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

Filing 23

DECLARATION of DANA M. SESHENS in Support re: 20 MOTION to Dismiss THE AMENDED COMPLAINT OR, IN THE ALTERNATIVE, FOR SUMMARY JUDGMENT.. Document filed by Charles 15 Associates, Charles 15 LLC, Charles Sterling LLC, Charles Sterling Sub LLC, College Place Enterprises LLC, Coney Island Baseball Holding Company LLC, Estate of Leonard Schreier, FFB Aviation LLC, FS Company LLC, Fred Wilpon Family Trust, Arthur Friedman, Ruth Friedman, Iris J. Katz and Saul B. Katz Family Foundation, Inc., Judy and Fred Wilpon Family Foundation, Inc., Amy Beth Katz, David Katz, Dayle Katz, Gregory Katz, Howard Katz, Iris Katz, 157 J.E.S. LLC, Air Sterling LLC, BAS Aircraft LLC, Jason Bacher, Bon Mick Family Partners LP, Bon-Mick, Inc., Brooklyn Baseball Company LLC, C.D.S. Corp., Michael Katz, Saul B. Katz, Todd Katz, Katz 2002 Descendants' Trust, Heather Katz Knopf, Natalie Katz O'Brien, Mets II LLC, Mets Limited Partnership, Mets One LLC, Mets Partners, Inc., Minor 1 (REDACTED), Minor 2 (REDACTED), L. Thomas Osterman, Phyllis Rebell Osterman, Realty Associates Madoff II, Red Valley Partners, Robbinsville Park LLC, Ruskin Garden Apartments LLC, Saul B. Katz Family Trust, Michael Schreier, Deyva Schreier Arthur, See Holdco LLC, See Holdings I, See Holdings II, Sterling 10 LLC, Sterling 15C LLC, Sterling 20 LLC, Sterling Acquisitions LLC, Sterling American Advisors II LP, Sterling American Property III LP, Sterling American Property IV LP, Sterling American Property V LP, Sterling Brunswick Corporation, Sterling Brunswick Seven LLC, Sterling Dist Properties LLC, Sterling Equities, Sterling Equities Associates, Sterling Equities Investors, Sterling Heritage LLC, Sterling Internal V LLC, Sterling Jet II Ltd., Sterling Jet Ltd., Sterling Mets Associates, Sterling Mets Associates II, Sterling Mets LP, Sterling Pathogenesis Company, Sterling Third Associates, Sterling Thirty Venture LLC, Sterling Tracing LLC, Sterling Twenty Five LLC, Sterling VC IV LLC, Sterling VC V LLC, Edward M. Tepper, Elise C. Tepper, Jacqueline G. Tepper, Marvin B. Tepper, Valley Harbor Associates, Kimberly Wachtler, Philip Wachtler, Bruce N. Wilpon, Daniel Wilpon, Debra Wilpon, Fred Wilpon, Jeffrey Wilpon, Jessica Wilpon, Judith Wilpon, Richard Wilpon, Scott Wilpon, Valerie Wilpon, Wilpon 2002 Descendants' Trust, Robin Wilpon Wachtler. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D, # 5 Exhibit E, # 6 Exhibit F, # 7 Exhibit G, # 8 Exhibit H, # 9 Exhibit I, # 10 Exhibit J, # 11 Exhibit K, # 12 Exhibit L, # 13 Exhibit M, # 14 Exhibit N, # 15 Exhibit O, # 16 Exhibit P, # 17 Exhibit Q, # 18 Exhibit R, # 19 Exhibit S)(Wagner, Karen)

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
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SECURITIES INVESTOR PROTECTION
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CORPORATION,
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Plaintiff-Applicant,
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- against :
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BERNARD L. MADOFF INVESTMENT
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SECURITIES LLC,
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Defendant.
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In re:
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BERNARD L. MADOFF,
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Debtor.
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IRVING H. PICARD,
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Plaintiff,
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- against :
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SAUL B. KATZ, et al.
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Defendants.
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Adv. Pro. No. 08-01789 (BRL)
SIPA LIQUIDATION
(Substantively Consolidated)

Adv. Pro. No. 10-05287 (BRL)

DECLARATION OF DANA M. SESHENS IN SUPPORT OF STERLING
DEFENDANTS’ MOTION TO DISMISS THE AMENDED COMPLAINT
OR, IN THE ALTERNATIVE, FOR SUMMARY JUDGMENT

I, DANA M. SESHENS, declare pursuant to 28 U.S.C. § 1746, that the following is true:
1.

I am an attorney with the firm of Davis Polk & Wardwell LLP, attorneys

for the Sterling Defendants. I submit this declaration in support of the Sterling
Defendants’ motion to dismiss the amended complaint pursuant to Bankruptcy Rule 7012
or, in the alternative, for summary judgment pursuant to Bankruptcy Rule 7056. I am
personally familiar with the facts set forth herein.
2.

In my role as counsel for the Sterling Defendants, I was involved in and

responsible for the Sterling Defendants’ response to the Trustee’s discovery requests,
including, but not limited to, the production of documents.
3.

The Trustee initiated discovery of the Sterling Defendants in 2009,

invoking Bankruptcy Rule 2004 and issuing two subpoenas, dated October 7, 2009.
4.

The Trustee’s subpoenas were exceedingly broad, covering 71 entities and

individuals, with close to 40 different document requests.
5.

Nearly 700,000 pages of documents, comprised of both hard copy and

electronic documents, were produced over the course of approximately one year.
6.

Roughly 70 boxes of hard copy records were copied and produced to the

Trustee.
7.

With respect to electronic documents, Sterling ran, at the request of the

Trustee, ninety seven (97) different search terms across the email boxes and individual
electronic document folders of all of the Sterling Partners, among others.
8.

Sterling produced more than 150,000 pages of electronic documents.

9.

Based on review of the documents that Sterling produced, not one

document contained a warning from anyone that Madoff might be engaged in fraud.
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10.

On May 11, 2010, the Trustee issued Rule 2004 subpoenas for deposition

testimony from Sterling Partners Arthur Friedman, Fred Wilpon, Saul Katz, and Michael
Katz, as well as Sterling’s Chief Financial Officer, Mark Peskin, and Arthur Friedman’s
assistant. Subsequent to May 11, 2010, the Trustee requested Rule 2004 testimony from
David Katz.
11.

Between June and September 2010, Messrs. Friedman, Wilpon, S. Katz,

D. Katz, and Peskin provided more than 10 days of deposition testimony on the record,
while Mr. Friedman’s assistant provided an informal interview.
12.

Unknown to the Sterling Defendants at the time, the Trustee had also

issued subpoenas to, and taken discovery from, numerous third parties, including
Sterling’s banks, Sterling Stamos Partners, Merrill Lynch, Bank of America, and possibly
other financial institutions.
13.

During the course of the Trustee’s expansive Rule 2004 investigation,

Sterling produced agendas and minutes from every Sterling partners’ meeting for which
they were taken and maintained.
14.

Based on review of the partner meeting minutes that Sterling produced,

there is no record of any discussion of any warning about the legitimacy of Madoff’s
operations, of the specifics of Sterling Stamos’ due diligence process, or of Sterling
Stamos’ investment decision-making process.
15.

The Sterling Defendants advised counsel for the Trustee that the original

complaint was not consistent with the evidence.
16.

Attached hereto as Exhibit A is a true and correct copy of the deposition of

Peter Stamos, dated August 19, 2010.
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17.

Attached hereto as Exhibit B is a true and correct copy of an article by

Adam Rubin, entitled Picard Wants $1 Billion from Wilpon/Katz, ESPN.com New York,
Feb. 5, 2011.
18.

Attached hereto as Exhibit C is a true and correct copy of excerpts from

the deposition of Ashok Chachra, dated October 8, 2010.
19.

Attached hereto as Exhibit D is a true and correct copy of excerpts from

the deposition of Saul Katz, dated August 4, 2010.
20.

Attached hereto as Exhibit E is a true and correct copy of excerpts from

the deposition of Fred Wilpon, dated July 20, 2010.
21.

Attached hereto as Exhibit F is a true and correct copy of excerpts from

the Rule 27 deposition of Arthur Friedman, dated June 29, 2010.
22.

Attached hereto as Exhibit G is a true and correct copy of excerpts from

the deposition of David Katz, dated August 31, 2010.
23.

Attached hereto as Exhibit H is a true and correct copy of excerpts from

the deposition of Arthur Friedman, dated June 22-24, 29 2010.
24.

Attached hereto as Exhibit I is a true and correct copy of an article by Matt

Ackermann, entitled Fidelity Unit Seeks Growth Via Self-Clearing Market, American
Banker, dated April 9, 2008.
25.

Attached hereto as Exhibit J is a true and correct copy of a Memorandum

from Arthur Friedman to the Sterling Partners, dated November 28, 2005, regarding
“Special Investment in Madoff,” which was produced by Sterling to the Trustee in the
course of discovery.

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26.

Attached hereto as Exhibit K is a true and correct copy of excerpts from

the deposition of Mark Peskin, dated July 29, 2010.
27.

Attached hereto as Exhibit L is a true and correct copy of a Memorandum

from Barry Gonder to Sterling Doubleday File, dated August 24, 1990, regarding
“Conversation with Bernie Madoff (212-230-2424) of Madoff Securities,” which was
produced by Sterling to the Trustee in the course of discovery.
28.

Attached hereto as Exhibit M is a true and correct copy of an article by

Randall Smith, entitled Wall Street Mystery Features a Big Board Rival, Wall Street
Journal, dated December 16, 1992.
29.

Attached hereto as Exhibit N is a true and correct copy of certain pages

from a Lenders’ Meeting Presentation, dated March 9, 2004, which was produced by
Sterling to the Trustee in the course of discovery.
30.

Attached hereto as Exhibit O is a true and correct copy of a chart

comparing Madoff’s rates of return to various interest rates from April 1989 to April
2004, which was produced by Sterling to the Trustee in the course of discovery.
31.

Attached hereto as Exhibit P is a true and correct copy of an article by

Alison Leigh Cowan and Richard Sandomir, entitled Madoff Fueled Mets’ Empire,
Lawsuit Says, New York Times, dated February 5, 2011.
32.

Attached hereto as Exhibit Q is a true and correct copy of an article by

Peter Chapman, entitled Before the Fall: Bernard L. Madoff, Traders Magazine, dated
March 2009.

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33.

Attached hereto as Exhibit R is a true and correct copy of a brochure

produced by SIPC, SIFMA, and NASAA, entitled Understanding Your Brokerage
Account Statements.
34.

Attached hereto as Exhibit S is a true and correct copy of an excerpt from

the transcript of the oral argument in In re Bernard L. Madoff Inv. Sec. LLC, No. 10-2378
(2d Cir. Mar. 3, 2011).
I declare under penalty of perjury that the foregoing is true and correct.

Dated: New York, New York
March 20, 2011
s/ Dana M. Seshens
Dana M. Seshens

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