2002/March/01/News PAW SEC case

Below is a message which Fred Noland wrote to Giselle Céspedes with the request to forward his report to Bosque's shareholders.

Original Message
Dear Fellow Bosque Investors:

This is a preliminary report on the hearing in Ft. Lauderdale this past Monday and Tuesday.

First, I want to thank all of you who have supported the efforts of Bosque's board and myself to overturn the SEC's judgment. The support has been fantastic and is greatly appreciated. I know that the board, and especially George Berenschot, are encouraged that so many shareholders, including some sharp critics, have joined together against a common threat.

Although we will have to wait to read Judge Ferguson's written decision before we can know with certainty if we succeeded, in whole or in part, the judge's critical questioning of the SEC's attorney, and a few comments the judge made as he adjourned the hearing, made me very optimistic that he was persuaded that a judgment against the company would only further victimize the shareholders. Judge Ferguson told us he would attempt to release a written order within two weeks. From past experience, those few weeks could turn into months if his other responsibilities force him to concentrate on criminal cases that require immediate resolution.

There were a few surprises and humorous moments in Ft. Lauderdale. On the humorous side was a poem sent by Gregg Calkins in an e-mail expressing support for my efforts, I must say that I took perverse pleasure in reading it to Jack Worland, the SEC's attorney. Thank you Gregg and thank you whomever the anonymous poet is. Here is the poem for anyone who may not have seen it:


 * And happy Valentine's Day to you, too, SEC.
 * Are your faces red?
 * Our spirits are blue.
 * Your lawsuit will benefit
 * only a few.
 * While protecting U.S.
 * shareholders from loss, key
 * errors were made when
 * you also sued Bosque.
 * So thus we find ourselves
 * trying to flee
 * the salvation promised
 * by you, SEC.
 * Good luck, Mr. Noland!
 * Our wish for you, hence, is
 * your arguments bring
 * our foes to their senses.

The biggest surprise was on the morning of the hearing. When George Berenschot, Hessel van Straten and I went for breakfast in the hotel where we had spent the weekend preparing, we found Jin Lan Wu and Rufus Davis at an adjoining table. I was delighted when Jin Lan and Rufus told me they had come to support our effort. Since our case was built on the testimony of George, as Bosque's president, Jin Lan's presence made it possible for George to show the judge that even the sharpest critics of himself and the Bosque board strongly oppose the SEC's position. After George testified, Jin Lan graciously thanked George for his skillful and persuasive responses on direct and cross examination. That pleased me so much that I invited Jin Lan and George and Hessel to join me for a beer. Over the beer, George and Jin Lan spoke of the hurt they both have felt from the accusations and rumors about them among Bosque shareholders. Although differences remain, Jin Lan and George agreed that differences about Bosque's past, present, and future should be discussed as matters of principle, on their merits, without personal attacks on those who advance arguments on one side or another.

One more good thing happened in Ft. Lauderdale. Although Herman Miller was called to the stand as the SEC's key witness, in the end he actually gave powerful testimony in support of Bosque's position. Herman seems to have been persuaded by the SEC that a judge is given no discretion in such a case. Thinking that a large judgment against the company was inevitable, Herman apparently, but mistakenly, convinced himself that the SEC could spread the proceeds of a forced sale of the company among a broader group of shareholders if non-U.S. shareholders would exchange their Bosque shares for shares in his "Bosque International Corporation." Since Herman had previously joined me and John Granger, Jim King, Richard Goldman, and Mike Pascucci in an unsuccessful attempt to intervene in the SEC case, I knew that Herman believes it would be unjust for Bosque's shareholders to be punished for acts of the company's founders. Confident that Herman would testify truthfully, I asked him if his testimony would be different if he understood that the judge does in fact have discretion (which he clearly does). I am sure that Mr. Worland was shocked and dismayed to hear his own star witness tell the judge that it would be immoral and unjust to give the SEC a judgment against Bosque.

I would also like to use this opportunity to urge everyone in the Bosque family to agree to a CEASE FIRE in the mud-slinging that has, sadly, characterized Bosque's shareholder communications. In light of Bosque's history it is understandable that many shareholders fear and distrust the motives of anyone who attains a position of responsibility in the company. We have all been hurt by reliance on unmet promises by Bosque's founders, and stung by our experience with the attempted "bail out" by Pacific International Hardwoods that resulted in handsome payments to PIH while the plantations were being neglected.

Frankly, I find reading the personal accusations and counter-accusations that have flown in every direction so distasteful that I often only skim the material that has gone out in the last couple of years. I respect and admire almost every Bosque shareholder I have come to know, including some who differ greatly with me in their assessment of what has happened and what should happen in the future. Having said that, I am unable to understand how such fine and intelligent people seem blind to that fact that their personal attacks, and the lawsuits that result from them, damage our ability to grow the company and make it profitable. Unless they have attorneys who volunteer their time, which I doubt, both sides in such lawsuits end up paying a lot of money to attorneys. In the case of lawsuits against Bosque, not only are the attorneys' fees and other legal expenses ultimately paid for by all the shareholders, but they divert the time and energy and damage the morale of those who we have hired to run our business. We shouldn't have to be reminded that our business is growing and selling trees, not generating fees for attorneys.

I have not been in total agreement with Bosque's board on a number of issues. Where I have disagreed I have attempted to communicate my position and the reasons for it. Despite occasional differences of opinion, I have never seen any decision taken for any reason other than to serve Bosque's interest. The corporate structure we inherited from Bosque's founders, based on separate holding companies that were wholly owned by the founders, helped those holding companies sell us more Bosque shares. At this point in Bosque's development, the best way the company can move forward and grow is to treat all shares equally. At the hearing in Ft. Lauderdale, George explained consolidation of the phases is vital to make Bosque manageable and profitable, and how all phases will benefit. I'm sorry that Bosque's shareholders could not have heard that testimony. Although arguments can be made, and have been made, to oppose the decision to consolidate phases, I expect that most people with the full facts would, after a full debate, agree that it was the right decision for the good of all shareholders in every Bosque phase.

Representing Bosque on the SEC case has given me the opportunity to work closely with George Berenschot, Hessel van Straten, and Marck Mulder. I believe I am in a good position to be able to judge their intelligence, knowledge, dedication, and ethics. We are fortunate that such people continue to work for all of us, despite the difficulties they and we face. They are not perfect. They are human. It offends my sense of reality and my sense of fairness to read and hear personal attacks on them - sometimes by people whom I like and respect and even consider to be my friends. As I see it, George, particularly, has been unfairly criticized for what in my view has been a heroic effort to make Bosque work. I am sorry that so few shareholders know the devotion with which he has undertaken a thankless job, at great personal sacrifice.

Before ending this message to my fellow Bosque investors I would like to make a comment on a point of personal privilege. Issue number 21 of "e-Bosque," after thanking me for my efforts to remove the dark SEC cloud from over the company, states: "Fred's appearance as counsel pro haec vice is yet another instance of a NIBO shareholder handling important Bosque matters. I make no criticism of Fred..." While disclaiming criticism, such a comment subtly suggests that suspicion about where my loyalties might lie would be warranted. To me, this is "yet another instance" of the mistaken but oft-repeated view among a few Bosque shareholders that there is something wrong with one company investing in another.

After the near disaster of a sale of all Bosque's and Bosque Industrial's shares to the Taiwanese, I concluded that the best, and perhaps only, way to develop Bosque's potential would be for "the Dutch" to have a sufficient percentage of Bosque shares to have an incentive to properly manage the company, I exchanged my Bosque shares for shares in NIBO. Later, when I saw the difficulty NIBO was having in raising money I put more of my own money into that effort by buying NIBO shares. I have certainly never tried to hide those facts and have disclosed them, and the reasons for them, to Richard Goldman and anyone who asked. I believe Richard may even have reported my exchange of Bosque for NIBO shares in an early issue of The Bosque Report.

Yes, I want NIBO to succeed. I also want Bosque to succeed. The only way NIBO can succeed is for Bosque to succeed. As most shareholders understand, NIBO's major asset is its shares in Bosque. Having a large percentage of Bosque's shares gives NIBO a greater, not lesser, interest in making decisions that will cause Bosque to thrive. I am only sorry that NIBO was prevented by U.S. securities laws from communicating with other U.S. investors about the possibility of doing the same thing.

By asking for a cease fire from mudslinging, I do not seek to shut off debate. I welcome debate on company policies and decisions, so long as the debate is on the merits of the actions taken by and for the company. It is not necessary to challenge an opponent's motives in order to challenge his or her ideas. I fervently hope we may see the end of snide, sarcastic, personal attacks on anyone in the Bosque family, including the present board of directors, Jin Lan Wu and Herman Miller. We are all bigger than that.

Thank you for taking the time to read and consider these views.

Fred Noland

MacDonald, Hoague & Bayless 705 Second Avenue, Suite 1500, Seattle, WA 98104-1745 Phone: 206-694-1602 Fax: 206-343-3961 Email: fredn@mhb.com