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NOVECON, LTD. v. BULGARIAN-AMERICAN ENTERPRISE FUN

September 16, 1997

NOVECON, LTD., NOVECON MANAGEMENT COMPANY, L.P., and RICHARD W. RAHN, Plaintiffs and counter-defendant Novecon, Ltd.,
v.
BULGARIAN-AMERICAN ENTERPRISE FUND, FRANK L. BAUER, NANCY L. SCHILLER, Defendants and counter-plaintiff Bulgarian-American Enterprise Fund.



The opinion of the court was delivered by: OBERDORFER

 A Memorandum and an Order of June 26, 1997 granted defendants' motion for summary judgment with respect to the contract issues and with respect to the defamation claim of plaintiff Richard W. Rahn, and denied plaintiffs' motion for summary judgment on defendants' counterclaim for negligent misrepresentation. See Novecon, Ltd. v. Bulgarian-American Enterprise Fund, 967 F. Supp. 1382 (D.D.C. 1997). The ruling denied defendants' motion for summary judgment on the defamation claim of the corporate plaintiffs, Novecon, Ltd. and Novecon Management Co. (referred to hereinafter as if they were a single corporation), because there was no showing that the corporate entity, as distinguished from its chairman and CEO, Rahn, was a limited-purpose public figure. See id. at 1391.

 I.

 The June 26 Memorandum relates the underlying contract dispute at the center of this litigation, which was resolved by the holding that no contract between the parties was, in fact, ever formed. The essential undisputed facts of the subsequent defamation claim are rather straightforward. Within a few months after Novecon filed its breach of contract action, BAEF received word that Rahn had visited the American ambassador to Bulgaria to discuss the lawsuit, that he had communicated with members of Congress about it, and that he intended to furnish Forbes magazine and several newspapers a letter or news release about the lawsuit and critical of BAEF. Shortly thereafter Rahn wrote members of Congress, charging that defendant BAEF,

 
an agency of the U.S. government, has abused its fiduciary responsibility with taxpayer money that has been entrusted to them; does not have competent management; has conducted its activities in such a way as to give the appearance, if not the fact, of a conflict of interest among certain senior managers and members of the Board; has acted in a manner damaging to legitimate U.S. businesses; and has damaged U.S. Bulgarian relations rather than improved them. . . .
 
. . . .
 
The BAEF has not only damaged American companies doing business in Bulgaria, but has unnecessarily alienated many Bulgarian business people because of its incompetence and arrogance. . . .
 
. . . The evidence of mismanagement or worse is now abundant, and clearly an investigation is warranted.

 Bauer Aff. Attach. BB at 1-2.

 Robert Odle, an attorney with apparent access to and influence with BAEF, testified in an uncontroverted affidavit that he received a number of phone calls and other communications from Rahn, which Odle perceived as intended to reach BAEF. In these communications to Odle, Rahn disparaged BAEF and pointedly suggested that he would bring his criticisms to the attention of Congress, the State Department, and the press if BAEF did not settle this lawsuit. Odle also received from Rahn a two-page fax describing the litigation in what he judged to be a draft form of an op-ed article. Shortly thereafter, Rahn sent Odle the January 1996 issue of The Rushford Report, which featured a lead article highly critical of BAEF, along with a request to "please, note the attached." Odle Aff. Attach. D.

 At about the same time, the Wall Street Journal Europe published an op-ed article by Greg Rushford, the editor and publisher of The Rushford Report, entitled, "AID's Boondoggle in Bulgaria." The article charged that BAEF had wasted taxpayer money on staff salaries, expensive office space, computers, automobiles, accountants, and attorneys. It specifically reported about this lawsuit that "four high-priced lawyers" had appeared to argue BAEF's motion to dismiss--a fact that Rahn had previously told Odle "would make interesting reading in the press," according to notes taken by Odle's secretary. Odle Aff. P 12. The article included a favorable profile of Rahn and criticism of BAEF's then-counsel in this case with some emphasis on the fact that counsel "declined repeated requests for their side of the story." Bauer Aff. Attach. GG. Several other newspapers in Bulgaria, including the country's largest, reprinted the allegations of the Journal article.

 
It is likely that you recently read an op-ed piece that was published in The Wall Street Journal Europe that was critical of the Bulgarian-American Enterprise Fund. Along with this piece, we are enclosing the BAEF's response which was printed on January 16, 1996 in The Wall Street Journal Europe.
 
The op-ed piece is one of several articles, all written by Mr. Greg Rushford, a paid professional writer. We find it odd that Mr. Rushford would choose to write about the Bulgarian-American Enterprise Fund, and then devote nearly one-third of his opinion piece to a lawsuit by a Dr. Richard Rahn on behalf of a Washington, D.C. firm called Novecon. Dr. Rahn, through Novecon, seeks to extort $ 200,000 of U.S. taxpayer money from the BAEF as a fee for a real estate project that the BAEF rejected because it turned out to be a veritable "Brooklyn Bridge" of misrepresentation. Among other problems, Novecon's client did not own the land on which the project was to be developed -- despite representations by Novecon to the contrary. Since there was nothing to sell, we did not buy their "Brooklyn Bridge".
 
We know that you are interested in the activities of the BAEF and that you recognize the unique role of the Fund in helping to promote the private sector in Bulgaria. A lot of progress has been made -- we are now in the process of funding our 500th investment -- and we expect such progress to continue. As always, we appreciate your support and would be glad to discuss with you any issues relating to the BAEF and its operations.

 Rahn Aff. Ex. 19.

 As described in the affidavit of defendant Frank Bauer, BAEF's president and CEO, BAEF distributed this cover letter and package of information to over five hundred addressees--government officials in the United States and Bulgaria, individuals within foundations and enterprise funds, and others in Bulgaria with whom BAEF did, or hoped to do, ...


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