Transcript
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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: Wednesday, December 21, 2011 TIME: 1:00 p.m. - 5:00 p.m. PLACE: 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

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1 IN THE CIRCUIT COURT OF THE 17TH JUDICIAL CIRCUIT IN AND

2 FOR BROWARD COUNTY, FLORIDA

3 CASE NO: 10-2411 CACE (19)

4 EDWARD J. MORSE, CAROL A. MORSE, and MORSE OPERATIONS, INC.,

5 Plaintiffs,

6vs.

7SCOTT W. ROTHSTEIN, et al,

8 Defendants.

9 ________________________________/

10

11 UNITED STATES DISTRICT COURT

12 SOUTHERN DISTRICT OF FLORIDA FORT LAUDERDALE DIVISION

13

14AMY ADAMS, ET AL, PLAINTIFF VS. SCOTT ROTHSTEIN, ET AL.

15 CASE NO: 11-CV-61688-JIC/LSS

16 Case No: 10-03767 RBR STETTIN VS. GIBRALTAR PRIVATE BANK & TRUST CO.

17Case No: 10-03802-RBR STETTIN VS. CENTURION STRUCTURED

18 GROWTH LLC, ET AL.

19 Case No: 11-02288-RBR STETTIN VS. FIDELITY CHARITABLE GIFT FUND

20Case No: 11-02368-RBR STETTIN VS. TD BANK, N.A.

21

22 Case No: 11-02473-RBR STETTIN VS. REGENT CAPITAL PARTNERS, LLC ET AL

23Case No: 11-02604-RBR STETTIN VS. MAPLE LEAF DRILLING

24 PARTNERS, ET AL

25 Case No: 11-02605-RBR STETTIN VS. DON KING PRODUCTIONS

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1 APPEARANCES FOR SCOTT ROTHSTEIN:

2 LAW OFFICE OF MARC S. NURIK 1 East Broward Boulevard

3 Suite 700 Fort Lauderdale, Florida 33301

4 BY: MARC S. NURIK, ESQUIRE

5 APPEARANCES FOR THE CHAPTER 11 TRUSTEE, HERBERT STETTIN:

6 BERGER SINGERMAN

7 350 East Las Olas Boulevard Suite 1000

8 Fort Lauderdale, Florida 33301 BY: CHARLES H. LICHTMAN,, ESQUIRE

9APPEARANCES FOR THE TRUSTEE:

10 GENOVESE, JOBLOVE & BATTISTA, P.A.

11 100 S.E. 2nd Street Suite 4400

12 Miami, Florida 33131 By: JOHN. H. GENOVESE, ESQUIRE

13 DAVID C. CIMO, ESQUIRE THERESA M.B. VAN VLIET, ESQUIRE

14 JESUS SUAREZ, ESQUIRE ROBERT F. ELGIDELY, ESQUIRE

15APPEARANCES FOR RAZORBACK:

16 CONRAD & SCHERER, LLP

17 633 South Federal Highway Eighth Floor

18 Fort Lauderdale, Florida 33302 BY: WILLIAM R. SCHERER, ESQUIRE

19 ERIC RAYMAN, ESQUIRE IVAN J. KOPAS, ESQUIRE

20 and KOZYAK, TROPIN & THROCKMORTON, P.A.

21 2525 Ponce de Leon Boulevard Ninth Floor

22 Coral Gables, Florida 33134 BY: HARLEY S. TROPIN, ESQUIRE

23

24

25

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1 APPEARANCES FOR PLATINUM PARTNERS VALUE ARBITRAGE CENTURION STRUCTURED GROWTH, LLC:

2 GOLDSTEIN, TANEN & TRENCH, P.A.

3 One Biscayne Tower, Suite 3700 Two South Biscayne Boulevard

4 Miami, Florida 33131 By: SUSAN E. TRENCH, ESQUIRE

5 CURTIS, MALLET-PREVOST, COLD & MOSLE LLP

6 101 Park Avenue New York, NY 10178-0061

7 BY: ELIOT LAUER, ESQUIRE GABRIEL HERTZBERG, ESQUIRE

8APPEARANCES FOR MURRAY HUBERFELD AND DAVID BODNER

9 HARVEY WERBLOWSKY, ESQUIRE

10APPEARANCES FOR THE COMMITTEE OF

11 UNSECURED CREDITORS:

12 AKERMAN, SENTERFITT One Southeast Third Avenue

13 25th Floor Miami, Florida 33131-1704

14 BY: MICHAEL GOLDBERG, ESQUIRE

15 APPEARANCES FOR T.D. BANK:

16 GREENBERG TRAURIG, P.A. 401 E Las Olas Blvd Ste 2000

17 Fort Lauderdale, Florida 33301 BY: MARK P. SCHNAPP, ESQUIRE

18 DONNA EVANS, ESQUIRE

19 APPEARANCES FOR RLI ZURICH INSURANCE COMPANY, COLUMBIA INC. & ZURICH INSURANCE:

20 CLAUSIN MILLER

21 One Chase Manhattan Plaza 39th Floor

22 New York, New York 10005 BY: SCOTT L. SCHMOOKLER, ESQUIRE

23

24

25

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1 APPEARANCES FOR FEDERAL INSURANCE COMPANY:

2 1430 South Dixie Highway Suite 204

3 Coral Gables, Florida 331463127 BY: ALEX HOFRICHTER, ESQUIRE

4APPEARANCES FOR THE MORSES:

5 TRIPP SCOTT, P.A.

6 110 S.E. Sixth Street,15th Floor Fort Lauderdale, Florida 33301

7 By: JOHN M. MULLIN, ESQUIRE GEORGE WALKER, ESQUIRE

8 LAW OFFICES OF ROBERTA DEUTSCH

9 2499 Glades Road Suite 110

10 Boca Raton, Florida 33431 BY: ROBERTA M. DEUTSCH, ESQUIRE

11APPEARANCES FOR EMESS CAPITAL, LLC:

12 KLUGER KAPLAN SILVERMAN, KATZEN & LEVINE, PL

13 201 S Biscayne Blvd Fl 17 Miami, Florida 331314

14 BY: CASEY H. CUSICK, ESQUIRE

15 APPEARANCES FOR ST. PAUL FIRE & MARINE:

16 MILLS PASKERT DIVERS P.A. 100 N Tampa St Ste 2010

17 Tampa, Florida 336025145 BY: JOHN A. BLACK, JR., ESQUIRE

18 APPEARANCES FOR ROSANNE CARETSKY:

19 BILLING COCHRAN LYLES

20 515 E Las Olas Blvd Floor Six

21 Fort Lauderdale, Florida 333012296 BY: DANIEL S. GELBER, ESQUIRE

22APPEARANCES FOR FEPICT, MS GROUP:

23 NYSTROM, BECKMAN & PARIS

24 One Marina Park Dr., 15th Flr. Boston, MA 02210

25 BY: JACK SIEGAL, ESQUIRE

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1 APPEARANCES FOR MICHAEL SZANFRANKSI:

2 LYDECKER, DIAZ 1221 Brickell Avenue

3 Floor 19 Miami, Florida 33131

4 BY: CHRISTOPHER G. BERGA, ESQUIRE MIGUEL J. CHAMORRO, ESQUIRE

5APPEARANCES FOR GIBRALTAR:

6 STEARNS WEAVER MILLER, et al.

7 150 W Flagler St Ste 2200 Miami, Florida 331301545

8 BY: MARY BARZEE-FLORES, ESQ. MATTHEW DATES, ESQUIRE

9APPEARANCES FOR FRANK PREVE:

10 PODHURST ORSEK

11 25 W Flagler St Ste 800 Miami, Florida 331301720

12 BY: RAMON A. RASCO, ESQUIRE

13 APPEARANCES FOR THE US GOVERNMENT:

14 500 East Broward Boulevard, Suite 700 Fort Lauderdale, Florida 33394

15 BY: JEFFREY KAPLAN, ESQUIRE

16 APPEARANCES FOR FRANK SPINOSA:

17 SCHLESINGER AND COTZEN, P.L. 799 Brickell Plz Ste 700

18 Miami, Florida 33131 BY: MICHAEL J. SCHLESINGER, ESQUIRE and

19 MICHAEL COTZEN, ESQUIRE and

20 SAMUEL J. RABIN, ESQUIRE 799 Brickell Plaza

21 Suite 606 Miami, Florida 33131

22

23

24

25

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1 EXAMINATION INDEX

2 PAGE

3 SCOTT W. ROTHSTEIN DIRECT BY MR. LAUER 2208

4

5

6 EXHIBIT INDEX

7 PAGETHE FUNDS'

8 259 Affidavit of Richard S. Fechter 2236

9 260 FP112310-0196804/1, E-mail dated 10/29/09 2342

10 261 FP112310-0196804/1, E-mail dated 10/29/09 2261

11 261 Confidential Settlement Agreement and 2261

12 General Release

13 262 PRODA 021218, Letter dated 10/14/09 2262

14 262 Confidential Settlement Agreement and 2262 General Release

15 263 PRODA 046167, E-mail dated10/16/2009 2263

16 264 PRODA 045671, Letter dated 10/15/09 2264

17 265 PRODA 048648, E-mail dated 10/23/09 2265

18 266 Elite Delivery Systems Website Printout 2286

19 267 Analysis dated 3/10/11 2292

20 268 FP112310-0086198, E-mail dated 1/22/08 2308

21 269 PCL59129, E-mail dated 4/13/09 2320

22 270 FP112310-0162455/1, E-mail dated 4/14/09 2322

23 271 E-mail dated 12/25/08 2336

24

25

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1 DIRECT EXAMINATION

2 BY MR. LAUER:

3 Q Good afternoon, Mr. Rothstein.

4 A Good afternoon, sir.

5 Q You've been asked a number of questions over

6 the past several days about your relationship with

7 George Levin. Did you ever meet Mrs. Levin?

8 A I did.

9 Q Could you state her name for the record?

10 A Gayla Sue Levin.

11 Q And did you and your wife socialize with the

12 Levins?

13 A We did.

14 Q Can you describe the nature of both in terms of

15 frequency and the nature of the socializations?

16 A For one series of months I remember we used to

17 go to breakfast together and we used to meet for

18 breakfast, I don't remember whether it was Saturday

19 morning or Sunday morning, we used to meet at a deli out

20 towards their home. And there were a lot of occasions

21 that we'd get to spent time together at political

22 functions. George and I would do the politics thing and

23 Sue and Kim would do whatever the women were doing at

24 those functions to avoid being bored out of their minds,

25 I suspect.

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1 They were at my wedding. There were some other

2 family functions that they attended with us. George and

3 I would go to lunch frequently. I don't know if Kim and

4 Sue met outside but they did talk. That's about the

5 extent of it.

6 Q Did you have a business relationship with

7 Mrs. Levin?

8 A Well, in the beginning of this it was my

9 understanding from speaking to Mr. Preve and to

10 Mr. Levin that Mrs. Levin was one of the investors when

11 I was just doing deals with George, the initial set of

12 deals.

13 Q This is 2007?

14 A 2006, 2007, it's the pre -- look at the

15 earliest deals, it's when we were only using Gibraltar

16 Bank and we were not using what I referred to over the

17 last bunch of days as complete deal packets.

18 Q This is before any contact to the hedge funds

19 that I represent?

20 A Any contact that I had with the hedge funds. I

21 can't tell you when they began contact with them.

22 Q Following that did you ever have any direct

23 business dealings with Mrs. Levin, just you and

24 Mrs. Levin?

25 A No.

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1 Q Did she have any interaction with these

2 fictitious settlements?

3 A No.

4 Q Did she have any idea that there was a fraud

5 going on?

6 A I'd be guessing.

7 MR. LICHTMAN: Objection to form.

8 A I have no idea.

9 Q Have you ever been to their home?

10 A Yes.

11 Q Has she been to yours?

12 A Yes.

13 Q This morning you were shown what was marked, I

14 believe as Plaintiff's -- sorry, as Exhibit 250, which

15 apparently the TD Bank people took with them, but if you

16 recall --

17 A Better watch those bankers.

18 Q Exactly. They are e-mails of June 24, June 25,

19 2009; do you recall that?

20 A If you could refresh my recollection as to the

21 contents I'd probably be able to help you better. I saw

22 a lot of pieces of paper over the last seven days.

23 Q I don't have the e-mails in front of me but the

24 context of the questions and the context in which I want

25 to ask you some questions was in June of 2009, this is

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1 several months after Banyon missed its payment to the

2 hedge funds in April, you described one or more

3 conversations that you had with Mark Nordlicht and the

4 need to deal with the situation.

5 A I recall the two e-mails on the same page. I

6 recall the contents of them. They weren't to me or from

7 me but they certainly involve me so I understand, yes.

8 Q Putting the e-mails aside --

9 MR. LICHTMAN: Let me see if I can clarify

10 something. Did you say TD Bank took exhibits that were

11 of record with them? I want to make sure if they

12 did then I want to call them --

13 MS. TRENCH: I think it was the Court Reporter

14 that took them.

15 MR. LAUER: To be witness-like, I have no

16 personal knowledge of what TD did. The Court

17 Reporter believes that they may have taken them.

18 MR. LICHTMAN: That TD did?

19 MS. TRENCH: No, no, the Court Reporter said she

20 thought the morning Reporter took them.

21 MR. LICHTMAN: Sorry to interrupt your flow. If

22 TD has them I want to e-mail them and say get them

23 back.

24 MR. LAUER: No personal knowledge.

25 BY MR. LAUER:

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1 Q So putting aside the e-mail, but in context, you

2 testified that in your discussion with Mark, you said

3 what you needed And I guess what the Banyon entities

4 needed was a good credit rating?

5 A Yes.

6 Q And that if prospective new investors were to

7 reach out and contact Mark or his colleagues, you're

8 expecting and asking that they would give a good credit

9 rating to these prospective new investors?

10 A Correct.

11 Q Now I recognize that you're sort of summarizing

12 conversations that took place perhaps over hours and

13 events that took place over days or weeks and you're

14 putting into capsular form, so you said that basically

15 Mark and Jack, quote, agreed to lie to new investors.

16 And what I'd like to ask you is in terms of your

17 recollection of what they may actually have said, did

18 Mark actually say, quote, unquote, Scott, I, Mark

19 Nordlicht, will lie to prospective new investors? Or is

20 it more likely that he said something in substance, if

21 investors contact us we will not give a bad rating or we

22 will not give a negative rating?

23 A I can give you a pretty close approximation of

24 what the conversation actually was with Mark.

25 Q Just on that context.

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1 A On that topic, I made it clear to Mark that if

2 and when the investors called him if they found out that

3 we were in default, if they found out that any payments

4 were late or that we were not making payments, if they

5 found out that they had any questions about our

6 investment strategy, that we would never be able to get

7 any new investors and they would not be able to get

8 their money back. And that it was critical that he give

9 us a good credit rating, that we paid on time, and that

10 he believed in the investment strategy.

11 Q Okay. And that's what you said to Mark and you

12 impressed upon Mark --

13 A Correct.

14 Q -- according to your recollection, the

15 importance of this to you?

16 A Yes.

17 Q I'm asking you for your best recollection of

18 Mark's response.

19 A Sure.

20 Q And I'm suggesting, if you will, that he didn't

21 quote say, I will lie to people; is it more likely that

22 he said in substance, if new investors contact us we

23 won't give it a bad rating or we will give it a good

24 rating or something like that?

25 MR. CIMO: Objection to the form.

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1 A I can tell you pretty closely near exactly what

2 he said.

3 Q That's what I'm asking you for.

4 A He said to me, You don't need to worry about me,

5 something to the effect of - I think I mentioned this the

6 other day - that it wasn't his first time at the dance.

7 I mentioned last time he didn't say it wasn't my first

8 time at the rodeo, because he wasn't a rodeo guy. What

9 he said is this wasn't my first time at the dance. It

10 was at that time that he went on to explain to me about

11 the Optionable litigation and also that his father had

12 had some serious criminal legal issues. And that I could

13 count on him to do the right thing because they wanted

14 their money out.

15 MR. CIMO: Objection withdrawn.

16 Q By the way, did Mark tell you that the

17 securities class action in Optionable was dismissed with

18 prejudice?

19 A I don't think it had been at the time we were

20 discussing it, but I don't think we were actually

21 discussing whether the litigation was successful or not.

22 My best recollection is he was trying to impart to me

23 that he was not new to this, that he understood how

24 business needed to be done in order to get things

25 accomplished.

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1 Q But then in terms of his actual words, he said

2 what you've described, which is, he understands what

3 needs to get done and he communicated to you, your best

4 recollection is that if prospective investors or new

5 investors would contact him he would not give it a bad

6 rating?

7 A No, he said he would do the right thing.

8 Q He would do the right thing?

9 A Yes.

10 Q Okay. Now, I think we've been through this

11 before but it seems every day or two you get asked the

12 same questions.

13 A Yes.

14 Q Okay.

15 A Groundhog Day is coming to mind.

16 MR. NURIK: That's a preliminary statement to

17 an objection or an invitation to an objection.

18 Q I take it though that you have no personal

19 knowledge, that is, you were not present at an occasion

20 if or when a prospective investor would have contacted

21 or spoken to Mark?

22 A I was not present.

23 Q You were not on the phone if a prospective

24 investor would have a conversation with Mark or anyone

25 else of the Funds following the April missed payment?

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1 A That's correct. I only got the opposite

2 sides. I got the beginning when I asked and when Frank

3 asked for them to lie for us and then the result. I

4 don't have the middle. I wasn't there.

5 Q You only have what people told you?

6 A For that particular issue, yes.

7 Q And again, as you've acknowledged, just as you

8 were telling people often what they wanted to hear

9 although what you were telling them was not accurate,

10 you recognize now that some people on some occasions may

11 have told you things that they wanted you to hear that

12 may not have been accurate?

13 MR. CIMO: Objection to the form.

14 A That certainly seems to be the case, yes, sir.

15 Q Okay. I covered this with you a bit on Tuesday

16 but you've had the time to reflect. Have you come

17 across any e-mail in the trove of e-mails or text

18 messages or transcribed voicemails in which someone from

19 one of the hedge funds after the April missed payment

20 told you, in words or substance, that they had

21 specifically met with a particular -- an identified new

22 investor?

23 A The only person that told me that they took

24 care of that for us was Jack Simony.

25 Q And did Jack identify for you a human being

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1 that he said he had spoken to about the investments

2 after April 13, 2009?

3 A No. There was a specific conversation that I

4 had with Jack that was unfortunately fairly heated while

5 all this was going on, while the Discala, Von Allmen,

6 Balamore, Bekkedam people were doing their due

7 diligence, and Jack simply told me that it had been

8 handled and that I needed to calm down.

9 Q Other than A.J. Discala who had one meeting

10 with Simony, can you point to an e-mail from any other

11 human being who was connected to an investor after April

12 13, 2009 who said in the e-mail that he spoke to Mark

13 Nordlicht?

14 A As of today I have not seen any such e-mail. I

15 still have thousands to read but as of today, no.

16 Q Okay. I don't know how it works in terms of

17 your homework availability but if you do find any such

18 e-mail will you let us know?

19 A I will. I'll notify my lawyer and he can take

20 appropriate steps.

21 Q Thank you. You have testified a bit about the

22 lock letter, right?

23 A Yes, sir.

24 Q And my clients never had any lock letters,

25 right?

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1 A I know at the end, towards the end meaning from

2 June, July '09 on, Mr. Preve was asking me for lock

3 letters for other accounts. I don't recall whether it

4 was for any of the New York hedge funds.

5 Q No one has shown you any lock letters, whether

6 drafted by you, drafted by Spinosa or anyone else,

7 purporting to be a lock letter for the purpose of

8 showing the hedge funds; is that correct?

9 A That's correct.

10 Q All right.

11 A That's correct.

12 Q In fact you've commented that when you think

13 about it a lock letter is a silly document, right?

14 A From my perspective it was extremely silly,

15 yes.

16 Q That's because you have a working -- a fair

17 working knowledge of how a bank operates in 2009?

18 A At that time I did learn that it was a near

19 impossibility to accomplish what they were trying to

20 accomplish with the type of accounts that we had.

21 Q And in part that's because, notwithstanding a

22 letter along the lines of the so-called lock letter that

23 some of Mr. Scherer's clients obtained, you or anyone

24 else could have wired all the money out of the account

25 in accordance with the bank/client relationship?

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1 A That and the fact that we were locking accounts

2 that had no money in them.

3 Q They didn't know that?

4 A You're talking about the perception of the

5 person receiving the lock letter then?

6 Q Correct.

7 A Yes.

8 Q So --

9 A The person --

10 Q Here you have a lock letter, correct?

11 A Yes.

12 Q With respect to what Mr. Scherer's clients were

13 told are law firm escrow accounts, correct?

14 A Correct.

15 Q And Mr. Scherer's clients are told that

16 Szafranski and/or others are verifying that the money is

17 going into the account, right?

18 A Correct.

19 Q All right. And the money then from their

20 perspective would be in a law firm escrow account,

21 right?

22 A Correct.

23 Q So, I take it the purpose of the lock letter

24 was to alleviate some concern on the recipient's part

25 that perhaps you or someone else within your law firm

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1 would invade the escrow?

2 A It was to prevent theft from - yes, sir, yes,

3 sir.

4 Q You described A.J. Discala's group as pretty

5 sophisticated, right?

6 A They appeared to be sophisticated to me, yes,

7 sir.

8 Q You met a number of them, you met Podaras you

9 met Ritchie, right?

10 A Yes, I met A.J., Ritchie Thane - I mean Thane

11 Ritchie. I met Mr. Legamaro, I met Dean Kretschmar.

12 Q You met Von Allmen?

13 A I met Von Allmen.

14 Q You thought he was pretty sophisticated, right?

15 A Yes, from my perspective he was very

16 sophisticated.

17 Q You described him as a voracious interrogator,

18 right?

19 A He asked a lot of questions, yes.

20 Q And at any point in time did any one of these

21 sophisticated people suggest to you, Scott, this lock

22 letter stuff is baloney?

23 A No, sir. What they did was they asked that I

24 have someone from the bank confirm to them how it

25 works. Which to me, my perception was when they were

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1 asking me, and this is only my opinion and why I reacted

2 the way I did, that they had a concern over the process,

3 which is why I had Mr. Spinosa on board to explain the

4 lock procedure which in fact of course was fake, there

5 was no real lock procedure.

6 Q Correct. But it was apparent to you at the

7 time that Mr. Von Allmen understood how banks work, he

8 was a sophisticated private equity guy, wasn't he?

9 MR. SCHERER: Objection, form.

10 A I believed he was.

11 Q He made hundreds and hundreds and millions of

12 dollars in complicated M&A transactions, correct?

13 MR. SCHERER: Objection, form.

14 A I don't know what the actual transactions were

15 but to me he was a sophisticated investor, and he asked

16 what I deemed based upon all the questions I've been

17 asked by all the investors, sophisticated questions,

18 including to speak to someone at TD Bank about the lock

19 letters.

20 Q Correct. And if they're asking for the lock

21 letters because they have a concern that lawyers might

22 invade the escrow account, that is steal money from the

23 escrow account, did it occur to you at the time that

24 they might also have a concern that one of these

25 modestly paid bankers had been corrupted by you?

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1 A I never thought about that.

2 Q Now that you think about it, and I'd like you

3 to go back to your interaction and your conversations

4 with them, is it possible that when they were asking for

5 a lock letter and asking to talk to Spinosa that they

6 realized that the lock letter is ridiculous and the

7 purpose of the lock letter is, if and when this thing

8 blows up they will have a claim against the bank?

9 MR. SCHERER: Objection to form.

10 A I never felt that way, no, sir. But I can't

11 tell you what they were specifically thinking, I would

12 be speculating.

13 Q And it's not an illogical thought, is it?

14 MR. SCHERER: Objection to form.

15 A Again, I can't say - from my perspective, I can

16 tell what you my perspective was, but I can't tell you

17 what was logical and illogical to them. They were -- I

18 was unfortunately, from my perspective, very good at

19 selling this product and that ended up hurting a lot of

20 innocent people. I caught them in the moment. So I

21 can't tell you with any particularity or specificity

22 what these people's actual thought processes were.

23 He seemed to me out of all the people, he

24 seemed to be one of the people that was asking the right

25 questions, asking the right follow-up. What he was

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1 actually thinking you to have talk to him.

2 Q And yet they are relying on a lock letter --

3 let me withdraw that.

4 You were not a banking lawyer, were you?

5 A No, sir.

6 Q You were not an expert in banking regulations,

7 were you?

8 A No, sir.

9 Q And yet you figured out that the lock letter

10 was an illusion?

11 MR. SCHERER: Objection, form.

12 A Here's what happened, the investor whether it

13 was Mel or the Coquina group, Mel Lifshitz or the

14 Coquina Group, one of them as I testified earlier, said

15 we want to get something protecting where this money is

16 disbursed from. I don't know who came up with the name

17 lock letter, but basically locking the account to where

18 the money could go and who could touch it.

19 To me when they first said it to me that

20 sounded perfectly reasonable to me, that sounded like

21 the bank should be able to do that. When I called

22 Mr. Preve and asked him about that, he told me he never

23 heard of any such thing unless you use a very

24 specialized account that basically has no mechanism for

25 sending money anywhere. It's a very specific type of

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1 instrument they use to remove the money from the

2 account, et cetera. Then I knew that it didn't make any

3 sense.

4 Q Let me turn the tables. If you -- if Doug Von

5 Allmen and his group had come to you in a different

6 context to ask you to rely on their sophistication, to

7 rely on their sophistication to invest with them or to

8 do a transaction involving banking, and you knew that

9 they had allowed this lock letter to be created and were

10 reporting, at least from your perspective to be relying

11 on the lock letter, would that have been a little bit of

12 an alert to you that maybe these guys aren't so

13 sophisticated?

14 MR. SCHERER: Objection, form.

15 A Asking me that question really isn't -- it's --

16 I'm not the right person to ask because at this point in

17 time I consider myself probably to be the best person to

18 do due diligence on any kind of investment.

19 Had Mr. Von Allmen, prior to me engaging in the

20 crimes that I engaged in, had someone sophisticated like

21 Mr. Von Allmen come to me with a similar thing and any

22 type of investment and we discussed this lock letter, I

23 believe I would have done what he did and asked to

24 speak - because I wouldn't have understood what that

25 meant - and I would have asked to speak to the banker,

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1 which is what that whole group did and I would have

2 wanted to be in touch with someone like they were, in

3 this case Mr. Spinosa who could explain how the lock

4 procedure worked.

5 But you're asking me to -- it's such wild

6 speculation, especially given the extent of my knowledge

7 now, it's a little difficult.

8 Q That's fair. But given your expertise, if you

9 were in that situation and you had 60 or 70 million

10 dollars of your family money invested, would you have

11 relied exclusively on what some low level banker in

12 Florida tells you or would you have at least called a

13 money center bank or an expert in banking or an expert

14 in banking law to make sure that you had the kind of,

15 quote, lock letter that really works?

16 MR. SCHERER: Objection to form.

17 A It would depend upon what I thought of

18 Mr. Spinosa. You need to understand, he carried the

19 title of regional vice-president of one of the largest

20 banks in the country. So, while I might not have relied

21 on what a teller or a simple bank officer told me,

22 again, you're asking me to speculate. But speculating,

23 I may very well have relied on Mr. Spinosa depending

24 upon how he came across to me, which I always thought

25 was very professional, but however he came across to

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1 this person.

2 And then if I was dissatisfied with that

3 explanation I would, if I were investing that kind of

4 money, likely contacted some other type of expert in the

5 field to get additional clarification.

6 Q You mentioned RRA Sports Marketing, what was

7 that?

8 A We created -- one of the companies that we had

9 purchased was a company from Brian Levy which was a

10 sports agency representing mostly football players and

11 some other athletes.

12 Q Who is we?

13 A Me and Stuart Rosenfeldt.

14 Q Individually or through the law firm?

15 A Everything was paid for by the law firm. It

16 actually was paid for by the people investing in the

17 fraudulent schemes, but the money flows through the law

18 firm out to these other places.

19 Q Who had the title ownership of this entity?

20 A In almost all those businesses I recall it

21 being exclusively titled in my name or a corporation

22 which I controlled.

23 Q What was the business?

24 A So that was - we established RRA Goal Line with

25 Brian Levy running it. And then as an offshoot to that,

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1 he introduced us to some people who were doing sports

2 marketing, photographs, memorabilia, that type of stuff,

3 and we created RRA Sports Marketing Management,

4 something along those lines. I don't recall the exact

5 name, and its business was to supplement what RRA Goal

6 Line was doing and to also mesh in with what Kip Hunter

7 Epstein of Kip Hunter Marketing was doing on the other

8 side.

9 Q You've been asked some questions about these

10 various Banyon entities and Banyon accounts, do you

11 remember that?

12 A I do.

13 Q And these were George Levin's accounts?

14 A Yes, sir.

15 Q And the Banyon entities were entities that

16 George set up and created, you didn't set up the Banyon

17 entities?

18 A No, sir.

19 Q Your law firm didn't set up the Banyon

20 entities?

21 A No, sir.

22 Q You weren't controlling the Banyon entities?

23 A No, sir.

24 Q George was?

25 A George and Frank and then there was the one

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1 Banyon entity that was Banyon Income Fund and I

2 understood that some other people had some input into

3 that like Mr. Bekkedam.

4 Q Basically that was on the investor side, it

5 wasn't part of you or your law firm?

6 A Correct.

7 Q You testified -- You were asked on several

8 occasions how much money you estimated that you

9 personally spent on what you have informally described

10 as the so-called rock star lifestyle. And at one point,

11 Page 40 in the transcript, you said you thought you

12 might have spent 200 million dollars, at pages 633 to 34

13 you estimated 100 to 150 million dollars. And I

14 recognize that you weren't using Excel to keep track of

15 all your expenses.

16 A That would have been a nice piece of evidence.

17 No, I was not.

18 Q But is it fair to say that over the course of

19 the peak years of your Ponzi scheme, let's say 2008,

20 2009, that you spent on personal things for yourself,

21 that is Scott Rothstein and people you wanted to spend

22 money on, somewhere between 100 and 200 million dollars?

23 A Yes.

24 Q And without trying to create an exhaustive

25 list, can you sort of give us, I am not asking you to

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1 list every car, but can you describe if you can some of

2 the principal businesses that you personally bought

3 using the Ponzi money or some of the principal personal

4 acquisitions that you acquired for yourself or people

5 that you wanted to give gifts to?

6 A I can take a run at it if you'd like. Is that

7 what you were looking for?

8 Q Yes.

9 A Okay. I purchased real estate, homes for

10 myself, homes for investment purposes, homes for

11 others. I purchased vacant real estate. I purchased

12 business real estate. I invested in buildings in

13 Brooklyn, South Florida, Manhattan. I purchased

14 restaurants, I purchased nightclubs, I purchased the

15 vodka company, part of a watch company. I purchased

16 part of a large Internet company. I bought a lot of

17 cars. I bought hundreds of watches, both for myself and

18 for others. I actually bought cars for other people

19 also. I bought very expensive, meaning the 2,500 to

20 $5,000 range pens for myself and for others.

21 I bought an extensive array of cufflinks, very

22 expensive, some one-of-a-kind cufflinks for myself and

23 others. I bought a limited amount of artwork. I bought

24 very expensive cigars. I bought extremely expensive

25 wine. I bought a lot of other people very expensive

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1 wine and cigars. I spent a huge sum of money on

2 clothing, shoes, suits, casual clothing. In decorating

3 my homes I bought extremely expensive furniture, a lot

4 of it custom-made. I spent a lot of money on very

5 high-end electronics. I spent a tremendous amount of

6 money on personal travel.

7 Q Private jets?

8 A From the time that I began the Ponzi scheme

9 until the time that it exploded I flew dozens of times

10 and I don't recall one where I was on a commercial

11 airline.

12 I bought firearms. I bought, in addition to

13 shoes, boots, tons of boots. I bought a lot of jewelry

14 for a lot of different people. I spent a huge sum of

15 money purchasing escorts for people. I spent a huge

16 amount of money in what we called previously gentlemen's

17 clubs. I spent huge sums of money on meals. I spent

18 huge sums of money having friends, co-conspirators and

19 non co-conspirators traveling with me. I spent big

20 dollars on very expensive hotels. That's all I recall

21 at this moment. I'm certain that there's more.

22 Q I appreciate that.

23 Now, the source of these funds were the

24 investments that people were making in what they thought

25 were settlements by your clients, correct?

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1 A Yes, sir, it was money I was stealing.

2 Q And you were stealing this money from a variety

3 of RRA accounts that you controlled?

4 A Correct.

5 Q And basically you were, is it fair to say that

6 you were running these accounts and running this scheme

7 for your personal benefit?

8 A I was running the scheme for the benefit of

9 myself, my co-conspirators and the law firm.

10 Q And the law firm was -- there were elements of

11 this law firm that was a legitimate law firm, right?

12 A The bulk of the law firm was legitimate,

13 meaning the bulk of the people working there, not the

14 bulk of the income, but the bulk of the people working

15 there were legitimate good people, honest lawyers and

16 other personnel.

17 Q You testified that in 2009 you thought the

18 approximate gross revenue of the law firm was something

19 like eight or nine million dollars, do you remember

20 that?

21 A From legitimate business?

22 Q Correct.

23 A I recall somewhere it being in the eight or

24 nine million dollars realm, yes.

25 Q And so it was running at an annualized level of

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1 about 11 million dollars a year?

2 A I can't give you that figure but it was

3 substantially less than the billions I had run through

4 the accounts.

5 Q Substantially less, you mean eight or nine

6 million compared to the billions you were running

7 through the accounts is not even close, it's not in the

8 same ballpark, is it?

9 A It's a tiny percentage.

10 Q Correct. And how did running a criminal Ponzi

11 scheme that invariably would lead to collapse and ruin,

12 how did that help the legitimate lawyers who were

13 legitimately practicing law in your law firm?

14 A Oh, no, I didn't say it did help them. At the

15 end of the day, sir, I hurt a lot of very decent good

16 people by what I did.

17 Q So, would it be fair to say even though you

18 gave money and compensation to a number of the people in

19 the law firm as proceeds of the Ponzi scheme, that

20 basically what you were doing in running this Ponzi

21 scheme was not in the interest of this legitimate law

22 firm?

23 A That's correct.

24 Q Mr. Rosenfeldt was listed on a number of these

25 law firm escrow accounts, right?

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1 A Correct.

2 Q Did he ever go to these accounts and remove

3 Ponzi money?

4 A Yes.

5 Q By himself?

6 A I don't know what you mean by himself. You're

7 talking about all the accounts that had Ponzi money in

8 them from operating all the way down, correct?

9 Q No. Okay. You had law firm operating accounts

10 and then you had what you would describe as the law firm

11 escrow accounts, right?

12 A Yes.

13 Q And the law firm escrow accounts were the

14 accounts into which the investor money was placed,

15 right?

16 A There was a very specific way that, I'd say 90

17 to 95 percent of the time the money always flowed before

18 we used it. Would you like to me to explain that?

19 Q No.

20 A You looked like you were waiting, I was going

21 to finish.

22 Q You finished, right?

23 A I am, sir.

24 Q You testified that you had a stash of cash in

25 your office, do you remember that?

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1 A I did.

2 Q And you said you controlled the cash?

3 A I did.

4 Q You did not allow any of your partners, even

5 partners who were complicit in criminal activity, to

6 have direct access to the cash?

7 A To my cash, no. Some of them had their own

8 access to their own cash.

9 Q Any cash that they had they got from you,

10 right?

11 A No. Mr. Rosenfeldt used to write out checks to

12 cash and to himself and he would cash them and create

13 his own little cash stash in his office.

14 Q Did he need to clear that with you?

15 A No, sir.

16 Q Did he have levels at which he needed to clear

17 it with you?

18 A We pretended to have them but you could see,

19 for example, there's an e-mail where I said, Stu, you

20 can now start spending between, I think, 30 and 35,000 a

21 month on the American Express bill and I believe he

22 decided that 35,000 meant 70,000 or 80,000 a month.

23 There was no real controls as long as we had the money I

24 didn't care what Stu spent. I don't think he cared what

25 he spent.

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1 Q You said at Page 1419 of the transcript that

2 Rosenfeldt asked you about how much money -- the amount

3 of money that Mike Szafranski was making, do you

4 remember that?

5 A Yes. He had looked in the accounts, saw how

6 much we were paying Szafranski and questioned it.

7 Q Right. And in fact you said basically none of

8 your business, you said, you're happy with the money

9 you're making, right?

10 A I laughed it off and said to him much like I

11 would in any other circumstance, Mike's helping us make

12 a lot of money, he's worth every penny we're paying him.

13 Q Who owned the RRA law firm?

14 A Mr. Rosenfeldt and I.

15 Q You were 50 percent owners each?

16 A Correct.

17 Q During the years that you ran your Ponzi scheme

18 and you spent on yourself or people you wanted to give

19 gifts to 150 or 200 million dollars, do you recall

20 Mr. Rosenfeldt's total take from the operation of both

21 the legitimate law firm and the Ponzi scheme?

22 A What he spent in total cash and otherwise?

23 Q What he got.

24 A Tens of millions of dollars. I never stopped

25 to add it up, not nearly as much as I did.

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1 Q Did you see the Trustee's Complaint against

2 Mr. Rosenfeldt?

3 A I don't know if I did or not. If I did it was

4 a very long time ago.

5 Q Would it refresh your recollection that in the

6 Trustee's Complaint he submitted an affidavit, which

7 I'll show you in a moment, an affidavit of Richard S.

8 Fechter, does that ring a bell?

9 A I don't know who that is, no, sir.

10 Q In the affidavit of Mr. Fechter, Mr. Fechter

11 goes through all the compensation including expense

12 reimbursements for Stuart Rosenfeldt in 2006, 2007, 2008

13 and 2009. Are you familiar with that?

14 A I recall seeing it, I don't remember what it

15 said.

16 Q I'll hand it to you in one second but I will

17 ask you to take a look and confirm that according to

18 this document, that is the affidavit by the Trustee,

19 during these four years Rosenfeldt's total take was in

20 the neighborhood of 8.8 or 8.9 million dollars which

21 would work out to a little bit more than two million

22 dollars a year. I'm handing you exhibit, what exhibit

23 is it? 259. Take a look at it.

24 A Okay. I've looked at it.

25 (Whereupon, The Funds' Exhibit No. 259 was

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1 marked for identification.)

2 BY MR. LAUER:

3 Q And have I correctly summarized the affidavit

4 submitted on behalf of the Trustee which says in essence

5 that his total take in the four-year period was

6 approximately 8.8 million dollars?

7 A That's what this says but it's way off.

8 Q Have you told that to the Trustee?

9 A This is about to be the first time we're

10 discussing this particular issue to my recollection, it

11 may have come up but there is -- if you want me to

12 explain I can explain.

13 Q Explain what?

14 A Why this is off.

15 Q Well, is it off because Rosenfeldt spent more

16 money on himself and wine, women and song and his rock

17 star lifestyle?

18 A I don't know -- if you're asking me that's

19 what's wrong with it, what's wrong with it, it does not

20 account for a substantial amount of other monies that

21 Mr. Rosenfeldt spent, yes.

22 Q On himself?

23 A On himself and others.

24 Q And "others" would be people who were either

25 providing a service to him personally or people he

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1 wanted to give personal gifts to?

2 A Correct. And it doesn't account for the money

3 that I spent on him.

4 Q Same thing, as part of your collective, to take

5 your phrase, your collective personal rock-star

6 lifestyles?

7 A Yes. In order to figure out specifically what

8 he spent or what the total amount of reward he received

9 from his participation in this scheme, you'd have to take

10 into account the cash that I spent on him, the cash that

11 I gave him, the gifts that I purchased for him and the

12 multitude of things that were paid for through the firm

13 that not necessarily would be reflected, for example, on

14 and American Express bill where a check might go out to

15 someone for a home or for a car or for a boat, that type

16 of thing.

17 Q It was not real law firm business?

18 A Correct. But this takes into account what you

19 would have seen in looking at the financial records of

20 the firm.

21 Q And it does not reflect the fact that these RRA

22 escrow accounts were being used by you, and I guess as

23 you're describing it also by Rosenfeldt, for your

24 personal use?

25 A We tried very hard. As a matter of fact, I

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1 can't think of an instance where Stu raided a trust

2 account by him actually going in and taking the money.

3 The raid was done, the money was taken from the trust

4 accounts, it went from the investor into a specific trust

5 account, usually 0923, and then from that account out to

6 various accounts where then it was spent.

7 Q Okay. But putting mechanics aside, and I

8 recognize the mechanics may have been somewhat involved,

9 the money in these accounts that came from investors was

10 being used by you and also by Stu for your personal

11 benefit?

12 A Correct.

13 Q You weren't spending millions of dollars to send

14 Stu to Bar association conventions where he would give

15 speeches, were you?

16 A Give speeches, no. We did spend some money on

17 Bar conventions where he did other things, but not give

18 speeches.

19 Q By other things you mean things of a personal

20 servicing nature, to be indelicate?

21 A Actually it would be indelicate at this time,

22 yes.

23 Q This morning you mentioned that you had this

24 automatic transcribing system. When did that go into

25 effect in your law firm?

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1 A I don't recall the date.

2 Q Approximately -- was it in effect starting in,

3 let's say, January of 2009?

4 A The first person that had it was Russ Adler. He

5 was the one who introduced us to it. He had it prior

6 to '09.

7 Q When did you get it?

8 A I'm trying to remember because he had it and

9 then Stu and I had it. I have to say probably sometime

10 after '07. But, again, without seeing -- the easiest

11 thing to do would be to look at the e-mail traffic, and

12 all of a sudden you'll start to see e-mails that are from

13 SimulScribe. It will either say SimulScribe and then

14 later I believe it said Phone Tag, company name change.

15 Q So your understanding is the existing record of

16 those phone calls to the extent they were transcribed

17 would now look like e-mails because they became e-mails,

18 and in fact they would be searchable like e-mails?

19 A My recollection is that they are actually not.

20 My recollection, I could be wrong, my recollection is

21 they were not searchable like e-mails except to the

22 extent that I think you could use the words Phone Tag or

23 SimulScribe to find them or you could enter the phone

24 number.

25 But I'm not sure. For some reason I think that

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1 the body of it may have been in some sort of strange

2 format, a PDF or otherwise where that couldn't be

3 searched, but I could be wrong.

4 But you could definitely tell which ones are not

5 e-mails because they'll say it's coming from or to a

6 telephone number, not a person's name or e-mail address.

7 And it will also have either SimulScribe or the Phone Tag

8 label somewhere on it.

9 Q Since the time that you've been in custody,

10 could you describe the different ways that you have

11 obtained information that relates to the case, putting

12 aside any information that agents of the government might

13 have provided you?

14 A Excluding anything having to do with the

15 government, I receive all of my information through my

16 attorney.

17 Q But physically or electronically, how does your

18 attorney communicate information to you?

19 A I don't think I'm permitted to give --

20 MR. KAPLAN: Objection, that's privileged.

21 MR. LAUER: The government privilege or a lawyer

22 privilege?

23 MR. KAPLAN: It's a government privilege. How

24 he is handled in custody is privileged.

25 BY MR. LAUER:

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1 Q Does Mr. Nurik have other lawyers working with

2 him on your matter?

3 MR. LAUER: That's privileged, too?

4 THE WITNESS: No, they're joking around.

5 No, he does not.

6 BY MR. LAUER:

7 Q Are you permitted to call Mr. Nurik from

8 prison?

9 MR. KAPLAN: Again, object, privilege.

10 MR. LAUER: My job is to ask the questions. I

11 don't mean to --

12 MR. KAPLAN: I appreciate that.

13 MR. LAUER: I don't mean to take on the United

14 States Government, not in this case.

15 BY MR. LAUER:

16 Q You testified that you thought A.J. Discala did

17 a reasonably good job in his due diligence.

18 A Through his people, yes. He was more of like

19 the salesman type, but he was surrounded by good people

20 that seemed quite diligent. Yes, sir.

21 Q So A.J. came on the scene and he was going to

22 create sort of this new feeder fund under the Clockwork

23 umbrella, right?

24 A Correct.

25 Q And he ended up doing two transactions, one

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1 known now as Razorback, right?

2 A I recall that. Yes, sir.

3 Q And the other one was D-3 Capital?

4 A I recall that as well.

5 Q Do you recall that Razorback was sort of a next

6 generation version of the Banyon Income Fund that

7 Bekkedam had brought Von Allmen into?

8 A I don't recall.

9 Q That basically Razorback was lending -- that

10 A.J.'s group lent money to a Banyon entity for a fixed

11 rate of interest plus a small percentage of the equity

12 piece.

13 A Now I understand what you're asking me. My

14 understanding of Razorback was indeed that, that money

15 was put in by various investors into the Razorback fund,

16 so to speak.

17 Those people were then paid a specific interest

18 rate by that Fund, and then the Fund made the investment

19 with me and kept the difference between what they paid

20 out and the total proceeds.

21 Q You're talking in the past tense, but would it

22 be fair to correct you to say this is what was intended?

23 A I can only tell what you actually happened. I

24 didn't -- What was going on in the setup and what they

25 intended to do, I can't tell you. That wasn't something

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1 I was involved in. I was only concerned about how much

2 money we'd be getting and what day we're getting it on.

3 Q What I meant is the so-called Razorback group

4 invested in an entity called Banyon USV1. Do you

5 remember that?

6 A Yes.

7 Q And that investment was made in early October

8 2009?

9 A I don't recall the date, but that sounds about

10 correct.

11 Q And the D-3 Capital investment was a direct

12 investment by Discala's group; do you remember that?

13 A I do remember that. Yes, sir.

14 Q So here instead of lending money to a Banyon

15 entity for a fixed rate of interest plus, the D-3 Capital

16 group was dealing directly through you with one of your

17 clients?

18 A That's correct. But I learned that information

19 secondhand as to the Banyon USV1, II. I learned that

20 secondhand. And sometime later when I wasn't involved in

21 the particulars of negotiating interest rates and that

22 type of stuff.

23 Q When you say --

24 A I mean interest rates between, for example, the

25 Banyon entities and the Razorback investors.

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1 Q Just to clarify, learning secondhand, you mean

2 you didn't know the exact terms of what the Banyon USV1

3 was agreeing to with the Razorback investors, but you had

4 firsthand knowledge of the money that was coming in that

5 has been known as the Razorback investment, right?

6 A I had firsthand knowledge of the money coming

7 in. The behind the scenes things, what was going on

8 between the investors, who was being paid what interest

9 rate, what the terms were, that was not something I was

10 involved in.

11 Q But in that first investment, that is, the

12 so-called Razorback Banyon USV1 investment, the

13 settlement that was purchased from one of your Plaintiff

14 clients was purchased by Banyon USV1 and not by an entity

15 called Razorback?

16 A The paperwork was done in the name of Banyon

17 USV1, correct.

18 Q D-3 Capital was the first direct investment by

19 Discala's group with one of your Plaintiff clients,

20 correct?

21 A I don't recall which came first, but it was a

22 direct investment.

23 Q Do you recall that the direct investment was

24 originally to be an $18 million purchase of a $30 million

25 settlement of an underage woman who had settled the claim

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1 against Mr. Epstein?

2 A I don't recall specifically. But if you show me

3 the paperwork, it will refresh my recollection. I just

4 don't recall the terms of that particular deal.

5 Q I'll get to that in a minute.

6 A Sure.

7 Q The second deal, though, the direct deal, do you

8 recall that that came up in mid October, around October

9 14, 15, 2009?

10 A That sounds approximately correct, but the

11 paperwork would say exactly when it came up.

12 Q Okay. Now, in connection with the so-called due

13 diligence by Mr. Discala and his advisors and colleagues

14 and investors, other than looking at the 13 boxes that

15 somebody brought down to your office, can you tell me

16 what specifically all these guys did that you refer to as

17 their due diligence on the D-3 Capital or Razorback

18 investments?

19 A To the best of my recollection, and this is in

20 no particular order, several members of what I'll call

21 the Discala team sat and met with me in my office for

22 several hours. That was at one time when Thane Ritchie

23 was there and one of his partners. They asked me

24 questions about the transactions, how they worked, a lot

25 of information about me and the law firm, background.

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1 There were at least two or three other meetings

2 that I recall where I met both with Mr. Discala and

3 members of his team, various members, sometimes on the

4 phone, sometimes in person, sometimes some were in person

5 and on the phone, where they asked what I considered to

6 be good questions, good due diligence questions of me for

7 a longer period of time than what I was used to dealing

8 with with some of the other investors.

9 I received e-mails from a number of the

10 different people and remember Mr. Legamaro writing to

11 me. I remember Mr. Podaras writing to me. I remember

12 Mr. Von Allmen writing to me. I remember meeting with

13 Mr. Von Allmen on various occasions where he asked me a

14 lot of questions.

15 I remember actually having dinner with

16 Mr. Von Allmen out at some private club that he had where

17 he actually pulled me aside and we went to the bar and

18 shared a glass of wine, and he was asking me questions

19 about the investment.

20 They had me speak to two different groups of

21 lawyers. I remember speaking to people from two firms.

22 I seem to remember Morgan Lewis at one point in time.

23 Q Clifford Chance?

24 A Clifford Chance. I don't remember who Gersten

25 Savage was attached to. Different groups of lawyers, I'd

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1 get questions and have to answer things.

2 Then on top of that there was questions being

3 asked of me through Mr. Preve. Somebody would contact

4 him from the group, one of these people. And then Preve

5 would say, the Clockwork group wants to know this, the

6 whatever he's calling it, the Von Allmen group, whatever

7 he was referring to.

8 So, there was a -- you know, compared to what I

9 was used to dealing with in the years prior, to me it was

10 fairly significant due diligence, and they kept prodding

11 and pushing. They kept us on our toes, that's for

12 certain.

13 Q Could you specify the subject matter of any of

14 the specific questions? You've testified that they asked

15 questions, they e-mailed questions, other people asked

16 questions, you had conversations. And I recognize it's

17 two years and you may not be able to do this with any

18 specificity and may not be able to connect questions with

19 the people. But to the extent that you can, if you can,

20 I would ask you to tell me what exactly it is these

21 Discala, Von Allmen people were asking you in connection

22 with the Razorback and D-3 Capital investments, that is,

23 in October of 2009?

24 A Sure. To the best of my recollection, all

25 right? The first place you want to go, obviously, you

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1 don't need me for this, is to look at the e-mail

2 questions that were e-mailed to me.

3 Q That's right.

4 A You can look at that. There were lengthy

5 questionnaires sent to me.

6 Q Um-hmm.

7 A Other than that, I remember discussing how, they

8 were asking me how I got my cases. I remember Thane

9 Ritchie in that meeting with Mr. Discala, that was one of

10 the areas he seemed most interested to me. How did I get

11 this possible pipeline of cases? How did a local firm

12 possibly get this?

13 I recall being asked by several of them to

14 explain the banking relationship. That was more

15 Mr. Podaras and Mr. Legamaro, actually more Mr. Podaras

16 than anyone. He was very interested in the banking,

17 wanted to know how the money flowed, how I set up the

18 accounts, who my contacts were at the bank.

19 They spent time asking me about the lock letters

20 at the point in time we were utilizing them and the

21 mechanics, and I had to refer them to Mr. Spinosa to

22 answer that question.

23 They asked me about my history with other

24 investors, Thane Ritchie. I don't remember, again,

25 whether it was Legamaro or Podaras, one or both of them

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1 asked me about prior investor experience.

2 Mr. Von Allmen asked me fairly extensively about

3 how I came up with the idea to do this, how it was

4 created, what made me think of doing this, which is one

5 of the things that most people never really got into with

6 me. It was usually a very brief conversation in that

7 regard.

8 I remember it was either Podaras or Legamaro

9 inquired of me as to how long my employees had been with

10 me and whether I trusted them, specifically my CFO, Irene

11 Stay.

12 Many of them asked questions of Ms. Villegas

13 because she was represented to have been with me for over

14 two decades and my COO and worked her way up from

15 secretary, and they inquired about my relationship with

16 her.

17 They inquired about other businesses that I

18 owned. Mr. Von Allmen asked me about my other business

19 interests. And, again, I get Legamaro and Podaras

20 confused, one of them asked about my business interests

21 and successes and failures.

22 I was asked at one point in time to provide a

23 client list of the law firm. I don't remember who asked

24 me that, one of those gentlemen.

25 We talked about transparency. And this was - to

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1 my recollection, this was not a Discala question. It

2 would have been again, Legamaro and Podaras and perhaps

3 one of the firms from outside. But we were talking about

4 transparency because they were pushing the issue of

5 getting comfortable with the banking and the lack of

6 transparency, people not being able to see things, not

7 looking on things. They were pushing a little bit more

8 as to whether or not what I was saying they couldn't see

9 was truly a breach of confidentiality.

10 There were usury questions asked. That was

11 Mr. Podaras who asked me about the usury questions. And

12 you should be able to find some of what I consider to be

13 rather amusing e-mails in that regard that go back and

14 forth between Mr. Podaras and I.

15 To the best of my recollection that's a pretty

16 good overview of what we discussed. There may be more.

17 Q Now, Mr. Von Allmen, and I think we've been over

18 this a bit, Mr. Von Allmen put in around $47 million of

19 his family money and his own money in May and June of

20 2009 in connection with the Banyon Income Fund that Preve

21 had put together and in part was promoted by Bekkedam.

22 Do you remember that?

23 A I believe that's correct, sir.

24 Q And in the private placement memorandum for the

25 Banyon Income Fund that was shown to Mr. Von Allmen, the

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1 Banyon Income Fund represents that it has invested over

2 $600 million in these discounted settlements. Do you

3 recall that number?

4 A I recall seeing that. I'm not sure if I saw it

5 in the document you're talking about, but I certainly

6 remember that number.

7 Q And given the discounts that were being used to

8 buy settlements, I may be off a bit, but if the income

9 fund was representing to Von Allmen and others that they

10 had invested $600-plus million in the these settlements,

11 that would have meant a settlement figure in the

12 aggregate of about a billion dollars; right?

13 A Give or take, yes, sir.

14 Q So, when you met with Von Allmen and Discala in

15 connection with the Razorback and D-3 transactions, did

16 Von Allmen raise the billion dollar settlement number

17 with you?

18 A I don't remember whether it was Von Allmen or

19 one of the other people, but they were most curious about

20 the relationship between the Banyon entities and my law

21 firm.

22 Q But did they say, My goodness, where did you get

23 a billion dollars worth of settlements in such a short

24 period of time?

25 A Yes. Yes, they did.

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1 Q And yet I gather nobody from Discala or

2 Von Allmen's group ever asked to be introduced to

3 referring attorneys?

4 A I don't recall them asking to be introduced to

5 referring attorneys. I substantiated things in other

6 ways this them as best as I could.

7 If you read the e-mails -- this just goes to

8 your question. If you read through the e-mails you'll

9 get a pretty good idea of the type of follow-up and the

10 like they were doing. They would ask questions. I would

11 give answers, and then there was follow-up to it.

12 Q I understand.

13 A I just want to be helpful so you know where to

14 look.

15 Q Since time is limited I'm trying to avoid having

16 you read too many e-mails. We'll get to some e-mails

17 A Understood.

18 Q I just need to clarify what's not in the e-mails

19 and what never happened, which is, I think you've said

20 this, none of the Von Allmen, Discala people ever asked

21 to be introduced to referring attorneys?

22 A I don't recall them ever asking that, sir.

23 Q By the way, while they did some independent

24 verification by looking at the 13 boxes in connection

25 with D-3 Capital, before that who were they relying on in

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1 the Razorback deal or the earlier deals for verification

2 that the settlements were real?

3 A Me, Mr. Szafranski, and Mr. Preve.

4 Q And who were they relying on for verification

5 that the defendants were actually wiring the settlement

6 money into the escrow accounts?

7 A Me, Mr. Szafranski, and Mr. Preve, and to a

8 limited extent the bankers.

9 Q Had they known Mr. Szafranski prior to being

10 introduced to you and the investments?

11 A To my knowledge, no.

12 Q So for all they knew Szafranski was on your

13 payroll, right?

14 MR. SCHERER: Objection, form.

15 THE WITNESS: I'd be guessing what they knew,

16 but they -- they did their own research from what

17 Mr. Preve and Mr. Szafranski told me.

18 As a matter of fact, as part of their due

19 diligence, I remember because this took place in the

20 conference room on our other floor, on 15 -- this

21 goes to the question you asked me before.

22 BY MR. LAUER:

23 Q But I'm asking you now --

24 MR. SCHERER: Let him answer the question,

25 Counsel.

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1 MR. LAUER: Mr. Scherer, with all due respect

2 because time is limited I'm focusing on Szafranski.

3 THE WITNESS: This is Szafranski dead on.

4 BY MR. LAUER:

5 Q All right.

6 A They had a very specific lengthy meeting and did

7 separate due diligence with Mr. Szafranski. It took

8 place on our next floor down. I believe it was our 15th

9 floor conference room, maybe up on 22, but not on my

10 floor. They met. They had a bunch of their attorneys

11 and some other people, and they met actually for several

12 hours with Mr. Szafranski, took him through the whole

13 thing.

14 Q They met him through you?

15 A Yes, through me and through the Banyon group,

16 sure.

17 Q Clifford Chance, that was the law firm that

18 Discala brought down prior to Morgan Lewis. Do you

19 remember that?

20 A I do.

21 Q What is it that you told the Clifford Chance

22 people?

23 A I don't recall specifically. You'd have to take

24 a look at the e-mails. They asked what I'll refer to as

25 the standard questions. I answered them. The rest you

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1 have to look in the e-mails or speak to Clifford Chance.

2 Q You came to learn that after Clifford Chance met

3 with you they resigned from doing further work for

4 Discala, Clockwork, or Ritchie or whomever it was, the

5 one that hired them, right?

6 A Yes. There was some point in time when they got

7 what we refer to in the e-mails as the spooked event,

8 where they got spooked and we had to go elsewhere for due

9 diligence.

10 Q And what spooked the Clifford Chance people that

11 they made the decision as a law firm that they did not

12 want to have a further relationship with Discala and his

13 group?

14 A What was explained to me was that they felt,

15 after listening to everything, that the issues involved

16 regarding this type of funding was outside their areas of

17 expertise, that they were being asked to offer opinions

18 on stuff that they were not comfortable offering opinions

19 on. And they thought by going to somebody who had a more

20 boutique practicing in dealing with the settlement

21 funding issues more similar to this, perhaps labor and

22 employment issues and the like. That was the reason that

23 I was given. Anything more than that, no.

24 Q That's the reason that you were given, but did

25 you have an opinion as to what might have spooked them?

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1 A I didn't, no.

2 Q At the time did you know the approximate size of

3 the Clifford Chance law firm?

4 A Gigantic, thousands of lawyers, to my knowledge.

5 Q All over the world, right?

6 A Yes.

7 Q And every area of expertise, right?

8 A Yes. You didn't ask me if I believed them,

9 sir. I know where you're going. This is what I was told

10 was their reason.

11 Q Okay. You mean I didn't ask you if you believed

12 what you were told about Clifford Chance leaving?

13 A Yes. It might save all these other questions

14 and save your time.

15 Q Okay. I think one thing I've learned in two

16 days or three days is if you want to get something out,

17 you're going to get it out, so you might as well get it

18 out.

19 A That's an excellent point. The answer is I did

20 not believe them.

21 Q Why not?

22 A The explanation that I was given varied too much

23 from what I knew to be real problem areas. They didn't

24 appear to be focused on -- this firm did not appear to be

25 focused on the real problem areas that could have arisen

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Page 2258

1 such as something as simple as why can't we give them

2 copies of real bank statements as opposed to screen

3 shots, things like that. So I didn't think that they

4 were -- I just think that they were spooked by the

5 entire, having to issue an opinion on this entire

6 investment strategy, in my opinion.

7 Q Did Doug Von Allmen know that Clifford Chance

8 had basically resigned and created this spooked

9 situation?

10 A I do not know.

11 Q Was that something that A.J. asked you not to

12 tell him?

13 A I don't recall. You would have to check the

14 e-mail traffic. I don't recall him saying it to me

15 personally.

16 Q Did Doug ever say to you, Scott, I'm a little

17 concerned with these kids. Clifford Chance resigned.

18 That's spooks me, too?

19 A I don't recall that.

20 Q That's not a trick question.

21 A I know. I'm just trying to remember because I

22 do remember Mr. Von Allmen asking questions about things

23 that were troubling him. I don't really recall what they

24 were. More towards the volume of cases and that type of

25 stuff and the lack of transparency. And I think if he

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1 would have said that to me, that's something that would

2 be reflected by an e-mail or something that I would

3 remember.

4 Q Who told you that Clifford Chance resigned?

5 A I don't recall. I think it was Mr. Preve,

6 though. I got most of my bad news from Mr. Preve first.

7 Q Do you remember getting an e-mail from Mr. Preve

8 October 29, 2009, basically saying, "Very skittish.

9 Von Allmen not fully convinced of legitimacy of the

10 play. More on this when we talk"?

11 A Yes.

12 Q And did you speak with Von Allmen?

13 A I spoke to Preve first. It was my job then to

14 sooth Mr. Von Allmen.

15 Q What was Von Allmen's concern about the

16 legitimacy?

17 A He just questioned the entire strategy. I met

18 with Mr. Preve following that e-mail and we discussed the

19 fact that without the Von Allmen money everything was

20 going to blow up, that we were without other sources for

21 funds.

22 We discussed at length the fact that

23 Mr. Bekkedam and his group didn't seem to be able to

24 produce anything near what they said they were going to

25 and that Von Allmen was our final pitch to take us over

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1 or explode this thing.

2 So we talked about various ways as to how we

3 were going to try to get Von Allmen on board. We were

4 going to try to create more transparency. I would show

5 him more things in the office. I would invite him to the

6 office to look at more things, perhaps give him

7 unredacted copies of things, anything I could do to try

8 to make him more comfortable.

9 Q More comfortable this was not a fraud?

10 A Correct. I also offered him the opportunity, I

11 was asked to offer him the opportunity to speak to other

12 people in my law firm. And I believe he spoke to,

13 although I'm not certain, you'd have to ask these people,

14 but I believe he spoke to Mr. Boden and to

15 Mr. Rosenfeldt.

16 Q And, again, that was to allay concerns he had

17 that he was a victim of fraud?

18 A Yes. As a matter of fact, and you're going to

19 have to ask the Von Allmen folks this, but if you look at

20 Szafranski's e-mail traffic back and forth, there's a

21 point in time when he's discussing with Mr. Lifshitz the

22 fact that Mr. Rosenfeldt has in fact attended certain

23 investor meetings that Mr. Szafranski was at and has in

24 fact given information on the deals and how this works.

25 And Mr. Lifshitz had then asked of me whether he

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1 could meet with Mr. Rosenfeldt as did other investors,

2 and my recollection is he was referring to Mr. Scherer's

3 clients. I don't know if that ever - if I actually let

4 Mr. Lifshitz meet with him or not. But I'm pretty sure

5 it's someone from the Von Allmen group.

6 MR. LAUER: Any time you want to take a break is

7 fine with me. If you don't want to take a break --

8 THE WITNESS: That's great. Let's take a quick

9 one, sure.

10 (Thereupon, a short break was taken.)

11 (Whereupon, The Funds' Exhibit No. 261 was

12 marked for identification.)

13 BY MR. LAUER:

14 Q Okay. I am handing you, Mr. Rothstein,

15 Exhibit 261, which is a photostatic copy of Confidential

16 Settlement Agreement and Release. It bears production

17 PRODA 21183 through 21212.

18 MR. SCHERER: What is the number of that

19 exhibit?

20 MR. LAUER: 261.

21 THE WITNESS: Thank you.

22 BY MR. LAUER:

23 Q Do you recognize this as the Confidential

24 Settlement Agreement and Release covering the settlement

25 that was sold to the D-3 Capital Club Group in mid to

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1 late October 2009?

2 A Give me one second.

3 Q Take your time.

4 A Yes.

5 (Whereupon, The Funds' Exhibit No. 262 was

6 marked for identification.)

7 BY MR. LAUER:

8 Q Now I'm handing you Exhibit 262, which is a

9 letter from Scott W. Rothstein to D-3 Capital Club, LLC,

10 dated October 14, 2009, bearing counsel's stamp 21218

11 through 21222.

12 Is that a letter that you authored and provided

13 the D-3 Capital Club in or about October 14, 2009,

14 concerning the settlement that is reflected in

15 Exhibit 261?

16 A I am one of the authors of the letter. It has

17 my name at the bottom. It's a forged signature, but I

18 authorized this to be transmitted to D-3 Capital.

19 Q So just to be precise, if you authorize someone

20 to sign your name, it's not a forged signature, is it;

21 it's an authorized signature that someone else is

22 signing?

23 A You're correct.

24 Q So this was an authorized signing by someone

25 else of your name?

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1 A Yes. They were authorized -- the language seems

2 strange to me because they were signing fake documents in

3 a fraud. So say it was authorized during the course of

4 the fraud, yes.

5 Q And they were genuinely signing documents with

6 your approval; albeit, the documents they were signing

7 were part of a fraudulent transaction?

8 A Correct.

9 (Whereupon, The Funds' Exhibit No. 263 was

10 marked for identification.)

11 BY MR. LAUER:

12 Q Now I am handing you what we have marked as

13 Exhibit 263, which consists of two pages of e-mails

14 bearing counsel's stamp 46167 and 46168 and what appears

15 to be a photostat of an account summary balance bearing

16 counsel's stamp 46169.

17 I would ask if you can identify Exhibit 263.

18 Are those e-mails that were sent in connection with the

19 D-3 Capital investment?

20 A This all pertains to the D-3 investment. Yes,

21 sir.

22 Q And just to start at the beginning of the

23 e-mail, first it's from Frank Spinosa. Do you see that

24 at bottom of the second page, 46168?

25 A I do.

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1 Q Okay. From TD Bank.

2 Is this e-mail purporting to send what purports

3 to be a $64 million balance in an account at Rosenstein

4 (sic,) Rosenfeldt, Adler escrow account?

5 A Can you ask the question again, please? I'm

6 sorry.

7 (The pending question was read back by the

8 court reporter.)

9 BY MR. LAUER:

10 Q I meant Rothstein.

11 A No.

12 Q What is it?

13 A The exhibit is put together incorrectly. The

14 attachment is one of our phoney balance statements.

15 What should be attached to this is the D-3 lock letter

16 which is being forwarded by Mr. Spinosa to me and then

17 forwarded by me to Mr. Podaras.

18 (Whereupon, The Funds' Exhibit No. 264 was

19 marked for identification.)

20 BY MR. LAUER:

21 Q I'm handing you Exhibit 264. This is a

22 document dated October 15, 2009, bearing a signature of

23 Frank Spinosa on what purports to be TD Bank

24 letterhead.

25 Is this what you have described as the lock

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1 letter for the fraudulent account?

2 A Yes.

3 Q I think you mischaracterized it. It's not a

4 phony lock letter. It's a genuine lock letter with

5 respect to a phony account?

6 A Actually I said phony bank statement. It's a

7 lock letter purporting to lock something that's not there

8 that can't be locked.

9 (Whereupon, The Funds' Exhibit No. 265 was

10 marked for identification.)

11 BY MR. LAUER:

12 Q Finally, I am handing you Exhibit 265, which

13 appears to be an e-mail from you dated October 23, 2009,

14 to A.J. at Clockwork and Dean K-r-e-t-s-c with a cc to

15 Frank Preve. Could you identify that e-mail?

16 A I recognize it. It's an e-mail that I sent out

17 to A.J. and to Dean with a copy to Frank trying to force

18 their hand on funding the rest of the deal.

19 Q Now, this deal was one in which A.J. and Dean

20 and Doug Von Allmen had agreed to put in $18 million?

21 A I don't recall specifically who the money was

22 coming from, but it appears to be Von Allmen because Dean

23 is involved.

24 Q The deal was they put up 18 million to buy a

25 $30 million settlement?

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1 A That sounds correct, sir.

2 Q And the e-mail is telling them that as of

3 October 23rd they have not come up with the 18 million;

4 is that correct?

5 A It says, "We're $8 million away from the first

6 18 million and the 5 million I've been promising her for

7 days has not yet appeared.

8 Q Could you explain the numbers? 8 million from

9 18 million means you would have had 10 million?

10 A I would have already had 10 million in-house.

11 That's what it appears to say.

12 Q What does that have to do with the 5 million?

13 A It appears that I was -- as these were being

14 funded I was getting funded piecemeal. And so part of

15 the fraud that we were utilizing was to tell them that

16 I've promised her this amount of money. And if you look

17 in our accounts, that would reflect exactly the amount or

18 close to it that I needed at that moment for the Ponzi

19 scheme to keep it alive.

20 Q So as of October 23rd they had only come up with

21 10 million of the 18 million that they were supposed to

22 come up with?

23 A You'd have to check the bank ledgers to be

24 certain, but that's my recollection.

25 Q And that's what you were telling them in this

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1 e-mail on October 23rd?

2 A Yes, sir. That's what it appears to be.

3 Q Now, if you turn back to Exhibit 264, the lock

4 letter, you have that?

5 A I do, sir.

6 Q Okay. So from their perspective, at least what

7 they were telling you is they thought the lock letter was

8 important, right?

9 A Yes, sir.

10 Q They thought that that was a necessary extra

11 precaution for their investment?

12 A My understanding from speaking to them was it

13 was one of the key elements in their funding the deal.

14 Q And this lock letter would from their

15 perspective protect them because it says that the money

16 can only be distributed to them, right? And they are D-3

17 Capital Club, LLC?

18 A Correct.

19 Q Now, if you turn to 263 --

20 A Yes, sir.

21 Q -- the top page, Frank Preve to Chris Podaras,

22 was Podaras part of A.J. and Doug's group?

23 A He was.

24 Q Preve says to Chris, "Did you pick up a balance

25 report from TD Bank yesterday for Razorback and D-3? If

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1 so, I need a copy. If not, I will have Szafranski pick

2 one up on Monday."

3 Do you see that?

4 A I do, sir.

5 Q Is the account balance bearing counsel's stamp

6 46169, is that what was purported to be the account

7 containing the Razorback and D-3 funds?

8 A Yes.

9 Q Is it these funds, this $64 million represented

10 amount, that is locked in by the lock letter,

11 Exhibit 264?

12 A Yes.

13 Q Now, let's go to 261. This is the Confidential

14 Settlement Agreement and General Release, right?

15 A Yes.

16 Q Okay.

17 A And some other papers.

18 Q Right. If you go to the page bearing counsel's

19 stamp 21191, the settlement agreement between the

20 plaintiff and the defendant bears the date October 14,

21 2009, right?

22 A Correct.

23 Q So that's what A.J., Doug and their group were

24 being told was the date that the settlement had been

25 signed?

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1 A Correct.

2 Q And at the same time they are being told that

3 the money for this settlement is already in the account?

4 A That it arrived on the 14th.

5 Q Go to the next page, the next document.

6 A I'm sorry. The next page in which one of these

7 documents?

8 Q What?

9 A I have a lot of documents. I don't know which

10 page to turn.

11 Q Within Exhibit 261 --

12 A Right.

13 Q -- the next separate document which is part of

14 the exhibit bears counsel's stamp 21193 and it has a

15 caption, Acknowledgment of Assignment/Purchase of

16 Settlement Proceeds.

17 Do you see that?

18 A I do.

19 Q And this is an acknowledgment where your law

20 firm acknowledges that -- Well, why don't you explain

21 it. What is this acknowledging to D-3 Capital Club,

22 LLC?

23 A It's acknowledging all of the things covered in

24 all these paragraphs. There's a lot of things. The

25 purpose is to say that we've got the money and this is

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1 the way we're going to handle it.

2 Q D-3 Capital in this case is the transferee; that

3 is, the entity that will receive the settlement money at

4 the appropriate time?

5 A Yes, sir.

6 Q And in Paragraph 8 you are confirming to D-3

7 Capital that upon receipt of $18 million you will

8 disburse the plaintiff's wire to plaintiff.

9 What does that mean? Does that mean that as

10 soon as you get the 18 million from D-3 Capital you will

11 send the plaintiff the money that is being used to

12 purchase her rights to this settlement?

13 A It says that once two things occur, one of which

14 is receipt of the $18 million, that we will disburse the

15 plaintiff's wire to the plaintiff.

16 Q Okay. So the way this was supposed to work is

17 $18 million comes from D-3 Capital. It goes into an

18 attorney escrow account that you manage. And when

19 appropriate you will then wire the plaintiff this

20 18 million?

21 A Correct.

22 Q And then down the road the way this deal was

23 supposed to work is the 30 million that's in the account

24 will get distributed to D-3 Capital?

25 A Over time, correct.

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1 Q Now go to Paragraph 13. Paragraph 13, am I

2 correct, is acknowledging by the law firm, by you on

3 behalf of the law firm, that the $30 million that is

4 sitting in that account from the defendant will be held

5 exclusively for the beneficiary - I guess it means for

6 the benefit of the transferee and the transferee is that

7 assignee; is that correct?

8 A That the money held in the locked account will

9 be held for their benefit, correct.

10 Q Now, do you agree with me that "beneficiary" is

11 not the correct word, that what this sentence, if written

12 in English would read, Will be held exclusively for the

13 benefit of the transferee?

14 A Yes.

15 Q And was this -- it's informing D-3 Capital that

16 you're acknowledging that the $30 million will be held

17 for their exclusive benefit?

18 A Correct.

19 Q And it's also acknowledging a letter from the

20 regional VP has been provided to the transferee. And I

21 take it that is a reference to the lock letter to D-3

22 Capital?

23 A Correct.

24 Q Exhibit 264.

25 A Correct.

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1 Q Now, the next document bearing counsel's stamp

2 or starting with counsel's stamp 2119A is a Sale and

3 Transfer Agreement. Do you see that?

4 A I do, sir.

5 Q All right. And is this the document by which

6 your purported client is selling and in fact did sell to

7 D-3 Capital Club, LLC her rights to the $30 million that

8 she is receiving from the defendant?

9 A Correct.

10 Q In paragraph 1 after the whereas clause is in

11 the middle of that paragraph it reflects the transferor,

12 meaning the plaintiff client, agrees to accept payment in

13 the sum of $18 million from D-3 Capital, right?

14 A I'm sorry. Which paragraph are you looking at?

15 Q It's paragraph numbered 1 on page 21199.

16 A That's correct.

17 Q In the second paragraph of paragraph numbered 1

18 it says that transferee, meaning D-3 Capital, has been

19 informed by RRA that pursuant to the transferor

20 instruments, transferor - meaning the Plaintiff client -

21 has irrevocably named transferee, meaning D-3 Capital, as

22 transferor's designated payee of the settlement proceeds?

23 A Correct.

24 Q That's a further way of confirming what's stated

25 several times here, that $18 million comes from D-3

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1 Capital to the Plaintiff and the rights to the 30 million

2 are sold to D-3 Capital?

3 A Correct.

4 Q Now, it turned out that D-3 Capital was not able

5 to raise the full $18 million. Do you remember that?

6 A That is my recollection, sir.

7 Q And in fact as you saw as late as October 23rd

8 they had only raised 10 million?

9 A To the best of my recollection you're correct,

10 sir.

11 Q In the end all they could come up with was

12 $13-and-a-half million?

13 A It was something of that nature. Yes, sir. It

14 was not the full amount.

15 Q Right. And yet they were told that the deal was

16 done, right, that in fact the transaction had been

17 completed, that they had satisfied the transaction with

18 your plaintiff?

19 A I don't recall telling them that.

20 Q Did you tell them that this deal has been

21 breached, that they have not met their obligations?

22 A I think that's what this e-mail is telling them,

23 the other one we looked at, where I'm telling them they

24 haven't funded -- Yes. I'm telling them they haven't

25 done what they said they were going to do, and my client

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1 is going crazy over it. So, yes, I'm telling them that

2 they are in breach.

3 Q And did they say, Well, we can't get the

4 18 million, so return all the money to us?

5 A I don't recall what they said. I have to see

6 the e-mail traffic. I don't recall.

7 Q Now, isn't what happened that you or someone

8 told them that someone else had come up with the extra

9 5-and-a-half million and in fact this deal was funded?

10 A I don't have a specific recollection of that,

11 but that is certainly something I may have told them.

12 I'd have to see the e-mail traffic. It seems more than

13 probable.

14 Q Have you seen any e-mails describing the fact

15 that on this deal where they supposedly are putting

16 $18 million in, but they only put in 13-and-a-half

17 million, that describes the fact that somebody else or

18 some other entity put in the other 5-and-a-half million?

19 A I don't specifically recall, sir. I'm four or

20 five days away from leaving for Morocco at this moment.

21 And it was probably on the back burner as far as I was

22 concerned. I don't know. I don't recall seeing the

23 e-mail traffic as I sit here today. You'd have to show

24 it to me to know.

25 Q But since you went to Morocco and have come back

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1 and have poured over countless documents and interacted

2 with Trustee's counsel and with Mr. Nurik and the like,

3 have you seen any e-mail from anyone to anyone else that

4 reflects that somebody came up with 5-and-a-half million

5 to meet the 18 million that was required for this

6 transaction?

7 A I don't recall, sir.

8 Q Did anyone tell Von Allmen or Discala that

9 Banyon or some Banyon entity had come up with the

10 5-and-a-half million?

11 A I seem to recall someone telling them that they

12 came up with the money, but I don't recall who told them.

13 Q Now, when they were told that someone else had

14 come up with 5-and-a-half million, did they say, Hey,

15 wait a minute. We have an exclusive lock letter. We

16 have an exclusive agreement. The money can only be sent

17 to D-3 Capital. How could anybody in his right mind put

18 in $5-and-a-half million of real money in this

19 transaction without even contacting us to get a letter

20 agreement that requires us to share our rights under

21 these agreements with them?

22 A I don't recall one way or the other, sir.

23 Q In fact, there is no communication whatsoever to

24 you or anyone else saying, This sounds really fishy that

25 some mysterious donor has come up with 5-and-a-half

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1 million bucks when we have lock letters that we think are

2 essential. We have contracts that we think are

3 essential. We are the exclusive transferee. And

4 somebody out there is really coming up with $5-and-a-half

5 million, and you expect us to believe that?

6 A I don't recall receiving any e-mail from them or

7 having any conversation with them in that vein. What I

8 would need to see what was going on is the e-mail traffic

9 probably more particularly between myself and A.J. and

10 myself and Mr. Preve to see exactly what was going on at

11 that time; as to me and Mr. Preve, what story we were

12 concocting to cover ourselves me and as to me and A.J. or

13 Mr. Preve and A.J. to determine how the sale of the fake

14 story was going and how best to handle it.

15 Q So you would need to work out the fake story

16 with A.J.?

17 A I would need to work out the fake story with

18 Preve and then Mr. Preve and I would be selling it to

19 A.J., Dean, and anyone else involved in that group.

20 Q Putting aside hypothetical, in the two years

21 since you came back from Morocco I take it you have not

22 seen - or certainly as you're sit here today you have no

23 recollection of seeing any documentation from A.J., from

24 Doug Von Allmen, from Podaras, from Ritchie, from any of

25 the people in the A.J. Clockwork group, from anyone

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1 associated with D-3 Capital basically questioning how the

2 heck could this be that someone is putting in

3 $5-and-a-half million and they don't ask us to share in

4 the lock letter?

5 A I don't recall that ever happening, sir, you are

6 correct.

7 Q And there's nothing that you can point to where

8 any of those individuals that supposedly thought this was

9 a legitimate investment in D-3 Capital, where they are

10 saying to you or to Preve or anyone else, How could this

11 be? We need to have some kind of letter agreement with

12 the transferee so that we are included contractually in

13 the rights that the transferee has with the transferor?

14 A As I sit here today I don't have any specific

15 recollection of that. I would need to see the e-mail

16 traffic to be certain.

17 Q Now, A.J. and one of his wizards came to your

18 office to look at boxes, right?

19 A Yes

20 MR. SCHERER: Object to the form.

21 BY MR. LAUER:

22 Q And you had 13 boxes of a real case against

23 Epstein brought down to your office, right?

24 A My recollection is I had some of them already

25 there and that I had some brought in afterwards.

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1 Q And you've testified that among the more

2 interesting items were doctored flight manifests where

3 you had inserted prominent people who purportedly would

4 have been on the flight where Epstein supposedly did what

5 he was accused of doing?

6 A That's not correct.

7 Q Go ahead and correct me.

8 A The flight manifests that I showed them were

9 real flight manifests. I told them a story about other

10 flight manifests that I have never showed them.

11 Q How thick were the flight manifests?

12 A I don't recall.

13 Q I'm trying to understand. I'm not going to have

14 you go through all 13 boxes, but I'm trying to get a

15 frame of reference. You're talking about a flight

16 manifest or flight manifests for a private jets, right?

17 A Yes. This is a very small document. It may

18 have been one or two pages. And I had it specifically

19 set aside. I'd either ask Mr. Adler or Mr. Edwards to

20 isolate the flight manifest.

21 Q So other than looking at the flight manifest for

22 Epstein's private jet, what exactly is it that they were

23 looking at in these 13 boxes?

24 A I have no idea. I left them alone to look at

25 the boxes for 20, 30 minutes.

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1 Q And how did your office come to have these 13

2 boxes? Did someone in your office actually play a role

3 in representing a real plaintiff against Epstein?

4 A Yes.

5 Q And could you in summary fashion tell us about

6 that.

7 A To the best of my recollection Mr. Edwards and

8 some other individuals from our mass tort group were

9 representing either one or several young ladies who had

10 been molested allegedly by Mr. Epstein.

11 Q And this was an active filed Court litigation?

12 A It was, sir.

13 Q And do you remember the stage at which the case

14 or cases were at the time that Legamaro was left with the

15 13 boxes?

16 A First, I'm not sure it's 13 boxes. I don't know

17 how many boxes it was. It could have been more. It

18 could have been less. I don't recall at all what stage

19 the case was at.

20 Q After Legamaro looked at all these boxes what

21 questions did he ask you?

22 A I don't recall specifically. They questioned me

23 a little bit about the case, but I don't recall

24 specifically what they asked me.

25 Q Did he talk to the lawyer in your firm who was

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1 suing Epstein to get a feel for the potential recovery

2 that that lawyer was looking for in that case?

3 A I do not believe so, but I don't have a specific

4 recollection of having him do that one way or the other.

5 Q Did he talk to the lawyer to get a feel from the

6 lawyer as to the nature of the claim in the real case?

7 MR. SCHERER: Object to form.

8 THE WITNESS: I don't have a specific

9 recollection one way or the other, sir.

10 BY MR. LAUER:

11 Q I take it that you recall that the essence of

12 the case against Epstein in the fictitious settlement was

13 this was an underage female?

14 A Correct.

15 Q Other than the allegation that Epstein had

16 violated federal and state law in transporting this

17 underage female for improper purposes, were there any

18 aggravating factors that you represented were included in

19 the case?

20 A I may have, but I don't recall specifically what

21 they were.

22 Q How about the real case? Other than the fact

23 that Epstein was being sued for having sexual relations

24 with an underage female, were there any allegations of a

25 truly aggravating nature beyond the fact that she was

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1 underage?

2 A Beyond the fact that he was allegedly molesting

3 underaged girls, I don't know of any other aggravating

4 factors. No, sir.

5 Q What I mean is, were there allegations that he

6 had physically harmed them beyond -- I don't mean to

7 trivialize it, far from it, beyond the fact that he had

8 factually consensual, but legally non-consensual

9 relations with an underage person, were there allegations

10 that he had beaten them or physically harmed them?

11 A I don't remember allegations like that.

12 Q And did anyone from your office who is

13 associated with the real case provide a sense of

14 parameters of what they thought the real case was worth?

15 A I don't recall anyone doing that other than me.

16 Q Did anyone from the real case, so to speak,

17 provide examples of judgments or reported settlements in

18 similar cases involving wealthy individuals who had had

19 sexual relations with underage people?

20 A I don't recall --

21 MR. SCHERER: Object to the form.

22 THE WITNESS: -- one way or the other.

23 BY MR. LAUER:

24 Q Did Legamaro ask your colleagues for any of that

25 information?

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1 A I don't recall him speaking to my colleagues.

2 He may have. I don't recall him asking me for that

3 information. I recall him asking me questions about the

4 case, but I don't remember specifics.

5 Q You weren't handling the case, right? Did

6 Legamaro know that the case whose boxes he was examining

7 was not being handled by you as the trial lawyer, but

8 that it was being handled by other trial lawyers in your

9 office?

10 A I led Mr. Legamaro and the others to believe

11 that I had other lawyers in the firm doing all the leg

12 work, but at the end of the day that I would be the one

13 negotiating the settlement.

14 Q Did you appear as counsel in the real cases?

15 A No, sir.

16 Q At any time did Legamaro or anyone with A.J.'s

17 group comment on the fact that you were not listed in the

18 pleadings in that case?

19 A You know, they may have. And the reason I'm

20 saying this is because someone brought it up from that

21 group related to something else. I don't remember

22 whether it was this case or not. And I simply said,

23 Well, everything is in the name of Rothstein Rosenfeldt

24 Adler. That's my name. I'm certain any judge would not

25 have any problem with me showing up at anything given the

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1 fact this is my law firm.

2 Q But you're not listed on the top of the other

3 counsel in any of the papers?

4 A I don't recall being, no, sir.

5 Q Now, again, this was a confidential settlement?

6 A It was set up to be, yes.

7 Q And that was the reason Discala and his people

8 were told that the payments were coming over time?

9 A Correct.

10 Q They were told that this was a big ticket

11 because Epstein was the defendant and he's a very wealthy

12 guy, correct?

13 A Correct. And he was associated with other

14 public figures who did not want their names dragged

15 through the mud. That's the way we sold it.

16 Q Now, I'm sure you've noticed this before, but

17 when you turn to the front of Exhibit 261 it actually

18 lists both the plaintiff and the defendant, right?

19 A Yes.

20 Q The plaintiff is Marsha Foreman, correct?

21 A Correct.

22 Q And the defendant is Elite Delivery Systems LLC?

23 A Correct.

24 Q So right off the bat, this is a breach of the

25 confidentiality agreement?

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1 A Correct. Assuming that they actually - they

2 actually got this particular document. I don't recall

3 specifically. I do recall them asking me who Elite

4 Delivery Systems were and how that was tied to

5 Mr. Epstein.

6 Q If they asked you that, they must have gotten

7 this documents, don't you think?

8 A Either that or we discussed the defendant's

9 name. I just want the record to be clear. I don't

10 recall whether they actually received this document or a

11 redacted one and then brought the names up.

12 As I've testified over the last many days, there

13 were circumstances where as part of the due diligence to

14 continue to lure investors in and to increase the level

15 of transparency, we would, quote, unquote, disclose

16 certain otherwise confidential information understanding

17 that it would be to no one's benefit to disclose it

18 because then everything they were investing in would

19 explode.

20 Q I understand that. But still you will agree

21 that whether there was a low risk of disclosure by

22 providing the names of the plaintiff and the defendant,

23 you were breaching the confidentiality agreement?

24 A Correct.

25 Q And Von Allmen and Discala and their colleagues

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1 were then aware of the fact that you were breaching the

2 confidentiality agreement?

3 A Correct.

4 Q And not only were you breaching an agreement,

5 you as an attorney were breaching your fiduciary

6 obligations to your client by doing so?

7 A Correct.

8 MR. SCHERER: Object to the form.

9 BY MR. LAUER:

10 Q And they, Von Allmen, Discala, and their

11 colleagues, were clearly well aware of the fact that you

12 as attorney in providing them with this information, the

13 names of the plaintiff and the defendant, were breaching

14 your fiduciary duties to your client?

15 MR. SCHERER: Object to the form.

16 THE WITNESS: I would be guessing what was

17 actually going on inside their head. But I can tell

18 you what I was doing, assuming this was real, which

19 is what I've just testified to.

20 BY MR. LAUER:

21 Q It would be a breach of your fiduciary duty?

22 MR. SCHERER: Object to form.

23 THE WITNESS: It would be a breach of the

24 confidentiality agreement.

25 BY MR. LAUER:

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1 Q And since you were acting as counsel and that's

2 how you came to this information, putting aside the fact

3 that you're running a massive fraudulent criminal Ponzi

4 scheme, you also, at least in addition, would have been

5 breaching your fiduciary duty to your client?

6 A Correct.

7 Q Now, Elite Delivery System, did they tell you

8 that they had Googled Elite Delivery system and looked

9 them up?

10 A They did not.

11 Q Have you ever Googled Elite Delivery System?

12 A No, sir.

13 Q Have you contacted Elite Delivery System?

14 A I don't know if they even really exist. It's a

15 name we created.

16 Q Maybe someone created it for you before you.

17 (Whereupon, The Funds' Exhibit No. 266 was

18 marked for identification.)

19 BY MR. LAUER:

20 Q I'm showing you Exhibit 266, which is what you

21 get when you Google the defendant's name on Exhibit 261.

22 A Okay.

23 Q Do you see that?

24 A I do.

25 Q Have you seen this before?

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1 A I have not.

2 Q Did A.J. or Doug Von Allmen or any of the people

3 that were part of this D-3 Capital Club tell you that

4 they had Googled Elite Delivery Systems?

5 MR. SCHERER: Object to form.

6 A No, but they did ask me what Elite Delivery

7 Systems were if I'm settling a case with Jeff Epstein.

8 Q And presumably you told them it was an Epstein

9 front or something like that?

10 A Correct.

11 Q We've got the idea, but did they tell you they

12 had Googled Elite Delivery Systems?

13 MR. SCHERER: Objection, form. You asked three

14 times, Counsel.

15 Q Withdrawn.

16 Did Discala or Doug Von Allmen or any of the D-3

17 Capital Club people tell you that they had looked up

18 Elite Delivery Systems?

19 A No.

20 Q Did they say they had done diligence concerning

21 Elite Delivery Systems?

22 A They didn't say that one way or the other, sir,

23 no.

24 Q How about Marsha Foreman, did they -- did one of

25 their many participants do any investigative work to

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1 determine whether Marsha Foreman, in fact, existed; and

2 if so, did she exist at this address?

3 MR. SCHERER: Object to form.

4 A I don't know whether they did or did not.

5 Q Did they do due diligence to determine whether

6 the Marsha Foreman living at this address was, in fact, a

7 minor?

8 A I do not know what they did with regard to the

9 name Marsha Foreman.

10 Q You testified -- You're free to take a few

11 seconds if you want to look at it.

12 A No, no, I was just flipping through it while you

13 were getting your next question ready.

14 Q We're shifting topics.

15 A Okay.

16 Q You testified at Page 354 -- let me withdraw.

17 You testified at 354 of the transcript that

18 through the period of January '09 - that is from April

19 2008 when my client started to lend money to the Banyon

20 entities who in turn were then buying discounted

21 settlements through you, that from April through

22 January '09 basically no one else was investing in this

23 program, do your remember that testimony?

24 MR. SCHERER: Objection to form.

25 MR. LAUER: What's the objection?

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1 MR. SCHERER: That is not his testimony. It

2 assumes facts not in evidence and you misrepresent

3 the evidence. Other than that I have no objection.

4 MR. LAUER: Okay. Go ahead.

5 MR. SCHERER: Like half your other questions.

6 MR. CIMO: I join in the objection.

7 THE WITNESS: I would have to see the testimony

8 to know. This is my eighth day testifying and --

9 BY MR. LAUER:

10 Q I'm not trying to challenge your testimony.

11 A No, no, I didn't say you were. But I've been

12 speaking about this case for two years now, now I've been

13 testifying seven full hours a day for, well, I'm on my

14 eighth day. It's all starting to kind of gel together.

15 If I could just take a look it I can tell you what it is.

16 Q Okay. At Page 354 you were asked this

17 question: "Question: You took Mr. Simony to the bank at

18 various times to give him a show about how much money was

19 in your Ponzi trust account; correct?

20 Answer: Correct.

21 Question: So that Mr. Simony would have had

22 what was the Ponzi amount that accurately reflected all

23 of their investments because nobody else was investing in

24 the Ponzi at this time. Correct?

25 Answer: Basically, correct."

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1 Now, is it not basically correct - and again at

2 388 just to bring this home, at 388 you testified in

3 response to the following questions at Line 15:

4 "Question: Nobody else was in these deals at

5 that point; right?

6 Answer: Right.

7 Now, there may have been very limited

8 exceptions, but essentially between April '08 and

9 January '09, am I correct that virtually all the money

10 that went into your Ponzi scheme originated with the

11 three hedge funds that I represent?

12 MR. SCHERER: Objection, form of the question.

13 A To the best of my recollection, the bulk of the

14 money at the time the hedge funds were investing was from

15 the hedge funds with others dribbling in and out, and

16 then Levin was doing whatever else he was doing to raise

17 money at that point in time unbeknownst to me.

18 Q And therefore, it is not correct that the vast

19 majority of the money that was repaid to the Banyon

20 collection accounts and through the Banyon collection

21 accounts to the lenders was in effect recycling to the

22 hedge funds their own money?

23 MR. SCHERER: Objection to form.

24 A No, that would not be true. That would only be

25 true for a limited period of time as I was paying them --

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1 Q Let me stop you.

2 MR. CIMO: Let him finish.

3 Q I'll give you the chance.

4 MR. CIMO: Let him finish the answer.

5 Q Focus on the period April '08 to January '09.

6 A From -- this is very easy, you don't need my

7 testimony for this. From April of '08 to January of '09

8 all you have to do is look at the ledgers, look at all

9 the bank accounts, you'll see how much money came in and

10 then you'll see how much money went out, you can tell

11 who's getting what money.

12 The bulk of the money during the time when they

13 were investing lots of money with us they were basically

14 just getting their money back plus probably some from

15 some other less lower level investors, perhaps the

16 Tonacchios, Lifshitz, Morse, Levy groups, certainly

17 smaller than your clients.

18 Q But --

19 A But as they were getting paid once I brought in

20 the bigger groups - let me finish - then the money that

21 they were getting belonged to those people because they

22 were no longer investing. From when they cut me off, I

23 stopped really doing much at the end of '08, but when

24 they officially cut me off in April of '09, April 13, '09

25 I think I cut them off - we were basically at a dead

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1 heat, all the money they received from that point on

2 would have been someone else's money.

3 Q We're just taking this in stages because we're

4 in Court. We have different issues to deal with in

5 Court.

6 Am I not correct -- Am I correct that the vast

7 majority of the money that was returned to the Funds

8 through the Banyon entities during the period April '08

9 to January '09 was, in fact, recycling to the Fund their

10 own money?

11 MR. CIMO: Objection to the form.

12 A As a general statement you are correct, sir.

13 Without looking at the ledgers for the

14 particularities of who else's money I was stealing.

15 (Whereupon, The Funds' Exhibit No. 267 was

16 marked for identification.)

17 BY MR. LAUER:

18 Q I'm handing you Exhibit 267, which is a report

19 by the Berkowitz, Dick, Pollack and Brant CPA consultants

20 firm dated March 10, 2011. Do you see it?

21 A I see it.

22 Q Are you aware that Mr. Glick of this firm did

23 analysis of the various accounts and transfers to prepare

24 this report?

25 A I have no idea what he did. This is the first

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1 time I'm seeing this.

2 Q Putting aside whether you've seen this before,

3 were you aware that an accountant, whether you knew his

4 name was Glick or not, was working with the Trustee to

5 try to organize the transfers in and out of the various

6 accounts?

7 MR. CIMO: Objection to form.

8 A I was not specifically aware of that, no, sir.

9 Q Were you generally aware?

10 A That's a very broad question. Let me answer it

11 this way, I knew that all the people trying to get money

12 from other people in clawback lawsuits and the like had

13 hired forensics people. Beyond that it's all guess work

14 for me.

15 As far as that specific issue is concerned, I

16 don't know who was doing what and who hired who to do

17 what.

18 Q Well, take a look at the first two paragraphs so

19 you'll see who hired the Berkowitz firm.

20 A Okay.

21 Q You can see that this report was prepared by a

22 firm that was hired by Herbert Stettin, the Trustee of

23 the law firm Debtor's Estate?

24 A That is what this document says.

25 Q If you'll see -- if you want to take a minute to

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1 read the report or read the caption -- you don't have to

2 read the report. Read the caption to get to feel for

3 it. I'm going to ask you some questions about the chart

4 on Page 5 and the chart on Page 7.

5 A Why don't we look at the charts, I'll try to

6 answer your questions that way. I'm not familiar with

7 any of this.

8 Q Okay. This report purports to have gone back

9 into some but not all of the accounts, but at least have

10 gone back to all of the accounts that received money from

11 the Banyon entities and sent money from RRA to the Banyon

12 entities during the period of your scheme. Now, can

13 you -- do you see the chart on Page 5?

14 A I see two charts. Are you talking about the big

15 chart or the little chart?

16 Q The big chart.

17 A I see it.

18 Q Okay. Now, see if we can -- Do you see that

19 Mr. Glick has, if you look at the column all the way on

20 the left where it says lender slash funding, paren,

21 funding entity; do you see that? Are you okay?

22 A My back is killing me, but I'm good.

23 Q Do you want to stand up?

24 A Not right this second. I'm all right.

25 I see it, yes.

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1 Q So, he's broken this up into different periods

2 of time, the first period of time is April 3, '08 to

3 January 2, '09; do you see that?

4 A I do.

5 Q The second period of time is January 3, '09 to

6 April 9, '09; do you see that?

7 A I see that.

8 Q And then April 10, '09 to October 2, '09, the

9 three periods.

10 A I see that.

11 Q Now, roughly those three periods correspond.

12 The first period is the period where the amount of money

13 on a net basis that the Funds had exposed to this

14 strategy peaked on or about January 2, 2009; does

15 that generally comport with your recollection?

16 A I don't have a recollection.

17 MR. CIMO: Objection to form.

18 A I don't have a recollection one way or the

19 other.

20 Q The next is January 3, '09 to April, '09 after

21 which the Banyon entities missed payments in or about

22 that period of time in April; do you recall that?

23 A I do.

24 Q And the period from that is until October 27

25 which precedes your trip to more Morocco?

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1 A Correct.

2 Q If we'll take Centurion, the first entry is

3 inflow 107 million; do you see that?

4 A I do.

5 Q And that is saying that between April 3, '08 and

6 January 2, '09 Centurion paid in 107 million dollars

7 through two of the Banyon entities.

8 A You are asking me to assume that these records

9 are correct, right, for the purpose of these questions,

10 but hypothetically --

11 Q Correct.

12 A -- I must assume that everything in here is

13 correct and complete?

14 Q Correct.

15 A Okay. Assuming that, I see it.

16 Q Correct. And these are -- this is the Trustee's

17 report?

18 MR. CIMO: Objection to the form.

19 A I don't doubt the veracity of the Trustee at

20 all, but this case has a lot of moving parts. And unless

21 I specifically check something with my lawyer, I'm just

22 going to take it as an assumption. I'm assuming it's

23 correct, it could be wrong.

24 Q Assume that with possible di minimus exception

25 that everything here, in this chart, is correct.

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1 MR. CIMO: Objection to form.

2 A I'm going to assume that it is correct --

3 Q Fine.

4 A -- for purposes of our conversations, but I

5 can't say that it is correct because without sitting down

6 and really looking at the bank accounts I can't tell you.

7 Q That's fine.

8 A Can I -- I don't mean to cut you off. Can I

9 take a five minute break? I have to stand up.

10 Q You can also do, if there --

11 A I don't want to testify standing.

12 (Thereupon, a short break was taken.)

13 (A discussion was had off the record regarding

14 an exhibit.)

15 THE WITNESS: What happens is it jumps, it goes

16 one, two, three, four, five, six, seven, eight, nine,

17 ten, 11, and then after 11 it goes to 17.

18 MR. LAUER: You don't have 12, the signature

19 page?

20 THE WITNESS: No, I do not. It goes from 11

21 to --

22 MR. NURIK: Yes, you do.

23 THE WITNESS: No, that's 17. It's 17.

24 I'm looking at the top.

25 MR. LAUER: Don't look at the top. Look at

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1 the --

2 (A discussion was had off the record.)

3 MR. LAUER: Don't look at the top, look at the

4 document.

5 THE WITNESS: Okay, to me that was part of the

6 document. I get you now. We're all good. Fire

7 away.

8 MR. LAUER: The most important part is one

9 through 12 which bears Joel's signature.

10 THE WITNESS: I see that.

11 BY MR. LAUER:

12 Q Back on the record or we're on the record?

13 MR. CIMO: Thank you.

14 Q Let's just try to walk-through this chart for a

15 minute. According to this chart April 3, '08 to January

16 2, '09 Centurion sent in 107 million and change and got

17 back 72 million?

18 A Correct, according to this chart.

19 Q During that period they were net out 35

20 million, which means they had 35 million on a net basis

21 still invested in this strategy?

22 A Again, assuming the chart is correct, yes.

23 Q Correct.

24 And we'll jump down to Platinum to cover the

25 same time period April 3, '08 to January 2, '09;

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1 Platinum lent the Banyons 218 million and got back 83

2 million, so they had invested in this strategy on a net

3 cash basis as of January 2, '09, a 134,800,000. Do you

4 see that according to the chart?

5 A I see that according to the chart.

6 Q The third fund, Level 3, between April 3, '08

7 and January 2, '09 loaned the Banyons 18 million,

8 received back 5 million and they had invested in this

9 strategy 12,700,000. You see that?

10 A I see that.

11 Q And if you add 35 and 134 and 12 you basically

12 see that as of January 2, 2009 you had - or had spent,

13 but you had received on a net basis from them over 182

14 million dollars.

15 MR. CIMO: Objection to form.

16 A Again, assuming the chart is correct, then that

17 is correct.

18 Q Going further with this chart, what this chart

19 also indicates is that during this same time period that

20 is January -- that is April 3, '08 through January

21 2, '09 if you add up the totals of the inflow that is

22 the 107 and the 218 and the 18, the Funds - or the

23 scheme that you were running and the accounts that you

24 controlled received about 343 million. And during that

25 same time period you sent back 72 million, 83 million,

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1 and 5 million.

2 A According to --

3 Q About a 160 million.

4 MR. CIMO: Object to the form.

5 A According to the chart, that's correct.

6 Q So according to this chart, they sent in about

7 340, they got back out 160, and you were still sitting

8 with 180 of theirs so you had used that 180 for your own

9 purposes?

10 MR. CIMO: Objection to form.

11 A Assuming the chart is correct, sir.

12 Q Right. Now, I would ask you to turn to Page 7

13 the bottom chart.

14 A Okay.

15 Q I'm sorry. Before we go to Page 7, I have a few

16 more questions on Page 5. You will see on Page 5 in the

17 period April 10 to October 27, '09, for Centurion under

18 inflows?

19 A Yes, sir.

20 Q The box is blank?

21 A Yes, sir.

22 Q That's because after the missed payment you

23 received no further money and they made no further loans

24 in connection with your activity?

25 MR. CIMO: Objection to form.

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1 MR. SCHERER: Can we get that question read

2 back?

3 MR. LAUER: I can ask it again.

4 MR. SCHERER: I lost the date.

5 MR. LAUER: The date is between April 10, '09

6 and October 27, '09.

7 MR. SCHERER: You said the payment was missed?

8 MR. HERTZBERG: Inflows after that date.

9 MR. SCHERER: After April what?

10 MR. LAUER: April 10th.

11 MR. SCHERER: Object to form.

12 BY MR. LAUER:

13 Q That doesn't mean to imply they made a payment

14 on April 9. According to this chart, am I correct, that

15 during this period early April to the end of your scheme

16 Centurion did not do any more deals?

17 MR. SCHERER: Objection to form.

18 MR. CIMO: Object to the form.

19 MR. LAUER: What is the objection?

20 MR. SCHERER: It assumes facts not in evidence.

21 It's wrong. He didn't make any payments in the month

22 of April. No money came from any of your clients in

23 April on. I believe to be the facts. So, I object

24 to the form. You can straighten out your question.

25 MR. CIMO: My objection is based upon the fact

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1 the witness never saw this document before and has no

2 knowledge of any of its contents.

3 MR. LAUER: Anything else?

4 MR. CIMO: That's it.

5 BY MR. LAUER:

6 Q Does the chart comport generally with your

7 recollection that at least from the time of the missed

8 payment until the end of your scheme, none of the Funds

9 made any further loans to Banyon for the purpose of

10 buying settlements?

11 A We're accepting Regent and Intercoastal, any

12 side deals, I don't remember the timing of those. I was

13 saying those are not included in Centurion, Platinum,

14 Level 3; right? We're accepting that?

15 Q Yes.

16 A Okay.

17 Q Let's put aside Intercoastal and Regent, which

18 we've discussed.

19 A Assuming that the chart is correct, then that is

20 what it reflects.

21 Q Well, does that reflection comport with your

22 recollection that the Funds no longer invested directly

23 or indirectly either by lending or otherwise in

24 connection with the Banyon activities or your activity?

25 A To the best of my recollection you are correct.

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1 Q Okay. Now, go to Page 7. Do you see the second

2 column 4/3/08 to 4/9/09; do you see that?

3 A I do.

4 Q That's covering the period roughly from when the

5 first of the three hedge funds began lending money to the

6 Banyons to roughly the period when the Funds no longer

7 put any money into a Banyon entity; do you see that?

8 A Yes.

9 Q And what Glick reports on this chart is during

10 this same period other RRA investor inflows, meaning

11 individuals or entities not associated with the Funds

12 caused your accounts to receive $309 million during that

13 period; do you see that?

14 MR. CIMO: Objection to the form, use of the

15 word your.

16 Q RRA investor inflows; do you see that?

17 A I do see that. I'm just trying to figure out

18 what the difference between RRA investors inflows and

19 funding entities inflows are.

20 Q Other RRA investor inflows and other RRA

21 investor outflows, is everyone dealing directly or

22 indirectly with you other than the three funds?

23 A Okay.

24 Q Okay.

25 A Now I understand. Thank you.

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1 Q And according to this chart prepared for the

2 Trustee during this period April 3, '08 to April 9, '09,

3 the accounts received from others, 309 million, but sent

4 out to these same others, that is everyone but the Funds,

5 334 million.

6 A Okay.

7 Q So, other investors received $25 million more

8 during this time period than they had actually paid in in

9 the aggregate; do you see that?

10 MR. CIMO: Object to the form.

11 A Assuming this chart is correct.

12 Q Assuming this chart is correct, this chart is

13 showing that during this period of time when the Funds

14 were putting in money, other investors received $25

15 million more than they actually put in?

16 MR. CIMO: Objection to form.

17 Q According to this chart, correct?

18 A Assuming this is correct, you are correct.

19 Q All right. And then if you go to the funding

20 entities inflows and outflows during this period, that is

21 referring to the three hedge funds and the Banyon

22 entities that they were lending to, the escrow accounts

23 received 497 million but only paid out 373 million during

24 that period. Do you see that?

25 MR. CIMO: Objection to form.

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1 Q So that on a net basis, the Banyon entities and

2 the three hedge funds that were funding the Banyon

3 entities had put more money in than they had taken out

4 during this time period?

5 MR. CIMO: Objection to the form.

6 A Correct me if I'm wrong, but that number should

7 also include any other of the extraneous investors like

8 Morse and -- doesn't include that?

9 Q If Morse put money in he's included in other RRA

10 investor inflows. If anyone else put money in, that

11 person is included in other RRA investor inflows.

12 A Assuming this is correct?

13 Q Assuming this is correct.

14 MR. CIMO: Same objection.

15 A Where would -- I'm going to only answer assuming

16 that this is a 100 percent correct.

17 Q Assuming this is correct.

18 A Because my concern is to who composed what

19 groups, but that's okay. I'll continue to go.

20 Q It's very simple, the three hedge funds each

21 funded a separate Banyon account; do you recall that?

22 A I do.

23 Q So you've got three hedge funds and you have an

24 individual Banyon account that was funded by loans from a

25 particular hedge fund; do you remember that?

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1 A I do.

2 Q That constitutes the sum and substance of

3 funding entities. You can accept that representation,

4 okay? Everything else, individual entities, people you

5 knew, people you didn't know that put money in or took

6 money out from what you were doing is listed in other; do

7 you have that?

8 A Okay. I understand.

9 Q So, this chart is saying that other, which is

10 everyone but the three hedge funds and the Banyon

11 entities they financed, took out $25 million more during

12 this period of time than they put in. Do you see that?

13 MR. CIMO: Objection to form.

14 A We just talked about that. Assuming this is

15 correct, you're correct.

16 Q At the same time the three hedge funds and the

17 Banyon entities that they financed had exposed - were

18 exposed and had invested in this strategy approximately

19 $124 million, that is they had put in $124 million more

20 than they had taken out.

21 MR. CIMO: Objection to the form.

22 A If this chart is a correct, yes.

23 Q Now, does that comport generally with your

24 recollection then that during the period April to April,

25 the majority of the money that the Funds received back

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1 from the Banyon entities, in fact, was a recycling of the

2 Funds' own money?

3 MR. CIMO: Objection to the form.

4 A I have -- without seeing all the financials I

5 can't testify to whether that's accurate or not. There

6 was so much money going in and out and so much money

7 moving around in the accounts, I don't want to testify to

8 something that's so speculative from my perspective. So,

9 you'll have to rely on this chart for your needs. And if

10 you want to provide me with all the other financials and

11 do that kind of analysis, we can do that.

12 Q I'm going to show you a packet of e-mails, I'll

13 try to move this along, concerning the Bar Association

14 grievance committee.

15 By the way, were you once on the grievance

16 committee?

17 A I was.

18 Q How did you get appointed to the grievance

19 committee?

20 A I don't remember.

21 Q Is that a sign of your prominence as an

22 attorney?

23 A The fact that I don't remember or the fact that

24 I got appointed?

25 Q Okay. I'll grant you that.

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1 (Whereupon, The Funds' Exhibit No. 268 was

2 marked for identification.)

3 BY MR. LAUER:

4 Q I've handed you Exhibit 268, which is a

5 composite exhibit of e-mails. And I'll take you through

6 the e-mails in a minute just to put this context. You've

7 testified, Mr. Rothstein, that you sent a number of

8 e-mails to Frank Preve where the purpose of constructing

9 the e-mail and the detail in the e-mail often was so that

10 he could send on that piece of information to someone

11 else such as an investor?

12 A The bulk of the times that these e-mails were

13 being sent to Mr. Preve, they were for the purpose of

14 having him have culpable deniability as to why we were

15 not able to pay certain things, yes, sir.

16 Q One of the story lines that you developed was

17 that you were having lingering but ever-increasing

18 problems with the bar grievance committee?

19 A Correct.

20 Q And as this story developed you developed a

21 story line that in part, at least the problem with the

22 grievance committee was being exacerbated by the fact

23 that the Funds had reduced the level of loans that they

24 were making to the Banyon entities?

25 MR. SCHERER: Object to the form.

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1 A We were using the grievance committee story to

2 try to force our funders, at this point in time the hedge

3 funds, to fund faster and in greater numbers.

4 Q And the grievance story in part was that as a

5 result of the hedge funds not making more loans at the

6 level that you wished to the Banyon entities, you were

7 having problems with clients who were complaining to the

8 grievance committee?

9 A More specifically the story that was told to

10 them by me and Mr. Preve was that they're telling us they

11 were going to actually fund and then not funding created

12 the problem with the Bar.

13 Q And part of the problem with the Bar is the Bar

14 was making noises about your ability to practice?

15 A It ran the gamut from grievances to potential

16 suspensions, freezing trust accounts, making my life a

17 nightmare, whatever we needed to do in order to create

18 some sort of fire, some impetus to get funds out of them.

19 Q And in fact --

20 A And also -- let me finish the answer. And also

21 to explain why we were not paying.

22 Q This was not something that you developed in one

23 e-mail, it was something that you developed over time to

24 build on the story to give it credibility?

25 A The story grew as it was needed to create the

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1 impetus and the excuse.

2 Q Turning to Exhibit 268, the first is an e-mail

3 January 22, 2008 from you to FPreve, "Hey G, just waiting

4 for Adria to arrive." Is Adria the woman from the bar

5 association?

6 A Adria, yes.

7 Q "We'll call as soon as I wrap and head over to

8 the office. Ciao, ciao Bar Hood."

9 Now, this was January 2008, it was several

10 months before my clients ever did any financing with

11 Banyon. What was the background of this particular

12 e-mail?

13 A The part you did not ask me about. Early on,

14 the bar story was created by me to fool both Mr. Preve

15 and Mr. Levin.

16 Q Okay, so --

17 A I didn't let Mr. Preve in on it until it was

18 necessary. Until he figured out that there was no way

19 this was really happening.

20 Q This is, as they say in show business, in medias

21 res, in the middle, just waiting for Adria to arrive.

22 What had you been telling Frank Preve?

23 A I don't -- here's the problem. We're back to

24 where we were all these other days - not with you. I

25 need to see the e-mail traffic days before, days after,

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1 in order to tell you what this is about. To take a

2 single several line e-mail out of context when you're

3 dealing with a case that has over a million e-mails in it

4 I can't tell you one way or the other.

5 Q Without getting specific then, is it your best

6 recollection that in some manner, shape, or form you were

7 telling Frank that you had some kind of problem, however

8 unspecific with this woman at the Bar Association?

9 A Correct.

10 Q And judging from the fact that you don't

11 describe who she is or use her last name, it's fair to

12 assume from this e-mail that you must have had previous

13 communication either in writing or in person with

14 Mr. Preve to explain to him that you were having some

15 type of problem with the grievance committee?

16 A Yes. You recall as you read the e-mails you'll

17 see that Mr. Preve was let in on the entire scheme

18 piecemeal, so yes.

19 Q Go to the next e-mail, April 7, 2009. A lot of

20 expletives here where you seem to be - this is from you

21 to Preve - where you seem to be unhappy about needing

22 someone to step up and fund about $20 million and another

23 30 million next week. Centurion is a joke and Platinum

24 just can't do it.

25 What was the nature of this e-mail? What were

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1 you trying to communicate through Preve to the Funds?

2 A That their failure to fund as promised was going

3 to be endangering my business and my career and the

4 strategy.

5 Q And then the next e-mail on that page, which

6 actually had been eight minutes earlier, you say: We

7 will have to convince them to use those monies to fund

8 the grieving parties. By grieving parties you are

9 referring to plaintiffs or clients who had filed a

10 grievance with the bar association?

11 A You talking about the second e-mail?

12 Q Yeah.

13 A That's to me from Frank.

14 Q Okay.

15 A So I'm -- it's -- you want me to guess what I

16 think he was talking about?

17 Q When he's referring to grieving parties, is he

18 referring to people who filed grievances with the

19 grievance committee?

20 A Yes.

21 Q And then the bottom e-mail from you to gents,

22 just received my mail for the day. I was grieved by

23 three of my clients. Does that mean that you were

24 telling Frank that three of your clients filed grievances

25 with of the grievance committee?

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1 A Yes, that is actually the first e-mail in the

2 chain. That's what starts this.

3 Q Basically you're saying, you're connecting the

4 grievances to the absence of funding from my client?

5 A Correct.

6 Q Then the next document, an e-mail from you to

7 Preve where you say: I just received a call from Mayer,

8 that's referring to Mark Nordlicht; correct?

9 A Yes, sir.

10 Q But, did not take it as I am in with bar

11 counsel.

12 Again, are you referring to your advocate or are

13 you referring to the lawyer that represents the grievance

14 committee and is basically investigating you and

15 challenging your activities?

16 A I have no idea. I just wanted to provide him

17 with something to utilize.

18 Q Well, the next e-mail: Okey dokey, I will call

19 him as soon as Adria leaves.

20 Again, you're referring to the bar grievance

21 lawyer?

22 A Yes.

23 Q You go to the next e-mail, April 8 from you to

24 Preve. Talk about two more grievances were delivered

25 today to the bar office in Fort Lauderdale.

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1 A One second, I want to make sure the record is

2 clear. These e-mails that we've read so far, except for

3 the very first one, are both you -- I know you're not

4 doing it intentionally but you're saying to Mr. Preve

5 when they are really to Mr. Preve and Mr. Levin. I want

6 to make sure the record is clear.

7 Q I was not doing that intentionally. I don't

8 have a lot of time.

9 A I know you weren't.

10 Q Okay.

11 A The record is clear. We're good to go.

12 Q Whoever was getting these e-mails was getting

13 the story line --

14 A Correct.

15 Q -- for them to believe or for them to pass on

16 that more grievances were filed and they were in large

17 measure connected to the fact that funding had not come

18 as promised?

19 A Correct.

20 Q And you're referring to the fact that there's a

21 possibility of you being suspended from practice;

22 correct?

23 A Correct.

24 Q And obviously if that happened that might

25 prevent you from operating law firm escrow accounts?

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1 A Correct.

2 Q So, you're building the story that would give a

3 plausible basis for your holding back the return of

4 money?

5 A Holding back -- yes, holding back the return of

6 money and trying to squeeze additional monies out of

7 them, correct.

8 Q April 9 goes: Just spoke to Adria, she's 100

9 percent certain that they are not making a request to

10 have an emergency suspension leveled against me today.

11 They want to see what I do today so I'm trying to do

12 stuff.

13 Do you see that?

14 A I do.

15 Q So, again, you're connecting the potential

16 freeze or the potential problem with a solution which

17 could come from new funds?

18 A Yes. You can see from the date that we're

19 building towards the April 13, 2009 date when I cut them

20 officially.

21 Q Right. Next one is April 10, and you say in

22 part: I'm with Adria right now. We're going through my

23 current exposure. I will report back as soon as she

24 advises. Monday morning the bar committee handling my

25 current grievances is meeting. Right?

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1 A Right.

2 Q You're building up?

3 A Yes, sir.

4 Q And then what happened was the Banyon missed

5 payments on or about April 13 and the Funds were told

6 that the reason the payments were missed was because of

7 this increasing problem that they had been hearing about

8 between you and the grievance committee; right?

9 A Yes.

10 Q And in part - and the Funds were also told by

11 you, somewhat aggressively, that either by you directly

12 or by you aggressively through Preve and Levin that it

13 was their fault because they supposedly had promised

14 funding to the Banyons which had not come through?

15 A That's correct.

16 Q Any in any event, payments were missed and then

17 there were series of meetings between the Fund, their

18 representatives and Preve and Levin and the Fund

19 representatives and you as well; correct?

20 A Correct.

21 Q At some point you set up a call between - with

22 the grievance committee in the form of Adria. And on

23 that call you must have had a call-in number, was Mr. Ari

24 Glass, if you remember that?

25 A I know there was a representative of the Fund on

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1 the call and I had someone from my office playing the Bar

2 representative.

3 Q Do you remember that Mr. Glass called in from

4 Mr. Goldberg's law firm?

5 A No, I don't recall that. Who is Mr. Goldberg.

6 Q Believe he is --

7 A There he is.

8 Q I believe he's a lawyer in the box.

9 And on that call did you brief this woman from

10 your law firm on what to expect?

11 A I did.

12 Q What did you tell her?

13 A I had given her a script to refer to about what

14 was going on, what questions she should answer. I told

15 her specifically that when they ask something that she

16 couldn't think up an answer for to just say that pursuant

17 to the Bar rules she couldn't answer that type of

18 question, that was her escape vow, so to speak. She was

19 a very bright woman from my firm. I actually forgot who

20 it was before but I remember now.

21 Q Who was it?

22 A It was Stuart Rosenfeldt's paralegal, Adelita

23 Cabello.

24 Q And did you explain to her -- Withdrawn.

25 What did you explain to Ari was the purpose for

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1 him being on this call?

2 A They wanted to talk to the Bar. That was the

3 purpose.

4 Q And in the course of the Bar call was part of

5 the script to basically suggest to Ari and the Funds that

6 they could help solve this problem?

7 A Yes.

8 Q By doing more funding?

9 A That's correct, by living up to -- the way I had

10 her address it was, that they needed to live up to any

11 agreements that they had made with our law firm.

12 Q Did Ari ask -- Were there any occasions in this

13 conversation when Ari asked questions where the woman

14 posing as Adria, said that she could not answer those

15 questions because it was a Bar Association issue?

16 A To the best of my recollection, yes, but I don't

17 have a specific recollection one way or the other.

18 Q And you'll see in this packet - time does not

19 permit me to go through them with you - April 20, April

20 21, April 21, April 22, additional e-mails back and forth

21 dealing with this supposed bar association problem. Do

22 you see that?

23 A Yes.

24 Q On May 13 you say to Preve: Are you in a

25 position to send funds today? Bar folks are getting

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1 ready to leave for the day. I would like to tell Adria

2 and Kevin my next step.

3 Again, you're trying to put pressure on the

4 Funds to actually send money again; correct?

5 A Correct.

6 Q By the way, on the May 13 e-mail, you said: I

7 would like to tell Adria and Kevin my next step. Who is

8 Kevin?

9 A That was Kevin Tynan, it was a person that we

10 had actually consulted with regard to bar issues in the

11 past.

12 Q Did you actually consult with Kevin in real

13 life?

14 A Not regarding this but other things, sure.

15 Q And then on May 26, you say to Preve: You're

16 e-mail was great with Adria. Kevin shoved it up the

17 Bar's --

18 A Yes.

19 Q On June 25 you're continuing to rely on the Bar

20 issue. You say -- this is to Preve -- all along you're

21 expecting Preve in some fashion to be passing this on

22 either by e-mail or phone conversations or meetings to my

23 clients; right?

24 A Correct.

25 Q Priority after a lovely breakfast meeting with

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1 the New York attorney about to send us cases, I came back

2 to my office to find two new Bar orders here with Adria;

3 right?

4 A Yes, sir.

5 Q This was continuing. And then you go on to

6 say - or I should say the preceding e-mail from Preve to

7 Scott Rothstein, subject: Priorities is basically

8 saying: Here's what we need to do, we need to pay the

9 May and June payments, need three-and-a-half million in

10 Banyon. I need two million tomorrow. George needs about

11 10 million in spending money. Try to stay away from

12 specifics with him. He doesn't want you knowing our

13 dirty laundry.

14 That's between you and Preve?

15 A Yes.

16 Q Now, notwithstanding all of the story lines and

17 the SOSs regarding the Bar Association and the grievance

18 committee, the fact is the Funds never put in any new

19 money? They never caved into this; did they?

20 A That's correct.

21 Q I'm handing you Exhibit 269, it's a composite.

22 (Whereupon, The Funds' Exhibit No. 269 was

23 marked for identification.)

24 BY MR. LAUER:

25 Q First, is from Irene Stay, which is the Monday,

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1 April 13, 2009 wire instructions for T2. Do you see

2 that?

3 A Yes.

4 Q And then on the other document bearing counsel's

5 stamp 20453, this is in chronological order. The next

6 event is from [email protected] to Scott

7 Rothstein. Do you see that?

8 A Yes.

9 Q On the second page?

10 A Yes.

11 Q At 12:43, a payment of $3,666,000 went out to

12 Regent Capital Partners?

13 A Correct.

14 Q On April 13; correct?

15 A Correct.

16 Q The next event after that at 12:51, it's from

17 you to Jack Simony where you say to Jack: I will be

18 awaiting receipt of the one-half back today.

19 I take it you are telling Jack you're expecting

20 to receive back in sum reinvesting form, half of the

21 three million six?

22 A Correct.

23 Q Jack says: Please send me wire instructions.

24 Right?

25 A Yes, sir.

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1 Q And then you send him wire instructions; right?

2 A I do.

3 Q And in fact, you never received any money back

4 from Jack Simony on Regent?

5 A I believe that's correct, sir.

6 Q He said he would do it but he didn't?

7 A Yes, sir.

8 Q Next document, 270.

9 (Whereupon, The Funds' Exhibit No. 270 was

10 marked for identification.)

11 BY MR. LAUER:

12 Q First page is an April 14, 2009 e-mail from you

13 to Preve. You tell him - it's from Jack Simony.

14 Subject: Ari on April 14th: Please start sending Ari

15 wires. It's important the process begin as soon as

16 possible. Need to calm him down a bit.

17 What's he saying here, you should send money to

18 Ari?

19 A Yes.

20 Q Because the payments had stopped; right?

21 A Yes. This was around the time that we were

22 making the single payments, a million here, two million

23 there to the various hedge funds.

24 Q Go to the next -- the next document is April

25 16. You say in the middle of that big paragraph: I

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1 believe he has his own money in the company despite

2 prohibitions to the contrary.

3 What do you mean by that?

4 A Sorry. Where are you looking? There's a lot of

5 stuff.

6 Q Nine lines down.

7 A Hang on.

8 Q I believe he has his own money in the company.

9 By that I take it you're saying you believe Ari has his

10 own money invested in one or more of the hedge funds;

11 right?

12 A I don't remember which fund that was. It was a

13 point in time where Jack Simony told us some kind of

14 story, we were talking about investing. And we said, if

15 the Funds can't get other money, tell these guys to put

16 their own money in the deals. And Jack told us this,

17 which apparently I now know is a story they couldn't put

18 their own money into this particular company. So I was

19 throwing that back at them.

20 Q The reality is not only is there no prohibition

21 against fund manager investing in their own funds and

22 other people's funds, these fund managers were all

23 investing?

24 MR. SCHERER: Objection to form.

25 A I don't know one way or the other but it's -

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1 assuming what you're telling me is correct, that would be

2 the fact. I have heard information about that since we

3 started this deposition.

4 Q So, this was sort of their version of your Bar

5 Association story?

6 MR. CIMO: Objection, form.

7 Q Go to the next document. This is an e-mail from

8 George Levin on April 16. Dear Ari.

9 Do you see that?

10 A What is the date?

11 Q April 16, at the bottom.

12 A Got it.

13 Q And after the payments -- After Banyon missed

14 its payments and there was a period of several days or a

15 week or two before the schedule of payments resumed.

16 There were a series of demands being made from you

17 through Levin and Preve to the Funds. Do you remember

18 that?

19 A Correct.

20 MR. SCHERER: Object to form.

21 Q And included in those demands were demands that

22 if you arranged to release funds or if the Banyons were

23 able to begin repaying the Funds, the repayments would

24 only occur on condition that the Funds agree to return a

25 significant percentage of what they received. Do you

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1 remember that?

2 A That is what we were trying to achieve, yes.

3 Q All right. And you pushed this directly and you

4 pushed this through Preve; right?

5 A Yes.

6 Q And you pushed this through George Levin?

7 A To a more limited extent, yes.

8 Q They were insisting that if the Funds expect to

9 get their loans repaid they would have to agree to do new

10 investments?

11 A Yes.

12 Q And yet again, they never agreed to that; did

13 they?

14 A They did not.

15 MR. SCHERER: Object to form.

16 A Not to my recollection.

17 Q Thank you.

18 MR. SCHERER: You would agree?

19 MR. LAUER: I'm happy to call you, Bill. In

20 fact --

21 MR. SCHERER: Oh, no, you wouldn't like what I

22 was going to say.

23 MR. LAUER: When you're under oath and I'm

24 examining you, I will like it.

25 MR. SCHERER: I bet. Maybe, maybe not. We'll

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1 bring in Adrianna.

2 BY MR. LAUER:

3 Q Have you ever seen the loan modification

4 agreement that was ultimately signed between Platinum and

5 the Banyon entity that owed Platinum money?

6 A I don't recall seeing that, no, sir.

7 Q Also one of the items that Levin was insisting

8 on, if you recall, in addition to the Funds agreeing to

9 make new loans, he was insisting that the Funds agree to

10 give good credit ratings to any prospective new

11 investor. Do you remember that?

12 A I remember that, yes, sir.

13 Q And in fact, do you know that when the -- when

14 Platinum and Levin finally signed off on the loan

15 modification, the only thing that Platinum agreed to do

16 was if they made -- if they gave information to a

17 prospective investor in writing they would share the

18 writing with Levin. Do you remember that?

19 MR. CIMO: Object to the form.

20 A I don't remember that.

21 Q But, that --

22 A No, I don't remember that.

23 Q They rejected Levin's demand that they agree to

24 give a good report to prospective investors?

25 MR. CIMO: Objection to form.

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1 A They may have rejected it in writing but in

2 reality they did what Levin, Preve and I asked. At least

3 according to Jack Simony and A.J. Discala.

4 Q We've been through that; right?

5 A We've been through a lot of this.

6 Q Discala had one unannounced meeting with Simony;

7 right?

8 MR. SCHERER: Object to form.

9 A I don't know how many times they met.

10 Q He and Jack have testified they had one

11 unannounced, unplanned 25 minute meeting. Are you aware

12 of anything else?

13 MR. CIMO: Objection to form.

14 A I'm not even aware of that.

15 MR. SCHERER: Are we going to swear you,

16 Elliot?

17 MR. LAUER: I'm ready.

18 Q Let me come back to Kip Hunter for a moment?

19 A Sure.

20 Q Did Hunter arrange for the law firm to contract

21 with Don King Productions?

22 A She did.

23 Q And did she do the negotiating with Don King

24 Productions?

25 A Some of it.

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1 Q And what was the purpose of that transaction?

2 A David Boden and I had set aside approximately a

3 million dollars to do large scale promotions. Kip came

4 up with this particular idea. That was the purpose, we

5 were going to try to promote all our different brands

6 including law firm, restaurants, other businesses, all at

7 the same time through one giant media outlet.

8 Q Kip negotiated the transaction for you?

9 A Most of it.

10 Q And did you think it was a fair deal?

11 A I actually didn't care.

12 Q Did she think it was a fair deal?

13 A I have no idea what she thought.

14 Q Was she a professional?

15 MR. CIMO: Objection to form.

16 A Sometimes yes, sometimes no.

17 Q Did you get branding rights on -- Did you meet

18 with Don King?

19 A On multiple occasions.

20 Q And why did you meet with Don King?

21 A To discuss the business deal and for fun.

22 Q And --

23 A He's a lot of fun.

24 Q Whose name was on the center of the Ring at the

25 fight that took place Valentine's Day 2009?

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1 MR. LICHTMAN: Objections.

2 A I don't remember what we put in the middle.

3 Probably RRA would be in the middle. If you show me a

4 Ring shot we can tell.

5 Q And in the center, that is center of the Ring,

6 was RRA; that's the law firm?

7 MR. CIMO: Object to the form.

8 A The RRA law firm, yes.

9 Q This was televised?

10 A It was.

11 Q Got a lot of publicity?

12 MR. CIMO: Object to the form.

13 A To my recollection it did, yes, sir.

14 Q Don King invited you into the Ring with him?

15 A He did.

16 Q He gave a shout-out to you and the RRA law firm?

17 A Yes, he was most gracious.

18 Q And you had the opportunity of representing the

19 RRA law firm to provide a gift to the winning boxer?

20 A Correct.

21 Q All of this is on television?

22 A Yes, sir.

23 Q You were listed as -- RRA was listed in the

24 program?

25 A Yes, sir.

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1 Q Did you have a complimentary tickets to give out

2 to the fight?

3 A We did.

4 Q Did you invite clients of the law firm?

5 A I don't remember who I invited. I invited a lot

6 of people.

7 Q Clients, prospective clients, people of means?

8 A I really have no specific recollection as I sit

9 here today as to who I invited.

10 Q Did other people from the law firm come besides

11 yourself?

12 A I believe they did. I don't have a specific

13 recollection.

14 Q Did a large number of people come from the law

15 firm?

16 A There were a lot of people there in general, but

17 I don't recall who came from the law firm and who didn't.

18 Q There was an after party which had RRA with

19 naming rights?

20 MR. CIMO: Objection to form.

21 A Yes, sir.

22 Q What was the nature of the after party?

23 A I don't recall actually. I remember it being at

24 the Bank Atlantic Center. I don't recall the nature of

25 it.

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1 Q Remember the Ring post said RRA?

2 MR. CIMO: Object to the form.

3 A I remember the RRA name and many of our other

4 companies' names being all over everything. That was the

5 purpose of the event.

6 Q Was there a lot of buzz from this?

7 MR. CIMO: Sorry? I didn't hear the question.

8 Can you read it back for me?

9 (The pending question was read back by the

10 Court reporter.)

11 MR. CIMO: Objection, form.

12 MR. SCHERER: When was this?

13 BY MR. LAUER:

14 Q Valentine's Day, 2009; right?

15 A There was a fair amount of buzz. I don't

16 know. I don't think it was at the end of the day

17 exactly what we expected but it was - all the people

18 that were involved had a lot of fun with it.

19 Q You got a lot of publicity out of it?

20 MR. CIMO: Object to the form.

21 A I can't define a lot for me because we were

22 getting a lot of publicity doing a lot of things.

23 As you know, we were plastered all over the

24 universe. So, yeah, we got a fair amount -- it was good

25 for the businesses, it was good for our visibility, and

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1 it was a lot of fun.

2 Q Okay. Did Kip feel that it was a good use of

3 your law firm funds?

4 MR. CIMO: Object to form.

5 A She told me she thought that. What she actually

6 knew, I don't know.

7 Q But, Kip Hunter told you that she thought this

8 was a good use of law firm funds?

9 MR. CIMO: Object to the form.

10 A She told me that and David Boden told me that.

11 But what they thought, I do not know.

12 Q You never know what someone thinks. You can

13 only testify as to what they told you. So, Kip Hunter

14 told you that she thought this was a good use of law firm

15 funds to pay $700,000 for this kind of publicity and

16 marketing with Don King Productions; correct?

17 MR. CIMO: Object to the form. Go ahead.

18 A Here's the way you have to look at it --

19 Q I think if you can't answer yes or no, we will

20 try another question.

21 A She didn't say that specifically, no.

22 Q In substance, did she tell you that she thought

23 this was an appropriate and good use of law firm funds to

24 spend $700,000 for this marketing program?

25 MR. CIMO: Objection to the form.

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1 A Not really. I can tell you why if you want to

2 know.

3 Q Did Kip Hunter commit fraud?

4 A You want to know what I know now sitting here

5 today?

6 Q Yeah, I want to know what you know now.

7 A Subsequent to the event I sat David Boden and

8 Kip Hunter down and I told them I thought it was a great

9 event, that I had lot of fun, that I had lot of money so

10 I didn't mind spending the money. But that I didn't want

11 to ever do anything like that again because I didn't

12 think we achieved $700,000 worth of marketing or anything

13 near it.

14 I told them we spent next to nothing doing

15 public service adds with the Dan Marino Foundation, the

16 Alonzo Mourning Foundation, the Wade's World Foundation

17 and got far more exposure in the relative - excuse me, in

18 the relevant markets for a lot less infusion of capital.

19 I told them, I didn't mind blowing it this one

20 time because it was fun for me. As far as a marketing

21 thing - and then I joke around with them and said, I'm

22 not going to ask either one of you if you got kickbacks

23 from Mr. King or his company. We'll leave it alone. We

24 won't do this kind of thing again, but I did have a good

25 time.

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1 Q Since you don't know - putting aside whether you

2 had buyer's remorse after you paid that money for the

3 marketing, when you were going into the program and she

4 was telling you this is what it cost and this is what you

5 get; was it clear in that process that she was

6 communicating to you that she believed this was a

7 reasonable use of your law firm money for this kind of

8 marketing value?

9 MR. CIMO: Objection, form.

10 A My recollection is that she was attempting to

11 convince me to do this. I also recall - and you to have

12 ask them about this - there was some tiff between David

13 Boden and her as to the amount of money we were spending

14 and what we were expecting to get. You have to ask them

15 about that.

16 Q Okay. Did she ever tell you that she thought

17 this could be done for less?

18 A Yes.

19 Q Did you tell her if you think it could be done

20 for less why don't you do it for less?

21 A No, I said just get it done. I didn't want to

22 hear about it anymore. Unfortunately, during the periods

23 of my life where I was spending other people's money, as

24 I told you days ago, I spent it like I hate it. Spent

25 money like I hated the money. I didn't care. I spent it

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1 and said, let's get this done. Let's get this done. I

2 have other things to worry about.

3 Q Did she negotiate with Don King Productions is

4 over the fee?

5 A I don't believe she did, no.

6 Q Do you know how the number was fixed?

7 A My recollection was we got several different

8 drafts of contracts or several different e-mails of

9 variety of amounts and ultimately at the end of the day

10 Mr. Boden and I and her picked whatever it is we were

11 going to do.

12 Q Did she work out what marketing items you were

13 getting for the $700,000 --

14 MR. CIMO: Objection to the form.

15 Q -- in terms of the center Ring and the posts and

16 the --

17 A My recollection is that it happened in stages.

18 We originally were going in for a much lesser amount,

19 which is one of the reasons I thought there was a

20 kickback scheme going on because we were originally going

21 in for a few 100 grand and by the time I got done getting

22 sold this, hook, line and sinker, I was in up to my nose.

23 As a matter of fact, I'm not sure I even knew it

24 was costing me 700,000 at the end of the day. I knew it

25 was very expensive but it was one of those things, like I

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1 got taken by Albert Peter, they put the hook in my mouth

2 and they just kept pulling.

3 MR. SCHERER: Elliot, taking our time to develop

4 your Don King case. Shameful, shameful. I wondered

5 what the heck you were doing.

6 MR. LAUER: I was not the first one to mention

7 Don King in this deposition.

8 BY MR. LAUER:

9 Q I'm showing you Exhibit 271. This is an e-mail

10 from you to Preve dated December 25, 2008.

11 A Yes.

12 (Whereupon, The Funds' Exhibit No. 271 was

13 marked for identification.)

14 BY MR. LAUER:

15 Q You start out by saying F Brian. Do you see

16 that?

17 A Yes.

18 Q This is Brian Jedwab?

19 A Yes.

20 Q This is in connection with him wanting to do

21 more due diligence?

22 A Yes.

23 Q You say I do not trust him?

24 A Correct.

25 Q And you're complaining that he keeps changing

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1 the kind of diligence and questions that he wants to

2 engage in; right?

3 A Correct.

4 Q Do you see at the bottom of the page Preve says

5 to you: Jack wants you to drop your pants for Brian, but

6 I didn't still don't hear anything about funding in

7 December. Do you see that?

8 A Yes.

9 Q Go onto the next document, March 19, 2009. This

10 is from you to Preve. Do you see that?

11 A I do.

12 Q And it's coming after an e-mail from Brian

13 Jedwab to you. Do you see that?

14 A Yes.

15 Q And you say to Preve: Can you give this A-hole

16 what he needs, actually what he needs is a solid beating

17 from Bobby. I want to kill him.

18 I take it Bobby is some kind of body guard of

19 yours?

20 A He was. He's since passed away.

21 Q And again, you're incensed at Brian's insistence

22 for further information?

23 A Yes, I'm incensed by this whole thing. And I'm

24 livid with Brian and having to deal with him, yes.

25 Q March 25, 2009 from you to Preve. Funding. Hey

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1 triple GGG: Did that little F Brian ever say anything

2 about releasing your money?

3 I take it that Brian was not one of your

4 insiders?

5 A No. Remember I described Brian as the guy who

6 if he figured out we were running a Ponzi scheme would

7 have gone running down the hall calling the police all

8 the way.

9 Q Let me ask you this. If you go to the last

10 document in this packet, there's an e-mail dated October

11 5 from you to Jack Simony and Mark Nordlicht with a copy

12 to Preve: Somebody F'd you. Somebody F'd me, according

13 to your e-mail?

14 A I see that.

15 Q Then you say: I was told that Platinum needed

16 to have the two, $3 million checks in their hands while

17 you awaited the TD wires so you could deal with the

18 valuation team?

19 A Yes.

20 Q Instead the two, $3 million checks were

21 deposited.

22 What's going on here?

23 A There was a point in time where we were trying

24 to make it a funding deal with them and we were trying to

25 make a little bit of peace, keep them in the mix as much

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1 as possible. I gave them two checks to hold while they

2 were dealing with people that they needed to deal with.

3 They weren't supposed to deposit them without notifying

4 us. We were going to wire funds, at least that's the

5 story we were utilizing. They went ahead and deposited

6 them anyway.

7 Q You were going to wire money to Banyon which in

8 turn would then -- you would wire money to a collection

9 account?

10 A Yeah, to whichever account they told me to wire

11 it to.

12 Q And the checks were given to them in connection

13 with the Banyon repayments?

14 A I suspect so. I don't know. I wasn't part of

15 that portion of the deals.

16 Q In fact, on the next side of this document you

17 say: We now need to explain to the Florida Bar.

18 So, right up to October you were still working

19 on the story that you've got these continuing problems

20 with the Florida Bar?

21 A In this particular case it's because I was

22 saying my trust account is now out of balance because

23 they deposited checks they shouldn't have deposited.

24 Q Got it. At Page 366 of the deposition, I say --

25 it starts at the bottom of 365. This is talking about

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1 A.J. saying that he had been given a good report from the

2 hedge fund.

3 The bottom Line 24 says: The conversation with

4 Mr. Discala I remember more clearly because we were in my

5 restaurant at Bova having cocktails and we were drinking

6 to the fact that he had gotten an excellent rating from

7 the Funds.

8 Now, Discala was supposedly representing a group

9 of serious investors who were supposedly genuinely

10 investing tens of millions of dollars with these

11 investments; right?

12 A Correct.

13 Q And he is responsible for this Clockwork group

14 and he's responsible for supervising the diligence and

15 making sure that everything is on the up and up; right?

16 A He was one of the people responsible, yes, sir.

17 Q And did you think it strange that he's

18 celebrating, if you will, with you that you got excellent

19 credit rating?

20 A Not at all.

21 Q You don't think that's strange that a guy that's

22 doing due diligence about investing with you is

23 celebrating with you like haha; isn't that great?

24 A That's not what was going on.

25 MR. SCHERER: Object to form.

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1 A We were celebrating the fact that we had passed

2 another hurdle of due diligence. A.J. believed it was

3 legitimate due diligence. He worked very hard to get to

4 that point and he very excited as were the other members

5 of his team that what we had told them would occur, which

6 was that we would get an excellent credit rating from the

7 hedge funds did in fact occur. It was one more notch on

8 our belt so to speak in passing due diligence.

9 It was a very exciting time for him. You could

10 tell he was excited about having reached that goal. I

11 will tell you that in many legitimate business deals that

12 I had, well beyond any of this Ponzi scheme stuff I ever

13 got started in, I can remember celebrating with clients

14 over all kinds of deals.

15 I remember celebrating with the Morse family on

16 some very, very large deals, things hundreds of millions

17 of dollars being used for car dealerships and the floor

18 plans and the like and going out and celebrating, having

19 a cigar and cocktails over the fact that we had just done

20 something fantastic.

21 Q Did it occur to you at the time that maybe A.J.

22 instead of celebrating should have spent more time

23 reading the D-3 Capital documents?

24 MR. SCHERER: Objection to form.

25 A No, sir. As I've testified, I thought they did

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1 a good solid job doing due diligence, far superior to

2 that done by a lot of other people that invested with us.

3 MR. LAUER: Mr. Hertzberg wants me to put on the

4 record Exhibit 260, which is the October 29, 2009

5 e-mail.

6 (Whereupon, The Funds' Exhibit No. 260 was

7 marked for identification.)

8 MR. SCHERER: Gabe, it must be really bad if

9 Elliot won't do it.

10 MR. LAUER: All right.

11 MR. CIMO: 260 is something you referred to in

12 a question?

13 MR. LAUER: I referred to it earlier and quoted

14 from it.

15 MR. SCHERER: What was the Exhibit?

16 MR. LAUER: 260.

17 MR. SCHERER: And it is what?

18 MR. HERTZBERG: We quoted from it so we're

19 putting it in.

20 MR. LAUER: I'll show it to the witness just

21 to --

22 MR. SCHERER: That's all right. We got it,

23 Elliot.

24 BY MR. LAUER:

25 Q Do you want to identify that for the benefit of

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1 the lawyers who haven't seen it in about three hours?

2 A Yes. It's a bunch of e-mails between me, Frank

3 Preve and George Levin on October 29 as the Ponzi scheme

4 was unraveling.

5 MR. LAUER: Okay. I think we've reached 5:00.

6 I would like to say that on behalf of our clients, we

7 certainly don't feel that this was the appropriate

8 amount of time to deal with this phenomenon but we

9 will have to move on.

10 Thank you very much.

11

12 THE WITNESS: Thank you, sir.

13 (The proceedings were adjourned at 5:00 p.m.)

14

15

16 C E R T I F I C A T E

17

18

19 STATE OF FLORIDA )

20 COUNTY OF BROWARD )

21

22

23 I, TERRI L. WRIGHT, Notary Public in and for the

24 State of Florida at Large, certify that I was authorized

25 to and did stenographically report the foregoing

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1 proceedings and that the transcript is a true and

2 complete record of my stenographic notes.

3

4 Dated this 21st day of December, 2011.

5

6

7

8 ______________________________________ Terri L. Wright

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