Official pretrial transcript now available

Posted on July 23, 2012 in Trial Updates

The official pre-trial hearing transcript is now available for review here [PDF].  For your convenience, the full text of the March 21st hearing is also available below:

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IN THE SECOND JUDICIAL DISTRICT COURT-FARMINGTON
OF DAVIS COUNTY, STATE OF UTAH
STATE OF UTAH,
Plaintiff,
vs.
ANDRES ESQUIVEL,
Defendant.
}
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)
)
)
) Case No. 111701135 FS
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)
)
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____________________________)
Remanded Preliminary Hearing
Electronically Recorded on
March 21, 2012
BEFORE: THE HONORABLE MICHAEL G. ALLPHIN
Second District Court Judge
APPEARANCES
For the State:
For the Defendant:
Transcribed by: Wendy Haws, CCT
(Certifier’s identity unknown) Signed by Administrative Office of the Courts Time: 2012.07.21 17:37:29 -06’00’ Reason: Document: Filed with the Utah State Courts Location: Salt Lake City, Utah
1771 South California Avenue
Provo, Utah 84606
Telephone: (801) 377-2927
Nathan D. Lyon
DAVIS COUNTY ATTORNEY’S OFFICE
800 West State Street
P.O. Box 618
Farmington, Utah 84025
Telephone: (801)541-4300
Michael T. Holje
BROWN, BRADSHAW & MOFFAT
10 West Broadway
Suite 210
Salt Lake City, Utah 84101
Telephone: (801)821-5218

INDEX
WITNESS: KYLE CLUFF PAGE
DIRECT EXAMINATION BY: MR. LYON 5
CROSS EXAMINATION BY: MR. HOLJE 17
REDIRECT EXAMINATION BY: MR. LYON 35
WITNESS: CHRISTOPHER PAUL ENGELBRECHT
DIRECT EXAMINATION BY: MR. LYON 38
CROSS EXAMINATION BY: MR. HOLJE 46
WITNESS: RYION BUTCHER
DIRECT EXAMINATION BY: MR. LYON 55
CROSS EXAMINATION BY: MR. HOLJE 64
WITNESS: ADAM SWEET
DIRECT EXAMINATION BY: MR. LYON 78
CROSS EXAMINATION BY: MR. HOLJE 82
WITNESS: THOMAS BRADY
DIRECT EXAMINATION BY: MR. LYON 86
CROSS EXAMINATION BY: MR. HOLJE 102
-o0oEXHIBIT
NUMBER DESCRIPTION PAGE
No. 1
No. 3
No. 2
No. 4
Two Checks to X-Tagged
Copy of Contract
Convertible Promissory Note
Stock Certificates Plus Other Documents
16
16
46
52
-o0o

PROCEEDINGS
(Electronically recorded on March 21, 2012)
COURT CLERK: No. 24, State of Utah vs. Andres Esquivel
case No. 111701135, set for remanded preliminary hearing.
THE COURT: Counsel, are you ready?
MR. LYON: Yes, your Honor.
MR. HOLJE: Yes, your Honor.
THE COURT: Call your witness.
MR. HOLJE: Your Honor, before we get started, the
State would like to invoke the exclusionary rule.
THE COURT: Counsel on either side, if you have
witnesses other than the officer that is going to assist
Counsel, any potential witnesses, we’d ask them to step aside,
please not talk about the case amongst themselves either before
or after their testimony.
MR. LYON: Your Honor, I do –-I have –
THE COURT: You all know who you’ve got. So if you
would just direct them, I’d appreciate it.
MR. LYON: Just for the record, I’ve got three victims
that will be present, my lead investigator and then our expert,
that I think are entitled to stay under the rule.
MR. HOLJE: Your Honor, with –-I don’t have any
witnesses to call today. For the Court’s information –Justin,
if you want to stand up –-your Honor, if I could
introduce Justin Pratt. He’s a new member of the bar. He’s

my mentee under the Bar’s new lawyer mentoring program –
THE COURT: Uh-huh.
MR. HOLJE: –-and he’s required to observe, so –
THE COURT: You can have him come up and sit behind
you there if you’d like.
MR. HOLJE: That would be great. Thank you, your
Honor. Other than that, Steve Burton is a member of the Bar.
He works with Justin Pratt. I don’t have any –
THE COURT: Okay.
MR. HOLJE: –-issue with him being here either.
THE COURT: Let’s go ahead, then, Mr. Lyon.
MR. LYON: Okay. Your Honor, just as a very brief
opening statement, just to lay a little foundation for your
Honor –
THE COURT: Go ahead.
MR. LYON: –-this is a securities fraud case, and
we’re going to be hearing from three of the individuals who
invested in the company which the defendant (inaudible), which
was called “X-Tag.” We also have the Investigator Sweet, who
performed some of the investigation.
We also have Tom Brady, who is our expert, who I think
will be able to shed a little bit of light for the Court, I’m
hoping, as to the securities, and why this falls within the
parameters of the security, given that this is not what we
generally see in our normal practice; but I think we’ll proceed

with that, your Honor.
THE COURT: Okay.
MR. LYON: State calls Kyle Cluff.
THE COURT: Sir, if you’d just –
MR. LYON: Stop right there. Stop right there.
COURT CLERK: You do solemnly swear that the testimony
you are about to give in the case now before the Court will be
the truth, the whole truth and nothing but the truth, so help
you God?
THE WITNESS: Yes.
THE COURT: Thank you. Now you can please have a seat
at the witness stand. Go ahead.
KYLE CLUFF,
having been first duly sworn,
testified as follows:
DIRECT EXAMINATION
BY MR. LYON:
Q. Mr. Cluff, could you please state your name, spelling
your last name for the record.
A. Kyle Cluff, C-l-u-f-f.
Q. Mr. Cluff, do you reside in the Davis County area?
A. Idonot.
Q. Is it Weber County?
A. Yes.
Q. Okay, and are you employed right now?

A. Iam.
Q. Okay, where do you work?
A. I work at McKay Dee Hospital.
Q. You’re also going to school?
A. Yeah, I’m a full-time student at Weber State.
Q. What are you studying?
A. I am a senior. I’m Athletic Therapy, and getting
ready to apply for my graduate school in Health Administration.
Q. Okay, now Mr. Cluff, have you been previously employed
at Anytime Fitness?
A. I have.
Q. Were you so employed at the Bountiful location back in
February of 2008?
A. I was.
Q. What were your responsibilities there?
A. I was a personal trainer/manager of the gym.
Q. While you were so employed, did you have an occasion
to come in contact with an individual by the name of Andres
Esquivel?
A. I did.
Q. Okay, that’s the defendant sitting next to Mr. Holje?
A. Yes, sir.
Q. Could you tell us when that occurred?
A. That was in February of 2008.
Q. What were the circumstances in which you came in

contact with him?
A. I came personally in contact with him under the
impression of him buying a personal training package from the
gym.
Q. Was someone –-did someone instruct you to speak with
Mr. Esquivel?
A. Yes.
Q. Who was that?
A. The gym manager.
Q. Tell us about the conversation you had with the
defendant.
A. That I did, or that the gym manager did?
A. That you did.
Q. Well, the defendant was in the owner’s office, as
I walked in, explaining about his Internet company. He was
talking about the government giving him money for startup
costs, about his soon-to-be appearance on the Oprah Winfrey
show, how MySpace tried to buy it for 5 million but he
declined.
Q. Did he explain what his company is?
A. He did.
Q. Can you tell us what he explained to you as?
A. He said his company was an Internet company that
would keep pedophiles and rapists off of the Internet, and
keep them from coming in contact face-to-face with children

or adolescents.
Q. Did he tell you what the name of his company was?
A. He did.
Q. What was that?
A. X-Tagged.
Q. Did he explain what the purpose of X-Tagged was?
A. To keep the Internet safe.
Q. Now, I recognize you said that he was going to help
keep people safe. Did he explain how that was going to work?
A. He did. He stated that X-Tagged used license plates
to verify individuals; and so, for example, if somebody was on
MySpace and they were talking to an individual, X-Tagged would
be a company that a person would take a picture touching their
license plate, and he said to me that if they touch someone
else’s license plate, that would be a felony same as if you
opened somebody’s mailbox and took their mail.
So I touch on their license plate. It identified them
as who they are. So if someone’s on MySpace talking to a –-to
a young girl, and they want to meet face-to-face, and she said,
“Are you X-Tagged?” she could then go see if he’s on X-Tagged
and if he’s verified, see what he looks like, see what his
license plate is, so when they meet face-to-face she can know
what to expect, know what car to see him driving up in, and
have him be verified.
Q. Now, was this supposed to be some sort of social

networking site?
A. Yes.
Q. At the time was he looking for investors in the
company?
A. He didn’t specify.
Q. Had he indicated whether he had already received money
from any sources?
A. He did. He said the government gave him $2,000,000
for startup costs.
Q. For the company?
A. For the company.
Q. Did he indicate whether he was going to be going in
television promoting this?
A. He did. He said he had already appeared on the Maury
show. That he was signing autographs and his lawyer made him
stop because their paperwork wasn’t fully done, and that in six
month’s time he would be on the Oprah Winfrey show.
Q. Now, on that first occasion that you came into contact
with him, was there any offering as to investment in the
company?
A. He told me what the stock price was.
Q. Which was what?
A. One dollar per share.
Q. Was there any minimum investment?
A. Yes, he did say you had to invest over $500. That was

the cost of the paperwork for his lawyer to process.
Q. Did he make any indication whether the company had
plans to go public?
A. He did. He did say once it went public, immediately
it would be upwards in the 30 to $40 per share, and that within
a relatively quick time it would surpass Google with their
stock, which was currently at 500 plus per share.
Q. Did he explain how the stock was going to be I guess
realizing those sorts of gains?
A. He did not.
Q. Did he indicate whether X-Tag was patented?
A. He did tell me it was patented.
Q. Did he tell you how much time was on the patent?
A. He did say it was a 20 year patent, and they had 18
years remaining.
Q. Had he received –-did he tell you whether he had
received any cooperation from the Utah Government Division of
Motor Vehicles?
A. He had stated that they are in process to link X-Tagged
with the DMV, to once again verify that they are the owner of
that –-of that car that they’re taking a picture with.
Q. Did he indicate to you whether he had received any
offers to buy the company?
A. He did. He said that MySpace offered him $5,000,000
for the company.
Q. Did he tell you whether he had accepted or declined
that offer?
A. He said he declined it.
Q. Did he give a reason why?
A. He did. He said that MySpace declined it for the
purpose that they would not use it. MySpace, for example, has
multiple individuals on there that have fake profiles. So if
X-Tagged were to be invented and be used, it would take away
from their amount of people, which would take away from the
price of advertising that they would receive. So he said that
they would take it and sweep it under the rug. So he was not
going to allow that to happen.
Q. Now, tell –-give us the context in which this whole
conversation took place while you’re speaking with him.
A. I was trying to sell him personal training at the gym.
Q. Okay, and did you in fact, I guess, sign him up? Is
that how you would characterize it? Did you sell him any
personal training plans?
A. He agreed to buy a fairly big plan. He stated, though,
that his days are very busy. He’s with lawyers and in and
out of meetings. That he needed somebody to train him about
2 o’clock in the morning; and he said he would train three
times what I’m asking if that –-if we could get somebody
there. I said we could not, you know, appease that request.
Q. So this conversation with him talking about your
company is taking place at the same time that you were trying
to sell him on personal training and fitness plans?
A. Correct.
Q. After this initial conversation did you make any
decisions as to whether to invest in X-Tag?
A. No.
Q. At some point did you make a decision to invest?
A. I did.
Q. Tell us when that happened.
A. It was –-I believe it was Monday after that weekend I
gave him a call and asked if the stock was closed or open.
Q. Okay, and what was his response?
A. He told me to hold on for a second and he asked whomever
he was driving with, he said, “Is the stock closed or
open?” They said, “It’s still open,” and he said, “Yes, it’s
still open.” Then so I told him I would like to purchase some
shares.
Q. How many shares did you want to purchase?
A. I told him I had $4,000, so that would be the
equivalent of 4,000 shares.
Q. Did you in fact write out a check for $4,000 to X-Tag?
A. I did.
Q. When did that happen?
A. That was I believe in March.
Q. To whom did you give the check?

A. I gave it to his associate, John.
Q. Did you receive anything in exchange for that?
A. I received a convertible promissory note.
Q. I’m sorry, tell me when –-when all of this oc –roughly
when all of this occurred.
A. This was in March.
Q. Now, at some time after March did you decide you
wanted to invest further in X-Tag?
A. I did. Even in March I wanted to invest more, but
that’s all the money I had.
Q. Okay, and so at some point later did you in fact
invest further?
A. I did. Mr. Esquivel called me I believe in May, told
me that there was a percent that had opened up and wanted to
know if I was interested in purchasing it.
Q. What did you tell him?
A. I asked him how much, and he told me it was $50,000
for 1 percent.
Q. Did you in fact give him $50,000?
A. No, I told him I’m not wealthy enough for that.
Q. Okay, did you invest any further money, then?
A. I did. He texted me a few days later and said that
they discussed it, and I could have it for $20,000. So I
called him, and I said, “I don’t have that money either.”
Then he came up with a solution, saying if I could come up

with $10,000, he would then credit –-the other $10,000, he
would then finance it himself.
Q. Okay, and tell us, how would you come up with $10,000?
A. So he took my $4,000 of the shares that I bought,
and he said he would convert that to the $10,000. He paid me
$2,000 for the diet plans and the personal training that I was
emailing him over several months. Then he also –-I gave him
another check for $2,000, and he took my Chevy Cavalier, which
had a broken engine, and said if I gave him the title he would
credit that for $2,000, which totals a monetary amount of
$10,000.
Q. At that time did you execute a second document to
memorialize the purchase of additional shares and the agreement
that you’ve just explained?
A. I did. He took my promissory note for the shares
back, and in return gave me a document for 1 percent of the
company.
Q. You didn’t –-did you keep a copy at all of that first
–-that first promissory note?
A. No, I did not.
Q. Okay, now –-now, Mr. Cluff, I’m showing you what’s
previously marked as State’s Exhibits looks like 1 and 3.
Could you tell us what these are?
A. Yeah, these are the two checks that I made out to
X-Tagged Incorporated.

Q. That’s Exhibit 1.
A. Exhibit 1 is the $2,000 I gave for the 1 percent
ownership.
Q. Okay.
A. And Exhibit –-is this two?
Q. No, this is just one exhibit.
A. Okay, yeah, the first one is the 4,000 shares. The
second check is the extra 2,000 I gave in the end of May, June.
Q. I’m showing you what’s been marked as Exhibit 3. Do
you recognize that?
A. Ido.
Q. What is it.
A. It is a copy of my contract that Mr. Esquivel gave me
after I gave him the monetary money that I had just described.
Q. Is it the second promissory note you’re talking about?
A. Yes.
Q. Pointing your attention to the very last page, there
is –-most of this is a typed contract, and on the last page
there’s some handwriting. Could you explain to us what that is
about?
A. Yes, Mr. Esquivel wanted me to meet him at Bogie’s,
which is a nightclub, I believe it’s Clearfield. I don’t go to
nightclubs, so I told him I would meet him in the parking lot.
In the parking lot he wrote the terms of our agreement. He
said that –-he gave me $2,000 for the gym and diet. I gave

him $6,000 in cash. Then for the title of my Cavalier he gave
me another $2,000. Then on the bottom he says that he financed
the rest by him, and X-Tagged for the other $10,000.
Q. Okay, so if I’m adding this up correctly, the 2,000
were the diet gym plans, the 6,000 representing the first
4,000, plus the second 2,000, and then $2,000 for the title
to your Chevy Cavalier?
A.
That’s correct.
Q.
Okay, $10,000.
MR. LYON: State moves to admit Exhibits 1 and 3.
MR. HOLJE: No objection.
THE COURT: Thank you. I’ll receive them.
(Exhibit Nos. 1 and 3 received into evidence)
Q. BY MR. LYON: Now, at any point in time was there a
conversation about –-we understand that you invested in X-Tag.
Was there any conversation between you and the defendant about
being able to get your money back?
A. Yes. Even on the promissory note that I initially
bought with the shares, he said that if the company did not
take off as he expected it to, we could receive our money back,
plus 3 percent interest in my case, by December of 2009. So
he, in other words, said, “You’re putting it in a bank, and
with a good interest plan. You’ll get it back if it doesn’t
work.”
Q.
Did you subsequently try to get that money back?

A.
I did multiple times.
Q.
Were you successful in doing so?
A.
No.
Q.
In that contract it references being able to call due
st
the note at –-or after December 31 , 2009. Did you try to
call due the note after that date?
A.
I did multiple times.
Q. In your dealings and discussions with Mr. Esquivel did
he ever tell you about a judgment of $3,075.62 that he received
against him in 2003?
A.
He did not.
Q.
Did he tell you about a judgment of $5,597.60 in 1999?
A.
He did not.
Q. Did he tell you about a judgment against him for
$1,537.69?
A.
He did not.
Q. Did he ever tell you whether this was a –-X-Tag was a
Utah business?
A.
He did not.
MR. LYON: Nothing further, your Honor.
THE COURT: Thank you. Counsel.
MR. HOLJE: Thank you.
CROSS EXAMINATION
BY MR. HOLJE:
Q. Okay, Mr. Cluff, just before I forget to ask this,

because it’s relevant to the charges in the Information, did
any of the money that you provided to Mr. Esquivel come from a
retirement account?
A. No.
Q. Your own retirement account?
A. No.
Q. Did any of this money come from equity in your home?
A. No.
Q. Okay, just personal savings?
A. Yes.
Q. Okay. All right, so is it your testimony Mr. Esquivel
told you to your face he’s the owner of X-Tag?
A. Yes.
Q. At any point did he use the word “stock”? We’ve
talked about shares here. You’ve mentioned shares. He never
mentioned the word “stock,” though, right?
A. It was quite a long time ago. I don’t recall.
Q. Okay. Your own assumption is that you were buying
stock?
A. That’s what I was assuming, yes.
Q. Okay. All right. You told us you gave your money to
an individual named John?
A. Uh-huh, that’s correct.
Q. You didn’t give it to Mr. Esquivel, right?
A. No. Mr. Esquivel told me to give it to John. He

would be coming to the gym to pick it up.
Q. Okay, did John have a last name, that you’re aware of?
A. I believe it was John Steere, I believe.
Q. Okay, had you ever met John Steere before?
A. I haven’t.
MR. LYON: Your Honor, if I could just interject. I
believe, Counsel, you’re talking about the first instance, not
the second?
MR. HOLJE: I’m talking –MR.
LYON: Just so we’re clear on the record.
MR. HOLJE: Thank you. That’s a useful clarification.
Q. BY MR. HOLJE: The first time you gave any money to X-
Tagged, was that to an individual named John??
A. Yes.
Q. Okay, and in return for this –-which was $4,000 at
the time, right?
A. That’s correct.
Q. In return for the $4,000 he gave you what?
A. A convertible promissory note.
Q. Okay, so the initial time was a convertible promissory
note, and subsequent when extra money was added, you were given
a second convertible promissory note; is that right?
A. A 1 percent document, yeah, of ownership in the
company.
Q. Okay. All right, so that we’re clear, I’m not trying

to trick you –
A.
Yeah.
Q. –-are both documents that we’re talking about
convertible promissory notes?
A.
To my knowledge. I’m not a legal expert.
Q.
Okay, did it say that on the top of it?
A.
On the top of it, it says 1 percent owner of X-Tagged.
Q.
Okay, but you –-do you have a copy of that anywhere?
A.
It’s with the Judge, I believe.
Q.
Okay. All right, thank you.
MR. HOLJE: Okay, if I may approach, Judge.
THE COURT: Yes.
Q. BY MR. HOLJE: Does this document that we’re looking
at, marked as Exhibit 3, does it have a title to it?
A.
Yes.
Q.
What does it say?
A.
“Convertible promissory note.”
Q.
Is this what you were given?
A.
Yes.
THE COURT: You can just leave it right there, in case
either one of you want to use it.
MR. HOLJE: Okay, thank you. Thank you, your Honor.
Q. BY MR. HOLJE: Your decision to give any money was
influenced by the representation of an attorney about the value
of X-Tagged shares; is that right?

A. That was for the 1 percent, yes.
Q. Okay. Tell us about that.
A. I received an email. I believe it was from–-forwarded
to me by Jason web, who worked at Advantia; and they said on
their last current valuation 1 percent of X-Tag was worth
$50,000.
Q. Okay, is Mr. Webb the attorney that you’re talking –A.
Yeah, that’s who I talked to initially when I got my
shares.
Q. Okay, and then it was based on that representation
that you decided to invest, right?
A. Of course.
Q. Not based on what Mr. Esquivel told you at the gym,
right?
A. No, it was based on both.
Q. Okay, but you hadn’t given any money prior to –excuse
me, let’s clarify that. That representation was given
to you when by Mr. –A.
That was when we were in the discussions of buying the
1 percent.
Q. Okay.
A. Before I had given any money.
Q. Okay, thank you. Then based on some very special
arrangements that Mr. Esquivel and you made, you decided to
give him money for 1 percent, right?

A. That’s correct.
Q. It’s your understanding that this was for ownership in
the company, right?
A. Yes.
Q. Okay, do you consider yourself an owner of X-Tagged?
A. Not at all.
Q. Did you at any point consider yourself an owner of
X-Tagged?
A. I did. I tried to execute that, with no –-no
success.
Q. Okay, what do you mean you tried to execute?
A. I would try to give ideas, ask questions. Anytime
I asked a question that was –-that the defender could –-the
defense couldn’t answer, he would use explicit language with
me, get angry with me, tell me to get a lawyer, “You’re not
going to see your money.”
Q. You worked pretty closely with Mr. Esquivel for two
years on X-Tagged business; is that right?
A. That’s correct.
Q. Okay, in an effort to make it profitable, right?
A. Yeah, to see some sort of return.
Q. Okay, tell us what your role was specifically.
A. I had no role, I had no title. I was just a 1 percent
owner.
Q. Okay, a 1 percent owner?

A. Uh-huh.
Q. Did you go to meetings with him, or –A.
I tried to set up a few meetings, but I never attended
any.
Q. Okay, so these ideas that you’re presenting for X-Tag,
those were presented how and when?
A. I would –-for one example I met –-I got in contact
with Isafe.org, which is an Internet safety company out of
California, and I tried to set up a meeting for Mr. Esquivel
multiple times, and finally he attended. I just tried to push
the company forward. He seemed hesitant. He wanted to stay
in the same level, as if it was comfortable, and none of his
promises came to fruition. So I was trying to enable it to
happen.
Q. Okay. Okay, back to –-well, sorry, did you ever at
any point attempt to convert your convertible promissory note
into shares of stock?
A. No, I did not. The company never went public.
Q. Okay. You never at any point received a stock
certificate, right?
A. No.
Q. Your evidence of ownership in the company is solely
based on a convertible promissory note?
A. That’s correct, and his recognition, well, I was on
good terms with him.

Q. Okay. All right, in that convertible promissory
note that you signed, was there language about risks involved
with –A.
None. It was all positive.
Q.
There was no language about risk?
A.
There was no risk.
MR. HOLJE: Okay. Your Honor, if I could approach?
THE COURT: Go ahead.
MR. HOLJE: Do you still have that up there?
Q. BY MR. HOLJE: I’m referring to State’s Exhibit 3. Is
this your signature on page 8 of that document?
A.
It is.
Q.
Okay, did you read the document before signing it?
A.
I did not.
Q.
You didn’t read it?
A.
Uh-uh.
Q. Okay. Page 6 mentions representations and warranties
of the holder; is that correct?
A.
Yes.
Q. Okay. I’ll give you a second to review paragraph 18
of that document.
A.
(Witness reading document).
Q.
Have you had an opportunity to review that?
A.
I did.
Q.
Okay, is there anything in that paragraph that talks

about risks associated with this –-what we’re calling an
investment for purposes of today?
A. It does say “the holder is capable of evaluating the
risks and merits of this investment.”
Q. Okay, talk about based on your financial and business
experience?
A. Uh-huh.
Q. Okay. Does it say that you could suffer a complete
loss of your investment?
A. Not that I can see. I could be missing it, though.
Q. You may need to continue onto the next page.
A. It’s the next page? Okay. Yeah, it does mention it.
Q. Okay, Mr. Cluff, the document that you signed, doesn’t
it say that it’s a highly speculative investment and involves a
high degree of risk?
A. It does.
Q. Okay, and you signed that, right?
A. I did.
Q. Okay, and again, if you already answered this, I
apologize. You did nothing to convert the promissory note
into anything other than a promissory note?
A. I never had an opportunity nor any –-any question to
do so.
Q. Okay, no inclination or anything?
A. None.

Q. Okay. You talked about some value for personal
training and dieting, right?
A. Yes.
Q. Mr. Esquivel never actually did any personal training,
did he, at Anytime Fitness?
A. No.
Q. Okay. Is it your testimony, then, that $2,000 of your
10,000 total was based on diet plans that you prepared for him?
A. It was diet plans and specific exercises that I would
email him –Q.
Okay, so –A.
–-in his preparation to be on Oprah.
Q. Okay, so based on a number of emails, you believe you
earned $2,000 from him, right?
A. I didn’t charge. He came up to me and said, “I will
give you $2,000 to go towards this 1 percent,” and I agreed.
said, “Okay.”
Q. Okay, in essence a credit, right?
A. Yeah, he would credit it to the $10,000 –Q.
Credit the 2,000.
A. –-for the 1 percent.
Q. Okay, you never, say, invoiced him for $2,000 worth of
work? You never gave him a bill for –A.
No, I never, and I was doing it just to help out a
fellow employee. He came to me and said, “Since you’ve done

this, I will give you this much money.”
Q. Okay. Out of the kindness of his heart, essentially?
A. Well, I guess so.
Q. All right. With respect to the title to your Chevy
Cavalier –A.
Uh-huh.
Q. –-1998 Chevy Cavalier, right?
A. Yes.
Q. And this was in 2009, right, that this was going on?
A. In 2008.
Q. Excuse me, 2008. So the car would have been ten years
old then, right?
A. Yes.
Q. Okay. A ten-year-old Chevy Cavalier, and you told us
the engine didn’t work; is that right?
A. Yeah, as I told Mr. Esquivel, yes.
Q. Did the engine even exist? Was there an engine –A.
It was in there, yeah, just –Q.
It didn’t work?
A. –-didn’t feel too good, yeah.
Q. Car was inoperable, right?
A. Yes, sir.
Q. Okay. All right, as far as the value of that car, did
you guys sit down and look it up or –A.
No, he stated that his lawyers just need collateral,

and he would give $2,000 for that title.
Q. Okay, again, a number that Mr. Esquivel just chose on
his own, right?
A. He stated it to me, and I said, “Of course.”
Q. Okay. All right, and with respect to efforts to get
your –-again, what we’ll call an “investment” for purposes of
today. With respect to getting your investment back, you told
us you tried several times?
A. Yes.
Q. Would you elaborate on that, please.
A. In what regards?
Q. How did you try to get it back?
A. Phone calls, multiple emails. I spoke with a lawyer.
Told me to write an email stating the provision that it says
that I can receive it back by December 31 st of 2009. I wrote an
email asking just for the amount back.
Q. These are emails to who?
A. Mr. Esquivel.
Q. Okay, do you have those emails still?
A. On my account I do.
Q. Did you provide them to Mr. Sweet, the investigator in
this case?
A. I don’t believe so.
Q. Okay. Take –-I’m not –-take a guess, how many times
did you –-did you try?

A.
Between five and ten.
Q.
Okay, and they were all by email?
A.
Yes.
Q.
Did you receive responses to any of these emails?
A. I received a few saying –-you know, attacking my
religion and using explicit language towards me saying I won’t
–-I won’t see it back. Get a lawyer.
Q. Okay, and those were emails that you didn’t see fit to
present to the investigator in this case?
A. I may have presented. It was quite a long time ago.
I don’t think I was asked for them either.
Q. Haven’t you been approached by individuals requesting
to pay you back this money?
A.
To me personally? Not to me personally.
Q.
You’ve never been approached about repayment of your–A.
I have heard rumors of them speaking to the other two
gentlemen that they wanted to buy us out; and we had given them
time frames and the amounts, and nothing ever materialized.
Q.
Okay, no personal contact from a Steve Klemark?
A.
No, not to me.
Q.
Or an Alan Brady?
A.
Not to me.
Q.
Or a Shar Jenkins or –A.
No, not to me. They were, according to the other two–THE
COURT: Just tell me what you know personally.

THE WITNESS: What I know personally is that they told
Ryion –THE
COURT: No, no, no.
THE WITNESS: Oh, sorry.
Q. BY MR. HOLJE: What you know.
A. Oh, no, I didn’t. They never contacted me.
Q. Okay. Didn’t you approach Mr. Esquivel in an email
one time asking for $90,000 in return?
A. I did.
Q. Okay, and that was based on your investment of $6,000
cash, right?
A. Yeah, that was based on multiple things. It was based
on the amount that he said he sold the company for three or
four months prior, that I had not received any payment for. So
he was asking for my buyout.
Q. Okay, and nothing in writing that you’re aware of
entitling you to $90,000 or anything?
A. With my calculation, it was my buyout. He did say
to me on the phone –-I said, “I need the money. I need to
be bought out,” and he said, “Well, I could probably get you
$90,000, you know, by tomorrow or the next day; but if you hang
onto this, it would be worth a lot more.” So that email was
referring to the conversation we had, “I’ll take the $90,000,
and you know, you can buy me out.”
Q. You mentioned that Mr. Esquivel never told you affirm

atively that X-Tag was a Utah business, right?
A. Not that I recall.
Q. Did he mention that it was a Wyoming business?
A. No, he did not.
Q. That it was a business incorporated in any state at
all?
A. No.
Q. Have you subsequently learned –-or I mean, in the two
years that you worked closely with him did you learn whether or
not it was incorporated in any state?
A. It was –-I didn’t –-not from his voice. No, not
from his mouth. I had assumed it was, because it’s X-Tag
Incorporated he said he invented in Utah. So that’s my
assumption.
Q. Okay, but working as a certain percent owner of X-Tag,
you never looked to see whether it was in fact a real company
or not?
A. I didn’t, nor did I have the opportunity. He never
gave me any –-any ability to look over the records or the
finances or any part of that dealings.
Q. Just finally, with respect to –-let’s go back to
the very beginning when you had a conversation in the gym, in
Anytime Fitness. You’ve told us about certain representations
that were made about the Oprah Winfrey show and Google buyouts
and things of that nature. You didn’t invest right after you

heard those things, right?
A. No, it was –-that was on a Saturday. I invested on
a Monday.
Q. Did you in the meantime speak to an attorney?
A. No.
Q. You told us before that you invested after an attorney
told you this was worth 50,000.
A. That was in regard to the 1 percent.
Q. Okay, so timewise about what, two months later; is
that accurate?
A. I invested in February. I think there’s a copy of my
check that I gave for the 1 percent was in the end of May.
Q. Okay.
A. Or the beginning of June.
Q. Okay, and in the meantime, between those three months
did you do any investigating on your own about X-Tagged or did
you talk to Mr. Esquivel about Oprah or any of those –A.
He would make remarks saying, for numerous reasons I
can’t remember, “It’s been postponed.” “It’s been postponed.”
There was always a reason it never –-never came to fruition.
So he continued to dangle the carrot in front of our –-in
front of my face, and I believed because I’m a –-I’m a trustworthy
person and I believed him.
Q. Okay, just relied on him, didn’t do any investigating
on your own; is that –

A. I played on the website, and it was built, and I
looked at it. I talked to his lawyer, which in fact gave me
a closure that this was a legitimate company.
Q. Okay, and you told us that you were a percent owner of
X-Tagged. At what point did you decide that you were not? You
also told us you don’t believe you’re a –A.
Oh, I don’t –-well, I don’t –-I don’t believe the
company is a legitimate company or a profitable company. I
don’t know if it’s even registered anywhere; but at the point
that I –-even if it was, the point that I thought that I was
not is when I questioned some of the things that he had been
saying about certain people buying the company, it being sold,
being jerked around side-to-side. As soon as I questioned
him, he blew up, started swearing, got angry, told me to get
a lawyer.
Q. Okay, and just finally, Mr. Cluff, you’ve told us that
you didn’t read that convertible promissory note, so if you
don’t know the answer to this, just say so. It directs you in
very specific terms on how to request that you be –-that you
get your money back. Did you follow through with any of those
specifics?
A. Like I said, my father got me in touch with his
lawyer, and he looked over the contract, and he told me it
was more than appropriate to use an email to request the
provision of the money to be returned, plus interest, within

a 30 day time frame, and I sent that.
Q. Okay, and could I direct your attention to paragraph
13 of that. Does your paragraph 13 on the State’s Exhibit 3 in
front of you say notices?
A. Yes.
Q. Okay, and does it give some addresses there?
A. It does.
Q. Okay, addresses on where letters are to be sent to
make certain things happen?
A. It was.
Q. Okay, but you didn’t write any letters to those
addresses, right?
A. He was no longer at that address.
Q. Okay, how do you know?
A. Because he told me he was in –-I was still on good
terms with him while he left to Colorado –Q.
Okay.
A. –-and I could not find –-he would not give a new
address to contact him. So the lawyer said an email would
suffice.
MR. HOLJE: All right, that’s all the questions I have
for your Honor.
THE COURT: Thank you. Mr. Lyon.
MR. LYON: Just a few followup, your Honor.
///

REDIRECT EXAMINATION
BY MR. LYON:
Q. Did the defendant ever tell you whether he was licensed
to sell securities in the State of Utah?
A. He never said.
Q. When discussing your investment with the defendant
orally, were there any discussions about risks and the risk
that you might be taking by investing in X-Tag?
A. He stated none.
Q. Okay, just so we’re clear, did he –-tell us, did he
specifically tell you there was no risk associated with X-Tag,
or tell us exactly –A.
All that he told me was that it was on the verge of
turning public and becoming, as I said, 30 to $40 immediately,
and it will go above Google, which was 500 and something, and
it was on that verge. Everything was ready. He was getting
ready to prepare for the Oprah Winfrey show. The site was up.
I looked at it. With all those things in hand, I believed it
was a legitimate –-legitimate company.
Q. Okay, and Mr. Woolsey has directed your attention to
the convertible promissory note, the paragraph and the language
that discussed the risk associated with investment.
A. Yes.
Q. Did you have any discussions with him, with the
defendant with regard to any of the risks associated with the

investment?
A. He never mentioned any risk. It was all positive.
Q. Did the defendant ever tell you how your 4,000 –-your
initial 4,000 buy in and then your other –-your second buy in,
how that –-how that was related to the –-let me start over.
With regards to your first investment of $4,000, that was equal
to how much –-what percentage in the company?
A. He never stated. It was just 4,000 shares.
Q. Okay, he never said whether that’s a percent, half
percent, 10 percent?
A. No.
Q. Did the defendant ever contact you with regards to –and
inform you that the company had been sold?
A. He had.
Q. Tell us when the first time that happened.
A. He had contacted me multiple times. Not necessary
that the company was sold, on those terms, but that he had
given part of it to different combinations of companies, and
he had stated that “You’re a millionaire. We’re all done. We
don’t have to do anymore work, you know. They’re going to take
it from here.” He did, however, on December I believe it was
2009, close to Christmas, he contacted me and said that they
sold the company in its entirety.
Q. Did they say to whom?
A. He told me it was Donald Trump that bought it.

Q. When you were first looking at investing the –-I
guess it would be the February, the springtime of 2008, did he
give you an initial date of when the company would go public?
A. When he –-when we were speaking, even when I called
him to buy the shares, he didn’t even know if –-he thought it
was public at the time, so he said it was on the verge.
Q. Now, would –-with regards to the judgments against
the defendant, would that –-had you known the defendant had
those problems with credit in the past, would that have
influenced your decision in investing in X-Tagged?
A.
Absolutely.
MR. LYON: Nothing further.
THE COURT: Anything else?
MR. HOLJE: No, your Honor.
THE COURT: Thank you, Mr. Cluff, you may step down.
This witness be excused?
MR. HOLJE: As far as we’re concerned.
MR. LYON: Yeah.
THE COURT: Hearing nothing –MR.
LYON: Oh, I’m sorry, what did you say?
MR. HOLJE: I said as far as we’re concerned, that’s
okay.
MR. LYON: Oh, okay.
THE COURT: You may be excused, Mr. Cluff.
Your next witness.

MR. LYON: Okay, your Honor, the State calls Christopher
Engelbrecht.
COURT CLERK: You do solemnly swear that the testimony
you are about to give in this case before the Court will now –in
this case now before the Court will be the truth, the whole
truth and nothing but the truth, so help you God?
THE WITNESS: (Inaudible).
THE COURT: Go ahead.
CHRISTOPHER PAUL ENGELBRECHT,
having been first duly sworn,
testified as follows:
DIRECT EXAMINATION
BY MR. LYON:
Q. Please state your name for the record, spelling your
last name.
A. Yes, Christopher Paul Engelbrecht, E-n-g-e-l-b-r-e-ch-
t.
Q. Mr. Engelbrecht, correct?
A. Correct.
Q. Back in the fall of 2008 were you the owner of Anytime
Fitness in Bountiful?
A. I was.
Q. In the time frame of about –-during the year of 2008
did you meet the defendant?
A. I did.

Q. Tell us when you first met him.
A. Andy came into the facility on –-in February to look
at a membership.
Q. Did you have contact with him that first time he came
in?
A. I did not.
Q. When did you meet with him?
A. I would guess it would be the second time.
Q. Tell us how the two of you met.
A. Andy came into my office to, what I assumed, talk
about a gym membership.
Q. When he comes into your office, do you initially start
talking about a gym membership?
A. The conversation was more short talk, you know,
personal, “How are you doing?” Then Andy, at that point,
had a lanyard of some sort around his neck, which then had
some digits on it, and the conversation took a turn for that.
Q. Okay, and was that lanyard dealing with X-Tagged?
A. It was.
Q. Tell us about your conversation that you had about the
company.
A. Excuse me. Andy proceeded to explain to me that it
was a company that he had invented that is designed to give
security to the Internet, keeping pedophiles, rapists, things
of that nature off of the social sites, such as Facebook and

MySpace.
Q. Did he tell you what phase the company was as far as
development? Was it –A.
He at that point explained to me that they were on the
verge of going public, and that they were going to put their –at
that point have stock in the company.
Q. Did he–at any point in time during your conversation
did he –-did the conversation turn towards an investment in
the company?
A. Yes, the conversation did take that direction, and –excuse
me, but it was a conversation that dealt with, “Hurry
up, we’re about to go public; and if you’re going to invest,
you need to make a decision.”
Q. How was that communicated to you, this hurry up and
decide?
A. Each time I spoke with Andy, he would basically say,
“We’re on the verge. We’re about a week away from going public.
So right now is the best time to get in, because once it converts
over, you’ll be a millionaire.”
Q. Okay, so are you talking about subsequent conversations
you’ve had with him, too, other than this first conversation?
A. They would be, you know, as he –-he came into the gym
one other time, and yes, that’s where the conversation went as
well.
Q. Okay, and just for right now, let’s focus on that

first conversation that you had with the defendant. When he’s
explaining the company, does he make any indication whether
individuals are interested in purchasing the company?
A. Yes, he told –-he told me that Michael Jordan was
looking at purchasing the company. He was going to be on the
Oprah Winfrey show because of it, and that he also mentioned
that it was going to be bigger than Google.
Q. Did he indicate –-did he tell you whether he was
planning on meeting with any other major –-I guess you could
say –-computer based companies?
A. What I can recollect right now is Google. Oh, wait, I
apologize, in regards to MySpace.
Q. Did he tell you whether –-what the price of X-Tag’s
stock was going to be after it went public?
A. Not a direct quote. He just continued to say it was
going to be worth millions. It’s going to be bigger than
Google.
Q. Now, on this first occasion that you meet with him, do
you make any decisions as to whether you want to invest or not?
A. No, I do not.
Q. Did you have a second –-or subsequent conversations
with the defendant?
A. Only through phone, telephone.
Q. Tell us about those conversations.
A. The last time I spoke with him before investing, he

said that they are within the next couple of days going public.
He’s not sure if I can still invest, but he will check it out,
and that at this point that I should probably just move forward
and invest, so that way –-and he’ll work something out.
Q. Did you make a decision as to whether you wanted to
invest or not?
A. Yes, at that point I –-what I had done is I called
Kyle to verify a few things, as he had spoke with his lawyer to
get some clarification; and it was at that point that I made
the decision to invest.
Q. How much did you initially invest?
A. 2,000.
Q. Now, when you spoke with the defendant about your
investment, did he talk to you about the risks associated?
A. No, it was all positive when he spoke to me.
Q. Did he –-as per your agreement and your oral agreement,
did you –-was there –-was there any decision as to
whether you could get your money back?
A. When he spoke to us, he basically made it look as
though there was nothing to be worried about. It was a win/win
situation, because verbally he had said to me that I would get
a 12 percent return on that after the given date. So it would
be no less than having money in a bank with interest.
Q. When you say “it,” under what circumstances would you
get your money back?

A. At the end of a specific period, which was the 2009
December.
Q. Just so we’re clear, you would get that money –-your
investment back plus 12 percent. Were there –-is that even if
the company had gone public?
A. That was –-yes, that would have been –-that was the
understanding that I had, yes.
Q. Did you have any conversations with him about X-Tagged
and its affiliation with the Utah Division of Motor Vehicles?
A. Yes, I did. He had said to me that they were working
to partner with the DMV for their license plate database, and
it would be unbelievably huge. He also mentioned that he was
looking at giving them 51 percent of the company.
Q. All right, Mr. Engelbrecht, I’m showing you State’s
Exhibit 2. Do you recognize that?
A. Yes, I do.
Q. What is it?
A. This is the convertible promissory note that we had
done for this –-the investment of $2,000.
Q. Who signed that?
A. That was signed by my wife, Melissa.
Q. Were you present at that time?
A. I was not.
Q. Do you recognize the signature on the back there?
A. Of my wife, yes.

Q. That’s her signature?
A. Yes, it is.
Q. Did you have subsequent conversations with the defendant
regarding this note?
A. Excuse me?
Q. Did you have subse –-after you executed this –-I
think it’s called a convertible promissory note –A.
Convertible promissory note.
Q. –-did you have subsequent conversations with the
defendant regarding the investment of $2,000?
A. At that point, no, I did not.
Q. Did the defendant make any indication to you whether
X-Tagged was patented?
A. Yes, he had said it was.
Q. Had the defendant disclosed to you about a judgment
in 2003 for $3,075.62?
A. No, he did not.
Q. Did he discuss –-disclose to you prior to your
investment about a judgment against him in 1999 for $5,597.60?
A. No, he did not.
Q. Similarly did he disclose to you about a judgment he
received against him for $1,537.69 in 1999?
A. He did not.
Q. Did he disclose to you he was not licensed to sell
securities in Utah?

A. No, he did not.
Q. During your conversations with him about X-Tagged, did
he make any indication as to X-Tagged being a Utah company?
A. No, he did not.
Q. Had you known about the prior judgments and he was
not licensed to sell securities, would that have changed your
decision in investing in X-Tagged?
A. 100 percent.
Q. Prior to receiving that promissory note, had you
received any disclosures as to risks associated with investment
in X-Tagged?
A. No, I did not.
Q. Now, in the fall of 2008 do you have a conversation
with the defendant about signing any documents to convert
stock?
A. Yes, I did.
Q. Tell us about that.
A. He called me concerning doing this conversion, and he
wanted me at that point to come over to his sushi restaurant.
I told him when I got off from the gym I would. I didn’t get
off until around 10 o’clock. At that point I called him, and
he said that he had already taken care of it, signed the
documents, and everything is taken care of.
Q. Did you in fact ever receive any stock in X-Tagged?
A. I did not.

Q.
Have you tried to receive your money back?
A.
Yes, I did.
Q.
Have you been successful in that?
A.
No, I have not.
MR. LYON: The State moves to admit Exhibit 2.
MR. HOLJE: No objection.
THE COURT: Thank you. I’ll receive it.
(Exhibit No. 2 received into evidence)
MR. LYON: Nothing further, your Honor.
CROSS EXAMINATION
BY MR. HOLJE:
Q.
Okay, Mr. Engelbrecht, you’re a business owner, right?
A.
I was, yes.
Q.
You were, okay. When did you sell?
A.
November of last year.
Q. Okay. All right, so at all times that we’re talking
about here, you were a business owner, right?
A.
Correct.
Q. All right, I’m sure as a business owner you understand
the concept of risk, right?
A.
Ido.
Q. Isn’t it –-in your opinion isn’t it kind of an oxymoron
to have an investment without risk?
A.
Yes.
Q.
Your testimony was that Mr. Esquivel said there is no

risk; is that accurate, or –
A. Yes.
Q. Okay, he affirmatively said that, or just you guys
never talked about it?
A. No, he said that in my office.
Q. That there is no risk in this?
A. Correct, he believed in karma.
Q. Okay, as a business owner did any red flags go off or
any bells and whistles in your head?
A. At that point, no, when it had to deal with a return.
Q. I’m sorry?
A. When it had to deal with a return that I would receive
at the end.
Q. Okay, so I’m not even sure I understand that, but
you –-your decision to invest was based on conversations
that talked about Oprah Winfrey and Google and things of that
nature; is that –A.
Yes, and he also mentioned the return that we would
receive at the end of the investment.
Q. How about –-you’re friends with Kyle Cluff, right?
A. That is correct.
Q. Okay, how about the conversations you had with Kyle
Cluff and representations from his attorney?
A. What question are we asking?
Q. You relied on those before investing; is that accurate?

A. Correct.
Q. Okay. This promissory note, convertible promissory
note, did you read it before signing it?
A. I did not.
Q. As a business owner, was that kind of the normal way
you do business or –A.
No.
Q. What made this one different?
A. I was not there.
Q. Okay. Is your name on it?
A. My name is written in as “Chris.”
Q. Okay, that’s your name, right, Chris?
A. That is.
Q. Okay. All right. You said it was signed by your
wife, right?
A. Correct.
Q. Okay. Has your wife made any efforts to get her money
back or get —-make contact with X-Tagged?
A. No.
Q. Okay. Did your wife read it before signing?
A. I cannot answer that.
Q. Okay. Did you have any independent verification
from an attorney, specifically Jason Webb, about the value of
X-Tagged?
A. I did not.

Q. Did you rely on any representations from an attorney
given to your friends about the value of X-Tagged?
A. I did.
Q. Okay. You’ve been –-you were here when I questioned
Mr. Cluff, right?
A. Yes.
Q. The –-I think the testimony was that this Jason Webb
said it would be worth $50,000; a 1 percent share was worth
50,000, right?
A. Correct.
Q. Was that information that was in your head at the time
you invested?
A. That’s what Kyle had told me.
Q. Okay, and that attorney, to your knowledge –-I understand
you didn’t speak to him, but to your knowledge, was he
sort of saying this was a legitimate company?
A. Yes.
Q. Subsequent to making an investment did you do any
independent investigation about whether or not X-Tagged was
incorporated in Utah or where it was incorporated or anything
like that?
A. No.
Q. Okay, did you ever hear anything through the grapevine
about that?
A. Not until a month ago.

Q. Okay. You told us that you asked for your money back,
right?
A. I did.
Q. Again, can –-can you elaborate on the efforts you
went through to get a money back?
A. In December 2009 I, one, sent an email to Andy directly
asking for it back. I received no reply; and two, I sent a
certified letter to the address on the contract, and that was
sent back as a return.
Q. Undeliverable?
A. Correct.
Q. Any reason why? I mean, no forwarding address, things
like that?
A. No forwarding address; and if I remember correctly,
address is no longer there, or something of that nature.
Q. Okay, so just those two things, right; an email with
no response and a letter that was unsuccessful?
A. Correct.
Q. Okay, and what efforts did you go through after that,
or how did you get here after that point?
A. How do I –-to this point here?
Q. Right.
A. Well, at that point, that’s when I went and visited
Mr. Sweet.
Q. Okay, on your initiation or were you contacted? In

other words –
A. No, it was on my initiation.
Q. Okay. Didn’t you also make a police report on this
matter?
A. No, I don’t –-I don’t recollect.
Q. You don’t recollect if you met with the Bountiful
police?
A. At this point I can’t remember.
Q. Okay. After sending an email or sending a letter,
haven’t you been contacted by numerous individuals about
repayment?
A. No, I have not.
Q. Ever in your life?
A. Not directly from them, no.
Q. Indirectly?
A. Explain.
Q. Well, did anybody talk to your wife, or did anybody
talk to your friend and say, “Pass the word onto Chris,” or –A.
Yes, through friends, not through my wife.
Q. Okay, if you’d explain that, please.
A. From what I understood, they would give a payment to
us, but there was no –-that I understood, there was no leading
time. There was nothing that took place in order for that to
happen.
Q. Okay, so you personally have never been contacted by a

Steve Klemark?
A. I was recently contacted, I think it was by Steve, as
of about two weeks ago.
Q. Okay.
A. But it wasn’t concerning payment. It was to sit down
and go over information that he said I needed to know.
Q. Okay, was that the first contact you’d ever had with
him?
A. Yes.
Q. Okay, what about an Alan Brady?
A. No.
Q. No contact from him; or a Shar Jenkins?
A. Actually there were emails –-I apologize, there were
emails just recently sent as of –-just as recent. I apologize,
my mind was thinking in the past, but there were emails sent
speaking with apparently his lawyer for me to try and gain
payment back. They said that I would be paid back.
There was a picture of a check with my name on it
for $2,000. There were text messages at that point that were
–-or I apologize, emails that were sent, and me requesting
that it would be the amount plus interest, and they informed
me, whomever I was speaking with via email, that I would be
paid back. I needed to work through his lawyer, Mr. Martinez,
and all communication at that point fell off. I had never
received nothing more.

Q. Okay, and can you put a time frame on this for us?
A. To my remembering would have been the December time
frame.
Q. Of 2011?
A. That’s correct.
Q. So that we’re clear here, your testimony is that
those efforts we’ve just talked about, those communications
we’ve just talked about via email and directing you to contact
lawyers and that, that’s the first contact you’ve ever had
about getting repayment, is just –A.
Other than from Kyle and speaking with him, I have
never had any type of direct contact, other than that, that I
can remember.
Q. Okay. Okay, if you’ll bear with me, we can probably
–-I think a lot of this has been covered. The only other
thing, just by way of clarification, I think you mentioned,
like Mr. Cluff did, that there was a representation made to
you about the DMV participating in this idea of X-Tagged,
right? Do you remember that?
A. Yes.
Q. That representation was specifically –-I think the
way you worded it was he was in the process of working with
them; is that –-did I get that right?
A. That’s correct.
Q. Okay, not that there was any sort of affirmative deal

in place, but that that was an effort that was being made; is
that right?
A.
That’s correct.
Q. Did you ever follow up with Mr. Esquivel about some
of the things you’ve testified to with respect to interested
parties and X-Tagged, people like Michael Jordan or Google or
any of them?
A.
No, I did not.
Q. Okay. Did you have any sort of –-did you think that
you were an owner of X-Tagged?
A.
No.
Q. Did you make any efforts to direct its affairs or, you
know, give ideas and input on it?
A.
No.
Q. Essentially is it –-is it fair to say that your buddy
Kyle made an investment and thought it was good, and you jumped
onboard?
A.
Yes.
MR. HOLJE: That’s all the questions I have.
THE COURT: Thank you, Counsel. Mr. Lyon?
MR. LYON: I’ve got nothing further from this witness.
THE COURT: Okay, thank you, Mr. Engelbrecht, you may
step down.
Your next witness?
MR. LYON: Similarly, your Honor, may he be excused?

THE COURT: Yes.
MR. LYON: You’re free to stay or go.
The State calls Ryion Butcher.
COURT CLERK: You do solemnly swear that the testimony
you are about to give in the case now before the Court will be
the truth, the whole truth and nothing but the truth, so help
you God?
THE WITNESS: Yes.
RYION BUTCHER,
having been first duly sworn,
testified as follows:
DIRECT EXAMINATION
BY MR. LYON:
Q. Okay, Mr. Butcher, could you please state your name
for the record –A.
Yes.
Q. –-spelling your first and last name.
A. It’s Ryion Butcher, R-y-I-o-n B-u-t-c-h-e-r.
Q. Mr. Butcher, were you employed at Performax Gyms in
Clearfield in 2009?
A. Yes, I was.
Q. During that time did you work with Mr. Cluff?
A. Yes.
Q. Who testified here today?
A. Uh-huh.

Q. At the time, Mr. Cluff was also working at Anytime
Fitness?
A. That’s correct.
Q. In your discussions and interactions with Mr. Cluff,
did you ever have any discussions about X-Tagged?
A. Yes.
Q. At any point in time did the defendant come into
Performax Gyms and have any discussions with you about X-
Tagged?
A. Yes, he did. He came in.
Q. Could you tell us when that happened.
A. That happened April 2009.
Q. Tell us about this first encounter you’ve had with
the defendant.
A. Yes, he was coming in to talk about the company and
meet with Logan Laws and Kyle.
Q. Okay, and Logan Laws is another individual that
happened to invest?
A. Yes, he was an 18-year-old kid that invested.
Q. Was this meeting set up by Mr. Cluff?
A. I believe it was set up by Mr. Esquivel.
Q. Okay, and so Mr. Esquivel was coming to meet with
Mr. Laws; you just happened to kind of sit in on the meeting?
A. Yes, they –Q.
Okay, during that meeting the defendant talked about

X-Tagged?
A. Yes.
Q. Could you tell us what he told you in describing the
company.
A. Yes, he told us about this new social networking
company. That it was going to be bigger than all the current
social networking companies out there.
Q. Specifically?
A. Google and –-well, I mean, Facebook and MySpace.
Q. Did he explain the company to you?
A. Yes, he was –-he talked about how they used the
license plates to verify individuals that it was really them
that were on the social networking site. That you would have
to get your picture taken with your license plate, and therefore
it would verify you that you’re that person.
Q. Now, did he tell you whether there were individuals
wanting to purchase X-Tagged?
A. Yes. He said that Google was interested in purchasing
X-Tagged. He was talking about a meeting with them within the
next two weeks.
Q. Did he give a price that investors were willing to pay
for X-Tagged?
A. Yeah, he was throwing all sorts of numbers around. He
said upwards for $500,000,000 to $1,000,000,000.
Q. Did he make reference to one Hugh Hefner being

interested?
A. Yes, he says he turned Hugh Hefner down. He also
stated that he was going on the Oprah show.
Q. Now, in this contacts did he indicate to you whether
there was an opportunity to buy into the company?
A. Yes, the said there was a half of a percent left in
the company, and it was the last half percent, and that if I
wanted in, I better act quickly, because there were so many
investors in line looking at buying this last half percent up.
Q. Did you in fact –-let’s see, did he tell you what
that percent would be worth?
A. Yes, he said it was currently worth $50,000.
Q. Did he explain to you how that’s worth –A.
No.
Q. –-$50,000? Did he explain what it would be worth
in the near future?
A. Yes, after –-well, after that, that meeting, and
after I invested it seemed like every single week the amount,
the price of it kept going up every single week.
Q. Okay, let’s just talk –A.
Okay.
Q. –-Mr. Butcher, just as to this first meeting –A.
Okay.
Q. –-did you in fact invest in the company then?
A. Yes.

Q. How much did you put in?
A. I put in 25,000 –-I mean, $2,500 at first.
Q. He was wanting to sell half a percent for $5,000; is
that correct?
A. Yes.
Q. Okay, and so tell us how you put in $2,500 as opposed
to 5.
A. Yes. Well, he said that if I would just pay the 25
for the half percent, and that I would kind of help out, then
that would make up for the rest.
Q. Okay, now at this time did the defendant tell you
whether X-Tag was patented?
A. Yes.
Q. Did he tell you whether it was an LLC in Utah?
A. No.
Q. Did he tell you whether it was a business in Utah?
A. Yes.
Q. Did he explain to you whether there was any sort of
affiliation between the Department of Motor Vehicles and X-Tag?
A. Yes.
Q. What did he tell you?
A. He said that they were onboard with X-Tagged.
Q. When you say “onboard,” what does that mean?
A. That they were going to –-they were going to be a
part of X-Tagged and authorize the use of people’s license

plate, getting their help with X-Tag and making it safe.
Q. Okay, when –-and did he explain how that –-the
interaction between X-Tagged and the DMV was going to take
place?
A. No.
Q. Now, when you make your initial $2,500 investment, do
you remember what day?
A. Yeah, I believe –-I can’t remember the specific day.
Q. All right, well, let me just see if I can help refresh
your recollection. I’m showing you what’s been marked as
State’s Exhibit No. 4. Do you recognize that?
A. Yes.
Q. Tell us what you’re looking at.
th
A. April 7 , 2009, a check for $2,500 made out to X-Tag.
Q. That’s your check?
A. Yes.
Q. Okay, and that’s the first investment you make?
A. That’s correct.
Q. Okay, and did you receive –-in exchange for the
$2,500 did you receive anything?
A. Yes, I got a –-I have a document saying that –Q.
Okay.
A. –-I would receive 50 –-50,000 shares.
Q. Okay, and I’m showing you –-this is all part of one
exhibit; but can you tell us what you’re looking at there?

A. Basically my investment paper –Q.
Okay.
A. –-of 100,000. That was 100,000.
Q. Okay, and so –-okay, and from whom did you receive
that investment papers?
A. Mr. Esquivel.
Q. Okay, now after giving the first $2,500 were you
again approached by the defendant as to another investment
opportunity?
A. Yes, he said –Q.
When did that happen?
A. Just shortly after. About probably two weeks.
Q. Okay, tell us what happened.
A. He contacted me again and said that another half
percent became available.
Q. Were you interested in purchasing another half
percent?
A. Yes.
Q. Did you in fact make another investment?
A. Yes.
Q. How much was the second one for?
A. For $2,500.
Q. Again, referring to what’s been marked as Exhibit 4,
do you recognize these?
A. Yes.

Q. Can you tell us what they are?
A. It’s my second investment of $2,500, and another
certificate saying that I own 50,000 shares.
MR. LYON: Okay, State moves to admit Exhibit 4.
MR. HOLJE: No objection.
THE COURT: Thank you. Just 4? They’re all the same
exhibit?
MR. HOLJE: They’ve all –-for the record, there are –Exhibit
4 has four documents within it.
THE COURT: Thank you. I’ll receive 4 with the four
documents.
(Exhibit No. 4 received into evidence)
Q. BY MR. LYON: Now, Mr. Butcher, in your conversations
with Mr. Esquivel, at any point in time did he let you know
that he had a judgment against him in 2003 for $3,075.62?
A. No.
Q. Did he let you know he had a judgment against him in
1999 for $5,597.60?
A. No.
Q. Did he let you know that he had a judgment against him
in 1999 for $1,537.69?
A. No.
Q. Did he ever have a conversation with you about the
risks associated with investment?
A. No.

Q. Did he ever let you know –-have a conversation with
you that you could get your money back if things didn’t work
out, things didn’t go public?
A. Yes.
Q. Tell us about that.
A. Yes, he told us that rest assured that anytime we
wanted out, he would give us our money back with 12 percent
interest.
Q. Did he give you a date as when you could get that
back?
A. He said anytime, because he –-he mentioned that he
had investors lined up, and any one of them would gladly jump
on that, that percent and buy it up for more than what I had
paid for it.
Q. Did you at anytime in fact try to exercise that right
and get your investment back?
A. Yes.
Q. Tell us when that happened.
A. That happened within probably a month later. I
approached Mr. Esquivel and I said, “You know what, things
aren’t going too well. I’m getting ready to purchase a house.
I could really use my money back. Could I get that back?” and
he said, “Absolutely.” He goes, “I have an investor that’s
willing to pay $50,000 right now for it, so it will only be
helping X-Tag, but yeah, I’ll give you your money.” Then he

stated he would give me that money Monday.
Q.
Did you in fact receive your money back?
A. No, and then he told me I’d receive it on Wednesday.
Then he just kept dragging it out and out and out further and
further and further.
Q. At any time did the defendant let you know that he was
not licensed to sell securities in Utah?
A.
No time did he ever.
Q. Other than those –-as part as what’s been received as
4, we’ve got those two documents memorializing the investment
you made, did you receive any other written explanation as to
the risks associated with investing in X-Tagged?
A.
No.
MR. LYON: Nothing further.
THE COURT: Thank you.
CROSS EXAMINATION
BY MR. HOLJE:
Q. So, Mr. Butcher, is it true that the only documents
you were given throughout this entire ordeal were those that
have been presented as State’s Exhibit 4?
A.
Yes.
Q. Okay, you didn’t –-unlike your friends, you didn’t
receive a convertible promissory note?
A.
No.
Q.
Okay, and I just –-for the record we need to clarify

a couple things. If I could direct your attention to the
consent of all members of the Board of Directors dated
th
April 7 , I think you have that one in front of you?
A. It’s right here.
Q. Oh, excuse me. That one mentions, does it not,
Mr. Butcher, that you were being granted 150,000 shares, and
then parentheses 100,000; is that right?
A. Yes.
Q. Okay, do you –-do you know which is accurate?
A. The –-well, let’s see.
Q. In other words, the wording says 150 –A.
Yes, the wording –-he mixed up the wording.
Q. Do you know which is accurate?
A. For the 1 percent, it’s 100,000 for half it’s 50.
Q. Okay, and with respect to what’s being given in
exchange for that, this document dated April 7th says $5,000;
is that right?
A. Yes.
Q. Is that what your copy says?
A. My total investment is 5,000, uh-huh.
th
Q. Okay, but on 4/7 of ‘09, on April 7 , you didn’t give
him $,000, right?
A. No, no.
Q. Okay. At no point did you, in a single episode, give
him $5,000?

A. No, it was –Q.
Okay.
A. –-two separate instances.
Q. Okay, with respect to the other one dated 4/7 –-4/16,
actually, of 2009, if I could direct your attention as well
to the amount given, the wording there says $5,000 was given,
right? I’m looking at the one dated April 16 th of ‘09.
A. Yes.
Q. Okay, does that say that you gave him $5,000?
A. Yes, total I’ve given him $5,000.
Q. Okay, but not on that occasion, right?
A. No.
Q. In fact, in parentheses it says 2,500, right?
A. Uh-huh.
Q. Okay. All right, I just wanted to put that on the
record –A.
Okay.
Q. –-to make sure that was –-that that was clear. Did
you believe you were an owner of X-Tagged?
A. No.
Q. Were you ever told you were an owner or –A.
He would say –-he would say that we are, but we
really had no say in anything to do with X-Tag.
Q. You were –-this document that you signed here, the
ones that –-the two documents we’ve been talking about, they

call you the business associate, right?
A. Uh-huh.
Q. Okay, and they say that you will be taking an active
roll in the business of the corporation, right?
A. Yes.
Q. Okay. You have promoted yourself as the X-Tagged
representative of Utah, right?
A. That’s the title he gave me.
Q. Okay.
A. Which I have no idea what it even means.
Q. Okay, did you –-didn’t you do a You Tube video sort
of promoting X-Tagged?
A. Yes, we did a funny –-promoting the stickers –Q.
Okay.
A. –-that he goes around and puts on cars.
Q. Okay, and you –-you represented yourself to the world
through the Internet that you were the Utah representative of
X-Tagged, right?
A. Yes.
Q. Okay, as that Utah representative of X-Tagged, what
was your role?
A. Basically just wanted me to help with things. For
instance, we wanted to change his website, make it better,
and so we were –-I was actively engaged in helping him fight,
somebody to do that and also do a promotional –-like a video

on how to use the X-Tag website.
Q. Is it fair to say marketing, you were –A.
Yes.
Q. –-involved in marketing X-Tagged in Utah?
A. Uh-huh.
Q. Didn’t you represent to Mr. Esquivel or others
involved in X-Tagged that you had a marketing degree?
A. No.
Q. At any time?
A. Not at any time.
Q. Are you aware of anybody suggesting that you did have
a marketing degree?
A. Some people might assume that, just because that’s
what I did at Performax. I would go marketing the gym.
Q. Okay.
A. So some people may interpret that as I must have a
marketing degree, but I do not.
Q. Your sworn testimony is you’ve never told anyone that
you did?
A. Yes.
Q. Okay.
A. I never told anyone.
Q. Okay. How long did you act as the –-or are you still
acting as the Utah representative of X-Tagged?
A. No, I recent –-I found out quite quickly, started to

do my homework on Mr. Esquivel, and started to find out a lot
of the things that he had been telling us were in fact lies.
Q. How long would you say you acted in that roll?
A. Two weeks.
Q. Okay, so all in –-I think you told us you provided
money in April, early April of 2009?
A. Yeah.
Q. Right.
A. Because I started getting suspicious pretty quick.
Q. Okay, are you aware of the date of the video that you
sent out or –A.
No, sir.
Q. Okay. All right, so you met in–-you met Mr. Esquivel
at a –-at a different gym than the one we’ve previously been
discussing, right? It wasn’t Anytime Fitness?
A. That’s correct.
Q. Okay, and when you met him, were either Kyle Cluff or
Chris Engelbrecht there?
A. Kyle was.
Q. Kyle was there as well?
A. Uh-huh.
Q. Okay, and his experience, did that inform your –-your
desire to meet with Mr. Esquivel?
A. No, it was after sitting down with Mr. Esquivel that I
was –-I became interested.

Q. Okay. Just purely out of curiosity when he walked in
the door you wanted to meet, or did Kyle say, “Hey, do you want
to sit down and meet?”
A. Yeah, just I wasn’t doing anything at the time, and
they were all going to meet, and so –Q.
Okay.
A. –-I went and sat in.
Q. Okay, now so that we’re clear, I mean, your buddies
had given him money almost a year earlier, right?
A. Yes.
Q. Okay, were you aware of that at the time?
A. At that time, yes.
Q. Okay. What we’ve heard here today in testimony is
that Mr. Esquivel talked about going on Oprah Winfrey as early
as March or February of 2008, and you met him in April of 2009,
right?
A. Uh-huh.
Q. Is it your testimony that you heard him from his mouth
say he was going on Oprah Winfrey at that time?
A. Yes.
Q. Okay, and did any red flags go off? Did your buddy
say, “Hey, he told us that a year ago and it still hasn’t
happened”?
A. Well, they were on –-I think they still believe that
it was going to happen, because he would keep pushing things

further and further, just like the meeting for Google. It
would come time to meet with Google, and all of a sudden the
meeting’s changed to this month or this week or this week. It
just always kept changing. The dates always kept changing.
Q. Okay. Okay, I think you told us –and I apologize
if I get the amounts –-you correct me if I’m wrong –-did
you tell us that he said it was worth –-X-Tagged was worth
500,000,000 to 1,000,000,000?
A. Yes, he has told me that before.
Q. Upwards of that, right?
A. Yes.
Q. Okay, and that he was willing to give you 1 percent
ownership of that for $5,000 or for –-yeah, I mean, ultimately
2 increments of a half percent for $5,000?
A. Yes.
Q. Did you do any math there to –A.
I know, I feel really stupid. Yes.
Q. Okay, so when he comes back and offers you a half a
percent more, the difference in time there was just these 10
days, right? Is that –-is that accurate –A.
Yes. Yeah, there –Q.
–-orwasit –A.
–-there wasn’t a whole lot of time that had passed.
Q. Okay, in those 10 days did any of these –-let me
rephrase that. What kind of –-what kind of interaction did

you have with him during those 10 days?
A. I was trained to help promote the website, get stickers
out and schedule things. A lot of which Andy would fail to
show up or appear or get the things that I needed to me.
Q. Did you use the gym –-were you a manager at the gym,
right?
A. I was –-I did –-I was the sales manager and did
marketing, and also personal training.
Q. Okay, and did you use the gym as sort of a vehicle to
get X-Tagged paraphernalia out there?
A. Did I use the gym?
Q. What I mean is, you know, did you promote X-Tagged
through the gym?
A. Not that I can recall.
Q. Didn’t have stickers available at the desk or –A.
No, no.
Q. –-anything like that?
A. No, we were –-we were going to shoot a commercial
there.
Q. All right, you testified earlier that –-or when
Mr. Lyon asked you about X-Tagged being a Utah business, was
there conversations about it being incorporated in any other
state?
A. No.
Q. Anybody ever bother to ask, that you’re aware of?

A. No.
Q. You certainly didn’t ask, right?
A. No.
Q. Okay. Have you subsequently learned that it’s a
business in Wyoming?
A. Yes.
Q. Okay, when did that happen?
A. Probably a month ago.
Q. A month ago is when you found out, not when it was
made a business in Wyoming; is that –A.
Yes, that’s correct.
Q. Again, with respect to –-I’ll ask you what I asked
Mr. Engelbrecht –-with respect to the DMV, your testimony
before was that DMV was onboard. Is it possible that that
conversation said it’s in the works or something a little
softer than onboard?
A. I understood it to be that they were full on going –
Q. Okay.
A. –-and that it was active.
Q. Okay, so those weren’t his words that they were –the
deal was signed and stamped and ready to go. That’s your
interpretation of it, right?
A. Yes.
Q. Okay. You mentioned Logan Laws was there, right?
A. That’s correct.

Q. Logan Laws, are you aware, has asked for money and
received money back in this instance?
A. Yes, but not without a fight.
Q. Okay, are you friends with Logan Laws?
A. Yes, I am.
Q. Okay, have you made any efforts like Logan to get your
money back?
A. Yes.
Q. Explain those, please.
A. Yes, when I first initially asked for my investment
back, I did it in a very nice way, after I found out that
through my research some of the things that Andy had told us
were lies. I just asked for my money back, didn’t want any
confrontation or anything.
When he just kept pushing the dates out, I called him
and I said that he wasn’t an honest man, and he blew up and got
mad at me, and then started telling all the other X-Tag people
that he kicked me off of X-Tagged because I was gay and I was
posting gay pictures of myself on X-Tag.
I do have an email stating that –-saying that he sent
a mass message out to everyone saying I was gay and I posted
gay pics, and that I would never see a penny of my investment.
Q. Subsequent to that have you sort of gone on your own
campaign on the Internet to –A.
Yes.

Q. –-to say bad things about him?
A. Of warning people about Mr. Esquivel.
Q. Okay.
A. And the investment scam.
Q. Okay, and that includes, you know, blogging and
posting descriptions on Internet sites and those types of
things?
A. Yes, telling my story basically.
Q. Okay, how long has that been going on?
A. For a while.
Q. Put in terms of months?
A. Probably two years.
Q. Okay, have you been approached by –-you’ve heard me
ask this question to your friends. Have you been approached by
Alan Brady, Steve Klemark, Shar Jenkins in regards to getting
money back?
A. Just Alan Brady.
Q. Okay, when did that happen?
A. Alan Brady, I’ve met with him once. I can’t recall
the day he came to Performax, though, and met with me, and
told me he’s working on getting our money back, and he has all
sorts of stuff on Andy Esquivel. I don’t know if he was just
pretending that he wasn’t with Andy anymore, but he told me
that Andy was indeed a fact –-a scam, and that there was a lot
more investors than I knew that were scammed, and he had a list

of them. Then he told me –
Q. Did you –A.
–-that he would try to get our money back, but
nothing ever happened.
Q. –-have you ever refused an offer to –A.
No.
Q. –-give you money back?
A. Nope.
Q. Never at any time?
A. Never at any time. They always said they were –-they
would say, “All right, we’re going to get you your money back,”
and then nothing would ever happen. Collin –-or Leonard
Martinez, his attorney, I called –-I’ve called him at least
20, 30 times and have not received an answer, or anything
about payback. Matter of fact, they were trying to negotiate
a payback the last time we were in Court with Andy, and said
that they were going to try and get us some –THE
COURT: Well, wait just a minute. Wait until
you’re asked.
THE WITNESS: Oh, okay.
Q. BY MR. HOLJE: As long as you bring it up, have you
been approached by anyone at the –-and I’m not talking about
today, okay? Specifically Kathy Morris, have you ever been
approached about anybody about, you know, your desire to go
forward with this case versus getting some money and drifting

off into the sunset?
A.
Yes.
Q.
Okay. Did you refuse to take money at that point?
A. No, I never refused to take the money. I even said
he didn’t have to pay me back the 12 percent interest. I just
said, ‘Just give me the 5,000 and we’re done.” I mean, that’s
it.
Q. From that time you’ve never heard any offer about
getting 5,000 back; is that accurate or –A.
That’s accurate.
MR. HOLJE: I think that’s all the questions I have for
you, Mr. Butcher.
THE COURT: Thank you. Mr. Lyon?
MR. LYON: I’ve got nothing further from this witness.
May he please be excused?
THE COURT: Thank you. Mr. Butcher, you may step down
and be excused. Thank you for coming today.
MR. LYON: You’re free to stay or to go.
THE WITNESS: Okay.
THE COURT: Your next witness.
MR. LYON: The State calls Adam Sweet.
COURT CLERK: You do solemnly swear that the testimony
you are about to give in the case now before the Court will be
the truth, the whole truth and nothing but the truth, so help
you God?

THE WITNESS: Yes.
ADAM SWEET,
having been first duly sworn,
testified as follows:
DIRECT EXAMINATION
BY MR. SWEET:
Q. Would you please state your name for the record,
spelling your last name.
A. Adam Sweet. Last name S-w-e-e-t.
Q. What’s your occupation?
A. I am a securities compliance investigator for the Utah
Division of Securities in the Utah Department of Commerce.
Q. How long have you been so employed?
A. For approximately 19 months.
Q. Were you assigned to perform the investigation
regarding the defendant?
A. Yes, I was.
Q. Okay, you’ve sat through the testimony of Mr. Cluff,
Engelbrecht and Butcher, correct?
A. Yes.
Q. Okay, now in your investigation of the defendant, did
you locate any past judgments that have been –-I’m not sure
what the proper (inaudible) terminology is –-levied against
him?
A. Rendered.

Q. Rendered, thank you.
A. Yes.
Q. Okay, could you tell us about those?
A. Yes, I can. Can I refer to my notes?
Q. Sure.
MR. HOLJE: Your Honor, we’ll stipulate that what
exists on, you know, on Court records is –-it is what it is.
I think the records an speak for themselves, rather than go
through half a dozen judgments.
MR. LYON: That’s fine, and I think I’ve gone through
each one of the witnesses what those judgments are. If they’re
willing to stipulate to that, that’s great.
THE COURT: Were there four of them?
MR. LYON: Three.
THE COURT: Three of them.
MR. LYON: Two in 1999. One for about 5,500, the other
for just over 15, and one in 2003 for just over 3,000.
THE COURT: You’ll stipulate to those?
MR. HOLJE: Not to the –THE
COURT: That they exist?
MR. HOLJE: That they exist, right.
THE COURT: All right, thank you.
Q. BY MR. LYON: Okay, did you also perform an investigation
as to whether X-Tagged is a registered business?
A. Yes, I looked into whether or not it was a registered

business.
Q. Okay, and how did you do that?
A. By accessing the Utah Division of Corporations.
Q. According to the Utah records is X-Tagged a registered
business at all?
A. No.
Q. Has it ever been?
A. In Utah, no, not by the name of X –-X-Tagged had no
listing.
Q. Did you investigate whether Mr. Esquivel is licensed
to sell securities in the State of Utah?
A. Yes, I did.
Q. Has he ever been so licensed?
A. No.
Q. Do you –-you’re familiar with the assertion that the
defendant made representations that he had communicated with
the Division of Motor Vehicles, and they were going to grant
authorization to communicate with the State database?
A. I’m sorry, I didn’t hear the –-didn’t get the first
part of the question.
Q. Let me give you a better question.
A. Okay.
Q. At all during your investigation, did you investigate
whether the Division of Motor Vehicles had granted defendant
consent or access authorization to communicate and access the

database containing all of the –-the DMV records?
A. Yes, I did. I did contact the Utah DMV and spoke
with someone and received a letter in return verifying that
–-without looking at it –-that X-Tagged would –-or Andy
Esquivel, that they had never had any dealings or operations
with them, and that –-it said in the letter, generally
speaking, they would never condone such activity, by allowing
a private company to gain access to drivers license and
people’s personal information.
Q. That’s because –-is it –-do you know whether that
information is protected by State and Federal statute?
A. I don’t know that.
Q. Okay.
A. I do know that now, after glancing down at the letter.
I don’t know if you want me to read that brief part.
Q. That’s sufficient.
A. Okay.
Q. Do you –-did you investigate whether X-Tagged had
ever become a publicly traded company?
A. No. I mean, as far as I understand as a personal
investigator, that it was not a Utah registered as a business.
I kind of stopped there.
Q. Okay, so you would –-there’s no need to even go
further?
A. Yeah, as far –-yeah.

Q. Did you check to verify whether X-Tag has ever been
patented?
A. I did. I did an online search of the U. S. Patent
Office, and there were no results for X-Tagged.
Q.
Which would indicate?
A. As far as I understand, it would indicate a patent
that X-Tagged was –-had claimed or was in the process of
claiming.
Q.
Meaning there is no patent?
A.
Not –-no, no.
MR. LYON: Okay, I’ve got nothing further.
THE COURT: Thank you.
CROSS EXAMINATION
BY MR. HOLJE:
Q. So, Mr. Sweet, you –-you investigated X-Tagged in
other states, correct?
A. I –-as –-I investigate –-no, I just investigated
the Utah –Q.
Did you –-did you look into whether or not there was
a –-the name X-Tagged was being reserved in Colorado?
A. It was either Colorado or Wyoming. I think I’d come
across that X-Tagged is a registered corporation there, in one
of those two. I can’t remember.
Q. Okay, and that that name –-well, does your report
refer to anything about the name X-Tagged being held in the

State of Colorado?
A. Reserved?
Q. Yes.
A. Let me –-let me check. It would right here if it
did. I do have in my report that X-Tagged is not registered
in Utah. X-Tagged held a name reservation in Colorado from
st th
April 1 , 2010 to July 30 , 2010, with Darrel Acumen listed as
reservation holder.
Q. Okay, not Andy Esquivel?
A. No, if it had said his name I would have put that in
there.
Q. Okay, are you aware that X-Tagged is incorporated I
the State of Wyoming?
A. No. If I –-well, no, I’m not.
Q. Okay, your investigation –A.
If I –-no, I mean, if I had reason to, I mean, to
search a particular state I would. I just don’t rand –-you
know, randomly. I think Colorado I learned that he was –-had
visited Colorado or was doing business in Colorado. So I went
to that State’s corporation’s website. So I had reason to look
there, and that’s why I came across Colorado’s information –Q.
Okay.
A. –-but I don’t recall. Wyoming’s new to me. I don’t
recall any of the investors testifying –Q.
Okay.

A. –-anything about it.
Q. You were being told that X-Tagged was a bogus business
essentially, right?
A. By who?
Q. Well, by any of the individuals that you’ve –-that
you met with as part of this investigation?
A. Um –Q.
Any of these alleged victims who’ve testified today?
A. –-they were complaining –-they submitted –-they
complained that they invested money with X-Tagged and Andy,
and hadn’t got their money paid back; and they proceeded to
tell me the representations that were made to them.
Q. Okay, but not necessarily that X-Tagged was not an
actual business or anything?
A. Um –Q.
In other words, an alter ego for –A.
–-I don’t remember an investor saying X-Tagged is not
a business.
Q. Okay, as far as you were concerned, it was, right? It
just didn’t –A.
Until I researched it and found out that it wasn’t
registered in Utah, but had a name reservation in Colorado.
Q. Okay. All right. Did you –-did you come across –well,
let me try that again. You did come across some other
businesses that Mr. Esquivel was involved in, right?

A. I did. So yes.
Q. Is single and dating one of those?
A. Yes.
Q. Okay, any –-and that was registered in the State of
Utah, correct?
A. Yeah, I have that registered for the State of Utah.
have the registration date, the expiration date, and then what
position Mr. Esquivel held.
Q. Okay, any sort of overlap that you were aware of, or
connection between single and dating and X-Tagged?
A. No. I mean, when we do a search of the corporation’s
website we can search of we know the names of the company.
Specifically we can do it that way; or if we don’t, we can put
in the principal’s name, the individual’s name, and that will
pull up businesses registered to that person. So –Q.
Okay.
A. –-it doesn’t explain any connections.
Q. But your investigation didn’t focus on whether or not
the two were somehow related?
A. No, because the complaints were not about single and
dating.
MR. HOLJE: Okay, Judge, if I could have just one quick
moment.
THE COURT: Go ahead. Are you all right?
COURT CLERK: Yeah.

MR. HOLJE: All right, I think that’s all the questions
I have for you. Thank you.
THE COURT: Thank you. Any followup, Mr. Lyon?
MR. LYON: Not from this witness.
THE COURT: Thank you, Mr. Sweet. You may step down.
Other witnesses?
MR. LYON: Just one, Judge. State calls Tom Brady.
COURT CLERK: You do solemnly swear that the testimony
you are about to give in the case now before the Court will be
the truth, the whole truth and nothing but the truth, so help
you God?
THE WITNESS: Yes, I do.
THOMAS BRADY,
having been first duly sworn,
testified as follows:
DIRECT EXAMINATION
BY MR. LYON:
Q. Would you please state your name for the record,
spelling your last name.
A. Thomas Brady, B-r-a-d-y.
Q. What’s your occupation?
A. I’m the acting director of enforcement for the Utah
Division of Securities.
Q. How long have you been so employed?
A. Well, I’m currently in two roles. I’m also the

securities analyst. I’ve been the acting director for a month.
Q. How long have you been with the Utah Division of
Securities?
A. Just under three years.
Q. Prior to taking a job with the Division of Securities,
did you receive any education?
A. I’m a lawyer; I’m an attorney.
Q. Okay, let’s talk about your education. You received
an undergraduate degree?
A. Yes, my undergraduate degree is in political science
from Brigham Young University.
Q. You say you’re a lawyer; you’ve gone on to law school?
A. Yes, I attended Michigan State University.
Q. Okay, and when did you finish up there?
A. In 2009.
Q. Tell us about your responsibilities as a securities
analyst and then Director of Enforcement.
A. Okay. As the analyst I’m more or less a staff
attorney. I’m a staff attorney or in-house Counsel for the
Division of Securities in the enforcement section. My responsibilities
are mainly to take the investigative reports that the
investigators conclude, review them, ensure that the elements
are met for whatever the allegations or causes of actions are,
and then prepare the pleadings for that case. Also for ongoing
cases I negotiate settlement agreements with opposing Counsel.

Q. Do you write any technical reports or articles based
upon –-as an analyst?
A. Yes, yes. When legal issues arise, it’s my task to
research those out. I prepare memos explaining the nuances
that come up in our cases.
Q. Provide legal Counsel to that division, then?
A. Correct.
Q. Okay, now tell us about –-as an acting director, tell
us what your responsibilities are.
A. My responsibilities are to screen incoming complaints,
supervise attorneys and investigators with their respective
case files. Also to –-I am involved in negotiations on
certain administrative proceedings.
Q. Now, are you affiliated with any groups related to
your employment?
A. Related to securities law, yes. I’m a member of the
North American State Securities Association.
Q. Okay.
A. NASSA.
Q. Have you held any positions of responsibility within
that group?
A. Yes, I’m a member of the Mountain Region Enforcement
section.
Q. Okay, and so what does that mean?
A. In that region or zone, there are representatives from

each state. I think there are eight or nine states in our
region that are represented, and we meet semi-annually to
discuss certain trends that are occurring, certain fraudulent
trends that are occurring within our respective states. We
also do what’s called “de-conflicting,” where we discuss
potential targets that we’re investigating one state that may
have carryover into a different state. Mainly it’s working
together.
Q. As a result of your training and experience, do you –can
you tell us what a security is?
A. Yes, I can.
Q. What is –A.
Would you like me to?
Q. Yeah.
A. Well, a security, by name, under the statute, under
61-1-13 could be a stock, a note or a bond, an interest in
an LLC. There are certain categories that it falls under.
There are –-or specifically named categories. Then there
are broader categories, such as an investment contract that we
look at.
Q. Okay. Are all securities regulated by the State of
Utah?
A. Yes. In addition to that, securities are regulated by
the Federal Government.
Q. Okay. Due monitoring. Can you tell us why they’re

regulated?
A. To protect investors, more or less. To protect the
investors. Not to inhibit business, but protect the investors.
Q. As part of protecting investors has the State imposed
certain regulations and disclosures associated with the sale of
security?
A. Yes, they have.
Q. Okay, and is that primarily located in 61-1-1?
A. Yes and no. There are three areas where securities
are regulated under –-under the Utah Uniform Securities Act.
The first one is registration. So if securities –-any offer
of a security needs to be registered with Federal Government or
with the State.
MR. HOLJE: Judge, I’m going to object on relevance at
this point. I mean, he’s charged with securities fraud. I
think for purposes of today we don’t need the academic lecture
here on this.
THE COURT: You’re satisfied that at least the charging
document, the Information charging securities fraud, that that
definition –-or the alleged actions here would fall within
that definition?
MR. HOLJE: The alleged acts, your Honor.
THE COURT: All right, thank you.
MR. LYON: Okay, and I don’t want to –-I know it’s
already a quarter after 5, I’m sure everyone’s having a good

time, but I will try to move us along.
MR. HOLJE: So that I’m –-and so that we’re clear, I’m
not admitting the definition of the security here. I’m just,
you know. What I’m saying is we can look at the statute
ourselves and see how security is defined.
MR. LYON: Okay.
THE COURT: But for purposes of today’s hearing, you
don’t object to the Court relying on the testimony of this
witness, when he indicates that the alleged actions would
fall within the securities fraud statute subject to your –assuming
it goes onto the time of trial, fleshing that out
and trying to have the Court or the trier of fact, a jury,
make a determination as to whether it actually falls within
that?
MR. HOLJE: Right, and I think he’s told us that a
security is a stock, a bond, a note, I mean, an investment
contract. Those are all statutory. We can look at those and
see. So it’s –
THE COURT: Okay. I think for purposes of this hearing
today then we’ve probably gone far enough, Mr. Lyon, unless you
think there’s a couple more questions you need to ask.
MR. LYON: No. I mean, ultimately that’s –-well, let
me be quick here, real fast, your Honor. I do have just a few
questions.
THE COURT: Go ahead.

Q. BY MR. LYON: You understand that for purposes of
today’s hearing only, we’re acknowledging that these three
transactions that took place fall within the parameters of a
security. So we don’t need to whether –-concern ourselves
whether they are or not –MR.
HOLJE: Judge, I may have confused everybody here.
I apologize. I’m not saying that we admit that what took place
here, even for today’s purposes, falls within security. I’m
just saying this witness is sort of testifying about where we
can find securities and how they’re regulated and –
THE COURT: Well, Counsel, I think it’s the burden of
the State, if he’s going to in fact prove up his Information,
that we’ve got to have some definition of securities for the
Court to make a determination that the alleged actions fell
within the securities fraud statute. So I mean –
MR. HOLJE: I agree with that, and all I’m saying is I
just don’t want to read through Title 61 here, you know. We
know that’s in there, but –
THE COURT: Okay, you just ask him a few clarifying
questions, will you –
MR. LYON: I will.
THE COURT: –that will get us where we need to be as
far as the limited scope that we’re trying to fit within here.
MR. LYON: Okay, and I do want to move things along.
just want to make sure I’m laying adequate foundation for the

Court.
THE COURT: Sure.
Q. BY MR. LYON: Okay, my train of thought is derailed. We
have talked about what a security is and why they’re regulated.
Could you tell us where primarily it is –-the focus of the
regulation is within the code? I mean, we’re –-it’s located
within 61-1; is that correct? At least part, in part.
A. That’s the anti-fraud provision of the code, yes.
Q. Okay, now under that section of the code are there
any responsibilities and obligations placed upon an individual
who is selling a security as far as disclosures go?
A. Yes.
Q. Okay, could you tell us about those.
A. Well, specifically you can look at subsection (2)
of 61-1-1 where it states that during an offer an individual
makes any untrue statement of material fact, or omits to state
a material fact, in order to make the statements made in the
light of the circumstances under which they’re made not misleading.
Under that provision, if an individual is offering a
security, yes, they need to state material facts. In other
words, good disclosures. If they fail to give or omit those
disclosures, then they violate that subsection.
Q. Okay, and you’ve heard the testimony today of these
three individuals?

A. Yes.
Q. Okay, are there any disclosures that should have been
given –-well, before we get there, let me just ask you, you
have heard –-you’ve had a chance to review the file regarding
Mr. Esquivel?
A. Yes, I have.
Q. Heard the testimony today by these three witnesses?
A. Yes, I have.
Q. Do you have an opinion as to whether –-let’s start
with Mr. Cluff –-whether the investment made by Mr. Cluff,
whether that was a security?
A. In my opinion, yes, that was a security transaction.
Q. Could you tell us why?
A. Well, in the initial offer it looks as if Mr. Esquivel
was offering a stock or a share of a company in that initial
offer. By definition, as we mentioned earlier, under statute,
a stock is a security, and share of a company is a security, so
long as it has the characteristics of a stock.
With the official transaction I guess you could say
while he was offered a stock it looks like what he actually
received was a promissory note. “He” being Mr. Cluff. Looks
like he received a promissory note under the code. A note is
presumed –-and under case law a note a presumed to be a
security.
Q. Okay, and understanding the presumptions that applied,

do you still believe that this –-that the note that was given
to Mr. Cluff is a security?
A. In my opinion, yes, it’s likely a security.
Q. Okay, can you tell us why?
A. Well, under–-when analyzing a note, as I said before,
under the Reeves’ test a note is presumed to be a security.
There are seven categories of non-securities. If a security –or
excuse me, a promissory note does not fall on its face in
one of those categories, you then apply what’s called a “family
resemblance” test.
In my opinion the promissory note did not fall in
any of those seven categories. So the next step would be to
look at the four factors of the family resemblance test, which
would indicate does it look like it falls into one of those
categories.
Q. Okay.
A. Those factors –Q.
You’re talking about –-when you say “the four
factors,” this is essentially the Reeves’ test that was
commonly referred to?
A. The Reeves’ test or family resemblance test.
Q. Okay.
A. Yes.
Q. Okay, can you just go through those four factors?
A. Sure. The first one is the expectation of the seller

and the buyer. In looking in this transaction, it looks like
the expectation of the seller and the buyer was that it was an
investment.
The second factor is the plan of distribution. In
this case it’s a little different, a little difficult to pinpoint
that. In my opinion it does not look like there was a
plan of distribution. You could argue that it could be open to
anybody, or it was specific to these individuals. So I don’t
know that that’s applicable in this case, in my opinion.
Q. Okay.
A. The third factor would be the expectation of the
public as to whether or not the transaction was an investment.
In my opinion the public would deem this as an investment.
Q. Why?
A. Because it had the characteristics of an investment.
There was an expectation of profit, there was furnishing value
with the expectation of profit. There was no consumer nature
to this. It looks like an investment.
Q. Okay, tell us about the fourth factor.
A. The fourth factor involves any risk reducing factors,
which would include a regulatory scheme or collateral –-or
collateral for the investment.
Q. Is there any sort of regulatory scheme?
A. It doesn’t look like it. In reviewing the promissory
note, there is no regulatory scheme attached.

Q. What would be a regulatory scheme?
A. Oh, for example, if it were –-a CD is regulated by
the FDIC. There’s another entity regulating that to ensure
the investor –-in other words, to protect the investor. There
is no protection here for the investor by another regulatory
agency, nor was the note collateralized. So those are three
out of –-given three out of the four factors. Missing one is
not dispositive; so in my opinion it’s likely to be a security.
Q. Now, you heard the testimony of Mr. Cluff as to the
events that led up to the first investment of $4,000, and then
a subsequent investment of 2,000 and a title to his vehicle and
whatnot. During all of this interaction with the defendant and
Mr. Cluff, were there any –-was there any information that
should have been revealed to Mr. Cluff by the defendant but
was not?
A. Well, material information, yes.
Q. Such as?
A. Financial statement of X-Tagged in its business operations,
its track record to other investors if it had other
investors, certainly the judgments against Mr. Esquivel should
have been disclosed, in my opinion.
Q. What about the patent information?
A. That would have been a misstatement, in light of the
evidence that I’ve seen. By stating that there was a patent
pending or in the works, and then as the investigation showed

that that was not true, that would be considered a misstatement
rather than a disclosure.
Q. Okay, so we’re breaking into two different categories
as far as omissions.
A. Yes.
Q. You’re talking omissions he should have disclosed
financial records and specifically the fact that he has three
judgments?
A. Yes.
Q. Okay, and as far as misstatements, what would you put
in that category?
A. Well, the patent.
Q. Uh-huh.
A. Stating that there was a patent, and if I could review
my notes?
Q. Sure.
A. Is that okay? Okay. I think as far as provable
misstatements, I think the patent would be the large one in
this –-in that transaction.
Q. Okay, let’s talk about now Mr. Engelbrecht. You’ve –you’ve
heard the testimony of Mr. Engelbrecht, and also had a
chance to read the file regarding this. Do you have an opinion
as to whether the investment made by Mr. Engelbrecht was a
security?
A. Yes, I do.

Q. And the opinion is?
A. I think it’s very similar to Mr. Cluff’s. Sounds like
the same transaction. The offer seemed to be a stock, and the
sale seemed to be a promissory note, which both are securities.
Q. Just so we’re clear, you’re breaking this down into
two separate analysis, essentially, because the –-if I’m
understanding you correctly, there’s discussion about stock,
but when it’s memorialized in writing it’s a promissory note.
Are you –-is it your testimony that both of these would fall
within the parameters of a security?
A. Yes, under 61-1-1 it talks about in connection with
the offer or sale of a security. Because there are different
securities, there are different products –I should say
different products here. That’s why I’ve broken them up into
two. Seems to have a different product with the offer than
with the sale.
Q. Okay, given the events leading up to the investment
by Mr. Engelbrecht, were there any disclosures that should have
been made known unto Mr. Engelbrecht that were not?
A. Yes, financial statements, the civil judgments that
were pending. Also there were statements made as to the value
of the stock, which under Hanley, Hanley vs. SEC it states that
in order for an offerer to recommend a security, there needs
to be a reasonable basis for recommending the security.
In my opinion some of the –-some of the statements

made about a stock being worth $1 one day and then soon growing
to $500 per share, in order to make that a reasonable statement
there needs to be some disclosure as to how that’s going to
happen. So in my opinion that would be a disclosure issue as
well, explaining how it jumps from $1 to $500.
Q. Were there any misstatements that occurred?
A. May I review my notes?
Q. Un-huh.
A. Yes, the statement about the DMV having a working
relationship with X-Tagged and then the subsequent verification
that that was false, that would be a misstatement. Also, again
the patent. Also the statement that there’s no risk in the
investment.
Again, going back to (Inaudible), there needs to be
a reasonable basis for making a statement, and the statement
that there’s no risk in an investment, especially a high yield
investment like this one, there needs to be a reasonable basis
for making that statement. I did not see one in the evidence,
and it does not appear that Mr. Esquivel gave Mr. Engelbrecht
a reasonable justification for making that statement. So I
would –-in my opinion that would be a misstatement as well.
Q. When we’re looking at the required parameters for
disclosure, is it necessary for the defendant to have explained
what was being done, what had been done, or how X-Tagged was
going to become a public company?

A. Yes. In light of the statements made about X-Tagged,
and the success it was going to have, the interest from Google,
Facebook, MySpace, in order to make those reasonable statements
there needed to be some sort of explanation to make the statements
reasonable.
Q. Now, let’s move onto Mr. Butcher. You’ve had a chance
to review the file regarding Mr. Butcher?
A. I have.
Q. You’ve heard his testimony here today?
A. Yes.
Q. Do you have an opinion whether the investment made by
Mr. Butcher is a security?
A. Yes, it looks like Mr. Butcher received a stock.
Q. Were there any diclosures that should have been made
to Mr. Butcher that were not?
A. Yes, the financial statements, the civil judgments,
also there are risk disclosures, although I did just get
through saying that saying there’s no risk is a misstatement.
Also the failure to disclose risks is an omission of material
fact.
Q. So if there was no conversation between Mr. Butcher
and Mr. Esquivel as to the risk, that would be an omission?
A. Correct.
Q. Okay.
A. Also, again, the statements –-well, as far as the

disclosures, yes, there needed to be disclosures as to how the
investment was going to succeed.
Q. The –-are there any misstatements that were made?
A. If I can review my notes, please. That the DMV was
onboard, as Mr. –-as Mr. Butcher characterized. Also the
worth of this stock. I think again going back to making the
statement reasonable, the fact that Mr. Esquivel made a statement
that a half percent of a company was worth $50,000, but he
was willing to sell that to Mr. Butcher for $5,000, I believe
it was –-or excuse me, 2,500. No, it was 5,000 –-5,000 for
a share that was worth $50,000, I think in order to make that
statement reasonable, there needed to be some sort of explanation.
Q. What about the statement regarding the patent of
X-Tagged, where would that fall?
A. That would be a misstatement, in light of the investigation
showing that there was no patent.
MR. LYON: Okay, I’ve got nothing further.
THE COURT: Thank you. Counsel.
MR. HOLJE: Just a few questions, your Honor.
CROSS EXAMINATION
BY MR. HOLJE:
Q. So Mr. Brady, just so that we’re clear, there are
statutory –-securities are statutorily enumerated to an
extent; is that correct?

A. Yes.
Q. In other words, a stock is a security, a bond is a
security, a note is a security?
A. Yes.
Q. What we’re talking about in this case, at least with
respect to two of the alleged victims is –-are –-just totally
lost my train of thought –-the promissory notes, the convertible
promissory notes; is that right?
A. Yes.
Q. A convertible promissory note is different from a
traditional note, correct?
A. I guess you could say that, yes.
Q. In other words, a convertible promissory note gives
somebody an opportunity to convert what is otherwise a note
into stock; is that accurate?
A. Yes.
Q. Okay, so to your knowledge is convertible –-specifically
a convertible promissory note listed anywhere in the regulatory
scheme of Utah?
A. No, it’s broadly defined as simply “note.”
Q. Okay, and is it your testimony that the term “note”
encompasses a convertible promissory note?
A. If it passed the family resemblance test of the
Reeves’ test, yes, that would be my testimony.
Q. Okay, so it’s not an automatic thing. There’s this

analysis that needs to take place, right?
A. Yes, it needs to be a substance over form issue.
Q. Okay. Right. Okay, and in this particular case, at
least with respect to those that Counsel that are talking about
convertible promissory notes, there was no stock issued at any
point, right, or no stock given to them?
A. Officially –-with the first two?
Q. Yes.
A. No.
Q. In other words –-so we need to make the record clear.
With respect to Mr. Cluff, then Mr. Engelbrecht, they never
received any stock, right?
A. It looks like in reviewing the file they received a
receipt indicating that they own shares. I don’t know that
they received any stock certificates officially.
Q. Right, okay.
A. If that’s what you’re asking.
Q. That is what I’m asking; and essentially, I mean, is
it fair to say they have a piece of paper saying that if they
want shares of stock they can get them, but that’s about it,
right? Is that –A.
Yes, and no. With –-as far as the promissory note is
concerned, yes, that’s correct, but a securities transaction
does not need to be in writing. It can be an oral agreement.
Q. Okay, and so are you relying on what –-we broke this

down into a dichotomy of sale versus –-or offer versus sale.
Are you relying on the offer when you give your opinion that
they were offered stocks?
A. Yes.
Q. Okay, that’s not based on the fact that they received
a convertible promissory note; it’s based on the fact that the
word “share” was used or something like that, or –A.
To clarify, you’re still talking about the first two–Q.
Yes, I am. Yeah.
A. Yes, based on the statements, the oral statements
made during the offer of a security, by the description or
Mr. Esquivel, my opinion of what he sold them was a stock.
Q. Okay, and your opinion is essentially aside from –your
opinion is not reliant on the convertible promissory note,
it sounds like, at least not exclusively?
A. Not with the offer. With the actual sale, yes.
Q. Right, okay. All right. I’m just –-I’m not trying
to confuse you. I’m trying to wrap my brain around this. You
said your opinion was that yes, it’s a security. With respect
to Engelbrecht and Cluff, your opinion was that it was a stock.
I’m just trying to figure out why you had that opinion. It’s
not based solely on the convertible promissory note. It takes
into account other factors.
A. Yes, and if you’d like I can explain why I think it’s
a stock.

Q. That actually might be helpful, yeah.
A. Okay.
Q. Yeah.
A. Okay, again, there needs to be a substance over form.
Although with a category like stocks and notes, it’s more cut
and dry; but with a stock, so long as the product that’s sold
has the characteristics of a stock it is considered a security.
Q. Okay, the family resemblance test, right?
A. No, no, that would be –-family resemblance relates to
the promissory note or to any note.
Q. Uh-huh.
A. A stock, if –-in order to look at the characteristics
of a stock, they’re typical –-there are usually five or six,
I believe. There’s whether or not there are voting rights;
dividends; whether it’s negotiable, meaning you can transfer
it, it’s transferrable; and whether or not there’s an appreciation
in value. If it carries those characteristics then it’s
likely a stock.
In looking in this case, judging by what Mr. Esquivel
was offering, in my opinion the stock offered was a security,
based on those characteristics.
Q. Okay, but the convertible promissory note that they
were actually given didn’t specify any of those things, right?
In fact, it said the opposite; no voting rights were given,
and that, you know, transferability and all those issues were

addressed in that; isn’t that accurate?
A. Yes, and therefore with the promissory notes you would
take a different analysis and view them as a note.
Q. Okay, so you’re –-you’re not looking at the two
together. You’re saying, “Hey, we have a stock here,” just
because at that point it meets the definition regardless of
what happened afterwards with the promissory note?
A. Well, I would say in my opinion Mr. Esquivel offered
one type of security, offered one security –Q.
Deliberately?
A. –-and sold a different security.
Q. Okay, and the fact that it was offered, that’s where
you’re saying fraud comes in, right?
A. Well, I’d say fraud comes in on both the offer and the
sale.
Q. Okay. You went through –-I don’t want to get too
bogged down in this family resemblance test here, but –A.
Sure.
Q. –-isn’t one of the considerations the managerial
efforts that are made by individuals involved in the company
and investors?
A. What you’re talking about is a passive investor.
Q. What I’m asking is, does it matter that Ryan Butcher
was the Utah representative, and that he put in efforts to
direct his company?

A. Okay, I think I know what you’re asking.
Q. Oh, and frankly, Kyle Cluff, as well, admitted to
being an owner of it, suggesting ideas on the direction of the
company. Those are relevant considerations, aren’t they?
A. They are if you’re using an investment contract
analysis. Under the investment –-to determine whether or
not a transaction or a product is a security as an investment
contract, you use what’s called a “Risk Capital Test,” which
looks at four factors.
One of them is what you’re talking about. One is
furnishing value; two, with the expectation of profit; three,
subject to the risk of the enterprise; and four, does the
investor receive actual or practical control of the enterprise?
Q. Okay, so you’re saying that is specific to investment
contracts?
A. The way you’re describing it, yes.
Q. Okay, and it doesn’t factor into notes or stocks?
A. That particular prong is for the investment contract
analysis. It wouldn’t provide the note analysis.
MR. HOLJE: Okay. Okay, I think that’s all the
questions I have, your Honor, your Honor.
THE COURT: Thank you. Anything else?
MR. LYON: (Inaudible).
THE COURT: Thank you, Mr. Brady. Appreciate it very
much.

Anything else?
MR. LYON: The State rests, your Honor.
THE COURT: Counsel, do you anticipate calling any
witnesses?
MR. HOLJE: No, I don’t, your Honor.
THE COURT: Do you feel a need to argue anything?
MR. HOLJE: I can do it very briefly.
THE COURT: Okay.
MR. HOLJE: Judge, with respect to Count No. I, that
alleges an amount of $10,000 or more. That is specific to
Mr. Cluff, Kyle Cluff. The State is alleging that it’s over
the $10,000 threshold based on an initial $4,000 check, a
subsequent $2,000 check, and then a credit that was given by
Mr. Esquivel just to be a nice guy, apparently, or whatever,
for a diet plan that was made. He was, you know, he was an
employee of the gym and was apparently helping him learn how
to eat right.
So Mr. Esquivel on his own says, “Okay, we’ll give you
a $2,000 credit for the diet plan. In addition, another $2,000
is credited based on a title to a ten-year-old car. In 2008 –in
2008 it’s a 1998 Chevy Cavalier. So a ten-year-old car that
by his own admission is inoperable, and again $2,000 seems to
be just kind of pulled out of thin air. You know, there’s no
evidence presented about the actual value of this 1998 Chevy
Cavalier.

I would suggest that a ten-year-old car that’s inoperable
in a Chevy particularly is not worth $2,000. That’s just
a number that was arrived at by Mr. Esquivel. Same with the
diet plan. Mr. Cluff told us there were no receipts given,
there were no –-it wasn’t invoiced. It was just a number that
they pulled out.
So in actuality what you have here is $6,000 being
given. The rest I would say are just credits that should not
be deemed sufficient for purposes of the $10,000 threshold.
That would make it a third –-that would make Count I a third-
degree felony, not a second degree felony.
THE COURT: Okay.
MR. HOLJE: I’ll submit on that basis, Judge.
THE COURT: Thank you. Let me first indicate for
Mr. Esquivel’s purpose and for anyone in the courtroom, I
think that both lawyers in this case understand that in
preliminary hearings it’s not the –-the Court doesn’t have
the opportunity to weigh the evidence, and has to take the
evidence in the light most favorable to the State.
So specifically, Mr. Esquivel, as it pertains to
your lawyer’s arguments regarding the value of the vehicle
and the value of the diet plan, the fact is there was evidence
presented that those were the values; 2,000, 2,000, $6,000
cash. So the Court takes that as –-as to be true in this
particular case, because I can’t weigh the evidence. It’s been

presented, and I take the evidence in the light most favorable
to the State.
So given that premise, let me back up, then, and
say based on the testimony of the witnesses, the documentary
evidence that I’ve received, that the Court finds probable
cause to believe that there were crimes committed in this
particular case by Mr. Esquivel; and they were as follows:
Count I, the Court finds that there was the crime
of securities fraud, a second-degree felony, committed in this
case. Probable cause to believe that it was been committed
by Mr. Esquivel, and specifically the $10,000 or more value
would apply to Mr. Cluff. So even though he’s not named in
this information, the Court believes that count would follow
Mr. Cluff.
The Court also finds probable cause to believe that
the crime in Count II, securities fraud, a third-degree felony,
was committed; and Count III, securities fraud, a third-degree
fraud, was committed as well. I’m not going to attach a victim
to either one of those, but we have two victims that basically
it appears to the Court after having heard the evidence that
each of those victims would be identified with one of these
particular counts.
So I’ll find that it’s appropriate to bind this over
to the trial Court, which in this case is Judge –
MR. LYON: Connors, your Honor.

THE COURT: –-Connors. How far out do you want to go?
MR. HOLJE: A couple of months, maybe?
MR. LYON: Let’s go –-this is just for arraignment.
MR. HOLJE: Oh, yeah, let’s just –-sorry, I thought
you sere setting the trial date as well, Judge.
THE COURT: No, no, no, no. So –
MR. HOLJE: We can –
THE COURT: –-arraignment.
MR. HOLJE: –-go just a couple –
THE COURT: Judge Connors holds his on Wednesday
mornings at 8:30.
MR. LYON: Tuesday.
COURT CLERK: Tuesday mornings.
THE COURT: At what?
MR. LYON: Tuesday mornings.
THE COURT: Tuesdays, excuse me. Thank you for keeping
me straight. Probably one other thing I ought to indicate for
the record that as Mr. Lyon indicated, securities is not one of
the areas that we normally get involved with. I was, however,
satisfied after having reviewed the statute and heard the
testimony of the expert witnesses, that at least there was
sufficient evidence presented that the Court could find
probable cause that these alleged incidents were in fact
a security transaction on each one of the three counts, and
therefore the violation occurred.

So have you got a date?
MR. HOLJE: Just a few weeks out is fine.
rd th
COURT CLERK: On the 3 or the 10 of April?
MR. HOLJE: I’m in Duchesne on the 3 rd. If we could go
th
to the 10 , please.
THE COURT: Mr. Lyon, do you want your exhibits?
MR. LYON: Yeah, do you mind if I withdraw them, or do
you want to leave them in?
MR. HOLJE: No, I don’t care.
THE COURT: I’ll allow you to withdraw your exhibits.
MR. HOLJE: Your Honor, this is kind of a weird request.
I’ve done it in the past, but he’s a –-he’s a resident of
Colorado. At least that’s where he’s at right now. He’s
making quite a bit of travel plans to get here each time for
Court. Is there any way to waive his personal appearance at
that arraignment, and you know, we’ll know –
THE COURT: Well, if that’s all we’re going to do is an
arraignment, we can do one of two things. We either waive his
appearance and you appear on his behalf, or I could actually
arraign him today, and then we set it for pretrial down the
road once you’ve had an opportunity to prepare. Let’s don’t –
MR. LYON: We can do that right now.
MR. HOLJE: Why don’t we do that, yeah. He’ll enter
pleas of not guilty right now, your Honor, and that might be
a

cleaner way. I apologize for not suggesting that sooner.
THE COURT: Well, let’s do this, then. Setting on
behalf of Judge Connors, and this case having been bound over
by the Magistrate, we’re here on an arraignment, Mr. Esquivel.
Counsel, Mr. Esquivel has a copy of the Information?
MR. HOLJE: Yes, he does.
THE COURT: He understands each of the counts?
MR. HOLJE: Yes.
THE COURT: Would you waive the reading of the Information,
then?
MR. HOLJE: We’ll waive a formal reading of that, your
Honor.
THE COURT: All right, and you anticipate that he’s
going to enter –
MR. HOLJE: Not guilty pleas today.
THE COURT: –-not guilty pleas.
MR. HOLJE: Yes, your Honor.
THE COURT: All right. Given that, I will arraign
Mr. Esquivel on these three counts, and enter a not guilty
plea on each of the three counts, and we’ll send it then to
Judge Connors for a pretrial conference. Now, you tell me
how far out that you want to go, that you think you can
reasonably –
(Counsel confer off the record)
MR. HOLJE: Something approximately a month down the

road, your Honor.
THE COURT: Okay, do you have a calendar? Do you want
to –
MR. HOLJE: Yeah, if we could –
THE COURT: –-do you want to tell me when you want to
come?
MR. HOLJE: Is there –
THE COURT: Tuesdays at 8:30.
th
MR. HOLJE: Okay. Okay, let’s go the 24 , if that’s
acceptable.
THE COURT: That’s fine, isn’t it?
MR. LYON: That’s agreeable to the State, your Honor.
th
COURT CLERK: Is that April 24 ?
MR. HOLJE: Yeah.
THE COURT: Tuesday, April 24 th at 8:30 a.m. Judge
Connors is in courtroom No. 5. Thank you all very much.
MR. HOLJE: Thank you.
THE COURT: Court will be in recess. Thanks, Diane.
MR. LYON: Thank you for staying late.
(Hearing concluded)

REPORTER’S CERTIFICATE
STATE OF UTAH )
) ss.
COUNTY OF UTAH )
I, Wendy Haws, a Notary Public in and for the State of
Utah, do hereby certify:
That this proceeding was transcribed under my direction
from the transmitter records made of these meetings.
That I have been authorized by Beverly Lowe to prepare
said transcript, as an independent contractor working under
her court reporter’s license, appropriately authorized under
Utah statutes.
That this transcript is full, true, correct, and contains
all of the evidence and all matters to which the same related
which were audible through said recording.
I further certify that I am not interested in the outcome
thereof.
That certain parties were not identified in the record, and
therefore, the name associated with the statement may not be
the correct name as to the speaker.
WITNESS MY HAND AND SEAL this 21 st day of July 2012.
My commission expires:
January 12, 2016
Wendy Haws, CCT
NOTARY PUBLIC
Residing in Utah County
Signed: ____________________
Beverly Lowe, CCR/CCT