Kelley Lynch vs. Leonard Cohen: Declaration

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Kelley Lynch c/o Paulette Brandt 1754 N. Van Ness Avenue Hollywood, California 90028 Phone: 323.331.4250 Email: kelley.lynch.2010@gmail.com In Propria Persona SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF LOS ANGELES LEONARD NORMAN COHEN, an individual, LEONARD COHEN INVESTMENTS, LLC, a Delaware Limited Liability Company, KELLEY LYNCH Plaintiffs vs. KELLEY ANN LYNCH, an individual, Defendant DECLARATION OF KELLEY LYNCH I, Kelley Lynch, hereby declare as follows: 1. I am the Defendant in this case. I have personal knowledge of the Complaint Filed August 15, 2005 Case No. BC338322 DECLARATION OF Department 64 Judge Ken Freeman
matters set forth herein and, if called as a witness, could and would testify competently thereto. 2. The proof of service Plaintiffs, Leonard Cohen and LC Investments,
LLC, filed with respect to the summons and complaint in this matter is evidence of extrinsic fraud. The proof of service states, under penalty of perjury, that a registered process server had served a substituted form of service on Jane Doe, white female, 57, 135 pounds, blonde hair, black eyes, and a female cooccupant. I am not 57; do not and, in August 2005, did not have blonde hair;
- 1 DECLARATION OF KELLEY LYNCH & CASE HISTORY
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do not have black eyes; and did not weigh 135 pounds. Furthermore, no members of my household fit that description. I lived alone with my sons, John Rutger Penick and Ray Charles Lindsey, as the primary members of the Mandeville Road household, for approximately 8 years. At times, various individuals lived or stayed with us. Those individuals include His Holiness Kusum Lingpa, His Eminence Yongzin Rinpoche, His Eminence Choegon Rinpoche, His Eminence Hung Kar Dorje Rinpoche, His Eminence Dorje Trangpo, and Gesar Mukpo. None of these individuals fit the description of the Jane Doe referred to in the proof of service. No female co-occupant ever resided us and I am unaware of any individual who could conceivably fit that description. No individual in my household attempted to evade service. 3. The proof of service filed with the trial court with respect to the notice
of default and default judgment lists my former residence, 2648 Mandeville Canyon Road, Los Angeles, California, as the address of service. I was evicted, by the Los Angeles Sheriffs Department, from that residence on December 28, 2005. The eviction was video-taped. Plaintiffs were aware of this fact and were also aware of my whereabouts. In fact, Leonard Cohen has been monitoring my whereabouts since we parted ways and has even hired private investigators to keep him apprised of my whereabouts. 4. In the early fall of 2004, Leonard Cohen understood that I intend to
report his tax fraud, that I was told is criminal, to the Internal Revenue Service. He attempted to force me into a settlement agreement that would include, from what I understood, providing false testimony against his representatives and/or
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advisers. That testimony was to include my alleging that he was defrauded by his representatives and/or advisers. On April 15, 2005, and thereafter, I reported Leonard Cohen's tax fraud to the Internal Revenue Service and this case was and remains retaliation due to that fact. 5. When I asked Betsy Superfon, an acquaintance of mine, to speak to
Leonard Cohen and his lawyer, Robert Kory, about the type of deal they had in mind and asked that they fax it through to me, I was told that Kory said "this is not the type of deal you can fax." Betsy Superfon also advised me that she spoke to Leonard Cohen, in the spring of 2005, and he told her at that time that I was the love of his life, he felt remorseful and terrified, and would give me anything I wanted to enter into an agreement with him. I refused. 6. In the winter and/or spring of 2005, Boies Schiller advised me that
Cohen and Kory were attempted to engage me in criminal conduct and advised me to go wired to my meetings with them. In fact, they suggested that I ask Investigator Brian Bennett of the Los Angeles District Attorney's office to wire me for my meetings. 7. In a lunch meeting I had with Robert Kory, he confirmed that there is
tax fraud on every Cohen related entity. 8. Leonard Cohen has used extremely abusive legal tactics, including
fraudulent restraining orders, to prevent Lynch from being involved in the litigation with respect to this matter, and for other reasons.
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9.
It is my personal opinion that Leonard Cohen uses corporate entities
to evade taxes and he appears to have a history of tax and residence problems in both the United States and Canada. 10. The harm that has arisen, due to this default judgment, including
with respect to my family (who continue to be targeted over this matter), is inconceivable. My family members, and others, have been victimized by individuals either related with or aligned with Leonard Cohen. Those individuals include, but are not limited to, Stephen Gianelli, Susanne Walsh (Cohen's fan), and an individual who goes by the name "Kelly Green." They appear obsessed with Lynch, her family member and others close to her, and matters related to Leonard Cohen, the Internal Revenue Service, and Phil Spector. Investigator William Frayeh, Los Angeles District Attorney's office, advised me that Gianelli appears to be a "shady character" who may have found a sympathetic ear with Phil Spector prosecutor, Alan Jackson, about me. I have been a friend of Phil Spector's for over 30 years and was dragged into his legal issues when Investigator Brian Bennett stopped by my house in 2005 after the DA received an "anonymous tip" about my friendship with Mr. Spector. I have also been relentlessly slandered and maligned on the internet. Much of this activity relates to the fraudulent allegations and default judgment in this matter. I have reported this activity to the IRS, FBI, DOJ, Treasury, and FTB because I view it as criminal harassment, witness tampering, witness intimidation, and an outright attempt to obstruct justice. I have been relentlessly harassed over my intention to file this motion to vacate and have been threatened over this issue since
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approximately April 2010. It was at that time that I was finally able to read a handful of related documents (including the complaint) pertaining to this case online. They were posted by Stephen Gianelli. I have no idea who these individuals are and their relentless targeting of me, my sons and family, and people close to me, etc. is disturbing and alarming. 11. The prosecutor in my related 2012 trial used the default judgment
against me, fraudulently accused me of misappropriating funds from Leonard Cohen, and fraudulently alleged that the assets remaining in an unnamed Traditional Holdings, LLC account totaled $150,000.00. This does not address the assets that Leonard Cohen personally took as loans and/or advances, etc. 12. Leonard Cohen has bankrupted me. He has withheld commissions
due for services I rendered. He has defrauded me of my legal ownership interest in Blue Mist Touring Company, Inc., Traditional Holdings, LLC, and other entities. He has defrauded me of my 15% ownership interest in intellectual property. I ended up homeless over this situation. He has gone to extraordinary lengths, targeted my sons, falsely accused my elderly parents and sister of various things, relentlessly slandered and maligned me, and has used perjury, fraud, and concealment to obtain orders, judgments, and verdicts. He has also used the news media skillfully to twist, distort, and manipulate the truth. 12. All declarations and exhibits attached to the motion to vacate are
incorporate herein and made a part hereof.
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I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct to the best of my knowledge. Executed this 2nd day of August 2013 at Los Angeles, California.
Kelley Lynch, In Propria Persona
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EXHIBIT B CASE BACKGROUND They already have taken similar action to "crush" others who stand in the way of their scheme, and thus their threats against Greenberg are credible and serious. INTRODUCTION Kelley Lynch, Leonard Cohens personal manager for approximately 17 years, is a party to the above-entitled action. She was not served or notified of the summons & complaint in this matter and the proof of service is evidence of extrinsic fraud. On May 12, 2006, a default judgment (that she was neither served nor notified of) was entered against her. Her trial, related Case No. 2CA045539, relates to this matter. Ann Diamonds article, written for Rolling Stone, provides an overview of what has generally occurred since Lynch and Cohen parted ways in the fall of 2004. Once this article was published on the internet, Cohen threatened the journalist with litigation and made an extraordinary flight from Europe (where he was in the midst of a tour) into Boulder, Colorado to obtain yet another fraudulent restraining order against Lynch. Cohen, according to his testimony in Lynchs 2012 trial, evidently believed Lynch might attend his concert. The Boulder hearing took place on September 2, 2008. Cohens concert was not
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scheduled for at least another 9 months - July 2009. Clearly, the extraordinary flight proves that there was more at hand than the lame excuse that Lynch might attend his concert. There was zero possibility of that in any event. Leonard Cohen has used abusive restraining orders against defendant and has availed himself of the legal system in order to obtain orders, judgments, and verdicts via fraud, perjury, and concealment. It is Lynchs opinion that all of this was done in an attempt to obstruct justice. There is also no doubt that this activity was undertaken to silence Lynch; conceal what has actually occurred; prevent her from requesting information she requires to file her 2004 and 2005 federal and state tax returns; prevent her from amending those returns that the default judgment fraudulently altered; undermine her credibility and discredit her; and, for other reasons. Cohen has used fraudulent restraining orders to prevent her from participating in litigation matters. Leonard Cohen has also used the present case to retaliate against Lynch for reporting his tax fraud, that she was told is criminal, to the Internal Revenue Service. The IRS is raised in Robert Korys August 18, 2008 letter to Ann Diamond: A review of your posting reveals that it contains numerous false statements regarding Mr. Cohen, some of which allege that Mr. Cohen has engaged in criminal conduct, including statements that imply that Mr. Cohen had engaged in tax evasion and tax fraud. The letter then addresses some of the extraordinary actions Cohen has taken since Lynch report his tax fraud to the IRS. The activity extends to quite a number of individuals and entities. http://www.scribd.com/doc/57416024/ann-diamond-defamatory-publications
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Thursday, July 3, 2008 Whatever Happened to Kelley Lynch by Ann Diamond http://www.scribd.com/doc/57415959/Ann-Diamond-Article-Corrected-by-KLLeonard-Cohen-Criminal-Cover-Up In June 2005, Neal Greenberg, Cohens investment and financial adviser, filed a lawsuit against Leonard Cohen and his lawyer/manager, Robert Kory. Allegations of blackmail, insurance fraud, conspiracy, and extortion were raised: The claims in the case -- on all sides -- get even more disturbing. The lawsuit alleges that Cohen and Kory employed 'tactics to terrorize, silence, or disparage' Lynch if she didn't take Cohen's side against Greenberg. One of the suit's wildest-sounding charges accuses the pair of instigating an incident in which the Los Angeles Police Department SWAT Team descended on Lynch's home and arrested her in her bathing suit; later, Lynch was involuntarily admitted to a psych ward and drugged. Lynch supplied documents and information to support Greenberg's case against Cohen and Kory. http://www.westword.com/2005-06-30/news/hellalujah/full/ On Aug 17, 2005, an article entitled A Devastated Leonard Cohen appeared in Canadas MacLeans Magazine. This article was clearly coordinated with the filing of Cohens lawsuit against Lynch. This article highlights the sordid tale involving a broke Canadian music icon, lawsuits that were flying, allegations of extortion, SWAT teams, forcible confinement, betrayal, and, tax troubles. http://www.macleans.ca/article.jsp?content=20050822_110877_110877
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What most of these articles failed to mention is the fact that Lynch had reported the allegations of Leonard Cohens criminal tax fraud to the Internal Revenue Service on April 15, 2005 and Cohen retaliated against her after spending months attempting to force her into a settlement that would presumably involve testifying that his advisers defrauded him, fraudulently induced him, and so forth and so on. Leonard Cohen was by no means broke. In the fall of 2004, he received $1 million advance for the delivery of his studio album, Dear Heather, was contractually committed and planned to tour; pursued a multi-million lithograph deal Lynch had been negotiating; was planning to release Book of Longing, and, had many other lucrative opportunities. Cohen also had the option of repaying the loans and/or advances he took from Traditional Holdings, LLC (the alleged retirement account) and other entities. The MacLean's article addressed two intellectual property transactions and the use of corporations and/or trusts to avoid an upfront tax hit: From the first sale, about $5 million was transferred to trusts that Greenberg had been enlisted to manage and that would protect Cohen from an upfront tax hit. It also raises issues related to Cohen and Korys attempts to enlist Lynchs participation in their plan to go after Cohens advisers: Greenberg's suit alleges that when Lynch refused to participate, Kory and Cohen vowed to crush her. It goes on to say their tactics to terrorize, silence, or disparage Lynch included threatening her that she would go to 'jail. But he ran into a glaring, immediate problem: had he done nothing, he would have legally been responsible for the funds that had gone missing. And on that money, he'd owe millions in taxes, a
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sum he no longer had. This addresses Leonard Cohens motive. No funds had gone missing, including Leonard Cohens millions in loans and/or advances that he has conveniently concealed. These articles continually raise Leonard Cohens tax troubles which are the driving force behind his targeting of Lynch. On August 17, 2005, MacLeans ran a companion interview, entitled Up Close and Personal: Cohen's Lifestyle Seems Anything But Lavish, written by awe-inspired journalist, Brian D. Johnson: Through interviewing him over the years, I've developed a bit of a relationship with Leonard Cohen. That night he told me what he'd hinted at months earlier in an email -- that he'd been stripped of most of his assets, and was mired in a legal battle with his money managers, who would accuse him of extortion. He said it would get nasty and personal, and that his name would be dragged through the mud. Cohen moved offensively and has attempted to throw Lynch under the proverbial bus. http://www.macleans.ca/culture/entertainment/article.jsp? content=20050822_110882_110882 Cohen, a man with access to the news media, is an expert at manipulating the press and dazzling adoring fans, sycophants, and others. Pico Iyer, who interviewed Cohen for the Shambhala Suns September 1998 edition, describes some of the tricks Cohen uses with the news media: I could see the coyote trickster whos been working the press for three decades or more. I felt disconcerted, almost, by his very niceness, his openness, his courtesy, as he continually kept thanking me for being kind enough to come here, and tended
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to my every need as if I were the celebrity and he the poor journalist and referred to what youre nice enough to call my career. I felt there was something excessive to his modesty, his unusually articulate and quick-witted sentences bemoaning his lack of articulateness and sharpness (Im sorry. You get this kind of spaciness at moments in retreats. They say zazen brings shortterm memory loss.), his claiming not to know, after twenty years in L.A., how long it takes to drive to Santa Barbara. These are the tricks of Cohens trade and they work well in courts of law, with law enforcement, jurors, and others. People are usually spellbound by Cohens exceedingly studied courtly good manners. He uses manners and props to disarm people. Some of those props include: popsicles, tuna fish sandwiches, a stick of incense, his modest abode, worry beads, matzo ball soup, Zen robes, expensive liquor, his valise, the word darling, and Joshu Sasaki Roshi. TAX FRAUD Because if they ruin her credibility, well, that helps Mr. Cohen. And they have done everything in their power to hurt Ms. Lynchs credibility. (RT 45) They wanted to go and they went and tried to hurt her economically and to put a restraining order so they couldnt have any contact during the litigation. That was their intent. That was their purpose. (RT 45) What Leonard Cohen actually understood in the fall of 2004 was that his personal manager, Kelley Lynch, was reporting his tax fraud to the Internal Revenue Service. Lynch worked as Cohens personal manager (and in other capacities although never as his business manager) since the death of legendary
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music industry manager and attorney, Marty Machat, in April 1988 until October 21, 2004. Having suspected Cohen of tax evasion and other illicit activity, Lynch naively informed a number of individuals that she intended to report Cohens tax fraud (that she was told is criminal in nature) to the IRS and provide them with evidence supporting the allegations. This decision followed inconceivably bizarre conduct on the part of Leonard Cohen and his representatives. Much of the extremely aggressive tax planning and evasion is documented in letters, emails, documents, and memoranda. In September 2004, Lynch hired accountant Dale Burgess who referred her to the law firm of DiMascio & Berardo. Lynch believed that Leonard Cohen had committed tax fraud; used her egregiously as an unwitting pawn; employed a variety of techniques to evade taxes; had a history of such conduct dating back until 1977 or earlier; and, appeared to have tax and residence problems in Canada as well as the United States. In fact, one of Canadas national treasures is unable to reside in Canada. In mid-October 2004, Cohen (who had flown in from Montreal) and Lynch met privately on a number of occasions. He appeared hysterical and demanded that Lynch hand over the corporate books and records for Blue Mist, LC Investments, LLC, and Traditional Holdings, LLC. Lynch refused. Cohen also demanded that Lynch assist with the unwinding of these entities and offered her anything she wanted. The issues Lynch addressed with her lawyers, accountant, and Leonard Cohen are detailed in DiMascio & Berardos October 27, 2004 letter to Richard Westin c/o the University of Kentucky Law School:
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Re: Kelley Lynch, Traditional Holdings, LLC; LC Investments, LLC; Leonard Cohen, et al. Dear Mr. Westin: This law firm has been retained by Kelley Lynch to represent her interests in connection with various corporations including, but not limited to, Traditional Holdings and LC Investments, LLC. We will be working with Dale Burgess, Ms. Lynchs CPA, to reconcile and correct Kelley Lynchs status as a corporate owner with significant tax liability and to unwind Ms. Lynchs involvement in Mr. Cohens businesses. We note that you are the architect of Mr. Cohens business structures and have had significant involvement with the above-referenced limited liability companies. It is our understanding that you will be in Los Angeles, California, the weekend of October 30 through October 31, 2004 and we would like to meet with you while you are in town to discuss the structure of the above-referenced companies, significant transactions and what we understand to be your position on Ms. Lynchs current tax liability. It would be appropriate to meet in our offices on Saturday, October 30, 2004 at 10 AM as we believe we have a good portion of the corporate documents in our offices. If you have any corporate documents that belong to either of the companies, we would appreciate it if you would bring these document when you travel to LA. In addition, we have been advised that Mr. Cohen has issued numerous threats to Ms. Lynch and members of her family within the past 24 hours. We also understand that Mr. Cohen has tried to force himself into Ms. Lynchs office this morning, even though Ms. Lynch is not in her office. Advise Mr. Cohen to immediately cease threatening Ms. Lynch and her family members and to either call this office or have his lawyer call if there are any personal items in Ms. Lynchs office that he would like to retrieve. Please contact this office at your earliest convenience so that we can discuss the contents of this letter. We look forward to hearing from you. On April 15, 2005, Lynch reported Cohens tax fraud to Agent Bill Betzer of the IRS. Agent Betzer initially advised Lynch to bring the allegations of fraud into the IRS with a lawyer. He then advised her to phone the IRS Fraud Hotline which she did. Lynch also reported the tax fraud via an IRS website and, due to
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the high profile nature of this matter and the aggressive and abusive tactics being used against her, phoned the Internal Revenue Service in Washington, DC. After receiving a confirmation from the IRS of her complaint, in or around July 2005, Lynch began emailing the IRS Commissioners Staff evidence. She also began documenting the destruction of her life, targeting of her family and others, in emails for the IRS, FBI, DOJ, Treasury, FTB, Doron Weinberg, Dennis Riordan, and others. A 1977 memo, prepared for Leonard Cohen, addresses tax and residence strategies. The memo argues that Cohen did not have to pay income taxes in Canada, Greece, or the United States; cautions him that his stays in the U.S. should be conducted under a non-resident H-1 visa; instructs him to funnel royalties and performance income from outside the U.S. into a tax haven country; advises him to continue to reside outside of Canada while accomplishing acts which establish Canada as his domicile; and, appears to be a document that is nothing other than a blatant blueprint for planning and committing tax fraud and evasion. Leonard Cohen Tax Planning Memo to Bill Dubey/Elmer, Fox, Westheimer & Co., CPAs from Ken Fratco dated August 22, 1977 Basis for Taxation Leonard Cohen has ties with several jurisdictions which could serve as a basis for taxing income earned by him. These jurisdictions are Canada, Greece, and the United States. I would like to set-out the basis for taxation in each of these countries. Canada taxes the world-wide income of its residents. Canada defines residents as those individuals physically residing in Canada. Greece also taxes the world-wide income of its residents; however, the Greek law defines residents as those individuals who have an actual dwelling place in Greece and who are domiciled in Greece. The U.S., on the other hand, taxes both citizens and
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residents on their world-wide income. The U.S. definition of residents is much broader and more encompassing than that of Canada or Greece. Any individual who resides in the U.S, for other than on a temporary basis or any individual who considers himself a domiciliary of the U.S., whether or not physically present in the U.S., is considered to be a resident of the U.S. All three countries tax income from a source within their respective jurisdiction paid to non-residents; there are, however several exceptions established by treaty. Because of the facts of Leonard Cohens case, a closer examination of what is considered U.S. source income and how it is taxed is necessary. Any compensation paid by a U.S. corporation is considered to be U.S. source income. If that compensation is paid in connection with the performance of personal services in the U.S. by a non-resident alien then such income is considered to be effectively connected with a U.S. trade or business and is taxed at the graduated income tax rates which apply to citizens and residents (IRC Sec. 871 (b)(1)). If the non-resident alien does not perform personal services within the U.S. then such compensation paid will be taxable at a flat 30% rate (Reg. 1.864-3 and IRC Sect. 871(a)(1)). Recommendations Leonard Cohen, while remaining a Canadian citizen, should continue to reside outside of Canada. He should, however, from time to time, accomplish acts which establish Canada as his domicile - the place he truly considers his home. Such actions, of course, must not include actually staying in Canada for other than temporary, short-term trips. Because Canada only taxes individuals who are residents, continued citizenship and domicile will not subject him to Canadian taxes and will aid him in preventing taxation by the U.S. or Greece on world-wide income. Because the U.S. taxes non-resident aliens on U.S. source income and because compensation paid from a U.S. corporation is considered U.S. source income, only royalties and performance income from services performed in the U.S. should be funneled into the U.S. corporations. Royalties and performance income from sources outside the U.S. will not be taxed by the U.S. as long as Leonard Cohen remains a non-resident alien and as long as such income is not funneled through the U.S. corporation. Leonard Cohens stays in the U.S. should be continued under a non-resident visa (H-1 qualifies as such) and should be temporary in nature. Temporary residents, even of long duration, merely for the purpose of transacting business or engaging in employment is not sufficient to establish residency. Hutchins v. Commissioner, 8 TCM December 18, 178. It should be noted, however, that residing in the U.S. for one year sets up a presumption of residency. Even though such presumption may be rebutted by proper evidence Leonard Cohens
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stays should be monitored and should not extend to a year. Income from royalties and performance income outside the U.S. should be funneled through a corporation incorporated in a tax haven country. This will prevent taxation by the U.S. and will most likely limit withholding by other countries where royalties and performance income are earned. As far as Greece is concerned, so long as Leonard Cohens domicile can be established for being elsewhere, there is no basis for taxing any income other than from Greek sources. The fact that Leonard Cohen maintains a house in Greece and will, from time to time, stay in Greece will not in and of themselves cause taxation. His trip to and ties to Greece should be reviewed periodically to prevent any presumption of domicile. While Leonard Cohens 1977 tax planning memo advised him that his stays in the U.S. should be continued under a non-resident visa (H-1 qualifies as such) and should be temporary in nature, a review of his U.S. immigration history shows that he entered the U.S. as a permanent resident on January 17, 1970. After Marty Machats death in 1988, Cohen planned to return to Canada as a resident. He abandoned his green card in 1989 and began carefully documenting the lengths of his stays in both the United States and Canada. In 1991, due to the residence and tax issues Cohen faced in Canada, Cohen began taking the steps necessary (first through documents filed by Stranger Music as his employer) to become a U.S. resident once again. On June 1, 1992 Cohen applied for permanent residence with the U.S. Department of Justice. On January 5, 1993, Cohen filed an Abandonment of Lawful Permanent Resident Status form and formally surrendered his 1970 green card. Howard Kushner, an immigration attorney in Niagara Falls, confirmed that Cohen had once again obtained Lawful Permanent Resident Status in the United States. The stamp in Cohens passport was dated July 4, 1993.
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In the fall of 1988, Leonard Cohen asked Kelley Lynch to consult her brother-in-law, Canadian attorney F. Van Penick, about his residence and tax status in Canada. Thereafter, Cohen frequently had Lynch consult Penick about sensitive matters, including but not limited to, his concern about Canadian statutes of limitations involving sex with a 15-year old minor; Freda Guttman and Ann Diamonds conversation about Lorca Cohens public statements (while attending Concordia University) that her father molested her; and, the absurd scenario whereby Cohen demanded a U.S. tax credit in exchange for the donation of his body of work to the University of Toronto. Van Penicks October 16, 1988 letter addresses the tax and residence issues that concerned Cohen at the time: Letter from F. Van Penick to Kelley Lynch dated October 26, 1988 re. Leonard Cohen's Canadian Residence & Tax Issues Dear Kelley: It doesnt speak too well of me to have my first communication with my sister-inlaw to be a starch-fronted exposition on Canadian residence (and I hope you will let us make amends when you visit Halifax), but here it is: 1. Residence may have different definitions for different purposes; 2. For Income Tax purposes, if you are resident in a country which levies Income Tax, then generally your tax is calculated on your world-wide income from all sources. If you are not, you will be taxed only on the income derived from that country, for example, capital gains on the sale of real estate in that country or evidence income from a corporation resident in that country. Accordingly, the residence status is crucial; 3. Residence is not a defined term but will be determined as a matter of fact, ultimately by a judge; 4. Factors in the residence equation are: a) location of dwelling places; b) location of spouse and dependents; c) location of personal property and social ties; d) intention to be resident in a particular country, shown, for example, by renting out your home (not selling it) and retaining your resident club memberships when you move to another country; 5. Everyone must be resident somewhere and you can have
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more than one residence; 6. These principles are applied fairly consistently in most countries; 7. If you leave a country in which you were resident, it is generally by a more difficult test that your loss of residence will be determined; 8. If you leave a country in which you were resident but maintain an intention to return, you will continue to be resident in that country throughout your absence; 9. The only good news in all of this is that return to a country in which you were, but have ceased to be resident, does not automatically mean that you must have intended to return during your entire absence. These are general principles and should only serve as a guide to anyones actual reference. In an effort to emphasize this point, to encourage future work for lawyers and accountants and to protect ourselves against undesirable claims, we caution you to seek and obtain specific professional advice based on full knowledge of all relevant residence criteria. Babs, Douglas, Emma, and I look forward to meeting you and Rutger, and I hope you will let me know if I can bore you further on the question of residence. Yours very truly. F. Van Penick According to Cohen, the risks he faced with respect to Canadian tax and residence issues were the fact that he owned a home in Montreal, Quebec; owned numerous properties in Montreal; maintained a Canadian bank account; had a paid assistant (Lee Taylor) in Montreal; was a member of Congregation Shaar Hashomayim in Montreal; was a member of SOCAN, the Canadian performing rights society; had grave concerns about being viewed as a Canadian roster artist by Sony Music; was one of the only artists on the Sony roster who was not signed to his home country (Canada); and had other badges of residency. Cohens high profile awards from the Canadian government and recording industry also became increasingly problematic: 1989 nominated for Juno Awards for Canadian entertainer and male vocalist of the year; 1991 appointed Officer of the Order of Canada; 1991 inducted into the Canadian Music Hall of Fame; 1991 nominated for a Juno Award for songwriter of the year;
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1992 honorary degree from McGill University, Montreal; 1993 June Award for male vocalist of the year; and, the 1993 Governor General Award for Lifetime Artistic Achievement. The Order of Canada recognizes the achievement of outstanding merit or distinguished service by Canadians who made a major difference to Canada through lifelong contributions in every field of endeavour, as well as the efforts made by non-Canadians who have made the world better by their actions. Membership is thus accorded to those who exemplify the order's Latin motto, taken from Hebrews 11:16 of the Bible, desiderantes meliorem patriam, meaning they desire a better country. Cohen decided that returning to Canada was simply too risky. According to Cohen, the deciding factor in his decision to reapply for a U.S. green card was the fact that Canada Revenue asks where you paid your prior years taxes while Internal Revenue Service does not. Marty Machats death in April 1988 afforded Cohen the ideal opportunity to unwind his residence and tax issues. Cohen, who has a long history of falsely blaming advisers and others, shamelessly began bad-mouthing Mr. Machat after his death. He has a long history and pattern of falsely accusing people, particularly his representatives, of ripping him off in an attempt to breach contracts. In fact, Cohen appears to have defrauded Steven and Marty Machat, Phil Spector, and possibly record producer Bob Johnston. http://www.scribd.com/doc/57415308/Kelley-Lynch-s-Conversation-With-StevenMachat-Leonard-Cohen-and-Phil-Spector Immediately following Mr. Machats death in April 1988, Leonard Cohen and his representatives began addressing many problematic issues: closing off-
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shore holding accounts (through which royalty income was funneled); resolving issues with respect to Cohens numerous social security numbers; addressing the allegedly inadvertent assignment of certain recording contracts to Leonard Cohen Productions, Ltd. (Nevada) with Sony; purchasing his partners shares of a residence located on Tremaine Avenue, Los Angeles, California; creating an entity known as Leonard Cohen Productions, Inc. (Delaware) in June 1988; carefully documenting his stays in both the U.S. and Canada (so as not to stay longer than 6 months in either country while he and his representatives sorted his residence/tax problems out); changing the name of Leonard Cohen Productions, Inc. to Blue Mist; changing the name of Stranger Music, Inc. to Leonard Cohen Stranger Music, Inc.; registering Blue Mist to do business in California; enrolling his daughter in a high school in Los Angeles; encouraging his son to relocate to Los Angeles; ultimately closing his Swiss bank account; and, establishing a high-profile media relationship with Mt. Baldy Zen Center in California; etc. While these details were made apparent and evident to Lynch over the 20 plus years she knew and worked with Cohen, as of 1993, he seemed to temporarily resolve his U.S. and Canadian residence/tax problems. In or around 1996, that would change when he, Neal Greenberg, and Richard Westin met and decided to work together. As of 1991, Cohen had abandoned his green card, decided not to return to Canada, planned to re-apply for U.S. permanent residence status, and was forced to confront problems involving his numerous social security numbers and
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previously filed U.S. tax returns. Cohens accountant, Burt Goldstein, resolved this dilemma with the Internal Revenue Service. Cohen testified at Lynchs 2012 trial that he didnt realize an individual could change their social security number and yet he personally had done so. Letter from Ken Eisner/Burton Goldstein to Kelley Lynch dated April 19, 1991 re. Leonard Cohen's Social Security Number & Tax Returns Dear Kelley: I visited the Internal Revenue Service this morning and discussed with them the quickest method to resolve Leonard Cohens social security number problem. They assured me that if Leonard signs this Power of Attorney and sends me a copy of his social security card that I can resolve this matter with a letter to the Philadelphia office of the Internal Revenue Service. If I provide the new number [614-xx-xxxx] we can correct both the returns that you sent me and prior years returns that employed the social security number 225-xx-xxxx. Please send me the signed Power of Attorney and card as soon as possible. Thank you for your assistance. Very truly yours, BURTON GOLDSTEIN Kenneth J. Eisner Over the years, Lynch wondered about Cohens tax and residence problems. He always had a plausible explanation or excuse. When Cohen, Greenberg, Westin, and others, began discussing extremely aggressive tax planning techniques, Lynch once again became concerned. In the fall of 2004, after hearing that Lynch was reporting his tax fraud to the IRS, Cohen began to scheme. He falsely accused Lynch of a number of things including having sex with Oliver Stone, Richard Rutowski, and his tax lawyer - in a clear attempt to stir up a custody matter with her younger son's
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father; attempted to force her into a settlement agreement that involved unwinding certain entities and probably lying about others; offered her palimony (50% community property); attempted to engage her in criminal activity including what she believed to be fraud, extortion, conspiracy, insurance fraud, and obstruction of justice; and, has used utterly abusive legal tactics against her that have permitted him to obtain court orders, a default judgment, and a verdict through the use of fraud, perjury, concealment, and lies. All of this was done in an effort to conceal his long history of wrong doing. Cohen has publicly noted that his reason for legally pursuing Lynch was his major tax hit. Cohen has also used highly abused restraining orders in an attempt to silence Lynch; prevent her from addressing litigation and business matters; prohibit her from addressing matters related to various corporate entities; prevent her from requesting IRS required form 1099 for the years 2004 and 2005; prohibit her from asking that illegal K-1s issued by LC Investments, LLC, an entity wholly owned by Leonard Cohen, be rescinded; prevent her from requesting a complete and proper accounting; obstruct her demands for payment for work she has done; advise Cohen to cease and desist with respect to the slander, defamation, and false statements he continues to disseminate, etc. The restraining orders now prevent Lynch from addressing many of these issues and have placed her in a position where she is unable to file her 2004 and 2005 federal and state tax returns or amend others wrongfully altered by the default judgment. The entire situation has exposed Lynch to blackmail, extortion, false accusations, slander, defamation, and threats.
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When Cohen retaliated against Lynch by filing the complaint in the instant matter, he clearly understood that there was a pending proceeding in the U.S. District Court for the District of Colorado: Greenberg & Associates, Inc., et al. vs. Leonard Cohen, et al., Civil Action No. 05-V-1233-LTB-MJW. Greenberg & Associates filed suit against Cohen and his lawyer, Robert Kory, raising allegations related to extortion and conspiracy. Lynch was a witness to matters involving Cohen and Korys attempts to extort monies from Greenberg and Westin, possibly others, and their insurance companies. Lynch was deeply disturbed when Robert Kory personally advised her that Arthur Indursky, Don Friedman, Stuart Fried, and Greg McBowman committed fraud in the inducement. Nothing could be further from the truth. At the time Cohen filed his proceeding against Lynch in Los Angeles, he was aware that she had reported his tax fraud to the IRS and State of Kentucky Revenue Cabinet. Greenbergs lawsuit against Cohen was on June 5, 2005 in the Boulder County Court. The Complaint in the instant matter was filed on August 15, 2005, nearly two full months later. Greenbergs lawsuit was removed to the U.S. District Court in Denver on July 1, 2005. The complaint was subsequently amended on August 2, 2005 and May 23, 2006, following the entry of the default judgment against Lynch. The following article appeared in Billboard Magazine on or around March 3, 2006. Based on this, and other inaccurate accounts repeated in the news media, Lynch (who was homeless at the time) believed that the default judgment had been entered against her. Lynch did not siphon any monies from Cohen's
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accounts; his nest egg was not reduced to $150,000; Scott Edelman and Robert Kory refused to take Lynch's calls during litigation; Cohen never made arrangements with Lynch to pick up the boxes she stored as a courtesy for him (including after her lawyers wrote Westin that Cohen should contact them regarding any belongings he would like to arrange to pick up); and, Lynch did not hire Westin or any other representative of Cohens. Leonard Cohen personally hired both Neal Greenberg and Richard Westin. He then proceeded to wrap them in attorney/client privilege with him, essentially leaving Lynch in the dark as to their activities and ulterior motives. Lynch remains unaware of the details of the mediations between Westin and Cohen and the settlement that reached in this matter. The details of that settlement agreement, which may involve further false accusations against Lynch, are clocked in secrecy. Leonard Cohen evidently obtained a substantial settlement from Westin. Billboard Magazine - Cohen's Ex-Manager Ordered To Pay $9.5 Million: Singer/songwriter Leonard Cohen may never see $9.5 million a court ordered his former business manager to pay after she failed to respond to allegations of stealing from his savings, Cohen's attorney said yesterday (March 2). A California Superior Court judge granted Cohen, 71, the default judgment Monday against Kelley Lynch in response to a lawsuit alleging she siphoned $5 million from the musician's personal accounts and investments. By late 2004, the suit alleges, his nest egg was reduced to about $150,000. Cohen, known for such reflective songs as "Suzanne," may never be able to collect, according to his attorney, Scott Edelman. "She's hard to get in touch with. I don't know where she lives now, and I don't have a phone number for her," Edelman said. "We don't know what she did with the money ... But she knows what's going on because she leaves me phone messages at all hours." Lynch could not be located for comment. Another defendant in the suit, tax professor and lawyer Richard Westin, reached an out-of-court settlement with Cohen on Feb. 13, details of which were not revealed. Lynch allegedly hired Westin to help defraud Cohen. Westin's attorney did not immediately return calls for comment. "Leonard is sad that this whole thing took place, but glad that this leg of the litigation is completed." Edelman said. "He would prefer to spend his time on his creative endeavors. Copyright March 2006 Associated Press.
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Cohen, Kory, Greenberg, Westin, and others, endeavored to obstruct justice, acted corruptly, and had the specific intent to interfere with a number of proceedings. Cohens conduct had the natural and probable effect of interfering with various proceedings (as evidenced by the use of the default judgment against Lynch in an attempt to assassinate her character and discredit her). Furthermore, Cohen, Kory, Steven Clark Lindsey (the father of Lynchs younger son), and others, have threatened Lynch with jail since 2005. With the assistance of the City Attorney and District Attorney of Los Angeles that plan was put into action when Lynch was arrested on March 1, 2012 in Berkeley, California. The District Attorneys role relates to Phil Spector. Lynch has known Phil Spector for over 30 years, was dragged into his trials by the District Attorneys office, was very public about the fact that Leonard Cohen lies about Phil Spector, and, she filed a complaint with the DAs Major Fraud Unit regarding Cohens fraud and theft with respect to her.
THE MT. BALDY PHASE Cohen's Complaint alleges that: In late 1994, after completing a successful tour following his album release in 1993, Cohen decided to spend some time at the Mount Baldy Zen Center in Los Angeles, California. Cohen remained there for nearly five years leading a life of rigorous religious discipline. Cohen left the Zen Center in January 1999. This is an entirely misleading and self-serving allegation. It is also blatantly false as Cohen was actively involved in his business and artistic affairs throughout this entire period and most definitely
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in constant contact with Lynch. In fact, he testified at Lynch's 2012 trial that they were in touch with one another on a daily basis. From approximately 1994 through 1999, Cohen went through his Mount Baldy phase. He had a contractually obligated studio album due and was working on a book of poems, drawings, and other business and artistic endeavors. During Cohens Mt. Baldy phase, he frequently stayed in Los Angeles where he recorded material for a number of albums, devoted time to his artwork (including album artwork), worked with Lynch on cataloguing his body of work, micro-managed these deals, and, was actively involved with his business affairs. This was most certainly not a Buddhist retreat. Some of Cohens endeavors are summarized in interviews and articles from that period. Cohen released two live album, promoted his book Stranger Music: Selected Poems and Songs, worked on and completed material for his 2001 studio album and 2005 book of poems, "Ten New Songs" and "Book of Longing," devoted time to artwork he planned to sell, participated in the 1996 documentary, "Leonard Cohen: Printemps 96," began submitting material to the Leonard Cohen files "Blackening Pages" section (which he understood was a valuable marketing tool), and micromanaged these deals. During his Mt. Baldy phase, Cohen remained exceedingly involved in the marketing and promotion of his work. Contrary to his cover story, Leonard Cohen was most definitely not in a strict Buddhist retreat. He frequently stayed in Los Angeles, was constantly in contact with Lynch, and spent a great deal of time at Lynchs office. While Cohen did have a deluxe guest cabin and took
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formal monks vows renouncing all material possessions, Mt. Baldy served as the perfect environment for Cohen to complete work on his music and poetry, entertain the news media, and participate in a documentary. Cohens deluxe guest cabin included a computer, fax, phone, and portable recording unit, and other items one would be hard pressed to find in any retreat environment. Lynch was convinced that Leonard Cohens tax strategies were undertaken for the sole purpose of evading taxes. THE ENTITIES Anyone who assisted me with the business was hired or engaged by Ms. Lynch. So any accountants would have been hired by Ms. Lynch? Leonard Cohen: Correct. (RT 272) The corporations DiMascio & Berardo referred to in their October 27, 2004 letter include but are not necessarily limited to: Leonard Cohen Productions, Ltd., a Nevada corporation, was formed on or around May 15, 1970, and evidently had been assigned certain record contracts between Leonard Cohen and Sony/Columbia. After Marty Machats death, Cohen advised Sony/Columbia that his recording agreements had been inadvertently assigned to this entity. Stranger Music, Inc., a New York corporation, was formed on February 27, 1967, and owned certain compositions. On September 28, 1990, Stranger changed its name to Leonard Cohen Stranger Music, Inc. (Stranger Music). Stranger Music, according to Cohen, was wholly owned by him. Stranger Music, Inc. was an S corporation within the meaning of Section 1361(a) of the Internal Revenue Code at all times from February 1, 1990 through
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November 10, 1996. The IRC prohibits non-residents from being shareholders of an S corporation. Shareholders are restricted to individuals who are citizens of the United States or resident aliens. This restriction is explicitly stated in the IRC at section 1361(c). A nonresident alien cannot be a shareholder of an S corporation due to the fact that profits and losses pass through to a shareholder's personal income tax return in proportion to his or her ownership interest and are taxed at the individual tax rate. A nonresident alien does not pay taxes to the United States; he/she pays taxes to his own country. Leonard Cohen obtained a green card in 1970; abandoned his green card in 1989; and did not obtain a new green card until 1993. Cohen, therefore, an unlawful shareholder of an S corporation from approximately 1989 until sometime in 1993. Cohen also has a pattern of engaging in what appears to be unlawful and/or criminal conduct. Leonard Cohen Productions, Inc. (LCPI), a Delaware corporation, was formed on June 23, 1988. In March 1993 LCPI changed its name to Blue Mist Touring Company, Inc. Blue Mist registered as a foreign entity in California on March 18, 1993 and its status has been forfeited. According to the California Secretary of States website, Blue Mist lists its business address as 419 N. Larchmont Blvd., #91, Los Angeles, CA 90004. This address was Kelley Lynchs former business PO Box. Lynch continues to be listed as the registered agent. Entity Name: Entity Number: Date Filed: BLUE MIST TOURING COMPANY, INC. C1854203 03/18/1993
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Status: Jurisdiction: Entity Address: Entity City, State, Zip: Agent for Service of Process: Agent Address: Agent City, State, Zip:
FORFEITED DELAWARE 419 N LARCHMONT BLVD STE 91 LOS ANGELES CA 90004
KELLEY LYNCH
1044 S KENISTON AVE LOS ANGELES CA 90019
LC Investments, LLC, a Delaware LLC, was formed on October 19, 1999. It was specifically created to facilitate a bond securitization deal as UCC Lending Corp/CAK Universal Credit Corp. (CAK) demanded a bankruptcy-proof entity. LCI, a Delaware LLC, registered as a foreign entity in California on November 9, 2000 and its status is active. According to the California Secretary of States website, LCI lists its business address as 419 N. Larchmont Blvd., #91, Los Angeles, CA 90004. This is Kelley Lynchs former business PO Box. Kelley Lynch continues to be listed as the registered agent. Entity Name: Entity Number: Date Filed: Status: Jurisdiction: LC INVESTMENTS, LLC 200032610011 11/09/2000 ACTIVE DELAWARE
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Entity Address:
419 N. LARCHMONT BLVD., #91
Entity City, State, Zip: Agent for Service of Process: Agent Address:
LOS ANGELES CA 90004
KELLEY LYNCH
419 N. LARCHMONT BLVD., #91
Agent City, State, Zip:
LOS ANGELES CA 90004
The purpose for which the Company was organized is to engage exclusively in any of the following activities: 1) to execute and perform under a loan agreement with the Lender and enter into the other Loan Documents. This language relates to the CAK deal Leonard Cohen was examining. Traditional Holdings, LLC, a Kentucky LLC, was formed on December 18, 2000. Traditional Holdings failed to register as a foreign entity in California and had no ties to California. Richard Westin is listed as the Kentucky registered agent. The State of Kentucky lists Leonard Cohen and Kelley Lynch as members.
General Information
Organization 0507175
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Number Name Profit or NonProfit Company Type KLC - Kentucky Limited Liability Company Status Standing State File Date Organization Date Expiration Date Last Annual Report Principal Office 3141 WARRENWOOD WYND LEXINGTON, KY 40502 Managed By Managers 12/30/2050 9/3/2003 I - Inactive B - Bad KY 12/18/2000 12/18/2000 TRADITIONAL HOLDINGS, LLC Unknown
Registered Agent RICHARD A. WESTIN 3141 WARRENWOOD WYND LEXINGTON, KY 40502
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Current Officers
Membe Leonard r Cohen
Membe Kelley Lynch r
Individuals / Entities listed at time of formation

Organiz RICHARD A. WESTIN er https://app.sos.ky.gov/ftshow/%28S%28xpajcvxq24mw0utjhqff4mvk %29%29/default.aspx?path=ftsearch&id=0507175&ct=06&cs=99999 The Articles of Organization refer to Lynch and Cohens capital contributions with respect to this entity. According to these Articles, Lynch owns 100% of Class B common shares and 99.5% of Class A common shares. Cohen owns .5% of Class A common shares. No membership interest may be assigned without the consent of a majority in interest. The LLC is governed by the laws of the State of Kentucky. Traditional Holdings was administratively dissolved by the State of Kentucky on November 9, 2004. Old Ideas, LLC, a Delaware LLC, registered as a foreign entity in California on April 26, 2011 and its status is active. According to the California Secretary of States website, Old Ideas, LLC lists its business address as c/o Robert Kory,
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9300 Wilshire Blvd., Suite 200, Beverly Hills, CA 90212. Robert Kory is listed as registered agent. BACKGROUND THE DEALS "I was representing myself at this point. [Cohen took over his own affairs after the death of his lawyer.] That was very refreshing and made them rather uneasy because usually the artists don't come in and negotiate the contract. I started undertaking that function. I found it very invigorating and refreshing. I'll never let a lawyer do that for me again. This is one of the bonuses of the whole enterprise, to actually sit with the guys and talk about how much you're worth." The Stranger Music of Leonard Cohen by William Ruhlmann Goldmine, February 19, 1993 A brief history of how the intellectual property deals and Cohens aggressive tax and corporate strategies came into existence is extremely relevant to the adversarial situation Lynch now finds herself in with respect to Leonard Cohen and many others. In or around 1994, Leonard Cohen became vitally interested in selling his intellectual property. At least four entities were used as the proposed vehicles with which to pursue intellectual property sales and to achieve Leonard Cohens entirely aggressive tax planning goals: Stranger Music, Blue Mist, LCI, Traditional Holdings, and Old Ideas. The entities essentially served the following functions: Blue Mist, Old Ideas, LLC, and possibly other entities, own all the intellectual property assets; Leonard Cohen, LCI, and possibly other entities, collected the royalty income; and, Traditional Holdings, and possibly other entities, sold intellectual property assets to Sony that it did not own or have the right to sell. It was and remains Lynchs unshakeable conviction that these steps were taken in an attempt to evade ordinary income taxes and remain under the radar of the
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Internal Revenue Service, State of Kentucky, and Franchise Tax Board. Lynch eventually heard from Cohens lawyer, Robert Kory, that there was tax fraud on every Cohen related entity, including Stranger Music. Throughout the 1990s, the entertainment industry underwent a flurry of activity with companies actively purchasing music catalogues and pursuing bond securitization deals. Of great importance to Cohen was the fact that he had released two of his most successful albums, Im Your Man and The Future in 1988 and 1992 and understood the importance of including those sales figures in any potential asset sale/bond securitization deal. In 1997, investment banker David Pullman entered into a high profile $55 million bond securitization deal with David Bowie that became known as the Bowie Bond. The bonds were securities backed by current and future revenues related to intellectual property rights. The intellectual property owner received a securitized loan. Bowies intellectual property assets were bought for US$55 million by the Prudential Insurance Company of America. Deals with other artists, such as James Brown, Ashford & Simpson, the Isley Brothers, and songwriting team Holland-DozierHolland followed. Charles Koppelman, former chairman of EMI Records Group North America, founded CAK Universal Credit Corp. that also offered bonds to famous individuals in the entertainment industry. The late 90s also saw an unforeseen internet phenomenon that would send chills throughout the entertainment industry. In June 1999, Napster was introduced as a pioneering peer-to-peer file sharing internet service that allowed people to easily share their digital files. Due to the outrageous international
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success of Napster (who at one point had approximately 1 billion users) artists, labels, studios, and politicians became exceedingly concerned about the future of the entertainment industry and the damage to potential sales. This is an extremely relevant footnote to the matter at hand as Leonard Cohen was keenly aware of this phenomenon and had grave concerns about digital downloading and the future of the music industry itself. This is what motivated Cohen with respect to the 2001 sale of intellectual property. Sometime around 1996, financial and investment adviser Neal Greenberg, an alleged Buddhist, visited Los Angeles to meet His Holiness Kusum Lingpa. At that time, Kelley Lynch, Oliver Stone, and others, sponsored a Buddhist center for His Holiness. Cohen and Greenberg became acquainted with one another during that visit. Cohen liked Greenberg immensely, decided to work with him, and, hired Greenberg and his investment companies to help structure the deals Cohen was interested in pursuing; propose strategies to reduce or evade taxation; advise Cohen on business and financial matters; and, ultimately invest the proceeds from the sales. Lynch did not know Greenberg well, was friendly with his ex-wife, and had heard rumors about his shady business dealings, possible securities violations, sexual harassment of her friends, and abusive treatment of his employees. She discussed these matters with Cohen who seemed unfazed. Cohen and Lynch phoned Greenbergs client, Peter Goldfarb, for confirmation that Greenberg had successfully invested his substantial assets. Once this was confirmed, Cohen decided to invest with Greenberg. Greenberg brought two lawyers onboard to assist him: Richard Westin, who would become
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Cohens personal tax lawyer, and Ed Dean. Westin represented Cohen until approximately April 2005. In anticipation of the sale of certain intellectual property assets to Sony/ATV, Leonard Cohen, Richard Westin, Neal Greenberg, Ed Dean, and others, restructured Stranger Music and issued stock to the Leonard Cohen, Cohen Family Charitable Remainder Trust, the Sabbath Day Trust, and the Mt. Baldy Zen Center. According to Cohen, he was the sole shareholder of LCSMI. Leonard Cohens letter from the summer of 1996 addressed the questionable assignment of copyrights to his d/b/a Bad Monk Publishing Company ("Bad Monk"). Cohen and Westin took the position that the copyrights were inadvertently assigned to Bad Monk and should be assigned back to Stranger Music. This type of questionable activity with respect to the assignment, transfer, and/or removal of copyrights to and from various entities was a constant cause of concern to Lynch, as were the holding periods. At their luncheon in the spring of 2005, Kory confirmed that the holding periods were illegal. The letter, addressed to Lynch, reads as follows: Dear Kelley: Based on the advice of Richard Westin, I do feel, as I did from the beginning, that a mistake has been made with respect to the assignment of the copyrights to Bad Monk Publishing due to poor legal advice. Peter Shukat should be instructed to correct this error by assigning the copyrights back to the corporation. Needless to say, I am highly disappointed at having received such advice particularly in light of the fact that I questioned the assignment of these copyrights to Bad Monk from the moment it was brought to my attention and suggested. Sincerely,
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Leonard Cohen . On July 9, 1996, due to Cohens concern about these assignments to Bad Monk, the copyrights were transferred to Stranger Music. These copyrights were part of the 1997 Stranger Music sale to Sony/ATV and Cohen. On October 30, 1996, also in anticipation of the 1997 Stranger Music sale to Sony/ATV, Cohen created two charitable remainder trusts: the Sabbath Day Charitable Trust (the "Sabbath Day Trust") and the Cohen Family Charitable Remainder Trust (the "Cohen Family Charitable Remainder Trust") (collectively, the Trusts.). Other suspect, and potentially illegal, conduct was continuously raised by Cohen and his representatives. That would include, but is not limited to, selfdealing, collapsible corporations, pre-payments or down payments handled as loans for tax purposes, the assignment of personal service contracts to corporate entities, the need for Cohens loans to be documented with promissory notes and the failure to document them, the possibility that the Internal Revenue Service could view these corporate entities as shell corporations and the transactions themselves as sham transactions, and so forth and so on. Ed Deans fax of November 1996 raises issues with respect to Cohens charitable remainder trusts, the tax-exempt status of these trusts, and selfdealing. The relevant parts of Ed Deans letter are as follows: I am confident that the IRS could not successfully argue that the charitable trusts are receiving compensation income or unrelated business taxable income that would disqualify them for tax-exempt status. Also, since none of Leonards new album
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obligations affect the amount of sales proceeds payable to the trusts I do not believe we face a potential self-dealing issue either, especially since I am signing all agreements as an independent trustee. Leonard Cohens November 20, 1996 letter to Scott Francis (Sony/ATV) is further evidence that he is knowledgeable of and articulate about contractual obligations and deal points. In this letter, Cohen urges Sony to address their matching rights with respect to the 1997 Stranger Music deal that had been negotiated with BMG for approximately a year. Cohen was the driving force behind these deals: Dear Scott Francis, I know you are very busy in Spain but I would appreciate swift action on the part of Sony in regard to their matching rights. You must understand that much is at stake for me at this moment. I would appreciate a swift reply. Sincerely, Leonard Cohen On June 27, 1997, the Stock Purchase Agreement between Leonard Cohen, Cohen Family CRT, Sabbath Day CRT, Mt. Baldy Zen Center and Sony/ATV was fully executed. The assets Stranger sold consisted of musical works written by Leonard Cohen, all copyrights therein throughout the world, and, other rights and interests therein. Since Marty Machats death in 1988, Steven Machat has alleged that Machat & Machat owned 15% of Stranger Music, Inc. After Lynch and Cohen parted ways, she found a number of letters from Marty Machat to Carter/Irving Trust, New York City, New York. One letter transmitted Machat & Machats check for $30,000 representing Machat & Machat and record producer Bob Johnson's respective 15% interest in Stranger Music. This evidence supports Steven
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Machats position that Machat & Machat owned 15% of Stranger Music, Inc. and the intellectual property owned by that entity. Cohen concealed this information from Lynch throughout the negotiations and sale of the stock of Stranger Music to Sony/ATV.
Marty Machats letter to Cannon Carter/Irving Trust, NYC dated November 25, 1970 Dear Cannon: The following are the relevant details on Stranger Music, Inc. Stranger Music, Inc. is presently owned by a client of ours, Leonard Cohen, who owns 70%. I own 15% and Bob Johnston of Sincere Productions, Inc. owns 15%. In order to acquire this ownership we recently purchased 49% of the stock of the company for $130,000. Therefore, in my most conservative opinion, the company is worth in excess of $300,000 but I believe it is worth in excess of $500,000. We have paid $50,000 on account of the purchase and owe $30,000. The $30,000 is due December 1st and the balance of $50,000 is payable $25,000 on July 1, 1971 and $25,000 December 1, 1971. In 1971 we have in excess of $85,000 in foreign advances coming in in addition to current income for mechanicals and performances which exceed $50,000 a year. Since it is a recent acquisition and we have changed accountants it will be a little while before I can get you a financial statement on the company. As I advised you, we intend to borrow $30,000 in order to meet the payment due December 1st of $30,000. The $30,000 will be repaid as follows: a. I have been advised by Leonard Cohen that our French sub-publisher has applied through his bank in France for the transmittal of $15,000 which should be in your hands momentarily; b. The balance of $15,000 will be paid out of current earnings of the company. Therefore, I would appreciate it if you would place the loan of $30,000 on the books of Stranger Music Inc. for which I enclose a promissory note. Sincerely, Martin J. Machat
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An alarming a number of tax inquiries, audits, and demands for tax returns followed the close of the Stock Purchase Agreement on June 27, 1997. Leonard Cohen continued to aggressively pursue intellectual property deals, including a bond securitization deal with both David Pullman and CAK. On June 30, 1998, Lynch received an outrageous fax from Cohen. Lynch had accompanied Adam Cohen (Cohens son), whom she managed, to Toronto for a press junket. She also met with Corky Laing (drummer for the band Mountain) who was working with Alliance Canada on intellectual property purchases. Cohen was jealous of Corky Laing and many other individuals Lynch did business with. Lynchs meeting with Laing ran late and this caused her and Adam Cohen to miss their flight to Los Angeles. This fax also proves that Leonard Cohen was obsessed with every aspect of these deals: Dear Kelley, I did wonder for a while (until I remembered who it was) about that call I was supposed to get after your meeting with Alliance. Multi-million dollar deals in the air still manage to capture my attention, although I realize they must be peanuts to you. And you did mention (several times) that youd be in the office Tuesday morning, so I came down [from Mt. Baldy] last night in order to talk to you this morning. Im back on the mountain now. News about Adams performance on that important Canadian TV show would have been welcome, but not obligatory. Its tough to get to a phone in Toronto, and I know how late into the night these meetings with The Artist and The Executives can run. And the airports are a mess. I miss you, too. Leonard
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Leonard Cohens arrogance, aggression, jealousy, and misogynistic tendencies are all self-evident in this letter. Furthermore, Adam Cohen would have been the individual to report back to his father the details of his performance in Canada - not Lynch. Leonard Cohen micro-managed his business affairs and exerted extreme control over Lynch. Concerns about the effect of a stock purchase rather than an asset purchase plagued the negotiations. Based on Leonard Cohens personal demands, these matters were handled by Neal Greenberg, Richard Westin, and others. The following letter addresses some of the concerns potential buyers had with respect to Cohens insistence upon the sale of stock rather than a straightforward asset deal. The unattractive and problematic stock deals limited the parties willing to purchase the intellectual property assets and reduced the potential sales price. The stock deals also substantially reduced Lynchs commissions. A fax from Jonas Herbsman/Shukat to Richard Westin dated February 6, 1998 addresses the tax issues related to the sale of the writers share of publishing: Dear Richard: The tax advisors at Sony have informed us that they will incur a substantial tax liability in the event they purchase stock in the company instead of purchasing the writers share from Leonard directly. They believe under the old tax law this would not have been the case, but under the revised tax law this is the case. Would you please call Frank Caveney at Sony #. He is in the Sony accounting department and he will direct you to the appropriate person to discuss this issue with. Regards.
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During the CAK negotiations and due diligence process, Cohen and his representatives continued to engage in negotiations with other parties (including Sony Music) interested in acquiring certain properties and/or rights. Ultimately, CAK offered to advance Cohen $5.8 million as part of a proposed loan transaction. This was a highly attractive offer that ultimately permitted Cohen to maintain ownership in the intellectual property assets while off-setting taxes until the royalties were paid through over a period of years. Sony, Leonard Cohens record label, was opposed to a potential bond securitization deal and took the position that these types of bond deals potentially interfered with their relationship roster artists. The bond securitization deal Cohen contemplated denied Sony the opportunity to pay artist royalty advances which they viewed as the currency of the music industry. Throughout the 1990s, Cohen and his representatives engaged in discussions with various parties regarding potential intellectual property deals. Greg McBowman and Lynch met with Cohen regarding his interest in these deals. Cohen was adamant about these deals as the effects of digital downloading were a cause of concern. In early November, 1999, Stuart Bondell (Sony Business Affairs) phoned Lynch to propose an asset buy-out with respect to Cohens intellectual property. After speaking with Cohen about this proposal, he advised her that he would only entertain an agreement with Sony if they made a solid, substantial, nonrefundable, good faith down payment on the royalty buy-out. After speaking with Cohen, Lynch phoned Stuart Bondell to advise him of Cohens terms and
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conditions. Sony agreed to pay Leonard Cohen a $1 million down payment or pre-payment against the intellectual property deal. In a letter dated November 5, 1999, Paul Gilbert/Sony Music Intl confirmed the $1 million wire transfer to Leonard Cohen's personal account: This is to inform you that we have transferred $1 million to Leonards account pursuant to the instructions received from you. This amount is deemed a partial prepayment against the proposed $8 million buyout of Leonards future royalty interests in his master recordings and compositions under all of his agreements with Sony Music and Sony/ATV. If this buyout is not concluded, this amount represents a general advance recoupable from any and all monies payable to Leonard under those agreements. Cohen personally retained the entire $1 million prepayment and never signed a promissory note documenting this debt to Traditional Holdings. This prepayment, handled as a loan on Cohens 1999 tax return, became the subject of an IRS audit and FTB inquiry. Leonard Cohen, based on the advice of his advisers/representatives, elected to handle this income as a loan for tax purposes. On November 8, 1999, CAK advised Kelley Lynch that in light of Sonys potential offer to purchase certain intellectual property rights, they were offering an alternative proposed Loan structure which they were willing to close the following day. CAK offered Cohen the option to fully prepay the Loan without penalty if pre-payment was within the first six months of the Loan. Cohen decided not to pursue the loan securitization deal with CAK and advised them that he intended to pursue an asset sale with Sony. On or about February 14,
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2000, CAK filed a lawsuit against Cohen alleging breach of contract and demanded full payment of their $290,000 Origination Fee as well as reimbursement of an additional $73,902.88 in expense payments. Richard Westins letter to Kelley Lynch of December 4, 1999 confirmed the details of a conference call he had with Greg McBowman and Don Friedman. Westin noted that Leonard Cohen was helped by the fact that Lynch was a shareholder of Blue Mist. According to Westin, this allowed Cohen to assert the defense that his transfer to the company was a non-taxable contribution to capital under IRC Section 118. In a letter dated December 13, 1999, Don Friedman (Grubman, Indurksy) advised Cohen that CAK was demanding payment of the origination fee of $290,000 plus expenses. CAK ultimately filed a lawsuit against Cohen for, among other things, breach of contract. Cohen and CAK entered into a settlement agreement on December 7, 2000. Cohen has a pattern of breaching contracts. It arises from his sense of entitlement. Westin's January 10, 2000 fax to Leonard Cohen and Kelley Lynch addressed the federal income tax implications regarding the properties transferred to Blue Mist as well as Cohen and Lynch's ownership interests. Excerpts from that Option are as follows: Opinion re. federal income tax implications of the transfer of the following properties to BMT, a Del. company (which is Cal. admitted) in which Kelley holds 15% of the stock and Leonard owns 85%. LC plans to transfer the following properties to BMT as a contribution under IRC Section 118. Whether the properties are property for purposes of IRC Section 118. The transfers may be disregarded as not having occurred in substance or as a mere unsuccessful attempt to assign income from personal services. A related issue is
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whether you have retained excessive controls after the transfer to BMT to invalidate the transfer for federal income tax purposes. The IRS might argue that the transfer of the right to be paid for subsequent record sales is really a payment for your services, rendered in the past, and that you should continue to be taxed on such income on the theory that you engaged in failed attempt to assign away income from personal services. This letter is evidence of Cohen and his representatives concerns about the IRS tax issues related to these deals and confirms Lynch's 15% ownership interest in Blue Mist and the intellectual property it owns. Leonard Cohens intense interest, aggressive demands, and micromanaging of these deals continued, as evidenced in this May 19, 2000 email: Dear Kelley, I received Dons email which you kindly forwarded to me. I must confess I am losing patience, and frankly losing interest in this deal. The dragging of feet is deafening. I dont know if its you, or the lawyers, or Sony, but something is very wrong. I had a good bond deal on the table with CAK until Sony spoke up, and now I am in litigation with CAK and Sony is busy revising the figures downwards. For several weeks now you have promised me tomorrow the figures on the live albums. I have my engineer working overtime in the studio preparing the first one, at considerable expense. Am I the only one here with a sense of time? And what am I doing in this hotel room polishing the last few songs for the studio album, as if it mattered to someone? I am working on two albums at the same time, both of which are about to be undervalued. The least I will do is adopt a more leisurely working pace. In fact, I feel like waiting for the seven year jubilee, and then quietly excusing myself from the whole matter. In other words, Kelley, this is bullshit. Sony destroys my deal with CAK
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(so as not to establish any precedent of their artists leaving the fold), dumps me into litigation, then they postpone the closing of their deal for seven months until they can discover that my catalogue sales are lagging, and then they lower the price. This is too obvious and too familiar. It is time to consider other options. I know youre doing your best, and I appreciate your efforts, but the playing field has suddenly tilted to an unacceptable degree. Lets talk soon. Leonard Richard Westins Facsimile Message to Lynch dated May 23, 2000 contains Kelley Lynch's shorthand notes of the conversation that followed her receipt of this fax. Issues that concerned Westin and other advisers were collapsible corporations, capital gains tax treatment, the bond deal and litigation (Westin noted that the secret is to sue them first; get in some newspaper), SOCAN and performing rights assignments to Blue Mist Touring, and the fact that the assignments to Blue Mist Touring were non-revocable. At the end of the conversation, Westin advised Lynch: If I saw it, I Richard Westin would rip up the papers. That is what I would do. Richard Westin advised Kelley Lynch to rip up the non-revocable Blue Mist assignments. She refused to do so; believed this was illegal; and, maintained the assignments in a safe place. The SOCAN assignments became problematic because the performing right's society refused to pay Blue Mist royalties for intellectual property it owned because its policy is to only pay the writer. Cohen and his representatives then decided to contact SOCAN and have them pay the royalties for intellectual property owned by Blue Mist to LC Investments. This arose initially with respect to the CAK deal because
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they wanted the properties assigned to a company that they viewed as bankruptcy-proof. The following excerpts of Leonard Cohens Declaration filed in the UCC Lending Corp/CAK Universal Credit Corp v. Leonard Cohen (United States District Court Southern District of New York, 00 Civ. 1068 DAB) matter dated August 30, 2000 confirms that Cohen understood he received substantial royalties on a regular basis; Cohen decided to terminate the bond securitization loan deal; and that Cohen personally decided to pursue a deal with Sony: I receive what I view to be substantial royalties, on a regular basis, from sales of my albums and uses of my compositions. On June 24, 1999, my transactional counsel advised plaintiffs in writing, as follows: As we discussed earlier today, due to the significant changes concerning the possible loan amount, our client Leonard Cohen and his manager Kelley Lynch have decided to terminate the previous engagement letter with CAK and to pursue another opportunity. My representatives subsequently discussed with Sony Music the possibility of Sonys acquisition of the Rights plaintiffs offered to advance $5.8 million as part of a proposed loan transaction. It is my understanding that in November of 1999, my representatives informed plaintiffs that I was seriously considering selling the Rights to Sony, if acceptable financial and related terms could be reached. In response, on or about November 8, 1999, plaintiffs wrote to my personal manager and advised her that In light of the recent events regarding Sony and their potential offer to purchase Leonard Cohens assets, we offer an alternative to the proposed Loan structure. I ultimately decided not to proceed with the loan
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and my representatives so advised plaintiffs. I declare under penalty of perjury that the foregoing is true and correct. Dated: August 30, 2000. Signed: Leonard Cohen. As of August 30, 2000, Leonard Cohen was well aware that he received substantial royalties, understood that Lynch was his personal manager, and was clear that he decided to terminate the CAK deal and pursue an asset sale with Sony Music International. Don Friedmans memorandum of September 19, 2000 to Stu Bondell/Sony re. Blue Mist confirmed that Blue Mist is a Delaware corporation, the capital stock of which is owned 85% by Leonard Cohen and 15% by Kelley Lynch. Cohen owns 425 shares and Lynch owns 75 shares. Sony will purchase Cohen and Lynchs stock in Blue Mist (representing 100% of the equity interest in any other unreleased recordings or in Cohens future recording services). This memorandum is a confirmation that the parties intended to sell their ownership interests in Blue Mist and the intellectual property assets as of September 2000.
On September 21, 2000 Don Friedman confirmed that Sony had begun their due diligence with Blue Mist. They also understood that the beneficial owners of Blue Mist were Leonard Cohen (85%) and Kelley Lynch (15%). The ongoing problems with respect to Cohen's demand for stock deals were also raised. Re: Leonard Cohen/Sony Music. Paul Gilbert of Sony called to ask us to provide Sony with some due diligence materials regarding Blue Myst Touring, Inc. He has asked for copies of the following: Tax returns. He did not specify
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how far back they want to go, but we should try to go back five (5) years. Bank Records. Are there any for this corporation? Any other financial records, audited financials, etc. I would assume that there is nothing of this kind, but please let me know. Please let me know what, if any, records there are, and please forward such records to me so that we can furnish them to Sony. Gilbert also indicated to me that Sonys tax people may have some concerns about the effect of a stock purchase deal, rather than an asset purchase deal, on Sonys treatment of the transaction. He is going to let me know if this really is an issue for them; if so, I will suggest that Richard address these issues with the Sony tax people. Finally, as previously predicted, Gilbert said that, if Sony is willing to do the transaction as a stock purchase, it will expect some portion of the purchase price to be held back in order to protect Sony against tax and other corporate liabilities. By October 10, 2000, the parties anticipated at least two separate asset sales: one involving the writers share of royalties for $4.1 million through a stock sale of LCI (or another entity) and another involving the record royalties for $8 million through a stock sale of Blue Mist. The Traditional Holdings deal (the assets of which were in Blue Mist) closed in 2001 and Sony/ATV put in a solid offer for the writers share on or about October 21, 2004. The publishing from the studio album Dear Heather was also being discussed as a possible property that could be included in one of the forthcoming deals. The income from the Blue Mist stock sale (as of October 2000) was broken down between Lynch and Cohen, based on their respective ownership interests, as follows: LC -
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$6,089,750.00; KL - $1,076,250.00. The precise intellectual property assets these figure addresses are not enunciated in this memorandum - with respect to the proposed Blue Mist Touring Company, Inc. and/or LC Investments, LLC sales or Lynchs ownership interest in intellectual property. In a fax dated October 10, 2000, Greg McBowman asked Richard Westin to come up with a breakdown on the ordinary income/capital gains tax breakdown on both of the sales. In response, Richard Westin issued a memo proposing that the deal be broken out as part asset sale, part stock sale and also discussed the need to allocate expenses incurred in the sales of Blue Mist and LCI between cap gains and ordinary income and strategies to soften the blow from the taxes on the Blue Mist sale. Two separate and distinct sales were anticipated at this time. Greg McBowman's memorandum addresses Kelley Lynch's ownership interest in Blue Mist and the properties owned by that entity. On October 15, 2000, Leonard Cohen as assignor attempted to assign his writers share of royalties on selected songs (listed on Exhibit A) to LCI. This is the same assignment that was previously given to Blue Mist. Leonard Cohen did not own these assets and had nothing to assign. LCI merely collected royalties that belong to Blue Mist. On November 19, 2000, Richard Westin detailed a strategy he and Neal Greenberg envisioned involving a annuity scheme in a letter to Leonard Cohen. According to this letter, the company issuing the annuity could be owned 1% by Kelley Lynch and 99% by Cohens children. Payments under the annuity were to be in the approximate amount of $600K per annum. Westin suggested that to
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make the company more solvent, Leonard Cohens children should contribute notes for about $150K each, that Lynch would control how much money was distributed from the company to Leonard Cohens children and Kelley Lynch would be paid a management fee for her services. The money would be managed in a secure fashion so that the company would be able to make payments on the annuity. Richard Westin suggested that the structure be put in place before a contract was entered into. Leonard Cohen rejected this plan as he did not want his children involved or named beneficiaries. Additional issues, some related to self-dealing, were discussed. Leonard Cohen and Kelley Lynch then sent Richard Westin an email with questions and a new plan was devised. Cohen participated, at his request, in conference calls with Greenberg, Westin, Lynch, and others, during which the structure was carefully reviewed. In addition to several explanatory faxes he received from Westin describing Traditional Holdings, Cohen and Lynch communicated specific questions relating to Traditional Holdings ownership and transactional structure, which questions Westin answered these questions in a letter dated December 4, 2000. On December 4, 2000, Richard Westin laid out the specifics of the newly conceived transaction that involved an annuity and new company, Traditional Holdings. Westin and Greenbergs plan had the following basic components: A limited liability company, which eventually became Traditional Holdings, would be created. Blue Mist would sell and transfer certain record royalty assets to Traditional Holdings in exchange for a deferred annuity, to be paid to Cohen beginning in about 10 years. Traditional Holdings would then sell the assets it
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received from Blue Mist to Sony. The tax plan prevented Cohen, the annuitant, from owning more than a de minimus interest in Traditional Holdings. Therefore, Cohen would own less than 1%, and another person, who ultimately was Lynch, would own the remaining LLC interest (more than 99 percent). In these written communications, Westin explicitly warned Cohen that the annuity plan gave significant transactional control to Lynch, placed significant tax and other burdens upon her as majority shareholder, and the plan would work only if Cohen and Lynch maintained their long-term relationship of personal and professional trust which would secure their mutual obligations as manager of the obligor (Lynch) and annuitant (Cohen). Cohen carefully reviewed, understood, and signed off on the ownership structure of Traditional Holdings, including the fact that Lynch owned 99.5% percent of Traditional Holdings membership interests, so as (among other reasons explained by Westin) to avoid any suggestion of self-dealing. The scheme would put off the income tax to Cohen until some time in the future or entirely. On December 7, 2000, Westin confirmed that Cohen and Lynch had decided to go ahead with the annuity deal. He prepared a list of all items that must be completed in connection with the transaction. Westin instructed Lynch to attach the recording contracts to the annuity contract with a face page stating, Assigned to TH LLC on [the date the annuity was signed]. The assignments to Traditional Holdings are not valid and the assets are owned by Blue Mist.
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On December 7, 2000, Cohen and Lynch signed a Private Annuity Agreement which document set forth the annuity obligations to Cohen. Lynch was instructed to sign the Private Annuity Agreement on Traditional Holdings behalf. Westin maintained that the company and its annuity contract with Cohen were legitimate under prevailing interpretations of the federal tax code. To purchase her ownership interest in Traditional Holdings, Lynch was required to submit to Traditional Holdings a promissory note for $240,000. Other than a face page which was supposed to be prepared at Richard Westins instruction evidencing an Assignment from Leonard Cohen to Traditional Holdings of the record royalties, there is no documentation transferring the right to receive record royalties out of Blue Mist. Specifically, Blue Mist was designated as the assignor of the assets. Traditional Holdings allegedly issued a Private Annuity (the Annuity) to Leonard Cohen in exchange for a transfer of certain intellectual property assets. The Annuity Agreement was signed on December 7, 2000 by Kelley Lynch (for Purchaser, Member, Traditional Holdings) and Leonard Cohen (Annuitant). The document was notarized on December 7, 2000 by Richard Bernstein, Los Angeles County Notary Public. However, the assets Cohen attempted to transfer were the record royalty rights which were assigned to Blue Mist. Furthermore, unbeknownst to Lynch (until June 2013), Traditional Holdings did not exist as of December 7, 2000 and could not enter into a legally binding agreement. Therefore, the Annuity Agreement itself is null and void. On December 7, 2000, Leonard Cohen and Richard Westin instructed Lynch to sign a Promissory Note prepared by Westin. Lynch promised to pay
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Traditional Holdings $240,000, with interest on the unpaid balance until the date of maturity. The interest rate was set at 6.1% per annum. The payment schedule was in 30 annual installments beginning on December 7, 2001. The Note was agreed to and signed by Kelley Lynch and Leonard Cohen on behalf of Traditional Holdings. Traditional Holdings did not exist on December 7, 2000 and this agreement is null and void. Furthermore, Westin (on Cohens behalf) extinguished Lynchs promissory note from the 2002 federal tax return without bringing it to the attention of Lynch. Richard Westin structured Traditional Holdings so that Kelley Lynch would be paid $44,000 per annum which would repay the promissory note and provide her with the monies to pay taxes due on that fee. He prepared a Promissory Note in favor of Traditional Holdings in the sum of $240,000 representing the amount Kelley Lynch owed for the issuance of her 99.5% member interest. Payments were to be made in 30 annual installments. No documents were prepared with respect to Leonard Cohens alleged capital contribution with respect to Traditional Holdings. Lynch was given no instructions or direction with respect to the Promissory Note, etc. In 2002, when she inquired about this matter, Cohen, Westin, and Greenberg essentially had a meltdown. On December 18, 2000, after inducing Lynch to execute the Annuity Agreement, Richard Westin formed Traditional Holdings and caused it to issue member interests to Kelley Lynch (99.5%) and Leonard Cohen (.5%). Kelley Lynch requested and received, after discussions with Leonard Cohen personally, an Indemnity Contract dated January 8, 2001, whereby Kelley
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Lynch agreed to assist Leonard Cohen with personal financial arrangements that entailed the creation of Traditional Holdings in exchange for Leonard Cohens agreement to indemnify her for any and all claims arising with respect to the promissory note. Indemnity Agreement - Kelley Lynch, Leonard Cohen & Traditional Holdings dated January 8, 2001 Whereas Kelley Lynch has agreed to assist Leonard Cohen with certain personal financial arrangements that entail the creation of Traditional Holdings and in so doing has provided and will provide value assistance to Leonard Cohen. Now therefore: For value received, the undersigned Leonard Cohen (Indemnitor) agrees to indemnify, save, and hold harmless Kelley Lynch (Indemnitee) from any and all claims, actions, damages, liabilities, or litigation arising out of the following circumstances: any obligation on her part to make good on a certain note for $240,000 in favor of Traditional Holdings (TH) in the event that TH is for any reason unable to: 1. Pay in the full the promise of full payment of a put described in the said; or 2. Causes her to have to make any payment to TH (or the assignee or transferee or successor of TH) with respect to the note, but only to the extent Indemnitee has not theretofore in the year in which indemnification is claimed, received sufficient cash from TH, net of any and all income taxes payable by Indemnitee on such cash, to make good on such liability as to which indemnification hereunder is sought by Indemnitee. In the event of any cause of action or claim asserted by a party to this Agreement or any third party, the Indemnitee will provide the undersigned timely notice of such claim, dispute or notice. Thereafter, the undersigned shall, at its own expense, faithfully and completely defend and protect the Indemnitee against any and all liabilities arising from this claim, cause of action and/or notice, and shall at once stand in the shoes of Indemnitee and pay all amounts due as they become payable with no right offset or to her claim for immediate and full payment. If the undersigned should fail to so successfully defend, the Indemnitee may defend, pay or settle the claim with full rights of recourse against the undersigned for any and all fees, costs, expenses and payments, including but not limited to attorney fees and settlement payments, made or agreed to be
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paid, in order to discharge the claim, cause of action, dispute or litigation, Indemnitor shall pay, to or for the benefit (as she may direct) Indemnitee, all costs and attorneys fees with the enforcement of this agreement. This agreement is binding upon and is to inure to the benefit of the parties, their successors, assigns, and personal representatives. Signed under seal this 8 day of January 2001. Leonard Cohen, Indemnitor Kelley Lynch Notarized: January 8, 2001, Richard Bernstein The Indemnity Agreement is relevant and material due to the fact that Cohen extinguished Lynchs promissory note from the federal tax returns in the year 2002. Richard Westin, Leonard Cohen's tax lawyer, prepared the Traditional Holdings tax returns. In 2001, he failed to report the income from the stock sale to Sony Music; in 2002, he extinguished Lynch's Promissory Note (using a separate tax ID); and, in 2003, he extinguished the annuity itself. These steps were taken without Lynch's knowledge, awareness, permission, or authorization. They were brought to her attention by Dale Burgess and DiMascio & Berardo. On April 18, 2001, Don Friedman and Stuart Fried summarized the transaction. As Kelley Lynch advised the IRS, she was asked to read this entire document to Leonard Cohen while he soaked in a bubble bath. This letter confirmed the fact that Richard Westin and Neal Greenberg provided the financial and tax-related advice for Leonard Cohen with respect to this transaction: As a separate matter, we also want to advise you and Holdings that this firm is not a financial or tax advisor and has not provided any taxrelated advice to you or holdings in connection with this transaction. In addition,
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we have had no role in the formation of Holdings (and have not reviewed or been provided copies of any of its formation documents) or in structuring the legal arrangement between you and Holdings. While we have prepared certain documents required to implement the tax and financial advice of your other advisors, we have done so at their request and direction. We have also assisted your tax and financial advisors by providing explanations of the relevant entertainment industry and intellectual property issues raised by the transaction. With respect to tax-related issues presented by the Agreement, we have, pursuant to your and Holdings request, consulted with and followed the advice of Richard Westin and Neal Greenberg. It is our understanding that you are relying on their advice regarding these matters. Lynch provided no financial or tax advice and had no role in the formation of any corporate entity or the structuring of legal arrangements with respect to Cohen-related entities. A letter from Richard Westin to Leonard Cohen and Traditional Holdings dated April 23, 2001 addressed the transfer of assets, under California and federal laws, and how annuities exchanged for properties are taxed. No properties were actually transferred to Traditional Holdings. A federal controversy appears to have arisen because Lynch has asked the IRS for an opinion on this transaction, the default judgment that wrongfully altered her tax returns, and other matters. As Traditional Holdings, LLC was not held in trust for Leonard Cohen, the trust referred to in the default judgment is not addressed. You have requested my opinion as to whether the transfers of the following properties and contractual rights are effective under California law, whether the assignments are effective for Federal income tax purposes and as to how private annuities in exchange for such properties are taxed. The subject of the transfers
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are described below and in the contract with Sony Music under which Sony obtained the properties. Facts: Traditional Holdings (an entity you do not control, but have an equity interest in) indicated its acceptance of the following contracts by assignment (purchase) at their fair market value (reduced by associated expected fees and charges in the event of subsequent sale) from their holder (yourself) as described in the pertinent documents. It is not a guarantee that this type of arrangement would not be audited; a guarantee of the outcome of any federal tax controversy, or an undertaking to represent any taxpayer in any federal tax controversy. Whether the rights you have transferred are property - If the sale under the annuity were to be attacked as a sham, then it might be argued that the real transfer was a disposition taxable to Leonard Cohen and not to Traditional Holdings in exchange for a private annuity. Kelley Lynch - as an unrelated majority co-owner has a material stake in assuring that the transaction is genuine. Sony is an adverse party, bargaining against Leonard Cohen and Traditional Holdings and has bargained firmly with the sellers. The documentation shows a genuine transfer. At a deeper level, the trouble with the assignment of income cases is that the taxpayer is typically at work trying to subvert the progressive income tax by shifting income to a lower bracket family member. The royalties were paid to a trust that the recording artist DID NOT CONTROL. Sony has repudiated Cohens claims to ownership and forced you to declare the works to be works for hire. Your lawyers believe your works were not works for hire and question the validity of the contract effort to retroactively recharacterize the works. If they were indeed works for hire, then their character as property as opposed to deferred compensation for services would be less certain. Cole case - was indifferent to whether the works were original with the author or performed at the direction of another (apparently the case). Either way - there was a completed transfer to the entity (a trust in Coles case and TH in Cohens case). How the private annuity is taxed. There is no taxable event (hence no income tax) at the time the assets were transferred to the LLC in exchange for the private annuity, provided the transaction was properly structured. The concept of the private annuity is that any tax is deferred until payments begin. This memorandum addressed many issues related to the IRS, tax implications of this transaction, potential tax problems, and addresses why
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Lynch was asked to help Cohen with this transaction as well as her ownership interest in Traditional Holdings, LLC. The transaction obviously was not properly structured and Cohen did not validly transfer assets to Traditional Holdings, LLC in exchange for the private annuity. Leonard Cohen, pursuant to the Annuity Agreement he entered into, was obligated to repay his substantial loans and/or advances (with interest) within 3 years. Otherwise, Lynch (on behalf of Traditional Holdings, LLC) could withhold future annuity payments until the loans/advances were repaid in full. Excerpts from Annuity Agreement dated December 7, 2000 between Traditional Holdings, LLC (Buyer) and Leonard Cohen (Annuitant): 2. Advances at Discretion of Purchaser: 2.1. Advances. Upon the written request of Annuitant, Purchaser agrees that it will consider whether it can make advance payments of amounts due under this Agreement. Any advances shall be repaid no later than three years after the date of the advance. Until an advance has been paid in full, the unpaid portion thereof shall bear interest at the lowest rate permitted by the Internal Revenue Code without having to impute interest thereunder under Section 7872. At the discretion of Purchaser, such advances may be repaid by withholding payments otherwise due under this Agreement. If Annuitant shall die with advances due and owing Purchaser, then such advances shall be satisfied by Annuitant's estate. Agreement signed by Kelley Lynch, on behalf of Traditional Holdings, LLC, and Leonard Cohen. Notarized. Leonard Cohen owes loans and/or advances to Traditional Holdings, LLC totaling millions of dollars. Cohen understood that these loans and/or advances were to be repaid within 3 years at 6% interest. His loans and/or advances include his personal transaction fees, miscellaneous loans and/or advances, and all commissions/fees paid to his financial and investment adviser as Cohen insisted on using Greenberg while Lynch felt his investments were reckless,
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fraudulent, and aggressive. Lynch also believes that Cohen is responsible for all assets wasted by Traditional Holdings, LLC, including with respect to all corporate distributions, etc. due to the fact that she agreed to assist Cohen with this entity based on fraudulent misrepresentations and for other reasons. Leonard Cohens decision to handle the down payment or pre-payment with respect to the Traditional Holdings, LLC deal as a loan became the ongoing source of problems with both the IRS and FTB. An IRS Notice to Leonard Cohen dated August 13, 2001 questioned the 1999 $1 million Sony pre-payment to Leonard Cohen: In our review of your 1999 tax return, we found what appear to be differences between income and/or deduction amounts you reported on your tax return and amounts reported to us by others. (Sony) Please use the enclosed envelope to send any supporting documents you want us to consider. On December 21, 2001, Richard Westin prepared and sent Kelley Lynch a Traditional Holdings Management Agreement dated December 21, 2001 addressing her role as manager of this entity. The management agreement is very clear as to Lynch's compensation which is addressed in two different sections of the agreement although these fees were fraudulently addressed on the expense ledger. As of January 2002, the IRS continued to address Leonard Cohen's tax deficiency with respect to the $1 million down payment or pre-payment Cohen personally received with respect to the 2001 Traditional Holdings stock deal. On January 8, 2002 the IRS sent a Notice to Leonard Cohen. This notice referred to a tax deficiency for the period December 31, 1999. The proposed taxes Cohen
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owed at that time were $587,925.00. This Notice related to the $1 million prepayment and/or down payment on the Traditional Holdings, LLC deal that Cohen personally received from Sony. The tax issues became alarming in or around February 2002 when Leonard Cohen received a 1099 from Sony (with respect to the Traditional Holdings, LLC stock sale) in the amount of $7 million. On or around February 7, 2002, Kelley Lynch faxed Ken Cleveland, Cohens accountant, the 1099 and asked him to phone her the following Monday. Instead, Cleveland immediately sent the following letter to Leonard Cohen. After consulting with Richard Westin over this matter, Cohen personally phoned Ken Cleveland. Cleveland later advised Lynch, in a conference call with Stuart Fried of the Grubman, Indursky firm, that this was a cover your ass letter. Excerpts of Ken Clevelands letter to Cohen dated February 7, 2002: When your management team retained my services in 1998 my first task was the settlement of the IRS audit of substantial stock donations you have made to your trust and various charities in previous years 1) In 1999, you received a $1 million advance from Sony. Your management team told me this was a deposit that you had to pay back. The IRS notice states that it is not a deposit but a taxable advance; 2) Tax returns are due April 15th; 3) With regards to the year 2001, we have just received notice that your Sony deal closed and you received over $7 million in income. If this is true, I shudder to think of the money that will be wasted paying penalties to the IRS for underpayment of taxes.
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Clearly, Lynch became concerned by Clevelands statement that he shuddered to think of the penalties due with respect to Cohens underpayment of taxes with respect to the Traditional Holdings, LLC deal. Sony ultimately provided Cohen with a corrected 1099 for the year 2001 which replaced the mistake in the $7 million 1099 previously issued. The income noted on the new 1099 was set at $0. Sony also acknowledged that the $1 million set forth on the 1099 (which became the subject of IRS and FTB inquiries) was a deposit against future royalties and confirmed that the 1099 was mistakenly issued. Due to the hysteria and conduct on the part of Leonard Cohen, Richard Westin, Ken Cleveland, Neal Greenberg, and others, following the receipt of the $7 million 1099 from Sony and Kelley Lynch's inquiries re. paying down the promissory note, she asked Richard Westin to prepare a letter clarifying these entities and the assistance she provided Cohen with respect to these deals and these corporate structures. Leonard Cohen acknowledged receiving this letter:
Richard Westin letter to Leonard Cohen dated March 6, 2002: Dear Leonard, I have now reviewed all the documents that were forwarded me in order to prepare the Traditional Holdings return. I would like to point out that I did not notice any sloppy record keeping and all the documents were delivered to me in a timely manner. I would like to review the structure of TH at this time because it is ornate you may need further clarification. I will start at the beginning. TH came about as the result of Neal and myself being approached by Kelley at your request to search for a tax structure that would benefit you with respect to the Sony royalty buyout. At that time, you were looking at ordinary income that would have been
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taxed at the rate of 47%. Traditional Holdings purchased your royalty buy-out properties using a private annuity. A private annuity is a contract under which a person sells property in exchange for deferred payments that end when the seller dies. The deferred payments are payments to you (which I will address later in this letter) and it is these deferred payments that allow the tax to be deferred. The payments cease upon your death. Private annuities have been around for decades and are not controversial. In the year 2011, you will begin receiving about $38,000 a month for the remainder of your life. You will then pay taxes yearly on this amount at whatever the tax rate is on ordinary income. You have therefore saved tremendously in taxes because you avoided the ordinary income tax of approximately $3.5 million in the year of the sale and will pay taxes as you receive your deferred payments. In the interim, your money is invested and if well managed it is also growing. All monies you take from TH until 2011 need to be documented as loans. This is why some confusion arose for Kelley in the year 2001 with respect to your personal tax return payment. Neal made the decision that the funds should come from TH and Kelley then contacted me in order to determine what paperwork, if any, was required. I had to prepare a note that was to be placed in the file with a copy of the return. It is important to have these loans documented by notes. To reiterate, TH obtained the properties with a private annuity in order to defer taxes. Kelley had to be brought in, and agreed to do so in order to help you, because you need a third partys involvement so that this transaction is not viewed as your selling something to yourself. The third party should not be a relative of yours therefore Kelley was selected. We had Kelley sign a promissory note in the amount of $245,000 to TH which shows that she invested in TH. She is to receive $24,000 a year for the first 17 years, then $31,250 a year, which allows her to repay the note; and, $20,000 a year which allows her to pay taxes on the amount she has received. It complicates things for Kelley and possibly eats into her lifetime gift tax exemption that would benefit her children. It is possible that estate taxes will change in the future and Kelley will not suffer any penalties. To summarize, Kelley was brought into this situation in order to help you accomplish a beneficial tax structure. At this time, Kelley needs to begin repaying the note to TH. She must pay $24,000 debt service on the note this year so that the entity remains legitimate. The way we anticipated handling this was to allocate $240,000/year of TH profits to Kelley each year which allows her to pay the taxes on the income that has created for Kelley.
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Unfortunately, because Kelley did not make the $24,000 payment in 2001 (she was not aware that she had to do so), this may create hardship for her with respect to taxes. In order to resolve this situation, I propose that Kelley be allocated the sum of $___________________ for the years 2001 and 2002. Out of this amount, Kelley will pay the note (by writing a check to TH) and pay the taxes she incurs by receiving these monies from TH, which we will call a fee for the sake of simplicity. It is often the case that once a structure has been established and taken out of the realm of theory, it takes time for all parties to understand what its function is and how it operates. I have basically raised three points here: (1) that a private annuity has been established in order to defer taxes; (2) you will eventually begin receiving monthly payments and until that time, all withdrawals from TH need to be documented as loans; (3) Kelleys participation was essential and requires a yearly payment to her which allows her to repay the note and the taxes she incurs because of the payment. On a separate note, I am giving some thought to your gift tax situation. I understand that you are giving Adam approximately $42,000 a year in support. This cancels out the possibility of gift him $11,000 a year (which is now the yearly gift amount) with respect to the property you have purchased. I also understand that Anjani Thomas has been given sums possibly in excess of $11,000 permitted yearly gift and need to rethink how the loan to her for the house should be handled. I would like to take some time and review the larger picture of your gifts with Kelley - this would include your voluntary monthly gift to the childrens mother which comes to $45,600 per year. Kelley has advised me that you would like to know if there is some way for you to give gifts to your children in a manner that does not create a gift tax. This is something Reeve Chudd and I need to think through. Since my involvement in your tax planning, several entities have been created: two charitable remainder trusts (which I understand Neal will address with you separately), and Traditional Holdings. These three entities - the two charitable remainder trusts and TH are really the essence of your tax and estate planning. Last year was a very complex year but going forward everything should be quite smooth and uncomplicated. The above letter essentially addresses Cohens use of corporations in an attempt to evade taxes. It also addresses the fact that Cohen elected to use Lynch to assist him and created grave ambiguities for her. Furthermore, Lynch
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learned in hindsight that her role in the Traditional Holdings, LLC deal would harm her. Stuart Friend's fax to Richard Westin dated April 1, 2002 transmitted Sony's letter regarding the $1 million 1099 Cohen received in 1999: Dear Mr. Cohen: As you requested, this letter is to confirm that the $1,000,000 paid to you by Sony Music Entertain, Inc. in November of 1999 was a deposit towards a possible royalty buyout by SMEI and mistakenly reported on Form 1099-Misc as royalty income for the calendar year 1999. Sincerely, Paul Gilbert Leonard Cohen hired Hochman, Rettig to handle the IRS audit of the $1 million 1099 for the year 1999. Lynch once again became very suspicious of Cohen, the IRS matters that continued to arise, the Traditional Holdings deal, and the annuity. She provided Hochman, Rettig with certain documents and asked them to review the annuity agreement and advise her if there was anything wrong with it. When Richard Westin heard about Lynch's discussion with Steve Blanq of Hochman, Rettig he raised issues regarding Leonard Cohen's attorney/client privilege and Steve Blanq advised Lynch that he could not discuss this matter with her. It was around this time that Blanq advised Lynch that Richard Westin's evasiveness made the Ogden, Utah IRS agent "nervous." His activity, conduct, memorandums, etc. made Lynch nervous as well. After parting ways with Cohen, Lynch contacted Steve Blanq who asked her Are you being blamed for Richard Westins actions? In 2003 and 2004, the Franchise Tax Board sent notices addressing the fact that Leonard Cohen failed to file state tax returns with respect to LC
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Investments, LLC, a company wholly owned by him. Cohen and Westin also failed to file tax returns with respect to Traditional Holdings in the State of Kentucky. The FTBs demands for tax returns created paranoia on the part of Leonard Cohen and Richard Westin and, in turn, caused Lynch to further question the situation with respect to Leonard Cohen, taxes, these deals, and the corporations that were being used. Hochman Rettig also handled the FTBs inquiry into Leonard Cohen's 1999 tax return and the ongoing problems with the $1 million 1099 and the apparent tax deficiency. Lynchs concerns with respect to many issues, including Cohens failure to file state tax returns, continued to grow. Westins September 24, 2004 email was deeply disturbing to Lynch. She had no idea what the reference to Neal Greenberg meant but understood that there were serious legal and tax issues with respect to the various entities. The September 24, 2004 Lynch received from Richard Westin addressed matters related to Traditional Holdings, LLC, LC Investments, LLC, federal and state tax returns, and, Neal Greenberg: Nothing is owed for 2003 to the feds as to LCI. I paid the State the $1,131 (please pay me) for LCI for 2002. There will be a small tax due to the State for 2003, according to my slightly out-of-date book on California taxes, for LCI. I have no clue yet as to what TH does to him. Incidentally, this year I plan to stand up and fight for you over your position in TH. Out of kindness (or something) you got into that deal for LCs benefit and then Neal tried to (pardon me) fuck you. That has to stop. We need to put our heads together about that. Perhaps I am wrong. I hope so.
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Richard Westin's letter to Cohen and Lynch dated October 4, 2004 re. Traditional Holdings' 2003 federal tax returns and K-1s raised further alarm on the part of Lynch who had decided, by this time, that she was reporting what she believed was tax fraud on the part of Leonard Cohen (and others) to the IRS: Kelley Lynch or Leonard Cohen can sign and file it with the Cincinnati IRS - he provides a cover letter and SASE for that purpose. The return reports quite a lot of income to Kelley. He has no information to indicate that there is a compliance with the duty to pay Kelley Lynch a $20,000 management fee. The obligation arises out of a management agreement in the TH binder; the agreement has not been signed. It has been in the binder since 2001 along with an unsigned amendment to the management agreement. This is in here to give KL some help with the tax burdens this entity creates for her. She should have been paid it and the agreement should have been signed by LC. There is also an unsigned promissory note [It was signed and notarized] issued by KL for $240,000, prepared for signature December 2000. The LLC agreement calls for a special allocation of profits to KL of at least $24,000. That is why the profit and loss sharing ratios are the odd number 99.55 and .45. The operating agreement calls in Section 9.1 for the distribution in cash of at least $24,000 to Class B shares (all in KLs hands). TH is a complicated structure. It is important to adhere to it because if it is audited and the Revenue Agent looks closely, what he or she will find will be a disregard for form that could result in significant tax adjustments and deeper tax inquiries that are not desirable. At this point in time, Lynch felt
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she had no alternative but to ask the IRS to review the corporate structures, private annuity agreement, and related tax returns. On October 6, 2004, Richard Westin wrote Cohen and Lynch regarding a 2003 Kentucky tax return of LC Investments, LLC. LCI is a Delaware entity registered in California and is not, as Westin clearly understood, a Kentucky entity. Lynch believes this was an intentional "mistake" on Westin's part that relates to his absolute concerns about the IRS and FTB with respect to these entities at this point in time. The K-1s, which reflect a 99.5% ownership interest on Lynch's part with respect to LCI, are clearly fraudulent. This letter encloses the 2-page LCI tax return for Kentucky. Attached are Kentucky Schedule K-1s. One is for Leonard Cohen and one for Kelley Lynch. The K-1 for Cohen indicates that he is a .45% owner and shows no share of income. The K-1 for Lynch shows that she is a 99.5% owner. It also shows no ordinary income or net income due. Westin does not explain why Kelley Lynch is listed as a member of LC Investments, LLC in the same percentages as Traditional Holdings. He also does not explain why LCI is filing a Kentucky return when it is a Delaware LLC registered as a foreign entity in California. Lynch remains convinced that this was an intentional mistake. The K-1 with respect to Lynch, transmitted to the State of Kentucky, is unlawful. The same is true for the K-1s LC Investments, LLC transmitted to the IRS (with respect to Kelley Lynch) for the years 2004 and 2005. Lynch LC was not a partner and has no involvement, whatsoever, with LC Investments, LLC although she is still listed as registered agent.
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Lynch is convinced that the steps with respect to these corporations are a step transaction. She is also convinced that the steps on the Traditional Holdings, LLC federal tax returns are further evidence of a step transaction. The step transaction doctrine is a judicial doctrine in the United States that combines a series of formally separate steps, resulting in tax treatment as a single integrated event. The doctrine is often used in combination with other doctrines, such as substance over form. The doctrine is applied to prevent tax abuse, such as tax shelters or bailing assets out of a corporation. The step transaction doctrine originated from a common law principle in Gregory v. Helvering, 293 U.S. 465 (1935) that allowed the court to recharacterize a tax-motivated transaction. Gregory v. Helvering was a landmark decision by the United States Supreme Court concerned with U.S. income tax law. The case is cited as part of the basis for two legal doctrines: the business purpose doctrine and the doctrine of substance over form. The business purpose doctrine is essentially that where a transaction has no substantial business purpose other than the avoidance or reduction of Federal tax, the tax law will not regard the transaction. The doctrine of substance over form is essentially that, for Federal tax purposes, a taxpayer is bound by the economic substance of a transaction where the economic substance varies from its form. In the instant matter, Leonard Cohen and Kelley Lynch owned shares of a company called Blue Mist. Blue Mist, in turn, owned intellectual property. On October 19, 1999, Leonard Cohen created a new company called LC Investments, LLC for the sole purpose of pursuing a bond securitization deal with
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CAK. On October 15, 2000, Cohen attempted to transfer intellectual properties owned by Blue Mist Touring Company, Inc. to LC Investments, LLC. All shares of LC Investments were owned by Leonard Cohen, as trustee. Sometime after this failed attempt to transfer the assets to LCI, Richard Westin wrote a letter or memorandum confirming that Lynch should have been compensated with 15% of LC Investments. She was not. On September 19, 2000, Don Friedman confirmed that Blue Mist is a Delaware corporation, the capital stock of which is owned 85% by Leonard Cohen and 15% by Kelley Lynch. Cohen owns 425 shares and Lynch owns 75 shares. Sony will purchase Cohen and Lynchs stock in Blue Mist (representing 100% of the equity interest in any other unreleased recordings or in Cohens future recording services)." This memorandum is a confirmation that the parties intended to sell their ownership interests in Blue Mist and the intellectual property assets to Sony. On September 21, 2000 Don Friedman confirmed that Sony had begun their due diligence with Blue Mist. They understood that the beneficial owners of Blue Mist were Leonard Cohen (85%) and Kelley Lynch (15%). The ongoing problems with respect to Cohen's demand for stock deals were also raised. On December 7, 2000, Leonard Cohen entered into a Private Annuity Agreement with Traditional Holdings, an entity that did not exist and induced Lynch to execute that document as well as a Promissory Note that his tax lawyer extinguished from the federal tax return in 2002. On December 18, 2000, Traditional Holdings was formed as a Kentucky LLC. Lynch was made a 99.5% member and Cohen a .5% member. Leonard Cohen attempted to sell intellectual property owned by Blue Mist to Lynch in
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exchange for an Annuity that his tax lawyer extinguished in 2003. Lynch asked for and received an Indemnity Agreement that was executed on January 8, 2001. Leonard Cohen, whose tax lawyer prepared the Traditional Holdings income tax returns failed to report the income from the 2001 Sony sale. Lynch and her lawyers were ultimately advised, by Robert Kory, that Leonard Cohen planned to roll Traditional Holdings, LLC into LC Investments, LLC. Lynch maintains that this convoluted set of transactions is a step transaction whose sole purpose was to avoid and evade taxation. Leonard Cohen controlled all entities. Leonard Cohen did not own the assets he ultimately attempted to assign and/or sell to both LC Investments, LLC and/or Traditional Holdings, LLC. Cohen had nothing to assign and/or sell to either of these entities. These assets are owned by Blue Mist Touring Company, Inc. No trust documents exist with respect to Blue Mist Touring Company, Inc. and/or Traditional Holdings, LLC and Lynchs ownership interest in these entities was not held in trust for Leonard Cohen. The step transaction doctrine states that: interrelated yet formally distinct steps in an integrated transaction may not be considered independently of the overall transaction. By thus linking together all interdependent steps with legal or business significance, rather than taking them in isolation, federal liability may be based on a realistic view of the entire transaction. The Traditional Holdings tax returns also appear to involve a step transaction: In 2001, Cohen failed to declare the income from the Sony sale; in 2002 (using a separate tax ID number) Cohen extinguished Lynch's Promissory Note; and, in 2003, Cohen
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extinguished the annuity itself. Lynch was unaware of this activity and it was brought to her attention by her lawyers and accountant in the fall of 2004.
In Gregory v. Helvering , the U.S. Supreme Court ruled as follows with respect to elaborate and devious forms created to conceal the real nature of a transaction and addressed the fact that the activity was tax motivated and nothing other than a contrivance. The same is true with respect to Leonard Cohen and his related entities: "It is earnestly contended on behalf of the taxpayer that since every element required by [the statute] is to be found in what was done, a statutory reorganization was effected; and that the motive of the taxpayer thereby to escape payment of a tax will not alter the result or make unlawful what the statute allows. It is quite true that if a reorganization in reality was effected within the meaning of [the statute], the ulterior purpose mentioned will be disregarded. The legal right of a taxpayer to decrease the amount of what otherwise would be his [or her] taxes, or altogether avoid them, by means which the law permits, cannot be doubted. [ . . . ] But the question for determination is whether what was done, apart from the tax motive, was the thing which the statute intended. The reasoning of the court below [i.e., the reasoning of the Court of Appeals] in justification of a negative answer leaves little to be said. When [the statute] speaks of a transfer of assets by one corporation to another, it means a transfer made 'in pursuance of a plan of reorganization' [ . . . ] of corporate business; and not a transfer of assets by one corporation to another in pursuance of a plan having no relation to the business
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of either, as plainly is the case here. Putting aside, then, the question of motive in respect of taxation altogether, and fixing the character of the proceeding by what actually occurred, what do we find? Simply an operation having no business or corporate purpose-a mere device which put on the form of a corporate reorganization as a disguise for concealing its real character, and the sole object and accomplishment of which was the consummation of a preconceived plan, not to reorganize a business or any part of a business, but to transfer a parcel of corporate shares to the petitioner. No doubt, a new and valid corporation was created. But that corporation was nothing more than a contrivance to the end last described. It was brought into existence for no other purpose; it performed, as it was intended from the beginning it should perform, no other function. When that limited function had been exercised, it immediately was put to death. In these circumstances, the facts speak for themselves and are susceptible of but one interpretation. The whole undertaking, though conducted according to the terms of [the statute], was in fact an elaborate and devious form of conveyance masquerading as a corporate reorganization, and nothing else. [ . . . T]he transaction upon its face lies outside the plain intent of the statute. To hold otherwise would be to exalt artifice above reality and to deprive the statutory provision in question of all serious purpose." Lynch obviously has many legal issues with respect to Leonard Cohen. In 2005, Boies Schiller, who reviewed three boxes of, advised Lynch to sue Cohen for conversion, fraud, and intentional torts. Boies Schiller also believed Cohen and Kory attempted to engage her in criminal conduct. In 2011, after speaking
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with Lynch, Steven Machat advised her to sue Cohen for theft. She clearly has issues related to malpractice with respect to Richard Westin who advised her by email in October 2004 that he never represented her and only represented Leonard Cohen. Cohen and his representatives set up an invalid legal structure potentially exposing Lynch to liability. They failed to properly advise Lynch how to implement the legal structure which she does not feel was her job in any event. Leonard Cohen and Westin failed to obtain conflict waivers needed to represent me, Traditional Holdings, and Leonard Cohen. Westin, working on behalf of Leonard Cohen negligently (and probably intentionally) prepared the Management Agreement causing uncertainty (or, at the very least, allegations of "uncertainty" which have now arisen) in the amount of Lynch's management fees with respect to Traditional Holdings. Westin, on behalf of Leonard Cohen, negligently and fraudulently prepared tax returns with respect to Traditional Holdings, LC Investments, and issued a fraudulent K-1 to Lynch with respect to LCI and the State of Kentucky. Leonard Cohen, on behalf of LCI issued fraudulent K-1s to Lynch with respect to LCI and the Internal Revenue Service. These are just some of the issues Lynch has attempted to address with Cohen and his representatives. Robert Kory advised DiMascio & Berardo that Blue Mist is an issue and the Assignments should not be respected. He advised DiMascio & Berardo that the assignments were part of a bigger scheme and that there was never an intention for Blue Mist to own the assets. Lynch understood that she was given stock in Blue Mist to compensate her for her services (unrelated to her commissions as
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Cohen's personal manager) and if the assignments are invalid and the stock is worthless, she was defrauded. Lynch owns 15% of Blue Mist and/or all assets, wherever they have gone. She also owns, according to the corporate books and records 99.5% of Traditional Holdings. Lynch is entitled to a 15% commission, dating back to 1988, for her services as Cohen's personal manager, including those commissions he continues to wrongfully withhold from her. Lynch and the corporate entities themselves are entitled to an accounting. In order for Cohen to explain his wrongful conduct, he had to raise fraudulent allegations of fraud and/or recission. This is one of the only ways in which Cohen could attempt to unwind the transaction involving the sale of assets to Sony re. the 2001 Traditional Holdings stock sale while taking the position that Lynch's ownership interest in Blue Mist is invalid. Lynch relied on Cohen and his representatives misrepresentations of many facts which turned out to be false and were known by these parties making the representations to be false. This has resulted in tremendous damage to Lynch, her sons, and others. On a final note, Leonard Cohen and Richard Westin never discussed a trust with Lynch regarding Traditional Holdings. No trust was set up and no trust documents exist. No verbal promises were made between Lynch and Cohen with respect to a trust, preserving assets (that Cohen raided) in Traditional Holdings, or with respect to other entities, and no document evidences any such alleged promises. In a meeting with DiMascio & Berardo, Kory referenced the fact that this was a community property state and Lynch may be entitled to palimony (50% of
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LCs assets). At that time, Kory was working towards a meditation with Westin, Greenberg, and others. Ira Reiner was handling the litigation aspects of the proposed meditations. Kory He "invited" Lynch and her representatives to attend the mediations. DiMascio & Berardo and Kory were attempting to reach a mutually beneficial settlement between you and Cohen and Lynch and were evidently discussing how to unwind Traditional Holdings. These parties agreed that Traditional Holdings should be unwound and Lynch has asked the IRS for a formal opinion with respect to that plan which involved merging Traditional Holdings into LCI. Kory also confirmed that Lynch was entitled to her 15% commission and owns 15% of the intellectual property. He advised Lynch personally that she has a cause of action against every one of Cohens representatives/advisers and assured her that he and Cohen would assist her with those matters. In January 2005, DiMascio & Berardo set forth the criminal and civil liability Cohen was facing with respect to his tax fraud re. Traditional Holdings, LLC alone. It seems overwhelmingly obvious that Cohens criminal tax fraud, penalties and interest, and civil penalties show bias and motive on his part. It does not, however, explain why Cohen would further defraud Lynch and attempt to profit from his tax fraud and wrongdoing. Criminal Liability: Leonard Cohen used an Annuity in order to defer the payment of taxes on the asset sale. There is nothing inherently wrong with an annuity transaction. However, criminal tax liability could arise if the IRS makes a determination that the annuity transaction had no substance and was designed for the sole purpose of evading tax liability. [IRC Section 7201 (the IRS is referred to as the Code).] In order to convict under Section 7201 of the Code, the basic elements that must be proven are (1) the existence of a tax deficiency, (2) an affirmative act constituting an evasion or attempted evasion of the tax,
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and (3) willfulness. An example of an affirmative act is the filing of a false return. Proof of willfulness is often unavailable and must be proven by circumstantial evidence, such as failure to report a substantial amount of income, the expenditure of large amounts of cash that cannot be reconciled with reported income, keeping false account books or other badges of fraud set forth in the Internal Revenue Manual. Reckless disregard for the truth or negligent failure to inquire into the facts underlying criminal activity is insufficient to support a conviction. A good faith misunderstanding of the law is a defense to a tax crime. Further, good faith reliance on the advice of counsel, after complete disclosure of all relevant facts, is also a defense to tax evasion. Under the Code, the defendant may be fined, imprisoned not more than 5 years, or both and made to pay the costs of prosecution and any special assessments. The maximum fine is $250,000 for individuals and $500,000 for corporations. The statute of limitations is 6 years from the commission of the offense. [IRC Section 6531.] In addition, there are two separate offenses under Section 371 of Title 18 that are typically asserted in cases of tax code violations involving several defendants, such as where corporate officers participate in the filing of the corporate tax returns. These offenses are (1) conspiracy to commit an offense against the U.S. and (2) conspiracy to defraud the U.S. Both offenses require (1) an agreement between two or more persons; (2) to achieve an illegal goal; (3) with knowledge of the conspiracy and with actual participation in the conspiracy; and, (4) at least one conspirator committing an overt act in furtherance of the agreement. In a tax conspiracy case, it must be shown that each defendant was not only aware of the tax consequences of his actions, but also that he had the specific intent to violate the tax laws. The conspiracy statute, along with the charge of aiding and assisting in the preparation of false returns (IRC Section 7206(2)), is among the governments most used tools in prosecuting attorneys, accountants, and other tax advisors who may have been involved in the activities of a taxpayer. Under a Title 18 violation involving conspiracy, each conspirator faces a fine, or imprisonment for up to 5 years, or both. The maximum fines are generally the same as those noted above. Civil Tax Penalties: There are over 150 civil penalties in the Code. They cover everything from the failure to file or pay a tax, to accuracy-related penalties, to information returns, to special penalties covering the activities of tax return preparers, tax shelter activities and beyond: Focusing solely on the obvious, we see the following potential problems with TH: (1) Accuracy Related Penalties where the amount of the penalty is 20% of the underpayment, (2) Substantial Understatement of Income Tax where the amount of the penalty is 20% of the underpayment, (3) fraud where the amount of the penalty is 75% of the portion of the underpayment attributable to the fraud, and (4) failure to pay taxes due where the penalty is of 1% for each month the tax is unpaid for a maximum penalty of 25%. Applying these penalties and acknowledging that the math is extremely rough, there is potential approximate tax liability as follows: $880,000 for substantial understatement and accuracy related penalties; $440,000 for fraud and $1,100,000 for failure to pay taxes for total penalties of approximately
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$7,260,000. This does not include interest which, at a rate of 5% per annum compounded and without effective compounding, equals about $650,000 for a total penalty and interest bill of $7,910,000. In addition, if the transaction is unwound and LC is determined to be the owner of the assets, he would have to pay tax on the sale which is the basis for the penalties and interest which amounts to about $2,500,000 (state and federal combined). Thus and in summary, at the end of the day, if the TH transaction is reported to the IRS, Leonard Cohen will be liable for taxes on the sale in the sum of about $2,5000,000, penalties of $7,260,000 and interest of $650,000 totaling $10,410,000. Additionally, among other issues, there is a tax deficiency resulting from Cohens failure to report the income from the Sony sale; an affirmative act constituting an evasion or attempted evasion of the tax; and willfulness involving, among other things, the fact that Cohen the annuity obligation to disappear from the 2003 federal tax return; Cohens failure to document and repay his loans within 3 years as required; and, Cohens failure to report the sale of certain assets to Sony on the 2001 tax return. Pursuant to Lynchs lawyers, similar penalties and interest existed with respect to at least two other Cohen entities. On February 7, 2005, DiMascio & Berardo wrote Lynch that they met with Kory and his associate. DiMascio & Berardo advised them that Lynch always relied on Cohen's advisers, Cohen was fully informed, and Lynch owned 99.5% of Traditional Holdings. Kory acknowledged that he did not have any clarity on what to do in the tax arena, had not been able to identify any causes of action, did not know the extent of the potential liability for any of the parties, let alone how the 2001 transaction was reported, and did not know how to unravel the entities so that the parties could go their separate ways. Kory was meeting with
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Michael Mesnick, a CPA formerly with the IRS, for guidance and assistance in evaluating the situation. DiMascio & Berardo further advised Lynch that Traditional Holdings had been suspended in Kentucky for failure to file statement of information and state tax returns had not been filed. DiMascio & Berardo discussed the fact that three sets of federal tax returns existed with respect to Traditional Holdings. These returns were dated March 3, 2001, March 5, 2001, and March 9, 2001. Lynch does not know what return was filed. Neither Kory nor DiMascio & Berardo felt comfortable contacting the IRS for copies of filed tax returns as they did not know whether this would alert the Service to possible inquiry into Traditional Holdings. They all agreed that they wanted to avoid this result. DiMascio & Berardo advised Robert Kory, once again, to look closely at the Indemnity Agreement Leonard Cohen and Traditional Holdings provided Lynch, at her request. Lynch felt that this letter, including the discomfort all parties felt with respect to contacting the IRS, was further evidence that she should report Cohens tax fraud to the IRS. In September 2010, the SEC charged Neal R. Greenberg with fraud and breach of fiduciary duty in the marketing and recommendation of his firm's hedge funds to investors. Greenberg misrepresented the diversification, risks and fees involved with investing in the Agile hedge funds to conservative investors who were dependent upon their investment income for some or all of their living expenses said Donald M. Hoerl, Director of the SEC's Denver Regional Office. Greenberg's unsuitable recommendations and misrepresentations deceived his
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advisory clients into believing their money was safe with him. Lynch met with representatives of City National Bank, and other investors, in an attempt to move the investments from Greenberg to a more reliable and suitable company but Cohen refused to entertain this possibility.
Lynch remains convinced that Cohen, Greenberg, and Westin, planned and coordinated their lawsuits and responses. In the instant matter, Leonard Cohen, filed a declaration which states, in pertinent part: I am the sole owner of ... Leonard Cohen Investments, LLC (LCILLC), a limited liability company established in 2000 to hold certain of my intellectual property assets and I am also the beneficial owner of Traditional Holdings, LLC (Traditional Holdings), a limited liability company formed in 2000 to hold the proceeds of a sale of certain of my artist royalties to Sony and to provide an annuity income to me for the remainder of my life. The attachment to the judgment, Item 6, reads, in pertinent part: It is declared that (1) Lynch is not the rightful owner of any assets in Traditional Holdings, LLC, Blue Mist Touring Company, Inc., or any other entity related to Cohen; (2) that any interest she has in any legal entities set up for the benefit of Cohen she holds as trustee for Cohens equitable title; (3) that she must return that which she improperly took, including but not limited to loans, and (4) that Cohen has no obligations or responsibilities to her. Leonard Cohen is not the sole beneficial owner of either Traditional Holdings, LLC or Blue Mist Touring Company, Inc. Lynch does indeed have an
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ownership interest in these entities which were not held in trust for Cohen. Furthermore, Leonard Cohen owes Lynch commissions and fees for services rendered so he does indeed have obligations and responsibilities to her. He also had obligations and responsibilities to Traditional Holdings, LLC and Blue Mist Touring Company, Inc., and other entities, as well. Leonard Cohen is indeed the sole owner of LC Investments, LLC. In his 2008 book, Gods, Gangsters & Honour, Steven Machat (entertainment industry manager, attorney, Marty Machats son and former partner), highlights some of Cohens questionable attributes and illicit conduct. This side of Cohen is concealed from the news media, adoring journalists, fans, and others.
Excerpts from Gods, Gangsters & Honour by Steven Machat The headline wasnt promising: Leonard Cohens Troubles May Be A Theme Come True. But the story was outrageous. Cohen had filed suit against his personal manager Kelley Lynch, accusing her of stealing more than $5 million while he spent five years at a Zen Buddhist retreat. I first met Leonard Cohen in October 1970 when I was at the University of Miami and I wasnt impressed. I found his songs and records depressing and, worse, Cohen seemed to wallow in his morbid tales of unrequited love, loss and so on. He always seemed to cast himself as the helpless victim. Leonard was desperate to get rid of his two managers, Judy Berger and Mary Martin, who he believed had stolen the rights to his songs and records early on in his career. Even back then, Cohen was convinced that women were ripping him off. He signed an agreement, and when he wanted to get rid of the contract, he accused everyone of ripping him off. You could say it became repeat behavior. My father duly got rid of Berger and Martin, set up a new company called Stranger Music for Cohen and agreed to manage Leonard for 15% as well as 15% of Stranger. The idea of the company was twofold: one, to maintain ownership of the copyrights duly created; and two, to minimize Leonards
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exposure to American tax, just like any other rich individual trying to minimize their tax liabilities. Then I got a call from Leonard, and it was a perfect example of how to tell when someone is lying. He said: Steven, you have a best friend in me forever. I will never harm you and I will always be there for you Why would he offer not to harm me? It suggested to me that he was thinking of harming me, and if he was thinking it, he would probably do it. Leonard sees truth only inside his illusions. I met up with Leonard at a Chinese restaurant on Wilshire in LA. Even by his standards, he was nervous. He was drinking whiskey, which Id never seen before, and it was only 12 PM. He appeared terrified. Unable to even look me in the eye, Cohen came to the point quickly: Your Dad ripped me off. Leonard told me he was convinced that my father had failed to exploit Cohens copyright to its full potential. But to me it was all bullshit. Leonard had to justify to himself why he was fucking us. Cohen controlled his copyright, not my father. The irony was that Cohen had total control over my father Do you know what happened to the $400,000 worth of bearer bonds in my fathers office? Bearer bonds are just unregistered bonds or paper money that are used to conceal ownership and, with it, tax liabilities. Cristini told me (who knows if this is true?) that he had found the bonds in my fathers office hours after he had died but the next day they disappeared. Cohen denied any knowledge of these bonds. I was unsure if they existed or were part of my fathers schemes cooked up to conceal Leonards money. Ive no problem with people trying to avoid tax, but as the years have passed, I couldnt help but smile at the apparent contradiction between Leonards public persona and his private business arrangements. This was a supposedly devout Buddhist with no interest in material possessions, who was all the same happy to put his trust in business managers and companies he created with his knowledge and consent whose sole aim was to minimize tax liability. Leonard then sold Stranger Music for a small fortune and Ive seen nothing from Cohen. Cohen said: Steven, you remember the 1988 tour? Flemming extorted $100,000 from me. He wanted 20% managerial commission, in addition to his promoters fees. He thought he was doing extra work for me and wanted me to pay him. Later, Flemming told me that Cohen was lying Leonard told me he would pay me a management commission. When I went to get the money after
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the tour, Leonard told me he couldnt pay me because he owed it to the Machats. So we settled on $100,000. Far from being the poet of the spirits, Leonard was a hustler using Buddhism as a facade. The next time I would see Leonard Wed just seen The Hand That Rocks The Cradle where Rebecca De Mornay plays the psychopathic nanny who stalks this family. Who should walk along but Cohen, who was holding hands with DeMornay, his girlfriend at the time. Cohen was extremely uncomfortable because he knew he had stolen from me and it was clear he couldnt get away quick enough. Neither could my son, because he took one look at DeMornay and ran. He was terrified because he thought she was the nanny in the film! It was clear that Leonard was also wary of me because, I guess, he thought I might be planning to sue him. Leonard told me that when he had gone off on his Buddhist retreat Kelley was left managing his business interests. He said: She started believing this money was hers and she started spending it. All of it. When I got back from my pilgrimage, I went to withdraw money left in the account to cover the draft. I was speechless. I didnt know where to look, where to turn or what to think. Cohen told me that with the help of his daughter, Lorca, he managed to piece together what had happened. All Leonard had to do to avoid U.S. taxes was tear up his green card, and stop living in and using the U.S. as his base. Its no secret that Leonard has also made a killing on the art market by selling his paintings, plus his touring of the last two years If thats true, it doesnt really tally with the clear implication from Cohen that he is a man who has been robbed of everything. Leonard told me before I left that he had actually offered Kelley a settlement Its clear that Cohen and his lawyers want to heap the blame on Kelleys shoulders for more than just revenge. Because Cohens pension assets were cashed in ahead of schedule they are liable to tax so they need to establish that this situation is her fault. The penalties could actually be greater than the tax itself. Leonard has cast himself into a hell of his own making. Leonard Cohen does indeed enter into agreements and then attempt to breach them by accusing people of ripping him off. That is precisely what has
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occurred in the present matter. It is my understanding that Machat & Machat had an agreement with Leonard Cohen that they would receive 15% commission for their management fees and they owned 15% of Stranger Music, Inc. The evidence supports precisely what Steven Machat has alleged for years. Leonard Cohen is consumed by greed and he uses corporations to evade taxes. Leonard Cohen is a hustler now using both Buddhism and Judaism as facades. He has now stolen from me, Steven and Marty Machat, and possibly Phil Spector and record producer Bob Johnson. Leonard Cohen did not return from a religious pilgrimage, attempt to withdraw money from a bank account to cover a draft, and discover that he was left without anything. This is merely a cover story that he has repeated for the news media, in court documents, and on the witness stand in Lynchs related trial. Cohen could not simply abandon his green card, stop living in the U.S., and return to Canada. He faced tax and residence problems in Canada as well. Leonard Cohen has made a fortune by touring and selling his paintings and other merchandise. Cohen has taken the position that he terminated Lynch and due to the wrongful termination, he owes her a tremendous amount of money. Cohen did indeed offer Lynch a settlement and as part of that settlement wanted her assistance in going after his advisers and/or representatives. The instant legal matter is a scheme on Cohens part due, in part, to the fact that Cohen used and/or wasted assets (including pension assets) ahead of schedule and he is liable for tax and penalties. Cohen also appears to have other tax problems with the IRS. He needed to establish that this situation was Lynchs
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fault which it was not. Leonard Cohen had many professional advisers handling the corporate, tax, accounting, and financial matters on his behalf. Leonard Cohen has simply attempted to blame his own conduct and wrongdoing on Lynch and possibly others. THE IRS AND FEDERAL TAX MATTERS Leonard Cohen's motive for relentlessly targeting Lynch has to do with his tax fraud that Lynch reported to the IRS. She was used horrendously by Cohen and others. Mike Taitelman, who briefly represented Lynch in the spring of 2005, spoke to Robert Kory and advised Lynch that if she agreed to assist Cohen, they would say she was used as a pawn; otherwise, they would accuse her of orchestrating this situation. This targeting continued in Lynch's 2012 trial. The following excerpts from Lynchs related 2012 trial before LA Superior Court relate to the default judgment in this matter and various tax issues that are at issue with respect to Leonard Cohen. They also address tax, financial, accounting, and business documents that Cohen steadfastly refuses to provide Lynch. Prosecutor Sandra Jo Streeter does not represent the Internal Revenue Service and is not in a position to falsely accuse Lynch of engaging in an alleged ruse that involves federal tax matters. Furthermore, Leonard Cohen does indeed have the information required to prepare and provide Lynch with the IRS required form 1099. Leonard Cohen steadfastly refuses to withdraw the K-1s issued to Lynch by his entity, LC Investments, LLC, although Lynch was never a partner on that entity. These K-1s were transmitted to the State of Kentucky and Internal Revenue Service for the years 2003, 2004, and 2005. Cohen also
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testified about the default judgment and alleged that the IRS accepted the default judgment. No evidence exists to support that testimony but the reason for the instant matter is wholly apparent. Prosecutor Sandra Jo Streeter: And indeed one of the things, the evidence will show, that she talks a lot about is tax fraud and the need to have the tax return. But the people will submit to you or show to you that this so-called business relationship, or not honoring their business relationship, indeed the most important thing that she mentions every so often the tax statement is merely a ruse. For example ... the evidence you will see ... that Ms. Lynch specifically asked for her K-1 form ... Lets talk a little bit about Ms. Lynchs need for the tax form or tax returns -- the evidence will show that Ms. Lynch was Mr. Cohens business manager. The evidence will show that Mr. [sic] Lynch -- Mr. Cohen has no clue as to what a W-2 form is, a 1099 is, a K-1 form. The evidence will show that Ms. Lynch is the one that had all of that information, knew all that information. Mr. Cohen did not have it, does not have it and does not understand what it means. Okay. (RT 43) Leonard Cohen Testimony: Q: Now, there is a mention of the K-1. The people ask you about some other documents. Do you know what a W-2 is? A: W-2? No, I dont. Q: How about a 1099? A: A 1099, yes, is issued by an employer to an employee. Pages 83-84: Page 280: Q: Okay. Now, do you know what a K-1 is now? A: I have a perfect -- a sense of what it is, but I wouldnt be able to teach it. Q: Okay. And is it fair to say that youve gotten emails through the years referencing a K-1. A: Thats correct. Leonard Cohen Cross: Two courts had given me a default --- or one court had given me a default judgment; the other court affirmed the default judgment. But, more significantly, the IRS accepted the results of that default judgment and awarded me a tax refund, so Ms. Lynch had no cause to ask me for any taxation information. (RT 282) That is the forensic report that Ms. Lynch has been asking for. The only problem is she doesnt like the results. (RT 282) [Traditional Holdings] So you had no involvement with the creation of this company? Cohen: I wasnt -- it was -- it was created in some -- some tax purposes. RT 286 The funds in that account they were running low? Cohen: I I discovered that they were being dissipated. Kelly: And in fact you had actually taken money from that account to buy homes, correct? Cohen: Yes, I had. Kelly: You took money from that account to buy a house for your son, correct? RT 287 Cohen: Thats correct. Kelly: To buy a house for your girlfriend? Cohen: Yes. Kelly: Its fair to say that you did take money from that account? Cohen: Thats correct, sir. RT 288
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Leonard Cohen testified that the IRS accepted the results of the default judgment but no evidence, including with respect to the documents in the IRS binder, support this position. Leonard Cohen's fraudulent refund was obtained on or around December 2005, well before the default was entered against Lynch in May 2006. In March 2007, over a year after Cohen received confirmation of this tax refund, Lynch met with Agent Sopko and her partner from the U.S. Treasury. Following that meeting, Lynch received an email from Agent Sopko advising her to report the allegations of Cohen's criminal tax fraud to Agent Tejeda/IRS and to provide him with evidence. Lynch has provided the IRS, FBI, DOJ, Treasury, and FTB with ample evidence supporting these allegations. She also provided the IRS Commissioner's Staff with the passwords to her email accounts and authorized the IRS to review and use any pertinent emails in any potential proceeding. Leonard Cohen suffered no theft loss and has attempted to convert his tax fraud into a profitable enterprise. Under IRC 165, an individual may deduct losses arising from fire, storm, shipwreck, or other casualty or from theft. Lynch has now formally challenged the fraudulent refund Cohen received since discovering it in the IRS binder in April 2012. It is now abundantly clear that these transactions were fraudulent sham transactions and the corporate structures nothing other than shell companies set up for the sole purpose of Leonard Cohens tax evasion and avoidance. In summary, Leonard Cohen hired Neal Greenberg, Richard Westin, and others, to put together a tax strategy that would allow him to convert ordinary income to capital gains tax treatment on the sale of stock.
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On May 12, 2006, a default judgment (that she was neither served nor notified of) was entered against her. The attachment to the judgment, Item 6, reads, in pertinent part: It is declared that (1) Lynch is not the rightful owner of any assets in Traditional Holdings, LLC, Blue Mist Touring Company, Inc., or any other entity related to Cohen; (2) that any interest she has in any legal entities set up for the benefit of Cohen she holds as trustee for Cohens equitable title; (3) that she must return that which she improperly took, including but not limited to loans, and (4) that Cohen has no obligations or responsibilities to her. The default judgment itself is evidence that Leonard Cohen is the alter ego of these corporate entities and has engaged in self-dealing. Cohen has failed to adhere to corporate formalities, failed to treat these entities as separate legal entities, and personally regards the entities themselves as an extension of himself and the assets as his personal assets. Disregarding a corporate entity is known as piercing the corporate veil. The following factors are relevant with respect to the Cohen related entities and his relationship to them. Cohen testified that the corporate books and records related to these entities were handled by his lawyer. There is an absence of and inaccuracies with respect to corporate records; Cohen has concealed and misrepresented members and/or shareholders; Cohen failed to maintain arm's length relationships with related entities; Cohen failed to observe corporate formalities in terms of behavior and documentation; Cohen intermingled the assets of the corporation and treated them as if they were his personal assets;
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There is a significant undercapitalization of the business entities. There is a lack of a business purpose with respect to these entities. Cohen personally siphoned corporate funds. Cohen clearly views himself as the dominant shareholder of a number of these corporate entities including, but not limited to, Blue Mist Touring Company, Inc. and Traditional Holdings, LLC. In fact, he views himself as the only shareholder although the corporate books, records, agreements, and other documentation, prove otherwise. These corporate entities were used as a faade for his personal dealings and the alter ego theory applies. Cohens fiduciary duties fall under three broad categories: the duty of care, the duty of loyalty, and duties imposed by statute. However, Cohens actual loyalties were subordinated by his personal interests. A fiduciary occupies a position of trust for another and owes the other a high degree of fidelity and loyalty. A director owes the corporation the duty to manage the entity's business with due care. Cohen engaged in self-dealing, acted in bad faith and negligently, and used these corporate entities to evade taxes. Cohen also committed fraud, breached many agreements and contracts, and appears to have engaged in illegal and/or criminal acts. These corporate entities are shams that have permitted Cohen to engage in fraud and other wrongful acts solely for his personal benefit. Cohen dominated the corporations finances and business practices so that the corporate entities have no separate will or existence; the control has resulted in a fraud or wrong, and/or dishonest or unjust acts; and (3) the control and harm directly caused Kelley Lynch, and others, egregious injury and unjust loss.
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Lynch had no fiduciary duty to Cohen. She merely owns 15% of Blue Mist Touring Company, Inc. and the intellectual property. With respect to Traditional Holdings, LLC, no fiduciary obligation would have arisen until approximately January 2012. By that time, Cohens tax lawyer (for Cohens sole benefit) extinguished the annuity from the federal tax returns and Cohens loans and/or advances totaled millions of dollars. He has steadfastly refused to repay those loans and/or advances. Furthermore, Cohen hired Neal Greenberg. Lynch found Greenbergs investment strategies reprehensible. Greenberg has now lost all of his clients money. Leonard Cohen disregarded the separate corporate entity and used these entities as a tool for personal reasons, merging their separate entities with that of the corporation and making the corporation merely their alter ego. Furthermore, Leonard Cohen most definitely engaged in tax fraud. Tax fraud against the federal government consists of the willful attempt to evade or defeat the payment of taxes due and owing (I.R.C. 7201). Lynch believes the evidence and facts prove an overwhelming attempt on Cohens part to evade and defeat taxes due and owing. His sense of greed and entitlement consumes him regardless of the image he presents to the public. Leonard Cohens vindictive, fraudulent, and retaliatory activity with respect to Lynch arises from the fact that she reported his tax fraud to the IRS. On March 6, 2007, Agent Kelly Sopko, U.S. Treasury Department, sent the following email to Lynch. On April 15, 2005, Lynch reported Cohens tax fraud to the IRS. Agent Sopko and her partner met with Lynch in March 2007 and the
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following email advises Lynch to contact Agent Tejeda, Internal Revenue Service, and provide him with evidence supporting the allegations that Cohen committed criminal tax fraud. Good afternoon Ms. Lynch, Per our meeting last week, I have found a solid IRS contact that will be better able to assist you. His name is Luis Tejeda, and he is the head of a fraud group at IRS. I spoke with him today and advised him that I would be passing on his contact information to you. Office phone and address redacted. He emphasized that you will need to put something in writing - a summary of all important details, with as much specificity as you have. (For example if you have copies of any paperwork involved, or social security numbers of people involved ) Once you pass the information on to him, he will review it and proceed accordingly. As standard practice, you will not get confirmation that your information was received. However, you may contact Tejeda to follow-up. I hope that this information is helpful to you. If there is anything else I can assist you with, please be sure to let me know. Kelly A. Sopko Special Agent Treasury IG for Tax Administration (TIGTA) Special Inquiries & Intelligence Division Lynch was not served the summons and complaint, or default judgment, in this matter. She was not served or notified of the fraudulent restraining order Cohen filed in Los Angeles on May 25, 2011. Lynch is convinced that Cohen, and others, set out to entrap her using fraudulent restraining orderes. Lack of jurisdiction in its most fundamental or strict sense means an entire absence of power to hear or determine the case, an absence of authority over the subject matter or the parties. When a court lacks jurisdiction in a fundamental sense, an ensuing judgment is void. The court lacked personal jurisdiction
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over Lynch, Blue Mist Touring Company, Inc., and Traditional Holdings, LLC. The default judgment itself is evidence of nothing other than theft and self-dealing on the part of Leonard Cohen. Lynch has a legal interest in Traditional Holdings, LLC, Blue Mist Touring Company, Inc., and other entities. She did not hold her legal shares of these entities as trustee for Cohens equitable title. That assertion is entirely fraudulent. Lynch has asked the Internal Revenue Service for a formal opinion with respect to this, and other, matters. That would include, but is not limited to, the fact that Lynchs federal tax returns were altered by default judgment. Finally, Lynch did not make charitable
contributions, in the form of tax payments, on behalf of Leonard Cohen or any Cohen related entity. Executed this 2nd day of August, 2013, at Los Angeles, California. declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct to the best of my knowledge. I
____________________________________ Kelley Lynch

Kelley Lynch vs. Leonard Cohen: Declaration

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It is my personal opinion that Leonard Cohen uses corporate entities

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incorporate herein and made a part hereof.

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Kelley Lynch, In Propria Persona

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FORFEITED DELAWARE 419 N LARCHMONT BLVD STE 91 LOS ANGELES CA 90004

1044 S KENISTON AVE LOS ANGELES CA 90019

419 N. LARCHMONT BLVD., #91

LOS ANGELES CA 90004

419 N. LARCHMONT BLVD., #91

Agent City, State, Zip:

LOS ANGELES CA 90004

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Registered Agent RICHARD A. WESTIN 3141 WARRENWOOD WYND LEXINGTON, KY 40502

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Membe Kelley Lynch r

Individuals / Entities listed at time of formation

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