, and I do not have even draft documents to refresh my memory on this issue. In any event, Jonathan Walker was not an investor in ELS (I doubt that ELS would have accepted him as an investor, given the history). So, I think the bottom line is that (1) Jonathan never placed his agreement with you concerning 50,000 shares of K2000 shares into the books and records of K2000, and he did not participate in the private offering of shares of ELS stock.

2. Efficient Learning Systems, Inc. I am fairly certain that the 23,500 shares of ELS stock represented by Certificate #0127 were a direct transfer from Ted Foley (or one of the Foley trusts, of which Ted was the trustee) to you, and not an original issuance of the shares directly to you from ELS. If it had been the latter, the normal course would have been for Ted to ask me to draft up resolutions for the corporate transaction, which I have neither recollection of nor draft documents for. What I do not know is the reason(s) for this transaction between you and Ted Foley.

I can verify that under the Stock Purchase Agreement dated October 25, 2012 by and among John Wiley & Sons, Inc., Ted Foley as the representative of the selling shareholders, and the all of the shareholders of ELS, you are among the shareholders and are identified as owning 23,500 shares of ELS common stock.

I apologize for the length of this email. I had to try to piece together writings and memories from a number of years ago, and thought it would be best to record what I recalled, which is the main reason this got so long. I hope this is helpful to you.

Regards,

Joseph P. Richardson

Gammage & Burnham | Profile
602.256.4452 Direct | 602.319.1067 Mobile

...EXPAND CONTRACT

CONCLUSIONs:
There are two sets of conclusions that can be drawn from this email, the first set below are relevant to this claim, specifically the Child-Support Fraud, and the second set (see here) that are relevant to the Share Elimination Conspiracy claim. The conclusions relevant to this claim are

Ignoring Reservation Order... EXPAND CONTRACT
From this email, Joe Richardson confirms that Ted Foley ignored the Plaintiff`s Reservation of 50,000 K2000 Shares for Child Support Obligation to reserve the 50,000 K2000 Child-Support Collateral shares on the company books.
Keen to Avoid Discovery of Share Elimination Fraud... EXPAND CONTRACT
Joe Richardson is fairly certain that the 23,500 ELSco shares came from Ted Foley`s ELSco stake.
The Plaintiff believes that this indicates that in order to avoid the Plaintiff`s discovery of the Share Elimination Fraud, he was very keen to make the Conversion Deal happen.
As a measure of how keen he was to avoid the Plaintiff`s discovery of the Share Elimination Fraud, this offering of his own shares would have been at a cost to him over $100,000 at payout. That was the cost he was willing to pay to eliminate the risk of the Defendant communicating with the Plaintiff, which would certainly have resulted in the exposure of all frauds relevant to this lawsuit and the Second Lawsuit mentioned in the Summary.
No Knowledge of the Reason for Transaction... EXPAND CONTRACT
By writing "What I do not know is the reason(s) for this transaction between you and Ted Foley", Joe Richardson indicates that he was kept in the dark about the negotiation basis between the Defendant and Ted Foley for the transaction.

Confirmation the Defendant did NOT receive sons' K2000 Share Certificates?...EXPAND CONTRACT

After the discovery of Ted Foley`s abrogation to register the Child-Support Collateral Shares, the Plaintiff suspected that the Defendant had never received the 2002 mailing containing their sons` K2000 share certificates, the mailing that was supposed to have been made after the registration of those shares in the K2000 share registry.
In October 2017, the Plaintiff asked his youngest son, Mathew Walker, to contact and ask his mother about ever receiving the mailing of their sons' K2000 share certificates in 2002. She confirmed to him that she never received any K2000 share certificates in his name or his brother`s name at any time.
She confirmed that she only received the "Child Support Collateral" Mailing in 2002.

CONCLUSION:
This was supplemental confirmation of the "Share Elimination Fraud"

2018-2019: Final Appeal to Support ELSco-JohnWiley Lawsuit...EXPAND CONTRACT

After being rejected in 2017 by the Defendant to cooperate with him on the Second Lawsuit (concerning the sale of ELSco to John Wiley & Sons), the Plaintiff worked on formulating that lawsuit without her help. With a reasonably solid formulation in hand, the idea was to try again with the enthusiastic support of their sons to pursuade the Defendant to join the "family team" and work together to prosecute the lawsuit.
But once again, despite strong pleas from her sons, the Defendant refused to participate, and ended communications by blocking the Plaintiff`s emails. (the emails have been kept)
That reaction led the Plaintiff to believe that the Defendant`s perfidy was greater than so far discovered. The Plaintiff then decided to initiate this lawsuit against her.

Relevant Articles ...EXPAND CONTRACT

Child Support Agreement...EXPAND CONTRACT

Property Division...EXPAND CONTRACT

At the time of the divorce, a child-support agreement was formulated under which property was divided as follows:

Defendant

Family Residence and all of its contents
Stock portfolio
Her Car

Plaintiff

All K2000 Shares (2,550,000 ... 51%)
His car

The key negotiations centered around the Plaintiff`s willingness to grant everything of value to the Defendant in exchange for all of the K2000 shares, which represented a 51% ownership of K2000.
The Plaintiff was willing to these lop-sided terms because he did not want to give up control of K2000 which was at the time struggling to get a foothold in its market.

Child-Support ...EXPAND CONTRACT

The child-support section of the agreement was fairly standard except for the inclusion of clause relating to the following:
Child Support Collateral Shares...EXPAND CONTRACT

At the end of October 2002, at the time of his resignation from K2000 and his return to Australia to get support from his extended family for his failing health, the Plaintiff committed himself to getting his affairs in order prior to leaving. Because he knew that it was likely that he was not going to have an income in the next few years, the Plaintiff submitted an order to reserve in the K2000`s records 50,000 of his K2000 shares in the Defendant`s name to be used as collateral against any child-support debt that he had accumulated up until 2004.
Under an associated stipulation, her consummation of those shares was delayed until 1st January 2004 so that 1) the Plaintiff could delay by a year any reduction in his 51% voting control in K2000, and 2) he would have time to meet his child-support obligations by other means. This arrangement was agreed on and encoded into the child-support agreement.
The collateral shares had attached mandates, the most important of which was an "intended usage stipulation", that specified that if consummated by the Defendant on 1st January 2004, enough of them would be sold to cover his child-support debt, and the rest would be returned to him.

Reservation Order -- The following is the order to reserve in the company`s records 50,000 K2000 shares in the Defendant`s name...EXPAND CONTRACT

FROM THE PLAINTIFF`S OWN RETAINED RECORDS

Notification of Collateral Shares -- On the 29th October, 2002, the Plaintiff sent the following email to notify the Defendant to expect a mailing containing an unsigned stock certificate for 50,000 shares as collateral on his child support obligation...EXPAND CONTRACT

OBTAINED IN AUGUST, 2017 BY THE PLAINTIFF`S ELDER SON FROM THE DEFENDANT`s COMPUTER

Unsigned Child-Support Certificate & Usage Mandates -- The following is the unsigned share certificate for the 50,000 K2000 child-support shares sent to the Defendant immediately after the above email...EXPAND CONTRACT

OBTAINED IN AUGUST, 2017 BY THE PLAINTIFF`S ELDER SON FROM THE DEFENDANT`s COMPUTER
[scroll down to view Usage Mandates]

"Conversion Deal"...EXPAND CONTRACT

In November, 2005 the Defendant entered into the following agreement with Ted Foley to "convert" the 50,000 K2000 Child-Support collateral shares into 23,500 ELSco shares

The Plaintiff claims that the Defendant breached their child support agreement by way of the following two subclaims:

MISUSE OF CHILD-SUPPORT COLLATERAL SHARES
With respect to the 50,000 K2000 collateral shares provided by the Plaintiff to the Defendant to cover his child-support obligation to the Defendant, this lawsuit claims that the Defendant breached their associated terms of use. (The offer to use 50,000 of the Plaintiff`s K2000 shares was originally proposed by the Plaintiff and an agreement was worked out in good faith by both parties, and was encoded in a Alternative Dispute Resolution that was sanctioned by the court) .
It is further claimed that this breach meets the required legal elements of fraud...EXPAND CONTRACT

Context

As described in the Child-Support Obligation section, an addendum was made to the couple`s child-support agreement in the form of an Alternative Dispute Resolution (for text click here and scroll to page 5-6 Item 3.
In this resolution 50,000 K2000 shares were required to be set aside as collateral to cover Plaintiff`s child-support debt to the Defendant.
The Plaintiff complied with this resolution and reserved 50,000 K2000 shares in the name of the Defendant (See Reservation of Collateral Shares).
In accordance with the "collateral" purpose implied by the Alternative Dispute Resolution, a set of "Usage Mandates" were attached to the collateral to define how the Defendant was to consummate the shares and mitigate the Plaintiff`s Child-Support debt...EXPAND CONTRACT

These mandates were detailed on the back of the following stock certificate, sent to her in November, 2002...EXPAND CONTRACT

OBTAINED IN AUGUST, 2017 by the Plaintiff`s Son from the Defendant`s Computer
[scroll down to view Usage Mandates]

These mandates explicitly specified the following:

Consummation -- The procedure for consummation of the shares, namely, "Wendy Heald may present the stock certificate to the Corporation for signature by the corporation`s officers."
Usage Restrictions -- A set of restrictions on how the shares may be used (e.g., "Wendy Heald .. may subsequently sell all or part of the stock in order to satisfy the balance of the debt."

Child-Support Fraud

With respect to the Plaintiff, the deceptions underlying this fraud took the form of the Defendant secretly violating the terms of the collateral established by the Plaintiff to cover his child-support obligations, and hiding her actions from the Plaintiff.
The following exposition describes the key legal elements (**) of fraud for this case...EXPAND CONTRACT

Deceptions...EXPAND CONTRACT

Defendant`s Deceptive Actions

Misuse of the 50,000 K2000 Child-Support collateral shares...EXPAND CONTRACT

As described in Child-Support Collateral Deliberations section, in 2004 the Defendant decided to ignore these mandates, and instead use the the 50,000 K2000 Child-Support collateral shares to enter into a Conversion Deal with Ted Foley in August 2006 in order to personally acquire 23,500 ELSco shares.
The act of "converting" the 50,000 K2000 Child-Support collateral shares into ELSco shares was a deliberate contravention of their intended purpose. It was an abrogation on her obligation to use the shares to fully or partially retire the Plaintiff`s child-support debt.
Instead, the shares were used to make a personal investment in ELSco.

Hiding of the Conversion Deal from Plaintiff to Prevent Discovery...EXPAND CONTRACT

Bound by the mandates associated with the 50,000 K2000 Child-Support shares, the Defendant had an obligation to report any action or decision that would materially deviate from those mandates. Instead, the Defendant chose to ignore those mandates, and to collude with Ted Foley to hide the Conversion Deal from the Plaintiff (and the Arizona Division of Child-Support).

Obligation to Report
When the Defendant discovered a problem with consummating the 50,000 K2000 Child-Support collateral shares, she still had an obligation to report the situation immediately to the following:

The Arizona Division of Child-Support -- Because the collateral shares were an essential element in their child-support agreement that the Plaintiff had put in place in good faith in order to cover the support of their children, the Defendant had an obligation to report the breakdown to the Arizona Division of Child-Support so that action could be taken to formulate a remedy.
Instead, she chose not to report the breakdown to the Arizona Division of Child-Support.
This resulted in the Plaintiff`s child-support debt continuing to accrue with interest for over a decade.
The Plaintiff -- Because both she and the Plaintiff were party to their child-support agreement, she had a duty to inform the Plaintiff of anything that would materially impact the terms of their agreement.

Reliance...EXPAND CONTRACT

The Plaintiff relied on the Defendant`s good faith adherance to the "Usage Mandates" in order to mitigate his child-support debt to the Defendant.

Ease of Ascertainment ...EXPAND CONTRACT

The ascertainment of this fraud is clear and unambiguous. The ease of ascertainment is evident from the Discovery of Child-Support Collateral Fraud section of the Chronology above.

Title Claim ...EXPAND CONTRACT

With the respect to the Conversion Deal, and the above Defendant`s Deceptive Actions taken by the Defendant, the following claim is made with respect to the title of the 50,000 K2000 Child-Support collateral shares:

Plaintiff`s Title To 50,000 K2000 Child-Support Collateral Shares
In August 2006, at the time of the consummation of the Conversion Deal, this lawsuit claims that it was the Plaintiff, and not the Defendant, that had valid title to the 50,000 K2000 Child-Support collateral shares that she used as the basis of the Conversion Deal to personally acquire 23,500 ELSco shares...EXPAND CONTRACT

Context

As detailed in 2004: Child-Support Collateral Deliberations and 2005: Conversion of K2000 Shares To ELSco Shares sections above, the Defendant consummated the Conversion Deal with Ted Foley in August 2006.

Base Claims

This claim is based on the following subclaims:

CENTRAL PREMISE
The "conversion" of 50,000 K2000 Child-Support collateral shares was the central premise upon which the Conversion Deal was based...EXPAND CONTRACT

Direct Acknowledgement...EXPAND CONTRACT

Although the 50,000 K2000 Child-Support collateral shares are not explicitly mentioned in the text of the Conversion Deal agreement, the following email contains a direct acknowledgement that the central goal driving the deal was the "conversion" of 50,000 K2000 Child-Support collateral shares into ELSco shares...EXPAND CONTRACT

Two acknowledgments, 1) that the shares had been "converted" ("Thanks, Ted... and for allowing me to convert the shares"), and 2) that, in matters related to his K2000 dealings (i.e., related to his expropriation of K2000`s business assets), she had "helped" Ted Foley ("Wendy: Thanks. You helped more than you might think. Ted"), were made in the these emails exchanged in September 2012 between the Defendant and Ted Foley.

This email also exposes the Defendant`s later deceitful attempt to disassociate the 50,000 K2000 Child-Support collateral shares from the Conversion Deal by claiming, when the Plaintiff later discovers her perfidy in 2017, that Ted Foley "just gave her the ELSco, and that the deal had nothing to do with the 50,000 K2000 Child-Support collateral shares".

Indirect Acknowledgement...EXPAND CONTRACT

Acknowledgement of Guilt -- In 2017 when the Plaintiff uncovered the Child-Support Fraud, he confronted the Defendant about her manifest perfidy with respect to their child-support agreement.
Later he wrote to both the Arizona Division of Child-Support and the Australian International Child-Support department with documents of supporting evidence of the fraud.
Caught red-handed, she eventually filed an official document with the Arizona Division of Child-Support to cancel the debt.
But that cancellation action in no way exonerated her of the fraud. Quite the opposite... it represents an indirect, but unequivocal acknowledgement of her guilt.

From the email above, the Defendant makes an direct acknowledgement that the deal she made with Ted Foley was to convert the 50,000 K2000 Child-Support collateral shares.
In addition, her cancelling of the Plaintiff`s child-support debt also is an indirect admission of the fundamental association of the 50,000 K2000 Child-Support collateral shares with the Conversion Deal.

OWNERSHIP PREMISE
The Defendant`s ownership of 50,000 K2000 Child-Support collateral shares was an implied premise upon which the Conversion Deal was based ...EXPAND CONTRACT

Under the Central Premise claim above, the Conversion Deal was for the "conversion" of the 50,000 K2000 Child-Support collateral shares.
Because the Defendant was the receiver of the value associated with the "conversion" of the 50,000 K2000 Child-Support collateral shares, and all other K2000 shareholders were the owners of the shares that they had "converted" in the original Share Exchange Deal, then it is implied that the Defendant would have to have been the owner of the 50,000 K2000 Child-Support collateral shares. By engaging in the Conversion Deal, the Defendant was implying her ownership of the 50,000 K2000 Child-Support collateral shares.

Analysis

The analysis of this subclaim is broken down into the following two time periods, 1) from 1st January, 2004 to 21st May 2005 and 2) from 21st May 2005 to August 2006:

PLAINTIFF`S MAY 2005 TITLE:
By 21st May 2005, title to all 50,000 K2000 Child-Support collateral shares would rightfully have been in the Plaintiff`s name (not the Defendant`s)...EXPAND CONTRACT
There are two analysis pathways to validate this subclaim, one path (see Path 1 below) that is more likely, and another that is less probable (see Path 2 below).
The important point is that both paths lead to the same result, namely, that the title to the shares end up in the Plaintiff`s name by 21st May 2005.
This comes about via the following analysis:
- Path 1: The court rules that the Defendant did NOT attain title on 1st January 2004...EXPAND CONTRACT
  This represents the case wherein the Defendant did not attain title for whatever reason, most likely one of the following two reasons:
  - Opted NOT to Consummate Title to the Child-Support collateral shares
    The Defendant decided not to consummate title to the 50,000 K2000 Child-Support collateral shares by not following the Usage Mandates on the back of the Child-Support Share Certificate,
    or
  - The Court Rules that Reservation Order is Void
    Because of Ted Foley`s delinquency in registering the reservation of the 50,000 K2000 Child-Support collateral shares in K2000`s books, the court rules that the authority of the "ReservationOrder " was void and therefore the 50,000 K2000 Child-Support collateral shares were never reserved in the Defendant`s name and therefore the share certificate that the Defendant received from him was void.
  Title to the 50,000 K2000 Child-Support collateral shares remained in the Plaintiff`s name...EXPAND CONTRACT
  By 21st May 2005, none of the 50,000 K2000 Child-Support collateral shares had been transferred into the Defendant`s name.
  
  The outcome of Path 1 is that by 21st May 2005, the Plaintiff had title to all of the 50,000 K2000 Child-Support collateral shares.
- Path 2: The court rules that the Defendant did attain title on 1st January 2004...EXPAND CONTRACT
  This path represents the highly improbable case wherein, the court rules (see Child-Support Share Certificate), that, 1) in spite of Ted Foley`s delinquency in registering the reservation of the 50,000 K2000 Child-Support collateral shares in K2000`s books, and 2) in spite of the Defendant never consummating title to the shares by getting her share certificate signed by a K2000 officer, she still was entitled to claim title on 1st January 2004.
  This outcome results in the following:
  Obligation to Sell ...EXPAND CONTRACT
  Immediately after obtaining title on 1st January 2004, the Defendant would have had an obligation to sell just enough of the 50,000 K2000 Child-Support shares to fully or partially retire his child-support debt (see SALE clause of ReservationOrder), because
  
  those shares were specifically encoded into the couple`s Child-Support Agreement for that purpose.
  and,
  
  under the terms of detailed on the following 50,000 K2000 Child-Support share certificate (mailed to her in Nov 2002)...EXPAND CONTRACT
  OBTAINED IN AUGUST, 2017 BY THE PLAINTIFF`S ELDER SON FROM THE DEFENDANT`s COMPUTER
  [scroll down to view Usage Mandates]
  
  At the very least, she could have offered the shares back to the Plaintiff, because she was well aware that he knew parties that would have been interested in buying them (including himself).
  
  At no time during the period between 1st January 2004 and 21st May 2005 did the Defendant attempt to consummate title to and sell any or all of the 50,000 K2000 Child-Support shares in order to retire all or part of the Plaintiff`s child-support debt.
  Obligation to Report...EXPAND CONTRACT
  In addition, even though the Defendant had not attempted to sell the shares, she still would have had an obligation to report the above decision to
  
  The Arizona Division of Child-Support -- The event needed to be recorded and an evaluation made with respect to its impact on the Plaintiff`s child-support debt.
  Instead, she chose not to report this decision to the Arizona Division of Child-Support.
  This resulted in the Plaintiff`s child-support debt continuing to accrue with interest for over a decade.
  
  The Plaintiff -- Because both she and the Plaintiff were both party to their child-support agreement, she had a duty to inform the Plaintiff of any action she took that would materially impact the terms of their agreement.
  Unsold Shares Returned to Me...EXPAND CONTRACT
  By 21st May 2005, none of the 50,000 K2000 Child-Support collateral shares had been sold and used to retire all or part of the Plaintiff`s child-support debt. Thereupon all of the shares were necessarily returned to the Plaintiff on that date:
  
  Under the Disposal clause of the ReservationOrder, and
  
  Under the terms of detailed on the back of the 50,000 K2000 Child-Support share certificate...EXPAND CONTRACT
  OBTAINED IN AUGUST, 2017 BY THE PLAINTIFF`S ELDER SON FROM THE DEFENDANT`s COMPUTER
  [scroll down to view Usage Mandates]
The outcome of Path 2 was the same as in Path 1. By 21st May 2005, the Plaintiff had title to all of the 50,000 K2000 Child-Support collateral shares.

PLAINTIFF`S AUGUST 2006 TITLE :
From 21st May 2005 until August 2006, title of the 50,000 K2000 Child-Support collateral shares remained with the Plaintiff...EXPAND CONTRACT
During the period between 21st May 2005 until August 2006, the Plaintiff was not party to or agreed to any transaction that transferred his title of the 50,000 K2000 Child-Support collateral shares.
Because there was no legitimate transaction around the 50,000 K2000 Child-Support collateral shares in above period, the Plaintiff retained title.

Because the Plaintiff had title to the 50,000 K2000 Child-Support collateral shares by 21st May 2005 and thereafter, the Defendant did NOT have valid title to the 50,000 K2000 Child-Support collateral shares that she used as the basis of the Conversion Deal in August 2006.

Injuries ...EXPAND CONTRACT

From this fraud, the Plaintiff endured the following injuries:

Injuries directly related to the Misuse of the Child-Support Shares:

Accrual of Child-Support Debt -- The financial penalty incurred from the accrual of the Plaintiff`s child-support debt for approximately 14 years.
Loss of Opportunity to Convert Collateral Shares -- The financial penalty incurred from the accrual of the Plaintiff`s child-support debt for approximately 14 years.
Share Appreciation -- Under the claim that the Plaintiff had the rights to the title to the 23,500 ELSco shares received by the Defendant from the Conversion Deal (see Damages: Rights To Proceeds From Sale), the Plaintiff incurred the financial penalty in 2012 equal to the payout that the Defendant received.
Interest -- The Plaintiff incurred a financial loss equivalent to the interest generated from that payout from 2012 through to the present (see Damages: Interest On The Defendant`s Payout).
Denied Opportunity to Discover Additional Frauds...EXPAND CONTRACT
In 2017, the Plaintiff uncovered two additional frauds, each related to the expropriation of K2000`s business assets. These were devised to entirely eliminate his interest in those assets in order to enrich the perpetrators of those frauds.
If, in 2005, he had known the details of the above described Conversion Deal, he would have been able immediately to discover these frauds and been able to initiated appropriate legal action.

For example, the fact that the conversion deal involved a "conversion" of 50,000 K2000 shares for 23,500 ELSco shares (rather than 50,000) would have immediately raised red flags that would have called out for his investigation.

Injuries related to the Cornerstone Premise Of The Property Division Agreement:
The Cornerstone Premise Of The Property Division Agreement was "Family Assets / K2000 Shares" Tradeoff.
From the Defendant`s Deceptive Actions carried out under this fraud, the Plaintiff`s value received from this tradeoff (i.e., all of the K2000 shares) was completely nullified.

Discovery ...EXPAND CONTRACT

This fraud was discovered in August 2017 (see Discovery of Child-Support Collateral Fraud).
The following two documents played a critical role in the discovery:

A copy of the ELSco-JohnWiley Stock Purchase Agreement
A copy of the agreement underlying the Conversion Deal, between the Defendant and Ted Foley.

Intent/Motivation ...EXPAND CONTRACT

Intent

Defendant was Legal Savvy

Because the Defendant was a Legal Savvy person, she was well aware that the Deceptive Actions, in which she was engaged, were fraudulent.
As detailed in 2004: Child-Support Collateral Deliberations and 2005: Conversion of K2000 Shares To ELSco Shares sections, she made no attempt to contact the Plaintiff or to notify the Arizona Division of Child-Support. Instead she intentionally consummated the Conversion Deal and hid her actions from the Plaintiff (and the Arizona Division of Child-Support).

Conscientiousness of Guilt

In 2017 when the Plaintiff uncovered the Child-Support Fraud, he confronted the Defendant and asked her to mitigate the injustice by cancelling the child-support debt.
He also wrote to both the Arizona Division of Child-Support and the Australian International Child-Support department with documents of supporting evidence of the fraud.
Caught red-handed, the Defendant eventually filed an official document with the Arizona Division of Child-Support to cancel the debt.
But that action in no way exonerated her of the Fraud. Quite the opposite... it represents an unequivocal acknowledgement of her guilt.

Motivation

Double Financial Benefit
The Defendant would have realized that disclosure of the Conversion Deal to the Plaintiff would have eliminated the possibility of realizing the double financial benefit from the accrual of the Plaintiff`s child-support debt in addition to the ELSco share appreciation. (The Plaintiff believes that success in this gambit was calculated under the expectation that the Plaintiff would pass on). And that double financial benefit was indeed realized.
Protecting Against Discovery
The Plaintiff also believes that by this time she was aware of Ted Foley`s perfidy and that she would lose the Conversion Deal if the Share Elimination Conspiracy was discovered by the Plaintiff.
Good Chance of "Getting away with it"
The Defendant and Ted Foley both knew that the Plaintiff`s prognosis was poor and all the Defendant had to do was wait, and and if he passed on, she would never be found out.

Evidence ...EXPAND CONTRACT

Arguments/Evidence Supporting Key Points

Key Point	Argument / Evidence
Elimination of the Plaintiff`s K2000 Shares from K2000-ELSco Share Exchange	Evidence: Comparison of K2000 Share registry and ELSco CapitalizationTable
Intention to Transfer the Plaintiff`s K2000 Shares to his Sons	Evidence: The Plaintiff sent an email (see "jfw email to wph re shares") to the Defendant a couple of days before the Plaintiff met with Ted Foley to effect the transfer of the Plaintiff`s K2000 shares to his sons and their registration on the K2000 share registry (on file in Ted Foley`s home office). Although the email was mainly about child support issues, it clearly expresses that the Plaintiff was "in the process of transferring" K2000 shares to his sons. Circumstantial: The Plaintiff`s actions were consist with his other "Tidy up your affairs" actions (e.g., child support obligation action, leaving to return to Australia for family support). It`s consistent with what most people would do in those circumstances.
Discovery Impeded	Evidence: The following evidence is provided to support the Defendant`s actions to prevent discovery. August 2017 Emails between the Plaintiff and the Defendant [Emails saved] August 2019 Emails between the Plaintiff and the Defendant [Emails saved]

Key Point

Argument / Evidence

Elimination of the Plaintiff`s K2000 Shares from K2000-ELSco Share Exchange

Evidence: Comparison of K2000 Share registry and ELSco CapitalizationTable

Intention to Transfer the Plaintiff`s K2000 Shares to his Sons

Evidence:
The Plaintiff sent an email (see "jfw email to wph re shares") to the Defendant a couple of days before the Plaintiff met with Ted Foley to effect the transfer of the Plaintiff`s K2000 shares to his sons and their registration on the K2000 share registry (on file in Ted Foley`s home office).

Although the email was mainly about child support issues, it clearly expresses that the Plaintiff was "in the process of transferring" K2000 shares to his sons.
Circumstantial:
The Plaintiff`s actions were consist with his other "Tidy up your affairs" actions (e.g., child support obligation action, leaving to return to Australia for family support). It`s consistent with what most people would do in those circumstances.

Discovery Impeded

Evidence:

The following evidence is provided to support the Defendant`s actions to prevent discovery.

August 2017 Emails between the Plaintiff and the Defendant [Emails saved]
August 2019 Emails between the Plaintiff and the Defendant [Emails saved]

Based on the above Child-Support Fraud, the misuse of the 50,000 K2000 Child-Support collateral shares by the Defendant represents an egregious violation of the couple`s child-support agreement driven by the intent of realizing a double financial benefit from the accrual of the Plaintiff`s child-support debt in addition to the appreciation of her fraudulently-acquired ELSco shares.

SUBVERSION OF THE CORNERSTONE PREMISE OF THE PROPERTY DIVISION AGREEMENT
The lawsuit claims that the Defendant`s Deceptive Actions in carrying out the Child-Support Fraud subverted the cornerstone negotiation premise of the 'property division' section of the couple`s Child-Support agreement...EXPAND CONTRACT

Context

"Family Assets / K2000 Shares" Tradeoff:
The default basis for divorce property division is 50/50.
However, the Plaintiff/Defendant`s negotiated property division settlement (see Exhibit A and B of Property Settlement Agreement) was predicated on an agreed tradeoff by which the Plaintiff retained title to all of his K2000 shares in exchange for granting the title to the family`s house, its contents, and their entire stock portfolio to the Defendant ("Family Assets").
The "Family Assets" and the "K2000 shares" represent the diametric elements in a tradeoff, which was the "cornerstone premise of the Property Division Agreement ".
The Plaintiff agreed in good faith to this unbalanced value tradeoff because it was important for him to retain a voting majority in K2000 in order to protect his majority control of the company.
Analysis

The essence of the tradeoff was that the Plaintiff traded 50% of his legal right to the Family Assets for the Defendant`s 50% legal right to the Plaintiff`s K2000 shares and the Defendant made the reverse tradeoff.
Because the Defendant`s role in both the Child-Support Fraud and the hiding of the Share Elimination Fraud sabotaged the "Family Assets / K2000 Shares" Tradeoff, the Plaintiff`s value received in this tradeoff (i.e.,all of the K2000 shares) was completely nullified by the Defendant`s roles in these frauds.

The Defendant`s Deceptive Actions in perpetrating the child-support fraud led to the sabotage of the cornerstone premise of Property Division Agreement, and therefore was an egregious subversion of the 'property division' section of the couple`s Child-Support agreement.