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 E

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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.

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BERNARD L. MADOFF INVESTMENT
SECURITIES, LLC,
Defendant.
-------------------------------x
In Re:

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BERNARD L. MADOFF,

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Rule 2004
Examination of:

Debtor.
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9

FRED WILPON

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TRANSCRIPT of testimony as taken by and before

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

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and Notary Public of the States of New York and New

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Jersey, at the offices of Baker & Hostetler, 45

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Rockefeller Plaza, New York, New York on Tuesday,

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July 20, 2010, commencing at 10:04 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.
KATHRYN M. ZUNNO, ESQ.
For Irving Picard, Trustee
BAKER & HOSTETLER, LLP
3200 National City Center
1900 East 9th Street
Cleveland, OH 44114-3485
BY: THOMAS R. LUCCHESI, 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

16

1

Q.

So, with respect to the real estate

2

business, the managing and developing real estate

3

properties, who's the partner that has primary

4

responsibility in that business?

5

A.

6

Q.

7
8

A.

Currently?
Currently, yes.
Of course it's evolved over the

years.

9

Q.

10

A.

Right.
But currently, Richard, Michael and

11

Tom will supervise the real estate business.

12

and I are essentially overseers of the whole and

13

specific to a number of the businesses, but not

14

necessarily in the everyday operating position.

15

Q.

Saul

So with respect to the real estate

16

business, you said that currently Richard Wilpon,

17

Michael Katz and Tom Osterman are the primary

18

partners involved in that?

19

A.

20
21
22
23
24
25

Q.

Correct.
You said that that has changed over

time?
A.
Q.
A.

Yes.
How has that changed over time?
Well, when we started, it was

Mr. Katz and myself.

And then when Michael and

17

1

Richard joined, they were part of the real estate

2

business.

3

to seek out, acquire the property, to manage the

4

property, the everyday of it.

5

always taken care of by Michael and Saul.

6

trained in that area, they're both CPAs.

7

and I were more in the operating.

8

I would -- I acquired most of the properties for us

9

and visited all the properties.

My job from the beginning has always been

The financial end was
They're
Richard

At the beginning

You know, I would

10

be constantly on the road visiting the properties or

11

trying to acquire others.

12

as time went on others in the company did that and

13

that's not been my job of late.

14

Q.

Then Richard did that and

Currently how do Richard Wilpon or

15

Michael Katz or Tom Osterman, how do they report to

16

you as to what's happening in the real estate sector

17

of the business?

18

A.

It's not an official -- it's not an

19

officious reporting.

I might see him in the hall, I

20

might talk to him about some other matter.

21

see him at a management meeting.

22

report what was happening, and we would listen to

23

it.

24

mean, they would always accept opinions and

25

thoughts, but they were running that business, and

I might

And they would

They were pretty much running that business.

I

33

1

a decision to start entities for the purpose of

2

investing in Madoff?

3

A.

I don't think we started an entity.

4

I think we started a relationship where each of the

5

partners independently invested with Bernie Madoff,

6

going way back, obviously.

7

Q.

8

end.

9

Madoff?

10
11
12
13

Well, why don't we take it from that

When do you recall when you first invested in
You personally.
A.
Q.
A.
Q.

Me personally?
Yes.
More than 20 years ago.
Our records show that the first

14

investment was in about October of 1985.

15

sound right to you?

16
17

A.
Q.

Does that

Yeah, kind of.
Prior to making that initial

18

investment in Madoff, did you have any discussions

19

with Mr. Madoff in connection with making that

20

investment?

21
22
23

A.
Q.
A.

The first investment?
Yes.
I don't know what you mean,

24

discussions.

He was well known in the industry, was

25

a well-known money manager.

So we made an

34

1

investment -- I wasn't alone.

2

or maybe all of us made an investment in, starting

3

in, you said '85, it could be.

4

that we had periodic conversations with him about

5

the investment.

6

over the years.

7

Q.

8
9

A.

Several of us made,

And subsequent to

The investments grew, obviously,

When did you first meet Mr. Madoff?
I met him -- Jeff must have been

about 15 and Mark Madoff was about 14, something

10

like that, they were about the same age.

11

or 14, I'm not sure exactly when, but when they were

12

kids in school, I met them.

13

town.

14

So, Jeff is 49.
Q.

15
16
17

A.
Q.

Maybe 13

We lived in the same

Over 30 years.

What town did you live in?
Roslyn, Long Island.
And how far was -- at that time how

far was your home from the Madoff home?

18

A.

Three, four, five miles.

I've never

19

been to the Madoff home in Long Island.

20

know exactly where he lived, but I know he lived in

21

the same town.

22

Q.

Okay.

I don't

And tell me about how you

23

first met him in connection with your son and Mark

24

Madoff.

25

A.

Mark and Andy, his younger brother,

35

1

and some other kids that were going to school

2

together met, and from time to time I'd see them at

3

our house.

4

whatever.

5

Generally we would meet the parents of our kids'

6

friends.

They were always around, playing ball or
Soon thereafter we met their parents.

7

And so we knew them, you know, we met

8

them at that time, and then subsequent to that I

9

think they moved to New York when their kids were

10

maybe going to high school.

I'm not exactly sure

11

when they moved, but they moved to New York sometime

12

thereafter.

13

we knew them.

14

Q.

Lived in New York most of the time that
New York City, I'm talking about.
Right.

How did it come to pass that

15

after you met Mr. Madoff through your children, that

16

you then invested in his business?

17

A.

He, he was in the investment

18

business, investing people's money.

19

real estate business primarily at that time.

20

evidenced an interest to diversify.

21

any, if there's a time in the future you would like

22

to invest, I could invest some of your funds and I'd

23

like the opportunity to invest in some real estate.

24
25

We were in the
And he

Said if there's

That didn't happen for a while but he
talked about it once or twice, and then we decided

39

1

Q.

Can you tell me a little more about

2

those discussions with your partners before, before

3

actually investing in Madoff?

4

A.

We were already seeking someone to

5

invest some of our liquidity.

6

at that time, but we were seeking to do that.

7

so there were a number of discussions with different

8

firms, different individuals at the firms that were

9

doing that kind of work.

10
11
12
13
14

Q.

It wasn't a very lot
And

And by firms you're referring to

investment-type firms?
A.
Q.
A.

Investment-type firms.
Okay.
My recollection is we did try a

15

couple and didn't do too well in a couple of them.

16

Howard Squadron was a close friend of mine, as well

17

as being an outside lawyer of ours.

18

think there was a conversation with him, and I knew

19

that he was an investor, or he told me he was an

20

investor, satisfied investor.

21

partners all invested.

22

others that were investors.

23

the moment, but numbers of other people that were

24

investors.

25

Q.

So he -- I

I think his firm, his

We subsequently learned
I don't remember who at

And we decided to give it a try.
And what did Mr. Squadron tell you,

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1

just about -- I want to be careful here, what did

2

Mr. Squadron tell you about Madoff, specifically?

3

A.

He knew him, that he represented him,

4

he liked him, trusted him.

5

had a strategy that was very unique, that he

6

understood how to make money without risk, without a

7

lot of risk.

8
9
10
11
12

Q.

15
16

What did Mr. Squadron tell you about

Madoff's strategy at that time?
A.

I don't recall.

I don't recall.

I

wouldn't understand the strategy anyway.
Q.

13
14

And thought he was --

Fair enough.
Did Mr. Squadron provide you with any

materials, any documents concerning Madoff?
A.
Q.

Not that I can recall.
You had mentioned earlier that you

17

were looking at other investment firms for

18

investment opportunities; is that right?

19
20
21
22
23

A.
Q.

Correct.
Do you remember who those were at

that time?
A.
Q.

No, I don't.
Do you remember what you did in

24

connection with researching or investigating those

25

firms to make the decision whether or not to invest?

42

1

investment firm before investing?

2
3

MS. SESHENS:
Q.

4
5
6
7
8

Q.

11
12
13

I don't know.

Did Mr. Katz have any discussions

with Mr. Madoff?
MS. SESHENS:
A.

Objection to the form.

I don't recall any, but it wouldn't

surprise me.
Q.

And what discussions did you

personally have with Mr. Madoff prior to investing?

14
15

You can answer.

I think he talked with Mr. Squadron

and perhaps others.

9
10

You can answer.
MS. SESHENS:

A.

Objection to the form.

MS. SESHENS:
A.

Objection to the form.

Just those that I've told you about.

16

After we invested, Saul and I would go to visit

17

Bernie approximately once a year, and we'd go to his

18

office or something and talk about where we -- how

19

the investments were doing, what was happening.

20

I had a personal relationship with

21

the Madoffs that developed over time, and not an

22

everyday personal relationship, but a friendship.

23

And so I made it a policy that when I saw him at a

24

charitable event or celebration of some kind, you

25

know, we attended his kids' weddings, he attended

43

1

our kids', you know, we were family friends, I just

2

didn't discuss business with him.

3

conversations with Bernie Madoff were really of a,

4

just of a personal nature.

5

their lives and what was happening in our lives.

6

Not in a context of, you know, what's happening in

7

the business, how are you investing these funds?

8

Because, frankly, I wouldn't -- that's not my

9

expertise.

10

So my

Of what was happening in

I wouldn't really know, and I didn't

want to mix the two.

11

So, once a year we'd go and have a

12

conversation, mostly schmoozing.

13

schmoozing is.

14

Q.

You know what

I've heard.

15

A.

16

it in Cleveland?

17

Can you define that?

Can you define

(Comments off the record.)

18

A.

That's the kind of relationship it

19

was.

20

that you will talk to, none, that is more betrayed

21

than I am.

22
23

Very trusting relationship.

Q.

There's no person

Thank you, Mr. Wilpon.
I want to go back to -- I want to

24

break that down into a few areas.

The first thing

25

is, and maybe I should have been a little more

44

1

clear.

2

between you and Mr. Madoff before you invested.

3

know you had mentioned that you had discussions, but

4

I just want to clarify what were the subject -- what

5

you actually discussed with him before his

6

investment.

7

the topics of those discussions concerning his

8

investments?

9
10

I just want to hone in on what was said

A.

Q.

12

Having to do with us investing with

Yes.
MS. SESHENS:

And other than what

he's already told you?

14

MR. BOHORQUEZ:

15
16

Do you recall what was the subject or

him?

11

13

I

Q.

Yes.

Before the actual investments were

made.

17

A.

Just what I've told you.

He

18

evidenced a desire to diversify and invest in other

19

things that we might have been investing in.

20

an investment guru, renowned in the field, even at

21

that time.

22

name it, he was top of the line, very well thought

23

of.

24

Levitt was a friend of mine and a friend of Howard

25

Squadron's.

He was

On all of the boards, on all of the, you

At the highest sources.

I remember Arthur

Arthur Levitt was -- knew Bernie very

45

1

well for a very long time, thought of him in the

2

highest regard.

3

So, that's the kind -- I mean, I

4

didn't know anything about the specifics of how he

5

invested that, except that he had good returns and

6

was risk adverse, and had a lot of people who knew

7

him and had a high regard.

8

Q.

9

Madoff as well?

10

A.

11
12
13
14

Q.

And was Mr. Levitt an investor in

I don't know that.
And what was your understanding of

Madoff's returns at that time, before you invested?
A.
Q.

That he had successful returns.
And you mentioned risk adverse.

What

15

was your understanding of his risk adverse strategy

16

at that time?

17

A.

At that time or any other time,

18

frankly, was that he was -- his strategy was such

19

that you were never going to -- he was never going

20

to hit a home run, so to speak, even at City Field

21

it's hard to hit home runs.

22

to, he was not going to lose a lot.

23

within that range all the time and because of his

24

volume and everything, whatever he did, or whatever

25

he was supposed to have done, was very successful.

And he was not going
And he was

48

1

tell you what stocks he bought or anything like

2

that.

3

That's not something I pay attention to.
Q.

Okay.

Because I thought what you had

4

said earlier was you had a personal relationship

5

with Mr. Madoff and you wanted to keep that separate

6

from the business relationship.

7

personal level throughout the 25, 30 years that you

8

knew him, and you did not -- you made it a practice

9

not to discuss business with him during those

10
11
12

So you saw him on a

personal interactions, correct?
A.
Q.

Correct.
And then I thought what you were

13

saying was that you would make an annual trip, once

14

a year, out to his office, and during that trip at

15

his office, that visit at his office is when you

16

would discuss business?

17

A.

It was not just business.

I would

18

accompany Saul, who might have some questions or

19

some thoughts or some ideas which were shot down,

20

you know, because Bernie had his strategy and that

21

was his strategy and, you know, don't, can you take

22

off the calls, can you take off the puts, whatever.

23

It was just a part of a collegial conversation among

24

friends.

25

me, he never asked me how is the real estate

And that he was invested -- he never asked

49

1

investment doing or anything like that.

2

those meetings, I don't ever remember him asking

3

about that.

4

three times in all those years we went to a movie

5

together in Florida or whatever, you know.

6

was no business conversation.

7
8
9
10

Even at

Certainly not more -- maybe two or

Q.
A.
Q.
A.

11

Q.

12

accompany Saul.

13

A.

There

Other than -Other than, I'd say that...
That roughly annual meeting?
Right.
Now, you mentioned that you would
What did you mean by that?
The personal relationship -- Saul had

14

a personal relationship with Bernie as well but mine

15

was a longer term, you know, the kids knew each

16

other, it sort of started differently.

17
18

Q.
A.

Right.
And so he would always ask me to come

19

with him, let's go see Bernie, you know, see how

20

everything's doing.

21

you anticipate -- he might ask him a question like,

22

Bernie, just for -- Saul would ask this question:

23

What do you anticipate the returns would be, the

24

annualized returns?

25

summer we went to see him and so with six months

Let's go see Bernie.

What do

It might have been in the

51

1

Q.

When -- after the initial investment

2

in 1985, during the early period of investing in

3

Madoff, did you review any account statements or any

4

quarterly reports or anything provided by Madoff?

5
6
7
8
9

A.

No.

I had people that were doing

that.
Q.

So who, in the early stages who were

the people who were doing that?
A.

Primarily Arthur was really tracking

10

everything and it was primarily Arthur.

11

would give that information to the accountants in

12

the office.

13

and whatever.

14

would be involved, but that's generally the people.

15

The people that are in the financial end.

16
17
18

Q.

They would put together the tax returns
Saul would be involved and Michael

What is your understanding of Saul

Katz's involvement?
A.

19
20

Then Arthur

In?
MS. SESHENS:

Q.

Involvement in what?

Well, you identified Arthur Friedman

21

reviewed the statements and kept track of the

22

investments.

23
24
25

A.
Q.

Um-hum.
And then he would work with

accountants at Sterling, correct?

53

1

the so-called bookkeeping of that.

2

Q.

So, was -- did Mr. Friedman's role

3

over time change in respect to the Madoff

4

investments?

5

A.

No.

I think it was always, he was

6

always the point person who was involved with any,

7

anything that had to be done administratively or if

8

he had a question or whatever, he was the person.

9

He would talk to someone in Bernie's office about

10

that.

11

Q.

And do you know if Mr. Friedman ever

12

worked with Mr. Peskin in terms of the accounting

13

aspects of the investments, the Madoff investments?

14
15

A.

I don't understand what that means.

You mean just the reporting, Fernando?

16

Q.

17

A.

Yes.
Except maybe to coordinate.

You

18

know, not in any kind of deep sense working with

19

him.

20

Q.

What about with respect to Mr. Katz,

21

how did Mr. Friedman work with Mr. Katz in

22

connection with the Madoff investments?

23
24
25

MS. SESHENS:

Can you specify just

which Mr. Katz.
MR. BOHORQUEZ:

Oh, sorry.

55

1

earning Z, if they were earning at all.

2

the overall person in charge of that.

3
4
5

Q.

Saul was

Was Saul Katz responsible for making

the investment decisions for Sterling in Madoff?
A.

No.

No one was in charge of making

6

the investment decisions.

7

which stocks Bernie bought?

8
9
10
11
12
13

Q.

Are you talking about

Let me back up.

Was Saul Katz in

charge of making the decision for a Sterling entity
or a Sterling partner to invest in Madoff?
A.

No.

The individuals made those

decisions.
Q.

Okay.

With respect to a Sterling

14

entity, how was the decision made to invest on

15

behalf of that entity into Madoff?

16
17

MS. SESHENS:
A.

Objection to the form.

If an entity had some money and was

18

to invest, it would have been agreed, I guess, in

19

some way that the entity was going to invest, and

20

then the specifics of that, you know, if an entity

21

had money, they may just have invested it in Bernie

22

or wherever.

23

Q.

That was just done as normal course.
Well, when you say it was agreed,

24

what do you mean by it was agreed?

25

was involved in that agreement?

Who made -- who

64

1

did you attend a year?

2

A.

3
4

Q.

I believe one.
And were those meetings held at the

Lipstick Building?

5

A.

6

Q.

Yes.
Did you attend a meeting of the Gift

7

of Life board at the Lipstick Building in December

8

of 2008?

9

A.

10
11

Q.

A.

13

Q.

14
Q.

A.

Q.

20

23
24
25

You were counting out your hands.

I was just trying to think of which

days it was before the December 11th.

19

22

-- sound right?

What were you trying to do then?

17

21

Yes.

Why do you remember that date?

15

18

Was that December 8th, 2008; does

that --

12

16

Yes.

A.

Right.

A few days before.

Would you repeat the question.

do -Q.
A.
Q.
A.

Let me back up.
Why do I remember that date?
Yes.
It's like a dagger in the heart.

Why

84

1
2

Q.

And how did they come to invest in

Madoff?

3

A.

They probably wanted to invest.

4

Everybody was hearing about Madoff, and they

5

probably wanted to invest.

6

mechanics.

7
8

Q.

Do you recall if they reached out to

you to invest in Madoff?

9
10

I don't know the

A.
Q.

I -- no, I don't recall.
Over the years, did Sterling refer

11

various accounts -- various individuals to Madoff to

12

open accounts?

13
14

A.
Q.

15
16

Let me see if I can rephrase that.
Did Sterling bring in accounts to

Madoff?

17
18

What do you mean by refer?

MS. SESHENS:
A.

19

Q.

20

Objection to the form.

No.

different way.

21

Let me try to lay this out a

Sterling partners had accounts in

22

Madoff, correct?

23

A.

24
25

Q.

Correct.
Sterling partners' family members had

accounts in Madoff, correct?

86

1
2
3
4
5

accounts, were they known as outsider accounts?
A.
Q.
A.
Q.

I don't know.
Not to your understanding?
Yeah, not -- it's not a term I'm...
What was the process, to the extent

6

you know, for helping your friends and families open

7

accounts with Madoff?

8
9

MS. SESHENS:
A.

Objection to the form.

All I know is that if someone wanted

10

to open an account, that might have been a family or

11

friend, if I had a family or friend that wanted to

12

open an account, I would tell Arthur.

13
14

Q.

Would you play any other role other

than referring -- actually, back up.

15

When you say you would tell Arthur

16

that a family and friend, or friend wanted to open

17

an account with Madoff, what would happen next?

18
19
20

A.

I presume he would talk to whomever

he talked to at Madoff.
Q.

Did you have any communication with

21

the family or friend that would like to open the

22

account after the initial discussion?

23

A.

No.

Maybe in passing they would say

24

how happy they were or how much it meant to them or,

25

you know -- people's lives were changed.

87

1

Q.

So after the initial hand-off to

2

Friedman, Arthur Friedman handled the relationship,

3

to the best of your knowledge, with the friends and

4

family?

5

A.

6

Right.

Q.

Okay.

And what was the, what was the

7

reason for offering these friends and family the

8

opportunity to invest in Madoff?

9

A.

Just --

10
11
12

MS. SESHENS:
Sorry.

Objection to the form.

You can answer.
A.

Just to try to help them.

For what

13

they -- they wanted to invest and we were trying to

14

help them.

15

charging fees.

16

Just trying to help them.

17

Q.

This is not a business.

We weren't

We weren't benefiting in any way.

And before you started, Sterling

18

started referring accounts to Madoff -- your friends

19

and family, getting -- let me rephrase that.

20

Before Sterling began to open

21

accounts on behalf of friends and family, did you or

22

anyone in the Sterling organization have discussions

23

with Mr. Madoff about that?

24

MS. SESHENS:

25

A.

No.

Not me.

Objection to the form.

143

1

A.

No.

You really have to know Arthur,

2

who's the most wonderful, intelligent, placid man.

3

He's a one of a kind, and "kind" is the heading.

4

Q.

5

for four days.

6

him.

7

We had the pleasure of deposing him
I agree, with my limited exposure to

Given that they're -- the number and

8

the amount of money that was being managed by

9

Mr. Friedman for these friends and family accounts,

10

was there ever any discussion as to what benefit

11

Sterling was getting?

12
13

MS. SESHENS:
Q.

14
15

In exchange?
MS. SESHENS:

A.

Object to the form.

Same objection.

Over the years I think there might

16

have been conversation.

17

the purpose of helping family and friends.

18

whatever costs were involved, we were bearing those.

19

Arthur was not a complainer, though.

20

someone who would bitch and moan about something.

21

Q.

We were doing it solely for
And so

Arthur is not

I'm not suggesting that he was

22

complaining, but you said that over the years there

23

may have been -- there were some conversations about

24

the increased burden of managing these friends and

25

family accounts.

What was the substance of those

190

1

and then move on.

2

BY MR. BOHORQUEZ:

3

Q.

Did you ever raise with the partners

4

the fact that Madoff had returned consistent,

5

nonvolatile returns over the years?

6

something that was discussed amongst the partners?

7
8
9

A.

Is that ever

We were receiving those returns for

many years.
Q.

Do you recall seeing, in this

10

document, the critique that's raised in this article

11

about the consistent and nonvolatile returns; was

12

that critique ever discussed amongst the partners?

13
14

MS. SESHENS:
A.

Objection to the form.

Yes, in the sense that people would

15

say they didn't understand it.

16

critique.

17

Q.

But that's not a

And the fact that people didn't

18

understand it, did that ever cause you any concern

19

or any other partner concerns?

20

A.

We knew some very, very smart people

21

who did understand it and didn't have any concerns,

22

and it went on for 25 or 30 years, or 35 years,

23

however many years.

24
25

Q.

Who are the very smart people that

you're referring to?

191

1

A.

I referred to them.

Howard Squadron

2

and other people over the course of time that either

3

were investors or -- so they -- there's always a

4

point of view that people might have, but I never

5

saw anything that... to answer your question.

6
7

Q.

Did you understand how Madoff was

making money off of his investment business?

8

A.

Not in any kind of depth.

9

Q.

10

kind of depth?

11

Well, what do you mean by not in any

A.

Did you have any understanding?
I'm not an investment person, I'm not

12

an investment, stock investment advisor, so I

13

wouldn't have that kind of expertise.

14

people talk about it, I've heard people make their

15

points.

16

me -- I don't remember them but I've seen the

17

documents in which he describes how he does this.

18

And peripherally I understand how he does it.

19
20
21

I've heard

I've seen the documents which you've shown

Q.

And what is your understanding as to

what commissions he actually received?
A.

22

percentage of?

23

Q.

When you say commissions, you mean a
I don't know how you mean that.
Well, he, Madoff received commissions

24

on the trades he was making on your accounts,

25

correct?

198

1

Q.

Did you ever have any discussions

2

amongst the partners concerning front-running and

3

Madoff?

4
5
6
7
8
9
10
11

A.
Q.

Not that I can recall.
You're aware that Madoff was

investigated on a few occasions by the SEC, correct?
A.
Q.

Yes.
Did you ever speak to Mr. Madoff

concerning those SEC investigations?
A.
Q.

No.
Were the Madoff SEC investigations

12

ever a topic of discussion at any of the partners

13

meetings?

14

A.

15
16
17

Q.

Yes.
Can you please tell me what were

those discussions?
A.

I can't remember the detail of the

18

discussions, but there was one time when someone in

19

Florida had committed some kind of violation, two

20

guys in Florida, that were investors in Bernie, and

21

the SEC came in and admonished them and Bernie sent

22

back $480 million or something, overnight.

23
24
25

Q.
A.
Q.

Is this Avellino & Bienes?
Something like that.
And what specifically did you discuss

199

1

amongst the partners concerning the Avellino &

2

Bienes matter?

3

A.

That the SEC had determined that it

4

was not Bernie who was at fault, or had violated

5

anything, and in fact it was amazing that he just,

6

you know, returned the 400 -- I don't remember the

7

number, but a large amount of money, overnight.

8
9
10
11

Q.

Did you ever talk to Mr. Madoff about

the Avellino & Bienes investigation?
A.
Q.

No.
Did you ever talk to him about the

12

fact that he was able to return all that money

13

overnight that you mentioned?

14
15

A.
Q.

No.
Other than the Avellino & Bienes SEC

16

investigation, did you have any other discussions

17

with the partners concerning any other SEC

18

investigations of Madoff?

19

A.

It's hard to put that in context

20

after all the publicity.

Because after all the

21

publicity, one learned that there were eight or nine

22

SEC investigations.

23

but there were a lot of SEC investigations, and they

24

always came up that Mr. Madoff was clean as a

25

whistle.

Not that we knew about those,

That gave us, you know, that was always

200

1

reinforcement.

Always said, hey, that's great.

2

Q.

Let me try to figure that out real

3

quick.

4

Which specific SEC investigations

5

gave you reinforcement that Madoff was a secure

6

investment?

7

A.

The results of the -- the results, as

8

I now remember them and read, of the SEC violations

9

was the man was clean, his operation was totally

10

clean.

11

closed him down or something.

12

Otherwise the SEC would have come in and

Q.

Did it ever give you pause that he

13

was -- he had been investigated on several occasions

14

by the SEC?

15

A.

You know, people can investigate, but

16

the fact is that the SEC, which is the branch of

17

government that has jurisdiction here...

18
19

Q.
A.

Right.
...investigated -- I'm sure they

20

investigated other firms as well, Merrill Lynch and

21

Prudential Bache and whatever, but the fact is they

22

investigated his operation, however many times they

23

say they investigated it now, and every single time

24

very smart people had full disclosure of everything,

25

and came out and said, the man is a prince.

201

1

Q.

And that was one of the reasons that

2

you found comfort in investing -- retaining your

3

money in Madoff's investments?

4

A.

Reasons of life go on, it's a motion

5

picture.

We trusted Bernie as a trusted friend and

6

advisor and person.

7

something and the SEC said this is a bad guy, we

8

would have said wait, wait, time out, what is he bad

9

about?

And I assume that if we heard

But that's never happened.

No one ever, by

10

the way, no one that I ever heard ever said anything

11

bad about Bernie.

12

Q.

13
14

A.
the NAACP.

15
16
17

Q.

In fact, they lauded Bernie.

Other than -NASDAQ, the NAACP, the -- I mean, not
The wrong one.
Yeah, you're mixing up your alphabet

soup.
A.

Bernie was on the top of the field.

18

He was on every committee, he was on every -- he was

19

writing the regulations at NASDAQ, he was the head

20

of the Cincinnati or whatever, some exchange.

21

mean, you're talking about, you're talking about

22

there's hardly anybody that wouldn't have said this

23

is one of the great geniuses of the investment

24

business in the last 35 years.

25

Q.

Thank you, Mr. Wilpon.

I

212

1

Q.

Okay.

Please go down to the bottom

2

of the document, under the signature very truly

3

yours, the name Fred Wilpon.

4

signature?

5
6
7
8
9

A.
Q.

Is that your

Yes, it is.
To the right of your signature is

that Saul Katz's signature?
A.
Q.

I believe so.
And to the left, under the word

10

"Agreed," Ruth Madoff, is that Mrs. Madoff's

11

signature?

12
13
14
15
16

A.

I don't think I've ever seen her

signature, but it looks like her signature.
Q.
A.
Q.

17

A.

Yes.
When did you last review this

document?

18

Are you familiar with this document?

19

Q.

20

the deposition?

21

A.

Two days ago.

22

Q.

In connection with the preparation of

(Witness nods.)
Can you explain to me the first

23

sentence of the letter agreement.

It says:

"Dear

24

Ruth, this will confirm the conversations with

25

respect to an investment by you in the network."

213

1

What is that sentence referring to?

2

A.

We decided to buy out of our

3

agreement with Cablevision.

4

so.

5

banks, I don't remember, for the monies that refers

6

in here, the $54 million.

7

9

So, we arranged for financing from a bank, or

Q.

8

We had an option to do

A.

Right.
When it came down to the time when

the option was going to expire, you know, there was

10

a time when we had to do this, for the purpose of

11

starting a network, which ultimately became SNY.

12

don't know there was anything ever called Mets

13

Network Company.

14

head.

15

the time, there was a couple of days left when we

16

had to exercise that option, and what I was told was

17

that the bank had accepted everything, but they were

18

doing paperwork.

19
20
21
22

That was out of Marvin Tepper's

He just made a name up.

Q.
A.
Q.
A.

I

When it came down to

Lawyers were making their fees.

Sounds unbelievable.
That was the first time in history.
Right.
So, I don't remember whether it was

23

two days before or five days before, something like

24

that, but we were concerned about it because,

25

suppose they lawyered a day after, then we'd have an

214

1

option that lapsed and we didn't want that to

2

happen.

3

So we were in my car, driving to our

4

office in Manhattan, and Marvin Tepper was with us,

5

Saul and I were in the back seat, Marvin Tepper was

6

in the front seat.

7

take that chance.

8
9

And we decided we didn't want to

So, what were the alternatives.

The

alternatives were that we could break accounts that

10

we had otherwhere, whatever, we could try to find

11

the money elsewhere, or we could break accounts at

12

Bernie and just have him send us the money.

13

So we decided to call Bernie, and we

14

called Bernie on my car phone, I don't recall, I'm

15

not sure whether I spoke to him or -- I don't

16

remember that.

17

phone or not.

18

Or whether he was on the speaker

We called Bernie and his secretary

19

said, he's out of town, I'll reach him for you.

And

20

she reached him.

21

was, but I saw other documents at prep that told me

22

he was in Europe somewhere, in France I think.

23

we said to Bernie, Bernie, we want to break some

24

accounts.

25

period.

At the time I didn't know where he

And

Even though it was in the middle of the
Because he didn't -- if you broke accounts

215

1

in the middle, you didn't get the value of that

2

account, in terms of the interest, the return that

3

was paid.

4

So, he said, okay.

And then he said,

5

yeah, but why should you break the accounts, you're

6

going to lose the continuity of the account.

7

send you the money.

8

accounts, I'll send you the money.

9

long do you need it for.

I'll

Got plenty of collateral in the
He said, how

We said, well, we don't

10

know whether we need it, but we might need it for,

11

you know, a few days.

12

you the money.

13

That was that.

14

So he said, okay, I'll send

And so he said he'd send the money.

I don't know what happened thereafter

15

in terms of Marvin Tepper calling Bernie, or Bernie

16

or someone.

17

there.

18

or why.

19

telephone.

20

I had no idea that -- until recalling here -- that

21

Ruth, was sent to Ruth.

22

he was sending it from his account.

23

account.

I don't really know what happened

And I don't know how this letter got written
Bernie didn't ask that of us on the
So, this letter was written by Marvin.

Had no idea because he said
Not from Ruth's

Sending the money.

24

So, that afternoon or sometime

25

thereafter, within the next few hours anyway,

216

1

someone must have told Arthur or one of the

2

accountants or someone and we got a call from the

3

bank that there was $104 million in the account.

4

other words, Bernie's 54 was wired, but the bank

5

that we borrowed the money from wired the money as

6

well.

7

on here, you've got money in the account.

8

obviously we realized what happened, the bank had

9

approved the transaction.

In

So someone got a call and said what's going
So

They funded the money

10

into the account, and then that day or the next day

11

or whatever, I don't remember -- I don't know who

12

did it or whatever, but they wired the money back to

13

Bernie.

14

for a day or half a day or something like that.

So the money may have been in the account

15

I have no idea why this letter was

16

written; it wasn't requested.

17

that's what you lawyers do.

18

that's my recollection of the whole thing.

19

Q.

I have no idea.

But

You write letters.

So

So it's your recollection that the

20

money was wired from -- you understand the money was

21

wired from Madoff accounts to your account without

22

any paperwork memorializing any agreement of any

23

sorts?

24
25

A.
Q.

Right.
You had also mentioned during your

SIPC v. BLMIS No. 08-01789-BR:
Rule 2004 Examination of Fred Wilpon
EXHIBIT A

CONFIDENTIAL
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17
33
45
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64

200
201
201

officious reporting. I might see
19 him in the hall, I
discussions. He was well
24 known in the industry, was

official reporting. I might see him in
the hall, I
discussions. He was wellknown in the industry, was

to hit a home run, so to speak,
20 even at City Field
a personal relationship with
14 Bernie as well but mine

to hit a home run, so to speak,
even at Citi Field
a personal relationship with
Bernie as well, but mine

You were counting out your
15 hands
days it was before the
18 December 11th.

You were counting on your
hands

I now remember them and
8 read, of the SEC violations
about? But that's never
9 happened. No one ever, by
Bernie was on the
17 top of the field.

days it was before December 11th.
REDACTED

I now remember them and
read, of the SEC investigations
about? But that never
happened. No one ever, by
Bernie was at the
top of the field.

1

Transcription error
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Grammatical error

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SIPC v. BLMIS No. 08-01789-BR:
Rule 2004 Examination of Fred Wilpon
EXHIBIT A

CONFIDENTIAL
PAGE

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ORIGINAL

Correction
CHANGE

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REDACTED

213
214
215
216
216
216

banks, I don't remember, for
5 the monies that refers
we had otherwhere, whatever,
10 we could try to find
Ruth, was sent to Ruth. Had
21 no idea because he said
bank that there was 104
3 million in the account. In
other words, Bernie's 54 was
4 wired, but the bank
wired from Madoff accounts
21 to your account without

banks, I don't remember, for
the monies referenced
Transcription error
we had elsewhere, whatever,
we could try to find
Grammatical error
Ruth, was sent by Ruth. Had
no idea because he said
Transcription error
bank that there was $108
million in the account. In
Transcription error
other words, Bernie's $54 million was
wired, but the bank
Transcription error
wired from Madoff's accounts
to your account without
Grammatical error
REDACTED

2