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

Filing 27

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 T, # 2 Exhibit U, # 3 Exhibit V, # 4 Exhibit W, # 5 Exhibit X, # 6 Exhibit Y, # 7 Exhibit Z, # 8 Exhibit AA, # 9 Exhibit BB)(Wagner, Karen)

EXHIBIT T

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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.
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In Re:

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BERNARD L. MADOFF,

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Rule 2004
Examination of:

Debtor.
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SAUL B. KATZ

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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 Wednesday,

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August 4, 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
PNC 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: FERNANDO A. BOHORQUEZ, ESQ.
KATHRYN M. ZUNNO, 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

100

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Q.

And it includes the other investments

of your partners as well?

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A.

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Yes.

Q.

So, earlier you told me that the

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reports that you saw only had your and your family's

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investments.

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A.

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Right.

Q.

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Is that still your understanding?

A.

That's my understanding.

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MS. SESHENS:
form.

Objection as to the

Sorry.

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A.

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ones I looked at.

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years ago.

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since, nor do I remember seeing this one.

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Q.

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What I said is that those are the
Those are the ones -- this is 15

I don't know if I've seen another one

So this one is from 1995.
Do you recall any point in time at

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which you considered purchasing insurance to cover

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your investments in Madoff?

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A.
that.
Q.

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I recall looking at and considering

Tell me what you recall about that.
MS. SESHENS:

A.

Objection to the form.

I recall friends of mine who were

more conservative than I am -- and I'm very

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conservative -- talked about doing it and asked us

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to look into it.

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Q.
A.

Who were the friends?
The friends at American Securities,

my friend Chuck Klein.
Q.

And did you have an understanding

that American Securities had purchased insurance?
A.

I think he said they were going to,

or considering it.
Q.

And so what did you do when you

learned about this?
A.

We weren't going to buy insurance on

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something that we thought was as good as gold and

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waste money.

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Q.

So what steps did you take to

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investigate, if any, what steps did you take to

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investigate the insurance aspect of this?

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A.

I think I asked Mr. Friedman to

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investigate it and see what the costs are.

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that's because of my respect for Mr. Klein who said,

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just take a look at it.

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Q.

But

So we took a look at it.

Did you attend any meetings with any

outside third parties to discuss the insurance?
A.
Q.

I don't recall.
Do you recall a guy named Robert

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partners' meetings and we got off on to a discussion

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following that.

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question.

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A.

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Q.

But I want to come back to that

Sure.
Did the partners in the partners'

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meetings discuss the double-up accounts bringing a

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certain added element of risk to the business?

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A.

I don't ever recall us talking about

the risk element in the doubling up, because we all

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assumed that the asset was solid, and that all we

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talked about is the ability to leverage and make a

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little bit more on that same asset class.

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Q.

Do you recall whether your son David

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had an opinion about the double-ups, whether that

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was a good idea or a bad idea from a business

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perspective?

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A.

My son David, as I think I testified

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earlier, felt as though we had too much in one

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place.

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Q.

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A.

And the double-ups would add to that?
Double-ups would add to that.

So if

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we had too much in one place, too much plus

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something, it just compounds the lack of diversity.

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Q.
group?

Did he voice that opinion to the

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A.
Q.
A.
Q.

Many times.

Never about the asset.

I understand.
Never about the asset.
Just about the fact of too much in

one place?
A.
Q.

Too much in one place.
And why -- was there a consensus

among the partners that diversity was a good idea?
A.

Everyone believed diversity was a

good idea.
Q.

Why was it, how was it that you ended

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up with all your eggs in one basket, at least at

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that point in time?

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MS. SESHENS:
A.

Objection to the form.

We all felt very strongly that we had

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no risk.

This was a risk-free investment because --

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now, of course, the world could have come to an end

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and the puts, which are a derivative, the other end

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of the puts could be some company that can go out of

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business.

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think that the world was going to come to an end.

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As a matter of fact, as bad as the market took place

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now, I didn't hear of any puts not being supported.

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So, it was a -- obviously erroneously, we believed

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this asset was as good as can be, it was as good as

But we didn't think that way, we didn't

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and a kiss and say, how are we.

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Q.

We talked a little earlier today

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about a time when you looked -- not you personally

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but perhaps others, looked into getting insurance to

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cover problems that might arise with your Madoff

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investments.

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said you didn't know Robert Duran.

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A.

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Q.

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A.

Right.
And the Frank Crystal Company.
I said that name struck a bell, but I

don't know.

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And I mentioned this guy Duran and you

Q.

Does the name Mark Frietas,

F-r-i-e-t-a-s, does that ring any bells with you?

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A.

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Q.

No.
I think you told me that the idea to

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look into that insurance came about because you

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learned that American Securities had purchased

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insurance?

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A.

No.

I said that my friend Chuck

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Klein asked me to look into it because he had done

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so.

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He requested I look into it.
Q.

So Chuck Klein had looked into it.

This was American Securities, right?
A.
Q.

Yes.
Did you understand that he had

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purchased the insurance?

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A.

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Q.

A.

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Did you understand that he had not

purchased the insurance?

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No.

Q.

No.
Did not have an understanding either

way?
A.

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did or didn't.

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Q.

To this day I don't know whether he

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Did you have an understanding of why

he looked into such insurance?
A.
Q.
A.
Q.

No.
Do you recall asking him about that?
No.
Did you have an understanding about

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whether the insurance that he was looking into and

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either had or hadn't purchased was related to

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investment in Madoff or in some other --

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A.

I think he covered, more than Madoff,

I think he covered his whole portfolio.
Q.
A.

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Q.

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What do you base that belief on?
My recollection.

assumed?

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A.

Something he said or something you

No, no.

That's what I recall he was

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talking about.

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particular.

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whole portfolio.

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A.

Yes.

Q.

Do you have any role in connection

with that, the audit process?
A.

Not at all.

Q.

Do you ever interact with the people

from KPMG?

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KPMG is the auditor for -- that

audits the Mets; is that correct?

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As I recall he was talking about his

Q.

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He wasn't talking about Madoff in

A.

No.

Q.

Do you ever receive reports from

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people within the Mets organization or Sterling

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organization about what the auditors are looking at

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or what they're talking about or asking about?

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A.

Not that I recall.

Q.

Do you recall KPMG ever asking any

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questions about Madoff or raising any concerns about

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Madoff?

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A.

No.

Q.

I'm going to go back to this, I hate

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going back here but I've got to go back for one

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question.

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transparency.

We had this whole discussion about

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