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 H

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

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

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4
5

-------------------------------x
SECURITIES INVESTOR PROTECTION
CORPORATION,

Videotaped

6
Plaintiff-Applicant,
7
8

v.

10

BERNARD L. MADOFF INVESTMENT
SECURITIES, LLC,
Defendant.
-------------------------------x
In Re:

11

BERNARD L. MADOFF,

12

Rule 2004
Examination of:

Debtor.
-------------------------------x

9

FRED WILPON

13
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

July 20, 2010, commencing at 10:04 a.m.

21
22
23
24
25

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

34

1

investment -- I wasn't alone.

2

or maybe all of us made an investment in, starting

3

in, you said '85, it could be.

4

that we had periodic conversations with him about

5

the investment.

6

over the years.

7

Q.

8
9

A.

Several of us made,

And subsequent to

The investments grew, obviously,

When did you first meet Mr. Madoff?
I met him -- Jeff must have been

about 15 and Mark Madoff was about 14, something

10

like that, they were about the same age.

11

or 14, I'm not sure exactly when, but when they were

12

kids in school, I met them.

13

town.

14

So, Jeff is 49.
Q.

15
16
17

A.
Q.

Maybe 13

We lived in the same

Over 30 years.

What town did you live in?
Roslyn, Long Island.
And how far was -- at that time how

far was your home from the Madoff home?

18

A.

Three, four, five miles.

I've never

19

been to the Madoff home in Long Island.

20

know exactly where he lived, but I know he lived in

21

the same town.

22

Q.

Okay.

I don't

And tell me about how you

23

first met him in connection with your son and Mark

24

Madoff.

25

A.

Mark and Andy, his younger brother,

35

1

and some other kids that were going to school

2

together met, and from time to time I'd see them at

3

our house.

4

whatever.

5

Generally we would meet the parents of our kids'

6

friends.

They were always around, playing ball or
Soon thereafter we met their parents.

7

And so we knew them, you know, we met

8

them at that time, and then subsequent to that I

9

think they moved to New York when their kids were

10

maybe going to high school.

I'm not exactly sure

11

when they moved, but they moved to New York sometime

12

thereafter.

13

we knew them.

14

Q.

Lived in New York most of the time that
New York City, I'm talking about.
Right.

How did it come to pass that

15

after you met Mr. Madoff through your children, that

16

you then invested in his business?

17

A.

He, he was in the investment

18

business, investing people's money.

19

real estate business primarily at that time.

20

evidenced an interest to diversify.

21

any, if there's a time in the future you would like

22

to invest, I could invest some of your funds and I'd

23

like the opportunity to invest in some real estate.

24
25

We were in the
And he

Said if there's

That didn't happen for a while but he
talked about it once or twice, and then we decided

39

1

Q.

Can you tell me a little more about

2

those discussions with your partners before, before

3

actually investing in Madoff?

4

A.

We were already seeking someone to

5

invest some of our liquidity.

6

at that time, but we were seeking to do that.

7

so there were a number of discussions with different

8

firms, different individuals at the firms that were

9

doing that kind of work.

10
11
12
13
14

Q.

It wasn't a very lot
And

And by firms you're referring to

investment-type firms?
A.
Q.
A.

Investment-type firms.
Okay.
My recollection is we did try a

15

couple and didn't do too well in a couple of them.

16

Howard Squadron was a close friend of mine, as well

17

as being an outside lawyer of ours.

18

think there was a conversation with him, and I knew

19

that he was an investor, or he told me he was an

20

investor, satisfied investor.

21

partners all invested.

22

others that were investors.

23

the moment, but numbers of other people that were

24

investors.

25

Q.

So he -- I

I think his firm, his

We subsequently learned
I don't remember who at

And we decided to give it a try.
And what did Mr. Squadron tell you,

40

1

just about -- I want to be careful here, what did

2

Mr. Squadron tell you about Madoff, specifically?

3

A.

He knew him, that he represented him,

4

he liked him, trusted him.

5

had a strategy that was very unique, that he

6

understood how to make money without risk, without a

7

lot of risk.

8
9
10
11
12

Q.

15
16

What did Mr. Squadron tell you about

Madoff's strategy at that time?
A.

I don't recall.

I don't recall.

I

wouldn't understand the strategy anyway.
Q.

13
14

And thought he was --

Fair enough.
Did Mr. Squadron provide you with any

materials, any documents concerning Madoff?
A.
Q.

Not that I can recall.
You had mentioned earlier that you

17

were looking at other investment firms for

18

investment opportunities; is that right?

19
20
21
22
23

A.
Q.

Correct.
Do you remember who those were at

that time?
A.
Q.

No, I don't.
Do you remember what you did in

24

connection with researching or investigating those

25

firms to make the decision whether or not to invest?

42

1

investment firm before investing?

2
3

MS. SESHENS:
Q.

4
5
6
7
8

Q.

11
12
13

I don't know.

Did Mr. Katz have any discussions

with Mr. Madoff?
MS. SESHENS:
A.

Objection to the form.

I don't recall any, but it wouldn't

surprise me.
Q.

And what discussions did you

personally have with Mr. Madoff prior to investing?

14
15

You can answer.

I think he talked with Mr. Squadron

and perhaps others.

9
10

You can answer.
MS. SESHENS:

A.

Objection to the form.

MS. SESHENS:
A.

Objection to the form.

Just those that I've told you about.

16

After we invested, Saul and I would go to visit

17

Bernie approximately once a year, and we'd go to his

18

office or something and talk about where we -- how

19

the investments were doing, what was happening.

20

I had a personal relationship with

21

the Madoffs that developed over time, and not an

22

everyday personal relationship, but a friendship.

23

And so I made it a policy that when I saw him at a

24

charitable event or celebration of some kind, you

25

know, we attended his kids' weddings, he attended

43

1

our kids', you know, we were family friends, I just

2

didn't discuss business with him.

3

conversations with Bernie Madoff were really of a,

4

just of a personal nature.

5

their lives and what was happening in our lives.

6

Not in a context of, you know, what's happening in

7

the business, how are you investing these funds?

8

Because, frankly, I wouldn't -- that's not my

9

expertise.

10

So my

Of what was happening in

I wouldn't really know, and I didn't

want to mix the two.

11

So, once a year we'd go and have a

12

conversation, mostly schmoozing.

13

schmoozing is.

14

Q.

You know what

I've heard.

15

A.

16

it in Cleveland?

17

Can you define that?

Can you define

(Comments off the record.)

18

A.

That's the kind of relationship it

19

was.

20

that you will talk to, none, that is more betrayed

21

than I am.

22
23

Very trusting relationship.

Q.

There's no person

Thank you, Mr. Wilpon.
I want to go back to -- I want to

24

break that down into a few areas.

The first thing

25

is, and maybe I should have been a little more

44

1

clear.

2

between you and Mr. Madoff before you invested.

3

know you had mentioned that you had discussions, but

4

I just want to clarify what were the subject -- what

5

you actually discussed with him before his

6

investment.

7

the topics of those discussions concerning his

8

investments?

9
10

I just want to hone in on what was said

A.

Q.

12

Having to do with us investing with

Yes.
MS. SESHENS:

And other than what

he's already told you?

14

MR. BOHORQUEZ:

15
16

Do you recall what was the subject or

him?

11

13

I

Q.

Yes.

Before the actual investments were

made.

17

A.

Just what I've told you.

He

18

evidenced a desire to diversify and invest in other

19

things that we might have been investing in.

20

an investment guru, renowned in the field, even at

21

that time.

22

name it, he was top of the line, very well thought

23

of.

24

Levitt was a friend of mine and a friend of Howard

25

Squadron's.

He was

On all of the boards, on all of the, you

At the highest sources.

I remember Arthur

Arthur Levitt was -- knew Bernie very

45

1

well for a very long time, thought of him in the

2

highest regard.

3

So, that's the kind -- I mean, I

4

didn't know anything about the specifics of how he

5

invested that, except that he had good returns and

6

was risk adverse, and had a lot of people who knew

7

him and had a high regard.

8

Q.

9

Madoff as well?

10

A.

11
12
13
14

Q.

And was Mr. Levitt an investor in

I don't know that.
And what was your understanding of

Madoff's returns at that time, before you invested?
A.
Q.

That he had successful returns.
And you mentioned risk adverse.

What

15

was your understanding of his risk adverse strategy

16

at that time?

17

A.

At that time or any other time,

18

frankly, was that he was -- his strategy was such

19

that you were never going to -- he was never going

20

to hit a home run, so to speak, even at City Field

21

it's hard to hit home runs.

22

to, he was not going to lose a lot.

23

within that range all the time and because of his

24

volume and everything, whatever he did, or whatever

25

he was supposed to have done, was very successful.

And he was not going
And he was

53

1

the so-called bookkeeping of that.

2

Q.

So, was -- did Mr. Friedman's role

3

over time change in respect to the Madoff

4

investments?

5

A.

No.

I think it was always, he was

6

always the point person who was involved with any,

7

anything that had to be done administratively or if

8

he had a question or whatever, he was the person.

9

He would talk to someone in Bernie's office about

10

that.

11

Q.

And do you know if Mr. Friedman ever

12

worked with Mr. Peskin in terms of the accounting

13

aspects of the investments, the Madoff investments?

14
15

A.

I don't understand what that means.

You mean just the reporting, Fernando?

16

Q.

17

A.

Yes.
Except maybe to coordinate.

You

18

know, not in any kind of deep sense working with

19

him.

20

Q.

What about with respect to Mr. Katz,

21

how did Mr. Friedman work with Mr. Katz in

22

connection with the Madoff investments?

23
24
25

MS. SESHENS:

Can you specify just

which Mr. Katz.
MR. BOHORQUEZ:

Oh, sorry.

55

1

earning Z, if they were earning at all.

2

the overall person in charge of that.

3
4
5

Q.

Saul was

Was Saul Katz responsible for making

the investment decisions for Sterling in Madoff?
A.

No.

No one was in charge of making

6

the investment decisions.

7

which stocks Bernie bought?

8
9
10
11
12
13

Q.

Are you talking about

Let me back up.

Was Saul Katz in

charge of making the decision for a Sterling entity
or a Sterling partner to invest in Madoff?
A.

No.

The individuals made those

decisions.
Q.

Okay.

With respect to a Sterling

14

entity, how was the decision made to invest on

15

behalf of that entity into Madoff?

16
17

MS. SESHENS:
A.

Objection to the form.

If an entity had some money and was

18

to invest, it would have been agreed, I guess, in

19

some way that the entity was going to invest, and

20

then the specifics of that, you know, if an entity

21

had money, they may just have invested it in Bernie

22

or wherever.

23

Q.

That was just done as normal course.
Well, when you say it was agreed,

24

what do you mean by it was agreed?

25

was involved in that agreement?

Who made -- who

64

1

did you attend a year?

2

A.

3
4

Q.

I believe one.
And were those meetings held at the

Lipstick Building?

5

A.

6

Q.

Yes.
Did you attend a meeting of the Gift

7

of Life board at the Lipstick Building in December

8

of 2008?

9

A.

10
11

Q.

A.

13

Q.

14
Q.

A.

Q.

20

23
24
25

You were counting out your hands.

I was just trying to think of which

days it was before the December 11th.

19

22

-- sound right?

What were you trying to do then?

17

21

Yes.

Why do you remember that date?

15

18

Was that December 8th, 2008; does

that --

12

16

Yes.

A.

Right.

A few days before.

Would you repeat the question.

do -Q.
A.
Q.
A.

Let me back up.
Why do I remember that date?
Yes.
It's like a dagger in the heart.

Why

87

1

Q.

So after the initial hand-off to

2

Friedman, Arthur Friedman handled the relationship,

3

to the best of your knowledge, with the friends and

4

family?

5

A.

6

Right.

Q.

Okay.

And what was the, what was the

7

reason for offering these friends and family the

8

opportunity to invest in Madoff?

9

A.

Just --

10
11
12

MS. SESHENS:
Sorry.

Objection to the form.

You can answer.
A.

Just to try to help them.

For what

13

they -- they wanted to invest and we were trying to

14

help them.

15

charging fees.

16

Just trying to help them.

17

Q.

This is not a business.

We weren't

We weren't benefiting in any way.

And before you started, Sterling

18

started referring accounts to Madoff -- your friends

19

and family, getting -- let me rephrase that.

20

Before Sterling began to open

21

accounts on behalf of friends and family, did you or

22

anyone in the Sterling organization have discussions

23

with Mr. Madoff about that?

24

MS. SESHENS:

25

A.

No.

Not me.

Objection to the form.

109

1

A.

Whether he would -- depending on what

2

the meeting was -- what part of the year it was, he

3

might say, well, we've earned X to date and if you

4

annualize that, it would be Y.

5

our projection or above our projection.

6

have to change the projection in our financials or

7

whatever.

8
9
10
11
12

Q.

That would be below
We might

And in connection with that report,

did Mr. Friedman ever provide any documents, any
materials for your review?
A.
Q.

Generally, no.
Did he ever provide any materials or

13

documents for your review in connection with the

14

Madoff investments?

15
16
17

A.

May have, but I don't really

recollect specifics.
Q.

You said earlier that Mr. Friedman

18

was in charge of the administration of the accounts.

19

What did you mean by administration?

20

A.

Well, the -- some of the family and

21

friends that were investors, if they had a question,

22

he would try to find the answer out for them.

23

think, I think, I'm not sure of this, but I think

24

that he helped people fill, you know, have the

25

information for their tax returns, because they

And I

110

1

needed the information for their tax returns.

2

would coordinate that with the people.

3

Q.

So he

Other than the friends and family and

4

the tax returns, is there anything else that you

5

understood Mr. Friedman to be doing in connection

6

with his administration of the Madoff investments?

7

A.

8
9
10

Q.

No.

That's generally.

You testified earlier that

Mr. Friedman was tracking statements.

What did you

mean by tracking the statements?

11

A.

As I understand it, he would get the

12

statements and he would make sure that the stocks

13

that were talked about were purchased and, you know,

14

to the best of his ability in terms of checking the

15

newspapers or whatever to see that the stocks were

16

the prices they were and he'd look at, I guess, the

17

puts and the calls.

18

Q.

I don't really know.

This tracking of the statements and

19

checking the stocks, was this something that

20

Mr. Friedman did early on or was it something that

21

he continued to do during the length of the

22

relationship with Madoff?

23

A.

I think he stopped doing it at some

24

point, but I'm not sure.

25

while.

But I know he did it for a

I don't really know.

I didn't have anything

143

1

A.

No.

You really have to know Arthur,

2

who's the most wonderful, intelligent, placid man.

3

He's a one of a kind, and "kind" is the heading.

4

Q.

5

for four days.

6

him.

7

We had the pleasure of deposing him
I agree, with my limited exposure to

Given that they're -- the number and

8

the amount of money that was being managed by

9

Mr. Friedman for these friends and family accounts,

10

was there ever any discussion as to what benefit

11

Sterling was getting?

12
13

MS. SESHENS:
Q.

14
15

In exchange?
MS. SESHENS:

A.

Object to the form.

Same objection.

Over the years I think there might

16

have been conversation.

17

the purpose of helping family and friends.

18

whatever costs were involved, we were bearing those.

19

Arthur was not a complainer, though.

20

someone who would bitch and moan about something.

21

Q.

We were doing it solely for
And so

Arthur is not

I'm not suggesting that he was

22

complaining, but you said that over the years there

23

may have been -- there were some conversations about

24

the increased burden of managing these friends and

25

family accounts.

What was the substance of those

145

1
2
3
4
5

A.
Q.

Right.
And these were individuals that

Sterling did not bring to Madoff to open an account?
A.
Q.

Right.
Now, I understand from your testimony

6

that at the beginning the idea of opening these

7

friends and family accounts was really done as a

8

favor to friends and family, right?

9
10
11

A.

Not only at the beginning.

Throughout.
Q.

But did there come a time when, with

12

the increased burden of managing these accounts, did

13

there come a time when there was a discussion that

14

maybe there should be something given in exchange

15

for the management of the accounts?

16

A.

17
18
19
20
21

Yeah.
MS. SESHENS:

A.

Objection to the form.

The motivation was always to help the

people, from the beginning to the end.
Q.
A.

Right.
Many people were not -- did not get

22

in because they weren't close friends or family.

23

And there were discussions, I don't know the

24

specifics, but about should there be an

25

administrative charge.

146

1

Q.

2

A.

Right.
And we all said no.

Because, you

3

know, that's not why we're -- we're not doing it to

4

make money.

5

it.

6
7
8
9
10
11

We're not receiving any benefit from

We're just doing it for friends and family.
Q.

Do you recall who raised the

possibility of charging an administrative charge?
A.
Q.

I don't recall that.
Did there come a time when Sterling

partners decided to diversify their investments?
A.

Several years prior to acquiring the

12

interest in the Mets we talked about

13

diversification.

14

diversification before that, but we talked about

15

diversification.

16

Q.

We had had a little

Just so we're clear on the time line,

17

the purchase of the Mets, the full ownership

18

purchase of that was in 2002, right?

19
20
21

A.

Yeah, but we, we've had ownership in

the Mets from 1980 or something like that.
Q.

So when you're referring that there

22

was a discussion of diversification a few years

23

before full ownership of the Mets, we're talking

24

like the late 1990s?

25

A.

No.

Late 1970s.

190

1

and then move on.

2

BY MR. BOHORQUEZ:

3

Q.

Did you ever raise with the partners

4

the fact that Madoff had returned consistent,

5

nonvolatile returns over the years?

6

something that was discussed amongst the partners?

7
8
9

A.

Is that ever

We were receiving those returns for

many years.
Q.

Do you recall seeing, in this

10

document, the critique that's raised in this article

11

about the consistent and nonvolatile returns; was

12

that critique ever discussed amongst the partners?

13
14

MS. SESHENS:
A.

Objection to the form.

Yes, in the sense that people would

15

say they didn't understand it.

16

critique.

17

Q.

But that's not a

And the fact that people didn't

18

understand it, did that ever cause you any concern

19

or any other partner concerns?

20

A.

We knew some very, very smart people

21

who did understand it and didn't have any concerns,

22

and it went on for 25 or 30 years, or 35 years,

23

however many years.

24
25

Q.

Who are the very smart people that

you're referring to?

191

1

A.

I referred to them.

Howard Squadron

2

and other people over the course of time that either

3

were investors or -- so they -- there's always a

4

point of view that people might have, but I never

5

saw anything that... to answer your question.

6
7

Q.

Did you understand how Madoff was

making money off of his investment business?

8

A.

Not in any kind of depth.

9

Q.

10

kind of depth?

11

Well, what do you mean by not in any

A.

Did you have any understanding?
I'm not an investment person, I'm not

12

an investment, stock investment advisor, so I

13

wouldn't have that kind of expertise.

14

people talk about it, I've heard people make their

15

points.

16

me -- I don't remember them but I've seen the

17

documents in which he describes how he does this.

18

And peripherally I understand how he does it.

19
20
21

I've heard

I've seen the documents which you've shown

Q.

And what is your understanding as to

what commissions he actually received?
A.

22

percentage of?

23

Q.

When you say commissions, you mean a
I don't know how you mean that.
Well, he, Madoff received commissions

24

on the trades he was making on your accounts,

25

correct?

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64
64

to hit a home run, so to speak, to hit a home run, so to speak,
even at Citi Field
20 even at City Field
REDACTED
You were counting out your
15 hands
days it was before the
18 December 11th.

You were counting on your
hands
days it was before December 11th.
REDACTED

1

Transcription error

Grammatical error
Grammatical error

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REASON