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)

EXHIBIT K

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

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UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
ADV. PRO. NO. 08-01789 (BRL)

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SECURITIES INVESTOR PROTECTION
CORPORATION,

Videotaped

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Plaintiff-Applicant,
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v.
BERNARD L. MADOFF INVESTMENT
SECURITIES, LLC,

Rule 2004
Examination of:
MARK PESKIN
(Vol. I)

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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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TRANSCRIPT of testimony as taken by and before

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MONIQUE VOUTHOURIS, Certified Court Reporter, RPR,

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CRR and Notary Public of the States of New York and

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New Jersey, at the offices of Baker & Hostetler,

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LLP, 45 Rockefeller Plaza, New York, New York on

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Thursday, July 29, 2010, commencing at 10:15 a.m.

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BENDISH REPORTING, INC.
Litigation Support Services
877.404.2193
www.bendish.com

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A P P E A R A N C E S:

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BAKER & HOSTETLER, LLP
45 Rockefeller Plaza
New York, New York 10111
BY: FERNANDO A. BOHORQUEZ, ESQ.
AMANDA E. FEIN, ESQ.
For Irving Picard, Trustee

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DAVIS POLK & WARDWELL, LLP
450 Lexington Avenue
New York, NY 10017
BY: DANA M. SESHENS, ESQ.
KAREN E. WAGNER, ESQ.
For Sterling Equities, certain
affiliated entities, and the Witness

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ALSO PRESENT:
GREGORY P. NERO, ESQ., Sterling Equities
DANIEL McCLUTCHY, Videographer

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A.

This is the SEF lines of credit that

we spoke of before.
Q.

Okay.

Did you have any credit

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facilities with Citibank that had a Madoff account

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as collateral?

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A.
Q.

I don't think we did.
Okay.

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A.

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that was B of A.

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Q.

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A.

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Q.

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A.

No,

Bank of America?
Yeah, yeah.

to Exhibit 6 --

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I don't think -- as collateral?

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Q.

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Thank you.

So if we go back

Yeah.
-- under "Liquidity," there is

included a Madoff securities and SSP Capital?

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Okay.

A.
Q.

Correct.
"SSP Capital" refers to Sterling

Stamos?
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Q.

Correct.
Why did you need to include Madoff in

this liquidity analysis?
A.

Well, I spoke about it before, that

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the lines of credit required us to have so much

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liquidity available if the line was called to be

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paid back.

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Q.
SEF?

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This is the line of credit for the

A.

We're only talking about SEF now.

Q.

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Right.

A.

There were several banks in the --

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call it a syndicate of banks that gave us this

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credit.

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Citibank -- in this particular case,

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Citibank asked us to please present in their -- with

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their definition of liquidity -- with their

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definition of liquidity a statement as to where we

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were on a monthly basis or quarterly basis.

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remember whether it was monthly or quarterly.

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This indicates June 30th.

I can't

I know

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that's a quarter.

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or July.

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negotiated.

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form of accounting.

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as to what their definition of compliance is.

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I can't remember if there's a May

But this is very formulaic, is very
So this doesn't necessarily follow a
It is what Citibank agreed on

So Madoff was considered liquid

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because it's a brokerage account.

You would call up

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your broker and say I need my money back, and they

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would sell securities and readily give it back to

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you with short notice.

It took time to clear

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through the process.

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But the banks knew that Madoff was a

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liquid -- you know, a liquid, you know, account and

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near an equivalent, cash equivalent, because it was

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short-term notice and easily liquidatable.

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SSP capital, certain accounts within

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certain fund investments that we had were more

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liquid than others.

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I'm not quite sure what the others
were, but we had other brokerage accounts.

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Q.

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A.

Like Prudential or -It was Maxim, it was Long Island

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Investors, it was a whole bunch of other typical

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brokerage accounts, no different than the Madoff

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account, that we would call upon in need of cash if

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we were in need of cash.

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basis.

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Q.

So that was the liquidity

And let me back up to one thing you

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mentioned, and we can get two more questions in

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before --

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A.

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Q.

Sure.
-- we have to change the tape.
What was your understanding of how

long -- let me back up.
What did Madoff represent to Sterling

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broker who had a great reputation.

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me am I worried that I had $181 million in JPMorgan.

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It's like asking

I mean, I'm giving it to Citibank.
They're not concerned.
Q.

So that was my follow-up question.

Did Citibank ever raise any questions about the --

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A.

No.

To the contrary, I think they

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were very secure knowing that the money was in a --

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a liquid asset.

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If you also look at the right-hand --

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excuse me, the left-hand column, "Fleet margin,

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Fleet margin, Fleet margin," I mean, all of these

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Fleet, which is now B of A, was exceedingly secure.

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They gave us loans supported, collateralized by

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Madoff.

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That's how I understand first --

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understood Madoff or got comfortable with Madoff,

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because these double-up loans you talk about, it

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took me, like, three seconds -- exaggeration -- ten

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minutes to negotiate them because B of A was so

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comfortable using Madoff.

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It wasn't a matter of marking to

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market.

It wasn't a matter of understanding the

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collateral.

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in Madoff.

Oh, Madoff.

Okay, fine, yeah, put it

It's going to be liquid.

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Q.

And why was BOA so comfortable with

Madoff?

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A.

B of A, I have to -- you have to ask

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them.

I mean, they had other clients with Madoff.

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They had other -- I believe other loans, tri-party

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agreement type loans with Madoff.

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If it was good enough for them, it
was sort of good enough for me.

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Q.

And then last question on this

document --

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(Comments off the record.)

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MR. BOHORQUEZ:

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break.

We'll change tapes.

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Why don't we take a

THE VIDEOGRAPHER:
record.

The time is 2:46.

Going off the

This ends tape number 3.

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(Brief recess.)

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THE VIDEOGRAPHER:

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record.

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The time is 3:02.

We are back on the

This is tape number 4.

MR. BOHORQUEZ:

This is Exhibit

No. 7.

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(Exhibit MP-7 marked for

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identification.)

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BY MR. BOHORQUEZ:

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Q.

Actually, I'm going to ask you one

more question on that and then we'll move on.