Anwar et al v. Fairfield Greenwich Limited et al

Filing 1190

LETTER addressed to Magistrate Judge Frank Maas from David A. Barrett dated 09/09/2013 re: SEC Depositions. Document filed by Harel Insurance Company, Ltd., Pacific West Health Medical Center Inc. Employees Retirement Trust(On behalf of Itself), Securities & Investment Company Bahrain, St. Stephen's School.(Barrett, David)

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September 13, 2013

VIA ECF FILING
The Honorable Frank Maas
United States Magistrate Judge
United States Courthouse
500 Pearl Street
New York, New York 10007
Re:

Anwar v. Fairfield Greenwich Limited,
Master File No. 09-CV -00118 (VM)(FM)

Dear Judge Maas:
We are writing in advance of the pre-motion conference on Monday, September
16,2013, to apprise the Court that the Anwar Plaintiffs' oppose enforcement of
Defendants' deposition subpoenas of current and former SEC employees. Defendants
have failed to show that such testimony would have any meaningful relevance whatever,
while depositions clearly would impose substantial and needless expense and delay in a
case where enormous resources have already been expended to complete fact discovery.
As the Court is aware, the SEC's Office of Inspector General ("OIG") conducted
an exhaustive investigation of the reasons why the agency failed to detect the Madoff
fraud. That investigation included interviews or depositions of 136 witnesses, among
them all of the SEC personnel whom Defendants have subpoenaed. The OIG published
its findings in a 457-page report (with 536 exhibits), entitled "Investigation of the Failure
of the SEC to Uncover Bernard Madoff's Ponzi Scheme" (August 31, 2009, available at
http://www.sec.gov/news/studies/2009/0ig-509.pdf)
(the "Report"). As the SEC's
counsel states in her August 26,2013 letter to the Court (the "SEC Letter"), all of the
notes and transcripts for these witnesses have been provided to Defendants, as well as
10,000 pages of documents.'
The Report details the myriad failings of SEC personnel in the course of
examinations and investigations of BLMIS. It finds that "a thorough and competent
investigation or examination [of Madoff and BLMIS] was never performed." (Report at
21). The SEC did not seek "to verify Madoff's trading through an independent third
party, and, in fact, never actually conducted a Ponzi scheme examination or investigation
I Plaintiffs did not see the SEC Letter until the Court filed it with an endorsed order on August
28,2013. We trust that in the future, the SEC will serve Plaintiffs' counsel (and all parties) with
any communications it has with the Court.

WWW.BSFLLP.COM

BOIES,

SCHILLER

&

FLEXNER

LLP

The Honorable Frank Maas
September 13,2013
Page 2

of Mad off' (id.). The Report concludes: "[D]espite numerous credible and detailed
complaints, the SEC never properly examined or investigated Madoff's trading and never
took the necessary, but basic, steps to determine if Madoffwas operating a Ponzi scheme.
Had these efforts been made with appropriate follow-up at any time beginning in June of
1992 until December 2008, the SEC could have uncovered the Ponzi scheme well before
Madoff confessed." (Report at 41).
Despite the extensive material that the SEC has produced concerning the very
witnesses whom Defendants have subpoenaed, Defendants argue that they need
depositions to support the defense claims that Defendants would have been unable to
detect Madoff's fraud even if they had conducted on-site testing or examination at
BLMIS or sought independent confirmation ofthe existence of the Fairfield Funds' assets
from third parties. But these arguments are pure speculation. The witnesses' testimony
already has led OIG to find, in effect, that the SEC was negligent or worse. And since
the witnesses never sought to "verify Madoff's trading through a third party," their
testimony cannot prove what would have happened if they had done something that never
occurred (i.e., conducted a proper examination or verified Madoff's purported trades and
holdings with third parties - which is what Plaintiffs argue should have been done by
Defendants). Indeed, if the witnesses had any views or evidence that, for example,
contacting third parties would have been futile, they undoubtedly would have told the
OIG in an effort to exculpate themselves.
In short, there is no reason to think that deposition testimony would add anything
relevant to the enormous discovery record in this case? Balanced against this is the
substantial cost and delay that depositions would entail. In this regard, fact discovery
closed on June 30, 2013, and the Scheduling Order (Dkt. 1025) contemplates completion
of expert discovery by year-end and dispositive motions shortly thereafter, making a trial
in mid-2014 (more than five years after the case was filed) eminently feasible. The
discovery record already is massive; the parties took some 98 depositions of persons with
first-hand knowledge of the facts and some ten million pages of documents have been
produced. Expending still more of the parties' resources in these circumstances would be
extraordinarily wasteful.
In terms of delay, the Defendants themselves are at fault, yet they are effectively
seeking still more delay. Defendants had the Report with its identification of potential
SEC witnesses three and one-half years before they served the SEC subpoenas on
February 27, 2013 - exactly one day before the Scheduling Order's deadline to subpoena
third parties. Although the parties agreed that the SEC subpoenas may be addressed after

To the limited extent that the SEC witnesses interacted with FGG, the relevant written records
have been produced to Defendants, who deposed the FGG witnesses at length concerning what
they told the SEC.

2

BOIES,

SCHILLER

&

FLEXNER

LLP

The Honorable Frank Maas
September 13,2013
Page 3

the June 30 discovery cut-off, this does not excuse Defendants' multi-year delay in
beginning a process that they should have anticipated would take many months to
resolve.
Indeed, there is no assurance that SEC depositions would be held anytime soon
even if the Court were to grant a motion to compel. Given the SEC's adamant opposition
and other circumstances (including the precedential impact of allowing the depositions
and the undoubted strain that budget sequestration puts on the SEC's resources), the SEC
may well appeal to the District Court and if unsuccessful, to the Court of Appeals.
Whatever the standard of review (see SEC Letter at 3-4), the SEC's refusal to
allow depositions reflects a formal, reasoned decision and order of the full Commission
(see Defendants' August 18, 2013 letter, Ex. B). It should not be overturned in the
present context absent compelling reasons, which Defendants have utterly failed to
demonstrate. The SEC - and Plaintiffs - should not have to waste resources to
underwrite Defendants' fishing expedition.
Respe~tfullY yours, ~
~~

David A. Barrett
cc: All Anwar counsel of record (via e-mail)
Laura Walker, Esq. (via e-mail)