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1 things, continuing losses to estate, gross mismanagement, and unexcused failure to satisfy 2 timely reporting requirements. I 1 U.S.C. section 1112(b)(4)(A), (B), and (F). 3 1. The Colafrancescos are the largest unsecured creditors in this case. a 2. The first four months of this case were wasted based upon an allegedly solid 5 $12 million offer made by "Energenox," an alleged entity held by Aaron Sandoval. It was 6 then discovered that Mr. Sandoval had recently exited from a chapter 13 case, and had no 7 assets or ability to make or contribute to the reported $12 million offer. At best, the 8 Debtor's reliance on this offer, and inducing creditors and the court to rely on this 9 supposed offer, was gross mismanagement. 10 3. At the outset of the case, the Debtor also represented as accurate a $10.25 million appraisal, filed in support of its original cash collateral motion on November 26, 1t 2009. The Debtor knew the appraisal was seriously flawed. The high value relied in large 12 part upon the steady long-term income from certain leases, including monthly income of 13 $6,600 from tenant Greenstone and $2,400 per month from tenant Tabangcura through 14 July 2011. See Phinney Declaration, Exhibit 1. In fact, these two leases did not exist. The 15 Debtor has explained that they were discussing leases with these entities at the time, but no 16 agreement was ever reached. Apparently, the appraiser was not informed of the fact that 17 his reliance on $9,000 in monthly income for the property was fictional. The problems 18 with the appraisal are confirmed by the difference between the present listing price of 19 $7.25 million and the July 2008 appraised value of$10.25 million 20 4. In July 2008, at the same time that the $10.25 million appraisal was done to 21 support a bank loan that would pay off Pacific Bank and J.W. Scott, Copperford also 22 executed a grant deed of the real property to J.W. Scott Co_-Inc, under a "Memorandum of 23 Understanding" which called for the property to be owned for the benefit of the Litchfields za (25%), Mr. Scott (40%), and Mr. Russi (35%), but without the burden of Copperford unsecured debt. 25 5. It is very telling as pointed out in the motion that the Debtor has collected 26 essentially zero in six months on its accounts receivable, which have a face value of 27 $328,395.87 and "current value" of $100,000. These are not legitimate accounts 28 129/00001 n RP/A0075902.DOC) 2