Irving H. Picard v. Saul B. Katz et al

Filing 137

DECLARATION of DAVID C. NEWMAN in Support re: 80 MOTION to Strike THE EXPERT REPORTS AND TESTIMONY OF STEVE POMERANTZ AND HARRISON J. GOLDIN.. Document filed by Charles 15 Associates, Charles 15 LLC, Charles Sterling LLC, Charles Sterling Sub LLC, College Place Enterprises LLC, Coney Island Baseball Holding Company LLC, Estate of Leonard Schreier, FFB Aviation LLC, FS Company LLC, Fred Wilpon Family Trust, Arthur Friedman, Ruth Friedman, Iris J. Katz and Saul B. Katz Family Foundation, Inc., Judy and Fred Wilpon Family Foundation, Inc., Amy Beth Katz, David Katz, Dayle Katz, Gregory Katz, Howard Katz, Iris Katz, 157 J.E.S. LLC, Air Sterling LLC, BAS Aircraft LLC, Jason Bacher, Bon Mick Family Partners LP, Bon-Mick, Inc., Brooklyn Baseball Company LLC, C.D.S. Corp., Michael Katz, Saul B. Katz, Todd Katz, Katz 2002 Descendants' Trust, Heather Katz Knopf, Natalie Katz O'Brien, Mets II LLC, Mets Limited Partnership, Mets One LLC, Mets Partners, Inc., Minor 1 (REDACTED), Minor 2 (REDACTED), L. Thomas Osterman, Phyllis Rebell Osterman, Realty Associates Madoff II, Red Valley Partners, Robbinsville Park LLC, Ruskin Garden Apartments LLC, Saul B. Katz Family Trust, Michael Schreier, Deyva Schreier Arthur, See Holdco LLC, See Holdings I, See Holdings II, Sterling 10 LLC, Sterling 15C LLC, Sterling 20 LLC, Sterling Acquisitions LLC, Sterling American Advisors II LP, Sterling American Property III LP, Sterling American Property IV LP, Sterling American Property V LP, Sterling Brunswick Corporation, Sterling Brunswick Seven LLC, Sterling Dist Properties LLC, Sterling Equities, Sterling Equities Associates, Sterling Equities Investors, Sterling Heritage LLC, Sterling Internal V LLC, Sterling Jet II Ltd., Sterling Jet Ltd., Sterling Mets Associates, Sterling Mets Associates II, Sterling Mets LP, Sterling Pathogenesis Company, Sterling Third Associates, Sterling Thirty Venture LLC, Sterling Tracing LLC, Sterling Twenty Five LLC, Sterling VC IV LLC, Sterling VC V LLC, Edward M. Tepper, Elise C. Tepper, Jacqueline G. Tepper, Marvin B. Tepper, Valley Harbor Associates, Kimberly Wachtler, Philip Wachtler, Bruce N. Wilpon, Daniel Wilpon, Debra Wilpon, Fred Wilpon, Jeffrey Wilpon, Jessica Wilpon, Judith Wilpon, Richard Wilpon, Scott Wilpon, Valerie Wilpon, Wilpon 2002 Descendants' Trust, Robin Wilpon Wachtler. (Attachments: # 1 Exhibit G)(Wagner, Karen)

EXHIBIT G

1

1

C O N F I D E N T I A L

2

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
11-CV-03605(JSR)(HBP)

3
4
5

--------------------------------x

6

IRVING H. PICARD, Trustee for
the Liquidation of Bernard L.
Madoff Investment Securities LLC,

7
8
9
10
11
12

v.

Plaintiff,

SAUL B. KATZ, et al.,

Videotaped
Deposition of:
DR. STEVE
POMERANTZ

Defendants.
--------------------------------x

13
14
15

TRANSCRIPT of testimony as taken by and before

16

NANCY C. BENDISH, Certified Court Reporter, RMR, CRR

17

and Notary Public of the States of New York and New

18

Jersey, at the offices of Davis, Polk & Wardwell,

19

450 Lexington Avenue, New York, New York on Sunday,

20

January 8, 2012, commencing at 9:27 a.m.

21
22
23
24
25

PICARD v. KATZ, et al.

CONFIDENTIAL

STEVE POMERANTZ 1/8/12
119

1
2
3
4
5
6

registered investment adviser?
A.
Q.

I don't -- I don't know that.
Did you consider yourself at the time

qualified to be a registered investment adviser?
A.
Q.

Yes.
All right.

Let me ask you some

7

questions about some of the Sterling people.

8

you ever met any of the Sterling people, Mr. Wilpon,

9

Mr. Katz, Mr. Friedman?

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25

A.
Q.

Have

No.
Do you know who Robin Wachtler,

W-a-c-h-t-l-e-r, is?
A.
Q.
A.
Q.
A.
Q.
A.
Q.
A.
Q.
A.
Q.
A.

No.
Do you know who Natalie O'Brien is?
No.
Do you know who Todd Katz is?
No.
How about Gregory Katz?
No.
Who's Deborah Wilpon?
I don't know.
Who is Richard Wilpon?
I don't know.
Who's Daniel Wilpon?
I don't know.
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5
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7
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15
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18
19
20
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22
23

Q.
A.
Q.
A.
Q.
A.
Q.
A.
Q.

I don't know.
Who's Marvin Tepper?
I don't know.
Who's Tom Osterman?
I don't know.
How about Leonard Schreier?
I don't know.
S-c-h-r-e-i-e-r.

Do you know

anything about him?
A.
Q.

No.
How about College Place Enterprises;

do you know what that is?
A.
Q.

No.
How about Sterling 30 Venture, do you

know what business that's in?
A.
Q.

No.
How about Robbinsville Park, LLC; do

you know what business that's in?
A.
Q.
A.
Q.

24
25

Who's Jeffrey Wilpon?

No.
Sterling 20 LLC?
No.
Do you know what that is?
(Witness shakes head.)

Q.

Charles Sterling Sub, LLC, do you
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know what that is?

2

A.

3
4

Q.

No.
FFV Aviation, LLC, do you know about

that?

5

A.

6

Q.

No.
So I take it with respect to the list

7

of names I just read you, you wouldn't be able to

8

offer us any opinion today as to the investment

9

sophistication of any of those people?

10

MR. KORNFELD:

11
12

A.

Object to form.

I -- well, some of those names are

corporations, they're not people.

13

Q.

Or the corporation.

I mean, the

14

investment sophistication of either the people or

15

the corporations and the people who are in them.

16

You don't know all about them?

17

A.

I'm not speaking for any of those

18

individuals.

19

the partnership, Sterling Equities partnership, but

20

I'm not speaking about any of those sub pieces.

21

Q.

I'm speaking -- I am speaking about

Right.

We'll come back to Sterling

22

Equity partners.

You don't know what relationship

23

any of the individuals or corporations that I just

24

read off to you have to Sterling partners; is that

25

fair?
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A.

2

Q.

That's correct.
So you can't offer any opinion

3

whatsoever regarding their investment

4

sophistication?

5

MR. KORNFELD:

6

A.

Object to form.

Well, some of them are corporations

7

and they have no sophistication.

8

just affiliates of the partnership.

9

Q.

Others are -- are

Well, are you familiar with what the

10

relationship is, for instance, between Sterling

11

Equities and Sterling 25 LLC?

12

A.

13
14

Q.

A.

No.

Other than being some kind of

affiliate, I can't.

17
18

Can't tell us anything about that; is

that fair?

15
16

No.

Q.

Yeah.

And you don't know who the

partners in Sterling 25 LLC are; is that right?

19

A.

20

Q.

That's correct.
And you don't obviously know what

21

sophistication they do or don't have; isn't that

22

fair?

23
24
25

A.

I don't -- I don't know who the full

partnership is of the entity.
Q.

Right.
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2

So who among the defendants do you
know?

3
4

A.

Katz, Fred Wilpon and Arthur Friedman.

5
6

I'm certainly most familiar with Saul

Q.
three.

7

All right.

Well, let's take those

What do you know about Mr. Wilpon?
A.

He's a very successful businessman,

8

with real estate interests and sports interests,

9

investment management interests.

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25

Reasonably wealthy

guy.
Q.
A.
Q.
A.
Q.
A.
Q.
A.
Q.

Do you know if he went to college?
Yes.
Where did he go?
I don't recall.
Do you know if he graduated?
Yes.
What did he major in?
I don't recall.
Do you know whether it had anything

to do with finance or investments?
A.

I don't recall his major.

have been business.
Q.

It could

I don't recall.

Do you know whether he ever worked

for a bank?
A.

Well, Sterling as an entity does have
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banking operations within it.

2

runs a business that does have certain bank-like

3

qualities.

4

Q.

5
6

worked for a bank?
A.

8

Q.

9

I don't know.
Do you know what a bank is?
MR. KORNFELD:

10

Q.

11
A.

Objection to form.

You know what a bank is, right?
MR. KORNFELD:

12

Same objection.

As a legal entity?

I don't -- I

don't have the definition of a bank.

14
15

You may have missed my question.
Do you know whether Mr. Wilpon ever

7

13

So, to some extent he

Q.

Let's put aside a legal entity.

Do

you know what a bank is?

16

MR. KORNFELD:

17

A.

Object to form.

I don't know what you mean by that.

18

I mean, if -- I'm telling you that I believe

19

Sterling Equity partners have bank-like qualities.

20
21

Q.

24
25

So we don't know what a bank

is?

22
23

Okay.

MR. KORNFELD:
Q.

Object to form.

Do you know whether Mr. Wilpon ever

worked for a registered broker-dealer?
A.

I don't know.
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Q.

You do know what a registered

2

broker-dealer is?

3

A.

4
5
6
7
8
9

Q.

Do you know whether he ever worked

for an investment management firm?
A.

I believe he was a general partner of

an investment management company.
Q.

The question is:

Do you know whether

he ever worked for an investment manager?

10
11

Yes.

MR. KORNFELD:
A.

Object to form.

I believe being a general partner of

12

an investment advisory firm implies that you worked

13

for one.

14

a general partner.

15
16
17
18

Q.

I worked for Weiss, Peck & Greer but I was

Could there be general partners who

don't work for the partnership?
A.
Q.

At times, I guess.
Well, okay.

Let's put aside the --

19

because we're going to spend a lot of time on

20

Sterling Stamos, as you might suspect, later.

21

put aside Sterling Stamos.

22

involvement that Mr. Wilpon had with a investment

23

manager?

24
25

A.
Q.

Let's

Do you know of any other

I don't know.
Do you know whether he has any
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training in investment management?

2
3
4

A.

Well, he certainly seems pretty

experienced at managing investments.
Q.

My question is do you know, do you

5

have any knowledge of any experience that Mr. Wilpon

6

has -- I'm sorry, I said experience -- any training

7

that Mr. Wilpon has in investment management?

8
9
10
11
12
13
14
15
16
17
18
19
20
21
22

A.
Q.

I don't know.
Well, how about Mr. Katz; did he go

to college?
A.
Q.
A.
Q.
A.
Q.

Yeah.
Do you know where he graduated?
No.
Do you know what he majored in?
No.
Do you know if it had anything to do

with finance or investment management?
A.
Q.

No.
Do you know whether he ever worked

for a bank?
A.
Q.

Same comments about Sterling.
Other than whatever they were doing

23

in Sterling, do you know whether he ever worked for

24

a bank?

25

A.

No.
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Q.

By bank, I mean something like, you

2

know, Chase or Bank of America or Citibank.

3

Something like that.

4

for an organization like that?

5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22

A.

Do you know whether he worked

No.

Q.

Do you know whether he ever worked

for a registered broker-dealer?
A.

No.

Q.

Do you know whether he ever worked in

the investment management business?
A.

Other than his affiliation with Bear

Stearns, I don't know.
Q.

What affiliation did Mr. Katz have

with Bear Stearns?
A.

I believe either Mr. Wilpon or

Mr. Katz had an affiliation with Bear Stearns.
Q.
A.
Q.

What affiliation did he have?
I don't recall.
Do you know whether that affiliation

had anything to do with investment management?
A.
Q.

That's -- all those companies do.
No, no.

Whether the affil-- I

23

mean -- what do you mean -- what do you mean he had

24

an affiliation?

25

A.

Let's get that straight.

I believe that he was somehow
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affiliated with that entity.

2

Q.

Well, suppose somebody runs the

3

lunchroom in Bear Stearns, would they -- would that

4

fall under affiliated?

5

A.

I would not include someone who

6

worked in the lunchroom.

7

mind registered as an affiliation.

8
9

Q.
what?

10

So when you say affiliation, it means

How are you defining that?
A.

11

That would not have in my

He was involved with the company.

Q.

Well, let's not play cat and mouse

12

here.

13

Mr. Katz was never affiliated with Bear Stearns.

14

Mr. Wilpon was a director on the board of Bear

15

Stearns.

16
17
18
19
20

Mr. Katz was not -- you've got the wrong one.

Does that help refresh your recollection?

A.
Q.

Yes.
Do you know why Mr. Wilpon went on

that board?
A.
Q.

No.
Have you ever seen that large

21

building sitting catty-corner to our offices here

22

that's a large black building?

23
24
25

A.
Q.
A.

See that?

Yes.
Do you know who developed it?
No.
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2

Q.

Would it surprise you if I told you

Mr. Wilpon was involved in developing that building?

3

A.

4

Q.

5

A.

6

Q.

7

No.
He's a real estate developer, right?
Yes.

correct?

8

A.

9

Q.

That's an area of his expertise,

That's one area of his expertise.
Right.

And he was in -- if I told

10

you that he was involved in developing that

11

building, you wouldn't have any reason to disagree

12

with that?

13
14
15

A.

I don't -- I don't have reason to

believe it one way or the other.
Q.

Right.

And you don't have any

16

information as to why he was asked to go on that

17

board?

18
19
20

The board of Bear Stearns?
A.

Presumably to contribute his

expertise to the running of Bear Stearns.
Q.

Well, do you know whether he had any

21

expertise in the business of Bear Stearns?

22

than the construction of the building over here on

23

46th Street?

24
25

A.
Q.

Other

And being asked to join the board?
Yeah.
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14
15

A.

I presume that he had something to

contribute to the business.
Q.

Bear Stearns was in a number of

businesses; isn't that right?
A.
Q.

Yes.
Investment management was only a

small part of what they did; isn't that correct?
A.

I think investment management

percolates through every business that they're
involved in.
Q.

Well, Bear Stearns was principally a

trading business; isn't that right?
A.

Either in terms of raising capital or

distributing capital or managing capital.
Q.

In any event, you don't have any

16

knowledge or information that Mr. Wilpon was invited

17

onto Bear Stearns' board because of his investment

18

management expertise, do you?

19

A.

As I said, I think it was -- he's

20

there because he can provide something of value to

21

the corporation.

22
23
24
25

Q.

But you don't know what the something

of value is?
A.
Q.

No.
So let's go back to Mr. Katz.
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were talking about whether you had any knowledge or

2

information concerning any training that Mr. Katz

3

may have had with respect to investment management.

4

A.

I mean, other than his own

5

experience, I don't know what his formal training

6

is.

7
8

Q.

in the stock market?

9
10
11
12
13

Do you know whether he ever invested

A.
Q.

Directly, himself?

I don't know.
Do you know whether Mr. Wilpon ever

invested in the stock market directly?
A.
Q.

I don't know.
Do you know what broker-dealer

14

accounts Mr. Wilpon had over the course of his

15

career?

16
17
18
19
20
21
22
23
24
25

A.
Q.

How about Mr. Katz?

A.
Q.
moment.

No.
Let's talk about Mr. Friedman for a

Do you know whether he went to college?

A.
Q.
A.
Q.

Other than BLMIS, I don't know.

Yes.
Did he graduate?
Yes.
Did he study anything involving

finance or investment management?
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2
3
4

A.
Q.
A.
Q.

I don't know.
You don't know what he majored in?
No.
Do you know whether he had any

5

further education in investments or finance after he

6

graduated from college?

7
8
9
10

A.

Well, all of these gentlemen do have

accounting experience of some form.
Q.
A.

All of which gentlemen?
Well, Mr. Friedman has some

11

accounting experience.

12

that investments, sometimes.

13
14
15
16
17
18
19

Q.

I mean, you can consider
They can overlap.

Do you consider accounting to be the

same as having experience in investments?
A.

I find a lot of accountants are very

familiar with notions of investing.
Q.

Do you know whether Mr. Friedman had

any training in investment management?
A.

I mean, you can't -- you can't fill

20

out a Schedule D or understand a 1099 unless you

21

have some understanding of investments, which is

22

what accountants do.

23

understanding of what these ideas are.

24
25

Q.

So, they definitely have

I think, I think my most recent

question was, do you know whether Mr. Friedman had
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any training at any point in his career in

2

investment management?

3
4
5
6
7
8
9
10
11
12
13

A.
Q.

No.
Do you know whether he ever worked

for a bank?
A.
Q.

No.
Do you know whether he ever worked

for a stockbroker?
A.
Q.

No.
Do you know whether he ever had a

personal stock trading account?
A.
Q.

I don't know.
So, other than whatever connection

14

Mr. Friedman had with BL -- managing or overseeing

15

accounts at BLMIS, you don't know whether he has any

16

other familiarity with how stock brokerage accounts

17

are supposed to work?

18
19
20

A.

I -- I don't know what his -- the

totality of his experience is.
Q.

And with respect to Mr. Katz, again

21

other than whatever went on with BLMIS, you don't

22

know that he had any other prior experience with how

23

stock brokerage accounts operate?

24
25

MR. KORNFELD:
A.

Object to form.

I don't -- I don't know what he
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2

knows.
Q.

And the same would be true with

3

Mr. Wilpon; other than whatever went on with BLMIS,

4

you don't know that he has any other experience with

5

stock brokerage accounts?

6

A.

Well, I mean, there's an affiliation

7

with Sterling Stamos, and there's certainly a lot of

8

knowledge that is presented to general partners of

9

an entity like that.

10
11

So, there's plenty of

experience with those types of things.
Q.

Do you know what Mr. Wilpon's

12

connection to Sterling Stamos was, other than being

13

named a general partner?

14
15
16
17
18

A.
Q.
A.

I believe he was a general partner.
Right.

Other than that?

Other than what Sterling Stamos

offers his contribution to be, I don't know.
Q.

Do you know whether he ever attended

19

any of the investment management meetings at

20

Sterling Stamos?

21

A.

22
23
24
25

Q.

I don't know.
Do you know whether he ever purported

to pick investments at Sterling Stamos?
A.
Q.

I don't know.
How about Mr. Friedman, do you know
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3
4
5
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7
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9
10

whether he was an employee of Sterling Stamos?
A.
Q.

I do not believe so.
Was he a general partner of Sterling

Stamos?
A.
Q.

No.
Did he attend any of the investment

meetings at Sterling Stamos?
A.
Q.

I don't know.
Would you consider Mr. Friedman a

professional investor?

11

MR. KORNFELD:

12

You can answer.

13
14
15
16
17

A.

Object to form.

Again, I don't know that we've

defined the term "professional investor."
Q.

Let's say, was he someone who was

paid to make investments?
A.

That's not the definition -- I

18

wouldn't agree with that definition of a

19

professional investor.

20

Q.

All right.

Let me do it this way.

21

Let me just say -- forget about professional

22

investor.

23

to make investments?

24
25

A.

To your knowledge, was Mr. Friedman paid

Well, he was -- he was paid for his

positions at Sterling Equity, and certainly a big
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component of his job was to interface with the

2

investments that the partnership had with BLMIS.

3

So, he is being paid to -- to act in some investment

4

capacity.

5

Q.

Well, other than the accounts that

6

were opened with BLMIS, do you know whether he had

7

or he was being paid to select any other investments

8

for Sterling Equities?

9

A.

10
11

I don't know what he was asked to do.
MR. KORNFELD:

Lunch break, or do you

still have a line here?

12

MR. WISE:

Let me just finish here

13

and I'll be finished quickly and then we'll take a

14

lunch break.

15
16

MR. KORNFELD:
thought ...

17
18
19
20
21

You're pausing, so I

MR. WISE:
Q.

No.

That's fair, but...

Do you consider all high net worth

individuals to be sophisticated investors?
A.
Q.

No.
There could be people who maybe

22

inherited money, right, who don't have much

23

sophistication?

24

A.

25

I think either they or their agents

would have the requisite sophistication to enter
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into a relationship.

2
3

Q.

They'd have to hire somebody else to

manage their money, right?

4

A.

There -- yeah.

You could -- many

5

reasons why somebody with a lot of money would hire

6

somebody.

7

Q.

Let's take sports figures,

8

professional basketball players.

9

money, right?

10

A.

11

Q.

They make a lot of

Yes.
You wouldn't consider them to

12

necessarily be sophisticated investors, right, just

13

because they have a lot of money?

14

A.

I don't think -- I don't think having

15

money is the be-all and end-all of being a

16

sophisticated investor.

17

Q.

So they would go to somebody to

18

manage their money for them; is that fair?

19

they're smart?

20

A.

21
22

Q.

25

Well, I think that's fair.
They might go to somebody that was

well respected in the industry, right?

23
24

If

A.
to.

I don't -- I don't know who they go

I mean -Q.

Well, it would be good advice if
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they'd go to somebody that was well respected in the

2

industry, wouldn't it?

3

A.

I think that if I was in the role of

4

advising them, I would advise them to go to somebody

5

who was competent.

6
7

Q.
right?

8
9

And well respected in the industry,

A.
condition.

If -- I don't see that as a necessary
But I mean, in other words, I know of a

10

lot of people I think are competent but I wouldn't

11

say that they're necessarily well known within the

12

industry.

13

Q.

You certainly wouldn't advise them to

14

go to somebody who wasn't respected in the industry,

15

would you?

16

A.

It could be somebody who doesn't

17

really interface with the industry; it's somebody

18

who's competent.

19

Q.

But it certainly would be a

20

reasonable thing for them to do to go to somebody

21

who was well respected in the industry; isn't that

22

right?

23

A.

That could be one of the -- I mean,

24

that could be something that happens.

25

that as necessary or sufficient for them to do the
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-- to make the right decision.

2

Q.

Well, would you agree with me that

3

that would be a reasonable course of action for

4

somebody to take?

5

A.

6

That -- that could be a result of the

actions that they take.

7

Q.

Do you recognize a difference between

8

a sophisticated investor and an institutional

9

investor?

10

A.

11
12

Well, yeah, I think -- I think those

mean two different things.
Q.

13

A.

And what's the difference?
Well, a sophisticated investor is

14

obviously someone who possesses sufficient

15

sophistication.

16

sophisticated investor.

17

an institutional investor.

18

institutional investor as somebody who, for the most

19

part, tends to be managing a pool of assets or in

20

some way has garnered together assets from several

21

different sources and is managing them consistently

22

with a given framework.

23

of money but there certainly could be small

24

institutions, but tends to be a large amount of

25

money.

I think of myself as a
I don't think of myself as
I think of an

Tends to be a large amount

There tends to be a commonality amongst the
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individual pieces of the asset pool that they have.

2

Q.

And the manager at an institutional

3

investor is usually someone who's paid to do that,

4

right?

5

A.

6

Q.

Not necessarily.
Well, do you know of any

7

institutional investors that don't have a paid money

8

manager?

9

A.

I would say most institutional

10

investments do not have a paid manager.

11

defined benefit plan is an institutional investor.

12

They are an institutional investor.

13

Q.

14

A.

15

Q.

16

Like a

But they'll hire -Oh, they'll hire someone to manage.

money, right?

17
18

A.

Q.

20

22

Yeah.

But the institutional investor

is the defined benefit plan --

19

21

They'll hire someone to manage the

A.

Fair enough.
-- and I hope they're not getting

paid.
Q.

Fair enough.

But they're an

23

institutional investor in your experience either

24

because they were -- withdrawn.

25

Poorly phrased.

Institutional investors either have
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someone on staff or alternatively hire someone

2

outside the firm and pay them to manage the money;

3

is that fair?

4
5

A.

They typically hire a manager and a

consultant.

6

Q.

7

Okay.

A.

And pay them?

They pay the manager and they pay the

8

consultant, unless -- unless they form that function

9

themselves.

10

Q.

All right.

11

MR. WISE:

All right.

Why don't we

12

stop here, take a lunch break and then we'll pick

13

up.

14

MR. KORNFELD:

15

THE VIDEOGRAPHER:

16

Great.
Going off the

record, the time is 12:44.

17

(Luncheon recess taken.)

18

THE VIDEOGRAPHER:

19

record.

20

BY MR. WISE:

21

Q.

The time is 1:30.

We are back on the

This is disk 4.

Dr. Pomerantz, before we get back to

22

our discussion about your report, I just as a

23

housekeeping matter wanted to just ask you a few

24

questions about the -- about the amount of time and

25

the bills in this.
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2
3
4

issues.

Can I go back and --

Q.
A.

7
8
9

-- change something we talked about

earlier?

5
6

Well, certainly.

It pertains to the Exhibit 11 which
is the Tim Dick memo.
Q.
A.

Ah-huh.
And I, in my testimony earlier today,

I discussed introductory discussion with Saul and

10

there's reference to earlier communication, which I

11

at the time testified was other -- was another

12

document by Mr. Dick that I had read, and that's

13

incorrect.

14

by Mr. Gonder that was also from -- was also an

15

historical document that was discussing what the

16

split-strike strategy is.

17
18
19
20
21

I was referring in my mind to a document

So, there is -- there is no document
by Mr. Dick historically.
Q.

All right.

So -- all right.

Well,

let's just leave it at that.
All right.

So let's go back to where

22

we were before lunch, which was talking about

23

investment sophistication.

24
25

Over the years that you've been in
the investment management business, I take it you've
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encountered a number of high net worth individuals

2

who sought investment advice, or investment

3

management advice?

4

A.

5

Q.

Yes.
Many of them come to people like you

6

or to other investment advisers for help; is that

7

fair?

8
9

A.
Q.

Yes.
Have some of those high net worth

10

business -- have some of those high net worth

11

individuals been people who were successful in

12

business?

13

A.

14

Q.

Yes.
Based upon your experience, would it

15

be true that many successful businessmen do not

16

themselves have very much experience investing in

17

the stock market?

18

A.

19
20
21
22
23
24
25

It certainly runs the spectrum in

terms of what people's experiences are.
Q.

Some might and others might not; is

that fair?
A.

Some might, some might not.

Those

who don't, still may have sophistication.
Q.

Well, sophistication in their

clothing or sophistication in what kind of novels
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they read?

What do you mean, sophistication?

2

MR. KORNFELD:

3

A.

Object to form.

They may have sophistication about

4

investing.

5

sophistication.

6

Q.

7

They may be very knowledgeable and have

Well, have you come across successful

businessmen who were not sophisticated in investing?

8

A.

9

Q.

Yeah, I think that's true, yes.
So merely being a successful

10

businessman does not necessarily mean you're a

11

sophisticated investor?

12

A.

No.

I don't see that as correlated

13

one way or the other.

14

the totality of who the individual is and what other

15

things they're involved in to make that

16

determination.

17

Q.

18

A.

20

22

Do you know what Mr. Wilpon's

business experience has been?

19

21

I think you have to look at

Q.

I mean, Sterling Equities.
Do you know what Sterling Equities

did?
A.

I know they're involved in real

23

estate and they're involved in sports franchises,

24

and they are a general partner to a fund of funds.

25

They administer and manage accounts for other
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A.

2

Q.

Well, they're also managing -Wait a minute.

3

plan was formed?

4

A.

Do you know when that

5
6

Q.

A.

8

Q.

A.

11

Do you know whether it existed

No.
They're also operating as a trust, as

a trustee for minors, and that embeds them with --

13

Q.

14

A.

15

Q.

16

A.

17

Q.

18
19

No, I don't know.

throughout the 1990s?

10

12

Do you know whether it existed in

1985?

7

9

No.

I'm sorry, who is "they"?
Some of the general partners.
For their own children?
Their own minor children.
Right.
MR. KORNFELD:

Why don't you let him

ask questions and he'll let you answer.

20

Q.

So you're -- that's what you think is

21

the source of the obligation to -- I'm sorry.

22

is it again that you think they had an obligation to

23

do?

24
25

MR. KORNFELD:
Q.

Object to form.

If they're not an experienced
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investor?

2

A.

If they are not a sophisticated

3

investor, even for themselves they have an

4

obligation to pursue competent counsel to interpret

5

and analyze what is happening in their accounts.

6

Q.

Let me just ask you a hypothetical

7

here.

Suppose I go out tonight to a cocktail party,

8

I run into a guy who says he's a broker or an

9

investment adviser, and he seems like a swell

10

fellow.

11

$10,000 with him.

12

whatsoever.

13

your view, do I have an obligation to hire somebody

14

to give me advice before I put $10,000 with this guy

15

that I met at a cocktail party?

16

So tomorrow I call him up and I invest
I've performed no investigation

Do you think I have an obligation in

A.

17

case is about.

18

Q.

That's not the situation that this

19
20

Well, just answer my hypothetical

first.
A.

I don't know.

I think it -- I think

21

if you start to receive information from him and

22

there are things of concern, I think you do have an

23

obligation to communicate and understand.

24

don't -- I don't think that you just blindly turn

25

the money over.

I

You absolutely have an obligation
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theirs that I've read -Q.

When you say "theirs," are you

3

talking about Sterling Stamos or are you talking

4

about Sterling Equities?

5
6

A.
Q.

Sterling Stamos.
Okay.

I want you to focus on

7

Sterling Equities for a moment, if you could.

8

you know whether anybody at Sterling Equities had

9

the competence and the ability to perform the kind

10

of quantitative and qualitative due diligence you

11

describe in your report?

12

A.

Do

I think they had the competence and

13

ability to hire consultants to do that if they could

14

not do that themselves.

15

Q.

Okay, I'll accept that.

Do I take it

16

from that that you don't know whether they had

17

anybody in-house at Sterling Equities who was

18

competent to perform those quantitative and

19

qualitative due diligence steps?

20
21
22

A.

I don't know every employee at

Sterling Equities.
Q.

Well, do you know of any who was?

23

Let's put it that way.

Can you name anybody at

24

Sterling Equities who had the competence and the

25

background to perform the kind of quantitative and
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