Stay Bankruptcy Filing PDF

1 TRACY L.
WILKISON
Attorney for the United States,
2 Acting Under Authority Conferred By 28 U.S.C. § 515
SCOTT M. GARRINGER
3 Assistant United States Attorney
Deputy Chief, National Security Division
4 MELISSA MILLS (Cal. Bar No. 248529)
FRANCES LEWIS (Cal. Bar No. 291055)
5 Assistant United States Attorneys
Public Corruption and Civil Rights Section
6 DIANA KWOK (Cal. Bar No. 246366)
Assistant United States Attorney
7 Environmental and Community Safety Crimes Section
1300 United States Courthouse
8 312 North Spring Street
Los Angeles, California 90012
9 Telephone: (213) 894-6529
Facsimile: (213) 894-0141
10 E-mail: diana.kwok@usdoj.gov
11 Attorneys for Party in Interest

UNITED STATES OF AMERICA
12
UNITED STATES BANKRUPTCY COURT
13
FOR THE DISTRICT OF ARIZONA
14
In re: Case No. 2:20-BK-06722-PS
15
ARDENT CYBER SOLUTIONS, LLC, Chapter 11
16
Debtor. GOVERNMENT’S NOTICE OF MOTION AND
17 MOTION TO STAY PROCEEDINGS;
MEMORANDUM OF POINTS AND
18 AUTHORITIES
19
20
21 The United States of America, by and through its counsel of

22 record, the United States Attorney for the Central District of
23 California and Assistant United States Attorney Diana Kwok, hereby
24 files a Motion to Stay the Proceedings in this matter.
25 This Motion is based upon the attached memorandum of points and
26 ///
27
28 ///
Case 2:20-bk-06722-PS Doc 46 Filed 07/30/20 Entered 07/30/20 16:31:35 Desc

Main Document Page 1 of 17
1 authorities, the files and records in this case, and such further
2 evidence and argument as the Court may permit.
3 Dated: July 27, 2020 Respectfully submitted,
4 TRACY L. WILKISON
First Assistant United States
5 Attorney
6 SCOTT M. GARRINGER
7 Deputy Chief, Criminal Division
8
/s/
9 DIANA KWOK
10
Attorneys for Party in Interest
11 UNITED STATES OF AMERICA
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2
1 TABLE OF CONTENTS
2 DESCRIPTION PAGE
4 I. INTRODUCTION...................................................1
5 II. SUMMARY OF PUBLICLY AVAILABLE RELEVANT BACKGROUND..............2
6 A. Paradis’s Involvement in Litigation Relating to the

LADWP Billing System......................................3
7
B. LADWP’s Public Contracts with Paradis.....................4
8
III. ARGUMENT.......................................................5
9
A. This Court has the power to stay the instant
10 bankruptcy cases in the interest of justice...............5
11 B. The pending criminal investigation and the instant

bankruptcy cases share multiple areas of overlap..........7
12
C. Paradis’s creditors do not have a unique interest in
13 proceeding expeditiously..................................9
14 D. If a stay is not granted, then Paradis will likely

have to choose between invoking his Fifth Amendment
15 privilege against self-incrimination, and potentially
losing the protections of bankruptcy......................9
16
E. A stay would allow this Court to avoid extensive
17 delays and protracted litigation resulting from
debtor’s continued assertion of privilege in response
18 to the creditors’ questioning............................11
19 F. A stay of the proceedings is critical for the

preservation of the integrity of the government’s
20 ongoing criminal investigation...........................11
21 G. The public has a greater interest in seeing that any

criminal activity is expediently investigated than in
22 advancing the instant bankruptcy cases...................13
23 IV. CONCLUSION....................................................13
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i
1 TABLE OF AUTHORITIES
2 DESCRIPTION PAGE
3 FEDERAL CASES
4 Ashworth v. Albers Med., Inc.
229 F.R.D. 527 (S.D. W. Va. 2005).............................12
5
Baker v. SeaWorld Entm’t, Inc.
6 2018 U.S. Dist. LEXIS 60958, 2018 WL 1726534 (S.D. Cal.
Apr. 10, 2018)................................................13
7
Federal Sav. & Loan Ins. Corp. v. Molinaro
8 889 F.2d 899 (9th Cir. 1989)...................................6
9 In re SK Foods, L.P., 2010 U.S. Dist. LEXIS 136188 (E.D. Cal.

Dec. 9, 2010)..................................................6
10
In re Zinnel
11 2013 U.S. Dist. LEXIS 46114, 2013 WL 128439 (E.D. Cal.
March 28, 2013)................................................6
12
Landis v. North American Co.
13 299 U.S. 248, 254 (1936).......................................6
14 United States v. Kordel

397 U.S. 1 (1970)..............................................6
15
Walsh Sec. v. Cristo Prop. Mgmt.
16 7 F. Supp. 2d 523 (D.N.J. 1998)...........................10, 11
17
18
19
20
21
22
23
24
25
26
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ii
1 MEMORANDUM OF POINTS AND AUTHORITIES
2 I. INTRODUCTION
3 On June 3, 2020, Paul Paradis (“Paradis”) filed two voluntary
4 bankruptcy petitions – one for himself, under Chapter 11, Subchapter
5 V (Case No. 2:20-BK-06724-PS), and a second, as the managing member
6 of Ardent Cyber Solutions LLC (Case No. 2:20-BK-06724-PS).
7 Soon thereafter, on July 7, 2020, Paradis attended the 341(a)
8 meeting of creditors in both cases, during which counsel for the City
9 of Los Angeles (“the City”) reportedly asked him a number of probing
10 questions in a stated effort to establish its claims against Paradis
11 and Ardent. Because Paradis invoked his Fifth Amendment rights and
12 refused to answer many of the City’s questions, the 341(a) meetings
13 were continued to July 30, 2020. In the interim, the government
14 received information about the ongoing proceedings from multiple
15 sources, including the Trustee’s office and the City.
16 As has been publicly reported, the United States Attorney’s
17 Office in the Central District of California and the Federal Bureau
18 of Investigation are conducting a criminal investigation into matters
19 related to Paradis’s work for the City of Los Angeles, including
20 civil litigation involving the billing system of the Los Angeles
21 Department of Water and Power (“LADWP”), certain LADWP contracts
22 related to Paradis, and other matters. One focus of this
23 investigation is whether a large segment of City ratepayers was
24 defrauded in connection with these matters.
25 Notwithstanding the public reporting on the government’s
26 investigation and the underlying civil litigation, many of the facts
27 known to the government as part of its investigation remain sensitive
28 and confidential. But if Paradis is required to answer questions

1 from his creditors that relate to the matters under investigation,
2 the government believes its investigation will be severely
3 compromised. Given the overlap between the federal criminal
4 investigation and the stated informational needs of the City to
5 establish its claims in bankruptcy, Paradis’s responses to the City’s
6 inquiries in a 341(a) meeting may reveal sensitive facts that would
7 allow other criminal subjects to potentially change their
8 testimony/statements, seek to interfere with witnesses, alter
9 evidence, or otherwise undermine the integrity of the investigation.
10 Accordingly, as discussed further below, the government submits
11 that a stay of both bankruptcy cases for the duration of the pending
12 criminal investigation is warranted in the interest of justice, in
13 order to preserve the integrity and confidentiality of the
14 government’s investigation. To ensure that a stay is only in place
15 for as long as necessary, the government would agree to provide a
16 status report to the Court in 180 days, to address whether it
17 believes a continued stay remains necessary.
18 II. SUMMARY OF PUBLICLY AVAILABLE RELEVANT BACKGROUND

19 The following information in this section is compiled
20 exclusively from public court filings and published news articles.
21 The government sets forth this summary for the sole purpose of
22 providing this Court with sufficient information to consider this
23 motion. If further details are necessary to that purpose, the
24 government respectfully requests that the Court advise what
25 additional information would be helpful.
26
27
28
2
1 A. Paradis’s Involvement in Litigation Relating to the LADWP
Billing System
2
In September 2013, LADWP implemented a new customer care and
3
billing system pursuant to a contract with PriceWaterhouseCoopers
4
(“PwC”). Shortly thereafter, LADWP ratepayers who believed they had
5
been overbilled began to file class actions against LADWP and the
6
City for damages.
7
One such ratepayer, Antwon Jones, filed his class-action lawsuit
8
against the City of Los Angeles on April 1, 2015 (the “Jones
9
litigation”). In a subsequent deposition, Jones testified that he
10
believed his attorney was Paul Paradis,1 who Jones had retained in
11
December 2014 in connection with his overbilling claims. But Paradis
12
was not listed as his attorney of record on the complaint filed in
13
April 2015. Instead, an Ohio attorney named Jack Landskroner
14
appeared as class counsel for Jones, and Paradis was the attorney of
15
record for the City in its own lawsuit against PwC, which was filed
16
on March 6, 2015.
17
In March 2019, after numerous protracted discovery disputes in
18
the City’s action against PwC, PwC alleged that Paradis and the City
19
had worked together to select Landskroner to handle the Jones
20
litigation, in an effort to quickly settle the class action. In
21
22
23 1 According to a transcript of a status hearing on July 14,

2020, a representative for the U.S. Trustee advised the Court that
24 Paradis was a witness in this criminal investigation. A reporter
thereafter filed a news article on that hearing interpreting this
25 comment to infer that Paradis was cooperating with the federal
criminal investigation. The government makes no representation as to
26 any purported cooperation by Paradis or any other individual. Both
cooperation and lack of cooperation by individual witnesses in an
27 ongoing criminal investigation is a highly sensitive matter, and to
the extent that any such information may be relevant to the Court’s
28 determination of these issues, the government requests the
opportunity to address the Court in camera.
3
1 particular, PwC alleged that Landskroner and his law firm ultimately
2 received about $10.1 million in attorney’s fees from the Jones
3 settlement, despite not having sought any discovery from the City,
4 not taking or defending any depositions in the case, and having been
5 given a draft of the class action complaint from Paradis. PwC also
6 pointed out that a tentative settlement had been reached between the
7 parties within 2.5 months of the class action being filed, and a
8 preliminary settlement agreement was signed just a few weeks later.
9 On March 4, 2019, when the Court asked Landskroner during a
10 hearing whether he had paid a referral fee to Paradis, Landskroner
11 invoked his Fifth Amendment privilege against self-incrimination.
12 Subsequently, when PwC deposed Paradis, Paradis also invoked the
13 Fifth Amendment in response to the majority of questions asked of
14 him.
15 B. LADWP’s Public Contracts with Paradis

16 Separately, and in the interim, Paradis was also engaged in a
17 series of public transactions with the LADWP, wherein he, his law
18 firm, and Aventador Utility Solutions LLC, were awarded multiple
19 multi-million dollar contracts for remediation work associated with
20 the Jones litigation. Specifically, in October 2015, LADWP publicly
21 reported that it had awarded Paradis’s law firm, Paradis Law Group,
22 PLLC, a no-bid contract in the amount of $1.3 million for remediation
23 of the utility’s customer care and billing system; that contract was
24 subsequently amended less than a year later for an additional $4.7
25 million. The following year, in June 2017, LADWP again publicly
26 reported awarding Paradis another multi-million dollar contract from
27 LADWP, but this time, it was a no-bid, $30 million contract for
28 continuing remediation of the utility’s customer care and billing
4
1 system, through an entity that Paradis had formed just three months
2 earlier – Aventador Utility Solutions LLC. (Id. at 3, 13-14.)
3 According to news articles, Aventador had apparently planned to
4 operate a “Cybergym” arena in downtown Los Angeles by the summer of
5 2019. But LADWP canceled Aventador’s $30 million contract once PwC
6 alleged that Paradis had been simultaneously representing both Antwon
7 Jones in the class action litigation against LADWP, and the City in
8 the related action against PwC. In April 2019, LADWP publicly
9 awarded a cybersecurity contract to debtor Ardent Cyber Solutions,
10 LLC, formerly known as Aventador Utility Solutions LLC, for
11 “cybersecurity services.”
12 As mentioned above, the United States is conducting an active
13 criminal investigation into matters including the above allegations
14 involving Paradis and Ardent, among others. Because the federal
15 criminal investigation is sensitive, ongoing and contains
16 confidential aspects, and at least one alleged creditor has indicated
17 an intent to elicit Paradis’s testimony about the above events in
18 order to establish its claims, the government requests that this
19 Court exercise its inherent power to stay the Paradis and Ardent
20 bankruptcy cases, so as to protect the integrity of the government’s
21 investigation.
22 III. ARGUMENT
23 A. This Court has the power to stay the instant bankruptcy
cases in the interest of justice
24
“The power to stay proceedings is incidental to the power
25
inherent in every court to control the disposition of the causes on
26
its docket with economy of time and effort for itself, for counsel,
27
and for litigants.” Landis v. North American Co., 299 U.S. 248, 254
28
5
1 (1936). While the Constitution does not mandate the stay of civil
2 proceedings in the face of parallel criminal proceedings, “a court
3 may [nevertheless] decide in its discretion to stay civil
4 proceedings, postpone civil discovery, or impose protective orders
5 and conditions when the interests of justice seem to require such
6 action. . . .” SEC v. Dresser Industries, Inc., 628 F.2d 1368, 1375
7 (D.C. Cir. 1980) (quoting United States v. Kordel, 397 U.S. 1, 12 n.
8 27 (1970)).
9 With respect to bankruptcy cases in particular, courts have
10 found that a stay may be warranted where a bankruptcy case seriously
11 implicates a debtor’s Fifth Amendment rights. See, e.g., In re
12 Zinnel, 2013 U.S. Dist. LEXIS 46114, 2013 WL 128439 (E.D. Cal. March
13 28, 2013) (granting stay of bankruptcy appeal where debtor was
14 criminally accused of engaging in enterprise through which he
15 allegedly obtained assets); In re SK Foods, L.P., 2010 U.S. Dist.
16 LEXIS 136188 (E.D. Cal. Dec. 9, 2010); (reversing bankruptcy court’s
17 denial of stay proceedings in seven adversarial actions because
18 bankruptcy litigation seriously implicated principal’s privilege
19 against self-incrimination); In re Marceca, 131 B.R. 774, 778 (Bankr.
20 S.D.N.Y. 1991) (granting motion to stay adversary proceeding pending
21 criminal investigation).
22 A determination of whether to stay a case is made on a case-by-
23 case basis, depending on “the particular circumstances and competing
24 interests involved in the case.” Federal Sav. & Loan Ins. Corp. v.
25 Molinaro, 889 F.2d 899, 902 (9th Cir. 1989). The Ninth Circuit has
26 held that in making this decision, courts should consider the extent
27 to which a defendant’s Fifth Amendment rights are implicated, as well
28 as the following factors:
6
1 (1) the interest of the plaintiffs in proceeding expeditiously
2 with this litigation or any particular aspect of it, and
3 the potential prejudice to plaintiffs of a delay;
4 (2) the burden which any particular aspect of the proceedings
5 may impose on defendants;
6 (3) the convenience of the court in the management of its
7 cases, and the efficient use of judicial resources;
8 (4) the interests of persons not parties to the civil
9 litigation; and
10 (5) the interest of the public in the pending civil and
11 criminal litigation.
12 Id. at 903.
13 Here, the balance of these factors mitigates in favor of a stay
14 of both the Paradis and Ardent bankruptcy cases -- particularly given
15 that Paradis has already invoked his Fifth Amendment privilege
16 against self-incrimination, both during the recent 341(a) meetings
17 and in his earlier civil deposition in the City’s lawsuit against
18 PwC.
19 B. The pending criminal investigation and the instant

bankruptcy cases share multiple areas of overlap
20
As a threshold matter, there is a clear overlap between
21
Paradis’s and Ardent’s bankruptcy cases and the pending criminal
22
investigation, such that Paradis’s Fifth Amendment rights will likely
23
be implicated in any continued 341(a) meeting. During the 341(a)
24
meetings held on July 7, 2020, the City reportedly asked Paradis why
25
he invoked the Fifth Amendment during his deposition with PwC, and
26
expressed particular interest in Aventador’s and Ardent’s activities
27
before 2019. When Paradis refused to answer a number of the City’s
28
7
1 questions, based on privilege or otherwise, the City made sure to
2 bring the issue to the attention of the Court at the Chapter 11
3 status conference for Paradis’s personal bankruptcy case on July 14,
4 2020:
5 With regard to one other major issue, just to bring to Your

Honor’s attention something that came up at the 341(a)
6 meeting of creditors in both the Ardent and Mr. Paradis’
case, is Mr. Paradis’ refusal to testify in both cases
7 about anything related to Ardent prior to 2019 when it was
known by a different name.
8
. . .
9
The reason why that’s important, Ardent made $16.9 million
10 in 2018 and has a significant business history that
deserves to be at least explored because it is a primary
11 asset of Mr. Paradis. And there’s a lot of money going
through that entity. So when we asked the questions
12 related to Ardent, you know, what happened in 2018 type of
issues, Mr. Paradis refused to answer.
13
. . .
14
[T]he response that we were getting from Mr. NewDelman was
15 that Mr. Paradis . . . will likely plead the Fifth at the
341(a) meetings for himself personally and for Ardent as it
16 relates to . . . Ardent issues prior to 2019.
17 (Transcript, 20-BK-06724-PS, 7/14/20, 17-18.) Given the City’s
18 statements at the most recent status conference, as well as the
19 questions that the City posed to Paradis at the first 341(a) meeting
20 of creditors, it is apparent that the City intends to pursue lines of
21 inquiry involving Aventador and Ardent, and Paradis’s related
22 business activities. These lines of questioning, however, inherently
23 conflict with the government’s interest in maintaining the integrity
24 of its ongoing criminal investigation.
25 Further, on July 20, 2020, CyberGym Control Ltd. and Strategic
26 Cyber Holdings LLC also filed proofs of claim against Paradis and
27 Ardent. The nature of these claims suggests that this alleged
28
8
1 creditor too may attempt to elicit testimony from Paradis that would
2 compromise the integrity of the federal criminal investigation.
3 C. Paradis’s creditors do not have a unique interest in

proceeding expeditiously
4
Here, as in any bankruptcy case, Paradis’s and Ardent’s
5
creditors have a significant interest in seeing that any
6
reorganization plan is submitted and approved in a timely manner.
7
But given that the instant petitions were filed only last month, the
8
proposed delay cannot be characterized as highly prejudicial.
9
Moreover, given the likelihood that Paradis will continue to invoke
10
the Fifth Amendment in response to questions raised by creditors
11
about matters relating to the federal criminal investigation, these
12
creditors would arguably benefit from a stay of the bankruptcy cases
13
until the conclusion of the investigation, at which time more related
14
facts are likely to have been uncovered by such investigation.
15
D. If a stay is not granted, then Paradis will likely have to
16 choose between invoking his Fifth Amendment privilege
against self-incrimination, and potentially losing the
17 protections of bankruptcy
18 In determining whether a stay is warranted, many courts have
19 agreed that “the strongest case for deferring civil proceedings is
20 where a party under indictment for a serious offense is required to
21 defend a civil or administrative action involving the same matter.”
22 SEC v. Dresser Industries, Inc., 628 F.2d 1368, 1375-76 (D.C. Cir.
23 1980). This is because “[t]he noncriminal proceeding, if not
24 deferred, might undermine the party’s Fifth Amendment privilege
25 against self-incrimination, expand rights of criminal discovery
26 beyond the limits of Federal Rule of Criminal Procedure 16(b), expose
27 the basis of the defense to the prosecution in advance of criminal
28 trial, or otherwise prejudice the case.” Id. at 1376.
9
1 Even where no indictments have yet been returned, a pre-
2 indictment stay may still be warranted if the government is
3 conducting an active parallel criminal investigation. This is
4 particularly the case where search warrants have been executed,
5 subpoenas have been issued, and defendants have been notified that
6 they are targets of the criminal investigation. Walsh Sec. v. Cristo
7 Prop. Mgmt., 7 F. Supp. 2d 523, 527 (D.N.J. 1998); see also Amsave
8 Credit Corp. v. Marceca, 131 B.R. 774 (S.D.N.Y. 1991) (granting pre-
9 indictment stay because criminal investigation was “reaching a
10 terminal phase that will likely result in the issuance of indictments
11 against [the defendant] and possibly others involved in this case”).
12 Here, the government’s investigation has proceeded at a brisk pace
13 since it began last year, and search warrants were executed as part
14 of the case just one year ago.
15 If the bankruptcy cases are not stayed, then Paradis will likely
16 be forced to choose between invoking his Fifth Amendment privilege
17 against self-incrimination, and potentially losing the relief and
18 protections of bankruptcy. As noted above, at least one alleged
19 creditor has indicated its intent to continue probing about
20 Aventador’s activities, among other topics. The rights of creditors
21 to pursue claims against Paradis and Ardent should be balanced
22 against the right of the debtor to assert his constitutional rights
23 (which would have the above-noted incidental benefits to the
24 integrity of the federal criminal investigation) without foregoing
25 the protections of bankruptcy. Accordingly, the government submits
26 that this factor weighs heavily in favor of granting a stay.
27
28
10
1 E. A stay would allow this Court to avoid extensive delays and
protracted litigation resulting from debtor’s continued
2 assertion of privilege in response to the creditors’
questioning
3
While this Court has an overall interest in judicial efficiency
4
with respect to managing its docket, it also undoubtedly has “an
5
interest in resolving individual cases efficiently.” Walsh, 7 F.
6
Supp. 2d at 528 (granting pre-indictment stay, in part because
7
“[w]ithout a stay, interrogatory and deposition discovery would
8
likely cause inefficiency, because several defendants [would] be
9
forced to assert Fifth Amendment privileges”). If the instant
10
proceedings are not stayed, then Paradis’s invocation of the Fifth
11
Amendment in response to creditors’ questions will likely result in
12
protracted litigation with respect to privilege issues, thereby
13
resulting in inevitable delays. Indeed, the first such delay has
14
already taken place following Paradis’s refusal to answer many of the
15
questions posed at the initial 341(a) meeting.
16
While the government cannot —— publicly or otherwise —— predict
17
with precision when the federal criminal investigation will be
18
completed, that lack of certainty can be mitigated by the
19
government’s offer to provide a status update after 180 days, or
20
allowing the parties to petition the Court to lift or modify the stay
21
once circumstances have materially changed. Either way, the
22
government respectfully submits that the efficiency gained by
23
imposing the stay will outweigh the prejudice of any resulting delay.
24
F. A stay of the proceedings is critical for the preservation
25 of the integrity of the government’s ongoing criminal
investigation
26
As noted above, the government has a significant interest in the
27
stay of these bankruptcy cases to protect the integrity of its
28
11
1 continuing investigation. It is beyond dispute that “[t]he United
2 States’ interest in an unimpeded criminal investigation favors a
3 stay.” Ashworth v. Albers Med., Inc., 229 F.R.D. 527, 532 (S.D. W.
4 Va. 2005). Even in cases where the government is not a party, it has
5 “a discernible interest in intervening in order to prevent discovery
6 in a civil case from being used to circumvent the more limited scope
7 of discovery in [a related] criminal matter.” SEC v. Chestman, 861
8 F.2d 49, 50 (2nd Cir. 1988); see also Dresser, 628 F.2d at 1375-76
9 (noting that prejudice to a criminal case might result from the
10 availability of broader discovery in the parallel civil action).
11 Here, debtor Paradis likely has substantial sensitive
12 information related to the federal criminal investigation -- the
13 forced public revelation of which would be highly detrimental to the
14 integrity of that investigation. The overlap between the
15 government’s investigation and the areas of interest to Paradis’s and
16 Ardent’s creditors creates a direct conflict between the bankruptcy
17 cases and the federal criminal investigation, such that any testimony
18 in the bankruptcy cases touching on the areas of overlap will have
19 some level of negative impact on the federal criminal investigation.
20 Thus, permitting the bankruptcy cases to continue in light of these
21 conflicting interests would not only likely interfere with the
22 federal criminal investigation, but would also jeopardize the public
23 interest in the prompt and efficient resolution of criminal matters.2
24
25
26
27 2 To the extent that the Court may wish to hear additional

details concerning the federal criminal investigation, the United
28 States requests the opportunity to make an in camera showing to the
Court.
12
1 G. The public has a greater interest in seeing that any
criminal activity is expediently investigated than in
2 advancing the instant bankruptcy cases
3 The public interest in uncompromised criminal investigations
4 likewise weighs strongly in favor of a stay. See Baker v. SeaWorld
5 Entm’t, Inc., 2018 U.S. Dist. LEXIS 60958, 2018 WL 1726534 at *3
6 (S.D. Cal. Apr. 10, 2018) (“The government has a strong interest in
7 maintaining and protecting the integrity of its criminal
8 investigation, and a stay would prevent premature disclosure of
9 criminal discovery materials.”) This is particularly true here,
10 wherein the alleged illegal conduct relates to interests that were
11 asserted on behalf of a class of up to four million LADWP ratepayers.
12 In contrast, the public’s interest in the swift progression of
13 Paradis’s and Ardent’s bankruptcy cases is minimal.
14 IV. CONCLUSION
15 For the foregoing reasons, the government respectfully requests
16 that this Court stay the instant bankruptcy cases until the
17 conclusion of the federal criminal investigation.
18
19
20
21
22
23
24
25
26
27
28
13

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1 TRACY L.

11 Attorneys for Party in Interest

21 The United States of America, by and through its counsel of

Case 2:20-bk-06722-PS Doc 46 Filed 07/30/20 Entered 07/30/20 16:31:35 Desc

2 evidence and argument as the Court may permit.

3 Dated: July 27, 2020 Respectfully submitted,

5 II. SUMMARY OF PUBLICLY AVAILABLE RELEVANT BACKGROUND..............2

6 A. Paradis’s Involvement in Litigation Relating to the

11 B. The pending criminal investigation and the instant

14 D. If a stay is not granted, then Paradis will likely

19 F. A stay of the proceedings is critical for the

21 G. The public has a greater interest in seeing that any

9 In re SK Foods, L.P., 2010 U.S. Dist. LEXIS 136188 (E.D. Cal.

14 United States v. Kordel

4 bankruptcy petitions – one for himself, under Chapter 11, Subchapter

5 V (Case No. 2:20-BK-06724-PS), and a second, as the managing member

6 of Ardent Cyber Solutions LLC (Case No. 2:20-BK-06724-PS).

7 Soon thereafter, on July 7, 2020, Paradis attended the 341(a)

9 of Los Angeles (“the City”) reportedly asked him a number of probing

10 questions in a stated effort to establish its claims against Paradis

12 refused to answer many of the City’s questions, the 341(a) meetings

13 were continued to July 30, 2020. In the interim, the government

14 received information about the ongoing proceedings from multiple

15 sources, including the Trustee’s office and the City.

16 As has been publicly reported, the United States Attorney’s

17 Office in the Central District of California and the Federal Bureau

18 of Investigation are conducting a criminal investigation into matters

19 related to Paradis’s work for the City of Los Angeles, including

20 civil litigation involving the billing system of the Los Angeles

21 Department of Water and Power (“LADWP”), certain LADWP contracts

22 related to Paradis, and other matters. One focus of this

23 investigation is whether a large segment of City ratepayers was

24 defrauded in connection with these matters.

25 Notwithstanding the public reporting on the government’s

26 investigation and the underlying civil litigation, many of the facts

27 known to the government as part of its investigation remain sensitive

28 and confidential. But if Paradis is required to answer questions

Case 2:20-bk-06722-PS Doc 46 Filed 07/30/20 Entered 07/30/20 16:31:35 Desc

2 the government believes its investigation will be severely

3 compromised. Given the overlap between the federal criminal

4 investigation and the stated informational needs of the City to

5 establish its claims in bankruptcy, Paradis’s responses to the City’s

6 inquiries in a 341(a) meeting may reveal sensitive facts that would

7 allow other criminal subjects to potentially change their

8 testimony/statements, seek to interfere with witnesses, alter

9 evidence, or otherwise undermine the integrity of the investigation.

10 Accordingly, as discussed further below, the government submits

12 criminal investigation is warranted in the interest of justice, in

13 order to preserve the integrity and confidentiality of the

14 government’s investigation. To ensure that a stay is only in place

15 for as long as necessary, the government would agree to provide a

16 status report to the Court in 180 days, to address whether it

17 believes a continued stay remains necessary.

18 II. SUMMARY OF PUBLICLY AVAILABLE RELEVANT BACKGROUND

20 exclusively from public court filings and published news articles.

22 providing this Court with sufficient information to consider this

23 motion. If further details are necessary to that purpose, the

24 government respectfully requests that the Court advise what

25 additional information would be helpful.

23 1 According to a transcript of a status hearing on July 14,

2 received about $10.1 million in attorney’s fees from the Jones

8 preliminary settlement agreement was signed just a few weeks later.

9 On March 4, 2019, when the Court asked Landskroner during a