Case File
efta-efta01150049DOJ Data Set 9OtherDS9 Document EFTA01150049
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Unknown
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DOJ Data Set 9
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efta-efta01150049
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UNCERTIFIED TRANSCRIPT DISCLAIMER
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IN THE MATTER OF
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FORTRESS
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-against-
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ZWIRN
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The following transcript of
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proceedings, or any portion thereof, in
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the above-entitled matter, taken on any
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date, is being delivered unedited and
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uncertified by the official court
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reporter.
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The purchaser agrees not to
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disclose this UNCERTIFIED and UNEDITED
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transcript in any form (written or
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electronic) to anyone who has no
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connection to this case. This is an
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unofficial transcript, which should NOT be
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relied upon for purposes of verbatim
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citation of testimony.
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This transcript has not been
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checked, proofread, or corrected. It is a
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draft transcript, NOT a certified
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transcript. As such, it may contain
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computer-generated mistranslations of
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stenotype code or electronic transmission
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errors, resulting in inaccurate or
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nonsensical word combinations, or
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untranslated stenotype symbols which
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cannot be deciphered by non-stenotypists.
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Corrections will be made in the
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preparation of the certified transcript,
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resulting in difference in content, page,
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and line numbers, punctuation, and
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formatting.
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This uncertified and unedited
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transcript contains no appearance page,
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certificate page, index, or certification.
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THE VIDEOGRAPHER: My name is
Marc Friedman of Veritext New York.
The date today is June 14, 2011. The
time is approximately 9:13 a.m.
This deposition is being held in
the office of Susman Godfrey located
at 560 Lexington Avenue, New York, New
York. The caption of this case is
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Fortress VRF 1, LLC and Fortress Value
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Recovery Fund 1, LLC versus Jeepers,
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Inc., et al. in the JAMS arbitration
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reference number 1425006537.
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The name of the witness is
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Daniel Zwirn.
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At this time the attorneys will
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identify themselves after which time
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our court reporter, Wayne Hock of
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Veritext, will swear in the witness
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and we can proceed.
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MR. SIFFERT: John Siffert,
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Lankler Siffert and Wohl for the
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witness.
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MR. REYNOLDS: Daniel Reynolds
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also from Lankler Siffert and Wohl.
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MR. LEE: Andrew Lee also from
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Lankier Siffert and Wohl.
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MR. SCHWARTZ: William Schwartz
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from Cooley, LLP for the Zwirn
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entities.
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MR. O'BRIEN: Bill O'Brien also
8
of Cooley.
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MR. ARFFA: I'm Allan Arffa from
10
Paul, Weis, Rifkind, Wharton and
11
Garrison, LLP. We represent the
12
claimants in this proceeding.
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MS. SHOLL: Hannah Sholl also
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from Paul Weiss.
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MEGAN JOHNSON: Megan Johnson
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from Fortress.
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MR. SUSMAN: Steve Susman and
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Seth Ard are here representing Jeepers
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and FTC. And Jeffrey Epstein is here.
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EXAMINATION BY
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MR. SUSMAN:
24
Q.
Would you please state your full
25
name for the record.
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A.
Daniel Bernard Zwirn.
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Q.
Mr. Zwirn, how old a man are
4
you?
5
A.
Thirty-nine.
6
Q.
Where do you live?
7
A.
New York City.
8
Q.
Where in New York City?
9
A.
3 East 84th Street, apartment
10
four.
11
Q.
How long have you lived there?
12
A.
About a year.
13
Q.
And where did you live before
14
then?
15
A.
800 Fifth Avenue, apartment 20F.
16
Q.
How long were you there?
17
A.
Two years.
18
Q.
Do you have any other homes
19
currently than the one on East 94th Street
20
(sic)?
21
A.
No, I don't.
22
Q.
You have testified I know a
23
number of times before the Securities and
24
Exchange Commission related to the matters
25
we're going to talk about today.
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Have you given your testimony
3
other than that before under oath either
4
in court or at deposition in any other
5
kind of matter?
6
A.
Yes.
7
Q.
What kind and when?
8
A.
Do you want me to list them
9
or
10
Q.
Yes, sir.
11
A.
There was a transaction in which
12
my former firm was involved where there
13
was a leasing transaction. There was a
14
case of some two former employees of my
15
former firm. There was a lending
16
transaction in some entertainment assets
17
in which my former firm was involved.
18
Q.
Excuse me, let me just stop you
19
one second.
20
A.
Okay.
21
Q.
The former firm, what firm are
22
you referring to?
23
A.
DB Zwirn and Company. And I was
24
in the --
25
Q.
DB Zwirn and Company?
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A.
Just to be clear, in the first
3
and third situations, I was helping our
4
funds --
5
Q.
I'm sorry, could you speak up a
6
little?
7
A.
Sure.
8
In the first and third
9
situations I referenced, I was called to
10
help our funds. In the second one, it was
11
with regard to the management company of
12
DB Zwirn and Company.
13
Q.
Give me the first one again.
14
Where was that case pending?
15
A.
I don't know.
16
Q.
Was it a case in court or was it
17
an arbitration?
18
A.
It was two different depositions
19
regarding the leasing transaction. I'm
20
not sure -- I don't know the circumstances
21
of that sort.
22
Q.
Who was the opposing party?
23
A.
In the first instance within
24
that situation, I believe it was a
25
trustee, but I don't recall. And then the
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second instance --
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Q.
The first --
4
A.
In the second instance with
5
regard to the first situation
6
Q.
I'm not even sure I understand
7
what the situation was.
8
What situation were you talking
9
about?
10
A.
It was a leasing transaction.
11
Q.
With whom? Between whom?
12
A.
Some of my -- of the entities
13
that my former firm managed had invested
14
in a lease transaction with one or two
15
businesses in New Jersey.
16
Q.
What were the entities that your
17
former firm managed that were involved in
18
this leasing transaction?
19
A.
I don't recall which of the
20
specific funds was invested in it or
21
accounts.
22
Q.
You have no idea what those
23
entities were; is that right?
24
A.
It was -- we managed several
25
different entities. I just don't recall
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which entities were involved. It was many
3
years ago.
4
Q.
What entities did you manage?
5
A.
It depends on the time.
6
Q.
The firm in question, your
7
former firm was DB Zwirn and Company?
8
A.
That was generally -- that's a
9
reasonable way to call the management
10
company, but there were other entities
11
that were generally referred to as the
12
management company. But DB Zwirn and
13
Company is a fair way to put it.
14
Q.
And DB Zwirn and Company, is
15
that a limited partnership or an LLC?
16
A.
By the way, that was -- that
17
also depends on the time. That was after
18
early '04. It was DB Zwirn and Company,
19
LP and DB Zwirn Partners, LLC. Before
20
that it was Highbridge Zwirn Capital
21
Management, LLC, I believe, and Highbridge
22
Zwirn Partners, LLC. And I was also
23
during an earlier a managing director of
24
Highbridge Capital Management.
25
Q.
And these former entities that
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you referred to, they were -- what were
3
they leasing?
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A.
I don't recall whether it was a
5
-- what type of lease it was, but they
6
were -- the entities to which I referred
7
managed funds or other entities with
8
capital that invested in leases for
9
various types of computer equipment.
10
Q.
Were these -- were the funds,
11
the entities that you were managing the
12
claimants or the plaintiffs in that
13
dispute?
14
A.
In the -- in the first instance,
15
those fund entities were managed entities
16
were creditors of the estate.
17
In the second one, in the second
18
instance within that situation that was
19
more recent, I believe, they were I guess
20
Plaintiffs in the situation. I don't know
21
the legal specifics.
22
Q.
Okay.
23
And when was your testimony in
24
that matter, the one involving the leasing
25
transaction?
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A.
In the first instance, it was
3
several years ago, between three, four
4
years ago, something like that. I just
5
don't recall.
6
Q.
When?
7
A.
And when in the second instance
8
of that first situation, it was last week.
9
Q.
You testified last week?
10
A.
Uh-huh.
11
Q.
Was it in court or in a
12
deposition?
13
A.
Deposition.
14
Q.
And that was -- was it the same
15
case?
16
A.
It was regarding the same
17
ultimate borrower, but I don't think it
18
was the same case. But I just don't
19
it's been -- I don't manage the entities
20
any more. I just don't know.
21
Q.
And so the testimony you were in
22
last week, who took your deposition?
23
A.
An attorney.
24
Q.
Which attorney?
25
A.
I don't recall his name.
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Q.
Who did he represent?
3
A.
A company called Cincom.
4
Q.
Spell that, please.
5
A.
I don't know -- I really don't
6
recall how to spell it. C I N C O M.
7
Q.
What's that?
8
A.
PerhapsCINCO
M.
9
Q.
Cinton (sic)?
10
A.
Sin come, C I N, as in Nancy, C
11
as in cat, O M, as in Mary. Again, I
12
think that's the spelling, but I just
13
don't recall.
14
MR. SIFFERT: Mr. Susman is
15
having difficulty hearing, so if you
16
could keep your voice up, that would
17
help.
18
THE WITNESS: Okay.
19
Sorry.
20
Q.
Okay.
21
And the first testimony you gave
22
was in a deposition, also; correct?
23
A.
Yes, I believe so.
24
Q.
And what was in what year?
25
A.
As I said, I just don't recall.
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I would guess perhaps four years ago,
3
three years ago. I just don't recall.
4
Q.
Okay.
5
Those are two separate occasions
6
you've testified.
7
What's -- has there been a
8
third?
9
A.
Well, going back to my previous
10
answer, there was an employee case with
11
regard to the management companies.
12
Q.
Who were the employees?
13
A.
Susan Chen and Todd Dittmann.
14
Q.
Susan?
15
A.
Chen, C H E N, and Todd
16
Dittmann, DITTMAN
N.
17
Q.
Who had they been employees of?
18
A.
The management company of my
19
former firm.
20
Q.
Of DB Zwirn and Company?
21
A.
Yes, or its affiliates.
22
Q.
Okay.
23
And what were they suing -- they
24
were suing that former company?
25
A.
I believe so.
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Q.
For what?
3
A.
I don't recall their complaint.
4
Q.
Was your testimony in a
5
deposition?
6
A.
Yes, I believe so.
7
Q.
When was that deposition taken?
8
A.
Maybe a year and a half or two
9
years ago. Maybe more. I just don't
10
recall.
11
Q.
And has there been any other
12
testimony either in a deposition or in
13
court or to an enforcement agency or
14
arbitration?
15
A.
There was another lending
16
transaction that I had previously
17
referenced for a company, a series of
18
companies in the entertainment area.
19
Q.
All right.
20
What can you tell us about that
21
matter?
22
A.
Again, it was with regard to a
23
borrower of some of the -- of money from
24
some of the entities that I had been
25
involved in managing through the
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management company.
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MR. ARFFA: Could I hold on a
4
second and take a break.
5
THE VIDEOGRAPHER: Stand by.
6
The time is 9:27. We are going
7
off the record.
8
(Whereupon a break was taken)
9
THE VIDEOGRAPHER: The time is
10
9:29. We are back on the record.
11
MR. ARFFA: Let me just say on
12
13
14
15
16
17
18
19
20
MR. SUSMAN: Oh, does that solve
21
the problem? Can I then ask him about
22
it?
23
MR. ARFFA: No, because I think
24
the way the order works he's not
25
supposed to be testifying about that
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the record we believe there's a
confidentiality order with respect to
the last matter that was just
referenced, so to the extent I have
the ability to designate that as
confidential under our order that
testimony, I may so -- I do so right
now.
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at all.
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MR. SUSMAN: He can't even
4
testify that he --
5
MR. ARFFA: Well, you already
6
have that, that fact.
7
MR. SUSMAN: Generally the matter
8
is? If you're making the
9
representation, Mr. Arffa, that he is
10
prevented by some confidentiality in
11
the matter by describing that he was
12
testifying in a lawsuit between A and
13
B and what that lawsuit was about, I
14
will not ask him any other questions.
15
But I will ask to see the
16
confidentiality order and then, if you
17
are wrong, we may have to talk to him
18
again.
19
MR. ARFFA: My point is I don't
20
have the order with me so I'm not sure
21
of the exact terms. I didn't have a
22
problem so far with his just saying he
23
testified and he gave you a very
24
generally description of what the
25
matter involved. I think that's fine.
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MR. SUSMAN: Why don't we leave
3
at this. I'm coming back to the
4
matter after lunch, so why don't you
5
get the order for us and then that
6
will guide me on how far I can
7
inquire.
8
MR. ARFFA: I will attempt to do
9
so.
10
MR. SUSMAN: Okay. So I'll come
11
back to that.
12
Q.
Was there any other matters that
13
you have testified in?
14
A.
Not that I recall. Oh, oh,
15
wait, wait, auto I'm sorry. With regard
16
to 9 former CFO of our management company.
17
Q.
With regard to --
18
A.
There was a case regarding the
19
former CFO of our management company.
20
Q.
That's Mr. Gruss?
21
A.
Yes.
22
Q.
You testified in that matter?
23
A.
Yes.
24
Q.
In a deposition?
25
A.
Yes, I believe so.
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Q.
When did -- was that testimony?
3
A.
Within the last year.
4
Q.
Is that lawsuit still pending or
5
has it been resolved?
6
A.
Still pending, I believe.
7
Q.
Any others?
8
A.
Not that I can recall.
9
Q.
Mr. Zwirn, where are you
10
currently employed?
11
A.
I'm not.
12
Q.
Are you working these days?
13
A.
I spend time, you know, trying
14
to look at new opportunities sometimes or
15
talk to people about different small
16
investments or situations, but nothing
17
that -- I'm not employed or no full-time
18
commitments of any sort.
19
Q.
Do you have an office outside of
20
your home?
21
A.
I do.
22
Q.
Where is your office located?
23
A.
It's at 595 Madison,
24
thirty-third floor.
25
Q.
What is the name on the door?
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A.
595 33, LLC.
3
Q.
595 --
4
A.
Space 33, LLC. It's the lessee
5
of the space.
6
Q.
Space 33 LL --
7
A.
LLC, yes.
8
Q.
What's the name on the door?
9
A.
There is no actual name on the
10
door. I just assumed you meant --
11
Q.
Are you the only one who offices
12
there?
13
A.
No, I'm not.
14
Q.
Who else offices there?
15
A.
Another -- a guy called Todd
16
Meister.
17
Q.
Who is Todd Meister?
18
A.
He's just a guy I've known since
19
we worked together almost twenty years at
20
Lazard and there are a couple of
21
administrative-type people.
22
Q.
Do you do any business with Mr.
23
Meister?
24
A.
I have not, no.
25
Q.
What business do you understand
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him to be in?
3
A.
I would say he's an investor and
4
kind of intermediary of transactions or
5
something like that. I don't really know.
6
I don't really engage with him that much
7
on what he does. I just know him
8
personally.
9
Q.
Okay.
10
Do you pay half the rent; is
11
that --
12
A.
About half. We also sublet to
13
David Lee, a former employee of mine.
14
Q.
He also what?
15
A.
We also sublet an office space
16
to David Lee, a former employee of mine.
17
And he does his own stuff.
18
Q.
David Lee?
19
A.
Uh-huh.
20
Q.
He offices there, too?
21
A.
Yes.
22
MR. SCHWARTZ: Can I ask Mr.
23
Zwirn to speak up, please?
24
THE WITNESS: Sure.
25
Q.
Is Mr. Lee still employed by
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you?
3
A.
No, he's not.
4
Q.
Is he still employed by any
5
companies you have been associated with?
6
A.
No, he is not. Not that I know
7
of.
8
Q.
Are you in the process of
9
raising a fund?
10
A.
No, I'm not.
11
Q.
Is Mr. Meister, to your
12
knowledge?
13
A.
Not that I know of.
14
Q.
Or Mr. Lee?
15
A.
I'm not sure what he's doing.
16
Q.
You don't have any idea what Mr.
17
Lee is doing today for a living?
18
A.
I know he talks to different
19
companies. I know he advised some sort of
20
telecom company on some capital raising
21
alternatives or something like that.
22
Q.
But you -- other than that, you
23
don't know the source of his income today?
24
A.
No, I don't.
25
Q.
Let me show you what's been
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marked as -- by the way, do you have a
3
home in Quogue?
4
A.
I do not own a home in Quogue.
5
Q.
Do you rent one there?
6
A.
No, I don't.
7
MR. O'BRIEN: Can I just ask, has
8
Exhibit 86 already been marked?
9
MR. SUSMAN: I'm told it has not
10
been marked. Mr. Ard is the one who
11
gave me that, who did the telling.
12
MR. ARD: That's correct. It's
13
on that sheet as being marked.
14
MR. SIFFERT: Shouldn't it be
15
with the real tag?
16
MR. ARD: I think he's marking it
17
now with the real tag.
18
MR. SUSMAN: I'm sorry, what I'll
19
do is I have them previously marked.
20
I'll hand them to the witness. When
21
he's done with them, he'll hand it to
22
the reporter and the reporter will put
23
a sticker on them to just save the
24
time.
25
MR. SIFFERT: That's fine.
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MR. SUSMAN: I'll try to get
3
these numbered in a way that --
4
THE WITNESS: So is this not
5
Bates stamp.
6
MR. SIFFERT: It is Bates stamped
7
but it's not been previously marked at
8
a deposition.
9
Q.
Do you recognize -- this is a
10
confidential memo copy number 001 that was
11
sent to Mr. Epstein in April of 2002 by
12
Highbridge Capital Management, LLC.
13
And you recognize this document;
14
do you not, sir?
15
A.
I don't recall the document
16
being sent or -- but I recognize it. It
17
looks like the original offering memo.
18
Q.
Okay.
19
I'm just going to use it to ask
20
you some questions about how this all got
21
going.
22
When did you first meet Glenn
23
Dubin?
24
A.
Summer of 2001.
25
Q.
In 2001?
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A.
Summer of 2001, roughly.
3
Q.
Where did you meet him?
4
A.
In his office.
5
Q.
What was the occasion for your
6
meeting him?
7
A.
One of his employees wanted to
8
introduce me to him.
9
Q.
And did you discuss with him on
10
that occasion going to work for Highbridge
11
Capital Management?
12
A.
I just
I don't recall the
13
specifics of the conversation.
14
Q.
At the time you met with Mr.
15
Dubin for the first time where were you
16
working?
17
A.
MSD Capital.
18
Q.
Okay.
19
Did there come a time when you
20
joined Mr. Dubin's company?
21
A.
Yes.
22
Q.
When was that?
23
A.
September of 2001.
24
Q.
Okay.
25
And what position did you have
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when you joined his company?
3
A.
Managing director.
4
Q.
And the company -- it was a
5
managing director of what company?
6
A.
Highbridge Capital Management.
7
Q.
And in that capacity, what did
8
you do when September of '01 and up to
9
April, '02? Let's focus on that period.
10
A.
I began -- I took the securities
11
exams, seven and sixty-three, for their --
12
that they wanted employees to do. I began
13
interviewing people and began investing
14
some amount of capital from their main
15
fund.
16
Q.
Their main fund being?
17
A.
I believe it was called
18
Highbridge Capital Corporation.
19
Q.
Now, when did -- when was it
20
decided to -- how did Highbridge Zwirn
21
Special Opportunities Fund, LP come about?
22
A.
I think in early 2002 we created
23
a separate management company, Highbridge
24
Zwirn Capital Management, LLC, with a view
25
toward raising funds that would invest in
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the same types of things -- additional
3
funds that would invest in the same types
4
of things I was investing in with
5
Highbridge Capital.
6
Q.
And that was created when, in
7
January, '02?
8
A.
Early '02. I don't remember the
9
month.
10
Q.
Highbridge Capital Management,
11
LLC, when it was set up, who was the
12
managing member?
13
A.
You mean Highbridge Zwirn
14
Capital Management, LLC?
15
Q.
Yes, HZCM.
16
A.
HZCM.
17
I don't recall the entity's
18
structure.
19
Q.
Do you recall who owned a piece
20
of it?
21
A.
Me, Glenn Dubin, and Henry
22
Swieca. In their case I believe it was an
23
entity that they controlled. I don't know
24
that they were the only investors in that
25
entity.
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Q.
How much did you own?
3
A.
Half.
4
Q.
50/50?
5
A.
I believe so, yeah.
6
Q.
And were you going to be the
7
person that was going to run this
8
management company?
9
A.
I was going to select
10
investments for it but strategically on
11
the strategic decisions, key hires, and
12
things of that sort and capital raising, I
13
worked mostly with Glenn.
14
Q.
Now, was the Highbridge Zwirn
15
Special Opportunities Fund, LP and there
16
was a -- can we all that the onshore fund?
17
Okay?
18
A.
Okay.
19
Q.
There was an offshore fund, too,
20
created at the same time?
21
A.
I don't know that it was exactly
22
the same time, but around that time.
23
Q.
Do you know which came first?
24
A.
I don't recall.
25
Q.
We'll call that the offshore
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fund.
3
Other than those two funds, were
4
any other funds set up in 2002 which were
5
going to be managed by HZCM?
6
A.
Not that I recall, other than of
7
course the capital from Highbridge which
8
was channeled through an entity called
9
HCM/Z I forgot what. But it was a
10
subsidiary of Highbridge Capital
11
Corporation.
12
Q.
Let's take a look at page JE 228
13
of the document I've just given you.
14
MR. SIFFERT: That's number
15
eighty-six.
16
A.
And to be clear, you said 2002.
17
I don't recall it -- whether we began
18
investing for Highbridge Capital
19
Corporation in '01. I'm not sure when the
20
CMZ Specialty Opportunities, LLC was
21
created, '01 or '02.
22
Q.
Do that again?
23
A.
You asked me which -- were there
24
any other entities created other than
25
onshore fund and offshore fund in 2002.
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Q.
Right.
3
A.
So there was an entity called
4
HCM/Z Special Opportunities. I'm not sure
5
whether it was formed in 2001 or 2002. It
6
was a subsidiary of Highbridge Capital
7
Corporation or potentially another entity
8
of Highbridge called Highbridge
9
International. I don't recall. And I
10
don't recall whether it was formed in 2001
11
and 2002. Or 2002.
12
Q.
But it was formed before the
13
onshore and offshore funds were formed?
14
15
16
17
18
19
20
21
22
23
24
Q.
If you will look at the last
25
paragraph of this page you're looking at,
A.
We were investing on behalf of
Highbridge before that, before the onshore
and offshore funds were started. I
believe the entity, that entity was
created before that time but I couldn't be
sure. We may have invested directly into
the Highbridge funds and then Highbridge
put those investments in that entity.
Either way it was Highbridge Capital
Corporation money in some form.
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it says, "the fund intends to establish
3
its initial portfolio by purchasing
4
investments from HCM/Z Special
5
Opportunities, LLC, the HCC subsidiary, a
6
Cayman Islands limited liability company
7
which is a subsidiary of Highbridge
8
Capital Corporation, a collective
9
investment fund managed by HCM."
10
So it's your recollection that
11
HCM/Z Special Opportunities, LLC was --
12
how long after you -- well, let me ask
13
that.
14
You don't recall when it was set
15
up; right?
16
A.
I do not. I believe 2001 or
17
2002.
18
Q.
Okay.
19
And did you have any ownership
20
in that entity?
21
MR. SIFFERT: Which entity?
22
MR. SUSMAN: The HCC subsidiary.
23
A.
No.
24
MR. SIFFERT: That's the HCM/Z?
25
MR. SUSMAN: Huh?
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MR. SIFFERT: You're referring to
3
HCM/Z.
4
MR. SUSMAN: Special
5
Opportunities, LLC.
6
MR. SIFFERT: And the question is
7
did Mr. Zwirn have any ownership
8
interest in HCM/Z?
9
MR. SUSMAN: Correct.
10
A.
No.
11
Q.
And did you make -- before April
12
of '02, were you making investment
13
decisions for it?
14
A.
As I said, we were making
15
investments starting in late '01 on behalf
16
of Highbridge. Whether they were through
17
HCM/Z, the HCM/Z entity or not, I just
18
don't recall.
19
Q.
Do you know why this HCM/Z
20
special opportunities, LLC was set up?
21
A.
I don't recall.
22
Q.
But you never had -- did you
23
have any kind of indirect ownership in
24
that entity?
25
A.
I don't know what you mean by
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that.
3
Q.
You owned no interest in that
4
entity?
5
A.
No, I did not.
6
Q.
Let's go to DB Zwirn and
7
Company, LLC.
8
MR. SIFFERT: Are we done with
9
eighty-six?
10
MR. SUSMAN: No, we're not.
11
Q.
You were the managing member as
12
of April, '02?
13
A.
I don't recall the structure.
14
I'm reading it here so I have no reason to
15
believe that wasn't the case.
16
Q.
Okay.
17
A.
But I don't know that that has
18
anything to do with what became DB Zwirn
19
and Company, LP. As I sit here today, I
20
just don't recall.
21
Q.
Were there other members of DB
22
Zwirn and Company, LLC other than you?
23
A.
I just don't know how that
24
worked at that time. I don't recall.
25
Q.
Do you recall -- it was a
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company.
3
Were there any officers or
4
directors of the company other than you
5
that you recall?
6
A.
When?
7
Q.
Back in 2002.
8
A.
We began hiring people. I don't
9
know that any of those people were
10
officers of that, but I just don't recall
11
how it was structured.
12
Q.
Okay.
13
This says that DBZ was the
14
managing member of Highbridge Zwirn
15
Partners, LLC which is referred to it says
16
as HZP or as the general partner.
17
Do you see that?
18
A.
Or -- I don't see that.
19
Where are you talking about?
20
Q.
I'm reading from the second --
21
the middle paragraph on the page we're
22
looking at.
23
A.
Okay.
24
Q.
HZP or the general partner is
25
the fund's general partner.
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Okay?
3
A.
HZP. Okay. I see that.
4
MR. O'BRIEN: Is that HZP, Z as
5
in zebra? Because I think the
6
reporter is getting it down as a C.
7
MR. SIFFERT: We're going to have
8
to show the reporter this because the
9
initialing is all wrong throughout.
10
Q.
When this was set up, who were
11
the other members, who else had an
12
ownership interest in HZP other than DB
13
Zwirn and Company?
14
A.
To the extent that that or the
15
other one, HZCM was managing the outside
16
funds and being compensated for doing so,
17
as a general matter in some form, Glenn
18
and Henry had half and I had half. Again,
19
I just don't recall the mechanics of this.
20
Q.
Okay.
21
And did -- and then there was an
22
entity called Highbridge Zwirn Capital
23
Management, an LLC, the trading manager,
24
and again that was a 50/50 ownership, as
25
you recall?
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A.
What I said was to the extent
3
that the outside funds were compensated
4
for being managed, my general
5
understanding is Glenn and Henry in some
6
form their entity had half and I had half.
7
Again, I don't recall how the legal
8
structure worked.
9
Q.
Okay.
10
Now, did there come a time when
11
there were other owners or members added
12
to either Highbridge Zwirn Partners or
13
Highbridge Zwirn Capital Management?
14
A.
I don't recall whether these
15
specific entities had additional members
16
added. As a general matter over time in
17
terms of the entities that were paid to
18
manage the outside funds, there were
19
additional people that were added as
20
owners.
21
Q.
Okay.
22
So you say there were different
23
people added to the trading manager over
24
time?
25
A.
Again, I don't recall. Trading
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manager I think was a Highbridge kind of
3
construct. I just don't recall the
4
structure. I'm just trying to make it
5
simple and say in terms of the owners of
6
the management company or companies that
7
managed the funds, additional owners were
8
added. Whether it was the trading manager
9
or not or whether it was called Highbridge
10
Zwirn Capital Management at the time or
11
not I just don't recall.
12
Q.
Who was added?
13
A.
In terms of people who were
14
added over time to the ownership group,
15
those people included Chris Suan, Vasan
16
Kesavan.
17
Q.
Chris Suan what?
18
A.
Chris Suan, S U A N, Vasan
19
Kesavan, and Perry Gruss at some point.
20
Q.
And do you recall who
21
percentages of ownership each of them had?
22
A.
I don't recall the specific
23
numbers. I would say probably less than
24
five.
25
Q.
Less than five for each of them
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or collectively?
3
A.
Each of them. And they may have
4
changed over time. I don't recall.
5
Q.
Did you have any ownership
6
interest in Highbridge Capital
7
Corporation?
8
A.
No.
9
Q.
There was a -- at some point in
10
time Highbridge Zwirn Capital Management
11
or the manager, it's called here the
12
trading manager, handled a what's called a
13
managed account for Highbridge.
14
Do you know what that refers to?
15
A.
There was a time I guess
16
starting in 2004 in conjunction with our
17
moving offices where Highbridge wanted to
18
change the structure because of their
19
internal reasons and at that point I
20
became -- I stopped being a managing
21
director of Highbridge and became we
22
referred to it as a senior adviser of
23
Highbridge and the capital that was
24
managed on behalf of Highbridge, instead
25
of having a portfolio manager effectively
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who was an employee of Highbridge which
3
would have been me, became a managing
4
account effectively of the management
5
companies that were being -- that were
6
managing the various funds that we were
7
managing.
8
Q.
Well, that -- look if you will
9
at page 234 of this document eighty-six.
10
At the top of the page it says, "the
11
non-U.S. fund" -- this is the first full
12
paragraph. "The non-U.S. fund and the HZC
13
subsidiary will be managed using trading
14
strategies generally similar to those the
15
trading manager will use for the fund."
16
Do you see that?
17
A.
I do.
18
Q.
But the trading manager was not
19
actually managing the HZC subsidiary or
20
was it at that time?
21
A.
Well, as I said, I think at that
22
time before the 2004 relocation that I
23
described, I was an employee of Highbridge
24
who was managing the subsidiary.
25
Q.
Okay.
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A.
Which was a subsidiary of the
3
Highbridge Capital Corporation.
4
Q.
Right.
5
It says the next under general
6
partner, the last sentence says, "the
7
general partner's responsible for the
8
management and administration of the fund
9
generally." And then it says trading
10
manager, "the trading manager" -- last
11
sentence -- "is responsible for all
12
investment activities of the fund."
13
Now, is that, in fact, how it
14
was divided up or did that change?
15
MR. ARFFA: I object to form.
16
A.
As I said, I don't recall how
17
the entities were structured at that time
18
beyond what I've said.
19
Q.
Do you recall at any point in
20
time -- well, my question is the general
21
partner.
22
Was it, in fact, in practice did
23
this ever handle management and
24
administration of the fund generally
25
itself?
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A.
I don't understand by itself.
3
Q.
Well, the trading manager --
4
A.
Okay.
5
Q.
-- here Highbridge Zwirn Capital
6
Management is responsible for investment
7
activities of the fund; right?
8
A.
I can read it, yes. Barely.
9
Q.
Did -- HZCM had employees;
10
correct?
11
A.
At this time I believe we were
12
hiring the employees into Highbridge.
13
Q.
They were being hired by
14
Highbridge?
15
A.
I believe.
16
Q.
Okay.
17
Highbridge Capital Management?
18
A.
I believe so.
19
Q.
Okay.
20
And that's true for the general
21
partner, too, its employees were all hired
22
by Highbridge Capital Management?
23
A.
I don't know that the general
24
partner as described here in this case had
25
any employees at this time. But again, I
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just don't recall how it was structured.
3
Q.
Fair enough.
4
Now look at Exhibit 93.
5
A.
Am I done with this?
6
Q.
Yes.
7
MR. SIFFERT: Is this also a new
8
exhibit?
9
MR. SUSMAN: Yes.
10
MR. SIFFERT: So the reporter
11
will mark it later.
12
Q.
Now, this is a redlined version
13
of a confidential offering memo from May,
14
2005 and I want you to look at page 2999
15
because obviously the structure changed
16
and this may help us discuss what changes
17
took place.
18
Okay, Mr. Zwirn?
19
A.
Okay.
20
Q.
If you look at the second full
21
paragraph, DB Zwirn Partners, LLC.
22
Now, that is the -- DBZP or the
23
general partner is the fund's general
24
partner.
25
Okay?
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A.
Okay.
3
Q.
And Zwirn Holdings, LLC is the
4
fund's manager. I'm sorry, DB Zwirn and
5
Company, LP was the fund's manager.
6
Do you see that?
7
A.
I do see it.
8
Q.
Okay.
9
And so this was just a change in
10
the entities that did these functions?
11
MR. SIFFERT: Objection as to
12
form.
13
A.
I don't understand.
14
What's the question?
15
Q.
Huh?
16
MR. SIFFERT: He said he didn't
17
understand the question is what he
18
said.
19
Q.
Okay.
20
Under the original onshore fund,
21
the general partner was something called
22
Highbridge Zwirn Partners, LLC. Now it is
23
changed to DB Zwirn Partners, LLC.
24
Okay?
25
A.
Yes. Again, I heard you say
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that. I don't know that that's how it
3
switched. There is a number of moving
4
parts here. I don't see -- one, I don't
5
know that this is what we ended up with
6
because this is a draft document.
7
Two, I don't see the notion of a
8
trading manager or how that works with
9
this. I just don't recall.
10
Three, there's some complexity
11
here caused by the JP Morgan transaction
12
for Highbridge where they're changing
13
around what's Swieca versus which
14
Highbridge, et cetera. I don't recall.
15
It wasn't my business; I don't recall what
16
they were doing there. I don't know that
17
you can map one to one from that document
18
to this. I don't know that you can't. I
19
just don't know.
20
Q.
Daniel B. Zwirn it says is a
21
managing member of Zwirn Holdings.
22
And it says here, "Dubin and
23
Swieca Asset Management, LLC formally
24
known as Highbridge Capital Management,
25
LLC, will, for a period of time, be a
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minority member of the general member, a
3
minority partner of the manager, as well
4
as a minority member of the manager's
5
general partner."
6
What ownership interest did they
7
have? Was their interest the same in all
8
three?
9
A.
Again, I don't recall exactly
10
the structure and I don't know that this
11
was the final structure since this is a
12
draft document.
13
As a general matter, what we
14
referred to as the firm that we had, they
15
were originally fifty percent and then
16
that changed over time.
17
Q.
And how did it change over time?
18
A.
It went to somewhere in the 40s
19
over a period of time, then it would have
20
gone to somewhere in the 30s, and
21
ultimately gone to zero.
22
Q.
Do you recall when it went --
23
A.
I don't recall the specific
24
years.
25
Q.
-- that it made the change?
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A.
I'm sorry, what was the
3
question? What change?
4
Q.
Okay.
5
And this is --
6
MR. SIFFERT: I'm sorry, Mr.
7
Susman, I don't think there was an
8
answer to the question because I don't
9
think he heard the question properly.
10
He interrupted the question and said
11
he didn't understand your question.
12
A.
You referred to a change. I
13
don't know what you meant.
14
Q.
From fifty to forty to thirty.
15
A.
It's fifty to somewhere in the
16
40s to somewhere in the 30s. I don't
17
recall the years during which that
18
happened.
19
Q.
Do you recall when it went to
20
zero?
21
A.
As originally scheduled, it
22
would have occurred somewhere around 2008
23
or nine, but it was ultimately -- it went
24
to zero earlier than that.
25
Q.
It was ultimately what? When?
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A.
At the time of --
3
MR. ARFFA: Asked and answered.
4
Q.
When?
5
MR. SIFFERT: You may answer the
6
question of when it went to zero, if
7
you remember.
8
A.
I guess in -- I believe in 2007
9
which was earlier than originally
10
scheduled.
11
Q.
Now, if you will look at this
12
document -- oh, there's something here
13
called DB Zwirn Special Opportunities Fund
14
TE.
15
What was that?
16
A.
Where are you looking?
17
Q.
The same paragraph we've been
18
looking at but towards the bottom.
19
A.
I think that was another fund
20
that was for tax exempt onshore investors.
21
Q.
Why was that set up?
22
A.
I believe because those people
23
had separate treatment on -- for various
24
things. I believe it was related to a
25
thing called UBTI, but I don't recall the
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specifics of it.
3
Q.
Were you the person who decided
4
to set it up?
5
A.
I don't recall how the decision
6
was made.
7
Q.
Do you recall when it was set
8
up?
9
A.
I don't recall.
10
Q.
Now, from 2002 when the onshore
11
fund got going to two thousand -- through
12
2006, let's focus on that time frame, an
13
entity which you ran managed the onshore
14
fund; right?
15
A.
I don't recall the specific
16
structure. It was a management company or
17
multiple management companies of which I
18
was originally the managing partner with a
19
different set of owners at different
20
percentages at different times over the
21
time frame that you've described.
22
Q.
Because it's changed, I tried to
23
make it kind of more generic, Mr. Zwirn, I
24
said you ran it, you were the boss.
25
A.
I spent the majority of my time
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on -- focusing on the investments.
3
Q.
Okay.
4
And the -- and to make this as
5
investments for whom?
6
A.
The investments that would be
7
owned by the funds that were being -- or
8
entities that were being managed.
9
Q.
And what were the funds or
10
entities that were being managed during
11
the time frame May 1, 2002 through 2006?
12
MR. ARFFA: I'm going to object
13
to form.
14
Is it easier to break down the
15
management entities from the funds?
16
Q.
Go ahead, you may answer the
17
question.
18
A.
It changed over time.
19
Q.
I want to know the complete list
20
of funds or entities that were being
21
managed by some entity with which you in
22
turn were running.
23
A.
Over that period of time, there
24
were management companies of which I was a
25
partner or equivalent where my primary
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focus was selecting investments. I was
3
not necessarily running those entities
4
depending on the entities. The funds or
5
entities over that period of time that
6
were managed at any one point during that
7
time but not necessarily at all times to
8
my recollection would have included the
9
Highbridge subsidiary, the onshore fund,
10
the offshore fund, the TE fund, I believe
11
at some point there was a thing called an
12
offshore two. I forgot what
13
differentiated that from the offshore
14
fund. There were some managed accounted
15
associated with individual investors.
16
There was an
17
Q.
Who would those have been?
18
MR. ARFFA: Let the record
19
reflect the witness was cut off before
20
he concluded his prior answer.
21
MR. SUSMAN: Oh, I'm sorry.
22
A.
In addition, there was an Asian
23
fund, I believe.
24
Q.
Asian fund?
25
A.
Yeah.
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And then there were entities in
3
which the management company had an
4
interest where the investment involvement
5
varied that included a European real
6
estate fund, potentially private equity
7
fund -- I don't recall where we were on
8
that -- a value equity fund
9
Q.
Hang on.
10
It was a European real estate
11
A.
Fund, yeah.
12
Q.
-- fund?
13
A.
I believe a private equity fund.
14
Q.
Do you know the name of it?
15
A.
It would have been under ZM.
16
Q.
ZM, what is ZM?
17
A.
It would have stood for Zwirn
18
Morgan.
19
Q.
Zwirn Morgan?
20
A.
Yes.
21
Q.
What is Zwirn Morgan?
22
A.
That was a partnership whose
23
owners included a guy called Quinn Morgan
24
and the owners of -- and the DB
25
Zwirn-related management companies for the
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purpose of doing private equity-type
3
investments.
4
Q.
Anyone else?
5
A.
I think that's all the funds.
6
Again, I don't know that -- all of those
7
were certainly not managed continually
8
over the time frame you've described, but
9
at least at some point I think were during
10
that time.
11
Q.
Now let me go back.
12
I know the onshore fund, the
13
Highbridge subsidiary, we've talked about
14
it, offshore funds, tax -- TE fund, tax
15
exempt fund; correct?
16
A.
Yes.
17
Q.
There was an offshore two, and
18
then you said there were managed accounts.
19
Which managed accounts?
20
A.
I don't recall the actual names
21
of the accounts, but there were managed
22
accounts --
23
MR. ARFFA: I would designate
24
here as confidential any of the names
25
of the specific investors.
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You can go ahead.
3
MR. SUSMAN: I think the whole
4
thing's confidential, isn't that the
5
way it works, and then you review it?
6
MR. ARFFA: That's fine. Why
7
don't we do it that way.
8
THE WITNESS: Should I say that
9
or should I not?
10
MR. SIFFERT: You may.
11
A.
There was -- there were entities
12
managed o behalf --
13
Q.
I'm sorry, who were the managed
14
accounts?
15
MR. SIFFERT: He said I don't
16
recall the names but there were
17
managed accounts --
18
Q.
Go ahead.
19
A.
Managed on behalf of a company
20
called Coast Asset Management.
21
Q.
Called what?
22
A.
Coast.
23
Q.
How do you spell it?
24
A.
COAS
T.
25
Q.
Coast Asset Management?
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2
A.
I don't know if it's Coast
3
Management or Coast Asset Management,
4
something like that, but Coast. And there
5
were some entities managed on behalf of a
6
company called Delphi Financial.
7
Q.
Called what?
8
A.
Delphi Financial.
9
Q.
Okay.
10
A.
That's all I recall.
11
Q.
What was the -- Delphi, is that
12
the
I notice they're listed on your
13
investor list.
14
There were managed accounts for
15
them, you say, that were brought to you by
16
Delphi?
17
MR. ARFFA: Objection to form.
18
A.
I don't know what you mean by
19
brought to us, but they were the company
20
that -- for whom we managed these
21
accounts.
22
Q.
Okay.
23
And did you know -- did you know
24
at the time or have access to the names of
25
the accounts?
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2
A.
I believe it was --
3
Q.
Or was it just Delphi.
4
A.
No, I don't think there were
5
different names. I just don't recall.
6
Q.
Did Delphi have money of its own
7
invested with you?
8
A.
I don't know that the money that
9
was under the different names wasn't
10
theirs. I don't know how they were
11
structured.
12
Q.
And was Delphi -- who did you
13
deal with at Delphi, was that Robert
14
Rosenkrantz?
15
A.
Him, Robert Smith, Rick Waldis.
16
Q.
And Coast Asset Management, who
17
was that?
18
A.
That was an asset management
19
company.
20
Q.
Huh?
21
A.
It was an asset management
22
company.
23
Q.
Yeah.
24
Who was -- what was Coast Asset
25
Management?
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2
A.
My best understanding, it was an
3
asset manager focused on different
4
alternative investment strategies.
5
Q.
Who did you deal with there?
6
A.
And again, to answer that
7
question, I didn't deal with them most of
8
the time. That's the same thing with
9
Delphi. But when I did, there were
10
several people. The only one whose name I
11
see Rick is Des Worthman. Des with a W.
12
I don't recall the last name.
13
Q.
What was the name of the Asian
14
fund?
15
A.
I don't recall the name,
16
specific name of that.
17
Q.
What was the name of the
18
European real estate fund?
19
A.
It was called ThreadGreen.
20
Q.
Spell it, please.
21
A.
THREADcapitalGREE
N,
22
all one word.
23
Q.
Okay.
24
And the private equity fund was
25
called what?
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2
A.
I think we discussed that. It
3
was ZM.
4
Q.
ZM?
5
A.
Yeah. I don't recall the full
6
name of the funds or also where we were in
7
the development of that over the time
8
frame you discussed.
9
Q.
Now, if you will look at
10
MR. SIFFERT: I think I'm going
11
to want to take a break in about two
12
or three minutes.
13
MR. SUSMAN: I just want to ask
14
one question here.
15
THE VIDEOGRAPHER: You have eight
16
minutes left on the tape.
17
Q.
Look at page four. It's 3007,
18
Bates number 3007.
19
Do you see the general partner
20
description there?
21
A.
(Reviewing).
22
I do.
23
Q.
And it says the general
24
partner's responsible for the management
25
and administration of the fund. And if
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2
you look down at manager, it says the
3
manager is responsible for all investment
4
activities of the fund.
5
Do you see that?
6
A.
I do.
7
Q.
Now, is that the way things
8
actually worked, that administrative and
9
10
11
12
13
14
15
16
Q.
I'm not asking you whether the
17
document was operative. I'm using it the
18
document only to ask you to -- as kind of
19
a help for you to explain, Mr. Zwirn, what
20
functions, for example, were being
21
performed by the general partner -- let's
22
take 2006 for example.
23
You had a general partner and
24
you had a manager; right?
25
A.
As I said, I don't recall the
management of the fund was handled by the
general partner and investment activities
were handled by the manager?
A.
Well, I don't know that this
document was ever operative or in what
form it ultimately became operative. This
is a draft.
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2
specific structure and how it changed over
3
time with regard to the different entities
4
or whether this description in the draft
5
document was correct at any given point in
6
time.
7
Q.
I don't want you to worry about
8
the description in the document.
9
A.
Okay.
10
Q.
As far as what was concerned in
11
2006, were all management, administration,
12
investment decisions of the onshore fund
13
being handled by a single entity known as
14
the manager?
15
A.
I don't recall how that was
16
structured. As a general matter, I
17
18
19
20
21
22
23
24
different entities and how they changed
25
over that five-year period. I don't
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focused the majority of my time on the
investments.
Q.
So the answer is you don't
recall that?
A.
I don't recall how the different
activities were organized in different
legal entities and structures for
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recall that.
3
Q.
Do you recall -- was there ever
4
-- do you recall, was there ever a
5
division between two entities or was it
6
always handled by one entity?
7
MR. ARFFA: Objection to form.
8
A.
I just don't recall how it was
9
done.
10
Q.
Let me be specific with you.
11
Do you know who was -- who
12
employed, for example, Mr. Kahn?
13
A.
I don't recall the legal entity
14
that did so.
15
Q.
He was the chief operating
16
officer; correct?
17
A.
Of what I would generally refer
18
to as the firm or basically the management
19
companies of the firm starting in 2005, I
20
believe.
21
Q.
He was -- the firm you refer to
22
as the management company?
23
A.
The DB Zwirn and Company, LP
24
management company or affiliate managing
25
companies.
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Q.
Did -- and Mr. Gruss was
3
employed by the firm?
4
A.
He was originally employed by
5
Highbridge Capital Management and then
6
after the time that we described in early
7
'04 became an employee of the firm as
8
we've described it and ultimately was
9
appointed a partner of the firm.
10
Q.
Okay.
11
Did any of those people -- did
12
the general partner itself have any
13
employees?
14
A.
As I said, I don't recall which
15
of the legal entities hired which person
16
with regard to what managed entity for
17
that period of time. I just don't recall.
18
MR. SUSMAN: Let's take your
19
break.
20
THE VIDEOGRAPHER: Stand by.
21
The time is 10:32.
22
We are going off the record.
23
This will end tape one.
24
(Whereupon a break was taken)
25
(Whereupon, a document entitled
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2
3
4
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April, 2002 Offering Memo was marked
Exhibit 86 for identification.)
(Whereupon, a document entitled
5
Confidential Memorandum was marked
6
Exhibit 93 for identification.)
7
THE VIDEOGRAPHER: The time is
8
10:44 and we are back on the record.
9
This is the start of tape two.
10
Q.
Mr. Zwirn, I pass you what's
11
been marked as Exhibit 33.
12
And you recognize this as --
13
you've seen this document before; correct?
14
A.
I believe so.
15
Q.
Is any of that -- any of the
16
handwriting on there your writing?
17
A.
Most of it, I believe.
18
Q.
Excuse me, what?
19
A.
I believe most of it is.
20
Q.
There's something on the top
21
that says all dates off by one.
22
Do you see that?
23
A.
I do.
24
Q.
Is that your handwriting?
25
A.
I believe so.
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2
Q.
Okay.
3
And this is -- there's something
4
at the bottom that says correct dates
5
starting
6
A.
Yes.
7
Q.
-- 10/16.
8
Do you know what that means?
9
A.
I don't recall writing that at
10
the time. As I sit here today, I believe
11
I just made a mistake regarding what date
12
we were making these calls.
13
MR. SIFFERT: Try to keep your
14
voice up, if you can.
15
THE WITNESS: Okay.
16
Q.
Okay.
17
So as I understand this, these
18
were -- this is a list of investors.
19
Now, were these investors in the
20
onshore and offshore fund or only the
21
onshore fund?
22
A.
These would appear to be
23
investors in -- some people who were
24
invested in onshore, potentially some who
25
were in both, and some people who were in
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offshore, some who may have not invested
3
yet, potentially -- I don't know whether
4
-- which of these people invested in any
5
of the other entities that we're talking
6
about.
7
Q.
Okay.
8
Well, would it have been the
9
investors in the TE fund, for example, do
10
you know whether they would have been
11
included?
12
A.
I don't recall. My sense is
13
looking at the numbers it would appear
14
that these were totals, not necessarily by
15
entity. There were many investors who
16
were in multiple entities, I believe.
17
Q.
Looking at the numbers here,
18
you're saying the numbers look like they
19
were -- these are numbers from people that
20
invested across the -- before the break,
21
you listed nine funds that were being
22
managed.
23
A.
Right.
24
Q.
By the firm.
25
This would have been an all
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inconclusive list? That's what I'm trying
3
to get.
4
A.
Those that I listed, as I said,
5
I don't recall which of those entities
6
were active over the period about which
7
you asked me.
8
Q.
Okay.
9
A.
Can you refresh me on the
10
question regarding this?
11
Q.
My question is the document's
12
called call list re PG departure
13
balance/investor status as of 7/1/06. And
14
this would be for all the money you were
15
managing or were you excluding certain --
16
A.
I don't --
17
MR. SIFFERT: Objection as to
18
form.
19
Q.
-- customers? Do you know?
20
A.
I just don't recall.
21
Q.
Okay.
22
And then at the top you
23
MR. ARFFA: Steve, I'd just like
24
to make sure we have the same rule at
25
the other depositions with Harry Reid
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is we don't each have to object to
3
form. I mean one objection to form
4
will cover all the other parties so
5
you don't need five people saying
6
object to form.
7
MR. SUSMAN: No. And if you
8
want, we can agree that every question
9
-- you can reserve your form objection
10
until time of trial.
11
Do you want to do that? You've
12
got them all.
13
MR. ARFFA: I'd rather object to
14
form, frankly.
15
MR. SUSMAN: You have your
16
choice.
17
Q.
Okay.
18
At the top of this list on the
19
left do you see there's something that
20
says fifty plus one hundred seventy MA and
21
there's a blank.
22
Do you know why that's blank?
23
A.
No, I don't.
24
Q.
Okay.
25
Do you know who that is?
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2
A.
No, I just don't recall why it's
3
blank.
4
Q.
Okay.
5
Those numbers don't ring any
6
bell to you?
7
A.
Not as I sit here today. I
8
don't recall.
9
Q.
Delphi Capital Management there,
10
it shows twenty-five plus two hundred
11
eighteen managed account.
12
What does that mean?
13
MR. SIFFERT: It says MA, it
14
doesn't say managed account.
15
Q.
MA means management account;
16
right?
17
A.
I don't recall. I didn't make
18
this document originally. I don't recall.
19
I have no reason to think it doesn't. I
20
don't know what the other number would be.
21
Q.
You don't have any idea what the
22
other number would be?
23
A.
I mean, I can speculate.
24
Q.
What do you think it is?
25
MR. SIFFERT: Don't guess. If
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2
you know, you know. If you think, you
3
can say that.
4
Q.
What do you think it is, sir?
5
A.
Perhaps an investment in one of
6
the funds that's separate from the managed
7
account, but I just don't know.
8
Q.
And for example, let's look at
9
Highbridge Capital Management. That's Mr.
10
Dubin and it's five hundred forty-five
11
million was the amount in the managed
12
account, eighteen million was an
13
investment he made in -- he had a personal
14
investment and a foundation investment in
15
either the onshore or the offshore funds
16
or both; right?
17
MR. ARFFA: Objection to form.
18
A.
I remember that he was invested
19
personally in some form. I don't recall
20
how and in what entities.
21
Q.
Okay.
22
And then the next one under that
23
is UBP, Union Bancaire Prives, that's a
24
huge investor.
25
What fund were they in?
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A.
I don't recall the specific
3
balances by fund. I think -- I believe
4
they were mostly in the offshore fund.
5
Q.
And we have down there Coast
6
Asset Management, that is one you
7
mentioned.
8
Do you see that one? It's a
9
small, $220,000, I guess.
10
MR. ARFFA: Objection to form.
11
A.
No, I don't believe so.
12
Q.
Huh?
13
A.
I don't believe so.
14
Q.
What was Coast Asset Management?
15
A.
As I sit here today, I think
16
that means two hundred twenty million
17
because there was nothing after the
18
decimal point.
19
Q.
Oh, two hundred twenty million?
20
A.
Yes, I think so.
21
Q.
And was that some of the managed
22
accounts?
23
A.
As I said, I think we managed
24
accounts on their behalf. I don't know --
25
they may have also been invested in the
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funds in some form. I don't recall how it
3
all broke down.
4
Q.
Now, these -- is this your
5
writing on the top here? I can't read it.
6
Can you read this?
7
A.
I can't read it.
8
Q.
Is it your writing?
9
A.
I would think that is. But to
10
be clear, on the top right I don't think
11
that is. I also can't read that. But I
12
can't read what it says.
13
Q.
Okay.
14
Now -- so this first batch of
15
calls that you made to investors, did you
16
make that over the Columbus Day weekend?
17
A.
In 2006, I believe so, yes.
18
MR. SIFFERT: Can I just say for
19
the record so it's clear that we're
20
looking at a photocopy and not an
21
original so that it's the poorness of
22
the photocopy that makes it illegible.
23
MR. SUSMAN: I take it you have
24
the original that --
25
MR. SIFFERT: I have not seen the
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original ever. But I want the record
3
to be clear that what the witness is
4
looking at is a photocopy. I have
5
never seen an original.
6
Q.
You seem to recall it was a
7
three-day weekend; right, when you made
8
these calls?
9
A.
I believe so.
10
Q.
And you began making them on
11
Saturday or Sunday?
12
A.
I believe Saturday.
13
Q.
Saturday?
14
A.
I believe so.
15
Q.
Columbus Day --
16
MR. SUSMAN: Does someone have a
17
BlackBerry? A calendar from 2006.
18
October, please.
19
MR. SIFFERT: The fourteenth is a
20
Saturday.
21
MR. SUSMAN: Huh?
22
MR. SIFFERT: I don't know which
23
would be the -- Columbus Day is --
24
MR. SUSMAN: First Monday, I
25
believe.
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MR. SIFFERT: That would be the
3
second.
4
MR. SUSMAN: Maybe it's the
5
second Monday.
6
MR. SIFFERT: Which would be the
7
ninth. The second Monday is the
8
ninth. So Saturday was the seventh.
9
MR. SUSMAN: And Sunday the
10
eighth.
11
Q.
And the dates down here commence
12
on the tenth, but you believe all those
13
days that are listed the tenth should have
14
been listed the ninth?
15
A.
I don't recall. I have a
16
recollection we were off -- I was off when
17
I did the dates. I don't know what the
18
correct date starting 10/16 means. I just
19
don't know.
20
Q.
But the calls would have begun
21
on Saturday, you believe, and continued
22
through Monday?
23
A.
Yes.
24
Q.
So these dates are neither in
25
the Saturday to Monday time frame, they're
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clearly off; right?
3
A.
As I said, I remember that it
4
was the Saturday to the Monday and I
5
remember that I had made a mistake in
6
terms of what the first date was.
7
Q.
When someone says down here
8
9
10
11
12
13
14
15
you make any personal investments in --
16
that were in accounts or entities that
17
were managed by the firm?
18
A.
Yes.
19
Q.
Which ones?
20
A.
I believe -- I don't recall the
21
timing but I was in the onshore fund and I
22
believe through a deferral structure I was
23
in the offshore fund. And I may have had
24
also small investments in some of the
25
different entities we discussed before
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correct dates starting 10/16, what did
that mean?
A.
I don't know. I don't recall.
I do recall it was over a three-day
weekend that included Columbus Day from
Saturday through Monday.
Q.
Did you personally invest -- did
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2
including the European real estate, a
3
couple of hundred thousand max or so in
4
that, maybe the private equity. I don't
5
know when and where that was in
6
development and potentially the Asia,
7
again small that I can recall. Although
8
I'm not sure about that. I don't recall.
9
Q.
Now, was the money you invested
10
in the onshore fund, are you listed down
11
here anywhere?
12
A.
Not that I can see.
13
Q.
How about do you have an
14
interest, direct or indirect, in any of
15
the entities that are listed on these
16
three pages?
17
A.
I don't today and I don't think
18
I did at the time.
19
Q.
Do you think -- well, do you
20
still have an investment in the onshore or
21
offshore funds?
22
A.
In the onshore.
23
Q.
In the onshore funds?
24
A.
Yes.
25
Q.
How much is your investment?
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A.
I think the latest NAV is
3
somewhere in the two hundred thousands.
4
Q.
And was your investment ever
5
larger? Did you ever take any money out
6
of the funds?
7
A.
Not that I recall. In the
8
deferral structure which was I believe
9
owned by the management company, the
10
management company took all of that money
11
out to spend on the expenses relating to
12
this situation.
13
Q.
Excuse me, say that again?
14
A.
In the offshore deferral
15
structure --
16
Q.
What does that mean?
17
A.
It was an account that I believe
18
was owned by the management company. I
19
don't know how the structure worked but it
20
would have been for the benefit of me and
21
Glenn Dubin and perhaps Henry Swieca, I
22
don't recall, and that structure had an
23
investment in the offshore and that
24
structure was broken to pay expenses on
25
behalf of the investors.
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2
Q.
What was the name of that
3
structure?
4
A.
I don't recall.
5
Q.
Is it listed here?
6
A.
I don't believe so.
7
Q.
Do you know how much the
8
investment was?
9
A.
I believe at its peak it was
10
over $40 million, but I don't recall. I
11
12
13
14
15
16
17
18
19
20
21
22
management company expended on behalf of
23
its investors primarily as a result of
24
this situation.
25
Q.
When was that done?
don't recall the specific number and when
that was.
Q.
Now, why do you say it was a
deferral structure?
A.
It was -- again, I'm not an
attorney or a tax attorney. It was some
sort of deferral of offshore fees received
by the management company.
Q.
And you say that was broken,
broken to pay expenses?
A.
On behalf of the -- that the
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2
A.
I don't recall what date.
3
Q.
And how was it -- how much money
4
did you get out?
5
A.
I received nothing.
6
Q.
Huh?
7
A.
I received nothing.
8
Q.
How much money did the
9
management company's entity get out?
10
A.
I don't recall.
11
Q.
Did Mr. Dubin take any of that
12
money?
13
A.
Well, money is fungible. There
14
was a time later when he wanted to be paid
15
by the management company.
16
Q.
And the management company got
17
that money from this offshore -- from
18
breaking the offshore deferral?
19
A.
No, as I said, money is fungible
20
so you can't necessarily trace every
21
dollar to every expense, but a significant
22
amount of money was used for management
23
company expenses primarily as a result of
24
the Gruss actions, et cetera, and sometime
25
-- I forget the timing -- but Glenn wanted
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2
to be paid.
3
Q.
Do you currently have any kind
4
of business relationship to Glenn Dubin?
5
A.
Well, I am -- I own four and a
6
half percent of a company called Corbin --
7
I guess Corbin Capital Partners or Corbin
8
Capital Management of which he and Henry
9
Swieca are the majority owners.
10
Q.
What did you say, four and a
11
half percent?
12
A.
Yes.
13
Q.
And what does Corbin do?
14
A.
They are a fund of hedge funds.
15
Q.
And do you have any -- is your
16
role in that just passive?
17
A.
Yes.
18
Q.
Is that the only business
19
relationship you currently have with Mr.
20
Dubin?
21
A.
There's a small personal
22
investment that we made several years ago
23
in an employee entity to invest in a
24
private equity fund that we -- it was
25
myself, Glenn Dubin, and one of our
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2
employees. That's the only other one I
3
can think of.
4
Q.
What was the name of that fund?
5
A.
The fund in which the capital
6
was invested?
7
Q.
Yes.
8
A.
It was an entity managed by
9
Roark Capital Partners.
10
Q.
What is your -- in what form is
11
your investment in Roark Capital Partners?
12
A.
It was a commitment of -- well,
13
to be clear, Roark Capital Partners, I
14
believe, is a management company for a
15
private equity firm. I don't know what
16
the fund is called. I several years ago
17
made a $500,000 commitment that has been
18
drawn down over time.
19
Q.
Do you currently have a
20
commitment or is it gone?
21
A.
I think there's some outstanding
22
commitment, but I don't recall the amount.
23
Q.
And the other two people who
24
made a commitment alongside you were Mr.
25
Dubin for $500,000?
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2
A.
Yes.
3
Q.
And the other person, what was
4
his name?
5
A.
Matt Rothfleisch.
6
Q.
His commitment was a lot less.
7
Do you remember what it was?
8
A.
$50,000.
9
Q.
Any other current business
10
relationship with Mr. Dubin?
11
A.
Not that I can recall.
12
Q.
By the way, was your role in
13
Corbin always passive?
14
A.
I was never employed by it but I
15
did a bunch of -- a decent amount of work
16
on it.
17
Q.
What kind of work were you doing
18
on it?
19
A.
Working with Glenn to think
20
about the strategy, think about some of
21
the employees, things of that sort.
22
Q.
What was -- who ran Corbin, was
23
it Glenn Dubin?
24
A.
No.
25
Q.
Who?
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2
A.
It changed over time.
3
Q.
When did it begin?
4
A.
I think in the 80s or something.
5
But I don't know the circumstances around
6
its founding.
7
Q.
You became involved in it when
8
you went to work for Mr. Dubin?
9
A.
Yes.
10
Q.
And who was running it at that
11
time?
12
A.
Initially a woman named Anna
13
Tan.
14
Q.
And then how did that change?
15
A.
Then a man named Mark whose last
16
name I don't recall.
17
Q.
And then?
18
A.
A woman named Tracy McHale
19
Stuart.
20
Q.
Is she currently running it?
21
A.
I don't know for a fact. I
22
believe so. But I just wouldn't know.
23
Q.
You worked pretty closely with
24
Mr. Dubin since 2001 when you went to work
25
for Highbridge?
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2
A.
Yes.
3
Q.
Into 2007; correct?
4
A.
There was a time certainly
5
through '06 and a good chunk of '07, there
6
was a time when it decreased. I don't
7
recall the date or dates.
8
Q.
Did you consider Mr. Dubin to be
9
an honest and honorable person?
10
A.
I don't recall my thoughts at
11
the time, but I thought he was very smart
12
and great at what he did.
13
Q.
Did he ever lie to you?
14
A.
Directly verbally that I could
15
recall? I don't think so. But I don't
16
recall specifically.
17
Q.
Have you seen an affidavit that
18
Mr. Dubin executed in connection with this
19
matter?
20
A.
Yes.
21
(Whereupon, a document entitled
22
Affidavit of Glenn Dubin was marked
23
Exhibit 87 for identification.)
24
Q.
Let me show you what's been
25
marked as Exhibit 87.
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MR. SIFFERT: Are we done with
3
thirty-three?
4
MR. SUSMAN: Yeah, for the time
5
being. I'm coming back to it. The
6
way I take a deposition, you're never
7
done.
8
MR. SIFFERT: I can see.
9
How did you mark the affidavit,
10
what number?
11
MR. SUSMAN: It's number
12
eighty-seven.
13
Q.
This is the affidavit you have
14
seen before?
15
A.
Yes.
16
Q.
I want you to look at paragraph
17
two, read it to yourself, and then tell me
18
if there's anything in there you disagree
19
with.
20
A.
(Reviewing).
21
The first place sentence, as I
22
said, I don't recall how his entities
23
worked. I wouldn't know about that.
24
The second sentence --
25
Q.
Okay.
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2
A.
I'm still going.
3
Q.
The easy thing, let's make sure
4
we get the right question so you
5
understand.
6
A.
Okay.
7
Q.
If you don't recall something,
8
you don't have to tell me; okay?
9
A.
Okay.
10
Q.
If reading it you say that's
11
just wrong, I know that's wrong, then I
12
want you to tell me.
13
Is there anything in paragraph
14
two that you can say shit, that's just
15
wrong?
16
A.
Well, the sentence, "while Zwirn
17
was responsible," depending on the time
18
there was a group of people who were
19
responsible for different aspects of the
20
management of the business that operated
21
the funds so I personally was not
22
depending upon the time. I don't --
23
Q.
Let me make sure we understand
24
that.
25
A.
Okay.
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2
Q.
You were the -- it's fair to say
3
you were the CE -- the CEO of the firm?
4
A.
We didn't use that title.
5
Q.
Huh?
6
A.
We didn't use that title.
7
Q.
What was your title?
8
A.
I don't recall the specific
9
legal titles within the entity. As a
10
general matter, once the firm was off
11
starting in '04 I was managing partner of
12
the entity. Before that, I was managing
13
director of Highbridge Capital, head of
14
its special opportunities group, and a
15
managing principal of the entities that
16
managed the outside funds that had no
17
employees.
18
Q.
Okay.
19
But the people that worked for
20
the firm ultimately reported to you;
21
correct?
22
MR. ARFFA: Objection to form.
23
What firm are you referring to?
24
MR. SUSMAN: What he's referring
25
to as the firm throughout.
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MR. SIFFERT: At all periods of
3
time; is that what you're saying?
4
MR. SUSMAN: Yes, sir.
5
A.
No.
6
Q.
At what period of time did
7
people who worked for the firm not report
8
to you?
9
A.
Before the early 2004 move, we
10
had a number of people who were reporting
11
to me and to other senior people at
12
Highbridge.
13
Q.
After the early
14
MR. SIFFERT: Let him finish the
15
answer.
16
A.
Before that time, initially the
17
operations were done wholly by Highbridge
18
and then after that they were done by a
19
combination of Highbridge people and
20
Highbridge employees focusing on our
21
business. In early '04, it was mostly
22
people who were employed by the management
23
company at sort of that time, although
24
there were still interconnects with senior
25
Highbridge people.
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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
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In terms of the management and
operations, throughout all of that time I
focused primarily on the investments made
by the various management company
structures that managed the various
entities that we talked about. Over that
in terms of the operations, when we
started off, it was a
Highbridge personnel,
Batchek, Ron Resnick,
combination of
including Rich
Glenn and Henry in
various forms, and then that evolved as
their senior management changed on the
non-investment part of it along with
Glenn.
Over time, after '04 it was
primarily people who were employed
primarily being the management companies
that we had at that time and thereafter.
Initially led by Perry Gruss, then a
combination of Perry Gruss and Harold
Kahn, and then a combination
and Lawrence Cutler. And at
times Glenn was the majority
issues arose involved in all
of David Lee
different
before the
of the kind
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1
2
3
4
5
6
7
8
9
10
11
12
were senior employees who were front
13
14
15
16
17
18
19
20
21
22
23
24
time on the investments that we made but
25
also served as part of the management
*** UNCERTIFIED ROUGH DRAFT ***
of key strategic decisions, some of the
hiring decisions, and involvement with key
investors.
Q.
From January 1, 2005 on, the
people who -- the senior officers of the
firm, the management company, reporting to
you; correct?
A.
On a day-to-day basis, the
managing directors focused on investments
reported to me as a general matter. There
office oriented who reported to me and
then became partners of the firm. Some of
whom spent times on key committees,
primarily non-investment-related
committees that some of those people
managed. All of the non-investment people
of the firm reported first to Perry Gruss,
then to a combination of Perry Gruss and
Harry Kahn, and ultimately to a
combination of David Lee and Lawrence
Cutler. I focused the vast majority of my
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2
committee whose components changed over
3
time that dealt with some of the bigger
4
strategic issues, some of which were front
5
office related, some of which were not.
6
Q.
Okay.
7
Let's -- let me divide this up a
8
little.
9
In two thousand --
10
MR. ARFFA: I don't mind but I
11
want the record to reflect that, as
12
we're taking this diversion, that the
13
witness was not allowed to continue,
14
just so the record's clear, going
15
through the affidavit, so we're all
16
clear on that. In other words, I
17
don't want anyone every saying he was
18
given the full opportunity to list
19
every statement here that he disagreed
20
with.
21
Q.
I'm not letting you off the hook
22
that easy.
23
There was something called a
24
management committee?
25
A.
Yes.
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2
Q.
Who was on the management
3
committee in 2006?
4
A.
I don't recall. I think it
5
changed over time. Key decisions included
6
myself around that time in '06 before that
7
time, myself, Chris Suan, Harold Kahn,
8
Perry Gruss, Vasan Kesavan.
9
Q.
Who?
10
A.
Vasan Kesavan.
11
Q.
How do you spell his name?
12
A.
VASAN
KESAVA
N.
13
Different people were on that committee at
14
different times. And also we involved
15
Glenn on all the key important matters as
16
he was referred to as a senior adviser of
17
our business.
18
And then after October of '06 --
19
Q.
Hang on, hang on. I just want
20
to make sure I get up to October of '06.
21
It was you, Suan, Kahn, Gruss,
22
Kesavan?
23
A.
Kesavan.
24
Q.
Anyone else?
25
A.
Suan.
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2
Q.
Got him.
3
A.
And I said for key issues, Glenn
4
Dubin. Who was on the management
5
committee when I don't recall. But key
6
issues were brought to that group.
7
MR. SIFFERT: You started to
8
answer the question after '06? Let
9
him finish the answer.
10
A.
After October of '06, it was a
11
combination of myself, David Lee, Lawrence
12
Cutler, Chris Suan, Vasan Kesavan, and
13
Glenn Dubin in various forms.
14
Q.
Who?
15
A.
And Glenn Dubin. Again, not
16
necessarily on the management committee
17
but as a senior adviser to us.
18
Q.
Sorry, it was you, Chris Suan?
19
A.
Vasan Kesavan.
20
Q.
Lee, David Lee?
21
A.
David Lee.
22
Q.
Lawrence Cutler?
23
A.
What's his first name.
24
Q.
Lauren?
25
A.
Lawrence. Also at different
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2
times our counsel, either David Proshan
3
and/or Stuart Sindell, and Glenn Dubin as
4
a senior adviser. Again, I don't know who
5
was on the management committee per se at
6
what time, but those were --
7
Q.
Was Cutler and Proshan on the
8
management committee before October of
9
'06?
10
A.
I don't know that Proshan was
11
ever on the management committee but no,
12
neither of them were on the management
13
committee before October of '06.
14
Q.
And Cutler was -- what was
15
Cutler's title?
16
A.
Originally he was I believe
17
chief compliance officer and then he was
18
chief administrative officer and chief
19
compliance officer and then he was chief
20
operating officer as well as CAO and CCO.
21
Q.
How often did the management
22
committee meet?
23
MR. ARFFA: When are we?
24
A.
The committee itself, depending
25
who was on it, different times, et cetera,
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2
might meet weekly, might meet more
3
frequently. It just totally depended on
4
the circumstances at a given time.
5
Q.
Were there ever minutes kept of
6
the meetings?
7
A.
Not that I recall.
8
Q.
The members of the management
9
committee that you listed in '06,
10
yourself, Suan, Kahn, Gruss, and
11
Kesavan --
12
A.
I didn't say they were members
13
of the management committee. I said some
14
subset of the people that I listed were
15
members of the management committee at
16
different times. I don't recall which
17
ones at which time. I roughly refer to
18
them collectively as senior management.
19
But again, that changed over time.
20
Q.
Where could we find out who was
21
a member of the management committee?
22
A.
I don't recall.
23
Q.
Where would you go to look?
24
A.
I just -- I don't know as I sit
25
here today.
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2
Q.
Ultimately did senior
3
management, as you have listed them,
4
report to you?
5
A.
Key management people reported
6
up to the management committee. I was a
7
managing partner so I would have been the
8
senior partner.
9
Q.
So the answer to my question is
10
yes, the buck stopped with you?
11
A.
The vast majority of my time was
12
focused on the investments part and --
13
Q.
I would ask you --
14
MR. SIFFERT: Don't interrupt
15
him, don't interrupt him.
16
You can ask the next question.
17
Q.
Go ahead.
18
A.
The vast majority of the time
19
that I spent focused on investments. The
20
non-investment part of the firm was
21
managed by different people over different
22
times. From my prospective as managing
23
partner, I focused on putting the right
24
people in place, making sure there were
25
systems, the right procedures, systems, et
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1
2
3
4
5
6
7
8
9
and
10
11
12
13
there was an issue or they would talk to
14
me. I don't recall that.
15
Q.
Did you have the right to hire
16
and fire senior management?
17
MR. ARFFA: Objection.
18
A.
I just told you what was in
19
practice. I don't know where it might
20
have been written. I don't recall that it
21
was written or not, whether I unilaterally
22
had that option or not. I just don't
23
recall.
24
Q.
Is the answer to my question --
25
is the answer you don't know whether you
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cetera, taking advice from other senior
people about how that should work, putting
the right people in seats, focusing on
hiring. I was not involved in the
day-to-day components of the
non-investment parts of the firm.
Q.
Did you have the right to hire
fire senior management?
A.
As a matter of course, I don't
recall doing so unilaterally. I would
talk to other senior people about it if
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1
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2
had the right?
3
A.
I would have substantial
4
influence if I wanted to terminate
5
someone, but as a matter of practice I
6
don't recall doing so unilaterally and I
7
don't know where it was written, if it
8
was, regarding specifically whether I did
9
or not.
10
Q.
All right.
11
Let's -- by the way, when did
12
Mr. Kahn leave?
13
A.
I believe 2007. I don't recall.
14
Q.
He was not listed as a member of
15
the management committee after October,
16
'06.
17
Is there a reason for that or --
18
MR. ARFFA: Objection to form.
19
A.
As I said, that changed over
20
time and we collectively made a decision
21
to elevate Lawrence Cutler and David Lee
22
into that position specifically with
23
regard to the non-investment parts of the
24
firm primarily.
25
Q.
So Kahn left in '07 sometime?
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1
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2
A.
I believe so.
3
Q.
Was he fired or did he quit?
4
A.
I don't know the mechanics of
5
how we separated from him. I don't
6
recall.
7
Q.
Do you recall why he left?
8
A.
I don't recall the specific
9
reasons or the mechanics associated with
10
that.
11
Q.
Excuse me?
12
A.
I don't recall the specific
13
reasons or the mechanics of it and I don't
14
recall what he thought at that time or I
15
don't know what he thought at that time.
16
Q.
Were you happy to see him leave
17
or unhappy to see him leave or
18
indifferent?
19
A.
I don't recall having a feeling
20
one way or the other. He was a nice
21
person, but I don't recall having a
22
feeling at that time.
23
Q.
Was Mr. Kahn ever reprimanded by
24
you for anything he did at the company?
25
A.
What do you mean by reprimanded?
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1
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2
Q.
You really screwed up, Mr. Kahn.
3
I'm really disappointed. You're a bad --
4
something -- did you ever face-to-face
5
express to him your dissatisfaction with
6
his job performance?
7
A.
I don't recall doing that.
8
Q.
Was his compensation ever cut
9
while he was working for you?
10
A.
I don't know.
11
Q.
Who would know the answer to
12
that question?
13
A.
David Lee and Lawrence Cutler or
14
Lawrence Cutler. But I don't know that
15
they would.
16
Q.
All right.
17
Is there anything in paragraph
18
two that you disagree with?
19
A.
I think we went over that
20
before.
21
Q.
Yes, sir.
22
MR. SIFFERT: That clause,
23
anything beyond that clause.
24
MR. SUSMAN: Mr. Siffert,
25
sometimes in these depositions you ask
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1
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2
questions and you interrupt witnesses.
3
Q.
I don't mean to, Mr. Zwirn. If
4
I do, I'm going to try to come back and if
5
I don't, you can stop me at any time and
6
say you don't let me finish; okay?
7
Because I want to get your -- the
8
testimony as full and as complete as it
9
can be.
10
So is there anything else in
11
paragraph two?
12
A.
I think I said that I don't
13
agree and I took a while to clarify how
14
but I don't agree with while Zwirn was
15
responsible for the day-to-day management
16
and operations, et cetera, et cetera.
17
Q.
Got it.
18
MR. SIFFERT: Is there anything
19
else in the paragraph besides what
20
you've already testified to?
21
Q.
So when he says you were
22
responsible for the day-to-day operations
23
and management of the Zwirn fund, you
24
think that is false; correct?
25
A.
It depends. We can go through
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1
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2
it from '02 through -- over time the
3
different roles and committees and all
4
that stuff.
5
Q.
I'm sorry.
6
You certainly have said that's
7
false prior to 2004.
8
MR. SIFFERT: He said what he
9
said and you're trying now to
10
characterize what he said?
11
MR. SUSMAN: No.
12
MR. SIFFERT: Isn't your question
13
other than that clause, what else do
14
you disagree with?
15
Q.
Was it false, Mr. Zwirn? Was
16
that statement false for the period of
17
time 2006?
18
A.
As I said, during the year 2006,
19
there was a management committee and other
20
senior management. I focused the majority
21
of my time on the investments that were
22
invested in by the entities that were
23
managed by the various management
24
companies.
25
As I said also, during 2006,
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2
there were different people who were part
3
of seep I don't remember management and
4
who were part of the management company --
5
excuse me, management committee. I don't
6
recall who was on it when specifically
7
beyond that which I had discussed before.
8
I can did go through the whole thing again
9
if you'd like. It's a long answer. But
10
it's not --
11
Q.
Was his statement false, as far
12
as you're concerned, for the period 2006?
13
MR. ARFFA: I object. I think
14
it's been asked and answered three
15
times and I think at this point you're
16
just trying to --
17
MR. SUSMAN: Excuse me?
18
MR. ARFFA: I'm objecting. I
19
think you asked and answered it three
20
times.
21
MR. SUSMAN: I think the question
22
can be answered with a yes or no or I
23
don't know.
24
MR. SIFFERT: Well, that may be
25
what you think the answer is, but he
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1
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2
answered the question the way he
3
answered the question and you don't
4
seem to like the answer so you're
5
asking it again. But if you want to
6
do that, go ahead.
7
MR. SUSMAN: I'll try it again.
8
Because I think Judge Carpinella is
9
entitled to see this witness handle
10
whether he can answer a question.
11
Q.
My question it --
12
MR. ARFFA: I object to the
13
commentary and I don't think the
14
witness should pay attention to that
15
kind of thing.
16
Q.
Was Zwirn responsible for the
17
day-to-day management --
18
MR. SIFFERT: You're talking to
19
the witness?
20
MR. SUSMAN: Excuse me?
21
MR. SIFFERT: Are you reading? I
22
don't know what you're doing.
23
MR. SUSMAN: I'm asking him
24
whether the following statement is
25
true or false for the year 2006.
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2
Q.
Zwirn was responsible for the
3
day-to-day management and operations of
4
the Zwirn fund.
5
MR. ARFFA: Objection to form.
6
Q.
Was that statement true or false
7
during 2006?
8
MR. ARFFA: Objection to form.
9
MR. SIFFERT: And I also will
10
point out that's not what the
11
affidavit says. The affidavit started
12
with the sentence starting in 2002 and
13
then it goes on as if 2002 is in that.
14
So you're now asking a separate
15
question other than what is in the
16
affidavit.
17
MR. SUSMAN: Without regard to
18
the affidavit.
19
MR. SIFFERT: So is the statement
20
Zwirn was responsible for the
21
day-to-day operations and management
22
of the Zwirn fund true or false in
23
2006?
24
MR. SUSMAN: You got it.
25
MR. ARFFA: Objection. Asked
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1
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2
answered.
3
MR. SIFFERT: And I object to the
4
form because you're saying it's a
5
binary question.
6
THE WITNESS: Should I answer it
7
again?
8
MR. SUSMAN: In fact, you can
9
answer it yes or no if you want, Mr.
10
Siffert, and he can adopt it. I don't
11
care.
12
MR. SIFFERT: My name is Siffert
13
and he can answer it for himself. He
14
doesn't need my help.
15
Q.
Go ahead.
16
A.
Over 2006, there were different
17
people involved in senior management, some
18
of whom were on the management committee.
19
The management operation of the fund
20
included many different components. I was
21
primarily responsible for the day-to-day
22
focus on the investments that we made.
23
During 2006, the non-investment
24
portion of the firm that managed the funds
25
was managed by a different combination of
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1
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2
people. It reported -- in early '06 and
3
onward those functions were reporting to
4
Perry Gruss and Harold Kahn who were
5
reporting to and/or part of the management
6
committee. After '06, that was primarily
7
David Lee and Lawrence Cutler who were
8
both then effectively reporting to the
9
rest of the management committee and
10
senior management and were also members of
11
the management committee.
12
Q.
Look at paragraph three.
13
True or false?
14
A.
(Reviewing).
15
MR. ARFFA: Objection to form.
16
A.
I just don't have standing to
17
know whether most of this is true or
18
false.
19
Q.
It is true that Glenn Dubin
20
introduced Jeffrey Epstein to you;
21
correct?
22
A.
Yes.
23
MR. SUSMAN: Let me have
24
Exhibit 88, please.
25
(Whereupon, an e-mail dated
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2
October 2, 2005 was marked
3
Exhibit 88 for identification.)
4
Q.
Exhibit 88 you recognize is an
5
e-mail exchange you had with Mr. Kahn on
6
October 2, 2005?
7
A.
I don't recall the e-mail.
8
Q.
It appears to be an exchange
9
between you and Mr. Kahn; doesn't it?
10
A.
Yes.
11
Q.
And Mr. Kahn asks you in the
12
you begin the questioning by saying, "FYI,
13
was chatting with Glenn re big guy
14
potential DBZ chairman and he noted that
15
Jeffrey Epstein, large LP investor,
16
mysterious billionaire, godfather to
17
Glenn's kids, is quite close with George
18
Mitchell." That's where it begins.
19
Do you see that one? Do you see
20
that?
21
A.
Yes me? Yes, I do.
22
Q.
Your response -- and then Mr.
23
Kahn writes an e-mail to you, "is Glenn
24
Dubin proprietary about his relationship
25
with him or do you think there's an
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1
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2
opportunity for you to develop your own
3
straight line relationship."
4
Do you see that question?
5
A.
I do.
6
Q.
And your response is, "not
7
remotely possible to develop direct
8
relationship. If you met him, you'd see
9
why. He's had eighty million with us for
10
three years and I've had a total of two
11
conversations with him, one for fifteen
12
minutes and one for ten minutes."
13
Okay?
14
A.
Yes.
15
Q.
The first conversation, the
16
fifteen-minute conversation, took place
17
back in 2002?
18
A.
I don't recall specifically the
19
year, but I think it was quite early.
20
Q.
Okay.
21
A.
Something like that.
22
Q.
Do you recall, was that a
23
personal meeting?
24
A.
Yes.
25
Q.
Do you recall how that came
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2
about?
3
A.
I have a recollection that Glenn
4
told me to go see Jeffrey at his office.
5
Q.
Did you go to his office?
6
A.
Yes.
7
Q.
Can you describe as much as you
8
can remember about what happened during
9
that meeting, what he said and what you
10
said.
11
A.
I recall going to his office at
12
lobby and being led into his office. He
13
had spent the -- I recall that -- I don't
14
recall the specific words of the
15
conversation word by word. My
16
recollection is that the majority of the
17
time was spend where he was telling me
18
about problems he was having with getting
19
utilities to a house he either owned or
20
was buying in the Virgin Islands of some
21
sort and how he was dealing with the
22
government there. I have some
23
recollection, also, that he asked me a
24
little bit about my personal background
25
and upbringing.
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2
That's about all I can recall.
3
Q.
And do you recall what you said?
4
A.
With regard to the -- first the
5
majority of the time I just listened and I
6
just might have said -- I recall something
7
about talking about how I grew up in
8
Pittsburgh, et cetera, but I don't recall
9
much of anything beyond that.
10
Q.
It was very short, about fifteen
11
minutes; right?
12
A.
Fifteen or seventeen minutes,
13
less than twenty. Small, it was short.
14
Q.
And the only ones present were
15
you and Mr. Epstein?
16
A.
In his office during that time,
17
yes. I was led into his office by other
18
people. That I can recall.
19
Q.
Now, the second conversation --
20
A.
Yes.
21
Q.
-- the ten-minute conversation,
22
was that in person or by the phone?
23
A.
In person.
24
Q.
Huh?
25
A.
In person.
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2
Q.
And where was that?
3
A.
At a house that I thought was
4
his in the upper east side. But I don't
5
recall how I thought it was.
6
Q.
What was the occasion of that
7
meeting?
8
A.
I believe Glenn told me to go up
9
there. It was -- I don't recall
10
specifically when it was. It was at least
11
a couple of years after the first time,
12
perhaps before one of the times that he
13
invested but I just don't recall.
14
What was your question
15
specifically?
16
Q.
Why you went there. What was
17
the occasion that sent you there?
18
A.
Glenn told me to go there.
19
Q.
But about what? Was it about
20
trying to get his second investment?
21
A.
No, it was -- as I recall, it
22
was to give a brief update of the
23
distressed credit market.
24
Q.
Of the distressed credit market?
25
A.
Yes.
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2
Q.
Do you recall what year it was?
3
A.
I don't recall the year, perhaps
4
'04 or '05. I just don't recall.
5
Q.
Was it -- do you recall, was it
6
after or before the management company
7
became unconnected from Highbridge? I
8
think you said that was the beginning of
9
'04.
10
A.
Well, there was no ownership
11
change with it. I don't know if it was
12
unconnected. But when we moved offices, I
13
think it was after we moved offices. I
14
have a recollection of walking -- I walked
15
to and from it. I don't recall.
16
Q.
Okay.
17
And what do you recall about
18
that meeting?
19
A.
I went to the front door of the
20
house. A maid in a black and white
21
uniform led me into a room or a study of
22
some sort on I think the first floor. I
23
waited there for a period of time and I
24
believe she showed me into some sort of
25
other study or something like that, a room
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2
where I had to walk up. I don't recall
3
how high. And there were -- and then she
4
red me into that room and sat and directed
5
me where to sit, I recall, and there were
6
two people there.
7
I recall Jeffrey introduced me
8
to the other person. I don't recall her
9
name. I don't recall that she said
10
anything during the meeting.
11
I started -- Jeffrey said -- I
12
recall telling Jeffrey about what was
13
going on in primarily distressed debt.
14
Very, very soon after, seven or eight
15
minutes, something very short, maybe ten,
16
under, Jeffrey said something to the
17
effect of, you know, he was done or that
18
was enough or whatever it was and
19
basically in some form directed me that,
20
you know, he was ready to end the meeting.
21
And then I walked home or walked back to
22
my office.
23
Q.
And that's all you recall about
24
that meeting?
25
A.
Yeah.
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2
Q.
Do you recall -- it was a woman
3
sitting in the room with Jeffrey?
4
A.
Yes, next to him.
5
Q.
Huh?
6
A.
Next to him.
7
Q.
Do you recall anything about
8
her?
9
A.
She was a very young woman. I
10
don't know how young. She had long,
11
straight blond hair. And after he
12
introduced her name, the name of which I
13
don't recall, she didn't say anything
14
afterward. And she sat directly next to
15
him.
16
Q.
All right.
17
Now, those were the two
18
occasions that you met with Jeffrey. In
19
fact, the two occasions you had with him
20
at the time you wrote this October 2, 2005
21
e-mail; correct?
22
A.
As I said, I don't recall the
23
e-mail. I believe those were the only
24
live meetings I had ever had with him up
25
until I guess today.
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2
Q.
Until today?
3
A.
That I can recall, yeah.
4
Q.
I guess what about your fifteen
5
and ten-minute meeting caused you to
6
conclude that if you met him, you'd see
7
why?
8
A.
As I said, I don't recall all
9
the e-mails. I don't recall what I was
10
thinking at that time.
11
Q.
Did Glenn describe to you
12
Jeffrey in some way that made you conclude
13
that it was impossible to establish a
14
direct relationship with him?
15
A.
As I said, I don't recall the
16
e-mail. As a general matter, Glenn was
17
very focused on making sure any and all
18
communication associated with Jeffrey went
19
through him in some way or it was directed
20
by him.
21
Q.
Do you recall after -- at some
22
point in time in late 2005 or early 2006
23
did you have a series of conversations
24
with Jeffrey about interesting someone to
25
become the -- to go on the board of your
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2
management company?
3
A.
We were thinking about having
4
someone who would -- could chair some sort
5
of international advisory board and
6
primarily through Glenn we communicated
7
with Jeffrey about that. I don't recall
8
the substance around that specific
9
conversations.
10
Q.
Did you have any direct
11
conversations with him then that you can
12
recall?
13
A.
I have a recollection that I was
14
on the phone with him and Glenn at the
15
same time. I don't recollect any
16
situation where I was only speaking to
17
him.
18
Q.
And that was -- would have been
19
-- was it about getting George Mitchell;
20
was that the guy's name?
21
A.
Yes.
22
Q.
And after that -- that was one
23
call you remember with Glenn on the phone?
24
A.
I don't remember that it was
25
only one. I don't recall.
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Q.
Do you recall your next call
3
with Jeffrey?
4
A.
I don't -- if there were more
5
than one, then it would have been next. I
6
just don't know about that series of call
7
including Glenn and Jeffrey. I just don't
8
recall.
9
MR. SIFFERT: He said he didn't
10
recall.
11
MR. SUSMAN: Okay.
12
Q.
After the George Mitchell thing
13
was -- you said not to pursue that, after
14
that time you had some calls with Jeffrey
15
in the fall of 2006?
16
A.
Yes, I believe so.
17
Q.
Do you recall how many times you
18
talked to him?
19
A.
No, I don't.
20
Q.
Do you recall when the first
21
call was?
22
A.
During the round of calls in
23
October where we talked to our investors.
24
Q.
Was it during the first round or
25
the second round?
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2
A.
First.
3
Q.
And when you -- how did that
4
call come about; did you call him, did he
5
call you?
6
A.
I believe I called him.
7
Q.
The first time you called him
8
you left a message?
9
A.
I don't recall.
10
Q.
If you look back at Exhibit 33
11
which should be --
12
MR. SIFFERT: How much time is
13
left on the tape?
14
THE VIDEOGRAPHER: Nine minutes.
15
MR. SUSMAN: How much?
16
THE VIDEOGRAPHER: Nine.
17
MR. SIFFERT: Do you want to
18
break or go for nine minutes? Dan, do
19
you want to break or go for the nine
20
minutes?
21
THE WITNESS: We can go for
22
whatever you want, whatever's most
23
convenient.
24
Q.
Your entry on this log in your
25
handwriting says, "no answer. Left
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message 10/12." Okay? Which I think we've
3
established the date's wrong; right?
4
A.
Yes.
5
Q.
Because it had to be either --
6
was he one of the first calls you made or
7
do you know?
8
A.
I don't recall.
9
Q.
In any event, it says left
10
message, would the message would be for
11
him to call you?
12
A.
I don't recall what I said on
13
the left message.
14
Q.
Well, you have a number of these
15
where you have left message.
16
A.
Yes.
17
Q.
Was the message -- do you recall
18
whether you typically -- I mean, you
19
didn't give him the whole -- I mean, it
20
wasn't a long explanation, was it, left on
21
some answering machine; right?
22
A.
I don't recall leaving the any
23
of the details regarding the situation on
24
anybody's answering machine.
25
Q.
So you left a message for
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someone to call you back; right?
3
A.
I would think so but I can't
4
tell you I remember the specific message
5
that I left or how he left it, whether I
6
left it with somebody or on a machine. I
7
just don't recall.
8
Q.
So do you recall that he'd call
9
you back?
10
A.
I know we spoke during that
11
round of calls. I don't know whether I
12
called him again or he called me. I just
13
don't recall.
14
Q.
Did you make any notes or memos
15
about that call?
16
A.
Not that I recall.
17
Q.
Did you record the call?
18
A.
No.
19
Q.
Was anyone on the phone
20
listening in on your line?
21
A.
No.
22
Q.
That call was made from where,
23
your home?
24
A.
I was in my office and Elise
25
Hubsher was in the office with me.
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2
Q.
And what do you recall -- as
3
best you can recall, recap that call for
4
me.
5
A.
I recall that I had a script for
6
all of those calls. I recall I did not
7
veer from it. I don't recall the specific
8
text of the call. I have a recollection
9
that Jeffrey Epstein tried to ask for
10
information that would have been off the
11
script and therefore different than the
12
information we were giving to everybody
13
else and that I remained on the script.
14
MR. SUSMAN: Exhibit 100.
15
(Whereupon, a document entitled
16
Talking Points-Investors was marked
17
Exhibit 100 for identification.)
18
MR. SIFFERT: Can we have it
19
so --
20
MR. SUSMAN: It's coming around.
21
It's been marked as Exhibit 100.
22
Q.
Is Exhibit 100 the script you
23
were referring to?
24
A.
I believe so.
25
Q.
And do you know who prepared the
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script?
3
A.
A combination of senior
4
management at the time and attorneys from
5
Schulte, Roth and Zabel.
6
Q.
Okay.
7
A.
I'm not sure individual by
8
individual who did it.
9
Q.
Okay.
10
And so you would have
11
essentially basically read this script?
12
A.
Basically. I don't know that I
13
read it. I don't recall the specific
14
words of each of the one-plus
15
conversations, but I know that I -- I
16
believe I stuck to the script.
17
Q.
Did Mr. Dubin help prepare the
18
script?
19
A.
I believe he received it before
20
and would have had an opportunity to
21
comment on it before we went out to
22
people.
23
Q.
Now, do you recall what, if
24
anything, Mr. Epstein said? Did he
25
interrupt you in the mid or did he let you
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get to the end and then say something?
3
MR. SIFFERT: Objection to the
4
form.
5
A.
I just don't recall the
6
specifics beyond what I said.
7
Q.
But he tried to get you to go
8
beyond the script?
9
A.
I recall that. I just don't
10
recall how or the wording, et cetera, my
11
best belief.
12
Q.
Did -- was he upset?
13
A.
I don't recall having a view as
14
to his state of mind. I recall some level
15
of again pushing to hear that he told
16
things different from the other investors,
17
but I don't recall much specifics.
18
Q.
Do you recall anything else he
19
said?
20
A.
I don't. I have a recollection
21
again that I stuck to the script and
22
focused on that.
23
THE VIDEOGRAPHER: Change tape?
24
MR. SUSMAN: We'll take a break
25
now and come back in ten.
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THE VIDEOGRAPHER: The time is
3
12:05. We are going off the record.
4
This will end tape two.
5
(Whereupon a break was taken)
6
THE VIDEOGRAPHER: The time is
7
12:17.
8
We are back on the record. This
9
will be the start of tape three.
10
Q.
Okay.
11
Did you, Mr. --
12
MR. SUSMAN: How long do you want
13
to go to; just tell me?
14
MR. SIFFERT: 1:00.
15
MR. SUSMAN: 1:00? Fine by me.
16
Q.
Did you record your early
17
October discussions with any investors?
18
A.
No. Not that I recall.
19
Q.
Look back at the Dubin
20
affidavit, paragraph four. "Beginning in
21
the fall of 2006, Zwirn called me and told
22
me that he was firing the fund's chief
23
financial officer."
24
Do you see the rest of that
25
paragraph?
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2
A.
Yes.
3
Q.
Is there anything in there that
4
you disagree with?
5
A.
Yes.
6
Q.
Okay.
7
Tell me what.
8
A.
The funds, first of all, didn't
9
have a chief financial officer. Gruss was
10
the CFO. Actually, at that time CAO of
11
the management company entities. I did
12
not inform Dubin of the firing of the CFO.
13
Dubin actively participated in it and made
14
the final decision or made the final
15
judgment that led management to conclude
16
we needed to separate from him.
17
Q.
Okay.
18
A.
This next sentence refers to
19
"Zwirn told me," et cetera?
20
Q.
Yes, the next sentence.
21
A.
In June of '06, when I had
22
learned of the fact that there were two
23
irregularities and that Lawrence Cutler
24
and David Proshan wanted to move forward
25
with a separate inquiry led by Schulte
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Roth, I told Glenn about that. When --
3
within a day of our first meeting with
4
Schulte Roth at Schulte Roth's offices in
5
September, we had another meeting, a
6
second meeting at Schulte Roth that
7
included Glenn where he learned everything
8
that we knew at that time and was kept up
9
contemporaneously during that period with
10
the other senior management team members.
11
I don't recall informing him of any of
12
Schulte Roth's findings.
13
And I believe that the issue
14
regarding the airplane was that the
15
capital was used for the equity of an
16
airplane for forty-five days.
17
Q.
Okay.
18
Did you say that Mr. Dubin was
19
the one who made the final judgment that
20
you had to separate with Mr. Gruss?
21
A.
His view, given his experience
22
and seniority as we were reviewing
23
options, that view was his view and we
24
agreed with it. I don't recall any other
25
senior management team members disagreeing
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with it.
3
Q.
Now, let's talk about the plane
4
a second.
5
It's your recollection that Mr.
6
Proshan and Cutler went to you in March or
7
April of 2006 to tell you that Tim Woo
8
brought to your attention an issue with
9
the plane and premature payment of
10
management fees; correct?
11
A.
No.
12
Q.
Huh?
13
A.
No.
14
Q.
That's not your testimony?
15
A.
I believe in March of '06 David
16
Proshan and Lawrence Cutler came to me to
17
say that there was some irregularity with
18
regard to the management fees, they
19
weren't sure whether there was or what it
20
was specifically. I don't know what they
21
told me about the plane equity issue at
22
that time. And they told me they wanted
23
to -- they weren't sure enough to give me
24
a firm recommendation other than they
25
wanted to spend more time working on it
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and come back to me. And the person that
3
they had learned information from was a
4
guy called Tim Wong, not Tim Woo, who was
5
a guy that I had driven to be hired not
6
specifically him but --
7
Q.
Tim Wong?
8
A.
Wong, W O N G who was the
9
management company controller, a position
10
that I wanted filled for the management
11
company in contemplation of an audit of
12
the management company that I wanted done.
13
Q.
He was the management company
14
controller, Wong?
15
A.
Yes.
16
Q.
Who did Mr. Wong report to?
17
A.
All of the people, all the
18
non-investment people in the firm
19
ultimately reported at that time to Harold
20
Kahn and Perry Gruss in early '06. He
21
worked with -- I recall him working with
22
each of Harold and Perry.
23
Q.
And you say you wanted some kind
24
of audit done?
25
A.
I wanted -- my understanding in
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'05 was that we didn't need an audit of
3
the management company but, as a matter of
4
trying to focus on best possible
5
practices, I wanted to get an audit of the
6
management company separate from an audit
7
of the funds. I was told that we needed
8
to hire a more seen management company
9
controller to get ourselves ready to go
10
through that process with PriceWaterhouse.
11
As a result, a search was done and Tim
12
Wong was hired. I don't recall who
13
specifically hired him.
14
Q.
Was the management company ever
15
audited?
16
A.
No.
17
Q.
So when Proshan and Cutler came
18
to you -- the best you can do is it's in
19
March or April, in that time frame?
20
A.
I think so, yes.
21
Q.
You can't come any closer to the
22
date; right?
23
A.
No.
24
Q.
And you're sure they talked to
25
you about -- something about premature
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payment of management fees, they may have
3
mentioned the plane but you don't recall?
4
MR. ARFFA: I object to form.
5
A.
I believe they mentioned
6
something regarding the management fee
7
issue or irregularity. I don't know the
8
words that they used. I don't recall
9
whether they talked about the
10
forty-five-day use of the capital for the
11
plane issue.
12
Q.
Whatever you were told then by
13
Mr. Proshan who was -- he was the general
14
counsel?
15
A.
Yes.
16
Q.
And Mr. Cutler who was the chief
17
compliance officer at the time?
18
A.
Yes.
19
Q.
Did you share that information
20
with Mr. Dubin?
21
A.
I don't recall doing so. I
22
recall them saying they weren't sure what
23
they had or whether there was anything to
24
discuss ultimately, that they wanted to do
25
more work.
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2
Q.
And they came back to you four
3
or six weeks later, four to six weeks
4
later; right?
5
A.
I believe it was June of '06.
6
Q.
Huh?
7
A.
I believe it was June of '06.
8
Q.
Okay.
9
And how do you know when it was?
10
How do you place it in June of '06?
11
A.
I know that we retained Schulte
12
soon after.
13
Q.
Within days?
14
A.
I don't know when Lawrence and
15
David did it, but my understanding would
16
be immediate or near immediate. They
17
asked -- they recommended that we do that
18
and I told them go ahead.
19
Q.
Do you know when Schulte was
20
retained?
21
A.
I don't recall the date.
22
Q.
Okay.
23
Now, when they came back to you,
24
Proshan and Cutler, who did they report
25
back to, was it you alone or was Mr. Dubin
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with you at the time?
3
A.
I believe it was just the three
4
of us, Proshan, Cutler, and me. I believe
5
immediately subsequent to that I reached
6
out to Glenn.
7
Q.
And did you share with Mr. Dubin
8
everything that you had learned?
9
A.
Yes.
10
Q.
How about the other people on
11
the management committee, were they -- did
12
you talk to them about it at the time, Mr.
13
Suan?
14
A.
I don't recall the specific
15
conversations. I would have -- I would
16
think they would have know since we
17
retained Schulte and Schulte was doing
18
interviews, but I just don't recall.
19
Q.
I take it when they came back in
20
June, Proshan and Cutler, they did talk to
21
you about the airplane, that's short use
22
of funds for the airplane?
23
A.
For the equity of the airplane,
24
I believe so.
25
Q.
And you told that to Mr. Dubin;
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correct?
3
A.
I believe so.
4
Q.
And I assume you at that time
5
informed Mr. Kahn, Mr. Gruss, the other
6
people in management that Schulte was
7
going to come on site and do an
8
investigation; correct?
9
A.
I don't recall doing so
10
directly. I don't know that David or
11
Lawrence didn't or how they might have.
12
Q.
Did Schulte interview people?
13
A.
Yes.
14
Q.
So it's pretty safe to assume
15
that someone got the word out that this
16
they were coming to investigate; right?
17
A.
I don't know how the -- I don't
18
know if that term was used or how it was
19
done, but people were interviewed.
20
Q.
Did Mr. Dubin concur that
21
Schulte should be hired for this task?
22
A.
I don't recall asking him. I
23
recall David and Lawrence recommending we
24
go ahead do that and I recall agreeing
25
with them and I recall then subsequently
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telling Glenn about it.
3
Q.
Okay.
4
Then there came a time in
5
September where Schulte made a report to
6
you about what they had found; correct?
7
MR. SIFFERT: We're not waiving
8
the privilege. I think he can say
9
that.
10
A.
Me and other senior management
11
team members.
12
Q.
Okay.
13
And you were testified under
14
oath, to your best recollection, that it
15
was on a Sunday evening?
16
A.
I believe so.
17
Q.
At Schulte's offices?
18
A.
Yes.
19
Q.
Do you know what Sunday evening
20
it was on?
21
A.
I don't recall.
22
Q.
September 17 sound reasonable to
23
you?
24
A.
It could be, but I just don't
25
recall the date.
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2
Q.
Who was present --
3
MR. SUSMAN: Let me have
4
ninety-three, please.
5
(Whereupon, a memorandum dated
6
September 17, 2006 was marked
7
Exhibit 92 for identification.)
8
Q.
Here's ninety-three.
9
MR. ARFFA: This is Exhibit 93?
10
MR. SUSMAN: Ninety-three.
11
MR. SIFFERT: You already had
12
ninety-three.
13
MR. SUSMAN: Sorry. I already
14
had ninety-three?
15
MR. SIFFERT: Yes.
16
MR. ARD: That should be
17
ninety-two.
18
MR. SIFFERT: Is there a
19
particular page you want him to look
20
at?
21
MR. SUSMAN: Excuse me?
22
MR. SIFFERT: Is there a
23
particular page you want him to look
24
at.
25
Q.
Well, my first question is did
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they give you -- did they share with you
3
this document when you met with them on
4
that Sunday evening?
5
A.
Not that I recall.
6
Q.
How long did the meeting last?
7
A.
Perhaps two or three hours. I
8
don't recall the specific length of time.
9
Q.
And who was present at the
10
meeting? Was Mr. Davis there?
11
A.
Yes.
12
Q.
Was Mr. Elovitz there?
13
A.
Yes, I believe so.
14
Q.
Ms. Clark?
15
A.
I don't recall.
16
Q.
Do you recall anyone else from
17
Schulte being present?
18
A.
I believe Steve Fredman.
19
Q.
Who?
20
A.
Steve friend man.
21
I believe Fred Ragucci. I don't
22
recall others. Oh, I believe Holly Weiss.
23
Q.
Were those all lawyers that had
24
been involved in the investigation?
25
A.
Well, Schulte was retained
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regarding the investigation and disclosure
3
and other items and I guess different
4
combinations of them were involved in that
5
and employment issues.
6
Q.
Okay.
7
Now, if you'll look over at page
8
-- I'll give you the bottom page since
9
this page is paginated -- page three.
10
Schulte Roth findings.
11
Do you see that?
12
A.
Yes.
13
Q.
Finding number one, "there's
14
been explosive" -- "this management
15
company is perpetually cash short.
16
Explosive growth. Expenses are
17
outstripping management and incentive
18
fees."
19
Would you agree with that
20
characterization?
21
A.
I don't recall what I believed
22
at the time.
23
Q.
Item number two of their
24
findings, "excessive management fee and
25
incentive fee deferrals done to provide
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tax advantages. Leave management company
3
without enough cash to pay expenses."
4
Were there management fee and
5
incentive fee deferrals?
6
A.
I believe there were, as I
7
mentioned.
8
Q.
For both the onshore and the
9
offshore fund?
10
A.
I don't know that you could do
11
that with the onshore fund. I just don't
12
know.
13
Q.
What was the reason for the
14
deferrals?
15
A.
I forgot why they were
16
recommended to me. I don't have a
17
recollection.
18
Q.
If you don't recall, it was to
19
provide some tax advantage?
20
A.
Yeah, I think so. I have no
21
reason to believe that's not the case. I
22
don't have a specific recollection of the
23
guys who worked on that giving me a whole
24
run down on the reasons.
25
MR. SIFFERT: Are these attorneys
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giving you this advice?
3
THE WITNESS: Yes.
4
MR. SIFFERT: Then I direct you
5
not to answer.
6
Q.
Did -- were you aware that
7
excessive deferrals of fees was leaving
8
the management company without enough cash
9
to pay expenses?
10
A.
What I know about the situation
11
came from Schulte and then subsequently
12
Gibson Dunn.
13
Q.
That was something you were not
14
aware of when you got that report from
15
Schulte?
16
A.
I don't recall seeing this
17
before. I believe getting a binder where
18
they pointed out different e-mails. I
19
don't recall this.
20
Q.
You got a binder from them; is
21
that what you gave you, the people at the
22
meeting?
23
A.
I believe so.
24
Q.
Oh, I didn't finish who was at
25
the meeting.
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2
A.
Okay.
3
Q.
It was you?
4
A.
In the first meeting, the
5
lawyers we talked about, me, Lawrence
6
Cutler.
7
Q.
Chris Suan?
8
A.
Chris Suan, Vasan Kesavan, David
9
Proshan. I don't recall whether David Lee
10
was at that first meeting or not.
11
Q.
Was Mr. Kahn there?
12
A.
I don't believe so.
13
Q.
Was Mr. Gruss present?
14
A.
No.
15
Q.
Okay.
16
Was Glenn Dubin present?
17
A.
Not at the first one. We had
18
one immediately after in the next day or
19
two where he was there.
20
Q.
Okay.
21
There were two meetings with the
22
lawyers?
23
A.
I think there were many meetings
24
live and on the phone, but those were the
25
first two, I believe, that I recall.
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2
Q.
The first one that was a Sunday
3
night, you don't recall Mr. Dubin being at
4
that one?
5
A.
No.
6
Q.
When was the second meeting with
7
the lawyers?
8
A.
I believe soon after, I don't
9
recall whether one day, two days, but
10
relatively soon.
11
Q.
Was it a continuation of kind of
12
the first meeting?
13
A.
Yes.
14
Q.
Was it because you hadn't gotten
15
through everything?
16
A.
No, I don't know that there were
17
any new findings that I can recall, it was
18
more discussion of bringing Glenn up to
19
speed on the findings as well as, you
20
know, the deliberations regarding what
21
Schulte had been engaged to do.
22
Q.
And do you remember who was at
23
the second meeting?
24
A.
I believe roughly the same
25
people plus Glenn.
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2
Q.
And what was the second meeting,
3
at Schulte's offices?
4
A.
Yes.
5
Q.
During the day?
6
A.
I don't recall whether it was an
7
afternoon or evening.
8
Q.
How long did it last?
9
A.
Again, I don't recall the
10
specific length of time. My sense would
11
be two to three hours again.
12
Q.
Was it within a matter of two or
13
three days of the first meeting, as you
14
recollect?
15
A.
I believe it was very soon
16
after. I don't know whether it was one
17
day or four days or two or three, I don't
18
remember, but in my mind I recall it being
19
very soon after.
20
Q.
And at the first meeting you got
21
a binder -- the participants were given a
22
binder of e-mail or other documents or
23
just e-mails?
24
A.
I know it had e-mails. I don't
25
recall if it had other documents.
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2
Q.
Was a PowerPoint presentation
3
made?
4
A.
I'm not sure. I don't recall.
5
Q.
Were the binders available at
6
the second meeting, also?
7
A.
I believe so.
8
Q.
Was Mr. Dubin allowed to look at
9
them?
10
A.
I believe everybody was.
11
Q.
The reason for bringing him up
12
to speed was that he was
13
A.
He and Henry were the largest
14
owners along with me and he was very
15
experienced and our senior adviser.
16
Q.
Okay.
17
Going down the Schulte report,
18
19
20
21
22
23
24
25
under early payment of management fees it
says, "in March or April Tim Wong informed
Cutler that management fees may have been
paid prematurely. In May, '06, Cutler
directed Wong to conduct an analysis."
Do you see that?
A.
I see it.
Q.
Do you have any explanation of
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1
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2
why the delay from March or April to May?
3
A.
I didn't -- I don't recall
4
seeing this document.
5
MR. ARFFA: Objection to form.
6
A.
Nor do I recall anything other
7
than the first time when David Proshan and
8
Lawrence Cutler came to me and said they
9
wanted to do some more work and the second
10
where they said they wanted to retain
11
Schulte.
12
Q.
Okay.
13
Look at page seven.
14
A.
(Reviewing).
15
Q.
And at the bottom of the page it
16
says, "Gruss told us he had no choice but
17
18
19
20
21
22
23
24
25
A.
As I said, in terms of his
to take management fees early because of
the management company's constant cash
shortages. He took management fees early
whenever the management company did not
have enough money to pay its expenses."
You understood that the
management company had cash shortages;
didn't you?
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2
conduct, I understood it when I was told
3
about it through Schulte and then
4
ultimately Gibson Dunn.
5
With regard to the management
6
company, there were a variety of different
7
ways for it to be funded, whether it was
8
through lines, et cetera, and there are a
9
variety of different mechanisms by which
10
expenses could be controlled up or down in
11
terms of hiring, offices, other expenses,
12
13
14
15
16
17
18
19
20
21
22
23
24
25
et cetera. At no point was there a
discussion about improperly taking
management fees from the funds at any time
in any way.
Q.
If you look over on page nine,
the bottom of the page it says, "the
following facts suggest Kahn was willfully
blind. Kahn was the COO, Kahn knew the
management company was constantly cash
strapped. Kahn knew management fees were
being diverted. Kahn was having a hard
time getting a $10 million loan for the
management company in the fall of 2005
because of the management company's
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1
2
3
4
A.
5
Q.
knew that Kahn was the
6
COO, too;
7
A.
8
Q.
9
10
11
12
to
13
14
15
16
document. I know that he was looking for
17
the loan that they're talking about.
18
Q.
If someone told new September
19
that the company was constantly cash
20
strapped, would that come as a surprise to
21
you?
22
A.
I know we had discussions
23
regarding working capital and timing
24
because we had very significant incentive
25
fees that came at the end of the year.
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negative cash flow."
Do you see those?
Yes.
Well, you
right?
Yes.
Did you know the management
company was constantly cash strapped or is
that the first time you learned it at the
Schulte meeting?
A.
I don't recall what was told
me if at that time regarding the
management company being cash strapped.
As I said, I don't recall seeing this
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2
In terms of the -- other than on
3
a seasonal basis, did I know of that? No,
4
I did not.
5
Q.
You knew the management fees
6
were being converted, that you did know;
7
right?
8
A.
Some of them.
9
Q.
And did you know that the
10
company had a negative cash flow?
11
A.
I knew that there were timing
12
differences and, including the incentive
13
fees, I don't believe it did.
14
Q.
Did you know that Kahn had a
15
difficult time getting a $10 million loan
16
in the fall of 2005?
17
A.
Not that I recall.
18
Q.
If you look at page ten, bottom
19
of the page, "using investor money to pay
20
plane expenses, in March or April of '06
21
Tim Wong informed Cutler that money from
22
the funds may have been used to pay
23
expenses relating to the purchase of Dan
24
Zwirn's plane. In May Cutler directed
25
Wong to conduct an analysis."
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2
This is the one you don't know
3
whether you were told about in March or
4
April; right?
5
A.
I don't know whether I heard
6
about it in the first conversation that
7
occurred in March or April. I believe I
8
heard about it in the June conversation
9
where we also said that there were -- that
10
there was reason to retain Schulte and I
11
agreed with that recommendation.
12
Q.
Cutler did not tell you that in
13
May -- he did not tell you in May of '06
14
he was directing Wong to conduct an
15
analysis?
16
A.
As I mentioned before, I don't
17
recall any communications between the
18
March or April first conversation and the
19
June conversation where David Proshan and
20
Lawrence Cutler suggested there was reason
21
to retain Schulte and I agreed with them.
22
Q.
Did the deferral of management
23
fees, did it result in a personal tax
24
benefit to you?
25
A.
I think all the deferrals,
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2
assuming one made money in the investment,
3
would have been beneficial from a tax
4
prospective to folks who did that, so that
5
would have been to me and to Glenn and
6
whoever else was in the deferral. I don't
7
recall who else was, whether it was Henry,
8
Chris, et cetera.
9
Q.
Now, do you recall anything --
10
do you recall anything different about the
11
substance of the second meeting at Schulte
12
from the first meeting at Schulte?
13
A.
Glenn was there on that one.
14
And in terms of I don't think we learned
15
anything new, I think it was continued
16
discussion regarding the recommendations.
17
Q.
Okay.
18
I think we've established that
19
you think that paragraph four of the Dubin
20
affidavit is not accurate; correct?
21
MR. ARFFA: Objection to form.
22
A.
I mean, I went through it piece
23
by piece.
24
Q.
Yes, yes.
25
There are two sentences there
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2
and I think you told me that both of them
3
are wrong.
4
MR. ARFFA: Objection to form.
5
MR. SIFFERT: His testimony is
6
his testimony. Why don't you ask the
7
next question.
8
MR. SUSMAN: I will.
9
Q.
How about number five?
10
A.
I don't recall -- I don't
11
believe that Glenn and I had -- I don't
12
know that Glenn and I were -- understood
13
at a different time that we were going to
14
reach out to all the investors in the
15
fund. In fact, I believe that we
16
discussed the merits of doing that with
17
counsel included.
18
Q.
Is this -- I'm not sure I
19
understand.
20
Is this accurate or inaccurate?
21
A.
I don't believe I told him about
22
it. I believe that he was actively
23
involved in the decision regarding how we
24
would reach out to investors.
25
Q.
And he was also involved in the
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2
decision about what they would be told;
3
correct?
4
A.
With counsel present.
5
Q.
Huh?
6
A.
With counsel present.
7
Q.
Yes.
8
But it is clear, is it not, that
9
they were not told what you learned from
10
Schulte, Roth and Zabel's report of their
11
investigation?
12
MR. SCHWARTZ: Objection to form.
13
A.
Who is they?
14
Q.
The investors.
15
We saw the script you used for
16
the investors during the first call.
17
MR. SIFFERT: Objection to form.
18
Do you understand the question?
19
THE WITNESS: Yes, I understand
20
it.
21
Q.
You understand the question?
22
A.
We retained Schulte Roth
23
regarding the investigation as well as
24
disclosure as well as employment issues.
25
We concluded what we concluded and we
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2
acted.
3
Q.
I'm sorry, you have testified
4
before that, in your opinion, using
5
investor moneys for the purchase of a
6
plane and for early withdrawal of
7
management fees was "qualitatively
8
material and completely unacceptable."
9
Do you recall that testimony?
10
MR. SCHWARTZ: Can we have a
11
reference to where that testimony is,
12
please?
13
MR. SIFFERT: That was in the
14
SEC.
15
Do you recall that testimony is
16
the question.
17
A.
I recall it.
18
Q.
If it was completely
19
unacceptable and qualitatively material,
20
explain to Judge Carpinella why you didn't
21
tell investors about it when you called
22
them all over the Columbus Day three-day
23
weekend in early October.
24
MR. ARFFA: Objection to form.
25
MR. SIFFERT: I don't think
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2
you've completely read the transcript
3
of the SEC because the SEC transcript
4
goes on and clarifies what that meant.
5
MR. SUSMAN: I'm not asking him
6
what he meant. I'm asking him whether
7
he said it. You can clarify that. I
8
assume you will.
9
Q.
But for the time being my
10
question is explain to the judge why, if
11
you thought the use of investor funds to
12
pay plane expenses and the premature
13
payment of management piece, you thought
14
it was totally unacceptable and
15
qualitatively material, why didn't you
16
tell the investors when you called them on
17
October 8, 9, and 10?
18
MR. ARFFA: Objection to form.
19
A.
I think there was substantial
20
context around that discussion, so if I
21
can get my testimony and read through it,
22
I'd appreciate that.
23
And as a general matter, as a
24
business matter, it was absolutely
25
unacceptable.
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2
Q.
You cannot explain why you
3
didn't completely level with the investors
4
in your first call --
5
MR. SIFFERT: Objection.
6
MR. ARFFA: Objection.
7
Q.
-- without reviewing your prior
8
testimony?
9
MR. ARFFA: Objection.
10
MR. SIFFERT: That is a -- that's
11
not a fair question. I object to the
12
form. He completely leveled with them
13
as was appropriate.
14
MR. SUSMAN: Make your
15
objections, gentlemen. You're
16
instructing the witness not to answer
17
the question? I'll let the judge
18
decide whether that's a fair question.
19
Because that's the first question I'm
20
going to play at the beginning of my
21
case next month.
22
Q.
I'll give you a chance to answer
23
it right now.
24
Tell the judge why you did not
25
disclose to your investors that you called
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1
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2
on October 8, 9, and 10 of 2006, why did
3
you not disclose to them things which you
4
thought were totally unacceptable and
5
qualitatively material.
6
MR. ARFFA: Objection to form.
7
A.
To the best of my judgment as a
8
businessperson, not a lawyer, I did the
9
right thing, the moral thing, the
10
honorable thing throughout every episode
11
do with Gruss' actions. That's the best I
12
can -- that's my best view.
13
MR. SUSMAN: On that, ladies and
14
gentlemen, we will eat lunch.
15
THE VIDEOGRAPHER: Stand by.
16
The time is 1:01.
17
We are going off the record.
18
(Lunch recess taken at 1:01
19
p.m.)
20
21
22
23
24
25
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2
AFTERNOON
SESSION
3
June 14, 2011
4
1:49 p.m.
5
THE VIDEOGRAPHER: The time is
6
1:49.
7
We are back on the record.
8
9
EXAMINATION CONTINUED BY
10
MR. SUSMAN:
11
Q.
Okay.
12
Now, after your phone call with
13
Mr. Epstein over the Labor Day -- over the
14
Columbus Day weekend, when was your next
15
phone conversation with Mr. Epstein?
16
A.
I recall having a conversation a
17
few weeks later as part of the second
18
round of calls.
19
Q.
That was a second round of
20
calls; right?
21
A.
Yes.
22
Q.
Do you have --
23
MR. SIFFERT: Try to keep your
24
voice up, if you can.
25
THE WITNESS: Okay.
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2
Q.
Did you have any communication
3
with Mr. Epstein directly between the
4
first call and the second call?
5
A.
I don't recall.
6
Q.
Did you speak to Mr. Dubin about
7
Mr. Epstein between the first call and the
8
second call?
9
A.
I don't recall doing so. I just
10
don't know. Other than I would have
11
reported back to him about the call after
12
the call.
13
Q.
I'm sorry, about the first call?
14
A.
After the first call -- any
15
communication with Mr. Epstein I would
16
report to Glenn. He wanted to know.
17
Q.
And what did you tell him after
18
the first call?
19
A.
I don't recall the specifics of
20
the conversation. But the general matter,
21
I told him whatever occurred with regard
22
to Mr. Epstein.
23
Q.
Okay.
24
But --
25
A.
And I don't know whether it was
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2
communicated through voice or e-mail or
3
both. I just don't recall.
4
Q.
But you did not report to him
5
that Mr. Epstein was upset, only that Mr.
6
Epstein tried to get you to go off script
7
and you didn't; right?
8
MR. SIFFERT: Objection.
9
A.
No, as I said, I don't recall
10
the text of the conversation. As a
11
general matter, whatever was going on that
12
involved Mr. Epstein Glenn wanted to know
13
immediately, so we would tell him our best
14
understanding of it.
15
Q.
Okay.
16
Now, look at Mr. Zwirn's
17
affidavit.
18
MR. SIFFERT: Mr. Who?
19
Q.
Paragraph six. You have it
20
there before you.
21
MR. SIFFERT: You mean Mr.
22
Dubin's affidavit, not Mr. Zwirn's.
23
MR. SUSMAN: I'm sorry, Mr.
24
Dubin's affidavit.
25
Q.
Paragraph six.
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2
Would you read that.
3
A.
(Reviewing).
4
Okay.
5
Q.
Have you read it?
6
A.
Yes.
7
Q.
Okay.
8
Now, obviously you were not part
9
of these communications Mr. Dubin had with
10
Mr. Epstein; correct?
11
A.
Correct.
12
Q.
But did Mr. Dubin ever tell you
13
anything like he says in paragraph six,
14
did he ever report to you anything like
15
that?
16
MR. SCHWARTZ: Objection to form.
17
A.
Not that I recall. I don't
18
believe this happened to the extent it was
19
regarding the first call.
20
Q.
I'm sorry, do that again?
21
A.
It says, "Zwirn said that his
22
counsel had told Zwirn to use the word
23
'non-material.'" I don't believe that
24
occurred on the first call. I don't
25
believe I said anything about that. I
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2
believe I stayed with the script in the
3
first call. And both calls, without
4
waiving privilege, I consulted with my
5
lawyers on what to say and when to say it
6
and I did it.
7
Q.
So in one of the calls did you
8
describe irregularities as non-material?
9
A.
I believe that was part of the
10
second script.
11
Q.
Did Mr. Dubin ever tell you,
12
without regard to whether it was the first
13
call or second call, that Mr. Epstein was
14
upset with your characterizing the
15
irregularities as being non-material?
16
A.
I don't recall that ever
17
happening.
18
Q.
Okay.
19
Did you ever tell Mr. Epstein
20
that your counsel had told you to use the
21
word "non-material?"
22
A.
I believe that was -- that word
23
may have been used in the second script.
24
I don't have it in front of me. I don't
25
believe I veered from the script in either
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2
the first or the second case.
3
MR. SUSMAN: Let me have one
4
hundred six. Thirty-five and one
5
hundred six.
6
(Whereupon, document entitled
7
Talking Points-Investors was marked
8
Exhibit 106 for identification.)
9
Q.
I'm passing you Exhibit 35
10
and 106. Let's begin with thirty-five.
11
Do you recognize what
12
thirty-five is?
13
A.
Yes.
14
Q.
Okay.
15
What is this?
16
A.
I believe this was the sheet I
17
used to make the contacts for the second
18
round of calls.
19
Q.
Is that your handwriting on the
20
-- over to the last two columns and your
21
check marks?
22
A.
(Reviewing).
23
I believe so.
24
Q.
Now, these calls were -- see, I
25
believe the earliest dates here are -- can
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2
you tell me what the earliest date is?
3
MR. SIFFERT: On the document,
4
thirty-five?
5
Q.
There's some that show the
6
twenty-fifth.
7
A.
I don't think so. I think it's
8
the twenty-eighth.
9
Q.
I may be misreading them.
10
A.
I could be wrong but it's hard
11
for me to tell.
12
Q.
You think they're the
13
twenty-eighth?
14
A.
I'm just trying to read it as I
15
sit here. I don't recall.
16
Q.
Huh?
17
A.
I'm just trying to read it as I
18
sit here. I don't recall. It's hard to
19
read. It's a copy of a copy or something
20
like that.
21
Q.
The first page, on the first
22
page there's some calls on the
23
twenty-eighth.
24
A.
I think so, yes.
25
Q.
Huh?
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2
A.
I think so. That's what I think
3
I read.
4
MR. SIFFERT: Steve, if it helps,
5
the twenty-fifth is a Wednesday and
6
the twenty-eighth was a Saturday, if
7
that helps.
8
Q.
Well, it looks -- when did you
9
do these calls; do you remember? Was it
10
over a period of two or three days?
11
A.
Yes, all together. That's not
12
to say someone couldn't have returned a
13
call later or something like that.
14
Q.
If you look at Financial Trust
15
Company at the bottom, Epstein, did you
16
call both Mr. Beller and Mr. Epstein?
17
A.
I don't recall. I believe I
18
spoke to Mr. Epstein.
19
Q.
Did you ever speak to Mr.
20
Beller?
21
A.
I don't believe so at this
22
point. I believe I spoke to him in
23
November.
24
Q.
You did speak to him in
25
November?
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2
A.
Yes, not in the context of the
3
second round of calls.
4
Q.
Was that the only time you had
5
talked to Mr. Beller?
6
A.
I don't recall other
7
conversations with him.
8
Q.
Okay. We'll get to that in a
9
second.
10
In here you have under Mr.
11
Epstein on October 30 left message;
12
correct?
13
A.
Yes.
14
Q.
But you say you did eventually
15
talk to him; right?
16
A.
There's a check mark there. I
17
believe I was using the check marks to
18
indicate I had connected.
19
Q.
Do you know when you connected?
20
A.
I don't recall.
21
Q.
Now, did you take any notes of
22
these calls?
23
A.
No, I didn't.
24
Q.
Were any of them recorded?
25
A.
Not that I recall.
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2
Q.
Was anyone on the phone with you
3
or did you do it by yourself?
4
A.
I believe Elise was in the room
5
with me during the majority over that
6
period of time. At times -- yeah, I think
7
it was Elise throughout.
8
Q.
Ms. Hubsher?
9
A.
Yes.
10
Q.
Were you making these on a
11
speakerphone?
12
A.
I don't believe so.
13
Q.
So she would have heard your
14
side of the call, not the other side? Was
15
she listening in to the calls?
16
A.
No, I don't believe so.
17
Q.
So if she was sitting in the
18
room, she would have heard what you said,
19
not what the other party said; correct?
20
A.
I believe so.
21
Q.
Now look at one hundred six.
22
Is this the text you used for
23
the domestic -- the calls with the onshore
24
fund, the domestic fund?
25
A.
(Reviewing).
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2
Q.
Are you still reading?
3
A.
No, I'm done.
4
Q.
My question was this the text
5
that you used for those calls.
6
A.
This is the script for that
7
second round of calls. I believe it had
8
other material with it that wasn't part of
9
the script.
10
Q.
Okay.
11
MR. SUSMAN: One hundred seven,
12
please.
13
(Whereupon, document entitled
14
Q&A For Investors was marked
15
Exhibit 107 for identification.)
16
Q.
And is one hundred seven the
17
other material you're referring to?
18
A.
(Reviewing).
19
Q.
Is this the other material
20
you're referring to?
21
A.
I'm still going through it.
22
Q.
Huh?
23
A.
I'm still going through it.
24
(Reviewing).
25
Q.
You got through enough to know
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2
that this is the document you used?
3
A.
I believe so. I don't know that
4
it's a final version of it.
5
Q.
Well, let me ask you a few
6
questions.
7
Did you actually -- this Q and
8
A, it says, "the proposed answers below
9
are for use with investors asking
10
follow-up questions after Dan discloses
11
the three issues to them."
12
So did you have to use any of
13
these follow-up things with Jeffrey
14
Epstein or do you remember?
15
A.
Beyond the script, I recall that
16
Mr. Epstein wanted to speak to Harry Davis
17
or our lawyers.
18
Q.
He asked to speak to your
19
lawyers?
20
A.
Yes. Which is one of the things
21
covered in here that I read.
22
Q.
Huh?
23
A.
It's one of the things covered
24
in here that I read. I don't know if I
25
literally turned to it as Mr. Epstein
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2
asked me about that. I know it's covered
3
in the QA that comes with the script are
4
you saying the script says that -- I'm not
5
sure I follow.
6
You first went over the script
7
with Jeffrey; correct.
8
MR. SIFFERT: Exhibit 107?
9
MR. SUSMAN: Exhibit 106.
10
A.
I believe with all investors I
11
went through the script, including Jeffrey
12
Epstein.
13
Q.
And do you recall anything that
14
Mr. Epstein said other than I want to
15
speak to your lawyer?
16
A.
Not that I recall, no.
17
Q.
Do you recall in what context it
18
was that he wanted to speak to your
19
lawyer?
20
A.
You know, I think consistent
21
with the first call he was -- he seemed to
22
be looking for more information than what
23
was script. I don't recall delivering any
24
more information other than that. I know
25
he then said he wanted to speak to our
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2
lawyer and I said I would try to do that.
3
Q.
Okay.
4
Look, if you will, at page four
5
of these additional descriptions.
6
MR. SIFFERT: One hundred seven?
7
MR. SUSMAN: Page four of one
8
hundred seven.
9
Q.
On the subject of interfund
10
transfers, the question is how was this
11
discovered and the answer is we discovered
12
it as a result of our control systems.
13
Someone came forward and brought this to
14
our compliance officer's attention who
15
immediately brought this to me.
16
Who was the someone who came
17
forward?
18
A.
I don't have firsthand knowledge
19
of it occurring, although my best
20
understanding is it was a woman named
21
Alissa Butchkowski.
22
Q.
Look at page six, paragraph
23
eight.
24
A.
I see it.
25
Q.
The question is -- the answer is
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2
those to whom we know to be directly
3
responsible are gone.
4
Who besides Perry Gruss was in
5
that category?
6
A.
I don't recall today who else
7
was deemed to be directly responsible at
8
that time or if anyone else was at that
9
time. I just don't recall.
10
Q.
Look at paragraph seven of the
11
Dubin affidavit.
12
A.
Are we done with six?
13
Q.
We are.
14
A.
I didn't finish answering --
15
Q.
I'm sorry, go ahead.
16
A.
Just to be clear, obviously I
17
was not privy to a conversation solely
18
between Glenn and Epstein. I believe in
19
the last sentence it talks about Epstein
20
having made that demand to Zwirn. That
21
did not happen.
22
Q.
Excuse me, let's try it again.
23
What did not happen?
24
A.
In either the first call or the
25
second call, I have no recollection of
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2
Epstein making a demand to me regarding
3
the entire capital account.
4
Q.
Do you have until either call --
5
A.
Or any of his capital accounts.
6
Q.
You're not saying it didn't
7
happen, you just don't recall it
8
happening?
9
A.
No, I don't believe it happened.
10
Q.
In either of the calls?
11
A.
Correct.
12
Q.
And do you also believe that Mr.
13
Dubin never told you that Epstein had made
14
that demand of him?
15
A.
I believe that's correct, he did
16
not.
17
Q.
So if we go to --
18
A.
Glenn did not, to be clear.
19
Q.
Huh?
20
A.
To be clear, Glenn did not tell
21
me that Epstein had made that demand of
22
him.
23
Q.
So when Glenn says in paragraph
24
seven, "I subsequently spoke to Zwirn
25
about Epstein's demand," that is a lie;
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2
correct?
3
A.
It didn't occur.
4
Q.
Then Mr. Dubin says, "Zwirn was
5
concerned that a complete redemption could
6
cause a run on the bank."
7
Did you ever discuss that
8
concern with Mr. Dubin?
9
A.
No.
10
Q.
Did you ever have that concern?
11
A.
No.
12
Q.
If Mr. Epstein had demanded his
13
entire
to withdraw his entire capital
14
account in October of '06, did the onshore
15
fund have the liquidity to pay it?
16
MR. SCHWARTZ: Objection to the
17
form.
18
A.
I mean, I don't really
19
understand. In any of his five tranches
20
he had different liquidity rights. I
21
don't recall there being a time of us not
22
being able to handle any demands that we
23
understood there to be.
24
Q.
So were you able to pay -- were
25
you able to -- did you have the ability to
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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
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return to him $80 million, for example?
MR. ARFFA: Objection to form.
A.
I don't recall the financials of
the firm at that point in time and I
wouldn't have needed to because he didn't
have a right to it.
Q.
And where Mr. Dubin says in this
affidavit, "Zwirn asked me to discuss with
Epstein, reducing his demand of one half
of the Financial Trust Company's total
capital account in the Zwirn fund at the
time,"
A.
notion
that did not happen; correct?
No, and I don't understand the
of total capital account. Jeffrey
had five different pieces of money. I
guess collectively they could have been
referred to as a capital account in
discussion, but this didn't happen.
Q.
And then it
well, he didn't agree
discuss anything with
says, "I agree"
he was going to
Epstein because he
never told you anything he had to discuss
with Epstein; correct?
A.
I know he was chatting with Mr.
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2
Epstein about what we could do to be good
3
customer service people but no, that was
4
not correct.
5
Q.
And paragraph eight,
6
"subsequently I participated in a
7
three-way call with both Zwirn and
8
Epstein."
9
There was no such call?
10
A.
I believe there were calls that
11
included Glenn, me, and Mr. Epstein as
12
well as Glenn's wife. They were much
13
later.
14
MR. SIFFERT: Okay.
15
Let's change the tape.
16
THE VIDEOGRAPHER: The time is
17
2:24.
18
We are going off the record.
19
This is the end of tape three.
20
(Whereupon a break was taken)
21
THE VIDEOGRAPHER: The time is
22
2:27.
23
We are back on the record, the
24
start of tape four.
25
Q.
Mr. Zwirn, did you report to Mr.
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2
Dubin about your second call with Mr.
3
Epstein, the one you had at the end of
4
October?
5
A.
I believe so.
6
Q.
And you would have told him that
7
you read the script and that Epstein
8
simply wanted to talk to a lawyer?
9
MR. ARFFA: Objection to form.
10
MR. SCHWARTZ: Objection to form.
11
MR. SIFFERT: Objection to form.
12
MR. SUSMAN: I'm sorry?
13
MR. SIFFERT: Objection to form.
14
The word "simply" is a problem, I
15
think.
16
MR. ARFFA: Other problems as
17
well.
18
MR. SCHWARTZ: It's also a
19
compound question.
20
Q.
He would have told -- well, what
21
did you --
22
A.
I believe I would have told him
23
my best understanding of what happened
24
which is I stuck to the script. He may
25
have attempted to access information not
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2
given to other investors and that he
3
wanted to speak to our attorney. I don't
4
recall whether we talked specifically
5
about the name Harry Davis or not, but
6
that's who I believe he ended up speaking
7
with.
8
Q.
What information did he seek
9
which was not being given out to
10
investors?
11
A.
I don't recall what information
12
he sought that would have been different
13
than that which had been given out to all
14
the other investors. It's my general
15
sense of what occurred. I don't recall
16
the specific script of the call. And to
17
be clear, by script, I mean our
18
conversation, not the script I had.
19
Q.
I didn't understand that.
20
What was the last thing you
21
said?
22
A.
I used the word "script" because
23
I said and I don't recall the script of
24
what Mr. Epstein and I discussed. By that
25
I meant what the precise words were that
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2
we used. I did not mean the script that I
3
stuck to that came through discussion with
4
Schulte Roth.
5
Q.
Do you recall saying anything
6
more to Mr. Dubin about that conversation
7
with Mr. Epstein than you've told us now?
8
A.
No, I do not.
9
Q.
Did Mr. Dubin say anything in
10
response?
11
A.
I don't recall a specific
12
response. As a general matter, in
13
discussions general frequently referred to
14
how we should do our best do whatever we
15
were able do for Mr. Epstein in terms of
16
meetings or access or whatever we could do
17
within the bounds of what we're able to do
18
for everybody and that he wanted to be
19
treated well.
20
Q.
Your impression after the second
21
call you had with Mr. Epstein was that he
22
was not upset or did you have an
23
impression one way or the other?
24
A.
I didn't know him and I don't
25
know him. I don't recall having a
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specific impression.
3
Q.
Okay.
4
When do you recall having the
5
next conversation with Mr. Epstein?
6
A.
I think it was after we received
7
his demand for a wire by fax. I don't
8
know whether it was also before or after
9
we had agreed to begin work on his behalf
10
for the assignment of his account. I just
11
don't recall.
12
Q.
Okay.
13
We can -- let's finish the Dubin
14
affidavit.
15
Paragraph eight, would you read
16
that?
17
A.
(Reviewing).
18
Okay.
19
Q.
Is that -- is there anything in
20
there that's truthful?
21
A.
This said we may have had a
22
three-way call at some point after the
23
second round of calls that excluded Mr.
24
Dubin's wife. I don't recall
25
specifically.
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2
Q.
Is the rest of it false?
3
A.
I can't dispute Glenn's
4
understanding in the last sent sense.
5
Q.
What?
6
A.
I can't dispute Glenn's
7
understanding. His understanding is his
8
understanding. But I recall none of this.
9
It didn't happen.
10
Q.
It did not happen?
11
A.
No.
12
There is a reference to a
13
written request. There was a fax demand
14
for an illiquid immediate payment or an
15
immediate wire that did occur and that's
16
the first we knew about that demand for
17
payment.
18
Q.
But otherwise that, none of had
19
occurred and Mr. Dubin's just making
20
things up?
21
MR. SIFFERT: Objection.
22
MR. SCHWARTZ: Objection to form.
23
A.
I can't characterize Mr. Dubin.
24
Q.
Huh?
25
A.
I don't know how to characterize
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2
Mr. Dubin. That's his business. None of
3
this other stuff happened that we
4
reviewed.
5
Q.
Do you have any explanation as
6
to why he would not be truthful in
7
preparing this affidavit?
8
A.
I'd be speculating. I don't
9
know. I can't tell you.
10
Q.
Okay.
11
The next conversation you think
12
was --
13
MR. SUSMAN: Exhibit 5, please,
14
Seth.
15
Q.
I show you what's been marked as
16
Exhibit 5.
17
This is a fax you have referred
18
to you got from Mr. Epstein on
19
November 13; correct?
20
A.
I believe I did. I don't recall
21
actually getting it off a fax, but I
22
believe so.
23
Q.
And then it begins by saying,
24
"as per our conversation, I hereby
25
instruct you."
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2
Do you recall any such
3
conversation?
4
MR. ARFFA: Objection to form.
5
MR. SCHWARTZ: Objection to form.
6
A.
I don't recall a conversation
7
where he previously instructed me to do an
8
immediate liquidation of an interest or an
9
immediate wire, no.
10
Q.
As per our conversation, do you
11
recall any conversation where he discussed
12
with you the subject of withdrawing his
13
capital or any part thereof?
14
A.
No.
15
Q.
And you think it was after you
16
received this fax that you had a three-way
17
conversation with Mr. Epstein, Mr. Dubin,
18
and yourself?
19
A.
Well, there was a -- after that
20
fax, there was a call from Glenn Dubin who
21
basically said that if we would work on
22
some sort of tax issue regarding Epstein's
23
interest, that we would be done with this
24
situation.
25
Q.
Okay.
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2
I was asking you about was there
3
a three-way call between you, Mr. Dubin,
4
and Jeffrey Epstein.
5
A.
I believe so, after the prior
6
call that I described.
7
Q.
That was after
do you know
8
when that call -- either of those calls
9
took place other than after November 13?
10
A.
I don't recall the specific
11
dates. I believe in November but I don't
12
know for sure.
13
Q.
And what do you recall was said
14
by anyone in the three-way call?
15
A.
My best recollection, it was
16
basically that we were going to go do this
17
work.
18
Q.
Do that again, sir?
19
A.
The only thing I recall is that
20
the firm, we were going go do this work.
21
Q.
What work?
22
A.
The work on Epstein's interest,
23
the transfer or the attempt to transfer.
24
Q.
Do you know what that transfer
25
was all about?
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2
A.
I don't recall from that time.
3
I know it was tax-related. In preparation
4
for this, I know my understanding is it
5
has something do with New York-sourced
6
income and that he would have needed our
7
-- I guess they needed us to work on it
8
with them and that they would have needed
9
or approval for it.
10
Q.
Do you have any idea the
11
magnitude of what that was worth to Mr.
12
Epstein?
13
A.
I don't.
14
Q.
So during your conversation
15
about this work, was there any discussion
16
about his withdrawal of funds or his not
17
withdrawing funds or his agreeing he
18
wouldn't withdraw funds if he did the work
19
or anything like that?
20
A.
I don't recall the specific
21
discussion of it other than we had -- my
22
impression of it was -- again Glenn was
23
very clear with us that this would stop,
24
the demands for immediate payment would
25
stop if we did this work.
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2
Q.
When you got this demand for
3
immediate payment, the Exhibit 5, did you
4
call Mr. Epstein or e-mail Mr. Epstein or
5
write him that he wasn't entitled to make
6
this kind of demand?
7
A.
I don't recall doing that. I
8
wouldn't have done that without talking to
9
Glenn anyway, that I can recall.
10
Q.
I'm sorry, you believe that he
11
had no right to make the demand; correct?
12
13
14
15
16
17
18
19
20
21
make any customer happy. Glenn was
22
consistently very focused on us doing
23
whatever we could from a customer service
24
prospective with him. We had a bunch of
25
other issues as a management that we were
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A.
The demand to liquidate an
interest instantly and get a wire? I
believe that he did not have a right do
that, correct.
Q.
So why were you interested in
his agreeing not to press it? Why was
that of interest to you at all?
MR. ARFFA: Objection to form.
A.
We wanted -- we always wanted to
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dealing with for all of our investors and
3
it was a -- it was time-consuming dealing
4
with it.
5
Q.
But just so I'm clear, is the
6
idea that Mr. Epstein would agree to
7
retract this withdrawal request for $80
8
million if you assisted him on this
9
assignment issue, that came to you
10
exclusive via Glenn Dubin, not directly
11
from Mr. Epstein at all; correct?
12
A.
He may have been on the -- I
13
believe we discussed the fact that we were
14
going do that on Mr. Epstein's behalf on
15
the three-way call. I don't know that it
16
was reiterated that there was a direct
17
quid pro quo. That only came from Glenn.
18
Q.
Okay.
19
Did you have just one three-way
20
call with Mr. Dubin and Epstein or was
21
there more than one subsequent to the
22
November 13 withdrawal request?
23
A.
I don't recall. I know we --
24
consistent with Mr. Dubin's request, we
25
wanted to do as much that we could in the
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context of what we were doing for other
3
investors for Jeffrey, so we spent a bunch
4
of time trying to set up meetings for
5
access to data on the NAV, NAV, for him.
6
I just don't recall whether all three of
7
us were on calls regarding that.
8
Q.
You say you -- so do you recall
9
any call with Mr. Epstein -- you said that
10
there was one with Glenn Dubin's wife on
11
the phone, Eva Dubin?
12
A.
Either one or two with the four
13
of us on the phone.
14
Q.
With the four you have on the
15
phone?
16
A.
I don't think there was ever a
17
call with me, Mrs. Dubin, and Jeffrey on
18
the phone.
19
Q.
When was there a call with four
20
of you on the phone?
21
A.
I believe there were one or two
22
after the topic of some sort of immediate
23
cash request came up a second time.
24
Perhaps February of the following year.
25
Q.
Do you have any -- are you able
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to date that at all?
3
MR. ARFFA: I object to the form.
4
A.
I don't recall the specific
5
dates.
6
Q.
You think it was in February of
7
'07?
8
A.
I think so.
9
Q.
What was the
how did those
10
calls come about?
11
A.
I don't recall.
12
Q.
What was said during those
13
calls?
14
A.
I just don't recall the
15
substance of them. I don't know that
16
there was anything new. I just don't
17
recall.
18
Q.
Do you recall what the purpose
19
of them was?
20
A.
I think there was -- I believe I
21
have a recollection that it was set up
22
somehow to kind of, you know, continue to
23
try to soothe Mr. Epstein.
24
Q.
Do you recall what was said by
25
you or Mr. Dubin or Mrs. Dubin towards
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that goal?
3
A.
I don't recall the specific
4
conversation at that time.
5
Q.
And you don't recall anything
6
specifically that Mr. Epstein said; right?
7
A.
I don't recall specific words of
8
it, no. As I said, I don't think there
9
was anything new beyond what we had
10
previously discussed.
11
Q.
Mr. Zwirn, I'm looking here at a
12
press report of your -- it's titled Dan
13
Zwirn Seeks Comeback With Alda Three Years
14
After Shutting Hedge Fund. It's based on
15
a May 18 release.
16
Do you know anything about your
17
setting up some new closed-end fund for
18
Alda Capital Corporation?
19
MR. ARFFA: Could we see that?
20
A.
Can I see it?
21
Q.
Do you know anything about it?
22
Does it ring any bell to you?
23
MR. ARFFA: I object to this.
24
Q.
Go ahead.
25
A.
It's an entity that doesn't
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exist for which I would serve as neither
3
an officer, director, or employee.
4
Q.
Is this something you were
5
thinking --
6
A.
What was the question?
7
Q.
My question is: Is this still in
8
the works or has it been abandoned?
9
MR. SCHWARTZ: objection.
10
A.
There is a document regarding
11
it. It's neither in the works or not,
12
it's just out there. It would be a small
13
investment with which I would have no
14
day-to-day involvement as an officer,
15
director, or employee.
16
Q.
What would be your role?
17
A.
To the extent that it existed, I
18
would have an interest in an outside
19
investment adviser that would advise it if
20
it ever happens.
21
Q.
Who would be involved with you
22
here?
23
A.
There's a guy called Al Gordon
24
who would be the day-to-day CEO.
25
Q.
How do you know Mr. Gordon?
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A.
I've known him for a year or so,
3
become friendly with him.
4
Q.
Did you have any business
5
dealings with him while you were running
6
the firm?
7
A.
The former firm? No.
8
Q.
The former firm.
9
Did you -- which lawyers were
10
you using to set up Alda, this fund, this
11
new fund?
12
MR. SCHWARTZ: Objection to form.
13
Q.
With Alda.
14
A.
The firm of Greenberg Traurig
15
worked on it. And to be clear, I don't
16
accept the premise of the article either.
17
I was not seeking a comeback. That was
18
not my wording.
19
Q.
Did you go and interview for
20
that article?
21
A.
No, I did not.
22
MR. ARFFA: Can someone at least
23
read into the record what the article
24
is if we're going to have testimony
25
about it?
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MR. SCHWARTZ: Just mark it.
3
MR. SIFFERT: Is there any reason
4
not to mark it? Steve, why don't you
5
just mark it?
6
MR. SUSMAN: I don't have an can
7
extra copy of it. We'll make one at
8
the break.
9
MR. SIFFERT: Seth said he did.
10
Seth has copies.
11
MR. SUSMAN: You don't have
12
13
14
15
One
16
17
18
19
20
one
21
22
it. I don't know that I saw this version
23
of it.
24
Q.
It says on the second page here
25
-- look at page two. This is like the
copies; do you, Seth?
MR. ARD: I do.
MR. SUSMAN: What's this number?
hundred nineteen.
(Whereupon, a three-page
document was marked Exhibit 119
for identification.)
Q.
You've seen this article before,
hundred nineteen?
A.
I've seen different versions of
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second paragraph above the word
3
"attractive margins." It says
4
A.
I don't see that.
5
Q.
Do you see, "Gordon and Zwirn
6
are the co-managers of Alda Capital, LLC,
7
a private equity firm formed last year,
8
according to the SEC filing."
9
Is that true?
10
A.
It's not a -- there's an entity
11
that we would be co-managers of, yeah. I
12
don't know that it's a private equity
13
investment firm. It's just a holding
14
entity.
15
Q.
There was apparently an SEC
16
filing?
17
A.
I think so.
18
Q.
"Gordon and a member of Zwirn's
19
family hold a stake through the private
20
equity firm in Alda Capital Manager, LLC,
21
the loan fund's investment adviser."
22
Who is your family, the member
23
of your family that holds that stake?
24
A.
I don't know that that's the
25
case.
* * *
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Q.
Huh?
3
A.
I don't know that that's the
4
case.
5
Q.
Was it you personally that had
6
the stake? Is this just an error?
7
A.
It's not correct. There's a
8
separate -- there was an entity that I
9
don't own that owns a stake.
10
Q.
Who owns that entity?
11
A.
It's multiple -- there are
12
multiple members including my wife.
13
Q.
What's the name of the entity?
14
A.
The holding company? I believe
15
it's Alda Capital, LLC.
16
Q.
Alda Capital, what's the last
17
name?
18
MR. SIFFERT: LLC, it's the name
19
in this article.
20
Q.
And that is owned by a company
21
which your family has an interest in; is
22
that what you're saying?
23
A.
Yes.
24
Q.
Is your wife active in this
25
business?
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A.
Nobody's active in the business.
3
It's not a full-time thing. It's an
4
entity.
5
Q.
Would you look, please,
6
Exhibit 89.
7
(Whereupon, an e-mail dated
8
December 23, 2004 was marked
9
Exhibit 89 for identification.)
10
Q.
Here is Exhibit 89. On the
11
bottom of the page there's an e-mail from
12
Mr. Dubin to you, "twenty million
13
January 1 domestic. We're done. FTC in
14
for twenty million January 1 LP."
15
Was it -- you got this e-mail
16
from Mr. Dubin?
17
A.
I don't recall the e-mail, but I
18
have no reason to think I didn't.
19
Q.
Was it Mr. Dubin who was
20
responsible for getting Mr. Epstein to put
21
in this $20 million to invest in the
22
onshore fund?
23
MR. ARFFA: Objection to form.
24
A.
I don't know who was responsible
25
for that.
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Q.
When Mr. Epstein invested that
3
$20 million, did you somehow become aware
4
that he was interested in getting a
5
two-year lockup on his investment?
6
A.
Yes. On that $20 million, yes.
7
Q.
How did you become aware of
8
that?
9
A.
I believe Glenn had said he had
10
been speaking to Jeffrey about investing
11
some more in another tranche -- and again,
12
I don't recall the specific words from
13
Glenn -- but that he would do it if we
14
agreed for that tranche to do it as a
15
two-year rolling lockup instead of a
16
three-year rolling lockup.
17
Q.
Was that fine with you?
18
A.
We agreed to that.
19
Q.
Huh?
20
A.
We agreed to that. I don't
21
recall how I personally felt about it.
22
But in talking to counsel, et cetera, I
23
know that we agreed to it in a note.
24
Q.
Did you have any discussion with
25
anyone from FTC about that, you
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personally?
3
A.
I don't recall that, no.
4
Q.
And then --
5
MR. SUSMAN: Would you hand him
6
Exhibit 90.
7
(Whereupon, an e-mail dated
8
September 7, 2004 was marked
9
Exhibit 90 for identification.)
10
Q.
Exhibit 90.
11
A.
(Reviewing).
12
Q.
Have you seen this -- obviously
13
you've seen this e-mail before.
14
A.
I don't recall doing so.
15
Q.
Huh?
16
A.
I see that I'm cc'd on it, but I
17
don't recall doing so.
18
Q.
Do you recall why you were -- do
19
you recall going through an exercise at
20
the request of Mr. Dubin back towards the
21
end of 2004?
22
A.
No, I don't.
23
Q.
Comparing the difference between
24
a one and a half percent and a two percent
25
management fee?
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A.
I just don't recall it.
3
Q.
Do you recall that Mr. Dubin was
4
assigned the task of approaching Jeffrey
5
Epstein to see whether he would agree to
6
increase the management fee to two
7
percent?
8
A.
I don't have any reason to
9
believe he wouldn't, Glenn wouldn't have,
10
but I don't recall the episode.
11
MR. SUSMAN: Exhibit 91.
12
(Whereupon, an e-mail dated
13
September 8, 2004 was marked
14
Exhibit 91 for identification.)
15
Q.
Do you recognize this as an
16
e-mail exchange you had with Mr. Dubin on
17
September 8, 2004?
18
A.
I don't recall the e-mail.
19
Q.
You don't recall it, but Mr.
20
Dubin writes to you, he says, "I just paid
21
for breakfast. Put FTC in the fund at two
22
percent." And you respond, "I might even
23
ship over the extra croissants from the
24
morning. Thank you."
25
Does that ring any bell?
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A.
I don't recall it. Again, I
3
don't have any reason to think it didn't
4
occur or I didn't receive it. I just don't
5
recall.
6
Q.
But this doesn't ring any bell
7
about Mr. Dubin being involved on behalf
8
of the fund going to Mr. Epstein and
9
asking for this change in the management
10
fee?
11
A.
We had a change in the
12
management fee that occurred for either
13
all or virtually all the investors from
14
one and a half to two percent and, as I
15
said, Glenn was the point person at all
16
times with regard to how we would deal
17
with Mr. Epstein. I just don't recall
18
this one back and forth regarding the
19
change in management fee.
20
MR. SUSMAN: Could I get
21
Exhibit 94?
22
MR. ARD: Steve, could we skip
23
over that one? I've got a bad copy of
24
it.
25
MR. SUSMAN: Not really.
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MR. ARFFA: Can we take a break?
3
MR. ARD: They want to take a
4
break.
5
THE VIDEOGRAPHER: Stand by.
6
The time is 3:02.
7
We're going off the record.
8
(Whereupon a break was taken)
9
THE VIDEOGRAPHER: The time is
10
3:19.
11
We are back on the record.
12
MR. SUSMAN: Okay.
13
Could I have Exhibit 95, please.
14
MR. ARD: Ninety-four, you mean,
15
the one we skipped over?
16
MR. SUSMAN: Ninety-four is fine.
17
(Whereupon, an e-mail dated
18
October 25, 2004 was marked
19
Exhibit 94 for identification.)
20
Q.
Let me show you Exhibit 94.
21
This is an e-mail that you sent to Mr.
22
Dubin on October 25 in which you apologize
23
for sending out a letter without his
24
explicit okay.
25
Do you see that in your e-mail
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to him?
3
A.
Yes.
4
MR. SIFFERT: The year is '04,
5
October of '04.
6
THE WITNESS: Yeah, October of
7
'04.
8
Q.
October, '04.
9
Do you see that?
10
A.
Yes, I do.
11
Q.
And essentially he was upset
12
because you had sent out a letter
13
suggesting that he no longer had a
14
relationship with DBZ and Company;
15
correct?
16
A.
He wrote. I don't know what his
17
interpretation of it was.
18
Q.
And he writes you here and says,
19
"why don't you have Perry and David field
20
the calls from Jeff Epstein, Bob
21
Rosenkrantz, Michael Sachs, Robert Wood
22
Johnson Foundation, Neil Tripplet, the
23
University of Chicago."
24
Were those your investors that
25
he was personally handling primarily?
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MR. ARFFA: Objection to form.
3
A.
He was involved with many of the
4
investors. I don't know that those were
5
the only ones.
6
Q.
He was involved with those;
7
right?
8
A.
I believe so, yes.
9
Q.
In fact, in Mr. Epstein's case,
10
he was really your contact person, your
11
point person; wasn't he?
12
A.
Yes, he was.
13
Q.
So since he was a partner of the
14
firm and he was -- he knew as much about
15
the irregularities as you did and knew
16
about them when you knew about them;
17
correct?
18
MR. ARFFA: Objection to form.
19
MR. SCHWARTZ: Objection to form.
20
A.
I don't think I said that.
21
Q.
Isn't that true?
22
MR. SCHWARTZ: Objection to form.
23
A.
What I said was after the June
24
meeting with Lawrence and David Proshan, I
25
told him about what was going on with the
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Schulte thing and in the meeting
3
immediately after the first meeting, he
4
was aware of all the stuff that was going
5
on with Schulte wand ass kept informed
6
throughout that time.
7
Q.
So my only question is why
8
wasn't he assigned the job of talking to
9
Jeffrey Epstein in early October and t the
10
end of October when these scripts were
11
prepared?
12
A.
We would have taken direction as
13
to who should call Jeffrey from Glenn.
14
Q.
And did you ask him to make the
15
calls at any time?
16
A.
Our relationship didn't work
17
like that. He would tell me what he
18
wanted do.
19
Q.
Were you taking orders from him?
20
A.
In the case of interactions with
21
Mr. Epstein, he instructed us what we
22
thought should be done and we always did
23
it, to my knowledge.
24
Q.
And he was the one who wanted
25
you do the talking to Epstein, not him?
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MR. SCHWARTZ: Objection to form.
3
A.
I don't know what you -- I don't
4
understand the generalization. I believe
5
that he wanted me do the first and second
6
round calls and when he wanted me to set
7
up meetings or try to set up meetings, we
8
would do it. As a general matter, he
9
wanted to make sure that we did whatever
10
we can including the assignment to make
11
Mr. Epstein happy as much as we could.
12
Q.
Was he -- did he ever say
13
anything to you critical of you for
14
allowing these irregularities to happen?
15
A.
Not that I recall. It didn't
16
happen.
17
Q.
Did -- in any of the calls that
18
you had with Mr. Epstein prior to 2007
19
when I think in February of 2007 you said
20
mentioned some calls where Mr. Dubin's
21
wife was on the phone and you were trying
22
to soothe things over with Mr. Epstein
23
A.
I didn't say that.
24
Q.
Well, the transcript will
25
reflect what you said.
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A.
I think what I said was that
3
Glenn, Eva, Mr. Epstein, and I were on the
4
phone and my impression of the purpose of
5
the calls was to soothe Mr. Epstein.
6
Q.
To soothe Mr. Epstein?
7
A.
Uh-huh.
8
Q.
Did you perceive that he was
9
upset then about something?
10
A.
I don't recall having a
11
perception of his feelings at that time.
12
Q.
Excuse me?
13
A.
I don't recall having a
14
perception of his feelings at that time.
15
I knew he had an accountant who was
16
harassing our junior IR, investor
17
relations, people and I knew that we had
18
already previously put this to bed in an
19
analysis for the transfer that occurred in
20
November vis-a-vis what Glenn had told us
21
and we were quite busy.
22
Q.
Well, he was upset about
the
23
purpose was to soothe him.
24
What was he upset about?
25
A.
Apparently not getting a direct
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wire or $80 million out of the funds.
3
Q.
And is it your testimony, sir,
4
that you had no perception that Mr.
5
Epstein was upset about anything prior to
6
that time?
7
A.
I don't have a recollection of
8
what my perception of Mr. Epstein's
9
feelings were as of that time.
10
Q.
So you have -- do you have any
11
understanding or any theory as to why Mr.
12
Epstein on November 13 made that demand
13
for an $80 million withdrawal?
14
A.
Other than that he wanted it
15
wired when he wanted it, I don't.
16
Q.
That came as a complete surprise
17
to you?
18
A.
That was the first time we had
19
heard he wanted to withdraw money through
20
his demand for immediate wiring.
21
Q.
Was it the first time that you
22
had heard he wanted to withdraw money at
23
all?
24
A.
That was the first time I heard
25
that, yes, or understood that.
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Q.
So you had mentioned that you
3
had a conversation with Mr. Beller on the
4
thirteenth?
5
A.
I believe I had one in November.
6
I don't know the specific date. And there
7
may have been -- I just don't recall right
8
this second. There may have been others
9
in February, but I don't recall the
10
specific text of them.
11
Q.
Was that conversation with Mr.
12
Beller before or after you got the $80
13
million withdrawal demand?
14
A.
The November one?
15
Q.
Yes.
16
A.
I don't recall.
17
Q.
Why did you have a conversation
18
with Mr. Beller?
19
A.
My best recollection it was to
20
review the liquidity of the various pieces
21
of money that had been invested by Mr.
22
Epstein.
23
Q.
To do what?
24
A.
Review the liquidity election
25
for each of the pieces of money or the
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tranches that Mr. Epstein had invested.
3
Q.
By that you mean the withdrawal
4
rights, the redemption rights?
5
A.
The lockups, yes.
6
Q.
The lockups?
7
A.
Uh-huh. That's my best
8
recollection.
9
Q.
So how did that get instituted?
10
Did Mr. Beller call you?
11
A.
I don't recall.
12
Q.
Who was on the call with Mr.
13
Beller besides yourself?
14
A.
I don't recall there being
15
anyone else on the call. I don't recall
16
whether someone was in the room at the
17
time.
18
Q.
Huh?
19
A.
I said I don't recall there
20
being someone else on the phone.
21
MR. ARFFA: Objection to form.
22
A.
I don't recall there being
23
someone else on the line at the time. I
24
don't recall also whether there was
25
someone else in the room. There may have
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been but I just don't know.
3
Q.
Did you make any notes of the
4
call?
5
A.
I believe subsequently I sent an
6
e-mail regarding it to Glenn.
7
Q.
Did you -- and you have no
8
explanation why you were having that
9
conversation with Mr. Beller when you were
10
having it with him?
11
MR. ARFFA: Objection to form.
12
A.
I just don't recall that.
13
Q.
And Mr. Beller, what did you
14
tell him about the lockup provisions?
15
A.
My best recollection is I just
16
went through the two-year rolling. I
17
don't know whether I went through the
18
specific dates of each of the five.
19
Q.
And did he say anything or just
20
listen?
21
A.
I don't recall.
22
Q.
What is the basis of you are of
23
the view that the withdrawal dates were
24
calculated separately for each separate
25
investment an investor made?
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A.
That's the way we always did it.
3
That's how we treated every investor.
4
That's how every investor, to my
5
knowledge, interpreted it.
6
Q.
Okay.
7
Would it have been impractical
8
or impossible if you didn't have a tranche
9
by tranche lockup to run a hedge fund?
10
MR. ARFFA: Objection to form.
11
A.
I don't know about any hedge
12
fund. I know that we needed lockups we
13
did for the businesses we pursued.
14
Q.
Why did you need it?
15
A.
Because as we discussed with our
16
investors, we were a -- we described
17
ourselves as what we referred to as a
18
global chaser of illiquidity, so we would
19
want to have assets and liabilities
20
matched as much as possible.
21
Q.
Were a -- what did you call
22
that, a global --
23
A.
A global chaser of illiquidity.
24
Q.
Okay.
25
And have you ever invested in
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funds that used a single withdrawal date
3
for an investor's capital account
4
regardless of how many investments were
5
made?
6
MR. SCHWARTZ: Objection to form.
7
A.
I have not and I have not heard
8
of that, to my knowledge.
9
Q.
You have not heard of funds that
10
calculate the withdrawal date in that way
11
based on a single capital account?
12
MR. ARFFA: Objection to form.
13
A.
Again, there's no way for me to
14
know about every fund. I just have
15
personally not heard of that.
16
Q.
Did you eve realize that there
17
was some ambiguity in your duties as to
18
whether there was a tranche-by-tranche
19
lockup or whether it was just a single
20
lockup date for a capital account?
21
A.
I'm not a lawyer. My best
22
understanding as a businessperson in all
23
of our practice was that it was tranche by
24
tranche that would be the only way that
25
would make sense in terms of maintaining
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liquidity.
3
Q.
Do you recall any documents that
4
were sent to investors in the onshore or
5
offshore fund explaining that their
6
investments will be locked up on a
7
tranche-by-tranche basis?
8
A.
I believe we sent offering memos
9
and subscription documents to all the
10
investors who subscribed.
11
Q.
It would be in the offering
12
memorandum or the subscription documents?
13
A.
That would be my best
14
understanding.
15
Q.
Anything else?
16
A.
To the extent that those were
17
updated or evolved over time, other
18
versions of them perhaps, that would be
19
the only thing I could recall.
20
Q.
Did you --
21
A.
To be clear, with regard to
22
investors generally, I know that we
23
interacted with investors. Our investor
24
relation partner I believe interacted with
25
investors and discussed different
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tranches, different pieces of money,
3
transfers, things of that sort.
4
Q.
At some point in time did you
5
provide in your -- for the investors to
6
have that one-year liquidity option? Do
7
you know what I'm talking about?
8
A.
Yes, the one-year plus liquidity
9
option.
10
Q.
What's it called?
11
A.
One-year plus, I believe.
12
Q.
Could you explain to us what
13
that is.
14
A.
It meant that in the calendar
15
year after the investor invested and in
16
17
18
19
20
21
22
23
24
25
every calendar year thereafter, with four
months' notice, the investor could elect
to not receive new investments and
therefore receive the proceeds and they
naturally occurred over time from his pro
rata -- his ratable share of the
investments with appropriate holdbacks.
Q.
And how many -- of the amount
invested in the onshore fund, what
percentage of it had elected to use that
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one-year plus liquidity option?
3
A.
It depended on the time. The
4
percentage would have changed every month.
5
Q.
Let's say as of the fall of '06.
6
A.
I don't recall the number.
7
Excuse me, the percentage.
8
Q.
Before 2007, did you ever
9
establish loss recovery accounts for
10
investors?
11
A.
I don't recall the circumstances
12
of the loss recovery accounts. I'm not
13
sure what that is, that I can recall.
14
Q.
That doesn't ring a bell to you
15
what that is?
16
A.
I recognize the term. I don't
17
recall what that meant.
18
Q.
Was there ever a loss that you
19
recall that would require setting up such
20
accounts?
21
A.
I'm not sure what the mechanics
22
of the account to be set up were for or
23
that they were, in fact, set up. I think
24
they were and I recall the term. I just
25
don't recall what they were for.
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2
Q.
For purposes of determining a
3
lockup, what does it mean for a withdrawal
4
request to be treated on a first in, first
5
out basis?
6
MR. SCHWARTZ: Objection to form.
7
A.
I just don't know as a general
8
matter.
9
Q.
That doesn't mean anything to
10
you?
11
A.
Not that I recall.
12
MR. SUSMAN: Exhibit 95, please.
13
(Whereupon, an e-mail dated
14
January 14, 2005 was marked
15
Exhibit 95 for identification.)
16
Q.
I pass you what's been marked as
17
Exhibit 95. This is a series of e-mails
18
that you read backwards but it begins over
19
on page five with an e-mail -- from a
20
January 13, 2005 from you to Suzanne
21
Kelly.
22
Who was Suzanne Kelly?
23
A.
She was a senior officer on the
24
front office who focused on domestic real
25
estate investments. Primarily lending.
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2
Q.
She was a senior officer of the
3
company?
4
A.
A managing director or the
5
equivalent.
6
Q.
A managing director?
7
A.
I believe so, yes.
8
Q.
And her response to your e-mail
9
is what.
10
Do you see that?
11
A.
I do.
12
Q.
And your response to her is
13
initially, "we have a bulge in the snake
14
during January re cash. Best case need to
15
move what can be moved to February."
16
What was your response?
17
A.
To be clear, I don't recall the
18
e-mail back and forth, but I see it as you
19
read it.
20
Q.
I mean, you don't deny that's
21
what you wrote?
22
A.
No, I don't deny it.
23
Q.
And you write another e-mail to
24
Mr. Perry and Mr. Suan in which you say,
25
"I don't need what from a team player
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senior officer of the firm when everyone
3
has to pitch re this. May have to
4
discuss."
5
Mr. Gruss writes to Mr. Suan on
6
the next e-mail -- go to page three -- Mr.
7
Suan being a partner at the time; correct?
8
A.
I believe so.
9
Q.
"He's panicked re cash."
10
And then Mr. Suan, the partner,
11
writes to Mr. Gruss, "no shit. How bad is
12
it."
13
MR. SIFFERT: That's not a quote.
14
We accept your interpretation.
15
Q.
And Mr. Gruss responds to Mr.
16
Suan, "bad. We have approximately 1
17
twenty-five million in cash but we owe
18
Highbridge one hundred fifty million and
19
CDC a hundred. We're paying back
20
Highbridge seventy-five on Tuesday." And
21
Suan says, "that's a bed shitting. Bad
22
cash management." And Mr. Perry writes
23
back and says --
24
MR. ARFFA: Gruss.
25
Q.
Mr. Gruss writes back and says,
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"bullshit. Bad pipeline management.
3
Biting off more than he can chew. We
4
don't need sourcing capability, we need
5
more onshore money." Mr. Suan writes to
6
Mr. -- it looks to me like he's writing it
7
to Mr. Perry, Mr. Gruss, "can we use Metis
8
still."
9
Do you see what that is?
10
A.
Yes.
11
Q.
What is it?
12
A.
I believe it was a turn on
13
recourse debt funding structure for
14
certain obligations. I don't recall what
15
specifically.
16
Q.
Were you aware that your CFO and
17
your partner were having this conversation
18
about how tight the situation was?
19
A.
I think they're referring to the
20
funds here, not the management company, to
21
be clear.
22
Q.
Okay.
23
A.
So I wasn't on the e-mails past
24
the ones I was on.
25
Q.
Were you aware -- okay.
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I think we talked about -- were
3
you aware that the fund itself, the
4
onshore fund was having tremendous
5
liquidity problems?
6
A.
I don't know that it was.
7
Q.
Huh?
8
A.
I don't think it was or I don't
9
know that it was.
10
Q.
You're saying you don't think it
11
was?
12
A.
Well, I think it's worth
13
stepping back so that we understand the
14
business and we were in the business of
15
trying to be invested and we had a
16
pipeline for our illiquid business. Each
17
of the front office had a pipeline that we
18
would discuss with various other people in
19
the firm. And based on the relative
20
likelihood of those illiquid fundings
21
being made, they would then go on a
22
treasury pipeline.
23
There was a constant review
24
where we were trying to be -- trying to
25
get as much competition for space within
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the entities as we could to try to
3
optimize return per unit of risk for our
4
investors. In terms of how we would
5
source cash to make investments, it came
6
from a variety of different places,
7
whether it was cash in the funds, a
8
variety of different single asset turn on
9
recourse structures, multi-asset class,
10
multi asset turn on recourse structures,
11
yield in interest coming from various
12
investments, repayments coming from
13
various investments of principal, full
14
refinancings or takeouts of investments,
15
as well as a variety of recourse financing
16
structures for our more liquid
17
investments. So we were always trying to
18
create this competition to optimize return
19
per unit of risk.
20
Frequently front officers who
21
were trying to do transactions might have
22
a view that their transaction was better
23
than I might have thought or that they
24
thought a transaction was more important
25
to do than I might have thought. So there
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was a constant interaction between front
3
office, mid office, treasury, et cetera,
4
with respect to optimizing that return per
5
unit of risk and we were always trying to
6
be as thoughtfully invested as possible
7
given the liquidity of the funds.
8
Q.
At some point in time it was
9
discovered that there was a practice of
10
transferring funds from the offshore fund
11
to the onshore fund.
12
You were not aware that was
13
going on?
14
A.
Correct, at the time that it was
15
occurring.
16
Q.
But you are now aware that it
17
was done -- the people who were
18
responsible for doing it and who knew
19
about it have said that it was done
20
because you needed money in the onshore
21
funds.
22
MR. SIFFERT: Objection.
23
A.
I don't recall the specific
24
testimony of those people. It was not
25
permitted activity and there's no reason
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it should have been done.
3
Q.
Explain to the judge how it's
4
possible that you weren't aware of the
5
financial circumstances that led to your
6
employees, including Mr. Gruss, to be
7
doing something that they shouldn't have
8
been doing.
9
MR. SIFFERT: I'm going to
10
object.
11
You're asking him to talk about
12
how it's possible he's not aware?
13
He's testified he wasn't aware.
14
Q.
Go ahead.
15
MR. SIFFERT: Can you answer that
16
question?
17
Q.
I don't mean to be argumentive
18
to you, but I think the judge will be
19
interested in having your best
20
explanation, which I'm giving you an
21
opportunity to give now, of -- as to how
22
this could have been -- how the
23
circumstances which led these people to do
24
things like transfer millions of dollars
25
from the offshore fund to the onshore
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fund, how those circumstances could have
3
been unknown by you.
4
MR. SIFFERT: So you want him to
5
testify to the facts that he now knows
6
others did to mislead him; is that
7
what you want?
8
Q.
Go ahead.
9
A.
I don't understand the question.
10
Q.
Are you saying that you never
11
12
13
14
15
16
17
18
19
20
21
because we wanted to optimize return per
22
unit of risk. There were a variety of
23
analyses including our treasury pipeline
24
and a variety of risk management analyses
25
that I looked at frequently and in those
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understood that people working for you
perceived that there was a real liquidity
problem with the onshore fund?
A.
As I said, there was always a
tension between those who wanted to
originate transactions and those people
who were focused on treasury as well as
the various types of non-recourse funding
structures that we use to finance
transactions. We wanted that tension
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the improper activity was not included or
3
those were changed to cover that activity
4
and none of those was that -- to the
5
extent that those would have been filled
6
out correctly, it would have shown in
7
proper activity. At no tie did I receive
8
any of those where that was the case.
9
Q.
Who was responsible in the
10
company for reconciling the tension
11
between the treasury function and the
12
investing function?
13
A.
As a general matter, we would
14
15
16
17
18
19
20
21
22
23
24
25
have discussions on a weekly basis with
each of the front office teams frequently
in conjunction with the asset management
folks to the extent that it was illiquid
and the at risk management people to the
extent that investments were liquid. We
would also have primarily in the illiquid
discussions folks from treasury frequently
and there would be an iterative process
where those people would discuss it --
treasure, asset management, myself, the
front office people -- and we'd try to get
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to the best possible return per unit of
3
risk.
4
Q.
Was Mr. Dubin involved in those
5
discussions?
6
A.
No.
7
Q.
Was Mr. Dubin aware of whatever
8
liquidity problems you had?
9
A.
I don't believe that there were
10
liquidity problems in the funds that I was
11
ever made aware of. As I said, we wanted
12
to optimize return per unit of risk and we
13
wanted to have our capital invested.
14
(Whereupon, an e-mail dated
15
January 15, 2005 was marked
16
Exhibit 96 for identification.)
17
Q.
Here's Exhibit 96.
18
A.
(Reviewing).
19
Q.
By the way, did you ever discuss
20
Mr. Epstein with Chris Suan?
21
MR. SIFFERT: You gave a
22
document. He's reading it, I'm trying
23
to read it.
24
Do you want us to read the
25
document or not?
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MR. SUSMAN: I'm not asking you
3
to read the document right now.
4
Q.
Did you ever discuss Mr. Epstein
5
with Chris Suan?
6
A.
Not that I recall.
7
Q.
But look at ninety-six now. The
8
first e-mail is from Mr. Kesavan to you.
9
And what you respond is, "what you're not
10
seeing and I've seen in the last few
11
weeks, only seen in the last few weeks so
12
there's no reason why you should know or
13
understand this, is that in the JPM era,
14
the relationship cannot and will not be as
15
tight with Highbridge. Interestingly we
16
have had several prior instances where
17
liquidity was tight at or near the level
18
where it currently is. In all instances a
19
hole was filled by Highbridge with a phone
20
call from me or Perry. This is no longer
21
able to happen given their new masters.
22
Rather, it's much more arms-length private
23
account. It will be a much more
24
arms-length private account that we
25
manage."
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Do you see that?
3
A.
Yes, I see it.
4
Q.
Those were your words, you did
5
use those?
6
A.
I don't recall this e-mail.
7
Q.
You're not denying that you said
8
that; correct?
9
A.
No.
10
Q.
In fact, what you said there is
11
true; isn't it?
12
MR. SIFFERT: Did you read the
13
whole e-mail including the one that
14
follows?
15
Q.
In that paragraph, what you said
16
is true; isn't it?
17
A.
I don't know that you can take
18
it out of context. We can go sentence by
19
sentence through.
20
Q.
Is what you say in that
21
paragraph true?
22
A.
I said I don't recall the
23
e-mail. As a general matter, Glenn liked
24
to do a lot of our business and we --
25
among the many different places that we
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financed transactions, we borrowed from
3
Highbridge at different times. It does
4
refresh me back to several hours ago, we
5
did have a private account at one point
6
with Duquesne. I forgot about that.
7
Q.
Is what reported in that
8
paragraph, the first paragraph of your
9
e-mail in the middle, is it true?
10
A.
I'm not sure what you mean.
11
Q.
You're not sure what I mean --
12
MR. SIFFERT: What sentence are
13
you talking about? I don't know what
14
sentence you're talking about in the
15
paragraph.
16
Q.
Is there anything in that first
17
paragraph which is not true?
18
A.
I think it refers to the fact
19
that we developed ever increasing numbers
20
of different places where we were doing
21
turn on recourse financing structures. So
22
I think what I'm referring to is the fact
23
that at one point very early on we only
24
had Highbridge but then we got more
25
accounts and we got more sources of turn
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on recourse financing, places like CDC and
3
Bernard. That's my interpretation of it.
4
Q.
I want to make sure the -- I
5
didn't ask you for your interpretation. I
6
asked you whether it's true or not.
7
Are you telling the judge that
8
you can't answer that question yes or no?
9
MR. ARFFA: Objection to form.
10
A.
I'm trying to answer the
11
question --
12
MR. SIFFERT: Why don't let him
13
answer a question.
14
A.
-- as well and completely and
15
appropriately as I can.
16
Q.
Can you answer --
17
A.
Can I answer the question
18
through a single word response to one
19
sentence picked out of an e-mail
20
communication? I don't think that's
21
optimal for my ability to answer the
22
question. That's my opinion.
23
MR. SUSMAN: Could I have
24
Exhibit 97, please.
25
(Whereupon, a facsimile dated
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August 19, 2005 was marked
3
Exhibit 97 for identification.)
4
MR. ARFFA: What are you calling
5
this?
6
MR. ARD: Ninety-seven.
7
Q.
Do you recognize attached to
8
9
10
11
12
13
14
15
hereby provides to the adviser notice and
16
request a reduction and withdrawal of
17
fifty percent of all assets."
18
Do you recall getting this
19
written request from Mr. Dubin?
20
A.
No, I don't. I have no reason
21
to think I didn't receive it.
22
Q.
And does this refer to a request
23
from Dubin to Highbridge Capital
24
Management that the managed account be
25
reduced by fifty percent?
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this fax a letter from Glenn Dubin to
yourself dated April 29 which says,
"pursuant to section 1P of the advisory
agreement among Highbridge Capital
Management, LLC, HCM/Z Special
Opportunities, and DB Zwirn and Company
dated January 1, 2004, the trading manager
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2
A.
I think it refers to a request
3
for a withdrawal of fifty percent of all
4
assets that I don't think occurred.
5
Q.
Excuse me?
6
A.
I think it refers to a request
7
for an immediate withdrawal of fifty
8
percent of assets that I don't believe
9
occurred.
10
Q.
Do you know why the request was
11
made?
12
A.
I have some recollection that
13
the convertible markets, convertible bond
14
markets in the spring of '05 were very
15
difficult and that I recall that there may
16
have been some issues dealing with that
17
for Highbridge which had a very large
18
exposure to that marketplace.
19
Q.
Did Highbridge have a lockup on
20
its managed account?
21
A.
My best understanding was that
22
it was as long or longer than any other
23
investor and could only be -- and
24
effectively was the equivalent, I believe,
25
of a three-year plus versus the one-year
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2
plus that we had. So there was no ability
3
to get specific assets.
4
MR. ARFFA: I just want to point
5
out for the record this doesn't seem
6
to have any Bates stamps on it. I
7
don't know who produced it and whether
8
it was produced.
9
MR. SIFFERT: It's the first I'm
10
seeing it.
11
MR. SUSMAN: It doesn't say
12
there.
13
MR. SIFFERT: Do you know where
14
it came from?
15
MR. ARFFA: And whether it was
16
produced to all the parties, let's put
17
it that way.
18
MR. SUSMAN: I don't know where
19
it came from.
20
MR. SIFFERT: Did you get this
21
directly from Mr. Dubin?
22
MR. SUSMAN: I don't know is the
23
answer.
24
Q.
Do you recall what became of
25
this request?
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2
A.
As I said, I don't recall that
3
there was any withdrawal. There may have
4
been some form of role off reduction based
5
on not funding new investments not
6
receiving cash or assets. I just don't
7
recall.
8
Q.
When did Highbridge begin to
9
take money out of the onshore funds?
10
A.
They were never invested in the
11
onshore funds.
12
Q.
Sorry, when did they begin to
13
take money out of their managed account?
14
A.
I don't recall the specific
15
dates. As I said, I don't think any --
16
there was any liquidation that occurred.
17
I think they simply stopped participating
18
in new investments for a period of time or
19
for certain investments.
20
MR. SUSMAN: Go ahead and change
21
the tape.
22
THE VIDEOGRAPHER: The tape is
23
4:03.
24
We are going off the record.
25
This is the end of tape four.
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2
(Whereupon a break was taken)
3
THE VIDEOGRAPHER: The time is
4
4:09.
5
We are back on the record. This
6
will be the start of tape five.
7
Q.
Was Mr. Dubin aware that the
8
firm was -- the management firm was
9
deferring taking management fees from the
10
funds?
11
A.
You mean the early taking of
12
management fees?
13
MR. SIFFERT: No, the deferral.
14
Q.
The deferral take management
15
fees.
16
A.
Was he aware that there was a
17
fee deferral?
18
Q.
Yes.
19
A.
Yes, he was, as he elected to
20
participate in it.
21
Q.
The answer is he was and he
22
elected to participate in it?
23
When did that change? When did
24
it change that you stopped deferring
25
taking management fees?
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2
A.
I don't recall the date.
3
Q.
Do you recall taking a
4
distribution of around $10 million from
5
the fund in 2006 or five to make a payment
6
on a condominium?
7
A.
From the funds? No, I don't
8
recall that.
9
Q.
Where did you get the money to
10
make the down payment or the payment?
11
A.
I believe it was an advance
12
against my expected compensation from the
13
management company and it came from the
14
management company.
15
Q.
It was an advance from the
16
management company?
17
A.
That's my understanding.
18
Q.
When was that advance made to
19
you?
20
A.
I don't recall the date.
21
Q.
Was Mr. Dubin aware of it?
22
A.
I don't recall. I think it was
23
$7 million.
24
MR. SUSMAN: Let me have
25
Exhibit 99, please.
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2
(Whereupon, a multi-page
3
document was marked Exhibit 99
4
for identification.)
5
Q.
Exhibit 99, sir.
6
A.
(Reviewing).
7
Q.
You recognize this as an audited
8
financial report for the onshore fund for
9
the period ended December 31, 2005?
10
A.
I believe so, yes.
11
Q.
And the auditor's report is
12
dated April 19, 2006 as reflected on
13
page 736.
14
And would you look, sir, at page
15
thirty-one. Under withdrawals, do you see
16
at the top there withdrawals. And it
17
says, "a limited partner may, upon at
18
least one hundred twenty days prior
19
written notice to the general partner,
20
withdraw a part or all of its capital
21
account as of the last business day of a
22
calendar quarter ending at least three
23
years after the limited partner initially
24
purchases an interest and as of the third
25
anniversary of that date thereafter."
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2
Did that accurately, as far as
3
you knew, cover the withdrawal rights for
4
-- under the partnership agreement except
5
for those that were granted by your letter
6
to Mr.
to FTC?
7
A.
I believe that none of the
8
people who had previously invested
9
tranches on a two-year rolling basis had
10
to change to three-year, so there -- and
11
I'm not sure when the one-year plus kicked
12
in. I don't recall a specific date. To
13
the extent that it hadn't, there would
14
have been a combination of people who had
15
investments, specific investments that
16
either had two-year rolling or three-year
17
rolling liquidity.
18
Q.
Where does it say rolling?
19
Where do you get this rolling idea from?
20
A.
That's the way it always was. I
21
believe that was in our PowerPoint
22
presentation from the very beginning.
23
It's the only way we had anybody interpret
24
it that I can recall. And that made sense
25
for our business. It was two-year
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2
rolling, three-year rolling, and one-year
3
plus.
4
Q.
Have you ever seen the term
5
"rolling" in any partnership agreement or
6
offering memorandum?
7
A.
I don't recall the specific
8
wording.
9
Q.
Have you ever seen the term
10
11
12
13
14
15
16
17
18
19
multiple investors who had multiple
20
individual investments and we maintain
21
records that each of them had those
22
multiple investments. We never added to
23
-- at no time when they came in with new
24
money did we ever add to a prior
25
investment that I can recall.
"tranche" in any offering memorandum or
partnership agreement?
A.
I believe each of the offering
memos/partnership agreements were
regarding specific investments that we're,
in this case, referring to as tranches.
Each investment was its own investment.
We always took investments on an
investment-by-investment basis. We had
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2
Q.
When you provided your investors
3
with a statement of the value of their
4
capital accounts, did you ever do it on a
5
tranche-by-tranche basis?
6
A.
I don't recall the specific
7
communications on an investor-by-investor
8
basis. I recall that we kept records on a
9
tranche-by-tranche or piece of investment
10
by piece of investment basis and our
11
investor relations people were interacting
12
with our investors as a general matter all
13
the time.
14
Q.
You see the words in this
15
sentence here, "at least three years after
16
the limited partnership initially
17
purchases an interest."
18
Can you explain to the court
19
what is meant by at least? What does that
20
mean, at least? Does that mean three and
21
a half years I can withdraw it, four
22
years, four and a half years?
23
A.
My best understanding of the
24
three-year rolling lockup was that, to the
25
extent that an investor invested, he could
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2
only apply to redeem that piece of money
3
three years I believe starting from the
4
first -- I forgot how the first date was
5
calculated -- and only subject to I
6
believe only twenty days notice. If he
7
didn't do that, then he would then roll
8
again for three more years.
9
Q.
Do you have any explanation why
10
the word "at least," those two words "at
11
least" is put in there?
12
A.
I didn't draft this.
13
Q.
When did you -- when did
14
Highbridge begin to withdraw or liquidate
15
its managed account?
16
A.
As I've said, I don't recall the
17
specific date and I don't recall us
18
liquidating anything proactively for them
19
at that time. I know we -- perhaps toward
20
the end of '07 there was a liquid position
21
that we gave them to handle on their own
22
that was separable from the position held
23
in the funds. But in terms of their
24
reduction of their NAV by not doing new
25
investments originally, I don't recall
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that date.
3
Q.
Do you recall when they asked to
4
begin withdrawing their fund, their funds?
5
A.
I see the exhibit -- un-Bates
6
stamped exhibit, but I don't have a
7
specific recollection other than what I'm
8
seeing here. I'm not saying it didn't
9
happen. I don't recall the date.
10
Q.
Is there any written schedule of
11
how their account was liquidated over
12
time?
13
A.
I believe there was some sort of
14
agreement around that. I just don't
15
recall how that worked.
16
Q.
Who would know about that?
17
A.
I believe David Lee would.
18
Especially Lawrence Cutler, Robert
19
Sumberac.
20
Q.
Do you have any idea how much
21
you were able to return to Highbridge
22
during 2006?
23
A.
I don't recall.
24
Q.
During 2007?
25
A.
I said I don't recall the
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2
specific numbers.
3
Q.
Did the Highbridge managed
4
account have the same assets as the
5
onshore fund?
6
A.
Same types or the exact same?
7
Q.
Well, the same exact -- they
8
couldn't have the same exact assets.
9
For example, stock in a company,
10
ownership of an interest in a property?
11
A.
It frequently had similar
12
investments or interest in investments
13
that were split in illiquids. It wouldn't
14
have been the same ratio, the same time,
15
the same way because each of the funds
16
continuously had different levels of
17
liquidity and access to turn on recourse
18
fundings and other sources of cash at
19
different times, but there would have been
20
overlap in positions.
21
Q.
Was it a goal of yours to try to
22
have the funds you were managing achieve
23
as much as possible the same rate of
24
return?
25
A.
As a general matter, we wanted
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2
to optimize the return per unit of risk
3
for each of the entities that we managed
4
taking into account the different
5
limitations we had in terms of the
6
investors or entities that we were
7
managing. So on its face, it wasn't a
8
9
10
11
12
13
14
15
16
17
A.
The only specific position that
18
I can recall a discussion about was a
19
formally private and then subsequently
20
listed public investment in a German real
21
estate company.
22
Q.
What was that about? What was
23
that discussion about?
24
A.
My best recollection -- I don't
25
recall the specific words of the
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notion that they should have the exact
same returns but to the extent possible
again given those constraints, adjusted
for those constraints, we wanted to
optimize return per unit of risk.
Q.
Did Mr. Dubin ever talk to you
about how to go about liquidating the
investments in Highbridge's managed
account?
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2
discussion -- my best recollection is that
3
I thought it was something that we
4
collectively should get out of and that I
5
was going do that for the funds. He had
6
had a discussion with one of the
7
principals of the larger partner in that
8
investment and had a view that, on behalf
9
of the Highbridge entity, he wanted to
10
retain it.
11
Q.
All right.
12
Did Mr. Dubin invest any of his
13
own or his foundation's money in the
14
offshore fund?
15
A.
I don't know how he would have
16
owned if he's onshore. I don't recall
17
regarding the foundation, what its taxable
18
status was or how it invested or whether
19
he invested separately personally away
20
from the foundation. I just don't recall
21
the specifics of his account or accounts.
22
Q.
Did Mr. Dubin ever request
23
withdrawal of his personal or foundation
24
funds?
25
A.
I just don't know for sure. I
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2
think at least some of it but I just don't
3
know. I don't recall.
4
Q.
Do you know whether he obtained
5
any redemption of his personal or
6
foundation funds?
7
A.
I don't recall.
8
MR. SUSMAN: One hundred nine,
9
please.
10
(Whereupon, a letter dated
11
November 3, 2006 was marked
12
Exhibit 109 for identification.)
13
Q.
I show you Exhibit 109. This is
14
a letter you got from the Fine Family
15
Limited Partnership requesting a
16
withdrawal. Actually, requesting to
17
rescind immediately, I'm sorry, a $5
18
million investment that the partnership
19
made in the fund on October 1, 2006.
20
Do you see that?
21
A.
I see it.
22
Q.
Did you immediately return the
23
$5 million?
24
A.
My best recollection is that we
25
mandatorily redeemed them and that our --
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I believe our management company bought
3
that interest. I don't believe that they
4
were given funds from the -- capital from
5
the funds when we redeemed them.
6
Q.
The management company bought
7
their interest; is that what happened?
8
A.
That's my best recollection. I
9
don't recall the specifics around that.
10
Q.
And he says -- he refers to here
11
the circumstances regarding the
12
September 25, '06 termination of the
13
employment of David Becker from DB Zwirn
14
and Company.
15
Who is David Becker?
16
A.
He was a former employee of the
17
management company who focused on had.
18
Q.
What did he do with the
19
management company?
20
A.
He focused on energy-related,
21
primarily illiquid investments.
22
Q.
And why was he terminated?
23
A.
I don't recall the specifics
24
around specifically why he was terminated
25
contractually.
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2
Q.
You don't have any
3
recollection --
4
A.
And to be clear, I don't recall
5
receiving this. It's not addressed to me,
6
this letter.
7
Q.
And you don't recall anything
8
about Mr. Becker's being terminated?
9
A.
I recall that -- I don't know
10
that it was an outright termination. I
11
don't recall the legal documentation
12
around his separating from the firm. I
13
recall that we were told that he had had
14
some sort of -- I don't know how to
15
characterize it, I'm not a lawyer -- a
16
legal issue and in discussing it with
17
counsel, we then separated from him.
18
Q.
Do you have any idea why this
19
Fine Family Partnership would say that was
20
something material that should have been
21
disclosed to them?
22
A.
I don't know their thinking
23
today. I don't recall having a thought on
24
their thinking at the time. As a
25
non-lawyer, I don't know about the notion
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of material.
3
MR. SUSMAN: Mr. Arffa, did you
4
find the confidentiality agreement at
5
noon that we talked about?
6
MR. ARFFA: Yes, but we have to
7
circulate it. We were going to
8
recirculate to make sure we all have
9
the right one.
10
MR. SUSMAN: Could I have
11
Exhibit 110.
12
MR. ARFFA: You're talking about
13
a different confidentiality agreement.
14
I apologize.
15
(Whereupon, a memorandum dated
16
November 3, 2006 was marked
17
Exhibit 110 for identification.)
18
Q.
Here is Exhibit 110.
19
A.
(Reviewing).
20
Q.
Exhibit 110, is this something
21
you wrote?
22
A.
If I can just finish it up,
23
please.
24
(Reviewing).
25
Okay. I'm done.
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2
Q.
Is this something you wrote?
3
A.
I believe -- I don't have a
4
specific recollection of how it was
5
written. I would imagine -- I believe I
6
was involved in its drafting. I would
7
have imagined also other people in senior
8
management as well as disclosure counsel
9
would have been involved.
10
Q.
Was this sent to your investors,
11
in fact?
12
A.
I believe it was.
13
MR. SUSMAN: Exhibit 111, please.
14
(Whereupon, an e-mail dated
15
November 13, 2006 was marked
16
Exhibit 111 for identification.)
17
Q.
I show you what's been marked as
18
Exhibit 111.
19
A.
(Reviewing).
20
Okay.
21
Q.
This is an e-mail you sent to
22
Mr. Dubin on Monday, November 13?
23
A.
I don't recall sending it, but I
24
don't have any reason to believe I didn't
25
send it.
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2
Q.
Do you know why you sent this to
3
Mr. Dubin at that time?
4
A.
I don't recall. If he had asked
5
for something, we would have gotten it for
6
him. But I don't recall the specifics
7
around it. As I said, I don't recall the
8
e-mail.
9
Q.
Excuse me?
10
A.
As I said, I don't recall
11
sending the e-mail. I'm not saying I
12
didn't send it. I don't recall the
13
specifics around why we sent it, although
14
had he asked for it I'm sure we would have
15
sent it.
16
Q.
Okay.
17
A.
But I don't recall him
18
specifically asking for it either by
19
e-mail or by phone. I just don't recall.
20
Q.
Do you recall sending this
21
schedule, this document you have here, did
22
you send it to FTC, also, or do you know?
23
A.
I just don't know.
24
MR. SUSMAN: Let me have number
25
twenty-seven.
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2
Q.
Exhibit 27 is an e-mail you got
3
on November 14 from Dan Zwirn
I mean
4
from Glenn Dubin. The question is, "did
5
you speak to JE." That's Jeffrey Epstein.
6
The response is, "turned out reasonably
7
well. We have some deliverables to give
8
them and then he said we can come to his
9
office. Ilysa, please make sure GD
10
reads."
11
Do you know what you were
12
talking to Mr. Epstein about at this time?
13
A.
I don't recall the specific
14
e-mail. I do recall that we had spoken
15
with Glenn about Jeffrey's desire to prove
16
out the NAV to his comfort and I believe
17
we worked with Jeffrey's office to try to
18
schedule a time where we would come and
19
review it with him and I believe we
20
couldn't. We reached out but were unable
21
to get PriceWaterhouse to do that with us
22
and I believe Deloitte and Touche was
23
willing do that with us.
24
MR. SUSMAN: Let me have
25
Exhibit 116, please.
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(Whereupon, a memorandum dated
3
March 26, 2007 was marked
4
Exhibit 116 for identification.)
5
Q.
You recognize this as a memo you
6
sent to investors on March 27, 2007?
7
A.
(Reviewing).
8
I believe that the firm sent
9
that out to investors.
10
Q.
When you found out -- Gibson
11
Dunn did its review, found out about the
12
interfirm transfers, did the remediation
13
that you undertook involve some promissory
14
notes which were issued from the onshore
15
fund to the offshore fund?
16
A.
I believe that there were --
17
there was documentation done with regard
18
to the advances that had been made by the
19
CFO and his colleagues. I don't recall
20
the structure of how that was done.
21
Q.
Do you recall the --
22
A.
And to be clear, I was not -- I
23
delegated authority to David Lee and
24
Lawrence Cutler with regard to the entire
25
independent review.
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Q.
If you'll look at page two of
3
your letter at the bottom of the page, it
4
talks about some interfund transfers the
5
amounts which are due from the onshore
6
fund to the offshore fund in a management
7
account are in excess of a hundred million
8
dollars.
9
Do you see that?
10
A.
I believe you referred to it as
11
your letter. Again, the letter came from
12
the firm. And I do see it there.
13
Q.
Well, you approved it; correct?
14
A.
No, I don't recall having the
15
authority to approve the contents of this
16
memo.
17
Q.
You didn't?
18
A.
As I said --
19
Q.
Who did?
20
A.
As I said, I delegated authority
21
with regard to the entire independent
22
investigation by Gibson Dunn to David Lee
23
and Lawrence Cutler.
24
Q.
And Mr. -- so at the point in
25
time when you quantify how much the
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onshore fund owed the offshore fund, was
3
it paid immediately or was there some note
4
issued?
5
A.
I didn't quantify it.
6
Q.
At the time the firm quantified
7
it.
8
A.
I recall that there were notes
9
used to document advances already done by
10
the previous CFO. I don't recall the
11
mechanics of that, that I recall.
12
Q.
Can you explain to the court if
13
you had sufficient liquidity in the
14
onshore funds, why didn't you just pay the
15
amounts that the onshore fund owed to the
16
offshore fund to the extent that you
17
quantified that amount?
18
MR. SCHWARTZ: Objection to form.
19
Q.
Why a promissory note?
20
A.
To be clear, my views on the
21
investigation to which I delegated
22
authority, I didn't have independent
23
views. I was told what was done through
24
this letter and how it was going to be
25
fixed. I don't recall the thinking
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underlying it. And I was never presented
3
with the underlying analysis.
4
Q.
Again, in your view, did the
5
onshore fund have the liquidity to pay the
6
offshore fund what it owed it as a result
7
of the independent review?
8
A.
I don't recall having a specific
9
view. I don't know how the decision
10
regarding notes was arrived at
11
specifically or I don't have a
12
recollection of it today.
13
Q.
Now would you look at
14
Exhibit 117.
15
(Whereupon, a facsimile dated
16
March 27, 2007 was marked
17
Exhibit 117 for identification.)
18
Q.
There's Exhibit 117.
19
A.
(Reviewing).
20
Q.
This is a letter from Mr.
21
Elovitz from Schulte, Roth and Zabel to
22
Mr. Indyke dated March 27, 2007.
23
Did you see this letter before
24
it was sent?
25
A.
I don't recall seeing it before
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it was sent.
3
Q.
Did you see it after it was
4
sent?
5
A.
I don't recall whether I did or
6
not around that time. I have seen it in
7
preparation for this.
8
MR. SUSMAN: One hundred
9
eighteen, please.
10
(Whereupon, an e-mail dated
11
July 11, 2007 was marked
12
Exhibit 118 for identification.)
13
Q.
This is Exhibit 118. This is an
14
e-mail that was -- includes that it was
15
sent to Mr. Lee that includes a written
16
letter from Highbridge Capital Management
17
to its investors dated July 6, 2007. And
18
if you'll look at page 37905, the
19
Highbridge Capital Management letter says
20
in the third to the last paragraph, "prior
21
to being notified of the accounting issues
22
at DBZ, HCM submitted a full redemption
23
request to liquidate the separate
24
account."
25
Is that false?
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A.
I don't think so.
3
Q.
Huh?
4
A.
I don't recall receiving this
5
e-mail. I'm not sure -- I'm sure I did.
6
I don't think it's false. But I'd have no
7
independent recollection of whether it was
8
or not.
9
Q.
There were reports made by
10
Gibson Dunn lawyers to the SEC on
11
January 9, 2007 and again on March 20,
12
2007.
13
MR. SIFFERT: I believe that
14
there's now only one hour left before
15
your time is expired and I would like
16
to take a break so that we --
17
MR. SUSMAN: Let me just finish
18
this. I'm not middle of a question
19
and we'll quit.
20
MR. SIFFERT: One question.
21
Q.
There were reports made by
22
presentations made by Gibson Dunn lawyers
23
to the SEC on behalf of Zwirn and Company,
24
LP. One was made on January 9 and one was
25
made on March 20, 2007.
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Were you present for any of
3
those presentations?
4
A.
No.
5
MR. SIFFERT: We'll take a break.
6
Q.
Did you ever
7
MR. SIFFERT: Let's take a break.
8
I want to take a break. I'm tired.
9
MR. SUSMAN: Fine.
10
THE VIDEOGRAPHER: The time is
11
4:48.
12
We're going off the record.
13
(Whereupon a break was taken)
14
THE VIDEOGRAPHER: The time is
15
5:00.
16
We are back on the record.
17
Q.
Mr. Zwirn, when we broke, I was
18
asking you about the presentations made by
19
the lawyers of Gibson Dunn to the SEC.
20
You were not present personally.
21
Did you ever see copies of their
22
presentations?
23
A.
No. It was not reviewed with
24
me. And I did not read it.
25
MR. SUSMAN: Mr. Arffa, what was
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it -- about which lawsuit I couldn't
3
ask him questions about?
4
MR. ARFFA: It was a matter -- I
5
know it was in the Los Angeles area.
6
MR. SUSMAN: Could you speak up
7
so I can hear you.
8
MR. ARFFA: Yes, there was a
9
litigation that he gave a deposition
10
in that involved certain investments.
11
I know the litigation was pending in
12
Los Angeles. We've determined that he
13
probably didn't learn anything that
14
was covered by the confidentiality
15
order. The testimony he gave is
16
subject, the transcript itself is
17
subject to the confidentiality order,
18
but we don't believe he probably,
19
depending upon your question, has
20
knowledge of the other discovery that
21
would be subject to a confidentiality
22
order. So it's probably okay.
23
MR. SUSMAN: What was the lawsuit
24
called? Pending in Los Angeles, you
25
said?
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MR. ARFFA: I believe so.
3
MR. SUSMAN: Do you know which
4
MR. ARFFA: If you ask me any
5
more questions, I want to be sworn in
6
and I want to have Siffert
7
representing me.
8
MR. SIFFERT: And we're going to
9
take a break.
10
(Whereupon, a multi-page
11
document was marked Exhibit 122
12
for identification.)
13
Q.
Would you please look at
14
Exhibit 122.
15
Have you seen this document
16
before?
17
A.
(Reviewing).
18
I'm sorry, what was the
19
question?
20
Q.
Have you seen this before?
21
A.
I don't recall seeing it at the
22
time or near the time. I do have a
23
recollection of seeing it in preparation
24
for today.
25
Q.
Do you know what it is?
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MR. SIFFERT: Other than what
3
counsel may have told you, do you know
4
what it is?
5
A.
I believe it has something to do
6
with, you know, our keeping track of what
7
we kept by hand, but I just don't recall
8
the specifics of it, how it mixed with
9
that previous exhibit. Beyond that, it
10
would be with counsel.
11
Q.
On the top of this document
12
there's something called DB and next to
13
that is PG.
14
What does DB stand for?
15
A.
I would assume it's David
16
Becker, but I'd be guessing. I don't know
17
for sure.
18
Q.
All right.
19
And obviously under the DB
20
column there are some yeses with David
21
Becker; correct?
22
A.
Under the DB column.
23
Q.
And there's also some nos;
24
right?
25
A.
That's what I see.
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Q.
In the case of --
3
MR. SIFFERT: There are also some
4
question marks.
5
Q.
There are in the case of --
6
well, in the case of the yeses, that means
7
you spoke with these investors about Mr.
8
Becker where it says DZ spoke with or left
9
message.
10
MR. ARFFA: Objection to form.
11
A.
I don't disagree with you. I
12
don't recall the document being created at
13
the time.
14
Q.
My question is do you have a
15
recollection of what you talked to people
16
about Mr. Becker? Why were you disclosing
17
something about Mr. Becker?
18
MR. ARFFA: Objection to form.
19
A.
I don't recall outside the fact
20
that we had Schulte as disclosure counsel
21
and received counsel regarding what to say
22
and when to say it with regard to
23
investors and followed it.
24
Q.
Was Mr. Becker involved in the
25
offshore fund or the onshore fund?
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A.
He was an employee of the
3
management company entities. I don't know
4
what the proportion of investments he was
5
involved with. They were very, very
6
small. I don't know how they were
7
attributed across the different accounts.
8
Q.
Do you have any understanding of
9
why you would talk to some investors about
10
him but not others?
11
A.
As I said, I don't recall this
12
document or the underlying thoughts
13
regarding it outside of what we discussed
14
with counsel.
15
Q.
Did Mr. Dubin -- as best you can
16
recall is that Mr. Dubin learned about the
17
plane in June of '06?
18
MR. ARFFA: Objection.
19
MR. SIFFERT: When you say he
20
learned about the plane, about the
21
purchase of the plane or the use of
22
the funds for the capital?
23
MR. SUSMAN: I'm sorry, let's go
24
back to the plane.
25
Q.
Mr. Dubin knew a plane was being
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bought; right?
3
A.
Yes.
4
Q.
As you did.
5
Did he encourage you to buy the
6
plane?
7
A.
Yes.
8
Q.
And did you have a discussion
9
with him about where he would get the
10
money to buy the plane?
11
A.
I don't recall that.
12
Q.
Did you understand that you were
13
going to get the money to buy the plane by
14
making a bank loan?
15
A.
For the majority of the
16
proceeds, I understood we were going to
17
get a turn on recourse bank loan.
18
Q.
From which bank?
19
A.
I believe Harold went out to
20
several people and I think the loan was
21
done with Merrill Lynch.
22
Q.
Okay.
23
And did Mr. Dubin understand in
24
-- was he told in June that some of the
25
Highbridge managed account money had been
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used for a brief time to pay the plane
3
expenses?
4
A.
He was -- I believe, I don't
5
recall a specific conversation. I believe
6
in June when David approached him and
7
Lawrence Cutler told me that there were
8
issues regarding management fees taken as
9
well as the forty-five-day funding for the
10
equity of the plane and that they wanted
11
to move forward and retain Schulte, I told
12
them about that. I don't know if they
13
told me from which entities the plane
14
equity was funded for forty-five days and,
15
as a result, I don't recall whether I said
16
that to Glenn or not.
17
Q.
Who at -- did you have any --
18
after JP Morgan Chase purchased Highbridge
19
at the end of 2003, did you have any
20
communications with people at JP Morgan
21
Chase?
22
MR. ARFFA: Objection to form.
23
A.
I'm not sure if it happened in
24
'03 or '04 that they got bought. I just
25
don't recall. I think I had a
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conversation that included Jes Staley
3
maybe once.
4
Q.
Jes Staley once?
5
A.
Yeah, I think I met him briefly
6
in a lobby of a building once when I was
7
with Glenn. I don't recall the substance
8
of that.
9
Q.
No business was discussed then?
10
A.
I don't recall beyond something
11
about, you know, if we needed a management
12
company advance given what was going on,
13
you know, would they actually give it to
14
us or something along those lines. I just
15
don't recall the specifics of it.
16
Q.
Did you have any communication
17
with anyone else at JPMC?
18
A.
Not that I recall.
19
Q.
Can you describe for us the
20
buyout of Dubin and Swieca Asset
21
Management's interest in the management
22
company?
23
A.
Highbridge owed the management
24
company a substantial amount of money for
25
incentive fees, as I recall, that they
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were holding back. Glenn invited David
3
Lee and me to come see him in his office
4
where he was with Bob Caruso. He
5
basically -- I don't know if he had a
6
script or it felt like he was reading from
7
a script basically -- said that he would
8
like to -- he wanted to be paid $30
9
million for his capital account in the
10
context of separating his and Swieca's
11
interests from the management company. I
12
said I think your capital account is
13
negative, something to the effect of --
14
again, I don't remember word by word but
15
why would we do that and how would we do
16
that. He said basically I don't care if
17
you pay me $30 million, I'm going to sue
18
you. And I said, well, if we were to --
19
something to the effect of if we were to
20
make an effort to do that, it could injure
21
-- it would injure our investors and/or
22
someone like myself and our family and our
23
investors. And he said, I don't care
24
about that. I want $30 million or we're
25
going to sue you. I then said, for what.
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And I don't think he said what he was
3
going to sue us for, he just reiterated
4
that he was going to sue us until we gave
5
him $30 million. And I think we left soon
6
after. And then there was negotiation
7
between David Lee and Bob Caruso.
8
Q.
And how was it resolved?
9
A.
We paid him I think in two
10
pieces something like $13 million and then
11
had a note for $17 million which was
12
ultimately I believe extinguished or
13
cancelled by him in some form before the
14
Fortress transaction.
15
Q.
Before what?
16
A.
The Fortress transaction where
17
the investors acquired the right to manage
18
the funds and wanted to then reassign that
19
right in some form to Fortress to manage
20
the funds.
21
Q.
Okay.
22
How much of incentive fees were
23
held back?
24
A.
Thirty or thirty-five million,
25
something like that, to my best
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recollection.
3
Q.
Did they get paid as part of the
4
settlement?
5
A.
I believe so. I'm not sure if
6
it was every dollar or not or how and on
7
what schedule but I think so. Most of it.
8
I just don't recall the numbers.
9
Q.
Did you get a regular monthly
10
report showing the amount of cash
11
available in the funds, the onshore fund?
12
A.
I looked at Pas in a variety of
13
different reports that showed not only
14
cash but what was invested in various
15
types of turn on recourse funding
16
structures as well as the expected
17
interest payments from various investments
18
and various treasury reports on terms of
19
expectations of repayments of various
20
entities.
21
Q.
What was the name of the report
22
you looked at that showed you at a glance
23
what the cash flow was going to be in the
24
near future?
25
A.
There was a -- for the illiquids
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and the most significant return on
3
recourse funding line structures there was
4
a thing called the treasury pipeline, but
5
then there are a variety of other risk and
6
analyses that were done that showed
7
different components of what was available
8
and different components of cash.
9
Q.
Did you consider Glenn Dubin to
10
be part of the senior management team at
11
the management firm at the firm?
12
MR. ARFFA: Objection to form.
13
Q.
Back in 2006.
14
A.
Certainly at least through the
15
majority of it, I don't recall when he
16
became less involved, but he was a senior
17
adviser and a grey -- in quotes, grey
18
hair, someone smarter who had been around
19
a long time, and we cared about his
20
opinion.
21
Q.
So you would consider him in
22
part senior management?
23
MR. ARFFA: Objection.
24
MR. SIFFERT: Asked and answered.
25
A.
I think we referred to him as
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the senior advisor.
3
Q.
Did he have the -- he had input
4
on who to hire obviously; did he not?
5
MR. ARFFA: Objection.
6
A.
It depends. At different times
7
he was more involved with that versus not
8
as well as who would make partner.
9
Q.
He did have a -- he did make
10
when was it decided to admit Mr. Gruss to
11
the partnership?
12
A.
We had two-year -- I don't
13
recall the exact date or the contract. We
14
had two-year partnership pools. I believe
15
one was I think '04/'05 and then '06/'07.
16
He would have been for the second one.
17
Q.
The first one is four '04/'05?
18
A.
I think it was for 2004/2005.
19
And the second one I think was 2006/2007,
20
I believe.
21
Q.
Okay.
22
But when was the decision
23
actually made to make him a partner?
24
A.
As I said, I don't recall the
25
actual timing of the decision.
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2
Q.
Was -- he had a three percent
3
interest; correct?
4
A.
I believe that was the number.
5
I don't know that we ultimately executed
6
that document. But we viewed him and
7
treated him as a partner.
8
Q.
But do you recall, was he
9
when was it announced that he was a
10
partner? Was that announced?
11
A.
I believe -- I don't recall
12
specifically the date. I believe it was
13
-- it may have been in one of our investor
14
letters. I just don't recall. It may
15
also have been communicated through one of
16
our monthly calls to the firm from
17
employees or both. I just don't recall.
18
Q.
You don't recall what month that
19
would have been?
20
A.
I don't recall.
21
Q.
When did you become aware that
22
the money was taken out of the onshore
23
fund to pay for certain of your capital
24
calls in Roark, in the Roark fund?
25
A.
I don't think it was.
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2
Q.
Where did the money come from?
3
A.
I believe I wrote checks for it
4
either directly or reimbursing the
5
management company. I don't believe any
6
capital calls of mine came from the fund.
7
8
Q.
Huh?
A.
I believe it was either directly
9
to from me through checks or where I
10
reimbursed the management company. I
11
don't believe there was any advance from
12
the fund to make capital calls for me for
13
Roark.
14
Q.
Are you familiar with the term
15
"tailoring" as used to describe your
16
investment policy for investing for these
17
onshore and offshore funds, managed
18
accounts?
19
A.
I believe
20
MR. ARFFA: Objection to form.
21
A.
I believe that was a shorthand
22
reference sometimes used where -- that
23
referred to the fact that in certain
24
situations where an investment would be
25
viewed as an onshore trade or business
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that there were situations where it would
3
be originated by onshore entities. After
4
a period of time, it would then be subject
5
to confirmation of value between the two
6
entities transferred -- parts of it could
7
be transferred to offshore entities and
8
the mechanics around how that was done
9
evolved over time.
10
MR. SUSMAN: I have no further
11
questions.
12
MR. SIFFERT: Before we go --
13
stop, I'd like to just go off the
14
record for two seconds because I want
15
to ask the witness whether he made a
16
mistake in something he just answered
17
you.
18
MR. SUSMAN: If what?
19
MR. SIFFERT: He made a mistake.
20
We'll go off the record for a minute.
21
THE VIDEOGRAPHER: Stand by.
22
The time is 5:23. We're going
23
off the record.
24
(Whereupon a break was taken)
25
THE VIDEOGRAPHER: The time is
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5:23.
3
We're back on the record.
4
MR. SIFFERT: No questions.
5
MR. SUSMAN: We're done?
6
MR. SCHWARTZ: No questions
7
THE VIDEOGRAPHER: This ends
8
today's deposition. The time is 5:23.
9
We're off the record.
10
(TIME NOTED: 5:23 p.m.)
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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EFTA01150320
Technical Artifacts (7)
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