Over protestations that he had been illegally “kidnapped” from his beachfront condo in the Central American country of Belize, Creative Pipe CEO Mark T. Pappas was denied bail Wednesday and will remain jailed pending a civil contempt hearing on Friday.
At an initial appearance in U.S. District Court in Baltimore, Magistrate Judge Beth P. Gesner denied Pappas bail because of his “long history” of noncompliance and “lack of candor” in the litigation.
What started as a simple copyright and trademark infringement lawsuit by Dunkirk, Md.-based Victor Stanley Inc. blossomed into one of the largest spoliation of evidence cases in recent years, as Pappas rang up more than $1 million in sanctions and faced jail time for civil contempt for failing to appear and follow court orders.
Pappas, appearing tan, was dressed in a maroon prison-issue jumpsuit Wednesday. For the hearing, he was represented by Andrew Radding, a partner at Adelberg, Rudow, Dorf & Hendler LLC. Radding asked Gesner to consider releasing Pappas and said his activity could be monitored by a tracking bracelet, via twice daily check-ins, or by other means.
Radding asked Gesner to consider that Pappas had been taken into custody by foreign law enforcement officers in what the lawyer called a violation of Belize’s extradition treaty with the U.S. He said the extradition treaty only applied to criminal charges, and Pappas only had a civil contempt warrant out for him and no criminal charges.
“I think Mr. Pappas is here illegally,” Radding said. “He was literally taken into custody in Belize, driven by Belizean authorities and essentially thrown on a plane with Belizean authorities and brought to Texas. There was no hearing, no due process — nothing that is provided for in any extradition treaty.”
Pappas, 45, owes more than $3 million in outstanding damages and sanctions stemming from a copyright infringement lawsuit over the design of site furnishings, such as park benches and waste containers, for state and municipal use.
An arrest warrant for Pappas was issued on Dec. 28, 2011, after he missed court dates and failed to make required payments to Victor Stanley Inc., whose designs the Southern California-based businessman was determined to have stolen.
Saying that the “past is prologue” given Pappas’ predilection for skipping court dates, Victor Stanley’s attorney, Randell C. Ogg, asked that Pappas be held in jail until Friday’s hearing. Ogg said Pappas not only skipped court dates, but had been moving money offshore and had signed over power of attorney to his lawyer so that his business interests could continue to run while he was out of the country.
“I would call him the ultimate flight risk, under the circumstances,” Ogg said.
Given a chance to respond, Radding said that Pappas had learned his lesson after 12 days in federal custody.
“The past is not always prologue, and the depth of the impact of these court orders to date has very much been brought home to Mr. Pappas,” Radding said. “He sees what can happen if the court has determined he’s not following orders. He’s been sitting since Monday in Supermax — or the facility formerly known as Supermax. He has been in lovely institutions in Houston and Oklahoma and elsewhere since his arrest. Not to mention the Belizean hoosegow.”
At a deposition after the bail hearing, Pappas said had been living in Belize since mid-December, at the same time he had been ordered to appear in court. He said he was aware of those orders.
Pappas also said in the deposition that he paid a company in Belize to open a checking in account in its own name, listing him as an authorized user without having his name on the account. He also admitted to using more than $500,000 — some of it his own money, some of it from his company’s pension and profit-sharing fund — to buy real estate in Belize.
Pappas said he could not remember the name of the company that set up the checking account for him, but said it had the word “capital” in it. He said he dealt primarily with a man named Enrique whose last name he did not remember.
He said he opened the account because Belize had stronger asset protection laws.
“I wanted to secure my assets from being attached,” Pappas said. “Going into the future it seemed like a good idea to do.”
In October 2006, Victor Stanley sued Pappas and his company for downloading its schematics from a website, having similar items manufactured in China and selling them under the trade name “Fuvista,” which Pappas later admitted was short for “FU Victor Stanley.”
In September 2011, the court entered a judgment in favor of Victor Stanley and awarded it $2.45 million in compensatory and punitive damages, as well as the sanction award of more than a million dollars.
By December, Pappas had paid $478,409 toward the sanctions, but said he was unable to come up with the balance. He offered to make a $100,000 “good faith” payment and further installments of $20,000 a month, which the court agreed to.
During Wednesday’s deposition, he was questioned about why he had not made the $100,000 payment.
“It was a bad judgment error,” he said. “I should have made it.”
He said he was paid a salary of $190,000 in 2011, while his wife, who also worked for the company, was paid $100,000. He also collected rent from Creative Pipe on office space he owned.
Pappas will be back in U.S. District Court on Friday for a hearing to show whether he should be charged with civil contempt, which carries the potential for further sanctions and incarceration.