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 F

1

1

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

2

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

3
4
5

-------------------------------x
SECURITIES INVESTOR PROTECTION
CORPORATION,

6
Plaintiff-Applicant,
7
8

Videotaped

v.

10

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

11

BERNARD L. MADOFF,

12

Rule 27
Deposition of:

Debtor.
-------------------------------x

9

ARTHUR FRIEDMAN

13
14
15

TRANSCRIPT of testimony as taken by and before

16

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

17

and Notary Public of the States of New York and New

18

Jersey, at the offices of Baker & Hostetler, 45

19

Rockefeller Plaza, New York, New York on Tuesday,

20

June 29, 2010, commencing at 1:49 p.m.

21
22
23
24
25

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

2

1

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

2
3
4
5
6
7
8
9
10
11
12
13

BAKER & HOSTETLER LLP
3200 National City Center
1900 East 9th Street
Cleveland, OH 44114-3485
BY: THOMAS R. LUCCHESI, ESQ.
For Irving Picard, Trustee
BAKER & HOSTETLER, LLP
45 Rockefeller Plaza
New York, New York 10111
BY: KATHRYN M. ZUNNO, ESQ.
FERNANDO A. BOHORQUEZ, ESQ.
AMANDA E. FEIN, ESQ.
For Irving Picard, Trustee
DAVIS POLK & WARDWELL LLP
450 Lexington Avenue
New York, NY 10017
BY: DANA M. SESHENS, ESQ.
KAREN E. WAGNER, ESQ.
ANDREW CLARK FRIEDMAN, ESQ.
For Sterling Equities, certain
affiliated entities, and the Witness

14
15
16
17
18
19
20
21
22
23
24
25

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

5

1

with Kathryn Zunno and Fernando Bohorquez.

2
3

A R T H U R

4

EXAMINATION BY MS. SESHENS:

5
6
7

Q.
A.
Q.

F R I E D M A N, previously sworn.

Good afternoon, Mr. Friedman.
Good afternoon.
I'm going to ask you some questions

8

today pursuant to Federal Rule of Civil Procedure

9

27, which will have no meaning to you, but just so

10

the record is clear I wanted to indicate we're

11

beginning a deposition under that rule.

12
13

A.
Q.

Okay?

Okay.
Mr. Friedman, we've talked over the

14

past couple of days about some aspects, different

15

aspects of Sterling's business.

16

that testimony generally?

17
18
19
20
21

A.
Q.

Do you remember

Yes.
And do you recall telling us about

three different areas of Sterling's business?
A.
Q.

Yes.
And if I have my recollection

22

straight, and you'll correct me if I'm wrong, you

23

told us of real estate ventures in which Sterling

24

conducted business; is that correct?

25

A.

Yes.

6

1
2
3
4

Q.

And Sterling also has baseball

interests; is that correct also?
A.
Q.

Yes.
And Sterling also has certain

5

investments that we spoke of, that you spoke of,

6

correct?

7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25

A.
Q.

Yes.
Now, of those different businesses,

which would you say, if any, is the predominant
business of Sterling Equities?
A.
Q.

Real estate.
And does Sterling hold itself out to

be in the business of investing securities?
A.
Q.

No.
Do you personally view yourself as a

professional securities investor?
A.
Q.

No.
Does Sterling Equities hold itself

out to be a securities investment advisor?
A.
Q.

No.
Do you view yourself as a securities

investment advisor?
A.
Q.

No.
Did you rely on Mr. Madoff and his

firm as the professionals to whom you and the

9

1

in any of the partners' offices.

2

more than one partner got together, there could be a

3

business discussion.

4
5
6
7

Q.

Any location where

So fair to say that not all business

discussions happened solely at partner meetings?
A.
Q.

That's correct.
Mr. Friedman, you also testified over

8

the past few days about some due diligence that you

9

performed towards the beginning of Sterling's

10

investment relationship with BLMIS.

11

that generally?

12

A.

13

Q.

Do you recall

Yes.
And I believe -- and again correct me

14

if I'm wrong -- you told us about some exercises you

15

undertook to track market prices or prices of the

16

securities; is that correct?

17
18

A.
Q.

That's correct.
And you also told us about some

19

analyses that you undertook that would analyze the

20

range of maximum gains and losses based on the

21

information that you had from the -- with respect to

22

the Madoff accounts?

23
24
25

A.
Q.

Is that correct?

That's correct.
And we saw some of these analyses

over the course of the past few days, correct?

10

1
2

A.
Q.

Yes.
And did you perform other iterations

3

of those analyses?

4

spreadsheet from June of a particular year, would

5

there be other spreadsheets for other months in that

6

same year or subsequent years?

7

MR. LUCCHESI:

8
9
10

A.
Q.

Objection.

Yes.
And do you recall performing these

analyses on more than one occasion?

11
12

And by that I mean, if we saw a

A.
Q.

Yes.
Did anyone other than you perform

13

these types of analyses in and around the time that

14

Sterling's investment relationship began with

15

Madoff?

16
17
18

MR. LUCCHESI:
A.
Q.

Objection.

It could have been my assistant.
So any analyses that were undertaken

19

in around that time would you say were undertaken at

20

your direction?

21
22
23

MR. LUCCHESI:
A.
Q.

Objection.

Yes.
And did you maintain, to the extent

24

you performed these analyses, did you maintain them

25

in your files?

11

1

MR. LUCCHESI:

2
3

A.
Q.

Objection.

Yes.
Mr. Friedman, in your second day of

4

testimony you testified about a change that I think

5

you said was in the anti-money laundering laws that

6

resulted in Mr. Madoff having to do a more extensive

7

background check into new account holders.

8

remember that generally?

9
10

A.
Q.

Do you

Yes.
And do you recall whether it was the

11

enactment of the Patriot Act that led to that

12

change?

13
14

A.
Q.

Yes, that's correct.
Do you also recall, Mr. Friedman,

15

that Mr. Lucchesi asked you some questions about a

16

special investment that Mr. Madoff offered to

17

Sterling?

18

A.

19

Q.

20

subject matter?

21

A.

Yes, I do.

22

Q.

And you remember that generally as a

Yes.
And do you also recall telling

23

Mr. Lucchesi about a discussion you remembered the

24

partners having about the special investment?

25

A.

Yes.

12

1

Q.

During that discussion amongst the

2

partners, do you recall any partner raising the

3

question of whether what Madoff was proposing to do

4

in connection with the special investment was

5

illegal?

6

A.

7

Q.

No.
Do you recall during that discussion

8

that the concept of illegality was raised in any

9

way?

10
11

A.
Q.

No.
To the extent you testified

12

previously about questions concerning the legality

13

of the special investment, were you testifying to

14

your present day view of how you could understand a

15

question of that nature having been raised?

16
17

A.
Q.

Yes.
Mr. Friedman, do you also recall

18

Mr. Lucchesi asked you some questions last week

19

about Sterling's 401(k)?

20
21

A.
Q.

Yes.
And in connection with that

22

testimony, I would like to hand you a page from the

23

rough transcript of your testimony on Thursday, June

24

24th that I will mark as an exhibit.

25

you, counsel, with copies.

And provide

19

1
2
3
4
5
6
7
8
9
10
11
12

A.

Canter, who we spoke about.

Q.

Yes.

A.

I know that he had a Madoff account.

Had nothing to do with 1KW -- was not a 1KW account.
Q.

Okay.

Was he a guy that you

administered his account as well?
A.

No.

Q.

Okay.

So that's what I'm -- what I'm

asking is, for the persons for whom you administered
accounts, that were called others -A.

Oh, I'm sorry.

Q.

-- did any of those individuals, to

13

your knowledge, have an account with Madoff, to use

14

your words, that was not a 1KW account?

15
16

MS. SESHENS:
A.

Objection to the form.

I did not administer or give any

17

other information to anybody that didn't have a 1KW

18

account.

19

talking about tax information and regular reporting

20

information.

21
22

Q.

25

Only to those who had a 1KW account.
Okay.

Listen, maybe I'm not being

clear with my question.

23
24

That is, I have to qualify that, I'm

You administered accounts for persons
that we've called others, correct?
A.

Yes.

20

1

MS. SESHENS:

2

We've called them outsiders.

3

calling them others.

4
5
6
7
8
9

Q.

Objection to the form.
I think you've been

I don't know where that term --

Is "others" a term that you use, or

is that -A.
Q.
A.
Q.

I think we were using outsiders.
Okay, my fault, my fault.
Okay.
You administered accounts for persons

10

called outsiders, that you've referred to as

11

outsiders, correct?

12
13

A.
Q.

Right.
And my question is whether you're

14

aware of whether any of those outsiders, for whom

15

you're administering accounts, also had an account

16

at Madoff that was not a 1KW account?

17

A.

18

No.
MR. LUCCHESI:

19

questions.

20

I don't have any other

BY MR. LUCCHESI:

21

Q.

Oh, maybe I do.

In response to Ms. Seshens' questions

22

a minute ago, you talked about -- she asked you

23

questions about analyses that you performed and she

24

was asking you along the lines of if we saw an

25

analysis for one month, would it be likely or was it

21

1

a fact that you did analyses in other months as well

2

or that others in your office.

3

answered yes to that.

4
5

A.
Q.

And you generally

Yes.
What analyses were you referring to

6

that you did on a month-to-month or a systematic

7

basis throughout the course of the relationship with

8

Madoff?

9

A.

I'm not answering it during the

10

course -- for a limited, for a period of time, not

11

during the entire course.

12
13
14

Q.

Oh, okay.

So you were answering for

a limited period of time?
A.

Yes.

I may have identified a

15

particular schedule that I did in one month, but I

16

did that for more than one month.

17

a period of, let's say two years in a given case,

18

not during the entire 23-year relationship.

19

Q.

Okay.

It may have been

I just want to explore that

20

for a minute because we looked at a couple, and we

21

can go back to some of them if you wish, we looked

22

at some analyses you did.

23

period of time at which you compared the prices of

24

transactions to see if it was within the range of

25

prices on a particular day.

For example, there was a

Do you recall that you

22

1

did that?

2

A.

3
4

Q.

Yes.
For what period of time did you do

that type of analysis?

5

A.

I don't have a definite recollection

6

of the exact period of time, but I would say it was

7

more like close to two years rather than just one

8

month.

9
10

Q.
A.

Okay.
Same for the schedule that said

11

maximum income, maximum loss.

12

many, many months, well past a year.

13

again...

14

Q.

15
16
17

I recall doing that
Perhaps,

In your records, you'd have records

that would reflect when you did that?
A.
Q.

Yes.
So if there are charts that show you

18

did that, that would be when you were doing it, and

19

I presume the opposite would be true, if there were

20

no charts in your records on your computer,

21

whatever, it would show you weren't doing that?

22
23
24
25

MS. SESHENS:
Q.
A.

Objection to the form.

Is that a fair statement?
I presume that they were all, all the

records that I kept manually were retained.