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 AA

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

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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.

NOREEN HARRINGTON

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SAUL B. KATZ, et al.,
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

18

Jersey, at the offices of Baker & Hostetler, 45

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Rockefeller Plaza, New York, New York on Friday,

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December 30, 2011, commencing at 9:34 a.m.

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insurance for his wife's jewelry, he -- it's like

2

saying he put money with Bernie each year instead of

3

paying for a policy.

4

Q.

When you were the chief investment

5

officer of Sterling Stamos, did there ever come a

6

time that anyone -- I'm sorry, SP Capital -- did

7

there ever come a time that it was suggested that SP

8

Capital invest with Madoff?

9

A.

No, not -- not prior -- not up until

10

August of 2003.

Or around that time, I'll say the

11

summer, the summer of 2003.

12
13

Q.

the topic of SP Capital and Madoff came up?

14
15

What happened in August of 2003 where

MS. GORDON:
Q.

Object to form.

Can you describe for me what you

16

meant when the topic of SP Capital investing with

17

Madoff came up in August of 2003?

18

MS. GORDON:

Object to form.

19

she said it was the summer of 2003.

20

I think

about the date.

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22
23
24
25

MS. GRIFFIN:
Q.

She wasn't sure

Okay.

Around the summer of 2003, with that

correction.
A.

Saul Katz and Peter Stamos wanted us

to meet with a man named Ezra Merkin, who ran Ascot

67

1

and Gabriel in the -- in that time, and that's

2

when -- it was about our returns and wanting to, you

3

know, have less volatility in the returns that SP

4

Capital had and that we should meet with Ezra

5

Merkin.

6
7

Q.

Stamos wanted "us" to meet with Merkin, who is "us"?

8

A.

9
10

Q.

Ashok Chachra and myself.
Did you have a meeting with Ezra

Merkin?

11

A.

12
13

When you say that Saul Katz and Peter

Q.

I did.

With Ashok.

With Ashok.

Do you recall generally when that

was?

14

A.

In the summer of 2003.

15

actually, I believe.

16

my date book.

17

meeting.

18

Q.

In August,

19
20
21
22
23
24
25

A.

I don't have -- I looked for

I don't have the exact date of the

And what was Ascot?
Ascot and Gabriel were funds run by

Ezra Merkin.
Q.

Did they have any relationship to

Madoff?
A.
Q.
A.

Yes.
And what relationship was that?
Well, they cleared through -- they

68

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did clearing of their transactions through the

2

Madoff broker-dealer, and in the meeting I learned

3

that they could give money -- Ezra Merkin could give

4

money to a third party, and he gave money to Madoff.

5

Q.

When you say that you learned at the

6

meeting Ezra Merkin could give money to a third

7

party and he gave money to Madoff, I'm sorry, what

8

do you mean by that?

9

A.

So, normally when you give money to a

10

hedge fund, that's where the money resides.

11

documents for Ezra Merkin allowed him to give money

12

to a third party.

13

him money, he has the ability to give that out to

14

another manager, is what it means.

15
16

Q.

So that means that if you give

And how did you come to learn that

Ezra Merkin gave money to Madoff?

17

A.

18
19

But the

Q.

In the meeting.
Do you know who, if anyone, said

that?

20

A.

21

Q.

Ezra Merkin.
And did you have an understanding as

22

to which fund, Ascot or Gabriel, he was referring

23

to?

24
25

A.

Just backing up, this was a

preliminary meeting on the funds Ezra had, so it was

69

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meant to be an introductory meeting, where we were

2

trying to learn about his investment strategies.

3

And how -- similar to what I said earlier -- how he

4

would deploy the money he was given.

5

out of that conversation.

6

Q.

7

And this fell

What did Merkin say to you in that

meeting?

8

A.

Let me take you back to the beginning

9

of the meeting.

Ashok and I got there and it was a

10

lot of small talk about the Mets and non-business

11

related things.

12

his background, who he was, of which we had already

13

learned of that prior, from -- internally, before we

14

went, so we had an idea of his background already

15

before we got there.

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background.

17

His background, a little bit about

But he went over his

We had a series of preliminary

18

questions we were going to add.

I wasn't given any

19

documents to prepare for this and it is eight years

20

ago, so I believe I had the pitch books for his

21

strategies, but I actually don't remember the

22

difference between his individual funds.

23

were more than the main -- I mean, there are more

24

funds here.

25

fund call Long Horizons, there's more than just

And there

There's a fund call Ariel, there's a

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Gabriel and Ascot, although they would be the, what

2

I would consider more the flagship funds.

3
4

Q.

Did you ask him any of the

preliminary questions that you indicated?

5

A.

I asked -- I was able to ask some

6

questions.

7

recollection of the meeting and I can give you a

8

general recollection of the meeting.

9

you a specific he said, I said, he said, I said.

10

Q.

So

I understand.

Your general

recollection will be great.

13
14

I cannot give

it's eight years ago --

11
12

I can actually not -- I have a general

A.

I can give you what I walked out

with, my general recollections of that meeting.

15

So, I would walk out with this:

We

16

had a couple of things that we got out of the

17

meeting, but I would categorize the meeting as

18

disappointing, and I would say disappointing for the

19

fact that we were hitting a brick wall and we hadn't

20

even started.

21

opinion, on the kind of information that we would

22

need.

23

So, he was not forthcoming, in my

One of the things that I did in the

24

meeting was try to explain to Ezra Merkin our

25

process of what we would need to do at SP Capital in

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order to make this investment.

2

So, one of my roles in the meeting

3

would have been to talk about some of the things I

4

mentioned to you earlier about our due diligence.

5

So, what would need to occur for us to be able to go

6

forward with this investment.

7

a few of them.

And I will highlight

8

I know that we would want to meet

9

with his traders, that we would want to actually

10

maybe even sit with them, see them, see them

11

trading.

12

of the things we did, and we may have had and it's

13

not a great recollection, but we normally looked at

14

investor letters that were old, to see the kind of

15

attribution of returns that you had.

16

That we would like to look at some -- one

We would have -- you know, I would

17

have said -- this was a general speech I gave a lot

18

of people.

19

was pretty rote for me, this speech.

20

that, you know, we would start this process and then

21

we would end up back at him.

22

start -- we normally end up back at the senior

23

person at the end.

24
25

So, whether I did all these topics, it
So, I told him

We normally don't

And he -- the meeting ended
reasonably abruptly, because after I went through

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some of this, he said to me that I don't get to ask

2

questions.

3

You don't get it, do you?

4

he repeated that:

5

is a privilege.

6

First he said I didn't get it.

He said:

And he paused, and then

You don't get it, do you?

This

You don't get to ask questions.
And I had a response to that.

I

7

said, I actually need to ask these questions, and

8

many more, as a fiduciary.

9

so do you.

10
11
12
13

Might I add, Mr. Merkin,

And that sort of was very close to the

end of the meeting.
Q.

Did you have an understanding as to

how Madoff was connected to Merkin's funds?
A.

The third party issue definitely came

14

up, that he could give cash to other managers.

15

is what I'm referring to in the back part of my

16

closing statement.

17

someone else, you have the same exact -- you're in

18

the same exact position as me.

19

passing money to someone else, you're acting as

20

fiduciary to your investors.

21

looking out for their interests.

22

That

If you're giving money to

Okay?

So if you're

So you should be

So, if you're passing money to a

23

third party, my due diligence is going to have to go

24

through you, through you, to see some of the same

25

things we would require of you if you're feeding

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discussions you did have with Ashok about the

2

meeting with Merkin?

3

A.

Other than the one, what I said

4

earlier?

5

would have been preparing for the meeting we were

6

ultimately going to have on this, so there would

7

have been a dialogue, but I don't recollect, you

8

know, the specific conversation.

9
10

You know, I don't recollect, although we

Q.

The meeting that you were going to

ultimately have regarding this, what do you mean?

11

A.

12

the investment.

13

Q.

14

A.

15

Q.

The investment meeting on the -- on

In Merkin?
In Merkin.
Did there come a time that you did

16

have an investment meeting on the investment with

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Merkin?

18

A.

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20
21
22
23
24
25

Q.

Yes.
Do you recall generally when that

was?
A.

Generally, I don't have the date, but

it would have been around August 2003.
Q.

Do you know who was at that

investment meeting?
A.

Yes.

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1

Q.

2
3

A.

David Katz, Saul Katz, Peter Stamos

telephonically, Ashok Chachra, myself.

4

Q.

5

A.

6
7

Could you tell me who that was?

Q.

Anybody else?
Not to my recollection.
Did you discuss the meeting with

Merkin at that investment meeting?

8

A.

9

Q.

10

We did.

meeting?

11

A.

Can you tell me what you said at that

Again, I can tell you in general

12

terms about the meeting.

13

had papers that we had prepared, and we discussed in

14

general terms the meeting with Merkin.

15

in general terms, I gave a negative assessment of

16

doing this investment.

17

Q.

We had -- we definitely

And, again

I'm sorry, when you say you gave a

18

negative assessment of doing this investment, are

19

you referring to the investment in Merkin?

20

A.

21

Q.

I am.
And can you tell me how you gave a

22

negative assessment at that meeting?

23

say?

24
25

A.

Okay.

What did you

I said that given the meeting,

and, you know, not -- and the comments that

116

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that meeting, I remember he held Ezra Merkin in high

2

regard and he, as a member of the -- as a member of

3

the community, as -- you know, he just held him in

4

high regard.

5

received.

6

comments were not well received as well.

7
8
9

Q.

And so my comments were not well

And in addition to that, my Madoff
So...

What do you mean your Madoff comments

were not received as well by Saul Katz?
A.

I basically have an inherent problem

10

with feeders, just in general, I'll say that,

11

because, again, if we're telling our investors that

12

we're transparent and we can't see where the money's

13

going, again, it's sort of a non-starter, that we

14

wouldn't be able to make those kind of investments.

15

But I also -- I -- and I brought up the numbers

16

again because I said, you know, I don't really see

17

how -- you know, I don't really understand the math

18

here of how somebody can get these kind of returns

19

that are so positive.

20
21

Q.
A.

Who are you referring to?
Well, I could -- I was referring to

22

Madoff at that time, I believe, when I said that,

23

but you have to remember, even what I'm doing today,

24

I was sort of commingling the two because if

25

somebody is -- if my belief is, from that meeting

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based on what I heard, that this is a feeder, then

2

they become linked in, you know -- ultimately I'm

3

investing in Madoff for whatever percentage.

4

So, anyway, Saul Katz wasn't happy

5

with me and he actually asked me a question.

He

6

asked me what I -- it was fairly linked to what I

7

said before, which was about me having, you know,

8

all the answers.

9

to the contrary, I don't have enough answers and,

And I said to him, you know, quite

10

you know, that's part of the problem.

11

well, what do you think Madoff does with the money?

12

He asked me specifically for my own opinion.

13

gave it.

14

an accusation of front-running, which is profitable

15

and non-correlated, but also illegal.

16

if it wasn't that, I believed it was fiction.

And

17

to that he said, what do you mean by fiction?

And I

18

said, I don't believe the numbers are worth the

19

paper they're written on.

20
21
22
23
24
25

Q.
A.
Q.

But he said,

And I

And my answer was this, which is, I made

And I said,

What numbers were you referring to?
Returns.
And what was the basis on which you

believed that the returns were fiction?
A.

They were too good.

too good to be true.

The numbers were

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2

Q.

And how did you reach that

conclusion?

3

A.

I don't know.

Experience.

4

Experience could be, you know, just -- as I said

5

earlier, I've had the privilege of working with

6

extremely bright people in this industry, some of

7

the best and some of the brightest, and yet they

8

didn't seem to be this good to me.

9

didn't have returns that were this good.

10

Q.

You know, they

Did you have an understanding of

11

whether Saul Katz had done any diligence into

12

Madoff?

13
14

A.
Q.

I don't know what he did.
Did you have an understanding as to

15

whether David Katz had done any diligence into

16

Madoff?

17
18

A.
Q.

Not to my knowledge.
What was the basis for your, I think

19

you said accusation that Madoff might be

20

front-running?

21

A.

When you have your own broker-dealer,

22

it allows you the ability to see other people's

23

transactions, and transactions which could -- you

24

know, could move a market.

25

simply means you jump in front of those orders, and

And so front-running

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1

you sort of get a quick return that wouldn't have

2

any correlations to the overall return of the market

3

that day.

4
5

Q.

And was front-running one of the

explanations for the returns that you saw in Madoff?

6

A.

It was, when I was asked my opinion

7

by Mr. Katz, I offered up two possibilities that

8

were my opinions at the time.

9

Q.

And you're saying when you were asked

10

your opinion by Mr. Katz -- what were you referring

11

to again?

12

A.

13
14

Bernie Madoff.

Q.

And what did he say in response to

your suggestion that Madoff might be front-running?

15

A.

He, he didn't pick out the

16

front-running.

He picked out the latter thing that

17

I said.

18

did I mean by that.

19

know, I don't think the numbers are worth the paper

20

they're written on.

21

with me, because these were people he respected a

22

great deal, and my responses, whether it be

23

front-running or fiction, portrayed something

24

illegal or bad.

25

that I have been wrong before, I could be wrong now,

So he picked out the fiction and said, what
And that's when I said, you

Obviously he was visibly angry

And I responded after he was angry

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and I would, if I could sit in front of Bernie

2

Madoff and we could execute our process, so, in

3

other words, we could do the due diligence required

4

for the investment, and he -- and the answers were

5

good, then I am wrong and we can go forward.

6

I asked for the meeting, I asked for the meeting.

7

Q.

8
9
10
11
12
13
14
15
16
17
18
19
20
21
22

A.
Q.

And so

With who?
Bernie Madoff.
And did you get a meeting with Bernie

Madoff?
A.
Q.

I did not.
Did Saul Katz respond in any way when

you asked for the meeting with Madoff?
A.
Q.

He did not.
Did David Katz react to any of the

things that you said at this meeting?
A.

My recollection is David said very

little at the meeting.
Q.
A.
Q.
A.

Was Ashok at this meeting?
He was.
What did he say?
Ashok spoke in the beginning,

23

particularly on the papers we had and the numbers we

24

had, and -- but I was definitely in the hot seat and

25

he was definitely not looking to get in the

121

1

crossfire, so he didn't say particularly much at the

2

end, that I can recollect.

3
4
5

Q.

When you say you were definitely on

the hot seat, what do you mean?
A.

I was sitting in a seat at the end of

6

the table like this one and I'm delivering a bad

7

message.

8

definitely -- the answers I'm giving or the things

9

I'm saying are not what they want to hear.

10
11
12
13
14
15
16

I'm delivering a bad message.

Q.

I'm

Did Ashok give any recommendations

with regard to this investment, at that meeting?
A.

My recollection is Ashok did not say

much, so...
Q.

What was Peter's response to what was

discussed about Merkin?
A.

You know, again, not positive.

I

17

don't remember the exact words, but totally in

18

disagreement with me on the assessments I had made.

19
20
21

Q.

Did you tell the people at this

meeting that you had looked into the options volume?
A.

You know, I don't remember

22

specifically, but I said, look, we -- I have thought

23

a lot about these -- I have thought a lot about this

24

investment.

25

that came up in the meeting, but do I have an exact,

I have thought about some of the things

184

1

work on the new investments that we were going to

2

make.

3

So, my recollection is these

4

investments were existing when I got to SP Capital.

5

That's my recollection, having seen this.

6

Q.

And given your understanding of the

7

mandate that Mr. Stamos gave you, why then did he --

8

why then did you meet with Mr. Merkin in 2003?

9

A.

I was asked to meet with Mr. Merkin

10

in 2003 because they wanted to make a new

11

investment, or additional investment with Ezra

12

Merkin.

13

Q.

And at the time, in preparation for

14

that meeting with Mr. Merkin, did you do anything to

15

educate yourself on the existing investments that SP

16

Capital had with Mr. Merkin?

17

A.

Yes.

I would have, I would have

18

looked at -- as I said earlier, I would have looked

19

at pitch book returns, letters.

20

gone through and I would have familiarized myself a

21

little bit before I went to the meeting with him.

22

Q.

Yes, we would have

And again, I appreciate what you

23

would have done.

24

that you did do.

25

A.

I'd like to know what you remember

Okay.

203

1
2
3
4
5

Q.

Do you recall how you got to and from

the meeting?
A.

I think I walked, but I don't -- I

mean, I don't really remember.
Q.

And you told us earlier that you

6

recall talking to Mr. Chachra immediately after the

7

meeting about it not going well, correct?

8
9
10
11

A.

That's right.

Q.

Do you remember where you were with

Mr. Chachra when you had that discussion?
A.

Outside of the building that Ezra

12

Merkin was in because I said not to say anything in

13

the elevator.

14

Q.

15
16
17

Okay.

And do you remember where

Mr. Merkin's offices were at that time?
A.
Q.

I don't.
Now, you told us earlier this morning

18

that following this meeting you felt like you needed

19

to do some work, correct?

20
21
22

A.
Q.

Yes.
And what was the purpose of the work

you were going to do?

23

MS. GORDON:

24

answered.

25

A.

Objection.

Asked and

You can answer again.
You know, to see if we could -- as I

204

1

testified, I had a negative view of the meeting

2

based on the fact that we couldn't fulfill our

3

fiduciary role and -- but I was going to -- you

4

know, we were going to do some work to try and see

5

if we could substantiate the returns, the comments

6

that were made in the meeting.

7

already a predetermined negative view.

8
9

Q.

So -- but I had

And in your mind the work that was to

be done to substantiate the returns or the comments,

10

was that specific to Merkin or was that related to

11

Madoff?

12

MS. GORDON:

13

answered.

14

A.

Objection, asked and

You can answer again.
I actually felt I had to think about

15

both invest -- both people, Merkin and Madoff after

16

the meeting.

17

Q.

And did you task Mr. Chachra with any

18

specific work that related to either Merkin or

19

Madoff?

20
21
22

A.

I don't remember exactly what I told

him to do.
Q.

23

anything?

24

A.

Do you remember if you told him to do

25

I do remember saying we have to do

some work on this, it's not going to go well.

206

1
2
3

A.

I don't remember specifically the

work that Ashok did versus what I did.
Q.

Okay.

And in terms of the work that

4

you did, Ms. Harrington, what work was specific to

5

Madoff?

6

A.

You know, I think I looked him up.

7

took -- I looked -- I think I both, you know, I

8

looked at both of them in more detail with the

9

background information or what I could find.

I

I

10

think I -- as I said earlier, I did some work on

11

looking at options.

12

strike conversion.

13

I thought a lot about why does somebody go to cash

14

to fly under the -- you know, to stay out of

15

regulatory filings.

16

those kind of issues.

17
18
19

Q.

I thought a lot about split
I thought a lot about the math.

I thought about a lot of the --

Okay.

When you looked up Mr. Madoff,

do you recall what that research revealed?
A.

Biography-type research, it was a

20

little bit more biographical, I would say, but I

21

don't recall specifically.

22

Barron's article or -- I remember specifically on

23

Merkin I saw something about a man named Victor.

24
25

Q.
A.

I may have seen a

Um-hum.
But I really don't have a

216

1
2

A.
Q.

No, not specifically.
Now, you told us also, in terms of

3

the work that you were doing, that you thought a lot

4

about the math; is that correct?

5
6
7
8
9

A.
Q.

Yup.
And what did you mean when you said

you thought a lot about the math?
A.

I think I testified earlier today

that doing these options strategies don't

10

necessarily produce results that lack volatility or

11

uncorrelated, or -- you know, there is some

12

uncorrelation, but it -- they look like they're

13

related to each other, you know, the investments

14

should look like they have some relationship.

15

You know, I can't point to exactly.

16

I thought about -- I did look up how big Madoff

17

Securities was, the broker-dealer.

18

again, I can't give you the specific number of the

19

size, but they weren't massively big.

20

Q.

21
22
23

My recollection

Did you ever -- well, withdrawn.
Ms. Harrington, did you think about

the math specifically as it related to Madoff?
A.

Again, I have two people with similar

24

strategies.

The difference is maturity or length of

25

duration of the investment.

So in my own mind I was

218

1
2

it?
A.

It seems like something -- because I

3

have an experience or something in the market that I

4

was involved in in 1994 that was similar and I --

5

but more tangible, and it was like me to, you know,

6

try and validate in some way or form if I could, use

7

the math to back up what I was saying.

8
9
10

Q.

And do you remember what you did to

do the math?
A.

You know, I don't remember exactly

11

what I did, but I think I looked at, you know -- I

12

looked at coloring options to see what kind of

13

returns I might get.

14

have a specific recollection of what I did.

15
16
17
18
19
20
21
22
23
24
25

Q.

You know, I don't, I don't

And do you remember discussing the

math with Ashok Chachra?
A.

I remember saying these returns are

too good to be true.
Q.
A.

And did you say that to Mr. Chachra?
I not only said it to him, I said it

in the investment meeting to everybody.
Q.
A.
Q.

Which you told us about this morning?
Yeah.
And in terms of the math that you

did, do you remember giving an analysis or any sort

219

1

of analytics to anyone at SP Capital with regard to

2

Merkin or Madoff?

3

MS. GORDON:

4

answered.

5

A.

Objection, asked and

You can answer again.
I remember specifically saying I want

6

the meeting so we can do the work, so we have all

7

the due diligence to make the assumption as to

8

whether this was right or not.

9

not nearly enough to do this investment.

What we had now was
We

10

could -- again, you have to go back to one of the

11

premises of why we can't make this investment.

12

can't make this investment based on transparency, we

13

can't make this investment based on, you know,

14

process.

15

We

I asked for the meeting to be able to

16

get all the information to be able to look at the

17

math much more closely and to ascertain whether we

18

were right or wrong.

19

information to be -- I wasn't certain.

20

certain, so -- and as I said in the meeting, I could

21

have been wrong.

22

process to take place, I had -- I had an opinion

23

which I voiced when Saul Katz asked for an opinion,

24

but I didn't have the hard tangible facts to be able

25

to say that it was right or wrong.

And, as I said, we needed more
I was not

But without access to allow our

245

1

Q.

We were talking a bit before the

2

break about the investors meeting wherein you shared

3

your views of Ezra Merkin and Bernie Madoff, and I

4

just want to return to that for a moment.

5

You testified earlier today that you

6

shared your opinions in that meeting concerning

7

Messrs. Merkin and Madoff, correct?

8
9

A.
Q.

That's correct.
And one of those opinions was that --

10

and correct me if I'm wrong -- Mr. Madoff

11

potentially was front-running; is that correct?

12
13
14
15
16
17

A.
Q.

Yes.
And in that meeting, did Peter Stamos

agree with your view?
A.
Q.
A.

Of front-running?
Of front-running.
I don't remember if Peter made a

18

comment particular to front-running.

19

agree with my views in that meeting.

20
21
22
23

Q.

He did not

So he didn't agree with your views as

a general matter in that meeting?
A.
Q.

Yeah, as a general matter.
And specifically as to front-running,

24

you don't recall a specific -- a particular

25

disagreement?

246

1

A.

2

disagreement.

3

Q.

I don't recall a particular

Do you recall whether Peter Stamos

4

disagreed with your views as to whether Madoff's

5

statements were fiction or returns were fiction,

6

rather?

7

A.

He didn't agree with my views that I

8

had expressed in that meeting on either front, is my

9

recollection.

10

Q.

Did Saul Katz agree with your opinion

11

that Madoff potentially was front-running, in that

12

meeting?

13
14
15

MS. GORDON:
answered this morning.
A.

16

front-running.

17

Q.

Objection.

Asked and

You can answer again.

Saul Katz did not comment on the
He only commented on the fiction.
And with respect to your opinion

18

regarding the returns being fiction, Mr. Katz did

19

not agree with your views; is that correct?

20
21

A.
Q.

That's correct.
And did David Katz agree -- express

22

an opinion or a view one way or the other as to your

23

opinions at that meeting?

24
25

A.

As I said this morning, David Katz --

my recollection is he was fairly quiet.

I don't

248

1

Q.

And any particular analysis you can

2

recall that reflected them being too good to be

3

true?

4

MS. GORDON:

5
6

A.

Same objection.

Nothing that I haven't already

stated.

7

Q.

You told us earlier today that in

8

that particular investors meeting you asked for a

9

meeting with Bernie Madoff; is that correct?

10

A.

11

Q.

12
A.

Q.

A.

18

Q.

A.

21

Q.

25

He did not respond.
And did you ever follow up with him

There wasn't any time, really.
What do you mean there wasn't any

time?

23
24

And I think you told us earlier today

again to seek a meeting with Mr. Madoff?

20

22

I directed the question towards Saul

Mr. Katz did not respond; is that correct?

17

19

Same objection.

Katz.

15
16

And who did you ask for that meeting?
MS. GORDON:

13
14

I did.

A.

I have to go back for a second, if I

can.
My recollection is this took place in

249

1

August.

My recollection is I quit after this.

2

recollection is not June, not July.

3

asked for the meeting.

4

the investments, and I stand by the conversation I

5

had with Peter Stamos that said, if you're going to

6

make this investment, I'm gone.

7

9

July.

It's not June, it's not

My recollection is I had the meeting with

Ezra Merkin in August of '03.
Q.

Do you recall leaving Sterling Stamos

12

and not returning to the office until you packed it

13

up on or about August 7th, 2003?

14

MS. GORDON:

15

A.

16
17

Q.

Object to form.

don't remember.

18
19

You know, I may have come back.

I

Do you have any records that would

reflect when you left Sterling Stamos?
A.

You know, I looked for my date book

20

as part of discovery, and I didn't have it.

21

it's eight years ago and I really don't remember my

22

schedule in August of 2003, sorry.

23

I

I was told they would make

recollection is August.

11

It's August.

So, there was no time, but my

8

10

My

Q.

So,

So is it fair to say that it's

24

equally as possible that the meeting was in fact in

25

June as it was in August?

250

1

MS. GRIFFIN:

2

MS. GORDON:

3

A.

Objection.
Objection.

It's not fair to say that because I

4

have a recollection.

5

recollection I have, but that is my recollection,

6

that it's August of 2003.

7

Q.

I'm certain of the

And you were telling me that there

8

was no time to ask for a follow-up meeting with

9

Mr. Katz as an explanation as to why you did not

10

seek one; is that correct?

11

MS. GORDON:

12

A.

Objection.

I asked for the meeting.

To be real

13

honest, I don't know if I saw Saul Katz again after

14

that.

15

after that meeting.

16
17
18
19

I don't have a recollection of seeing him

Q.

Did anyone in that meeting tell you

you couldn't meet with Bernie Madoff?
A.
Q.

I don't recall them saying that.
I think you told us earlier today --

20

and this is just, I want to see if I understood your

21

testimony correctly -- that there were some

22

positives and some negatives discussed at that

23

meeting.

24
25

A.
Q.

Is that correct?
That would be correct.
And we talked about some of those, I

261

1

Q.

Well, did you return the money to the

2

victims of the mutual fund timing that Mr. Stern was

3

engaged in?

4

MS. GRIFFIN:

5

MS. GORDON:

6

A.

I did not.

Objection.
Objection.
I asked Elliot Spitzer, I

7

fully acknowledged to Elliot Spitzer and his staff

8

that I had this investment, I made money on this

9

investment, and he categorized me as a victim of the

10

crime and, therefore, he did not feel that I was

11

obligated to do anything about it.

12
13
14

The mutual fund scandal cost me money
and I benefited nothing from it.
Q.

Now, in terms of the mutual fund

15

scandal, there came a time, did there not, Ms.

16

Harrington, when you called Attorney General Elliot

17

Spitzer's office and left an anonymous tip about

18

the -- what you had observed at Stern Asset

19

Management?

20
21

A.
Q.

22
23
24
25

That's correct.
Is that correct?
Do you recall when that was?

A.
Q.
A.

Yes.
And when did you do that?
While I was working at SP Capital and

262

1

it would have been April of 2003.

2
3

Q.

General at that time?

4
5

And why did you call the Attorney

A.

To report what I believed was a

crime.

6

Q.

And how regularly were you

7

communicating with the Attorney General's office in

8

and around the time that you left this anonymous

9

tip?

10
11
12
13

MS. GORDON:
A.

Object to form.

My belief is I made five phone calls

before I actually got a human being.
Q.

And after you got a human being, did

14

you have a regular communications with the Attorney

15

General's office?

16

A.

17
18
19
20
21

I think the word "regular"

overstates, but if you would allow me, I'll -Q.
A.
Q.
A.

Sure.
-- categorize it.
Absolutely.
When I did get a person, I tried to

22

walk them through the crime on the phone, and since

23

I had left so many anonymous messages already, she

24

was prepared for my phone call and she said, we need

25

your help in figuring this out, and you can remain

266

1

investigation after I left Stern, and I wasn't sure

2

where to go.

3

either being the SEC or the Attorney General.

4

things influenced me during this time period that

5

sent me in the direction of the Attorney General.

6

And so I really weighed my options,
And

But it is -- so, I wasn't certain I

7

was going there, but I just want to say, I was

8

trying to build a roadmap myself if I would do this.

9

Obviously, this was the first time I ever did

10
11

anything like this.
Q.

So at least you, in your own mind,

12

had thought about whether you could go to the SEC or

13

the Attorney General; is that correct?

14
15

A.
Q.

Yeah.
So you knew that those were two

16

avenues that you could take if you wanted to

17

report --

18

A.

19

Q.

20
21

A.
Q.

Yes.
-- evidence of illegal activity?
Yes.
Now, at any point, Ms. Harrington,

22

between the summer of 2002 and December 11th, 2008,

23

did you reach out to the New York Attorney General's

24

office to communicate to him your views about

25

Madoff?

267

1
2

A.
Q.

I did not.
And at any point in time between the

3

summer of 2003 and December 11th, 2008, did you

4

reach out to the SEC to communicate your views about

5

Madoff?

6
7

A.
Q.

I did not.
At any point between the summer of

8

2003 and December 11, 2008, did you reach out to the

9

NASD or FINRA -- I'm not sure when they switched

10

over -- to communicate your views about Madoff?

11
12

A.
Q.

I did not.
At any point in time between December

13

2 -- the summer of 2003 and December 11th, 2008, did

14

you reach out -- thank you -- to any of your former

15

colleagues at Goldman Sachs to communicate your

16

views about Madoff?

17

A.

18

Q.

19

yours, correct?

20

A.

Not that I recollect.
And Jon Corzine was a mentor of

Actually, I have to just -- hold on a

21

second, I think I just said something wrong.

22

I just said no and I had that

23
24
25

conversation I reported earlier with Herb Miller.
Q.

Was Herb Miller a colleague of yours

at Goldman Sachs?

274

1

Q.

And prior to December 11th, 2008, in

2

anything you ever wrote, did you pen or disclose

3

your views about Madoff?

4

A.

5

Not to my recollection.

Q.

And did you not share or disclose

6

your views about Madoff with anyone because you were

7

uncertain as to whether they were true?

8

A.

9

That is not why I did it.

Q.

10

And why didn't you do it?

A.

The situation between the mutual

11

funds and Bernie Madoff, in my mind, were incredibly

12

different, and I'll explain to you why.

13

In the case of the Attorney General

14

on the mutual funds, I had factual, tangible,

15

physical evidence that a crime was taking place.

16

And in the case of Bernie Madoff I never had the

17

meeting.

18

but I did not have -- they're light years apart in

19

my mind, they are light years apart.

I made -- you know, I voiced an opinion,

20

Reporting a crime is incredibly

21

difficult, and they question everything that you

22

say.

23

General's office, every word you say they look into,

24

they check.

25

thing that you say, and I didn't have nearly enough

When you're being interrogated at the Attorney

You have to substantiate every single

275

1

evidence in the other situation with Madoff or

2

Merkin to speculate and, with no tangible proof, I

3

felt very strongly that I would diminish my own

4

credibility in a crime I felt very strongly about.

5

Q.

When you say you would diminish your

6

credibility, you mean with respect to the mutual

7

fund issue?

8
9

A.

Well, I did feel that you can't just

walk in there and say, you know, by the way, you

10

should look at this.

11

understood the process.

12

that one goes through when they make a statement.

13

The process is difficult, okay, and extensive.

14

can't even think of the words.

15

to report a crime, what happens to you is, they

16

don't believe anything you say and they question

17

everything you say.

18

them where the evidence of that crime is.

19

it's a daunting, difficult process.

20

firsthand, tangible information in the mutual funds,

21

and I didn't have that because I never got to that

22

level.

23

Because I actually -- I
I understood the process

I

But when you go in

And you really need to show

I'll say this:

It's --

And I had

Had I, if I had

24

firsthand information, if I knew with some certainty

25

that this was fraud, I believe I would have said

276

1
2

something.
Q.

And after you left SP Capital, did

3

you do anything to try to follow up on your opinions

4

that you had expressed at SP Capital regarding

5

Madoff?

6

MS. GORDON:

7

A.

Anything?

Object to form.
I don't -- well, could you

8

just -- I'm sorry, I'm tired.

9

that again?

10

Q.

11

Could you just say

Sure.
After you left SP Capital, did you do

12

anything, did you take any steps, did you undertake

13

any efforts to explore the opinions you had

14

expressed regarding Madoff while at SP Capital?

15

MS. GORDON:

16

A.

17
18

Objection.

I did not.
MS. SESHENS:

Hang on one second.

Let me just see -- could we go off for two minutes?

19

MS. GORDON:

20

THE VIDEOGRAPHER:

21

You bet.
We're off the

record, the time is 6:02.

22

(Recess taken.)

23

THE VIDEOGRAPHER:

24
25

record.

We're back on the

The time is 6:12.
MS. SESHENS:

Ms. Harrington, subject