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 B

1

1

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

2

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

3
4
5

----------------------------------x

6

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

7
8

Videotaped
Deposition of:

Plaintiff,
PETER STAMOS

9

vs.

10
SAUL B. KATZ, et al.,
11
12

Defendants.
----------------------------------x

13
14
15

Transcript of testimony as taken by and before

16

LESLIE ROCKWOOD, Certified Shorthand Reporter, RPR and

17

Notary Public of the State of California, at the offices

18

of Shearman & Sterling, Four Embarcadero, Suite 3800,

19

San Francisco, California, on Thursday, January 5, 2012,

20

commencing at 9:48 a.m.

21
22
23
24
25

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1

That when -- if and when the ruling was made, we would

2

have a time frame to get registered, which is, you know,

3

6 to 12 months.

4

So that would suggest that, you know, in the

5

next two months, we should decide.

6

got the two-months time frame from.

7
8
9

Q.

I don't know where I

And when you say "the ruling was made," what

ruling were you referring to?
A.

Well, I believe that the Securities &

10

Exchange Commission -- this is what the article is

11

referring to -- was divided and hadn't decided yet, but

12

that they were going to decide.

13

that that was our intention anyway.

14

Q.

All right.

And I should also say

Just to speed things along, when

15

you're saying "the ruling," was it a proposed regulation

16

by the SEC that was going to require a registration of

17

hedge funds?

18

MS. SESHENS:

Objection to the form.

19

Q.

BY MS. GRIFFIN:

If you know.

20

A.

My understanding, both from this article as

21

well as from other things that I recall reading from

22

Schulte, Roth, for example, was that this was something

23

that was being considered by the SEC, that we should be

24

prepared for that.

25

required or not, we intended to register.

It may be required.

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Whether it was

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1
2

Q.

You also wrote in this email that, "I have a

call with Davis Polk tomorrow."

3

You testified previously that Schulte, Roth

4

was your primary counsel -- outside counsel, I believe;

5

is that correct?

6

A.

That's correct.

7

Q.

Was Davis Polk also Sterling Stamos' legal

8

counsel?

9

A.

I believe we used Davis Polk -- I recall

10

using Davis Polk for certain select items of our legal

11

process.

12
13

Q.

Can you tell me for what certain select items

of legal process you would use Davis Polk?

14

A.

The only one that I can specifically recall

15

was we used Davis Polk to help us with the separation

16

agreement we had with Noreen Harrington.

17

Q.

Okay.

Do you recall -- and I'm not trying

18

to get into the substance of your conversations with

19

counsel.

20

Polk about the SEC proposed investment regulations --

21

investment advisor?

22

A.

But do you recall speaking with anyone at Davis

I don't personally recall having that

23

conversation myself.

I have a vague recollection of us

24

having conversations with -- "us", meaning our firm --

25

having conversations with both Schulte, which was our
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outside counsel for the firm, and with Davis Polk about

2

what the implications would be for registration both for

3

our firm, as well as for the Wilpon and Katz family and

4

their partners.

5

Q.

And you say, "with regard to what the

6

implications would be for registration for both our firm

7

and as well as for the Wilpon and Katz families and their

8

partners."

9

What did you mean by that?
MS. SESHENS:

I want to ask counsel to at

10

least either instruct or ask the witness to exclude from

11

his answer any communications that may have been with

12

counsel.

13

MR. GOUDISS:

Yeah.

I join the objection.

14

If you can answer the question without

15

reference to specific legal advice that you received,

16

please do so.

17

THE WITNESS:

The only thing I recall is --

18

well, with regard to the firm, it was straightforward.

19

Registration would be the responsibility of working with

20

our outside counsel, Schulte, Roth & Zabel.

21

recall if at this time we had -- I believe Derek Daley

22

might have been operating as our -- it's July 14th, 2004.

23

We might have had Derek Daley as our internal general

24

counsel working with them.

25

conversation with regard to registering for the firm.

And I don't

So Schulte would be the

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I believe in regard to Davis Polk, the issue

2

was something that I believe I testified to 18 months

3

ago.

4

the issue of confidentiality and privacy with regard to

5

his family and the affiliated partners and that that was

6

going to be an issue that we wanted to have -- that Saul

7

wanted to have addressed by -- I believe that was by

8

Davis Polk.

9

registration would be for what would have to be revealed

10
11

And that is that Saul had -- Saul Katz had raised

So what would -- what the implications of

about their personal assets, for example.
Q.

BY MS. GRIFFIN:

And you refer to that

12

Saul Katz had raised the issue of confidential and

13

privacy with regard to his family and affiliated partners

14

and that was going to be an issue.

15

connection to Madoff?

16

A.

Did that have any

I think in -- there was two aspects of it.

17

One is that in general, wealthy families like to keep

18

their personal investments private and their personal

19

capital levels private, and that they were a very private

20

family, that's the Wilpons and the Katzs.

21

recall that, you know, they weren't listed, for example,

22

with Forbes 500.

23

At the time, I

So privacy for the family.

But I also recall a specific question

24

about -- that I recall Saul referring to me regarding

25

Mr. Madoff's concerns for disclosure, vis-à-vis their
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relationship with Saul and Fred, and whether that would

2

in any way, shape or form, hurt their relationship with

3

Mr. Madoff.

4

confidential.

5

Q.

Because he, too, was very private, very

And were you involved in -- I'm not asking,

6

again, for the substance of the conversations.

But were

7

you involved in any calls with Davis Polk concerning

8

registration, Saul Katz and/or Sterling Equities and

9

Madoff?

10

MS. SESHENS:

Objection to the form.

11

MR. GOUDISS:

You can answer that "yes" or

12

"no", if you understand.

13

MS. SESHENS:

I think that -- yeah.

14

THE WITNESS:

Was I involved?

15

MR. GOUDISS:

In conversations with

16

Davis Polk on the subject.

17

THE WITNESS:

I don't recall specifically

18

having conversations myself.

19

conversations internally with my staff that I believe may

20

have been transmitted to Davis Polk.

21

that call, but I don't recall it.

22
23

Q.

BY MS. GRIFFIN:

I do recall having

Okay.

I may have been on

Do you know who from

your staff would have had those calls with Davis Polk?

24

MS. SESHENS:

Objection to the form.

25

THE WITNESS:

"Would have" suggests

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conversation.

2
3

Q.

And do you recall any part of the

conversation?

4

A.

No.

5

Q.

Did you have other family members who were

6

also invested with Madoff?

7

A.

Yes.

8

Q.

And can you tell me who they -- which of your

9

family members were invested with Madoff?

10

A.

Yes.

My father, Spiro, my two brothers,

11

Basil and Chris, and my father-in-law, Mr. Chong Hon

12

Char.

13

That's C-H-O-N-G, H-O-N, C-H-A-R.

14

Q.

How did they come to be investors with

A.

In the case of my father, it was around -- on

Madoff?

15
16

or around the same time that I became an investor, either

17

at the same time or soon thereafter.

18

I would know -- or it might actually indicate that.

19

it was also at the invitation of Mr. Katz and facilitated

20

by Mr. Friedman and Ms. Maucher.

21

and I.

22

If I saw documents
And

That's for my father

For my brother -- I apologize.

I think I

23

misspoke.

I think I said that my brother Chris was an

24

investor.

He was actually -- I don't believe he was an

25

investor.
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today.

2
3

Q.

But it wasn't an issue for you at Sterling

A.

We didn't make any investments with

Stamos?

4
5

Bernie Madoff.

6

questions.

7

Q.

If we did, we would have asked those

I believe you testified earlier that you

8

didn't have any problems with the disclosure requirements

9

required by investment legislation; is that right?

10

A.

We didn't have any problems, no.

11

Q.

But you had an understanding that Madoff had

12

concerns with that?

13

A.

14

other managers did.

15

referred to this as about 50/50.

16

funds wanted to register and half didn't.

17

That he might have concerns for that, as
I think, you know, that the articles
About half of the hedge

And so, for example, in the conversation we

18

had with Mr. Merkin, he hadn't decided, but he ultimately

19

decided not to register.

20
21

Q.

Okay.

We decided to register.

But at this time period, in August of

2004, you did not understand what Madoff's concerns were?

22

MS. SESHENS:

Objection to form.

23

THE WITNESS:

I don't believe I testified to

24

that.

If I did, what I meant to say was I believe I

25

understood that his concerns were confidentiality.
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1

believe from -- that those concerns were allayed to the

2

satisfaction of Mr. Madoff and Mr. Katz, because Mr. Katz

3

continued to maintain investments with Mr. Madoff.

4

I should say that I know it's vague, what I

5

remember, because it's many years ago, but what I have

6

conviction on is that if I had any inkling of there

7

being a problem there, I would have gone immediately to

8

Mr. Katz for two reasons, 1, as a fiduciary to him, I'd

9

be worried.

10

Number 2 is I was in competition with

11

Mr. Madoff, and I would have loved to have had several

12

hundred million dollars of assets from the Katz and

13

Wilpon family with me.

14

around is that I had no understanding that there were

15

issues there.

16

What I have deep conviction

On the extreme large size, several hundred

17

million dollars of assets going into my firm would have

18

been a remarkable increase in our assets under

19

management.

20

But on the personal side, I have friends who

21

invested with us, one in particular that I recall,

22

Jack Gallagher, who I considered as close to a family

23

member as I could imagine.

24

Long Island Jewish.

25

I'd meet my wife.

He was the CEO of North Shore

If it weren't for him, I don't think
He had invested with our friends and

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family fund.

2

And in 2005, comparing our pre-tax returns to

3

Mr. Madoff's, he said, "Peter, I want to redeem from you

4

and put my money all back with Madoff.

5

to do this, Peter.

6

I'm sorry I have

His returns are better than yours."

If I had any knowledge -- or if Mr. Katz or

7

Mr. Wilpon had any knowledge at that time, we would have

8

done everything we could to persuade Mr. Gallagher to

9

keep his money with us.

10

But I know as of 2004, 2005, we

had no inkling.

11

(Exhibit Trustee 300 was marked for

12

identification.)

13

Q.

BY MS. GRIFFIN:

I'm sorry, Mr. Stamos.

I'm

14

going to give you what's been marked as Trustee's 300.

15

And just for the record, we're going to give you a copy

16

of it.

17

Ms. Bieber.

It's a privilege log that was provided to us by
And we're going to give copies to everybody.

18

And you don't need to read the whole thing.

19

I mean, you're welcome to, feel free, but there are two

20

entries that I'm going to be directing your attention to,

21

and they're entries 431 and 489.

22

MR. DITCHFIELD:

431 and?

23

MS. GRIFFIN:

489.

24

THE WITNESS:

Can I mark this?

25

MR. GOUDISS:

Do you want him to mark the

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year, it was in February, that in some point in the

2

coming months that I'd like to have a follow-up meeting

3

with Ashok Chachra and Ms. Harrington who had joined us,

4

to have them have a follow-up meeting because we were --

5

for the reasons I just described.

6

we have that meeting, I didn't set the time until later.

7

It was requested that

Q.

Did the meeting, the February '03 meeting

9

A.

Yes.

10

Q.

Were you present at that meeting?

11

A.

I don't believe I was present.

8

happen?

I think that

12

was a meeting that Ms. Harrington and Mr. Chachra had

13

just themselves.

14

Q.

Okay.

And did you come to hear about what

15

happened at that February 3rd meeting with Mr. Merkin and

16

Ms. Harrington and Mr. Chachra?

17

A.

Yes.

18

Q.

And what did you come to hear had happened?

19

A.

So while it was several years ago, the reason

20

why I remember or at least I believe that I wasn't in the

21

meeting, because I remember getting briefed on the

22

meeting by Ms. Harrington, and I remember how she

23

expressed to me that she had felt that Mr. Merkin had not

24

been respectful to her, that she may have even said

25

disrespectful to her, that she felt that, she felt
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slighted, she felt that the firm was slighted, and I

2

remember trying to calm her down and try to explain to

3

her that this is Mr. Merkin's style, he's very

4

professorial, he tends to be paternalistic and the like.

5

And so I remember that conversation very distinctly.

6

MR. GOUDISS:

Could I stop there?

If you go

7

to the question before, I think you said or at least it

8

was taken down as "February 3rd meeting," and I thought

9

you had meant to say February 2002 as opposed to putting

10

a specific date on it.

11
12

THE WITNESS:

Sorry.
I don't believe the meeting

occurred until May or June.

13

Q.

BY MS. GRIFFIN:

Ah.

Thank you.

14

A.

So I requested a meeting in February, I

15

believe the meeting occurred in May or June.

16

I believe that is because I think on July the 1st we were

17

launching the levered vehicle and I remember a series of

18

meetings.

19

Q.

The reason

The levered fund.
And did Ms. Harrington, aside from telling

20

you how she felt after that meeting, tell you about the

21

substance of her discussions with Mr. Merkin?

22

A.

I don't know whether she told me at that time

23

when we first had the debrief or if it wasn't until later

24

when we had an investment committee meeting of the

25

substantive concerns that she had.

But at some point she

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expressed her substantive concerns.

2
3

Q.

And can you tell me what substantive concerns

she expressed to you concerning Mr. Merkin?

4

A.

Yes.

What I recall is that she felt that Mr.

5

Merkin was not providing the firm with adequate

6

transparency, a point I disagreed with.

7
8

Q.

Is that all she expressed to you about her

concerns?

9

A.

No.

She at one point during the discussion,

10

which became somewhat of a heated argument, she expressed

11

her concern that she didn't think that Mr. Merkin was

12

trustworthy and that she thought that there was a

13

possibility that he was actually just a feeder to Bernie

14

Madoff.

15

Q.

When she said -- what was your understanding

16

of what she meant by she didn't think Mr. Merkin was

17

trustworthy?

18

A.

I couldn't separate out what portion of that

19

emotion she was expressing was her feelings of being

20

treated disrespectfully, which as she interpreted it, her

21

frustration at his opaqueness in the first meeting, her

22

sense of, you know, industry knowledge.

23

the source of it.

24

interpretation.

25

Q.

I couldn't get

It was very different than my own

And when you say -- when you indicated that
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she -- that one of her concerns is that Merkin might

2

possibly be a feeder fund to Bernie Madoff, what did you

3

mean by that?

4

A.

She expressed, and I believe it was sort of

5

in a passing, kind of end of the argument, you can't

6

trust this person type of thing, you know, he might even

7

be not the manager himself, for example, he might be just

8

a feeder fund, a fund that channels money to Madoff and

9

isn't actually doing what it is he says he's doing, which

10

would be a -- something I would remember because it would

11

be such a dramatic contradiction to everything we knew

12

about Ezra Merkin, had come to know about him in the

13

prior year of being an investor with him, and everything

14

that we had learned based upon all of his references and

15

all of his reputation in the industry.

16

Q.

You indicated that Ms. Harrington suggested

17

Mr. Merkin had opaqueness at this first meeting.

18

did you mean by that?

19

A.

What

So Mr. Merkin's style in meetings typically

20

in the first meeting, especially, I should say in the

21

first meeting, and especially with members of the staff

22

as opposed to the principal, tends to be very

23

professorial and he tends to be somewhat condescending.

24

And she described things that sounded to me fall into

25

that category.

And in that context it was hard for her
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to get, I think, as she would put it, a straight answer

2

to some of the questions she was trying to have answered.

3
4
5

Q.

Did she indicate what types of questions she

asked that she wasn't getting answered by Mr. Merkin?
A.

I don't remember specifics about it, I just

6

remember the general non-responsiveness of Mr. Merkin to

7

the questions she was trying to get answers to.

8
9

Again, in sharp contrast to my own experience
with him where he seemed to be very upfront and very

10

direct with me about what it was he did, how he did it,

11

with absolute clarity.

12

Q.

Was there anybody else present for this what

13

you described as a heated debate between you and Ms.

14

Harrington?

15

A.

Yes.

16

Q.

Who else was present?

17

A.

I'm not sure of who else was present in the

18

room versus on the phone, but, to the best of my

19

recollection, in the room, I believe Derek Daley was

20

present, I believe Ashok Chachra was present, I believe

21

Ellen Horing was present, I'm fairly sure that Saul Katz

22

was, at least for part of the meeting, on a conference

23

call, meaning he dialed into our conference room.

24

you know, it's so many years ago now, I don't even

25

remember whether I was physically in the room myself or
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whether I was calling in from California.

2

Q.

Was David Katz at this meeting or --

3

A.

I don't recall.

4

Q.

Okay.

5

Did Ms. Harrington mention anything

about Madoff at this meeting?

6

A.

I don't recall her mentioning anything about

7

Madoff at the meeting other than the passing comment that

8

Mr. Merkin might have been a feeder to Mr. Madoff.

9
10

MR. GOUDISS:

when you hit a breaking point.

11
12

MS. GRIFFIN:

That's fine.

Can we go off the

record, please.

13
14

It doesn't have to be now, but

THE VIDEOGRAPHER:

We're off the record at

3:25.

15

(Recess.)

16

(Exhibit Trustee 304 was marked

17

for identification.)

18

THE VIDEOGRAPHER:

19
20

We're back on the record

at 3:42.
Q.

BY MS. GRIFFIN:

Mr. Stamos, I'm showing you

21

what's been marked as Trustee's 304.

22

Derek S. Daley, sent Wednesday, June 18, 2003 at

23

7:27 p.m. to Peter Stamos.

24

Bates range SSMT02406069.

25

Forward:

It's an email from

Levered fund.

Do you want to take a minute and go ahead and
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recommendation she was making to us when she was very

2

enthusiastic about this investment.

3
4

Q.

Okay.

You were giving some testimony earlier

today about Ezra Merkin.

5

A.

Yes.

6

Q.

Do you remember that generally?

7

And you testified in sum and substance that

8

prior to December 11th, 2008, you viewed Mr. Merkin as

9

one of the top five most trusted managers in the

10

business.

11

A.

Yes.

12

Q.

Do you recall that generally?

13

A.

Yes.

14

Q.

And where in that realm of top managers of

15

trustworthiness, if anywhere, did you put

16

Bernard L. Madoff prior to December 11th, 2008?

17

A.

Prior to December 11th, 2008, I put him in

18

that same pantheon of managers.

Not necessarily a

19

manager who would go into our portfolio, because he

20

wouldn't meet the requirements that we had, but I have a

21

number of managers that are in that pantheon.

22

goes out to ten.

Maybe it

23

So for example, the ones that I invited to be

24

on the investment advisory board for me with Major League

25

Baseball, they all had not only that level of reputation,
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but they specifically added to what it is we did for

2

Major League Baseball, which is portfolio construction

3

and manger selection and so on.

4

But in that pantheon, I would include people

5

like Seth Klarman of Baupost, who I've mentioned several

6

times, who also would not make it through our due

7

diligence process because of the level of opaqueness in

8

his portfolio.

9

But, you know, Bernard Madoff was held by me

10

and by virtually everyone else I know in the industry in

11

that pantheon of top ten, let's call it.

12

Q.

Now, you, just a short while ago, gave some

13

testimony about Mr. Katz's suggestion in 2008 of a fund

14

to funds that consisted of black boxes.

15

A.

Yes.

16

Q.

Do you recall that?

17

A.

Yes.

18

Q.

And do you recall that that suggestion was

19

made at a Sterling Stamos board meeting?

20

A.

Yes.

21

Q.

And do you also recall during that board

22

meeting, that Mr. --

23
24
25

Well, let me ask it this way:
who was at that board meeting?
A.

Yes.
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your experience at Sterling Stamos, were there times when

2

managers would not pass Sterling Stamos' diligence

3

process?

4

A.

Yes.

5

Q.

And in your view was a manager's failure or

6

inability to pass Sterling Stamos' due diligence process

7

an indication that that manager was engaged in fraud?

8

A.

I can't recall of an indication of that ever

9

occurring.

What I can recall is why we made redemptions

10

and the specific lists of rationale for why we made

11

redemptions never includes suspicion of fraud because

12

they didn't meet a due diligence requirement.

13

Q.

And in terms of the transparency reports that

14

you spoke of earlier, did -- there were managers, were

15

there not, who either were unwilling or unable to fill

16

out transparency reports; is that correct?

17

A.

That's correct.

And so, to be clear, if

18

someone wouldn't fill out a transparency report, it could

19

be for any number of reasons, and if they didn't fill out

20

the transparency report, would that increase the

21

possibility of them committing fraud?

22

might be one of the reasons that we would want to be

23

concerned about.

24

concern for any of the managers that we invested with.

25

In the first case, we invested with managers who were

Yes.

And that

But I don't recall ever having that

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highly reputable with impeccable track records, long

2

track records, and who had met reference checks.

3

So the one that strikes me as the most

4

obvious is David Shaw.

D.E. Shaw is spectacular, but he

5

didn't pass our due diligence requirements.

6

frankly, I wish I had him in my portfolio this last year,

7

from a performance standpoint.

8

well for 25 years.

9

become a fiduciary, you have to live by a set of rules

Quite

He's performed really

So, no, it's more that when you

10

that are consistent, and those rules over time we believe

11

result in a better portfolio.

12

sometimes some very good investments as a result of that.

13

Q.

Okay.

But you walk away from

If I could ask you to turn your

14

attention just briefly to Exhibit 308, switch from 303 to

15

308.

16

A.

17

Wilpon.

18

And I apologize, I forgot to mention Jeff

well.

19
20

Jeff Wilpon made a number of referrals for us as

Q.

In terms of introducing you to potential

managers?

21

A.

Managers, yes.

22

Q.

And other than Mr. Jeff Wilpon's introduction

23

to managers, do you recall him having any involvement in

24

the due diligence process at Sterling Stamos?

25

A.

Actually, again, quite the opposite.
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infective, but what David did have is -- and does have, I

2

believe, to this day, some of Saul's judgment and

3

instincts about people.

4

you know, counsel me in the same way, in this case not

5

like a father but more like brother, and ask me questions

6

about the managers.

7

days he even came on some manager interviews with us,

8

gave us some of his judgment.

9

deferred the investment decisions to us.

10

Q.

And so David would regularly,

And that's why I think in the early

But, again, like Saul, he

Now, you also testified in response to

11

questions to Ms. Griffin that you -- not you personally,

12

but Sterling Stamos was marketing Mr. Katz, Mr. Wilpon

13

and David Katz to potential investors.

14

Do you recall that?

15

A.

Yes.

16

Q.

And can you tell me why it is that Sterling

17

Stamos, or what was SP Capital at the time, was marketing

18

those individuals to potential investors?

19

A.

Because they had a, if you'll pardon the

20

phrase, sterling reputation in the New York area in

21

general -- I mean, in the investment world in general,

22

because of their remarkable track record in real state,

23

remarkable track record with American Securities and

24

private equity, and that gave us credibility.

25

addition to the fact that they owned the New York Mets,
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were at the time highly respected owners.

A portion of

2

the Mets, I believe, at the time.

3

they owned 50 percent or more at this point in time.

4

that opened doors both on the manager's side, the people

5

that we invested with.

6

know, use the cachet of the New York Mets and the ability

7

to have access to the owners' box and to throw out the

8

first pitch or to have a charitable event at Shea Stadium

9

as an incentive for hedge fund managers to consider us.

I don't know whether
And

Specifically they would, you

10

I think I got an allocation to Michael Lowenstein when he

11

asked for a charitable event that they could throw out

12

the first pitch or have a couple seats.

13

day I got access to him.

14

Then the next

That's on the one hand.

On the other hand, they had the reputation of

15

being savvy businessmen, very thoughtful, very credible.

16

And so a number of other limited partners who chose to

17

invest with us would do it under the halo of the fact

18

that Saul and Fred had chosen us as their investment

19

manager for a significant portion of their assets.

20

Q.

Okay.

Last set of questions.

Mr. Stamos, at

21

any point prior to December 11th, 2008, did you believe

22

that there was a high probability that Bernie Madoff was

23

engaged in fraud?

24

MS. GRIFFIN:

Objection.

25

THE WITNESS:

No.

If I had any inkling

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whatsoever, I think as I testified before, that that were

2

occurring -- first of all, on behalf of my business

3

partners, but also a number of our limited partners still

4

had a significant amount of investments with -- with Mr.

5

Madoff, I would have let them know that I had those

6

concerns.

7

number of investors, I think I testified to that

8

18 months ago, by name, the kinds of questions they asked

9

me.

I was specifically asked those questions by a

And I could not come up with any rationale for why

10

that would be occurring.

11

That's the right reason for

doing it.

12

In addition, it would be an incredible boon

13

for us if that were the case, because then I could have

14

all that capital come and invested with me, and I'd been

15

trying for years to get them to move 90 percent of their

16

assets to me and to keep 10 percent with Bernie Madoff as

17

a side account for their personal investments.

18

time did I have any inkling of that.

19

Q.

BY MS. SESHENS:

So at no

And is your answer the same

20

if the question is at any point prior to December 11th,

21

2008, did you believe that there was a high probability

22

that Bernie Madoff was engaged in a Ponzi scheme?

23

MS. GRIFFIN:

Objection.

24

THE WITNESS:

Same answer.

25

Q.

BY MS. SESHENS:

And at any point prior to

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substance, but over time that deferral became even more

2

and more in form and in substance.

3
4

Q.
that.

MS. SESHENS:

FURTHER EXAMINATION
BY MS. SESHENS:

9
10

I just have one question to

clarify.

7
8

Are you saying -- strike

Okay.

5
6

BY MS. GRIFFIN:

Q.

Mr. Stamos, if you could look at page 10 of

the document.

11

A.

Uh-huh.

12

Q.

And in the description of your role at the

14

A.

Uh-huh.

15

Q.

Does that -- where it says "Mr. Stamos is the

13

top.

16

chief executive officer of Sterling Stamos and is

17

ultimately responsible for all investment decisions," do

18

you see that?

19

A.

That answers the question.

20

Q.

Does that refresh your recollection that this

21
22

document -A.

That refreshes my recollection of this

23

document and I believe if you would review all of our

24

documents, that is consistent throughout all of our

25

documents that I remain ultimately responsible for all
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investment decisions of the firm.

2
3

MS. SESHENS:

Thank you.

I have nothing

MR. GOUDISS:

I want to thank the witness,

further.

4
5

but before we go off the record, I want to make a short

6

statement about a letter that Fernando sent us.

7

THE WITNESS:

May I --

8

MR. GOUDISS:

The witness is excused.

9
10

This

only relates to a discovery letter we got earlier in the
week.

11

MS. GRIFFIN:

Okay.

12

MR. GOUDISS:

Thank you again, sir.

13

MS. SESHENS:

Thank you for your time.

14

MR. GOUDISS:

This won't take long, but --

15

MS. SESHENS:

That's fine.

16

MR. GOUDISS:

For the record, Ms. Bieber

17

received a letter on January 2nd from one of your

18

partners, Mr. Bohorquez, identifying certain alleged gaps

19

or deficiencies in our document production.

20

the press of these depositions and travel, we have not

21

responded in writing, but I wanted to lay out very

22

briefly responses to certain of the issues and an

23

invitation to continue to work with you on other of the

24

issues.

25

Because of

With respect to the categories identified in
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