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

Filing 146

MEMORANDUM OF LAW in Support re: 145 MOTION in Limine TO EXCLUDE STERLING STAMOS DOCUMENTS.. 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. (Wise, Robert)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------- x
:
IRVING H. PICARD,
:
:
Plaintiff,
:
:
11-CV-03605 (JSR) (HBP)
:
- against :
SAUL B. KATZ, et al.,
:
:
Defendants.
:
:
----------------------------------- x

MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS’ MOTION
IN LIMINE TO EXCLUDE STERLING STAMOS DOCUMENTS

DAVIS POLK & WARDWELL LLP
450 Lexington Avenue
New York, New York 10017
[phone]
Attorneys for Defendants

TABLE OF CONTENTS
PAGE
PRELIMINARY STATEMENT .........................................................................................1
ARGUMENT.......................................................................................................................2
I.

STERLING STAMOS MARKETING MATERIALS, POST-DECEMBER
11, 2008 EMAILS, AND THIRD-PARTY DUE DILIGENCE
QUESTIONNAIRES ARE INADMISSIBLE HEARSAY AND SHOULD
BE EXCLUDED BECAUSE THEY ARE NOT PARTY ADMISSIONS .............2

II.

STERLING STAMOS MARKETING MATERIALS, POST-DECEMBER
11, 2008 EMAILS, AND THIRD-PARTY DUE DILIGENCE
QUESTIONNAIRES ARE NOT BUSINESS RECORDS .....................................6
A.

Sterling Stamos Marketing Materials and Third-Party Due
Diligence Questionnaires Do Not Satisfy Rule 803(6)................................7

B.

Sterling Stamos Post-December 11, 2008 Emails Do Not
Satisfy Rule 803(6) ....................................................................................10

CONCLUSION..................................................................................................................14

TABLE OF AUTHORITIES
PAGE
CASES
Bridgeway Corp. v. Citibank, 91 Fed. App’x 727 (2d Cir. 2004) ...................................... 8
Cabrera v. Jakabovitz, 24 F.3d 372 (2d Cir. 1994) ............................................................ 4
Carrie Contractors, Inc. v. Blount Constr. Grp. of Blount, Inc., 968 F. Supp. 662
(M.D. Ala. 1997)......................................................................................................... 11
Giannone v. Deutsche Bank Sec., Inc., No. 03 Civ. 9665, 2005 U.S. Dist. LEXIS
36948 (S.D.N.Y. Dec. 30, 2005)................................................................................... 8
Goldstein v. Laurent, No. 09 Civ. 2437, 2011 U.S. Dist. LEXIS 89121 (S.D.N.Y.
Aug. 2, 2011) ................................................................................................................ 8
Hargett v. Nat’l Westminster Bank, USA, 78 F.3d 836 (2d Cir. 1996)............................... 7
In re Nassau Cnty. Strip Search Cases, 742 F. Supp. 2d 304 (E.D.N.Y. 2010)................. 7
In re Parmalat Sec. Litig., 659 F. Supp. 2d 504 (S.D.N.Y. 2009).................................... 13
In re Worldcom Inc. Sec. Litig., No. 02 Civ. 3288, 2005 U.S. Dist. LEXIS 2215
(S.D.N.Y. 2005) ............................................................................................................ 8
Lion Oil Trading & Transp., Inc. v. Statoil Mktg. & Trading (US) Inc., No. 08 Civ.
11315, 2011 U.S. Dist. LEXIS 24516 (S.D.N.Y. Feb. 28, 2011)........................... 6, 12
Lorraine v. Markel Am. Ins. Co., 241 F.R.D. 534 (D. Md. 2007) .................................... 12
Menorah Home & Hosp. for the Aged & Infirm v. Fireman’s Fund Ins. Co., No.
04 Civ. 3172, 2011 U.S. Dist. LEXIS 145423 (E.D.N.Y. Dec. 16, 2011) ................... 8
Morisseau v. DLA Piper, 532 F. Supp. 2d 595 (S.D.N.Y. 2008) ....................................... 6
Nat’l Commc’n Ass’n., Inc. v. Am. Tel. & Tel. Co., No. 92 Civ. 1735, 1998 U.S.
Dist. LEXIS 3198 (S.D.N.Y. Mar. 16, 1998) ............................................................... 4
Ortho Pharm. Corp. v. Cosprophar, Inc., 828 F. Supp. 1114 (S.D.N.Y. 1993)................. 7
Pappas v. Middle Earth Condominium Ass’n, 963 F.2d 534 (2d Cir. 1992)...................... 4
Potamkin Cadillac Corp. v. B.R.I. Coverage Corp., 38 F.3d 627 (2d Cir. 1994) .............. 2
Saks Int’l, Inc. v. M/V Export Champion, 817 F.2d 1011 (2d Cir. 1987) ........................... 8
ii

Seattle-First Nat’l Bank v. Randall, 532 F.2d 1291 (9th Cir. 1976)................................. 11
Shea v. Royal Enters., Inc., No. 09 Civ. 8709, 2011 U.S. Dist. LEXIS 63763
(S.D.N.Y. June 16, 2011).............................................................................................. 9
United States v. Freidin, 849 F.2d 716 (2d Cir. 1988) ............................................... 12, 13
United States v. Kaiser, 609 F.3d 556 (2d Cir. 2010)....................................................... 12
United States v. Kim, 595 F.2d 755 (D.C. Cir. 1979) ....................................................... 11
United States v. Lemire, 720 F.2d 1327 (D.C. Cir. 1983) ................................................ 11
United States v. Sanders, 749 F.2d 195 (5th Cir. 1984) ................................................... 13
United States v. Strother, 49 F.3d 869 (2d Cir. 1995) ........................................ 6, 8, 11, 12
Wallace Motor Sales v. Am. Motor Sales, 780 F.2d 1049 (1st Cir. 1985)........................ 13
Yankee Bank for Fin. & Savings, FSB v. Task Assocs., Inc., 139 B.R. 71 (N.D.N.Y.
1992) ........................................................................................................................... 13
STATUTES & RULES
Fed. R. Evid. 801(c)............................................................................................................ 2
Fed. R. Evid. 801(d)(2)(D) ................................................................................................. 3
Fed. R. Evid. 802 ................................................................................................................ 2
Fed. R. Evid. 803(6)................................................................................................... passim
Fed. R. Evid. 902(11).......................................................................................................... 7
OTHER AUTHORITIES
5 Jack B. Weinstein & Margaret A. Berger, Weinstein’s Federal Evidence, §
803.08[2] (2d ed. 2011) .............................................................................................. 13
12A Federal Procedure: Lawyer’s Edition § 33:445 .......................................................... 7

iii

Defendants respectfully submit this memorandum of law in support of their
motion in limine to preclude the Trustee from referring to or offering inadmissible
documents from Sterling Stamos Partners (“Sterling Stamos”) at the trial of this case.
PRELIMINARY STATEMENT
Sterling Stamos is not a party to this action. Nor are the Sterling Partners and
Sterling Stamos one and the same. Nevertheless, the Trustee has repeatedly referred to
the Sterling Partners as partners of Sterling Stamos and indicated his intention to rely on
(a) Sterling Stamos marketing brochures and related sales materials to prove that the
Sterling Partners were experienced investment managers who should have discovered the
fraud of Bernard L. Madoff (“Madoff”) and his brokerage firm, Bernard L. Madoff
Investment Securities LLC (“BLMIS”) and (b) Sterling Stamos emails written after
Madoff’s arrest supposedly to show that Peter Stamos much earlier warned the Sterling
Partners about Madoff’s fraud.
Both categories of documents are hearsay, and neither is admissible against
Defendants. The Sterling Partners were passive investors in, not active partners of,
Sterling Stamos, and there is no basis for admitting into evidence the marketing materials
and hedge fund due diligence questionnaires upon which the Trustee relies to
demonstrate the Partners’ supposed investment expertise. Similarly, there is no basis for
admitting the post-December 11, 2008 emails upon which he bases his claim that
warnings were given.

ARGUMENT
Hearsay is an out-of-court statement offered “to prove the truth of the matter
asserted” in the statement. Fed. R. Evid. 801(c). Hearsay is inadmissible unless it falls
within an exception provided by the Federal Rules of Evidence. Fed. R. Evid. 802. The
Trustee, as the proponent of such evidence, bears the burden of establishing its
admissibility. See Potamkin Cadillac Corp. v. B.R.I. Coverage Corp., 38 F.3d 627, 632
(2d Cir. 1994).
I.

STERLING STAMOS MARKETING MATERIALS, POST-DECEMBER
11, 2008 EMAILS, AND THIRD-PARTY DUE DILIGENCE
QUESTIONNAIRES ARE INADMISSIBLE HEARSAY AND SHOULD
BE EXCLUDED BECAUSE THEY ARE NOT PARTY ADMISSIONS
Over the course of this litigation, the Trustee has claimed that Defendants were

sophisticated securities investment management professionals, even though the evidence
is utterly to the contrary, by relying on Sterling Stamos marketing materials and thirdparty due diligence questionnaires from 2004 and early 2005. 1 The documents on their
face are out-of-court statements not under oath by a non-party in the action and are
hearsay. The Trustee has advanced no theory that would support their admission. 2
1

(See, e.g., Trustee’s Mem. of Law. in Supp. of Mot. to Strike the Expert Reports
and Test. of John Maine (doc. no. 83) at 15-16; Trustee’s Mem. of Law in Opp’n to Def.
Mot. for Summ. J (“Tr. Opp. Mem.”) (doc. no. 120) at 42-43; Trustee’s Statement of
Additional Material Facts That Are Undisputed or As To Which There Exists Genuine
Issues To Be Tried (“Tr. Rule 56.1”) (doc. no. 125) ¶¶ 174-177.) A representative list of
these documents is attached hereto as Exhibit A. Pursuant to the Court’s pre-trial
schedule, Defendants served the instant motion on the Trustee before the parties’ exhibit
lists were final. Upon receipt of the Trustee’s final exhibit list, Defendants will
supplement Exhibit A to specifically identify the actual trial exhibits at issue.
2

These materials refer to Saul Katz and David Katz, and at times Fred Wilpon, as
Sterling Stamos “investment professionals,” and suggest that the Katzes were involved in
investment decisions at Sterling Stamos based on their “alternative investment
experience.” No Sterling Partner who was questioned about the Sterling Stamos
(…continued)

2

The Trustee has also offered certain emails postdating Madoff’s arrest—and none
sent by or to any Defendant—to support his claims that Peter Stamos warned some
Defendants of Madoff’s fraud, even though Mr. Stamos has repeatedly testified that he
never made such warnings. 3 The Trustee has argued that these documents are party
admissions under Fed. R. Evid. 801(d)(2)(D). (See Tr. Opp. Mem. at 22 n.24.) But
neither Sterling Stamos nor the authors of the emails are parties, and there is no evidence
that they were under the control of the Sterling Partners—indeed the Trustee concedes
they were not. (See Tr. Opp. Mem. at 22 n.24; Tr. Rule 56.1 ¶ 173.) The agreements that
govern Sterling Stamos also define both the passive investment status of the Sterling
Partners and the total control of Peter Stamos, contradicting the Trustee’s repeated charge
that the Sterling Partners were “partners” in Sterling Stamos. (See, e.g., Tr. of Feb. 23,
2012 Oral Arg. (doc. no. 139) at 10:23-11:18, 14:5-7; Tr. Rule 56.1 ¶ 1.) There is no
basis for admitting these documents against any Defendant.
(continued…)

marketing materials had any familiarity with them, and no Sterling Stamos employee
who was questioned about the documents recalled ever showing them to or reviewing
them with any Sterling Partner. (See Deposition Transcript of David Katz, Dec. 28, 2011,
111:14-112:19, 326:4-327:10 (Seshens Decl., Ex A); Deposition Transcript of Saul Katz
(“S. Katz. Tr.), Jan. 13, 2012, 66:15-24, 85:2-6 (Seshens Decl., Ex. B); Deposition
Transcript of Fred Wilpon, Jan. 10, 2012, 39:1-4 (Seshens Decl., Ex. C); Deposition
Transcript of Kevin Barcelona (“K. Barcelona Tr.”), Dec. 15, 2011, 156:3-13, 159:14160:12, 184:1-4 (Seshens Decl., Ex. D).) References to the “Seshens Decl.” are to the
Declaration of Dana M. Seshens, dated March 5, 2012 and filed in support of
Defendants’ motions in limine.
3

(See, e.g., Am. Compl. ¶¶ 871-875; Tr. Opp. Mem. at 22-23; Press Release of
Irving H. Picard 3 (May 19, 2011) (Seshens Decl., Ex. E).) A representative list of these
emails is attached hereto as Exhibit B. Pursuant to the Court’s pre-trial schedule,
Defendants served the instant motion on the Trustee before the parties’ exhibit lists were
final. Upon receipt of the Trustee’s final exhibit list, Defendants will supplement Exhibit
B to specifically identify the actual trial exhibits at issue.

3

First, under Rule 801(d)(2)(D), a statement offered against a party is not hearsay
if it is made “by the party’s agent or servant concerning a matter within the scope of the
agency or employment, made during the existence of the relationship.” A party seeking
to introduce statements under Rule 801(d)(2)(D) must establish (1) the existence of an
agency relationship, (2) that the statement in question was made during the course of that
relationship, and (3) that the statement relates to a matter within the scope of the agency.
Pappas v. Middle Earth Condominium Ass’n, 963 F.2d 534, 537 (2d Cir. 1992). The
formation of an agency relationship requires “the manifestation by the principal that the
agent shall act for him, the agent’s acceptance of the undertaking and the understanding
of the parties that the principal is to be in control of the undertaking.” Nat’l Commc’n
Ass’n, Inc. v. Am. Tel. & Tel. Co., No. 92 Civ. 1735, 1998 U.S. Dist. LEXIS 3198, at
*130 (S.D.N.Y. Mar. 16, 1998) (emphasis added) (quoting Cabrera v. Jakabovitz, 24
F.3d 372, 386 (2d Cir. 1994)). “The critical element is control of the agent by the
principal.” Id. (emphasis added).
No evidence of control exists here. There is no dispute that Sterling Stamos was
formed in 2002 by the Sterling Partners and Peter Stamos and his family. Two entities
were established, a management company for the investment funds, Stamos Partners
Capital Management LP, and a general partner, Stamos Partners Associates GP, LLC.
The Sterling Partners were only limited partners in the management entity, while the sole
general partner was Stamos Partners Capital Management GP, LLC, an entity controlled
by Peter Stamos in which no Sterling Partner has ever held an interest. (Limited
Partnership Agreement of Stamos Partners Capital Management, LP (“LP Agmt.”) § 1.05
and Schedule A (Seshens Decl., Ex. F); First Amended and Restated Limited Liability

4

Company Agreement of Stamos Partners Capital Management GP, LLC. (Seshens Decl.,
Ex. G).) Peter Stamos was the sole managing member of the general partner, of which
the Sterling Partners were non-managing members. (Limited Liability Company
Agreement of Sterling Partners Associates, LLC (“LLC Agmt.”) § 1.05 (Seshens Decl.,
Ex. H).)
The governing documents for each entity vested all control over investment and
operational decisions exclusively with Peter Stamos, manifesting control by Peter Stamos,
and lack of control by any Defendant. 4 (LP Agmt. §§ 2.01, 2.02; LLC Agmt. §§ 2.01,
2.02.) Consequently, the Trustee cannot establish that Sterling Stamos, or any employee,
“spoke” as an agent of the Sterling Partners through Sterling Stamos marketing materials
or in post-December 11, 2008 individual emails. 5
II.

STERLING STAMOS MARKETING MATERIALS, POST-DECEMBER
11, 2008 EMAILS, AND THIRD-PARTY DUE DILIGENCE
QUESTIONNAIRES ARE NOT BUSINESS RECORDS
The Trustee also may argue that the Sterling Stamos marketing materials, post-

December 11, 2008 emails, and third-party due diligence questionnaires are admissible as
business records under Fed. R. Evid. 803(6). Again, he is wrong.

4

Although the names and the organization of these entities have changed over
time, the passive nature of the Sterling Partners’ ownership interest and Peter Stamos’
complete control of the business and its investments have not. Notably, by the time the
post-December 11, 2008 emails were written, the Sterling Partners’ passive ownership
interest in Sterling Stamos had decreased to only 25%, following Merrill Lynch’s
acquisition of 50% of Sterling Stamos in 2007.
5

The Trustee has not offered any evidence regarding the creation of a DeMarche
Associates, Inc. due diligence questionnaire, which appears to be an incomplete draft,
replete with unanswered questions and requests for additional information. (See
Deposition Transcript of Kevin Okimoto (“K. Okimoto Tr.”), Jan. 6, 2012, 152:9-21
(Seshens Decl., Ex. I).)
5

Under Rule 803(6), a record of “acts, events, conditions, opinions, or diagnoses”
is not excluded as hearsay if:
(A) “the record was made at or near the time by—or from information
transmitted by—someone with knowledge”;
(B) “the record was kept in the course of a regularly conducted activity of
a business”;
(C) “making the record was a regular practice of that activity”;
(D) “all these conditions are shown by the testimony of the custodian or
another qualified witness, or by a certification that complies with Rule
902(11) or (12) or with a statute permitting certification”; and
(E) “neither the source of information nor the method or circumstances of
preparation indicate a lack of trustworthiness.” Fed. R. Evid. 803(6).
To qualify, a document must satisfy each of these requirements. See United
States v. Strother, 49 F.3d 869, 874 (2d Cir. 1995). Thus, only some records created by a
business, or by an employee of the business, may qualify as a “business record” for
purposes of Rule 803(6). See, e.g., Lion Oil Trading & Transp., Inc. v. Statoil Mktg. &
Trading (US) Inc., No. 08 Civ. 11315, 2011 U.S. Dist. LEXIS 24516, at *18-19 (S.D.N.Y.
Feb. 28, 2011) (“The mere fact that [a document] was created in the course of
employment does not render it a business record.”); Morisseau v. DLA Piper, 532 F.
Supp. 2d 595, 621 n.163 (S.D.N.Y. 2008) (“An e-mail created within a business entity
does not, for that reason alone, satisfy the business records exception of the hearsay
rule.”).
A.

Sterling Stamos Marketing Materials and Third-Party Due
Diligence Questionnaires Do Not Satisfy Rule 803(6)

As to the marketing materials, the Trustee has no evidentiary basis to satisfy the
requirements of Rule 803(6). Moreover, marketing materials and due diligence
questionnaires are not “records” of “acts, events, conditions, opinions, or diagnoses”
made at or near the time that the acts or events occurred. These materials do not record

6

routine events and cannot fit within the confines of the business records exception. See,
e.g., In re Nassau Cnty. Strip Search Cases, 742 F. Supp. 2d 304, 319 (E.D.N.Y. 2010)
(“Although the scope of [Rule 803(6)] is broad, it is not unlimited; for example, it does
not embrace operating or procedural manuals, which are not records of any act,
transaction, occurrence, or event as required by the Rule.” (citing 12A Federal Procedure:
Lawyer’s Edition § 33:445)).
First, the Trustee has not obtained a Rule 902(11) business records certification.
None of the seven current or former Sterling Stamos employees he deposed gave
competent or sufficient foundational testimony; none testified that these marketing
materials or the diligence questionnaires were records created or maintained in the
ordinary course of business or described the process by which specific documents were
created. This evidentiary deficiency alone requires their exclusion. See, e.g., Hargett v.
Nat’l Westminster Bank, USA, 78 F.3d 836, 841-42 (2d Cir. 1996) (affirming the
exclusion of evidence where the witness “did not recall the circumstances under which
the document was created”); Ortho Pharm. Corp. v. Cosprophar, Inc., 828 F. Supp. 1114,
1119-20 (S.D.N.Y. 1993) (excluding evidence where the witness did not describe the
method for creating the documents).
Second, by their very nature, marketing materials do not meet the standards for
trustworthiness required by Rule 803(6). Business records are an exception to the
hearsay rule because it is presumed that they are trustworthy based on the process by
which they are created. Strother, 49 F.3d at 874 (“[T]he ‘principal precondition’ to
admissibility is the sufficient trustworthiness of the record.” (quoting Saks Int’l, Inc. v.
M/V Export Champion, 817 F.2d 1011, 1013 (2d Cir. 1987).) “[T]he business record

7

exception is founded on the notion that such documents bear a sufficient degree of
reliability ‘because they are created either through systematic checking, by regularity and
continuity which produce habits of precision, by actual experience of business in relying
upon them, or by a duty to make an accurate record as part of a continuing job or
occupation.” Giannone v. Deutsche Bank Sec., Inc., No. 03 Civ. 9665, 2005 U.S. Dist.
LEXIS 36948, at *9-10 (S.D.N.Y. Dec. 30, 2005) (quoting In re Worldcom Inc. Sec.
Litig., No. 02 Civ. 3288, 2005 U.S. Dist. LEXIS 2215, at *24 (S.D.N.Y. 2005)).
For example, bank statements, medical records, police reports, and business
invoices are admissible as business records under Rule 803(6) because they are created as
a matter of routine, or under circumstances that give rise to a guarantee of trustworthiness.
See, e.g., Bridgeway Corp. v. Citibank, 91 Fed. App’x 727, 729 (2d Cir. 2004) (bank
statements admissible as business records where it was bank branch’s regular practice to
make such records); Menorah Home & Hosp. for the Aged & Infirm v. Fireman’s Fund
Ins. Co., No. 04 Civ. 3172, 2011 U.S. Dist. LEXIS 145423, at *7-10 (E.D.N.Y. Dec. 16,
2011) (invoices for construction services admissible as business records where invoices
were regularly sent to vendors and created near the time costs were incurred); Goldstein v.
Laurent, No. 09 Civ. 2437, 2011 U.S. Dist. LEXIS 89121, at *10-11 (S.D.N.Y. Aug. 2,
2011) (police report admissible as a business record under Rule 803(6)); Shea v. Royal
Enters., Inc., No. 09 Civ. 8709, 2011 U.S. Dist. LEXIS 63763, at *33-36 (S.D.N.Y. June
16, 2011) (medical records admissible as business records).
Marketing materials are very different. Marketing materials are not “records” of
“acts, events, conditions, opinions, or diagnoses” made at or near the time the acts or
events occurred, and they are far from routine. They are intended to sell, promote, and

8

present information in the most positive light possible, exactly as described in the
testimony elicited by the Trustee.
•

Sterling Stamos witnesses questioned about statements set forth in marketing
materials referring to Fred Wilpon, Saul Katz, or David Katz as Sterling Stamos
“investment professionals” or as part of the Sterling Stamos “investment team,”
testified that they did not reflect the operation of the investment side of Sterling
Stamos’ investment business at the time. (See, e.g., K. Barcelona Tr. 196:22198:15 (Seshens Decl. Ex. D); Bankruptcy Rule 2004 Deposition Transcript of
Ashok Chachra, Oct. 8, 2010, 119:19-122:15, 123:21-124:14, 130:3-134:22
(Seshens Decl., Ex. J); K. Okimoto Tr. 139:20-141:11, 142:12-19, 152:2-16,
152:22-153:8 (Seshens Decl., Ex. I); see also, e.g., S. Katz Tr. 80:22-83:5
(Seshens Decl., Ex. B).) At most, these statements were intended to convey a
very general involvement by those individuals, by recommending potential
investment managers or vetting their reputations in the broader business
community. (See, e.g., Deposition Transcript of Peter Stamos (“P. Stamos Tr.”),
Jan. 5, 2012, 229:24-231:6, 231:21-233:14, 234:13-235:9 (Seshens Decl., Ex. K).

•

Peter Stamos described as “marketing puffery” statements in a Sterling Stamos
“firm overview” dated July 2005 that Sterling Equities “has developed a deep
expertise in hedge funds” and provided unique “due diligence capabilities,” while
recognizing that Sterling Equities did have real estate due diligence experience.
(Bankruptcy Rule 2004 Deposition Transcript of Peter Stamos, Aug. 19, 2010,
167:22-169:10 (Seshens Decl., Ex. L).)

•

Peter Stamos and Chris Stamos both testified that they purposefully played up
their association with Sterling Equities and its Partners, particularly early on in
Sterling Stamos’ existence, so as to take advantage of the “halo effect” provided
by the Sterling Partners’ business reputation across the New York community.
(See, e.g., Chris Stamos Deposition Transcript, Jan. 4, 2012, 46:15-47:23, 50:2552:4 (Seshens Decl., Ex. M); P. Stamos Tr. 300:10-301:19 (Seshens Decl., Ex.
K).)
B.

Sterling Stamos Post-December 11, 2008
Emails Do Not Satisfy Rule 803(6)

Nor do the post-December 11, 2008 emails constitute business records under Rule
803(6). These emails reflect communications following Madoff’s arrest by and between
Sterling Stamos personnel and other third parties, but not with any Sterling Partner. The
Trustee relies on these communications as evidence that Sterling Stamos personnel
“warned” the Sterling Partners about Madoff years before his fraud was disclosed. All of
9

the Trustee’s post-December 11, 2008 emails were personal responses to a shocking
event—the disclosure of Madoff’s fraud—and were far from records “kept in the course
of a regularly conducted activity,” as Rule 803(6)(B) requires. The emails assert, for
example:
•

“[Madoff] wouldn’t make it through our risk and ops controls – lack of
transparency, no third party administrator, etc. Unfortunately, our partners – Saul
and Fred – against our recommendations invested as individuals and through their
real estate firm.” (Tr. Opp. Mem. at 22 (quoting Bohorquez Decl., Ex. 149).) 6

•

“Please let me know if you would like to discuss this further as we are trying to
inform all of our investors that our due diligence process rejected Madoff but,
unfortunately, the Katz and Wilpon families maintained their investment
independent of our advice.” (Id. at 22-23 (quoting Bohorquez Decl., Ex. 150).)

•

“We had recommended to [the Wilpon and Katz families] to redeem [from
Madoff] for years but they kept their investment independent of our
recommendation.” (Id. (quoting Bohorquez Decl., Ex. 151).)
These are classic hearsay, statements made out of court and not under oath by

non-parties. None is admissible for the truth of the matter asserted.
First, the post-December 11, 2008 emails refer vaguely to conversations that
purportedly took place years in the past. Accordingly, they all fail Rule 803(6)(A)’s
requirement that the “record” in question be made “at or near the time” of the act, event,
condition, opinion, or diagnosis recorded therein. “The timeliness with which a report is
prepared with relation to the events recorded therein is important ‘to assure a fairly
accurate recollection of the matter . . . [and] because any trustworthy habit of making
regular business records will ordinarily involve the making of the record

6

Citations to the “Bohorquez Decl.” refer to the Declaration of Fernando A.
Bohorquez, Jr. in Opposition to the Defendants’ Motion for Summary Judgment, dated
February 9, 2012 (doc. no. 126).
10

contemporaneously.’” Strother, 49 F.3d at 876 (emphasis added) (quoting Seattle-First
Nat’l Bank v. Randall, 532 F.2d 1291, 1296 (9th Cir. 1976)).
Courts generally have concluded that a delay of more than a couple of months
between when an event occurred and when the record of that event was made is too long.
See, e.g., Strother, 49 F.3d at 876 (delay of six months too long for record to be
considered made “at or near the time” of the event); United States v. Lemire, 720 F.2d
1327, 1350 (D.C. Cir. 1983) (delay of one year and ten months too long to satisfy the
timeliness requirement); United States v. Kim, 595 F.2d 755, 760 (D.C. Cir. 1979) (delay
of more than two years too long to satisfy the timeliness requirement); Carrie
Contractors, Inc. v. Blount Constr. Grp. of Blount, Inc., 968 F. Supp. 662, 666 (M.D. Ala.
1997) (delay of approximately seventeen months too long to satisfy the timeliness
requirement).
Second, many of the post-December 11, 2008 emails do not satisfy Rule 803(6)
because they were plainly not sent for business purposes, as confirmed by the discovery
taken by the Trustee. 7 See, e.g., United States v. Kaiser, 609 F.3d 556, 574 (2d Cir. 2010)
(“The purpose of [Rule 803(6)] is to ensure that documents were not created for ‘personal
purpose[s] . . . or in anticipation of any litigation’ so that the creator of the document ‘had
no motive to falsify the record in question.’” (quoting United States v. Freidin, 849 F.2d
716, 719 (2d Cir. 1988)); Lorraine v. Markel Am. Ins. Co., 241 F.R.D. 534, 571 (D. Md.
2007) (Mag. Judge) (“It is essential for the [business records] exception to apply that [a
For example, Basil Stamos testified that the emails he sent to his philanthropic
partners following Madoff’s arrest were to inform them that Sterling Stamos was not
affected by the Madoff fraud at a time when Basil Stamos was not a Sterling Stamos
employee and Sterling Stamos had no philanthropic arm of its business. (Basil Stamos
Deposition Transcript, Jan. 3, 2012, 59:12-18, 70:2-71:5 (Seshens Decl., Ex. N).)
7

11

document] was made in furtherance of the business’ needs, and not for the personal
purposes of the person who made it.”).
Third, the emails were personal responses to a shocking event—the disclosure of
Madoff’s fraud—and are far from records “kept in the course of a regularly conducted
activity,” as required by Rule 803(6)(B). See Strother, 49 F.3d at 876 (documents
“drafted in response to unusual or ‘isolated’ events” are not admissible as business
records); see also Lion Oil, 2011 U.S. Dist. LEXIS 24516, at *19 (“changes in standard
contractual terms in response to supply disruptions caused by extreme weather events”—
i.e., two hurricanes—were “unique responses to unusual or isolated events” and thus
were not records kept in the course of regularly conducted business activity).
Finally, the post-December 11, 2008 Sterling Stamos emails were not part of a
regularly conducted business activity. 8 To establish the “regular practice” element of
Rule 803(6)(C), the proponent must show that the document was “kept pursuant to a
routine procedure,” “regularly prepared,” or “filled out in the regular course of business.”
United States v. Freidin, 849 F.2d 716, 722 (2d Cir. 1988) (citing Wallace Motor Sales v.
Am. Motor Sales, 780 F.2d 1049, 1061 (1st Cir. 1985); United States v. Sanders, 749 F.2d
195, 197-98 (5th Cir. 1984)). “Memoranda that are casual, isolated, or unique do not
qualify as business records[.]” 5 Jack B. Weinstein & Margaret A. Berger, Weinstein’s
Federal Evidence, § 803.08[2] (2d ed. 2011); cf. Fed. R. Evid. 803(6) advisory
committee’s note (“Absence of routineness raises lack of motivation to be accurate.”)

8

For example, the post-December 11, 2008 emails from Basil Stamos and Tim
Dick completely fail to satisfy the “regular practice” prong of Rule 803(6). See
Bohorquez Decl. Exs. 125, 138-48.
12

Thus, courts in this Circuit have generally excluded documents not made as part
of a business’ “regular practice.” See, e.g., In re Parmalat Sec. Litig., 659 F. Supp. 2d
504, 526 (S.D.N.Y. 2009) (excluding report where witness testified that it was “not a
document that was commonly issued” by its preparer); Yankee Bank for Fin. & Savings,
FSB v. Task Assocs., Inc., 139 B.R. 71, 79-80 (N.D.N.Y. 1992) (excluding letter where
there was no showing that it was the regular practice of the subject business to draft such
a letter); cf. Freidin, 849 F.2d at 719-723 (excluding memorandum drafted by secretary
whose job responsibilities did not typically involve preparing such memoranda).
CONCLUSION
For the reasons set forth above, Defendants respectfully request that the Court
preclude the Trustee’s counsel from referring to or offering at trial the documents
identified in Exhibits A and B attached hereto, or any other similar documents, because
they are inadmissible hearsay to which no evidentiary exception applies.
Dated: New York, New York
March 5, 2012
DAVIS POLK & WARDWELL LLP
By: /s/ Robert F. Wise, Jr.
Robert F. Wise, Jr
Karen E. Wagner
Dana M. Seshens
450 Lexington Avenue
New York, New York 10017
Telephone:
[phone]
Facsimile:
[phone]
Attorneys for Defendants

13

EXHIBIT A

Representative List of Sterling Stamos Marketing Materials
and Third Party Due Diligence Questionnaires Subject to
Defendants’ Motion in Limine
Document
Feb. 9, 2012 Bohorquez Decl., Ex. 213; Trustee 187
Feb. 9, 2012 Bohorquez Decl., Ex. 117; Trustee 308
Trustee 110, SSMT01876757
Trustee 111, SSMT00025935
Trustee 257, SSMT01855447
Trustee 267, SSMT00184407
Trustee 266, SSMT02257869
SSMT00002134
SSMT00024050
SSMT00184406; SSMT00229008
SSMT01238316
SSMT01291191

EXHIBIT B

Representative List of E-mails Sent By or To Sterling Stamos Subject to
Defendants’ Motion in Limine
Document
Feb. 9, 2012 Bohorquez Decl., Ex. 120, SSMT01010357
Feb. 9, 2012 Bohorquez Decl., Ex. 122, Trustee 227
Feb. 9, 2012 Bohorquez Decl., Ex. 125, Trustee 312
Feb. 9, 2012 Bohorquez Decl., Ex. 138, Trustee 233
Feb. 9, 2012 Bohorquez Decl., Ex. 139, Trustee 234
Feb. 9, 2012 Bohorquez Decl., Ex. 140, Trustee 235
Feb. 9, 2012 Bohorquez Decl., Ex. 141, Trustee 236
Feb. 9, 2012 Bohorquez Decl., Ex. 142, Trustee 237
Feb. 9, 2012 Bohorquez Decl., Ex. 143, Trustee 238
Feb. 9, 2012 Bohorquez Decl., Ex. 144, Trustee 239
Feb. 9, 2012 Bohorquez Decl., Ex. 145, Trustee 240
Feb. 9, 2012 Bohorquez Decl., Ex. 146, Trustee 241
Feb. 9, 2012 Bohorquez Decl., Ex. 147, Trustee 242
Feb. 9, 2012 Bohorquez Decl., Ex. 148, Trustee 243
Feb. 9, 2012 Bohorquez Decl., Ex. 149, Trustee 329
Feb. 9, 2012 Bohorquez Decl., Ex. 150, Trustee 330
Feb. 9, 2012 Bohorquez Decl., Ex. 151, SSMT01061678
Trustee 253, SSMT00934563
SSMT00802069
SSMT00847189
SSMT00847964
SSMT00906783
SSMT01010532
SSMT01011307
SSMT01035963
SSMT01061678
SSMT01062442
SSMT01064123
SSMT01064719
SSMT01089216
SSMT01219632
SSMT02083948
SSMT02287755
SSMT02321479
SSMT02324182
SSMT02332853
SSMT02403787
SSMT02404830

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