Full opinion text
DECISION AND ORDER WARREN, District Judge. Now before the Court is the motion of defendant-counterplaintiff and plaintiff Pal-iafito America, Inc. (“Paliafito”), to hold Joy Lee, Jerry Lee, and David Loeffler, Esq. in civil contempt of court for violating several orders of this Court. Paliafito alleges the following contempts of court: (1.) that Joy Lee destroyed documents in violation of this Court’s order; (2.) that Joy Lee opened a new bank account in violation of this Court’s order; (3.) that Joy and Jerry Lee violated this Court’s order by causing Grip Toy products and money to be transferred between and among various defendant corporations; and (4.) that Joy Lee, aided and abetted by David Loeffler, violated this Court’s order by selling her stock in MAI Inc. For the following reasons, Paliafito’s motion will be granted in part and denied in part. FINDINGS OF FACT I.THE ACTORS 1. Paliafito America, Inc. (“Paliafito”), an Illinois corporation, is a defendant-counter-plaintiff in the underlying action, Select Creations v. Paliafito, Case No. 91-C-1240, and the plaintiff in this contempt proceeding. 2. Miryoung (“Joy”) Lee and Jong Sik (“Jerrold” or “Jerry”) Lee, husband and wife, are third-party defendants in the underlying case and defendants in this action. They are partners in the manufacture and sale of the “Grip toys” line of products. (PX 32, ¶¶4-7)- ' 3. Joy Lee, formerly a citizen of South Korea, is a naturalized United States citizen who resided in the State of California during all times relevant to this motion. (1 Tr. 80: 2-5 (Lee)). She is a counterdefendant in the underlying litigation, and is named as one of the “Mantae defendants” in this Court’s First Supplemental Writ of Attachment, Preliminary Injunction, and Appointment of Receiver (“the First Supplemental Writ”). (PX 100 ¶ 1). Until May of 1993, Joy Lee was President and CEO of MAI, Inc. (4 Tr. 816: 19-21); (PX 109). Until at least July 8, 1993, Joy Lee owned the issued and outstanding stock of MAI, Inc. (PX 136 and PX 242 (stock transfer)). 4. Jong Sik (“Jerry”) Lee is a citizen and resident of Korea and the husband of Joy Lee. He is one of the eounterdefendants in the underlying litigation and one of the “Mantae defendants” as defined in the First Supplemental Writ. (PX 100, ¶ 1). Jerry Lee was the majority owner of the Korean company, MAI, Ltd. 5. David Loeffler, Esq., is a partner in the law firm of Krukowski & Costello, S.C. He has been counsel of record for the Lees since April 27,1993. (8 Tr. 1655: 3-5 (Loef-fler).) 6. Many Amazing Ideas, Inc. (“MAI”) is an American corporation which was owned and operated by Joy Lee. MAI was primarily engaged in the business of importing and distributing Grip Toy products. On February 22, 1993, MAI filed a Chapter 11 bankruptcy petition. MAI operated as a debtor-in-possession (“DIP”) until December 8, 1993, when a Chapter 7 trustee was appointed. 7. From April 2, 1993 until May 28,1993, Robert Wilcox was Chief Operating Officer of MAI, and from May 28, 1993 until at least December 8,1993, Wilcox was also President, Chief Executive Officer, Treasurer, and Secretary of MAI. (6 Tr. 1108: 2-12 (Wilcox)). 8. MAI Ltd. was the Korean operation owned and operated by Jerry Lee which, until December of 1992, was the principal supplier of Grip Toy products to MAI, Inc. (3 Tr. 575; 8-576: 12; 583: 8-25 (Lee)). MAI, Ltd. is defined as one of the “Mantae defendants” in the underlying action. II. BACKGROUND A. The Underlying Action 9. On December 11, 1991, Paliafito filed its first amended counterclaim and third-party complaint in this action, alleging that the Lees and MAI had breached their contract with Paliafito, committed frauds against Paliafito, and violated the Racketeer Influenced and Corrupt Organizations Act. Pal-iafito also moved for preliminary writs of attachment and a preliminary injunction, on the grounds, among others, that the Lees and MAI were remitting virtually all of the proceeds from the sale of Grip Ball back to Korea so that, even if and when Paliafito obtained a judgment, there would be no funds in the United States left to satisfy it. See Select Creations, Inc. v. Paliafito America, Inc., 830 F.Supp. 1213, 1215 (E.D.Wis. 1993). 10. This Court conducted hearings on Paliafito’s motion for four days in January and another six days in April 1992. Id. During the course of the 1992 hearings, Pal-iafito presented strong evidence that the Lees operated a web of corporate pools through which they could transfer and hide assets. (PX 32 at 195 (Conclusions of Law ¶ 89(c))). 11. As more fully described below, after Paliafito filed its counterclaim and motion, the Lees began to take steps designed to frustrate the orders this Court might — and ultimately did — enter to preserve evidence and to protect Paliafito’s ability to collect a judgment. The totality of the evidentiary record before this Court, together with Joy Lee’s demeanor while testifying before this Court, her repeated impeachments on prior inconsistent statements (many of them sworn), her evasive manner of testifying, the absurdity of some of her “explanations,” compels the conclusion that the Lees have engaged in a pattern of willful, and flagrant contempts of this Court’s orders. B. The Lees Control Several Corporations Worldwide Through Which They Can Hide Assets 12. Puff Pac Production Limited and Mi Jong Industries were Lee-controlled companies located in Korea. 13. During the evidentiaiy hearings on Paliafito’s motion for a writ of attachment in early 1992, Paliafito identified Puff Pac Productions as being part of the Lees’ corporate pool. (PX 32 at 5, Findings of Fact ¶¶ 14-16). 14. Puff Pac Productions was engaged in the manufacture of Grip Ball products and was owned by Jerry Lee and his family. (PX 32 at 5, Findings of Fact ¶¶ 15-16). 15. At the time, Jong Ok Lee, Jerry’s brother (5 Tr. 858: 2-4 (Lee)), and Ho Seop Song, Joy’s brother (1 Tr. 140: 5-7 (Lee)), were the directors of Puff Pac Productions Limited. (PX 18). 16. On April 15,1992, almost immediately after the close of the evidentiary hearings, Puff Pae Production Limited changed its name to “Mi Jong,” and Jong Ok Lee and Ho Seop Song resigned as directors. (PX 18). 17. “Mi Jong” had been the name of another Lee-controlled company (1 Tr. 141: 11-21 (Lee)) which, on February 10, 1992, had changed its name to “Mai Moolsan.” (PX 20). Jerry had been auditor of that company, but on August 7, 1992, it was wound up by vote of the shareholders and Jong Ok Lee, Jerry’s brother, was appointed liquidator. (PX 20). 18. Puff Pac/Mijong obtained over $3 million from the sale of Grip Ball. (PX 53 at MAI-86). 19. The Lees control the Indonesian manufacturing company, P.T. Kartika Sinarnusa Semesta (“PTKSS”), also called PTMJ Products. (1 Tr. 102-103: 2-25, 1-14 (Lee)). 20. On June 12, 1992, Nowak faxed a power of attorney to Joy Lee which authorized Jong Ok Lee, Jerry’s brother, to act on behalf of MAI in connection with setting up an Indonesian operation. (PX 3). 21. Starting in June 1992, Joy caused MAI to invest over $255,000 of MAI money in the Indonesian operation. (PX 6). 22. In the summer of 1992, Jong Ok Lee set up and ran PTKSS. Jong Ok Lee used money obtained from the sale of Grip Ball to start the Indonesian operation. (1 Tr. 187: 13-16 (Lee)). 23. Jong Ok Lee worked in the Grip Ball business. (1 Tr. 187: 10-12 (Lee)). He was one of the original owners of Puff Pac Production, later renamed Mijong Industries. (5 Tr. 858: 8-25 (Lee)). 24. Joy Lee testified that Jong Ok Lee was the owner of PTKSS and that MAI had some investment in the operation. (5 Tr. 863: 8-13 (Lee)). On a corporate application dated August 5, 1992, MAI is listed as the 95% owner of the Indonesian joint venture, and Jong Ok Lee is listed as a representative of MAI. (PX 5 at pp. 1 & 4). 25. The setup of the Indonesian operation was not documented, but rather was formed pursuant to an oral arrangement. (5 Tr. 857-58: 9-25, 1 (Lee)). 26. On August 20, 1992, Joy requested her office to Federal Express to Nowak three blank checks, documents relating to the establishment of the Indonesian operation, and financial statements relating to the Korean companies. (PX 4). 27. Joy claimed that she had “oral understandings” with her brother-in-law, Jong Ok Lee, that if MAI invested a given amount in the Indonesian operation, he would “give” back his stock in the Indonesian operation to MAI. (5 Tr. 857-58: 9-25, 1 (Lee)). 28. The Lees’ attorneys provided advice to them on protecting their assets. 29. On May 29,1992, L. Michael Rudolph, Esq. provided Keith Nowak, Esq. with a draft memorandum which outlined a plan to insulate the Lees’ corporate assets from creditors via corporate structure and organization. (PX 278). The memorandum was produced from MAPs files. (PX 278 at Bates MAI 1120). 30. On September 1, 1992, Dick Ferdinand, a financial consultant, at Merrill, Lynch, wrote to Joy regarding her plans to restructure her companies and to prepare for a public offering. (PX 9). He wrote that she would “be in a much stronger and safer position if a significant portion of [her] personal net worth [was] separate from her holdings in MAI” and suggested that they meet to “plan a strategy” to accomplish this goal. (PX 9). 31. Joy’s financial advisors viewed the Korean and Indonesian operations as parts of the Lees’ corporate holdings. 32. On October 14, 1992, Merrill Lynch submitted a proposal, which was accepted by Joy on behalf of Grip Toys, Inc., “to conduct a strategic analysis ... for Grip Toys, Inc. and its affiliates Scatch Europe B.Y., MAX, Ltd. Co., and M.A.I. Indonesia_to determine the amounts that might be realized through a financial recapitalization involving a private placement or a public offering of debt or equity securities.” (PX 10 at 1). 33. One of the stated objectives was “to determine the valuation of the Company [previously defined as Griptoys, Inc., and its affiliates Scatch Europe B.V., M.A.I., Ltd., Co., and M.A.I. Indonesia as a whole and for its three principal operations (United States, Korea, and Indonesia) individually." (PX 10 at 1) (emphasis added). 34. Joy Lee herself even indicated that the Korean and Indonesian operations were under her control. 35. In the autumn of 1992, Joy created several charts (PX 12, 13A, 13B) which indicated that PTMJ Products (the Indonesian operation) was owned 100% by MAI. The charts also indicate that “Mi Jong” or “Mi-jong Korea” were affiliated with MAI. “Mi Jong” was owned by a “Lee Family Member.” (PX 13A, 13B). Joy affirmed that Jerry’s brother started Mi Jong. (1 Tr. 160: 15-16 (Lee)). 36. The accounting firm of Coopers & Lybrand viewed the Korean and Indonesian operations as affiliated with the Lees. 37. In work papers prepared by Coopers & Lybrand on or about November 30, 1992, the firm examined transactions between MAI and “related parties.” (PX 146; PX 147). In plaintiffs exhibit 146, Coopers & Lybrand noted that “MAI purchases inventory from the following related parties 1) MAI, Ltd., 2) Mijong Industry Inc. 3) Puff Pac Production Inc." (PX 146) (emphasis added). In plaintiffs exhibit 147, Coopers & Lybrand noted that “MAI purchases inv[entory] from related parties, earns commissions from related parties, and has loans to employees, stockholders and affiliated companies” and that “Joy Lee (only BOD member) approves all material related party transactions.” (PX 147). C. The Value of the Lees’ Companies 38. On October 18, 1992, in a memorandum written in Korean to her husband, Joy reported that “according to our financial statement ... 30% of our stock value is approximately $20,000,000 to $35,000,000.” Joy also testified that she wrote in PX 11 “we will evaluate Korea, USA, Indonesia or all separately in order to maximize the value of the whole package.” (1 Tr. 156: 14-16, 157: 1-13 (Lee)). 39. As of December 1992, MAI was an $80 million business. (2 Tr. 223: 3-8 (Lee)). 40. In one and one-half years, world-wide Grip Toys sales exceeded $84 million. (PX 53) 41. In 1992, the Lees’ Korean operation exported over 35% of the Republic of Korea’s total toy exports. (2 Tr. 223: 9-17 (Lee)). 42. The success of Grip Toys’ sales led to the Lees’ accumulation of nearly $30 million in assets in Korea. (3 Tr. 575: 16-20 (Lee)); (PX 15 at p. MAI-844, MAI-845). 43. MAI, Ltd. in Korea also recognized substantial profits. For the six month period ending June 30, 1992, MAI, Ltd. enjoyed net income before taxes of $4.3 million. (PX 15 at MAI 848; PX 144 at pp. 1-4). 44. From February 23, 1992 until December 28, 1992, MAI, Inc. in the United States transferred over $8.9 million to Korea to MAI Ltd., Mantae Co. and PTKSS Indonesia. (PX 57 at 4 & 30; PX 64). These funds transferred to Korea reduced the debt owed to the Korean banks by Jerry Lee and his companies (2 Tr. 261: 1-7 (Lee)) and correspondingly reduced the banks’ claim against the collateral securing that debt. (1 Tr. 174-75: 25, 1-11 (Lee)). 45. Joy Lee amassed a personal net worth in the United States, as of November 19, 1992, of $3.2 million. (PX 26 at p. MAI 1120-3242). 46. Joy Lee maintained personal assets in bank accounts in at least one foreign country. She maintained a personal bank account at the Hong Kong Bank in Vancouver, Canada (1 Tr. 87-88: 9-25, 1-3 (Lee)), and she used that account to bring money into the United States to settle a lawsuit. (1 Tr. 90-91: 11-25, 1 (Lee)). D. This Court’s December 1st Decision and Order 47. On December 1, 1992, 828 F.Supp. 1301 the Court issued its Decision and Order requiring the Mantae defendants to make available sufficient assets to be attached and finding that Paliafito had established a likelihood of proving that the Mantae defendants had engaged in fraud and racketeering. (PX 32). 48. At the end of November 1992, Joy was aware that the Court was about to render this decision. (1 Tr. 187-88: 17-20, 6-23 (Lee)). Also pending was Paliafito’s motion for leave to file a second amended counterclaim to add, among other parties, MAI, Ltd. Select Creations, Inc. v. Paliafito America, Inc., 830 F.Supp. at 1215, (referencing the Motion of Paliafito America, Inc. for Leave to File a Second Amended Counterclaim and Third-Party Complaint (filed April 17, 1992)). By the end of November, it was the Lees’ plan to close the Korean operation and to move the main source of manufacturing of Grip Toy products to Indonesia. (1 Tr. 188: 19-23 (Lee); PX 23). E. MAI, Ltd.’s Purported Bankruptcy 49. The Lees claim that on December 26, 1992, MAI, Ltd. went into bankruptcy in Korea. (PX 37; 5 Tr. 891 (Lee)). 50. For the following reasons, the Court finds the Lees’ claim to be false. 51. Based on the Declaration of Min Han, submitted in support of Paliafito’s First Request for a Determination of Foreign Law on its Contempt Motion, the Court makes the following determinations of foreign law under Rule 44.1 of the Federal Rules of Civil Procedure: (1)that, under Korean law, an insolvent corporation, or creditors, may wind up the corporation’s affairs in one of the following three ways: (a) liquidation under the Korean Bankruptcy Law (Declaration of Min Han (“Han Dec.”) ¶¶ 3^4); (b) corporate reorganization under the Corporate Reorganization Law (Han Dec. ¶¶ 5-6); (c) dissolution and liquidation by resolution of shareholders or otherwise in aceor-dance with the Korean Commercial Code (Han Dec. ¶¶ 8-9); (2) that, under the Korean Civil Procedures Law, the commencement of a bankruptcy or a corporate reorganization proceeding is registered on the company registry on file with the Commercial Recording Office of the District Court in the district where the corporation resides (Han Dec. ¶¶ 4-6); (3) that, under the Korean Commercial Code, when a corporation is dissolved by a resolution of shareholders, the corporation must register such dissolution on the company registry on file with the Commercial Recording Office of the District Court in the district where the corporation resides (Han Dec. ¶ 9); and (4) that, under the Korean Civil Procedures Law, a shareholder or a creditor of a corporation may request a certified copy of court records relating to a bankruptcy or a reorganization proceeding commenced on behalf of the corporation. (Han Dec. ¶7). 52. As set forth above, if a bankruptcy, a reorganization proceeding, or a voluntary dissolution has indeed been commenced on behalf of MAI, Ltd., the fact of such commencement would be reflected on its company registry, plaintiffs exhibits 16 and 17. It is not. Accordingly, the Court finds that MAI, Ltd. never went into bankruptcy or any other proceeding to liquidate its assets. 53. However, it is possible that MAI Ltd. may have been technically insolvent, though still legally in existence as a “Company in Dormancy.” (Declaration of Jin Ouk Kim at 5-7). F. Creation of MJ Korea as the Lees’ Korean Front 54. For the following reasons, the Court concludes that the Lees created and controlled “MJ Korea” as a front for their operations, including MAI, Ltd. in Korea at least through the summer of 1993. 55. On December 29, 1992, three days after the Lees claim to have put MAI, Ltd. into bankruptcy, MJ Korea was incorporated. (PX 38). 56. According to Joy, in just a few days, people who had worked for Jerry Lee at MAI, Ltd. set up MJ Korea with an investment of about $60,000 and took over an existing Scatch Europe order for hundreds of thousands of sets of Grip Football. (5 Tr. 891-92: 14-25, 1-2 (Lee); 3 Tr. 601: 12-20 (Lee)). 57. Jerry Lee also went to work for MJ Korea and continued to correspond with the Scatch Europe people. (5 Tr. 893: 3-9 (Lee)). 58. Within days after the supposed bankruptcy of MAI, Ltd. and the creation of MJ Korea, the Lees wrote to Scatch Europe to request that payments on Letters of Credit be switched to MJ Korea for games manufactured by Mijong Industries. Thus, on December 31, 1992, Joy sent a letter to Jan Smit at Scatch Europe explaining that “M.A.I. Ltd. will be remained under Chapter 11 (Similar) about 6 months at the most then we will be out of it. I think our plan could have a lot of future benefits if our sales side did not slow down.” (PX 40). 59. On January 2, 1993, Jerry sent a letter to Wil Van Bladel at Scatch Europe advising him of MAI, Ltd.’s bankruptcy and the movement of manufacturing to Indonesia. (PX 37). As you have been informed by Joy, and as we have already explained to you while you were in Korea last month, all the manufacturing facilities under M.A.I. Korea is in the process of being transferred to the facilities in Indonesia. As of December 26, 1992, M.A.I. Korea has decided to file Chapter 11 which in views of others may have either negative or positive implications. (PX 37) 60. Jerry also represented that the production of Grip Football was under Mi Jong Industry’s control and that payment should be made to MJ Korea: [T]he production and export of Grip Football has been completely under Mi Jong Industry’s control from the initial stage. Thus, there will be no problem with the production and supply of Grip Football to Scatch Europe BV. Therefore, I would like to request the following amendments be made on L/C No. 8A/ 9250348: ... The beneficiary of the L/C [should be switched] from M.A.I., Ltd. to MJ. Korea, Ltd. (PX 37) (emphasis added). 61. When confronted with Jerry Lee’s statement that Grip Football was under Mi-jong Industries’ control, not MJ Korea’s control, Joy stated: “[Y]ou sometimes have to say things to make the whole thing work.” (5 Tr. 897: 14-15 (Lee)). 62. Plaintiff’s exhibits 37 and 42, which demonstrate that Jerry conducted business on behalf of MJ Korea in January and February of 1993, contradict Joy’s claim that he had first become employed by MJ Korea when the Hans bought MJ Korea in April 1993. (4 Tr. 743: 5-15 (Lee)). 63. On or around February 1993, Ray George, MAPs vice president for sales, (1 Tr. 167: 7-8 (Lee), drafted a memorandum which stated: MAI is vertical in that it controls its own manufacturing with plants in Korea and Indonesia. This is not true for many toy companies who depend on outside sources for manufacturing and are thus at the mercy of these outside manufacturers. (PX 14 at 4) (emphasis added). 64. At the time Ray George’s memorandum (PX 14) was drafted, sometime after the February 1993 Toy Fair (5 Tr. 875-76 (Lee)), MAI, Ltd. had purportedly been “bankrupt” for nearly two months and only MJ Korea remained in business. 65. In February 1993, Jerry conducted business on behalf of MJ Korea and MAI, Ltd., entities that shared the same telephone number — his. On February 8, 1993, Jacqueline Jean, an MJ Korea employee, wrote a letter to Pekka Immonen on M.A.I., Ltd. letterhead. Ms. Jean wrote, “I was informed last weekend from our head quarter in L.A. that we M.A.I., Ltd. had just given the exclusive right of European Market to a distributor and exporter ‘Scatch Europe’ in Nether-land.” (PX 41). 66. The February 8th letter, written on M.A.I., Ltd. letterhead, lists the telephone numbers for M.A.I., Ltd. to be 582-0551 and 582-0553. (PX 41). 67. On February 12, 1993, Jerry wrote a letter to Wil Van Bladel at Scatch Europe on MJ Korea letterhead. (PX 42) The letterhead for MJ Korea lists telephone numbers 582-0551 and 582-0553, the same telephone numbers which M.A.I., Ltd. listed on its letterhead on plaintiffs exhibit 41. The number 582-0551 was also Jerry’s home telephone number. (1 Tr. 210: 3-15 (Lee)). 68. In order to explain how Jerry’s home telephone number could be the same as MJ Korea’s, Joy claimed at the hearing on December 13, 1993, that Jerry “moved” M.J. Korea’s telephone number, 582-0551, to his home after M.J. Korea moved to bigger offices. (1 Tr. 210-11: 12-25, 1-5 (Lee)). She affirmed that Jerry was then using this telephone number as his home telephone number. (1 Tr. 212: 10-12 (Lee)). 69. Later, at the hearing on January 5, 1994, she changed her testimony. Joy testified that MJ Korea’s first office was in a residential apartment that Jerry had occupied: Actually, I clearly found out afterward because I wasn’t sure what happened, was' between, and so I called and found out they had a small office, MJ Korea had small office, very beginning, which was not an office, but [in] Korea there’s really [no] rule that residential area cannot be used for office, there’s no rule for that. So the office of MJ very initially was in an apartment. So MJ had got the phone number from the phone company of 582-0551. At the time Jerry didn’t have a place to stay, because the real estate where he used to stay was collateralized to the bank, so they had to kick him out. So he stayed in one of the rooms of the MJ’s office, which was an apartment, so MJ moved out from this apartment to office later, and Jerry stayed there for longer than MJ moved out. (5 Tr. 900: 4-21 (Lee)). 70. Although Joy claimed that 582-0551 was “never” MAI, Ltd.’s phone number (5 Tr. 901: 6-9 (Lee)), an MAI, Ltd. fax (PX 41) shows otherwise. 71. The Korea Exchange Bank (“KEB”), from whom the Lees had obtained financing, also treated MJ Korea as an operation controlled by and affiliated with the Lees. The Korea Exchange Bank acted as the agent for all of the other Korean banks to which MAI and the Lees owed money. (2 Tr. 232: 3-6 (Lee)). 72. On January 13, 1993, the manager of the Korea Exchange Bank’s Nonhyun-dong South Branch faxed a letter to “Miryoung Song” (ie., Joy Lee), enclosing a UCC security agreement to be signed. (PX 46). The KEB’s branch manager also linked future financing to MJ Korea to payment of the MAI, Ltd. debt: I would like to request your cooperation to pay back the credit you have with-,our bank before the end of January 1993, either by selling out the items in stock in the U.S. ... or by completing the sales of the company which has opened the stand by L/Cs. As you already know, not only our branch is in the very difficult situations but also in order for us to offer financial support for the newly established company M.J. Trading Co., Ltd., the delayed payment for the dishonored credit by MAI Korea should be cleared off as soon as possible. (PX 46) (emphasis added). 73. On January 20, 1993, Joy signed a security agreement on behalf of MAI pledging all of MAI’s assets to secure obligations to the Korea Exchange Bank, Jerry, Mijong Industries, Inc., and MAI, Ltd. (PX 43). The Korean Exchange Bank had requested the law firm of Kellow & George to prepare the security agreement documents. (PX 45). (Joy and Jerry had personally guaranteed the “documents upon acceptance” (“D/A”) obligations to the Korean banks. (2 Tr. 228: 4-9 (Lee))). 74. Thereafter, the Korea Exchange Bank did, in fact, provide D/A financing to MJ Korea. (5 Tr. 904-06: 1-25, 1-25, 1-2 (Lee)). G. MJ Korea Sold to Han Family 75. This Court has already found that “[o]n April 21, 1993 the Hans purchased eighty-five percent of the shares of MJ Korea. A fifteen percent interest was retained by Jong Ok Choi, a member of the original shareholder group.” Select Creations, Inc. v. Paliafito America, Inc., 852 F.Supp. 740, 748-49 (E.D.Wis.1994) (citations to record omitted). {See also PX 38, 39; 3 Tr. 606: 17-607: 16; 5 Tr. 1028: 14-19; 7 Tr.1384: 8-1387: 8 (Wilcox)). 76. The Court further concluded that Min Suk Han was elected chairman and representative director of MJ Korea, and that, “[tjhereafter, the Hans, through MJ Korea, ostensibly conducted the Grip Toys business.” Select, 852 F.Supp. at 749 (citations to record omitted). {See also PX 38, 39; 7 Tr. 1371: 4-11 (Wilcox)). 77. Mr. Min Suk Han is a Korean business man, approximately 72 years of age. (7 Tr. 1407: 1 (Wilcox, J. Lee)). He is no relation by blood or marriage to Joy or Jerry Lee. (3 Tr. 607: 3-4; 8 Tr. 1599: 7-10 (Wilcox, J. Lee)). 78. Ms. Yang Ok Han is also a Korean national. She is the daughter of Min Suk Han, and a director of MJ Korea (PX 38, 39). She is not a relation of the Lees. (8 Tr. 1599: 7-10). 79. Despite the sale of the MJ Korea stock to the Hans, the Lees continued to exercise control over the operations of MJ Korea, at least through the summer of 1993. See Select, 852 F.Supp. at 749-50. {See also FOF 158; 159, infra.) 80. Moreover, on July 14, 1993, Russell Clementson, an attorney with the United States Trustee’s Office, met with Herbert Katz and Alison Zirn from Strooek & Strooek & Lavan, the law firm representing MAI Inc. in bankruptcy. (5 Tr. 1041-42: 16-18,15-16 (Clementson)). Mr. Clementson asked what the relationship of MJ Korea to MAI was. (5 Tr. 1042: 8-12 (Clementson)). Mr. Clem-entson testified that Katz and Zirn told him they weren’t certain who owned or controlled MJ Korea and that they were investigating. (5 Tr. 1042: 17-21 (Clementson)). H. The February 19, 1993 Writ and MAI’s Bankruptcy 81. On February 16, 1993, the Court heard argument on the issue of how much of the Mantae defendants’ assets were to be attached. (PX 60). Before Paliafito brought the matter to the Court’s attention on February 16, the Lees had never disclosed that, on December 31, 1992, Joy had given the Lieberman & Nowak law firm a security agreement in MAI’s inventory and receivables. (PX 60 at 29-30). 82. On February 18, 1993, Joy submitted a declaration to the Court promising not to pledge MAI assets until such time as the Court determined the proper amount of the attachment. (PX 215). She faded to disclose that one month earlier Joy had already pledged all of MAI’s assets to the Korean Exchange Bank, her husband, Mijong Industries and MAI, Ltd. (2 Tr. 330-31: 20-25,1-7 (Lee); PX 43; PX 60 at 71, 73-74). 83. On February 19, 1993, the Court issued the First Supplemental Writ of Attachment, Preliminary Injunction, and Appointment of a Receiver which, in part, required the Mantae defendants to deposit $8 million with the Receiver. (PX 61). 84. On February 22,1993, MAI, Inc. filed a Chapter 11 bankruptcy petition, prepared and signed by Strooek & Strooek & Lavan (“Strooek”). (PX 63; 68). 85. MAI had been referred to Strooek on January 12, 1993 by letter from James Lee of DeBro & Lee to Herbert Katz of Strooek. (PX 44). James Lee had written to Katz that MAI was interested in filing for Chapter 11 so that the Lees could sell MAI’s assets free and clear of liens. He also had noted that MAI had a firm offer for its assets for $20 million. (PX 44). 86. On February 23, 1993, Ray George wrote a memorandum to MAI’s sales representatives explaining why MAI had filed a Chapter 11 petition: “[D]ue to the judge’s order from Wisconsin in regards to the MAI-Paliafito case, in order to set aside the order from the judge and to continue business as usual, MAI filed for Chapter 11 protection on February 22, 1993.” (PX 73). 87. John Waldron also wrote a memorandum to MAI’s office staff for Joy explaining the purpose of MAI’s bankruptcy filing: “MAI and Mrs. Lee intend to be on top again.” (PX 74). 88. After the bankruptcy petition was filed, one of the very first things that Joy wanted Stroock to do was to look into whether the bankruptcy stay could be extended to cover her and her husband. (2 Tr. 263: 20-24 (Lee)). That was because Joy knew that Paliafito was pursuing her and her husband in court in Wisconsin. (2Tr. 267: 1-3 (Lee)). II. THE FIRST ALLEGED CONTEMPT: JOY LEE’S VIOLATION OF THE COURT’S JANUARY 24, 1992 ORDER 89. On January 24, 1992, the Court entered an order providing, in pertinent part, that “[t]he parties or their agents, attorneys, and others under their direction, shall not destroy or dispense with documents until further order of the court.” (PX 75). 90. Joy received the Court’s January 24, 1992 Order from Nowak. (2 Tr. 331-32: 24-25, 1 (Lee)). Nowak explained the Order to her and she understood it and circulated it among MAI employees. (2 Tr. 332-33: 22-25, 1-4 (Lee)). 91. On February 24, 1993, two days after it filed its bankruptcy petition, MAI circulated a memorandum among its employees which stated: EFFECTIVE THIS DATE, ALL DOCUMENTS (letters, faxes, etc ...) ARE NOT TO BE THROWN IN THE TRASH. THEY ARE TO BE PUT INTO A BOX WHICH WILL BE PLACED BY BOTH FAX MACHINES. AT THE END OF EACH DAY, DANNY WILL GATHER ALL PAPERS FOR SHREDDING. THIS IS TO BE DONE SO THAT NO DOCUMENTS FALL INTO THE WRONG HANDS. PLEASE FOLLOW THESE INSTRUCTIONS, INITIAL THE BOTTOM BY YOUR NAME AND RETURN IT TO ME. (PX 76). 92. The “wrong hands” referred to in the memorandum were Paliafito’s. (2 Tr. 333-34: 23-25, 1 (Lee)). 93. Joy and other MAI employees initialed the memorandum. (2 Tr. 333, 334-35: 13-14, 2-25, 1-12 (Lee); PX 76). 94. Pursuant to the memo, documents were destroyed for “security reasons,” (2 Tr. 335: 13-15 (Lee)), including documents Joy thought were protected by the lawyer-client privilege. (6 Tr. 1213-14: 14-25, 1-19 (Wilcox)). 95. MAI did not keep a record of documents that were shredded, and there was document shredding going on at times when Joy was not there to see it. (2 Tr. 336-37: 18-25, 1-2 (Lee)). According to Joy, “nobody can know” which documents were or were not shredded. (2 Tr. 342: 9-16 (Lee)). 96. The shredding continued for five or six weeks, or until about April 3, 1993, when Wilcox unplugged the shredder after becoming MAI’s chief operating officer. (6 Tr. 1210-12: 19-25, 1-25, 1-7 (Wilcox); 4 Tr. 811: 4-9 (Lee)). IV. CONSIDERATION AND ISSUANCE OF THE APRIL 7TH WRIT A. The Lees, Stroock, Nowak and Loef-fler Confer 97. In early March 1993, Paliafito circulated its proposed First Supplemental Writ. (PX 81). 98. On March 4, 1993, Arnold Quittner at Stroock wrote a letter to Joy, with a copy to Nowak, reviewing the proposed First Supplemental Writ. (PX 81). Quittner wrote that Joy’s stock in MAI was not a marketable security that the receiver could take into possession without violating the automatic stay: We have also taken the position that the stock in MAI owned by Joy Lee is not a marketable security, and the attempt by the receiver to take it into custody would be an attempt to exercise control over MAI, which would be a violation of Bankruptcy Code § 362, the automatic stay. (PX 81). 99. Quittner concluded that MAI need not file an opposition to the proposed supplemental writ. (PX 81). Joy read Quittner’s letter and discussed it with him. (2 Tr. 353: 21-22 (Lee)). 100. Joy also requested Stroock to give her legal advice with respect to the disposition of her personal assets. (5 Tr. 912: 3-9 (Lee)). On March 5, 1993, Alison Zim at Stroock faxed a letter to Joy advising her that the February 19th Writ did not “appear to restrict [Joy’s] ability to withdraw and use any personal funds or assets, ...” but did not attempt to “conclusively resolve this issue.” (PX 226). 101. As of March 4, 1993, Lieberman & Nowak had filed a motion to withdraw as counsel for MAI and the Lees. (PX 72). On March 8, 1993, Nowak sent a memorandum to David Loeffler setting forth his comments on the proposed First Supplemental Writ. (PX 229). Nowak also faxed a copy of Quitt-ner’s March 4 letter to Joy (PX 81) to Loef-fler. (PX 230). (8 Tr. 1660-61: 23-25, 1-3 (Loeffler)). 102. Nowak noted that “Arnold Quittner is filing a Section 105 Petition with the bankruptcy Court that would stay the action with respect to Joy and may attempt the same thing with respect to Jerry.” (PX 229 at 1 ¶2). This petition was never filed. (8 Tr. 1659: 2-15 (Loeffler)). 103. In paragraph 4, Nowak commented that Joy’s MAI stock “cannot be remotely considered as a ‘marketable security.’ This should be pointed out to the Court.” (PX 229 at 3 ¶ 4). 104. In paragraph 10, Nowak comments that subparagraphs (c) and (d) of paragraph 15 must be clarified to permit a contemplated “new business relationship with a Mr. Wilcox.” Nowak suggests that “[t]his should be discussed with Arnold.” (PX 229 at 4 ¶ 10). 105. Loeffler never discussed the new business relationship nor a clarification of 15(c) or (d) with Quittner. (8 Tr. 1665: 7-13 (Loeffler)). 106. In paragraph 11, Nowak writes that, with respect to subparagraphs (e) and (f) of paragraph 15 of the proposed First Supplemental Writ, “MAI, Ltd. is not a defendant and thus, it appears should not be bound by this restriction.” (PX 229 at 4 ¶ 11). 107. Neither Nowak nor Loeffler ever sought a modification of ¶ 15(e) and (f). (8 Tr. 1668: 15-19 (Loeffler)). 108. On March 12, 1993, David Loeffler, on behalf of the Lees, filed the Lees’ response to the proposed supplemental writ. (PX 82). In pertinent part, Loeffler requested “that paragraph 15(a) at pages 11 and 12 of the proposed Order be amended to explicitly provide that Miryoung Lee may allocate portions of her salary ... to the payment of her attorneys’ fees.” (PX 82). 109. Loeffler never requested the Court to modify paragraph 15(d) nor to modify the proposed writ to allow Joy to sell her MAI stock to pay attorneys’ fees. (PX 82, 101, 102, 285). 110. Loeffler knew at the time that he could seek a modification or clarification of the First Supplemental Writ at any time if a good reason existed. (8 Tr. 1674-75: 18-25, 1-5 (Loeffler)). 111. The Mantae defendants joined in Loeffler’s response. (PX 231). B. Entry and Service of the First Supplemental Writ 112. On April 7, 1993, the Court entered the First Supplemental Writ of Attachment, Preliminary Injunction, and Appointment of a Receiver (“First Supplemental Writ”). (PX 100). 113. By its terms, the injunctive provisions of the Writ applied to “[t]he Mantae defendants, and any person or entity in active concert or participation with them who receives actual notice of this Order by personal service or otherwise.” (PX 100, ¶ 15). 114. Paragraph 1 of the First Supplemental Writ defined “the Mantae defendants” as Mantae Company Limited (a/k/a MAI, Ltd., Puff Pac productions, Ltd., Best General Merchandise), Miryoung (“Joy”) Lee, and Jong Sik (“Jerrold”) Lee. (PX 100, ¶1). 115. The First Supplemental Writ was served upon MAI, Inc. and its bankruptcy attorneys, Strooek. (6 Tr. 1215-16: 1-25, 1-15 (Wilcox)). 116. Joy received and read the First Supplemental Writ on or about April 7, 1993. (2 Tr. 369: 11-13 (Lee)). 117. David Loeffler also received and read the First Supplemental Writ on or about April 7,1993. (8 Tr. 1675-76: 6-25,1-2 (Loeffler)). V. THE SECOND ALLEGED CONTEMPT: JOY LEE OPENS A NEW BANK ACCOUNT 118. Paragraph 15(b) of the First Supplemental Writ enjoined Joy Lee “from establishing any new bank, money market, brokerage, or other accounts created for the deposit and/or retention of assets.” (PX 100, ¶ 15(b)). 119. In May 1993, after the First Supplemental Writ was entered, Joy closed her personal bank account and established a joint bank account with her nephew at a different bank. (2 Tr. 394-96: 24-25, 1-25, 1-2; 4 Tr. 735: 3-5 (Lee)). 120. Joy read subparagraph (b) of paragraph 15 of the Writ before she opened up the joint bank account with her nephew. (2 Tr. 396: 20-22 (Lee)). 121. Joy never notified anyone that she had opened up a bank account with her nephew, Danny Kim. (5 Tr. 910: 2-10 (Lee)). VI. THE THIRD ALLEGED CONTEMPT: VIOLATIONS OF SUB-PARAGRAPHS (e) AND (f) OF PARAGRAPH 15 OF THE FIRST SUPPLEMENTAL WRIT BY DOING BUSINESS WITH THE LEE-CONTROLLED “FRONTS” 122. Paragraphs 15(e) and 15(f) of the First Supplemental Writ provide: The Mantae defendants, and any person or entity in active concert or participation with them who receives actual notice of this Order by personal service or otherwise, are enjoined: ****** (e) from directing customers to pay anyone other than the Receiver for amounts due the Mantae defendants; (f) from shipping any product directly, or indirectly, to customers in the United States without the permission and supervision of the Receiver, or its agent. * * * (PX 100 ¶ 15 (emphasis added)). A. Strooek and MAI See MJ and PTKSS as Fronts 123. MAI and its counsel, Strooek, apparently recognized that, because PTKSS and MJ Korea were Lee-controlled companies, the First Supplemental Writ precluded MAI from doing business with them. Thus, on April 19, 1993, Strooek, on behalf of MAI, filed a brief regarding the application of § 105 with the Court. In it, MAI argued that “irreparable harm will result to MAI ... if MAI’s access to its affiliated suppliers, which may include third-party defendants, is restricted as contemplated by this Court’s previous orders.” (PX 201 at 7). 124. MAI requested that the Court “lift the injunction to the extent it interferes with MAI’s supply sources, prohibits any of the Mantae Defendants from sending goods to MAI, or prohibits MAI from paying for any of such purchases in the ordinary course of business.” (PX 201 at 8-9). B. Wilcox Views MJ Korea and PTKSS as Affiliates of the Lees 125. Wilcox also recognized that, even though MAI, Ltd. had supposedly been “bankrupt” for months, it in fact continued as MAI’s supplier. (PX 92; PX 93; PX94; PX 279 at 5). 126. On April 26, 1993, at 9:42 a.m., Wilcox faxed a proposal to Joy for appointing an exclusive distributor to purchase MAI. (PX 283). The proposal was precipitated by MAI’s current position in both the marketplace and the current financial condition of the company considering the “Paliafetto [sic]” lawsuit. (PX 283 at 2). 127. Under the proposal, the unnamed distributor would buy all of MAI’s inventory and patents, would maintain a distribution facility in the United States, and could “purchase goods from MAI, Ltd. per contract to be signed....” (PX 283 at 2) (emphasis added). In addition, the distributor would be assigned the worldwide rights to Grip Ball. (PX 283). 128. That same day, approximately an hour and a half later, Wilcox faxed an identical proposal to Joy. However, in the second version, Wilcox deleted “MAI, Ltd.” in paragraph 1(D) and replaced it with “overseas.” (PX 282 at 2; 8 Tr. 1638-39: 22-25,' 1-11 (Wilcox)). Additionally, Wilcox filled in Vincent Jung as the new distributor under the proposal. (PX 282). 129. Wilcox testified that this proposal was never finalized or effectuated. (8 Tr. 1627-28: 16-14 (Wilcox)). 130. Wilcox’s “M.S. Han” file (PX 151) contains a letter written to Wilcox by Yang Ok Han. She writes: I received a letter from Joy mentioning your concerns about M.J Korea & our relationship between Jerry & my father & me. As you know, I do not have much experience in business. I’m trying to learn as quick as I can and at the same time to provide answers for Jerry & my father isn’t that easy. But I can tell you one thing that we are really planning to continue our relationship until we reach our goal successfully. (PX 151 at 276) (emphasis added). 131. Documents contained in Wilcox’s “M.S. Han” file (PX 151) contain a letter from Yang Ok Han indicating that it was faxed from MAI, Ltd. (PX 151 at W0000278-80). PX 114, 110, and other exhibits, purportedly sent by MJ Korea, also all indicate MAI, Ltd. as the sender in the facsimile traffic. 132. When Wilcox questioned Joy about this anomaly after the September depositions, Wilcox could not recall Joy giving any explanation. (2 Tr. 450-51: 17-25, 1-11 (Lee)). The respondents contend that this can be explained by the fact that MAI Ltd. sold its fax machines to MJ Korea, and that the configurations on the machines were not changed. (2 Tr. 452: 5-12 (Lee)). We find this explanation incredible. 133. Wilcox initially viewed Joy as a necessary link to MJ Korea. (6 Tr. 1237: 7-9 (Wilcox)). In a memorandum prepared by Wilcox related to a August 27th strategy meeting at Stroock’s offices in Los Angeles (PX 137), Wilcox expressed the view that “without Joy’s involvement no financing is available from M.J.” (PX 137 at 3). 134. After Paliafito’s counsel gave notice to MAI and Wilcox during the September 27, 1993 hearing in the Bankruptcy Court that MAI was running into the Court’s injunction, Wilcox and MAI stopped sending money to or purchasing product from overseas suppliers, including MJ Korea or the Indonesian operation. (6 Tr. 1233-34: 2-25, 1-4 (Wilcox)). C. MAI Inc.’s Lawyers Viewed MJ Ko-. rea and PTKSS as Affiliates of the Lees 135. On April 27, 1993, this Court held a status hearing. (PX 103). 136. At the hearing, Quittner appeared for MAI and requested the Court to stay the action for 60 days to enable MAI to seek a § 105 injunction to expand the scope of the § 362 automatic stay to cover the Lees and the companies they control. (PX 102 at 32-33). 137. Quittner further argued that the § 105 relief was necessary because “Joy Lee has got to be able ... to design new product, to making sales, to getting production done in Korea wherever else it is done to get the product over here_” (PX 102 at 42-43) (emphasis added). 138. The Court granted Quittner’s request and stayed the Wisconsin action for 60 days. (PX 103 at 2, ¶ 2). 139. Quittner never sought § 105 relief from the Bankruptcy Court during the 60 day stay period. 140. The Court never granted MAPs April 21st request to lift the injunction “to the extent it interfere[d] with MAI’s supply sources, prohibited] any of the Mantae Defendants from sending goods to MAI, or prohibited] MAI from paying for any of such purchases in the ordinary course of business.” (PX 201 at 8-9; PX 103). D. MAI Inc. Officials and Lawyers Meet with Bern Galvin 141. In late April 1993, Bern Galvin was retained by the committee of unsecured creditors in the MAI bankruptcy to act as a business consultant. (5 Tr. 1045: 21-23 (Gal-vin)). 142. On May 24, 1993, Bern Galvin met with Wilcox, Quittner, Zirn, Stuart Koenig, counsel for the unsecured creditors committee, and an unnamed representative for the unsecured creditors at Stroock’s offices. (PX 148; 5 Tr. 1047-48: 25, 1-12 (Galvin)). Quittner, Zirn, and Wilcox were running the meeting. (5 Tr. 1049-50: 22-25, 1-2 (Gal-vin)). 143. At this meeting, Galvin took notes (PX 148). (5 Tr. 1047: 19-24 (Galvin)). In his notes about MAI, Galvin wrote “main product made in Korea by related companies by MAI, Ltd.” (5 Tr. 1048-49: 24-25, 1-3 (Galvin); PX 148 (emphasis added)). E. MAI’s Frequent Calls to Korea 144. After it relocated to West Memphis, Arkansas, MAI placed 56 telephone calls to the Korean telephone numbers 582-0551 and 582-0553 through July 2, 1993. (PX 156 at i-7). 145. As set forth above, Joy identified the Korean telephone number 582-0551 as both Jerry’s home telephone number and the number of MJ Korea. (FF ¶¶ 76-77). Additionally, on February 12, 1993, Jerry faxed a letter to Scatch Europe under MJ Korea letterhead listing MJ Korea’s telephone numbers to be 582-0551 and 582-0553. (FF ¶; PX 42). On February 8, 1993, Jacqueline Jean faxed a letter (PX 41) to Scatch Europe under MAI, Ltd. letterhead listing MJ Korea’s telephone numbers to be 582-0551 and 582-0553. (PX 42). F. Joy Resiyns from MAI, Inc. 146. On May 28, 1993, Paliafito filed a motion to convert the MAI bankruptcy to Chapter 7 or, in the alternative, to appoint a chapter 11 trustee. (PX 108). 147. The same day, Joy resigned as president and director of MAI (PX 109; 2 Tr. 404: 8-10 (Lee)). One of the reasons for her resignation was so that MAI and its lawyers could go into the bankruptcy court to tell Judge Greenwald, in opposition to Paliafito’s motion to convert, that Joy was no longer part of MAI management. (6 Tr. 1125: 9-17 (Wilcox)). 148. On May 28, 1993, Wilcox became the chief executive officer, president, and secretary of MAI (6 Tr. 1108: ' 6-12 (Wilcox)), although he never actually went on the payroll of MAI. (6 Tr. 1108: 17-19 (Wilcox)). 149. From then until December, Wilcox was in control of the management of MAI. (6 Tr. 1125-26: 25, 1-2 (Wilcox)). 150. After July 1993, MAI had only one employee — Joy Lee — on MAI’s books and records. (6 Tr. 1125: 3-8 (Wilcox)). G.Jerry Proposes Creation of an Ayent dr “Front” Company 151. On June 2, 1993, Jerry Lee faxed a Korean language letter on MAI, Ltd. stationery. (PX 110). Paliafito presented evidence that pertinent portions of PX 110 are translated from Korean to English, as follows: 1. We open a STANDBY L/C for US $2,000,000 to M.J. USA BRANCH. M.J. USA finances a front company by getting a cash loan of US $2,000,000 from the Korea Exchange Bank, L.A. Branch. The front company buys all the MAI items in stock. 2. At the same time, we get the purchasing orders of minimum US $2,000,000 from K-Mart and TARGET and make deliveries as quickly as we can.... Then, we pay US $2,000,000 back to the Korea Exchange Bank, L.A. Branch with the money from the above mentioned sales. 4. As such, if we recover US $12,000,000 (regular price) by selling MAI items in stock, i.e. worth US $12,000,000 adding various extras to them, then our business would be a successful one. The entire money earned in these sales may be spent in the U.S. (One exception, I have to use about US $2,000,000 to take care of personal business.) ‡ *1* ‡ ¡i* 6. M.J. Korea, Ltd. will transfer the STANDBY L/C of US $2,000,000 to M.J. USA Branch. And I will receive US $1,000,000 in advance to take care of my personal business. Therefore, M.J. USA will be taking over the entire items in stock for the total amount of US $3,000,-000. (PX 110). 152. Joy Lee claimed that the phrase “front company” in paragraph one was not a correct translation, but that the term should be “agent” company or “representative” company. (2 Tr. 418, 423: 5-6, 3-4 (Lee)). 153. While the dictionary definition for the contested term (“Dae Ri In Ho Sa”) is “agent” or “representative,” the term may also carry the connotation of a “front company,” depending upon the context and the writer’s intent. (3 Tr. 460-62: 10-25, 1-16, 7-25 (Interpreter Gras); PX 217). 154. The totality of the evidence, including the circumstances surrounding the transmission of PX 110 from Jerry to Joy, leads us to conclude that Jerry intended this term to mean the equivalent of a front company. 155. Joy testified, and the in-court translators agreed, that the term “personal business” in paragraphs 4 and 6 was not a correct translation. Instead, she testified that “personal problem” should be substituted for “personal business.” (3 Tr. 468: 14-22 (Lee); PX 218; PX 219). 156. Joy testified that it was Jerry’s plan, as indicated in PX 110, to purchase all of MAPs inventory at below market price. (3 Tr. 492-93: 14-25, 1-3 (Lee)). H. The Appearance of ConPro and MJ USA Branch 157. On June 8, 1993, Joy, on behalf of ConPro, Inc., signed two D/A Contract Notes for the purchase of $40,320 in Grip Footballs (PX 117) and $18,240 in Hit ’N Grip (PX 220). The D/A Contract Notes list ConPro’s address as 706 Royal Avenue, Memphis, Tennessee. (PX 117; PX 220). The D/A Contract Notes indicate that they were faxed from MAI, Ltd. (PX 117; PX 220). 158. On June 8, 1993, Daniel Kim, who worked for both MAI and MJ Korea (2 Tr. 439: 11-20 (Lee)), sent a fax (PX 114) to Joy on MJ Korea letterhead. In it, Mr. Kim stated: “President Lee has instructed me to tell you to arrange with DeBro & Lee not to send INVOICES to the Korea Exchange Bank from now forward.” (PX 114) (emphasis added). 159. “President Lee” referred to in PX 114 refers to Jerry. (2 Tr. 442: 13-16 (Lee)). 160. On an Approval of Establishment for Overseas Branch filed on June 9, 1993, MJ Korea established its “MJ USA Branch” at APAK Packaging, 706 Royal Avenue, Memphis, Tennessee. (PX 124). 161. Yang Ok Han was appointed branch manager of MJ USA branch. She traveled to the United States and met with Joy and banks. She also discussed purchasing Joy’s MAI stock. (4 Tr. 745^6: 6-25, 1-7 (Lee)). I. MAI Money was Sent Overseas 162. On May 28,1993 and August 3,1993, MAI Inc. transferred funds in the amount of approximately $29,000 to PT Kartika Semes-ta, the Indonesian operation. (PX 176; 7 Tr. 1335: 12-17 (Wilcox)). 163. After April 7, 1993, MAI Inc. transferred funds in the approximate amount of $341,500 to MJ Korea. (7 Tr. 1335-36: 18-25, 1-19 (Wilcox)). 164. Based upon a 5% commission “credit” which MAI received from MJ Korea, Wilcox estimated that MJ Korea received another $270,000 from MAI’s international customers for Grip Ball sales. (7 Tr. 1340-41: 9-25, 1-10 (Wilcox)). 165. In a 1993-1994 International Sales Forecast for Grip Toys contained in Wilcox’s “Joy” file faxed to Wilcox on August 12,1993, international sales for Grip Ball-related products was forecasted to be almost $2 million in 1993. (PX 150 at 484). 166. Wilcox put Joy in charge of international sales. (7 Tr. 1343: 2-4 (Wilcox)). Under the MAI system then in place, it was entirely possible that Joy could have directed customers outside the United States to pay MJ Korea directly and Wilcox would not know anything about it. (7 Tr. 1343: 5-11 (Wilcox)). VII. THE FOURTH ALLEGED CONTEMPT: JOY LEE’S SALE OF MAI STOCK. A. The Respondents’ Knowledge of the Court’s Order 167. Soon after the First Supplemental Writ was entered, Joy Lee and David Loef-fler each independently read paragraph 15(d), the subparagraph preventing her from changing her ownership interest in any entity involved in the “manufacture, exportation, importation, distribution or sale of the Grip Bah game.” (PX 100; 3 Tr. 532: 18-20 (Lee); 8 Tr. 1675-76: 21-25, 1-2 (Loeffler)). 168. At the time of the First Supplemental Writ and thereafter, MAI was involved in the “importation, distribution or sale of the Grip Ball game” as described in subpara-graph (d) of paragraph 15 of the First Supplemental Writ. (PX 32; 3 Tr. 532: 21-24 (Lee)); 6 Tr. 1218-19: 25, 1-5 (Wilcox). 169. By April 15, 1993, Stroock was looking into “issues of control of debtor [i.e. MAI Inc.] stock.” (PX 70 at 34, entry 8). 170. Loeffler knew of Stroock’s efforts. He was “sure” that, prior to the April 27th hearing before this Court, Stroock was looking into “the question of ownership and control of MAI stock.” He also was “sure” that Stroock sent him memoranda on this issue. (9 Tr. 1808-09: 21-25, 1 (Loeffler)). 171. April 15, 1993 came and went without any compliance by the Lees or their enterprises with the requirement that they post $8 million with the receiver, and the respondents all knew this. (PX 102 at 4). 172. The respondents were on notice that the First Supplemental Writ provided that non-compliance could result in the entry of judgment. (PX 100, ¶ 17; PX 102 at 4). On April 19, 1993, they knew that Paliafito had moved for entry of judgment. (PX 102, 103). 173. On April 21, 1993, Joy faxed a letter (PX 235) to Quittner stating “I never want to see another 204 pages of opinion from California court. Now is the time to show that your Law Firm [Stroock] can bite Skadden and Springer’s nonsense and Arnold will not put up with such nonsense.” (PX 235). 174. According to Joy, nothing less than her and her family’s ownership and control of MAI were at stake: I am totally depending on your success. Remember me and my family put every possible efforts and sweat into this company. We just can not give away.” (PX 235 at 2 (emphasis added)). 175. On April 26, Joy faxed to Loeffler a copy of her memorandum to Quittner. (PX 235 at 1). 176. The same day Loeffler filed a motion to reconsider portions of the First Supplemental Writ. In it, Loeffler requested the Court to reconsider “portions of paragraphs 15(a) and paragraph 17” to permit the Lees “to spend current income not attached to compensate their defense attorneys on a pay-as-you-go basis.” (PX 101 at 1 & 3). 177. Loeffler never requested the Court to modify subparagraph 15(d) nor to modify the First Supplemental Writ to allow Joy to sell her MAI stock, or any other asset, to pay attorneys’ fees. (PX 101). B. The April 27 Status Conference 178. On April 27, the Court held a status hearing at which, among other things, Paliaf-ito’s counsel informed the Court that, once the Court entered judgment against the Lees, Paliafito intended to execute its judgment against the MAI stock owned by Joy. (PX 102 at 66-67). 179. At the hearing, Loeffler also reiterated his request that the Court modify ¶ 15(a) of the First Supplemental Writ to permit the Lees to pay their attorneys on a “pay as you go” basis. (PX 102 at 10 (lines 14r-17), 59 (lines 20-24), 61 (lines 18-20), 71 (lines 10-13)). 180. Loeffler was silent on the question of whether Joy could sell her stock, and he made no mention, much less a request to modify, Paragraph 15(d) or any other provision to let Joy sell her stock, to pay attorneys’ fees or for any other purpose. (PX 102). 181. On April 27,1993, the Court issued a letter ruling reflecting its rulings made at the status hearing. The Court modified only paragraph 15(a), leaving the others intact and unchanged: Third, the Court ordered that paragraph 15(á) of the First Supplemental Writ of Attachment, Preliminary Injunction, and Appointment of a Receiver filed April 7, 1993 be amended by replacing the language reading “provided however [sic] that such expense [sic] shall not be construed to include payment for attorneys’ fees” with “provided, however, that such expenses shall be construed to include payment for necessary and reasonable attorneys’ fees.” (PX 103 at 2 ¶3). The Court also stayed proceedings for 60 days, including consideration of Paliafito’s motion for entry of judgment. (PX 103). C. Paliaftto Moves to Oust the Lees from MAI 182. On May 28, 1993, the same day that Paliafito filed its motion to convert the bankruptcy to Chapter 7 (Findings of Fact “FF” ¶ 148), Joy tendered her Stroock-drafted “resignation” and appointed Ray George sole director of MAI and Wilcox president and secretary. (PX 109; 2 Tr. 404: 5-10 (Lee)). 183. She also announced her intention to put her MAI stock in a voting trust to be voted by a third person. (PX 109). This also was Stroock’s idea (2 Tr. 405: 5-7 (Lee)), and her promise to do so was included in a Stroock-drafted declaration filed with the Bankruptcy Court in opposition to Paliaf-ito’s motion to convert the MAI bankruptcy to Chapter 7. (PX 111). “On May 28, 1993 ... I also agreed to place my shares in a voting trust and grant an independent party the right to vote on all matters requiring shareholder approval other than the sale of substantially all of the Debtor’s assets or the sale of stock.” (PX 111). D. This Court’s June 25 Status Conference 184. On June 25, 1993, the Court held a status conference. The Court notified the parties that it would defer ruling on Paliafi-to’s motion for entry of judgment against the Mantae defendants for two weeks, that is, until July 9, 1993. (PX 133). 185. At no time during the status hearing did Loeffler or anyone else seek a modification of ¶ 15(d), (e), or (f) of the First Supplemental Writ. Nor did Loeffler seek any determination by the Court about whether Joy could sell her stock to pay her attorneys’ fees. (PX 285). 186. On June 25, Loeffler “Fed-Ex’d” a letter to Joy reporting the results of the conference. The letter included reminders that the Court had deferred decision for two weeks on Paliafito’s motion for judgment, a request for payment for services, and an enclosure of the Court’s April 27th letter ruling. (PX 134). E. Joy States Her Intent to Sell Her MAI Stock 187. On June 26, 1993, the day she received Loeffler’s June 25, 1993 letter, Joy expressed her intention to sell her MAI stock. (3 Tr. 532-33: 25, 1-3 (Lee); 8 Tr. 1694-95: 16-25, 1 (Loeffler)). 188. On June 28, 1993, Zirn, an associate at Stroock, prepared and circulated a memorandum regarding the “disposition of MAI stock” (PX 135) to Robert Wilcox, copies to Joy, Loeffler, and Katz: Pursuant to our telephone conversation earlier today, I spoke to Herb regarding Joy’s contemplated disposition of her shares in MAI, and any advise [sic] he may have rendered in connection therewith. Herb advised me that he has not spoken •with Joy regarding her plans to sell the stock. He merely informed her that he had been advised by David Loeffler that the Wisconsin attachment order had been modified to allow her to use her personal assets to pay for attorneys’ fees. (PX 135). F. The Respondents Knew Paliafito Would Object 189. Loeffler recognized that Paliafito “may well argue that 15D is the only controlling provision” and that ¶ 15(d) prohibited Joy from selling her stock. (8 Tr. 1698: 4-19 (Loeffler)). 190. Loeffler identified the risk to Joy that the stock sale could violate paragraph 15(d), but he advised her that she could proceed with the sale. (8 Tr. 1700: 6-13 (Loeffler)). 191. Loeffler justified his advice on the grounds that if he was wrong, and the Court determined that the sale did violate ¶ 15(d), “what difference does it make because if it’s covered by the writ, the deal’s going to be no good anyway. But if it is not covered by the writ then you are free to sell it.” (8 Tr. 1699: 4-6 (Loeffler) (emphasis added)). 192. Loeffler discussed with Stroock the impact of the terms of the First Supplemental Writ with Stroock upon Joy’s contemplated sale. Stroock thought Loeffler’s reading was reasonable (8 Tr. 1702-03: 22-25, 1-4 (Loeffler)), but they discussed the likelihood that Paliafito would take the view that ¶ 15(d) precluded the sale. (8 Tr. 1703: 5-9 (Loef-fler)). G. The Respondents Agree to Joy’s Stock Sale 193. Before she sold her stock, Joy wanted to get the opinions from Loeffler and Victor George on the issue of whether she could sell it. (3 Tr. 534: 12-20 (Lee)). 194. Loeffler and Victor George told Joy that it would be okay for her to sell the MAI stock to pay attorneys’ fees. (3 Tr. 538: 19-25 (Lee)). 195. Joy also recalled that she discussed with the attorneys at Stroock, either Katz or Zirn, whether it would be proper for Joy to sell her stock. (3 Tr. 541: 2-4 (Lee)). 196. Everybody Joy asked agreed that it would be okay for her to sell the stock. If everyone had not agreed, Joy probably would not have sold the MAI stock. (3 Tr. 539-540: 25, 1-5 (Lee)). 197. Wilcox knew that there was a “strong likelihood” that Paliafito would be concerned if the stock was sold. (6 Tr. 1248-49: 24-25, 1-4 (Wilcox)). 198. Loeffler never suggested to Joy that, in light of the fact that Loeffler knew the position Paliafito would take, that she should go into Court and ask the Court whether sh