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 BB

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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.

It could have come from anywhere.

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could have been from a redemption from the SSP

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account.

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Madoff account.

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It

a property.

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It could have been excess funds in the
It could have been from the sale of

Excess funds in general were

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accumulated, and then a decision would have been

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made, you know, let's double it up.

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Q.

decision to double it up?
A.

It would have been the partners who

made that decision.
Q.

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A.

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partners.

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And who played a role in that

Q.

All of them together?
All decisions are made by all the
It's a very unique organization.
It sounds like it.

I'm just trying

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to get a better understanding of the decision-making

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process of the double-ups.

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So who determined when there was an

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excess of funds?

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A.

The individual partners knew their

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own personal accounts.

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wouldn't realize there were excesses.

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When there was -- people

Arthur would be in charge to call up
the capital accounts.

He would know, and he would

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say, hey, everybody has a little bit more money than

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expected.

What do you want to do with it?

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And this would be usually done either

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at a management meeting or over a lunch or just

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walking around the office.

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I'd say it's a very unique office.

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It's small enough that you can still talk to your

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partners one-on-one either by walking down the hall

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or making a quick phone call.

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And decisions are made by the

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partners.

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want to come in, that's okay, also.

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form a pool of money to be doubled up.

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So you want to come in, great.

Q.

You don't

And they would

And did there come a time when

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non-partners were invested in these double-up

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accounts?

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A.

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Q.

Yes.
So who solicited or who spoke with

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the non-partner investors to see if they wanted to

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get -- to invest in a double-up?

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MS. SESHENS:

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You can answer.

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Q.

Objection to the form.

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A.

You can answer.
The -- that was -- non-partners could

be children of the partners.

It could be their

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double-up entity, have different levels of

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investment?

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A.
Q.

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A.

Yes.
Okay.

And how was that determined?

It's whatever that individual thought

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they could afford to lock away, to lock up for a

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period of time.

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Q.

And that was based on -- on the

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excess analysis?

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A.

It was -- I don't know what the

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excess analysis is, but it was based upon that

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person's understanding of what their needs were,

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short-term, long-term.

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And based upon that, you can say I
can put away X dollars for a longer period of time.
Q.

Well, what I mean by the excess

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analysis is what you were referring to earlier, that

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you said that there were excess funds that were then

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pooled.

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A.

Right, okay.

I don't know if it was

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a formal analysis versus a thought process that went

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through each person's mind.

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Q.

So Mr. Friedman would notify the

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partners and executives that they had excess funds,

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and those funds could or could not have been used to

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invest in the Sterling --

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A.

Correct.

It was up to the individual

partner to make that decision.

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Q.

And when you said locked, locked up,

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you used the term "locked up," what did you mean by

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that?

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A.

The nature of a double-up account is

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that you would take money and put it into a pooled

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account, and then you would borrow money and also

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put it in the pool account.

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And that borrowed money had a term,

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three years usually.

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to break the loan because we would fix the rate on

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the loan.

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means you're breaking the rate lock, you're pulling

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funds out that have been set aside and given a

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certain rate for a three-year period.

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So you didn't necessarily want

And if you -- if you want to come out, it

Depending upon where interest rates

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are in the market, you could either make money or

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lose money doing that.

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Q.

I see.

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Equities Funding?

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A.

Now, what is SEF, Sterling

Sterling Equities Funding is -- call

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it the internal bank of the firm.

Rather than each

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partner borrowing money from banks, it borrows its