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 Y

1

CONFIDENTIAL
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
ADV. PRO. NO. 08-01789 (BRL)

1

2
3

4

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

5

SECURITIES INVESTOR PROTECTION
CORPORATION,
Plaintiff-Applicant,

6

v.

Rule 2004
Examination of:

7

8

BERNARD L. MADOFF INVESTMENT
SECURITIES, LLC,
Defendant.

9

ASHOK CHACHRA

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

In Re:
10
BERNARD L. MADOFF,
11

Debtor.
12

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

13
14
15

TRANSCRIPT of testimony as taken by and before

16

MONIQUE VOUTHOURIS, Certified Court Reporter, RPR,

17

CRR and Notary Public of the States of New York and

18

New Jersey, at the offices of Baker & Hostetler,

19

Rockefeller Plaza, New York, New York, on Friday,

20

October 8, 2010, commencing at 10:16 a.m.

45

21
22
23
24

BENDISH REPORTING, INC.
Litigation Support Services
877.404.2193
www.bendish.com

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The Mets have an office in Manhattan

Q.

2

and I'm just asking if the Mets' offices were at 575

3

when you were there.

4

5

I don't know.

A.

If you don't know, you don't know.

Q.

Okay.

6

So this next meeting, the

7

second meeting that you recall, that was at your

8

offices at 575 sometime in 2002.

9

That's correct.

10

Okay.

Who was in attendance at that

11

12

I believe it was Peter Stamos, Saul

13

believe it was Noreen Harrington.

14
15
16
17

18
19

And what was Ms. Harrington's
position at that time?
A.
Q.

She was the chief investment officer.
And what was your position at that

time when you started?
A.

20

Q.

21

I was an associate.

that meeting?

22
23

A.

What was the topic of discussion at

The topic was an investment in a fund

run by Ezra Merkin.

24

Q.

25

And do you recall which fund

specifically?

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2

A.

investments in numerous funds of his.

3
4

We had numerous investments, we had

Q.

what funds

5

At that time in sometime in 2002,
what Ezra -- let me rephrase that.
In 2002 what funds run by Merkin --

6

by Ezra Merkin did Sterling Stamos have investments

7

in?

8

9

A.

I would have to check the exact

dates, but I believe, to the best of my knowledge,

10

it was investments in Ascot, Gabriel and Long

11

Horizons.

12
13
14

Q.

A.
Q.

And who called the meeting?
I don't remember.
So tell me what was discussed at the

15

meeting concerning Sterling Stamos' investments in

16

the Merkin funds.

17

A.

You know, basically from what I can

18

remember, Noreen, you know, Noreen was chief

19

investment officer and she wanted to,

20

better understand the knowledge and relationship

21

between, you know, or the history, because Peter was

22

quite close to Ezra Merkin and was very supportive

23

of giving him more capital, and from the best of my

24

memory, Noreen was not very supportive of giving him

25

more capital.

I think,

And I believe Peter wanted Saul to

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just talk about their personal relationship with

2

Ezra Merkin.
Q.

3

Let's start with why Peter was

4

supportive of investing in Merkin.

5

say at the meeting -- that meeting as to why he was

6

supportive of investing in Ezra Merkin?
MS. BIEBER:

7

8

What did Peter

I object.

You can

answer.
A.

9

I don't remember exactly.

10

long time ago.

11

Peter's basis was.

12

It was a

was referring to Ezra's track record.

13
14

Q.

A.

16

Q.

A.

19

21

And what was the track record at that

What do you mean by that?
Well, you said that Peter referenced

Ezra Merkin's track record.

18

20

To the best of my knowledge, he

time?

15

17

I don't remember exactly what

Q.

Yes.
So what was his track record at that

time?
A.

I would have to look at the data.

22

mean, he had a, from what I can remember, quite a

23

long track record of managing capital.

24

to look at the exact record to answer more

25

I

specifically.

I would have

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But is it your recollection that --

Q.

2

actually,

I'm more interested in what Peter said at

3

the meeting.

4

good track record or a bad track record?

5

he describe Merkin's track record?

A.

6

So did Peter say that Mr. Merkin had a

I don't remember.

Or how did

Like I said,

I

7

don't remember specifically what he said.

8

supportive of making the investment which he was --

9

he thought it was a very -- he thought it was a good

10

track record.

11

Q.

He was

12

he thought it was a good track record?

13
14

And did he explain at the meeting why

A.
Q.

I don't remember.
At that time in '03 did you have any

15

opinion as to whether Merkin had a good or bad track

16

record?

17

A.

You know,

I was -- in terms of being

18

in a position of evaluating the funds, my role at

19

the time was more doing quantitative analysis,

20

attending meetings with Noreen Harrington,

21

documenting those meetings.

22

was really developing more of my own investment

23

views over time.

24

didn't feel like I had -- from what I remember at

25

the time, generally speaking, you know,

You know,

frankly,

I

So at that meeting specifically I

I don't know

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if I had a view of saying, you know -- comfortable

2

saying you should increase or decrease your

3

allocation.

4

and providing the analytical support at the time.

5

Q.

It was more what does the data suggest

And I'm glad that you're being very

6

specific on the time frame because that's a good

7

thing, we need to make sure that we're specific.

8

So at that time what sort of data

9
10
11

analytics or analysis did you do of the Merkin funds
at that time in 2002?
A.

You know,

from what I can remember,

12

we looked at the monthly performance of the fund,

13

the annualized volatility of the fund,

14

correlation of the fund to the broader equity

15

markets, looked at the distribution of returns, that

16

type of analysis.

17
18
19
20
21
22
23

Q.

the

And you provided -- did you provide

that analysis to Peter Stamos --

A.
Q.

I

provided it to Noreen Harrington.

Was that analysis provided to Peter

Stamos at some point?

A.
Q.

You would have to ask Noreen.
NOw, you said Noreen Harrington was

24

not supportive of investing in Merkin at that time.

25

Why was that?

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A.

1

From my understanding, to the best of

2

my recollection, she was not -- she did not want to

3

increase it beyond where the current position

4

already was.
Q.

5

6

And why did she not want to increase

it?
A.

7

You would have to ask her

8

specifically.

9

my memory of that meeting is quite vague, to be

10
11

12

15
16

17

I vaguely -- I have more

honest.
Do you recall what, if anything, she

Q.

said at that meeting as to what she believed --

13
14

You know,

A.

It will work better if you let me

Q.
finish,

If I remember --

I'll let you finish
A.

Sure.
and when you're done -- you have

Q.

18

to let me finish,

19

another it will just be a mess.

20
21

A.
Q.

because if we're talking over one

Yeah.
So let's back up.

What did

22

Ms. Harrington say at that meeting about why she was

23

not supportive of investing -- increasing the

24

allocation in the Merkin funds?

25

A.

I don't remember specifically what

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she said.

2

Did she cite to any of the analytics

Q.

3

that you had prepared in connection with the Merkin

4

funds?
A.

5

I don't remember specifically.

6

Q.

7

about Merkin?
MS. BIEBER:

8

9

MR. BOHORQUEZ:

14

You can

I'm sorry.

What's

the basis of the objection?

12
13

I object.

answer.

10
11

What did Saul Katz say at the meeting

MS. BIEBER:

I don't know that Saul

Katz said anything about Merkin at the meeting.
Q.

15

him that.

16

A.

I think he did.

I think I did ask

But go ahead, you can answer.
You know, to the best of my memory,

17

which I just want to also state for the record this

18

is over eight years ago,

19

know, Saul I believe said that Ezra was a long-term

20

season ticket holder of the Mets.

21

very involved in the synagogue; that he had known

22

the Wilpons and the Katzes for many years and had a

23

good standing in the community.

24
25

Q.

I mean, there is no -- you

He had -- he was

Did Saul Katz say anything about

Merkin's experience or track record in terms of his

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investment business?

A.

2
3
4

recall.

6

He may have.

Q.
A.

5

I don't -- I don't remember.

I don't

I don't remember.

And why was Saul Katz at the meeting?
I don't know.

I was just asked to

attend.

7

Q.

8

meeting?

9

else that was discussed at that meeting?

10

A.

SO what was the result of that
Well, actually, do you recall anything

I mean, the only thing else I do

11

remember is that Noreen, she was -- she did not

12

just remember vaguely like -- and I can't remember

13

if it was that meeting or a different meeting, so I

14

don't remember if I'm confusing things, so I don't

15

want to -- I -- you know, I -- I believe she had

16

mentioned something to the effect of she had had a

17

meeting with Ezra and she did not share the same

18

view of Ezra in terms of -- she just -- they didn't

19

have a very good meeting, something to that effect.

20

So that's the only other thing I remember about it.

21

Q.

I

So let's back up to the meeting that

22

Ms. Harrington had with Merkin.

What did

23

Ms. Harrington -- did Ms. Harrington speak to you

24

about the meeting, other than the meeting that

25

you're describing with Saul Katz and Peter Stamos,

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did Ms. Harrington discuss with you the meeting that

2

she had with Merkin?
A.

3

She had mentioned, to the best of my

4

memory, that she had met with him in her previous

5

job.

6

Q.

So she knew him before she joined

7

Sterling Stamos?

8

A.

9
10
11

That is my understanding.
And when did she join Sterling

Q.
Stamos?
A.

Late 2000 -- middle, beginning of

12

fourth quarter, around thereabouts in 2002.

13

was also,

14

when -- this is the issue, I don't remember when

15

Noreen Harrington and I did also visit with Ezra

16

Merkin and I do not believe -- I just don't remember

17

when that meeting was.

18

There

I mean, a meeting -- and I don't remember

Q.

The meeting that you met with Merkin

19

and Ms. Harrington, was that before the meeting with

20

Stamos, Katz and Noreen and yourself?

21

A.

I don't remember if it was -- you

22

know, I cannot

23

before or after.

24
25

Q.

I don't remember exactly if it was

And was that meeting that you and

Ms. Harrington had with Merkin, was that in fourth

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quarter of '02 you believe?

2

A.
Q.

3
4

I don't remember when it was.
What was discussed at that meeting

that you had with Merkin and Ms. Harrington?
A.

5

You know,

I really don't remember

6

much about that meeting except I know that I

7

attended it with her.

8

think a lot of it was, frankly,

9

from my memory it was more of an introductory

From the best of my memory,
just

I

it was

10

meeting where Noreen was kind of explaining her role

11

and Ezra walked through his background and, you

12

know, kind of -- what was going on with his -- he

13

was managing a number of funds.

14

overview-type meeting.

15

Q.
A.

16
17
18

Q.

21

Anything else that you recall?
I don't recall anything else, no.
When did -- when did Noreen

Harrington leave Sterling Stamos, do you recall?

19
20

It was more of an

A.

Middle of 2003 or thereabouts.

I

mean
Q.

So she wasn't there for very long.

22

So she joined sometime in the fourth quarter of '02

23

is your recollection?

24
25

A.
Q.

I think that's what I just said, yes.
And then she left sometime in -- and

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she left I believe you said in mid-2003?

2
3

A.

I

think that's what I

just said,

yeah.

4

Q.

Now,

I

don't have the record in front

5

of me, so bear with me.

6

frame that Ms. Harrington was there, did she ever

7

raise any concerns as to whether she believed that

8

Merkin was a feeder for Madoff?
A.

9

Okay.

So during that time

I

10

exactly her

11

don't believe she -- that was

I

don't remember that exact feedback,

no.

12

Okay.

Q.

Well, what do you remember at

13

all concerning what Ms. Harrington said about any

14

relationship between Merkin and Madoff?

15

A.

I really don't remember specifically

16

what she said.

17

Q.

18
19

Okay.

Well, what generally did she

say?
A.

You know, they -- we believed that

20

they had a very similar strategy in different

21

markets.

22

acknowledged that she believed that they were close,

23

whether they were both trading counterparties.

24

Ezra was very open with he had a very close

25

relationship and I remember in a few different

And, you know,

I believe she just

But

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meetings that he had mentioned with Madoff.

2

wasn't -- so I don't remember specifically what she

3

said.

4

relationship that the two had had.

I remember she acknowledged that that was a

Q.

5

So it

What did Merkin at that time period,

6

from '02 to '03, what did Merkin express to you or

7

anyone at Sterling Stamos about his relationship

8

with Madoff at that time?
A.

9

10

Q.

11

A.

Can you clarify the dates?
'02, between 2002 and 2003.

I mean,

I don't remember exactly

12

which meetings happened when.

It would be very hard

13

to.

14

nine-month period of time eight years ago.

15

asked you, frankly,

16

me either.

I can attempt to say what happened during a

17

But if I

I don't know if you could tell

From my -- to the best of my

18

recollection, in that time period Ezra Merkin said

19

that Madoff was a trading counterparty for his Ascot

20

fund and that the two executed very similar

21

strategies, but that the Ascot fund was more focused

22

on the longer dated options market called the leaps

23

market, and Madoff was very focused on near term

24

options between, you know, one-week and three-month

25

options.

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you know -- you know,

2

introduced me to, you know, whoever, and that person

3

became a limited partner.

4

Q.

Okay.

Peter would say Saul

In addition to introducing

5

Peter Stamos to potential investors and limited

6

partners, did Mr. Katz play any role in selecting

7

fund managers do you recall?

8

9

A.
Q.

No.
Not to your recollection or you know

10

that he did not?

11

A.

12

Q.

I don't believe he played a role.
Okay.

So, to your recollection, he

13

didn't play any role in deciding which funds to

14

invest in?

15
16

17

A.

No.

He didn't actually know many of

the fund managers.

Q.

Okay.

With respect to David Katz,

18

he's listed here as a senior investment team member.

19

What was his role at that time prior to

20

registration?

21

A.

Saul's son.

There was no role.

He

22

attended one -- after Noreen left, he attended one

23

fund manager interview with me.

24
25

Q.
A.

Okay.
He happened to be in the city that

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day and I was going to a meeting, and he said can I

2

corne along and I said sure.

3
4

Q.

meeting, you don't recall any other --

A.

5

6
7

Q.

No.
-- investment-related meetings that

Mr. David Katz attended?
A.

8

9

So other than that one fund manager

Q.

He attended, no.
Why -- you didn't draft this, but why

10

would Saul Katz and David Katz be identified as part

11

of the senior investment team if to your

12

recollection they didn't play much of a role in the

13

investment portion of the business?

14

confused by the document, that's all.

15

A.

16

Q.

17

managed a fund,

18
19

20
21
22
23
24
25

I'm just

I'm confused as well.
NOw, David Katz you mentioned had
an account.
MS. BIEBER:

Object.

But you can

answer.

A.
Q.

I don't think I -Not a fund.

You identified it as

some sort of an account.
A.
Q.

It was like a brokerage account.
So other than that management of that

account and the one meeting with the fund manager,

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A.

1

2
3

I don't know.
Do you know why Fred Wilpon would be

Q.

listed as another investment professional?

No.

A.

4

Q.

5

Do you know what role, if any, Fred

6

Wilpon had in any of the Sterling Stamos'

7

investments?
A.

8

9
10

I don't believe Fred Wilpon or Saul

Katz or David Katz had anything to do with the
investments of Sterling Stamos.

11

Q.

So with respect to Saul Katz,

the

12

only thing that you recall was helping Peter bring

13

in clients?

14

A.

15

Yes.
MR. BOHORQUEZ:

16

7.

Okay.

17

Okay.

Can I get tab

please.

18
19
20
21
22
23

If you can mark that as Exhibit 4,

(Exhibit Chachra-4 marked for
identification.)
Q.

I've handed you, Mr. Chachra, a short

two-page document.
A.
Q.

And why are you laughing?

I've never seen this document.
That was going to be my first

24

question.

So you've never seen this document.

25

Is

this document another marketing document?

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A.

2

No.

Based on the fact that it's a hedge

Q.

3

fund manager questionnaire, do you think it was

4

Kevin Okimoto or part of his team?
I don't know who drafted it.

A.

5

Q.

6

On page 3 where it has listed Saul

7

Katz, it says, "Mr. Katz is a general partner of

8

Sterling Stamos and is actively involved in the

9

investment decisions as well as the management of

10

Sterling Stamos."

11

Do you think that is an accurate

statement?

12

A.

13

accurate.

14

partnership, but from my -- I'm not attesting to be

15

a lawyer to understand how the corporate structure

16

worked.

17

understanding, but he was not -- he didn't interact

18

with me on the investment decisions, so I view that

19

as an inaccurate statement.

20

with Peter, and that he may have talked to Peter

21

about.

22

23
24

25

He was a member -- it's half
He was a member of the general

He owned half the company was my

Q.

He may have interacted

To your understanding he was not

actively involved in the investment decisions?
A.

My understanding he was not involved

at all in the investment decision-making.

As it

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relates to introducing clients and/or the revenue

2

and profits of the business, my understanding he was

3

involved.

4

Q.

And with respect to -- we talked

5

about introducing clients to the business.

6

respect to the revenue and profits of the business,

7

what was his role in that
A.

8

9

With

I think he advised Peter on when

Peter wanted to open up an office in California and

10

we were going to spend money, my understanding he

11

consulted Saul.

12

know, we were going to open up our own office when

13

we moved from 575 Fifth to 455 Park, he consulted

14

Saul.

We were spending the firm's money.

Q.

15

If we were going to make -- you

Anything else that you recall?

If

16

you can go to the next page which ends in 410, you

17

see under David Katz it says the same thing, David

18

Katz "is actively involved in the investment

19

decisions, as well as the management of Sterling

20

Stamos."

21

well?

22
23

A.

Do you consider that to be inaccurate as

Yes.
MR. BOHORQUEZ:

Why don't we take a

24

break there because it's pushing 1:30, and to try to

25

accommodate you, Mr. Chachra, let's take a 15-minute

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Q.

And in addition to potential

2

investors, did you discuss the creation of the firm

3

and one of the reasons being diversifying the

4

Katz/Wilpon's interest away from Madoff with Merrill

5

Lynch, anyone from Merrill Lynch at any time?

6
7
8

9
10
11

A.

Isn't that the same question you just

asked?
Q.

Well, clarify for me then, because

this mornlng I thought you said you had had those
discussions with Merrill Lynch.
A.

Yeah, it was with people, employees

12

of Merrill Lynch.

13

you know, Sterling Stamos, I would have to walk

14

through the history of the firm and say we were

15

created -- in certain instances we would say the

16

single manager concentration was with Madoff, and in

17

other instances we would say we just were created

18

because the family had had a single manager

19

concentration and we wanted to diversify.

20
21
22
23
24
25

Q.

When I would have to go present,

So when you were identifying, for

example, financial advisors from Korea -A.
Q.

They are Merrill Lynch employees.
That's what was confusing me, but

we've cleared that up.
And in connection with any of those

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discussions that you had concerning the history of

2

the firm and the purpose of the firm to diversify

3

the Katz/Wilpon investments from Madoff, did anyone

4

ever ask why Katz/Wilpon wanted to diversify their

5

investments from Madoff?

6

A.

I

think it was obvious.

No.

People

7

said -- I don't remember anyone specifically asking

8

why, because if they had a single manager

9

concentration it would be implicit within that

10
11

12

13
14
15

statement.
Q.

So the answer lS no, you don't

recall?
A.

I

don't recall anyone asking me why

they would want to diversify, no.
Q.

During any of those discussions do

16

you recall anyone raising any issues or concerns

17

about Madoff at all in any way in connection with

18

those discussions?

19

20
21

22

A.
Q.

A.
Q.

In those discussions?
Yes.
No.
During your time at Sterling Stamos,

23

did there corne a time when anyone, whether from

24

Sterling or from Merrill Lynch or any of your

25

potential investors or current investors, did they

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