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)

EXHIBIT M

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

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
11-CV-03605(JSR)(HBP)

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IRVING H. PICARD, Trustee for
the Liquidation of Bernard L.
Madoff Investment Securities LLC,

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Videotaped
Deposition of:

Plaintiff,
v.

DAVID M. KATZ

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SAUL B. KATZ, et al.,
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Defendants.
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TRANSCRIPT of testimony as taken by and before

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

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and Notary Public of the States of New York and New

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Jersey, at the offices of Baker & Hostetler, 45

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Rockefeller Plaza, New York, New York on Wednesday,

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December 28, 2011, commencing at 9:32 a.m.

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PICARD v. KATZ, et al.

CONFIDENTIAL

DAVID M. KATZ 12/28/11
11

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Sterling Stamos when it started?
A.

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family office.

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Q.

Sterling Stamos was supposed to be a

Okay.

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when you started?

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A.

That was back in June of '02

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Q.

About.

About then, yeah.

And I think you testified at your

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2004 that one of the reasons for starting Sterling

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Stamos as a family office was to diversify some of

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your investments with Madoff, right?
A.
Q.

That was the main reason.
Okay.

And Sterling Stamos, as I

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understand it, and just so you can confirm it,

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basically there's a management company, right, and

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then there's a general partnership?

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A.
Q.

And those two comprise Sterling

Stamos in your understanding?

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Um-hum.

MS. SESHENS:
A.

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Q.

I'm not sure of the structure, quite

frankly.

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Objection to the form.

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Okay.

So, what is your understanding

of the structure of Sterling Stamos now?
A.

Now?

We own -- we, Sterling

Equities, own a piece, I think it's 25 percent.
BENDISH REPORTING, INC.
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PICARD v. KATZ, et al.

CONFIDENTIAL

DAVID M. KATZ 12/28/11
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2
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Q.

Did you -- did you help in any way in

getting people to invest in Sterling Stamos?
A.

No.

I mean, I had a friend that

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invested, but that was much later.

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beginning, absolutely not.

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the people that were invested at the beginning.

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8
9

Q.

You know, at the

I didn't know most of

Who were the people who were invested

at the beginning of Sterling Stamos?
A.

I don't remember.

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remember their names.

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I don't even

Peter's -- Peter's friends.

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Q.

I think they're mostly out of

And how -- how did, if you know, any

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of the other Sterling partners help in getting

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investors in Sterling Stamos?

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A.
Q.

I don't know how they helped.
Did you or your other partners refer

potential investors to Peter Stamos?
A.

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Q.

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I'd be guessing.

I'd be guessing.

investments...

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A.
Q.

Now, with respect to your Madoff

Um-hum.
... you had several -- you being the

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Sterling partners -- referred several investors to

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Madoff, right?

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MS. SESHENS:

Objection to the form.

BENDISH REPORTING, INC.
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PICARD v. KATZ, et al.

CONFIDENTIAL

DAVID M. KATZ 12/28/11
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A.

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could help them.

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4

No.

Q.

People asked us if they -- if we

So, when you say people asked us if

they could help them, what do you mean by that?

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A.

I mean, I had a friend that would

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say, do you know Madoff, do you know of how I could

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get in?

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could help him.

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Q.

So I said maybe, and, you know, see if I

And how would you help your friends

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get into Madoff?

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A.

I'd give his name to Arthur, and

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Arthur would get him an account.

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Frank.

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Q.
A.
Q.
A.
Q.

Probably ask

Frank DiPascali?
Yes.
And Arthur Friedman?
Correct.
And these friends that came to you

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for help to get into Madoff, they also approached

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other Sterling partners as well?

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A.

No.

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MS. SESHENS:

Objection to the form.

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THE WITNESS:

Am I supposed to wait

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until you say "objection"?
MS. SESHENS:

You are.

BENDISH REPORTING, INC.
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If you could

PICARD v. KATZ, et al.

CONFIDENTIAL

DAVID M. KATZ 12/28/11
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A.
Q.

Advice from counsel?

A.

Yes.

Q.

Not that I know of.
So, yes or no, did you ever ask any

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lawyer to determine whether Madoff should be

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registered as an IA?

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A.
Q.

David Katz?

A.

Yes.

Q.

No.
Did any Sterling partner ever reach

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out to an attorney to determine whether Madoff

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should be registered as an IA?

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MS. SESHENS:
A.

Objection to the form.

Q.

I don't know.

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You don't know.
At that time, in -- back in 2004 time

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frame we're talking about, what was your

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understanding as to whether Madoff was registered or

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not with the SEC?

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A.

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Q.

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was registered?

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A.

I always assumed he was.

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25

Q.

So you always believed that Madoff

Um-hum.
And what did you base that

understanding on?
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Q.

Did you end up pulling money out of

Bernie in connection with this?

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A.

I don't think so.

I don't think so.

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I pulled money out of Bernie or not put money in

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Bernie to SSP, but I've also put money into Bernie

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and not into SSP after this.

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8

Q.

So you're saying that after this

point you still continued to invest with Bernie?

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A.

I believe so.

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MR. BOHORQUEZ:

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THE VIDEOGRAPHER:

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Is that it?
We're off the

record, the time is 3:28.

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(Recess taken.)

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THE VIDEOGRAPHER:

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record.

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The time is 3:43.

We're back on the

tape 5.

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MR. BOHORQUEZ:

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I can -- I can just

clear it up.

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This is the beginning of

THE WITNESS:

Okay.

BY MR. BOHORQUEZ:
Q.

Mr. Katz, earlier I had asked you

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whether Mr. Tepper provided any legal advice in

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connection with the registration issue.

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25

A.
Q.

Correct.
Right?
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A.
Q.

Yes.
Do you want to clarify your response

as to that question?

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A.

Sure.

Marvin thought there might be

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a downside as -- as it relates to third-party risk,

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as far as money goes.

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Q.

And without disclosing the content of

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this legal advice on this issue, what third-party

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risk are you referring to?

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A.
Q.

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A.
Q.

I don't believe so.
Did Mr. Tepper provide this counsel

in the form of a verbal discussion at a meeting?

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And did Mr. Tepper provide this

counsel in the form of a memo?

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I -- that's all I remember.

A.
Q.

I -- I believe so.
And do you know if Mr. Tepper

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communicated with any outside counsel with respect

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to the registration investment issues, adviser

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issues?

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A.
Q.

I don't know that.
And without disclosing the content,

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what is third-party risk in the content -- in the

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context of a registration?

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A.

Somehow Sterling would be liable for
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something Sterling Stamos does.

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Q.

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A.

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Q.

Okay.

And --

That's the way I understood it.
Putting aside any communications with

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Mr. Tepper, did you have any discussions with your

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partners concerning potential liability for Sterling

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with respect to what Sterling Stamos would do in

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connection with the registration?

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MS. SESHENS:

I just caution, so long

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as you can answer that by excluding any

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communications with counsel.

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15

Q.

Why don't I just ask this as a yes or

no.
A.
Q.

Okay.
Yes or no, did you have any

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discussions with your partners, aside from

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Mr. Tepper, concerning any potential liability for

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Sterling with respect to whether Sterling Stamos

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would have to register?

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A.
Q.
A.
Q.

Yes.
Who were those partners?
I think most all were there.
And when you say "there," are you

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referencing a --

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A.

A -BENDISH REPORTING, INC.
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Q.

No?

Did Stamos ever express to you

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that -- that as a fiduciary Sterling Stamos --

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that -- strike that.

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Did Stamos ever express to you that

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because he was a fiduciary, that he could -- that

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Madoff would not be able to pass Sterling Stamos'

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due diligence?

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A.
Q.
A.

Because he was a black box.
For instance.
For -- that's what it was.

Yes, I

knew that beforehand.
Q.

So, just so I'm clear, Stamos

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expressed to you that because Bernie was a black box

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he couldn't pass Sterling Stamos' due diligence?

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A.

No.

I'm saying that Bernie was a

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black box, so he could not pass Bernie's -- Peter's

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test, because Peter didn't take in any black boxes.

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Q.

And is that a discussion that you had

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with Mr. Stamos?

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A.

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Q.

No.
So how did you understand that Bernie

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couldn't pass Sterling Stamos' test because Bernie

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was a black box?

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A.

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Because I know Bernie is a black box,

and I know they didn't take black boxes.
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you understood that Madoff was registered?
A.
Q.
A.
Q.
A.
Q.

Correct.
You recall -Yes.
-- testifying to that generally?
Yes.
And you testified that it was your

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understanding, in sum and substance, that Madoff was

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always registered; is that correct?

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11

A.
Q.

Correct, yes.
And did you have an understanding at

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the time as to the capacity in which Madoff was

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registered?

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A.
Q.
A.
Q.

What type of registration?
Yes.
No.
Did you distinguish in your mind

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between registration as an investment adviser as

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opposed to registration in some other capacity?

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A.
Q.

No.
Did you understand Madoff to be

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registered in some capacity during the entire time

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that you were invested with Madoff?

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25

A.
Q.

Absolutely.
And what did you understand Madoff
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being registered to mean?

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A.

That there was somebody or some --

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some organization that would overlook what he's

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doing and, you know, give him the once-over.

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Q.

Now, do you recall that Mr. Bohorquez

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asked you some questions about Sterling Stamos

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documents that listed some individuals as,

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quote/unquote, investment professionals?

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10

A.
Q.

Yes.
Do you -- at any point -- at any

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point in time, did you ever consider Saul Katz, your

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father, to be an investment professional at Sterling

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Stamos?

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15

A.
Q.

No.
At any point in time did you ever

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consider yourself to be an investment professional

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at Sterling Stamos?

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A.
Q.

No.
At any point in time did you ever

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consider Fred Wilpon to be an investment

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professional at Sterling Stamos?

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A.
Q.

No.
At any point in time, Mr. Katz, did

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you become familiar with Sterling Stamos' due

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diligence process?
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