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

Filing 89

DECLARATION of David J. Sheehan in Support re: 81 MOTION for Partial 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)(Sheehan, David)

Exhibit 7

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Plea

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
------------------------------x

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UNITED STATES OF AMERICA,

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v.

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DAVID KUGEL,

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10 Cr. 228 (LTS)

Defendant.
------------------------------x

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New York, N.Y.
November 21, 2011
12:45 p.m.

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Before:
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HON. LAURA TAYLOR SWAIN,
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District Judge
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APPEARANCES
PREET BHARARA
United States Attorney for the
Southern District of New York
JULIAN MOORE
LISA A. BARONI
MATTHEW SCHWARTZ
Assistant United States Attorneys
MARTIN ADELMAN
DANIEL ZELENKO
MICHAEL BLUMENTHAL
Attorneys for Defendant

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ALSO PRESENT:

GREG HAGARTY, FBI
PAUL TAKLA, FBI
JEFFREY STEIMEL, Pretrial Services

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SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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(Case called)

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MR. MOORE:

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for the government.

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of the USA, Lisa Baroni and Matthew Schwartz.

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Special Agents Greg Hagarty and Paul Takla of the FBI.

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Steimel of U.S. Pretrial Services is also with us.

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THE COURT:

Good afternoon, your Honor, Julian Moore
With me at counsel table are my colleagues
Also present are
Jeff

Good afternoon, Mr. Moore, Ms. Baroni,

Mr. Schwartz, Agent Hagarty, Agent Takla, Officer Steimiel.

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MR. ADELMAN:

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Adelman for Mr. Kugel.

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Good afternoon, your Honor, Martin

themselves.

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THE COURT:

The other gentlemen will introduce

Good afternoon, Mr. Adelman, and good

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afternoon, Mr. Kugel.

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MR. ZELEKNO:

Good afternoon, your Honor.

Daniel

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Zelenko and Michael Blumenthal, also appearing on behalf of

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Mr. Kugel.

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THE COURT:

Good afternoon Mr. Zelenko and good

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afternoon, Mr. Blumenthal, and good afternoon, everyone in

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attendance.

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I would just like to say, I understand there was a

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little bit of a miscommunication with respect to the door

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signage.

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you can see, it is a fairly small courtroom.

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have said:

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hope ye who entered here.

I was conducting a trial in here this morning.

As

The sign should

Kugel on at 12:30, trial in progress, not abandon
Forgive us.

It was just a matter of

SOUTHERN DISTRICT REPORTERS, P.C.

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not wanting to have a lot of unnecessarily disruptive activity

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going on while the trial was going on.

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anyone who would have come in while the trial was going on

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would not have been disruptive.

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was no meaning to offend.

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But I also assumed that

Again, my apologies.

There

And I hope that none was taken.

It is my understanding that Mr. Kugel has an

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application to waive indictment and enter a guilty plea to a

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six-count superseding information which is labeled S4 10 Cr.

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228.

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Now, Mr. Adelman, would you be the principal one I
should speak to, or should it be Mr. Zelenko?

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MR. ADELMAN:

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THE COURT:

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MR. ADELMAN:

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THE COURT:

That's fine, yes, your Honor.

Mr. Adelman, is that correct?
Yes, ma'am, it is.

And the plea is pursuant to the agreement

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that has been marked as Government Exhibit 1 and has been

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executed and is at defense table.

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MR. ADELMAN:

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THE COURT:

Is that correct?

Yes, it is, ma'am.

And an advice of rights form has also been

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reviewed and executed and marked as Court Exhibit 1.

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correct?

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MR. ADELMAN:

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THE COURT:

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Mr. Moore, are you the principal one today?

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MR. MOORE:

Is that

Yes.

Now, I have a question for the government.

Yes, today, your Honor.

SOUTHERN DISTRICT REPORTERS, P.C.

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THE COURT:

Would you make a statement regarding

victim notification in connection with this proceeding?
MR. MOORE:

Yes, your Honor.

As the Court is aware,

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last week we reached out via a letter to the Court requesting

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that today's proceeding be publicized.

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issued that order.

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Wednesday, December 16, we published on the U.S. Attorney's

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Madoff website that today's proceeding would be conducted and

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that Mr. Kugel, the defendant present in court today, would be

Your Honor so kindly

And as of that date, which I believe was

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pleading pursuant to the S4 superseding indictment to the

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counts that we will go through today.

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THE COURT:

Mr. Kugel, before I accept your waiver of

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indictment and your guilty plea, there are a number of

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questions that I must ask you while you are under oath to

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assure that it is a valid waiver and plea.

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cover a point more than once and I may cover matters that were

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also addressed in the advice of rights form that you have seen.

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But if I do so, that will be because it is very important that

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you understand what is happening here today.

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At times I may

In that connection, if you don't understand something

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that I ask you, please say so and I will reword the question or

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you may speak with your attorney.

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Do you understand that?

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THE DEFENDANT:

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THE COURT:

Yes, your Honor.

Ms. Ng, would you please administer the

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oath or affirmation.

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(Defendant sworn)

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THE COURT:

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Would you please state your full name for

the record.

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THE DEFENDANT:

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THE COURT:

David Louis Kugel.

Mr. Kugel, do you understand that you have

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solemnly promised to tell the truth and that if you answer any

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of my questions falsely, your false or untrue answers may later

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be used against you in another prosecution for perjury or

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making a false statement?

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THE DEFENDANT:

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THE COURT:

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You can be seated for the next portion of

the proceeding.

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THE DEFENDANT:

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THE COURT:

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THE DEFENDANT:

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THE COURT:

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THE DEFENDANT:

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66.

And how far did you go in school?
I have a graduate -- undergraduate

degree.
THE COURT:

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THE DEFENDANT:

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Thank you.

How old are you, sir?

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Yes, your Honor.

In this particular field?
BBA in accounting, business

administration.
THE COURT:

Since you finished your formal schooling,

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what types of work have you done?

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THE DEFENDANT:

Brokerage firms, security work.

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THE COURT:

Are you able to read, speak, and

understand English well?

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THE DEFENDANT:

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THE COURT:

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THE DEFENDANT:

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THE COURT:

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Are you a citizen of the United States?

under the care of a doctor or psychiatrist?
THE DEFENDANT:

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THE COURT:

Yes, your Honor.

Are you under care for any condition that

affects your ability to think clearly?

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THE DEFENDANT:

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THE COURT:

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THE DEFENDANT:

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THE COURT:

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Yes, your Honor.

Are you now or have you recently been

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10

Yes, your Honor.

I don't know, your Honor.

You don't know?
No, your Honor.

Are you taking any medication that affects

your ability to think clearly?

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THE DEFENDANT:

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THE COURT:

No, your Honor.

Are you under treatment for any condition

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or taking any medication that affects your judgment in terms of

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making important decisions for yourself?

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THE DEFENDANT:

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THE COURT:

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No, your Honor.

In the past 24 hours have you taken any

drugs, medicine or pills or have you drunk any alcohol?
THE DEFENDANT:
medicine.

I have taken medicine, prescribed

No alcohol.

THE COURT:

And have you taken the prescription

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medicine on the schedule prescribed and in the amount

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prescribed?

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THE DEFENDANT:

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THE COURT:

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THE DEFENDANT:

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THE COURT:

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THE DEFENDANT:

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THE COURT:

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THE DEFENDANT:

Is your mind clear today?

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THE DEFENDANT:

Yes, your Honor.

And who are your lawyers?
Martin Adelman, Dan Zelenko, and

Michael Blumenthal.
THE COURT:

Yes, your Honor.

Are you represented by counsel here today?

THE COURT:

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Yes, your Honor.

Are you feeling well physically today?

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Yes, your Honor.

Messrs. Adelman, Zelenko and Blumenthal

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and Mr. Moore, does any of you have any doubt as to Mr. Kugel's

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competence to waive indictment and plead guilty at this time?

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MR. MOORE:

No, your Honor.

And the government is

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aware of Mr. Kugel's prescribed medication that he takes, as

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indicated on page 3 of the pretrial services report.

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THE COURT:

Defense counsel.

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MR. ADELMAN:

The same answer, your Honor.

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MR. ZELEKNO:

Same, your Honor.

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MR. BLUMENTHAL:

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THE COURT:

Same also, your Honor.

Mr. Kugel, your attorneys have informed me

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that you wish to waive indictment and enter a guilty plea to an

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information.

SOUTHERN DISTRICT REPORTERS, P.C.

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Plea

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Do you wish to waive indictment and plead guilty?

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THE DEFENDANT:

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THE COURT:

Yes, your Honor.

Have you fully discussed your case with

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your attorneys, including the charges to which you intend to

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plead guilty and any possible defenses to those charges?

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THE DEFENDANT:

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THE COURT:

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Yes, your Honor.

Have you and your attorneys also discussed

the consequences of entering a guilty plea?
THE DEFENDANT:

Yes, your Honor.

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THE COURT:

Are you satisfied with your attorneys and

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their representation of you?

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THE DEFENDANT:

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THE COURT:

Yes, your Honor.

On the basis of Mr. Kugel's responses to

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my questions and my observations of his demeanor, I find that

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he is fully competent to waive indictment and enter an informed

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plea at this time.

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Before I accept your plea, sir, I am going to ask you

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some more questions.

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the Court that you wish to plead guilty because you are in fact

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guilty and that you fully understand your rights and the

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consequences of your plea.

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These questions are intended to satisfy

Now, I will describe to you certain rights that you

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have under the Constitution and laws of the United States.

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will be giving up these rights if you enter a guilty plea.

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Please listen carefully.

You

If you do not understand something

SOUTHERN DISTRICT REPORTERS, P.C.

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that I'm saying or describing, stop me and I or your attorney

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will explain it more fully.

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Under the Constitution and laws of the United States,

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you have the right to a speedy and public trial by a jury on

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the charges against you that are in the information.

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Do you understand that?

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THE DEFENDANT:

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THE COURT:

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Yes, your Honor.

Do you understand that you have the right

to plead not guilty and to continue to plead not guilty?

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THE DEFENDANT:

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THE COURT:

Yes, your Honor.

If there were a trial, you would be

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presumed innocent and the government would be required to prove

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you guilty by competent evidence and beyond a reasonable doubt.

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You would not have to prove that you were innocent at trial.

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Do you understand that?

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THE DEFENDANT:

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THE COURT:

Yes, your Honor.

If there were a trial, a jury composed of

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12 people selected from this district would have to agree

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unanimously in order to find you guilty.

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Do you understand that?

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THE DEFENDANT:

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THE COURT:

Yes, your Honor.

If there were a trial and at all stages

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leading up to it, you would have the right to be represented by

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an attorney.

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would be provided to you free of cost.

And if you could not afford one, an attorney

SOUTHERN DISTRICT REPORTERS, P.C.

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Do you understand that?

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THE DEFENDANT:

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THE COURT:

Yes, your Honor.

If there were a trial, you would have the

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right to see and hear all of the witnesses against you and your

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attorney could cross-examine them.

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have your attorney object to the government's evidence and

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offer evidence on your behalf, if you so desired.

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also have the right to have witnesses required to come to court

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to testify in your defense, and you would have the right to

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testify yourself, but you would not be required to testify.

You would have the right to

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Do you understand all that?

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THE DEFENDANT:

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THE COURT:

You would

Yes, your Honor.

Do you understand that if there were a

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trial and you decided not to testify, no adverse inference

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could be drawn against you based on your decision not to

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testify?

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THE DEFENDANT:

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THE COURT:

Yes, your Honor.

Do you understand that if you were

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convicted at a trial, you would have the right to appeal that

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verdict?

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THE DEFENDANT:

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THE COURT:

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Yes, your Honor.

Do you understand each and every one of

these rights that I have questioned you about?

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THE DEFENDANT:

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THE COURT:

Yes, your Honor.

Do you have any questions about any of

SOUTHERN DISTRICT REPORTERS, P.C.

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these rights?

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THE DEFENDANT:

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THE COURT:

No, your Honor.

Do you understand that by pleading guilty

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today you will be giving up each and every one of these rights,

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that you will be waiving these rights?

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THE DEFENDANT:

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THE COURT:

Yes, your Honor.

Do you also understand that you will be

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waiving any possible claim that your constitutional rights may

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have been violated and that you will have no trial?

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THE DEFENDANT:

Yes, your Honor.

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THE COURT:

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Ms. Baroni, do you need water?

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MS. BARONI:

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THE COURT:

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MS. BARONI:

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THE COURT:

One moment.

That would be great, your Honor.
Ms. Ng.
Thank you, your Honor.
Mr. Kugel, do you understand that by

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entering a plea of guilty you will also have to give up your

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right not to incriminate yourself because I will ask you

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questions about what you did in order to satisfy myself that

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you are guilty as charged and you will have to admit and

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acknowledge your guilt?

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THE DEFENDANT:

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THE COURT:

Yes, your Honor.

Do you understand that you can change your

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mind right now and refuse to enter a guilty plea.

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have to enter this plea if you do not want to, for any reason.

SOUTHERN DISTRICT REPORTERS, P.C.

You do not

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Do you understand this fully?

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THE DEFENDANT:

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THE COURT:

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THE DEFENDANT:

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THE COURT:

Yes, your Honor.

And do you still wish to plead guilty?
Yes, your Honor.

The document that contains the charges to

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which you've indicated you wish to plead guilty is called an

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information.

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You have a constitutional right to be charged by an indictment

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rather than an information.

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It has been issued by the United States Attorney.

An indictment would be a charge

issued from a grand jury.

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Do you understand that?

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THE DEFENDANT:

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THE COURT:

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Yes, your Honor.

Mr. Adelman, would you please show

Mr. Kugel the waiver of indictment form.

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MR. ADELMAN:

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THE COURT:

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Mr. Kugel, have you signed this waiver of indictment

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I have done so, your Honor.

Thank you.

form?

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THE DEFENDANT:

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THE COURT:

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THE DEFENDANT:

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THE COURT:

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Yes, your Honor.

Did you read it before you signed it?
Yes, your Honor.

Did you discuss it with your attorney

before you signed it?

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THE DEFENDANT:

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THE COURT:

Yes, your Honor.

Did you fully understand it before you

SOUTHERN DISTRICT REPORTERS, P.C.

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signed it?

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THE DEFENDANT:

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THE COURT:

Yes, your Honor.

Do you understand that if you do not waive

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indictment, if the government wanted to prosecute you on these

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particular charges that are in the information, the government

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would have to present the charges to a grand jury, which might

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or might not indict you on them?

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THE DEFENDANT:

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THE COURT:

Yes, your Honor.

Do you understand that you are under no

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obligation to waive indictment?

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THE DEFENDANT:

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THE COURT:

Yes, your Honor.

Do you understand that by waiving

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indictment you are giving up your right to have the case

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presented to a grand jury?

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THE DEFENDANT:

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THE COURT:

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THE DEFENDANT:

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THE COURT:

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Yes, your Honor.

Do you understand what a grand jury is?
Yes, your Honor.

Did anyone promise you anything or

threaten you to get you to waive indictment?

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THE DEFENDANT:

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THE COURT:

No, your Honor.

Have you seen a copy of the fourth

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superseding information?

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says S4 10 Cr. 228 at the top.

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THE DEFENDANT:

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THE COURT:

That's the charging instrument that

Yes, your Honor.

Have you read it?

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THE DEFENDANT:

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THE COURT:

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THE DEFENDANT:

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THE COURT:

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Yes.

Have you discussed it with your attorney?
Yes.

Do you understand the charges against you

that are detailed in the information?

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THE DEFENDANT:

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THE COURT:

Yes, your Honor.

If you want me to, I'll read the

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information out loud now here in court.

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it to you out loud?

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THE DEFENDANT:

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THE COURT:

Do you want me to read

No, your Honor.

I find that Mr. Kugel's waiver of

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indictment is knowing and voluntary.

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I accept it and I so

order it.

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Mr. Kugel, do you understand that Count One of the

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superseding information charges you with participating in a

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conspiracy in violation of Title 18 of the United States Code,

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Section 371 to commit securities fraud in violation of Title

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15, Sections 78jb and 77ff, and 17, Code of Federal

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Regulations, Section 250 10B-5.

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records of a broker dealer in violation of Title 15, Sections

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78qa and 78ff, and 17, Code of Federal Regulations, Section

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240.17A-3, and also to falsify books and records of an

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investment advisor, in violation of Title 15, United States

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Code, Sections 80b-4 and 80b-17, and 17, Code of Federal

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Regulations, Section 275.204-2?

Also to falsify books and

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THE DEFENDANT:

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THE COURT:

Yes, your Honor.

Do you understand that Count Two of the

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superseding information charges you with conspiracy in

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violation of Title 18, Section 371 to commit bank fraud in

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violation of Title 18, Section 1344?

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THE DEFENDANT:

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THE COURT:

Yes, your Honor.

Do you understand that Count Three of the

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superseding information charges you with securities fraud in

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violation of Title 15 Sections 78jb and 77ff, as well as 17,

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CFR, Section 240.10B-5, and Title 18, U.S. Code, Section 2?

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THE DEFENDANT:

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THE COURT:

Yes, your Honor.

Do you understand that Count Four of the

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superseding information charges you with falsifying books and

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records of a broker dealer in violation of Title 15, Sections

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78qa and 78ff, 17, Code of Federal Regulations, Section

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240.17A-3, and Title 18, Section 2?

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THE DEFENDANT:

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THE COURT:

Yes, your Honor.

Do you understand that Count Five of the

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superseding information charges you with falsifying books and

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records of an investment advisor in violation of Title 15, U.S.

21

Code, Sections 80b-4 and 80b-17, 17, CFR, Section 275.204-2 and

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Title 18, U.S. Code, Section 2?

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THE DEFENDANT:

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THE COURT:

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Yes, your Honor.

Do you understand that Count Six of the

superseding information charges you with committing bank fraud

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in violation of Title 18, United States Code, Sections 1344 and

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Title 18, United States Code, Section 2?

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THE DEFENDANT:

4

THE COURT:

Yes, your Honor.

Do you understand that the government

5

would have to prove each and every part or element of each of

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these charges beyond a reasonable doubt at trial if you did not

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plead guilty?

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THE DEFENDANT:

9

THE COURT:

Yes, your Honor.

Mr. Moore, would you please explain the

10

matters that the government would have to prove if we were to

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go to trial on the charges in the fourth superseding

12

information?

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MR. MOORE:

Yes, your Honor.

14

With regard to Counts One and Two, the conspiracy

15

counts, in order to prove the crime of conspiracy, the

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government must establish each of the following elements beyond

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a reasonable doubt:

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information existed, in other words, that there was in fact an

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agreement or understanding to violate the laws of the United

20

States; second, that the defendant knowingly, willingly and

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voluntarily became a member of the conspiracy charged; and,

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third, your Honor, that any one of the conspirators, not

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necessarily the defendant, knowingly committed at least one

24

overt act in the Southern District of New York in furtherance

25

of the conspiracy during the life of the conspiracy.

First, that the conspiracy charged in the

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With regard to Count Three, your Honor, the securities

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fraud count, to establish a violation of Section 10B as charged

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in Count Three of the information, the government must prove

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each of the following elements:

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First, that in connection with the purchase or sale of

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securities, the defendant did any one or more of the following:

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One, employed a device, scheme, or artifice to defraud; or,

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two, made an untrue statement of a material fact or omitted to

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state a material fact which made what was said under the

10

circumstances misleading; or, three, engaged in an act,

11

practice, or course of business that operated or would operate

12

as a fraud or deceit upon a purchaser or seller.

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Second, your Honor, that the defendant you are

14

considering acted knowingly, willfully, and with the intent to

15

defraud.

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And, third, that the defendant used or caused to be

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used any means or instruments of transportation or

18

communication in interstate commerce or the use of the mails in

19

furtherance of the fraudulent conduct.

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With regard to Count Four, falsifying books and

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records of a broker dealer:

First, the government must prove

22

beyond a reasonable doubt that at the time of the alleged

23

offense, Bernard L. Madoff Investment Securities, which I'll

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refer to during the rest of these proceedings as BLMIS, was a

25

registered broker dealer; second, that BLMIS failed to make and

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keep certain accurate records as required under the SEC's rules

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and regulations; third, that the defendant aided and abetted

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BLMIS' failure to make and keep accurate records; and, fourth,

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that the defendant acted knowingly and willfully.

5

With regard to Count Five, falsifying books and

6

records of an investment advisor, in order to prove this crime

7

beyond a reasonable doubt the government must:

8

that at the time of the alleged offense, BLMIS was in fact an

9

investment advisor; second, that BLMIS failed to make and keep

10

certain accurate records as required under the SEC's rules and

11

regulations; third, that the defendant aided and abetted BLMIS'

12

failure to make and keep accurate records; fourth, that the

13

defendant acted knowingly and willfully; and, fifth, the

14

offense involved the use of the mails and means of

15

instrumentalities of interstate commerce.

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First, prove

Finally, with regard, your Honor, with regard to Count

17

Six, the bank fraud count, the government must prove beyond a

18

reasonable doubt that:

19

offense, the defendant executed or attempted to execute a

20

scheme or artifice to defraud a bank or that the defendant

21

executed or attempted to execute a scheme or artifice to obtain

22

money owned by or under the control or custody of that bank by

23

means of false or fraudulent pretenses, representations, or

24

promises; second, that the defendant engaged in the scheme or

25

artifice knowingly and willfully and with the specific intent

First, that at the time of the alleged

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to defraud the bank; and, third, and finally, your Honor, that

2

the bank involved was a federally-insured chartered

3

institution.

4

THE COURT:

5

Mr. Kugel, do you understand the matters that the

6

Thank you, Mr. Moore.

government would have to prove if you did not plead guilty?

7

THE DEFENDANT:

8

THE COURT:

9

Yes, your Honor.

Do you understand that the maximum

possible penalty for the crime charged in Count One of the

10

superseding information is five years of imprisonment, plus a

11

fine of the greatest of $250,000, twice the gain resulting from

12

the offense or twice the loss to other people resulting from

13

the offense, plus a $100 special assessment, plus full

14

restitution to all persons injured as a result of your criminal

15

conduct, plus three years of supervised release after your term

16

of imprisonment?

17

THE DEFENDANT:

18

THE COURT:

Yes, your Honor.

Do you understand that the maximum

19

possible penalty for the crime charged in Count Two is five

20

years of imprisonment, plus a fine of the greatest of $250,000,

21

twice the gain resulting from the offense, or twice the loss to

22

other people resulting from the offense, plus a $100 special

23

assessment, plus full restitution to all persons injured as a

24

result of your criminal conduct, plus three years of supervised

25

release after your term of imprisonment?

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1

THE DEFENDANT:

2

THE COURT:

Yes, your Honor.

Do you understand that the maximum

3

possible penalty for the crime charged in Count Three is 20

4

years of imprisonment, plus a fine of the greatest of $5

5

million, twice the gain resulting from the offense, or twice

6

the loss to other people resulting from the offense, plus a

7

$100 special assessment, plus full restitution to all persons

8

injured as a result of your criminal conduct, plus three years

9

of supervised release after your term of imprisonment?

10

THE DEFENDANT:

11

THE COURT:

Yes, your Honor.

Do you understand that the maximum

12

possible penalty for the crime charged in Count Four is 20

13

years of imprisonment, plus a fine of the greatest of $5

14

million, twice the gain resulting from the offense, or twice

15

the loss to other people resulting from the offense, plus a

16

$100 special assessment, plus full restitution to all persons

17

injured as a result of your criminal conduct, plus three years

18

of supervised release after your term of imprisonment?

19

THE DEFENDANT:

20

THE COURT:

Yes, your Honor.

Do you understand that the maximum

21

possible penalty for the crime charged in Count Five is five

22

years of imprisonment, plus a fine of the greatest of $250,000,

23

twice the gain resulting from the offense or twice the loss to

24

other people resulting from the offense, plus a $100 special

25

assessment, plus full restitution to all persons injured as a

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1

result of your criminal conduct, plus three years of supervised

2

release after your terms of imprisonment?

3

THE DEFENDANT:

4

THE COURT:

Yes, your Honor.

Do you understand that the maximum

5

possible penalty for the crime charged in Count Six is 30 years

6

of imprisonment, plus a fine of the greatest of $1 million,

7

twice the gain resulting from the offense, or twice the loss to

8

other people resulting from the offense, plus a $100 special

9

assessment, plus full restitution to all persons injured as a

10

result of your criminal conduct, plus five years of supervised

11

release after your term of imprisonment?

12

THE DEFENDANT:

13

THE COURT:

Yes, your Honor.

And do you understand that the maximum

14

possible combined penalty for the six crimes to which you

15

propose to plead guilty is 85 years of imprisonment, plus a

16

fine of $11,750,000 or, if greater, the sums of the relevant

17

gains, losses, and statutory amounts relating to your offenses,

18

plus full restitution to all persons injured by your criminal

19

conduct, plus a $600 mandatory special assessment, plus

20

supervised release for five years after your term of

21

imprisonment?

22

THE DEFENDANT:

23

THE COURT:

Yes, your Honor.

I will now give you some information and

24

verify your understanding of the supervised release aspect of

25

the potential penalty.

Supervised release means that you will

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be subject to monitoring when you are released from prison.

2

Terms and conditions will be imposed.

3

the set terms and conditions, you can be reimprisoned without a

4

jury trial.

5

comply with any of the set terms or conditions, you can be

6

returned to prison for the remainder of the term of supervised

7

release.

8

served in prison as a result of your sentence and no credit for

9

any time spent on postrelease supervision.

If you violate any of

If you are on supervised release and you do not

You will be given no credit for the time that you

For example, if you

10

received a prison term and then a three-year term of supervised

11

release and after you left prison you lived up to the terms of

12

supervised release for two years, but then you violated some

13

term of the supervised release, you could be returned to prison

14

for three whole years.

15

Do you understand that?

16

THE DEFENDANT:

17

THE COURT:

Yes, your Honor.

Do you also understand that if I accept

18

your guilty plea and adjudge you guilty, that adjudication may

19

deprive you of valuable civil rights, such as the right to

20

vote, the right to hold public office, the right to serve on a

21

jury, and the right to possess any kind of firearm if you

22

currently have or otherwise contain such rights?

23

THE DEFENDANT:

24

THE COURT:

25

Yes, your Honor.

Do you understand that there are

sentencing guidelines that the Court must consider in

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Plea

determining your sentence?

2

THE DEFENDANT:

3

THE COURT:

4

Yes, your Honor.

Has your attorney discussed the sentencing

guidelines with you?

5

THE DEFENDANT:

6

THE COURT:

Yes, your Honor.

Do you understand that in determining your

7

sentence the Court has an obligation to calculate the

8

applicable sentencing guideline range and must consider that

9

range, possible departures under the sentencing guidelines, and

10

other sentencing factors under the statute we referred to as

11

Section 3553(a)?

12

THE DEFENDANT:

13

THE COURT:

Yes, your Honor.

Do you understand that if your attorney or

14

anyone else has attempted to estimate or predict what your

15

sentence will be, their estimate or prediction could be wrong?

16

THE DEFENDANT:

17

THE COURT:

Yes, your Honor.

Do you also fully understand that even if

18

your sentence is different from what your attorney or anyone

19

else told you it might be, or if it is different from what you

20

expect, you will still be bound to your guilty plea and you

21

will not be allowed to withdraw your guilty plea?

22

THE DEFENDANT:

23

THE COURT:

Yes, your Honor.

Do you understand that the sentence to be

24

imposed will be determined solely by the Court and that I can

25

only determine the sentence to be imposed after the probation

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department prepares a presentence report?

2

THE DEFENDANT:

3

THE COURT:

Yes, your Honor.

Do you understand that the Court has

4

discretion while taking into account the specific provisions

5

and policy statements in the guidelines to sentence you to any

6

number of years of imprisonment between zero and the combined

7

statutory maximums of 85 years?

8

THE DEFENDANT:

9

THE COURT:

10

Yes, your Honor.

Are you now serving any state or federal

sentence or are you being prosecuted for any other crime?

11

THE DEFENDANT:

12

THE COURT:

No, your Honor.

Do you understand that the superseding

13

information also includes a forfeiture allegation in which the

14

government asserts that you are required to forfeit to the

15

United States any and all property constituting or derived from

16

any proceeds that you obtained as a result of the crimes

17

charged in Counts One, Two, Three, Four, and Six, as well as

18

any and all property traceable to such property, including but

19

not limited to a sum of money representing the amount of

20

proceeds obtained as a result of said offenses, totaling

21

approximately $3,585,000 as to each of Counts Two and Six, and

22

$170 billion as to Counts one, Three, and Four?

23

THE DEFENDANT:

24

THE COURT:

25

Yes, your Honor.

Mr. Adelman, would you please show

Mr. Kugel the agreement which has been marked as Government

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Plea

Exhibit 1.

2

MR. ADELMAN:

3

THE COURT:

4

Mr. Kugel, have you signed this agreement?

5

THE DEFENDANT:

6

THE COURT:

7

THE DEFENDANT:

8

THE COURT:

9

I have done so, your Honor.

Thank you.

Did you read it before you signed it?
Yes, your Honor.

Did you discuss it with your attorney

before you signed it?

10

THE DEFENDANT:

11

THE COURT:

12

Yes, your Honor.

Yes, your Honor.

Did you fully understand the agreement

before you signed it?

13

THE DEFENDANT:

14

THE COURT:

Yes, your Honor.

Does the agreement reflect accurately your

15

complete and total understanding of the entire agreement

16

between the government, your attorney, and you?

17

THE DEFENDANT:

18

THE COURT:

19

Yes, your Honor.

Is everything that you understand about

your plea, cooperation, and sentence covered in this agreement?

20

THE DEFENDANT:

21

THE COURT:

22

THE DEFENDANT:

23

THE COURT:

Yes, your Honor.

Has anything been left out?
No, your Honor.

Has anyone made any promises to you other

24

than what's written in that agreement or threatened you or

25

forced you to plead guilty or to enter into the cooperation

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agreement?

2

THE DEFENDANT:

3

THE COURT:

No, your Honor.

Do you understand that even if the

4

government does not oppose or take a position on what your

5

attorney will ask as a sentence, I am free to impose whatever

6

sentence I believe is appropriate under the circumstances and

7

the applicable law, and you will have no right to withdraw your

8

plea?

9
10

THE DEFENDANT:

Yes, your Honor.

(Continued on next page)

11
12
13
14
15
16
17
18
19
20
21
22
23
24
25

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Plea

THE COURT:

Do you understand that the agreement

2

provides that you must cooperate fully with the office of the

3

United States Attorney, the Federal Bureau of Investigation,

4

and any other law enforcement agency designated by the United

5

States Attorney?

6

THE DEFENDANT:

7

THE COURT:

Yes, your Honor.

Do you understand that the agreement does

8

not bind any federal, state, or local prosecuting authority

9

other than the United States Attorney?

10

THE DEFENDANT:

11

THE COURT:

Yes, your Honor.

Do you understand that the agreement

12

provides that if the United States Attorney determines that you

13

have provided substantial assistance in the investigation or

14

prosecution and if you have fully complied with the

15

understandings specified in the agreement, the United States

16

Attorney will file a motion, pursuant to Section 5K1.1 of the

17

Sentencing Guidelines, requesting that the Court sentence in

18

light of the factors set forth in Section 5K5.1(a)?

19

THE DEFENDANT:

20

THE COURT:

Yes, your Honor.

Do you understand that the factors that

21

the Court may consider in this connection include the

22

significance and usefulness of your assistance, taking into

23

account the government's evaluation of your assistance, the

24

truthfulness, completeness and reliability of any information

25

or testimony you provided, the nature and extent of your

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1

assistance, any injuries suffered or any danger or risk of

2

injury to you or to your family as a result of your assistance,

3

and the timeliness of your assistance?

4

THE DEFENDANT:

5

THE COURT:

Do you understand that?

Yes, your Honor.

Do you understand that even if the United

6

States Attorney files such a motion, the sentence to be imposed

7

on you remains within the sole discretion of the Court?

8

THE DEFENDANT:

9

THE COURT:

Yes, your Honor.

Do you understand that you will not be

10

entitled to withdraw your guilty plea even if the Court denies

11

the government's motion?

12

THE DEFENDANT:

13

THE COURT:

Yes, your Honor.

Do you understand that if the United

14

States Attorney determines that you have not provided

15

substantial assistance in an investigation or prosecution, or

16

that you have violated any provision of the agreement, the

17

United States Attorney is not obliged to file a motion under

18

Section 5K1.1 of the Sentencing Guidelines?

19

THE DEFENDANT:

20

THE COURT:

Yes, your Honor.

Do you understand that you will not be

21

entitled to withdraw your guilty plea even if the United States

22

Attorney does not file the motion?

23

THE DEFENDANT:

24

THE COURT:

25

Yes, your Honor.

Do you understand that your agreement

provides that if you commit any further crimes, or if it is

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determined that you gave false, incomplete, or misleading

2

testimony or information, or otherwise violated any provision

3

of the agreement, you will be subject to prosecution for any

4

federal violations of which the United States Attorney has

5

knowledge, including perjury and obstruction of justice?

6

THE DEFENDANT:

7

THE COURT:

Yes, your Honor.

Do you understand that your agreement

8

provides that if you commit any further crimes, or if it is

9

determined that you gave false, incomplete or misleading

10

testimony or information, or otherwise violated any provision

11

of the cooperation agreement, all statements made by you to the

12

United States Attorney or other designated law enforcement

13

agents and any testimony given by you before a grand jury or

14

other tribunal may be admissible in evidence in any criminal

15

proceedings against you?

16

THE DEFENDANT:

17

THE COURT:

Yes, your Honor.

Do you understand that your agreement also

18

provides that you may not assert a claim that such statements

19

should be suppressed from evidence and that you have waived

20

your right to claim that such statements should be suppressed?

21

THE DEFENDANT:

22

THE COURT:

Yes, your Honor.

Do you understand that page 3 of the plea

23

agreement includes your agreement to forfeit to the United

24

States any and all property constituting and derived from any

25

proceeds that you obtained as a result of the unlawful

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activities charged in Counts One, Three and Four of the

2

Superseding Information, including, but not limited to, a sum

3

equal to $170 billion, and also to forfeit any and all property

4

constituting and derived from any proceeds that you obtained as

5

a result of the unlawful activities charged in Counts Two and

6

Six of the Information, including, but not limited to, a sum of

7

money equal to $3,585,000 as to each count, as well as your

8

right, title and interest in the specific property identified

9

in the agreement?

10

THE DEFENDANT:

11

THE COURT:

Yes, your Honor.

Do you understand that you are

12

specifically agreeing that the amount to be forfeited includes,

13

but is not limited to, a sum of money equal to $170,007,175,000

14

in United States currency as well as the specific property and

15

that a judgment will be entered against you for at least that

16

amount?

17

THE DEFENDANT:

18

THE COURT:

19

Do you understand that you are not

obligated to admit the forfeiture allegation?

20

THE DEFENDANT:

21

THE COURT:

22

Yes, your Honor.

Do you understand that you are not obliged

to agree to the forfeiture amount with the government?

23

THE DEFENDANT:

24

THE COURT:

25

Yes, your Honor.

Yes, your Honor.

And do you understand that it is up to the

Court to make a final determination as to forfeiture?

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THE DEFENDANT:

2

THE COURT:

Yes, your Honor.

Do you understand that any amount that you

3

do forfeit will not be credited toward any fines, restitution,

4

cost of imprisonment, or other additional penalty that the

5

court may impose on you?

6

THE DEFENDANT:

7

THE COURT:

8
9
10
11

Do you still wish to plead guilty pursuant

to this agreement?
THE DEFENDANT:
THE COURT:

Yes, your Honor.

Mr. Adelman, do you know of any valid

reason why Mr. Kugel would prevail at trial?

12

MR. ADELMAN:

13

THE COURT:

14

Yes, your Honor.

I do not, your Honor.

Do you know of any reason why he should

not be permitted to plead guilty?

15

MR. ADELMAN:

16

THE COURT:

I do not.

Mr. Kugel, would you please stand now and

17

tell me what you did that makes you guilty of the six crimes

18

charged in the Fourth Superseding Information?

19

THE DEFENDANT:

Yes, your Honor.

20

Your Honor, I stand before you ready to plead guilty

21

to the six counts in the Information filed against me, and to

22

accept responsibility for what I have done.

23

for my actions and the harm suffered by the victims.

24

the Court and everyone to know that I will do all I can to

25

cooperate with the government.

I am deeply sorry

SOUTHERN DISTRICT REPORTERS, P.C.

I want

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Plea

As to Counts One, Three, Four and Five, I provided

2

historical trade information to other BLMIS employees, which

3

was used to create false, profitable trades in the Investment

4

Advisory clients' accounts at BLMIS.

5

the early '70s, until the collapse of BLMIS in December 2008, I

6

helped create fake, backdated trades.

7

trade information -- sorry --first to Annette Bongiorno, and

8

later to Joanne Crupi, and others which enabled them to create

9

fake trades that, when included on the account statements and

10

trade confirmations of Investment Advisory clients, gave the

11

appearance of profitable trading when in fact no trading had

12

actually occurred.

13

these fake, backdated trades based on historical stock prices

14

and were executed only on paper.

15

Specifically, beginning

I provided historical

I helped Bongiorno, Crupi and others create

Many of these false trades were based on trades that

16

previously had been used in the Proprietary Trading operations

17

at BLMIS.

18

BLMIS customers on their monthly statements and trade

19

confirmations, and that the information was false.

20

I was aware that the trades would be reported to

I did this at the Madoff offices in Manhattan and

21

known that many of the account statements and trade

22

confirmations were mailed to clients from the offices in

23

Manhattan.

24
25

I therefore plead guilty to the crimes alleged against
me in Count One, Three, Four and Five.

I did conspire with

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1

other BLMIS employees to commit these crimes and, in fact, they

2

were committed, in violation of the law.

3

Finally, as to Count Two and Six, I acknowledge that

4

from at least from 2002 through 2007, on several occasions, I

5

caused false financial information to be submitted to various

6

financial institutions on my behalf and on behalf of other

7

potential borrowers.

8

submitted in connection for applications for mortgage loans.

The false financial information was

9

I asked Joann Crupi to prepare documents that did not

10

accurately reflect my assets and the assets of others at BLMIS

11

and she did so.

12

my own and the other potential borrowers' holdings in accounts

13

at BLMIS.

14

institutions on my behalf and on behalf of other potential

15

borrowers.

16

Those documents overstated the total value of

These fake documents were submitted to financial

The false documents were prepared at BLMIS offices in

17

Manhattan and submitted to federally-insured lenders by U.S.

18

mail or wire transmissions.

19

THE COURT:

20
21
22
23

Thank you.

I have a couple of questions

for you.
You used the term "conspired" in relation to Counts
One, Three, Four and Five.
THE DEFENDANT:

What do you mean by that?

When I conspired, I worked together

24

with them to create the false trades that appeared on the

25

Investment Advisory clients' statements and confirmations,

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2

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pursuant to agreement and understanding.
THE COURT:

You had an agreement and understanding

3

with the other individuals you mentioned in order to create the

4

false trades?

5
6
7

THE DEFENDANT:

That applied to historical

information, yes.
THE COURT:

And you said that the customer information

8

regarding the false trades was mailed in the regular Postal

9

system, is that correct?

10

THE DEFENDANT:

11

THE COURT:

To the best of my knowledge, yes.

And the financial institutions to which

12

the false mortgage information, application information, was

13

given were banks; is that your understanding?

14

THE DEFENDANT:

15

THE COURT:

16

Yes, your Honor.

Is it your understanding that they were

federally-insured banks?

17

THE DEFENDANT:

18

THE COURT:

Yes, your Honor.

And when you were dealing with the false

19

trading history information and the false financial

20

information, did you know that that information was false?

21

THE DEFENDANT:

22

THE COURT:

Yes, your Honor.

And did you know that what you were doing

23

was wrong and unlawful?

24

THE DEFENDANT:

25

THE COURT:

Yes, your Honor.

Does the government have any further

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1

requests for factual matters to be addressed in Mr. Kugel's

2

plea allocution?

3

MR. MOORE:

No.

Thank you, your Honor.

4

THE COURT:

Mr. Adelman -- actually, before we do

5

that, Mr. Moore, would you please summarize the government's

6

evidence against Mr. Kugel?

7

MR. MOORE:

8

Had this case proceeded to trial --

9

THE COURT:

10

Certainly, your Honor.

You will have to get up again in a minute

but it is your choice.

11

MR. MOORE:

My apologies, your Honor.

12

Had this case proceeded to trial, the government would

13

have proven through testimony and evidence beyond a reasonable

14

doubt the facts set forth in the Superseding Information.

15

Specifically, the government would have proven, with

16

respect to Counts One, Three, Four and Five of the Information,

17

that Mr. Kugel was employed at the Bernard L. Madoff Investment

18

Securities LLC, or "BLMIS," from in or about 1970 through at

19

least on or about December 11, 2008.

20

investment advisor and a market maker, your Honor.

21

BLMIS was both an

Beginning in or about the 1970s, Kugel was a trader in

22

BLMIS's Proprietary Trading and Market Making operations.

23

or about the late 1990s, your Honor, Mr. Kugel assumed a

24

managerial position on the trading floor and later took on the

25

role of Trading Floor Compliance Analyst.

Beginning in or

SOUTHERN DISTRICT REPORTERS, P.C.

In

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1

about the early 1970s until the collapse of BLMIS in 2008,

2

Mr. Kugel helped create fake, backdated trades for Mr. Madoff's

3

Investment Advisory, or the "IA," business with his

4

codefendants, Annette Bongiorno, Joann Crupi, as well as other

5

individuals, your Honor.

6

of which mimicked actual trades executed in connection with the

7

Proprietary Trading operation -- were used to deceive the

8

clients of the IA business and to give the appearance that

9

actual trading occurred when, as Mr. Kugel and others well

10
11

These fake, backdated trades -- many

knew, no trading occurred at all in the IA account.
Beginning in or about the early 1970s, Bongiorno

12

requested from Kugel backdated arbitrage trades to be used in

13

Investment Advisory clients' accounts.

14

when the IA business had received money that was to be

15

invested, Bongiorno told Kugel the amount of funds that she had

16

available to purportedly invest on behalf of IA clients, which

17

was typically in the millions of dollars.

18

Mr. Kugel provided Bongiorno historical information from which

19

she created the fake trades.

20

historical stock prices from the Wall Street Journal and other

21

sources, he provided Bongiorno with the name of the stocks, the

22

buy and sell dates of potential trades, as well as the

23

historical price ranges of those stocks of the respective dates

24

that she could use to make a profit.

25

mimicked trades previously executed in connection with limited

On a regular basis,

In response,

Specifically, Mr. Kugel, using

Often, this information

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Proprietary Trading operation.

2

Mr. Kugel also gave Ms. Bongiorno the total volume of

3

shares traded in particular stocks on certain dates so she

4

would not exceed a particular stock's daily trading volume when

5

creating the fake trades.

6

by Kugel, Bongiorno then selected the particular stocks and

7

historical purchase prices from the price ranges given to her

8

by Mr. Kugel.

9

prices to be used for each IA client in order to meet the rate

Using the information provide to her

Bongiorno selected different stocks and purchase

10

of return predetermined by Madoff for that client.

11

so, Ms. Bongiorno calculated the number of shares that would

12

have to be used in each IA client's account, based on both the

13

amount of money the client had available to invest and the

14

predetermined rate of return for each client as determined by

15

Madoff.

16

In doing

Beginning in or about the early 1990s, Mr. Kugel

17

similarly provided Ms. Crupi with historical price information

18

to enable Crupi to create false, backdated arbitrage trades for

19

IA clients.

20

selected the particular stock and historical purchase prices to

21

be used for each IA client in order to meet the rate of return

22

predetermined by Madoff for that client.

23

calculated the number of shares that would have to be used in

24

each IA client's account based on both the amount of money the

25

client had to invest and the rate of return predetermined by

Using the information provide by Kugel, Crupi then

In doing so, Crupi

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Madoff.

2

In or about the mid-1990s, your Honor, Crupi took over

3

the role of Kugel in selecting the historical information

4

needed for the fake arbitrage deals.

5

selected the name of the stocks, the buy and sell date of a

6

potential trade, as well as the historical price range for that

7

date that she could use to make a profit.

8

fake, backdated arbitrage trades that were executed on paper

9

only in the IA clients' accounts.

10

In doing so, Crupi

Crupi then created

With respect to Counts Two and Six, your Honor, the

11

government would have proven that, separate and apart from the

12

fake trades that Kugel, Bongiorno, Crupi, and others created at

13

BLMIS, Kugel, with the assistance of Ms. Crupi and others, also

14

defrauded numerous financial institutions in order to obtain

15

loans using artificially-inflated financial information.

16

multiple occasions, Mr. Kugel and Crupi submitted false and

17

misleading information concerning Kugel's assets and the assets

18

of others to financial institutions in order to obtain loans

19

for the purchase and construction of homes for Kugel and

20

others.

21

others obtained multiple million-dollar loans based on the

22

submission of this fraudulent information.

On

With the assistance of Crupi and others, Kugel and

23

THE COURT:

24

Mr. Kugel, how do you now plead to the charge against

25

Thank you.

you in Count One of the Fourth Superseding Information, not

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guilty or guilty?

2

THE DEFENDANT:

3

THE COURT:

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How do you now plead to the charge against

you in Count Two, not guilty or guilty?

5

THE DEFENDANT:

6

THE COURT:

7

you in Count Three, not guilty or guilty?
THE DEFENDANT:

9

THE COURT:

you in Count Four, not guilty or guilty?
THE DEFENDANT:

12

THE COURT:

Guilty, your Honor.

How do you now plead to the charge against

you in Count Five, not guilty or guilty?

14

THE DEFENDANT:

15

THE COURT:

16

Guilty, your Honor.

How do you now plead to the charge against

11

13

Guilty, your Honor.

How do you now plead to the charge against

8

10

Guilty, your Honor.

Guilty, your Honor.

And how do you now plead to the charge

against you in Count Six, not guilty or guilty?

17

THE DEFENDANT:

18

THE COURT:

Guilty, your Honor.

Are you pleading guilty to each of these

19

charges because you are in fact guilty of each of these

20

charges?

21

THE DEFENDANT:

22

THE COURT:

23

Yes, your Honor.

your own free will?

Are you pleading guilty voluntarily and of

24

THE DEFENDANT:

25

THE COURT:

Yes, your Honor.

Mr. Adelman, would you please show

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Mr. Kugel Court Exhibit 1, the advice of rights form.

2

MR. ADELMAN:

3

THE COURT:

4

Mr. Kugel, have you signed this form?

5

THE DEFENDANT:

6

THE COURT:

7

THE DEFENDANT:

8

THE COURT:

9

I have done so, your Honor.

Thank you.

Did you read it before you signed it?

it?
THE DEFENDANT:

11

THE COURT:

Yes, your Honor.

Did you discuss it with your attorney

before you signed it?

13

THE DEFENDANT:

14

THE COURT:

15

Yes, your Honor.

Did you understand it before you signed

10

12

Yes, your Honor.

Yes, your Honor.

Mr. Adelman, did you also review and sign

Court Exhibit 1?

16

MR. ADELMAN:

17

THE COURT:

Yes, your Honor.

Mr. Adelman, are there any other questions

18

that you believe I should ask Mr. Kugel in connection with his

19

plea?

20

MR. ADELMAN:

21

THE COURT:

No, ma'am.

Mr. Moore, are there any other questions

22

that you believe I should ask Mr. Kugel in connection with his

23

plea?

24

MR. MOORE:

No.

Thank you, your Honor.

25

THE COURT:

Mr. Kugel, you have acknowledged that you

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are guilty as charged in the Information.

2

your rights and that you are waiving them voluntarily.

3

I find that you know

Because your plea is entered knowingly and voluntarily

4

and is supported by an independent basis in fact, containing

5

each of the essential elements of each of the offenses, I

6

accept your guilty plea and I adjudge you guilty of the

7

offenses charged in Counts One, Two, Three, Four, Five and Six

8

of the Fourth Superseding Information, to which you have pled

9

guilty.

10

You can be seated now.

Thank you.

11

Mr. Adelman, do you wish to be present for any

12

interview of Mr. Kugel in connection with the preparation of

13

the presentence report?

14

MR. ADELMAN:

15

THE COURT:

16

MR. ADELMAN:

17

THE COURT:

18
19

Yes, ma'am.

I will make that direction.
Thank you.

Do the parties have a particular request

with respect to the setting of a sentencing date?
MR. MOORE:

Your Honor, the government requests a

20

sentencing control date for six months from now and that a

21

presentence report not be ordered at this time.

22

THE COURT:

Ms. Ng, may I have a date, please?

23

THE CLERK:

Friday, May 4th, 2012, at 11 a.m.

24

THE COURT:

May 4th at 11 a.m.?

25

THE CLERK:

Yes.

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THE COURT:

The sentencing control date is set for

May 4th at 11 a.m.
Will the government inform the Court and the defense

4

at such time that it believes that it is appropriate to prepare

5

a presentence report?

6

MR. MOORE:

We will, your Honor.

7

THE COURT:

Thank you.

8

Counsel, when it does come time for sentencing, please

9

be certain to give any comments or objections promptly to the

10

Probation Office, and to make your sentencing submissions in a

11

manner consistent with my sentencing submission procedures,

12

which are posted on the court's website and they are also

13

available here in hard copy.

14

Mr. Kugel, at some point the Probation Office will be

15

preparing a presentence report to assist me in sentencing you.

16

You will be interviewed by the Probation Office.

17

important that the information that you give to the probation

18

officer be truthful and accurate.

19

what my decision is as to what your sentence will be.

20

It is

The report is important in

You and your attorney have the right and will have an

21

opportunity to examine the report, to challenge or comment on

22

it, and to speak on your behalf before sentencing.

23

be truthful with the Probation Office and the Court may have an

24

adverse effect on your sentence and may subject you to

25

prosecution.

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Do you understand that?

2

THE DEFENDANT:

3

THE COURT:

Yes, your Honor.

Now, I understand that there is a --

4

actually, we need to deal with bail conditions, and we also

5

need to deal with the documents that I have been given relating

6

to forfeiture.

7

Is it the parties' request that I sign today the

8

Preliminary Order of Forfeiture and also the Stipulation and

9

Order relating to forfeiture issues?

10

MR. MOORE:

Yes, your Honor.

11

THE COURT:

Any objection from the defense?

12

MR. BLUMENTHAL:

13

THE COURT:

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15
16
17
18
19
20

No, your Honor.

And am I to sign the full and redacted

copy?
MR. SCHWARTZ:

Yes, your Honor.

Of course, we ask

that only the redacted versions be docketed.
THE COURT:

Yes.

And that the full version be filed

under seal?
MR. SCHWARTZ:

Please, yes.

The redactions are in

accordance with the court's local rules.

21

THE COURT:

22

MR. SCHWARTZ:

23

Thank you.

So relating to the privacy rules.
Correct.

It is financial accountant

information and the names of minors.

24

THE COURT:

25

Thank you.

(Pause)

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Ms. Ng will take care of the entry of those orders.

2

I have reviewed the Pretrial Services' report.

3

parties have a joint application and recommendation with

4

Do the

respect to bail pending sentencing?

5

MR. MOORE:

Yes, your Honor.

6

In light of Mr. Kugel's cooperation, his full

7

disclosure of his financial assets and his dealings that limits

8

to the government, we are satisfied that he will follow the

9

rules set forth by Pretrial Services in accordance with the

10

proposed bail package we are prepared to present to the Court

11

at this time.

12

Namely, we respectfully submit to you, your Honor,

13

that the defendant's ball be set at a $3 million personal

14

recognizance bond to be secured by six financially-responsible

15

persons and $900,000 in cash or property.

16

of course, have to be clean assets, wholly unaffiliated with

17

BLMIS.

18

This property will,

We further request that the defendant be subject to

19

strict pretrial supervision, and that his travel be restricted

20

to the Southern District of New York, the Eastern District of

21

New York and the District of New Jersey.

22

We further request that he surrender all of his travel

23

documents and make no new travel applications.

We ask that

24

this restriction also apply to his wife.

25

holiday this week, your Honor, we request that the defendant

In light of the

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have until Thursday, December 1st, to meet these conditions.
To date, the government has already met with a number

3

of the defendant's proposed suriters and has been satisfied

4

with their financial and personal qualifications.

5

persons include close family members and friends of the

6

defendant who have known him for decades and present strong

7

moral suasion over the defendant to follow the conditions of

8

his release.

9

These

The defendant has been working with our office and the

10

FBI for quite some time now, your Honor.

11

has been both been reliable, timely in making his appointments,

12

and flexible with his schedule when the government requested

13

meetings with him.

14

During this time he

The defendant is a long-time resident on Long Island,

15

and his family resides in that district, in the Southern

16

District of New York and the District of New Jersey.

17

your Honor, the defendant currently helps assist his elderly

18

mother with her care, and that includes bringing her to visit

19

his brother, who resides in the District of New Jersey.

20

Currently, this is his primary job responsibility.

21

Moreover,

As part of the cooperation process, your Honor, the

22

defendant has filled out financial affidavits and worked with

23

our Asset Forfeiture Unit at the U.S. Attorney's Office,

24

detailing the amounts and whereabouts of all of his assets.

25

has worked closely with Mr. Schwartz in that regard, and has

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fully accepted the fact that he must forfeit the vast majority

2

of his assets.

3

As your Honor is aware, and I believe as the Court has

4

issued today or will be issuing shortly, our Asset Forfeiture

5

unit has presented forfeiture papers for your review in which

6

the defendant has agreed to a forfeiture amount of over $170

7

billion.

8

defendant has agreed to give up his home, luxury vehicle,

9

monies maintained in several financial institutions, and other

10
11
12
13

And as part of that forfeiture, your Honor, the

specific assets detailed in the papers before your Honor.
The government does not believe the defendant is a
danger to the community.
For all of these reasons, your Honor, the government

14

believes that the proposed bail package is reasonable and

15

appropriate in this case for this individual defendant.

16

THE COURT:

And the government believes, I take it,

17

based on its thorough review of the financial situation and its

18

dealings with Mr. Kugel over a lengthy period of time, that the

19

evidence is clear and convincing that the package that has been

20

proposed, including the delayed satisfaction of all of the

21

particulars of the package, is sufficient to address the

22

societal interests in proper appearance for proceedings in this

23

case and protection of the public?

24

MR. MOORE:

We do, your Honor.

25

THE COURT:

Thank you.

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Did Pretrial Services wish to be heard further on
this?

3

MR. STEIMEL:

4

THE COURT:

5

And the defense has no objection to the set of

6

No, your Honor.

We stand by our report.

Thank you.

conditions?

7

MR. ADELMAN:

No, ma'am.

I was just going to endorse

8

them by pointing out that Mr. Kugel, aside from these financial

9

considerations, is closely tied to his family, all of whom are

10

here in New York.

11

suriters.

12

His brother and sister are going to be

The brother is a dentist in New Jersey.

He is in contact with his aged mother on a frequent

13

basis.

14

daughter and son are here.

15

no connections anywhere else in the world.

16

passports of Mr. and Mrs. Kugel with me to surrender to the

17

court.

18

His goal is to help her when she needs help.

His

His grandchildren are here.

He has

I have the

And I endorse the proposal that has been made.
Your Honor doesn't have to hear this now, and I

19

apologize.

At some point in time I will be requesting travel

20

permission for Mr. Kugel to go to Florida.

21

real estate, a house there, that he is obliged to sell to raise

22

funds for the forfeiture.

23

it, not the government, and he has his personal property there.

24

So I will be in communication with your Honor to ask for such a

25

trip, and I expect you will remember what I just told you today

He has a piece of

He is going to be the one selling

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in ruling on the application.

2

THE COURT:

I have listened carefully to what you just

3

told me.

4

the communication to my chambers, that you verify that there is

5

no objection to it from the government, from the Probation

6

Department, and that you write a letter reciting those

7

communications and the positions of those two aspects of the

8

institution.

9

I would simply ask that you speak -- before you make

MR. ADELMAN:

Yes, your Honor.

10

THE COURT:

11

I am going to prepare a bail disposition sheet.

12

All right, then.
I'm

sorry.

13

MR. STEIMEL:

Your Honor, I'm sorry --

14

THE COURT:

15

MR. STEIMEL:

16

Just one clarification.

It is Pretrial Services, not Probation?
Yes, your Honor.
I know that defense counsel

17

indicated that the wife's passport was also going to be ordered

18

seized or surrendered to Pretrial Services.

19

actually -- I'm not sure if I heard you say whether the wife's

20

passport was also supposed to be surrendered.

21

that?

22
23
24
25

THE COURT:

I am going to.

I was not clear

Did you order

It was in the list of

conditions that -- I'm sorry, am I interrupting you?
MR. MOORE:

No.

I'm just saying you hadn't issued

your decision yet.

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THE COURT:

It was part of the package as described by

Mr. Moore.
And so what I was about to say was that I find, based

4

on the review of the Pretrial Services' report and all of the

5

representations that have been made to the Court, that the

6

package as proposed is appropriate and sufficient to address

7

the statutory concerns of appearance and protection of the

8

community.

9

sentencing on the basis of these conditions.

10

Accordingly, I will approve release pending

Now I am going to prepare a bail disposition sheet on

11

which I will summarize the conditions.

12

sure that everyone agrees that I have reflected the appropriate

13

conditions.

14
15

I will read out to make

So if you will bear with me, I will do that.

MR. ADELMAN:

Your Honor, may I have a moment to

consult with my brother and sister here?

16

THE COURT:

Yes, you may.

17

MR. ADELMAN:

18

(Pause)

19

THE COURT:

20

$3 million PRB with six FRPs; 900,000 security in cash

Thank you.

This is what I have written.

21

and property (not derived from BLMIS or any activity that is

22

the subject of the charges); strict supervision; travel

23

restricted to S.D.N.Y., EDNY, DNJ; surrender passports of

24

defendant and spouse, and no new applications.

25

must be met by December 1, 2011.

All conditions

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Does that cover it?

2

MR. MOORE:

3

MR. ADELMAN:

Yes, your Honor.
Yes, your Honor.

The only -- I don't

4

anticipate him not being compliant by December 1, but if there

5

is one piece that is missing or it will come in the next day, I

6

will come back to your Honor and advise.

7

THE COURT:

Yes.

If you need to, you can make an

8

application for an extension of the deadline, but this is the

9

deadline that I am putting in today.

10

MR. ADELMAN:

11

THE COURT:

12

(Pause)

13

THE COURT:

14

THE DEFENDANT:

15

THE COURT:

16

Yes.

All right.

Let me print the copies.

Mr. Kugel.
Yes, your Honor.

Did you hear the conditions that I had set

for your bail?

17

THE DEFENDANT:

18

THE COURT:

Yes, your Honor.

Do you understand that you must comply

19

strictly with all of those conditions, and that the violation

20

of any of those conditions may result in the issuance of a

21

warrant for your arrest, the revocation of your release, or

22

other sanctions?

23

THE DEFENDANT:

24

THE COURT:

25

Yes, your Honor.

The Pretrial Services Department will be

going over the details of all of the conditions with you.

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Counsel, is there anything further that we need to
address together this afternoon?

3

MR. MOORE:

4

MR. ADELMAN:

5

THE COURT:

6

Nothing from the government, your Honor.
Nor from the defense.

All right.

Thank you.

We are all

adjourned.

7

MR. MOORE:

8

MS. BARONI:

9

THE CLERK:

Thank you, your Honor.
Thank you, your Honor.
All rise.

10
11

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-

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15
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