| [LETTERHEAD OF SONNENSCHEIN NATH & ROSENTHAL LLP] |
1301
K Street, N.W.
Suite
600, East Tower
Washington,
D.C. 20005-3364
202.408.6400
202.408.6399
fax
www.sonnenschein.com
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Melissa
Campbell Duru, Special Counsel
Office
of Mergers and Acquisitions
Division
of Corporation Finance
U.S.
Securities and Exchange Commission
100
F Street, NE
Washington,
DC 20549 - 3628
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Re:
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CNS
Response, Inc.
Commission
File No. 0-26285
Comment
Letter Dated September 23, 2009
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1.
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We
note corrective disclosure provided in responses to comments 6, 7, 8, 10,
13 and 14 was included in the filing made on September 21, 2009. Please
confirm that you have distributed or will distribute the additional
soliciting materials filed in the same manner as the proxy
statement.
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The
Company confirms that the additional soliciting materials that included
disclosure in response to the comments referenced above were distributed
to stockholders in the same manner as the definitive proxy
statement.
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2.
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We
note your response to prior comment 16. Revise your materials to clearly
state, as done in your response, that proxy holders may exercise their
discretion to vote proxy cards on other matters that may come before the
meeting only if the proxy holders were unaware of such matters a
reasonable time prior to the meeting or adjournment thereof. Please
clarify that this limitation on the exercise of discretionary authority
will apply both to proxy cards that you may have already received from
shareholders and those that are to be sent in by shareholders prior to the
meeting.
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The
Company’s additional definitive soliciting materials include disclosure
intended to make clear that the proxy holders may exercise their
discretion to vote proxy cards on other matters that may come before the
meeting only if the proxy holders were unaware of such matters a
reasonable time prior to the meeting or adjournment thereof. The
disclosure also makes clear that this limitation applies both to all proxy
cards that the Company has already received or receives prior to the
meeting.
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3.
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The
Company’s additional definitive soliciting materials include disclosure
intended to make clear that the proxy holders may exercise their
discretion to vote proxy cards on other matters that may come before the
meeting only if the proxy holders were unaware of such matters a
reasonable time prior to the meeting or adjournment thereof. The
disclosure also makes clear that this limitation applies both to all proxy
cards that the Company has already received or receives prior to the
meeting.
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With
respect to your prior comment 3, the Company supplementally advises the
staff that it has already, in a number of letters submitted to the staff
by counsel, provided the staff with detail as to a variety of misleading
statements and false claims made by Mr. Brandt in his proxy
materials. Some examples of Mr. Brandt’s misleading statements
and false claims:
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·
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He
makes a number of false statements regarding the Company’s financing
alternatives, such as “CNS Response had vastly superior financing
alternatives to the bridge loan that was closed with George Carpenter’s
former colleague, John Pappajohn.” The “alternatives” were
nothing more than discussions regarding hoped-for terms that never
materialized into any definitive proposal. This is
evidenced by a number of internal communications, including emails and the
minutes of board of directors
meetings.
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His
disclosure does not address the Company’s bylaw provisions that have the
effect of preventing him from calling a special meeting for the election
of directors. His disclosure as to the Company’s challenges to
his ability to call a meeting focus on his first-called meeting (the July
3 meeting and the subsequent six purported adjournments and re-convenings
of that meeting), but does not address the meeting he purportedly noticed
on August 25 which, as Mr. Brandt has acknowledged in his court filings,
was a newly-noticed meeting that has no relation to those prior meetings.
While the interpretation of the bylaws was the subject of the Company’s
challenges and Mr. Brandt’s counter-arguments in the context of the July 3
meeting, the bylaw provisions relating to the September 4 meeting – the
meeting actually covered by his proxy materials and solicitation – are
never addressed by Mr. Brandt.
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He
has stated, incorrectly, that “[t]he Board has chosen, as CEO, a person
that I previously dismissed (with concurrence of other directors) as
President.” This falsehood is particularly egregious in light
of the fact that the CEO, Mr. Carpenter, is also an incumbent
director.
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He
implies that the Company set a record date of August 27 because it that
date fell immediately following the completion of a tranche of the
Company’s private placement, but fails to disclose that the meeting date
and the record date were set more than five weeks prior to the closing of
this financing and the board of directors did not know, at that time, if
or when a closing would occur. He also fails to disclose that
his reason for attempting to set a record date of August 24 was ensure
that these new stockholders would not be able to vote at his September 4
meeting, and that he knew a financing was about to close when he attempted
to set that record date from information he became aware of through his
position as a Company director.
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He
makes statements such as “[s]o I wanted everyone to have a chance to be
knowledgeable and to vote” in discussing the reasons for calling a meeting
on his own rather than requesting one, in his capacity as a director, to
be called by the Company. These statements run counter to
actions, as illustrated by his attempts, starting on June 30, to call and
hold meetings without delivering any disclosure to or soliciting proxies
from Company stockholders generally and holding his purported meetings on
holidays and Sundays when it would be highly unlikely that any
stockholders would be able to
participate.
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He
falsely stated that “[t]he stockholders of CNS Response, Inc. (OTCBB:
CNSO) have been told not to vote by CNS Response, Inc.’s incumbent Board
and management” in connection with his purported September 4
meeting. The Company has never made such
statement.
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He
falsely stated, after his purported September 4 meeting, that “[t]he
directors elected at the meeting now comprise six of the seven directors
of the company,” and implied that these directors were now the legitimate
directors of the Company, which is not the case under Delaware
law.
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With
respect to your prior comment 5 and disagreement with the Company’s
conclusion that the existing disclosure is sufficient, the Company
continues to believe that the disclosure as presented is more than
adequate. The current disclosure, which covers more than three
paragraphs, discusses in detail Mr. Brandt’s claims under Section 225 of
the DGCL, including the nature of a Section 225 action, the status of the
case, the implications of a status quo proceeding and order and the
possible effects all of this may have on the Company’s ability to hold its
meeting and the election of directors. The Company knows of no
provision in Schedule 14A requiring this type of disclosure to be located
in an particular part of a proxy statement and disagrees with any
implication that this disclosure, either because of its content or its
location, is in any way inadequate under the proxy
rules.
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4.
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We
refer you to your response with respect to bullet point 3 of comment 9.
You have not provided the support requested. We partially reissue the
comment.
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With
respect to the referenced bullet point (“...those efforts...have caused us
to incur significant legal and related expenses...”), this is a factual
statement, not one of opinion or belief. As of August 31, the
Company has received invoices totaling approximately $550,000 in legal and
other fees in connection with contesting Mr. Brandt’s
actions.
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5.
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Support
for each statement or assertion of opinion or belief must be self-evident,
disclosed in the proxy materials or provided to the staff on a
supplemental basis. Please provide support for the assertion that “recent
revelations in Len’s securities filings show that CNS has been damaged by
Len’s failure to uphold his fiduciary obligations to all shareholders.”
What are the specific revelations being referenced that support Mr.
Carpenter's assertion? Please revise or
advise.
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Mr.
Brandt makes a number of statements regarding contacts he has had with
potential investors. (For example: “In the last
60 days, Mr. Brandt has received and had numerous calls
expressing interest in further financing of the Company.”) He
has never provided any information to the Company as to these contacts or
expressions of interest, although he is a director of the Company and has
a fiduciary obligation to do so, particularly under these circumstances,
where he has known that the Company is interested in obtaining additional
financing and he is raising objections as to the terms of the financing
the Company is pursuing.
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Sincerely,
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/s/
Thomas L. Hanley
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Thomas
L. Hanley
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