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

Filing 167

DECLARATION of Regina Griffin in Support re: 162 FIFTH MOTION in Limine To Deem Statements By Sterling Stamos Employees In The Course Of And In Connection With Their Employment By Sterling Stamos As Admissions of The Sterling Defendants.. Document filed by Irving H. Picard. (Attachments: # 1 Exhibit 1, # 2 Exhibit 2 - Filed Under Seal Pursuant to Protective Order, # 3 Exhibit 3, # 4 Exhibit 4, # 5 Exhibit 5, # 6 Exhibit 6, # 7 Exhibit 7, # 8 Exhibit 8, # 9 Exhibit 9, # 10 Exhibit 10, # 11 Exhibit 11, # 12 Exhibit 12, # 13 Exhibit 13, # 14 Exhibit 14, # 15 Exhibit 15 -1, # 16 Exhibit 15 - 2)(Sheehan, David)

Exhibit 12

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

Videotaped
Deposition of:

Plaintiff,
PETER STAMOS

9

vs.

10
SAUL B. KATZ, et al.,
11
12

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

13
14
15

Transcript of testimony as taken by and before

16

LESLIE ROCKWOOD, Certified Shorthand Reporter, RPR and

17

Notary Public of the State of California, at the offices

18

of Shearman & Sterling, Four Embarcadero, Suite 3800,

19

San Francisco, California, on Thursday, January 5, 2012,

20

commencing at 9:48 a.m.

21
22
23
24
25

PICARD v. KATZ, et al.

CONFIDENTIAL

PETER STAMOS 1/5/12
14

1
2

Q.

And can you tell me what was Sterling Stamos?

What type of business entity was it?

3

A.

Well, the formation of the firm --

4

Q.

Right.

5

A.

-- was an investment firm.

6

Q.

Was it a partnership?

7

A.

I don't know the legal structure.

8

originally SP Capital Management.

9

same legal structure we have today.

10

It was

I believe it's the
We just changed the

name.

11

Q.

Did you ever consider yourself in a

12

partnership with anybody in connection with Sterling

13

Stamos?

14
15

A.
terminology?

16
17

Well, are you speaking of this in a legal

Q.

Was this a limited partnership or -Did you, yourself, what you considered a

partner?

18

A.

Yes.

19

Q.

And who did you consider yourself to be

20
21

partners with?
A.

I considered myself to be partners with the

22

partners from Sterling Equities.

23

Wilpon and Saul Katz.

24
25

Q.

So primarily Fred

And when you say you considered yourself to

be partners with the partners from Sterling Equities, why
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1
2

MR. GOUDISS:
Q.

Go ahead.

BY MS. GRIFFIN:

Did you ever have

3

communications with Saul Katz about Sterling Stamos

4

wherein you understood that he would be communicating

5

with other members of Sterling Equities?

6

A.

Yes.

7

Q.

And under what circumstances would you have

8

those types of conversations with Saul Katz?

9

A.

On a -- on a regular basis.

10

Q.

Did you understand, you know, whether Saul

11

Katz spoke on behalf of the other partners of Sterling

12

Equities in connection with Sterling Stamos business?

13

MR. GOUDISS:

14

Go ahead.

15

THE WITNESS:

I object.

My understanding was that --

16

well, first of all, I have to frame this.

17

stages of the firm, which was the period '02 to '04, we

18

shared office space with them.

19

with Saul, and my understanding was that whatever I would

20

share with him, he would share the relevant aspects of

21

what I shared with him with their partners, and

22

similarly, that he would represent their interests when

23

he met with me.

24

the firm, we were operating quite closely together.

25

Q.

In the early

I would regularly meet

That was in the first early stages of

BY MS. GRIFFIN:

And how did you come by your

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1

which would be just considered informal advisory

2

meetings.

3
4
5

Q.

In the early stages, who were the various

advisors that you would have that you referred to?
A.

So for purposes of clarity, I think

6

throughout the day it would be helpful to divide it up

7

into time frames.

8

Q.

Sure.

9

A.

So there was a period of time, 2002 to 2004,

10

before we became a registered investment advisor, where

11

essentially in that phase -- we'll call that Phase I --

12

we were the investment office of a family office.

13

the family office of the Sterling partners and my family,

14

and our --

15

Q.

16
17

Can I interrupt you?

It was

When you say "Sterling

partners," what do you mean?
A.

The Sterling Equities, the ones that you

18

referred to early on.

19

and family of our respective families.

20

friend and family organization.

21

And my family and various friends
It was largely a

The second phase would be the larger, the

22

more institutionalized firm was we became registered

23

investment advisor, professionalized the firm, took on

24

institutional capital.

25

So in this first phase, we met with a lot of
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1

Jerry Rosenkranz, who was a private equity investor, a

2

limited partner in the firm, who would invest with us and

3

introduced us to various private equity investors and

4

potentially may have introduced us to some other limited

5

partners.

6

Q.

When you refer to "limited partners" -- you

7

have a lot of partners -- could you explain what you mean

8

by "limited partners"?

9
10
11

A.

Limited partners, people who invest with us,

invest in our funds.
Q.

When you said that some of the advisors would

12

sometimes introduce you to potential new investors, who

13

were some of those advisors besides -- did they include

14

Saul Katz?

15

A.

I'm sorry, you have to repeat, rephrase.

16

Q.

Was Saul Katz one of the advisors who also

17

introduced you to potential new investors?

18

A.

Yes.

19

Q.

Was Fred Wilpon one of the individuals who

20

also introduced -- one of the advisors who also

21

introduced you to new investors?

22

A.

Yes.

And I remember one that was important:

23

Chuck Klein as well, American Securities.

24

simplify this, essentially, you know, Fred Wilpon's

25

family, Jeff Wilpon, the Katz family and the Wilpon
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1

family and their extended partnership, if they knew of

2

potential investors who would be suitable to come invest

3

with us, that was part of their role, to help us raise

4

capital.

5

hedge funds, private equity, real estate, all of which we

6

eventually invested in, if they knew of good managers,

7

they would introduce us to them as well.

8
9

And in the case of knowing the industry of

Q.

And when you say "managers," just for the

record, could you explain what you mean by that?

10

A.

We are set up as a fund to funds.

So when I

11

say "limited partners," I'm referring to limited partners

12

who invest with us, and when I saying "fund managers,"

13

I'm saying the managers that we in our fund-to-fund

14

structure would invest in.

15

So, for example, Chuck Klein introduced us to

16

Bill Ackman at Gotham Capital, and we would go to meet

17

with him and potentially choose to invest with him.

18

Katz introduced me to people he knew in the industry, and

19

I would make the decision as to whether or not to invest

20

with them.

21

Q.

22

24
25

Who did Saul -- I didn't mean to speak over

you.

23

Can you recall any of the people in the
industry that Saul Katz introduced you to?
A.

Saul

I recall one in particular, Ezra Merkin.
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1

Q.

Forgive me if you've testified to this

2

previously, but for foundation purposes, at the formation

3

stage, at phase -- I think what you've called --

4

A.

Phase I.

5

Q.

-- Phase I, what was your position at

6

Sterling Stamos?

7

A.

Same position I hold today.

I was chairman

8

and CEO, but at that time, I was -- I also held the title

9

of chief investment officer, which I no longer hold.

10
11

Q.

To be clear, what time period are we talking

about there?

12

A.

I was chairman and chief executive officer

13

and chief investment officer at the formation of the

14

firm.

15

chief investment officer role to Noreen Harrington for a

16

six to nine-month period.

For a brief period of time, I turned over the

17

And then more recently, I believe it was,

18

almost three years ago, I turned over the chief

19

investment officer title to Michael Chisek.

20

that was in April or May or June of 2009.

21

Q.

I believe

As chairman and CEO and chief investment

22

officer, can you just very briefly tell me what your

23

responsibilities were for Sterling Stamos?

24
25

A.

Three responsibilities:

Responsibilities to

invest capital well, the capital I've been entrusted
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1

with, number one; number two, to continue to raise

2

capital for the firm; and number three, to run an

3

effective organization.

4
5

Q.

Normally I would go into those questions in

detail, but I'm trying to save you some time.

6

A.

Actually, I apologize.

I recall Saul Katz

7

also introduced me to Bob Rosenthal, Robert Rosenthal,

8

which is an investment firm called First Long Island

9

Investors.

10

Q.

11

investment manager?

12

A.

13

16

Yes, someone that we could invest with and

somebody who could also invest with us.

14
15

And to be clear, was Bob Rosenthal an

Yes.

Q.

Did you invest with Bob Rosenthal or his

A.

No.

firm?
Actually, it's important because that

17

was one of the investments that was originally handed to

18

us in kind as part of the original investment of the

19

Sterling Equity partners, and we independently reviewed

20

the investment and decided to redeem from that investment

21

with Robert Rosenthal.

22

Mr. Katz also introduced us to a hedge fund

23

manager -- I can't remember the name; I believe it was

24

Winfield or Wingate -- that was also contributed in kind

25

as part of the original investment.

Again, we reviewed

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1

A.

Robert Rosenthal.

And he said it in a way

2

that everybody heard.

3

him and we don't believe it's up to the standard of what

4

it is we're looking for."

5
6

And I said, "Because we reviewed

And Mr. Wilpon said, "That's exactly why it
is I chose you."

7

The decision to -- so basically to divide our

8

responsibilities.

9

Q.

10

Rosenthal's fund?

11

A.

12

And why did you decide to redeem out of

We thought we could do better with other

managers.

13

Q.

You mean in terms of return performance?

14

A.

Risk-adjusted returns.

15

Q.

And what do you mean by that?

16

A.

Return per unit of volatility.

17

had better options.

18

Q.

We thought we

And what was it about the return per unit of

19

volatility with Mr. Rosenthal's fund that led you to that

20

conclusion?

21

A.

To be clear, I think Mr. Rosenthal runs a

22

very good firm and a very good fund, but his fund was

23

primarily long only, with high correlation to the equity

24

markets, and we were seeking to find more managers that

25

were less correlated to the equity markets.
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1
2

MS. GRIFFIN:

Oh, I'm sorry, I thought he was

still reading.

3

Q.

Have you had a chance to read Exhibit 165?

4

A.

Yes.

5

Q.

What is this document?

Let me -- for the

6

record, it says under the heading, "Board discussion

7

October 9, 2002, board members:

8

Spiro Stamos, Peter Stamos."

9

Saul Katz, David Katz,

What is this document?

10

A.

As I recall, original board was made up of

11

Saul Katz and his son David and myself and my father

12

Spiro.

13

the progress of our first quarter having been in business

14

and to review and talk about what we planned to do going

15

forward.

This would have been a board meeting to review

16

Q.

Do you know who prepared Trustee's 165?

17

A.

I don't know whether it was written by me or

18

by one of the members of my team at my direction.

19

again, I can hypothesize, given the three bullets that

20

are outlined there, that they are the same three bullets

21

that outlined -- that I just articulated, it's consistent

22

with how I thought about the formation of the firm.

23

it clearly had my input.

24

Q.

25

for such meetings?

But

So

Would you routinely prepare notes like this

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1

data that would then go to our auditor, Ernst & Young.

2

So the administrator prepares the documents,

3

and the documents are audited by Ernst & Young, and those

4

documents are the source of data that we use to

5

distribute to our limited partners.

6
7

Q.

IFS and then RK as your administrator?

8
9

And who was involved in the decision to hire

A.

Well, it was my decision as CEO, but I took

input from, you know, several people.

I don't recall at

10

the time who played the largest influence.

11

just a question of interviewing.

12

Q.

It was more

When you said it was your decision as CEO,

13

what did you understand your decision-making authority to

14

be?

15

A.

Essentially it was delegated to me, all

16

decision making around final investment decisions, hiring

17

and firing of people, and acceptance or nonacceptance of

18

investors.

19

Q.

When you say "it was delegated to me" --

20

A.

By the board.

21

Q.

And who was the board?

22

A.

The same four members that are listed on

Q.

And how was it delegated to you?

23

page 1.

24
25

means?
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1

A.

Well, first of all, that was my

2

understanding; and secondly, I believe all the documents

3

that we currently have actually are positioned that way,

4

such that even when we had, you know, another chief

5

investment officer, for example, I still am required to

6

sign off on all new investments and on all redemptions.

7

So I'm the managing member of the general partner.

8
9

Q.

Who was Sterling Stamos' auditor in the

October 2002 time frame?

10

A.

I don't recall the exact date that we

11

actually hired Ernst & Young, but I know that Ernst &

12

Young was our first auditor, and we had audited books by

13

the end of -- I believe at the end of the first -- second

14

quarter, which would be the end of the calendar year.

15

So at some point in time, Ernst & Young was

16

hired.

17

remained, I believe, our auditor ever since.

18
19
20
21
22
23

I'm just not sure when we were.

Q.

And they have

And what services did Ernst & Young provide

to Sterling Stamos as its auditor?
A.

They prepared our audited statements for tax

purposes, filing purposes.
Q.

Were you involved in the decision to retain

Ernst & Young as Sterling Stamos' auditor?

24

A.

I made that decision.

25

Q.

And do you know why you made the decision to
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1

around here --

2

A.

Uh-huh.

3

Q.

-- about discussions you had with Mr. Katz

4

about the effect that registering as an investment

5

advisor might have upon his relationship with

6

Bernard Madoff.

7

A.

Yes.

8

Q.

Okay.

I'm going to show you what's been

9

marked as Trustee's 290.

10

MS. GRIFFIN:

Just for the record, it's an

11

email from Peter Stamos, dated Wednesday, July 14, 2004,

12

at 9:29 p.m., to Saul B. Katz, David Katz, Subject:

13

(BN) Divided SEC Proposes More Oversight of Hedge Funds."

14

And its Bates range is SE-T957067 (indicating).

15
16

Q.

Oh, I'm sorry.

"FW:

This is supposed to be

attached to it.

17

A.

Thank you.

18

MR. GOUDISS:

288?

19

MS. GRIFFIN:

I'm sorry.

We skipped one.

This is Trustee's

20

290.

21

ahead of time, and we're jumping around.

22
23
24
25

We've marked a bunch of exhibits

MR. GOUDISS:
Q.

Okay.

BY MS. GRIFFIN:

Glad I asked.

Mr. Stamos, have you had a

chance to look at Trustee's 290?
A.

Not yet.
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1
2

As part of looking at that, would you like me
to look at this second part as well?

3

Q.

Sure.

4

A.

Okay.

I've read this now.

5

Q.

Okay.

Do you recognize Trustee's 290?

6

A.

I do.

7

Q.

Did you send this email to Saul Katz and

8

David Katz?

9

A.

I believe so, yes.

10

Q.

And in it, you wrote, "Team, It looks like

11

we've got 60 days to get ready to register."

12

What did you mean by that?

13

A.

14

forwarded.

15

Saul and David.

16

of the team.

17

people listed on that.

18

Q.

By "team"?

I believe this is an email that I

So this is probably one that was -- went to
It may have been forwarded to the rest

The team is, generally speaking, the other
But I'm not sure of that.

And when you wrote, "It looks like we've got

19

60 days to get ready to register," what did you mean by

20

that?

21

A.

It had been our intention to register as an

22

investment advisor, which we did.

And based upon this

23

article, it looked like there was a possibility that we

24

would -- that it would be required.

25

60 days to get ready to start that process.

And so we would have

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1

Q.

And when you're referring to this article,

2

are you referring to the attachment, which is entitled

3

"Divided SEC Proposes More Oversight of Hedge Funds"?

4

A.

I believe so.

This is the attachment -- I

5

assume this is the attachment that Mr. Hammerman

6

forwarded to my brother, Chris, and me.

7
8

Q.

And when you say "register," just for the

record, can you explain what you mean by that?

9

A.

Yes.

So it had been our intention, and we

10

fulfilled that intention, to become a registered

11

investment advisor in the context of moving into Phase II

12

of the firm, from a family office into one that could

13

accept institutional capital.

14

And as the article refers to that, that was

15

best practices for leading institutions, and we wanted to

16

be a leading institution.

17

capital from pension funds and other institutions.

18

thought -- that was part of my mandate.

19

we did, register with the SEC.

20

Q.

We wanted to be able to accept
We

And that's what

And when you say, "We've got 60 days to

21

register," why did you believe -- why did you write that

22

you had 60 days to get ready to register?

23

A.

I don't recall the exact formation of the

24

60 days.

But as I read it again, it's 60 days to get

25

ready to register.

My recollection is the following:
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That when -- if and when the ruling was made, we would

2

have a time frame to get registered, which is, you know,

3

6 to 12 months.

4

So that would suggest that, you know, in the

5

next two months, we should decide.

6

got the two-months time frame from.

7
8
9

Q.

I don't know where I

And when you say "the ruling was made," what

ruling were you referring to?
A.

Well, I believe that the Securities &

10

Exchange Commission -- this is what the article is

11

referring to -- was divided and hadn't decided yet, but

12

that they were going to decide.

13

that that was our intention anyway.

14

Q.

All right.

And I should also say

Just to speed things along, when

15

you're saying "the ruling," was it a proposed regulation

16

by the SEC that was going to require a registration of

17

hedge funds?

18

MS. SESHENS:

Objection to the form.

19

Q.

BY MS. GRIFFIN:

If you know.

20

A.

My understanding, both from this article as

21

well as from other things that I recall reading from

22

Schulte, Roth, for example, was that this was something

23

that was being considered by the SEC, that we should be

24

prepared for that.

25

required or not, we intended to register.

It may be required.

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2

Q.

You also wrote in this email that, "I have a

call with Davis Polk tomorrow."

3

You testified previously that Schulte, Roth

4

was your primary counsel -- outside counsel, I believe;

5

is that correct?

6

A.

That's correct.

7

Q.

Was Davis Polk also Sterling Stamos' legal

8

counsel?

9

A.

I believe we used Davis Polk -- I recall

10

using Davis Polk for certain select items of our legal

11

process.

12
13

Q.

Can you tell me for what certain select items

of legal process you would use Davis Polk?

14

A.

The only one that I can specifically recall

15

was we used Davis Polk to help us with the separation

16

agreement we had with Noreen Harrington.

17

Q.

Okay.

Do you recall -- and I'm not trying

18

to get into the substance of your conversations with

19

counsel.

20

Polk about the SEC proposed investment regulations --

21

investment advisor?

22

A.

But do you recall speaking with anyone at Davis

I don't personally recall having that

23

conversation myself.

I have a vague recollection of us

24

having conversations with -- "us", meaning our firm --

25

having conversations with both Schulte, which was our
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hypothetical.

My sense is that is --

2

Q.

BY MS. GRIFFIN:

3

A.

I believe it would have been our general

4

counsel.

If you know.

I believe it would have been Derek Daley.

5

Q.

Okay.

6

A.

But I'm not sure of that.

7

Q.

I'm going to show you, Mr. Stamos, what's

8

been marked previously as Trustee's Number 178.

9

record, it's an email from Peter Stamos, sent Wednesday,

10

July 28th, 2004, at 9:17 p.m., to David Katz.

11

For the

"BM etc," Bates range SE-T680297.

12

A.

Yes.

13

Q.

Have you seen Trustee's 178 before?

14

A.

I believe so.

15

Q.

Okay.

Subject:

I'm familiar with this.

I'm familiar with it.

It's two emails.

It looks like at

16

the bottom of the page, first, there's an email from

17

David Katz, email address [e-mail], sent

18

Wednesday, July 28th, 2004, at 12:08 p.m., to

19

Peter Stamos.

20
21

Do you recall receiving this email from
Mr. Katz?

22

A.

I do.

23

Q.

And do you recall sending this response to

24
25

him, at the top of Trustee's 178?
A.

I'm very familiar with this email, yes.
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Q.

Do you recall sending this email to Mr. Katz?

2

A.

It's been seven years.

3

recollection, yes.

4

Q.

Okay.

This refreshes my

At the bottom of the page, Mr. Katz

5

wrote to you, "Peter about the BM thing," and there's

6

some misspellings, but I'm going to do the best I can.

7

"I will pull all out of him if I have too and be" -- and

8

I think "the" -- "GP with you."

9
10
11

What did you understand Mr. Katz to mean when
he wrote, "Peter about the BM thing"?
A.

I have a very clear recollection of this and

12

why I was happy with David's response.

The issue that we

13

were confronting was once we got beyond the privacy of

14

the Katz/Wilpon families -- which was relatively easy to

15

do, because it turns out that registering doesn't really

16

change much in terms of the form ADV disclosures.

17

The other issue that needed to be addressed

18

was would the amount of disclosure that the Wilpons and

19

Katzs have be such that their relationship with

20

Bernie Madoff would be hampered in any way.

21

Now, remember at that time, getting access to

22

Bernie Madoff was considered a privilege.

All right?

23

And you had to -- it was a -- like many great hedge fund

24

managers at the time, it was sort of -- you only got in

25

by invitation.

There are hedge fund managers, by the
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way, for whom that's still the case today, Baupost,

2

Seth Klarman, for example.

3

Great managers, but they set their rules as

4

to who gets to go in.

5

in was being part of a -- you know, being a friend and

6

a -- a confidential friend.

7

And one of the ways that you got

And if that violated Mr. Madoff's concern of

8

confidentiality in any way, shape or form, then what

9

David was telling me was he, personally, would take out

10

all of his money from Bernie Madoff and just be a member

11

of the general partner with us.

12

that was, of course -- I viewed that as a positive,

13

because, remember, Mr. Madoff was in competition with me

14

for Katz's capital, the Wilpon capital and other

15

families' capital.

16

Q.

17

20

Q.

25

How does this turn off?

When you say with the amount of disclosure --

when you say with the amount of disclosure -MS. GRIFFIN:
difficulties.

23
24

When you say that the -- would the amount --

MS. GRIFFIN:

21
22

And

sorry.

18
19

That's David Katz.

Sorry.

We're having technical

My apologies, Mr. Stamos.

(Interruption in proceedings.)
Q.

BY MS. GRIFFIN:

Mr. Stamos, when you said

would -- the amount of disclosure would be such that the
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require revealing of confidential information that could

2

possibly hurt their relationship with Bernie Madoff.

3

What David was saying to me was that if that

4

were the case, and he would no longer be able to -- he

5

would not longer be able to be an ongoing investor with

6

Bernie Madoff, he was fine with that.

7

from Bernie Madoff completely, and then he would then

8

serve as the general partner with us, which, of course,

9

made me happy at many levels, that he would do so.

10

Q.

BY MS. GRIFFIN:

11

Trustee's 178:

12

out well for me.

13
14
15

He would redeem

He further writes in

"We are making headway, and it could end
Call.

We will talk.

DMK."

When he says, "We are making headway" -- it's
a little typo, but what did you understand him to mean?
A.

I believe that he was making progress with

16

regard to his broader partnership understanding why that

17

made sense for us to register and that they would support

18

that and that they would all turn to him to play a larger

19

role in however this played itself out.

20

And that was actually very consistent with

21

what David and I had as part of our original plan for

22

this firm is that he would play a larger role in the firm

23

over time.

24

Q.

25

And when you said the -- his -- "David's

broader partnership," what did you mean by that?
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A.

I'm referring to that same characterization

2

you gave me in the early parts of this discussion, that

3

"partnership" being the Sterling Equities partners.

4

Q.

Okay.

And then at the top, your responsive

5

email, "Great, David.

6

your good hands.

7

dad."

8
9
10

And thank you.

I'll leave this in

I'm working on some solutions for your

Can you tell me what you meant when you said,
"I'm working on some solutions for your dad"?
A.

Yes.

It was our understanding that with

11

registration, one of the things that we would be doing is

12

that we would start to separate out more of the functions

13

of our firm from their firm.

14

believe, 18 months ago.

15

I testified to this, I

For example, moving into separate real

16

estate, separate offices.

17

information technology.

18

more formal separation between the running of the

19

business and the investment process.

20

those things would allay concerns that Mr. Katz had and

21

his other partners had about being more involved in an

22

investment process that they didn't feel qualified to do

23

and didn't want as part of their mandate.

24
25

For example, separating our
For example, more -- creating

And that all of

The whole idea of Sterling Stamos was -- or
SP Capital Management was that was supposed to be my
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responsibility.

2
3

So we were going to use this as an
opportunity to formalize that separation.

4
5

Q.

Okay.

Mr. Stamos, you can put that to the

side.

6

I'm going to show you what's been marked next

7

as Trustee's 291.

8

Monday, August 2, 2004, at 11:52 a.m., to J. Ezra Merkin,

9

Subject:

"RE:

It's an email from Peter Stamos, sent

Catching up."

And its Bates Stamp is

And I misspoke.

I think it's an email

10

SSMT01249952.

11

chain, by the way.

12

A.

Yes.

13

Q.

Did I give you two pages?

14

A.

(Indicating.)

15

Q.

Ah.

16
17

I've read this document.

Okay.

Yes, mine's double-sided.
Mr. Stamos, have you had a chance to

look at Trustee's 291?

18

A.

Yes.

I have.

19

Q.

Do you recognize this document?

20

A.

I do.

21

Q.

Can you tell me what it is?

22

A.

This is an email -- on the first page, this

23

is an email from me, myself, to J. Ezra Merkin, copying,

24

I believe, his assistant and my assistant.

25

Q.

Do you recall sending this email to
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left on the tape.

2
3

MS. GRIFFIN:
we'll mark an exhibit.

4
5

Why don't we break now, and

THE VIDEOGRAPHER:
Tape 1.

Okay.

This is the end of

We're off the record at 11:57.

6

(Recess.)

7

(Exhibit Trustee 296 was marked for

8

identification.)

9

THE VIDEOGRAPHER:

10
11

beginning of Tape 2.
Q.

Okay.

This is the

We're on the record at 12:16.

BY MS. GRIFFIN:

Hi, Mr. Stamos.

I'm going

12

to give you what's been marked as Trustee's 296.

It's

13

subject Pete Sheet, start date of 9/2/2004, at 3:00 a.m.,

14

Bates range SSMT01229948 (indicating).

15

A.

I've read the document.

16

Q.

Okay.

17

A.

Yes.

18

Q.

Can you tell me what it is, please?

19

A.

Just as the other one, this is my Pete Sheet,

Do you recognize Trustee's Number 296?

20

which is my daily phone calls, to do list and some

21

specifics on calls that I'm supposed to return.

22

Q.

And, again, just for the record, who

23

prepares -- or who prepared Pete Sheets at or about

24

September 2004?

25

A.

Whoever was serving as my executive assistant
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at the time.

2

been Gillian.

3

time.

4

Q.

It could have been Ming.

It could have

I'm not sure who was doing it at that

Under -- the top of the document, Peter's

5

calls, the second name, Anthony Scaramucci, do you see

6

that?

7

A.

Yes.

8

Q.

Who is Anthony Scaramucci?

9

A.

Anthony Scaramucci is a hedge fund to funds

11

Q.

How do you know Anthony Scaramucci?

12

A.

He was introduced to me by Fred Wilpon.

13

Q.

Was he involved in Sterling Stamos' business

10

14
15
16
17
18
19
20
21
22

manager.

in any way?
A.

He was a potential recruit for us, somebody

we considered hiring for our front office.
Q.

And in what capacity did you consider hiring

Mr. Scaramucci?
A.

Considered hiring him for the front office,

which is the raising of capital side of the business.
Q.

Okay.

And down below, at the bottom,

Michael Katz, do you see that?

23

A.

Yes.

Yes.

24

Q.

Did you frequently talk to Michael Katz?

25

A.

If you could -- if you could define -BENDISH REPORTING, INC.
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MR. GOUDISS:

2

THE WITNESS:

-- frequently.

3

MR. GOUDISS:

Yeah.

4

Object --

Q.

BY MS. GRIFFIN:

6

A.

Yes.

7

Q.

And how do you know Michael Katz?

8

A.

He's the brother of Saul Katz.

9

Q.

Okay.

5

10

Do you know who Michael Katz

is?

And did Michael Katz have anything to

do with Sterling Stamos' business?

11

A.

He was a member of the ownership structure.

12

Q.

And did you talk to him about Sterling

13

Stamos' business with him?

14

A.

Periodically.

15

Q.

And what do you mean by "periodically"?

16

A.

You know, on occasion.

17

the office, I would talk to him.

18

have a phone call.

19

Q.

If he would stop into
Occasionally we might

I might meet him at a baseball game.

Do you recall ever having discussions with

20

Michael Katz about registering Sterling Stamos as an

21

investment advisor?

22

A.

I don't recall specific conversations with

23

Michael Katz about that subject.

24

but I don't recall them.

25

Q.

It could have occurred,

Do you recall having conversations with
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A.
Ms. Yukako.

3
4

Q.

I don't recall personally speaking to
I may have, but I don't recall.
Do you have an understanding as to whether

anyone at Sterling Stamos spoke to Yukako Kawata?

5

A.

Yes.

6

Q.

And what is your understanding?

7

A.

I believe that this was a set of

8

responsibilities that was delegated to some of the people

9

who are cc'd in these two references.

Kevin Okimoto took

10

on primary responsibility for coordinating all of our

11

legal activity until we had our own internal general

12

counsel, so he played that role.

13

been primarily responsible for those communications --

14

coordinating those communications between Mr. Glaser and

15

other counsel.

And Kevin would have

16

Q.

You said Mr. Glaser was from Cooley Godward?

17

A.

I believe he was at Cooley Godward at the

18

time.

19

believe he joined us in February of 2005 as our internal

20

general counsel.

21
22

This was -- looks like August of 2004.

Q.

And I

So at this time Sterling Stamos had three law

firms involved in the investment advisor issue?

23

MR. GOUDISS:

24

Go ahead.

25

MS. SESHENS:

I object.

I object.

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other investors?

2

A.

No.

We hadn't launched it yet.

3

Q.

When did you launch Sterling Stamos?

4

A.

We launched -- well, the firm was

5

incorporated on June 17th and then we launched our first

6

two funds, I believe on July 1st, 2002, and we did that

7

initially with only internal capital, meaning capital

8

from the Sterling Equities partners and from the Stamos

9

partners.

10
11
12
13
14
15
16

Q.

What was Tom Olds' position with Sterling

A.

Tom Olds was originally hired as an

Stamos?

engagement manager or associate.
Q.

What were his job responsibilities as an

engagement manager or associate?
A.

He was the second to me, the senior-most

17

person on the investment team.

18

responsibility as a manager was to help me build out the

19

rest of the team, and so he helped me recruit Ashok

20

Chachra who came in as an analyst or associate.

21
22
23

Q.

And his first

And how did Mr. Olds -- what were his

day-to-day tasks as an associate?
A.

I'll give you an example.

His

24

responsibility, he was trained in mathematics and as a

25

certified financial advisor.

CFA, level three or

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something like that.

2

design portfolios.

3

tasks was to develop a model that would show us what

4

asset allocation we should have among the various

5

strategies of hedge funds so as to optimize risk adjusted

6

returns.

7

interviews with me and with Mr. Chachra to meet potential

8

managers that we would potentially invest with.

9
10
11

And he knew how to do analysis to
So his first -- one of his first

Another example is he would go on manager

Q.

Did Mr. Olds conduct any diligence in the

course of his duties?
A.

There are several levels of diligence.

12

There's investment due diligence, operation due

13

diligence, risk management due diligence, legal due

14

diligence.

15

as I described the family office, the primary due

16

diligence we did was investment due diligence, meaning is

17

this investment an appropriate investment for us based

18

upon their historical returns and the reputation of the

19

manager to go into our portfolio?

20

diligence he did, which was primarily data analysis and

21

interviews.

22

Q.

At that time when we were in that early phase

So that level of due

What data analysis would Mr. Olds conduct?

23

MS. SESHENS:

Objection to the form.

24

THE WITNESS:

I can give you an example.

25

example would be taking the historical returns of the
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managers that we were considering putting into our

2

portfolio and then constructing a pro forma of what the

3

portfolio would be.

4

manager but 12 managers, each with equal positions or

5

changing the position size.

6

Q.

7

diligence?

8

A.

For example, if we had not one

9

BY MS. GRIFFIN:

What is operational due

Operational due diligence is, generally

speaking, an analysis of the operations of a business, in

10

this case of the hedge funds that we consider investing

11

in, and it includes a whole series of questions that we

12

have to have answered in order to qualify the fund

13

manager as a potential investment.

14

Q.

What series of questions would you have to

15

have answered in order to qualify the fund manager as a

16

potential investment?

17
18

MR. GOUDISS:
time frame.

19

I object.

Particularly over

But go ahead.
MS. GRIFFIN:

In this time frame in the

21

MR. GOUDISS:

2002.

22

THE WITNESS:

2002, 2004 we did not conduct

23

operation due diligence.

24

diligence after we started the process of becoming a

25

registered investment advisor and hiring a CFO.

20

change --

We conducted operation due

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been over this, but it's just easier to keep going.

2

was her position when she was hired?

3
4

A.

What

When she was officially hired, she was given

the title of chief investment officer.

5

Q.

And what were her responsibilities as chief

6

investment officer?

7

A.

8

assembled.

9

Chachra.

To be the supervisor of the team that was
So at that particular time it was Ashok
But then the anticipation -- I believe Tom Olds

10

had left at that time.

11

be hiring other associates as well and she would be

12

responsible for conducting the analysis and doing manager

13

interviews and then making recommendations to me for

14

potential additions or substractions from our portfolio.

15
16
17

Q.

I'm sorry.

It was anticipated that we would

When you said she would be

responsible for doing the analyses -A.

The same analysis we just referred to before,

18

only she was more senior than either Tom Olds or Ashok

19

Chachra -- she had more experience.

20
21
22

Q.

Not to put words in your mouth, but are you

referring to due diligence analyses or specific analyses?
A.

Investment due diligence, all of the -- the

23

analyses that we would do would go to the chief

24

investment officer, she would lead that analysis and then

25

make recommendations to me.
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And I believe that was through December 30th of 2002,

2

December 31st.

3
4
5

Q.

When you say he traded in and out of single

stock positions, what do you mean?
A.

I can tell you an example.

He had a -- would

6

have a position in a company called MBNA, he would buy it

7

when he thought it was low and sell it when he thought it

8

was up, and then move in and out sometimes on a daily

9

basis, sometimes on a weekly basis, and he was trying to

10

achieve staple steady returns as a short-term day trader,

11

if you will.

12

Q.

13

Okay.

I got that term.

Do you know how Ms. Harrington went about --

14

well, did she evaluate Sterling Stamos' existing fund

15

managers?

16

A.

I believe she -- I know that for a fact she

17

did some interviews of our existing managers, I'm not

18

sure which ones she did, but I know of some that she did.

19
20
21

Q.

And do you know what the purpose of her

interviews with the existing managers was for?
A.

In general, the purpose was to reaffirm that

22

we should stay with the manager, that the manager was

23

continuing to do the things that we had -- that

24

originally he or she had said that they would do.

25

the things that are listed for ongoing monitoring, that's
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3
4
5
6

the responsibility of the investment team.
Q.

And was she a part of that investment team

that was responsible for that function?
A.

She was second only to me in that

responsibility.
Q.

Okay.

Did there come a time that Ms.

7

Harrington met with Ezra Merkin to discuss Sterling

8

Stamos' investments with him?

9

A.

Yes.

10

Q.

Do you know why Ms. Harrington was meeting

11
12

with him?

What was the purpose of that meeting?

A.

I requested a meeting with Mr. Merkin, I

13

believe it was in February of 2002, with Ms. Harrington,

14

who had recently joined us and become partner, and with

15

Mr. Chachra.

16

were making increased investments with Mr. Merkin in a

17

series of his funds as we were raising capital.

18

investments were June 30th and as capital came in --

19

June 30th to July 1st of 2002, as capital came in, we

20

kept adding capital to all of our managers and he was

21

becoming a larger and larger pool of capital for us,

22

because I think at that time we had three funds.

23

second, in particular, we had made a decision in the

24

early part of 2002 at Ms. Harrington's recommendation to

25

launch a levered fund, and we were considering putting

And I requested that meeting because we

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him for many years, and I said, "Saul, does that," you

2

know, "comport with your understanding of Mr. Merkin?"

3

And of course, I believe at that time all of

4

us, with the exception of Noreen, stood, generally

5

speaking, in awe of Mr. Merkin.

6

investment committee for Yoshiba.

7

world renowned, and he may have been president of the

8

temple, and he just was stalwart in the community.

9

Saul said some reassuring words to me about this being a

10

trustworthy person.

11

me to him.

12
13
14

He was chairman of the
He was considered

And

That's why he originally introduced

So Saul was aware of this conversation.
I'm not sure if he was aware of the details

that followed later on, but...
Q.

So suffice it to say that a manager's

15

reputation is a significant factor in what you look at in

16

selecting a manager and maintaining a manager?

17

MR. GOUDISS:

18

Go ahead.

19

THE WITNESS:

Object.

We have said in the firm, since

20

the inception of the firm, something that Fred Wilpon

21

said to me when they selected me to be the CEO of our

22

firm, that whenever you make an investment decision,

23

there are ten questions that need to be answered.

24

first nine are trust and value based; the tenth one is

25

can they do the job.
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were often closed to outside investors.

2

And the level of questioning that I would

3

have of Saul, in particular, based upon his judgment, was

4

if he knew the manager, what he thought of that person as

5

an individual, could we trust them?

6

questions we had to answer, the trust and value based,

7

those are qualitative judgment calls.

8

part of due diligence.

9

most important parts.

10

So in the first nine

It's an important

I would argue it's one of the

And then on the quantitative side, you know,

11

can they actually do the job, can they execute on hedge

12

fund strategies and so on, that was our job.

13

Q.

BY MS. GRIFFIN:

Okay.

Page 11 of that

14

document, Bates range, last four digits, 8262.

15

Saul B. Katz, it says, "Mr. Katz is a general partner of

16

Sterling Stamos and is actively involved in the

17

investment decisions, as well as the management of

18

Sterling Stamos."

19

Under

Was that true in or about October 2004?

20

A.

Yes.

At that time he was actively involved.

21

Again, with the caveat being that his active involvement

22

was, on the investment side at least, at the very general

23

level.

24
25

On the business side, very specific level.
Q.

And David Katz, it says, "Mr. Katz is a

general partner of Sterling Stamos and is actively
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involved in the investment decisions as well as the

2

management of Sterling Stamos."

3
4

Is that an accurate statement in or about
October 2004?

5

A.

Yes.

6

Q.

Okay.

7

A.

With the same caveat, at the general level on

8

the investment side.

9

side of it.

10

Q.

More specifically on the management

Were you marketing Mr. Katz's, Mr. Saul Katz

11

and Mr. David Katz, their involvement with the fund to

12

your potential investors?

13

A.

Yes.

14

Q.

And did you inform your potential investors

15

that their -- strike that.

16

MR. GOUDISS:

Thank you.

17

MS. GRIFFIN:

I'll save you the objection.

18

MR. GOUDISS:

You saved me the objection.

19

MS. GRIFFIN:

You're coughing so hard I felt

20

bad.

21

Q.

On page 3 of the first attachment -- my

22

apologies.

23

A.

Going back to the first?

24

Q.

Yes.

25

A.

Okay.

Jumping back.

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exposure to the hedge fund world.

And this was -- we

2

became the integrative investment arm for everything else

3

other than that for them.

4

Q.

Okay.

5

A.

The whole document?

6

Q.

I'm sorry, you can put that --

7

A.

You're finished with this document?

8

Q.

Yes.

9
10

You can put that aside.

We're finished.

Sorry.

Did there come a time that Merrill Lynch
acquired an ownership interest in Sterling Stamos?

11

A.

Yes.

12

Q.

And do you remember approximately when that

14

A.

Yes.

15

Q.

And who was involved in the negotiations of

16

that transaction?

17

A.

13

was?

I was.

And I believe that the primary

18

responsibility for negotiating the terms and conditions

19

was mine, but I went back to my various partners to get

20

their agreement.

21
22

Q.

And who would you -- which of your various

partners would you go back to get their agreement?

23

A.

On the Sterling Equities side, I would go

24

back to Saul Katz.

25

Q.

You wouldn't speak to any of the other
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2

Sterling Equities partners?
A.

As a matter of course, I would speak to Saul

3

directly, and my assumption is he would share with the

4

partners as need be.

5

asked me, I would also give them an update.

6

course, I had a dedicated internal team focused on the

7

negotiations for structuring it, internal legal staff,

8

internal financial staff, internal investment staff, and

9

we had external counsel help us negotiate the terms and

10
11
12

But if one of the other partners
And of

conditions.
Q.

And just to be clear, in your last record

that when you would -- strike that.

13

When you were referring to the other partners

14

in your last answer, were you referring to Sterling

15

Equities partners?

16

around here.

17

A.

Okay.

There's a lot of partners floating

So what I would do is on a regular

18

basis I would speak to Saul Katz, and my assumption was

19

that he would share the information with his partners,

20

but I would also -- those are the Sterling Equities

21

partners.

22

But I would also, as a matter of course, if

23

any of them asked me a question, I would be happy to

24

answer them directly.

25

was with Saul.

My primary source of communication

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On the other side of the ownership structure,

2

which is the -- we'll call it the Stamos partners, there

3

my communication was daily with my team.

4

were partners, Ashok Chachra, Kevin Barcelona and

5

Kevin Okimoto, others of whom at the time were associates

6

and colleagues.

7

Q.

Some of whom

Did you ultimately sign an agreement whereby

8

which Merrill Lynch acquired an ownership interest in

9

Sterling Stamos?

10

A.

Yes.

11

Q.

And how much of an interest did Merrill Lynch

12

acquire?

13

A.

A 50 percent interest.

14

Q.

And how much did they pay for that interest?

15

A.

The valuation of the firm was $460 million.

16
17
18
19

They ultimately paid $230 million for a 50 percent stake.
Q.

And to whom did Merrill Lynch pay that sum of

money for the ownership interest?
A.

They paid -- of that $230 million, 50 percent

20

or 115 million, was paid out to the Sterling Equities

21

partners in two installments.

22

was paid out to the Stamos partners proportionate to our

23

ownership stake in the firm.

24
25

MR. GOUDISS:

And the other 50 percent

Note that I'll designate this

portion of the transcript confidential as well.
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Q.

BY MS. GRIFFIN:

Now, if you could take a

2

moment and look at Trustee's 310.

3

"Sterling Stamos internal chat application."

4
5

At the top it says,

Do you recognize what that could be referring
to?

6

A.

I haven't read this yet.

7

Q.

That's okay.

8

A.

I'm familiar with this.

9

Q.

Okay.

10

chat application?

11

A.

Did Sterling Stamos have an internal

I believe that we did, yes.

I am not -- this

12

is the first time I've actually seen this chat, but I've

13

seen other chats, and I actually participated on a few

14

myself.

15

Q.

And the metadata that accompanied the

16

production of this document has it dated somewhere

17

around -- a file name anyway of 06/12/2006.

18

there's another date after it -- well, it's 06/12/2006

19

and I don't know what 22-0727 is.

20
21
22

And then

But in the document -- who's Michelle Ruvolo,
by the way?
A.

Michelle Ruvolo was the assistant to Rohit.

23

Rohit was the managing director in charge of risk, and I

24

believe at that time Michelle was either a director or

25

senior associate.

She's currently a managing director
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2
3
4

still on the risk team -- risk management team.
Q.

And as a senior associate or a director of

the risk management, what were her responsibilities?
A.

To do analysis of the underlying investments

5

from a risk perspective and to provide that analysis at

6

the direction of Rohit, who was the head of risk.

7
8

Q.

The chat application document says,

"Michelle Ruvolo says 'Rohit.'"

9
10

"Michelle Ruvolo says, 'Ascot does not keep
financial.'"

11
12

"Michelle Ruvolo says, 'Their holdings report
consists entirely of T-bills.'"

13
14

"Rohit Kumar says, "'Because they turn
everything into cash on year end.'"

15
16
17

Was it true in or about 2006 that Merkin
turned to cash at the year end?
A.

Yes.

I believe that's correct.

And as Rohit

18

said in his next statement, we believe that that was done

19

intentionally.

20

that was conducted by -- a similar strategy was conducted

21

by Mr. Madoff, which was if you're doing an options

22

arbitrage by year end, you're -- particularly if you're

23

providing year-end liquidity to your underlying

24

investors, you want your trades to be completed and in a

25

liquid form by year end to provide liquidity to your

And that was part of the similar strategy

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3

Q.

Okay.

Can you tell me who you remember being

A.

Members of the board, which included my

there?

4

father, Spiro Stamos, Kevin Dunleavy, who's a Merrill

5

Lynch representative on the board, myself, Saul Katz.

6

Saul Katz, Spiro Stamos and Peter Stamos represented the

7

three voting members of the Sterling Stamos group.

8
9

I don't recall who the other board members
were on the Merrill Lynch side, because they turned over

10

somewhat.

11

senior members of the three.

12

with a vote.

13
14
15

But I know that Kevin Dunleavy was one of the
And he represented them

And then in addition to that, there was my
general counsel and various members of our staff.
Q.

Do you remember Mr. Dunleavy's response to

16

Mr. Katz's suggestion about a fund to funds comprised of

17

black box strategists?

18

A.

Yes.

19

Q.

And what was Mr. Dunleavy's response?

20

A.

His response was twofold.

Number one, we

21

could not do that under the Merrill Lynch structure,

22

because under the Merrill Lynch structure, they required

23

a different level of transparency than black boxes -- a

24

fund to funds and black boxes.

25

He did say -- and I just had my memory
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make the referral and we would sometimes say yes and

2

sometimes say no.

3

Q.

Okay.

It was our call.
If you could turn to the page -- it

4

bears Bates Number ending in 8262, it's towards the back,

5

and it is page 11, if that's helpful.

6

A.

That's helpful.

7

Q.

Of the marketing supplement.

8

A.

Oh, is this the --

9

Q.

Yes, yes, you've got it.

10

A.

The bio -- bio, Saul B. Katz, David B. Katz.

11

Q.

Yes.

And Ms. Griffin asked you some

12

questions earlier about this page and in particular the

13

language that Mr. Saul Katz is "actively involved in the

14

investment decisions."

15

Do you see that?

16

A.

Uh-huh, yes.

17

Q.

And you, I believe, said at a very, very --

18

at a very general level he was involved in the investment

19

decisions.

20

Do you recall that generally?

21

A.

Yes.

22

Q.

And can you tell me what you meant by at a

23
24
25

I do.

general level?
A.

At the time that this was written, which I

believe is early 2005, late 2004, the Katz and the Wilpon
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and Sterling Equities partners represented a substantial

2

portion of all of the assets that we managed.

3

them our largest limited partner would be an

4

understatement.

5

25 percent or 50 percent of the assets.

6

in that all of the referrals that they made to us of

7

limited partners who also chose to invest with us, the

8

Sterling Equities related investments, their investments

9

with us, was a significant, I believe, majority of the

So to call

I don't know whether it was at that time
If you included

10

assets we had.

So Mr. Katz in the context of being one

11

of our largest investors and being a member of the

12

general partner with a lot of business experience gave me

13

credibility in that I was two years into this new

14

industry, and at that time he was on our investment

15

committee, and that investment committee discussed very

16

broad topics and very specific topics, and on the broad

17

topics, the general topics, Mr. Katz was a very big

18

contributor.

19

example, you know, comparing one set of managers versus

20

another set of managers for the kinds of returns that we

21

wanted to generate, we wanted to generate returns that

22

had singles and doubles, not triples and home runs.

23

is a Saul Katz contribution to the investment committee.

24

Look for managers who are stable and steady over time,

25

invest in managers -- he would counsel us that, you know,

Part of the discussion would be, for

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infective, but what David did have is -- and does have, I

2

believe, to this day, some of Saul's judgment and

3

instincts about people.

4

you know, counsel me in the same way, in this case not

5

like a father but more like brother, and ask me questions

6

about the managers.

7

days he even came on some manager interviews with us,

8

gave us some of his judgment.

9

deferred the investment decisions to us.

10

Q.

And so David would regularly,

And that's why I think in the early

But, again, like Saul, he

Now, you also testified in response to

11

questions to Ms. Griffin that you -- not you personally,

12

but Sterling Stamos was marketing Mr. Katz, Mr. Wilpon

13

and David Katz to potential investors.

14

Do you recall that?

15

A.

Yes.

16

Q.

And can you tell me why it is that Sterling

17

Stamos, or what was SP Capital at the time, was marketing

18

those individuals to potential investors?

19

A.

Because they had a, if you'll pardon the

20

phrase, sterling reputation in the New York area in

21

general -- I mean, in the investment world in general,

22

because of their remarkable track record in real state,

23

remarkable track record with American Securities and

24

private equity, and that gave us credibility.

25

addition to the fact that they owned the New York Mets,
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were at the time highly respected owners.

A portion of

2

the Mets, I believe, at the time.

3

they owned 50 percent or more at this point in time.

4

that opened doors both on the manager's side, the people

5

that we invested with.

6

know, use the cachet of the New York Mets and the ability

7

to have access to the owners' box and to throw out the

8

first pitch or to have a charitable event at Shea Stadium

9

as an incentive for hedge fund managers to consider us.

I don't know whether
And

Specifically they would, you

10

I think I got an allocation to Michael Lowenstein when he

11

asked for a charitable event that they could throw out

12

the first pitch or have a couple seats.

13

day I got access to him.

14

Then the next

That's on the one hand.

On the other hand, they had the reputation of

15

being savvy businessmen, very thoughtful, very credible.

16

And so a number of other limited partners who chose to

17

invest with us would do it under the halo of the fact

18

that Saul and Fred had chosen us as their investment

19

manager for a significant portion of their assets.

20

Q.

Okay.

Last set of questions.

Mr. Stamos, at

21

any point prior to December 11th, 2008, did you believe

22

that there was a high probability that Bernie Madoff was

23

engaged in fraud?

24

MS. GRIFFIN:

Objection.

25

THE WITNESS:

No.

If I had any inkling

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