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

Filing 84

DECLARATION of David J. Sheehan in Support re: 82 MOTION to Strike the Expert Report and Testimony of John Maine.. 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 7-1, # 8 Exhibit 7-2, # 9 Exhibit 8, # 10 Exhibit 9, # 11 Exhibit 10)(Sheehan, David)

Exhibit 5

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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

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ARTHUR FRIEDMAN
(Volume I)

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TRANSCRIPT of testimony as taken by and before

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

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and Notary Public of the States of New York and New

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Jersey, at the offices of Baker & Hostetler, 45

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Rockefeller Plaza, New York, New York on Tuesday,

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June 22, 2010, commencing at 10:11 a.m.

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

ARTHUR FRIEDMAN 6/22/10

CONFIDENTIAL

SIPC v. BLMIS
144

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A.

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I really don't recollect exactly.

Q.

Did you check all of the trades for

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all of the accounts at that, whatever time period

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you were doing it, or did you just pick one account?

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6

A.

accounts because everything was a mirror image.

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Q.

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No, I checked -- no, not all of the

Fair enough.

A.

In other words, he would buy seven --

if he bought seven securities, it would be seven

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securities in each account.

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account.

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Q.

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I wouldn't have done every other account.

A.

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So I only had to do one

Q.

But you would have done -I would have done every trade, yes.
So, you indicated that you attempted

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to replicate Madoff's strategy.

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Tell me.

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A.

What did you do?

Trying to recollect exactly what I

did.

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I would take the stocks that he

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purchased, and I believe what I did was to follow

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the strategy.

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testing what he did that he's giving us accurate

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numbers, but if I utilize his strategy, let's say

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when I got the slips that said this is what he

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bought, I would take that information and then try

What I'd want to see is I wasn't

BENDISH REPORTING, INC.
877.404.2193

ARTHUR FRIEDMAN 6/22/10

CONFIDENTIAL

SIPC v. BLMIS
145

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to enact it on my own account.

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quantities, didn't matter the quantity, but just to

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take what to buy, but I would always be lagging

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behind him.

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would do, and I found that he did, I'm making up,

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say 15 percent.

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made a profit.

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strategy was good, it worked, but not to the extent

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that it worked for him.

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Different

Just to get a general idea of how I

I did more like six percent.

I

I determined in my own mind that the

One of the major reasons was the

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commission.

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somehow what the commission would be, what I'd have

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to pay if I did this on my own.

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little or no commission, and that made a big

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difference when you're dealing with, just looking to

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try to make one percent a month, that made a

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difference.

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Q.

When I did the strategy I determined

Whereas he had

So your understanding was that the

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difference between the -- I know you made these

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numbers up, but your six percent return that you

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were able to accomplish and his 14 or 16, whatever

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you said, was primarily driven by the absence of

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commission costs?

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MS. SESHENS:
A.

Objection to the form.

That was one of -BENDISH REPORTING, INC.
877.404.2193

ARTHUR FRIEDMAN 6/22/10

CONFIDENTIAL

SIPC v. BLMIS
146

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MS. SESHENS:

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A.

Sorry.

Go ahead.

That was one major factor.

It could

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also -- again, I'm doing it after the fact, just

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using his information, that could change my result

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either way.

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later using his strategy the market -- I was able to

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make a better purchase than he did, then, you know,

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it could have gone either way.

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Q.

I mean, if the next day or two days

If Madoff wasn't charging a

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commission, is that what you told me?

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understanding was he wasn't charging you a

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commission?

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A.

Your

My understanding was that he was

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making a market in some or all of these stocks and

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he was making money but he determined the price.

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he could buy it at one and sell it to us, in effect,

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at one-and-1/16th, but the one-and-1/16th was

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certainly a fair price and certainly it traded

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during the day well above one-and-1/16th -- these

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are all examples, of course -- he was making a

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commission or a substitute for commission, the

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1/16th.

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at whatever price, one-and-1/16th, and then pay a

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commission on top of that.

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Q.

If

But I would actually have to go and buy it

If you bought it from someone other
BENDISH REPORTING, INC.
877.404.2193

236
C O N F I D E N T I A L

1
2

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

3
4
5
6

-------------------------------x
SECURITIES INVESTOR PROTECTION
CORPORATION,
Plaintiff-Applicant,

7
v.

Videotaped
Rule 2004
Examination of:

8
9
10

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

ARTHUR FRIEDMAN
(Volume II)

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BERNARD L. MADOFF,

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

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TRANSCRIPT of videotaped testimony as taken by

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and before PATRICIA MULLIGAN CARRUTHERS, Certified

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Court Reporter, RPR, RMR, RDR, and Notary Public of

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the States of New York and New Jersey, at the

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offices of Baker & Hostetler, 45 Rockefeller Plaza,

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New York, New York on Wednesday, June 23, 2010,

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commencing at 10:07 a.m.

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

ARTHUR FRIEDMAN 6/23/10

CONFIDENTIAL

SIPC v. BLMIS
336

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break, that is the hell sheet.

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A.

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That is correct.

Q.

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be?

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What is the hell sheet intended to

document?

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Correct?

What does it represent?

A.

What's shown on that

It's all of the accounts listed

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numerically.

The 1KW numbers.

The name of the

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account, the total amount on -- in the account as of

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the date in question spread across the top by who

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the owners are.

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times the total, the numbers will equal that total

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column when you add them up.

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Q.

So allocating their percentage

Okay.

And as we talked about before,

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the way this printed out, you would actually have to

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take the page where the control number ends with 266

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and line that up next to the first page of the

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printout which is Control 260, right, because

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there's more things going out this way to the right.

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A.
Q.

Uh-huh.
Is that correct?

Because you'll note

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the account numbers repeat themselves.

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over at one.

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They start

So what was the -- Was this done
every month?
A.

Yes.
BENDISH REPORTING, INC.
877.404.2193

ARTHUR FRIEDMAN 6/23/10

CONFIDENTIAL

SIPC v. BLMIS
337

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Q.
A.
Q.

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A.

Yes.
What was this used for each month, if

anything?

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By you or your staff?

Well, the -- seeing how we did on a

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month-to-month basis percentagewise, what was the

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profit, and for each individual account holder, each

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partner would get an idea or check the amount in

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particular accounts, but it was a reference to the

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balances in every account.
Q.

Okay.

Now, when you say "every

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account," would this -- this would include then

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the -- what you call "the outsiders"?

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A.
Q.

Yes.
And why were they included, if they

were outsiders, in the totals?
A.

Well, it was a separate total, but I

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personally would use them because I would have

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questions, people calling, What is the -- how did we

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do this month or what's the balance in my account or

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I would like to withdraw a certain amount or the

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efficiency factor, whatever it might be.

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reference that I used on a monthly basis.

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Q.

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factor."

Okay.

I had a

And you mentioned "efficiency

What was that?
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