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

Filing 31

DECLARATION of Fernando A. Bohorquez, Jr., in Opposition re: 20 MOTION to Dismiss THE AMENDED COMPLAINT OR, IN THE ALTERNATIVE, FOR SUMMARY JUDGMENT.. Document filed by Irving H. Picard. (Attachments: # 1 Exhibit 1, # 2 Exhibit 2, # 3 Exhibit 3, # 4 Exhibit 4, # 5 Exhibit 5, # 6 Exhibit 6, # 7 Exhibit 7, # 8 Exhibit 8, # 9 Exhibit 9, # 10 Exhibit 10, # 11 Exhibit 11, # 12 Errata 12, # 13 Exhibit 13-1, # 14 Exhibit 13-2, # 15 Exhibit 14, # 16 Exhibit 15, # 17 Exhibit 16, # 18 Exhibit 17, # 19 Exhibit 18, # 20 Exhibit 19, # 21 Exhibit 20, # 22 Exhibit 21, # 23 Exhibit 22, # 24 Exhibit 23, # 25 Exhibit 24, # 26 Exhibit 25, # 27 Exhibit 26, # 28 Exhibit 27, # 29 Exhibit 28, # 30 Exhibit 29, # 31 Exhibit 30, # 32 Exhibit 31, # 33 Exhibit 32, # 34 Exhibit 33, # 35 Exhibit 34, # 36 Exhibit 35, # 37 Exhibit 36, # 38 Exhibit 37, # 39 Exhibit 38, # 40 Exhibit 39, # 41 Exhibit 40, # 42 Exhibit 41, # 43 Exhibit 42, # 44 Exhibit 43, # 45 Exhibit 44, # 46 Exhibit 45, # 47 Exhibit 46, # 48 Exhibit 47, # 49 Exhibit 48, # 50 Exhibit 49, # 51 Exhibit 50, # 52 Exhibit 51, # 53 Exhibit 52, # 54 Exhibit 53, # 55 Exhibit 54, # 56 Exhibit 55, # 57 Exhibit 56, # 58 Exhibit 57, # 59 Exhibit 58)(Bohorquez, Fernando)

Exhibit 40

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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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-------------------------------x
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.
-------------------------------x

8
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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

SAUL B. KATZ 8/4/10

CONFIDENTIAL

SIPC v. BLMIS

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A. Which was, you know, 50 years ago.
Because I wasn't -- I'm not good at details. But
I'm a good stratagist. That's the reason the health
system is where it is today, that's one of the
reasons Sterling is where it is today. I've always
been good at strategy. I haven't been good at
details. So, my job has always been the stirrer.
Q.
The stirrer?
A. Stirrer.
Q.
To stir things up?
A. That's right.
Q.
Okay.
A. Exactly right. To stir it, to
challenge, to find new ideas, new deals. Some don't
come out well, but we try them.
Q.
Nothing ventured, nothing gained.
A. Well, the only people who haven't
made mistakes are the people who are the liars or
have never done anything.
Q.
Fair enough.
So, as a stratagist, and going back
to -- what were your areas of responsibility in the
Sterling organization, prior to your involvement,
prior to getting so involved with -A. Finding deals, starting new deals,

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A.
Whether it's at the hospital, whether
it's at UJA, I've always given 25 to 30 percent of
my time to community affairs. So that's been a...
Q.
That's been a constant?
A.
It's been a constant.
Q.
Okay, fair enough.
But your full-time job, so to speak,
was with Sterling?
A.
Yes.
Q.
And that's the areas that you focused
on, and I'm not too interested in the beginning when
you started with Sterling. I'm really starting in
the '90s.
A.
Okay.
Q.
The areas that you focused on sounded
to me like it was real estate development, finding
deals, finding properties. That's the real estate
side, right?
A.
(Witness nods.)
Q.
And you mentioned investments,
looking for ways to invest the company's money and
the partners' money?
A.
Correct.
Q.
Did you -- do you have any areas of
responsibility with respect to the Mets?

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looking at properties to try to buy deals. Looking
for new ways to invest our money. Whether they be
the marketing company, the SBIC, that's what I've
been doing.
Q.
And what -- so, as we went through
the '90s, was your focus, you were working 40, 60,
80 hours a week at Sterling?
A. Whoa, whoa, whoa, whoa, whoa. You
didn't talk to my partner, did you? He would never
tell you I worked 60 or 80 hours. I've never been
accused of that.
Q.
That was a very poor question. And
your partners did not accuse you of working that
much.
A. Right.
Q.
Sterling was a full-time job for you?
A. Yes. Excuse me. You're talking
about prior?
Q.
Prior.
A. Well, I've been involved in the
hospital for 30 years. Growing from the smallest
hospital, which is Glen Cove Hospital where I live,
which is where I started. And so I've always spent
time.
Q.
Sure.

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A. Yes.
Q.
What were your responsibilities or
what are your responsibilities?
A. Since we bought Nelson out, it's been
very active, occupies, I would say -- we bought
Nelson out, excuse me, in 2002, 2003. Some -- 2002
or '3. I've been very -- that's, most of my work in
Sterling has been focused on that.
Q.
What do you do with respect to the
Mets organization?
A. I'm involved in all of the long-term
planning, financing, the starting of SNY, which
started in 2006 but we had to buy it out in 2003 or
4, the opportunity to do it. Budgeting processes,
as far as long-term strategy is concerned. They do
hear my voice on player personnel, at some level.
And anything else that an owner would do, which is
what I am.
Q.
Other than your health system work
and working with the Mets organization, where else
do you spend time today within the Sterling Group of
companies?
A. Since December 11th, 2008 I've spent
an awful lot of time on the issues at hand.
Q.
The restructuring? What do you mean

BENDISH REPORTING, INC.
877.404.2193

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SAUL B. KATZ 8/4/10

CONFIDENTIAL

SIPC v. BLMIS

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was simple, well respected member of the community.

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So...

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Q.

When were there -- when did you

become aware of SEC investigations?
A.

When I read about it in the paper,

with those accountants in Florida.
Q.

Were you aware at the time it was

occurring or were you --

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A.

No. I saw it in the paper.

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Q.

-- or after the fact?

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A.

After the fact. After the fact. I

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didn't know --

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Q.

Let me ask the question differently.

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A.

Sure.

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Q.

Did you read about it in the paper

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and become aware of it after the collapse of Madoff?

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A.

No.

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Q.

Closer in time to when the event

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actually happened?

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A.

Yes. Yes.

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Q.

So you remember the accountants in

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Florida?

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Well, I remember there were

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accountants in Florida who got in trouble with the

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SEC and the SEC had Bernie give everybody back their 11:06:46

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investigation?
A. Actually, I remember the name Barry
Gonder. I think he represented them at the time. I
also remember Barry Gonder telling me that his wife,
who's in the securities business, did a similar
strategy that Bernie was doing.
Q.
When did he tell you that, at the
time?
A. At that time.
Q.
Did he tell you anything else about
her strategy?
A. Not that I recall. Just the fact
that certain things stick in your head -gesundheit -- certain things stick in your head, and
that's, like the name Barry Gonder comes up.
Q.
Now, did you, in preparation for your
deposition, did you review Barry Gonder, any memos
from Barry Gonder?
A. Yes, I did.
Q.
Did you remember his name before you
reviewed those?
A. Yes, I did. I don't take credit for
remembering too many names, but that one for some
reason I did.
(Exhibit SK-1 marked for

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money, as I read, which he gave back immediately.
And the SEC, with this problem, in my mind would
have investigated Bernie to make sure that Bernie is
doing the right thing and he wasn't part of the
charge on the accountants. And, again, Bernie is
clean, Bernie is terrific. SEC has done a good job.
Q.
Do you remember any other instances
of becoming aware of SEC investigations of
Mr. Madoff?
A.
No. Not in detail. No.
Q.
What's the relationship between
either Sterling or the Mets and Travelers? At least
back in 1990, what was the relationship?
A.
What time was that?
Q.
1990.
A.
I know we borrowed money from them.
I don't even recall why we borrowed the money, but I
know we borrowed money from them.
Q.
Do you recall Travelers doing any
diligence on Madoff in connection with any of its
dealings with Sterling?
A.
Yeah, because we put up some of
Madoff's accounts for security, so they did an
investigation with due diligence.
Q.
Did you have any role in that

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identification.)
Q.
Mr. Katz, I've handed you Exhibit 1.
Have you seen that document before?
A. Yes, I have.
Q.
When -- you last saw this document, I
assume, in preparation for your deposition, right?
A. Yes.
Q.
Do you recall seeing it in September
of 1990?
A. No.
Q.
Do you recall -A. Not to say I didn't see it. I just
don't recall.
Q.
That's fine.
Now, this, the memo ends with the
initials MBT. That's Mr. Tepper, correct?
A. Yes.
MS. SESHENS: The first memo on the
first page?
MR. LUCCHESI: Yes.
A. Yes.
Q.
And what is his role or what was his
role in 1990?
A. General counsel -- sorry. I think he
was general counsel. I'm not sure when he joined

BENDISH REPORTING, INC.
877.404.2193

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16 (Pages 52 to 55)

SAUL B. KATZ 8/4/10

CONFIDENTIAL

SIPC v. BLMIS

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us. Before that he was outside counsel, so I can't
tell you 1990 if he was general counsel or outside
counsel.
Q.
But he was counsel, though, correct?
He was a lawyer?
A. He is a lawyer. I'm only saying to
you that he was outside counsel and I'm not sure
when he joined us as general counsel. So in 1990
I'm not sure if he was general counsel or outside
counsel. But he's still MBT.
Q.
Do you recall any discussion with
your partners concerning this memo or the
attachment?
A. No.
Q.
Do you know whether this memo was
prepared -- strike that.
The attached memo, which is Barry
Gonder's memo to the Sterling Doubleday file, do you
know whether that was dated before or after
Travelers loaned money and closed the loan with your
organization?
A. I do not know.
Q.
Do you know whether you relied in any
way on Mr. Gonder's findings in connection with any
decisions that you made to invest with -- to invest

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documents other than account statements from Madoff? 11:15:55
A. I think we got two things. We got
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stock transactions and monthly statements. Two

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different.

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Q.

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A.

Confirmation tickets, yes.

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Q.

Do you recall getting other reports

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something like that, but I don't remember seeing any

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for a while.

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Q.

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documents?

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A.

All sent to Arthur.

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Q.

And the same with the confirmation

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statements?

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A.

Oh, yeah. Yes.

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Q.

What was the purpose of sending them

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was our person in the office who gathered all the

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information on Bernie and whatever relationship we

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had with Bernie through the office, it was Arthur's.

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The stock transactions, you're

referring to confirmation tickets?

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money with Madoff after the date you received a copy
of this document?
A. I certainly didn't depend on Barry
Gonder's memo, but it's all confirmation that grows
over a period of time, with feeling more secure
about what's going on.
Q.
Did you receive account statements
from Madoff with respect to your Madoff accounts?
A. At some time I did.
Q.
And what would you -- was there some
time that you didn't?
A. I don't recall when I stopped looking
at them. What I did with them is I turned them all
over to Arthur.
Q.
That was going to be my question.
A. I turned them over to Friedman. So
whether they stopped coming to me, my secretary
would send them right on to Arthur before they came
to me, but I didn't look at them.
Q.
Okay. So, was that your practice?
A. Yes.
Q.
After a short period of time you did
not look at the account statements?
A. Right.
Q.
Do you recall receiving any other

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called portfolio management reports, maybe on a

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quarterly basis?

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A.

As I recall, there was a time we got

What would you do with those types of

A.

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to Arthur Friedman?
As I said earlier, he was the one who

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Q.
Did you keep copies of what you gave
to Mr. Friedman?
A.
No.
Q.
Did you expect him to keep copies?
A.
I'm terrible with paper. I don't
keep paper.
Q.
Do you know what Mr. Friedman did
with the account statements and the other documents
that you sent to him?
A.
I have no idea.
(Exhibit SK-2 marked for
identification.)
A.
Are we through with this?
Q.
Yes, for now.
I've handed you what's been marked as
Exhibit 2. I'm really just interested in the second
page of Exhibit 2.
A.
Yes.
Q.
Which is -- is that a document that's
familiar to you?
A.
Yes.
Q.
That's the portfolio management
report we talked about a minute ago?
A.
Yes.
Q.
Would you -- this one, this

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SAUL B. KATZ 8/4/10

CONFIDENTIAL

SIPC v. BLMIS

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they're not full partners of Sterling Equities, so
they're not entitled to an interest, but we normally
offer them interests in deals as they come up.
Q.
So they sit in the meetings as well
or at least portions of the meetings?
A. Yeah. The answer is yes. Yes.
Q.
Okay. Do any other individuals
regularly attend the partners' meetings?
A. No.
Q.
Do you ever or sometimes have outside
people come in for portions of your meetings?
A. Yeah, if we needed some presentation,
some information, yes.
Q.
Has Mr. Madoff, Bernie Madoff ever
attended any portion of a partners' meeting at
Sterling?
A. Not in person or on the phone.
Q.
That was going to be my next
question.
Does Mr. Stamos attend those meetings
now?
A. No.
Q.
Did he at any point in time?
A. Not on a formal basis. But he might
have been -- I don't know if he was there but he

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A.
Q.

Could you repeat that?
Yeah, let me ask it a different way.
Is there another group, in addition
to the partners' meetings, is there a group, another
meeting called an executive committee or executive
committee meeting that occurs on a regular basis?
A. No.
Q.
So there is no executive committee?
A. The partners are the executive
committee.
Q.
The partners are the executive
committee?
A. Right. Now, that's not to say that
partners don't meet.
Q.
No, I'm not implying that. I want to
know if there is a separate -A. There is no executive committee.
That is the executive committee.
Q.
Okay. Because I think there was a
little confusion about that from some of the -- at
least on our part. Not that you guys are confused.
We were confused about some people used the phrase
executive committee and partners, and I wasn't sure
if that was two different things.
A. Let me help you then. At the Mets we

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might have been at a meeting.
Q.
Now, in addition to the partners'
meetings, the partners make decisions about running
the business, right?
A.
Yes.
Q.
They set the direction. And you, do
you lead those meetings or chair those meetings?
A.
No. Mr. Wilpon does.
Q.
And is it that formal, that he runs
the meeting?
A.
He's chair and he runs the meeting.
Q.
Is there an agenda for each meeting?
A.
Yes, there is.
Q.
And is that distributed in advance?
A.
Yes, it is.
Q.
And minutes are kept, correct?
A.
Minutes are kept and distributed with
the agenda.
Q.
The minutes from the previous
meeting?
A.
The previous meeting, yes.
Q.
Are there any other meetings,
regularly scheduled meetings with either all of the
partners or a subset of the partners that occur in
order to run the business of the Sterling entities?

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have a chairman of the -- Office of the Chairman.
So three people are in the Office of the Chairman.
That's just the Mets and only the Mets business.
Q.
Okay.
A.
SAP meets, I think they meet every
Monday morning. And so the partners that run SAP
meet every Monday morning.
Q.
Okay.
A.
But there is no executive committee.
Q.
Over the whole thing?
A.
Over the whole business. We're all
in the executive committee.
Q.
Okay.
Did you have a personal or a social
relationship with Bernie Madoff?
A.
Somewhat.
Q.
Describe it, please.
A.
Business social.
Q.
And what would that be comprised of?
A.
He came to a number of my family
affairs, whether it was a wedding or bar mitzvah.
Not all. I went to a couple of his, not all. I
don't think -- I can't recall a time that he and I
went out to dinner together, either personally or
with -- individually or with our wives. But we saw

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them at social events.
Q.
Okay. Just because you were at the
same event?
A. Yes, because we were at the same,
exactly right.
Q.
Did you sit on any boards with Bernie
Madoff?
A. No. No.
Q.
Did you ever vacation with
Mr. Madoff?
A. No. Never went on vacation with him.
Although I ran into him on two different times while
on vacation, but I didn't vacation with him.
Q.
Where was that?
A. Once in Sardinia and once in the
South of France.
Q.
Was that by design you ran into him?
A. Absolutely not. As a matter of fact,
as an aside, I could tell you that I was with my
brother and we saw him at our favorite restaurant
and we bought him dinner and my sister-in-law to
this day is angry at me for having bought him
dinner.
Q.
Was she angry at the time or was she
angry --

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years, it would be a lot, including his parties, my
parties and our communal parties.
Q.
Did you -- in your answer you said
all times you talked to Bernie. You said maybe two
times a year you'd have a phone call.
A. Right.
Q.
What about, would you call others at
his office with regard to business matters?
A. I never spoke to anybody in his
office other than Bernie.
Q.
Did you ever -A. I'm sorry, I may have spoken to Frank
once or twice during the 25 years.
Q.
Do you recall what you spoke to Frank
about?
A. No, no.
Q.
Annette Bongiorno, did you ever speak
to her?
A. Who's that?
Q.
Annette Bongiorno.
A. Not that I recall.
Q.
How about, do you remember the name,
does the name Jodi Crupi?
A. No.
Q.
Eleanor Squillari?

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A.

Oh, no, she wasn't angry at the time.

11:49:43

2

Q.

-- or after December 11th --

11:49:43

3

A.

She wasn't angry at the time. She

11:49:46

4

was angry after. I said, it didn't matter, he was

11:49:47

5

using our money one way or the other.

11:49:49

6

Q.

11:49:58

So be it.
How often would you, before you got

7

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so involved with the hospital work, the health

11:50:17

9

system work when you were focusing more on the

11:50:20

10
11
12

Sterling work, how often would you communicate with 11:50:23
Madoff or his office during the week?
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A.

I think that my communication with

11:50:34

13

Bernie was pretty consistent throughout the whole 25

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14

years, whether I was busy in the hospital or not.

11:50:41

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Q.

Okay.

11:50:45

16

A.

And I -- Fred and I would visit him

11:50:46

17

maybe once a year, and maybe I would have a

11:50:50

18

conversation with Bernie on the phone two times in

11:50:57

19

addition to that parameter.

11:51:03

20

Q.

Two times per year?

11:51:05

21

A.

Yeah. So, if I saw Bernie -- if I

11:51:07

22

spoke to Bernie, whether in person or by phone, two,

11:51:10

23

three times a year, other than the -- and if the

11:51:15

24

social events I talked about, just so we know, for

11:51:22

25

25 years, if there were 15 social events over 15

11:51:25

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A.
Eleanor was his secretary.
Q.
Yes.
A.
So I would have spoken to Eleanor
when I was calling for him.
Q.
Any other reasons to speak to
Eleanor?
A.
No. It would just be to get through
to Bernie.
Q.
Did anyone else, any other partners
within the Sterling organization, have a personal or
social relationship with Bernie?
A.
Fred much more than mine,
substantially more than mine but not that much, but
substantially more than mine. Jeffrey with Mark,
but not really with Bernie. But no one else.
Q.
Did -- I remember reading when this
case broke about Bernie having season tickets to the
Mets.
A.
We had 20,000 of those people.
Q.
I know. But I'm only interested in
Bernie.
A.
Okay.
Q.
Was he -- he was a season ticket
holder?
A.
Yes.

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Q.
Were his seats next to the owner
seats or close to the owner seats?
A.
Yes.
Q.
So, would you sit or would you guys
sit, you or Fred Wilpon sit with Bernie during the
games?
A.
No. Because we didn't use those
seats. We only sat in our box -- Fred and I
rarely -- Fred never goes downstairs, and I'll go
downstairs infrequently, and my seats are not next
to his. We have a number of owners' seats.
Q.
Okay.
A.
But I've never sat with Bernie at a
ballgame. Oh, I take it back. He came to Japan
with us.
Q.
Oh, when you played in Japan.
A.
We played in Japan. He and Ruth came
to Japan with us. And so I did sit at a ballgame
there with him.
Q.
Now, we're aware that Madoff made
investments in some of the Sterling business
operations.
A.
Yes.
Q.
What -- we can go through some of
those maybe, if we need to, but what role did you

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same as any other limited partner, and treated that

11:56:28

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2

way.

11:56:31

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11:53:22

4

potential -- persons that you'd call to be limited

11:56:35

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5

partners in your deals?

11:56:38

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6

11:53:30

Q.

Did you have a standard list of

11:56:33

Standard list, no. Continuing, for

11:56:40

7

instance in SAP I think we got 140 different

11:56:46

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investors. We may have visited with four or 500 to

11:56:50

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get the 140. I'm not sure. I didn't do most of

11:56:54

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that money raising over the last number of years.

11:56:58

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11

Q.

You didn't do most of it for SAP?

11:57:01

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12

A.

Right. But I would make a phone call

11:57:03

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to Bernie or to a couple of others that I had a

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relationship with to help the rates.

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you would be that person as opposed to Mr. Wilpon,

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who knew Bernie personally before you, or

11:57:31

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Mr. Friedman, who was the liaison on the

11:57:34

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23

investments?

11:57:38

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24

A.

11:57:41

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25

A.

Q.

Were you the designated person, so to

speak, to make phone calls to Bernie?
A.

Well, on that business -- on the

11:57:13
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business with him, yes.
Q.

11:57:09

Why was it -- how was it decided that

This was not a Madoff investment.

11:57:22

Mr. Friedman took care of the money going to Madoff. 11:57:44

81

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have in connection with Bernie making investments in

11:54:40

1

This was a conversation with Bernie investing with

11:57:48

2

Sterling business operations?

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us.

11:57:52

I would make the phone call to

11:54:45

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4

Bernie, it would be my contact to make that phone

11:54:48

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Mr. Friedman. What about why, was there some

5

call, to ask if he wanted to invest, tell him what

11:54:50

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6

it was about.

discussion between you and Fred Wilpon about whether 11:57:58
it should be one of you or the other of you?
11:58:01

3

A.

Q.

Okay. So I guess that eliminates

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6

How would it be determined if a

11:55:12

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8

particular investment opportunity was something that

11:55:15

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stirs these things and so I usually knew what the

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you should call Madoff about?

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deal was about, what the business was about and why

11:58:09

If we were looking for limited

11:55:31

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we were going into that particular business, and why

11:58:11

11

partners, Bernie would be a source of money, for us

11:55:35

11

Bernie should invest in that business would be my

11:58:14

12

raising money for doing deals. The only -- yeah,

11:55:44

12

conversation with Bernie.

11:58:17

13

that would be...

11:55:48

13

Would you discuss in advance with

11:55:50

14

15

your partners that Madoff would be one of the

11:55:53

15

16

potential sources of money that you would be

11:55:56

16

opportunity to go over this exhibit with

11:59:01

17

contacting?

11:55:59

17

Mr. Friedman a few weeks ago. Have you seen this

11:59:02

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A.

11:56:01

18

document before? It's a cover letter and then an as

11:59:12

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19

of July 7, 2004 chart setting forth Madoff

11:59:16

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20

investments in Sterling ventures.

11:59:20

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Q.

A.

Q.

I don't recall doing that, but that

would be the process.
Q.

Was there some criteria that you

A.

As I said earlier, I'm the one who

(Exhibit SK-3 marked for

11:58:30
11:58:35

identification.)
Q.

11:58:03

If you look at Exhibit 3, had the

11:58:51

21

employed with respect to your many projects as to

11:56:08

21

A.

I've seen it recently.

11:59:23

22

when you would call Madoff versus when you would not 11:56:12

22

Q.

Does this -- I guess recognizing that

11:59:29

23

call Madoff?

11:56:15

23

the investment in Sterling Vessels doesn't appear on

11:59:31

24

A.

11:56:19

24

here, does this accurately, to your mind, summarize

11:59:35

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25

or set forth the investments made by Madoff in

11:59:39

25

Any time we were looking for outside

money, he would be a potential limited partner, the

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A. I never had any discussions with
people.
Q.
Do you know what front-running is?
A. Yes.
Q.
What do you understand that to be?
A. That if some broker has information
or an order to buy 20,000 shares and those will
drive the stock up, he'll buy a thousand shares for
himself first before he buys it and then sells it
when he's gotten through the selling.
Q.
Did you ever have any discussion with
anyone that Madoff might be involved in
front-running?
A. Not that I recall.
Q.
Did you ever have any suspicion that
Madoff might be involved -- whether you discussed it
with anybody or not -- might be involved in
front-running or inside trading?
A. No. Because he did it in -front-running would be a particular stock, again.
Q.
I understand.
A. And he did it in lumps. And so my
sense of it was that because of the flow he had, he
had a sense of where the market was going, whether
it was one stock or 25 stocks. And that was his

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Q.
Their choice or your choice?
A. Their choice. It's their choice.
It's their choice.
Q.
Now, we talked to -- in our
discussions with other people from Sterling, we've
talked about investment in Madoff, not just by the
Sterling partners, but by what I think we've called
outsiders.
A. Friends and family.
Q.
Friends and family. Tell me about
your role in that, if you have any role.
MS. SESHENS: Objection to the form.
A. My role in that is that this was such
a blessing that I wanted to share with my friends
and family. And so if an opportunity came and if
somebody needed a safe, steady return to help them
live their life, we introduced them to an idea.
Q.
And how would that introduction take
place?
A. Tell them we're doing it and just
tell them what we know, tell them what we knew.
Q.
So give me -- what would you -- I've
become a good -- let's say it's 1990 and I'm a good
friend of yours and you're going to tell me about
Madoff. What would you tell me?

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advantage. His advantage was not in front-running,
but his advantage was a sense of the market, a sense
of how much he was trading and a feel for the
market. That was my naive understanding.
Q.
Now, switching gears totally.
A. Sure. Are we through with this?
Q.
Yeah, for now.
You're married to Iris?
A. 50 years.
Q.
I was going to ask how long.
Congratulations.
A. Thank you.
Q.
How many children do you have?
A. Three.
Q.
What are their names?
A. David, Natalie -Q.
Oh, Natalie was the one I didn't
remember.
A. And Heather.
Q.
And are Natalie and Heather involved
in the Sterling business?
A. No.
Just so, off the record, I can tell
you that, ladies, that's by choice. I don't want
anyone to get upset with me, okay.

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MS. SESHENS: Objection to the form.
A. I'd tell you that Bernie's been a
friend of ours for a while, we've had a successful
relationship with him, and we've invested money with
him, and this has been our returns and we're
comfortable doing this. If this is what you'd like
to do with some of your money, you're certainly
welcome to do it.
Q.
And would you -- what would be the
next step, if the person wanted to take you up on
that offer, would they just call Bernie directly?
What would they do?
A. They'd speak to Arthur. Arthur
Friedman, speak to Mr. Friedman.
Q.
And then what would happen?
A. Mr. Friedman would open an account
for them.
Q.
In their own name?
A. In their own name.
Q.
Would they -- would these friends and
family, would they ever be joined in accounts with
Sterling partners?
A. If they didn't have enough of the
minimum, in order to help them, we might join them
in the account.

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Q.
A.
Q.

Right. That Arthur administered.
Yes.
Arthur Friedman administered.
Because if you didn't have that rule
in place, every time someone withdrew money,
Mr. Friedman would have to reallocate everything -A.
Change percentage of the ownership.
Q.
At some point in time, do you recall
that at some point in time Madoff came to you or
someone else at Sterling with some kind of a special
deal or a special opportunity?
A.
At one time he came to us and said
that he's going to try a new strategy that he thinks
may be more efficient and make us more money and
asked us if we wanted to do it.
Q.
Who did he approach with that?
A.
I don't recall.
Q.
You don't recall?
A.
No, I don't recall.
Q.
Could it have been you?
A.
It could have been but I don't
recall.
Q.
What do you recall about this special
deal? What was the strategy?
A.
As I recall, he made a little bit

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recall any.

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tape, so let's take a short break. You can call

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your daughter. Give us a few minutes so we can see

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if we can wrap this up.

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THE VIDEOGRAPHER: We're back on the 03:02:07
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BY MR. LUCCHESI:

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I don't think so. Certainly don't

02:42:51

MR. LUCCHESI: Okay. We're out of

THE VIDEOGRAPHER: Going off the
record, the time is 2:43. This ends tape 3.

extra money for a short period of time, months, and
then it looked no different than all the other
accounts.
Q.
I guess I didn't ask the question
very well.
What was different about Madoff's
strategy for this special deal as compared to what
Madoff -A. I don't recall.
Q.
Do you think that's something you
knew at one point?
A. I'm not sure.
Q.
Do you recall that the opportunity
for this special deal was limited in the sense that
partners had to invest new money into Madoff? You
couldn't, in other words, take money out of an
existing Madoff account and put that in the special
account?
MS. SESHENS: Objection to the form.
Q.
Do you recall that?
A. No, I don't recall that.
Q.
Was there any -- other than this one
special deal that you told me about, are there any
other special deals or short-term arrangements that
Madoff brought to you or your partners at any time?

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Okay. You mentioned a few minutes

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ago, when I was asking you about the double-up

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accounts, you said that your brother, Michael, would

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have -- might have been the person that talked to

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the banks, because at some point you said he was in

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charge of finances. What were Michael's -- I didn't

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follow up at that time and I want to find out, what

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were Michael's job responsibilities in late, in the

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mid to late 1990s with the Sterling Group of

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companies?

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A.

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was responsible for the bookkeeping, banking

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relationships and the typical things that a CFO

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Q.

He was chief financial officer, which

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would be responsible for.
Q.
What is his role with the company
today?
A.
Was strictly real estate, with a
relationship working with Mark because he was -working with Mr. Peskin, who is the CFO, just all of
the supervisory, working with Mark Peskin, because
he has the background, enjoys the finance aspects of
the business, but spends most of his time in real
estate.
Q.
Why was there that -- why was -- did
he move from being a CFO to spending most of his
time in real estate?
A.
The business grew too much for him to
be able to do them both. So we -- I literally gave
him the choice of he can be the CFO or he can be
dealing in real estate, can't do them both. He
chose to continue to stay in the real estate and we
brought Mr. Peskin on about seven or eight years
ago.
Q.
We talked about the double-up
accounts and the concept of risk with a big
leverage. I'd asked a series -- I started off by
asking a question at one point about whether the
notion of the, any additional risk was discussed at

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out of the market?
A. When he was out of the market, yes.
Q.
Anything else that you can recall as
far as a limitation?
A. That's all.
Q.
Did you have to give prior notice?
In other words, did Bernie require like a one week?
A. Not when he was out of the market.
Q.
Do you ever recall any time when you
wanted to make a withdrawal and you were unable for
one reason or another, from Madoff?
A. Never.
Q.
I can show you a document if you need
to see it, but in 2000 you received a letter from
the Attorney General of New York, from the Office of
the Attorney General having to do with your family
foundation, and having some questions about the
types of trading that the foundation was engaged in.
Do you recall that letter?
A. Not until I was just shown it
yesterday or the day before.
Q.
And if you need to see the letter I
can show it to you. But that letter needed to be -they were looking for a response, and the documents
indicate that that letter was faxed by Arthur

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respond?
A. We did respond. I don't know if I
responded.
Q.
Would it be your style, your business
practice, in this instance where a written response
is being requested, that others would draft the
response and that you would sign it?
A. Yes.
Q.
Would you review it before you signed
it?
A. I doubt it.
Q.
So you wouldn't read it?
A. If it was of interest to me,
otherwise I wouldn't.
Q.
Would this type of response be
something that was of interest to you?
MS. SESHENS: Objection to the form.
A. Depends on how busy I was.
MS. SESHENS: You might just show it
to him if you want him to answer that question.
Q.
Were there certain types of documents
that you'd be more likely to read that were put in
front of you for signature versus types that you
were less likely to read?
A. In my office I have a general counsel

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Friedman to Madoff's office. And there's a -- I
guess I'll stop there.
Were you aware that -- did you give
that letter to Arthur to deal with, to craft a
response?
A. I don't recall.
Q.
Would that have been logical?
A. That would have been what I would
have done, but I don't recall.
Q.
Were you aware that Mr. Friedman sent
the letter to Bernie Madoff's office?
A. No.
Q.
Can you think of any reason why
Bernie Madoff's input or input from his office would
have been required to respond to the Attorney
General's letter?
MS. SESHENS: Objection.
A. I think the letter asks for certain
details and Bernie was able to answer. I don't
recall.
Q.
Did you have any role -- did you have
any role in drafting the response to the Attorney
General's inquiry?
A. No. Not that I recall.
Q.
Do you recall that you did -- you did

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and a chief financial officer who were constantly
asking me to sign things and I just sign them
because I have the confidence of what they're
putting in front of me, they need my signature.
Q.
So if your general counsel or your
CFO put a document in front of you and said sign it,
you would take it on faith -A.
That's correct.
Q.
-- that the document reflects -A.
Conversations we've had and what
they're telling me it's for.
Q.
And your CFO is?
A.
Mark Peskin.
Q.
And your general counsel is Mr. Nero?
And before Mr. Nero it was Mr. Tepper?
(Indiscernible crosstalk.)
Q.
With Mr. Nero sitting here.
A.
Yes.
Q.
But has any of those individuals,
Mr. Nero, Mr. Peskin or Mr. Tepper ever put
something in front of you that didn't reflect
whatever the deal was or whatever the conversations
were that related to that document?
A.
I've only seen one instance like
that.

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Q.
And what would that be?
A.
The one you're going to show me
later.
Q.
How do you know what I'm going to
show you later?
A.
I just have a feeling. I have a
feeling. Still can't figure it out.
Q.
You're referring to the 54 million
dollar -A.
Yes.
Q.
-- Ruth Madoff?
A.
Yes.
Q.
Whether it was a loan or an
investment with respect to your exercise of the
option?
A.
There was never an investment.
Q.
Indisputably the document suggests
that?
A.
That's correct.
Q.
Is it your testimony that you didn't
read the document before you signed it?
A.
I don't recall.
Q.
You don't recall if you read it or
not?
A.
Right.

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banks to lend us each $27 million for the $54

03:35:33

2

million. We were satisfied that the two banks were

03:35:39

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going to deliver the money. Because the content was

03:35:43

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very valuable, worth substantially more than the $54

03:35:50

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million.

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Banks being what banks are were
crossing the T's and dotting the I's, and we were

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running out of time and we could not take the chance

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that there would be a blip. Because if we didn't

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pay by May 31st, we'd lose that opportunity, a

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one-time opportunity, 30 days.

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So I remember being in a car with

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Q.
Is it your testimony that the
discussions -- first of all, you never discussed it
with Ruth, correct?
A. Absolutely not.
Q.
I asked that in a bad way.
A. I've never discussed any business
with Ruth, including anything in that document.
Q.
The discussions that you had with
Bernie about the $54 million, why don't you tell me
what that was. Tell me what the discussion was.
A. Let me put it in context. The
control of our media, of our content, is an
exceedingly valuable asset. Because of the document
that we got signed with Cablevision earlier, we had
a 30-day window to buy back that content. If we
didn't, Cablevision would own that content -- when I
say own it, they'd have control of it, they'd have
to pay us for it but they'd have control of the
content not only for the next ten years but because
of the way that thing read, forever. It was a
continuing, potentially forever. So we had a 30-day
window to buy that content back. We were able to
start a network once we got the content, which we
did, which is SNY.
We made a deal with the banks, two

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Fred, Marvin and we were coming into the City and we

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were trying to figure out what to do. I said, we

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just can't wait any longer. Let's call Bernie,

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close one of our accounts or two of our accounts or

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whatever it takes and get us $54 million, even if

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it's in the middle of a cycle.

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So we called Bernie, told Bernie

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where we were and he says, why break it, I'll wire

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you $54 million and either you'll pay me back in a

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couple of days when you get the money from the bank

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or at the end of the cycle on June 30th, when we

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unwind whatever we have to unwind, you'll pay me

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back the money.

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We thanked him profusely, hung up the
phone. I never talked to him about it again. That
was the extent of the conversation we had with
Bernie. Never talked to Ruth.
The money came the next day.
Q.
Bernie's money?
A.
Bernie's money came the next day.
The same day the bank put the money in the bank.
The banker called me and said, what is going on
here, I got $54 million just came into the account
and I just put 54 million in. I said, the deal
closed? Yes. We got our money? Yes. Okay, send
Bernie back his money, and we shipped Bernie back
his money the next day.
Q.
Who did you give that instruction to?
A.
The bank.
Q.
You gave it directly to the bank?
A.
Whether some pieces of paper had to
be sent to them, wire instructions, I don't know,
but the conversation took place between me and the
banker that the thing was completed. Because this
was very important that I was on top of closing that
deal to make sure we got the money in the bank to
send to Cablevision.
Q.
Do you recall who the banker was that

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A.
Right.
Q.
Is it your belief that Mr. Tepper
prepared this?
A.
Yes.
Q.
What is the basis for that belief?
A.
That he was our general counsel, he
would have prepared it.
Q.
But there's nothing on the document
that indicates that?
A.
No. There is no MBT, there is no -no.
Q.
And do you recognize, I think
Mr. Wilpon has already said that is his -A.
That is his signature.
Q.
This document is the one -- well, let
me ask you this: Do you believe you read this
before you signed it?
A.
I could have.
Q.
If you had read it, would you -- let
me back up.
The document doesn't -- isn't
consistent with the conversation you told me about.
A.
That's correct.
MS. SESHENS: Objection to the form.
Q.
You agree it's not consistent with

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well, whether you read it or didn't read it I guess
is (inaudible). This I think you said is the one
instance in however many years you've been in
business that one of your people, general counsel,
CFO, has put before you a document that you signed
that didn't accurately reflect the conversations
that preceded it. Is that correct?
A.
Correct.
Q.
Can you give me any explanation as to
how the terms in this document came to be?
A.
I don't know.
Q.
Can you think of any legitimate
business reason -- by legitimate I mean not
illegal -- any business reason why one would
structure this arrangement as a -(Interruption.)
A.
I'm sorry. It's not a duck.
Q.
You can tell a lot about a person by
his ring tones.
(Comments off the record.)
Q.
Let me ask it this way: Can you
think of any business purpose for structuring the
transfer of this $54 million in the manner it's
structured here, as opposed to what was discussed on
the telephone?

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the conversation?
A.
That's correct.
Q.
If you had read it would you have
recognized it was not consistent with the
conversation?
MS. SESHENS: Objection.
A.
If I had read it?
Q.
Yes.
A.
Yes.
Q.
Do you believe you would have signed
it?
MS. SESHENS: Objection.
A.
I would have asked Marvin Tepper why.
Q.
But you have no recollection of that
occurring?
A.
No.
Q.
Do you have a recollection of -A.
Not that I didn't read it and not
that I didn't ask him. I don't recollect whether I
read it or asked him.
Q.
Right. I understood that.
A.
Okay.
Q.
Do you recall signing this?
A.
No.
Q.
If in fact you didn't read it --

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going to Sterling Equities Associates. We're

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borrowing money without a note. Whether there was

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some covenants potentially at the club that we

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weren't allowed to borrow or that we had covenants,

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I don't know what precipitated this piece of paper.

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But there are reasons that might have happened that

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Marvin was looking to make sure that we weren't

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breaking any covenants in the day that we had the

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money as to whether it was this or that, I don't

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know.

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Q.

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A.

It's on Mets stationery, the money is

Do you think as a business matter,

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and I don't know what your paperwork behind the Mets

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is, but if there are covenants, for example, with

03:47:53

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15

major league baseball leagues or the banks or

03:47:55

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whatever, that you can't take a loan, do you believe

03:48:00

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17

as a business matter that it's appropriate to

03:48:02

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disguise a loan that is really a loan, that was the

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basis of your discussion, as a potential investment

03:48:09

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in order to avoid the effect of a covenant?

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21

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asked me what could be; I don't know. I shouldn't

03:48:26

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be answering what could be. You have to figure out

03:48:30

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what could be. I'm telling you we didn't do

03:48:33

MS. SESHENS: Objection to the form.
A.

We don't do it. I don't know. You

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anything. I don't know anything about this.
Q.
Despite the fact that your signature
is on it?
A. Absolutely.
Q.
And Mr. Wilpon's signature is on it?
A. That's correct.
Q.
And both of you -- I mean, Mr. Wilpon
didn't know anything about it either.
MS. SESHENS: Is that a question?
MR. LUCCHESI: Yes.
Q.
Does that surprise you, that
Mr. Wilpon -A. It would surprise me if he knew about
it.
Q.
So both of you signed a document
involving $54 million and neither of you knew what
you were signing?
A. That's correct.
Q.
Do you recall whether you discussed
with the other partners, other than the people that
were in the car, did you discuss with the other
partners the discussion that you had with Bernie
about the 54 million dollar loan?
A. Yes.
Q.
When did that occur?

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03:48:38

3

I don't know how soon after -- I may

03:50:54

03:48:39

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have gotten off the phone and called them right

03:50:57

03:48:40

5

after the phone.

03:51:00

03:48:42

6

Q.

Okay.

03:51:00

03:48:43

7

A.

But your question is, discussed is

03:51:01

03:48:46

8

one thing. We didn't discuss it. We informed them

03:51:02

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9

as to what happened. This was not a prior

03:51:06

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10

discussion, let's call Bernie and borrow the money.

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11

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the signatures of everybody -- by the way, before I

03:51:59

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forget, Ruth Madoff's signature, do you know if

03:52:08

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15

that's her signature or not?

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A.

(Witness shakes head.)

03:52:13

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Q.

No.

03:52:13

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A.

I think I've seen that before, but I

03:52:15

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-- Fred's I know, mine I know. I'm not sure of

03:52:17

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hers. Could be Bernie signing all the time for all

03:52:19

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I know.

03:52:22

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03:49:24

23

not in Sterling or the Mets records. Are you aware

03:52:26

03:49:26

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of that?

03:52:30

03:49:28

25

A.

conversation with Bernie and he was going to advance 03:50:51
the money.
03:50:53
A.

Q.

03:51:11

I've got it.
This document, Exhibit 7, that shows

Q.

The signed version of this letter is

No, I'm not aware of it.

209
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A.

03:49:37

Right when it happened and

2

subsequently a number of times because we were very

03:49:39

3

pleased with what Bernie did.

03:49:44

4

Q.

After the fact you talked about?

03:49:45

5

A.

Yes. No, we did not discuss it -- if

03:49:47

6

you asked if we discussed it while doing it, the

03:49:49

7

answer is no.

03:49:52

8

Q.

Because I was wondering -- since this

03:50:03

is dated the 25th, I was wondering if maybe you had

03:50:05

10

the discussion possibly on the 24th, which was a

03:50:09

11

Monday on your way into work and maybe there was a

03:50:12

12

partners' meeting at lunch?

03:50:15

9

13
14

A.

No. This was not discussed prior.

03:50:18
03:50:22

We were surprised at this. This was not --

15

Q.

You were surprised at what?

03:50:25

16

A.

That Bernie said don't break the

03:50:27

17

accounts, I'm just going to send you the money.

03:50:30

18

Q.

Right. But if that had happened --

03:50:33

19

A.

It happened right on the phone, right

03:50:35

20

03:50:37

then and there.
But if that had happened on the

03:50:38

22

morning on the 24th, on your way to work, which was

03:50:40

23

a Monday, and if that was also a day you had a

03:50:43

24

partners' meeting at lunch, I was thinking maybe you

03:50:45

25

discussed at lunch the fact that you had this

03:50:49

21

Q.

03:51:55

03:52:23

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Q.
Now, at some -- I want to change
topics and talk about the 401(k) program that was
offered to the Sterling employees. And I forget the
dates but I think it was '97?
A.
'97-'98.
Q.
Prior to offering the program, you
know, offering the 401(k) option -- let me ask it
this way -- prior to '97-'98 was there a 401(k)
option for your employees?
A.
No.
Q.
So this was the creation of a plan
from the get-go, from scratch?
A.
Yes.
Q.
Whose idea was that?
A.
I don't recall.
Q.
It was not your idea?
A.
No. Not that I recall.
Q.
Were you involved in the discussions
about -- first of all, the discussions about the
idea to offer a 401(k) plan to your employees?
A.
I would have been.
Q.
As part of the partners?
A.
Yes.
Q.
As all the partners would have been?
A.
Yes.

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220
MS. SESHENS: Objection to the form.

1
2

A.

Ashok at the moment is a potential

222

04:25:33

1

04:25:41

2

3

long-term aide to our family in, when this whole

04:25:44

3

4

thing gets through playing itself out, in investing

04:25:56

4

5

our money. And so he knows where we are, where we 04:26:03
were.
04:26:06

5

6

6

7

Q.

Where you want to go.

04:26:06

7

8

A.

And where we want to go.

04:26:08

8

9

Q.

So he's the potential for the

04:26:10

9

04:26:11

10

As an advisor. He potentially will

04:26:14

11

12

advise us long term and help us find the right

04:26:20

12

13

people.

04:26:25

13

So -- but back at the time when he

04:26:26

14

15

was working under Peter Stamos, one of his roles was

04:26:29

15

16

to help you balance your, this Sterling portfolio

04:26:34

16

17

across all the investments, real estate, Madoff, et

04:26:41

17

18

cetera, correct?

04:26:45

18

04:26:46

19

10
11

14

19

replacement for Peter Stamos down the road?
A.

Q.

A.

No. He was learning where we were,

20

understanding where we were in real estate,

04:26:51

20

21

baseball, network and all the other assets, and on a

04:26:53

21

22

20-year position where we're going to be, and how to

04:26:59

22

23

position each of these assets.

04:27:04

23

24

Q.

You told me earlier that he left?

04:27:06

24

25

A.

Yes.

04:27:11

25

about Peter Stamos at length before. Did anyone
from the Stamos group of people, any other advisors
or employees working with Stamos, ever criticize or
express concern about investment with Madoff?
A. No.
Q.
Have you seen any post-December 11th,
after December 11th, have you seen any statements
from Peter Stamos or those working under him, either
written statements or oral statements to the effect
that they were aware or they were concerned about
Madoff and, hence, that's why they never invested in
Madoff?
A. No.
Q.
After, following the collapse of
Madoff, did you come to learn that Sterling Stamos
had any direct investments with Madoff?
MS. SESHENS: I just want to put our
standing objection for relevance, to relevance for
anything after December 11, 2008 on the record.
MR. LUCCHESI: Okay. You can have a
continuing objection.
MS. SESHENS: Yes. Thank you.
A. Could you repeat the question.
Q.
Yes. I'll reword it a little bit.
Did Sterling Stamos have any direct

221
1

Q.

2

Stamos?

3

A.

Do you know why he left Sterling

04:27:11
04:27:13

I think similar to the same reason

04:27:15

4

that I'm having some issues with Peter as to where

04:27:16

5

Peter's gone and how -- Peter had two partners when

04:27:21

6
7

he started, Kevin Yakamoto (phonetic) and Ashok, and 04:27:28
both of them are gone. So, nothing bad, just a
04:27:32

8

change in where you want to go. Ashok wants to deal

04:27:39

9

with a small group of people, sort of a family

04:27:43

10

office kind of thing, and Peter has got this Merrill

04:27:49

11

Lynch big picture thing.

04:27:54

12

Q.

What is Ashok doing now?

04:27:56

13

A.

He's at Allen & Company, small

04:27:59

14

04:28:02

private boutique, investment company.

15

Q.

Is that here in New York?

04:28:05

16

A.

It's New York but it's international.

04:28:06

17

Q.

Is he based here in New York?

04:28:09

18

A.

Yes, he's based in New York.

04:28:10

19

Q.

Did you ever -- you said you had

04:28:20

20

discussions with Ashok about your investments.

04:28:22

21

A.

Yes.

04:28:27

22

Q.

Did he ever express any concern or

04:28:27

criticism about your investment with Madoff?

04:28:29

23
24

A.

No.

04:28:32

25

Q.

Did anyone from the -- I asked you

04:28:35

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investments in Madoff?
A.
Not that I'm aware of.
Q.
Did Sterling Stamos have any indirect
investments in Madoff?
A.
As I discovered after December 11th,
yes.
Q.
So based on your answer that would be
something you were not aware of before December
11th?
A.
That's correct.
Q.
And you learned about it sometime
after?
A.
Yes.
Q.
What -- can you tell me what are the
indirect investments that you're aware of.
A.
As I understand it, and I don't know
much of the details, but they are an investor, and I
don't know which funds they are invested in -sorry. I don't know which fund of funds that they
have that are invested in Gabriel, which is Ezra
Merkin's fund.
Q.
Ezra Merkin's fund or -A.
Gabriel is a Merkin's fund. So I
don't know which of Sterling Stamos' funds of
funds -- remember, they've got 30 different funds.

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