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 V
1
1
C O N F I D E N T I A L
2
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
ADV. PRO. NO. 08-01789 (BRL)
3
4
5
-------------------------------x
SECURITIES INVESTOR PROTECTION
CORPORATION,
Videotaped
6
Plaintiff-Applicant,
7
8
v.
BERNARD L. MADOFF INVESTMENT
SECURITIES, LLC,
9
10
Rule 2004
Examination of:
DAVID KATZ
(Volume I)
Defendant.
-------------------------------x
In Re:
11
BERNARD L. MADOFF,
12
13
Debtor.
-------------------------------x
14
15
TRANSCRIPT of testimony as taken by and before
16
NANCY C. BENDISH, Certified Court Reporter, RMR, CRR
17
and Notary Public of the States of New York and New
18
Jersey, at the offices of Baker & Hostetler, 45
19
Rockefeller Plaza, New York, New York on Tuesday,
20
August 31, 2010, commencing at 10:10 a.m.
21
22
23
24
25
BENDISH REPORTING, INC.
Litigation Support Services
877.404.2193
www.bendish.com
80
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
triggered that discussion with your father?
A.
Q.
That's enough.
Had you ever before raised the issue
of diversification with your father prior to 2001?
A.
Q.
A.
Q.
Yeah, I'm sure.
Do you recall when?
No, I couldn't pick dates.
Was it in the '80s, when you were
starting at Sterling?
A.
Probably around the '80s, maybe at
the end, I'm guessing, more in the '90s.
Q.
Do you recall actually raising the
issue of diversification in the '90s?
A.
I remember one conversation
specifically and I'm not sure of the year.
Q.
What is that one conversation
specifically that you recall?
A.
That's the one I had with my father
19
in his office, where I was trying to get him to
20
focus, which isn't easy sometimes, and I asked him,
21
you know, if he was dead, he looks down, he'd think
22
I'm insane, if he saw me doing this, put all my
23
money in one place, he'd think I was insane and he'd
24
kill me.
25
Q.
Why would he think you are insane?
81
1
A.
Can't have all your money in one
2
place.
3
and it's not -- doesn't make sense.
4
I'm supposed to be taking care of my sisters
Q.
I'm sorry, when do you think this
5
conversation was?
6
A.
7
Q.
Excuse me.
Okay.
'90s.
Prior to that conversation had
8
you had any discussions with your father about
9
diversification or what he thought about having
10
11
12
13
14
15
16
money in one place?
A.
Q.
I don't recall.
No?
So why did you think he'd be
angry or, I'm sorry, what did you say?
A.
Q.
A.
Angry?
Why did you think he'd be insane?
Why did I think he'd -- oh, why did
17
he think I would be insane?
18
money in one place just doesn't make -- it doesn't
19
make any sense.
20
every rule there is.
21
Q.
Because having all your
Makes no sense.
Okay.
It goes against
Did you have any conversations
22
with anyone other than your father that informed
23
that opinion?
24
25
MS. SESHENS:
A.
Objection to the form.
No, not that I can think of.
84
1
A.
2
Q.
3
A.
4
Q.
Oh, yeah.
I'm sure.
Did you agree with that decision?
It's not my decision.
Other than the discussion in the '90s
5
with your father, between that conversation and the
6
discussion you had in '01 with him about
7
diversification, did you have any other
8
conversations with your father about
9
diversification?
10
A.
11
I'm sure, but for the life of me I
couldn't tell you what, but I'm sure there were.
12
Q.
Okay.
And that conversation in the
13
'90s, did you talk about Madoff's strategy in any
14
way?
15
16
17
18
19
20
21
22
23
24
25
A.
Q.
No.
Did you talk about the amount of
money he had in Madoff, specifically?
A.
Q.
No.
Did you talk about any concerns that
either of you had about Madoff, if any?
A.
Other than there's too much money in
one place?
Q.
A.
Yes.
No.
That was the only thing.
Otherwise we'd take everything out.
PICARD v. KATZ, et al.
CONFIDENTIAL
DAVID M. KATZ 12/28/11
90
1
2
A.
Q.
I don't.
I don't know.
The reference to the fund of funds in
3
the memo, is that a reference to SS -- to Sterling
4
Stamos?
5
6
7
A.
Q.
A.
Q.
10
11
But you don't recall any discussions
with Mr. Lifton about investing in Stamos?
8
9
I believe so.
A.
Q.
Me, personally?
Yeah.
No.
Do you recall if any of your partners
12
had discussions with Mr. Lifton about investing in
13
Stamos?
14
15
16
17
18
19
20
21
22
MS. SESHENS:
A.
Objection to the form.
No, I don't know if they would -- how
would I know if they had a conversation with him?
Q.
A.
Q.
Well, did they tell you?
No.
You see in the second paragraph --
oh, MK is your uncle, Michael Katz, right?
A.
Q.
Correct.
Okay.
The second paragraph is, "I
23
spoke to Ron, and the name of his hedge fund is
24
Bedford Oak."
25
A.
Do you see that paragraph?
Um-hum.
BENDISH REPORTING, INC.
877.404.2193
PICARD v. KATZ, et al.
CONFIDENTIAL
DAVID M. KATZ 12/28/11
91
1
Q.
And then Michael goes on to write:
2
"He wanted to know if we will be interested in
3
investing in this fund.
4
David would follow up" --
5
A.
6
7
8
9
10
11
12
13
14
15
16
17
18
Q.
I told him that Peter or
Right.
-- "since they are in charge of the
fund."
A.
Q.
Right.
Did you or Mr. Stamos follow up with
Bedford Oak?
A.
I have no -- I didn't.
I didn't
follow up.
Q.
A.
Q.
Do you know what Bedford Oak is?
No.
And reading this doesn't refresh your
memory in any way?
A.
Q.
No.
And you see where Mr. -- Michael Katz
19
writes that, "I told him that Peter and David were
20
to follow up since they are in charge of the fund"?
21
22
23
A.
Q.
A.
Um-hum.
What does that mean to you?
I was the point --
24
MS. SESHENS:
25
Objection to the form.
Go ahead.
BENDISH REPORTING, INC.
877.404.2193
145
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
BLMIS?
A.
Q.
What's that?
Sorry.
BLMIS, Bernard L. Madoff
Investment Securities.
A.
Q.
No.
So you would never speak with anyone
there about your accounts at any point?
A.
Q.
No.
I just want to go back for a second
to our discussions about Bernie being a black box.
A.
Q.
Yup.
Can you tell me why, or did you think
that was problematic?
A.
Q.
In what way?
Was there anything about Bernie being
a black box that concerned you?
A.
Q.
No.
But I think you said before that the
19
black box meant that you didn't know Bernie's
20
strategy, right?
21
A.
22
23
Q.
I guess my question is, why would
that be problematic in any way?
24
25
Yes.
MS. SESHENS:
A.
Objection to the form.
Why would it be problematic?
146
1
Q.
2
A.
3
4
THE WITNESS:
MS. SESHENS:
MS. ZUNNO:
Q.
11
exactly?
12
A.
13
16
I think you got
So that's why I was
confused by your question.
10
15
Yeah.
one word backwards.
9
14
I think he said it
wouldn't be problematic?
7
8
I don't know.
MS. SESHENS:
5
6
Yeah.
Q.
Let's just start over.
The black box would mean what
What does black box mean to you exactly?
It's a proprietary trading method.
Proprietary trading method meaning
what?
A.
Q.
Meaning it's secret.
And is there anything about the
17
trading method being secret that you have, that you
18
would have concerns about?
19
20
21
A.
Q.
A.
Not in this case, no, absolutely not.
Why not?
Well, I guess Bernie was an
22
outstanding citizen.
23
SEC writes rules with him.
24
25
Q.
He helped computerize NASDAQ,
A lot of reasons.
I guess putting Bernie aside, just
the black box strategy in general --
147
1
A.
2
3
Q.
A.
5
Q.
A.
8
10
Q.
No.
Going back to Sterling Stamos, I
supposed to invest in black boxes, correct?
A.
12
Q.
Right.
So why weren't they supposed to
invest in black boxes?
14
15
-- would you be concerned if an
think you had said that Sterling Stamos wasn't
11
13
Um-hum.
investment manager had a black box strategy?
7
9
-- with a particular investment
manager --
4
6
Um-hum.
A.
We've got enough allocated to black
boxes by being in Bernie.
16
Q.
17
Okay.
Is it fair to say by the creation of
18
Sterling Stamos you were trying to minimize your
19
exposure to black boxes?
20
A.
21
Yeah.
22
Q.
Yeah, to black boxes, sure.
place as well.
23
No.
And having money just -- having money in one
So, it is fair to say by the creation
24
of Sterling Stamos you were trying to minimize your
25
exposure to black boxes?
173
1
Ashok's, whoever that was at the time, and maybe
2
Peter's brother.
3
Q.
4
5
6
7
8
9
10
A.
What was Peter's brother's name?
Well, there was a bunch.
There was
Chris.
Q.
A.
Basil?
Chris and Basil.
Basil wasn't around
a lot; Chris was around more.
Q.
A.
Okay.
Maybe Chris and actually maybe his
11
father, because his father was at the Long Island
12
Investors one, too.
13
14
15
16
17
18
19
Q.
And that's all I remember.
I think you also mentioned being
present at some internal meetings?
A.
Q.
A.
Q.
A.
Um.
At Sterling Stamos?
Correct.
What internal meetings were those?
It would range, you know, depending
20
on when I walked in.
21
closed, I would always stick my head in, probably
22
unwanted, you know, and sit down.
23
You know, it'd be rude if they didn't ask me, so...
24
25
Q.
If I saw the conference door
Or asked to be.
Would you say that prior to Sterling
Stamos registering as an investment advisor that you
174
1
were involved in the investment decisions of
2
Sterling Stamos?
3
A.
4
Q.
Not even close.
Would you say that you were on the
5
senior investment team at Sterling Stamos prior to
6
registering?
7
8
A.
That would defeat the whole purpose
of having Sterling Stamos.
9
Q.
10
What do you mean?
A.
If we were going to do it, we'd do it
11
ourselves, we'd do it.
12
brain.
13
Q.
Right?
We wanted Peter's
Do you know, aside from Peter, who
14
else was involved in the investment decisions of
15
Sterling Stamos?
16
A.
Yeah.
Depending on who you asked.
17
If finances, but it was Peter and Ashok and I guess
18
depending on who -- there's a few other people
19
floating around the office.
20
names.
21
I don't remember their
They're probably not there anymore.
Q.
Prior to Sterling Stamos registering
22
as an investment advisor, did your father, Saul
23
Katz, have any involvement in the investment
24
decisions at Sterling Stamos?
25
A.
About the same I did.
Nothing.
175
1
2
3
Except he went to less meetings, I'm sure.
Q.
which investment managers the funds would invest in?
4
5
So he had no involvement in deciding
A.
Q.
Not that I know, not that I know of.
Do you know if any meetings were
6
scheduled with Madoff and Mr. Stamos as well as some
7
Sterling partners to discuss the issue of Sterling
8
Stamos registering as an investment advisor?
9
10
A.
Q.
11
A.
Wouldn't surprise me.
Why wouldn't it surprise you?
Madoff was registered.
12
friend, give maybe the ins and outs.
13
He's a close
choice.
14
15
16
17
Q.
Logical
Do you recall learning of any
meetings with Madoff?
A.
Q.
No.
Let me just make sure I have that
18
question formed as an actual question.
19
recall learning of any meetings that took place with
20
Madoff regarding the subject of Sterling Stamos'
21
registration?
22
23
24
25
A.
Q.
A.
Q.
Do you
No.
Do you know Ezra Merkin?
Yeah.
How do you know Ezra Merkin?
346
1
2
3
4
5
6
7
8
9
10
MS. SESHENS:
A.
Objection to the form.
In which type of funds Sterling
Stamos would invest?
Q.
A.
Yeah.
Did I ask them?
I might have
overheard.
Q.
A.
Overheard?
When I was sitting in the meetings I
might have overheard them talking.
Q.
Okay.
I guess, well, if you were
11
sitting in on meetings and overheard them talking
12
about funds in which to invest, would you voice your
13
opinion?
14
15
A.
Q.
I wouldn't talk.
When Sterling Stamos was first
16
created, I think you said they weren't supposed to
17
invest in black boxes, right?
18
19
20
21
22
A.
Q.
That was my understanding.
Were there any other types of funds
in which they weren't supposed to invest?
A.
Q.
23
None that I know of.
Okay.
Would you agree that one of the
24
purposes of Sterling Stamos was to diversify away
25
from Madoff?
347
1
2
A.
Q.
Yeah.
Yes.
Would you agree that the fact that
3
Madoff was a black box, was that one of the reasons
4
Sterling wanted to diversify away from Madoff?
5
MS. SESHENS:
Objection.
Katie, I
6
know we've given a lot of leeway on this, this is
7
like the fourth or fifth time this line of
8
questioning has been asked.
9
my objection, we've gone over this, it's been asked
10
and answered and it's captured in the testimony that
11
I think has been elicited thus far.
12
MS. ZUNNO:
So I just want to note
I note your objection.
13
disagree that this was asked and answered.
14
ask my question again.
15
BY MS. ZUNNO:
16
Q.
But I'll
Was the fact that Madoff was a black
17
box one of the reasons Sterling wanted to diversify
18
away from Madoff?
19
A.
20
Q.
No.
So other than diversifying away from
21
Madoff, are there any other reasons why Sterling
22
Stamos was created?
23
A.
24
family office.
25
reason now.
Seemed like a good business, start a
No.
I
I can't think of any other
CONFIDENTIAL
DRAFT
SIPC v. BLMIS No. 08-01789-BR:
Rule 2004 Examination of David Katz
EXHIBIT A
REDACTED
1
PRIVILEGED CONFIDENTIAL
ATTORNEY CLIENT COMMUNICATION
CONFIDENTIAL
DRAFT
SIPC v. BLMIS No. 08-01789-BR:
Rule 2004 Examination of David Katz
EXHIBIT A
PRIVILEGED CONFIDENTIAL
ATTORNEY CLIENT COMMUNICATION
REDACTED
81
3 and it's not -- doesn't make sense.
and it's not -- it doesn't make sense.
Transcription Error
REDACTED
91
91
Met him, one day walked into his office and he
1 was
13 Do you know about Peter Stamos'
I met him, one day I walked into his office and he was
Transcription Error
Do you know about Peter Stamos's
Grammatical Error
REDACTED
2
CONFIDENTIAL
DRAFT
SIPC v. BLMIS No. 08-01789-BR:
Rule 2004 Examination of David Katz
EXHIBIT A
REDACTED
3
PRIVILEGED CONFIDENTIAL
ATTORNEY CLIENT COMMUNICATION
CONFIDENTIAL
DRAFT
SIPC v. BLMIS No. 08-01789-BR:
Rule 2004 Examination of David Katz
EXHIBIT A
REDACTED
4
PRIVILEGED CONFIDENTIAL
ATTORNEY CLIENT COMMUNICATION
CONFIDENTIAL
DRAFT
SIPC v. BLMIS No. 08-01789-BR:
Rule 2004 Examination of David Katz
EXHIBIT A
REDACTED
5
PRIVILEGED CONFIDENTIAL
ATTORNEY CLIENT COMMUNICATION