PORTLAND, Maine — After more than eight hours of testimony, both sides in a complicated fraud case brought against Cate Street Capital CEO John Halle rested Thursday, leaving open the possibility of settlement talks as a final decision from U.S. District Court Judge George Z. Singal likely will not come before the end of the year.
The case has opened a window on the private and corporate finances of Halle, whose company managed the now-bankrupt Great Northern Paper Co. and a number of other ventures around the country.
The bench trial stems from a $1.6 million judgment against Halle, won in 2009 by his former business associate Richard Davimos in connection with a loan Halle arranged to finance the movie “My First Mister.”
Testimony in the trial Thursday grew more heated as attorneys for both sides narrowed questioning to establish specific points, building cases for and against allegations that Halle transferred a home and corporate interests to his wife to avoid paying a former business partner.
Some of that testimony left open questions about Halle’s financial history and contradicted previous statements that all of his paychecks from Cate Street Capital and Great Northern Paper were deposited into an account in his wife’s name only.
“As long as I can remember, I’ve always turned my paycheck over to [Sharon Halle],” John Halle said during a June hearing indicating that his wife then deposits those checks into a TD Bank account in her name.
Attorneys for Davimos entered into the record bank statements from a joint account owned by Halle and his wife, with what Halle confirmed as payroll deposits from both Cate Street Capital and Great Northern Paper through 2011.
That earlier testimony arose in a related case now in Maine District Court, where attorneys for Halle and Davimos agreed to keep filings confidential until the full record of evidence is established and agreed upon with the court.
While the federal case deals with specific allegations that Halle moved assets to avoid paying a $1.6 million judgment Davimos won against Halle in New York’s top court in 2009, it’s brought certain evidence from the confidential probe of what Halle owns into the public record.
Halle testified Wednesday that he’s involved, in some capacity, in more than 60 corporate entities — including the limited liability company that owns the Windham home he lives in — but that he has no ownership stake in any of them, including Cate Street Capital.
Halle claims he was a manager, not a member, of the corporations involved in the lawsuit, including companies holding real estate and other property such as airplanes and a boat that he or Cate Street Capital executives used.
Three corporations — Jenis Holding Co., N70KC LLC and JH North Hampton Group — are the subject of the federal lawsuit, which Halle’s attorney has argued Halle either held no ownership stake in or that at the time of his ownership had no assets that could have paid the judgment against him.
Davimos also has alleged Halle transferred a Falmouth home to his wife in order to avoid paying him, which Halle’s attorney, Brian Champion, contested in part because the proceeds from the sale of that house went to pay another earlier debt.
Davimos’ attorney Lee Bals argued, however, that the transfers included “badges of fraud,” such as the fact that Halle transferred the assets to an “insider,” his wife, and retained some control or use of the assets after they were transferred.
Champion also argued for Halle that Davimos did not prove he was injured by any of the transfers and that the way Halle structured the corporations and properties he owned was driven by estate planning purposes and federal law stipulating he could not, as a Canadian citizen, own more than a one-third stake in a plane registered in the United States.
The plane was the subject of one of the “unique questions” Singal said are posed by the case.
Bals argued that Halle’s transferral of his interest in a company called JH North Hampton Group to his wife days before that company bought a Mitsubishi MU2 Peacock aircraft constituted a fraudulent transfer because of the expectation that the company would gain an ownership stake in the airplane, which was purchased for about $325,000.
“What is the value of an expectation?” Singal asked Bals.
Champion argued that expectation held no legal value, pointing out that a deal to acquire that airplane — used at times by Cate Street Capital executives for travel — had fallen through previously and was of uncertain fate at the time it did actually close in June 2009.
After testimony from Halle, his wife and a private property appraiser who testified about the Falmouth home, both parties are expected to file written arguments with the court within 30 days from when the trial transcript is finished.
They will then have 15 days for responses and the possibility of oral arguments before Singal issues a verdict, if the parties do not reach a settlement in the 5-year-old judgment in the interim.