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Page 2201 IN THE CIRCUIT COURT OF THE 17TH JUDICIAL CIRCUIT IN AND FOR BROWARD COUNTY, FLORIDA CASE NO: 09-062943 07 RAZORBACK FUNDING, LLC, et al, Plaintiffs, vs. SCOTT W. ROTHSTEIN, et al, Defendants. ________________________________/
DAY 8 - AFTERNOON SESSION DEPOSITION OF SCOTT W. ROTHSTEIN
DATE TAKEN: TIME: PLACE:
Wednesday, December 21, 2011 1:00 p.m. - 5:00 p.m. James Lawrence King Federal Justice Building 99 Northeast Fourth Street Miami, Florida 33124
Examination of the witness taken before:
Terri Wright United Reporting, Inc. 1218 Southeast Third Avenue Fort Lauderdale, Florida 33316 (954)525-2221
United Reporting, Inc. (954) 525- 2221
Page 2202 1 2 3 4 5 Plaintiffs, 6 vs. 7 SCOTT W. ROTHSTEIN, et al, 8 9 10 11 12 13 14 15 16 17 Case No: 18 19 20 Case No: 21 22 23 Case No: 24 25 Case No: 11-02604-RBR STETTIN VS. MAPLE LEAF DRILLING PARTNERS, ET AL 11-02605-RBR STETTIN VS. DON KING PRODUCTIONS Case No: 11-02473-RBR STETTIN VS. REGENT CAPITAL PARTNERS, LLC ET AL 11-02368-RBR STETTIN VS. TD BANK, N.A. Case No: 10-03802-RBR STETTIN VS. CENTURION STRUCTURED GROWTH LLC, ET AL. 11-02288-RBR STETTIN VS. FIDELITY CHARITABLE GIFT FUND AMY ADAMS, ET AL, PLAINTIFF VS. SCOTT ROTHSTEIN, ET AL. CASE NO: 11-CV-61688-JIC/LSS Case No: 10-03767 RBR STETTIN VS. GIBRALTAR PRIVATE BANK & TRUST CO. UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA FORT LAUDERDALE DIVISION Defendants. ________________________________/ IN THE CIRCUIT COURT OF THE 17TH JUDICIAL CIRCUIT IN AND FOR BROWARD COUNTY, FLORIDA CASE NO: EDWARD J. MORSE, CAROL A. MORSE, and MORSE OPERATIONS, INC., 10-2411 CACE (19)
United Reporting, Inc. (954) 525- 2221
Page 2203 1 2 3 4 5 6 7 8 9 APPEARANCES FOR THE TRUSTEE: 10 11 12 13 14 15 APPEARANCES FOR RAZORBACK: 16 17 18 19 20 21 22 23 24 25 United Reporting, Inc. (954) 525- 2221 CONRAD & SCHERER, LLP 633 South Federal Highway Eighth Floor Fort Lauderdale, Florida 33302 BY: WILLIAM R. SCHERER, ESQUIRE ERIC RAYMAN, ESQUIRE IVAN J. KOPAS, ESQUIRE and KOZYAK, TROPIN & THROCKMORTON, P.A. 2525 Ponce de Leon Boulevard Ninth Floor Coral Gables, Florida 33134 BY: HARLEY S. TROPIN, ESQUIRE GENOVESE, JOBLOVE & BATTISTA, P.A. 100 S.E. 2nd Street Suite 4400 Miami, Florida 33131 By: JOHN. H. GENOVESE, ESQUIRE DAVID C. CIMO, ESQUIRE THERESA M.B. VAN VLIET, ESQUIRE JESUS SUAREZ, ESQUIRE ROBERT F. ELGIDELY, ESQUIRE BERGER SINGERMAN 350 East Las Olas Boulevard Suite 1000 Fort Lauderdale, Florida 33301 BY: CHARLES H. LICHTMAN,, ESQUIRE APPEARANCES FOR SCOTT ROTHSTEIN: LAW OFFICE OF MARC S. NURIK 1 East Broward Boulevard Suite 700 Fort Lauderdale, Florida 33301 BY: MARC S. NURIK, ESQUIRE APPEARANCES FOR THE CHAPTER 11 TRUSTEE, HERBERT STETTIN:
Page 2204 1 2 3 4 5 6 7 8 APPEARANCES FOR MURRAY HUBERFELD AND DAVID BODNER 9 HARVEY WERBLOWSKY, ESQUIRE 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 United Reporting, Inc. (954) 525- 2221 CLAUSIN MILLER One Chase Manhattan Plaza 39th Floor New York, New York 10005 BY: SCOTT L. SCHMOOKLER, ESQUIRE APPEARANCES FOR THE COMMITTEE OF UNSECURED CREDITORS: AKERMAN, SENTERFITT One Southeast Third Avenue 25th Floor Miami, Florida 33131-1704 BY: MICHAEL GOLDBERG, ESQUIRE APPEARANCES FOR T.D. BANK: GREENBERG TRAURIG, P.A. 401 E Las Olas Blvd Ste 2000 Fort Lauderdale, Florida 33301 BY: MARK P. SCHNAPP, ESQUIRE DONNA EVANS, ESQUIRE APPEARANCES FOR RLI ZURICH INSURANCE COMPANY, COLUMBIA INC. & ZURICH INSURANCE: CURTIS, MALLET-PREVOST, COLD & MOSLE LLP 101 Park Avenue New York, NY 10178-0061 BY: ELIOT LAUER, ESQUIRE GABRIEL HERTZBERG, ESQUIRE GOLDSTEIN, TANEN & TRENCH, P.A. One Biscayne Tower, Suite 3700 Two South Biscayne Boulevard Miami, Florida 33131 By: SUSAN E. TRENCH, ESQUIRE APPEARANCES FOR PLATINUM PARTNERS VALUE ARBITRAGE CENTURION STRUCTURED GROWTH, LLC:
Page 2205 1 2 3 4APPEARANCES FOR THE MORSES: APPEARANCES FOR FEDERAL INSURANCE COMPANY: 1430 South Dixie Highway Suite 204 Coral Gables, Florida 331463127 BY: ALEX HOFRICHTER, ESQUIRE
5 6 7 8 9 10 11APPEARANCES FOR EMESS CAPITAL, LLC: LAW OFFICES OF ROBERTA DEUTSCH 2499 Glades Road Suite 110 Boca Raton, Florida 33431 BY: ROBERTA M. DEUTSCH, ESQUIRE TRIPP SCOTT, P.A. 110 S.E. Sixth Street,15th Floor Fort Lauderdale, Florida 33301 By: JOHN M. MULLIN, ESQUIRE GEORGE WALKER, ESQUIRE
12 13 14 15 16 17 18APPEARANCES FOR ROSANNE CARETSKY: KLUGER KAPLAN SILVERMAN, KATZEN & LEVINE, PL 201 S Biscayne Blvd Fl 17 Miami, Florida 331314 BY: CASEY H. CUSICK, ESQUIRE APPEARANCES FOR ST. PAUL FIRE & MARINE: MILLS PASKERT DIVERS P.A. 100 N Tampa St Ste 2010 Tampa, Florida 336025145 BY: JOHN A. BLACK, JR., ESQUIRE
19 20 21 22APPEARANCES FOR FEPICT, MS GROUP: BILLING COCHRAN LYLES 515 E Las Olas Blvd Floor Six Fort Lauderdale, Florida 333012296 BY: DANIEL S. GELBER, ESQUIRE
23 24 25NYSTROM, BECKMAN & PARIS One Marina Park Dr., 15th Flr. Boston, MA 02210 BY: JACK SIEGAL, ESQUIRE
United Reporting, Inc. (954) 525- 2221
Page 2206 1 2 3 4 5 APPEARANCES FOR GIBRALTAR: 6 7 8 9 APPEARANCES FOR FRANK PREVE: 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 United Reporting, Inc. (954) 525- 2221 PODHURST ORSEK 25 W Flagler St Ste 800 Miami, Florida 331301720 BY: RAMON A. RASCO, ESQUIRE APPEARANCES FOR THE US GOVERNMENT: 500 East Broward Boulevard, Suite 700 Fort Lauderdale, Florida 33394 BY: JEFFREY KAPLAN, ESQUIRE APPEARANCES FOR FRANK SPINOSA: SCHLESINGER AND COTZEN, P.L. 799 Brickell Plz Ste 700 Miami, Florida 33131 BY: MICHAEL J. SCHLESINGER, ESQUIRE and MICHAEL COTZEN, ESQUIRE and SAMUEL J. RABIN, ESQUIRE 799 Brickell Plaza Suite 606 Miami, Florida 33131 STEARNS WEAVER MILLER, et al. 150 W Flagler St Ste 2200 Miami, Florida 331301545 BY: MARY BARZEE-FLORES, ESQ. MATTHEW DATES, ESQUIRE APPEARANCES FOR MICHAEL SZANFRANKSI: LYDECKER, DIAZ 1221 Brickell Avenue Floor 19 Miami, Florida 33131 BY: CHRISTOPHER G. BERGA, ESQUIRE MIGUEL J. CHAMORRO, ESQUIRE
Page 2207 1 EXAMINATION INDEX 2 PAGE 3 4 5 6 7 THE FUNDS' 8 259 9 260 10 261 11 261 12 13 14 15 263 16 264 17 265 18 266 19 267 20 268 21 269 22 270 23 271 24 25 United Reporting, Inc. (954) 525- 2221 E-mail dated 12/25/08 2336 FP112310-0162455/1, E-mail dated 4/14/09 2322 PCL59129, E-mail dated 4/13/09 2320 FP112310-0086198, E-mail dated 1/22/08 2308 Analysis dated 3/10/11 2292 Elite Delivery Systems Website Printout 2286 PRODA 048648, E-mail dated 10/23/09 2265 PRODA 045671, Letter dated 10/15/09 2264 PRODA 046167, E-mail dated10/16/2009 2263 262 262 Confidential Settlement Agreement and General Release PRODA 021218, Letter dated 10/14/09 Confidential Settlement Agreement and General Release 2261 2262 2262 FP112310-0196804/1, E-mail dated 10/29/09 2261 FP112310-0196804/1, E-mail dated 10/29/09 2342 Affidavit of Richard S. Fechter 2236 SCOTT W. ROTHSTEIN DIRECT BY MR. LAUER 2208
EXHIBIT INDEX PAGE
Page 2208 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BY MR. LAUER: Q A Q Good afternoon, Mr. Rothstein. Good afternoon, sir. You've been asked a number of questions over DIRECT EXAMINATION
the past several days about your relationship with George Levin. A Q A Q Levins? A Q We did. Can you describe the nature of both in terms of Did you ever meet Mrs. Levin?
I did. Could you state her name for the record? Gayla Sue Levin. And did you and your wife socialize with the
frequency and the nature of the socializations? A For one series of months I remember we used to
go to breakfast together and we used to meet for breakfast, I don't remember whether it was Saturday morning or Sunday morning, we used to meet at a deli out towards their home. And there were a lot of occasions
that we'd get to spent time together at political functions. George and I would do the politics thing and
Sue and Kim would do whatever the women were doing at those functions to avoid being bored out of their minds, I suspect. United Reporting, Inc. (954) 525- 2221
Page 2209 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 They were at my wedding. There were some other George and
family functions that they attended with us. I would go to lunch frequently.
I don't know if Kim and That's about the
Sue met outside but they did talk. extent of it. Q
Did you have a business relationship with
Mrs. Levin? A Well, in the beginning of this it was my
understanding from speaking to Mr. Preve and to Mr. Levin that Mrs. Levin was one of the investors when I was just doing deals with George, the initial set of deals. Q A This is 2007? 2006, 2007, it's the pre -- look at the
earliest deals, it's when we were only using Gibraltar Bank and we were not using what I referred to over the last bunch of days as complete deal packets. Q This is before any contact to the hedge funds
that I represent? A Any contact that I had with the hedge funds. I
can't tell you when they began contact with them. Q Following that did you ever have any direct
business dealings with Mrs. Levin, just you and Mrs. Levin? A No. United Reporting, Inc. (954) 525- 2221
Page 2210 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q A Q A Q Q Did she have any interaction with these
fictitious settlements? A Q going on? A I'd be guessing. MR. LICHTMAN: I have no idea. Have you ever been to their home? Yes. Has she been to yours? Yes. This morning you were shown what was marked, I Objection to form. No. Did she have any idea that there was a fraud
believe as Plaintiff's -- sorry, as Exhibit 250, which apparently the TD Bank people took with them, but if you recall -A Q Better watch those bankers. Exactly. They are e-mails of June 24, June 25,
2009; do you recall that? A If you could refresh my recollection as to the I saw
contents I'd probably be able to help you better. a lot of pieces of paper over the last seven days. Q
I don't have the e-mails in front of me but the
context of the questions and the context in which I want to ask you some questions was in June of 2009, this is United Reporting, Inc. (954) 525- 2221
Page 2211 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 several months after Banyon missed its payment to the hedge funds in April, you described one or more conversations that you had with Mark Nordlicht and the need to deal with the situation. A I recall the two e-mails on the same page. I
recall the contents of them.
They weren't to me or from
me but they certainly involve me so I understand, yes. Q Putting the e-mails aside -MR. LICHTMAN: something. Let me see if I can clarify
Did you say TD Bank took exhibits that were I want to make sure if they
of record with them?
did then I want to call them -MS. TRENCH: that took them. MR. LAUER: To be witness-like, I have no The Court I think it was the Court Reporter
personal knowledge of what TD did.
Reporter believes that they may have taken them. MR. LICHTMAN: MS. TRENCH: That TD did? No, no, the Court Reporter said she
thought the morning Reporter took them. MR. LICHTMAN: Sorry to interrupt your flow. If
TD has them I want to e-mail them and say get them back. MR. LAUER: BY MR. LAUER: United Reporting, Inc. (954) 525- 2221 No personal knowledge.
Page 2212 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q So putting aside the e-mail, but in context, you
testified that in your discussion with Mark, you said what you needed And I guess what the Banyon entities needed was a good credit rating? A Q Yes. And that if prospective new investors were to
reach out and contact Mark or his colleagues, you're expecting and asking that they would give a good credit rating to these prospective new investors? A Q Correct. Now I recognize that you're sort of summarizing
conversations that took place perhaps over hours and events that took place over days or weeks and you're putting into capsular form, so you said that basically Mark and Jack, quote, agreed to lie to new investors. And what I'd like to ask you is in terms of your recollection of what they may actually have said, did Mark actually say, quote, unquote, Scott, I, Mark Nordlicht, will lie to prospective new investors? Or is
it more likely that he said something in substance, if investors contact us we will not give a bad rating or we will not give a negative rating? A I can give you a pretty close approximation of
what the conversation actually was with Mark. Q Just on that context. United Reporting, Inc. (954) 525- 2221
Page 2213 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A On that topic, I made it clear to Mark that if
and when the investors called him if they found out that we were in default, if they found out that any payments were late or that we were not making payments, if they found out that they had any questions about our investment strategy, that we would never be able to get any new investors and they would not be able to get their money back. And that it was critical that he give
us a good credit rating, that we paid on time, and that he believed in the investment strategy. Q Okay. And that's what you said to Mark and you
impressed upon Mark -A Q Correct. -- according to your recollection, the
importance of this to you? A Q Yes. I'm asking you for your best recollection of
Mark's response. A Q Sure. And I'm suggesting, if you will, that he didn't
quote say, I will lie to people; is it more likely that he said in substance, if new investors contact us we won't give it a bad rating or we will give it a good rating or something like that? MR. CIMO: Objection to the form.
United Reporting, Inc. (954) 525- 2221
Page 2214 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q A he said. Q A That's what I'm asking you for. He said to me, You don't need to worry about me, I can tell you pretty closely near exactly what
something to the effect of - I think I mentioned this the other day - that it wasn't his first time at the dance. I mentioned last time he didn't say it wasn't my first time at the rodeo, because he wasn't a rodeo guy. he said is this wasn't my first time at the dance. What It
was at that time that he went on to explain to me about the Optionable litigation and also that his father had had some serious criminal legal issues. And that I could
count on him to do the right thing because they wanted their money out. MR. CIMO: Objection withdrawn.
By the way, did Mark tell you that the
securities class action in Optionable was dismissed with prejudice? A I don't think it had been at the time we were
discussing it, but I don't think we were actually discussing whether the litigation was successful or not. My best recollection is he was trying to impart to me that he was not new to this, that he understood how business needed to be done in order to get things accomplished. United Reporting, Inc. (954) 525- 2221
Page 2215 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q But then in terms of his actual words, he said
what you've described, which is, he understands what needs to get done and he communicated to you, your best recollection is that if prospective investors or new investors would contact him he would not give it a bad rating? A Q A Q No, he said he would do the right thing. He would do the right thing? Yes. Okay. Now, I think we've been through this
before but it seems every day or two you get asked the same questions. A Q A Yes. Okay. Groundhog Day is coming to mind. MR. NURIK: That's a preliminary statement to
an objection or an invitation to an objection. Q I take it though that you have no personal
knowledge, that is, you were not present at an occasion if or when a prospective investor would have contacted or spoken to Mark? A Q I was not present. You were not on the phone if a prospective
investor would have a conversation with Mark or anyone else of the Funds following the April missed payment? United Reporting, Inc. (954) 525- 2221
Page 2216 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q A sides. That's correct. I only got the opposite
I got the beginning when I asked and when Frank I
asked for them to lie for us and then the result. don't have the middle. Q A Q I wasn't there.
You only have what people told you? For that particular issue, yes. And again, as you've acknowledged, just as you
were telling people often what they wanted to hear although what you were telling them was not accurate, you recognize now that some people on some occasions may have told you things that they wanted you to hear that may not have been accurate? MR. CIMO: Objection to the form.
That certainly seems to be the case, yes, sir. Okay. I covered this with you a bit on Tuesday Have you come
but you've had the time to reflect.
across any e-mail in the trove of e-mails or text messages or transcribed voicemails in which someone from one of the hedge funds after the April missed payment told you, in words or substance, that they had specifically met with a particular -- an identified new investor? A The only person that told me that they took
care of that for us was Jack Simony. Q And did Jack identify for you a human being United Reporting, Inc. (954) 525- 2221
Page 2217 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that he said he had spoken to about the investments after April 13, 2009? A No. There was a specific conversation that I
had with Jack that was unfortunately fairly heated while all this was going on, while the Discala, Von Allmen, Balamore, Bekkedam people were doing their due diligence, and Jack simply told me that it had been handled and that I needed to calm down. Q Other than A.J. Discala who had one meeting
with Simony, can you point to an e-mail from any other human being who was connected to an investor after April 13, 2009 who said in the e-mail that he spoke to Mark Nordlicht? A As of today I have not seen any such e-mail. I
still have thousands to read but as of today, no. Q Okay. I don't know how it works in terms of
your homework availability but if you do find any such e-mail will you let us know? A I will. I'll notify my lawyer and he can take
appropriate steps. Q Thank you. You have testified a bit about the
lock letter, right? A Q right? United Reporting, Inc. (954) 525- 2221 Yes, sir. And my clients never had any lock letters,
Page 2218 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 yes. Q That's because you have a working -- a fair A I know at the end, towards the end meaning from
June, July '09 on, Mr. Preve was asking me for lock letters for other accounts. I don't recall whether it
was for any of the New York hedge funds. Q No one has shown you any lock letters, whether
drafted by you, drafted by Spinosa or anyone else, purporting to be a lock letter for the purpose of showing the hedge funds; is that correct? A Q A Q That's correct. All right. That's correct. In fact you've commented that when you think
about it a lock letter is a silly document, right? A From my perspective it was extremely silly,
working knowledge of how a bank operates in 2009? A At that time I did learn that it was a near
impossibility to accomplish what they were trying to accomplish with the type of accounts that we had. Q And in part that's because, notwithstanding a
letter along the lines of the so-called lock letter that some of Mr. Scherer's clients obtained, you or anyone else could have wired all the money out of the account in accordance with the bank/client relationship? United Reporting, Inc. (954) 525- 2221
Page 2219 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A That and the fact that we were locking accounts
that had no money in them. Q A They didn't know that? You're talking about the perception of the
person receiving the lock letter then? Q A Q A Q A Q Correct. Yes. So -The person -Here you have a lock letter, correct? Yes. With respect to what Mr. Scherer's clients were
told are law firm escrow accounts, correct? A Q Correct. And Mr. Scherer's clients are told that
Szafranski and/or others are verifying that the money is going into the account, right? A Q Correct. All right. And the money then from their
perspective would be in a law firm escrow account, right? A Q Correct. So, I take it the purpose of the lock letter
was to alleviate some concern on the recipient's part that perhaps you or someone else within your law firm United Reporting, Inc. (954) 525- 2221
Page 2220 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 would invade the escrow? A sir. Q You described A.J. Discala's group as pretty It was to prevent theft from - yes, sir, yes,
sophisticated, right? A sir. Q You met a number of them, you met Podaras you They appeared to be sophisticated to me, yes,
met Ritchie, right? A Ritchie. Q A Q A Yes, I met A.J., Ritchie Thane - I mean Thane I met Mr. Legamaro, I met Dean Kretschmar. You met Von Allmen? I met Von Allmen. You thought he was pretty sophisticated, right? Yes, from my perspective he was very
sophisticated. Q right? A Q He asked a lot of questions, yes. And at any point in time did any one of these You described him as a voracious interrogator,
sophisticated people suggest to you, Scott, this lock letter stuff is baloney? A No, sir. What they did was they asked that I
have someone from the bank confirm to them how it works. Which to me, my perception was when they were United Reporting, Inc. (954) 525- 2221
Page 2221 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A Q asking me, and this is only my opinion and why I reacted the way I did, that they had a concern over the process, which is why I had Mr. Spinosa on board to explain the lock procedure which in fact of course was fake, there was no real lock procedure. Q Correct. But it was apparent to you at the
time that Mr. Von Allmen understood how banks work, he was a sophisticated private equity guy, wasn't he? MR. SCHERER: Objection, form.
I believed he was. He made hundreds and hundreds and millions of
dollars in complicated M&A transactions, correct? MR. SCHERER: Objection, form.
I don't know what the actual transactions were
but to me he was a sophisticated investor, and he asked what I deemed based upon all the questions I've been asked by all the investors, sophisticated questions, including to speak to someone at TD Bank about the lock letters. Q Correct. And if they're asking for the lock
letters because they have a concern that lawyers might invade the escrow account, that is steal money from the escrow account, did it occur to you at the time that they might also have a concern that one of these modestly paid bankers had been corrupted by you? United Reporting, Inc. (954) 525- 2221
Page 2222 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A A Q I never thought about that. Now that you think about it, and I'd like you
to go back to your interaction and your conversations with them, is it possible that when they were asking for a lock letter and asking to talk to Spinosa that they realized that the lock letter is ridiculous and the purpose of the lock letter is, if and when this thing blows up they will have a claim against the bank? MR. SCHERER: Objection to form. But I can't
I never felt that way, no, sir.
tell you what they were specifically thinking, I would be speculating. Q And it's not an illogical thought, is it? MR. SCHERER: Objection to form.
Again, I can't say - from my perspective, I can
tell what you my perspective was, but I can't tell you what was logical and illogical to them. They were -- I
was unfortunately, from my perspective, very good at selling this product and that ended up hurting a lot of innocent people. I caught them in the moment. So I
can't tell you with any particularity or specificity what these people's actual thought processes were. He seemed to me out of all the people, he seemed to be one of the people that was asking the right questions, asking the right follow-up. United Reporting, Inc. (954) 525- 2221 What he was
Page 2223 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A A Q were you? A Q No, sir. And yet you figured out that the lock letter actually thinking you to have talk to him. Q And yet they are relying on a lock letter --
let me withdraw that. You were not a banking lawyer, were you? No, sir. You were not an expert in banking regulations,
was an illusion? MR. SCHERER: Objection, form.
Here's what happened, the investor whether it
was Mel or the Coquina group, Mel Lifshitz or the Coquina Group, one of them as I testified earlier, said we want to get something protecting where this money is disbursed from. I don't know who came up with the name
lock letter, but basically locking the account to where the money could go and who could touch it. To me when they first said it to me that sounded perfectly reasonable to me, that sounded like the bank should be able to do that. When I called
Mr. Preve and asked him about that, he told me he never heard of any such thing unless you use a very specialized account that basically has no mechanism for sending money anywhere. It's a very specific type of
United Reporting, Inc. (954) 525- 2221
Page 2224 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A instrument they use to remove the money from the account, et cetera. sense. Q Let me turn the tables. If you -- if Doug Von Then I knew that it didn't make any
Allmen and his group had come to you in a different context to ask you to rely on their sophistication, to rely on their sophistication to invest with them or to do a transaction involving banking, and you knew that they had allowed this lock letter to be created and were reporting, at least from your perspective to be relying on the lock letter, would that have been a little bit of an alert to you that maybe these guys aren't so sophisticated? MR. SCHERER: Objection, form.
Asking me that question really isn't -- it's --
I'm not the right person to ask because at this point in time I consider myself probably to be the best person to do due diligence on any kind of investment. Had Mr. Von Allmen, prior to me engaging in the crimes that I engaged in, had someone sophisticated like Mr. Von Allmen come to me with a similar thing and any type of investment and we discussed this lock letter, I believe I would have done what he did and asked to speak - because I wouldn't have understood what that meant - and I would have asked to speak to the banker, United Reporting, Inc. (954) 525- 2221
Page 2225 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A which is what that whole group did and I would have wanted to be in touch with someone like they were, in this case Mr. Spinosa who could explain how the lock procedure worked. But you're asking me to -- it's such wild speculation, especially given the extent of my knowledge now, it's a little difficult. Q That's fair. But given your expertise, if you
were in that situation and you had 60 or 70 million dollars of your family money invested, would you have relied exclusively on what some low level banker in Florida tells you or would you have at least called a money center bank or an expert in banking or an expert in banking law to make sure that you had the kind of, quote, lock letter that really works? MR. SCHERER: Objection to form.
It would depend upon what I thought of You need to understand, he carried the
title of regional vice-president of one of the largest banks in the country. So, while I might not have relied
on what a teller or a simple bank officer told me, again, you're asking me to speculate. But speculating,
I may very well have relied on Mr. Spinosa depending upon how he came across to me, which I always thought was very professional, but however he came across to United Reporting, Inc. (954) 525- 2221
Page 2226 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 this person. And then if I was dissatisfied with that explanation I would, if I were investing that kind of money, likely contacted some other type of expert in the field to get additional clarification. Q that? A We created -- one of the companies that we had You mentioned RRA Sports Marketing, what was
purchased was a company from Brian Levy which was a sports agency representing mostly football players and some other athletes. Q A Q A Who is we? Me and Stuart Rosenfeldt. Individually or through the law firm? Everything was paid for by the law firm. It
actually was paid for by the people investing in the fraudulent schemes, but the money flows through the law firm out to these other places. Q A Who had the title ownership of this entity? In almost all those businesses I recall it
being exclusively titled in my name or a corporation which I controlled. Q A What was the business? So that was - we established RRA Goal Line with And then as an offshoot to that,
Brian Levy running it.
United Reporting, Inc. (954) 525- 2221
Page 2227 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 he introduced us to some people who were doing sports marketing, photographs, memorabilia, that type of stuff, and we created RRA Sports Marketing Management, something along those lines. I don't recall the exact
name, and its business was to supplement what RRA Goal Line was doing and to also mesh in with what Kip Hunter Epstein of Kip Hunter Marketing was doing on the other side. Q You've been asked some questions about these
various Banyon entities and Banyon accounts, do you remember that? A Q A Q I do. And these were George Levin's accounts? Yes, sir. And the Banyon entities were entities that
George set up and created, you didn't set up the Banyon entities? A Q entities? A Q A Q A No, sir. You weren't controlling the Banyon entities? No, sir. George was? George and Frank and then there was the one United Reporting, Inc. (954) 525- 2221 No, sir. Your law firm didn't set up the Banyon
Page 2228 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Banyon entity that was Banyon Income Fund and I understood that some other people had some input into that like Mr. Bekkedam. Q Basically that was on the investor side, it
wasn't part of you or your law firm? A Q Correct. You testified -- You were asked on several
occasions how much money you estimated that you personally spent on what you have informally described as the so-called rock star lifestyle. And at one point,
Page 40 in the transcript, you said you thought you might have spent 200 million dollars, at pages 633 to 34 you estimated 100 to 150 million dollars. And I
recognize that you weren't using Excel to keep track of all your expenses. A That would have been a nice piece of evidence.
No, I was not. Q But is it fair to say that over the course of
the peak years of your Ponzi scheme, let's say 2008, 2009, that you spent on personal things for yourself, that is Scott Rothstein and people you wanted to spend money on, somewhere between 100 and 200 million dollars? A Q Yes. And without trying to create an exhaustive
list, can you sort of give us, I am not asking you to United Reporting, Inc. (954) 525- 2221
Page 2229 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 list every car, but can you describe if you can some of the principal businesses that you personally bought using the Ponzi money or some of the principal personal acquisitions that you acquired for yourself or people that you wanted to give gifts to? A I can take a run at it if you'd like. Is that
what you were looking for? Q A Yes. Okay. I purchased real estate, homes for
myself, homes for investment purposes, homes for others. I purchased vacant real estate. I purchased
business real estate.
I invested in buildings in I purchased
Brooklyn, South Florida, Manhattan.
restaurants, I purchased nightclubs, I purchased the vodka company, part of a watch company. part of a large Internet company. cars. I purchased
I bought a lot of
I bought hundreds of watches, both for myself and I actually bought cars for other people
for others. also.
I bought very expensive, meaning the 2,500 to
$5,000 range pens for myself and for others. I bought an extensive array of cufflinks, very expensive, some one-of-a-kind cufflinks for myself and others. I bought a limited amount of artwork. I bought
very expensive cigars. wine.
I bought extremely expensive
I bought a lot of other people very expensive United Reporting, Inc. (954) 525- 2221
Page 2230 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 wine and cigars. I spent a huge sum of money on In decorating
clothing, shoes, suits, casual clothing.
my homes I bought extremely expensive furniture, a lot of it custom-made. I spent a lot of money on very I spent a tremendous amount of
money on personal travel. Q A Private jets? From the time that I began the Ponzi scheme
until the time that it exploded I flew dozens of times and I don't recall one where I was on a commercial airline. I bought firearms. shoes, boots, tons of boots. for a lot of different people. I bought, in addition to I bought a lot of jewelry I spent a huge sum of I spent a huge
money purchasing escorts for people.
amount of money in what we called previously gentlemen's clubs. I spent huge sums of money on meals. I spent
huge sums of money having friends, co-conspirators and non co-conspirators traveling with me. dollars on very expensive hotels. at this moment. Q I spent big
That's all I recall
I'm certain that there's more.
I appreciate that. Now, the source of these funds were the
investments that people were making in what they thought were settlements by your clients, correct? United Reporting, Inc. (954) 525- 2221
Page 2231 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q Yes, sir, it was money I was stealing. And you were stealing this money from a variety
of RRA accounts that you controlled? A Q Correct. And basically you were, is it fair to say that
you were running these accounts and running this scheme for your personal benefit? A I was running the scheme for the benefit of
myself, my co-conspirators and the law firm. Q And the law firm was -- there were elements of
this law firm that was a legitimate law firm, right? A The bulk of the law firm was legitimate,
meaning the bulk of the people working there, not the bulk of the income, but the bulk of the people working there were legitimate good people, honest lawyers and other personnel. Q You testified that in 2009 you thought the
approximate gross revenue of the law firm was something like eight or nine million dollars, do you remember that? A Q A From legitimate business? Correct. I recall somewhere it being in the eight or
nine million dollars realm, yes. Q And so it was running at an annualized level of United Reporting, Inc. (954) 525- 2221
Page 2232 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 about 11 million dollars a year? A I can't give you that figure but it was
substantially less than the billions I had run through the accounts. Q Substantially less, you mean eight or nine
million compared to the billions you were running through the accounts is not even close, it's not in the same ballpark, is it? A Q It's a tiny percentage. Correct. And how did running a criminal Ponzi
scheme that invariably would lead to collapse and ruin, how did that help the legitimate lawyers who were legitimately practicing law in your law firm? A Oh, no, I didn't say it did help them. At the
end of the day, sir, I hurt a lot of very decent good people by what I did. Q So, would it be fair to say even though you
gave money and compensation to a number of the people in the law firm as proceeds of the Ponzi scheme, that basically what you were doing in running this Ponzi scheme was not in the interest of this legitimate law firm? A Q That's correct. Mr. Rosenfeldt was listed on a number of these
law firm escrow accounts, right? United Reporting, Inc. (954) 525- 2221
Page 2233 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q Correct. Did he ever go to these accounts and remove
Ponzi money? A Q A Yes. By himself? I don't know what you mean by himself. You're
talking about all the accounts that had Ponzi money in them from operating all the way down, correct? Q No. Okay. You had law firm operating accounts
and then you had what you would describe as the law firm escrow accounts, right? A Q Yes. And the law firm escrow accounts were the
accounts into which the investor money was placed, right? A There was a very specific way that, I'd say 90
to 95 percent of the time the money always flowed before we used it. Q A No. You looked like you were waiting, I was going Would you like to me to explain that?
to finish. Q A Q You finished, right? I am, sir. You testified that you had a stash of cash in
your office, do you remember that? United Reporting, Inc. (954) 525- 2221
Page 2234 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q A Q I did. And you said you controlled the cash? I did. You did not allow any of your partners, even
partners who were complicit in criminal activity, to have direct access to the cash? A To my cash, no. Some of them had their own
access to their own cash. Q right? A No. Mr. Rosenfeldt used to write out checks to Any cash that they had they got from you,
cash and to himself and he would cash them and create his own little cash stash in his office. Q A Q Did he need to clear that with you? No, sir. Did he have levels at which he needed to clear
it with you? A We pretended to have them but you could see,
for example, there's an e-mail where I said, Stu, you can now start spending between, I think, 30 and 35,000 a month on the American Express bill and I believe he decided that 35,000 meant 70,000 or 80,000 a month. There was no real controls as long as we had the money I didn't care what Stu spent. he spent. United Reporting, Inc. (954) 525- 2221 I don't think he cared what
Page 2235 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q You said at Page 1419 of the transcript that
Rosenfeldt asked you about how much money -- the amount of money that Mike Szafranski was making, do you remember that? A Yes. He had looked in the accounts, saw how
much we were paying Szafranski and questioned it. Q Right. And in fact you said basically none of
your business, you said, you're happy with the money you're making, right? A I laughed it off and said to him much like I
would in any other circumstance, Mike's helping us make a lot of money, he's worth every penny we're paying him. Q A Q A Q Who owned the RRA law firm? Mr. Rosenfeldt and I. You were 50 percent owners each? Correct. During the years that you ran your Ponzi scheme
and you spent on yourself or people you wanted to give gifts to 150 or 200 million dollars, do you recall Mr. Rosenfeldt's total take from the operation of both the legitimate law firm and the Ponzi scheme? A Q A What he spent in total cash and otherwise? What he got. Tens of millions of dollars. I never stopped
to add it up, not nearly as much as I did. United Reporting, Inc. (954) 525- 2221
Page 2236 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q Did you see the Trustee's Complaint against
Mr. Rosenfeldt? A I don't know if I did or not. If I did it was
a very long time ago. Q Would it refresh your recollection that in the
Trustee's Complaint he submitted an affidavit, which I'll show you in a moment, an affidavit of Richard S. Fechter, does that ring a bell? A Q I don't know who that is, no, sir. In the affidavit of Mr. Fechter, Mr. Fechter
goes through all the compensation including expense reimbursements for Stuart Rosenfeldt in 2006, 2007, 2008 and 2009. A said. Q I'll hand it to you in one second but I will Are you familiar with that? I recall seeing it, I don't remember what it
ask you to take a look and confirm that according to this document, that is the affidavit by the Trustee, during these four years Rosenfeldt's total take was in the neighborhood of 8.8 or 8.9 million dollars which would work out to a little bit more than two million dollars a year. is it? A 259. Okay. I'm handing you exhibit, what exhibit
Take a look at it. I've looked at it.
(Whereupon, The Funds' Exhibit No. 259 was United Reporting, Inc. (954) 525- 2221
Page 2237 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 marked for identification.) BY MR. LAUER: Q And have I correctly summarized the affidavit
submitted on behalf of the Trustee which says in essence that his total take in the four-year period was approximately 8.8 million dollars? A Q A That's what this says but it's way off. Have you told that to the Trustee? This is about to be the first time we're
discussing this particular issue to my recollection, it may have come up but there is -- if you want me to explain I can explain. Q A Q Explain what? Why this is off. Well, is it off because Rosenfeldt spent more
money on himself and wine, women and song and his rock star lifestyle? A I don't know -- if you're asking me that's
what's wrong with it, what's wrong with it, it does not account for a substantial amount of other monies that Mr. Rosenfeldt spent, yes. Q A Q On himself? On himself and others. And "others" would be people who were either
providing a service to him personally or people he United Reporting, Inc. (954) 525- 2221
Page 2238 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 wanted to give personal gifts to? A Correct. And it doesn't account for the money
that I spent on him. Q Same thing, as part of your collective, to take
your phrase, your collective personal rock-star lifestyles? A Yes. In order to figure out specifically what
he spent or what the total amount of reward he received from his participation in this scheme, you'd have to take into account the cash that I spent on him, the cash that I gave him, the gifts that I purchased for him and the multitude of things that were paid for through the firm that not necessarily would be reflected, for example, on and American Express bill where a check might go out to someone for a home or for a car or for a boat, that type of thing. Q A It was not real law firm business? Correct. But this takes into account what you
would have seen in looking at the financial records of the firm. Q And it does not reflect the fact that these RRA
escrow accounts were being used by you, and I guess as you're describing it also by Rosenfeldt, for your personal use? A We tried very hard. As a matter of fact, I
United Reporting, Inc. (954) 525- 2221
Page 2239 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 yes. Q This morning you mentioned that you had this When did that go into can't think of an instance where Stu raided a trust account by him actually going in and taking the money. The raid was done, the money was taken from the trust accounts, it went from the investor into a specific trust account, usually 0923, and then from that account out to various accounts where then it was spent. Q Okay. But putting mechanics aside, and I
recognize the mechanics may have been somewhat involved, the money in these accounts that came from investors was being used by you and also by Stu for your personal benefit? A Q Correct. You weren't spending millions of dollars to send
Stu to Bar association conventions where he would give speeches, were you? A Give speeches, no. We did spend some money on
Bar conventions where he did other things, but not give speeches. Q By other things you mean things of a personal
servicing nature, to be indelicate? A Actually it would be indelicate at this time,
automatic transcribing system. effect in your law firm?
United Reporting, Inc. (954) 525- 2221
Page 2240 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q I don't recall the date. Approximately -- was it in effect starting in,
let's say, January of 2009? A The first person that had it was Russ Adler. He had it prior He
was the one who introduced us to it. to '09. Q A When did you get it?
I'm trying to remember because he had it and I have to say probably sometime
then Stu and I had it. after '07.
But, again, without seeing -- the easiest
thing to do would be to look at the e-mail traffic, and all of a sudden you'll start to see e-mails that are from SimulScribe. It will either say SimulScribe and then
later I believe it said Phone Tag, company name change. Q So your understanding is the existing record of
those phone calls to the extent they were transcribed would now look like e-mails because they became e-mails, and in fact they would be searchable like e-mails? A My recollection is that they are actually not.
My recollection, I could be wrong, my recollection is they were not searchable like e-mails except to the extent that I think you could use the words Phone Tag or SimulScribe to find them or you could enter the phone number. But I'm not sure. For some reason I think that
United Reporting, Inc. (954) 525- 2221
Page 2241 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the body of it may have been in some sort of strange format, a PDF or otherwise where that couldn't be searched, but I could be wrong. But you could definitely tell which ones are not e-mails because they'll say it's coming from or to a telephone number, not a person's name or e-mail address. And it will also have either SimulScribe or the Phone Tag label somewhere on it. Q Since the time that you've been in custody,
could you describe the different ways that you have obtained information that relates to the case, putting aside any information that agents of the government might have provided you? A Excluding anything having to do with the
government, I receive all of my information through my attorney. Q But physically or electronically, how does your
attorney communicate information to you? A I don't think I'm permitted to give -MR. KAPLAN: MR. LAUER: privilege? MR. KAPLAN: It's a government privilege. How Objection, that's privileged. The government privilege or a lawyer
he is handled in custody is privileged. BY MR. LAUER: United Reporting, Inc. (954) 525- 2221
Page 2242 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q Does Mr. Nurik have other lawyers working with
him on your matter? MR. LAUER: THE WITNESS: That's privileged, too? No, they're joking around.
No, he does not. BY MR. LAUER: Q prison? MR. KAPLAN: MR. LAUER: don't mean to -MR. KAPLAN: MR. LAUER: I appreciate that. I don't mean to take on the United Again, object, privilege. My job is to ask the questions. I Are you permitted to call Mr. Nurik from
States Government, not in this case. BY MR. LAUER: Q You testified that you thought A.J. Discala did
a reasonably good job in his due diligence. A Through his people, yes. He was more of like
the salesman type, but he was surrounded by good people that seemed quite diligent. Q Yes, sir.
So A.J. came on the scene and he was going to
create sort of this new feeder fund under the Clockwork umbrella, right? A Q Correct. And he ended up doing two transactions, one United Reporting, Inc. (954) 525- 2221
Page 2243 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 known now as Razorback, right? A Q A Q I recall that. Yes, sir.
And the other one was D-3 Capital? I recall that as well. Do you recall that Razorback was sort of a next
generation version of the Banyon Income Fund that Bekkedam had brought Von Allmen into? A Q I don't recall. That basically Razorback was lending -- that
A.J.'s group lent money to a Banyon entity for a fixed rate of interest plus a small percentage of the equity piece. A Now I understand what you're asking me. My
understanding of Razorback was indeed that, that money was put in by various investors into the Razorback fund, so to speak. Those people were then paid a specific interest rate by that Fund, and then the Fund made the investment with me and kept the difference between what they paid out and the total proceeds. Q You're talking in the past tense, but would it
be fair to correct you to say this is what was intended? A I can only tell what you actually happened. I
didn't -- What was going on in the setup and what they intended to do, I can't tell you. That wasn't something
United Reporting, Inc. (954) 525- 2221
Page 2244 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 I was involved in. I was only concerned about how much
money we'd be getting and what day we're getting it on. Q What I meant is the so-called Razorback group Do you
invested in an entity called Banyon USV1. remember that? A Q 2009? A correct. Q Yes.
And that investment was made in early October
I don't recall the date, but that sounds about
And the D-3 Capital investment was a direct
investment by Discala's group; do you remember that? A Q I do remember that. Yes, sir.
So here instead of lending money to a Banyon
entity for a fixed rate of interest plus, the D-3 Capital group was dealing directly through you with one of your clients? A That's correct. But I learned that information I learned that
secondhand as to the Banyon USV1, II. secondhand.
And sometime later when I wasn't involved in
the particulars of negotiating interest rates and that type of stuff. Q A When you say -I mean interest rates between, for example, the
Banyon entities and the Razorback investors. United Reporting, Inc. (954) 525- 2221
Page 2245 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 in. Q Just to clarify, learning secondhand, you mean
you didn't know the exact terms of what the Banyon USV1 was agreeing to with the Razorback investors, but you had firsthand knowledge of the money that was coming in that has been known as the Razorback investment, right? A I had firsthand knowledge of the money coming
The behind the scenes things, what was going on
between the investors, who was being paid what interest rate, what the terms were, that was not something I was involved in. Q But in that first investment, that is, the
so-called Razorback Banyon USV1 investment, the settlement that was purchased from one of your Plaintiff clients was purchased by Banyon USV1 and not by an entity called Razorback? A The paperwork was done in the name of Banyon
USV1, correct. Q D-3 Capital was the first direct investment by
Discala's group with one of your Plaintiff clients, correct? A I don't recall which came first, but it was a
direct investment. Q Do you recall that the direct investment was
originally to be an $18 million purchase of a $30 million settlement of an underage woman who had settled the claim United Reporting, Inc. (954) 525- 2221
Page 2246 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 against Mr. Epstein? A I don't recall specifically. But if you show me I just
the paperwork, it will refresh my recollection. don't recall the terms of that particular deal. Q A Q I'll get to that in a minute. Sure.
The second deal, though, the direct deal, do you
recall that that came up in mid October, around October 14, 15, 2009? A That sounds approximately correct, but the
paperwork would say exactly when it came up. Q Okay. Now, in connection with the so-called due
diligence by Mr. Discala and his advisors and colleagues and investors, other than looking at the 13 boxes that somebody brought down to your office, can you tell me what specifically all these guys did that you refer to as their due diligence on the D-3 Capital or Razorback investments? A To the best of my recollection, and this is in
no particular order, several members of what I'll call the Discala team sat and met with me in my office for several hours. That was at one time when Thane Ritchie They asked me
was there and one of his partners.
questions about the transactions, how they worked, a lot of information about me and the law firm, background. United Reporting, Inc. (954) 525- 2221
Page 2247 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 lawyers. There were at least two or three other meetings that I recall where I met both with Mr. Discala and members of his team, various members, sometimes on the phone, sometimes in person, sometimes some were in person and on the phone, where they asked what I considered to be good questions, good due diligence questions of me for a longer period of time than what I was used to dealing with with some of the other investors. I received e-mails from a number of the different people and remember Mr. Legamaro writing to me. I remember Mr. Podaras writing to me. I remember
Mr. Von Allmen writing to me.
I remember meeting with
Mr. Von Allmen on various occasions where he asked me a lot of questions. I remember actually having dinner with Mr. Von Allmen out at some private club that he had where he actually pulled me aside and we went to the bar and shared a glass of wine, and he was asking me questions about the investment. They had me speak to two different groups of I remember speaking to people from two firms.
I seem to remember Morgan Lewis at one point in time. Q A Clifford Chance? Clifford Chance. I don't remember who Gersten Different groups of lawyers, I'd
Savage was attached to.
United Reporting, Inc. (954) 525- 2221
Page 2248 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 get questions and have to answer things. Then on top of that there was questions being asked of me through Mr. Preve. Somebody would contact And then Preve
him from the group, one of these people.
would say, the Clockwork group wants to know this, the whatever he's calling it, the Von Allmen group, whatever he was referring to. So, there was a -- you know, compared to what I was used to dealing with in the years prior, to me it was fairly significant due diligence, and they kept prodding and pushing. certain. Q Could you specify the subject matter of any of You've testified that they asked They kept us on our toes, that's for
the specific questions?
questions, they e-mailed questions, other people asked questions, you had conversations. And I recognize it's
two years and you may not be able to do this with any specificity and may not be able to connect questions with the people. But to the extent that you can, if you can,
I would ask you to tell me what exactly it is these Discala, Von Allmen people were asking you in connection with the Razorback and D-3 Capital investments, that is, in October of 2009? A right? Sure. To the best of my recollection, all
The first place you want to go, obviously, you United Reporting, Inc. (954) 525- 2221
Page 2249 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 don't need me for this, is to look at the e-mail questions that were e-mailed to me. Q A That's right. You can look at that. There were lengthy
questionnaires sent to me. Q A Um-hmm. Other than that, I remember discussing how, they I remember Thane
were asking me how I got my cases.
Ritchie in that meeting with Mr. Discala, that was one of the areas he seemed most interested to me. this possible pipeline of cases? possibly get this? I recall being asked by several of them to explain the banking relationship. That was more How did I get
How did a local firm
Mr. Podaras and Mr. Legamaro, actually more Mr. Podaras than anyone. He was very interested in the banking,
wanted to know how the money flowed, how I set up the accounts, who my contacts were at the bank. They spent time asking me about the lock letters at the point in time we were utilizing them and the mechanics, and I had to refer them to Mr. Spinosa to answer that question. They asked me about my history with other investors, Thane Ritchie. I don't remember, again,
whether it was Legamaro or Podaras, one or both of them United Reporting, Inc. (954) 525- 2221
Page 2250 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 owned. asked me about prior investor experience. Mr. Von Allmen asked me fairly extensively about how I came up with the idea to do this, how it was created, what made me think of doing this, which is one of the things that most people never really got into with me. It was usually a very brief conversation in that
regard. I remember it was either Podaras or Legamaro inquired of me as to how long my employees had been with me and whether I trusted them, specifically my CFO, Irene Stay. Many of them asked questions of Ms. Villegas because she was represented to have been with me for over two decades and my COO and worked her way up from secretary, and they inquired about my relationship with her. They inquired about other businesses that I Mr. Von Allmen asked me about my other business And, again, I get Legamaro and Podaras
confused, one of them asked about my business interests and successes and failures. I was asked at one point in time to provide a client list of the law firm. I don't remember who asked
me that, one of those gentlemen. We talked about transparency. United Reporting, Inc. (954) 525- 2221 And this was - to
Page 2251 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 my recollection, this was not a Discala question. It
would have been again, Legamaro and Podaras and perhaps one of the firms from outside. But we were talking about
transparency because they were pushing the issue of getting comfortable with the banking and the lack of transparency, people not being able to see things, not looking on things. They were pushing a little bit more
as to whether or not what I was saying they couldn't see was truly a breach of confidentiality. There were usury questions asked. That was And
Mr. Podaras who asked me about the usury questions.
you should be able to find some of what I consider to be rather amusing e-mails in that regard that go back and forth between Mr. Podaras and I. To the best of my recollection that's a pretty good overview of what we discussed. Q There may be more.
Now, Mr. Von Allmen, and I think we've been over
this a bit, Mr. Von Allmen put in around $47 million of his family money and his own money in May and June of 2009 in connection with the Banyon Income Fund that Preve had put together and in part was promoted by Bekkedam. Do you remember that? A Q I believe that's correct, sir. And in the private placement memorandum for the
Banyon Income Fund that was shown to Mr. Von Allmen, the United Reporting, Inc. (954) 525- 2221
Page 2252 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Banyon Income Fund represents that it has invested over $600 million in these discounted settlements. recall that number? A I recall seeing that. I'm not sure if I saw it Do you
in the document you're talking about, but I certainly remember that number. Q And given the discounts that were being used to
buy settlements, I may be off a bit, but if the income fund was representing to Von Allmen and others that they had invested $600-plus million in the these settlements, that would have meant a settlement figure in the aggregate of about a billion dollars; right? A Q Give or take, yes, sir. So, when you met with Von Allmen and Discala in
connection with the Razorback and D-3 transactions, did Von Allmen raise the billion dollar settlement number with you? A I don't remember whether it was Von Allmen or
one of the other people, but they were most curious about the relationship between the Banyon entities and my law firm. Q But did they say, My goodness, where did you get
a billion dollars worth of settlements in such a short period of time? A Yes. Yes, they did. United Reporting, Inc. (954) 525- 2221
Page 2253 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q And yet I gather nobody from Discala or
Von Allmen's group ever asked to be introduced to referring attorneys? A I don't recall them asking to be introduced to I substantiated things in other
ways this them as best as I could. If you read the e-mails -- this just goes to your question. If you read through the e-mails you'll
get a pretty good idea of the type of follow-up and the like they were doing. They would ask questions. I would
give answers, and then there was follow-up to it. Q A look. Q Since time is limited I'm trying to avoid having We'll get to some e-mails I understand. I just want to be helpful so you know where to
you read too many e-mails. A Q Understood.
I just need to clarify what's not in the e-mails
and what never happened, which is, I think you've said this, none of the Von Allmen, Discala people ever asked to be introduced to referring attorneys? A Q I don't recall them ever asking that, sir. By the way, while they did some independent
verification by looking at the 13 boxes in connection with D-3 Capital, before that who were they relying on in United Reporting, Inc. (954) 525- 2221
Page 2254 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the Razorback deal or the earlier deals for verification that the settlements were real? A Q Me, Mr. Szafranski, and Mr. Preve. And who were they relying on for verification
that the defendants were actually wiring the settlement money into the escrow accounts? A Me, Mr. Szafranski, and Mr. Preve, and to a
limited extent the bankers. Q Had they known Mr. Szafranski prior to being
introduced to you and the investments? A Q To my knowledge, no. So for all they knew Szafranski was on your
payroll, right? MR. SCHERER: THE WITNESS: Objection, form. I'd be guessing what they knew,
but they -- they did their own research from what Mr. Preve and Mr. Szafranski told me. As a matter of fact, as part of their due diligence, I remember because this took place in the conference room on our other floor, on 15 -- this goes to the question you asked me before. BY MR. LAUER: Q But I'm asking you now -MR. SCHERER: Counsel. United Reporting, Inc. (954) 525- 2221 Let him answer the question,
Page 2255 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. LAUER: Mr. Scherer, with all due respect
because time is limited I'm focusing on Szafranski. THE WITNESS: BY MR. LAUER: Q A All right. They had a very specific lengthy meeting and did It took This is Szafranski dead on.
separate due diligence with Mr. Szafranski. place on our next floor down.
I believe it was our 15th
floor conference room, maybe up on 22, but not on my floor. They met. They had a bunch of their attorneys
and some other people, and they met actually for several hours with Mr. Szafranski, took him through the whole thing. Q A sure. Q Clifford Chance, that was the law firm that Do you They met him through you? Yes, through me and through the Banyon group,
Discala brought down prior to Morgan Lewis. remember that? A Q people? A I don't recall specifically. I do.
What is it that you told the Clifford Chance
You'd have to take
a look at the e-mails. the standard questions.
They asked what I'll refer to as I answered them. The rest you
United Reporting, Inc. (954) 525- 2221
Page 2256 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 have to look in the e-mails or speak to Clifford Chance. Q You came to learn that after Clifford Chance met
with you they resigned from doing further work for Discala, Clockwork, or Ritchie or whomever it was, the one that hired them, right? A Yes. There was some point in time when they got
what we refer to in the e-mails as the spooked event, where they got spooked and we had to go elsewhere for due diligence. Q And what spooked the Clifford Chance people that
they made the decision as a law firm that they did not want to have a further relationship with Discala and his group? A What was explained to me was that they felt,
after listening to everything, that the issues involved regarding this type of funding was outside their areas of expertise, that they were being asked to offer opinions on stuff that they were not comfortable offering opinions on. And they thought by going to somebody who had a more
boutique practicing in dealing with the settlement funding issues more similar to this, perhaps labor and employment issues and the like. I was given. Q That was the reason that
Anything more than that, no.
That's the reason that you were given, but did
you have an opinion as to what might have spooked them? United Reporting, Inc. (954) 525- 2221
Page 2257 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q I didn't, no. At the time did you know the approximate size of
the Clifford Chance law firm? A Q A Q A sir. Gigantic, thousands of lawyers, to my knowledge. All over the world, right? Yes. And every area of expertise, right? Yes. You didn't ask me if I believed them, This is what I was told
I know where you're going.
was their reason. Q Okay. You mean I didn't ask you if you believed
what you were told about Clifford Chance leaving? A Yes. It might save all these other questions
and save your time. Q Okay. I think one thing I've learned in two
days or three days is if you want to get something out, you're going to get it out, so you might as well get it out. A That's an excellent point. The answer is I did
not believe them. Q A Why not? The explanation that I was given varied too much They didn't
from what I knew to be real problem areas.
appear to be focused on -- this firm did not appear to be focused on the real problem areas that could have arisen United Reporting, Inc. (954) 525- 2221
Page 2258 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 such as something as simple as why can't we give them copies of real bank statements as opposed to screen shots, things like that. So I didn't think that they
were -- I just think that they were spooked by the entire, having to issue an opinion on this entire investment strategy, in my opinion. Q Did Doug Von Allmen know that Clifford Chance
had basically resigned and created this spooked situation? A Q tell him? A I don't recall. You would have to check the I do not know. Was that something that A.J. asked you not to
e-mail traffic. personally. Q
I don't recall him saying it to me
Did Doug ever say to you, Scott, I'm a little Clifford Chance resigned.
concerned with these kids. That's spooks me, too? A Q A
I don't recall that. That's not a trick question. I know. I'm just trying to remember because I
do remember Mr. Von Allmen asking questions about things that were troubling him. were. I don't really recall what they
More towards the volume of cases and that type of And I think if he
stuff and the lack of transparency.
United Reporting, Inc. (954) 525- 2221
Page 2259 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 would have said that to me, that's something that would be reflected by an e-mail or something that I would remember. Q A though. Q Who told you that Clifford Chance resigned? I don't recall. I think it was Mr. Preve,
I got most of my bad news from Mr. Preve first. Do you remember getting an e-mail from Mr. Preve
October 29, 2009, basically saying, "Very skittish. Von Allmen not fully convinced of legitimacy of the play. A Q A More on this when we talk"? Yes. And did you speak with Von Allmen? I spoke to Preve first. It was my job then to
sooth Mr. Von Allmen. Q What was Von Allmen's concern about the
legitimacy? A He just questioned the entire strategy. I met
with Mr. Preve following that e-mail and we discussed the fact that without the Von Allmen money everything was going to blow up, that we were without other sources for funds. We discussed at length the fact that Mr. Bekkedam and his group didn't seem to be able to produce anything near what they said they were going to and that Von Allmen was our final pitch to take us over United Reporting, Inc. (954) 525- 2221
Page 2260 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 or explode this thing. So we talked about various ways as to how we were going to try to get Von Allmen on board. going to try to create more transparency. him more things in the office. We were
I would show
I would invite him to the
office to look at more things, perhaps give him unredacted copies of things, anything I could do to try to make him more comfortable. Q A More comfortable this was not a fraud? Correct. I also offered him the opportunity, I
was asked to offer him the opportunity to speak to other people in my law firm. And I believe he spoke to,
although I'm not certain, you'd have to ask these people, but I believe he spoke to Mr. Boden and to Mr. Rosenfeldt. Q And, again, that was to allay concerns he had
that he was a victim of fraud? A Yes. As a matter of fact, and you're going to
have to ask the Von Allmen folks this, but if you look at Szafranski's e-mail traffic back and forth, there's a point in time when he's discussing with Mr. Lifshitz the fact that Mr. Rosenfeldt has in fact attended certain investor meetings that Mr. Szafranski was at and has in fact given information on the deals and how this works. And Mr. Lifshitz had then asked of me whether he United Reporting, Inc. (954) 525- 2221
Page 2261 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 could meet with Mr. Rosenfeldt as did other investors, and my recollection is he was referring to Mr. Scherer's clients. I don't know if that ever - if I actually let But I'm pretty sure
Mr. Lifshitz meet with him or not.
it's someone from the Von Allmen group. MR. LAUER: fine with me. Any time you want to take a break is
If you don't want to take a break -That's great. Let's take a quick
THE WITNESS: one, sure.
(Thereupon, a short break was taken.) (Whereupon, The Funds' Exhibit No. 261 was marked for identification.) BY MR. LAUER: Q Okay. I am handing you, Mr. Rothstein,
Exhibit 261, which is a photostatic copy of Confidential Settlement Agreement and Release. PRODA 21183 through 21212. MR. SCHERER: exhibit? MR. LAUER: 261. Thank you. What is the number of that It bears production
THE WITNESS: BY MR. LAUER: Q
Do you recognize this as the Confidential
Settlement Agreement and Release covering the settlement that was sold to the D-3 Capital Club Group in mid to United Reporting, Inc. (954) 525- 2221
Page 2262 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 late October 2009? A Q A Give me one second. Take your time. Yes. (Whereupon, The Funds' Exhibit No. 262 was marked for identification.) BY MR. LAUER: Q Now I'm handing you Exhibit 262, which is a
letter from Scott W. Rothstein to D-3 Capital Club, LLC, dated October 14, 2009, bearing counsel's stamp 21218 through 21222. Is that a letter that you authored and provided the D-3 Capital Club in or about October 14, 2009, concerning the settlement that is reflected in Exhibit 261? A I am one of the authors of the letter. It has
my name at the bottom.
It's a forged signature, but I
authorized this to be transmitted to D-3 Capital. Q So just to be precise, if you authorize someone
to sign your name, it's not a forged signature, is it; it's an authorized signature that someone else is signing? A Q You're correct. So this was an authorized signing by someone
else of your name? United Reporting, Inc. (954) 525- 2221
Page 2263 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 sir. Q And just to start at the beginning of the Do you see that A Yes. They were authorized -- the language seems
strange to me because they were signing fake documents in a fraud. So say it was authorized during the course of
the fraud, yes. Q And they were genuinely signing documents with
your approval; albeit, the documents they were signing were part of a fraudulent transaction? A Correct. (Whereupon, The Funds' Exhibit No. 263 was marked for identification.) BY MR. LAUER: Q Now I am handing you what we have marked as
Exhibit 263, which consists of two pages of e-mails bearing counsel's stamp 46167 and 46168 and what appears to be a photostat of an account summary balance bearing counsel's stamp 46169. I would ask if you can identify Exhibit 263. Are those e-mails that were sent in connection with the D-3 Capital investment? A This all pertains to the D-3 investment. Yes,
e-mail, first it's from Frank Spinosa. at bottom of the second page, 46168? A I do. United Reporting, Inc. (954) 525- 2221
Page 2264 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q Okay. From TD Bank.
Is this e-mail purporting to send what purports to be a $64 million balance in an account at Rosenstein (sic,) Rosenfeldt, Adler escrow account? A sorry. (The pending question was read back by the court reporter.) BY MR. LAUER: Q A Q A I meant Rothstein. No. What is it? The exhibit is put together incorrectly. The Can you ask the question again, please? I'm
attachment is one of our phoney balance statements. What should be attached to this is the D-3 lock letter which is being forwarded by Mr. Spinosa to me and then forwarded by me to Mr. Podaras. (Whereupon, The Funds' Exhibit No. 264 was marked for identification.) BY MR. LAUER: Q I'm handing you Exhibit 264. This is a
document dated October 15, 2009, bearing a signature of Frank Spinosa on what purports to be TD Bank letterhead. Is this what you have described as the lock United Reporting, Inc. (954) 525- 2221
Page 2265 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 letter for the fraudulent account? A Q Yes. I think you mischaracterized it. It's not a
phony lock letter.
It's a genuine lock letter with
respect to a phony account? A Actually I said phony bank statement. It's a
lock letter purporting to lock something that's not there that can't be locked. (Whereupon, The Funds' Exhibit No. 265 was marked for identification.) BY MR. LAUER: Q Finally, I am handing you Exhibit 265, which
appears to be an e-mail from you dated October 23, 2009, to A.J. at Clockwork and Dean K-r-e-t-s-c with a cc to Frank Preve. A Could you identify that e-mail? It's an e-mail that I sent out
I recognize it.
to A.J. and to Dean with a copy to Frank trying to force their hand on funding the rest of the deal. Q Now, this deal was one in which A.J. and Dean
and Doug Von Allmen had agreed to put in $18 million? A I don't recall specifically who the money was
coming from, but it appears to be Von Allmen because Dean is involved. Q The deal was they put up 18 million to buy a
$30 million settlement? United Reporting, Inc. (954) 525- 2221
Page 2266 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q That sounds correct, sir. And the e-mail is telling them that as of
October 23rd they have not come up with the 18 million; is that correct? A It says, "We're $8 million away from the first
18 million and the 5 million I've been promising her for days has not yet appeared. Q Could you explain the numbers? 8 million from
18 million means you would have had 10 million? A I would have already had 10 million in-house.
That's what it appears to say. Q A What does that have to do with the 5 million? It appears that I was -- as these were being And so part of
funded I was getting funded piecemeal.
the fraud that we were utilizing was to tell them that I've promised her this amount of money. And if you look
in our accounts, that would reflect exactly the amount or close to it that I needed at that moment for the Ponzi scheme to keep it alive. Q So as of October 23rd they had only come up with
10 million of the 18 million that they were supposed to come up with? A You'd have to check the bank ledgers to be
certain, but that's my recollection. Q And that's what you were telling them in this United Reporting, Inc. (954) 525- 2221
Page 2267 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 e-mail on October 23rd? A Q Yes, sir. That's what it appears to be.
Now, if you turn back to Exhibit 264, the lock
letter, you have that? A Q I do, sir. Okay. So from their perspective, at least what
they were telling you is they thought the lock letter was important, right? A Q Yes, sir. They thought that that was a necessary extra
precaution for their investment? A My understanding from speaking to them was it
was one of the key elements in their funding the deal. Q And this lock letter would from their
perspective protect them because it says that the money can only be distributed to them, right? Capital Club, LLC? A Q A Q Correct. Now, if you turn to 263 -Yes, sir. -- the top page, Frank Preve to Chris Podaras, And they are D-3
was Podaras part of A.J. and Doug's group? A Q He was. Preve says to Chris, "Did you pick up a balance If
report from TD Bank yesterday for Razorback and D-3? United Reporting, Inc. (954) 525- 2221
Page 2268 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q so, I need a copy. one up on Monday." Do you see that? I do, sir. Is the account balance bearing counsel's stamp If not, I will have Szafranski pick
46169, is that what was purported to be the account containing the Razorback and D-3 funds? A Q Yes. Is it these funds, this $64 million represented
amount, that is locked in by the lock letter, Exhibit 264? A Q Yes. Now, let's go to 261. This is the Confidential
Settlement Agreement and General Release, right? A Q A Q Yes. Okay. And some other papers. Right. If you go to the page bearing counsel's
stamp 21191, the settlement agreement between the plaintiff and the defendant bears the date October 14, 2009, right? A Q Correct. So that's what A.J., Doug and their group were
being told was the date that the settlement had been signed? United Reporting, Inc. (954) 525- 2221
Page 2269 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q A Q Correct. And at the same time they are being told that
the money for this settlement is already in the account? A Q A That it arrived on the 14th. Go to the next page, the next document. I'm sorry. The next page in which one of these
documents? Q A What? I have a lot of documents. I don't know which
page to turn. Q A Q Within Exhibit 261 -Right. -- the next separate document which is part of
the exhibit bears counsel's stamp 21193 and it has a caption, Acknowledgment of Assignment/Purchase of Settlement Proceeds. Do you see that? I do. And this is an acknowledgment where your law
firm acknowledges that -- Well, why don't you explain it. LLC? A It's acknowledging all of the things covered in There's a lot of things. The What is this acknowledging to D-3 Capital Club,
all these paragraphs.
purpose is to say that we've got the money and this is United Reporting, Inc. (954) 525- 2221
Page 2270 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the way we're going to handle it. Q D-3 Capital in this case is the transferee; that
is, the entity that will receive the settlement money at the appropriate time? A Q Yes, sir. And in Paragraph 8 you are confirming to D-3
Capital that upon receipt of $18 million you will disburse the plaintiff's wire to plaintiff. What does that mean? Does that mean that as
soon as you get the 18 million from D-3 Capital you will send the plaintiff the money that is being used to purchase her rights to this settlement? A It says that once two things occur, one of which
is receipt of the $18 million, that we will disburse the plaintiff's wire to the plaintiff. Q Okay. So the way this was supposed to work is It goes into an And when
$18 million comes from D-3 Capital.
attorney escrow account that you manage.
appropriate you will then wire the plaintiff this 18 million? A Q Correct. And then down the road the way this deal was
supposed to work is the 30 million that's in the account will get distributed to D-3 Capital? A Over time, correct. United Reporting, Inc. (954) 525- 2221
Page 2271 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q Now go to Paragraph 13. Paragraph 13, am I
correct, is acknowledging by the law firm, by you on behalf of the law firm, that the $30 million that is sitting in that account from the defendant will be held exclusively for the beneficiary - I guess it means for the benefit of the transferee and the transferee is that assignee; is that correct? A That the money held in the locked account will
be held for their benefit, correct. Q Now, do you agree with me that "beneficiary" is
not the correct word, that what this sentence, if written in English would read, Will be held exclusively for the benefit of the transferee? A Q Yes. And was this -- it's informing D-3 Capital that
you're acknowledging that the $30 million will be held for their exclusive benefit? A Q Correct. And it's also acknowledging a letter from the And I
regional VP has been provided to the transferee.
take it that is a reference to the lock letter to D-3 Capital? A Q A Correct. Exhibit 264. Correct. United Reporting, Inc. (954) 525- 2221
Page 2272 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q Now, the next document bearing counsel's stamp
or starting with counsel's stamp 2119A is a Sale and Transfer Agreement. A Q I do, sir. All right. And is this the document by which Do you see that?
your purported client is selling and in fact did sell to D-3 Capital Club, LLC her rights to the $30 million that she is receiving from the defendant? A Q Correct. In paragraph 1 after the whereas clause is in
the middle of that paragraph it reflects the transferor, meaning the plaintiff client, agrees to accept payment in the sum of $18 million from D-3 Capital, right? A Q A Q I'm sorry. Which paragraph are you looking at?
It's paragraph numbered 1 on page 21199. That's correct. In the second paragraph of paragraph numbered 1
it says that transferee, meaning D-3 Capital, has been informed by RRA that pursuant to the transferor instruments, transferor - meaning the Plaintiff client has irrevocably named transferee, meaning D-3 Capital, as transferor's designated payee of the settlement proceeds? A Q Correct. That's a further way of confirming what's stated
several times here, that $18 million comes from D-3 United Reporting, Inc. (954) 525- 2221
Page 2273 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 sir. Q In the end all they could come up with was Capital to the Plaintiff and the rights to the 30 million are sold to D-3 Capital? A Q Correct. Now, it turned out that D-3 Capital was not able Do you remember that?
to raise the full $18 million. A Q
That is my recollection, sir. And in fact as you saw as late as October 23rd
they had only raised 10 million? A To the best of my recollection you're correct,
$13-and-a-half million? A It was something of that nature. Yes, sir. It
was not the full amount. Q Right. And yet they were told that the deal was
done, right, that in fact the transaction had been completed, that they had satisfied the transaction with your plaintiff? A Q I don't recall telling them that. Did you tell them that this deal has been
breached, that they have not met their obligations? A I think that's what this e-mail is telling them,
the other one we looked at, where I'm telling them they haven't funded -- Yes. I'm telling them they haven't
done what they said they were going to do, and my client United Reporting, Inc. (954) 525- 2221
Page 2274 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 is going crazy over it. they are in breach. Q And did they say, Well, we can't get the So, yes, I'm telling them that
18 million, so return all the money to us? A I don't recall what they said. I don't recall. I have to see
the e-mail traffic. Q
Now, isn't what happened that you or someone
told them that someone else had come up with the extra 5-and-a-half million and in fact this deal was funded? A I don't have a specific recollection of that,
but that is certainly something I may have told them. I'd have to see the e-mail traffic. probable. Q Have you seen any e-mails describing the fact It seems more than
that on this deal where they supposedly are putting $18 million in, but they only put in 13-and-a-half million, that describes the fact that somebody else or some other entity put in the other 5-and-a-half million? A I don't specifically recall, sir. I'm four or
five days away from leaving for Morocco at this moment. And it was probably on the back burner as far as I was concerned. I don't know. I don't recall seeing the You'd have to show
e-mail traffic as I sit here today. it to me to know. Q
But since you went to Morocco and have come back United Reporting, Inc. (954) 525- 2221
Page 2275 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 and have poured over countless documents and interacted with Trustee's counsel and with Mr. Nurik and the like, have you seen any e-mail from anyone to anyone else that reflects that somebody came up with 5-and-a-half million to meet the 18 million that was required for this transaction? A Q I don't recall, sir. Did anyone tell Von Allmen or Discala that
Banyon or some Banyon entity had come up with the 5-and-a-half million? A I seem to recall someone telling them that they
came up with the money, but I don't recall who told them. Q Now, when they were told that someone else had
come up with 5-and-a-half million, did they say, Hey, wait a minute. We have an exclusive lock letter. We
have an exclusive agreement. to D-3 Capital.
The money can only be sent
How could anybody in his right mind put
in $5-and-a-half million of real money in this transaction without even contacting us to get a letter agreement that requires us to share our rights under these agreements with them? A Q I don't recall one way or the other, sir. In fact, there is no communication whatsoever to
you or anyone else saying, This sounds really fishy that some mysterious donor has come up with 5-and-a-half United Reporting, Inc. (954) 525- 2221
Page 2276 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 million bucks when we have lock letters that we think are essential. essential. We have contracts that we think are We are the exclusive transferee. And
somebody out there is really coming up with $5-and-a-half million, and you expect us to believe that? A I don't recall receiving any e-mail from them or What I
having any conversation with them in that vein.
would need to see what was going on is the e-mail traffic probably more particularly between myself and A.J. and myself and Mr. Preve to see exactly what was going on at that time; as to me and Mr. Preve, what story we were concocting to cover ourselves me and as to me and A.J. or Mr. Preve and A.J. to determine how the sale of the fake story was going and how best to handle it. Q So you would need to work out the fake story
with A.J.? A I would need to work out the fake story with
Preve and then Mr. Preve and I would be selling it to A.J., Dean, and anyone else involved in that group. Q Putting aside hypothetical, in the two years