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Lessons Learned. The pitfalls of the mistruths, half-truths, incompetence, greed, and

desperation that permeates the yacht building industry.

by Robert L. Conconi

My story of lessons learned in the yacht building industry centers on my purchase of a superyacht, and a company called Pacific Asian Enterprises’s (PAE) first ever attempt to build such a vessel. PAE built the Nordhvn 120, Hull 1, which I named Aurora, like all of PAE’s boats – in China. With a contracted price of $16 million (U.S.), which was supposed to be all inclusive, she was delivered two years late and in a condition that left much to be desired.

This story’s cast of characters is quite colorful, and includes PAE’s President and co-owner Mr. Dan Streech, Vice President and co-owner Mr. Jim Leishman, Chief Designer and co-owner Mr. Jeff Leishman (Jim’s brother), PAE’s N-120 project manager Mr. Trevor Smith, Mr. Steve D’Antonio, an “independent” Marine Consultant who inspected and surveyed Aurora over a period of 5 full days in late 2013 (December 15th – 19th), and, of course, yours truly.

Though I dealt with PAE long before the Fall of 2009, that is when the main focus of my story begins. We exchanged emails discussing the N-120 prior to a boat show in Ft. Lauderdale during the Fall of 2009, but that boat show is where this story truly takes off. Through a series of face-to-face negotiations, email negotiations, and oral and written promises, Streech, the Leishman brothers, and Smith promised me (and my wife Diane) that they could and would build us a custom luxury superyacht, the Aurora. PAE promised that they could and would build Aurora on time, on budget, and committed to provide us with a flawless and turnkey customer service experience – equivalent to that of a competing yacht builder, Westport Yachts.

Now, of course, there was never a doubt by anyone involved that Diane and I were very interested in buying a Westport Yacht back in 2009; they all admitted as much during testimony. [Trial testimony of Danll Streech Trial Transcript Volume 3, 455:22-25; trial testimony of James Leishman Trial Transcript Volume 4, 679:12-15; trial testimony of Trever Smith Trial Transcript Volume 5, 746:3-12, Volume 6,

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992:15-18 & 1001:2-6] Regardless, PAE’s ownership (Streech and the Leishman brothers), together with project manager Trevor Smith, talked us into purchasing PAE’s N-120 instead of a Westport, by way of, among other things, the promises and assurances mentioned above.

You see, Diane and I had previously purchased a used PAE yacht and two new builds from PAE before the N-120. All of the prior yachts were much smaller – Aurora was PAE’s first attempt to break into the superyacht market, and unfortunately, it showed. While certain aspects of our prior dealings with PAE left much to be desired, we were ultimately always able to work beyond any differences (and we genuinely liked the folks that we dealt with) until the N-120 build.

With this history of PAE’s promises and our prior dealings, PAE was able to talk us into purchasing the N-120 by promising that they could and would match the product offered by Westport, as well as the “Westport Experience” itself. They even went so far as to say they could do it even better. By way of example, PAE’s project manager Trevor Smith sent us an email dated November 4, 2009, wherein he wrote:

“I wanted to follow up with you after the show, Jeff and I viewed the 112 Westport with Chris June on Sunday afternoon, we spent about 45 minutes touring the yacht, very nice interior. After reviewing the interior fit and finish Jeff and I can both confidently state that the fit and finish of N120 01 will meet or exceed the Westport 112 that was on display at the 2009 Fort Lauderdale International Boat Show.” [Trial Exhibit 205]

Lesson Learned: In any other industry, a rose by any other name is still a rose. In the yacht building industry, a rose by any other name generates memory loss. Throughout the negotiation process, we all referred to Westport’s customer service experience, which PAE promised to meet or exceed, as the “Westport Experience.” However, when it came time to live up to the promised “Westport Experience”, everyone at PAE had sudden memory loss.

By way of a plethora of written emails and other communications with me, the folks at PAE assured me of a “Turnkey”, “All-in”, and “Perfect” “Westport Experience”. Emails like the October 6, 2009 email that Streech sent me wherein he wrote:

“We completely understand your request for an “all in” approach and will repackage the boat accordingly . . . All-in, tanks full package-. . . Understood and no problem.” [Trial Exhibit 242]

And testimony from Trever Smith, who admitted during his deposition that the

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“Westport Experience” was discussed extensively during negotiations - and that it was in fact ‘the heart’ of the deal. [Deposition Transcript of Trever Smith dated July 14, 2015, 211:19-212:4]

And while the PAE folks repeatedly testified during their respective depositions leading up to the trial, and during the trial itself, that they had no idea what “Westport Experience” means [Deposition Transcript of Danll Streech dated September 21, 2015, 116:15-17; trial testimony of Danll Streech Trial Transcript Volume 4, 591:13-14, trial testimony of James Leishman Trial Transcript Volume 5, 736:12-17; trial testimony of Trever Smith Trial Transcript Volume 5, 746:13-21 & Volume 6, 993:21-26], a former Westport salesman, Mr. Chris June, testified under oath (and on video) that, at my request, he met with Jeff Leishman and Trevor Smith at the 2009 Ft. Lauderdale boat show – not once, but twice – and that he described the Westport experience to both men in great detail, as including, among other things:

“on-time, on-budget construction, a fully turnkey yacht ready for delivery; a commissioning process with a captain for orientation, full fuel, full oil, full fluids, the best service in the world, immediate, 24 hours a day, seven days a week, including holidays; resolving a problem as fast as possible with no questions asked; 100 percent satisfaction through the build process; or after delivery, anywhere in the world.” [Deposition Transcript of Chris June dated October 3, 2015, 26:16 – 27:13; 28:24-30:2; 49:15-20]

Despite Trevor Smith and Chris June’s testimony to the contrary, PAE’s ownership denied that they ever agreed to the “Westport experience” because, as they claim, it is not written anywhere in the Agreement. [Deposition Transcript of Danll Streech dated September 21, 2015, 115:9-12; trial testimony of Danll Streech Trial Transcript Volume 4, 586:21-587:9] Of course the Agreement specifically mentions Westport multiple times, including the exact language from the Trevor Smith email that I referred to above [Exhibit 205] which is in the Agreement verbatim:

“. . . fit and finish to be equal to or better than the Westport 112 viewed at the 2009 Fort Lauderdale International Boat show” [Trial Exhibit 1]

Curiously, while the PAE folks pointed to the absence of the phrase “Westport Experience” in the Agreement, they had to admit (because of an email they had written to me) that there were in fact other “oral and implied obligations” – that were outside of the Agreement. [Trial Exhibit 295]

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For instance, PAE’s Vice President Jim Leishman testified under oath that PAE had oral and implied obligations to provide good service, to provide a high quality boat, to do their best to be honest, to treat me with respect, and to try to make the process as fulfilling and pleasant as possible for us. [Deposition Transcript of James Leishman dated September 23, 2015, 251:9-16]

Further, PAE’s President Dan Streech testified under oath that PAE had oral and implied obligations that included fair play, courtesy, honesty, customer service, and financial responsibility. [Trial testimony of Danll Streech Trial Transcripts Volume 3, 478:22-479:18]

Now, with further respect to our purchase Agreement [Trial Exhibit 1], it was signed by me and PAE on November 14, 2009 and November 18, 2009, respectively, and by its terms, PAE was obligated to:

“. . . receive, launch, commission, clean and detail [the] Vessel and reasonably demonstrate to the Buyer satisfactory operation of all systems and sea trial [the] Vessel to Buyers’ reasonable satisfaction.” [Trial Exhibit 1]

To be clear, PAE agreed to “commission,” and they had to demonstrate, to my “reasonable satisfaction” – “all systems”.

The Agreement defined “commissioning” as:

“. . . ensur[ing] that the equipment [was] installed and working as described in the Specifications.” [Trial Exhibit 1]

The Agreement is clear. Aurora’s commissioning and demonstration to our reasonable satisfaction must occur prior to her delivery in order to trigger our obligation to make the final payment. From my perspective (again, I’m not interested in rehashing what the jury may or may not have agreed with, but rather conveying my “lessons learned” in dealing with these people), it was this “to buyers reasonable satisfaction” language which primarily captured the agreed to Westport Experience.

For our part, Diane and I were obligated to pay the $16,000,000.00 that I referenced above. The Agreement clearly shows that the $16 million dollar (U.S.) figure was comprised of a trade-in and monetary installment payments tied to PAE’s performance – such as construction milestones, sea trial of Aurora, and final acceptance by, and delivery of Aurora to, me.

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But for the final payment, which I believe is still not yet due given PAE’s failure to meet certain pre-conditions to that payment, PAE agrees that I facilitated the trade-in and made all installment payments on time - or in advance - of the actual due date specified under the Agreement. [Trial testimony of Danll Streech Trial Transcript volume 2, 256:3-4; Deposition Transcript of Danll Streech dated September 21, 2015, 208:1-4]

Lesson Learned: It’s “you scratch my back, and I’ll stab yours” in the yacht building industry. PAE needed me to scratch its back financially not only to build Aurora, but also to stay in business. My help came in the forms of advanced payments – well in advance of the payment schedule – and unsecured loans. I granted the advanced payments and unsecured loans in order to protect myself from losing the money I had already invested into Aurora, and to secure the delivery of the superyacht of my dreams. Of course, my generosity was rewarded with underperformance and litigation.

However well-intentioned PAE’s ownership may have been with its vision of Aurora, it just was not able to fund that vision. Even more, over the course of the years that followed our signing of the purchase Agreement in November 2009, PAE’s ownership induced me to make advance payments and loans to the tune of over $5.5 million (U.S.) – while I was undergoing cancer treatments – under the pretext that the money would be used to ensure that Aurora was delivered on time and in the condition promised. In reality, the PAE folks testified under oath that they were going through significant cash flow issues, and the advanced payments and loans that they received from me were not used towards Aurora, but instead for PAE’s general debts and expenses which were unrelated to Aurora. [Deposition Transcript of Danll Streech dated September 21, 2015, 208:8-22; trial testimony of Danll Streech Trial Transcript Volume 2, 256: 23-26, 258:22-26, 260:14-23, 261:3-7 & 18-22, 262:5-7 & 13-17; Exhibit 251, Exhibit 252, Exhibit 254, Exhibit 387]

PAE’s ownership approached me often, mostly through Dan Streech, to ask for the advanced payments and loans on which PAE survived. I became PAE’s “Bank of Bob” – its involuntary line of credit – its lifeline to stay afloat. And when I was asked to provide these advanced payments and loans, PAE – again mostly, but not exclusively, through Dan Streech – would ensure me that my money was indeed going towards completing Aurora. For example:

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In an October 22, 2010 email, Mr. Streech assured me that none of my money was being “relied on to contribute to general overhead.” [Trial Exhibit 387]

And in a February 2, 2011 email from Streech, he told me “Your support of PAE and your trust and confidence in us as we build your N120 has made you our first choice as we reach out for help”. [Trial Exhibit 251]

And a May 6, 2011 email after I “graciously agreed to fund $750,000 in the name of an ‘advanced payment’ towards” Aurora, Dan Streech asked me for $1,342,500.00, because PAE was incapable of meeting its financial obligations, telling me that PAE was obligated – but “unable to make that payment” to its Chinese manufacturing facility. [Trial Exhibit 252]

And an April 17, 2012 email where Streech asked me for yet another advanced payment in the amount of $305,000.00, which he promised would be held “in a separate account and used only for the purpose of purchasing and/or paying for” items for the construction of Aurora. [Trial Exhibit 254]

Of course, Mr. Streech had to later admit under oath that he “didn’t actually” set up a separate account and simply spent this advanced payment in the normal course of PAE’s business. [Deposition Transcript of Danll Streech dated September 21, 2015, 271:2-6; Deposition Transcript of PAE’s PMQ Danll Streech dated December 16, 2015, 36:19-24]

PAE’s ownership was so desperate for money during the Aurora build that it borrowed $2,500,000 from another Nordhvn owner, whose name I will withhold for now out of respect for his privacy, in December of 2011 “on the exact last day [PAE was] given to pay off [PAE’s] bank credit line balance.” [Trial Exhibit 686]

Further, when PAE was “hav[ing] trouble” meeting its payment obligation to the factory for Aurora in July of 2013, Dan Streech asked that other Nordhvn owner for another loan to “. . . solve the cash flow challenge of paying for N120 #1. . .” [Trial Exhibits 688, 724]

Despite PAE’s written representations to the contrary, my advanced payments and loans were used for purposes other than Aurora, which, in my opinion, left PAE

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financially unable to complete, commission, or deliver Aurora in accordance with our Agreement.

Lesson Learned: never throw money at a sinking ship! That is, even though I provided PAE with an enormous amount of money, and much of it in advance of the due dates called for in the Agreement, the Aurora build was falling way behind schedule. For example, on August 28, 2012, I learned that Aurora was much further behind schedule than I had been led to believe, by way of the following email from Dan Streech:

“We know that this boat is major milestone in your life and we know that any loss of the 2013 cruising season is unacceptable and non-negotiable… a non-starter for which any excuse or explanation is intolerable.” [Trial Exhibit 257]

As of August 2012, I was well over $7 million dollars - and nearly 3 years - into the Aurora build, but I would unfortunately have to wait much longer, while PAE continued to ask me for even more money.

On March 27, 2013, PAE’s project manager Trever Smith sent me an email informing me that “in order to have the N120 virtually turnkey as it leaves the yard we need to ask for some assistance”. Mr. Smith went on to explain that PAE immediately needed another $322,000.00, but that this is “finally the last time” PAE would “bug” me with its “cash flow woes”. [Trial Exhibit 436]

But of course, that was not the last time PAE would beg me to cure its cash flow woes. A few short months later, on June 21, 2013, Dan Streech sent me an email asking for yet another loan…this time for $4 million…to get Aurora “over the finish line…completed, released from the factory and delivered to Vancouver”… [Trial Exhibit 267]

PAE also claimed that they weren’t as late as they actually were by arguing that during the delivery cruise from China to Vancouver over the summer of 2013, Diane and I were aboard and had full use of Aurora. In reality, we were merely passengers – and Trevor Smith even testified during his deposition that we did not have “personal use” of the Yacht during that crossing. [Deposition Transcript of Trever Smith dated July 14, 2015, 339:23-340:8]

Despite PAE receiving millions from me in the form of advanced payments and loans to make the boat “perfect” and “turnkey”, Aurora was delivered almost two years late. Soon after Aurora’s arrival in Vancouver, Canada on August 30, 2013,

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we began to discover her numerous defects and nonconformities, including a leak which allowed sea water to come spraying into her engine room on the day after her arrival in Vancouver. PAE’s Vice President, James Leishman, went so far as to testify that the leak could have caused Aurora to have “sunk”. [Deposition Transcript of James Leishman dated September 23, 2015, 68:19-21; Trial Exhibits 301 and 731]

Along with the life endangering nonconformities, Aurora arrived with many cosmetic deficiencies. That is, despite her $16 million dollar price tag, Aurora’s interior also left much to be desired. Particularly so with respect to the interior woodwork, which, after being professionally inspected, the inspector’s written conclusion was that:

“upon close[] inspection there are many serious issues that give it the feel of a boat that is old and tired.” [Trial Exhibit 338]

Here are some of the pictures from that report.

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- Cracks and open spaces in the crown molding throughout

- Finger prints underneath the wood’s finish

- Wood splits within the same piece of wood caused by “drying or internal stress issues”

- Discolored cloudiness on the wood, which was reported to be “prevalent

throughout the vessel…[and] consistent with a vessel that is already ten + years old”

When PAE’s own expert Destry Darr Pethtel – Aurora’s interior designer – was shown the pictures in this report, she testified under oath that the condition shown was “unacceptable”. [Deposition Transcript of Destry Darr Pethtell dated January 22, 2016, 111:7-10]

Even PAE has agreed that the condition of the wood should be remedied. While they offered to do so, they refused to agree to a third party vendor to perform the work that their factory was unable to do in the first place. [Trial Exhibits 55, 565 and 566]

They also told the jury repeatedly during trial that they were “still” willing to repair the woodwork. For example, on April 18, 2016, Trever Smith testified at trial that PAE “agreed to repair the woodwork,” and further testified, on April 26, 2016, that

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PAE was “still willing” and “happy to” make these repairs “at any time.” [Trial testimony of Trevor Smith Trial Transcript Volume 6, 1037:6, Trial Transcript Volume 9, 1765:18-19 & 22-23] Further, on April 12, 2016, Dan Streech testified at trial that PAE’s Chinese factory “stood by ready” to fix these wood issues. Of course following the trial, after having fooled the jury, PAE refused to honor their promises once again. [Trial testimony of Danll Streech Trial Transcript Volume 4, 592:18-25]

Many other defects and sloppy workmanship were discovered throughout – including a mark-out for a pipe which while marked for the cut, was never actually cut out to accommodate the pipe:

[Trial Exhibit 291]

The foregoing examples are just the tip of the iceberg. The sheer volume of issues and defects rendered Aurora wholly inconsistent with our Agreement.

This, of course, was not the dream Yacht that Diane and I had bargained for – and not the dream Yacht that PAE had promised. As I increasingly insisted that PAE abide by its commitments under the Agreement, PAE’s customer service continued to decline. I continuously discovered new issues and problems with Aurora which caused me to realize that the representations and promises made during the negotiation of the Agreement to manufacture Aurora, and during the manufacture itself (and afterwards), were simply untrue.

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Upon our realization of the shear scope of Aurora’s nonconformities, Diane and I immediately insisted that PAE repair the defects and nonconformities and bring Aurora into compliance with the terms of the Agreement, and ultimately that PAE take back the boat and refund our money, which, of course, never happened.

From Aurora’s arrival in Canada in August of 2013 to December of 2013, when PAE forced me to take possession of Aurora by discontinuing PAE’s insurance coverage, PAE was either unable or unwilling to make all of the repairs and remediation necessary to bring Aurora into compliance with the Agreement. That is nearly two years behind the agreed to (contracted for) delivery date. Diane and I took possession of Aurora from PAE under protest in order to insure and protect our investment, but more importantly, we refused, and continue to refuse, to accept Aurora pursuant to the terms of our Agreement.

PAE’s ownership came up with every excuse one could imagine during the course of the litigation for its nonconformities, and even went so far as to claim that it was unable to remedy all of the deficiencies because I would not let the workers back on the Yacht. [PAE’s Opening Arguments Trial Transcript Volume 2, 178:19-179:4; Trial testimony of Danll Streech Trial Transcripts Volume 2, 314:2-10; Trial Exhibit 55] This is demonstrably not the case as PAE was still working on Aurora through the end of March 2014 – well after PAE demanded the final payment. In reality, the only thing that I ever banned PAE from doing was showing the Yacht to other potential purchasers because I did not want to be a part of any other potential buyer’s decision to do business with PAE. [Trial Exhibit 562] In spite of PAE’s refusals, I made every attempt to hold PAE and its owners accountable to our agreement. On April 6, 2014, I wrote to Trever Smith, Dan Streech, and Jeff Leishman to inform them that I felt I was:

“. . . the victim of a confidence game here, you knew that I would accept your promises and assurances of future performance. In every case, I exceeded my responsibilities under our contract.” [Trial Exhibit 553]

And that I was at a:

“total loss” as to why PAE appeared to be “ending [the] delivery process”, which necessarily required PAE to finish the commissioning of Aurora at its own expense. [Trial Exhibit 553]

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I also sent an email to Dan Streech on August 4, 2014, just prior to PAE filing its lawsuit, wherein I reminded him that:

“We discussed the previous experiences on 76 and 86 and the terms of our contract were designed to make that type of conversation academic, as the funds would not be payable until the terms were satisfied. That is where we are presently and PAE is not honoring their part of the agreement.” [Trial Exhibit 305]

Because PAE continuously refused to bring Aurora into compliance with the Agreement, Diane and I were required to spend a great deal of money in an effort to bring Aurora up to the standards that we had bargained for, which resulted in significant loss of use and enjoyment of Aurora.

PAE further blamed me and my family for Aurora’s nonconformities by claiming that she should have been professionally crewed. [Trial testimony of Jeff Leishman Trial Transcript Volume 6, 1087:11-1088:11; PAE’s argument Trial Transcript Volume 9, 1615:26-1616:3] While there were times that together with our adult children we crewed Aurora ourselves, we are experienced “yachtmen” and a “professional crew” requirement is not found anywhere within PAE’s Agreement. As PAE well knew, I have a tremendous amount of yachting experience – particularly with respect to large Yachts – and, at times, involving our crewing of Aurora, I had a Captain’s License approved by the US Coast Guard. Even with that knowledge, PAE testified that many of the problems identified could have been avoided if Aurora had a professional crew. [Trial testimony of Danll Streech Trial Transcripts Volume 2, 216:26-217:10; Trial Transcripts Volume 4, 586:7-9; Trial testimony of Jeffrey Leishman Trial Transcripts Volume 6, 1087:11-1088:11]

Curiously, Aurora actually did employ a crew at one point, and when that professional Captain continued to identify problems on Aurora, Dan Streech tried to blame that captain for my ‘“bad experience” claiming:

That “Captain Mark is one of the worst [captain’s] that [PAE] ha[s] ever seen”; [Trial Exhibit 290]

That he “poisoned the atmosphere surrounding AURORA and . . . damaged [our] joy” of Aurora; [Trial Exhibit 290]

And Streech even went so far as to accuse the captain of smoking marijuana onboard! [Trial Exhibit 290]

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Despite its failure to comply with the preconditions within the Agreement, PAE demanded we make the final payment in February 2014. I declined to pay because I was, and still am, waiting for “systems [to be] demonstrated” as detailed in our Agreement. Further, I was continuously learning that certain systems and components were never properly installed by PAE from the beginning. [Trial Exhibit 305]

Curiously, Dan Streech, Trevor Smith and Jim Leishman each testified that PAE employee Mike Tellaria – was aboard Aurora for the trip from Hong Kong to Vancouver – and demonstrated Aurora’s systems to me during that trip in compliance with PAE’s “demonstration of the systems” obligation under the Agreement . . . [Deposition Transcript of Danll Streech dated September 21, 2015, 286:24-287:8 & 354:2-12; Trial testimony of Trevor Smith Trial Transcript Volume 6, 1035:17-23; Trial testimony of James Leishman Trial Transcript Volume 5, 708:7-10]

Of course, when Mr. Tellaria was deposed under oath, he testified to the contrary as follows:

Q Did you demonstrate any of the N120 systems to Mr. Conconi? A No. Q Do you know if anyone else was demonstrating systems to Mr. Conconi during the voyage? A No. Q Did you see anybody do any demonstration whatsoever of any system of the N120 during the voyage? A No. [Deposition Transcript of Mike Telleria dated November 12, 2015, 56:22-57:5]

At trial, Mr. Telleria changed his testimony completely, but when confronted with his foregoing deposition testimony, he was forced to concede the point. [Trial testimony of Mike Telleria Trial Transcript Volume 7, 1159:10-25, 1173:15-20, 1174:1-13]

Lesson Learned: When people want your money, they love you, but when you want them to perform, they quickly turn. Now, of course, whenever Dan Streech asked me for advanced payments, loans, or anything else, he would sing my praise. For example, on June 21, 2013, Streech sent me an email where he wrote:

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“you have been a perfect gentlemen, partner and participant in the building of the boat and have done your part and much more…especially in that you have advanced early payments to PAE when we needed them. We are very very appreciative of all that you have done.” [Trial Exhibit 267]

However, as I started to insist that PAE honor its commitments, Dan Streech’s praise for me as the “perfect gentlemen” and “partner” suddenly changed. During his deposition, he referred to me – a customer who saved PAE from financial ruin - as:

- a “crazy guy” that is “irrational” [Deposition Transcript of Danll Streech dated September 21, 2015, 23:9-13; 24:7-11; 340:10-13]

- A “blind drunk” [Deposition Transcript of Danll Streech dated September 21, 2015, 357:11-15]

- And a “liar” [Deposition Transcript of Danll Streech dated September 21, 2015, 28:1-21]

In fact, Mr. Streech bad mouthed most anyone who disagreed with him about Aurora’s condition, including:

- Kells Christian - an expert witness who, unlike Streech, actually inspected Aurora - was described by Streech as “Creepy”. [Deposition Transcript of Expert Witness Danll Streech dated March 25, 2016, 51:7-8]

- And Doug Sharp, another expert witness who likewise actually inspected Aurora, was described by Streech as a person who should be “tarred and feathered”, is “disgusting”, is a “junkyard dog” [Deposition Transcript of Expert Witness Danll Streech dated March 25, 2016, 51:13-14, 22]; is “revolting” [Deposition Transcript of Expert Witness Danll Streech dated March 25, 2016, 51:24-25]; a “goon” [Deposition Transcript of Expert Witness Danll Streech dated March 25, 2016, 51:25-52:3]; and a “clown” [Deposition Transcript of Expert Witness Danll Streech dated March 25, 2016, 52:3-5]

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Curiously, PAE’s own expert, Steve D’Antonio testified that he was told that Dan Streech had banned him from PAE’s Chinese manufacturing facility. [Deposition Transcript of Steve D’Antonio dated February 22, 2016, 44:4-13], and that he asked Streech to reconsider that ban at the 2015 Ft. Lauderdale Boat show [Deposition Transcript of Steve D’Antonio dated February 22, 2016, 86:19-25, 87:9-17, & 88:1-5] but that as of the date of his February 2016 deposition – he was still concerned that his testimony would negatively impact his business relationship with PAE. [Deposition Transcript of Steve D’Antonio dated February 22, 2016, 96:8-12]

Lesson learned: The yacht industry will circle the wagons and defend itself against its customers. You see, it was D’Antonio’s inspection report with all of Aurora’s highlighted deficiencies which really set this whole ordeal in motion. [Trial Exhibit 33] D’Antonio’s inspection report contained 179 deficiencies with Aurora as of December 20 2013. [Trial Exhibit 33] D’Antonio classified some of these deficiencies as “Critical safety item[s], direct risk[s] of fire, explosion, electrocution, injury or loss of life [which] should be resolved before using the vessel.” [Trial Exhibit 33] Some of those findings were as follows:

“Access to the master cabin escape trunk is very difficult, requiring removal of an overhead panel. There are no stairs or ladder, the hatch is heavy and not hinged, making practicing escape from it difficult. Providing a passenger knew it was there, use of this escape route is neither easy not practical.” [Trial Exhibit 33, Deficiency #8] “There is a live, unterminated wire under the crew stairs.” [Exhibit 33, Deficiency #58]

“Wiring entering the port fwd and aft gensets’ enclosures is chafing and not adequately protected.” [Trial Exhibit 33, Deficiency #67] “During the sea trial portion of the dry exhaust (on the blanket and on exposed metal adjacent to it) reached 357⁰ and 412⁰ port and stbd respectively. Insulation should be improved to reduce this temperature to 200⁰ or less.” [Trial Exhibit 33, Deficiency #82] “Liferaft (sic) installation, the hydrostatic release mechanisms do not appear to be installed in accordance with the manufacturer’s installation

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instruction. One of the web straps is lashed to the life rail; this would prevent the raft from being deployed. Furthermore, the mechanism looks as if it could become lodged between the raft and the life rail that surrounds the raft. . .” [Exhibit 33, Deficiency #133] “There is a strong odor of gasoline in the gasoline tank locker, in the Portuguese bridge. The tank’s fill is located inside this locker, if the fill cap is not installed or not tight, gasoline fumes can fill this locker (this may be the source). A pressure washer is located in this locker, it could serve as an ignition source, which could lead to an explosion.” [Trial Exhibit 33, Deficiency #134]

A recurring theme of these “critical safety items” that D’Antonio identified in his inspection report was the lack of Ground Fault Interrupters (“GFI”) protection onboard Aurora. GFI protection is an electrical system safety measure that protects people from being electrocuted. D’Antonio identified the following GFI related issues onboard Aurora in his December 20th, 2013 inspection report:

“The receptacle used for the pressure washer in the Portuguese bridge lacks GFI protection.” [Trial Exhibit 33, Deficiency #18] “The lazarette receptacle lacks GFI protection.” [Trial Exhibit 33, Deficiency #37] “The water heater locker receptacle lacks GFI protection.” [Trial Exhibit 33, Deficiency #38] “Receptacle in port shaft alley is not GFCI protected.” [Trial Exhibit 33, Deficiency #39] “The FB wet bar receptacle lacks GFI protection.” [Trial Exhibit 33, Deficiency #54

At his February 2016 deposition, D ’Antonio was asked if he stood by the results of his December 20, 2013 inspection report – which he did – and whether or not he would change anything – and he responded “no”. [Deposition Transcript of Steve D’Antonio dated February 22, 2016, 102:25-103:7]

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But he was clearly concerned with how his livelihood would be impacted by a Streech ban – and that his testimony would negatively impact his business relationship with PAE, and a few short months later at trial, Mr. D’Antonio did change his testimony – completely – claiming he had been mistaken as to many of the deficiencies that he had noted in his inspection report. In particular, D’Antonio testified that he would change his results regarding the “critical safety item[s]” related to the GFI protection issues rampant throughout Aurora. Curiously, D’Antonio’s change in position came after he was informed of his Streech ban, but before the trial. [Trial testimony of Steve D’Antonio Trial Transcript Volume 3, 360:5-362:6] Now Diane and I were not the first to enter into a contract with PAE for the N-120 – another couple, named Bob and Lynn Grossman, were the first. Streech described the Grossmans as “high maintenance . . . [which] was bound to erode the already too low margin” when explaining their defunct deal to me. [Trial Exhibit 235] Streech also went after a forensic accountant I hired to review PAE’s books and records, Brian Bergmark, whom Dan Streech described as “an idiot” who Streech wouldn’t hire to “balance [his] checkbook”. [Deposition Transcript of Expert Witness Danll Streech dated March 25, 2016, 54:8-12]

Of course, Mr. Bergmark, as part of his examination of PAE’s accounting related to Aurora, examined the final invoice that PAE provided to me, and found that it included certain credits for components that I had purchased myself – components that the Agreement required PAE to purchase but it admittedly couldn’t afford to do so. Things like electronic equipment, A.V. equipment, vessel monitoring equipment, and tenders – and Mr. Bergmark found that I should have been credited $231,819.00 more for the additional expenses that I incurred on behalf of PAE than PAE actually credited to me within the final invoice. [Trial testimony of Brian Bergmark Trial Transcript Volume 9, 1577:17-1578:8; Exhibit 740] Mr. Bergmark further discovered that PAE “marked up” the amount that it actually paid for certain components by 33% - that is, on a consistent basis, PAE charged me 33% more than the amount PAE actually payed for parts used in the construction of Aurora. [Deposition Transcript of Brian Bergmark dated March 14, 2016, 33:23-34:8]

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Danll Streech’s personal insults aside, one thing became abundantly clear…as far as PAE is concerned… nothing is ever its fault, but rather:

It’s a “change order”… [Deposition Transcript of Danll Streech dated September 21, 2015, 20:9-17, 42:15-24; Trial testimony of James Leishman Trial Transcript Volume 5, 702:1-4; Trial testimony of Trever Smith Trial Transcripts Volume 6, 1027:18-24 & 1029:6-11]

It’s the vendor’s fault… [Trial testimony of Danll Streech Trial Transcript Volume 4, 582:22-583:1; Trial testimony of Trevor Smith Trial Transcript Volume 5, 852:7-17]

It’s the supplier’s fault [Deposition Transcript of Danll Streech dated September 21, 2015, 292: 15-293:17, 303:10-18, 305:25-306:5, 369:7-10 & 17-18, 370:8-17]

It’s the electrician’s fault… [Trial testimony of James Leishman Trial Transcript Volume 9, 1700:18-20; Trial testimony of Trevor Smith Trial Transcript Volume 5, 888:4-6; Volume 6, 932:23-933:5]

It’s the captain’s fault… [Trial Exhibit 290]

It’s my fault… [Deposition Transcript of Danll Streech dated September 21, 2015, 342:16-18, 353:5-9]

But despite all of their attempts to cast blame elsewhere, PAE’s Agreement specified that …

It is PAE’s responsibility to “bring the Vessel into compliance with the terms of the Agreement” and to “receive, launch, commission, clean and detail the Vessel and reasonably demonstrate to Buyer the satisfactory operation of all systems and sea trial the Vessel to Buyer’s reasonable satisfaction.” [Trial Exhibit 1]

So, per the purchase Agreement, regardless of whoever PAE blamed for Aurora’s nonconformities, it was ultimately PAE’s responsibility to correct them. However, in the end, in addition to our $5.5 million (U.S.) trade-in and the $8.8 million that we paid to PAE, we also had to pour a tremendous amount into Aurora after delivery in order to bring her up to the standard for which we contracted.

Finally – the elephant in the room which PAE recently featured, quite prominently in a yachting publication – the Canadian tax issue.

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While PAE often points to this issue as the motivation behind my refusal to pay the final invoice, the amount of Tax that I paid to the Canadian Government didn’t cause PAE to deliver Aurora 2 years behind schedule….

The amount of Tax that I paid to the Canadian Government didn’t cause the leak in Aurora’s engine room on the day after her arrival in Canada….

The amount of Tax that I paid to the Canadian Government didn’t cause the gaps in Aurora’s crown molding, splits in her wood, or handprints under her finish.

In reality, the whole Canadian tax issue involved misinformation that PAE’s Vice President James Leishman provided to the Canadian government upon the Yacht’s arrival in Vancouver [Trial testimony of James Leishman Trial Transcript Volume 4, 656:8-11 & 13-16] and it all centers on who or what owned Aurora when she arrived in Canada.

You see PAE agreed that Diane and I could assign our interest in the Agreement to purchase the Aurora to a business called Alberta Service Bureau, ASB for short. [Trial Exhibit 11]

Mr. Leishman testified that if he told the Canadian authorities that I was the owner, - as opposed to ASB – he did so in error. [Deposition Transcript of James Leishman dated June 11, 2015, 86:24-87:8] Further, he will tell you that PAE facilitates similar assignments for its other customers to take title of their yachts through a business and that assignments of vessel ownership to corporate entities is “routine” [Deposition Transcript of James Leishman dated June 11th, 2015, 31:8-21; trial testimony of James Leishman Trial Transcript Volume 5, 728:4-7, 728:24-729:9, 732:11-18]

In fact, Mr. Leishman sent me an email on July 1, 2015 – 11 months after PAE filed this lawsuit, where he wrote:

“Dan, Jeff, Trevor and I are sorry for the rough birth of this magnificent yacht – we did the very best we could and are thankful for your help. I’ll do whatever I can to appease the CBSA, I never wanted you to have a problem with this.”1 [Trial Exhibit 307]

1 The CBSA is the Canadian Border Service Agency – the agency James Leishman spoke to when he brought Aurora into Vancouver as her Captain.

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Regardless, when I held PAE to its contractual obligations, they turned the Canadian tax issue into a conspiracy theory to discredit me despite repeated warnings from the trial judge that they could not do so, and PAE made the CBSA issue a cornerstone of the lawsuit in an attempt to smear my name, and divert attention away from their egregious misconduct. But in the end, PAE’s misplaced references to a CBSA investigation into the amount of tax paid – an investigation that Jim Leishman caused - may be an interesting sideshow, it is utterly immaterial to PAE’s failure performance under the Agreement.

Lessons Learned: never buy the first model. While I believe that PAE may be capable of building Yachts of a certain size – they bit off far more than they could chew in stepping up to the 120ft class – and it showed. They haven’t been able to sell another since [Trial testimony of Danll Streech Trial Transcripts Volume 3, 445:25-446:1], and I think their recent article has more to do with convincing a potential buyer to pay a deposit, than any of the rhetoric contained within the article

Which brings me to my final lesson learned – always perform your due diligence. A lessons learned article like this one – with full evidentiary cites – would have caused me to second guest my non-stop investment in PAE and simply walk away in favor of a more stable and reputable yacht builder.