Anwar et al v. Fairfield Greenwich Limited et al

Filing 906

TRANSCRIPT of Proceedings re: CONFERNCE held on 5/1/2012 before Magistrate Judge Theodore H. Katz. Court Reporter/Transcriber: Jennifer Thun, [phone]. Transcript may be viewed at the court public terminal or purchased through the Court Reporter/Transcriber before the deadline for Release of Transcript Restriction. After that date it may be obtained through PACER. Redaction Request due 8/13/2012. Redacted Transcript Deadline set for 8/23/2012. Release of Transcript Restriction set for 10/19/2012.Filed In Associated Cases: 1:09-cv-00118-VM-FM et al.(McGuirk, Kelly)

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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PASHA ANWAR,

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Plaintiff,

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v.
FAIRFIELD GREENWICH LIMITED,

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09 CV 118(VM)(THK)

Defendants.
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New York, N.Y.
May 1, 2012
11:00 a.m.

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Before:
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HON. THEODORE H. KATZ,
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Magistrate Judge
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APPEARANCES
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WOLF POPPER, LLP
Attorney for Defendant
BY: ROBERT FINKLE

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COVINGTON & BURLING, L.L.P.
Attorneys for Defendant
BY: BRUCE A. BAIRD

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SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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(In chambers)

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THE COURT:

This is Judge Katz.

Sorry for the delay.

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So I have your letters.

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Mr. Finkle, on your issue of Mr. Beaus' e-mails.

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MR. FINKEL:

Let me hear from you first,

Yes, your Honor.

Greg Beaus is a partner

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at Fairfield Greenwich from 2002 to 2003.

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employee prior to that from 2000.

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compensation in the form of a buyout, a percentage of profits

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through 2008.

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He was a senior

Then he received partnership

Beaus' counsel has agreed to produce those documents

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only to 2003.

He doesn't deny that the claims from 2003 to

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2008 were present in the complaint and they were sustained by

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the Court.

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state of mind not only with respect to the claims against him

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to the period 2008, but also to the extent that it may bear on

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the state of mind and the activity of the other defendants.

We're looking for relevant discovery as to Beaus'

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Now, from 2003 Greg Beaus was one of the most senior

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people at Fairfield Greenwich and it may well be that in 2004

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to 2008 in electronic documents he has information that will

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not only be relevant to the claims against him, but also

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against the other defendants.

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Greenwich 2003.

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THE COURT:

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MR. FINKEL:

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Bear in mind he did leave

Are you on a cell phone?
I am.

I am sorry.

I am on a speaker

phone.
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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THE COURT:

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MR. FINKEL:

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will take it out of the way.

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I can pick up the phone if that will be easier.

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THE COURT:

We're getting buzzing here.
I do have a phone that is on my desk.

I

I don't know if that is better.

That will be easier because the reporter

is having trouble hearing.

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Much better.

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MR. FINKEL:

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As I was saying valid claims against Greg

Beaus through 2008, and we're looking for the discovery

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commensurate with the claims.

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clear not only are we entitled to the discovery for the

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relevant period through 2008.

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after 2008 for a period of time, we would have some breadth

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beyond the claims that we're asserting.

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with the chief counsel for the defendants, Simpson Thatcher,

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that we would take discovery through the middle of discovery

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2009 with respect to documents.

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The law in the Second Circuit is

If we have chose to request even

In fact, we agreed

So I am only ask for those documents that are relevant

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to the claims against Beaus and it is entirely consistent with

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Rule 26.

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THE COURT:

Well, as I understand it, it is Mr. Beaus'

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position that he left Fairfield in 2003.

I think there is a

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suggestion, although I don't think it has been established even

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when he was at Fairfield, he was not the person steering people

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to Madoff.

But leaving that aside, what I understand has been
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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produced by both Fairfield is that any communications between

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Mr. Beaus and Fairfield regardless of the time period.

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Mr. Beaus is objecting to is having to search through six years

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of personal e-mails after he left Fairfield in the hope that

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maybe you would find in random remark he made there to some

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third party about Madoff.

What

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Isn't that a little bit of a fishing expedition?

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MR. FINKEL:

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Your Honor, it is not at all.

Because

during the period of 2004 to 2008 Greg Beaus received

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compensation of approximately $15 million is attributable to

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the Madoff relationship.

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THE COURT:

That was for work he performed while he

was at Fairfield, correct.
MR. FINKEL:

It was a resolution of his partnership

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interests and it did derive from the partnership interests that

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he received in 2002, 2003.

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THE COURT:

Have you received the e-mails from

Fairfield yet?
MR. FINKEL:

We have received the documents relating

to Beaus from Fairfield.
THE COURT:

Were there extensive communications

between him and Fairfield post 2003?
MR. FINKEL:

No, there aren't.

I would say that Bruce

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Baird correctly represented that there weren't any or there

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were very few.
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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THE COURT:

So what is it you are hoping to find in

his personal e-mails?
MR. FINKEL:

It may well be that he continued to

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communicate with his clients who are investors in Fairfield

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Greenwich on the subject matter that is in dispute, which is

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the Madoff relationship.

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don't believe that Bruce Baird has argued that it would be

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burdensome to search thee-mails with key terms.

It is not a burdensome request.

I

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THE COURT:

I thought that is his primarily argument.

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MR. BAIRD:

Yes, it is our argument.

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Among other

things, it would be burdensome, your Honor.

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THE COURT:

Let me ask you something --

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MR. BAIRD:

It is a pain in the neck.

And the longer

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the time period, the more of a pain the neck because e-mail

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accounts are in different places where they are stored.

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THE COURT:

Let me ask you something:

Did Mr. Baird

have clients at Fairfield that he referred to Madoff?

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MR. BAIRD:

You mean Mr. Beaus?

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THE COURT:

I am sorry.

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MR. BAIRD:

Yes -- no.

Mr. Beaus.
That wasn't his job.

I don't

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believe there is an instance of that.

His whole job was to

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find a non-Madoff -- to create a non-Madoff aspect of the

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business.

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and try to persuade customers of Fairfield that they should

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invest with these other money managers.

What his job was to go out to other money managers

That is the thing he

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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built.

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he might leave and he would like a payout based on what he

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built because he would be walking away from this thing that he

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built.

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That is why he asked -- he was going to build that and

MR. FINKEL:

That is a disputed fact, your Honor.

If

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you look at the severance agreement that Beaus put into the

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record in Exhibit A, it lists what he did while he was at

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Fairfield Greenwich.

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the things that are listed in the four points are that he was

It is on page 12 of Exhibit A.

Two of

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involved in constructing and managing a multi manager fund, the

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Fairfield Investment Fund comprising of managers with whom the

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firm did business.

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Fund was Madoff.

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Greg Beaus had very substantial meetings with clients of

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Fairfield Greenwich with regard to Madoff trying to convince

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them to invest in what is really a fund of funds, the Fairfield

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Investment Fund with respect to Madoff.

One of those four managers in the Fairfield

We have documents that show in 2002, 2003

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THE COURT:

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Okay.

MR. FINKEL:

The severance agreement that quotes

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Mr. Beaus supported the marketing, including the drafting of

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shareholder correspondence of the firm's senior manager in

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multi manager funds through his extensive client base

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throughout the world.

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MR. BAIRD:

We don't dispute that he can look at any

of the documents from 2000 to 2003 to try to make his point.
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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THE COURT:

Well, leaving aside that dispute, which

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really isn't determinative, the question is what about his

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communications after he left Fairfield is going to shed any

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light on this?

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MR. FINKEL:

Well, we don't know.

We haven't taken

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Greg Beaus' deposition.

We haven't taken some of the senior

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people from 2002 to 2003 on the issue of why he left.

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want to take the deposition once.

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logic, and since Madoff was the dominate relationship that

We only

But it certainly bears some

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Fairfield Greenwich had in 2002, 2003, that Greg Beaus may have

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had communications from 2004 to 2008 on the subject matter of

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Madoff.

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This is a case where not only did the seven class

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representative plaintiffs do electronic discovery, but 20 other

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named plaintiffs did electronic discovery and we were required

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to search multiple different e-mail boxes to obtain what was

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marginally relative information.

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Mr. Beaus had one or two e-mail addresses from 2004 to 2008.

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know from my personal experiences with my own e-mails that it

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is a relatively easy process to review the e-mails for keyword

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searches.

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documentation.

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Look, as far as I understand,
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I do it all the time when I am looking for

THE COURT:

So, Mr. Baird, how difficult would it be

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for him to just to do a search that involves the word "Madoff"

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or "Fairfield"?
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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MR. BAIRD:

It is difficult, your Honor.

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just one computer.

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computers.

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procedure in a case, I shake my head at the variety of

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different things that go wrong and the variety of places where

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past e-mails may end up.

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in the neck and he is paying his own fees and I guess that is

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the motive, your Honor.

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He has changed jobs.

It is not

He has changed

Every time I start an electronic discovery

So it costs money.

It will be a pain

In terms of what Mr. Finkle is saying, he is using the

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words as a fishing expedition.

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could conceivably find something.

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relates to that.

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There is no claim of wrongdoing.

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falls on what Mr. Beaus did or didn't do between 2002 and 2003.

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It is one of those rare situations in the way there is no other

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defendant in this case situated like Mr. Beaus is leaving in

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2003.

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firm cutoff in terms because of the claim that is made, because

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of the underlying facts that when he left you actually can say

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discovery after 2003 is not going to make his claim or break

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his claim.

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He is talking about how he
He doesn't have a claim that

His claim relates only to unjust enrichment.
It is a claim that rises and

It is that rare case where you really can say there is a

He has to find something between 2002, 2003.

MR. FINKEL:

If I may, Judge, I don't think that would

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be the case if Greg Beaus only received compensation in 2002,

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2003.

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for five additional years.

Here he received a percentage of the partnership profits
So I contest Bruce Baird's

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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proposition that Greg Beaus' state of mind only in 2002, 2003

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is relevant.

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regard to Madoff or Fairfield from 2004 to 2008, that would

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bear on the issue of unjust enrichment.

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Clearly if information came to his attention with

THE COURT:

There are no communications that turned up

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between him and Fairfield during this period that have any

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bearing on these issues.

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made to a third-party bear on that claim?

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MR. FINKEL:

So why would a passing comment he

Well, it would go to -- depending on the

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comment, it would go to the merits of the claim against

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Bruce --

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THE COURT:

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MR. FINKEL:

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THE COURT:

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MR. FINKEL:

But doesn't that turn -Whether or not -Wait a minute.
-- whether or not Greg Beaus was entitled

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to receive the compensation from 2004 to 2008 and as well as

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potentially claims against third parties depending on what he

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said.

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This is not a fishing expedition because in those five

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years Greg Beaus received $15 million as a percentage of the

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profits of Fairfield Greenwich.

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within the community for having a relationship with Fairfield

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and Madoff.

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have communications over that five-year period on the subject

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matter of Fairfield and Madoff.

I assume that he was known

It is entirely reasonable to assume that he did

Without the discovery, I

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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cannot say for a fact that he had those communications, but it

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certainly is reasonable that he would have had those

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communications and in the absence of any representation from

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Bruce Baird unconditionally that he didn't have those

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communications, I have to believe that it is extremely likely

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that he did.

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THE COURT:

What would that show about whether he was

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unjustly enriched for what he did while he was at Fairfield in

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2002 or 2003?

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MR. FINKEL:

The claim extends not only to 2002, 2003

but also to 2008.
THE COURT:

Yes, but he is being compensated for work

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he did back then.

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based on what he is thinking in 2006?

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So where does the unjust enrichment come in

MR. FINKEL:

He is being compensated as a buyout of

his partnership interest.

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THE COURT:

Right.

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MR. FINKEL:

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Fairfield Greenwich.

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being done by Fairfield Greenwich in 2004 to 2008.

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first in all likelihood to what he knew in 2002, 2003.

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the documents postdated that period and it also goes to what he

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knows when he was receiving $15 million in additional

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distributions from profits that were being earned by Fairfield

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Greenwich.

As a percentage of the profits at
He is being compensated for work that is
It goes to
He had

It goes to the state of mind and the equities of
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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the situation of whether he should be entitled to keep that $15

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million.

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MR. BAIRD:

I didn't understand that, your Honor.

It

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seemed to me that Judge Marrero held clearly that for an unjust

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enrichment claim to be made out that Mr. Finkle has to prove

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that in the course of steering plaintiff's investments into

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Madoff, they should have been on notice of Madoff's scheme.

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2000 to 2003 is what he has got to prove.

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around that under Judge Marrero's decision.

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MR. FINKEL:

So

There is no way

I don't believe that that is the holding

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of Judge Marrero.

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Greenwich unlawfully made these monies that the fee-only

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defendants should be required to return those monies even if

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they independently didn't have that knowledge.

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whole concept of the fee-only defendants where we don't plead

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scienter because they only take as good as Fairfield Greenwich

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could take.

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Fairfield Greenwich, which acted with a culpable state of mind,

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the fee-only defendants as partners or former partners

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continuing to get a partnership distribution should recount

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that money to the investors who contributed to Fairfield

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Greenwich.

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I believe the holding is that if Fairfield

That is the

Therefore, if they receive the money through

THE COURT:

Well, that makes his scienter even less

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relevant because you are saying it is simply a question of

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whether he benefited from the activities of Fairfield
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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Greenwich.

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MR. FINKEL:

To that extent that it is correct; but

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according to Bruce Baird's theory, it would bear on the merits.

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Bruce Baird suggested there is no element of culpability in

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what Judge Marrero wrote in the opinion.

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bear on the state of mind that the other defendants, depending

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on what Greg Beaus may have written to third parties or

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internally with respect to Madoff or Fairfield.

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THE COURT:

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Mr. Baird, do you know how many different

computers he has used in the six years since he left?

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And it also would

MR. BAIRD:
into it.

I don't, your Honor.

We haven't gotten

He hasn't wanted to pay for it.
THE COURT:

So you would be asking him to search all

of his e-mails, whether they are personal or business e-mails?

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MR. BAIRD:

Well, I guess --

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THE COURT:

I am asking Mr. Finkle that question.

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MR. FINKEL:

My understanding is that Greg Beaus had

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two e-mails.

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Bruce Baird told me he had a personal e-mail address.

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don't know how many computers he used, but my understanding is

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that he had a relatively limited number of e-mail addresses.

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He probably had one relating to his business and

MR. BAIRD:

So I

On the argument that Mr. Finkle is making,

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you could justify taking discovery of a wide variety of people

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in the New York area to see whether they made a random comment

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about Fairfield that may be relevant to their state of mind.
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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You could justify taking e-mail discovery of every friend of

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every defendant, every wife and girlfriend, every boyfriend,

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every child.

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Mr. Finkle's articulating would reach.

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There is no end to where the theory that

THE COURT:

I am tending to agree with Mr. Baird here.

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It just seems to me that what you are asking him to do, and I

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don't know what would be involved, but I don't think it is just

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a minor burden to figure out whether you have look to get

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through six years' of e-mails and various hard drives and

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e-mail accounts to determine whether there was some passing

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remark about Madoff just seems clearly outweighs the benefit.

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I think it is essentially you are hoping to find some comment

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that he made that might shed some light on what he knew in 2002

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or 2003.

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when Fairfield itself has been willing to produce

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communications between Fairfield and Mr. Beaus and nothing has

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turned up during that period.

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It is really a very remote connection.

Particularly

So essentially you are just looking for something he

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might have said to some third party.

I don't think it

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justifies the burden.

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Mr. Baird and not require that search.

So I am going to agree here with

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Were there any other issues in your letters?

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MR. BAIRD:

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MR. FINKEL:

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THE COURT:

No, your Honor.
That is the only one, your Honor.
Take care folks.
o0o

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]