ASD Emergency Hearing Day One Sept 30, 2008

The following are results of the ASD Emergency Hearing for release of funds and return of operations of Ad Surf Daily between Ad Surf Daily and US Attorney’s Office.

Today was the first day of the Hearings as requested by ASD for the release of the funds in Washington DC. I was there today and will be again tomorrow.

Day 1 went very well for ASD despite grueling cross examination of ASD member witness Robert Grayson and ASD expert attorney Gerald Nehara by US attorney William Cowden.

Both gentlemen had long and excellent testimonials .ASD member Robert’s testimony was well prepared and full of facts ,he brought a complete binder,as evidence, for the court full of charts and graphs of his business sales data before and after ASD.This went right up against the US AG allegation that ASD is not a real advertising business and that it is just a smoke screen for a Ponzi scheme.

Robert told the court that his business was up 39% so far this year with ASD compared to 2007 advertising on Google,Yahoo and MSN and a much cheaper rate.

Robert was questioned hard by AG Cowden about the business he was advertising and the products he was marketing .He was also asked repeatedly about the ASD business model and the rebate program.He was asked if he understood how ASD can payout 125% and make the advertising free and still stay in business,Of course the answer is that only 50% of the revenue is shared on daily basis and if and when there are no sales then there will be no rebates that day .Point is rebates are not guaranteed and when a member reaches 125% in rebates his or hers advertising expires and would have to repurchase again to advertise.
(MY impression was that I don’t think AG understands that completely and or he doesn’t want to understand it.)

ASD’s expert witness attorney Gerald Nehara ,after explaining his background as an expert in direct marketing field and representing Amway corporations for eleven years and several other MLM businesses after that,gave a thorough and to the point testimony and explained the business model very clearly to the court and gave his reasons why ASD is not a Ponzi and that it is a legitimate and a viable advertising business as proven by the letters he received from the members.
Judge Collyer listened very intently to his testimony.

Mr. Nehara, incidentally, joined ASD on July 29th ,two days before AG’s seizure of ASD’s accounts.

He was hired to look at ASD’s model and make recommendations to fine tune and advise the business on an ongoing basis ,and he was paid a retainer fee for the whole year.So,naturally, he was shocked at the US attorney’s actions like everyone else.

US attorney Cowden looked like an amateur when cross examining this expert of thirty some years.
Questioning his judgment about ASD and the validity of members letters,saying that 1027 supportive letters only represents 1% of the members and that they only wrote because ASD asked them to,to which Nehara’s replied bluntly “of course since you call ASD a smoke screen and an illegitimate business and that 1 % was a big enough a number to prove that this advertising business really works”.

Nehara, at times was agitated with Cowden for repeating the same questions over and over again especially about the rebate program,he was fixated on the 125% return.Again he was explained the 50% revenue share and the no guarantee clause and that the rebates do end and that the Ad packages do expire .

Cowden just didn’t seemed satisfied with the answers and was irritating the witness and the Judge .
Judge Collyer finally ended the hearing at 4.30 pm . Nehara’s cross examination will resume tomorrow and 3 other witnesses will take the stand as well.

One thing I noticed ,though, was that US Attorney not once called ASD a Ponzi or a scam in the court room as that was the crust of AG’s allegations when they seized ASD’s account on August 1st.Maybe he will do that tomorrow,who knows.

Stay tuned ,more tomorrow.

Attique.
ATTIQUE QAMAR

ASD Emergency Hearing Day Two

Day 2 started with the continued cross examination of Mr.Gerald Nehara by US attorney Mr.William Cowden.

Mr. Cowden asked Mr. Nehara again as to where and when and how he met Andy and for how long and what did Andy tell him about the business model ,was there anything that concerned him about the business model.Mr. Nehara replied yes and that there was and he was going to recommend some changes to the language of the terms and conditions and also recommend to ASD to identify who is a member and who is a customer,reason for that is that in an any viable business there is a person selling and there is someone buying.
Mr. Cowden again wanted to know how this plan was financially feasible if it pays out 125%,to which Mr. Nehara glared at him and replied "only 50% of the days revenues,if there is any, is shared every day counseler".
When Mr. Cowden again went back on this 125% point after few other questions Judge Collyer told them to take a 10 min break and have it sorted out.
I guess she was getting fed up with the repeat questioning on the same topic.

After the break, Mr. Cowden showed the court few minutes of the ASD video to make a point that ASD was promoting an income opportunity rather than an advertising business.In the video Mr. Bowdoin ,with his attorney, is presenting ASD as income vehicle and how one can make money and achieve financial freedom ,not once mentioning any word of an advertising business. ASD lawyers objected to that and pointed out that the rest of the video does mention the advertising part and Judge Collyer promised to watch the whole video later.Mr. Nehara's reaction to that was most ,if not all, MLMs promote there business that way.
Mr. Cowden may have scored a point when he asked if Mr. Nehara has ever represented a company with both income and rebate program like ASD,whose business plan he is endorsing ,to which Mr. Nehara replied no.

Cowden rested and ASD attorney took over and started to clarify few points.

Mr. Nehara again answered that ASD is not a Ponzi or a illegal pyramid scheme and that it is a legitimate MLM direct selling business in his opinion.He would have fixed errors in the terms and condition page had it not been for the seizure by the Government.
He told the counsel that he was comfortable with the 1027 emails he received from the members as they were asked to send accurate account of their experience with ASD.Reason he was asked about the emails was because Mr. Cowden had nit picked on members emails and tried to discredit them.

Chuck Osmin took the hot seat next and answered some questions by ASD counsel first.
Chuck works for ASD in the customer service/accounting department and he is the team leader.
Chuck was here to testify on his on accord and not sent by ASD
Chuck told the court that he and few others ,who can , still show up for work almost everyday even though there pay checks have stopped because of AG's action.
He does it because he believes in the corporation and the people behind it.
Chuck's testimony refuted the AG's allegation that ASD's customer service was non existent.He testified that ASD hired more people and added more phone lines to handle the explosive growth that occurred right after the Miami and Tampa rallies, when ASD went from about 50,000 members to 100,000 in matter of just weeks.
He said that complaints were being handled and cash out requests were being processed despite the servers being down for some time for upgrades.

On the cross examination he was grilled by a young US attorney Mr.Basu,Cowden's partner ,who sounded like he just got out of the Law school.
Chuck was asked about his time at ASD ,if he had any ad packs,if he knew Andy had any advertising experience prior to ASD and if there were any Board of directors.Chuck's replied that he did have ad packs,most were bonus awards, and he did not know the answers to the other questions.
Basu did ask him about the business model and how it worked.
And ,as not to be left behind,the 125% question as well.

Judge did stop Basu couple of times and asked Chuck directly to explain to her how the ad packs , credits , rebates and different levels of membership worked .Chuck did a fabulous job explaining it all to her and I think she got it in the end.

During rest of the cross examination Basu asked mostly irrelevent questions about Chuck's ad packs and about him gifting few to his son and niece.

Best testimony of the day came from Mr. Philip Schwartz.
He is a corporate and a business lawyer,mostly doing compliant and regulatory level law.
He has been involved in defending businesses accused of being a Ponzi schemes in the past.
He was asked to come on board by ASD back in June of this year and he actually did so in July.He was hired to make sure that ASD's business was in compliant with all the laws and to make recommendations along the way.
He is the architect of the ASD's oversight and compliant plan and he went into details of the plan.
He emphasized to the court that it is crucial and urgent that ASD gets some money back to stay solvent.
He said if this case dragged on for 6 to 9 months there may not be a viable business or asset base to get back to ,assets being its members/advertisers.
He said that while there is a cloud of AG hanging over ASD the trust in ASD and its business plan will be lost.
His plan would have the initial money be placed into an escrow account so everybody,including the judge, knows where it is and how it is being spent.A reputable accounting firm has already ,or will be, retained for ASD .
Going forward more funds should be released to ASD as the court and the Government feels comfortable.

During cross examination by Mr. Cowden Mr. Schwartz told the court that ASD is a sound legitimate business and not a Ponzi as it has been accused of.
He said ASD ,in his opinion, will not run out of money paying rebates of up to 125 % as they have an on going advertising revenue and has a very low operating cost.
And, with a large passionate user base of ASD , it would attract more advertising revenue from other outside advertisers as evident by the success of other social networking sites such as My Space and Face book.
He said success of such networking sites was doubted as well by many when they were small.
He said that social web advertising network like ASD have a potential to grow very large as evident by its recent explosive growth.
He pointed out that ASD had a net income of 20 million dollars in the past 7 months and assets of some 9 million dollars even after paying out rebates and commissions.
At the time of seizure there were approximately 83 million ad packs in ASD and 17 million in LFD.

He told Mr. Cowden that his plan would also sets aside funds for members who wanted a refund and no longer wished to advertise with ASD.
He proposed ,among other things,a new management structure and Mr. Bowdoin to step down to an advisory role;fixing the errors in the terms and conditions ;forming and appointing some members to a membership committee with their own counsel,paid for by ASD, to represent all the members , and a stronger policing of the members to make sure they are in compliant with the company's policies.

Mr. Cowden again went back to the 125% payout questioning to which gallery laughed out in disbelief as if to say "come on man what is with you and what part of it you don't get ? "
Mr. schwartz ,however,reiterated the payout process to him very calmly.

Mr. Cowden,however, was not satisfied and calling it a Ponzi and wire fraud and said that ASD had 18 months since it started to be in compliant and now they are asking for funds to be released so they can be in compliant.

To which I would say that it seems like ASD was already in the process of doing that by hiring expert attornys like Mr. Nehara and Mr.Schwatrz if AG hadn't jumped the gun and seized the assets.

He asked Mr.Schwartz if ASD can survive with the current business model and his answer,just like Mr. Nehara , was a firm yes.

With the time running out at 4.30 and Judge Collyer having another meeting to tend to said a few words that may shed a light on her thought process at the time . She said and I quote ,others can correct me if I am wrong ," assume that the government is right that it is a wire fraud and a Ponzi then you are asking for 2 to 3 million dollars ?and then with an undeterminable fact if its a Ponzi why the lawyers have not tried to reach a settlement agreement instead of this evidentiary hearing and a compliant plan?" She stopped and looked at the courtroom with a smile and said "no I have not reached any decision and don't read anything into it"
ASD's counsel Johnathen Goodman did reply and I thought he said "we are trying to save the company's assets which are its members your honor".
She told both sides that they are to appear on wednesday ,a week from today, for the final comments as the time has run out for this hearing and she will render her decision in two weeks after looking at all facts ,and she said,while looking at the gallery and the ASD counsel that she was mindful of the urgency of the matter.

That would be around October 22nd for her decision.

So , there you have it.

What I took away after 2 days of hearing is that ASD made a very strong and a compelling case for itself and it was very impressive.

Judge Collyer seemed like she is very thoughtful ,concerned and a fair Judge.

US attorney William Cowden seemed hell bent on shutting down ASD,like Golden Panda.
He may have driven home his point on 125% to the judge.
But ,in my opinion,he failed to produced any real evidence or reason to shut ASD down,not once he mentioned or talked about any victims of ASD ,who were scammed and defrauded or produced any letters or other evidence of complaints that AG said they had received.No victims or complainers showed up from their side for this hearing.
Overall, I think we have avery good chance of getting a favorable decision from Judge Collyer.

Despite the pain every body is feeling from ASD shut down,I think this might be a blessing in disguise.
When ASD is allowed to operate again and the cloud of AG is gone it will be a much better run and operated company.
You will be able to advertise and earn income with confidence.
Having passed the government scrutiny and with the expert like Mr.Nehara and Mr.Schwatrz on its side and with their compliant plans in place I see no stopping this company from becoming the biggest social web advertising network.
It will be a rocking success !

Just sit tight and ride out the storm ,it will pass.

Attique.