1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 5901 GREEN VALLEY CIRCLE 3 SACRAMENTO, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 FEBRUARY 23, 2010 10 11 12 13 14 15 FINAL ACTIONS 16 17 18 19 20 21 22 23 REPORTED BY: JULI PRICE JACKSON 24 CSR NO. 5214 25 26 27 28 1 1 P R E S E N T 2 3 For The Board Betty Yee of Equalization: Chairwoman 4 5 Jerome E. Horton Vice-Chair 6 Bill Leonard 7 Member 8 Michelle Steel Member 9 Marcy Jo Mandel 10 Appearing for John Chiang State Controller 11 (per Government Code Section 7.9) 12 Diane G. Olson 13 Chief, Board Proceedings Division 14 15 ---OOO--- 16 17 18 19 20 21 22 23 24 25 26 27 28 2 1 5901 GREEN VALLEY CIRCLE 2 SACRAMENTO, CALIFORNIA 3 FEBRUARY 23, 2010 4 ---o0o--- 5 B1 BRUCE CULVER AND DONNA TURNER CULVER 6 NO. 480448 7 ---o0o--- 8 MS. OLSON: Our first item is B1, Bruce Culver 9 and Donna Turner Culver. 10 MS. YEE: Okay, go back and take up the items 11 under submission. 12 First item, item B1, Bruce Culver and Donna 13 Turner Culver. 14 Is there a motion? 15 Let me move to sustain the Franchise Tax Board. 16 Is there a second? 17 MR. HORTON: Second. 18 MS. YEE: Second by Mr. Horton. 19 Discussion? Mr. Leonard? 20 MR. LEONARD: There were several hearings today 21 where the taxpayer kind of talked me out of sympathy and 22 this may be one of them. 23 But I am bothered by the reliance on the 1099 24 by Franchise Tax Board when I don't know -- I wish Taser 25 would be more cooperative, obviously. 26 But can I just pose a question to Appeals? 27 MS. YEE: Yes. 28 MR. LEONARD: What kind of weight do we give 3 1 1099s? Or how's a taxpayer to report a transaction 2 by -- is there another form to use that -- by which they 3 might report? 4 The whole argument here, obviously, was did he 5 perform services as an employee or a contractor or did 6 he simply monitor his investments as a 7 shareholder/director? 8 MS. KELLY: Exactly. 9 And, so, Taser, the company, in issuing a 1099, 10 you know, they're reporting the transaction. The 1099 11 itself is not determinative because they may not be 12 reporting it correctly. 13 So, the 1099 by itself indicates that the 14 transaction occurred. Does it -- is it determinative 15 that the transaction was taxable? No, it's not. 16 And, so, we are -- we have the -- we're on the 17 corrected 1099, which is for the remaining amount, it's 18 approximately 3.5 million in warrants. 19 MR. LEONARD: Right. 20 So -- so, we can not tell from that piece of 21 paper what -- what was done? 22 MS. KELLY: We can't. No, that's not 23 determinative for the tax treatment. 24 We know the warrants were issued. 25 MR. LEONARD: Ms. Mandel was trying to do her 26 own legal research. 27 Are there cases about what a director's duties 28 are that don't cross the line into employee or 4 1 contractor compensation? 2 Obviously, it was mentioned an officer of the 3 corporation is also a shareholder and is paid as an 4 officer. 5 MS. KELLY: Uh-huh. 6 MR. LEONARD: Is -- how bright is this line 7 here? 8 MS. KELLY: Well, the case that's directly on 9 point because it involves a director is Centel. 10 And the reason that it's not directly on point 11 is that in Centel they had very clear minutes from the 12 Board of Directors. We know exactly why Centel issued 13 the warrants. 14 Whereas here, while the Appellants alluded that 15 they may have documentation, we don't have anything that 16 tells the Board specifically why Taser issued the 17 warrants. And, so, the Board's left trying to determine 18 that based on the facts and circumstances surrounding 19 his activities. 20 But, really, the question is why were the 21 warrants issued? Were they issued to acknowledge the 22 financial risk that Appellant took in, you know, funding 23 the company and making loans to the company? Or were 24 they issued for -- in connection with compensation? 25 And Appellant did indicate that in 2004 he was 26 participating in selling activities, which is different 27 than what happened in Centel. There are many 28 similarities with Centel. In fact, most of the facts 5 1 are similar to what happened in Centel. 2 The only differences that I see are the selling 3 activity and, as well, the minutes are not clear. We 4 don't know exactly why Taser issued the warrants. 5 MR. LEONARD: And the holding in Centel, do you 6 want to state that? 7 MS. KELLY: The holding in Centel was that the 8 company, that telephone, did not transfer and the 9 directors, Davis Gray and the other shareholder, 10 Electric, did not receive the warrants in connection 11 with the performance of services within the meaning of 12 Section 83. 13 MR. LEONARD: Thank you. 14 MS. YEE: And, Mr. Leonard, on the Centel case, 15 I actually thought the Appellants, even though they were 16 relying on Centel, I got the sense that Mr. Culver was 17 involved in much more than just providing financial aid, 18 if you will, to the company. 19 So, I think there was more involvement with 20 respect to other activities or certainly -- 21 MR. LEONARD: That's why I don't know where the 22 line is. 23 I mean, in the two director Board, I could see 24 a lot of mentoring by Board Members that are really 25 not -- I mean, I guess you could do the same thing under 26 a contract but since there wasn't a contract and -- 27 MS. KELLY: Right. In Centel both of the 28 directors served in a consulting capacity to the 6 1 company. They were involved in day-to-day activities, 2 but it was limited. 3 Davis was a director, Gray was the Chairman of 4 the Board and the court noted -- notes that neither were 5 employees and they didn't participate in the employee 6 stock option plan. 7 And, like I said, the only difference there is 8 that the minutes were supremely clear that the reason 9 they were issued was to acknowledge the financial risk. 10 And, so, the Board here is faced with making a 11 factual determination as to why the Taser issue the 12 warrants here. 13 MS. MANDEL: Because I was asking a lot about, 14 you know, whether there was anything about a director 15 versus employee and independent contractor, even any 16 sort of description of, you know, "Hey, there's this 17 Centel case and you could make some hay of it." 18 And I think where I'm having a little bit of a 19 stickiness is he was a director and he's doing things 20 for the company, does being a director -- because you're 21 investing -- because you have a big -- you know, a lot 22 of money invested in the company, does that then somehow 23 change everything you do as director for that company 24 into your personal investment activity? Or are you 25 providing services for the company as a director? 26 I mean, FTB did say, oh, they thought maybe the 27 warrants were, you know, for -- that even as to the 28 lending activity, that somehow that was services -- 7 1 providing services. 2 I think they were trying to maybe analogize 3 that the sort of underwriter who's getting paid for 4 their underwriting activity. 5 And it -- it would be nice if there was 6 something explicit from Taser like there was in Centel 7 of what -- what the -- what the warrants were actually 8 for. 9 And in the absence of that -- and then you have 10 the 1099, which they did correct from 8 million down to 11 3 million something, and they did that for some reason 12 that the other part of it was not compensation. 13 MS. KELLY: Right. And I think the first set 14 of warrants related to the loan, the $1.5 million loan, 15 I think that's what Appellants were saying. 16 And, so, the second is set related to other 17 financial activity that Appellants were explaining I 18 believe. 19 MS. MANDEL: Yeah. And while they were 20 directors in Centel, as you said, the minutes from the 21 Centel board were clear that it was not -- you had the 22 other complication in Centel that you had three 23 different people who all kind of got the same thing and 24 they didn't all have the same exact role other than 25 guaranteeing the loan, they didn't have same exact role, 26 vis-a-vis the company. 27 MS. KELLY: Exactly. One director received 28 compensation. 8 1 MS. MANDEL: Yeah. 2 MR. LEONARD: Madam Chair? 3 MS. YEE: Yes, Mr. Leonard? 4 MR. LEONARD: Like I said, I've totally changed 5 my notes from coming into the room this morning. I 6 think at this point I'm inclined to support granting for 7 the taxpayer as to Taser, but holding for FTB as to 8 Pentawave. 9 If there's anyone else that agrees with me on 10 that, I would be happy to make a motion. 11 MS. KELLY: And, Ms. Yee, can we refine the 12 motion to clarify that we're talking about the 3. -- 13 we're talking about excluding the 3.5 million in 14 warrants? 15 Because the total claim for refund, some that 16 has already been allowed. 17 So, want to be careful. 18 MR. LEONARD: That's right. 19 MS. KELLY: Right. We don't -- want to be 20 careful not to grant the claim for refund as some of 21 it's already been paid. 22 MR. LEONARD: Yeah, I didn't ask the numbers, 23 but if my motion's approved, we need to divide and 24 calculate the proper number. 25 MS. KELLY: Right. We just need to specify 26 that it's with respect to the 3.5 million in warrants -- 27 MR. LEONARD: Yes. 28 MS. KELLY: -- that's being granted to the 9 1 Appellant. 2 MS. YEE: Okay. Mr. Leonard, is that a motion 3 then? 4 MR. HORTON: Well -- 5 MR. LEONARD: Sure, I'll make that a motion. 6 MS. YEE: Okay, let's just see if there's a 7 second? 8 MS. STEEL: Second. 9 MS. YEE: Second by Ms. Steel. 10 Mr. Horton? 11 MR. HORTON: Well, I'm -- here's the challenge 12 when we have a condition subsequent to rebuttable 13 actions. 14 The issues -- the issuance of a 1099 is a 15 serious matter. It's a significant amount of funds 16 relative to the status of the business and the 17 operation. And, so, these two directors in the company 18 are integrated in such a way that a conscious decision 19 was made to not only issue the 1099, then a 20 re-evaluation to re-issue the 1099. 21 So, it's hard for me to subsequently listen to 22 oral testimony knowing that a conscious, methodical 23 effort was taking place and, arguably, the Board was 24 aware that this transaction was taking place. 25 And then to say that that's not the case, there 26 isn't any services providing and no one's taken a 27 consciousness to say that we want to reward this 28 individual for the services that they've provided in 10 1 addition to the risk associated with the investment. 2 Therein is part of the challenge because trying 3 to get beyond that is a little difficult. And the other 4 challenge is that if we do so, then the actions of the 5 taxpayer in the preparation, decision and over a period 6 of time and the evaluation of what actually took place, 7 where we're not privy to that information, those actions 8 in and of themselves, in a cumulative sort of way, we 9 now say that a taxpayer -- I mean a taxpayer can totally 10 ignore the decisions made by the company and their 11 Executive Board, their Board of Directors in making the 12 decision to issue compensation and file it the way that 13 it benefits them the most. 14 I don't know if we should go there. 15 MS. MANDEL: Yeah, I think I had walked in the 16 room slightly opposite to where Mr. Leonard walked in 17 the room and kind of wound up slightly opposite to where 18 he is now just because I can't -- I don't see -- I 19 can't -- it seems to me that when a -- when a director 20 is -- when a director is doing director activities for 21 the company, they get some kind of compensation, 22 perhaps, perhaps not. But they're doing services for 23 the company. 24 And he's just saying everything I did as a 25 director I did really as an investor. But he's holding 26 that director position and -- I mean I was very 27 attracted to Centel, but on -- without something really 28 explicit, from the company or something that's out there 11 1 one way or another that says that investor directors 2 are, you know, whatever they're getting, they're getting 3 because they're an investor -- unless they're somehow an 4 officer, employee or providing other type of outside 5 services that they are being compensated for. 6 And I guess I'm just not that comfortable that 7 I have seen that one way or another from either side 8 which sort of, you know, leaves me at the FTB's door, I 9 guess. 10 MS. YEE: Yeah, I mean, there really wasn't 11 anything explicit in any of the documents or 12 instruments. Neither the promissory note or the warrant 13 agreement suggested that the warrants issue were tied in 14 any way to the loan. 15 And I go back to kind of the focus that I had, 16 which was on the federal audit report, because the 1099 17 miscellaneous suggests that the 3.5 million was 18 non-employee compensation. I mean, that's just ordinary 19 income from the stockholder. 20 And, so, I think the FTB, in its independent 21 audit also came to the same -- I mean, there's a 22 consistency issue that I want to kind of address to 23 between -- 24 MS. KELLY: The Appellants thought that the -- 25 that the 3.5 million warrant on the federal audit became 26 moot because they had the other NOL adjustments, the 27 carrybacks. 28 MS. YEE: Right, the carrybacks. 12 1 MS. KELLY: So, that's how they explained the 2 inconsistency. 3 MS. YEE: Right, right. 4 MR. HORTON: Now I will say that the FTB could 5 have done a better job clarifying the Centel case. 6 They left it out there for one to believe that the 7 Centel case just conclusively said the title "director," 8 and in and of itself, irrespective of what you do and 9 the services you perform by virtue that you are a 10 director, therefore, is not compensation, is tied into 11 the investment and protecting of your investment. And 12 then only after deliberation and trying to extract did 13 we finally get to that that wasn't the case and that the 14 Centel case did not supercede or negate or abolish the 15 IRS Code Section 83, which still holds, even in the 16 Centel case, that there has to be a determination of 17 what activities was actually taking place. 18 So, I mean, to the extent that we can encourage 19 FTB to work on that, it would be nice, save us a little 20 bit of time, in my opinion. 21 MS. YEE: All right. So noted, Mr. Horton. 22 Other comments, Members? 23 We have a motion on the table by Mr. Leonard, 24 second by Ms. Steel to grant for Taser and sustain the 25 Franchise Tax Board as it relates to Pentawave and with 26 the adjustments noted by the Appeals Division. 27 Please call the roll. 28 MS. OLSON: Madam Chair? 13 1 MS. YEE: No. 2 MS. OLSON: Mr. Leonard? 3 MR. LEONARD: Aye. 4 MS. OLSON: Ms. Steel? 5 MS. STEEL: Aye. 6 MS. OLSON: Mr. Horton? 7 MR. HORTON: No. 8 MS. OLSON: Ms. Mandel? 9 MS. MANDEL: No. 10 MS. OLSON: Motion fails. 11 MS. YEE: Okay. Let's go back to the main 12 motion to sustain the Franchise Tax Board. Motion by 13 Yee, second by Mr. Horton. 14 Please call the roll. 15 MS. OLSON: Madam Chair? 16 MS. YEE: Aye. 17 MS. OLSON: Mr. Leonard? 18 MR. LEONARD: No. 19 MS. OLSON: Ms. Steel? 20 MS. STEEL: No. 21 MS. OLSON: Mr. Horton? 22 MR. HORTON: Aye. 23 MS. OLSON: Ms. Mandel? 24 MS. MANDEL: Aye. 25 MS. OLSON: Motion carries. 26 MS. YEE: Okay. 27 ---o0o--- 28 14 1 B2 DONALD A. WATTSON AND CHRISTINE A. WATTSON 2 NO. 446005 3 ---o0o--- 4 MS. OLSON: Our next item is B2, Donald A. 5 Wattson and Christine A. Wattson. 6 MS. YEE: Okay, item B2, Donald A. Wattson and 7 Christine A. Wattson. 8 Is there a motion? 9 MR. LEONARD. Madam Chair? 10 MS. YEE: Mr. Leonard? 11 MR. LEONARD: I guess I'm on forms today. This 12 is another one where our forms don't fit the real world. 13 The K1 doesn't have a place to zero out capital 14 contribution if the partnership agreement allows them to 15 not be zeroed out, basically. Nevertheless, you have to 16 close out the partnership or file the annual return. 17 So, it's -- capital contributions have always 18 defied my ability to define what they are in 19 partnership. I have trouble with income, but capital is 20 even beyond that. I can see how the tax preparer filled 21 the box that way. I can see how FTB took that to be 22 something real. 23 But I -- it really -- the story that was 24 testified to does make sense, that it was merely an 25 entry device to end in zero, which apparently is our 26 goal in partnership life -- although I suspect that more 27 partnerships actually end with a negative number, we 28 just don't say it that way. 15 1 So, I believe the taxpayer's story. I'm not 2 sure how to ask the question of Appeals because I don't 3 know what burden of proof there is to -- to -- franchise 4 Tax Board sort of offered it but I don't know if it was 5 done or needed to be done, but said there should have 6 been a list of notes attached to the return, which is 7 one way to do it. 8 I don't know how FTB would have accepted it if 9 they put in this balancing number, gotten to zero and 10 then put a note and said, "By the way, that number 11 doesn't exist." 12 I don't know if FTB would have accepted that 13 return or we'd still be here. 14 MR. AMBROSE: If I could? 15 MR. LEONARD: Aren't I right, Mr. Ambrose? 16 MR. AMBROSE: I think they would have taken the 17 same position. I think their position is that the 18 failure to restore the negative capital account 19 constitutes a type of a liability that was assumed by 20 the partnership. 21 So, I guess -- I guess my thought is, even if 22 they had reported it that way, as Mr. Cornez suggested, 23 I think they probably still would have, you know, 24 assessed it. 25 MR. LEONARD: Okay. 26 MR. AMBROSE: Yeah. 27 MR. HORTON: This is just for clarification, 28 can you just explain how the failure to restore created 16 1 a taxable event? 2 MR. AMBROSE: Can I? I can give you FTB's 3 position. 4 MR. HORTON: Yes, that will work. 5 MR. AMBROSE: FTB, in applying -- believes that 6 IRC Section 752 applies in the case where the 7 partnership is liquidated and the partner who has a 8 negative capital account doesn't restore that account. 9 You know, as we understand their argument, all 10 of that constitutes a liability to that partner. So, 11 the failure to pay in to restore that account is relief 12 of that liability. The excess of that over the 13 taxpayer's basis, which -- outside basis, which they 14 must assume to be zero in this case, I don't think it 15 was ever stated outright, equals gain, equals taxable 16 gain or deemed distribution. 17 And if I might add? That -- that's -- because 18 we didn't necessarily agree with that legal theory or 19 the -- you know, the -- that was the legal authorities 20 were on point, that's why we asked them in the hearing 21 summary to address some other aspects of this 22 transaction, for instance, in '95, you know, the 23 reorganization agreement, could it be argued -- or could 24 it being characterized as a disguised sale or some sort 25 of a transfer of the partners' interest in that year? 26 And, if so, then, you know, what would be the 27 tax consequence of that? And, you know, that -- that 28 was -- that was never addressed. So, we're here we are 17 1 where. 2 MR. LEONARD: I'll move to grant if you want a 3 discussion underway. 4 MS. YEE: Okay, motion by Mr. Leonard to grant 5 for the Appellant. 6 Is there a second? 7 MS. STEEL: Second. 8 MS. YEE: Second by Ms. Steel. 9 Do we have discussion? 10 MR. HORTON: You know, while listening to the 11 FTB, I don't -- I didn't quite -- they didn't seem to 12 quite clearly explain theirselves (verbatim) on the 13 reasonable reliance on the Schedule K. 14 It's one of those situations where it's sort of 15 is what it is, if I could just summarize with a few 16 words. And the lack of clarity makes it complicated. 17 MS. MANDEL: I don't know. The reorganization 18 agreement seemed a little -- I don't know -- it -- it 19 almost seemed like that was the event in the partnership 20 at that time. 21 I mean, he had no more obligations to the 22 partnership. The other guy gets it for a dollar, right? 23 But let's not close it up for five years if 24 it's going to cost me anything in taxes. 25 MR. HORTON: Yeah. 26 MS. MANDEL: Or if it's going to cost me more 27 than $10,000, I guess, in taxes. 28 MR. HORTON: That's the other challenge. I 18 1 mean, you're in a position to determine your fate when 2 you make a decision like that subsequently that doesn't 3 quite go your way or, at least, it's being challenged by 4 the FTB. 5 MS. MANDEL: Let's sleep on it. 6 MS. YEE: Shall we -- let's -- 7 MR. LEONARD: Madam Chair? 8 MS. YEE: Yes. We have a motion. 9 Yes, Mr. Leonard? 10 MR. LEONARD: Part of the nature of this and 11 why I don't understand partnership agreements is, 12 apparently, they decided to disproportionally share the 13 capital and the income. 14 So, you can almost assume once the original 15 agreement distributes that differently that somebody's 16 going to be showing income without showing the 17 equivalent capital contribution. Someone else is going 18 to be showing capital contribution and no income. 19 I don't know why they did it. Maybe in the 20 business they were assuming some kind of losses all 21 along, in like the real estate investment or rental 22 property or something where there was going to be 23 reportable losses that they could take. 24 And it was -- those losses are more valuable to 25 some partners than others and, so, they wanted tax 26 losses and the other guys wanted cash. 27 But once you start down that road, then you do 28 get into this situation where it's -- it's -- as long as 19 1 you keep capital income separate, like our bookkeeping 2 rules require that you do, it never is equal. 3 And if gets too unequal, I guess the partners 4 can sue each other, but otherwise, they're -- they're 5 accomplishing their partnership interest in their own 6 self interest that we all expect them to do. 7 I guess I'm saying on the other side, I'm 8 assuming that one of the other partners was a California 9 taxpayer. In one sense, you could argue over the life 10 of the partnership by paying tax on an extraordinary 11 share of the income that they overpaid, or they paid on 12 behalf of the whole partnership, not just themselves. 13 We never get to see that. I'm not sure FTB 14 looks at it that way, but in the universe of WAK, 15 whatever the name of this thing was, it probably nets 16 out that the amount of tax collected was right. 17 MR. AMBROSE: Because it's all flow through, 18 flow through to somebody. 19 Yeah, right. 20 Because it raises the question if it's deemed 21 distributed to this guy and he's going to owe a tax on 22 that, where did it come from? 23 And is that person that it came from get a 24 deemed deduction -- which is a term I don't think 25 exists. 26 But you've got put it -- if you're going to 27 really balance out, then you've got to go through the 28 whole K1 to all of the partners to that do. 20 1 Or you can sleep on it. 2 MS. YEE: Yeah. Mr. Leonard, we have a motion 3 by you and a second by Ms. Steel to grant. 4 I would propose that maybe we take this up 5 tomorrow, but as we're thinking about this overnight, 6 are there questions Members wish to pose to Appeals for 7 further clarification? 8 MR. LEONARD: No. 9 MS. YEE: All right. Why don't we put this 10 over 'til tomorrow? 11 ---o0o--- 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 21 1 B3 ROBIN LAKE 2 NO. 480267 3 ---o0o--- 4 MS. OLSON: Our next item is B3, Robin Lake. 5 MS. YEE: Okay, item B3, Robin Lake. 6 Is there a motion? 7 MR. HORTON: Move to sustain the FTB 8 concessions on reduction. 9 MS. YEE: Okay. Motion by Mr. Horton to 10 sustain the Franchise Tax Board. 11 MR. HORTON: What's the reduction amount? 12 MS. KELLY: Yes, to 1,077. 13 MS. YEE: Very well, as modified is there a 14 second? 15 MS. MANDEL: Second. 16 MS. YEE: Second by Ms. Mandel. 17 Discussion? 18 Without objection, such will be the order. 19 Thank you. 20 ---o0o--- 21 22 23 24 25 26 27 28 22 1 B5 JOHN BRYANT ARTZ AND WENDI A. ARTZ 2 NO. 464509 3 ---o0o--- 4 MS. OLSON: Our next item is B5, John Bryant 5 Artz and Wendi A. Artz. 6 MS. YEE: Okay, item B5, John Bryan Artz and 7 Wendy A. Artz. 8 Is there a motion? 9 I'll move to the sustain the Franchise Tax 10 Board. 11 Is there a second. 12 MR. HORTON: Second. 13 MS. YEE: Second by Mr. Horton. 14 Discussion? Objection? 15 MS. STEEL: Objection. 16 MS. YEE: Ms. Steel, okay. 17 Any discussion? 18 MS. STEEL: No. 19 MS. YEE: Okay. Please call the roll. 20 MS. OLSON: Madam Chair? 21 MS. YEE: Aye. 22 MS. OLSON: Mr. Leonard? 23 MR. LEONARD: Aye. 24 MS. OLSON: Ms. Steel? 25 MS. STEEL: No. 26 MS. OLSON: Mr. Horton? 27 MR. HORTON: Aye. 28 MS. OLSON: Ms. Mandel? 23 1 MS. MANDEL: Aye. 2 MS. OLSON: Motion carries. 3 That concludes our business for today. 4 MS. YEE: Okay, very well. We will recess 5 until 9:30 tomorrow. 6 Thank you. 7 ---O0O--- 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 24 1 REPORTER'S CERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, JULI PRICE JACKSON, Hearing Reporter for the 8 California State Board of Equalization certify that on 9 FEBRUARY 23, 2010 I recorded verbatim, in shorthand, to 10 the best of my ability, the proceedings in the 11 above-entitled hearing; that I transcribed the shorthand 12 writing into typewriting; and that the preceding pages 1 13 through 25 constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: March 3, 2010 17 18 19 20 21 22 23 ____________________________ 24 JULI PRICE JACKSON 25 Hearing Reporter 26 27 28 25