07/10 11:05
00:00:00 Your court resumes at session.
00:00:01 Thanks, everybody.
00:00:02 Please be seated.
00:00:03 We ready to go?
00:00:04 Yes, sir.
00:00:06 Okay.
00:00:06 Clerk, we can get the jury when you're ready.
00:00:08 I worry Ms.
00:00:21 Patterson's going to trip on that.
00:00:27 It's got a lot of give to it.
00:00:29 Daz, I just don't want to sit and see anybody fall.
00:00:31 Some tape would work.
00:00:34 No duct tape in your kit bag?
00:00:36 We were just saying that we need to purchase one of those rubber strips with a cord that can run through it so people don't trip over it.
00:00:45 Because that's a tort-laden environment in the courtroom.
00:00:47 I think it's Robertson.
00:00:50 Robertson, not Patterson.
00:00:51 Robertson, I can't.
00:00:52 It's Robertson.
00:00:53 Thanks.
00:00:53 I had it written down.
00:00:54 It was in her.
00:00:55 Yeah.
00:00:55 She's eating turkey.
00:00:58 Rutherford Robertson scale so so much but this thing's a true pastor
00:01:41 Welcome back, everybody.
00:01:42 Please have a seat.
00:01:49 All right, the jury is assembled.
00:01:51 We're continuing on with direct testimony from Mr. Kroenke.
00:01:55 Mr. Brzezinski, would you read it?
00:01:56 Thank you, sir.
00:02:00 Mr. Kroenke, as you testified before, the first contract was signed May 5th,
00:02:07 And you stated you're out there now for about four weeks or so, so this takes us beginning of June.
00:02:13 What's happening during this five week period or so?
00:02:20 As I've testified, there was very little testing being done.
00:02:25 Some.
00:02:26 A lot of stripping was done.
00:02:28 A lot of equipment repair was done.
00:02:30 A lot of road building and dikes were done.
00:02:35 The blue plant was Travis did have a chance to work on the blue plant and was making progress on it I think he was really frustrated with how the speed of the process but We're heading in the right direction on the plant and we had I think gotten to that spot where we had tested and we had discovered that That there was gold in that spot and that it was worth mining in that spot.
00:03:01 Okay
00:03:03 Let's just flash back to our original contract of 5.5.
00:03:06 We're going to put that on the screen for you.
00:03:08 And of course, you're welcome to look at the one in the binder next to you.
00:03:13 So we talked about what you're going to provide.
00:03:15 Let's look at the section that says, there it is, Randy will provide.
00:03:22 What equipment was Mr. Elliott supposed to provide you with, once again?
00:03:26 Multiple 400 class excavators.
00:03:28 Let me stop you right there.
00:03:29 Did you get those?
00:03:30 No.
00:03:31 What did you get?
00:03:35 Okay, and let's look at the very first part of that paragraph, starting with full.
00:04:05 full and unrestricted access to the Dan Creek Placermine property.
00:04:08 Were you getting that?
00:04:11 At that point, no we weren't.
00:04:18 The relationship was still being formed and I was trying to communicate to Randy that I wasn't feeling good about being directed and redirected and at that point I was feeling manipulated at multiple levels.
00:04:35 I would say no.
00:04:37 And were you communicating your feelings to Mr. Elliott?
00:04:41 I was.
00:04:41 I distinctly remember one conversation around this time frame where I flew out to the mine and we were standing very close to the spot in that picture, both Randy and I, and a pretty long conversation ensued and I was clear with Randy that I wasn't happy with where it was going, was feeling manipulated, and
00:05:05 My crew was being directed in ways that I didn't approve of and so yeah, I communicated it.
00:05:10 Okay How did you try to resolve the situation I Think that any situation can be resolved with good communication.
00:05:21 So Provided you have reasonable people on both sides of the dispute It just takes good communication.
00:05:28 You have to be flexible.
00:05:30 You have to be articulate and you have to
00:05:35 you have to have a set of priorities what what is your priority in this in this situation and I think if the proper if people are reasonable and the priorities are correct then I think usually it could be resolved through that process and at this point did you feel that you could achieve that goal I did there there was a lot of parts I like Randy's story and
00:06:04 You know, there was a part of Randy that I really enjoyed and was genuinely trying to trust.
00:06:10 So yes, at that time I felt like with the proper communication and at that point I felt like an amendment needed to happen to the contract to continue on the right path.
00:06:23 Okay.
00:06:24 Let's look at that amendment.
00:06:25 Let's bring up contract number two.
00:06:27 This is exhibit two.
00:06:28 Okay.
00:06:32 And is this the second contract that you just referred to?
00:06:35 It is.
00:06:36 Okay, and just let's scroll to the bottom just to make sure it's all there.
00:06:40 Okay, let's go back to right there is good.
00:06:49 What was your goal with this contract?
00:06:54 One of the primary goals was to articulate that mining
00:07:00 was part of the spirit of our deal.
00:07:05 And so as we got four or five weeks in, just the conversations I was having with Randy revolved around testing and there was kind of some weird stuff going on.
00:07:19 So I needed to make sure that the contract was clarified that it was more than just testing.
00:07:25 It was testing and mining to cover the expenses.
00:07:28 So that was one of the big things added.
00:07:31 Another thing at that point is it was obvious that his 400 class excavators would not, frankly, they just weren't living up to what Randy said they would, so we added the CAT 336 to the contract for things that I would provide.
00:07:49 What's the difference between a 336 and a 400?
00:07:55 CAT uses the last two numbers in the number to designate
00:08:00 The size of the machine so in this case a 336 you drop the first three So it's a 36 metric ton machine.
00:08:07 So it's just slightly smaller than a 400 400 would be designated as a 40 so Very very capable machine 360 size machine.
00:08:18 Now you mentioned expenses.
00:08:20 What are your expenses running at this point?
00:08:23 Oh At this point in the project.
00:08:24 I mean we had hundreds of thousands of dollars of expenses.
00:08:27 I mean that the expenses were going up and
00:08:31 you know tens of thousands dollars a day or or or very close to that and what was being achieved for those tens of thousands of dollars a day we had nothing at that point to really show for it we had with the exception of a place that we felt like we could mine and if we could get the blue plant running and mining in that location I was still very hopeful that that this could be a successful
00:08:59 operation and a successful contract.
00:09:03 What did Mr. Elliott receive for your tens of thousands of dollars a day?
00:09:07 We were building a brand new plant for him.
00:09:09 So all of that, I mean that wasn't going to be my plant, that was going to be his plant.
00:09:13 And what else?
00:09:15 I mean the roads, the dikes, all of the maintenance that we did on his equipment.
00:09:20 We even brought out, like on our itemized list of expenses are a bunch of stuff just for him.
00:09:27 When you mean brought out, how do you bring things out there?
00:09:31 Well, at that point, you have two options.
00:09:33 You can either drive it to McCarthy and then figure out an airplane ride from McCarthy to Dan Creek, or I flew a lot of this stuff out myself in my airplane.
00:09:46 How many times did you fly back and forth during this process?
00:09:50 I think at least 12 or 14 times.
00:09:52 Okay.
00:09:56 Did you address your mounting expenses with Mr. Elliott?
00:09:59 Yes, often.
00:10:01 I was very clear and I feel like communicated well that the expenses are racking up and we have nothing to show for it.
00:10:10 We really need to focus our efforts on making sure that we don't have this huge liability with nothing to show for it.
00:10:18 What was Mr. Elliott's response?
00:10:23 consistently told me that I'm too worried about it, to not worry about it, the expenses will get paid, and this just takes time.
00:10:31 We have to be patient and let it run its course.
00:10:40 Were you worried about the expenses?
00:10:44 Yeah.
00:10:45 I mean, I don't know if worried is the best.
00:10:48 I was concerned.
00:10:52 You know, I have an obligation to the people that I employ, and I take that very, very seriously.
00:10:58 So if the company that I'm tasked with running can't operate in a profitable way, then you don't have a company.
00:11:08 And if you don't have a company, then a lot of people are going home without jobs, and it puts people in a really tough situation.
00:11:14 So that responsibility has always
00:11:19 been very serious to me, and so in a situation like this where I can see we're losing hundreds of thousands of dollars, I was concerned.
00:11:27 Okay.
00:11:29 What other changes did you make to this contract, or were made to this contract, I guess?
00:11:40 I believe in incentivizing the folks that work for me.
00:11:48 Frank has always loved gold mining and kind of loves all aspects of it and Travis was pretty excited these two guys were two of my top guys in each respective division and to get guys at that caliber to commit to living in a Connex and traveling away from their family there has to be an incentive there has to be an incentive for them to feel good about it and to want to participate in it and and be
00:12:18 Thankful that they did and so My suggestion was to give Travis and Frank a Cut of whatever success we were able to achieve Let me turn attention to the paragraph right above Can you tell me the purpose of that paragraph?
00:12:46 So starting with equipment at... Yeah, I started to see some conversations where the expenses were getting, potentially getting combined.
00:13:07 So Randy was supporting this whole other operation, this other crew out there with fuel and equipment, and I was concerned at that point that
00:13:17 that he was going to try to charge those expenses to our operation which were very different and so I think that paragraph was put in there to clarify that it had to be expenses that were directly related to the agreement that Randy and I were operating under and under this second agreement what is the arrangement for expenses incurred by you and Mr. Elliott
00:13:43 The same that receipts and proof of the expenses will need to be provided to be considered legitimate.
00:13:49 Now, I see a handwritten note or word.
00:13:54 What is that?
00:13:56 Anecdotal.
00:13:57 Who wrote that in?
00:13:59 Randy did.
00:14:00 When?
00:14:03 I executed the contract and slid the contract over to him and he wrote that in before he executed it.
00:14:10 Did you
00:14:12 did you know what anecdotal meant or why was it what do you think it was there no I hadn't I had very little exposure to that word that word is not something I've ever seen in another contract or even in anything else I've done so listening to Randy I mean I asked him what that meant and he basically said that it's a little bit lower standard of proof that
00:14:37 He doesn't have the staff that I had to produce detailed spreadsheets and long lists of receipts so that his receipts might be itemized in a handwritten notebook or pictures of receipts.
00:14:52 That's what I was told to believe what anecdotal meant to Randy.
00:15:01 How do you keep track of your expenses?
00:15:05 I mean various ways it depends on who's the the purchaser who's spending the money so you know in some cases where someone in the field or someone that's not in the office makes a purchase they'll do exactly that they'll take a picture of the receipt or or turn in the physical receipt there's different ways that you can get it back to the office and then the office is kind of tasked with
00:15:35 putting it together in a presentable format that's easy to read and easy to see.
00:15:41 If we didn't have the office staff, then naturally those receipts would probably just go in a bucket somewhere and you'd have to figure it out later.
00:15:49 How is your crew keeping track of what they're doing out there?
00:15:53 How are they communicating that to the office?
00:15:56 So being that we're a commercial construction company, we're used to having to
00:16:02 to communicate back to a home office so we utilize software that is able to deploy daily reports so you'll see I think a lot of daily reports from Travis and you know Travis you'll see some different frustrations that he had so daily report is the primary mechanism for what is a daily report it's a report that an on-site employee would make up
00:16:29 or not make up, would produce at the end of the day that kind of outlined his activities or the activities of his crew that day.
00:16:38 And these reports are coming in from the mine?
00:16:40 Yes.
00:16:41 Did you send them with any special computers, generators, satellites?
00:16:45 How do they get this back to the office?
00:16:47 Oh, just with a phone.
00:16:48 There's an app.
00:16:51 It's very convenient.
00:16:52 And phones work at the mine?
00:16:54 Yeah.
00:16:55 Yeah, GCI had a tower just above the mine.
00:16:58 Or Verizon, maybe.
00:17:08 Let me turn your attention to what you said before, I think before our break and right after, is that there was one piece of land that you had promised.
00:17:19 Tell us about that.
00:17:22 I guess I don't understand your question.
00:17:24 Okay, I'm sorry.
00:17:25 I'll rephrase it.
00:17:27 You mentioned that you guys were able to strip a piece of land that had some promise from you.
00:17:31 Oh, yeah.
00:17:31 Can you tell us about that?
00:17:36 going back to that picture they were mining a cut and had had moderate success we were able to watch them even in that five weeks we were out there and see their daily clean outs so there was a lot of theories from Randy on the depth of the bedrock and the way that the stream had been and the the deposit that was still there so it was Randy's suggestion to
00:18:05 clear the area adjacent to where the contractors were along parallel to the creek and he felt like that would be even more potentially even more lucrative or a richer deposit than what the contractors were operating in the area that they were and did you guys start mining there yeah so we shortly after the second contract we had that whole area stripped we had done our testing
00:18:36 Our notion was that Randy was correct that there Was a good deposit there that the ground was rich and then it was worth putting the blue pant in that site So right about that time You know right there blue plant.
00:18:51 Yeah, we nicknamed it big blue because it was a it was Travis did a great job.
00:18:57 I mean I was really impressed the especially considering that the the state of the equipment He put together
00:19:04 multiple pieces into a plant that was quite impressive still had some issues and bugs to work out but it was 300% better than anything they had had out there please continue so we were pretty excited it was time to put the blue plant in in motion in the area that we had stripped and spent a considerable amount of our resources preparing and so I
00:19:34 One little disagreement that Randy and I had is we wanted to put the blue plant right down in that hole where the yellow plant was and Randy won't let us He said it had to be up You know probably 150 yards away Which I didn't necessarily agree with I felt like that was a very inefficient use of equipment hauling all of those Materials all the way to the plant when you could just put the plant right up next to the resource so but I I
00:20:02 It wasn't worth the argument, so we did what Randy directed us to do.
00:20:06 It took us several days to establish the pad and set the plan up and get the water to it in the location that Randy wanted.
00:20:14 What happens next?
00:20:15 We started mining.
00:20:19 I think we were able to run for a couple days with that material, and we were really excited by the results.
00:20:24 I think one of even Travis's daily reports used the word Eureka.
00:20:30 They were excited.
00:20:30 I mean, we were finding gold.
00:20:32 How excited were you?
00:20:34 Really excited.
00:20:35 I mean, you could finally start seeing that, you know, this was going to happen.
00:20:38 We're going to be able to follow through with this.
00:20:40 And it was a real high point, I think, in the entire exchange for us.
00:20:48 What happens next?
00:20:50 I mean, we were able to run a couple days.
00:20:52 I don't think it was a week.
00:20:53 I think it was three or four days.
00:20:55 And Randy came down to the site, said, all right, you guys have seen what's here.
00:21:02 you've you know your sampling is done you need to move somewhere else what do you mean he said we couldn't mine there anymore was that piece of land productive yeah I mean that would have paid for expenses more than paid for the expenses how much gold were you getting out of that I mean we were getting I think on the last day six ounces a day maybe and it was just getting better I mean as you the further down you get in the in the deposit
00:21:29 You know, gold is heavy, so the further down you get, the better it gets, generally speaking, and that was true in this case.
00:21:36 So what were your expectations for this piece of land?
00:21:40 My expectation was that we would be allowed to use the blue plant that we put a lot of resources in, a lot of parts and a lot of labor into, to building it, and to get that operation running that would pay us back, and then
00:21:54 peel Frank off, because Frank really liked testing, and take Frank's small plant and start going to the different areas that Randy had a desire to test and to prove up.
00:22:03 So in my opinion, both things needed to happen to allow us to be able to fulfill the contract.
00:22:13 Based on the gold that you saw coming out of that, what was your expectations if you could mine that for the rest of the season?
00:22:21 I think that if we would have been allowed to mine that the rest of the season, we would have been able to get a minimum of 1,500 ounces.
00:22:30 We had better equipment.
00:22:31 We had a better plant.
00:22:32 We had the large excavator that we needed.
00:22:34 We had dump trucks that ran every day.
00:22:35 I think 1,500 ounces would have been easy, but that would have been the minimum of my expectations.
00:22:45 So when you heard that your crew was removed from that site, what did you do?
00:22:52 upset is probably a good word immediately probably started talking communicating with Randy either by virtue of text or call I know somewhere around that time I asked for another meeting so this is probably you know we this whole thing went on there was another another part of it with the blue plant where
00:23:17 Randy insisted that we hooked the centrifuge up to it and he wanted us to run the tailings so all of the part that we stripped the overburden he insisted that we run that for a week and we didn't want to it wasn't something we want to do we didn't feel like the resource was rich enough in moving that material so we lost a week there so I'd say you know four or five weeks after this
00:23:45 It took four or five weeks for this whole thing to work out that we just described.
00:23:50 I called another meeting.
00:23:52 Tell us about that meeting.
00:23:53 The meeting was at Randy's house at the mine.
00:23:57 Kevin and I flew out there.
00:23:59 Travis and Frank were on site.
00:24:01 We all went up to Randy's house and met.
00:24:06 Pretty much laid out how we absolutely disagreed with getting kicked off that piece of property.
00:24:13 and being redirected to do nothing but test and even with the testing when we were redirected we'd test a little area and find promise and our request would be that we could set up on that spot and do some mining and he would never let us as soon as the resource was discovered he would move us and he was very strong about it to the point where my guys
00:24:43 didn't feel like they had any other option but to follow his direction.
00:24:47 Very difficult situation to try to manage.
00:24:49 So how do you manage it at this meeting?
00:24:52 So I think the meeting was late July and when we went out there and I basically laid it out for Randy and said we're not, we can't continue in this fashion anymore.
00:25:04 The expenses are getting too large and we have nothing to show for it.
00:25:12 that we need to be allowed to move the Big Blue down to that location and able to mine.
00:25:18 And that's when Randy said that if we mine that area that we'd be conflicting with the other crew, that he already had a contract with the other crew for that acreage that I knew nothing about, and that he would be breaking his obligation to the other crew if allowed to mine there.
00:25:37 Okay, so how are you going to be, were you going to be able to get any gold out of that?
00:25:43 Well, his suggestion was that we give the Big Blue plant to his other contractors and that they would pay the bill.
00:25:49 Oh, did they?
00:25:51 No.
00:25:51 And at that point, he was suggesting that we almost turn our contract into a client-contractor relationship and don't worry about the expenses.
00:26:02 There's a lot of promises again.
00:26:05 He'll pay these expenses.
00:26:07 He just wants us to go up valley and keep testing.
00:26:10 up valley what do you mean up valley I mean up to the upper parts where it's super steep and it's pretty hard to navigate let me turn your attention to exhibit 15 which we'll have shortly what's that that's a picture of Kevin on that hike that we did way up the mine so that kind of shows you the terrain you have hard rock on the
00:26:40 On the north side and on the south side you have a large scree field going all the way up to the top of the mountain that is moving every season.
00:26:50 And what did Mr. Elliott want your guys to do?
00:26:55 Every year the scree comes down in several locations and blocks the road, makes the road impassable.
00:27:01 So at that time he had high hopes for the upper mine.
00:27:07 He'd had a lot of difficulty mining it himself.
00:27:10 So he really wanted our crew, probably mostly because of Frank's abilities to excavate, to go up there and rebuild that road and establish a good trail to go back up to these areas of the mine.
00:27:23 How hard is it to build a road on, I don't know, whatever degree of slope that is?
00:27:28 What would you say the slope is there?
00:27:31 A 45 degree slope.
00:27:32 How hard is it to build a road at a 45 degree slope?
00:27:36 It's very difficult.
00:27:40 Is it dangerous?
00:27:41 It's dangerous.
00:27:42 You never know when that's going to slide down again.
00:27:47 So constructing it in a way that provides safety or a way out is critical.
00:27:53 I mean only some of the best excavators have the capacity to do something like that.
00:28:00 So at this meeting, did you address your expenses?
00:28:03 Oh yeah, we brought the whole list of expenses and at that point I was feeling very manipulated and
00:28:11 You know, I was Skeptical that I could trust Randy at his word anymore What was mr. Elliott's reaction to the expenses you presented?
00:28:22 He had some issues with the Sani But other than that he was asking Made mention of his accountant looking at expenses.
00:28:31 So he had some questions which we answered and
00:28:35 You know, he basically said don't worry about the expenses.
00:28:38 The expenses are going to be covered by the end of the year.
00:28:41 Quit worrying about the expenses.
00:28:43 Okay.
00:28:44 You said he had some issues with the Sani, the Sani being the excavator that you brought on site.
00:28:49 Yeah, the brand new midsize excavator that we brought in to run the plant.
00:28:53 Okay.
00:28:54 What were Mr. Elliott's issues with that expense?
00:28:57 Well, the Sani was plagued with issues from early on.
00:29:02 It would run
00:29:04 and then it would flash codes and go into limp mode.
00:29:10 Saney actually flew up from Georgia.
00:29:12 The dealer flew out several times trying to work through the issues with us, but it was kind of a painful process.
00:29:20 Did you ever figure out what went wrong with it?
00:29:21 Yeah.
00:29:22 What went wrong with it?
00:29:23 So the new diesel equipment
00:29:27 has a different fuel that it needs to run on.
00:29:29 So from 2012 on, or 2013 depending on the type of equipment or the size of the equipment, the EPA established new rules and so the machines made after that date have to use ultra-low sulfur diesel.
00:29:45 If they don't, the regen system on the exhaust side of the motor won't function properly and it will do exactly what it did.
00:29:55 It'll shut down.
00:29:57 Where did the fuel come from for this particular piece of equipment?
00:30:00 Well, fuel was something that Randy was going to supply.
00:30:04 Did he?
00:30:04 He did, yeah.
00:30:06 We made it very clear that we needed a tank full of ultra-low sulfur diesel to run this piece of equipment.
00:30:12 He guaranteed us that it would be there and that he bought 1,000 or even 2,000 gallons of ultra-low sulfur diesel and brought it in.
00:30:22 Later, only later did we discover that when he brought it in he got mixed up on the tanks and delivered the ultra-low sulfur diesel to Ron Whittem, poor boy copper, and delivered number one heating oil to us.
00:30:34 Will that Sandy run on heating oil?
00:30:36 No.
00:30:40 I mean, I guess it will for an hour.
00:30:45 What did it cost to fix that piece of equipment?
00:30:47 $50,000, $55,000.
00:30:48 Who paid for that?
00:30:52 Did Mr. Elliott ever reimburse you for that?
00:31:00 No.
00:31:01 He just disputed the charge for the equipment.
00:31:20 On both the first and second contract, Mr. Elliott was going to provide you with unrestricted access, is that correct?
00:31:29 Yeah.
00:31:30 Did you get it?
00:31:31 No.
00:31:37 How so?
00:31:40 As I testified, I mean, every time we got to a place where we wanted to stop and spend some time mining, we were forced to leave.
00:31:57 Under the first and second contract, Mr. Elliott was going to provide you with equipment.
00:32:03 Did he do that?
00:32:05 No.
00:32:14 At this point, what are you guys doing?
00:32:22 The whole crew is up river.
00:32:24 The blueprint is built.
00:32:26 handed over to the contractors.
00:32:31 We're up valley trying to find new areas to mine to test building these roads that go up the side of the mountain to areas that Randy had always wanted to access.
00:32:45 And we're trying to decide what to do.
00:32:49 We're trying to decide if this is becoming obvious, it's getting worse by the day.
00:32:57 But in the same sense, I get reports from Frank or Travis that we had a really good day, that we found really hopeful prospect and really good results.
00:33:08 And if allowed to mine there, this could still be good.
00:33:12 And were they allowed to mine there?
00:33:13 No.
00:33:14 I asked repeatedly to move the blue plant, to take the blue plant back into our possession that we built and to move it up valley.
00:33:21 And I was consistently met with no.
00:33:24 So who's paying?
00:33:27 Your guys do work out there.
00:33:29 I am.
00:33:30 Who's paying for your equipment?
00:33:32 I am.
00:33:34 Who's paying for their food and shelter?
00:33:38 I am.
00:33:39 Is Mr. Elliott paying for anything?
00:33:41 No.
00:33:55 What happens next?
00:34:01 I don't know the period of time that that went on up up valley but at some point my guys were really frustrated Travis especially he saw the potential I think we all saw the potential we all knew what we needed to do to be successful we had the
00:34:24 The land that I feel like was rich enough to be successful, we had the right equipment there to be successful.
00:34:31 We had the right manpower and expertise there to be successful.
00:34:35 And so it's really frustrating when you get to a point where everything is aligned, but there's just one piece that's not allowing you to realize that success.
00:34:45 What is that piece?
00:34:46 It was Randy.
00:34:48 So it's a tough situation.
00:34:51 You have hundreds of thousands of dollars at that point.
00:34:54 If you leave, you're acknowledging a failure, a loss.
00:35:00 If you stay and try to work it out, there's a chance.
00:35:03 But every day you go forward and you get the same result or a different form of manipulation, it's hard to continue forward in that fashion.
00:35:16 So I think the final decision for us is we basically said, Randy, we're going to
00:35:25 take the blue plant back and we're gonna go back down to the area that we stripped and we're gonna mine that area and that's when Randy said if you take your 336 out of the valley I'm kicking you off what did you do we left we had no other option at that point I mean there I think there was even a
00:35:58 What's the process of getting your equipment out of there?
00:36:01 We couldn't even get it out of there.
00:36:02 This was late August.
00:36:05 The river was high.
00:36:07 Again, the only time you can cross the Nizina is early spring and late fall when the water has receded to the point that it's safe to cross.
00:36:17 We had to find a place to park our equipment and leave it there for months until we could come back and retrieve it in October.
00:36:25 Were you able to retrieve all your equipment?
00:36:27 No.
00:36:28 Why not?
00:36:29 Randy wouldn't let us.
00:36:31 What do you mean?
00:36:33 So it was sometime around, there was one piece of equipment that we didn't have the capacity to remove ourselves.
00:36:42 It was a gravel plant or a screen plant.
00:36:46 And we didn't have any trailers or anything.
00:36:49 We had utilized Randy's equipment.
00:36:51 He was going to provide the mobilizations per our agreement.
00:36:55 So we were able to remove the equipment that was drivable, so our dump trucks and our two excavators.
00:37:02 And we loaded up the dump trucks with some of the smaller ancillary items that we had out there, but we had no way to move that gravel screen.
00:37:11 So when we got everything out, Randy and I were still trying to communicate.
00:37:16 and I really wanted to resolve this at one point I had set a meeting with Randy and he'd agreed to it and we had my entire staff at my office and the meeting time came and it went and 30 minutes after after we got a text Randy saying he wasn't gonna make it so I mean at that point I know no no no other recourse other than to file a lien on the property to preserve our rights and
00:37:45 Once that lien was filed, Randy would not let us back onto the property.
00:37:48 I'd asked Keith Roland to go and get our last piece of equipment, and Randy didn't allow him to do that.
00:37:54 Did you eventually get it back?
00:37:56 A year later.
00:37:59 Did you ever present your expenses to Mr. Elliott when you moved out of the mine?
00:38:05 Yep.
00:38:05 He asked for a written copy in October, and I personally hand-delivered it to the address that he asked.
00:38:12 I'm going to show you Exhibit 5.
00:38:17 It's also in your folder.
00:38:19 Can you take a look at that and we'll scroll for you and you can tell us what that is.
00:38:25 So this is a summary, expense summary of the expenses that we had that tie back to an itemized list of expenses.
00:38:41 And are those your total expenses for that mining season?
00:38:45 No.
00:38:46 What do you mean?
00:38:48 There was more expenses that came in after the fact.
00:38:50 The plant that a year later, for example.
00:38:56 Ridiculous overtime charges that we compensated Frank and Kevin for.
00:39:02 So no, this is less than that amount.
00:39:06 Well, why didn't you update that expense report as it grew and give that to Mr. Elliott?
00:39:14 It seems like constantly updating the expense report at the stage that we were at in the relationship would just offer nothing but confusion.
00:39:22 So rather than fight for nickels and a lot of money, to be honest with you, it was just worth it to us to just try to stay the course.
00:39:33 So let's look at those categories.
00:39:34 Metal and fabrication.
00:39:35 Can you explain that to us?
00:39:37 So that was all of the parts that we bought basically for the blue plant.
00:39:44 And again, included in that is different things that we bought for Randy.
00:39:48 Batteries and bearings and things that he would request that he needed, teeth for his bucket, fuel filters for his excavators.
00:39:58 It's a big long list.
00:40:01 How do you get to that number?
00:40:02 What kind of backup information do you keep as a company?
00:40:06 So we have an itemized list that Kevin, for the most part, was tasked with tracking on a daily basis.
00:40:14 And that's what you can see here.
00:40:16 It's several pages long.
00:40:18 And then we have receipts to back it up as well.
00:40:22 So we're just going to go to the bottom of that document.
00:40:40 So what is the bottom line on Exhibit 6, page 5?
00:40:45 The amount?
00:40:46 Yes, please.
00:40:47 Can you read that?
00:40:49 Yeah.
00:40:50 $59,892.33.
00:40:50 Okay.
00:40:52 And let's go back to your original document here.
00:40:58 Why is that number different?
00:40:59 Because, like I said, there was more expenses that came in after this summary was populated.
00:41:05 Okay.
00:41:07 And you also said that you have
00:41:10 other documentation beyond that let me show you exhibit 13 and this exhibit is 228 pages we're not going to look through every single page but we'll just scroll quickly and you can tell me what are these what are we looking at well these are the receipts the itemized receipts that would support the itemized list
00:41:43 So these receipts make up the line items on that six page on Exhibit 6, and then you total that into your summary.
00:41:54 Okay.
00:41:56 Let's go back to Exhibit 5.
00:42:00 Let's look at food and living expense.
00:42:03 It sounds obvious, but tell us what that is.
00:42:05 Why is it so expensive?
00:42:06 I mean, that's the weekly food that we bring out to the mine, living expenses if they had
00:42:12 You know, maybe any kind of PPE, which is your safety equipment.
00:42:18 So that would have been those items.
00:42:20 How do you get food and all the equipment out to those guys?
00:42:24 Everything has to be flown out.
00:42:26 It's more expensive than Costco?
00:42:30 Yeah, quite a bit more expensive.
00:42:31 And it's a challenge.
00:42:33 I mean, that's part of one of the logistical challenges of doing anything in the bush is
00:42:38 you know keeping keeping keeping your folks well-fed and and happy and how expensive it is to get it out there several times I was even asked with my airplane to help the other crew I remember distinctly spending a whole afternoon flying the other crews groceries from McCarthy to Dan Creek of course that did nothing to benefit us but it was it's just kind of how we operate you know if somebody has a need we try to fill it one of the other crews
00:43:07 Additionally, one of the other crew members, it was a woman with a child, and the child had gotten sick, and she needed to go to the hospital in Glen Ellen, and they asked me if I would fly her to Glen Ellen, which I happily complied with or, you know, did.
00:43:27 So, airplane is the only way to do that efficiently.
00:43:31 Okay.
00:43:32 Let's look at exhibit number seven.
00:43:35 And what is that, sir?
00:43:37 That's all those meals and Supplies and Ziplocs and everything else.
00:43:43 Now the bottom line on that document is?
00:43:45 $7,137.63 Okay, and let's go back to Exhibit 5.
00:43:47 Why is that number more?
00:43:58 probably some of that was reallocated maybe into the material and fabrication if we discovered that it wasn't in the right list of expenses we would have moved it to the proper list okay let's look at the next huge number labor what is that those are the actual hours of labor for the different folks who are out at the mine okay and how many folks were at the mine I know you talked about Travis and Frank but how many folks did you have out there quite a few so we had
00:44:28 Frank and Travis were the leads and then we had probably six other six other people including my oldest son he's he's now in the military but he spent quite a bit of time out there helping now what kind of work were these six other people doing
00:44:50 You know, they were more operating, so they'd operate dump trucks or operate the piece of equipment that wasn't as critical.
00:44:58 So once something was set up, for example, once the big blue is set up and it has a pile of material to run through and somebody knows how fast to load the plant, then Travis or Frank, once they taught somebody the speed, the feed rate, they wouldn't have to do it themselves.
00:45:17 So that's where they could hand it off to somebody who might not have been quite as skilled because it's just a redundant set of actions for that exclamator.
00:45:28 So then that would free them up to go and test again or to do something that nobody else could do.
00:45:36 Okay.
00:45:36 Let's look at Exhibit 8.
00:45:45 What is that?
00:45:47 So this is their hours and it's extrapolated out at $78 an hour.
00:45:54 How do you come up with $78 an hour?
00:45:58 That's an interesting question.
00:46:00 So $78 an hour was our rack rate.
00:46:03 Let me stop you right there.
00:46:04 What is a rack rate?
00:46:07 So it's a rate that we've established for in-town work.
00:46:13 That's published, so to speak.
00:46:14 So if somebody asks us to do a T&M job or even if we're bidding a job, that's the rate that we're plugging in for our people.
00:46:22 And it's a blended rate to include 40 hours of regular time and 10 hours of overtime.
00:46:31 And on your normal projects, it's a blended rate.
00:46:35 So what kind of employees do you have on a regular project?
00:46:39 So you always have a supervisor, a manager of some sort, whether it's a superintendent or the assistant to the superintendent, and then kind of a makeup of a crew.
00:46:50 You have several skilled guys usually, several laborers, and so most crews are five or six people large with one manager.
00:47:04 Was that the case here at the mine?
00:47:06 No.
00:47:06 I mean, we had...
00:47:08 The majority of the hours came from our two top guys Now you said the blended or rack rate the term you used is for 40 hour work week and 10 hours of overtime How much are how many hours a week are Frank and Travis working?
00:47:27 Really long hours too long 80 90 hundred hour weeks Yeah, and and and those guys are on salary and
00:47:38 And so at the end of the season, towards the end of the year, they legitimately needed to be reimbursed for all those extra hours.
00:47:49 So Travis had 373 hours of overtime on this job alone, and Frank had just over 197 hours of overtime.
00:48:00 That expense, is Frank's and Travis's overtime more than $70 an hour?
00:48:04 Oh, way, way over.
00:48:09 Did you recalculate your labor cost?
00:48:12 No.
00:48:13 Again, it just will offer nothing but confusion.
00:48:18 So no, we did not recalculate.
00:48:19 Okay, let's scroll to the bottom.
00:48:24 And what is the total hours, total rate, excuse me, total expense for labor that you expanded?
00:48:32 $211,051.66 And let's flip back to Exhibit 5, please.
00:48:43 And is that the same number on the labor rate?
00:48:48 It is.
00:48:48 Okay.
00:48:50 Equipment rental.
00:48:50 Let's talk about that.
00:48:51 What is that?
00:48:54 So part of the conversation or the contract, we agreed to supply equipment at
00:49:01 FMV fair market value rate of what you could rent a piece of equipment for in town.
00:49:07 Okay so that number is is just simply that it's a compilation of the different pieces of equipment over the The amount of months and I mean it's conservative at every at every juncture so you there's Three different components to rain equipment.
00:49:26 You can either rent it daily monthly or or weekly
00:49:31 And it's always cheaper to rent it monthly than it is daily or weekly.
00:49:38 The other thing to consider is that with monthly rentals you have a not to exceed hourly rate.
00:49:44 So generally it's $200 per month and if you go over that you have to pay.
00:49:49 None of those things applied to this.
00:49:51 They were all embraced in the most conservative way and even if it
00:49:58 Even if it didn't use the full month, we would just take half the monthly rental rate and just apply half of that amount, which is not how a rental company would do it.
00:50:08 Let's look at Exhibit 12.
00:50:14 What is that, sir?
00:50:16 That's the months and the price for each piece of equipment.
00:50:22 Again, it's conservative.
00:50:29 Exhibit number five please.
00:50:33 Going down the list, let's look at Kevin and Seth time.
00:50:36 What is that and how did you calculate that?
00:50:39 On this summary sheet this was an estimation.
00:50:43 At this point we hadn't completely calculated or itemized all of our time.
00:50:51 It was on a different sheet so these were numbers that we estimated and again we tried to estimate them in a conservative way.
00:50:58 And when you mean estimate, did you estimate them yesterday or when did you estimate them?
00:51:03 No, this would have been October when Randy was requesting the expense.
00:51:10 And do you keep track of your hours on a daily, weekly basis?
00:51:15 Yeah.
00:51:16 I mean, not necessarily a daily basis, but for sure a weekly basis.
00:51:20 Okay.
00:51:21 Let's take a look at Exhibit 10, please.
00:51:26 Can you tell the jury what we're looking at, please?
00:51:28 So this is a time log for Kevin and I and a description of what we were doing during that time.
00:51:35 Obviously, Kevin and I are an integral part of our companies, and so our time is largely bifurcated.
00:51:45 We both work 10-hour days, five days a week, 50 hours at a minimum.
00:51:52 I work more than that usually, and so does Kevin.
00:51:56 So, you know, we're having to allocate our time.
00:51:58 How much time do we spend on this project versus the other projects that we have going?
00:52:01 We had a whole other company that was still running, several of them, so.
00:52:04 Okay, so let's go through this.
00:52:15 And let's get to the bottom, okay.
00:52:19 And tell us about those numbers.
00:52:22 So right underneath the hours, so 217 hours, that's Kevin.
00:52:25 $249.5 is me.
00:52:26 Okay.
00:52:29 And please explain the other numbers.
00:52:34 So then it's populated by an hourly rate which is right underneath it for a total of $82,450 and then the 20% overhead and profit for a grant.
00:52:48 What is overhead and profit?
00:52:49 Why is it there?
00:52:50 Overhead profit is part of any contract or part of any construction company normal operating procedures.
00:52:56 So as a general contractor, you have to capture your overhead with the staff, the accounting staff and the building that you put these people up in and the infrastructure that you have to have to be able to conduct business.
00:53:10 So that's your overhead and then a very modest usually profit margin.
00:53:14 All right.
00:53:15 And so what is the total? $98,940.
00:53:21 And just, I might have missed it, 217 is you or Kevin?
00:53:26 That's Kevin.
00:53:27 And 249, 5?
00:53:29 That's me.
00:53:29 Okay, let's go back to number 5, please.
00:53:33 And how much were you requesting from Randy for your and Kevin's time?
00:53:39 Looks like 55,000.
00:53:39 That's significantly different from what we just saw.
00:53:47 Why?
00:53:52 Again, I think that we tried to treat this in the most conservative fashion as possible.
00:53:59 We were initially there to partner and to mine gold, and so we really tried to embrace that aspect.
00:54:09 We actually went through an exercise of how much we would have charged if we hadn't had the contract in place and the opportunity to mine and discover gold.
00:54:23 And so we have a rack rate for all of our heavy equipment.
00:54:27 And this is how we bill out even today.
00:54:30 I just met with a client last night that wants us to do their home site.
00:54:36 And because bidding can be elusive with dirt work, you don't always know what you have below grade, we just simply offer our rate sheet.
00:54:44 It's this much per day per piece of equipment for a 10-hour day.
00:54:49 And then if we're only there half a day, we'll only charge for half a day for that equipment.
00:54:53 And so we went through that exercise.
00:54:54 We applied that concept that we use day in and day out with hundreds of clients at this point.
00:55:01 I don't believe that this exercise that he's describing is part of the discovery.
00:55:11 I would object and just say let's move on.
00:55:14 He's got his numbers.
00:55:15 We're going to look at those.
00:55:16 But if we're going to speculate about what it could have been under different circumstances, I think that would do us a favor.
00:55:23 But the point is that this was not disclosed at any point previously that he was going to do this exercise.
00:55:27 And that's also subject to, it's similar to the motion essentially that U-Haul had filed over their damages, so.
00:55:33 Okay, all right, move it on.
00:55:53 Let's scroll that up a little bit and cut you off right there.
00:55:58 Sorry, down.
00:55:59 I apologize.
00:56:00 My up is your down.
00:56:04 Let's look at the next category, which was support flights.
00:56:10 Can you tell me about those?
00:56:13 That was the 12 flights that I made to Dan Creek and not including
00:56:20 Those are the things that I talked about flying to the hospital and the food.
00:56:24 So math wasn't a part of law school, but that looks like $2,000 a flight.
00:56:28 How did you arrive at that figure?
00:56:32 It's roughly half of what the market would charge for those flights.
00:56:36 How do you know what the market is?
00:56:37 I used to do it for a living.
00:56:38 So I own two air taxis in my previous career with the lodge, and so I have an intimate
00:56:45 knowledge of the F.A.R.
00:56:47 federal aviation regulations and what you're allowed to charge for and what you're not if you're not operating under part 135.
00:56:51 Okay.
00:56:54 What would the normal rate be if somebody wanted to rent the plane and a pilot?
00:56:59 Oh, it would be double that.
00:57:01 I mean, probably $4,000 a flight to round trip.
00:57:06 Mobilization in, mobilization out.
00:57:08 I know we've talked about it, what it entails.
00:57:10 How did you arrive at those numbers and were they consistent?
00:57:13 Well, those were estimates again.
00:57:15 We didn't have all of the information.
00:57:17 We didn't have all of the overtime information, some of which was the mobilizations, Travis's time.
00:57:24 We obviously didn't have the cost of that gravel screening a year later.
00:57:28 We had multiple trips with pickup trucks and trailers.
00:57:33 When you say multiple?
00:57:35 Like 15 to McCarthy.
00:57:38 So these were again estimations that
00:57:42 We used, in a conservative sense, to provide Randy with an itemized summary.
00:57:48 Okay.
00:57:51 And I skipped over a category, copper nugget, and it's in parentheses, so for those of us who are accountants, can you explain why it's in parentheses?
00:57:59 Because it's a subtraction from the amount.
00:58:02 What is it?
00:58:03 Why is there a copper nugget there?
00:58:05 So early in the relationship when I was out there, that mine
00:58:10 Dan Creek has a lot of copper in it and throughout Randy's history he had dug up a couple large copper nuggets and they were really in really a neat neat piece and so I'd asked Randy if I could buy one of those and he said sure and so very early in a relationship I took it home and we had agreed on a price at that time so that was something that I felt like needed to be honored
00:58:37 And can you take us through the next several categories down to the balance due?
00:58:51 So this spreadsheet populated to a total expense.
00:58:56 We assigned a very modest profit and overhead to it, which would be way under market for a Bush job.
00:59:06 There's inherently a lot more risk
00:59:08 in a job with this kind of logistics and off the road system which gave us a total due of just over $616,000 and then again I wanted to acknowledge the gold that Randy did provide and so that acknowledgement is that second line from the bottom to the penny and then everything populates to the bottom.
00:59:37 So what are you asking this jury for?
00:59:43 Our agreement was to split our expenses 50-50, and to also split the gold 50-50.
00:59:53 So I'm asking the jury to award us half of those expenses, the half that would be due to Randy,
01:00:05 And I'm asking the jury to award us a modest amount of gold that we were precluded from capturing.
01:00:13 1,500 ounces, I think, is the minimum that we would have gotten.
01:00:18 But I believe in being conservative, too.
01:00:19 So even though I think we probably would have recovered more than that, I think that's fair.
01:00:26 Now, that line, profit and overhead, 10 and 10, you're also
01:00:33 That is included in the 546, right?
01:00:34 It is.
01:00:35 So half of that is going to Randy?
01:00:37 Yeah.
01:00:38 I mean, he's getting half of the profit.
01:00:40 Yeah.
01:00:48 Now, you told me these numbers are conservative.
01:00:52 Who paid for this?
01:00:54 I paid for all this.
01:00:57 All of that?
01:00:59 Yes.
01:01:03 came out of your pocket yes including all the overtime to the guys so after you left the mine what did you leave behind what do you mean well you said that your guys built things what did you leave behind at the mine we left behind a bunch of capital projects capital improvements to the to the mine the mine was in a
01:01:34 Far better state when we left than when we got there.
01:01:50 Who gets the benefit of those capital improvements?
01:01:53 At this point, Randy.
01:01:55 Did you get any benefit from that?
01:01:56 No.
01:01:58 Did you get an expense for those?
01:01:59 Yep.
01:02:00 Is that the expense?
01:02:01 Yep.
01:02:02 No, it's not.
01:02:03 It's more than that.
01:02:09 Now, I just want to address a couple of things.
01:02:13 In opening, Mr. Campion said that you rushed in.
01:02:16 Did you rush in?
01:02:19 No, I wouldn't classify it as that.
01:02:21 I think we moved quickly, which is kind of our, that's how we operate.
01:02:26 So we're a company that's flexible and we can make decisions and move quickly when needed.
01:02:35 For example, we just finished building a
01:02:38 28,000-foot facility for an out-of-state company that wanted to have a presence in Alaska.
01:02:45 They came to us in August of 2022, I think.
01:02:55 Anyways, they didn't have a piece of property.
01:02:57 They didn't have any plans.
01:02:59 They had an idea.
01:03:02 In that time, we helped them secure the piece of property.
01:03:06 We fully designed a 28,000-foot facility and handed them the keys 13 months later.
01:03:12 Is there a difference between rushing in and moving quickly?
01:03:16 Absolutely.
01:03:16 What's the difference?
01:03:18 Rushing in is used to describe, I think, the words escaping me, but not a practical approach or a reasonable approach.
01:03:31 Not exercising caution.
01:03:32 I don't think that was the case.
01:03:34 We also heard an opening that you didn't know what it takes to get equipment out into the bush.
01:03:42 You didn't know what it takes to run this operation.
01:03:44 Is that correct?
01:03:45 I couldn't be further from the truth.
01:03:47 Why?
01:03:48 I lived in Bush, Alaska for 14 years.
01:03:52 I mean, logistics was everything.
01:03:56 Probably the most critical component of this, whether you were successful at this or not, was how well you planned for it.
01:04:05 That was one of the biggest disappointments was just how ill-prepared Everything that Randy did was I mean whether it was hauling fuel and preparing for the year or Having all this equipment ready to go throughout the winter like what we would have done We're good at logistics, that's something that we've prided ourselves on and and we've had a lot of projects that required Significant logistics, so it's something we're very good at
01:04:34 Now, Mr. Campion talked about COVID in 2020, and either he said or he alluded, I don't wish to misquote him, that you were having business issues and you were concerned about your income.
01:04:45 How did 2020 look for your company?
01:04:47 It was a great year.
01:04:48 Why?
01:04:48 Did everybody else have problems?
01:04:51 Well, not everybody else had problems.
01:04:52 I mean, I think we had the problems with COVID, so there was uncertainty for sure.
01:04:58 I don't think anybody escaped that.
01:05:01 But we already had contracts signed.
01:05:03 We were
01:05:04 Executing those contracts building on those contracts so we had a solid year already mapped out and you know we were just trying to navigate with the current political situation there was a time where we didn't know if we were going to get shut down but you know the the different entities within the government eventually said that construction is a critical infrastructure and so we we had no shutdowns and were able to
01:05:34 operate normal and ended up having a good year so how far advanced do you book business for your construction company usually I mean if projects a normal construction project is going to be 12 to 15 months you know we have several of them usually queued up and so we might be in the middle of one or another one queued up or in the design of one usually you have several months of design before that too
01:06:07 And I want to address the last thing that Mr. Campion said, that you just pulled your guys out.
01:06:11 You didn't wait out until the end of the season, and if you just waited, everything would have been hunky-dory.
01:06:17 Is that the case?
01:06:17 No.
01:06:18 We were given an ultimatum to either continue testing up the valley, or we had to leave.
01:06:28 And if you stayed, what would have happened?
01:06:32 Best-case scenario, more of the same.
01:06:34 Worst-case scenario, a
01:06:37 A situation that could have really deteriorated quickly.
01:06:40 Have you stayed for two more months?
01:06:42 What would that number look like?
01:06:43 It would have been bigger.
01:06:45 How much bigger?
01:06:47 A lot bigger, hundreds of thousands of dollars bigger.
01:06:49 Thank you.
01:06:50 No further questions.
01:06:51 Thank you, Mr. Brzezinski.
01:06:54 So we've been going an hour or so, folks.
01:06:58 I'm guessing that we're not going to finish CROSS today, but I want to go ahead and give you all a break, let everybody
01:07:04 Use the restroom, get some water, and we'll pick up across here in about 10 minutes or so, okay?
01:07:08 Is it a question we're allowed to give it to ?
01:07:20 Yes.
01:07:41 Of course.
01:08:01 Okay, jury is out, folks.
01:08:04 Take a break and we'll pick up in about ten minutes.
01:08:06 And judge, may I just point out, two hours, six minutes to the minute.
01:08:13 Okay, thank you.