CHICAGO (CN) – A federal judge has rejected the “incredible” explanation two men gave for the destruction of a hard drive containing thousands of documents related to claims that they looted more than $30 million from a real estate venture.
Krakow Business Park (KBP) was formed in Poland in 1997 to buy and develop real estate near the Krakow airport. It owns several large office buildings and a railway station.
In 2008, minority shareholders Jan Domanus and Andrew Kozlowski sued the company’s manager, Adam Swiech; several alleged shell companies; Swiech’s brother, Richard Swiech; another shareholder named Derek Lewicki, and several others. They claimed that the co-conspirators looted KBP of more than $30 million in a fraud scheme that has spanned a decade.
In May 2011, the defendants’ former counsel sent plaintiffs’ counsel 1,800 pages of documents recovered from a hard drive belonging to Richard Swiech. When the plaintiffs complained that the documents were incomplete, the defendants eventually produced 22,942 pages of documents from the hard drive.
Still unsatisfied with the production, plaintiffs asked to examine the hard drive themselves. They were told that it “crashed” in May 2009. Richard Swiech claimed that he sent it to Lewicki in Poland who used a “special software program” to “recover some files from the hard drive.”
Lewicki said he then gave the hard drive to a “friend’s children to play with” because it “was inoperable and useless, other than for the fact that it contained shiny, interesting parts.”
U.S. Magistrate Judge Nan Nolan ordered sanctions this month and said she will issue a “spoliation charge” that will tell the jury to presume that the lost evidence favored the plaintiffs.
“The court finds that much of defendants’ explanation for discarding the hard drive is incredible,” Nolan wrote.
“First, the production from the hard drive included many documents from 2010 and 2011 – after the hard drive was allegedly destroyed – including a facsimile dated August 18, 2010, an email dated January 3, 2011, an email dated April 28, 2011, and contracts revised on July 11, 2011, and November 11, 2011,” she added. “Second, Richard Swiech contends that in May 2009, he took the computer which contained the hard drive to the Apple Store for repairs, and attaches an invoice for that visit. But the invoice is clearly dated February 22, 2012, and Richard Swiech provides no explanation for the handwritten note on the invoice which states, ‘Repair done 5/19/2009.'”
“Furthermore, despite the subject of the hard drive and its contents being discussed at numerous status conferences – including several requests by Plaintiffs’ counsel to have it forensically inspected – defendants’ counsel never indicated that the hard drive had been destroyed two years prior. … Consequently, these facts lend credence to plaintiffs’ contention that the hard drive was destroyed during the midst of discovery in this litigation, after defendants produced some documents from it, and only after plaintiffs requested that it be forensically inspected.”
Noting that the plaintiffs have no evidence that any of the remaining documents on the hard drive would have supported their claims, however, Nolan said Lewicki and Richard Swiech did not act in bad faith.
“Mere proof that defendants intentionally discarded the hard drive does not demonstrate that adverse information was destroyed,” Nolan wrote.