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

Filing 90

DECLARATION of DANA M. SESHENS in Support re: 79 MOTION for Summary Judgment.. Document filed by Charles 15 Associates, Charles 15 LLC, Charles Sterling LLC, Charles Sterling Sub LLC, College Place Enterprises LLC, Coney Island Baseball Holding Company LLC, Estate of Leonard Schreier, FFB Aviation LLC, FS Company LLC, Fred Wilpon Family Trust, Arthur Friedman, Ruth Friedman, Iris J. Katz and Saul B. Katz Family Foundation, Inc., Judy and Fred Wilpon Family Foundation, Inc., Amy Beth Katz, David Katz, Dayle Katz, Gregory Katz, Howard Katz, Iris Katz, 157 J.E.S. LLC, Air Sterling LLC, BAS Aircraft LLC, Jason Bacher, Bon Mick Family Partners LP, Bon-Mick, Inc., Brooklyn Baseball Company LLC, C.D.S. Corp., Michael Katz, Saul B. Katz, Todd Katz, Katz 2002 Descendants' Trust, Heather Katz Knopf, Natalie Katz O'Brien, Mets II LLC, Mets Limited Partnership, Mets One LLC, Mets Partners, Inc., Minor 1 (REDACTED), Minor 2 (REDACTED), L. Thomas Osterman, Phyllis Rebell Osterman, Realty Associates Madoff II, Red Valley Partners, Robbinsville Park LLC, Ruskin Garden Apartments LLC, Saul B. Katz Family Trust, Michael Schreier, Deyva Schreier Arthur, See Holdco LLC, See Holdings I, See Holdings II, Sterling 10 LLC, Sterling 15C LLC, Sterling 20 LLC, Sterling Acquisitions LLC, Sterling American Advisors II LP, Sterling American Property III LP, Sterling American Property IV LP, Sterling American Property V LP, Sterling Brunswick Corporation, Sterling Brunswick Seven LLC, Sterling Dist Properties LLC, Sterling Equities, Sterling Equities Associates, Sterling Equities Investors, Sterling Heritage LLC, Sterling Internal V LLC, Sterling Jet II Ltd., Sterling Jet Ltd., Sterling Mets Associates, Sterling Mets Associates II, Sterling Mets LP, Sterling Pathogenesis Company, Sterling Third Associates, Sterling Thirty Venture LLC, Sterling Tracing LLC, Sterling Twenty Five LLC, Sterling VC IV LLC, Sterling VC V LLC, Edward M. Tepper, Elise C. Tepper, Jacqueline G. Tepper, Marvin B. Tepper, Valley Harbor Associates, Kimberly Wachtler, Philip Wachtler, Bruce N. Wilpon, Daniel Wilpon, Debra Wilpon, Fred Wilpon, Jeffrey Wilpon, Jessica Wilpon, Judith Wilpon, Richard Wilpon, Scott Wilpon, Valerie Wilpon, Wilpon 2002 Descendants' Trust, Robin Wilpon Wachtler. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C PART 1, # 4 Exhibit C PART 2, # 5 Exhibit D, # 6 Exhibit E, # 7 Exhibit F, # 8 Exhibit G, # 9 Exhibit H, # 10 Exhibit I, # 11 Exhibit J, # 12 Exhibit K, # 13 Exhibit L, # 14 Exhibit M, # 15 Exhibit N, # 16 Exhibit O, # 17 Exhibit P, # 18 Exhibit Q, # 19 Exhibit R, # 20 Exhibit S, # 21 Exhibit T, # 22 Exhibit U, # 23 Exhibit V, # 24 Exhibit W, # 25 Exhibit X, # 26 Exhibit Y, # 27 Exhibit Z, # 28 Exhibit AA)(Seshens, Dana)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
------------------------------- x
:
IRVING H. PICARD,
:
:
Plaintiff,
:
:
11-CV-03605 (JSR)(HBP)
- against :
:
SAUL B. KATZ, et al.,
:
:
Defendants.
:
:
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DECLARATION OF DANA M. SESHENS IN SUPPORT OF
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
I, Dana M. Seshens, declare, pursuant to 28 U.S.C. § 1746, that the
following is true:
1.

I am a partner with the firm of Davis Polk & Wardwell LLP,

attorneys for Defendants. I submit this declaration in support of Defendants’
motion for summary judgment.
2.

In my role as counsel for Defendants, I was involved in and

responsible for Defendants’ response to the Trustee’s discovery requests in this
action, including, but not limited to, the production of documents. As a result, I
am personally familiar with the facts set forth herein.
3.

Prior to discovery taken in this action, the Trustee had carried out

exceedingly broad discovery under Bankruptcy Rule 2004 in connection with his
Rule 2004 investigation of Defendants (“Rule 2004 Discovery”). The breadth and
scope of that discovery is set forth in my March 20, 2011 and June 20, 2011
declarations submitted in support of Defendants’ prior motion to dismiss or, in the

alternative, for summary judgment (“Motion to Dismiss”) and are incorporated
herein by reference. See Mot. to Dismiss the Am. Compl. or, in the Alternative,
for Summ. J. (doc. no. 20) and papers filed in support thereof (docs. nos. 23
(Seshens Decl.); 27 (Supp. Seshens Decl.)).
4.

On August 19, 2011, the Court held oral argument on Defendants’

Motion to Dismiss and, reserving decision on the Motion at that time, ruled that
the Trustee should be allowed to take some additional discovery, which was to be
cabined by the discovery that already had been taken. (Aug. 19, 2011 Oral Arg.
Tr. 63:10-16.)
5.

On September 27, 2011, the Court granted Defendants’ Motion to

Dismiss in part and declined Defendants’ invitation to convert the Motion to one
for summary judgment, finding that “the Trustee has made a reasonable argument
that he is entitled to further discovery before a motion for summary judgment is
fully ripe.” Picard v. Katz, No. 11 Civ. 3605, 2011 U.S. Dist. LEXIS 109595, at
*20 n.8 (S.D.N.Y. Sept. 27, 2011).
6.

On September 16, 2011, the Trustee served Defendants with a First

Set of Requests for Production of Documents (“Trustee Requests”), containing
eighty-one document requests.
7.

The parties met and conferred several times regarding the Trustee

Requests. Ultimately, Defendants agreed to produce non-privileged documents
dated on or before March 1, 2009 that were responsive to the Trustee Requests as
agreed upon by the parties through the meet-and-confer process, subject to and
without waiver of Defendants’ relevance and other objections.

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8.

To determine the universe of electronic documents “potentially

responsive” to the Trustee Requests, Defendants ran 155 search terms requested
by the Trustee across every Sterling Partner and employee email box and personal
document folder and across a number of select drives and folders maintained on
the Sterling Equities’ network file server. Defendants also ran these same search
terms through certain electronic document repositories maintained by the New
York Mets.
9.

As a result of the application of these search terms, counsel for

Defendants reviewed hundreds of thousands of documents and produced
approximately 30,000 documents and native files, totaling approximately 260,000
pages of non-native documents, in response to the agreed upon Requests.
10.

Defendants also collected and produced approximately 1,200 hard

copy documents, totaling approximately 6,000 pages, from the files of the Sterling
Partners, Sterling employees, and the New York Mets.
11.

At the Trustee’s request, and subject to and without waiver of

Defendants’ relevance objection, Defendants ran thirty-five new search terms
across the email box of Sterling’s chief financial officer to identify certain
communications sent after March 1, 2009 that were potentially related to the
restructuring of debt in 2009. Defendants produced an additional 2,300
documents and native files, totaling approximately 18,000 pages of non-native
documents, in response to the agreed upon Requests.
12.

Based upon a review of all of Defendants’ documents responsive

to the Trustee Requests, not one document reflected a warning from anyone, or a

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belief by any Defendant, that Madoff might be running a Ponzi scheme or
engaged in fraud.
13.

In addition to taking discovery from Defendants, the Trustee also

sought discovery about Defendants from numerous third parties. Between
October 11, 2011 and December 15, 2011, the Trustee served twenty-one
document subpoenas on third parties and an additional document subpoena on
Defendants’ expert.
14.

In response to the twenty-one third-party subpoenas, thirteen

parties produced documents, while others informed the Trustee that they had no
responsive documents to produce. Together, these third parties produced
approximately 43,000 documents and native files, totaling approximately 280,000
pages of non-native documents. These productions did not include documents
previously produced to the Trustee by certain of the third parties during Rule
2004 Discovery (See infra.)
15.

Between November 7, 2011 and the close of discovery on January

13, 2012, the Trustee took twenty fact depositions and one expert deposition.
Eighteen of these depositions were conducted between December 9, 2012 and
January 13, 2012.
16.

Of the twenty fact depositions taken, four were depositions of

Sterling Partners, including Fred Wilpon and Saul Katz, three were employees of
Sterling Equities, and one was an employee of the New York Mets. The
remaining twelve depositions were third-party witnesses.

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17.

The Trustee also sent a private investigator to question

acquaintances of Defendants and others.
18.

On September 20, 2011, Defendants served the Trustee with a First

Set of Requests for the Production of Documents (“Defendants’ Requests”).
Among other things, Defendants sought from the Trustee the Rule 2004
Discovery to which Defendants previously did not have access.
19.

In response to Defendants’ Requests, the Trustee disclosed, among

other documents, his Rule 2004 Discovery, including, but not limited to,
document productions from Sterling Stamos Partners, Bank of America, Frank
Crystal & Co., American Securities, and J.P. Morgan.
20.

In response to Defendants’ Requests for the Trustee’s Rule 2004

Discovery and any third-party documents produced in other Rule 2004
investigations that related to any Defendant or to certain portions of the Trustee’s
complaint against Defendants, the Trustee produced approximately 248,000
documents and native files, totaling approximately 2.7 million pages of nonnative documents.
21.

The Trustee also produced to Defendants previously undisclosed

deposition testimony taken as part of Rule 2004 Discovery, including, but not
limited to, the deposition of Charles Klein of American Securities.
22.

The Trustee provided Defendants with a privilege log reflecting

Rule 2004 Discovery documents withheld from production on the basis of the
attorney-client privilege or work product doctrine, which reflected, among other
things, that attorney notes and summaries from an interview on July 13, 2010 with

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Robert Duran of Frank Crystal & Co. had been withheld from production on work
product grounds.
23.

In total, Defendants produced over 100,000 documents and native

files, totaling nearly 1 million pages of non-native documents, in response to the
Trustee’s requests as part of Rule 2004 Discovery and discovery in this action.
24.

In total, third parties produced approximately 291,000 documents

and native files, totaling approximately 3 million pages of non-native documents,
consisting of documents produced to Defendants by the Trustee, as described
supra, and documents provided to Defendants by third parties as a courtesy in
response to the Trustee’s document subpoenas in this action.
25.

Attached hereto as Exhibit A is a true and correct copy of excerpts

from the deposition of Christopher Stamos, dated January 4, 2012.
26.

Attached hereto as Exhibit B is a true and correct copy of excerpts

from the deposition of Peter Stamos, dated January 5, 2012.
27.

Attached hereto as Exhibit C is a true and correct copy of the

Expert Report of Bruce G. Dubinsky, dated November 22, 2011.
28.

Attached hereto as Exhibit D is a true and correct copy of excerpts

from the deposition of Bruce G. Dubinsky, dated January 11, 2012.
29.

Attached hereto as Exhibit E is a true and correct copy of an article

by Peter Chapman, entitled Before the Fall: Bernard L. Madoff, Traders
Magazine, dated March 2009.

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30.

Attached hereto as Exhibit F is a true and correct copy of an article

entitled NASDAQ and Primex Announce End of Exclusive Rights Agreement, PR
Newswire, dated December 21, 2003.
31.

Attached hereto as Exhibit G is a true and correct copy of an article

entitled 3 Firms Plan to Develop New System For Trading, N.Y. Times, dated
June 8, 1999.
32.

Attached hereto as Exhibit H is a true and correct copy of excerpts

from the Bankruptcy Rule 2004 deposition of Fred Wilpon, dated July 20, 2010.
33.

Attached hereto as Exhibit I is a true and correct copy of excerpts

from the deposition of Fred Wilpon, dated January 10, 2012.
34.

Attached hereto as Exhibit J is a true and correct copy of excerpts

from the Bankruptcy Rule 2004 deposition of Arthur Friedman, dated June 22-24,
29 2010.
35.

Attached hereto as Exhibit K is a true and correct copy of excerpts

from the Rule 27 deposition of Arthur Friedman, dated June 29, 2010.
36.

Attached hereto as Exhibit L is a true and correct copy of excerpts

from the deposition of Saul B. Katz, dated January 13, 2012.
37.

Attached hereto as Exhibit M is a true and correct copy of excerpts

from the deposition of David Katz, dated December 28, 2011.
38.

Attached hereto as Exhibit N is a true and correct copy of excerpts

from the Bankruptcy Rule 2004 deposition of Saul B. Katz, dated August 4, 2010.
39.

Attached hereto as Exhibit O is a true and correct copy of excerpts

from the deposition of Mark Peskin, dated December 29, 2011.

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40.

Attached hereto as Exhibit P is a true and correct copy of excerpts

from the Bankruptcy Rule 2004 deposition of Mark Peskin, dated July 29, 2010.
41.

Attached hereto as Exhibit Q is a true and correct copy of excerpts

from the deposition of Steven Kenny, dated December 9, 2011.
42.

Attached hereto as Exhibit R is a true and correct copy of a

Memorandum from Barry Gonder to the files of Sterling Doubleday, dated
August 24, 1990, which was produced by Sterling to the Trustee in the course of
discovery.
43.

Attached hereto as Exhibit S is a true and correct copy of an

Analysis of Bernard L. Madoff’s Investment Mgmt. for Saul B. Katz (Account
KW024) performed by J.P. Morgan, dated July 1993, which was produced by
Sterling to the Trustee in the course of discovery.
44.

Attached hereto as Exhibit T is a true and correct copy of a Letter

from Robert J. Grossman to Marvin B. Tepper, dated May 25, 2000, which was
produced by Sterling to the Trustee in the course of discovery.
45.

Attached hereto as Exhibit U is a true and correct copy of a Letter

from Sharon Bonelli to Arthur Friedman, dated January 2, 2003, which was
produced by Sterling to the Trustee in the course of discovery.
46.

Attached hereto as Exhibit V is a true and correct copy of excerpts

from the Bankruptcy Rule 2004 deposition of David Katz, dated August 31 and
September 1, 2010.

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47.

Attached hereto as Exhibit W is a true and correct copy of excerpts

from the Bankruptcy Rule 2004 deposition of Peter Stamos, dated August 19,
2010.
48.

Attached hereto as Exhibit X is a true and correct copy of excerpts

from the Bankruptcy Rule 2004 deposition of Charles D. Klein, dated November
8, 2010.
49.

Attached hereto as Exhibit Y is a true and correct copy of excerpts

from the Bankruptcy Rule 2004 deposition of Ashok Chachra, dated October 8,
2010.
50.

Attached hereto as Exhibit Z is a true and correct copy of excerpts

from the deposition of Michael Katz, dated December 9, 2011.
51.

Attached hereto as Exhibit AA is a true and correct copy of

excerpts from the deposition of Noreen Harrington, dated December 30, 2011.
Dated: New York, New York
January 26, 2012
s/ Dana M. Seshens
Dana M. Seshens

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