GOVERNMENT OF

GOVERNMENT OF THE VIRGIN ISLANDS OF THE UNITED STATES ECONOMIC DEVELOPMENT COMMISSION PUBLIC HEARING THURSDAY, November 15, 2012 12:43 p.m. to 2:32 p.m. Port Authority Conference Room St. Thomas, Virgin Islands MEMBERS PRESENT ALBERT BRYAN, Chairman NATHAN SIMMONDS, Vice Chairman LYNN MILLIN MADURO, ESQ., Member RANDOLPH ALLEN, Member JOSE PENN, Member STAFF PRESENT PERCIVAL CLOUDEN, CEO JENNIFER NUGENT-HILL, ACEO HENRY SMOCK, ESQ., Legal Counsel FRED HANDLEMAN, ESQ., Director of Legislative & Legal Affairs MARGARITA BENJAMIN, Director of Applications STEPHANIE BERRY, Director of Compliance BETH HOFFMAN, ESQ., Investigator SEMELE GEORGE, Public Relations DORENE LEWIS, Board Liaison PORTER'S COURT REPORTING, INC. P.O. Box 11303 St. Thomas, Virgin Islands 00801 TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123102 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ITEM No. 1 No. 2 No. 3 No. 4 INDEX DESCRIPTION PAGE Meeting Called to Order 3 Roll Call 3 Review and Approval of Agenda 4 Cases for Public Hearing a. Southern Trust Company, Inc. 6 b. DIAM Management 41 c. Asset Recovery Management, Inc. 65 (Hearing Adjourned.) TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123103 1 2 3 4 S 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 (No Response) THE CHAIR: (No Response) THE CHAIR: Abstention? Motion carries. Motion to accept the agenda as amended. MR. PENN: So moved, Mr. Chair. THE CHAIR: Second? MR. SIMMONDS: Second. THE CHAIR: Properly moved and seconded. All those in favor? (Chorus of Ayes) THE CHAIR: Opposed? (No Response) THE CHAIR: Abstentions? (No Response) THE CHAIR: The agenda stands approved. Cases for Public Hearing, Southern Trust Company. Who speaks to this matter? MS. KELLERHALS: I do. THE CHAIR: Mr. Smock, could you swear in the testifiers? (Thereupon Erika Kellerhals, Esq. and Jeffrey Epstein were duly sworn in by Attorney Smock.) TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123104 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MS. KELLERHALS: Good afternoon, Chairman, Commissioners and Staff. I appreciate the opportunity to come before you today and speak with you regarding my client, Southern Trust Company, Inc. I'm here today with Mr. Jeffrey Epstein who is the President of Southern Trust. And after a brief introduction covering the business and its compliance with the statutory requirements of the EDC program, I'm going to turn the floor over to Mr. Epstein and he will talk to you L little bit about the new business model. Southern Trust, which will be located on the Island of St. Thomas is applying for benefits under Category Ile as a designated service business. And once it gets up and running it will provide cutting edge consulting services to companies around the world lying in part upon the use of biomedical and financial informatics. The client base for this company is going to range from individual consumers to scientist, to investment companies looking to create new strategies using what's called mine information. I want to get a few housekeeping out of the way and on the record before Mr. Epstein explains to you exactly what it is they are going to be doing. Southern Trust is going to meet all the statutory requirements including that with respect to capital investment. In fact Southern Trust has indicated in their TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123105 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 application will exceed the statutory investment requirement of $100,000.00. We've also set out a detailed employee benefit plan. And one of the things that's noted about the plan itself is in addition to providing generous lead packages, life insurance and a donated leave program, the company actually includes one hundred percent employee and dependent coverage for health insurance. So the company will absorb the cost of all health insurance. And they have agreed to a minimum $50,000.00 per year charitable contribution in addition to the mandatory contributions to the Territorial Scholarship Fund and the Department of Labor database. And those of you who know Mr. Epstein he has been a long-term resident of the Virgin Islands know that he has given generously over the course of the last 11 years to various charities in the Virgin Islands. We did request as part of the application a waiver of the employee requirement for the first five years down to five employees. There were a couple of different reasons for doing that. One is as Mr. Epstein explains and as we explained in the application, there are some very specialized job positions needed by virtue of the business model and what the business itself would be doing. And it's anticipated that getting to maximum capacity and finding the right employees will take a significant period of time. And TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123106 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 as a result of asking for that waiver of the employment requirement down to five, we are also asking that the percentage residency requirement also be amended from 80 percent to 50 percent for the first five years. I'm now going to turn the floor over to Mr. Epstein and he can talk to you a little bit about his background in this business in particular. MR. EPSTEIN: Thank you. What's happening in today's environment is the fact that most everyone here has a computer in front of them. Most of the time if you look back 25 years if you wanted to know whose genetics determined your current circumstance, if you wanted to get financial advice, if you wanted to get medical advice you would go to one doctor. You would, hopefully, choose the right doctor and he would according to his experience say, fine, maybe you have a stomach ache and we have in response to your problems three or four solutions. In fact if you were going to go into the Army years ago they classified your health like only five categories. Were you sort of very healthy, healthy or were you F-4. Everything was very general and very broad categories. As you all are aware everything nowadays has become personalized. You have your clothes that you wear TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123107 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 can be custom made. Everyone has many options on how to set up their computers. What's happening in the world is that many decisions that used to be made by one single individual now it's impossible to get accurate information without accessing vast numbers of databases. What Southern Trust will do will be basically organizing mathematical algorithms so that if I want to know what my predisposition is for cancer we can now have my genes specifically sequenced. Unfortunately, it hit home as of yesterday for me exactly what my company does. One of my closest friends wa. diagnosed two days ago with a terminal cancer. Now he's at the best hospital. I've known him since I was six years old. His tumor needs to be sequenced. We will spend time going through the DNA of his exact tumor. Now that was the first step that's available today. It hasn't been available ever before. But that's only the first step. Now we know specifically what type of cancer he has. In the past unless you are lucky enough to have the right doctor when you went to diagnose that problem and he can say, well, Jose or Albert I've seen this before and you were out of luck. Now what we'll do is we'll use this one sequence, his own DNA and the specific problem he has with his cancer and access worldwide databases of every drug, every single drug across the world that's been tested TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123108 11 1 2 3 4 5 6 7 8 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 on all different types of cancers that specifically have his DNA sequence involved. So the chances of a successful treatment are now viable where before as he said last night he would be dead in four weeks. So as of medical advance you are able for the first time to have custom made medicine but you can't do that without accessing a vast database of information. Even If you are the best doctor in New York or California or here, you can only read what you can read. You have 24 hours a day. The new sequences in biomedicine will allow you to access every publication that affects your area and you don't have time to read it. So my company's algorithms will in fact digest the information as best as they can currently and then spit out its recommendations. So you'll have computer generated solutions for medical problems, which is the next century's work on how to get people healthy. My real business has always been money. People want to know which companies to invest in and you might have been lucky enough -- I was poor but if your parents had any money and they wanted to simply find the stock to buy or how to invest their money, again they had to find a stockbroker or a local banker or someone they could go to and ask their advice. And that one person's advice was only as good as the college they went to or their experience in the —TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123109 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 business. Now, just as I -- with my friend or as a simple example years ago if you had asked me what is the name of George Washington's horse? I lived in Coney Island. George Washington's horse, okay, what would I have to do? I'd have to get on the bus and go to the library. I'd have to ask the librarian for a book on George Washington. Hopefully, somewhere in the appendix would be a note that said George Washington's horse or otherwise I was in trouble. I'd have to actually read the book. I would then go back, make a report, come to my school. And as you all know right now we go to Goggle and in a nanosecond Goggle searches 10 billion documents for th names of George Washington's horse. And you can find out what the horse ate for breakfast on a certain day. So my company will then take the concept of building these search algorithms but not searching the information for the name of George Washington's horse but in fact searching the world's databases for what is the best investments. I can't spend 24 hours a day going through al the investments around the world but my computer can do it in a nanosecond. Unbeknownst to most people today again when I first started on Wall Street I was a school teacher. The stock exchange traded a couple of million shares per day an TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123110 13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that was a big -- and if you had a 100 million shares a day it was a calamity. Now everyday, every minute those numbers of shares are traded but not by people. Seventy-Five or Eighty percent of all the trading around the world -- when I say trading, all the statistics you read about how many shares traded today is done by a computer. In fact some of the computers trade thousands of times per second buying and selling at small increments. So the speed at which decisions are made you have speed by computers but you need a search engine, just like Goggle has a search engine for documents, a method to search the financial arena for the best investments in my financial arm of Southern Trust and the best medicine. So again if it was me personally -- this again it hits very close to home. I'm leaving for New York after this meeting to go sit with the sequencers to see if I can save my friend. And this is the first time in history that it's probably a chance because most people don't know when they say you have lung cancer, cancer is not really a thing. It's not like -- you see we used to -- the past 30 years we know we had a disease. You had the flu or you had some type of liver disorder. Cancer is very different. Cancer is not a thing. It's a process. It's a process. What do I mean by that? It doesn't mean I have something in my lung that has a little "C" that says cancer. TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123111 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 It means that my lung is doing something. It is a process. It is cancering. My lung is cancering or my prostate is cancering. In my friend's case his brain, bones and liver are cancering. So in the past -- unfortunately anyone diagnosed with a disease for lung cancer you could only treat them with a lung cancer approved drug. Like I have a breast care center in New York. So now it turns out that many females for breast care you can treat it with things that were only used before for prostate. And the only way they got to that is they realized that in certain studies in the Netherlands just by these search engines there had been good results based on the computers being able to search the database, the solutions for specific types of problems. Why the Virgin Islands? Again we have high speed connections in St. Croix. So I have to beg both servers to hold my database information. The high level people that Erika mentioned is I need high level mathematicians to come down and help program the computers. Some people actually have to be here and monitor the computers. And these algorithms -- it's amazing but true -- much of the work hopefully to be done later in life. So that five, ten years away is the computers themselves will help redesign some of the computer programs. Just like in the cars we first built some computers to help TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123112 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 us manufacture cars. Now the computers are helping to design. They in fact design their own little parts. In the new version you can actually printout just like a fax machine started 20 years ago, you could have the computer design the part and make it. It actually prints parts. So Southern Trust will be basically building up a database searching mechanism to search things on an individual basis both in the medical field and the financial field. Again it's an exciting area that the idea is that the diseases that affect the local population -- of work in Africa. To backup Africa is for me a ground for experimentation because it has been so underdeveloped it is not burdened with the current What do I mean? When telephone companies now come to places like Senegal where I was a couple of months ago, they don't put copper in the ground. They don't have to worry about laying cables and going to everyone's house. They leapfrog the old systems going directly to cellular. So though Senegal and Ivory Coast are poor countries, 70 percent of the people have cell phones because they were able to not deal with the local in-breaded telephone companies who had to charge a ridiculous sense of money because they had already laid all this pipe and copper I do lots fertile system. —TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123113 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 in the ground. The same thing here, Africa has almost no medicine. It's difficult. But with searching as opposed to testing people everyone is not the same, not everyone needs an aspirin and not everyone needs the same aspirin or the same amount of aspirin. The idea would be to build up a personal medical database for lots of people. That's it. And ask as many questions about the subject. I enjoy it. MR. SIMMONDS: Good afternoon. I get the financial part. I mean you got a billion dollars to invest. You search for the best investments and you invest other people's money. The medical part I'm not sure I get as yet. I mean I'm not going to ask you how much something like that would cost because it sounds like it would be really expensive. But who are you catering too? I mean people are going to come to you and say, you know what, I have an ailment. I need you to search and see if there is a cure. MR. EPSTEIN: No, it's the drug companies. To develop a new drug now cost a billion dollars because you sort of start from scratch and it's really like trial and error in your backyard, trying to figure out which piece fits in this screw. So the drug companies spend the first five years testing all the different parts to see if it will work on this drug -- on this disease. The drug —TRANSCRIPT BY PORTER'S COURT REPORTING, INC. (340) 775-2428-- EFTA01123114 1 2 3 4 5 6 7 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 companies would much rather have my computer do the trials and errors. MR. SIMMONDS: But you are not testing anything. You are basically just searching for already tested products. MR. EPSTEIN: The algorithms themselves will be almost like a chemistry lab in the computer. In the old days when you had to test for something you had to actually build it to see if it would work. When the Wright Brothers built their airplane they flew it and it crashed. They flew it and that's when they changed the wing. And now what you do is you design it in the computer. The computer inside all the new space ships are all designed by saying here is the wind, here is the gravity and the product comes out at the end. So there is big drug companies that want to know what's the most likely pathway to hit this type of disease. MR. SIMMONDS: Why would it take five years before local folks could be trained in doing this sort of -- MR. EPSTEIN: It won't take five. It will be growing simultaneously because the mathematics it's like the new programs. For example, the last Windows program that came out last week, Windows 8, took 600 people TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123115 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 six years to do. Now it's not that many people but you need high level programmers. So I would like to have young people -- I'm teacher by heart -- engaged early on. But the programming initially will take time to get up and running and been testing it until it sort of becomes a model for its performance. MR. SIMMONDS: Thank you. THE CHAIR: Mr. Allen. MR. ALLEN: Good afternoon, Mr. Epstein. I've been listening to you quite intense. You are asking for five years exemption and you need instead of 80/20, you need 50/50. You know that's going to take going back to the Legislature to change the statute? MS. KELLERHALS: We are aware that they did bring in an amendment to go to the Legislature -- that the Legislature actually passed legislation that would reduce the number of employees to five. I understand that it was vetoed by the Governor. But based upon my discussions with the EDC staff it was my understanding that at this time based on the circumstances of each applicant it would be considered. MR. ALLEN: That's the reason why it's in this proposal? TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123116 19 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MS. KELLERHALS: It's in the proposal in part because it fits the business model better. It allows them as Mr. Epstein explained there is that ramp up while they are getting the programs together. MR. EPSTEIN: I much rather it be shorter frankly. MR. ALLEN: You much rather it be shorter? MR. EPSTEIN: Sorry. I would like to get it done as fast as possible. MR. ALLEN: Yes, I understand that. But some of the computer models that you discussed it's so way out. Is this your thinking or this is something that is on the market that you are trying to tap into? MR. EPSTEIN: I am not a mad man. So it might appear that way. MR. ALLEN: No, I'm just asking if this is your thought brand new or there is something out there that you are trying to bring it here. MR. EPSTEIN: Both. There are products just beginning. They have not yet been fully developed. Database mining is a very -- product is probably the wrong word. The database mining which mining means as in the past you got to dig into the ground. Here the concept of database mining is very well established but not TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123117 20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 in these two areas. Normally, for example, as you know when you go in your computer it might target you for a specific type of advertisement because it knows that after you've been searching for French fries. So they mine all the people in the area who is looking for French fries and said, you know, Randolph seems to like that. So we'll send him a message. So the concept itself is very well established, using the medical really the next couple of years. MR. ALLEN: I have no more questions. THE CHAIR: How do you get around all the proprietary medical information, though? I mean how does that -- MR. EPSTEIN: Because you initially start out -- most people they opt in or opt out. Sometimes they, even for the first sequencing, potentially to answer your question, when the human geno project is first begun a question came in if they sequence my geno, my personal geno, is that information tied to Jeffrey Epstein or will it be anonymous? And everyone whose genes get sequenced has the right to say I don't want my name associated with my gene because maybe if I have something that's bad I might have a rocker gene from a woman pre-deposing me to breast cancer I won't get health insurance. —TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123118 21 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 So the decision of having your name associated with the sequence is your decision. However, the sequence then goes into a big pile and says the person who had that sequence was responsive to this drug. So there is no name attached. So there is no privacy issue. If it turns out that most people don't mind having their names I was surprised. But most people say, look, if I'm doing something good for society and it's helpful you say, yes, I've had a problem and if I can help others my name could be attached. That's a decision I would make. THE CHAIR: So it's a biomedical Goggle that -- MR. EPSTEIN: Yes. THE CHAIR: -- that tracks genes, preference gene receptivity to different medications in order to make doctors more efficient. MR. EPSTEIN: Yes, and drugs more efficient. THE CHAIR: But how do you get paid? MR. EPSTEIN: The drug companies instead of having -- as I said imagine having your own little chemistry lab in a computer as opposed to having a thousand people. So they pay me for the algorithm. THE CHAIR: So they pay you a TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123119 22 1 2 3 4 5 6 7 8 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 membership fee to access your server or they pay you for an algorithm that you actually sell them instead? MR. EPSTEIN: There will be just like in any other product because there are different algorithms. Some will be outright purchases, probably the simple ones. There will be leases for longer runs and most people will be coming back. Sometime if you want to know -- just like a search engine in answer to one question. So you get paid for that one piece of advice, ongoing advice or exclusive rights like drug companies might want to have for a specific answer. THE CHAIR: And these mathematicians build these algorithms to build themselves or they build algorithms specifically for whatever question is posed because I know you mentioned I still want to know why you have a server here, though? MR. EPSTEIN: I'd like to have everything here for security purposes. As you know everybody is hacking servers. The only way really unfortunately to make sure you are secure is to have location wise. Once you put your server -- THE CHAIR: So your server will be more or less your vault rather than a server to power anybody else anywhere else? MR. EPSTEIN: Yes, yes. The systems -TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123120 23 4 5 7 8 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 everything is interconnected. But again the only real way to have certain types of things is servers that are not connected to the Internet directly. THE CHAIR: How do you anticipate that this business will grow so that it would actually affect employment? MR. EPSTEIN: Because if things go as I planned it will need a significant number of people, hopefully, again, probably between five to ten years or maybe more operate a virtual laboratory. So you need lots of people. You need to watch and help the mathematicians. It's accessing the computers and training people to operate the systems. As you know if you thought about it years ago, 20 years ago if we said we are going to have to program a computer, it's impossible. I can't do it. I'm a pretty good mathematicians. But now students coming up can program things that were unthinkable years ago. THE CHAIR: And the office space or will there be an office space? MR. EPSTEIN: Yes, sir. THE CHAIR: It will be in St. Thomas? MR. EPSTEIN: Yes, sir. THE CHAIR: But the server will he TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123121 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 on the level three establishment on St. Croix? MR. EPSTEIN: Don't know yet. THE CHAIR: Because I know I heard you mention St. Croix and the access to the band. But you are figuring you can tap in a fiber anywhere and get there? MR. EPSTEIN: Yes. You want the access. So that's really for the trading aspects. It turns out -- and again it's an interesting fact, that computers that trade, the algorithms that's a different part of the business, the computers that trade it makes a tremendous difference if you have fiber and high speed fiber but not high speed fiber. So just as a silly example there was a company in New York that moved its offices three streets closer to the stock exchange and paid millions of dollars to upgrade their space so they can be three streets closer because then they get an edge. MR. SIMMONDS: Mr. Chair, if I might follow-up on something that you asked? THE CHA/R: Sure. MR. SIMMONDS: So what then do you see as the economic benefit to the territory? MR. EPSTEIN: Well, obviously, hopefully -- MR. SIMMONDS: I mean you are TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123122 25 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 suggesting that it will be at least five years, maybe even longer before you start ramping up employment. MR. EPSTEIN: I think there will be revenues of a considerable number of millions of dollars at the end of the fifth year. But the ramp up these are high dollar revenue items to the company. So obviously in terms of the taxes and in terms of employment. MR. SIMMONDS: five or so individuals that -- MR. EPSTEIN: taxes. MR. SIMMONDS: MR. EPSTEIN: MR. SIMMONDS: exemption. I'm sorry, taxes for the No, no, the business The business taxes? Yes, sir. But you are getting an MS. KELLERHALS: Right, but the exemptions are only 90 percent on eligible income. MR. SIMMONDS: So you are saying that the 10 percent would be substantial for the territory? MR. EPSTEIN: Yes. The answer is "yes". And combined with employment it's a little down side. THE CHAIR: How was this -- MR. SIMMONDS: You are already a resident of the Virgin Islands, right? TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123123 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. EPSTEIN: Yes, sir. I also have homes in New York and Florida. Most people prefer prefer to be down here. This is my favorite place to be. It's a more difficult business environment but I prefer to be here. I prefer to have my employees here. I've had a very successful time here. THE CHAIR: How is this different, the financial side than what you were doing before? MR. EPSTEIN: What I was doing before was really financial advice which is almost I don't want to say antiquated but somewhat. You would come to me and say what should I buy? And I'll use my judgment based on 30 years in the business of what you should buy. I didn't really use computer search engines to find it. It's a very different business. This is not financial advice. This is the mathematics and the product of financial algorithms for sale. THE CHAIR: So you have clients that have invested in this and these algorithms produce not information but -- they do produce information but it actually trades based on that information. MR. EPSTEIN: That's correct. THE CHAIR: The computer. MR. EPSTEIN: Yes, the computer can trade. And the client they can either buy its position in —TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123124 27 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the algorithm or can have advice but I prefer only the algorithm. I don't want to do financial advice. This is much more sophisticated. THE CHAIR: When you say they buy a position in the algorithm, you can invest in an algorithm? MR. EPSTEIN: Yes. So if you go on, for example, many trading sites you, yourself, can sign up as a subscription and say I get the Albert Bryan newsletter When you think about that what was that? That was someone who is willing to pay you a monthly fee for your personal advice. Here we do the same thing except it's not a person. It's a computer. THE CHAIR: Why isn't this a Tech Park business, though? MS. KELLERHALS: We couldn't come to an agreement with the Tech Park. So there is an understanding that we could go to the EDC. THE CHAIR: Because I was trying to figure out if there was a distinctive difference because it is a little different. It is an Internet provided service but your core business is not really Internet. MR. EPSTEIN: THE CHAIR: MR. EPSTEIN: management. No, it's database. It's data. Yes, data and it's TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123125 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 THE CHAIR: Right, I go it. MR. PENN: In the projections you have two revenue lines, fee income and investment income. It seems that -- is the fee income both the medical and the financial? MR. EPSTEIN: It's a mixture. Again according to what the client wants to do, whether they want to have a single -- you can invest, for example, in the follow-up in only the bond algorithm. So you would then be paying for your piece of a bond algorithm. If you wanted to have more you would be fee for the entire business. MR. PENN: I was just trying to get a feel for how much of the business you estimated because your estimate would have been medical versus financial. MR. EPSTEIN: I think it will move. I think it will start off being more financial because the medical is much more sophisticated. But in terms of overall sort of doing good thing, hopefully, I think the medical area would be more exciting. MR. PENN: And how many people would you say would you need to do what you project for year five? I'm not going to put numbers on the record but I see nearly a doubling of your estimates between year one and year five and I'm just trying to figure out -- MR. EPSTEIN: I wanted to be TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123126 29 1 2 3 4 5 6 7 8 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 conservative. If things go well we'll meet a lot of people. MR. PENN: But I mean I guess with the question you had before about the mix 50/50 -- MR. EPSTEIN: Yes. MR. PENN: -- in year five what do you project that to be to generate what you project even though it's conservative? How many bodies are you considering? MR. EPSTEIN: Again I would like as many as possible frankly. But the idea is how well will a product this mechanism take. Especially because it's medical you don't want to sell something before it's ready. And once it's ready then there would be people in the marketing department. There will be a bunch of other things. So it's difficult to put a number on it. MR. PENN: How do you market that? MR. EPSTEIN: Well, for the medical things through the drug companies as well as certain medical NIH, the hospital divisions, the medical countries. Iceland is one of the few countries -- and that's another discussion at some point because Iceland is an isolated community and they have 50 years of genetic information. So everyone in Iceland has a genetic sequence and you can then see what's happening, the children, what was really inherited. Is breast cancer inherited, not inherited. Is schizophrenia by TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123127 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 simply looking at all the data that was accumulated? Places, frankly, like St. Thomas are the perfect place to sequence people because it's so isolated. You are able to get much better data than ever before. And it also ends up -- and that's one of the advantages of being here as opposed to New York. THE CHAIR: But when I think of genetic sequencing -- and I know we are getting way out on a limb. MR. EPSTEIN: No, ask. THE CHAIR: I mean I would think that you would have to have some DNA sampling of these people going back for 50 years and 50 years ago we didn't have that type of technology. So how do you -- I mean people have died. How do you trace that? How do you do sequencing of somebody who is no longer here? MR. EPSTEIN: In Iceland they've kept the sequencing. They started taking blood. So they have kept blood samples from everyone. That was very forward thinking. So they were simply able to get the sequence out of the blood. THE CHAIR: Got you. That was confusing. MR. EPSTEIN: Yes, it's 50 years of data. It's the only country. It doesn't make them any —TRANSCRIPT BY PORTER'S COURT REPORTING, INC. (340) 775-2428-- EFTA01123128 31 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 healthier at the moment but they have tremendous amounts of data but almost no information. THE CHAIR: Wow! MR. EPSTEIN: Because now they have 300,000 people and all their ancestors. Now what do we do with it? It was the same problem when we had the human geno. It was a book of three billion letters and it took ten years to do and three billion dollars to do it, three billion dollars to do it only ten years ago. That same sequence you can now walk into your doctor and have it done for $65.00. You can sequence your entire geno for $65.00. MS. MADURO: I have one question for Legal Counsel. So through the Chair may I ask my question to Legal Counsel? With respect to the fact that the Governor has vetoed the proposed legislation, how will that impact us inasmuch as we are in a public hearing and this board is going to have to later decide moving this application forward without the approved legislation? MR. SMOCK: You'll have to remind me which legislation are you talking about? MS. MADURO: On the amount of employees that the companies may have. Traditionally we would approve an application with a minimum of 10 and move TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123129 32 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 forward in the event that the applicant cannot ramp up to 10 we would do a modification or a waiver of employees. But in this instant we are going to start out knowing that we are not going to have 10 employees. MR. SMOCK: So we'll be dealing with the old legislation. THE CHAIR: But the law allows for us to waive the employment in any case. MR. SMOCK: If we wish. THE CHAIR: For due cause only because those employees are not needed. MR. SMOCK: If we wish to. MS. MADURO: True. But we traditionally do it by coming back to public hearing. So in the interest of time and because we now know that the applicant is not intending to ramp up to that I think it should be notated on the record so that we don't have to come back in the event that the applicant is approved to a waiver process or a modification process on it. MR. SMOCK: I believe it's already a part of the application. THE CHAIR: How many more people are doing this? MR. EPSTEIN: There is a couple doing it in California. Steve Jobs had a group that was trying to TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123130 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 help him and it was a little too short. They didn't get it done in time but they were getting there. In fact the last day of his life they thought they were able to sequence his gene in a way and maybe find a useful drug and he had enough. They said we think we can try a new one that's specifically tailored for your specific problem and he said I can't do this anymore. And then they had a big meeting. They tried to convince him to try it and he said I'm done. THE CHAIR: Where are you getting your mathematicians from? MR. EPSTEIN: Usually from the United States. THE CHAIR: That's a big place. MS. HILL: I'm sorry, where? MR. EPSTEIN: United States. I had hoped to get some from Europe just like engineers but it turns out that they don't exist anymore and anybody in this level of mathematics anywhere, they don't exist in China because you need a bit of a creative person as opposed to simply a copy cat. They don't exist in Europe. And if you are really good you are already here. So the universities usually. THE CHAIR: MR. EPSTEIN: THE CHAIR: So you already have one? I've had one. And what was his profile TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123131 1 2 3 4 5 6 7 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 like? MR. EPSTEIN: Harvard. It's usually Harvard, MIT. But this is Harvard and he used to be at the institute of advanced studies at Princeton. THE CHAIR: So in your five-year plan you are going to send some Virgin Islanders to Harvard? MR. BRYAN: No, I want to train them here. THE CHAIR: How do you do that, though? MR. EPSTEIN: Because it's much -- you have to start off thinking that, for example, Algebra is not as important as it used to be. Programming is important. And you don't have to -- in the old days you have to actually poke holes in the card to program. And now the younger people can have their little abortage (phon) do things simply by typing in and raise the abortage right-hand. You type it in and it already programs. So advance programming is very different. It's nothing -- I'm sure if you have children how they text, for example, they speak in B28, see you soon. You could ask me five minutes ago how am I going to teach -- one of the problems is how do you teach kids to talk because in fact they are starting to talk as they text. So adults don't understand it. TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123132 35 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 THE CHAIR: Is that what it is? MR. EPSTEIN: Yes. THE CHAIR: So are you planning -- and I know you have contributed generously before. So are you planning to do -- I know we have one applicant that started our Junior Achievement Program and we have some others that did a financial piece that seems to be successful at Charlotte Amalie High. Junior Achievement has gone viral. It's all over the Virgin Islands now. Are you going to do any programs to start to build that type of interest and expose young people to that kind of -- MR. EPSTEIN: I'm willing to do any of those things. Again I come from a background where I had no money and it was only by understanding math and science that I was able to live the life I currently lead. So I would love to do it. THE CHAIR: Any other questions? MR. EPSTEIN: I'll be more than happy in some other forum to sit down and say fine. In fact in some of the scholarship money that I have given before here in St. Thomas was to try to find children to go to visit Harvard, encourage them. One of the things I did five years ago is I brought a whole bunch of Noble Prize winners here to St. —TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123133 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Thomas for lectures at the university again so kids can sec:• they don't have to be in the music business. Science is as fun and exciting. MR. SIMMONDS: One of our board members is the Provost at UVI. So we certainly will have him get in touch with you and see what kind of programs could be developed in conjunction with UVI to train mathematicians. MR. EPSTEIN: Not only mathematicians, in fact it's a longer discussion. I'm willing to have as many discussions anybody here would like to have on the record, off the record. But that Apple computer sitting in front of the Chairman has more teaching ability than all the teachers in St. Thomas but people don't understand how to use it yet still, not only here but most places because the teacher unions don't like that idea. There is something that I would always encourage adults to do as I would encourage all children is something that some people know about and some might not. It's called the Khan Academy, K-h-a-n, it you should go on line. learn in high school. You Academy. Now if you haven't seen It teaches every subject you can watch it when you want. It's simple. You don't feel embarrassed if you don't understand it the first time because you can play it over and over again. You can blog with other children or people your own age to learn the same subject or maybe having the same —TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123134 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 problems you have. I don't understand how miosis works or mitosis in bio-medicine. So I can blog now and say who else? Can someone explain to me how the chromosome split and they get answers. So, yes, it's a tremendous amount of things to be done. THE CHAIR: You know we were having that discussion the other day and that's a serious shift now. Because the most important thing is teaching kids how to learn on the Internet because all of the information is already there. They don't need to sit. Florida has this future school I think it's called Florida Virtual School. And they have their whole high school curriculum on line for anybody in the nation to go on and do it. But in the Virgin Islands like Iceland we are in the middle of nowhere. MR. EPSTEIN: You see that's sort of insensibly the same thinking I grew up with. But the middle of nowhere just like Africa you have an Apple computer sitting on the Internet. So in fact you are not in the middle of nowhere. You are in the middle of everything You are in the middle of everything. You just have to understand how to use this thing. And it's not taught in the school. And not only are the computers now used to say so you can learn Algebra but it turns out -- and if again let's look ten years down the road if I'm successful it turns out TRANSCRIPT BY PORTER'S COURT REPORTING, INC. (340) 775-2428-- EFTA01123135 38 2 6 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that with 14 people in the room everyone has a different learning skill and they learn differently. Some people are very visual. Once they see a motorcycle part they can put it together. I can't. Some people need to hear it verbally because they learn verbally. Some people learn visually. Some people have a combination of the two. If you go back 500 years there was not one person that sat in the classroom and said to the people in the field sit in here and let me lecture you and don't move while I do it. In fact as I described it the thing that everyone learns to do and really learns well is to walk and no one taught them. No one taught you to walk. THE CHAIR: So what you are suggesting is in 10 years we may be able to have a -- your same product that would be able to take a genetic code of how somebody is, figure out what is the best way for them to learn and put it on the Internet for them? MR. EPSTEIN: I don't want to say -- that's pushing it but yes. It's the Frankenstein version but it's true, yes. In fact it will turn out that certain people can learn certain things. Certain people can move through space differently. So your skill set if you think about it the questions that people ask are questions they have to find the right person to ask. You want to find the best docto, TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123136 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 z5 If you got sick and I got sick we go to the best doctor. The best doctor for a 100 percent likelihood is connected on that machine somehow. So how can you find that person in the right place that's connected with that information? It's really exciting. THE CHAIR: That is. MR. EPSTEIN: Yes, but things like the Khan Academy you don't need -- if you want to learn mathematics you don't really need to go to high school. THE CHAIR: So why can't we fix the LEAC, man, if we can do all of that? Anymore questions? MR. SMOCK: Mr. Chairman, for the record to follow-up on Commissioner Millin's question and comments, this application did request fewer than 10 persons. But Section 708 of Title 29 Subsection F does provide for the record that: To be eligible for the granting of benefits you must employ at least 10 persons on a full-time basis. And such enterprise and all employees and such enterprise shall be subject to the exceptions contained in Section 711 of this subchapter be residents —TRANSCRIPT BY PORTER'S COURT REPORTING, INC. EFTA01123137