United States District Court, E.D. Virginia, Alexandria Division
MEMORANDUM OPINION AND ORDER
Bruce Lee United States District Judge
MATTER is before the Court on the six-day non-jury trial of
Plaintiff SecTek, Incorporated's ("SecTek")
claims against Defendant Jeanette S. Diamond ("Ms.
Diamond"), arising from SecTek's purchase of The
Diamond Group ("TDG") from Ms. Diamond, pursuant to
a Stock Purchase Agreement ("SPA"). (Dkt. 71 at 1).
Ms. Diamond also asserted a counterclaim against SecTek
involving the SPA, for breaching the implied covenant of good
faith and fair dealing.
filed its Second Amended Complaint on May 27, 2016, asserting
eight causes of action: (1) breach of contract relating to
indemnification under the SPA for the tax assessment (Count
1); (2) breach of contract relating to indemnification under
the SPA for the Texas Lawsuit (Count 2); (3) fraud in the
inducement (Count 3); (4) constructive fraud in the
inducement (Count 4); (5) breach of contract relating to
indemnification under the SPA for fraud (Count 5); (6)
securities fraud under 17 C.F.R. § 240.10b-5 (Count 6);
(7) specific performance for breach of contract under tax
indemnification (Count 7); and (8) specific performance for
breach of contract under indemnification for the Texas
Lawsuit (Count 8). See Dkt. 67.
the counts remained after the summary judgment stage. On
August 29, 2016, the Court denied both SecTek and Ms.
Diamond's Motions for Partial Summary Judgment because
there were genuine issues of material fact regarding (1) the
Tax Assessment and the options for reducing it, and (2)
whether there was a TDG office in New Mexico at the time the
SPA was executed. (Dkt. 123 at 2). The Court heard testimony
and received evidence with respect to these two issues, and
also on the issues directly connected to the Counts alleged
in the Second Amended Complaint.
are three issues currently before the Court. The first issue
is whether Ms. Diamond breached the terms of the SPA by
failing to indemnify SecTek for the New Mexico tax
assessment, the Texas civil lawsuit, and fraudulent behavior.
The second issue is whether Ms. Diamond fraudulently induced
SecTek into executing the SPA by failing to disclose and
intentionally omitting information sought by SecTek, which
concerned TDG's New Mexico gross receipts tax
liabilities. The third issue is whether SecTek CEO Wilfred
Blood ("Mr. Blood") demonstrated bad faith by
refusing to invoice a wage adjustment contract in order to
avoid paying Ms. Diamond money she was owed under the SPA.
Court enters judgment in favor of Plaintiff SecTek on Counts
1, 2, 3, 5, and 6 because the Plaintiff has met its burden in
demonstrating: (1) by a preponderance of the evidence that
Ms. Diamond breached the terms of the SPA; and (2) by clear
and convincing evidence, that Ms. Diamond fraudulently
induced SecTek into executing the SPA. With respect to Count
4, which is Plaintiffs claim for constructive fraud in the
inducement, the Court enters judgment in favor of Defendant
Ms. Diamond and against Plaintiff SecTek. Additionally, the
Court enters judgment in favor of Defendant on her
counterclaim of breach of the implied covenant of good faith
and fair dealing (Counterclaim Count 1) because Mr.
Blood's actions, with respect to tendering funds owed to
Ms. Diamond under the SPA, amount to bad faith.
non-jury case, the court must make specific findings of fact
and separately state its conclusions of law. Fed.R.Civ.P.
52(a) (1). The trial judge has a function of finding the
facts, weighing the evidence, and choosing from among
conflicting inferences and conclusions those which he
considers the most reasonable. Taylor v. Republic
Services, Inc., 968 F.Supp.2d 768, 775 (citing
Perm-Texas Corp. v. Morse, 242 F.2d 234, 247 (7th
Cir. 1957)). The trial judge has the inherent right to
disregard testimony of any witness when satisfied that the
witness is not telling the truth, or the testimony is
inherently improbable due to inaccuracy, uncertainty,
interest, or bias. Id. (citation and internal
quotation marks omitted); see Columbus-Am. Discovery Grp.
V. Atl. Mut. Ins. Co., 56 F.3d 556, 567 (4th Cir. 1995)
(stating that the fact finder is in a better position to make
judgments about the reliability of some forms of evidence,
including evaluation of the credibility of witnesses). It is
the duty of the trial judge sitting without a jury to
appraise the testimony and demeanor of witnesses. See
Burgess v. Farrell Lines, Inc., 335 F.2d 885, 889 (4th
satisfy the demands of Rule 52(a), a trial court must do more
than announce statements of ultimate fact. United States
ex rel. Belcon, Inc. v. Sherman Constr. Co., 800 F.2d
1321, 1324 (4th Cir. 1986) (citation omitted). The court must
support its rulings by spelling out the subordinate facts on
which it relies. Id. The language of Rule 52 has
not to require a court to make findings on all facts
presented or to make detailed evidentiary findings; if the
findings are sufficient to support the ultimate conclusion of
the court they are sufficient. Nor is it necessary that the
trial court make findings asserting the negative of each
issue of fact raised. It is sufficient if the special
affirmative facts found by the court, construed as a whole,
negative each rejected contention. The ultimate test as to
the adequacy of the findings will always be whether they are
sufficiently comprehensive and pertinent to the issues to
provide a basis for decision and whether they are supported
by the evidence.
Darter v. Greenville Cmty. Hotel Corp., 301 F.2d 70,
75 (4th Cir. 1962). This rule does not require that the trial
court set out findings on the myriad of factual questions
that arise in a case. Taylor, F.Supp.2d at 776
(citing Golf City, Inc. v. Wilson Sporting Goods,
555 F.2d 426, 433 (5th Cir. 1977)). The sufficiency of the
trial court's findings depends upon the particular facts
of each individual case, and no general rule can govern.
Darter, 301 F.2d at 75.
following are findings of fact made by the Court after having
an opportunity to observe the witnesses, consider the
evidence, and weigh the credibility of the witnesses. As
described in the following findings of fact, the Court finds
that SecTek has proven, by a preponderance of the evidence,
the following claims: breach of contract relating to
indemnification under the SPA for the tax assessment (Count
1); breach of contract relating to indemnification under the
SPA for the Texas Lawsuit (Count 2); breach of contract
relating to indemnification under the SPA for fraud (Count
5); and, securities fraud under § 10(b) of the
Securities Exchange Act and 17 C.F.R. §240.10b-5 (Count
6). Additionally, the Court finds that SecTek has proven, by
clear and convincing evidence, the claim for fraud in the
inducement (Count 3). With respect to Count 4, which is
Plaintiffs claim for constructive fraud in the inducement,
the Court enters judgment in favor of Ms. Diamond and against
SecTek has a remedy at law with respect to breach related to
tax indemnification (Count 7) and breach of contract related
to indemnification for the Texas Lawsuit (Count 8), the Court
DENIES SecTek's request for specific performance on Count
7 and Count 8.
Court also finds that Ms. Diamond has proved, by a
preponderance of the evidence, that SecTek is liable for
breaching the terms of the SPA for breaching the implied
covenant of good faith and fair dealing with respect to the
Piper Down wage adjustment contract (Counterclaim 1).
is a Virginia corporation with its principal place of
business in Virginia. Amended Statement of Undisputed Facts
(Dkt. 146, "Statement of Undisputed Facts") ¶
1. The Defendant in this matter is Ms. Jeanette Diamond
("Ms. Diamond"), an individual who is a resident of
Texas and the former principal and seller of TDG.
Id. ¶ 2. TDG is a company that provides
security guards at various federal government buildings in
Texas and New Mexico. Id. ¶ 3. Prior to
February 3, 2012 (the "Closing Date"), Ms. Diamond
owned 100% of the outstanding shares of TDG stock.
Id. ¶¶ 4, 21; Exhibit PI. On February 3,
2012, SecTek purchased 100% of the stock of TDG from Ms.
Diamond in a SPA. Statement of Undisputed Facts ¶ 4.
began operations in New Mexico as early as 2006. Id.
¶ 5. TDG's operations in New Mexico consisted of
providing security personnel at various federal office
buildings throughout the state, including in the cities of
Clovis, Farmington, Gallup, Santa Fe, Las Vegas, Hobbs,
Roswell, and Las Cruces. Id. ¶ 5; Exhibit D40
at 244357. Griggs Bennett ("Mr. Bennett")
was TDG's Chief Financial Officer for the period of time
at issue, and Jack King ("Mr. King") was TDG's
Director of Operations.
in fall 2007, TDG leased an office in Las Cruces, New Mexico
(the "Las Cruces Office"). Exhibit PI43. TDG signed
subsequent one-year leases in 2008 and 2009 for the same
office. Deposition of Jack King ("King Depo.") at
77:22-79:6; Exhibit P127 at SEC13275; Exhibit PI44.
Also in 2008, according to the testimony of both Ms. Diamond
and Mr. Bennett, TDG leased office space in the basement of
the federal building located on Gold Avenue in Albuquerque,
New Mexico ("Gold Avenue Office"). TDG also
provided security guards at other posts throughout New
Mexico. Exhibit D40 at SEC244357. From 2008 to the present,
TDG has had approximately 40 to 60 posts at various locations
throughout New Mexico. Id.
Mexico Gross Receipt Taxes
Aaron Brown is the bureau chief of Audit Technical Support
Services within the Audit Compliance Division of the New
Mexico Taxation & Revenue Department (the
"Department"). Deposition of Aaron Brown
("Brown Depo.") at 16:11 to 16:19. During Mr.
Brown's testimony, he explained that the state of New
Mexico levies gross receipts taxes ("GRT") on all
tangible sales and services that are sold in the state.
Id. at 30:8-10. GRT includes a state tax rate, as
well as local option tax rates established by municipalities
and counties in New Mexico. Id. at 30:6-31:13. The
local option tax rates are applied based upon the counties or
cities where the taxpayer maintains a location in the state
of New Mexico. Id. If a business has no physical
locations in the state, it pays GRT only at the state rate,
without any local option taxes added. Id.
statute, the tax rate for a taxpayer who provides services in
New Mexico is based on the taxpayer's business location.
See N.M. Stat. Ann. § 7-1-14. Furthermore, by
regulation, the Department requires taxpayers with multiple
business locations to report gross receipts by each location
as defined in the regulation. See Reg. 18.104.22.168
NMAC. A taxpayer is required to report receipts for the
location where the place of business is located, even though
services may be performed in other locations in the state.
Brown Depo. at 40:1-23.
Mexico, a business location can include each site where the
company maintains an office or, in the absence of an office,
can include locations where the company operates from space
provided at a customer location. Exhibit P99; see
also Reg. 22.214.171.124 NMAC. Regulation 126.96.36.199 further
provides that space provided by a client can constitute a
business location if the following conditions are present:
(a) the space is occupied by the provider of the service for
a period of six consecutive months or longer;
(b) the provider or employees of the provider of the service
are expected, by the purchaser of the services or
representatives of the purchaser, to be available at that
location during established times; and,
(c) critical elements of the services are performed at,
managed, or coordinated from the purchaser's location.
Reg. 188.8.131.52(G)(1) NMAC. The regulation also lists indicia
to consider in determining whether the conditions above are
(a) the provider of the service has assigned employees to the
client's location as a condition of employment;
(b) telephone is assigned for the exclusive use by the
(c) the space has been designated for the use of the service
(d) the space contains office furniture or equipment
furnished by either the client or the service provider for
the sole use of the service provider;
(e) the service provider is identified by business name on a
sign located in or adjacent to the provided space;
(f) the client or other persons can expect to communicate,
either in person or by telephone, with the service provider
or employees or representatives of the service provider at
the space provided by the client; and
(g) the contract between the client and the service provider
requires the client to provide space to the service provider.
Reg. 184.108.40.206(G)(2) NMAC. Finally, Regulation 220.127.116.11
provides the following pertinent language:
Any person meeting the three conditions as evidenced by the
listed indicia must report the receipts derived from the
performance of the service at the client's location to
the municipality or county in which the furnished space is
Reg. 18.104.22.168(G)(3). NMAC.
Ms. Diamond and Mr. Bennett testified that the Las Cruces
Office and the Gold Avenue Office subjected TDG to an
in-state tax rate with respect to New Mexico GRT, even though
TDG's New Mexico contract was managed from TDG's
corporate office in Dallas, Texas. According to the
Department, the location where a company manages contracts
and accounting books is irrelevant in determining whether a
company is subject to an in-state or out-of-state tax rate on
gross receipts. Brown Depo. at 51:7-52:21. The Court finds
that since TDG began operations in New Mexico, it has been
subject to GRT on receipts derived from its New Mexico
Managed Audit Agreement
TDG was subject to GRT on gross receipts derived from its New
Mexico operations, TDG failed to report any gross receipts or
pay any GRT to New Mexico from October 2006 through November
2008. Statement of Undisputed Facts ¶ 7; Exhibit P127,
Taxation & Revenue Department Managed Audit Option - A,
Audit Narrative ("Managed Audit Narrative") at SEC
13275. In October 2008, after becoming aware of its failure
to pay GRT on the gross receipts from its New Mexico
operations, TDG entered into a Gross Receipts and
Compensating Tax Managed Audit Agreement, Option A (the
"Managed Audit Agreement") with the Department
regarding TDG's failure to report any gross receipts and
pay any gross GRT from October 2006 through November 2008.
Exhibit P127 at SEC13275. According to Mr. Bennett, the
purpose of the Managed Audit Agreement was to bring TDG into
compliance with New Mexico tax laws.
managed audit provides a taxpayer with the opportunity to
self-report to the Department a failure to comply with New
Mexico tax law, and thereby avoid penalties and interest.
Brown Depo. at 59:3-61:19. Unlike an audit initiated by the
Department (which TDG was subjected to in 2013 and 2014 and
which resulted in the assessment at issue in this
litigation), a managed audit "Option A" is more
limited in scope. Brown Depo. at 62:2-63:6. When a taxpayer
selects "Option A, " as TDG did in 2008, the
Department simply accepts the information submitted by the
taxpayer, does not review it for correctness, and calculates
the amount of unpaid taxes based on the taxpayer-provided
December 31, 2008, TDG submitted a check to the Department in
the amount of $192, 414 to be applied to the assessment that
would result from the Managed Audit Agreement. Exhibit P127
at SEC13275. On October 23, 2009, in connection with the
Managed Audit Agreement, TDG submitted GRT returns for those
periods in 2007 and 2008 for which it failed to report gross
receipts and to pay the applicable tax on those receipts.
Statement of Undisputed Facts ¶ 10; see also
Exhibit P125. In November of 2009, based on the forms
submitted by TDG, the Department assessed $206, 880.59 in
unpaid GRT. Statement of Undisputed Facts ¶ 11. TDG was
credited $192, 414 because of the check TDG submitted in
December of 2008, and ultimately paid the full amount
assessed. Exhibit P125; Exhibit P128A at SEC13292-93.
Bennett testified that at the time the managed audit was
completed in October 2009, TDG maintained offices in Las
Cruces, and in Albuquerque, on Gold Avenue.
Offices in New Mexico
Bennett testified that in late 2009, after the managed audit,
he discussed with Mr. King and Ms. Diamond the possibility of
closing TDG's locations in Las Cruces and Albuquerque.
Mr. Bennett believed that TDG would have to pay GRT at a
higher, in-state rate unless the offices were closed. Mr.
Bennett stated that he informed Ms. Diamond of his belief,
and Ms. Diamond instructed him to close the offices. This
testimony was corroborated by Ms. Diamond herself. The Court
finds that TDG did not, however, follow through on this
supposed plan. Instead, TDG remained in the Las Cruces Office
until 2011 and closed its existing Gold Avenue Office in
favor of moving it to a different location in
Albuquerque-albeit through TDG employee Guillermo B. Chavez
("Mr. Chavez") on behalf of TDG. Mr. Chavez
testified that he was a Lieutenant Supervisor at TDG and in
late 2010 became a Captain.
respect to the Las Cruces Office, TDG began leasing the Las
Cruces Office in the fall of 2007. Exhibit P143. TDG
subsequently Dated:e-year leases in 2008 and 2009 for the
same office space. Exhibit P144; King Dep. 79:1-79:6. In July
2010, Mr. King directed a TDG employee, Wendy Eisen
("Ms. Eisen") to sign a lease in her own name for
the Las Cruces Office for use by TDG. King Depo. 81:21-83:2;
Exhibits P147, P148, P151-P155, P157-P159. Ms. Eisen, who is
Ms. Diamond's daughter, was a receptionist in TDG's
Dallas office and was not involved with TDG's New Mexico
operations. King Dep. 81:2-8. TDG reimbursed Ms. Eisen for
payments she personally made for rent for the Las Cruces
Office through January 2011. Exhibit P269.
Diamond testified that it would be unusual for her daughter
to be the tenant in name for space used by TDG and that there
is not a business reason for TDG to put a company lease in
her daughter's name. Deposition of Jeanette Diamond
("Diamond Depo.") at 58:2-8. The Las Cruces Office
remained open until January 2011. Exhibits PI57-P159. Because
it remained open, the Las Cruces Office subjected TDG to New
Mexico GRT at the in-state rate.
respect to the Albuquerque office, Mr. Chavez testified that
in December of 2009, Mr. King instructed him to lease, in his
own name, new office space for TDG. Mr. Chavez stated that he
found a location in Albuquerque at 508 XA
Central Avenue ("Central Avenue Office"). See
also Statement of Undisputed Facts ¶ 13. Ms.
Diamond's son, Stuart Diamond, who was also an employee
of TDG, assisted Mr. Chavez in opening the Central Avenue
Office by setting up phone, fax, and internet service.
December 23, 2009, Mr. Chavez paid the first month's rent
and security deposit from his own funds and Mr. King approved
his request to TDG for reimbursement of those amounts.
Statement of Undisputed Facts ¶ 14; see also
Exhibits P136-138. Thereafter, Mr. Chavez paid the rent every
month with personal checks beginning in January 2010 through
the 2012 sale of TDG's stock to SecTek. Statement of
Undisputed Facts ¶ 14. In accordance with instructions
emailed by Mr. King to Mr. Chavez (and copied to TDG's
then accountant, Susana Medina ("Ms. Medina")), Mr.
Chavez testified that he submitted copies of his personal
checks with his monthly expense reports for the "office
rent." Id. These expense reports were approved
by Mr. King and processed by Ms. Medina, who would stamp the
reports with her name. Id.
reimbursed Mr. Chavez for the monthly rent payments for the
Central Avenue Office from December 2009 to February 2012.
Exhibits P223 and P224. Several of the checks later written
by TDG to reimburse Mr. Chavez for office rent that he paid
were signed by Ms. Diamond, either by hand or with her
signature stamp. Diamond Depo. at 70:12-22, 72:9-19, 73:4-11,
76:18-20, 77:16-19. The Central Avenue Office was utilized by
TDG beginning in December 2009, and remained open through the
Closing Date. Exhibits P223, P224.
2011, under penalty of perjury, Ms. Diamond signed TDG's
Private Patrol Company Renewal Application (the "Patrol
Application") and submitted it to the New Mexico
Regulation and Licensing Department. Statement of Undisputed
Facts ¶ 16. The Patrol Application lists the Central
Avenue Office as TDG's physical New Mexico address and
mailing address. Exhibit 226 at SEC13876. After 2009, TDG
paid GRT at the lower out-of-state rate, even though it (1)
did not close the Las Cruces office until late January 2011,
and (2) maintained the Central Avenue Office throughout 2010,
2011, and 2012 until the sale of TDG in February 2012.
Exhibit P95 at NMTD 57-86.
Sought Reimbursement for Gross Receipts under Federal
Government Contracts partially based on the higher
Diamond testified that as of the end of 2009 she believed the
New Mexico offices were closed to avoid the in-state rate and
that, going forward, she anticipated that TDG would only be
paying GRT at the out-of-state rate. Diamond Depo. at
85:9-13, 86:24-87:14. TDG sought and obtained increased
compensation from the federal government based on its
representations to the Government that it paid GRT at
in-state rates for Albuquerque and Las Cruces. Exhibit
PI60-167. TDG adjustment requests submitted under the Service
Contract Act ("SCA"), 41 U.S.C. § 351 et
seq., certify that the amount sought accurately reflects
the contract adjustment for which the government was liable.
Id. GRT was a component of SCA adjustments sought by
TDG, which were submitted by Ms. Diamond and approved by the
government after 2009 when Ms. Diamond says she believed that
TDG closed its New Mexico offices and would thus be subject
to the lower out-of-state rate. Diamond Depo. 81:14-16,
82:22-24, 83:1-15, 86:13-87:14. Accordingly, the evidence
shows that Ms. Diamond sought payment from the federal
government for GRT in an amount greater than she claims she
believed TDG was required to pay to New Mexico.
Diamond's Pass-through Tax Return Compared to TDG's
Gross Receipts Tax Returns
Pass-through entity tax return for 2011 shows gross receipts
of $5, 479, 948 with respect to revenue generated within New
Mexico. Exhibit D45 at SEC 13550.
SecTek's Due Diligence for the TDG Acquisition
times relevant to this litigation, Wilfred Blood ("Mr.
Blood"), is and has been Chief Executive Officer of
SecTek. Statement of Undisptued Facts ¶ 17. Mr. Blood
testified that in August of 2011, he received a solicitation
call from a business broker engaged by Ms. Diamond to help
her sell TDG. Mr. Blood further testified that in late 2011,
SecTek began conducting due diligence regarding TDG's
business operations and financial performance. Although
everyone at TDG could answer questions during the due
diligence process, Ms. Diamond testified that she designated
Mr. Bennett as the principal point of contact for SecTek due
connection with the due diligence, Mr. Blood testified that
SecTek sent Mr. Bennett a Due Diligence Request List (the
"Diligence List"). Statement of Undisputed Facts
¶ 18. A copy of the Diligence List, with Mr.
Bennett's handwritten responses, was emailed back to Mr.
Blood by Mr. Bennett on December 16, 2011. Id.
¶ 19; Exhibit P2. Category Number 11 of the Diligence
List, titled "Physical Facilities, " requested,
inter alia, information about "[a]ll
outstanding leases, subleases, rental agreements and the like
for real property . . .." Exhibit P2 at SEC20110. The
copy of the Diligence List returned to Mr. Blood on December
16, 2011 provided no information about that item.
Id. Additionally, on December 28, 2011, Mr. Bennett
sent Mr. Blood a follow-up email regarding the Diligence
List. Statement of Undisputed Facts ¶ 20; Exhibit P004.
In that email, Mr. Bennett falsely stated that TDG's
corporate office in Dallas was TDG's "only leased
property, " and failed to disclose the TDG Central
Avenue Office in Albuquerque. Exhibit P004.
Blood testified that when performing its due diligence,
SecTek created an online data-room, accessible by all the
parties and their counsel to the SPA transaction, wherein Mr.
Bennett and others at TDG posted documents and information
responsive to the Diligence List. Mr. Blood stated that the
thirteen folders in the online data-room corresponded with
the thirteen categories in the Diligence List, and Mr.
Bennett testified that he and other TDG employees uploaded
documents and information into those folders. With respect to
Category 11.c, which addressed, as previously mentioned,
leases, subleases, and rental agreements, Mr. Bennett created
a single page document and submitted it to the data-room.
Exhibit P3 at SEC00000077. That document states "See 1
la, " referring to another page of that document which
addressed Category 11.a on the Diligence List. Id.
Referring to TDG's Dallas office, the page for Category 1
l.a says "Corporate office is leased" but does not
mention the Central Avenue Office in Albuquerque. Exhibit P3
Blood testified that in November 2011, before closing under
the SPA, he attended meetings in Dallas with TDG staff, which
included: Ms. Diamond, Mr. Bennett, Mr. King, and Ms. Medina.
Mr. Blood stated that he questioned Mr. King about TDG's
operations, including its operations in New Mexico. Mr. Blood
said he specifically asked Mr. King whether TDG had any
offices in addition to the Dallas corporate office. Mr. King
falsely stated that TDG did not have any other offices, as he
failed to disclose the existence of the Central Avenue
Office. The evidence shows that Mr. King falsely stated that
Mr. Chavez operated a virtual office in New Mexico, equipped
with a suitcase, laptop, and mobile phone, when in reality, a
physical office in Albuquerque existed.
Blood testified that he also asked Mr. Bennett about
TDG's finances and accounting. Mr. Blood stated that he
reviewed TDG's financial information, and noticed that
the rate at which TDG paid GRT was lower than he expected.
This observation, Mr. Blood noted, was based on his work
experience in the 1980s as Vice President and Controller of
DynCorp International ("DynCorp"). At the time Mr.
Blood worked there, DynCorp had physical offices in Las
Cruces and Albuquerque and, thus, was subject to GRT at an
in-state rate. When Mr. Blood asked Mr. Bennett why TDG's
GRT appeared to be low, Mr. Bennett falsely stated that TDG
had no offices in New Mexico and thus paid the lower,
out-of-state rate. Michael Smigocki ("Mr.
Smigocki"), SecTek's financial advisor, testified
that Mr. Bennett told him that TDG had no offices in New
Mexico. At no point during due diligence or prior to the
Closing Date did Mr. Bennett, Ms. Diamond, or any agent of