Anwar et al v. Fairfield Greenwich Limited et al

Filing 1378

BRIEF re: #1377 MOTION to Intervene New Greenwich Litigation Trustee, LLCs Notice of Motion to Intervene for Limited Purposes and for Entry of Order Unsealing Class Certification Motion Papers. . Document filed by New Greenwich Litigation Trustee, LLC, as Successor Trustee of Greenwich Sentry, L.P. and Greenwich Sentry Partners, L.P. Litigation Trusts.(Wallner, Robert)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
PASHA S. ANWAR, et al.,
Plaintiffs,
09ev 11 8-VM-FM

-againstFAIRFIELD GREENWICH LTD., et al.,
Defendants.

NEW GREENWICH LITIGATION TRUSTEE, LLC'S MEMORANDUM IN
SUPPORT OF MOTION TO INTERVENE FOR LIMITED PURPOSES AND FOR
ENTRY OF ORDER UNSEALING CLASS CERTIFICATION MOTION PAPERS

MILBERG LLP
Robert A. Wailner
Kristi Stahnke McGregor
Charles Slidders
One Pennsylvania Plaza
New York, NY 10119
Tel.: [phone]
Attorneys for Proposed Intervenor New Greenwich
Litigation Trustee,
LLC, as Successor Trustee
of
Greenwich Sentry, L.P. and Greenwich Sentry
Partners, L.P. Litigation Trusts

TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES . ii
BACKGROUND............................................................................................................................. 1
ARGUMENT...................................................................................................................................3
A.

The Trustee Should be Permitted to Intervene for Limited Purposes .....................3

B.

5
The Class Certification Papers Should be Unsealed ...............................................
1.

5
There is a Presumptive Right of Access to the Papers ................................

2.

The Anwar Parties Bear the Heavy Burden to Overcome the
Presumptive Right of Access.....................................................................12

3.

The Anwar Parties Cannot Satisfy their Burden........................................14

CONCLUSION.............................................................................................................................17

TABLE OF AUTHORITIES
Page(s)
CASES
In re "Agent Orange" Prod. Liability L itig.,
Cir.
821 F.2d 139 (2d 1987) ....................................................................................................16
In re "Agent Orange" Prod. Liability L itig.,
Cir.
104 F.R.D. 559 (E.D.N.Y. 1985), aff'd, 821 F.2d 139 (2d 1987) ..............................13,15
Anwar v. Fairfield Greenwich Ltd.,
2015 U.S.Dist. LEXIS 27050(S.D.N.Y. Mar. 3, 2015),petition filed,
passim
No. 15-792(2d Cir Mar. 16, 2015)...................................................................................
Anwar v. Fairfield Greenwich Ltd.,
728 F. Supp. 2d 372(S.D.N.Y. 2010) .......................................................................................9
In re Bankof New York Mellon Corp. Forex Transactions Litig.,
(LAK) (S.D.N.Y. Apr. 30,2015) ............................................................14,15
No 12-md-2355
In re Bernard L. Madofflnv. Sec. LLC,
654 F.3d 229 (2d Cir. 2011) ...................................................................................................... 9
Cochran v. Volvo Group North Am., LLC,
(M.D.N.C. 2013).................................................................................... 13
931 F. Supp. 2d735
Doe v. Ashcroft,
317 F. Supp. 2d 488(S.D.N.Y. 2004) .................................................................................... 12
Dorsett v. Cnty.of Nassau,
283 F.R.D. 85 (E.D.N.Y. 2012).................................................................................................5
Eagle Star Ins. Co. v. Arrowood Indem, Co.,
(HB), 2013 U.S.Dist. LEXIS 135869(S.D.N.Y. Sept. 23,
No. 13 Civ. 3410
2013)..............................................................................................................................5, 13, 17
In re Franklin Nat'l Bank Sec. Litig.,
Cir.
92 F.R.D. 468 (S.D.N.Y. 1981), aff'd, 677 F.2d 230 (2d 1981) .....

3

In re Greenwich Sentry, L.P. and Greenwich Sentry Partners, L.P.,
Case No.10-16229(Bankr. S.D.N,Y.)...................................................

1

Hartford Courant v. Pelligrino,
Cir,
371 F.3d 49 (2d 2004) .....................................................................

8

11

In re Hydrogen Peroxide Antitrust Litig.,
552 F.3d 305 (3d Cir. 2008) ..................................................................................................... 7
Joy v. North,
692 F.2d 880 (2d Cir. 1982) .................................................................................................... 15
Lugosch v. Pyramid Co. of Onondaga,
435 F.3d 110 (2d Cir. 2006) .............................................................................................passim
Manchanda v, Bose,
No. 25 Civ. 9658 (LGS), 2015 U.S. Dist. LEXIS 96
(S.D.N.Y. Jan. 6, 2015)........................................................................................................... 13
Martindell v. Int'l Tel. and Tel. Corp.,
594 F.2d 291 (2dCir. 1979) ......................................................................................................3
Nixon v. Warner Commc 'ns, Inc.,
435 U.S. 589 (1978).................................................................................................................. 8
Pa. Pub. Sch. Emps. Ret. Sys. v. Morgan Stanley & Co.,
772F.3d111 (2dCir. 2014)...................................................................................................... 6
Pansy v. Borough of Stroudsburg,
23 F.3d 772 (3d Cir. 1994) ........................................................................................................4
In re Providence Journal Co.,
293 F.3d 1 (1st Cir. 2002)..........................................................................................................8
Sec. Inv. Prot. Corp. v. Bernard L. Madofflnv. Sec. LLC,
Adv. Pro. No. 08-01789 (BRL), 2011 Bankr. LEXIS 1390
(Bankr. S.D.N.Y. Apr. 12, 2011).............................................................................................15
United States v. Amodeo,
44 F.3d 141 (2d Cir. 1995) ....................................................................................................... 5
United States v. Amodeo,
71 F.3d 1044 (2d Cir. 1995) ............................................................................................... 5,12
United States v. Erie County,
763 F.3d 235(2d Cir. 2014) .............................................................................................passim
United States v. Gen. Motors Corp.,
99 F.R.D. 610 (D.D.C. 1983) .................................................................................................. 15
United States v, Green,
....................... 6, 12
No. 12 CR 83S, 2015 U.S. Dist. LEXIS 48982 (W.D.N,Y. Apr. 14, 2015)
United States v. mt '1 Bus. Machines Corp.,
67 F.R.D. 39 (S.D.N.Y. 1975)................................................................................................. 15
111

United States ex rel. Alcohol Foundation, Inc. v. Kalmanovilz Charitable
458
Foundation, Inc.,186 F. Supp. 2d (S.D.N.Y. 2002) ..................................................13, 14
Virgin Atl. Airways Ltd. v. British Airways PLC,
257 F.3d256 (2d Cir. 2001) ......................................................................................................6
Walker, Truesdell, Roth & Assocs., Inc. v. Globe Op Fin. Servs. LLC,
Index Nos. 600469/2009 & 600498/2009 (Sup. Ct., NY Cnty. May 27, 2014),
Ct.,
notices of appeal filed (Sup. NY Cnty., June 27, 2014)r....................................................1
STATUTES AND RULES

Securities Litigation Uniform Standards Act of 1998, Pub. L. No. 105-353, 101,
...............................................................................................................2
112 Stat. 3227 (1998)
Fed. R. Civ. P. 23(f).........................................................................................................................7
Fed. R. Civ. P. 24(b)....................................................................................................................3, 4
Fed, R. Civ. P.26(c) ...................................................................................................................... 16
OTHER AUTHORITIES

Charles Wright, Arthur Miller & Mary Kane, 7C Federal Practice and Procedure
3d1911(2007)........................................................................................................................4
Linda Mullinex, Putting Proponents to Their Proof Evidentiary Rules at Class
Certification, 82 Geo. Wash. L. Rev. 606 (May 2014).............................................................8
MISCELLANEOUS

Joe Van Acker,Madoff Investors Win Class Cert. In Suit Against PwC, Citco,
Law360(Mar. 4,2015) ............................................................................................................ 11
Wall
Chad Bray, Fairfield Greenwich Founders to Settle Madoff Suit, St. J. (Nov.
6,2012) .................................................................................................................................... 11
Back
Christine Vargas Colmey & Jonathan Sablone, in the saddle again: Madofj'
ffs
feeder fund plaint closer to recovery from fund service providers Citco and
Nixon Peabody LLP (Mar. 17, 2015) ........................................... 11
Pricewaterhouse Coopers,
Accounting Firms That Missed Fraud at Madoff
lanthe Dugan & David Crawford,
Wall St. J. (Feb. 18, 2009) .............................................................................11
May Be Liable,
Time.com
Stephen Gandel, The Madoff Fraud: How Culpable Were the Auditors?
(Dec. 17, 2008) ........................................................................................................................10

lv

Madoff lawsuit shows that
Stephen R. Hernick & Matthew C. Blickensderfer,
of fraud
individual issues of reliance will not doom class certification claims
Lexology (Apr. 24. 2015) ........................................................................11
in securities cases,
Institute of Chartered Accountants of Ontario, Allegations of Professional
Misconduct against Stephen Wall (Oct. 12, 2012) .................................................................10
The MadoffAffair, Frontline (May 12, 2009)................................................................................10
Michael J. de la Merced, In Madoff's Wake, Scrutiny ofAccounting Firms, N.Y.
Times(Dec. 21, 2008).............................................................................................................10
Francine McKenna, PwC Partner At MF Global Has Long, And Mixed, Track
(June 7, 2013).........................................................................................10
Record, Forbes.com

PricewaterhouseCoopers LLP, "Ponzi schemes: a classicForensic eye
scam,"
10 (Summer 2013) .....................9
opener, Exploring today's hottest issues in economic crime
Forbes.com
(Apr. 6, 2011)..................................................10
Halah Touryalai,
Protection Racket,

V

New Greenwich Litigation Trustee, LLC, as Successor Trustee of Greenwich Sentry, L.P.
and Greenwich Sentry Partners, L.P. Litigation Trusts, by its undersigned counsel, respectfully
submits this memorandum in support of its motion (i) pursuant to Federal Rule of Civil
Procedure 24(b), to intervene in this action for the limited purposes of this motion, and (ii) for
entry of an Order unsealing the papers filed in support of and in opposition to the motion for
class certification, which motion was granted by the Court by Decision and Order dated March 3,
2015 (ECF No. 1357, 2015 U.S. Dist. LEXIS 27050 (S.D.N.Y. Mar. 3, 2015) ("Class
Certification Decision")).'
BACKGROUND
Greenwich Sentry, L.P. and Greenwich Sentry Partners, L.P. (collectively, the "Domestic
Funds") are among the Fairfield Greenwich Group ("FGG") family of funds that invested with
Bernard L. Madoff Investment Securities LLC. In November 2010, the Domestic Funds filed
2 In connection with
petitions for relief under Chapter 11 of the United States bankruptcy code.
the bankruptcy, the Greenwich Sentry and Greenwich Sentry Partners Litigation Trusts were
3 New
established, and litigation on behalf of the trusts was filed in New York State court.
Greenwich Litigation Trustee, LLC has recently been appointed as Successor Trustee of the
trusts.

To narrow any dispute, the Trustee does not seek to unseal materials reflecting discovery
produced by the plaintiffs or depositions of the plaintiffs.
2

Case
See In re Greenwich Sentry, L.P. and Greenwich Sentry Partners, L.P., No. 10-16229
(Bankr. S.D.N.Y.).
See Walker, Truesdell, Roth & Assocs., Inc. v. GlobeOp Fin. Servs.Index Nos.
LLC,
600469/2009 & 600498/2009 (Sup. Ct., NY Cnty. May 27, 2014) (dismissal motions granted),
Ct.,
notices of appeal filed (Sup. NY Cnty., June 27, 2014). Discovery in the state cases has
largely been coordinated with discovery in this action.

Defendants in the state cases -- who also are defendants in this action -- are (i)
PricewaterhouseCoopers LLP and PricewaterhouseCoopers Accountants N.V. (collectively,
4 and (ii)
"PwC"), who served as the Domestic Funds’ outside auditors, Citco Fund Services
(Europe) BV and Citco (Canada) Inc. (collectively, "Citco"), who served as administrators. As
alleged in the state cases, the Domestic Funds sustained damages due to defendants’ wrongful
conduct including, inter alia, PwC's failure to audit the Funds’ financial statements in
accordance with generally accepted auditing standards, and Citco’s concealment of material
information from the Funds. According to defendants, the state cases are "substantially similar"
No.
to this case.See Anwar v. Fairfield Greenwich Ltd., 15-792 (2d Cir. Mar. 17, 2015), Doc. 6see
2, Citco Rule 23(f) Petition at 15 n. 11; also id.,Declaration of Walter Rieman, Esq.,

6

5
(attaching state complaints).
On March 3, 2015, this Court (Marrero, J.) issued the Class Certification Decision,
certifying a plaintiff class of investors in the Domestic Funds and other FOG-sponsored funds.
petition filed, No. 15-792 (2d Cir Mar. 16,
See ECF No. 1357, 2015 U.S. Dist. LEXIS 27050,
2015). The Court found that "Plaintiffs have provided evidence that the Citco Defendants
withheld the same material information from all of their clients or investors . . . ." ECF No.
*77
1357 at 34-35, 2015 U.S. Dist. LEXIS 27050, at (internal quotation marks and citation

PricewaterhouseCoopers LLP was an auditor for both Domestic Funds, while
PricewaterhouseCoopers Accountants N.V. was an auditor only for Greenwich Sentry, L.P.
In fact, there are important differences between the state cases and this case. For example, the
state cases are not subject to preclusion under the Securities Litigation Uniform Standards Act of
1998, Pub, L. No. 105-353, 101, 112 Stat. 3227 (1998) ("SLUSA"). SLUSA’s applicability to
See ECF No. 1376. Additionally,
this case, however, is sharply disputed by the parties.
defendants claim that the class members have no standing to assert some or all of their claims,
arguing that only the funds (and not investors in the funds) were in privity with the defendants.

2

omitted). The Court also stated that, "among the material omissions Plaintiffs allege, and
are
support with common evidence, that Citco Defendants did not disclose that"
about the veracity of the
grave doubts
(1) "its internal auditors had
Funds' financial information and whether the Funds' assets
existed"; (2) "it was not following its own, or industry-standard
procedures, but was basing the NAY solely on unverified
information from Madoff, never reconciling that information with
"its
an independent source"; (3) attempts to verify that the Funds'
due to Madoff's lack of cooperation in
assets existed failed
doing nothingto supervise
meetings with Citco"; (4) "it was
Madoff as Citco's sub-custodian"; and "Fairfield Sentry was on
(5)
Citco's internal 'Watch List' as a 'high risk fund."
See also
ECF No. 1357 at 33-34, 2015 U.S. Dist. LEXIS 27050,*76 (emphasis supplied).
at
ECF No. 1357 at 34 n.9, 2015 U.S. Dist. LEXIS 27050,*77 n.9 ("Plaintiffs provide common
at
evidence in the record to support each of these omissions."). Although the Class Certification
Decision is publically filed, the parties filed their papers in connection with that motion
(including briefs and exhibits) under seal. shown below, the Trustee and members of the
6 As
public enjoy a presumptive right to access to those documents under both the common law and
the First Amendment; accordingly, the papers should be unsealed forthwith.
ARGUMENT
A.

The Trustee Should be Permitted to Intervene for Limited Purposes

A Rule 24(b) motion is the proper mechanism for a non-party seeking to intervene for the
F.2d
See
limited purpose of unsealing court records. Martindell v. Int'l Tel. and Tel. Corp., 594
92
In
291, 294 (2d Cir. 1979); re Franklin Nat'l Bank Sec. Litig., F.R.D. 468, 471 (S.D.N.Y.
1981), aff'd, 677 F.2d 230 (2d Cir. 1981). Rule 24(b) provides in pertinent part:

6

The Docket references various "sealed" documents
(seeECF Nos. 1296, 1323, 1326 and 1327),
which might include some of the materials at issue.

(1) In General. On timely motion, the court may permit anyone to
intervene who ... (B) has a claim or defense that shares with the
main action a common question of law or fact.

(3) Delay or Prejudice. In exercising its discretion, the court must
consider whether the intervention will unduly delay or prejudice
the adjudication of the original parties’ rights.
Fed. R. Civ. P. 24(b).
Rule 24(b)’s requirements are easily satisfied here. First, the motion is timely, as the
Trustee promptly requested, in accordance with Judge Marrero’s individual rules, a pre-motion
conference on April 13, 2015 -- just weeks after the Court issued the Class Certification
i.e.,
Decision (ECF No. 1366) -- and then filed the instant motion in accordance with the Court’s
April 30, 2015 scheduling order (ECF No, 1371).
Second, because the Trustee challenges the sealing of the class certification papers, its
claim, as required by Rule 24(b)(1)(13), shares "a question of law or fact in common with the
Pansy
main action" -- namely, whether the papers should be sealed. v. Borough of Stroudsburg,
seeCharles Wright, Arthur
23 F.3d 772, 778 (3d Cir. 1994) (internal quotation marks omitted);
Miller & Mary Kane, 7C Federal Practice and Procedure 3d

1911 at 468 (2007) ("[C]ourts

generally have interpreted their discretion under the rule broadly and have held that it can be
invoked by nonparties who seek to intervene for the sole purpose of challenging confidentiality
orders.").
Finally, limited intervention will not "unduly delay or prejudice the adjudication of the
see
original parties’ rights," Fed. R. Civ. P. 24(b)(3), as the Trustee does not seek to litigate the
(seeECF
merits of this action. The parties have proposed a January 4, 2016 trial date No. 1368

ri

7 and
at 2, Letter of David Barrett, Esq. on behalf of the parties to the Court),the Trustee's
8 Accordingly, the Trustee
limited intervention would not delay that date or create any prejudice.
9
should be permitted to intervene for the limited purposes of this motion.
B.

The Class Certification Papers Should be Unsealed
1.

There is a Presumptive Right of Access to the Papers

"The common law right of public access to judicial documents is firmly rooted in our
435
nation's history." Lugosch v. Pyramid Co. of Onondaga, F.3d 110, 119 (2d Cir. 2006).
United Stales v. Erie County,
Indeed, that right "is said to predate even the Constitution itself."
44
United States v. Amodeo, F.3d 141, 145 (2d Cir.
763 F.3d 235, 239 (2d Cir. 2014) (citing
1995) ("Amodeo
r')). As the Second Circuit has explained, the right "is based on the need for
federal courts, although independent -- indeed particularly because they are independent - to
have a measure of accountability and for the public to have confidence in the administration of
71
United States v. Amodeo, F.3d 1044, 1048 (2d
justice." Lugosch,435 F.3d at 119 (quoting
Cir. 1995)("Amodeo Ii").
"Judicial documents" are court filings that are "relevant to the performance of the judicial
Amodeo I,44
Lugosch,435 F.3d at 119 (quoting
function and useful in the judicial process."

'' The letter's reference to a "January 4, 2015" trial date is a typographical error.
8

The fact that the Trustee -- but not the parties -- has sought to unseal the papers shows that the
Trustee's interest is not adequately represented by the parties, further warranting permissive
283
intervention. See Dorsett v. Cnly. of Nassau, F.R.D. 85, 90 (E.D.N.Y. 2012).
Even if the Trustee's request for limited intervention is denied, the Court should still unseal the
See
documents for the reasons set forth in the following section. Eagle Star Ins. Co. v.
No.
at
Arrowoodlndemn. Co., 13 CV 3410 (FIB), 2013 U.S. Dist. LEXIS 135869, *4 (S.D.N.Y.
Sept. 13, 2013) (granting motion to unseal, but denying motion to intervene as moot, explaining:
unseal the records at issue irrespective of a motion to intervene.").
sua sponte
"The Court may

5

F.3d at 145). Here, the class certification papers qualify as "judicial documents" because they
were relevant to the class motion, and the Court considered them in ruling on the motion.
In addition to the common law right of access, the First Amendment provides the Trustee
See United States v.
a presumptive right of access to the class certification motion papers.
at
Green, No. 12 CR 83S, 2015 U.S. Dist. LEXIS 48982, *2 (W.D.N.Y. Apr. 14, 2015) ("The
First Amendment access right extends to court dockets, records, pleadings, and exhibits, and
establishes a presumption of public access that can only be overcome by specific, on-the-record
findings that the public's interest in access to information is overcome by specific and
compelling showings of harm.").
Anwar plaintiffs needed to "establish the Fed. R. Civ. P.
To obtain class certification, the
23 requirements bypreponderance of the evidence." Pa. Pub. Sch. Emps, Ret. Sys. v. Morgan
a
Stanley & Co., 772 F.3d 111, 119 (2d Cir. 2014) (emphasis supplied). Reflecting that heavy
burden, the parties filed voluminous briefs and supporting exhibits that no doubt presented an
10 Indeed, the
Anwar
exhaustive presentation of their opposing positions on class certification.
the
exceeded burden that typically would be imposed on a
plaintiffs' burden on the motion
plaintiff opposing a summary judgment motion. Unlike a class certification motion, on a
summary judgment motion the plaintiff would need to present evidence merely showing the
see
existence of a material issue of fact, Virgin Ati. Airways Ltd. v. British Airways PLC, 257
F.3d 256, 262 (2d Cir. 2001); it would not need to prove anything by a preponderance of the
evidence.

Citco's pending Rule 23(f) petition to the Second Circuit alone comprises12 volumes.
some
No. 15-792 (2d Cir. Mar. 17, 2015), Doc. 6-2.
See Anwar v. Fairfield Greenwich Ltd.,

no

With respect to summary judgment motion papers, the Second Circuit has squarely held
that "a presumption of immediate public access attaches under both the common law and the
F.3d at 126. Given that holding, there can be no basis for
First Amendment." Logusch, 435
refusing to recognize a First Amendment right of access to the class certification papers.
Additional factors warrant recognition of a First Amendment right of access here.
decidedthe class certification motion, and thus has already engaged in
this Court has actually
Compare
extensive judicial decision-making in the context of an extraordinarily large record.
with Logusch, 435 F.3d at 120-21 (holding that First Amendment right of access applied to
Erie County,
summary judgment motion papers, even though motion had not yet been decided);
763 F.3d at 240-43 (holding that First Amendment right of access applied to court-filed
compliance reports, even though court had not yet taken any action with respect to the reports).
Second, the Court issued its Class Certification Decision based solely on the papers
without a public hearing. Had there been a hearing, it presumably would have been transcribed
and open to the public. As the Second Circuit has instructed, "access to written documents filed
in connection with pretrial motions is particularly important in the situation. . . where no hearing
Logusch,
is held and the court's ruling is based solely on the motion papers." 435 F.3d at 124
(ellipsis in original, citation omitted).
Third, the critical importance of the Class Certification Decision in the overall context of
this litigation warrants recognition of a First Amendment access right. "[D]enying or granting
In re Hydrogen Peroxide
class certification is often the defining moment in class actions,"
Antitrust Litig., 552 F.3d 305, 310 (3d Cir. 2008) (citation omitted); indeed, parties may seek
see
interlocutory review of a class certification decision, Fed. R. Civ, P. 23(f) -- something the
defendants have successfully done once and are pursuing again.

7

Fourth, recognition of a First Amendment right of access here is supported by the
"experience and logic" analytical approach sometimes employed by the See Erie County,
courts.
763 F.3d at 241. The "experience" factor "focus[es] on whether the documents are ones that
Id. (citation omitted). "[T]he
'have historically been open to the press and general public."
notion of public access to judicial documents is a capacious one: the courts of this country have
long recognized a 'general right to inspect and copy public records and documents, including
judicial records and documents' in part because the public has an interest in a
'keep[ing]
Id. (second brackets in original) (quoting
watchful eye on the workings of public agencies."
597-98(1978)),
435
Nixon v. Warner Commc'ns, Inc., U.S. 589,
Experience shows that class certification motion papers historically have been publicly
filed.

See Linda Mullinex, Putting Proponents to Their Proof Evidentiary Rules at Class

Certification, 82 Geo. Wash. L. Rev. 606, 609 (May 2014) (describing "[t]he earlier era of driveSee generally Erie
by class certifications or certifications based on the pleadings alone").'
County, 763 F.3d at 241 (finding that First Amendment right of access applied to reports
prepared by compliance monitors, where movant pointed to "several instances" where similar
293
In
reports were publically accessible);re Providence Journal Co., F.3d 1, 10-13 (1st Cir.
371 F.3d 49, 58 (2d Cir. 2004) ("holding
2002), construed in Hartford Courant v. Pelligrino,
that the District of Rhode Island's blanket policy of refusing to file memoranda of law that
counsel were required to submit in connection with motions violated the First Amendment").
"Logic" also supports unsealing the documents, as the issues in this case "are manifestly
Erie
ones of public concern and therefore ones which the public has an interest in overseeing."
County, 763 F.3d at 242. Madoffs scheme obviously is the subject of enormous public
1 4/07/Mullenix82_3_Redacted.pdf.
"Available at http ://www. gwlr.org/wp-content/uploads/20

F.3d
attention,see In re Bernard L. Madofflnv. Sec. LLC, 654 229, 231 (2d Cir. 2011), and has
been described in this case as "the largest financial fraud yet witnessed in the record of human
728 F. Supp. 2d 372, 412
wrongdoing and tragedy." Anwar v. Fairfield Greenwich Ltd.,
(S.D.N.Y. 2010) (Marrero, J.). Defendants themselves have emphasized "the broad public
interest in the Madoff matter" and, specifically, the "broad public interest in full disclosure
6;12
regarding Madoff’s fraud so that the fraud cannot be repeated." Exhibit 1 hereto, Petition at

see id.at 2 ("this [is] a matter of unique public interest"). PwC has even publically addressed the
Madoff scheme in its marketing materials, calling it "the largest Ponzi scheme uncovered to
date" with an estimated $50 billion in losses suffered by victims including "individual investors
See
and sophisticated institutions alike." PricewaterhouseCoopers LLP, "Ponzi schemes: a
12
classic scam," Forensic eye opener, Exploring today's hottest issues in economic crime 10,
(Summer 2013).
Moreover, the evidence of Citco’s "grave doubts" about the funds’ assets and its failure
to "follow[] its own, or industry-standard procedures" (ECF No. 1357 at 33-34, 2015 U.S. Dist.
LEXIS 27050, at *76) directly implicates defendants’ due diligence and monitoring activities -Exhibit 1 hereto, Mills Letter at 2
See
clearly among the "critical issues" in this case. generally
("Among the critical issues in this case is whether Plaintiffs can prove that the Defendants
12

Exhibit 1 hereto is a copy of the August 19, 2013 Letter of Carl Mills, Esq. on behalf of
defendants to The Honorable Frank Maas ("Mills Letter"). Exhibit A to the Mills Letter is a
June 21, 2013 letter to the SEC and the Petition for Review of Decision to Deny Defendants’
Request to Depose Nine Current and Former Securities and Exchange Commission Employees
In
("Petition"), excluding exhibits thereto, filed in re Subpoenas Served in Anwar v. Fairfield
Greenwich Ltd.
13

Available at http://www.pwc.com/en CA/ca/risk/forensic-services/publications/pwc-forensic("[A]rming investors with the right tools and
See
eye-opener-summer-2013-en.pdf. also id.
education to appropriately understand and evaluate investment opportunities will greatly reduce
the impact of these schemes.").

should have reasonably foreseen that the Fairfield defendants would fail to perform the expected
due diligence and monitoring of the Funds’ investments held by BLMIS . . .
Additionally, defendants’ roles with respect to the FGG..sponsored funds have attracted
Forbes.com
(Apr. 6,
Halah Touryalai,
Protection Racket,
significant public attention.See, e.g.,
2011) ("[A]mong [Citco’s] mix of clients have been tainted funds, including Fairfield Greenwich
14 The
Group, which funneled $7 billion into Bernard L. Madoff Investment Securities."); Madoff
In
5 Michael J. de la Merced, Madoff's
Afftuir, Frontline (May 12, 2009) (referencing Citco);’
Times (Dec. 21, 2008) ("PricewaterhouseCoopers
Wake, Scrutiny of Accounting Firms, N.Y.
was the main auditor for Sentry, the largest fund run by Fairfield Greenwich Group, the $14.1
billion investment manager that has lost the most money so far in the Madoff scandal. The
$7.5
accounting firm was tasked with minding Sentry, which had about billion invested in Mr.
Madoff’s firm."). 16

14

Available at http://www.forbes.com/forbes/2011 /0425/features-citco-hedge-fund-keunen
protection-racket.html.
15

I.
Available at http ://www.pbs .org/wgbhlpages/frontline/madoff/interviews/cohen.html#

16

2/22/business/22accounting.html?_r’O. Also
Available at http://www.nytimes.com/2008/1
publically available are charges filed by the Institute of Chartered Accountants of Ontario’s
Professional Conduct Committee against PricewaterhouseCoopers LLP’s engagement partner in
charge of the Fairfield Sentry Limited audit, including charges that he "failed to obtain sufficient
and appropriate audit evidence of the operating effectiveness of the internal controls of Bernard
L. Madoff Investment Securities, LLC . . . ."SeeInstitute of Chartered Accountants of Ontario,
Allegations of Professional Misconduct against Stephen Wall (Oct. 12, 2012),
0 11
http://www.epaontario.ca/Public/CurrentHearings/Hearinglnfo/Ipage 16369 .pdf, at J 1 (vi),
PwC Partner At MF Global Has Long, And Mixed, Track
Francine McKenna,
2(vi). See also
(June 7, 2013), http://www.forbes.com/sites/francinemckenna/2013/06/07/
Record, Forbes. com
pwc-partner-at-mf-global-has-long-and-mixed-track-record/) ("An independent review of Bernie
Madoff Ponzi scheme litigation will show that PwC also audited the Kingate Global Funds, the
Fairfield Greenwich Group of funds - the largest Madoff feeder fund family - and several other
The
funds that invested in Madoff."); Stephen Gandel, Madoff Fraud: How Culpable Were the
Time.com(Dec. 17, 2008), http://content.time.com/time/business/article/
Auditors?,
0,8599,1 867092,00.html) ("[I]t now appears KPMG, along with the other auditors of the Madoff
Footnote continued
10

See
this
Defendants' involvement in litigation itselfhas attracted press reporting. Chad
Wall
Bray, Fairfield Greenwich Founders to Settle Madoff Suit, St. J. (Nov. 6, 2012) (noting that
FGG settlement "doesn't resolve claims against several firms that acted as the Sentry funds'
auditor, custodian or administrator, including PricewaterhouseCoopers LLP and Citco Group
Ltd."). 17 Even the Class Certification Decision has drawn public attention, further underscoring
the public interest in this case.
18 Thus, a First Amendment right of access is amply supported by
"experience and logic."
In sum, the Trustee has a common law and First Amendment presumptive right of access
to the class certification documents.

feeder funds, did very little to ensure investors weren't being ripped off.")
17

103620671495
Available at http://www.wsj.com/artic1es/SBl000l424127887324894104578
Accounting Firms That Missed Fraud at Madoff
lanthe Dugan & David Crawford,
216. See also
May Be Liable, Wall St. J. (Feb. 18, 2009), http://www.wsj.com/articles/SB1234916385
61904323 ("PricewaterhouseCoopers's Canadian affiliate has dismissed claims that it was
negligent in its audit of Madoff feeder fund Fairfield Greenwich Group. . . . 'PwC was not the
auditor for Bernard Madoff Investments where the alleged fraud occurred,' the Canadian affiliate
said in a statement.").
18

Law360
SeeJoe Van Acker, Madoff Investors Win Class Cert, In Suit Against PwC, Citco,
1/madoff-investors-win-class-cert4n-suit(Mar. 4, 2015), http://www.law360.com/articles/62751
Back
againstpwc-citco; Christine Vargas Coirney & Jonathan Sablone, in the saddle again:
Madoff feeder fund plaintiffs closer to recovery from fund service providers Citco and
Pricewaterhouse Coopers, Nixon Peabody LLP (Mar. 17, 2015), http://www.
174229_Private_Fund_Disputes_Alert_i 7MAR20 15 .pdf; Stephen R.
nixonpeabody. corn/files!
1-lernick & Matthew C. Blickensderfer, Madoff lawsuit shows that individual issues of reliance
Lexology (Apr. 24. 2015),
will not doom class certification offraud claims in securities cases,
http :!/www. lexology.com!library/detail . aspx?g=482b65 6b-ffe 1 -4a40-bbcf-c 1 dba 1 f5e973.

11

2.

The Anwar Parties Bear the Heavy Burden to Overcome the
Presumptive Right of Access

Because a presumptive right of access attaches to the class certification documents, the
Anwar parties bear the burden to overcome the presumption. To overcome the First Amendment
presumptive right of access, the
Anwar parties must demonstrate -- on a document-by-document,
redaction-by-redaction basis -- "the most compelling reasons" warranting the continued sealing
F.3d at 121, 123 (citation omitted); also Doe v.
see
of the documents. See Lugosch, 435
Ashcroft, 317 F. Supp. 2d 488, 492 (S.D.N.Y. 2004) (Marrero, J.) (in case implicating national
security concerns, noting Government's burden to show "the specific and compelling reasons"
for "each particular redaction," citing "exacting First Amendment standards"). Continued
sealing "may be justified only with specific, on-the-record findings that sealing is necessary to
preserve higher values and only if the sealing order is narrowly tailored to achieve that aim."
*34
2015 U.S. Dist. LEXIS 48982, at (granting motion to
Logusch,435 F.3d at 124.See Green,
restrict access to hearing transcript that identified government witnesses in criminal case, where
detective's affidavit provided specific information showing that witnesses "have been subjected
to intimidating behavior" and one witness had been "shot three times by unknown assailants").
The First Amendment presumption is "stronger" than the common law presumption,
Erie
County, 763 F.3d at 241; nonetheless, the common law presumption is still heavy, given "the
role of the material at issue in the exercise of Article III judicial power and the resultant value of
such information to those monitoring the federal courts." 239 (quoting
Id. at
Amodeo II, F.3d
71
at 1049).
As Judge Marrero has explained, the burden to overcome the presumption of access is "at
its peak" when the documents at issue are "submitted to and used by the Court":
Judicial records presumptively are to be made available to the
public. See United States v. Amodeo, F.3d 1044, 1047-51 (2d
71
12

Cir. 1995). The weight of the presumption varies according to the
document at issue and "is at its strongest when the document in
question, as here, has been submitted as a basis for judicial
decision making." By contrast, the presumption is particularly
weak if the document plays "no role in the performance of Article
III functions, such as those passed between the parties in
discovery." The party requesting that a matter be filed and kept
under seal bears the burden of showing why the material should be
kept from public view. Here, the presumption in favor of public
access is at its peak because the documents at issue were submitted
to and used by the Court in rendering this Decision."
United States ex rel. Alcohol Foundation, Inc. v. Kalmanovitz Charitable Foundation, Inc.,
186
F. Supp. 2d 458, 465 (S.D.N.Y. 2002) (emphasis supplied, various internal citations omitted).
See also Eagle Star Ins. Co. v. Arrowood Indem. Co., 13 Civ. 3410 (FIB), 2013 U.S. Dist.
No.
LEXIS 135869, at *7 (S.D.N.Y. Sept. 23, 2013) (because sealed materials "constitute 'the heart
of what the Court is asked to act upon," "[t]he weight of the presumption of access therefore is
correspondingly high") (citation omitted); re "Agent Orange" Prod. Liability Litig.,
In
104
F.R.D. 559, 572-73 (E.D.N.Y. 1985) ("Once a court has relied on material, that material should
be disclosed."),
aff'd, 821 F.2d 139 (2d Cir. 1987);
Manchanda v. Bose, 25 Civ. 9658 (LGS),
No.
2015 U.S. Dist. LEXIS 965, at *5..6 (S.D.N.Y. Jan. 6, 2015) (denying motion to seal various
documents, including complaint and information revealed in motion to dismiss and
accompanying exhibits, stating: "the circumstances here are not sufficiently extraordinary to
outweigh the presumption in favor of public access.").
19

19

In Cochran v. Volvo Group North Am., LLC, F. Supp. 2d
931
735 (M.D.N.C. 2013), which
involved a "potential class action," id.at 731, the court recognized a common law (but not a
see
First Amendment) presumptive right of access to class certification papers.
Id. at 728-29. Even
then, the presumption of access could be rebutted "only if countervailing interests 'heavily
outweigh the public interest in access . . Id. at 731 (citation omitted).See generally id.
. ."
at
730 ("Because lawsuits filed on behalf of a class potentially affect the rights of persons who are
not parties to the case, transparency has heightened value in class actions.");
In re "Agent
Orange," 104 F.R.D. at 572-73.

13

In this case, because actual evidence was "submitted to and used by the Court," the
Alcohol Foundation,186 F. Supp. 2d at 465, even with
presumption of access "is at its peak,"
See
not
respect to the materials that were referenced in the Class Certification Decision.
435 F.3d at 123 ("If the rationale behind access is to allow the public an opportunity to
Logusch,
should have
assess the correctness of the judge's decision . . . documents that the judge
considered or relied upon, but did not, are just as deserving of disclosure as those that actually
entered into the judge's decision.' Moreover, 'once those submissions come to the attention of
the district judge, they can fairly be assumed to play a role in the court's deliberation.")
(emphasis in original, citations omitted)
3.

The AnwarParties Cannot Satisfy their Burden

Anwar parties cannot satisfy their burden to overcome the
For several reasons, the
20
presumptive right of access.

First, this case concerns events of many years ago prior to Madoff s arrest in
i.e., -See
December 2008 -- including PwC's and Citco's activities in 2002 and 2003, respectively.
In
Anwar, 728 F. Supp. 2d at 393 n.4,
395. Instructive here is Judge Kaplan's recent decision in
No
re Bank of New York Mellon Corp. Forex Transactions Litig., 12-md-2355 (LAK) (S.D.N.Y.
Apr. 30, 2015) (Exhibit 2 hereto), granting a motion to remove the defendant bank's
i.e.,
confidentiality designations with respect to emails that were "old" --dating from 1997 to
2010. See id.at 1. As the Court explained, "from a competitive point of view, [the documents]
20

Because the class certification materials are subject to the First Amendment right of access, the
Court need not determine whether Anwar parties have overcome the common law right of
the
763
access.See Erie County, F.3d at 241 ("Since we find that the compliance reports are subject
to a First Amendment right of access, which is stronger and can only be overcome under more
stringent circumstances than the common law presumption, . . . we need not, and do not, engage
Anwar
in such a common law analysis."). In any event, the parties cannot satisfy the lower
(albeit still heavy) burden to overcome the common law right of access.

14

appear quite stale in light of the events of the last several years relating to the matters here in
104
controversy." Id.2' See also In re "Agent Orange," F,R.D, at575 ("An important factor in
determining whether disclosure will cause competitive harm is whether the information that the
United States v. In! '1 Bus. Machines Corp.,F.R.D.
67
party seeks to protect is current or stale.");
39, 48-49 (S.D.N.Y. 1975).
seepage 9
Second, the "broad public interest in the Madoff matter" (defendants' phrase,
above) and the public interest in the Class Certification Decision itself weigh heavily in favor of
unsealing the papers.
See In re "Agent Orange,"
104 F.R.D. at573-74; United States v. Gen.
Motors Corp., 99 F.R.D. 610, 612 (D.D.C. 1983) (unsealing documents where case was "of
some public significance and has, in fact, already received considerable publicity," explaining
that "the greater the public's interest in the case the less acceptable are restraints on the public's
access to the proceedings").
Third, any possibility that disclosure of the documents may embarrass the defendants (or,
more accurately, to any embarrassment already caused by the description of the evidence in
add
the Class Certification Order) would not warrant maintaining the seal, Joy v. North,
See
692
F.2d 880, 884 (2d Cir. 1982) ("[A] naked conclusory statement that publication of the Report
will injure the bank in the industry and local community falls woefully short of the kind of
showing which raises even an arguable issue as to whether it may be kept under seal.");
Bank of
New York Mellon,Exhibit 2 hereto at 1 (unsealing emails even though some or all of them were
"probably . . . embarrassing" to the defendant); Inv. Prot. Corp. v. Bernard L. Madofflnv.
Sec.

21

Judge Kaplan found that the bank had not demonstrated "good cause" under the confidentiality
order, and that its arguments "approach the outer limit of responsibility." at 1-2. Here, of
See id.
course, the
Anwar parties need to do much more than merely show "good cause" to maintain the
documents under seal.

15

*7
Sec. LLC,Adv, Pro. No. 08-01789 (BRL), 2011 Bankr, LEXIS 1390, at (Bankr. S.D.N.Y.
Apr. 12, 2011) ("the Defendants have not adequately established any harm beyond merely
’embarrassing or prejudicial’ association with these Ponzi scheme proceedings, which is not
sufficient cause for sealing").
Fourth, the parties anticipate a January 2016 trial date, at which time all of the evidence
of defendants’ alleged misconduct will likely become public. Merely delaying the inevitable
public disclosure serves no "higher values" sufficient to overcome the right of access at this
F.3d at 124.
juncture. See Logusch, 435
Fifth, the Anwar parties cannot meet their burden by relying on the outstanding
Second Amended Stipulation and Order
confidentiality stipulation and order.See generally
Governing Confidentiality of Discovery Material, ECF No. 591 ("Discovery Order"). Under the
Discovery Order, defendants could designate a document as confidential so long as it contained
"non-public information." Id.,

2. But simply because something is "non-public" does not

come close to satisfying the stringent standard necessary to overcome the presumptive right of
22
assumes the judicial documents contain nonpublic
that
access here.Indeed, the right of access
information but still should be unsealed. Moreover, the Discovery Order contemplates
(Id.,
challenges to the confidentiality designations 9), thus eliminating any "reliance" argument
23 See Lugosch, F.3d at 126 ("[T]he mere existence of a
435
that theAnwar parties might assert.
22

The Discovery Order’s standard is even weaker than Rule 26(c)’s standard for a protective
821 F.2d 139,
order. SeeFed. R. Civ. P. 26(c)(1);In re "Agent Orange" Prod. Liability Litig.,
147-48 (2d Cir. 1987) (noting that protective order in that case permitted parties to designate
materials as confidential, even though they "never were required to show good cause as
mandated by Rule 26(c)").
23

The Discovery Order provides that, in the event of a challenge, the party seeking confidential
treatment bears "the burden of demonstrating that the designated material should be protected
under. . . the applicable law."
Id. 9.

16

confidentiality order says nothing about whether complete reliance on the order to avoid
Eagle
disclosure was reasonable."); Star, 2013 U.S. Dist. LEXIS 135869, at *8.9.
Anwar parties cannot satisfy their burden to overcome the presumptive right
In sum, the

of access.
CONCLUSION
For the foregoing reasons, the Court should grant the Trustee's motion for permissive
intervention, and enter an order unsealing the class certification papers.
Dated: New York, New York
May 11, 2015
Respectfully submitted,
MILBERG LLP
Is! Robert A. Wailner
Robert A. Waliner
Kristi Stahnke McGregor
Charles Slidders
One Pennsylvania Plaza
New York, NY 10119
Tel: [phone]
[e-mail]
kmcgregormilberg.com
[e-mail]
Attorneys for Proposed Intervenor New Greenwich
of
LLC, as Successor Trustee
Litigation Trustee,
Greenwich Sentry, L.P. and Greenwich Sentry
Partners, L.P. Litigation Trusts

704361v1

17

[S4IIIfflt1

I I(IL(I (('S I Ii I.>Imrrl & Reed 1.1,1 1

Hughes
Fiubbard

One I arerv Park Plaza
New York, New York 10004-1482
Telephone: [phone]
Fax: [phone]
h ugh i'shubbard.con)

August 19, 2013

BY HAND
The Honorable Frank Maas
United States Magistrate Judge
United States Courthouse
500 Pearl Street
New York, New York 10007
Anwar v. Fairfield Greenwich Limited,
Master File No. 09-CV -00118 (VM) (FM)

Re:

Dear Judge Maas:
We write on behalf of defendants PricewaterhouseCoopers Accountants N.V.,
PricewaterliouseCoopers LLP, and The Citco Group Limited and related entities (collectively,
"Defendants") pursuant to your Honor's Individual Practice Rule LA. and Local Civil Rule 37.2
to request an informal conference to address the Security and Exchange Commission's (the
"Commission" or "SEC") refusal to comply with Rule 45 subpoenas issued in this action and
served on current and former SEC employees (the "Witnesses").
Procedural History
On February 27, 2013, Defendants served subpoenas requesting the deposition
testimony of nine current and former SEC employees who participated in the SEC's
examinations and investigations into Madoff and BLM1S. Defendants and the SEC then engaged
in a series of correspondence and calls, during which the SEC requested additional details
regarding the information sought from the Witnesses, and Defendants provided information
regarding the scope and purpose of the requested testimony. Among other things, Defendants
informed the SEC that the Witnesses have direct knowledge of communications between
Madoff, Fairfield individuals, and the SEC, and that the Witnesses' testimony regarding that
knowledge is important to understanding the nature and extent of Madoffs deception, and
Fairfield's involvement therein. Fairfield's conduct is critically important to defending against
Plaintiffs' claims and assessing comparative fault. Additionally, Defendants stated that the
Witnesses' personal knowledge is a source of evidence relevant to evaluating Plaintiffs'
allegations regarding the potential effectiveness of any additional diligence that Plaintiffs allege
Defendants should have performed.
Additionally, the parties discussed a number of alternative arrangements, and
Defendants offered to limit the number of depositions to four in order to lessen any perceived

Nev York
(,r)s44

w

\Vashiogioo, D.C.

m

Los Angeles

Miami

w

.Jerse\' City

w

Kaj isas (it N

v

1 1,nrls

m

lOky()

burden on the SEC. Following these discussions, on June 7, 2013, SEC Associate General
Counsel Richard M. Humes sent Defendants a decision refusing to authorize any of the requested
depositions on the grounds that preparing for such depositions was unduly burdensome (the
".June 7 Decision," attached as Exhibit 7 to Exhibit A). On June 14, Defendants timely
submitted a Notice of Intent to Petition for Review of the Decision in accordance with SEC
regulations. (Exhibit 7 to Exhibit A.) On June 21, 2013, Defendants filed their Petition for
Review (the "Petition," attached as Exhibit A), which the SEC denied on August 5, 2013 (the
"Aug. 5 Decision", attached as Exhibit B, together with the June 7 Decision, the "Decisions").

The Testimony is Relevant
Under Federal Rule of Civil Procedure 26(b)(1), "[p]arties may obtain discovery
regarding any nonprivileged matter that is relevant to any party's claim or defense." This Court,
not the SEC, is the tribunal best suited to make determinations regarding whether the requested
testimony is relevant. Indeed, this Court has already made determinations in this action
regarding document and witness challenges, and is familiar with the various claims and defenses
of the parties. The SEC should therefore not preempt the authority of this Court to establish the
parameters of discovery in this case.
The proposed testimony is critical to Defendants' ability to present their defenses.
Under New York law, "a negligent tortfeasor is liable for any reasonably foreseeable risk that is
462
Kosymnka v. Polaris Inc/us., Inc.; F,3d 74, 79 (2d Cir.
proximately caused by its action."
2006). Among the critical issues in this case is whether Plaintiffs can prove that the Defendants
should have reasonably foreseen that the Fairfield defendants would fail to perform the expected
due diligence and monitoring of the Funds' investments held by BLMIS, or that the brokerdealer regulatory regime, of which the SEC was a fundamental component, would exhibit the
unprecedented breakdown and failure to uncover the Madoff fraud that is recounted in detail in
the SEC's Office of Inspector General's Report entitled "Investigation of the Failure of the SEC
to Uncover Bernard Madoff's Ponzi Scheme." Two of the Witnesses spent more than two and a
half months at BLMIS's offices, interacting with Madoff on a near-daily basis, and inquiring
regarding many of the so-called "red flags" thatAnwar Plaintiffs allege should have alerted
the
the Defendants that something was amiss at BLMIS. All of the Witnesses had some interactions
with Madoff, BLMIS employees, and/or FUG.
Defendants' Petition stressed the Witnesses' central roles, noting that "Madoff's
ability to conceal the fraud from even the most determined investigators and examiners is highly
relevant to whether the Defendants could or should have uncovered Macloll's scheme." (Petition
at 10.) Defendants further noted that the Witnesses' testimony "is important to understanding
the nature and extent of Madoff's deception and Fairfield's involvement therein. Fairfield's
conduct is critically important to the Defendants in defending against Plaintiffs' claims and
assessing comparative fault." (Petition at 5.) The Witnesses' firsthand knowledge regarding the
SEC's examinations and investigations is entirely relevant to Defendants in defending against
See
Plaintiffs' claims, and the Witnesses should be required to testify.In cc Us, Bioscience Sec.
Litig., 150 F.R.D. 80 (E.D. Pa. 1993) (requiring FDA employees with firsthand Factual
knowledge to testify).

62395 844_I

The Depositions Will Not Impose An Undue Burden On The SEC

45,
Under Federal Rules of Civil Procedure 26 and district courts consider
whether discovery requests would impose an undue burden on the recipient, and further consider
a number of factors relevant to the question of undue burden, including: whether the discovery is
"unreasonably cumulative or duplicative"; whether the discovery sought is "obtainable from
some other source that, is more convenient, less burdensome, or less expensive"; and whether
"the burden or expense of the proposed discovery outweighs its likely benefit., taking into
account the needs of the case, the amount in controversy, the parties' resources, the importance
of the issues at stake in the litigation, and the importance of the proposed discovery in resolving
Watts
the issues. (June 7 Decision at 2-3 (quoting v. SEC,482 F,3d 501, 509 (D.C. Cir. 2007)),
While the testimony the Defendants seek will not unduly burden the SEC, it will
significantly aid in the full and fair resolution Anwar. The Decisions overstate the burden on
of
the SEC of allowing the depositions. Defendants' Petition noted that the requested depositions
are narrow in scope. In correspondence with the SEC, the Defendants listed specific topics about
4 to
which each witness would be examined. (Exhibit Exhibit A, Appendix A; Exhibit 5 to
Exhibit A, Appendix A.) Such targeted discovery, propounded upon a limited number of
See Jones
deponents, regarding specified areas of examination, is not unduly burdensome. v.
McMahon, No. 5:98-CV-0374, 2007 WL 2027910 (N.I).N.Y. July 11, 2007) (permitting
nonparty depositions of 19 of 32 specifically identified non-party New York State Troopers).
Contrary to the SEC's objections, the fact that agency attorneys would have to
prepare the Witnesses for their deposition does not constitute an undue See Fagan i.
burden.
F.R.D. 5,7 (D.D.C. 199]) ("The mere fact that discovery requires
Districi o/Columbia, 136
In ic Shopping
work and may be time consuming is not sufficient to establish undue burden.");
F.R.D. 299 (S.D.N.Y. 1982) (incurring some burden or expense is "not
Carts Antitrust Li g., 95
a valid objection where the information sought is relevant and material"). Furthermore, only
three of the Witnesses are still employed by the SEC. Defendants have expressed willingnss to
accommodate the Witnesses' schedules so that the depositions are as minimally disruptive as
possible, even offering to reduce the number of depositions to minimize any impact on the SEC's
resources and avoid taking cumulative or duplicative testimony. Such a compromise is the
propel approach to minimizing the potential burden on the agency, rather than refusing to allow
05 Civ.
any depositions at all. See Bridgeport Music Inc. v. UMG Recordings, Inc.. No. 6430
(VM)(JCF), 2007 WL 4410405 (S.D.N.Y. Dec. 17, 2007) ("discovery should not simply be
denied on the ground that the person or entity from whom it is sought is not a party to the
action... A better approach is for the court to take steps to relieve a nonparty of the burden of
compliance even when such accommodations might not be provided to a party.").
Under the direction of this Court, the parties have successfully taken scores of
depositions, including those of third-parties. The protocol that has been established has worked
well to ensure that depositions are conducted fairly and efficiently. There is no reason to expect
otherwise in this instance.

62395844!

Respectfully submitted,

Carl W. Mill

cc:

All Anwar counsel of record (via e-mail)
Richard M. Humes, Esq.

62395844_I

*4 1
4

800 TIirnD AVENUE
NEW YORK, NEW YORK 10022
WWW}OEKM.COM

NEW YORK
LONDON
HONGKONC
WASHINGTON DC
N I AM I
CAYMAN I!,LANQS
UVI

TEL [phone]
FAX [phone]

June 21, 2013

VIA FACSIMILE AND FEDERAL EXPRESS
Elizabeth M. Murphy
Secretary
U.S. Securities and Exchange Commission
[00 F. Street, N. E.
Washington, D.C. 20549-9612
Re:

in Anwa,' v. PaiifieId (frew?wic/l Limited
Subpoenas issued
No. 09 Civ. 00118 (VM)(FM) (S.D.N.Y.)

Dear Secretary Murphy:
We represent GlobeOp Financial Services LLC ("UlobeOp") and write on behalf
of
GlobeOp, PricewaterhouseCoopers Accountants NN. ("PwC Netherlands"),
PricewaterhouseCoopers LLP ("PwC Canada"), and The Citco Group Limited and related
entities ("Ctto") (collectively, "Defendants") in the above
-referencedaLtlOfl
On June 7, 2013, the Securities and Exchange Commission ("SEC") denied
De:fi.ndants’ request depose nine eurrei it or former SEC employees. On June 14, 2013,
to
pursuant to Rule 430(b)(1) of the SEC’s Rules of Practice, Del ndants filed a notice of our
Intention to petition for review this decision Pursuant to Rule 430(h)(2), we enclose our Petition
for Review of the SEC’s June 7 decision,
Sincerely,

Jonathan D. Cogan
Justin Sonimers
[phone]

cc:

All An war Counsel

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

In re Subpoenas Served in
ANWAR e. cii.
Master File No. 09cv- I 18 (VM)
(S.D.N.Y.)

V.

FAIRFIELD GREENWICH LIMITED. ci cii.

PETITION FOR REVIEW OF DECISION TO DENY DEFENDANTS' REQUEST TO
IF S ANI) FX( IIANGF
DEPOSE NINE CURRENT AND FORMER SECURITIES
COMMISSION EMPLOYEES

KOBRE & KIM LLP
800 Third Avenue
New York, New York 10022
+ 1 212 488 1200
A i!o,iwys fi De/ndcini
CJloicOp Financial Services LLC

TABLE OF CONTENTS
BACKGROUND
A. The Anwar Action and SEC Investigations .......................................... 2
B. The Subpoenas and Decision ........................................................... 5

ILARGUMENT ..................................................................................... 6
A. The Subject iVat/et' of file Subpoenas is
of Broad Public Interest ......................6
13, The Witnesses
Testimony Is Relevant To The Anii'ar
Action And Cannot Be Obtained From Any Other Source.............................8

C The Depositions Will No! Impose an Undue Burr/en on the SEC..... ........ ... ....I]

111.

CONCLUSION.................................................................................15

TABLE OF AUTHORITIES
P ng

Cases

,.......... .... 7
728
Anwar v. Falifleid Greenwich Lid., F. Stipp. 2d 372 (S,D.N.Y, 20 10) ........
Aristocrat Leisure Lid. v. Deutsche Bank Trust Co. Americas,
262 F R D 293 (S D N Y 2009)

8

Baer v. United Slates, No. 11-1277,2011 6131789 (D.N.J. Dec 8, 2011),
WL
Feb.
mol, to amend denied, 2012 WI, 296120 (.D.N.J 1, 2012) ...... ........ --- .......... ......... 14
Bianzbwg v. Hayes, 408 U.S. 665 (1972) .........................................................................7
6430
Bridgeport Music Inc. v. UA’IG Recordings, Inc., No, 05 Civ. (VM)(JCF),
2007 WL 4410405 (S.D,N.Y, Dec. 17, 2007) .................................................................13
United States v. Biyan, 339 U.S. 323 (1950)......................................................................7
225
Conch! v, Duane, F.R.D. 100 (S.D.N.Y. 2004) ...........................................................9
Comprehensive Nab/i/tat/on Sei’vs., Inv, v, Commerce Funding Corp.,
240 F.R,D. 73 (S.D.N.Y. 2006) .........................................................................................8
F.2d
Davis Enters. v. US. Env. Protection Agency, 877 1181 (3d Cir. 1989) ................12
DichterMad Family Partners, LI.? v. United States, 709 F.3d 749 (901 Cir. 2013),
petition for cert. flied,May 21, 2013 (No. 12-1391) .......................................................14
Donahue v. United States, 870 F. Supp. 2d 97 (D.D.C. 2012) ..........................................7
Eugenia VI Venture Holdings, Ltd. v. Chabra, No, 05 Civ. 5277,
2006 WL 1293118 (S.D.N.Y. May 10, 2006) ... .......................................... .. ...... ............ 8
...
Pagan v. Districtof Columbia,136 F.R.D. 5 (D.D.C. 1991) ...........................................13
No.
.Ines v. McM hon, 5:98-CV-0374,2007 WL 2027910 (NT,D.N.Y. July 11, 2007) 12
Lent v Signature Ti uck SyS Ina, No 06-CV-569S, 201 0 WL 1707998
(W,D.N.Y. Apr, 26, 2010) ....... .......... ...... ..... ........ .. ... ..... ........ ............ ........ ....... .......... 8,15
F.3d
Molchcrtsky v. Un/fec! States, 713 159, 162 (2d Ci r. 2013) ......................................14
129
Moore v Amour Pharmaceutical Co,, F R D 551 (N .D. Ga 1 990)

12

Moore v. Am ur Pharmaceutical Co., 927 17.2d 1194. 1198 (1 Iii Cii. 199 1) ...........12, 13
111

Moran v. Pfizer, No. 99 civ. 9969, 2000 WL 1099884 (S.D.N,Y. 4, 2000) ............9
Aug.
United Slates v, Nixon 418 US, 683 (1974) .............................
United Slates v. Peitz, No. 01 CR 852, 2002 WL 453601

,,,,,................................ 7

(N.D. Iii. March 22, 2002) -12

In re Shopping Carts Antitrust Litig., 95 F.R.D. 299 (S.D.N.Y, 1982) €................... 13
SIPCv, Barbour, 421 U.S. 412 (1975)...............................................................................7
In re U.S. Bioscience Sec. Litig., 150 F.R.D. 80 (E.D. Pa. 1993) ......................................9
Waits v. SEC, 482 F.3d 501 (D.C. Cir. 2007) ..................................................................11

Rules
17 C.F.R.

201.430............................................................................................................

Fed. R. Civ. P. 26..........................................................................................................8, 11
Other Authorities
4 The Works a/Jeremy Benthcnn 320-21 (J.

Browning ed. 1 843) .....................................$

Assessing the Madoff Pouzi Scheme and Regulatory Failures: Hearing Before the
ises
Subcomm on Capital Markets, Insurance, and GovLI nmcnt S ponsoi d Enterprises
at the H Comm on Financial Services, 111th Cong (2009)
(statement of Rep Paul B Knajoiski, Chairman, Subcomm on
Capital Mkts , Ins., and Gov’t Sponsored Enters, of the U Comm on
......................... ....... ......... ....... ......................... ............................................... 7
Fin. Servs...
.......
Exchange Act Release No, 9856, Impact and Monitoring .............. .. .......... ................. 7
How the Securities Regulatory System Jailed to Detect the Madolilnvcstmcnt
Securities Fraud, the Extent to Which Securities Insurance will Assist Defrauded
Victims, and the Need tot Reform Heating before the S Comm on Banking,
Housing and Urban -fairs, 111th Cong (2009) (statement of Sen Christopher
At
........ 7
J. Dodd, Chairman, S. Comm. on Banking, Housing, and Urban Affairs)..... ........

flu

Defendants GlobeOp Financial Services LLC, Citco Group Limited and related
entities, t Pt iccwaterhoueCoopeic AtcounLrnL N V ( 'PwC Nethet ltnd' )
PricewaterhouseCoopers LLP (PwC Canada), (collectively, "Defendants"), pursuant to 17 C.F.R.
€ 201,430(b)(2), hereby respectfully petition for review of the June 7, 201,3 decision (the
"Decision") of the United States Securities and Exchange Commission ("SEC" or
Commission") icJustng to authorize SEC employees Simon i Suh MLagll in Chcung, Peter
Lomore, Mark Donohue, John Gentile, John McCarthy, William Ostrow, Erie Swanson, and
Demetrios Vasilakis (the "Witnesses") to provide the testimony requested pursuant to subpoenas
served on the SEC (the "Subpoenas").
2
The Decision should be reversed for several reasons. First, there is a compelling
public interest in having the Witnesses testify. TheAnwar

Defindanis provided services to

Fairfield Sentry Limited and affiliated Fairfield funds 3 (the "Funds"), which were Bernard L.
Madofi Investment Securities, LLC's ( 'BLMIS") largest investment advisory clients, alleged to
have held more than 5 billion with Madoff as of December 2008, The

Anwar case is about

whether the Defendants could have and should have uncovered and prevented Bernard
d Madoff's
Madoff') schemes The SEC investigated and examined BLMIS and Madoff a number of times
during the period that the Defendants provided services to the Funds. Each of the Witnesses was
directly involved in at least one of the investigations or examinations. In the course of the SEC's
investigations and examinations, each of the Witnesses had direct contact with Bernard Macloff
I

2

The Citco Group Limited Citco Fund Services (Europe) 13 V Citco (( amid ) Inc.,C two ( Iob1tI Custody N.V.,
Citco Fund Set-vices (I3crinudi) Limited and Cilco Bank Nederland N V Dublin Branch ( otkcttVel) the
"Citco Defendants").
Enclosed is Exhibit I are copies of the deposition SUbpOUliS issued ut bum I on/,c/d uocc n,u ic/i Limited,

No 09 Civ. 00118 (VM1 M) ($ D N Y ) and 1 Va/Ac, liw. ckI/ Roil,
LW, etal., Index Nos, 600'169/2009, 600498/2009 (N.Y, Sup CL).
3

c(

is soc inc

./o/' Op 1w ci i's

The Funds include Fairfield entry Limited, Greenwich Sentry Limited, and Greenwich
rh Stun y P irtnr s I P

or other I3LMIS employees. Fairfield personnel were also a focus of the SECs attention - both
during its later examinations and investigations, as well as during the Office of Inspector
General's investigation into the SEC's failure to uncover Madofis fraud and certain of the
Witnesses were personally involved in gathering infrmation from Fairfield personnel, The
Witnesses thus have firsthand knowledge regarding the world's largest-ever Ponzi scheme, the
SEC's investigations and examinations of Madoff and BLM IS, BLMJS's operations, and
Fairfield's potential involvement in Madoffs scheme that is not available from any other source.
Second, the requested testimony will not impose an undue burden on the
Commission or the Witnesses. The ordinary burden of preparing witnesses frr testimony not
is
"undue," even where the proposed deponent is a nonparty. Here, nearly half of the Witnesses are
no longer SEC employees, and any time these Witnesses expend preparing for their depositions
will not have any material impact on the SEC's ability to carry out its business. The Decision
makes no reference to the compromise offered by the Defendants of deposing only four of the
nine Witnesses who were the subject of the Subpoenas. Furthermore, the Decision does not
indicate that the SEC has been inundated with Madoff-related requests for testimony. And, in
general, the same factors that make this a matter of unique public interest make it unlikely that
allowing the Witnesses to testify will set a precedent that would overwhelm the SEC with similar
requests for testimony in the future. There is only one largest-ever Ponzi scheme, f3LMIS had
only one largest client, and there is only one relevant, related, pending litigation - the
Anwar
action in which the Witnesses were subpoenaed.
I.

BACKGROUND
A.

The Anwar Action and SEC Investiaatioiis
The Anwar Plaintiffs purport to represent a class of investors in certain Funds

established by the Fait field Greenwich Group ("I an ficid or "I GO' ) sonie ol which entrusted

3
substantially all of their assets to BLMIS. As the world now knows, Madoli was using IThMIS
to run the largest Ponzi scheme in history. When Madoff contessed to the fraud in December
2008, it was revealed that the FOG funds did not possess the assets purportedly held by F3LMIS,
and the value of Plaintiffs' investments in the funds was allegedly reduced to zero.
Plaintiffs therearter brought
directors and officers of the

roo

the Amvar putative dash action against not only the

funds, but also against thud parties hired by those funds at

various points in time to perihrm administrative services (certain Citco defendants and
cJlobeOp), custodial services (certain Citco defendants), and auditing services (PwC Netherlands
and PwC Canada).

(Anwar v. Fairfield Greenwich Lie!., No,09 Civ, 00118 (VM)(FM)

(S.D.N.Y. filed Jan 7, 2009).) Central to Plaintiffs' case is the issue of whether the Defendants
were negligent for having failed to uncover Madoffs fraud. (Second Consol. Am. Conipi., Sept.
29, 2008, ECF No, 273 ("SCAC" or "Complaint") €j I, 433445, 505508, 554557.) Plaintiffs
allege that the Defendants ignored or failed to investigate "red flags" that cast doubt on the
legitimacy of BLMIS and the returns generated for the Funds, and that additional diligence
regarding Madoff and/or site visits to I3LMIS would have uncovered MadofFs fraud. (SCAC
301, 302 4 315.)
Plaintftfs' Complaint also puts the SEC's investigations squat ely at issue, As the
Definddmts noted in art April

25, 2013 letter to the Commission, the Complaint makes specific

reference to one of the SEC's BLIvIIS investigations, as well as to interviews that certain
Witnesses conducted with individuals from Fairfield. (Ex. 4.) The Complaint alleges that
certain "Fairfield Defendants sought and followed MadolVs instructions on how to approach
their upcoming [SEC] testimony," and that "Madoff.

. . . instruet[ed I the Fairfield Delndarts in

4. All docket c1aiiuns refer to entries ill ,1nu'a,' v, f"a!jield (Jreenwicls

/1,/ri., No. 09 Civ, 0 118 (VM) (SONY.).

IN

4
what to say and what not to say to the SEC" (SCAC 11234.) The Complaint firther alleges that
the Fairfield individuals thereby "aided Madoff in deceiving the SEC."

N. The Complaint goes

on Ito allege that this deception had ripple effects beyond the SEC investigation, as "[tihe
Fairfield Defendants ... cited] to the inconclusive resLilt of' the SEC investigation in their public
statements to Fund investors as proof' that MadolT and
manager and custodian of the Funds' assets."

BIL1MIS could be trusted as [a] faithful

Id. The ilnwar plaintiffs' allegations therefore put

at issue the purpose, scope conduct and resolution of the SEC's investigation.
Each of the Witnesses participated in one of the SEC's investigations or
examinations of Madoff and/or BLMIS. For example, as part of the 1992 cause examination,
investigators Gentile and Vasilakis spoke with Madof on the phone, sent document requests to
BLMIS, and spent at Least one day at I3LMIS's offices. (OlG Repot-0 Ex. 100 at

5, 15, 010

Report Ex. 101 at 5.) During the SEC's 2004-2005 investigatIon. Latnure and Ostrow sent
document requests to BLM IS and reviewed the documents BL MIS

IS provided in response. Both

Lamore and Ostrow spent more than two and a halt' months on-site at BL MIS,

IS. intcrLlcling daily

with Maclull h inisel 1. In connection with the investigation, I aniore and Ostrow spec i heal ly
questioned Macloll about the consistency of' the split strike conversion sttai.cgy's returns and
Madolis incredible ability to time the market. (010 Report Lx. 4$ at 2:5-44: I 65:16-22.)

As

part of the 2005-2006 investigation, I amore. Sub and Chcung inter' iew'cd I CC officers,
including Am it Vijayvergiya (010 Report at 276), and took the depositions oh I ernud Maclam
Frank Di Pascal i, and FGG CEO ,le lirey Tucker, (See 010 Report at 790. 293. 3 10,) The
investigators directly inquired about the purported "red flags" that the
5

'mow- Plainti Uk allege.

All citations to the "Olu Report'' mcI any exhib its thereto refer to the pub lie$ FC ( ) frice of
or the version
,
Inspector General report"I nvestigation of Fnilure to Uncover
ofthe SEC
I3crn:rrd Mado if's Poll "inc."
1.1 Sch
Report No. ()tG-509.

5

including the volume of Madoff's
accounts at the

options trading, and made inquiries regarding Madoff's

Depository Trust Company.

(See, e.g., 010 Report Ex. 48 at 238:48; 242:7-10)

The investigators also contacted at least one individual at the Chicago Board Options Exchange.
(010 Report Ex. 48 at 240:9-10.) Sub and Cheung sent document requests to both BLMIS and
I an fkld, and reviewed the documents produced in response. (010 Report at 280 284.) As a
result of these activities, including their frequent and substantive contact with Madoff, the
Witnesses obtained firsthand knowledge regarding Mado if and [3CM IS s operations, and
Fairfield's involvement therein,
B.

Ijeibpoenas and Decision
On February 27, 2013, Defendants served the Subpoenas requesting the

deposition testimony of nine former and current SEC employees who participated in the SEC's
examinations and investigations into Madoff and I3LMIS. (Ex. 2.) On March 4, SEC Assistant
General Counsel Melinda Hardy requested additional inrorniation regarding ding thc inlot in tion
gat
sought fiom the proposed Witnesses (Ex,

3. ) On April 25, De6endants provided Ms Hardy

with additional i n formation regarding the scope and purpose of the requested testimony. (Ex. 4)
ding
Among other things, the Defendants stated that the Witnesses have direct knowledge of what
Madoff and the Fairfield individuals said to the SEC, and that the Witnesses' testimony
regarding that knowledge is important to understanding the nature and extent of Madoff's
deception and Fairfield's involvement therein. Fairfield's conduct is critically important to the
DeIenchntc in defending against Plaintiffs' claims and assessing comparative (wlt

(Id at 2)

Additionally, the letter stated that the Witnesses' personal knowledge is a source of evidence
relevant to evaluating Plaintiffs' allegations regarding the potential effectiveness of any
additional diligence that Plaintiffs now contend the Defendants should have performed.

(fri.)

A series of conference calls followed to discuss the depositions during which the
parties discussed a number

or alternative arrangements. As demonstrated in Defendants' letter

dated May 31, Defendants offered to limit the number of depositions to four witnesses (Simona
Suh, Peter Lamoi c, Mark Donohue and John Gentile) in order to lessen any put pot lcd burden on
the SEC. (Ex. 5. ) The SEC also produced a small number oldocumenis to Defendants that had
already been made public pursuant to a FOLA request. Following these discussions, on June 7
SEC Associate General Counsel Richard M. l'Iumes sent Defendants the Decision, refusing to
authorize the requested depositions on the grounds that preparing for such depositions was
unduly burdensome, (Ex. 6.) On June 14, Defendants timely submitted a Notice of Intent to
Petition for Review of the Decision, (Ex. 7.)
H. ARGUMENT
As the Decision notes. SEC witnesses should be allowed to testily in response to a
valid subpoena if disclosure is consistent with the public interest. The Decision asserts that the
testimony the Defendants seek is contrary to the public interest because the testimony's
relevance is outweighed by the burden the testimony would impose on the SEC (Ex 6 at 2.)
The Decision's rationale (1) fails to take into

aCCOLInt

the broad public interest in the Madoff

matter, (2) unduly minimizes the relevance of the testimony, and (3) overstates the burden on the
Commission.
A.

The Subject Matef the Su J€JjasJQf Broad Public Interest
There is broad public interest: in lull disclosure regarding Madoirs fraud so that

the fraud cannot be repeated.

MadofEs deception is

Lill

paullelcd in scope and scale

7
Congressional testimony and hearings described Madoff's fraud as
A17111611'
,

extraordinary,U

and in

fudge Marrero described the fraud as "the largest linancial hand yet witnessed in the

record of human wrongdoing and tragedy."
372, 412 (S.D.N.Y. 20

Anwar v. Faii:/iekl Greenwich Lkt,728 F. Supp. 2d

10).7 Although the Decision asserts that the SEC, in conducting its

investigations and examinations of I3LMES, did not locus on verifying that BEM IS's customers'
assets were sale (Decision at 3), protection of hrokendcaler customers' assets is certainly within
the scope of the SEC's jurisdiction. See Exchange Act Release

No, 9856, Impact and

Monitoring ("Rule 1 50- 3 represents the first comprehensive program undertaken by the
Commission to provide regulatory safeguards over customers' funds and securities held by
broker-dealers."); see also 5IPC v, L?wbour, 421 U.S. 412 (I 975) SEC has "plenary
(the
authority" to supervise SIPC). Although the SEC's work is of unquestioned importance to the
securities markets and the public at large, that does not relieve SEC employees of the
responsibility to provide testimony when they have lusthand knowledge relevant to an action
339
S'cc tinited Stales v Bryan, U S 32, 31 (1950) (the public has a tight to every man's
evidence") (quoting Wigmort, Evidence € 2192 (3d ed ))

Llnied States v Nixon.418 U.S.683,

710 (1974) (exceptions "to the demand for every man's evidence are not lightly created nor
expansively construed, for they are in derogation of the search fir truth");

Bran-burg v. [Ia,ves,

408 U.S. 665, 688 (1972)
(holding that even "men of the first rank and consideration . men in
6. How the Securities Regulatory System Failed to Detcet the Madoff I nvestment Securities Fraud, the Extent to
Which Securities Insurance will Assist Defrauded Victims and the Need lot Reform: Flearing hcloie tin. S
of-San. Christopher J Dodd
toph&
Comm on Banking, Housing and Urban Af fairs, Ill iii C ont, (2009) (statement
Chairman, S. Comm. on Banking, Housing, and Urban Affairs),
Congress opined that MadofPs fraud was "a case study to guide the work of the Financial Srvics Committee
in reshaping and reforming our Nation's financial services regulatory system." Assessing the MadofiPouzi
Scheme and Regulatory Failures: Hearing Before the Subcomm, on Capital Markets, Insurance, and
Government Sponsored Enterprises ofthe H Comm on Financial Services, cs 111th Conk (009) (statement of
s of thL II
Rep Paul F Knajot ski Chairman, Sutcomm on Capital Mkts Ins., and Gov't Sponsored I mu
Comm. on Fin. Servs.).

I
high office" must provide testimony) (quoting 4

The Works f Jeiviny Bentham
320-21 (i.

Browning ccl. 1843)),
13.

The Witnesses Testimony Is Relevant To The
Obtained From Any Other Source

Anwar Action And Cannot Be

"The Decision expresses doubt that the testimony the Defendants seek to elicit is
relevant in Anwar and describes the potential relevance of the testimony as that it "may show
what may have happened if Defendants made certain inquiries." (Ex. 6 at 3.) First, relevant
evidence is evidence "having any tendency to make the existence of any fact that is of
consequence to the action more probable or less probable than it would he without the evidence,"
Fed. R. Evict. 401, and discovery

requests need only be reasonably calculated to lead to the

discovery of admissible evidence, Fed. R. Civ. P. 26(b)(1). Second, whether the testimony is
Ultimately relevant is a determination left to the district court. See

Scm's., mv. v, Commerce F'uncling Corp., F.R.D. 78,
240

Cciinprelwnsive Habiliiciiion

83-84 (S.D.N.Y.2006); tens'

Signature Truck Sys,, Inc., 06-CV-569S, 2010 WE 1707998, at
No.

v.

*3 (W.D.N.Y. Apr. 26,

2010). 8 This is especially true where, as here, the district court is very lam liar with the various
claims and deflenses of the parties, having

Supervised the use for more than four years, including

addressing numerous motions to dismiss and reconsider, a motion for class ccrti flcation, and
numerous discovery matters.
Notably, the Decision does not assert that any of the Witnesses lack personal
knowledge regarding the events at issue

s or that they will be unable to provide adequate

5277,
testimony. See Eugenia VI Venture olcfings, Lid. v. Chabra, No, 05 Civ. 2006 WI..
129 3118 (S.D.N.Y. May 10, 2006) (holding that defendant could not seek discovery from
Moreover, while relevance is one factor a court may consider, it "is not the controlling facror in an undue burden
1)
analyst. tHo/a( [ ,sure / (d t' [)cui/ic Bank Trust Co tas 262 FAD. 291 300 ( D N V 2009)
itnu

9
individual who had no personal knowledge) To the contrary, the Defiendants served Subpoenas
only on those SEC personnel from each investigation or examination who have firsthand
knowledge regarding how Madoff was able to carry out the fraud, and the lengths to which he
went to conceal it. Defendants seek testimony regarding the Witnesses' personal knowledge of
communications with thud parties, including M idoli, other 131 MIS employees, and individuals
horn Fairfield, in connection with the SEC's BLMIS investigations and examinations. Madoirs
deception, and the Witnesses' firsthand knowledge thereof, is not only relevant, it is a critical
issue in Ann'ar. See Couch! v. Dunne, 225 F,R.D. 100, 105 (SD.N.Y. 2004) ("Although not
unlimited, relevance, for purposes of discovery, is an extremely broad concept") (citations
omitted).
This is not a case where the Defendants are seeking to elicit "expert" testimony
regarding the SEC's practices with respect to broker-dealer or investment advisor examinations
or investigations.9 Rather, courts have required agency witnesses to testify where they had

in
unique, hirsthand knowledge of facts relevant to the ease, which is the case here. See i'e US,
Bioeiece Sec. Lilig,, 150 F.R.D. 80 (Ed). Pa. 1993) (requiring FDA employees with flrsthand
factual knowledge to tctily)
In asserting that the Witnesses' testimony is not relevant inAnwar, the Decision
focuses on one line of inquiry suggested in Defendants' May 31 letter, related to the fact that
Madoff tokl SEC investigators that he was no longer trading options as part of his split strike
conversion strategy. (Ex, 6 at 4.) The Decision suggests that because the Delndants were

I'
aware that MadolT was purporting to continue to trade options on behal oh' the Fairfield funds,
9. The Decision's citation of, for example, vluran v. P/a',', No. 99 civ. 9969, 2000 WL 1099884. at 3 (S,D.N,Y,
Aug 4 2000) is therefore mapposiic In that caSL tlic Court found that ihcplaintiff '\ is attLmptlne to use the
Dt Witnesses as a lice source of expert testimony thatis 'jyatlable to 1) 1 ai n ti rr elst,WhuL Id
,1

10
Madoif could not have misled the Defendants as he misled the investigators.

Id The Decision

misses the point, which is that for every audience, Madoft had a story, and for every story,
Madoui had supporting facts, argurnents and documents MadofFs ability to conceal the flaud
fi cm even the most determined investigators and examiners is highly relevant to whether
De/ncfcirits could or

the

should have uncovered Madoff's scheme.

Furthermore, the issue of Madof1s lies regarding options trading was only one
example of what the Defendants seek to cover during the Witnesses' depositions. To clarify the
scope of the subpoenas the Defendants provided specific topics for proposed deponent Peter
Lamore, who, as discussed above, spent more than two and a half months at I3LMIS's offices,
interacting with Madoff on a near-daily basis. (Even the fact that Madoft was the investigators'
primary contact is relevant in

Anwar, where the Defendants might have been met with a similar

personal reception had they undertaken procedures at ELM IS.) During his time at BLMIS,
Lamore made inquiries regarding many of the so-called "red flags" that the

Anivar Plaintiffs now

allege should have alerted the Defendants to the fact that something was amiss at ELM IS. For
example, Lamorc made inquiries regardingding the consistency of"the split-strike

Strategy'sreturns

Madours ability to time the market to generate positive returns, and Madofrs ability to enter and
exit the split-strike strategy without affecting the market. (Ex.

5, Appendix A.) Den if, as the

Decision asserts, the SEC had a different "focus" than the Defendants (Lx. 6 at 3), the Witnesses
were still privy to details about BLMIS's operations. The Witnesses monitored ELMIS during
several critical periods, questioned ELMIS regarding the"red flags and still did not uncover
Madoff' s fraud.
Moreover, the proposed testimony is relevant because of the role that FGG, a
named defendant in this action,

played in the OIG's Investigation of the Failure of the SEC to

Uncover Bernard Madoirs Ponzi Scheme Not only did tile SE com ill Lill
C
icitc with FOG in its
earlier examinations and investigations, but the 010 reached out to FOG in 2009 for an onsite
examination and information requests. Having sought information, testimony and documents
fiorn FOG and its personnel in the past, tile, SEC cannot now protest that its actions have no
relevance to this case,
In order to allow Defendants a Full and t'air opportunity to gather evidence to
present their defenses, it is necessary to obtain the deposition testimony of the Witnesses
regarding the outward-facing aspects of the SEC's examinations and investigations.
C.

LIrden oil
The Depositions Will Not Impose an Undue B

The Decision notes that under Federal Rules of Civil Procedure 26 and 45, district
courts consider whether discovery requests would impose an undue burden on the recipient, and
further consider a number of factors relevant to the question of undue burden, including: whether
the discovery is "unreasonably cumulative or duplicative"; whether the discovery sought is
.

'obtainable from some other source that is moic convenient less burdensome, or less

expensive", and whether 'the burden or expense of thc proposed discovery outweighs its likely
benefit, taking into account the needs of the case, the amount in controversy, the parties'
resources, the importance of theissuesat stake in the litigation, and the importance of the
proposed discovery in resolving the issues. (Ex. 6 at 2-3 (quoting
Wails v, SEC. 482 F.3d 501,
509 (DC, Cir. 2007)).)
The discovery sought here is not "unreasonably cumulative or duplicative," nor is
the Witnesses' testimony as to their interactions with Madofi, others at BLMIS, and Fairfield
available from any other source. See Fed, R. Civ. P. 26, The Decision asserts that the
information the Defendants seek is available in the 010 Report, as well as various transcripts and

12
other documents that the SEC has produced. The Decision does not address, however,
Defendants' concerns regarding the admissibility of the 010 Report and other documents.
Courts have noted that the potential inadmissibility of documLnts and prior testimony may be
taken into account when considei ing whetherto allow deposition tctimony, Sec Dcivn Enlums.
,
01
v U S Pnv Pi olec.iion Agency, r 2d 1181, 1183 (3d C ir. 1989) 6. ont(.Ici tag adm tstbi hty
877
documentary evidence in deciding whether district court abused its discretion in denying EPA
depositions). Furthermore, thediscovery sought here will significantly benefit the Full and Eur
resolution of the Anwar ease.
The Decision overstates the burden on the SEC of allowing the depositions. The
with the SEC, the
Defendants requested depositions that are narrow in scope. In cotTespondellce
Defendants listed specific topics about which each witness would be examined, (Ex. 4,
Appendix. A; Ex. 5, Appendix A.) Such targeted discovery, propounded in advance on a limited
number of deponents, regarding specified areas of examination, is not unduly burdensome. Sec

Jones v. McMahon, No. 5:98-CV-0374, 2007 WL 2027910, at *17 (N.D.N.Y. July 11, 2007)
(permitting nonparty depositions of 19 of 32 specifically identified nonparty New York State
Troopers), € Given the narrow scope of the requested testimony, the Decision's citation to

Moom v, Amour Pharmacewical Co., F.R.D. 551 (NJ). Ga, 1990), (Ex. 6 at 3 n.Z), is
129
inapposite. The Moore decision was appealed to the Eleventh Circuit, which upheld the district
court's grant of a motion to quash subpoenas tbr the depositions of two CDC doctors. 927 F.2d
1194, 1198(11th Cir. 1991) The doctors were central to the (DC s AIDS research at the height

No.
Untied ,'iciIec v, Pc/i:, 01 ('R 852,
tO. Courts have previously ordered the SEC to comply with subpoenas
2002 WL 45361)1, at 5 (NJ). III, March 22, 2002) (denying the SEC's motion to quash a subpoenas duces
for documents where the SEC had information pertinent to criminal allegations
tecum served on SEC attorneys
against def)ndanl.)

13
of the AIDS epidemic, and the court noted that the subject matter about which the doctors'
testimony was sought was overbroad, such that allowing their depositions "would be similar to
asking a Federal Aviation Administration employee, in an airline crash case, to detail the
evolution of airline safety since the Wright brothers." Ic!. This is hardly the case here.
Moreover, the fact that agency attorneys would have to prepare the Witnesses i'or
their deposition does not constitute an undue burden. See F'cgan r. District ol Colunthia, 136
F.R.D. 5, 7 (D,D,C. 1991) ("The mere fact that discovery requires work and may he time
consuming is not sufficient to establish undue burden,"); In re Sliopping Car/s An/i/i Lilig., 95
-us!
F.R.D. 299. 308 (S.D.N.Y. 1982) (incurring some burden or expense is "not a valid objection
where the information sought is relevant and material") (citation omitted).
As the Decision acknowledges, fewer than halt' of the Witnesses still work at the
SEC. Defendants have expressed willingness to accommodate the Witnesses' schedules so that
the depositions are as minimally disruptive as possible.
Furthermore, the Defendants offered to reduce the number of depositions from
nine to four in order to minimize any impact on the Commission's resources and operations and
avoid taking any cumulative or duplicative testimony. The reduction in the number of
depositions would reduce any burden on the agency in preparing the Witnesses, would mitigate
any potential impact on the SEC's ongoing operations, and would decrease the likelihood that
any of the testimony would be cumulative. Such a compromise is the proper approach to
minimizing the potential burden on the agency, rather than refusing to allow any depositions at

all. See Bridgeporl Music Inc. v. UiVIC] Recordings, Inc., No, 05 Civ.
6430, at 3 (VM)(CF),
2007 WL 4410405 (S.D.N.Y. Dec. 17, 2007) ("[D]iscovery should not simply be denied on the
ground that the person or entity from whom it is sought is not a party to the action. . - A better

14
approach is for the court to take steps to relieve a nonparty of the burden of compliance even
when such accommodations might not he provided to a party.") (citation omitted).
, employees, this is
While courts recognize the interest of agencies to protect their
sLklng testimony horn SI C
not the sort of case that will lead to a flood of private litigants

employees. The Decision gives no indication that the SEC has been inundated with requests for
its employees to testily in Madoff-related matters. Notably, the SEC has successfully rebuffed
attempts by private litigants to sue it for its failure to uncover Madoff's fraud, See Mo/c/ia/sky t'.

United S/a/es, 713 F.3d 159, 162 (2d Cir. 2013)
(holding that the discretionary function
exception to the Federal Torts Claims Act barred investor's claims against (he government based
on the SEC's failure to discover Madoff's Ponzi scheme);
Dichtc,'A1cid iam// Pw'ine;'s, LLP v,

United States, 709 F.3d (9th Cir. 2013),petitionf/n' ccii. fl/cc!, May 2 I 2013 (No. 12-1391);
749
Donahue v. Un/Icc! Skites, F. Supp. 2d 97 (D.D.C. 2012) (same); l3aei' v. United Slates, No.
870
I 1-t 277, 2011 WE 6131789 (D.N,J. Dec. S. 2011), to amend denied, 2012 WL 296120
inot.

in
(D.N.J Feb. I, 2012). Nor would allowing testimony to be taken Anwar set a precedent that
would force the Commission to allow testimony to be taken in all manner of other matters.

Anwar is unique in that it involves the world's largest-ever Ponzi scheme, and B EM IS's single
largest client by fat Allowing the Defendants to depose the Witnesses will not create precedent
for depositions to be taken in lutue cases Rately, if ever, will the SEC stall have had such
frequent, intimate contact with the mastermind of a fraud.
Here, unlike in the vast majority of cases, the SEC's I3LMIS investigations and
examinations were chronicled in a 400 page report issued by the Commission Office of the
Inspector General that was based on 140 depositions and interviewsof 122 individuals,

15
Finally. the Decision does not take into account the amount in controversy in

Anwar, Plaintiffs allege that their class-wide losses amount to more than $5 billion, (Pis.' Class
Cert. Mern. at 2, 1/11/12, EiCF No, 776,) The importance of the ISSUeS at stake tiecessitate full
discovery to explore Defendants' defenses and gain first-hand testimony regarding the BIMIS
operations.

III. CONCLUSION
For the above reasons, Defendants respectfully request that the SEC reverse the
Decision and authorize the Witnesses to provide deposition testimony.

Dated: June 21, 2013
Respeci1i. Ely Submitted,

' Jonathan 1). Cogan
Justin Sommers
KOBIU & KIM H P
800 Third Avenue
Now York, New York 10022
[ci -11 212488 1200
11712488 1220
Counsel for GlobeOp J'7noncia/ Services LW

at
II Sea Lent t', Signalwa 'fruckS,yvtamx, Inc., So. 06-c V-S&YS, 200 WI 1707998 (WD.N.Y i\pril 26, 2010),
4 (allowing addiionu! nonparty deposition ill tight of the complex issues, amount in contioversy, and multiple
(Iclendanis in the case and the importance of the proposed discovery in resolving issues related to plaintitts'
theory orliability).

CERTIFICATE OF SERVICE
[, Justin Sommers, counsel for GlobeOp Financial Services LLC, hereby certify that on June 21,
2013, 1 filed the foregoing Petition for Review with the Secretary oithe United States Securities
and Exchange Commission by Lacsimilc ([phone]) and Federal L\plcss A copy was also
served on Assistant General Counsel Richard M Humes via facsnm1t Federal I xpicsc and
electronic mail.

EXHIBIT 2

Case 1:11-cv-09175-LAK Document 265 Filed 04/30/15 Page 1 of 2

UNITED STATES DISTRICT COURT
RN
SOUTHERN DIS I RE( i or NEW YORK
---------------------------x
In re:
BANK OF NEW YORK MELLON CORP.
FOREX TRANSACTIONS LITIGATION
---------------------------x
This Document Relates to:
Louisiana Municipal Police Employees' Retirement
System v. The BankNew York Mellon Coq).,
of
ii Civ, 9175 (LAK)
---------------------------x

12-md-2335 (LAK)

USDS SDNIY
DOCUMENT
ELECTRONICALLY FILED
DOC #
DATE FILED: 'I (3o i

0 RI) ER

I ,ivis A. K,\

lj\N,

D isirict Juc/ge.

This is a securities class action brought on belial I’ of persons who purchased Bank of
New York Mellon ("BNYM") common stock during part of the period 2008 through 2011 The
claim, which in substantial part underlies also a civil action by the United States as well as actions
against BNYM by customers, turns in major part on the assertion that BN YM’ s standing instruction
h)reign exchange ("FX") service was marketed as providing its customers with "best execution" for
FX transactions when, in truth and in fact, it did not - it provided BNYM with exceptional profits,
allegedly at customer expense. The government and customer cases, subject in some cases to court
approval, have been settled for more than $700 million in the course of which BNYM in substance
admitted the assertion regarding the standing instruction service and "best execution." This case,
which claims that BNYM common stock purchasers were misled by BNYM’S actions, remains.
It is before the Court on a motion by the Lead Plaintiff to eliminate confidentiality protection for a
handful of the millions of documents that I3NYM designated as confidential pursuant to the
Confidentiality Order entered in this action on June 20, 2012 (Dl 104).
The eight documents in question consist of emails between and among BNYM
personnel concerning a variety of matters relating to the standing instruction program and the
pricing o:f:FX services thereunder. The Court has reviewed each of them. Some or all probably are
embarrassing to BNYM. But they are old the earliest dates in part to 1997 and the most recent to
2010 -- and, from a competitive point of view, appear quite stale in light of the events of the last
several years relating to the matters here in controversy. Parts of two of the emails in question have
Reutersnews
been made public by one or another state attorney general. One comments tersely on a
story concerning another bank. All appear to relate to the fraud alleged in this ease and, in some
respects at least, admitted in cases that are pending settlement approval proceedings.
In the circumstances, the Court concludes that BN YM has not demonstrated good
cause for maintaining these documents in confidence Indeed, its iguinL uts ippinacli the outer limit

Case 1:11-cv-09175-LAK Document 265 Filed 04/30/15 Page 2 of 2

of responsibility.
Lead Plaintiff's motion to dc-designate certain documents marked as confidential by
I3NYM [12-md-2335, DI 53] is granted in all respects.
SO ORi)ERJ1).
Dated:

April 30, 2015

Lew
. aplan
United States District Judge