DS9 Document EFTA01165407

1 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 REAL-TIME AND INTERACTIVE REAL-TIME TRANSCRIPT 3 ROUGH DRAFT DISCLAIMER 4 IMPORTANT NOTICE: AGREEMENT OF PARTIES 5 6 We, the party working with real-time and rough draft transcripts, understand that if we choose to 7 use the real-time rough draft screen or the printout that we are doing so with the 8 understanding that the rough draft is a noncertified copy. 9 We further agree not to share, give, copy, scan, 10 fax or in any way distribute this real-time rough draft in any form (written or computerized) to any 11 party. However, our own experts, cocounsel and staff may have limited internal use of same with 12 the understanding that we agree to destroy our real-time rough draft and/or any computerized 13 form, if any, and replace it with the final transcript upon its completion. 14 Case: Fortress v. Jeepers 15 Witness: David Lee Date: June 1, 2011 16 REPORTER'S NOTE: 17 Since this deposition has been real-timed and is in rough draft form, please be aware that there 18 may be discrepancies regarding page and line number when comparing the real-time screen, the 19 rough draft, and the final transcript. 20 Also please be aware that the real-time screen and the noncertified rough draft transcript may 21 contain untranslated steno, reporter's notes, misspelled proper names, incorrect or missing Q/A 22 symbols or punctuation, and/or nonsensical English word combinations. All such entries will be 23 correct on the final, certified transcript. 24 Court Reporter: Laurie A. Collins, RPR Reporting Firm: Veritext Reporting Company 25 EFTA01165407 2 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 THE VIDEOGRAPHER: Good morning. We're on the record. My name is Chris Martin. I'm 3 the videographer for Veritext Court Reporting. Today's date is June 1st, 2011, and the time 4 is 9:06 a.m. This deposition is being held at the 5 office of Susman Godfrey, 560 Lexington 09:06:52 Avenue, New York, New York. The caption on 6 this case is Fortress VRF I LLC and Fortress Value Recovery Fund LLC versus JEEPERS, Inc., 7 respondent, and Financial Trust Company, Inc., and JEEPERS, Inc., counterclaimants and third- 8 party claimants. This is filed with the Judicial Arbitration and Mediation Service, 9 Reference Number 1425006537. The name of the witness is David Lee. 10 And at this time will counsel please 09:07:27 introduce themselves for the record. 11 MR. SUSMAN: Harry Susman for JEEPERS and FTC, along with Darren Indyke. 12 MR. ARFFA: I'm Allan Arffa from Paul, Weiss, Rifkind, Wharton & Garrison LLP. We 13 represent the claimants in this proceeding. Also with me is Hannah Sholl from Paul, Weiss. 14 MS. JOHNSON: Megan Johnson from Fortress. 15 MR. SIFFERT: John Siffert, Lankler 09:07:53 Siffert & Wohl LLP, on behalf of Dan Zwirn 16 personally. MR. O'BRIEN: William O'Brien from 17 Cooley LLP for the Zwirn entity parties in the case. There are several of them. I don't 18 know all the names. MR. SIFFERT: And you're representing 19 the witness. MR. O'BRIEN: And the witnesses. 20 THE VIDEOGRAPHER: At this time the 09:08:16 court reporter, Laurie Collins, will swear in 21 the witness.' EXAMINATION BY 22 MR. SUSMAN: Q. Mr. Lee, can you give us your address 23 for the record? A. Sure. 5 Stokes Farm Road, Old Tappan, 24 New Jersey 07675. Q. Have you given testimony before? 25 A. Yes. 09:08:48 Q. In connection with this Zwirn fund? EFTA01165408 3 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 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL A. Yes. Q. How many times? A. I can't recall specifically, but more likely than five. Q. Did you give testimony to the SEC? A. No. Q. In what connection have you given testimony? What proceedings? A. Fund-related litigation with specific counterparties involving transactions. Q. Where do you currently work? A. I have my own firm. Q. What is the name of it? A. Colford Capital, C-O-L-F-O-R-D. Q. What does Colford Capital do? A. It is a merchant banking operation trying to find acquisitions and advising on corporate transactions. Q. How long has Colford been in existence? A. Today is its first anniversary. Q. Prior to working at Colford, where did you work? A. Dan Zwirn & Co. Q. How long of a gap was there between when you left D.B. Zwirn and Colford starting? MR. O'BRIEN: It's Colford. Q. I'm sorry, could you spell it? 09:10:21 A. C-O-L-F-O-R-D. Q. Okay. Got you. How long of a gap was there between work -- when you quit at Zwirn or stopped working and your starting up at Colford? A. None. Q. Does Dan Zwirn have any connection to Colford? A. No. Q. Anyone who worked with you at the Zwirn 09:10:45 enterprise connected to Colford in any way? A. On an affiliate basis, I do utilize the services of an assistant that previously worked with me at Dan Zwirn. Q. Is it a he or she? A. She. Q. What's her name? A. Alicia Ferraro. Q. And when you say "an affiliate basis," does she work somewhere else most of the time? 09:11:18 A. Yes. She actually works for Dan Zwirn 09:09:12 09:09:51 EFTA01165409 4 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 as well. Q. So you and Dan share the same 3 assistant? A. Yes. 4 Q. And "assistant," is she your secretary? A. Secretary. 5 Q. Do you and Dan share offices? 09:11:32 A. Yes. 6 Q. Where are those offices? A. 595 Madison Avenue. 7 Q. Who else offices at 595 Madison? A. A person named Todd Meister, 8 M-E-I-S-T-E-R. Q. Did he have any connection to the Zwirn 9 operation? A. No. 10 Q. And what business is it that Mr. Zwirn 09:12:01 runs out of 595 Madison Avenue? 11 A. As I understand it, he has an investment firm called Alda Capital that has made 12 investments in various financial businesses. (Mr. Schwartz joins proceedings.) 13 Q. Does Colford and Alda make investments together? 14 A. No, we have not made any investments together. 15 Q. Do you and Mr. Zwirn look at 09:12:31 investments together? 16 A. To date we have not looked at any investments together. 17 Q. Are there plans to do so in the future? A. Nothing definitive or concrete. 18 Q. I had asked you, I think, whether Mr. Zwirn had any connection to Colford. I also 19 mean does he provide any financing or investor in any way. 20 A. No 09:12:55 Q. How about does Fortress provide any 21 financing to Colford? A. No. 22 Q. Can you give me your educational background? 23 A. Wharton School, University of Pennsylvania, 1986 bachelor's. 24 Q. And then after graduating from Wharton, where did you go to work? 25 A. Dillon, Read. 09:13:35 Q. How long were you at Dillon, Read? EFTA01165410 5 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 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL A. 4. A. 4. A. A little under two years. What were you doing at Dillon, Read? I was an investment banking analyst. From Dillon, Read where did you go? Lazard. Q. How long were you at Lazard? A. I left Lazard in January 1999, so approximately 11 years. Q. And what were you doing at Lazard? A. I was an investment banker. Q. Where did you go from Lazard? A. Sandler Capital. How long were you at Sandler? Two years. What were you doing at Sandler? Making private equity investments. Sandler is a hedge fund? More of a private equity fund. Private equity fund? Okay. And where is Sandler located? New York City. So that takes us up to roughly 2001? Correct. In 2001 where did you go to work? I started a firm called Saturn Venture 4. A. 4. A. 4. A. 4. A. 4. A. 4. A. Partners. 4. Ventures? A. For about two years. Q. What did Saturn Ventures do? A. It was a venture capital firm. Q. So now 2003, roughly, where did you go to work? A. I started a firm called LLJ Capital. 09:13:53 09:14:32 How long did you keep operating Saturn 09:15:06 MR. O'BRIEN: Could you spell that? THE WITNESS: LLJ. Q. LLJ Capital. What does A. It was my last name, my partner's last name, and our wives' started with J. Q. A. I got you. What did LLJ do? It was funded by Dan Zwirn to make special situation debt investments. Q. Was LLJ owned by Dan Zwirn or just simply the financing was provided? A. It was financing was provided. Q. How did you come to meet Dan Zwirn? LLJ stand for? 09:15:40 junior names both 09:16:14 EFTA01165411 6 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 A. I hired Dan Zwirn out of Wharton in 1993, and he worked mostly under my supervision 3 for the first year and a half as an investment banking analyst. 4 Q. So that would have been at Lazard? A. Yes. 5 Q. So you basically gave Dan his first job 09:16:47 in finance? 6 A. Well, he had a summer internship before, but I guess his first full-time job. 7 Q. And do you remain friends with Dan? MR. O'BRIEN: Objection to form. 8 Q. I'm sorry, so from 1993 to 1996, roughly, he worked for you? 9 A. No, for about a year and a half. Q. Oh, for just a year and a half? 10 A. Yes. 09:17:14 And did he leave Lazard in 1994/'95? 11 Q. A. I actually left Lazard in mid '94 and then returned back to Lazard a year and a half 12 later. Dan left Lazard in '95. Q. Where did you go during this interim 13 period from Lazard between '94 and '95? A. Toronto Dominion Bank. 14 Q. So as I understand it, you hired Dan, he was at Lazard, you left; by the time you came 15 back, then he was leaving? 09:17:57 A. He had left when I came back. 16 Q. He had left. A. Yes. 17 Q. You remained friends with Dan from '95 through 2003? 18 MR. O'BRIEN: Objection to form. A. We maintained an acquaintance. 19 Q. So in 2003 when he or D.B. Zwirn provided the funding for LLJ Capital, how did that 20 come to be? 09:18:28 A. I reconnected with Dan in 2003 over 21 lunch, having not seen him for two or three years. And he discussed with me the possibility of 22 starting a new business with his funding. Q. So the funding that you mentioned that 23 D.B. Zwirn provided to LLJ Capital, what entity exactly provided the funding to LLJ? What Zwirn 24 entity? I'm not so much concerned with the name as was it one of the hedge funds or was it some 25 company he ran. 09:19:13 MR. ARFFA: Objection to form. EFTA01165412 7 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 A. All the funding we received came from the D.B. Zwirn Specialty Opportunities Fund L.P.. 3 Q. So that would have been the onshore fund; right? 4 A. Correct. Q. And how much funding did they initially 5 provide to LLJ? 09:19:32 A. It was on a deal-by-deal basis. 6 Q. How long did this -- did LLJ Capital remain in existence? 7 A. I remained with LLJ until April 2005. Q. What happened in April 2005? 8 A. I joined D.B. Zwirn & Co. Q. At that point how much -- did LLJ 9 Capital as of April 2005 get money from anyone else other than D.B. Zwirn? 10 A. No. 09:20:12 Q. How much money, roughly, by April 2005 11 did LLJ Capital have invested on behalf of D.B. Zwirn? 12 A. I think approximately a hundred million. 13 Q. So in 2005 you decided to go in-house, in effect, with the Zwirn management company? 14 A. Yes. MR. O'BRIEN: Objection. 15 MR. ARFFA: Objection to form. 09:20:40 Q. And what was your position that you 16 started in April 2005 with D.B. Zwirn? A. I was a managing director. 17 Q. What entity was it that actually employed you? 18 A. D.B. Zwirn & Co., L.P. Q. Were you a partner in D.B. Zwirn & Co., 19 L.P.? A. No. 20 Q. I meant when you first joined. Did you 09:21:20 ever become a partner in D.B. Zwirn & Co., L.P.? 21 A. No. Q. In the D.B. Zwirn & Co., L.P., what -- 22 it provided investment advisory services? A. It was the management company on behalf 23 of the funds and managed accounts. Q. By that you mean it would provide 24 management services for the onshore fund, the offshore fund, and the various managed accounts; 25 is that right? 09:22:00 A. Yes. EFTA01165413 8 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 MR. O'BRIEN: Objection to form. Q. As the managing director, what were 3 your job responsibilities? What were you doing? A. Well, I was a managing director, and my 4 responsibilities were to originate and manage a portfolio of investments and to also manage a 5 portfolio of investments that had been originated 09:22:46 by others prior to my arrival. 6 Q. And how long were you a managing director of D.B. Zwirn & Co., L.P.? 7 A. Until October '06. Q. How big was the portfolio of 8 investments that you were managing between April '05 and October '06? 9 A. North of 300 million. Q. You mentioned a portfolio of 10 investments that had been made by someone else 09:23:32 that you were managing; is that correct? 11 A. By others. Q. By others. 12 Who were the others who had made those investments? 13 A. There was a person named Ivan Zinn and a person named Cameron Fleming. 14 Q. Was there some special area of investments that you were charged -- or type of 15 investment you were charged with making? 09:24:06 A. I generally focused on an industry, 16 which was media, telecommunications, and the services that provided those two industries. 17 Q. Now, as a managing director, did you have any role in the administrative functions of 18 the management company? A. None. 19 Q. Did you have any role in meeting with the investors in the actual funds or clients who 20 had managed accounts? 09:24:58 A. I occasionally was asked to come in for 21 portions of meetings. Q. What portions of the meetings would 22 those be? A. Most of the time -- frankly, all the 23 times that I can remember, I was asked to discuss the types of investments that I focused on and the 24 portfolio. Q. During that time period from April 2005 25 to October 2006, did you ever have any discussions 09:25:35 with investors about what the terms of any EFTA01165414 9 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 investment would be in the funds or in the managed accounts? 3 A. No. Q. Did you, when you were making 4 investments either at LLJ Capital or when you were a managing director, make any investments with 5 Fortress, side by side or in some sort of 09:26:07 partnership? 6 MR. O'BRIEN: Objection to form. MR. ARFFA: Objection to form. 7 A. I don't recall closing on any deals that I originated with Fortress. There were a 8 number of portfolio investments that had Fortress as a coinvestor that I inherited from Ivan and 9 Cameron. Q. Can you give me a rough estimate of the 10 size of those investments? 09:26:47 A. Of each investment or cumulative? 11 Q. Cumulatively. A. Including Fortress's piece or D.B. 12 Zwirn piece? Q. Just the D.B. Zwirn piece. 13 A. I'd have to guess, but I would estimate 200 million. 14 MR. O'BRIEN: Let me just say that you shouldn't guess. You can -- if you can 15 estimate in some range, but just a fat guess 09:27:25 you should not do. 16 THE WITNESS: Okay. No, I cannot. 17 Q. What's that? A. No, I cannot. 18 Q. Was it fair of the $300 million portfolio that you were in charge of looking after 19 that more than half of those investments had Fortress as a coparticipant? 20 A. No, that would be inaccurate because 09:27:58 investments mature and are repaid. So the numbers 21 that I threw out would be based -- at least on the 300 north number I threw out earlier was an 22 approximate running tally, and the guess I threw out was cumulative. 23 Q. So that I understand what you're saying, you're saying the 300 was a sort of 24 average amount of the portfolio over time, at any point in time, and the 200 million was some amount 25 of investment that may have run -- churned through 09:28:40 the portfolio over the year; is that fair? EFTA01165415 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A. Q. fund? A. Q. interest than the offshore A. not sure Q. interest NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL MR. ARFFA: Objection to form. A. Roughly. Q. Did you yourself have any the onshore or offshore Zwirn funds prior to October 2006? Yes. What were you invested in? The onshore fund. When did you make that investment? The spring of 2006. How large of an investment did you A. Q. A. Q. A. Q. make? A. Q. was that A. Q. into the investment? No. Did investment in 09:29:08 400,000. Do you recall what the liquidity option applied to your investment? The one year plus liquidity. Did you make any subsequent investments 09:29:52 onshore funds after this initial you ever invest in the offshore No. Did you have at any point any ownership or in any of the Zwirn entities other investment you've mentioned in -- onshore fund? You'd have to be more specific. I'm I understand your question. Yeah. Did you have any ownership in any of the -- strike that. When we started, Mr. O'Brien said he is here representing a bunch of Zwirn entities. There are entities called Zwirn Holdings, D.B. Zwirn & Co., L.P., D.B. Zwirn & Co. LC. Did you have any ownership interest in any size in any entity that had the name Zwirn in 09:31:06 it, other than your investment in the onshore fund? A. So in your -- I just want to make sure I understand the question. When you're referring to the Zwirn entities, are you referring to entities that are affiliated with the management company? Q. Yes. A. No, I did not. Q. I'm also referring to just any company 09:31:43 that had the name Zwirn in it, or entity. 09:30:33 EFTA01165416 11 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 MR. ARFFA: Objection to form. Q. It could have been part of the 3 management company, it could have been a hedge fund, any type of entity. 4 A. No. Q. What happened, by the way, to LLJ 5 Capital? 09:32:21 A. It was acquired by the onshore fund in 6 the second half of 2005. Q. When it was acquired, did you receive a 7 payment for your ownership interest in LLJ Capital? 8 A. Yes. Q. How much of a payment did you receive? 9 A. Approximately 800,000. Q. Do you remain a limited partner in the 10 onshore fund? 09:33:04 A. Yes. 11 Q. Did you ever withdraw any of your initial $400,000 investment? 12 A. No. Q. Prior to October of 2006, did you 13 had you ever heard of Jeffrey Epstein? A. Yes. 14 Q. In what connection had you heard of Mr. Epstein prior to October 2006? And I'm using 15 that October date because that's when I understand 09:33:37 you became the acting CFO. 16 MR. ARFFA: Objection to form. A. I heard of Jeffrey Epstein through 17 colleagues at Lazard. Q. By the way, what had you heard from 18 your colleagues at Lazard about Jeffrey Epstein? A. Not flattering things. 19 Q. Such as? A. That he was extremely difficult. 20 Q. Difficult in what way? 09:34:19 A. Generally difficult to do business with 21 and difficult to negotiate with and belligerent. Q. Other than what you heard from Lazard 22 folks about Jeffrey Epstein, had you heard anything else about him between -- prior to 23 October of 2006? A. Other than magazine or newspaper 24 articles, I do not recall anything else. Q. Did you know that he was an investor in 25 the Zwirn fund? 09:34:58 A. Prior to October 2006? EFTA01165417 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL Q. Yes. A. No. Q. Prior to October 2006, had you ever heard of an entity called Financial Trust Company? A. No. Q. Now, you mentioned -- oh, I want to ask you one last question about some of the background 09:35:26 we talked about earlier. How did you and Dan end up sharing office space currently? A. When I left, D.B. Zwirn was housed at Fortress's offices. Dan had a -- and Todd, who shares that floor, had an empty corner office. And Dan had also hired Alicia. And so he made an offer for me to sublet that space, which I found attractive and decided to put my office there. Q. So you left Fortress or D.B. Zwirn, I'm 09:36:18 sorry, in roughly June of 2010? A. May 31, 2010. Q. So you continued to work at D.B. Zwirn & Co. even after Fortress acquired the management company? MR. O'BRIEN: Objection. MR. ARFFA: Objection. Q. I'm sorry, I guess it didn't acquire. After Fortress took over management responsibilities of the funds, the onshore and 09:36:46 offshore funds -- MR. ARFFA: Objection to form. Q. -- did you become an employee of Fortress? A. No. Q. You remained an employee of D.B. Zwirn & Co.? A. Yes. Q. And it moved its offices, then, into Fortress's offices for some period of time? 09:3-:03 A. Yes. Q. And you made the move at that point? A. Yes. Q. Fortress took over management of the funds in roughly the summer of 2009? A. June 1, 2009. Q. So for roughly a year you were working for D.B. Zwirn & Co. but actually physically housed at Fortress's facilities? A. Yes. Q. In October of 2006 you became the 09:37:36 EFTA01165418 13 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 acting CFO of D.B. Zwirn & Co.? A. Yes. 3 Q. Do you remember what day it was that you were made the acting CFO in October? 4 A. October 5th. Q. Who suggested to you that you become 5 the acting CFO? 09:38:17 A. It was a discussion amongst myself, Dan 6 Zwirn, and David Proshan. Q. What was the discussion that occurred? 7 MR. O'BRIEN: I'm just going to caution the witness, since Mr. Proshan you said might 8 have been involved in these conversations, to not in your answer reveal any communications 9 that are in the nature of legal advice or seeking legal advice. 10 A. I don't recall the specifics of the 09:39:05 conversation. It's been a long time ago. 11 Q. At that point you obviously knew that Perry Gruss was no longer the CFO? 12 MR. O'BRIEN: Objection to form. Q. Right? 13 MR. O'BRIEN: Objection to form. MR. ARFFA: Objection. Can I just have 14 a rule that if any of us object to form that it counts for everyone and that way you don't 15 have to hear two or three people saying it? 09:39:30 MR. SUSMAN: Yeah, that's fine. I 16 don't know how you're going to do that in practice, but fair enough. 17 MR. ARFFA: The first one to say it; the others don't have to. 18 A. Can you repeat the question, please? Q. Yeah. Before you went to this meeting 19 with Mr. Zwirn and Mr. Proshan, did you know that Perry Gruss was no longer the CFO? 20 A. Yes. 09:39:52 Q. How did you learn that Perry Gruss was 21 no longer going to be the CFO? A. I learned in a discussion with Lawrence 22 Cutler over lunch. Q. The discussion with Mr. Cutler over 23 lunch, how -- how many days before or was it the day before the October 5th, 2006, meeting that you 24 had? A. It was on October 5th. 25 Q. So what did Mr. Cutler tell you at the 09:40:31 lunch that you had? EFTA01165419 14 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 A. He told me that Perry Gruss had resigned the night before. He told me that there 3 had been an internal investigation and that investigation had resulted in a number of issues 4 regarding management company expenses and the use of money from the funds for the purchase of an 5 airplane but that it had been remediated but the 09:41:30 decision had been made that Perry had to go and 6 that we were going to restructure senior management and implement a number of new 7 compliance procedures. Q. Did he at the lunch suggest to you that 8 you might become CFO as part of this restructuring? 9 A. No. Q. Prior to Mr. Cutler telling you at 10 lunch that there had been this internal 09:42:14 investigation, did you have any hint that there 11 was an investigation underway? MR. O'BRIEN: Objection to form. 12 A. No. Q. So was it the news that Mr. Cutler told 13 you that there had been an internal investigation that came as a surprise to you; first time you 14 heard of it was October 5th? A. Yes. 15 Q. Had you heard that there were any 09:42:44 issues with Perry Gruss's job performance at all 16 prior to October 5th? A. Yes. 17 Q. What issues had you heard existed about his job performance? 18 A. Dan had informed me around September 15th that he wanted to make management changes and 19 that he wanted me to consider possibly stepping into a role of managing the firm in the near 20 future. 09:43:25 Q. When Mr. Zwirn informed you that he 21 wanted to make management changes, did he specifically mention Mr. Gruss as one of those 22 changes he wanted to make? A. No, he did not. 23 Q. I think I asked you what issues you were aware of about Mr. Gruss's job performance, 24 and you told me in response that you had this discussion with Mr. Zwirn on September 15th. 25 MR. SIFFERT: Objection. 09:44:02 Q. My only question is did Mr. Zwirn EFTA01165420 15 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 mention Perry Gruss during this September 15th conversation. 3 MR. O'BRIEN: Objection to form. A. He mentioned that I should spend time 4 with Perry to learn more about the firm's business and finances. 5 Q. Did you infer from that that there was 09:44:20 some issue that he had with Perry Gruss? 6 A. I recall making an inference that there could have been an issue. 7 Q. Did you ask Mr. Zwirn specifically whether there was some problem with Perry Gruss's 8 performance? A. I don't recall asking him that 9 specifically. Q. And prior to the September 15th 10 discussion with Mr. Zwirn, had you heard of any 09:44:49 specific issues with Mr. Gruss's job performance? 11 A. No. Q. Did you ask Dan why he wanted to make 12 management changes? A. Yes. 13 Q. And what did he say? (Discussion off the record.) 14 A. My recollection was that he wanted somebody who had deal experience in a role of 15 leadership as opposed to someone that had more of 09:45:24 an operational background. 16 Q. So at least during the September 15th conversation, Mr. Zwirn did not mention to you 17 that there was any sort of investigation underway about any sort of improprieties involving 18 Mr. Gruss? A. No, he did not. 19 Q. The only explanation he gave you for why he might want to make management changes was 20 to bring somebody with more deal experience into a 09:46:05 leadership role? 21 A. Yes. Q. How is it, by the way, that you 22 remember that this discussion with Mr. Zwirn happened on September 15th, 2006? 23 MR. SIFFERT: Objection. A. I just happen to remember. There 24 were -- there were a number of events that occurred in that short window of time that I seem 25 to have specific recollection of, but obviously 09:46:41 there are other things I don't. EFTA01165421 16 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 Q. So between September 5th and October 5th, did you hear any other news about Mr. Gruss's 3 job performance or any investigation about him or any issue with the management company? 4 MR. O'BRIEN: I take it you mean September 15. 5 MR. SUSMAN: Did I -- I did mean September 15. Sorry. 6 MR. ARFFA: Objection to form. A. Repeat the question. 7 Q. I'll ask the question again. Between September 15th, 2006, and October 5th, 2006, did 8 you hear any additional information about Mr. Gruss's job performance or any issues at the 9 management company in terms of how it was being run? 10 MR. ARFFA: Objection to form. Q. Any problems? 11 A. I was not aware of any problems associated with Mr. Gruss's performance. 12 Q. Essentially you had a discussion with Mr. Zwirn on September 15th where he mentioned he 13 might want to make some changes, and October 5th you go to lunch with Mr. Cutler and he tells you 14 Perry Gruss is going to have to leave, you come back from lunch, and you're offered his job on 15 October 5th? MR. SIFFERT: Objection as to form. 16 Q. Is that -- A. I'm not sure whether that was a 17 question or a statement. Q. Is that the chronology? Do I have it 18 right? 19 MR. SIFFERT: Objection as to form. A. Those two events occurred on those two dates, yes. 20 Q. I just want to make sure I'm not missing any events that occurred between September 21 15th and October 5th relative to your becoming CFO. 22 MR. ARFFA: Objection to form. A. Well, once again, define "events." 23 Q. Any conversations you had with anyone else, any information you learned in the interim 24 that gave you some indication you might become the CFO or have some leadership role. 25 MR. ARFFA: Objection to form. A. Part of the September 15th and 09:47:02 09:47:32 09:48:00 09:48:17 09:48:45 EFTA01165422 17 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 subsequent September 18th conversation with Dan, as I previously mentioned, Dan suggested I speak 3 with Perry and some others with regard to learning about the firm's operations and its finances and 4 in particular to spend time with Lawrence Cutler to learn about a number of the operational changes 5 that were planned. 09:49:21 Q. You mentioned there was a September 6 18th discussion with Dan? What was that discussion about? 7 A. On the 15th he mentioned the idea that he wanted me to think about that he wanted to 8 discuss with his partners. On the 18th we had a confirmation discussion that I was interested in 9 taking on the additional role, and he conferred to me that his partners were in agreement with him. 10 Q. By the 18th when you said you were 09:50:04 interested in taking on the additional role, did 11 you understand that role was going to be the CFO? A. At that point in time, no. I thought 12 the role would be more of a president- or CEO-type role sometime in the future. 13 Q. Did you actually talk to Mr. Gruss between September 15th, say, and October 5th, 14 2006? A. Yes. 15 Q. And what did you talk to him about? 09:50:30 A. I recall a couple of conversations and 16 a breakfast meeting where I was trying to gather as much information as I could from him about the 17 firm and the funds and its finances and inner workings. 18 Q. Did he ask you why you were asking for this information? 19 A. No, he did not. Q. Had you ever asked for that kind of 20 information from him before? 09:51:09 A. No. 21 Q. Did you also meet with Mr. Cutler? A. Yes. 22 Q. How many times do you think you met with him during -- between September 15th and 23 October 5th in an effort to learn more about the firm's management? 24 A. I can't recall how many times. Q. And Mr. Gruss during this time period 25 never, in any of your discussions, let on that he 09:51:38 was under some kind of investigation, perhaps, or EFTA01165423 18 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 that his job might be in jeopardy? A. No. 3 MR. ARFFA: Objection to form. Q. You say you talked to Mr. Gruss about 4 the firm's finances. By that do you mean the management company's finances or do you also 5 include the funds' finances? A. I would say all of the above. 6 Q. During those conversations did Mr. Gruss tell you anything about the liquidity 7 needs of the funds, the onshore and offshore funds? 8 MR. O'BRIEN: Objection to form. A. No. 9 Q. Did he express any concern to you that the funds did not have a lot of liquidity? 10 A. Not that I can recall. Q. So on October 5th you were offered the 11 job of acting CFO; is that right? A. Yes. 12 Q. Did you get a pay raise? A. At that point in time, no. 13 Q. Mr. Cutler had explained to you that there was this issue with the airplane and the 14 fund expenses that had been the subject of an internal investigation. He explained that to you 15 at lunch; right? A. It was management fees, not fund 16 expenses. Q. And you understood it was prepayment -- 17 early payment of management fees -- A. Yeah. 18 Q. -- that had occurred, was an issue? A. Yes. 19 Q. And was that the first you'd ever heard of investor money being used to finance an 20 airplane purchase? A. Yes. 21 Q. And was it also the first you ever heard of the early payment of management fees? 22 A. Yes. Q. Did anybody explain to you why the 23 management fees had been paid earlier or what the explanation that had been given for that practice 24 was? MR. ARFFA: Objection to form. 25 MR. O'BRIEN: Since the question doesn't have a time frame, I'm going to direct 09:52:00 09:52:38 09:53:19 09:53:39 09:54:04 EFTA01165424 19 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 you to not, in your answer, communicate something that was communicated to you by 3 counsel. A. I recall Lawrence saying that on a 4 number of occasions management fees were taken after they were accrued but prior to when they 5 were payable. 09:54:37 Q. Did Lawrence explain to you or tell you 6 what the explanation was for why that had occurred? 7 A. I can't really recall at that point in time. 8 Q. After you became the acting CFO on October 5th, was that news then conveyed to all 9 the other employees that day or the next day? A. It was conveyed on October 9th. 10 Q. What was the reason for delaying from 09:55:14 October 5th to October 9th to tell the employees 11 that you were the acting CFO? MR. ARFFA: Objection to form. 12 A. There was a strategy to make a comprehensive announcement to the employees about 13 Perry's departure and other organizational changes. 14 Q. After the announcement was made that you would be acting CFO, did you then make any 15 effort to contact investors in the funds or 09:55:59 managed accounts to let them know about your new 16 job responsibilities? A. There was no effort on my part. 17 Q. I understand there were a series of investor calls to inform investors, roughly about 18 October 10th or October 11th. Do you recall that happening? 19 MR. O'BRIEN: Objection to form. A. My understanding is that Dan and 20 possibly others from the IR department made a 09:56:35 number of investor calls I believe starting on 21 October 9th. Q. Did you participate in any of those 22 investor calls in any way? A. I don't recall participating in any of 23 those round of calls. Q. When did you first hear that there had 24 been advances made from the offshore fund to the onshore fund and from some of the managed accounts 25 to the onshore fund? 09:57:09 A. On October 9th. EFTA01165425 20 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 Q. Was it before or after the announcement of your new job and that Perry was gone? 3 A. After. Q. Was the announcement in a conference 4 room? A. It was in Dan's office with a number of 5 employees dialed in globally. 09:57:36 Q. On a conference call? 6 A. Yes. Q. After that meeting how did you then 7 come to learn about the advances from the offshore fund to the onshore fund? 8 A. Lawrence came to my office, said that he had had a conversation with Alisa Butchkowski 9 and that Alisa had told him that when her prior boss, LeeAnn Law, left in the summer of 2006 that 10 LeeAnn had told her that the offshore fund was 09:58:42 owed money from the onshore fund and that two of 11 the accounting employees, Jason Pecora [phonetic] and Phil Ryu, also knew about it. 12 Q. How much was the amount of these -- the money that was owed at that point? 13 A. As of that moment, I didn't know. Q. Did Larry give you any indication of 14 how large a sum it was? A. I can't recall. 15 MR. SIFFERT: Lawrence? 09:59:34 MR. SUSMAN: Lawrence? Is that what it 16 is? Fair enough. Q. What was your reaction to Mr. Cutler 17 telling you about what Alisa had told him? A. Surprise. 18 Q. And then did Mr. Cutler explain to you when he'd had this conversation with Alisa? 19 A. It was shortly after the firm announcement. 20 Q. So after you had this conversation with 10:00:17 Mr. Cutler, what did y'all do about this 21 information you'd learn from Alisa? A. We asked Alisa to come up to my office, 22 and also Bob Sumberac, and we asked Alisa to repeat what she had told Lawrence just earlier. 23 Q. Did she repeat to you the same thing that Mr. Cutler had conveyed? 24 A. Yes. Q. After you had this discussion with 25 Alisa, what did y'all then do? 10:00:54 A. We asked Jason Pecora to come up to my EFTA01165426 21 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 office, and we asked Alisa to yet again explained what she had just explained. And then we asked Jason what he knew about this issue that Alisa had brought to our attention. Q. Did Jason confirm what Alisa had said? A. Jason said he had no idea what we were talking about. 10:01:24 Q. So what happened after you had this conversation with Jason and Alisa? A. I asked Dan Zwirn and the other two partners, Chris Swan and Vasan, into the office, and we explained what had just happened in the conversation with Alisa. Q. And what was their reaction? A. Dan had a look of utter surprise and shock, screamed out some expletives. And then I recall conversation about trying to figure out if 10:02:06 this was true and how do we figure this out. Q. Did y'all come up with a plan to try to figure out if it was true? MR. O'BRIEN: Objection to form. A. My recollection is that the first step we would take would be for Bob Sumberac, who was the controller, to dig into the firm's accounting systems and ledgers to see if he could figure out whether this was true or not. Q. So you tasked Bob with going and trying 10:02:40 to dig through the fund's ledgers to see if there were in fact these monies owed? A. Yes. 17 Q. And did Bob do that? A. Over the course of the next two days, 18 yes. Q. Did he report back in some form? 19 A. Well, we had multiple conversations over the course of those two days. 20 Q. Was it all oral? Was there anything 10:03:14 written that was prepared by Mr. Sumberac and 21 given to you or Mr. Zwirn? A. I recall a spreadsheet that he put 22 together at some point during those two days. Q. So that takes us to roughly like 23 October 11th, thereabouts? A. Yes 24 Q. Did the spreadsheet show the outstanding balance of the advance from the 25 offshore fund to the onshore fund? 10:03:57 A. The first analysis showed an estimated EFTA01165427 22 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 balance of 108 million. Q. Did that balance materially change over 3 the subsequent weeks? MR. O'BRIEN: Objection to form. 4 A. With regard to what we believed the onshore fund owed the offshore fund, no. 5 Q. Was there at this point any indication 10:04:40 that there had also been advances from the managed 6 accounts or the TE fund? A. As of October 11th, no. 7 Q. When did you discover that there had also been advances from the Highbridge managed 8 account and the TE fund? MR. ARFFA: Objection to form. 9 A. The weekend of the 14th and 15th, we discovered that there was possibly a balance of 10 approximately 50 million owed from the onshore 10:05:14 fund to the Highbridge account. And we also 11 thought that there might be balances owed from the onshore to the TE account as well. 12 Q. How did you discover the $50 million advance from the Highbridge account to the onshore 13 fund? A. We had engaged Deloitte & Touche that 14 week to assist us; and as part of some analyses and work that we saw, a wire transfer. 15 Q. When did Deloitte & Touche get hired, 10:06:31 roughly, relative to October 9th, when you first 16 heard about the issue from Alisa? A. It was either that Thursday or that 17 Friday, so either the 12th or the 13th. They were engaged by Fried Frank, so I 18 don't know if -- Q. So Fried Frank was also hired roughly 19 after -- shortly after October 9th? A. Yes. 20 Q. Did you participate in any of the 10:07:20 meetings to discuss what would be disclosed to 21 investors during the October 9th, 10th, and 11th series of calls? 22 A. No. Q. By the way, when you found out about 23 these advances to the onshore fund, did it cause you concern that this had occurred? 24 A. Yes. Q. And why? 25 A. Why -- I don't understand your 10:07:54 question. EFTA01165428 23 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 Q. What about it was of concern to you? A. It caused a lot of concerns. One of 3 the concerns that was prominent was did we have an accurate NAV calculation. 4 Q. Any other concerns? A. Yes, of course. 5 Q. Such as? 10:08:38 A. The quality of the books and records. 6 Q. Anything else? A. I'm not sure -- do you want me to list 7 out all the emotions I went through that week? Q. Not really the emotions as much as the 8 issues that were potentially raised by having these loans or advances. 9 MR. ARFFA: Objection to form. A. Well, as I said, the primary concern 10 was did we have an accurate NAV. If we did not 10:09:17 have an accurate NAV, then there were a lot of, 11 you know, consequences. Q. Was there any -- were you concerned 12 that -- about how investors would react to hearing about it? 13 A. That would be one of the consequences. Q. But whether or not there was an 14 accurate NAV calculation, might investors be upset? Did you believe investors might be upset 15 about this having occurred? 10:09:50 A. Yes. 16 Q. Were there any tax issues that were raised by having these loans or advances occur? 17 MR. O'BRIEN: Does your question have any time frame? 18 MR. SUSMAN: Sure this October of 2006 time period. 19 MR. O'BRIEN: The whole month? MR. SUSMAN: Yeah. 20 MR. SIFFERT: Well, the concern I 10:10:09 have -- 21 MR. SUSMAN: Look, guys, I'm letting you all do this, but you've got to stop it. 22 Okay? Object to form. Don't -- you can quibble with the question all you want. 23 MR. SIFFERT: To the extent these involve privileged conversations -- we're 24 trying to avoid privilege, Harry. That's the issue. 25 MR. SUSMAN: So just instruct him. 10:10:30 MR. SIFFERT: It's not disruptive. EFTA01165429 24 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 MR. O'BRIEN: Just instruct him, he said. 3 MR. SIFFERT: I'm not obstructing. MR. SUSMAN: Just instruct him. 4 MR. SIFFERT: Okay. Don't report anything about conversations with counsel on 5 these topics. A. Tax issues would be privileged. 6 Q. After October 14th when you also discovered that there might be money from 7 Highbridge's managed account that had been advanced plus you thought there was an issue with 8 the TE fund, were you involved in attempting to document these loans or advances so that there was 9 some piece of paper that actually memorialized, such as a note? 10 A. Yes. Q. Were in fact notes prepared that 11 obligated the onshore fund to repay the money at some point in time? 12 A. Yes. Q. Why didn't you just have the onshore 13 fund repay the money as opposed to entering into a -- a loan agreement that would allow 14 repayment over some period of time? MR. ARFFA: Objection to form. 15 You may answer. A. The onshore fund did not necessarily 16 have the liquidity at that point in time to repay it quickly. 17 Q. There was a second series of investor phone calls like at the end of October; is that 18 correct? A. Yes. 19 Q. Did you participate in those, any of those calls? 20 A. Yes. Q. How many of them did you participate 21 in? A. I can't recall specific number. 22 Q. Was your role to speak during the call or were you just there listening? 23 A. The vast majority of the calls I listened. 24 Q. Who else listened with you? A. It was split amongst Elise Hubsher and 25 I believe Lawrence Cutler. Q. Did you listen to a call that involved 10:10:46 10:11:29 10:12:14 10:12:43 10:13:21 EFTA01165430 25 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 Financial Trust Corporation or Jeffrey Epstein? A. No, I did not, did not. 3 Q. What was the reaction of the investors on the call that you did listen in on? 4 A. Vast majority were supportive. Q. Were any agitated or upset? 5 A. I do not recall any of the calls in 10:14:15 which I listened in on an investor openly 6 expressing agitation. Q. Did you hear from Ms. Hubsher, 7 Mr. Cutler, or Mr. Zwirn that there had been other investors who were agitated during these calls, 8 during calls that you didn't listen to? A. The only one I can recall was the call 9 that he had with Financial Trust. Q. What were you told about the call that 10 he had with Financial Trust? 10:15:02 A. I recall Dan mentioning that Jeffrey 11 was upset. Q. Did Mr. Zwirn tell you anything more 12 than Jeffrey Epstein was upset? A. I can't recall specifically with regard 13 to that particular call what else was said. Q. We're talking about the second set of 14 investor calls Mr. Zwirn told you after he had had one with Financial Trust that Mr. Epstein was 15 upset? 10:15:59 A. Yes. 16 Q. At that point you knew who Financial Trust was and who Mr. Epstein was relative -- that 17 they were a big investor in the fund; is that right? 18 A. Yes. Q. Did Mr. Zwirn tell you what he planned 19 to do about Mr. Epstein's being upset? MR. ARFFA: Objection to form. 20 A. That he was going to call Glenn. 10:16:17 Q. Glenn? 21 A. Glenn Dubin. Q. Did you know who Glenn Dubin was at 22 that point? A. Yes. 23 Q. Had you ever spoken yourself to Glenn Dubin? 24 A. I don't recall speaking to Glenn prior to that second call to investors directly. 25 Q. I don't mean in any capacity. Had he 10:16:44 ever made an investment where you spoke to him at EFTA01165431 26 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 any point in time? A. I don't recall speaking to him before 3 that. Q. Did Mr. Zwirn explain to you why he was 4 going to talk to Mr. Dubin about Mr. Epstein being upset? 5 A. I recall that Glenn had a close 10:17:05 relationship with Jeffrey and that Dan almost 6 always conferred with Glenn on matters related to Jeffrey. 7 Q. In between the time of the second -- the first set of calls and the second set of 8 calls, before you made the second set of calls, you reached out to lenders to the fund; correct? 9 A. Yes. Q. Who was -- I think it's KBC? Do I have 10 the initials right? 10:17:52 A. Yes. That was one of the lenders. 11 Q. It was a lender to both the onshore and offshore fund? 12 A. Yes. Q. Were they the biggest lender? 13 A. No. Q. What kind of liquidity did they provide 14 to the funds? MR. ARFFA: Objection to form. 15 A. As of that particular day, they were 10:18:15 actually not a lender. We had a credit agreement 16 that was in the process of being closed. Q. Did you reach out to them because you 17 were concerned that the issues with Gruss had potentially -- strike that. 18 Did you have any problems with any of the lenders when you told them about the Perry 19 Gruss issues or these interfund notes? A. No. 20 MR. O'BRIEN: Objection to form. 10:18:50 Q. You've told me you heard Mr. Epstein 21 was upset after the second investor call. When was the first time that you heard that Mr. Epstein 22 wanted or was asking for some of his money back from the fund? 23 MR. ARFFA: Objection to form. A. I believe there was a letter faxed to 24 us around November 13th. Q. I'm going so to show you what was 25 previously marked as Exhibit 5. Is that the 10:19:59 letter? EFTA01165432 27 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 (Discussion off the record.) MR. SUSMAN: I'm not going to ask him 3 about the document other than is that the letter you're referring to. 4 MR. ARFFA: What's the exhibit number? MR. SUSMAN: It's Exhibit 5. 5 A. Yes. 10:20:20 Q. Prior to seeing Exhibit 5, had you 6 heard from any source that Mr. Epstein might want some of his money back from the fund? 7 A. I don't recall that I had heard he wanted his money back prior to this letter. 8 Q. Now, you had told me during the second set of calls that I think none of the investors 9 who you listened to were upset or agitated, were supportive. 10 Did you hear from Mr. Zwirn or 10:21:04 Mr. Cutler or Ms. Hubsher that any of the 11 investors on the calls they had listened to had asked for any of their money back? 12 A. No, I don't recall anyone asking for their money back around those calls. 13 Q. And certainly in the calls you listened to, did any of the investors ask for their money 14 back? A. Not that I recall. 15 Q. Prior to receiving Exhibit 5, had you 10:21:40 dealt with any investors attempting to redeem from 16 the fund? A. I don't believe so. 17 MR. SUSMAN: I think we've been going for about an hour and 20 minutes. Do you want 18 to take a break? Or keep going? Whatever you want to do. 19 THE VIDEOGRAPHER: There's eight minutes left on the video. 20 MR. SUSMAN: Let's go eight more 10:22:14 minutes. 21 Q. Exhibit 5, how did you come to see it first? Did it arrive on the fax machine and 22 someone deliver it to you or did somebody specifically bring it to your attention? 23 MR. ARFFA: Objection to form. A. I don't remember. 24 Q. After you saw Exhibit 5, did you participate in the discussions about Mr. Epstein's 25 $80 million request, on or about November 13th? 10:22:44 A. Can you be more specific? Participate EFTA01165433 28 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 with whom? Q. Were there any discussions either on 3 November 13th or, say, the next day that you remember about Mr. Epstein's $80 million request? 4 A. I recall us having discussions about this letter shortly after receiving it. 5 Q. And who were those discussions with 10:23:11 that you recall? 6 A. I believe it included counsel. Q. All of the discussions had included 7 counsel that you remember? MR. ARFFA: Objection to form. 8 A. I can't remember conversations that didn't include counsel. 9 Q. Did you have any discussions on November 13th, that day or the next day, with 10 anyone from Mr. Epstein's office about -- 10:24:02 specifically about the $80 million request? 11 A. I recall a telephone call with Harry Beller. 12 Q. And what do you recall from that conversation? 13 A. My recollection was I told Harry that their investment was subject to a lockup agreement 14 and that there was a schedule of when certain tranches of their investment were eligible to be 15 redeemed and that there certainly was no ability 10:24:44 nor right for them to receive an immediate 16 liquidated cash interest. Q. Other than the conversation you just 17 told me about, did you have any other conversations with Harry Beller about Mr. Epstein 18 redeeming on November 13th or November 14th, let's say? 19 A. I only recall one conversation with Harry during this time frame with this letter. 20 Q. From the description of the 10:25:19 conversation, had you already received the letter, 21 the $80 million request, at the time you had the conversation? 22 A. I believe it was in response to receiving the letter. 23 Q. And, for example, that's why you recall having discussion with him that he could not 24 immediately redeem the money, which is one of -- what the Exhibit 5 actually requests? 25 A. Yes. 10:25:41 MR. ARFFA: Objection to form. EFTA01165434 29 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 Q. Okay. If you look at Exhibit 5, the next page 3 of it, you'll see there's a fax confirm there that shows that it was sent around 6 o'clock at night 4 in the evening. A. Okay. 5 Q. So this conversation with Mr. Beller 10:25:58 had to either have occurred later on the evening 6 of November 13th or sometime on the 14th; is that fair? 7 MR. ARFFA: Objection to form. A. I just don't recall specifically what 8 time. Q. I want to make sure I've got your 9 memory of the conversation. You told Mr. Beller that the -- Mr. Epstein's investments were subject 10 to lockups. Do you remember that? 10:26:42 A. Yes. 11 Q. And that there was no right to immediately withdraw? 12 A. Yes. Q. What else do you recall from the 13 conversation? A. I recall Harry saying Jeffrey wants his 14 bait back, and that he'll let the profit ride. Q. Anything else you recall? 15 A. No. 10:27:22 Q. I think you testified that you told him 16 that there was -- did you -- strike that. When you said the investment was 17 subject to a lockup agreement, did you explain to him what the lockup agreement was? 18 A. I don't recall getting into the specifics of the lockup agreement. 19 Q. What did Mr. Beller say to you in response to your saying the investment was subject 20 to a lockup agreement? 10:27:49 A. The only thing I can recall Harry 21 saying is that Jeffrey wants his bait back. Q. I think you testified you told 22 Mr. Beller there was a schedule for his -- for -- some schedule? 23 A. Yes, that the redemptions were subject to a lockup agreement that had tranches with dates 24 associated with it. Q. PF had Mr. Beller seen the schedule 25 that you were talking about? 10:28:23 MR. O'BRIEN: Objection. EFTA01165435 30 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 Q. As far as you know? A. I don't know. 3 Q. Did you offer to send him the schedule? A. I don't recall. 4 Q. Did he ask to see the schedule that you referenced? 5 A. Not that I recall. 10:28:36 Q. How did the conversation with 6 Mr. Beller end? A. I can't recall. 7 MR. SUSMAN: All right. Let's take a break. 8 THE VIDEOGRAPHER: We're off the record. The time is 10:28. This is the end 9 of Tape 1. (Recess taken from 10:28 to 10:43.) 10 (Mr. Indyke joins proceedings.) 10:41:11 THE VIDEOGRAPHER: We're back on the 11 record. The time is 10:43. This is the beginning of Tape 2. 12 Q. Mr. Lee, after you had the conversation with Harry Beller that you discussed, did you tell 13 anyone about the conversation? A. I most certainly would have. 14 Q. Would you have told Dan Zwirn? A. Yes. 15 Q. Do you remember what his reaction was? 10:44:09 A. No, I don't recall. 16 Q. Did Mr. Zwirn indicate to you whether he had also talked to Harry Beller? 17 A. I don't recall. Q. I want to focus sort of on the time 18 period shortly after you got the $80 million request. Did you participate in any discussions 19 where Glenn Dubin was present or participated in some way, about the request? 20 A. I recall at least one but maybe more 10:44:56 than one conversation that Dan had with Glenn, but 21 I was not on the line. I was sitting in his office. 22 Q. So you were sitting in Dan's office while Dan was talking to Glenn? 23 A. Yes. Q. And it was not on a conference call, so 24 you were just hearing Dan talking to -- his side of the conversation? 25 A. Yes. 10:45:30 Q. When did these conversations occur? EFTA01165436 31 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 A. Sometime around this date of November 13th. 3 Q. And you just happened to be in Mr. Zwirn's office when he called Mr. Dubin up? 4 MR. O'BRIEN: Objection to form. A. I don't recall exactly why I was in his 5 office. 10:45:57 Q. And what do you recall from listening 6 to those conversations between Mr. Zwirn and Mr. Dubin about the $80 million request? 7 A. My recollection was Dan was asking Glenn to have Jeffrey back down. 8 Q. Did Mr. Zwirn make this request to get Jeffrey to back do you know more than once to 9 Mr. Dubin? A. I can't recall. 10 Q. Do you recall the substance of what 10:4:-:0= Mr. Zwirn was saying to Mr. Dubin to get him to 11 get Jeffrey to back down? A. I recall Dan explaining to Glenn or -- 12 well, let me rephrase that -- asking Glenn to explain to Jeffrey that he wasn't entitled to 13 immediate payment and that the funds were illiquid in its investment strategy and that people 14 couldn't just withdraw their money on demand. But that was in the context of Dan trying to have 15 Glenn explain that to Jeffrey. 10:47:49 Q. Is there anything else you recall from 16 the conversations you listened in on, or at least listened in on the Dan side of the conversation 17 with Mr. Dubin? A. I remember Dan saying the last thing we 18 need is a lawsuit from Jeffrey. Q. After Mr. Zwirn had these calls with 19 Mr. Dubin, did Mr. Zwirn hang up the phone and tell you what Glenn said to him? 20 A. I believe he did. 10:48:37 Q. What do you recall Mr. Zwirn telling 21 you Mr. Dubin had said to him on the call? A. That I don't remember exactly. 22 Q. Just so I'm clear, is it you recall one call or two calls where you were listening to the 23 Zwirn side of a conversation with Mr. Dubin about the $80 million request? 24 A. I recall more than one call, but I can't remember if it was two, three, four. 25 Q. It may have been multiple calls that 10:49:08 you recall listening to, at least sitting in the EFTA01165437 32 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 office listening to, with Mr. Dubin about the 80 million? 3 A. As I think about it, I think there was some iteration in the process. 4 Q. This series of calls occurred after you received the written demand for $80 million or 5 before? 10:49:37 A. There may have been a call before 6 receiving the letter having to do with Jeffrey being upset. 7 Q. As I understood your testimony earlier was that until you got the $80 million written 8 request you were unaware that Mr. Epstein wanted to withdraw his money; is that right? 9 A. That's my recollection. Q. Am I correct that the calls that you 10 would have listened to between Mr. Zwirn and 10:50:18 Mr. Dubin about Mr. Epstein's request to withdraw 11 money must have occurred after you got Exhibit 5? MR. O'BRIEN: Objection to form. 12 A. With regard to the 80 million request, that would be my recollection. 13 Q. Do you recall that -- had Mr. Epstein made some other different request to withdraw 14 money prior to the $80 million request? A. I don't recall Mr. Epstein making a 15 withdraw to -- or making a request to withdraw 10:51:01 money from the funds prior to this. 16 Q. During the conversations that you listened to with Dan and Glenn, did Mr. Zwirn ever 17 reference any conversations that he had had with Mr. Epstein? 18 MR. ARFFA: Objection to form. Q. About withdrawing money. 19 A. Not about withdrawing money. I don't recall any conversations that Dan relayed to me. 20 Q. Did you participate in any 10:51:59 conversations with Chris Swan about Mr. Epstein's 21 withdraw request in the November 2006 time period? By that I mean any -- were you a participant in 22 any conversation where Chris Swan was present? MR. O'BRIEN: Can you just terminate 23 the question to be that as a whole? MR. SUSMAN: Yes. 24 Q. During November 2006 do you recall participating in any discussions where Chris -- 25 about the $80 million request where Chris Swan was 10:52:26 present? EFTA01165438 33 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 MR. SIFFERT: Again, not privileged conversations. 3 MR. SUSMAN: It can be either/or. I just want to know who was there. 4 A. Many times there were multiple people in the room. I can't recall specifically any time 5 Chris was in the room; I can't specifically say he 10:52:48 was never in the room. 6 Q. How many conversations can you recall discussions that occurred within the Zwirn 7 operation -- strike that. During November 2006 how many 8 conversations do you recall occurred for the purpose of discussing this $80 million request of 9 Mr. Epstein's? A. Specifically with regard to this 10 request, I can't recall, but I would say numerous. 10:53:29 Q. Just so make sure I'm clear, other than 11 this conversation that you listened to between Mr. Dubin and Mr. Zwirn, were any of those 12 conversations ones where lawyers were not present? A. I can't recall. 13 Q. Did you ever listen to any conversation between Mr. Zwirn and Mr. Epstein about his 14 request to withdraw money during November 2006? A. I don't recall. I don't believe I did. 15 Q. How about any conversation between 10:54:25 Mr. Zwirn and Mr. Beller about the $80 million 16 request? A. I don't recall. 17 Q. Did you take any notes of the conversations that you listened to where Dan was 18 talking to Glenn? A. No. 19 Q. By the way, the conversation that you say you had with Harry Beller about the $80 20 million request, did you call Mr. Beller or did he 10:54:59 call you? 21 A. I believe I called him. Q. How did you know to call him about -- 22 let me ask. Did you know who Harry Beller was -- A. Yes. 23 Q. -- prior to -- when did you first learn who Harry Beller was? 24 A. I believe sometime in October. Q. Okay. And who told you who he was? 25 A. People in the IR department. 10:55:26 Q. And what did they tell you? EFTA01165439 34 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 A. Dan also told me. That he was cagey, be very careful what 3 you say to him. Q. They also explained to you that 4 Mr. Beller represented Mr. Epstein -- A. Yes. 5 Q. -- in some capacity? 10:55:53 A. Yes. 6 Q. Did you understand what capacity Mr. Beller represented Mr. Epstein in? 7 A. At that point in time, I thought he was a tax accountant for Mr. Epstein. 8 Q. So after you received Exhibit 5, the $80 million request, why did you call Mr. Beller 9 up, the tax accountant, to discuss it? A. I recall having had other conversations 10 with Harry prior to this, and so therefore I felt 10:56:24 I had a direct relationship with him 11 telephonically. Q. So you had had discussions with 12 Mr. Beller about other matters related to the FTC investment -- 13 A. Yes. Q. -- prior to the 80 million? 14 A. Yes. Q. What were those discussions about? 15 A. He wanted to understand -- or wanted to 10:56:46 know what the monthly performance was in October, 16 again in early November, and I would explain to him that the nature of the funds' assets being 17 illiquid resulted in our being able to provide performance data lagged substantially. 18 He also asked me a number of questions about New York State-sourced income. 19 Q. So as I understand it, you had had enough conversations with Mr. Beller that you felt 20 like he was your point of contact at FTC, so 10:57:37 that's why you called him about the $80 million 21 request? A. Yes. 22 Q. Did you make any effort to contact Mr. Epstein directly? 23 A. No. Q. Did somebody ask you to call Mr. Beller 24 about the $80 million request or did you do it on your own initiative? 25 A. I can't recall. 10:58:07 Q. Did anybody -- do you recall anyone EFTA01165440 35 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 talking about calling Mr. Epstein up directly to request him about the $80 million request? 3 A. I don't recall. Q. So after these calls that you listened 4 to with Mr. Zwirn where he's talking to Mr. Dubin, what do you recall happening next with 5 Mr. Epstein's $80 million request? 10:58:39 A. I recall hearing through Dan, through 6 Glenn, that Jeffrey was very concerned that if he couldn't have his $80 million right away then the 7 NAV must not be valid. He wanted to understand how he came to value the assets and came up with a 8 net asset value. MR. O'BRIEN: I'm sorry, had you 9 finished your answer? THE WITNESS: No. 10 Q. Sorry. 10:59:29 A. And I can't recall specifically whether 11 this occurred before or after the 80 million request. Jeffrey wanted to speak to Harry Davis 12 at Schulte Roth specifically with regard to why Dan's disclosure in early October didn't allude to 13 the items that were in the disclosure in late October, and then that Jeffrey wanted to meet with 14 PwC and Fried Frank to understand the NAV, and that PwC being the auditor would not speak to 15 investors so that we would have Deloitte make a 11:00:29 presentation as to how the NAV was calculated. 16 Q. And that meeting was -- a meeting was set up for you to make a presentation to 17 Mr. Epstein; correct? A. Yes, yes, an appointment was made for 18 sometime that following week, which then had to be rescheduled for the Tuesday before Thanksgiving. 19 (Pause.) Q. So at the time the meeting was 20 scheduled, thereabouts, did you understand that 11:01:37 Mr. Epstein was -- strike that. 21 At some point was Mr. Epstein's -- his redemption request was still outstanding. He had 22 made it in writing and not retracted it; correct? MR. SIFFERT: Objection to form. 23 MR. ARFFA: Objection to form. Q. At some point did you hear or did you 24 learn that Mr. Epstein was formally going to retract his $80 million request? 25 MR. O'BRIEN: Objection. 11:02:10 Q. Was going to agree to withdraw it? EFTA01165441 36 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 MR. O'BRIEN: Objection to form. MR. ARFFA: Objection to form. 3 A. I was informed sometime in December of that year, through Dan, through Glenn Dubin, which 4 was a call I did not participate on, that Jeffrey wanted to move or assign Financial Trust's 5 interest on the onshore fund to a newly formed New 11:02:47 York C Corp. because of some New York 6 State-sourced income issue he was concerned with and that if we accommodated his request, because 7 the GP could refuse such a request, that the redemption issue would go away. 8 Q. Mr. Zwirn informed you of this agreement that Mr. Epstein had agreed to; you did 9 not participate in it being -- the deal being struck, if you will? 10 MR. ARFFA: Objection to form. 11:03:35 A. Correct. 11 Q. You just heard about it second- or thirdhand? 12 A. Yes. Q. And the way Mr. Zwirn described it was 13 that it was some arrangement that had been agreed to between Jeffrey and Glenn Dubin; is that right? 14 MR. O'BRIEN: Objection to form. A. I don't know if "agreement's" the word. 15 I was informed that if we accommodated this 11:03:53 request the redemption issue would go away, were 16 the words I remember. Q. When you were informed that, had 17 Mr. Zwirn decided whether to accommodate Mr. Epstein's request to transfer the interest? 18 A. He asked me to look into whether we could do it because they wanted to do it postdated 19 to 1/1/06. Q. And you did look into it; correct? 20 A. Yes. 11:04:29 Q. And determined you could do it? 21 A. With certain representations from Financial Trust that we could be comfortable in 22 doing it since we were within the same tax year. Q. And you conveyed that news to 23 Mr. Zwirn -- is that right? -- that in fact you could do -- you could accommodate the request? 24 MR. ARFFA: Objection to form. A. Yes. 25 Q. And did Mr. Zwirn indicate to you that 11:04:57 he was then going to accept Mr. Epstein's proposal EFTA01165442 37 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 that he -- you cardiac date his request to transfer the interest and he would withdraw the 3 redemption -- or the redemption issue would go away? 4 MR. O'BRIEN: Objection to form. A. My understanding was Dan was going to 5 inform Glenn and Glenn would inform Jeffrey. Q. Did your accommodating Mr. Epstein's 6 request to transfer the interest from FTC to JEEPERS, did that take time and effort and money 7 by D.B. Zwirn & Co.? A. It took some time and some effort and 8 some amount of legal fees to outside counsel to document. 9 Q. Okay. Now, when Mr. Zwirn -- strike that. 10 As I understood your testimony, Mr. Zwirn said that if Mr. Epstein would -- if the 11 fund would accommodate Mr. Epstein's request the redemption issue would go away? 12 A. It's not the fund accommodating; it's the GP of the fund. 13 Q. If the GP accommodated Mr. Epstein, the redemption issue would go away; is that right? 14 A. Yes. Q. And that occurred in December, this 15 conversation? A. Yes. 16 Q. So as of December was the redemption issue still there, still alive? 17 MR. O'BRIEN: Objection to form. MR. ARFFA: Objection to form. 18 A. We never thought it was a redemption or valid redemption, so we didn't look at it this 19 way. We just thought it was somebody demanding his money back, which he wasn't entitled to. So 20 that's how we operated. Q. Did you understand that if -- strike 21 that. If Mr. Epstein did not say the 22 redemption issue would go away, was the GP willing to go through this effort to nevertheless 23 accommodate his transfer of his interest? MR. O'BRIEN: Objection to form. 24 MR. ARFFA: Objection to form. A. I don't understand. Can you ask it 25 again? Q. Yeah. As I -- you say that the general 11:05:21 11:06:12 11:06:34 11:06:57 11:07:40 EFTA01165443 38 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 partner accommodated Mr. Epstein's desire to transfer the interest, and Mr. Epstein said that 3 the redemption issue would go away if you accommodated him; right? 4 A. Through Glenn through Dan, yes. Q. Okay. 5 If -- was the reason why -- one of the 11:08:01 reasons why you accommodated Mr. Epstein and went 6 through the effort of helping him transfer it because you wanted him to make the redemption 7 issue go away? That was part of the deal, as you understood it? 8 MR. O'BRIEN: Objection to form. A. My recollection is that was the only 9 reason we would have accommodated the request from Mr. Epstein. 10 Q. After the transfer of the interest in 11:08:43 December of '06/early '07 is when the documents 11 were signed. Does that sound right to you? A. My recollection is it was executed 12 sometime in late December 2006. Q. After that point in time when was the 13 next time that you heard that Mr. Epstein, if at all, wanted his money back still? 14 A. I received a phone call message from Harry on January 31st, 2007, when I returned. I 15 happened to be walking down the street in London, 11:09:25 so that's -- for some reason I have a specific 16 recollection. But he called and said, Where is Jeffrey's money? I said, what do you mean? What 17 are you talking about? He said, Where is Jeffrey's 80 million? I said, You're not entitled 18 to it and we accommodated your request -- transfer request. We were told that if we did that you'd 19 stop making these demands, it would go away. He said, I don't know what you're talking about on 20 these transfers issues. I just know Jeffrey asked 11:09:59 me where his 80 million was, so that's why I'm 21 calling you. Q. So after you had this conversation with 22 Mr. Beller -- strike that. What was your reaction to having this 23 call with Mr. Beller where he's saying, I want my 80 million, after you had understood Mr. Epstein 24 said it was going to go away? A. I recall being quite angry. 25 Q. So how did you leave things with 11:10:29 Mr. Beller once you had this call with him on EFTA01165444 39 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 January 31st? A. Something along the lines of if you 3 want your money back, you have a lockup agreement and a schedule of redemption dates, and you can 4 exercise it per the agreement. Q. Did you convey the substance of your 5 conversation with Mr. Beller with Mr. Zwirn? 11:10:55 A. Yes, of course. 6 Q. What was his reaction? A. Anger. 7 Q. Did he tell you what he was going to do in response to having heard from Mr. Mr. Beller 8 that Mr. Epstein still wanted his 80 million back? A. I believe he was going to call Glenn. 9 Q. This series of calls happened on like January 31st is what you recall? 10 A. (Nods head.) 11:11:36 Q. What then happened to the $80 million 11 request that had been renewed? What's the next thing you recall? 12 MR. O'BRIEN: Objection to form. A. I can't recall whether there were 13 conversations that Dan relayed to me involving Glenn and including his wife, whether they 14 occurred prior to February 14th or shortly thereafter. But I don't recall being specifically 15 involved in any activities or discussions with 11:12:15 regard to Epstein until the morning that they sent 16 us a subsequent letter, which I think was on February 14th. 17 Q. And what -- the letter you're referring to is a letter that was sent on February 14th 18 where Mr. Epstein demanded all of his money back? A. Yes. 19 MR. O'BRIEN: Objection to form. The document speaks for itself. But I think we 20 know what letter we're talking about. 11:12:39 Q. What caused you to get back involved 21 with Mr. Epstein's withdraw request on the morning of February 14th? 22 A. My recollection is that Harry was berating some of the junior staff in the IR 23 department about receiving some type of schedule and that the schedule had an error on it. And 24 then Dan also -- I think Harry also called Dan and wanted to see the redemption schedule, and I think 25 he wanted to see a comparison of the redemption 11:13:47 schedule, the current version, versus whatever had EFTA01165445 40 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 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL been sent to him back in November. I also recall a very heated conversation between Dan and Harry where once again I sat in Dan's office but was not on the phone. Q. What do you recall doing on the morning of February 14th regarding Mr. Epstein's 11:14:34 redemption? MR. ARFFA: Objection to form. A. I don't recall a redemption on the morning of the 14th. What I recall was Harry verbally abusing our IR staff with regard to gathering certain information. So I decided to run interference and started examining that information, working directly with the staff to make sure I understood what was right or wrong and to make the corrections and to make sure that what 11:15:06 was sent to him was correct. Q. And your memory is that the derating or -- MR. ARFFA: Verbal abuse. Q. -- verbal abuse of the IR staff had -- by Mr. Beller had to do with Mr. Epstein's redemption rights? MR. ARFFA: Objection to form. A. I don't believe it was with regard too his rights. I think it was with regard to a 11:15:33 schedule and an error in a date on that schedule. Q. The schedule was of what? A. It was a schedule of eligible redemption dates and investment tranches eligible for that redemption date. Q. So your memory is that Mr. Beller was berating the staff prior to February 14th about a schedule of redemption dates? A. Yes. Q. And you decided to -- and he was upset 11:16:13 that there was some sort of error on that schedule? A. Yes. Q. And so as a consequence you decided to run interference for them and start dealing with Mr. Beller? A. Well, that's -- I almost -- I always tried to run interference with Mr. Beller, because he had a history of being abusive to our junior staff. So on prior occasions I had asked 11:16:44 Mr. Beller to only call me and not to call any of EFTA01165446 41 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 our staff members. Q. You mentioned that Mr. Beller had 3 wanted to see a comparison of the current version of redemption schedule versus one he'd received 4 earlier? A. Yes, I recall a request -- I can't 5 recall whether it was before or after Dan had some 11:17:23 conversation with Harry -- that we had to send a 6 comparison schedule. Q. Okay. 7 So what did you do on the morning of the 14th with regard to -- strike that. 8 So let's get the chronology right. January 31st you heard from Mr. Beller that 9 Mr. Epstein wants his 80 million back; right? A. (Nods head.) 10 Q. And on the -- at some point did you 11:17:53 hear from your staff that Mr. Beller was 11 complaining about some redemption schedule that he'd received prior to February 14th? 12 MR. ARFFA: Objection to form. A. I don't recall Mr. Beller complaining 13 about a redemption schedule prior to February 14th. I don't recall. 14 Q. The complaints that Mr. Beller had about the redemption schedule that you're talking 15 about, did those occur on February 14th? 11:18:29 A. I believe they did. 16 Q. They occurred in the hours right before you got the letter from Mr. Epstein asking for a 17 full redemption; right? A. I believe so. 18 Q. Now, after you got the February 14th letter, did you participate in any discussions 19 with Mr. -- where Mr. Dubin was present about Mr. Epstein's redemption? 20 A. I don't recall participating in any 11:19:22 conversations between Dan and Glenn where I was on 21 the phone line. Q. You did not talk directly to Glenn? 22 A. With regard to Epstein, no. Q. As I understand it, you -- did Dan 23 convey to you the substance of some conversations he had with Glenn about Mr. Epstein's withdraw 24 request during February of 2007? A. I believe so. 25 Q. And what do you recall Mr. Zwirn 11:19:55 telling you about those conversations? EFTA01165447 42 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 A. Just the general context of my recollection is that Glenn and Ava, his wife, were 3 going to try to talk Jeffrey off the ledge, was the term being used in conveying the conversation 4 Q. Did you ever hear what had come of those conversations? 5 A. I don't recall any resolution to the 11:20:30 conversations. 6 Q. Let me talk to you quickly about the Highbridge managed account. Prior to becoming 7 CFO, did you have any involvement with the Highbridge managed account? 8 A. No. Q. Did you make any investments for the 9 Highbridge managed account? A. I would make investments that would be 10 funded by the various funds, which may have 11:21:21 included the managed account, but I didn't have 11 any involvement with those allocation decisions. Q. Who made the allocation decisions? 12 A. Prior to October of '06, I believe allocation decisions were the primary 13 responsibility of Perry Gruss. Q. Was there anyone in particular who was 14 responsible for managing the Highbridge managed account within Zwirn? Is there someone who that 15 was their primary task? 11:21:59 A. Prior to October '06, I was not aware 16 of anyone whose main job was to manage that managed account. 17 Q. Do you have any idea what role Glenn Dubin had in managing the Highbridge managed 18 account? A. Prior to October '06? 19 Q. Uh-huh. A. No. 20 Q. When did you first hear that Highbridge 11:22:34 wanted to withdraw its money from the managed 21 account? MR. O'BRIEN: Objection to form. 22 A. At some point between October '06 and January '07, I was made aware that Highbridge had 23 exercised an option to freeze 50 percent of their account, but I can't recall whether that freeze 24 date was April '05 or April '06. Q. Did you understand that -- 25 MR. O'BRIEN: Have you finished 11:23:18 answering the question? Have you finished EFTA01165448 43 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 your answer? THE WITNESS: I haven't finished my 3 answer. I believe they had an option to put a 4 hundred percent of their account into what we call freeze mode, which is very different from 5 a liquidation or redemption, in April '07. We 11:23:38 received letters, the same letter addressed to 6 multiple parties at D.B. Zwirn, in January 2007 that instructed us to freeze their 7 account and to turn over management of that account to Highbridge. 8 Q. Prior to that request in January of 2007, did you have any indication or hint that 9 Highbridge intended to try to have the account actually liquidated or paid out to them or taken 10 away from D.B. Zwirn's role? 11:24:28 MR. O'BRIEN: Objection to form. You 11 asked multiple questions there. Q. Let me ask it this way: As I 12 understand it, you heard that Highbridge had asked to freeze part of the account sometime in '06, 13 which meant that D.B. Zwirn would continue managing it? 14 A. Yes, under -- under the agreement, D.B. Zwirn was to manage it, even with a hundred 15 percent of the managed account in freeze mode. 11:24:50 Q. And at their discretion could liquidate 16 investments and pay them out, D.B. Zwirn could? MR. ARFFA: Objection to form. 17 A. Would manage out investments. Q. When was the first time you heard that 18 Highbridge wanted to take over immediate control of the account and take it away from D.B. Zwirn? 19 A. Sometime in late January of '07, we received by hand messenger multiple -- a single 20 letter addressed to multiple parties at 11:25:22 D.B. Zwirn. 21 Q. Prior to receiving that lettered, did you have any hint that Highbridge was going to 22 take that kind of action of immediately trying to take control of the account? 23 A. No Q. Were you familiar with -- strike that. 24 As of the end of '06, how did the assets in the Highbridge managed account compare 25 to the assets held by the onshore fund, in terms 11:25:53 of the type of investments? Were they identical? EFTA01165449 44 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 A. No, they were not identical. MR. ARFFA: Objection to form. 3 A. There was a tremendous amount of overlap in holdings amongst the various funds in 4 the managed accounts with different allocations based upon liquidity and tax issues. So nearly 5 every investment that was in the Highbridge 11:26:23 managed account was a participation in a larger 6 investment that were held by other funds of D.B. Zwirn. 7 Q. As I understand it, a big chunk of what was in the Highbridge managed account was an 8 investment in some German housing company that was publicly traded? 9 A. Yes. Q. Did the onshore fund and offshore fund 10 also have investments in that same company or was 11:26:52 that something that was unique to the Highbridge 11 managed account? A. There was an investment in both funds 12 in that company. Q. Given the overlap of investments 13 between the Highbridge managed account and what was in the onshore and offshore fund, was there 14 any concern that if you tried to sell the Highbridge -- the assets just in the managed 15 account that that would negatively impact the 11:27:27 onshore and offshore funds? 16 MR. O'BRIEN: Objection to form. A. Absolutely. That was of great concern, 17 and that's one of the primary reasons, as I understand it, why the investment management 18 agreements did not allow for immediate withdrawals or liquidation of the Highbridge account and that 19 they would receive proceeds in the ordinary course when realized but that terminating the account had 20 the practical efficacy of not allocating any new 11:28:01 investments to the Highbridge account. 21 Q. Would the opposite be true as well, that if you sold a bunch of assets in the onshore 22 fund or offshore fund it could negatively impact the Highbridge managed account? 23 MR. ARFFA: Objection to form. A. It's quite possible. 24 Q. If you had a run on the onshore fund, for example, and you had to liquidate investments 25 to pay investors back, could that cause Highbridge 11:28:27 to be unable to sell its assets? EFTA01165450 45 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 MR. O'BRIEN: Objection to form. A. Well, your question supposes a 3 hypothetical that couldn't happen because of the redemption schedule in terms and lockups and the 4 ability for the general partner to gate, to prevent a run on the bank from investors. 5 Q. If for whatever reason you needed to 11:28:53 liquidate assets in the onshore fund, for example, 6 could that make it harder for Highbridge to liquidate its assets? 7 MR. ARFFA: Objection. I think that's asked and answered. 8 A. You're asking me a hypothetical that preconditions or presupposes the answer, so I 9 don't understand your question. Q. I'm asking -- how does my hypothetical 10 presuppose a condition? 11:29:21 A. I said presupposes the answer. 11 Q. Which what? A. Well, I interpret your question as 12 saying if it rains I'll get what. So I don't understand your question. 13 Q. Because it follows logically if the onshore fund has to liquidate its assets 14 Highbridge would have problems selling its assets? MR. O'BRIEN: Objection. 15 MR. ARFFA: Objection. 11:29:39 Q. Is that right? 16 A. Not necessarily have problems selling, but it would potentially cause material harm in 17 value to the Highbridge assets. Q. Because they're marked to market, and 18 if you have to have a fire sale of these assets, that would then impact the value of the Highbridge 19 assets that they still held; is that right? MR. O'BRIEN: Objection to form. 20 A. That's a logical conclusion to your 11:30:00 hypothetical question. 21 (Discussion off the record.) (Exhibit 60, DESCRIPTION, marked for 22 identification.) Q. I'm going to show you Exhibit 60. 23 (Exhibit 61, DESCRIPTION, marked for identification.) 24 Q. While we're on that, I'm going to show you what we're marking as Exhibit 61. 25 Q. Do you recognize Exhibit 60 and 61? 11:31:11 A. Vaguely. EFTA01165451 46 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 3 4 Q. Are the Exhibits 60 and 61 you e-mailing to yourself these e-mails? A. Oh, when at some point we were notified there'd be potential litigation or arbitration, I put together information for purposes of having it handy by going through the D.B. Zwirn e-mail 5 system with certain screens. 11:32:11 Q. So in January of 2010, you had access 6 to everyone's -- or at least Mr. Zwirn's e-mail account at Highbridge -- I mean at D.B. Zwirn; is 7 that right? A. Yes, I had access to the entire 8 D.B. Zwirn e-mail system. Q. Including the e-mails that were not 9 yours? A. Yes. 10 Q. And you went -- and what did you do? 11:32:31 You went through those e-mails trying to find 11 e-mails that you thought might be relevant to a dispute with Mr. Epstein? 12 MR. ARFFA: Objection to form. A. Yeah, I think so. 13 Q. These are -- right, these are two e-mails from 2006 between Mr. Dubin and 14 Mr. Zwirn -- right? -- that you originally didn't have any involvement in; right? 15 A. Correct. 11:33:07 Q. So what do you go back into the system 16 and search for Mr. Dubin's name and Mr. Epstein's name? 17 MR. O'BRIEN: Objection to form. Q. Let me strike that. 18 A. I can't remember exactly how I did it. Q. How did you locate these e-mails, even? 19 A. There was -- there was a program on our Outlook system where I could search by sender, 20 keywords, date ranges, a whole host of different 1 1 :33: parameters. 21 Q. How much time did you spend searching through these old e-mails? 22 A. I don't recall. Q. Was it days? 23 A. I don't recall in terms of how many days I spent or how much time per day I spent. 24 Q. Was it a big job? Did it take you many hours? 25 A. I don't -- I didn't consider it a big 11:34:09 job. I did not -- I don't recall it taking up a EFTA01165452 47 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 significant amount of time. Q. Did someone ask you to do this? 3 MR. O'BRIEN: Objection to form. Objection on privileged grounds, if there is a 4 privileged response to that. THE WITNESS: Yeah, there is. 5 Q. Did counsel ask you to do this or did 11:34:30 you do it on your own initiative? 6 MR. O'BRIEN: I'm going to object to that question on privileged grounds. You can 7 answer the question as to whether or not you did it on your own initiative. 8 Q. Let me ask it this way: Were you given a specific instruction by somebody to do this, 9 search through these e-mails? It's a "yes" or "no." 10 A. It's not a "yes" or "no." I 11:35:08 volunteered that I could gather information to 11 counsel. Counsel said that would be good. MR. O'BRIEN: Stop there. 12 THE WITNESS: Yeah. (Exhibit 62, DESCRIPTION, marked for 13 identification.) Q. Let me show you Exhibit 62. Have you 14 seen Exhibit 62 before? A. I can't recall if I saw this specific 15 one. 11:36:10 Q. Did you participate in preparing state 16 of the firm talking points that was going to be given on or about October 30th, 2006? 17 A. I recall being frequently active in prepare state of the firm talking points. I do 18 not recall if I participated in this specific date 's talking points. 19 Q. Would Mr. Zwirn be the one to sort of give the state of -- strike that. 20 Were these talking points for some 11:36:37 meeting of the firm employees? 21 A. It was common practice once a month on Monday mornings to have a state of the firm 22 conference call, which could be attended in person in the main conference room. 23 Q. And Mr. Zwirn would -- would he make the presentation or would you? 24 A. Dan would. Q. Number 2 on the talking points says 25 there have been some rumors about our firm needing 11:37:07 to sell assets in order to meet a large investor EFTA01165453 48 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 redemption. These rumors are false. Do you know what that's referring to? 3 A. Given that this was the Monday after we had disclosed to the world our talking points 4 about the issues and the internal investigation we were about to undertake, there were lots of rumors 5 out there, including pending newspaper articles 11:37:41 that we were aware were being prepared and made 6 those rumors that were false. Q. So in other words there wasn't some 7 specific rumor about you needing to sell assets to meet a large investor redemption? 8 A. There may have been. But as I said, there were multiple rumors flying around that 9 weekend. (Exhibit 63, DESCRIPTION, marked for 10 identification.) 11:38:23 Q. I'm going to show you real quick 11 Exhibit 63. You will recognize Exhibit 63 was the promissory note from the onshore fund to the 12 offshore fund for the $108 million? A. Yes, I recognize this. 13 Q. And you signed it? A. Yes. 14 Q. The demand note, it recites that there was a loan made by lender -- it's on the first 15 page -- that there was a loan made by the lender 11:38:58 to the borrower on June 13th, 2005, the maximum 16 aggregate principal amount of such loan at the time being $175 million. 17 Do you see that on there? A. Yes. 18 4 • MR. SUSMAN: It's in the defined terms, 19 Bill. MR. O'BRIEN: Thank you. 20 Q. Was there actually some loan made on 11:39:20 June 13th, 2005, of $175 million? 21 MR. ARFFA: Objection to form. A. No, I think the 175 was sort of the 22 maximum that was outstanding. I think the loan that was made in June of '05 was 78 million. 23 Q. On the Schedule I that you're looking at, is that your handwriting? 24 A. Yes. Q. Where it says notation made by DL, 25 that's you? 11:40:05 A. Yes. EFTA01165454 49 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 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL Q. The information that's on Schedule I is information that you got from whom? A. Bob Sumberac. Q. Got you. If you could, just turn to -- there are these letter agreements at the end of Exhibit 63 dated October 31st, 2006. A. Yes. Q. I just want to run through real quick, there are various entities. There's D.B. Zwirn & Co., L.P.. and that's the manager? A. Yes. Q. And there's also something called D.B. Zwirn Partners LLC, which was the general partner of the fund? A. Of the onshore fund. Q. Of the onshore fund. And so D.B. Zwirn & Co., LLP, the manager, received management fees from the onshore fund; is that correct? A. I'm sorry? Q. Did D.B. Zwirn & Co. LLP -- A. L.P. Q. -- L.P., I'm sorry, receive management fees from the onshore fund? A. Correct. Q. And the incentive fee went to D.B. Zwirn Partners, LLC? A. There was an incentive allocation that went to LLC. Q. You were the CFO of both of those entities; is that right? A. I can't recall specifically if I was the CFO of LLC, but I was the CFO of L.P. at that point in time. MR. SIFFERT: It's been an hour. MR. SUSMAN: Has it? Do you want to break or do you want to go to 12:30 and have lunch? What's your reference? It's kind of of up to you. MR. SIFFERT: I don't think we should go for another 45 minutes. MR. SUSMAN: Let's take a break. THE WITNESS: I'm fine. THE VIDEOGRAPHER: We're off the record. The time is 11:42. This is the end of Tape 2. (Recess taken from 11:42 to 11:50.) 11:40:35 11:40:57 11:41:21 11:41:58 11:42:17 EFTA01165455 50 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 THE VIDEOGRAPHER: We're back on the record. The time is 11:50. This is the 3 beginning of Tape 2 -- 3, sorry. Q. If you could, on Exhibit 63, which is 4 the promissory note from the onshore to the offshore fund, it recites in the first paragraph 5 that the -- it says little I, the outstanding 11:51:21 principal amount of the loan payable on the 6 earlier to occur of, and it says written demand by lender and December 31, 2006, maturity date. And 7 then it little 2 is the interest is repayable. Was it the expectation when you entered 8 into this prom sorry note that the loan, the 108 million, would be paid by December 31, 2006? 9 MR. ARFFA: Objection to form. A. Yes. 10 MR. ARFFA: Harry, can I also ask, 11:52:00 there does not appear to be a Bates stamp on 11 there. I don't think that -- MR. SUSMAN: Yeah, because it's like a 12 TI F image. If you notice the signatures and handwriting, for some reason when it prints 13 out, it doesn't come with a Bates number. It's on one of your CDs. 14 MR. O'BRIEN: This was produced by us? MR. SUSMAN: Yes. 15 (Exhibit 64, DESCRIPTION, marked for 11:52:25 identification.) 16 Q. Let me show you Exhibit 64. This is an unsigned version of a promissory note to -- 17 between the onshore fund and Highbridge for $50 million. Do you know was a note like this 18 actually executed? A. Yes, I believe it was. 19 Q. Again, this states a maturity date of the earlier to occur of of December 31, 2006, was 20 listed. Again, was it your expectation that this 11:53:00 50 million would be repaid by the end of the year? 21 A. Yes. MR. ARFFA: Objection to form. 22 Q. So what happened? Why wasn't the offshore fund repaid and Highbridge repaid by 23 year-end 2006? A. My recollection is that both of these 24 loans were repaid by the end of 2006. Q. Were new loans put in place? 25 A. Yes. 11:53:22 Q. So they were refinanced, in effect? EFTA01165456 51 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 A. No. Q. What was the difference between the old 3 notes and the new? A. In conjunction with our internal 4 reviews and working with Deloitte, we found that there were other amounts owed from the onshore 5 fund to other funds, and those were documents as 11:53:48 notes as well. 6 Q. Actually, I probably marked some of these. Hold on. 7 (Pause.) Q. By the way, when you participated in 8 the investor calls, there were scripts? When you listened there was a script that Mr. Zwirn was 9 supposed to follow? A. Yes. 10 Q. Did you participate in drafting or 11:54:50 developing those scripts? 11 A. Yes. Q. Do you know who else participated in 12 drafting those scripts? A. There were a very large number of 13 people who participated in those scripts, including multiple counsels. 14 Q. Do you know whether Glenn Dubin was involved in preparing the scripts? 15 A. I recall that there was a script 11:55:24 specifically for Glenn. I do not recall if Glenn 16 made any comments on that crypt. Q. You mean a script that Glenn was 17 specifically supposed to use? For what purpose? MR. ARFFA: Objection to form. 18 A. To the extent he received calls from investors or other parties asking about the Zwirn 19 disclosures. Q. Was it somehow different project the 20 script that Mr. Zwirn was going to use? 11:55:55 A. My recollection was that it was 21 consistent with the Zwirn script but less detailed so that if detailed questions occurred Glenn could 22 refer them back to Dan. Q. Were there any particular investors 23 that you anticipated might call Mr. Dubin or who Mr. Dubin was tasked with calling? 24 MR. O'BRIEN: Objection to form. A. I don't recall us tasking Mr. Dubin 25 with making any calls, but we believed he would 11:56:29 receive a large number of calls because many of EFTA01165457 52 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 the important investor relationships were originally sourced through Glenn. 3 Q. By the way, were you ever told when Mr. Dubin first heard object these issues 4 regarding the financing of the airplane or the payment of management fees? 5 A. Yes, I do recall shortly after Perry's 11:56:58 termination Lawrence Cutler telling me that they 6 had reviewed the results of the Schulte investigation into those two issues at some point 7 in mid to late September and that Glenn's conclusion was that Perry had to be fired. 8 Q. Did Mr. Cutler tell you anything more about what Mr. Dubin's reaction was to hearing 9 about the use of investor funds to finance the plane or prepayment of management fees? 10 A. That's about the only thing I can 11:57:49 remember. 11 Q. Let me show you what's been previously marked as Exhibit 38. Oh, wait. Can I see 12 Exhibit 38 real quick? I just want to make sure it's the same. 13 A. (Handing.) Q. It is. Perfect. Sorry. 14 This is a series of e-mails in the late morning of November 13th. Mr. -- first of all, 15 who is Anne Colice? 11:58:44 A. She was a junior assistant to Dan's 16 primary assistant. Q. Was she just Dan's assistant or did she 17 work as anyone else's assistant? A. I think just Dan. 18 Q. And she sends an e-mail to Mr. Zwirn that says that Harry Beller has called or these on 19 the phone and that then that he called and it was very important. Mr. Zwirn then forwarded that to 20 you. 11:59:15 Did you have any discussions with 21 Mr. Zwirn after you got this e-mail about what Mr. Beller was calling about? 22 A. I don't recall. Q. You -- upon getting the e-mail you then 23 forward it to Elise Hubsher. Why did you do that? A. I don't recall. 24 Q. You have here a note: Need their redemption schedule. Why were you asking her for 25 Mr. Epstein's redemption schedule? 11:59:46 A. I just don't recall. EFTA01165458 53 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 Q marked as Ms. NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL Let me show as Exhibit 39. Hubsher sending for Financial Trust? A. I don't see to me here. Q. If you look this different? Maybe. MR. O'BRIEN: Q. Sorry, let me apologize. A. Okay. Q. Exhibit 40, do you recognize it as an e-mail from Ms. -- MR. ARFFA: Sorry, which? MR. SUSMAN: This is Exhibit 40. MR. ARFFA: What is the Bates stamp? MR. SUSMAN: The Bates stamp is DBZCO-FTC_2114 is the first page. MR. ARFFA: That's Exhibit 40? MR. SUSMAN: That's Exhibit 40. Q. Do you recognize Exhibit 40 as Ms. Hubsher then sending you this redemption schedule for FTC? MR. ARFFA: I just want to put on the record, as we did last time, where the names of other investors appear, we do ask that that 12:01:18 be treated as confidential. MR. SIFFERT: It's on the first page of the document. A. I see what's on top here. I don't recall specifically this e-mail. Q. Do you know what you would have -- why -- what you would have been doing with the FTC redemption schedule on November 13th, 2006, during the day? MR. O'BRIEN: Objection to form. A. I can't recall specifically this e-mail. Q. Do you recall reviewing this redemption schedule on November 13th, 2006? A. I don't actually recall reviewing it, but that doesn't mean I didn't. Q. Okay. Do you recall sending it to anyone else? A. No. Q. Did you ever specifically send this redemption schedule to Harry Beller on or about you what's been previously Do you recognize Exhibit 39 you a redemption schedule an e-mail from Ms. Hubsher at the top, it's -- oh, is 12:00:32 Let me see. show you Exhibit 40. I 12:01:00 12:01:50 12:02:17 EFTA01165459 54 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 November 13th, 2006? A. I just don't recall. 3 Q. In your reviewing of the old e-mails that are archived at D.B. Zwirn, have you ever 4 seen any evidence of anybody sending this redemption schedule to Harry Beller on or about 5 November 13th, 2006? 12:02:47 A. I don't recall. 6 Q. Let me just for ease show you again another copy of Exhibit 5. You've got it there. 7 A. Okay. Q. That's the $80 million request. You 8 see there's -- the first sentence of it begins, As per our conversation, I hereby instruct you to 9 liquidate an interest in the amount of $80 million? 10 Did you discuss with Mr. Zwirn what 12:03:26 conversation Mr. Epstein was referring to? 11 A. I remember Dan denying that he ever promised Jeffrey $80 million. But I don't recall, 12 prior to receiving -- or seeing a copy of this letter, Dan mentioning a conversation with Jeffrey 13 regarding 80 million. Q. After you got the letter, did you have 14 any conversations with Mr. Zwirn about whether he had had some conversation with Mr. Epstein about 15 $80 million? 12:04:17 A. As I stated, I remember Dan denying 16 that he was ever promised Jeffrey $80 million. Q. How did it come up that Mr. Zwirn was 17 denying that he ever promised Mr. Epstein 80 million? Why did Mr. Zwirn say that to you? 18 MR. ARFFA: Objection to form. A. Because it's in the letter. 19 Q. And so did you ask Mr. Zwirn specifically: Did you promise Mr. Epstein 80 20 million? 12:04:55 A. I can't remember exactly how I phrased 21 the question, but I do recall saying why would Jeffrey think he was entitled to $80 million, 22 something along those lines. Q. Dan said in response what? 23 A. Absolutely there's no way in the world I would have promised that. It's completely 24 illogical. He's not entitled to it. Q. Correct you thought Mr. Epstein's 25 requests, these redemption requests, he sent in 12:05:32 were bogus; is that right? EFTA01165460 55 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 MR. O'BRIEN: Objection to form. A. I'm not sure of the ultimate definition 3 of bogus, but we didn't think that they were valid redemption requests. 4 (Exhibit 65, DESCRIPTION, marked for identification.) 5 Q. Let me show you Exhibit 65. This is an 12:05:53 e-mail from you to the auditors and Mr. Liebowitz. 6 You say, With you forward to our audit partner the correspondence between us and Epstein re his bogus 7 redemption request; right? A. Uh-huh. 8 Q. I assume you include within the bogus redemption requests Exhibit 5; right? That's the 9 $80 million letter that's here (indicating). A. I'm not sure whether I'm referring to 10 that or to the February letter. 12:06:26 Q. Well, you thought they both were bogus, 11 that's why you say his bogus redemption requests; right? 12 MR. SIFFERT: May I just have a moment with counsel? 13 A. I'm not sure why this isn't privileged. (Discussion off the record.) 14 Q. Put aside Exhibit 65. We'll deal with it later. Mr. Lee, you thought Exhibit 5 was 15 bogus -- right? -- the 80 million? 12:07:09 A. Apparently I did at the time I wrote 16 this e-mail. Q. Yeah, okay. 17 Q. Did you have any discussions with Mr. Zwirn about putting in writing to Mr. Epstein 18 immediately after you got the $80 million request something saying this is bogus or silly or 19 ridiculous or you're lying when you suggest, anything to that effect? 20 MR. ARFFA: Objection to form. 12:07:37 Q. Did y'all discuss that? 21 A. I believe we did, but most of those conversations were privileged. 22 Q. Were any of them not privileged? A. It's possible, but I can't recall the 23 specifics of ones that were or were not. MR. O'BRIEN: Can I say with regard to 24 Exhibit 65 an issue comes up it appears to be a privileged communication that should not 25 have been produced. So I'm just putting you 12:08:07 on notice right now of that, and we will EFTA01165461 56 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 follow up with that. I just wanted to give you notice of that immediately. 3 MR. SUSMAN: We'll deal with it. I'm not quite sure how that could be privileged, 4 but no point in fighting about it. Q. So am I correct, Mr. Lee, that without 5 violating the privilege you can't explain to me 12:08:34 why D.B. Zwirn didn't respond in writing to 6 Mr. Epstein's $80 million request at the time and explain it was invalid or anything to that effect? 7 MR. ARFFA: Objection to form. MR. O'BRIEN: Objection to form. 8 Without revealing privileged communications, if you can answer that 9 question, if you understand the question, you can. 10 A. The conclusions as to why we didn't 12:09:06 respond were based upon legal advice. 11 Q. Now, you mentioned the meeting with Mr. Epstein where it was canceled, set up. I'm 12 going to show you, to refresh memory, Exhibit 66. (Exhibit 66, DESCRIPTION, marked for 13 identification.) Q. You recall that you had flown in from 14 Florida to attend the meeting, and it was canceled while you were in the air? 15 A. Yes, I remember that pretty vividly. 12:09:36 Q. You were on Thanksgiving break with 16 your family? A. (Nods head.) 17 (Exhibit 67, DESCRIPTION, marked for identification.) 18 Q. Let me show you Exhibit 67. This is the day -- you sent an e-mail to Mr. Zwirn I guess 19 the day the meeting was canceled November 21st saying did you end up chatting with him at 10 a.m. 20 today, Mr. Epstein, and then Mr. Zwirn responds to 12:10:17 you; correct? 21 A. Yes. Q. Okay. And Mr. Zwirn at the end says 22 bottom line we are showing extreme fealty, which is what he wants. I realize the absolute bizarre 23 nature of this response, but critical to keep him capital. 24 Did you understand why Mr. Zwirn thought it was -- why Mr. Epstein wanted you to 25 show extreme fealty to him? 12:10:48 MR. ARFFA: Objection to form. EFTA01165462 57 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 A. Can you ask the question again? Q. Yeah. Mr. Zwirn is saying, We're 3 showing extreme fealty, which is what he wants. A. Okay. Yeah, I read that. 4 Q. Did you have any understanding where Mr. Zwirn got that idea from? 5 A. We -- Dan believed that Jeffrey liked 12:11:24 to be kowtowed to, was a comment he had made to me 6 before. So that would be consistent with that statement. 7 Q. So Dan believed that he -- what Jeffrey really wanted was just for Dan to kowtow to him? 8 MR. O'BRIEN: Objection. Q. Is that -- 9 MR. O'BRIEN: Objection to form. A. Ask the question again. 10 Q. Are you saying did you understand that 12:11:59 Dan thought it was necessary to kowtow to Jeffrey? 11 MR. ARFFA: Objection to form. A. Yes, I believe it was -- Dan believed 12 it was necessary to kowtow to Jeffrey. Q. Did you understand why Dan said, I 13 realize the absolute bizarre nature of this process but critical to keep him happy. 14 Why was it critical to keep Mr. Epstein happy? 15 A. In light of our announcements and 12:12:27 negative press and pending SEC investigation, we 16 thought the last thing we needed was litigation from a major investor who was constantly in the 17 press himself for his other issues. Q. Now I want to show you what have been 18 previously marked as Exhibit 31. Then I'm going to show you what I marked as Exhibit 68. 19 (Exhibit 68, DESCRIPTION, marked for identification.) 20 MR. O'BRIEN: I'm just going to look at 12:13:07 Exhibit 31, which I don't have a copy of. 21 MR. SUSMAN: Sure. Q. Do you see that -- am I -- does it look 22 to to you what Exhibit 68 is you forwarding on an e-mail that you had received from Cara Howe on 23 October 18th, 2006, titled "redemption schedule"? A. That would be a logical conclusion. 24 Q. And if you look at Exhibit 31, isn't that the original of the e-mail that you received 25 on October 18th, 2006, from Ms. Howe? 12:13:52 A. I have no reason to believe that this EFTA01165463 58 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 3 4 5 6 7 8 9 10 11 12 14 right? 15 A. Well, money's fungible, but yes, it was 12:15:17 a loan to the management company. 16 Q. Why were you sending to Mr. Ray burn this redemption schedule for the redemption -- for 17 the potential redemptions of investors in the funds themselves? 18 A. Because that would have a material impact on the potential revenue of the management 19 company if its assets under management were to decline. And so therefore as part of his 20 diligence, he presumably wanted to have a sense of 12:15:51 what the AUM profile would look like to support 21 our revenue projections to support the loan. Q. So, in other words, was Citi attempting 22 to see in November of 2006 or to make sure that investors could not withdraw in large numbers from 23 the funds, which would have a bad impact on the management company? 24 MR. O'BRIEN: Objection to form. MR. ARFFA: Objection to form. 25 A. I can't recall specifically why he 12:16:20 wanted to see it, but in conjunction with his is -- that the answer is not yes. Q. Okay. Why were you -- and if you look, Exhibit 31 is a spreadsheet that shows a -- MR. ARFFA: Do you have 31? MR. SUSMAN: I don't have copies with me. It was previously marked. I don't have a copy myself. 12:14:15 Q. It's a spreadsheet that shows the redemption rights of various investors. A. Yes MR. O'BRIEN: When he asks questions like that about a thick document, at least take the time to look at it to see whether it's correct. Q. Who is Brian ray burn CK? A. Brian was a mid level lending officer at Citibank and was part of the group that was in 12:14:41 charge of the loan that Citibank had made to D.B. & Co., the management company. Q. This was a loan that allowed the management company to fund its operations; right? A. It was a working capital loan. 13 Q. For the management company itself? A. For the management company. Q. To pay the management company expenses; EFTA01165464 59 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 duties as a loan officer, it would make sense for him to look at something so material to the 3 operations of the management company. Q. We talked earlier about the transfer 4 from FTC to JEEPERS. You were involved in documenting the assignment from FTC to JEEPERS; 5 correct? 12:16:58 MR. ARFFA: Objection, asked and 6 answered, I believe. A. I had some level of supervisory 7 involvement of David Proshan, who was dealing directly I believe with Darren Indyke. 8 Q. Do you recall that there was a release in the assignment that was originally drafted? 9 A. I recall specifically asking for a release from Financial Trust and JEEPERS that the 10 reason for their transfer or whatever reasons for 12:17:38 their transfer would have no negative implications 11 to D.B. Zwirn & Co. because we had no idea as to specifically why they were trying to make this 12 confer. (Exhibit 69, DESCRIPTION, marked for 13 identification.) Q. Let me show you what I am going to mark 14 as Exhibit 69. Do you recognize this as draft of an assignment between FTC and JEEPERS that 15 Mr. Proshan sent to Mr. Epstein's representative 12:18:28 Mr. George Delson, I believe was his name? 16 A. I don't recognize the [email protected]. 17 Q. Do you recognize this is a draft assignment? 18 A. It appears to be. Q. If you look on page 3, it's F -- it's 19 DBZCOFTC_680 is the Bates number you see there is a clause that says assignor and assignee does 20 hereby release and forever discharge the 12:19:31 indemnified persons from all claims, debts, 21 liabilities, demands, and it continues on. Okay? With respect to arising out of this interest or 22 assignment. Do you see that? That's the release that was proposed? 23 A. That was the release that was proposed by David Proshan. 24 Q. If you turn to the paragraph before on page DBZCOFTC_679, there's a paragraph: Each of 25 assignor and assignee does hereby agree to jointly 12:20:04 and severally to indemnify and hold harmless the EFTA01165465 60 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 fund; right? That's an indemnification. You know the difference between indemnification and 3 release; right? A. Yes, I do. 4 MR. ARFFA: Objection to form. Q. So you asked to be indemnified in case 5 somehow you guys got in trouble because of the 12:20:21 assignment; right? 6 A. When you say "we," to whom are you referring? 7 Q. DBZ. A. Well, I can't speak to what was 8 motivating Mr. Proshan on this draft to put these clauses in other than there would be an obvious 9 benefit if JEEPERS were to agree to it. (Exhibit 70, DESCRIPTION, marked for 10 identification.) 12:21:00 Q. Let me show you Exhibit 70. After the 11 assignment, the draft, was sent to Mr. Epstein, Mr. Epstein objected to the release -- right? -- 12 and Mr. Proshan informed you and Mr. Dubin of that? 13 A. Yes, I recall this. Q. Was the reason for the release that you 14 had proposed in part to make sure that Mr. Epstein couldn't resurrect his $80 million request? 15 MR. O'BRIEN: Objection, asked and 12:21:44 answered. 16 A. David acted -- MR. O'BRIEN: Just answer the question. 17 A. I don't know what the question is. You made a statement. Do you want to ask a question? 18 Q. No, it's a question. Is one of the reasons why you sought to get a release as part of 19 this assignment was to make sure that Mr. Epstein could not resurrect the $80 million request, that 20 it had gone away for good? 12:22:15 A. When you say "you," are you referring 21 to me? Q. I'm talking about the entity for which 22 you were the CFO. A. Once again, I do not know -- my 23 recollection is until I saw this I wasn't aware that David Proshan was asking for this. 24 Q. You have no memory of asking -- that you asked for a release or what happened with the 25 release? 12:22:42 A. No, I have a memory that I thought he EFTA01165466 61 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 was asking for too much, and I instructed him MR. O'BRIEN: Just -- you can talk 3 about -- inches okay. MR. O'BRIEN: -- what you thought, but 4 in terms of communications with counsel, do not answer. 5 A. My thought when I saw this was that 12:22:58 this was overreaching. 6 Q. Asking for the release? A. Yes. 7 Q. And why did you think it was overreaching? 8 A. I just thought it was. Q. You can't remember any reason why other 9 than just you thought it was overreaching? That's it? 10 MR. ARFFA: Objection to form. 12:23:38 A. My sense of what was fair to ask for in 11 light of what this accommodation was to accomplish that asking for a blanket release on anything and 12 everything was just too much. Q. Well, did you want to get a release, at 13 a minimum, of Mr. Epstein's $80 million request? A. That falls into privilege. 14 Q. Did you have any direct discussions with Mr. Epstein or any of his representatives 15 about the terms in the release should be, or the 12:24:29 assignment, rather, should be? 16 MR. O'BRIEN: I'm sorry, which one are we asking about? 17 MR. SUSMAN: The assignment. A. I do not recall having any 18 conversations with Epstein or his representatives. Q. In addition the assignment, do you 19 recall that JEEPERS filled out a subscription document, a new subscription agreement? 20 A. I don't recall that one. 12:25:15 (Exhibit 71, DESCRIPTION, marked for 21 identification.) Q. I show you Exhibit 71. 22 MR. ARFFA: What's the number on this? MR. SUSMAN: It's Exhibit 71. 23 (Discussion off the record.) Q. Do you recall reviewing Exhibit 71 at 24 any point in time? A. No. 25 (Exhibit 72, DESCRIPTION, marked for identification.) EFTA01165467 62 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 Q. Let me show you what's been previously marked but I'm going to mark it again. It's 3 Exhibit 72. Remember you said earlier that Mr. Beller had been calling up prior to February 4 14th and berating people about the roll justify schedule or redemption schedule? 5 MR. O'BRIEN: Objection to form. 12:27:18 That's not my recollection of what his 6 testimony was. MR. SUSMAN: Yeah. 7 A. No, my recollection of my testimony is that he was berating on February 14th. I think I 8 stated there were prior occasions he had berated people and he had been instructed to speak only to 9 me. Q. Does Exhibit 73 refresh your memory 10 that what he had been berating people about and 12:27:39 what had to do with the capital balances and the 11 numbers he was getting and that in response to that on February 12th you asked that he be 12 instructed to only speak to you? MR. ARFFA: Objection to form. 13 A. That does refresh my memory. (Exhibit 73, DESCRIPTION, marked for 14 identification.) Q. Let me show you Exhibit 73. This is -- 15 MR. ARFFA: Seventy-three? 12:28:13 MR. SUSMAN: Seventy-three. 16 Q. This is an e-mail that you sent early in the morning of February 14th at 6 a.m. It says 17 the detailed redemption roll-off schedule for Jeffrey Epstein. 18 Do you know what had occurred to cause you to want to ask for the roll-off schedule for 19 Jeffrey Epstein either sometime before 6 a.m. in the morning on February 14th or on February 13? 20 A. I can't remember what precipitated it. 12:28:44 Q. You just have no memory why on the 14th 21 you are making this request? A. I can't recall specifically why I was 22 making this request. Q. Now, you did say that you had a call 23 with Mr. Beller on January 31st where he had asked about the 80 million; right? 24 A. Yes. Q. That was the one when you were in 25 London? 12:29:10 A. Yes. EFTA01165468 63 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 Q. And do you recall any discussions between the January 31st call with Mr. Beller and 3 the morning of February 14th at 6 a.m. with anyone about Mr. Epstein's redemption rights? 4 A. Well, I remember having or making a phone call after hanging up with Harry to inform 5 them about that conversation. I do not recall any 12:29:34 conversations about Epstein's redemption or 6 roll-off between January 31st and February 14th. (Exhibit 74, DESCRIPTION, marked for 7 identification.) Q. Let me somehow you Exhibit 74. This is 8 an e-mail from Dan Zwirn to Mr. Dubin on February 14th, 2007. This is at 9 a.m. in the morning. 9 And Mr. Zwirn writes, This is what I sent to you. We had also sent to Harry Beller and reviewed with 10 him in excruciating detail. And the title is 12:30:28 attached Financial Trust 1/1/13/06. 11 Had you sent the attached schedule to Mr. Beller before February 14th, 2007? 12 MR. ARFFA: I just want to put on the record that we request confidential treatment 13 as to the names of the other investors. A. I believe I had, but I can't recall 14 with definitiveness if I did. Q. When do you believe you had sent it to 15 them prior to February 14th at 9 a.m. in the 12:31:12 morning? 16 A. Sometime around that November 13th letter A . 17 Q. And you would have sent it to him by e-mail; right? 18 A. I just can't recall. Q. Well, when you say you believe you sent 19 him the redemption schedule, did you tell Dan Zwirn that you had sent him -- sent Harry Beller 20 the redemption schedule? 12:31:47 A. I believe -- I believe so, but I can't 21 recall for sure. Q. Why is it that you believe that you 22 sent Mr. Beller the redemption schedule sometime around November 13th, 2006? 23 MR. ARFFA: Objection to form. A. I don't know why I believe it. I just 24 believe I did. Q. I think I asked you before, but to this 25 day you've seen no evidence that you actually did 12:32:11 send the redemption schedule to Mr. Beller back in EFTA01165469 64 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 November of '06; right? A. You have not presented me any evidence 3 of that, no. Q. Well, and you haven't found any when 4 you went searching for the old e-mails; right? A. I didn't go searching for these types 5 of e-mails, so... 12:32:32 Q. Well, in your review of historic 6 documents, you haven't seen evidence of you forwarding a redemption schedule to Mr. Beller on 7 February 13th, 2006? MR. ARFFA: Objection to form. 8 A. In my very limited review of documents, I have not seen any evidence that I forwarded. 9 Q. When Mr. Zwirn sent this e-mail to Mr. Dubin that says, we have sent to Harry Beller 10 and reviewed with him in excruciating detail, did 12:32:54 you understand Mr. Zwirn was talking about you, 11 David Lee, that that's the "we" who sent it to Harry Beller and went over it with him in 12 excruciating detail? MR. O'BRIEN: Objection to form. 13 A. I can't remember with that level of detail with regard to this e-mail from four years 14 ago. Q. Did you ever ask Mr. Zwirn what he was 15 referring to when he said we had also sent to 12:33:29 Harry Beller and reviewed with him in excruciating 16 detail? A. I don't recall asking him that. 17 Q. And Mr. Zwirn says, we will resend to Harry and Jeffrey and go through it again in as 18 much detail as they would like; right? That's how he ends the e-mail; correct? 19 A. That's what I read. Q. And then you -- Exhibit 21, you 20 actually sent this e-mail. You forwarded it to 12:33:58 Mr. Beller; correct? 21 A. Apparently. Q. And do you recall what Mr. Beller's 22 reaction was when he got Exhibit 21? MR. O'BRIEN: Objection to form. 23 Q. Do you? A. No, I don't recall. 24 (Exhibit 75, DESCRIPTION, marked for identification.) 25 Q. Let me show you Exhibit 75. Do you 12:34:36 recognize Exhibit 75 as you sending another EFTA01165470 65 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 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL schedule to Mr. Beller and to a woman named Lesly who you believe to be Mr. Epstein's assistant? A. I can't recall who Lesly is. Q. At a minimum you send it to Mr. Beller; right? A. Apparently. Q. And why did you send Exhibit 75 to Mr. Beller after having sent him Exhibit 21? MR. ARFFA: Sorry, what's the new one, exhibit? What's the JE 2640? MR. O'BRIEN: That's Exhibit 75. MR. SUSMAN: Seventy five. MR. ARFFA: That's Exhibit 75. Thank you. A. I can't recall. Q. Do you have any -- A. I believe it was because there was an 12:36:14 error in the schedule we sent, so we were trying to send him an amended one. Q. There was an error in the Exhibit 21 schedule? A. Yes. Q. Which was the schedule from back from November of 2006? A. Yeah, I think so. Q. Do you remember what the error was? A. I don't recall specifically what it 12:36:31 was. Q. Do you recall having any discussions with Mr. Beller about these schedules after you sent them to him on February 14th? A. The conversation I remember is the one Dan had with him where I sat in his office. (Exhibit 76, DESCRIPTION, marked for identification.) Q. Let me show you Exhibit 76. MR. SIFFERT: Have you finished your 12:37:15 answer? THE WITNESS: No. Yeah, I'm finished, sorry. Q. So the bottom of Exhibit 76 is an e-mail from Dan to Glenn Dubin that he then forwarded to you, and this is on February 14th. MR. O'BRIEN: I'm sorry, the bottom -- you mean on the first page? MR. SUSMAN: The first page, yes. Q. Mr. Zwirn is writing to Mr. Dubin: We 12:37:46 sent a detailed schedule to Jeffrey and Harry. We 12:35:21 EFTA01165471 66 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 called their offices, asked for Jeffrey and Harry, and referred to Harry. 3 When he's talking about the "we," did he understand he was including -- he meant him and 4 you? MR. O'BRIEN: Objection to form. 5 A. Let me read this. Q. Okay. 6 (Pause.) A. Okay. What's your question? 7 Q. Is the conversation that Mr. Zwirn was reporting to Mr. Dubin on Exhibit 76 the 8 conversation that you recall having with Mr. Beller on February 14th? 9 A. I believe so. Q. And so according to -- does Mr. Zwirn's 10 retelling of the conversation jibe with your recollection of the conversation? 11 MR. O'BRIEN: I'll just note that the e-mail refers to two different conversations. 12 MR. SUSMAN: Right. That's correct. A. So you're referring to the paragraph 13 that says, Harry called back after reviewing the sheet? 14 Q. Yes A. It seems to be consistent with my vague 15 recollection. Q. Okay. And so what I'm -- Mr. Lee, 16 you've told me you had a conversation with Mr. Epstein back on November 13th, 2006 -- I'm 17 sorry, what's that? A. I never had a conversation with 18 Mr. Epstein. Q. I meant -- I'm sorry, you had a 19 conversation on November 13th or 14th, 2006, with Mr. Beller about the redemption schedule. We've 20 talked about that conversation; correct? A. Yes. 21 Q. And you say you had a conversation on January 31st with Mr. Beller about Mr. Epstein's 22 $80 million; correct? A. Yes. 23 MR. O'BRIEN: That's the very matter in dispute, but we'll pass. 24 MR. SUSMAN: What's that? MR. O'BRIEN: Mr. Epstein's request for 25 $80 million. MR. SUSMAN: Fine. 12:38:06 12:39:14 12:39:47 12:40:18 12:40:36 EFTA01165472 67 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 Q. And then you had this conversation on February 14th with Mr. Zwirn and Mr. Beller; 3 correct? A. Yes. 4 Q. Are there any other conversations with Mr. Beller that you had about Mr. Epstein's 5 redemption that we -- other than those three? 12:40:59 A. It's very possible that I had, but : 6 can't recall with specificity when. Q. Now, Mr. Zwirn says that -- in his 7 Exhibit 76 he writes, Harry called back after reviewing the sheet and asked for immediate 8 redemption yet again despite the fact he has absolutely no contractual right to that. We would 9 be making exception for him against our 150 other investors. 10 And the "immediate redemption yet 12:41:33 again," did you understand what Mr. Zwirn was 11 referring to there, what prior requests had been made for an immediate redemption? 12 MR. ARFFA: Objection to form. A. For me to answer your question would be 13 to make a presumption based upon what I'm reading now. I don't recall my reaction to reading this 14 four years ago. Q. Then if you could, at the -- so is it 15 fair that Mr. Beller's reaction to upon seeing 12:42:13 these schedules on February 14th was that he was 16 upset? MR. SIFFERT: Objection to form. 17 A. I don't recall Harry being upset in phone conversations that I had or that I listened 18 to. The memory that sticks out in my mind is Harry had this attitude of Jeffrey wants his 19 money, just give him his money. We say, you have these -- it doesn't matter; Jeffrey wants his 20 money. That was sort of the tone he always took. 12:42:55 It was sort of like watching a Woody Allen movie. 21 So I don't recall him expressing anger or making any type of cohesive arguments with 22 regard to the request. Q. And then do you recall what Mr. -- how 23 Mr. Beller left it when you were done talking to him? 24 A. I don't recall other than reading this paragraph, but I do recall that we were supposed 25 to have a call scheduled with Jeffrey after lunch. 12:43:26 Q. And did that call take place? EFTA01165473 68 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 A. We attempted to call Jeffrey, but he never returned our call. 3 Q. And do you recall that shortly thereafter you got the letter demanding a full 4 redemption? A. Yes, I do recall that. 5 MR. SUSMAN: Do y'all want to take a 12:43:53 lunch break? 6 MR. O'BRIEN: I was just about to suggest it. 7 MR. SUSMAN: Okay. Fine. THE WITNESS: How apropos. We're 8 talking about lunch breaks. THE VIDEOGRAPHER: We're off the 9 record. The time is 12:43. We're off the record. 10 (Time noted: 12:43 p.m.) 12:44:07 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 EFTA01165474 69 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 AFTERNOON SESSION (Time noted: 1:16 p.m.)^ 3 THE VIDEOGRAPHER: We're back on the record. The time is 1:16. This is the 4 beginning of Tape 4. Q. Mr. Lee, let me show you Exhibit 48. 5 Do you recall receiving Exhibit 48 from Alisa 0::1:-:29 Butchkowski on February 14th, 2007? 6 A. I have a vague recollection. I don't recall this specific e-mail schedule but... 7 Q. If you look at Exhibit 21 -- you have it in your pile over there. It's the -- here's a 8 copy of it if you don't -- A. I have it. 9 Q. Okay. If you look on -- Exhibit 21 on the second -- the redemption schedule, it shows -- 10 for each of the tranche investments it simply 01:18:21 shows the amount of invested capital and then the 11 total appreciated value of the account. MR. ARFFA: Objection to form. 12 A. You're referring to Exhibit 21? Q. Yes. 13 A. Okay. Q. Do you see Exhibit 48 is 14 Ms. Butchkowski attempting to calculate the current value of each one of the investments? 15 MR. O'BRIEN: Objection to form. 01:18:50 A. I'm having a hard time reading it. 16 Q. You see at the top it says current tranche value -- you're on the schedule itself? 17 A. Yes. Okay. Q. And if you look, the first line, 18 there's the April 1, 2002, subscription with the value of 17,675,619.63? 19 A. Okay. Q. And if you look at the very bottom of 20 the page, you see balance at 12/31/06, and there's 01:19:27 this 17,675,620 number? 21 A. Okay. MR. O'BRIEN: I'm going to give the 22 witness my copy, which I think might be a little -- 23 THE WITNESS: More legible? MR. O'BRIEN: A little less dark. 24 THE WITNESS: More legible. Q. In the top of that column is $10 25 million? 01:19:48 A. Okay. EFTA01165475 70 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 Q. Do you recognize Exhibit -- what Ms. Butchkowski was trying to do in Exhibit 48? 3 MR. O'BRIEN: Objection to form. Q. Let me ask a better question. What the 4 calculations that are in these charts, what those are attempting to do in the schedule that's 5 attached to Exhibit 48. 01:20:10 MR. SIFFERT: Objection to form. 6 A. Presumably she's trying to calculate the current NAV value of each tranche that 7 Financial Trust invested in. Q. Do you understand how she did the 8 calculation? A. Yes. 9 Q. You understand what -- what is it that you understood she did to try to derive the 10 current NAV of each tranche? 01:21:12 A. She took the investment date and the 11 amount of each investment for that tranche, calculated the attributable P&L to that capital 12 account, and then rolled that number forward based upon monthly net P&Ls. 13 Q. Was this a calculation that she -- did you track on a like monthly basis the value of 14 each tranche of an investment, or is this something that they had especially calculated at 15 your request? 01:21:54 MR. ARFFA: Object to the form. 16 A. I can't specifically recall. Q. By the way, did you give her any 17 instructions about how to do this calculation of the current NAV? 18 A. I don't recall giving her instructions. Q. Do you know where she got this 19 methodology from? A. I don't recall. 20 Q. Where is Ms. Butchkowski today; do you 01:22:33 know? 21 A. Q. I have no idea. When was the last time you spoke to 22 her? A. I believe in early 2007. 23 (Exhibit 77, DESCRIPTION, marked for identification.) 24 Q. Let me show you what I'll mark as Exhibit 77. Exhibit 77 is an e-mail, and I want 25 to focus -- it's a chain of e-mails, but let's focus on the bottom one is an e-mail from Patricia 01:23:08 EFTA01165476 71 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 Peters to Dan cc'd to you; subject: Jeffrey's office. His assistant called to see if you were 3 available to meet with him between 1 and 4 today or tomorrow. And then you respond, Initial 4 reaction is not to meet with him. MR. ARFFA: It says not to meet him. 5 MR. SUSMAN: Not to meet him. 01:23:33 A. Yes. 6 Q. Why did you think it wasn't a good idea to meet Mr. Epstein as of February 20th, 2007? 7 A. My recollection is in light of the fact that we had had a number of conversations or Dan 8 had had a number of conversations with Epstein via Glenn Dubin that that our relationship with 9 Mr. Epstein going forward should be more formalized and possibly include attorneys. 10 Q. Did you have any understanding whether 01:24:23 Mr. Zwirn ever talked to Mr. Epstein directly 11 without Mr. Dubin's participation? A. Other than the call prior to 12 Thanksgiving and the two rounds of investor calls, I am not aware of any conversations that Dan had 13 with Mr. Epstein that did not include Glenn or Glenn's wife. 14 Q. I'm showing you what I'm marking as Exhibit 78. I'm sorry, withdraw Exhibit 78. I 15 show you what's been previously marked as Exhibit 01:25:17 50. Now, Exhibit 50, the bottom is an e-mail from 16 Ms. Hubsher to you and Mr. Zwirn on March 2nd, 2007. She's got a chart that shows the difference 17 in redemptions of new scheme versus original scheme. 18 A. Okay. Q. Do you recall -- did you ask 19 Ms. Hubsher to perform this calculation? A. I believe I did. 20 Q. And why did you ask her to do it? 01:26:14 A. In conjunction with our discussions 21 with Mr. Epstein around February 14th and the letter that was sent, it was the first time I was 22 aware that there was a side letter that was dated in January of '05. And in referencing that side 23 letter in the February 14th letter, there was a position taken that the rolling redemption 24 schedule would be based on the entire capital account as to when the first tranche was made as 25 opposed to the practice that we had apparently had 01:27:09 in place the entire time, every investor at each EFTA01165477 72 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 tranche had a two-year rolling lockup. So therefore in light of that 3 assertion, I wanted to see if it would have had a material impact on the amount of redemptions that 4 could occur over the course of the following quarters. 5 Q. You said you wanted to see if it would 01:27:42 have a material impact on the amount of 6 redemptions that could occur over the course of the following quarter. 7 What is the "it" that you're referring to? 8 A. The hypothetical scenario that if we took the interpretation asserted by Mr. Epstein in 9 this letter. Q. So in other words you asked Ms. Hubsher 10 to say if Jeffrey Epstein is right about how the 01:28:09 redemption schedule rights work, show me what 11 impact it would have on the funds? MR. ARFFA: Objection to form. 12 Q. Is that right? A. I don't know if I asked her in the 13 context of saying if Jeffrey was right. I asked her to see what it would look like under an 14 alternative interpretation based upon the letter. Q. But the alternative interpretation was 15 the Epstein view of the redemption rights; 01:28:37 correct? 16 A. As communicated in the February 14th letter, yes. 17 Q. By the way, here's Exhibit 49. It's been previously marked. That's the model that was 18 actually attached to Exhibit 50 when it was originally sent to you, just to save trees and not 19 passing out copies. A. Okay. 20 Q. Okay? 01:29:12 A. Is there a question? 21 Q. Do you recognize Exhibit 49 as the document that you actually got initially from 22 Ms. Hubsher? A. I don't recall the backup. I do recall 23 the summary. Q. Why, Mr. Lee, if you thought 24 Mr. Epstein's position was bogus or not bright, why did you have Ms. Hubsher go through all this 25 trouble? 01:29:41 MR. ARFFA: Objection to form. EFTA01165478 73 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 A. We ran lots of "what if" analysis for many different situations constantly. 3 Q. Why would it matter what impact Mr. Epstein's -- if you -- Mr. Epstein's view was 4 accepted, why would it matter what impact that would have on the fund versus the old 5 interpretation? 01:3C:09 MR. ARFFA: Objection to form. 6 A. Can you -- Q. Strike that. 7 As I understand it, you asked Ms. Hubsher to model the redemption -- the 8 liquidity of the fund under the existing interpretation of redemption rights versus what 9 would happen if Epstein's view of the world were right; is that fair? 10 A. Yes. 01:30:33 Q. Why did you care to know what the 11 difference would be? MR. ARFFA: Objection to form. 12 A. Because I wanted to see what the possible scenario would look like. 13 Q. Was one reason why you wanted to see that because if it were more helpful to the fund 14 you might considering adopting Mr. Epstein's view? MR. ARFFA: Objection to form. 15 A. No, I don't recall thinking that. I 01:30:59 just wanted to know what the answer was. 16 Q. Just for curiosity's sake? A. Yes. 17 Q. Am a I correct that based on what Ms. Hubsher modeled, if you look at the results, 18 if you accept the Epstein view it would permit greater redemptions earlier; right? 19 A. It would permit greater but not in a material way. 20 Q. So, for example, $128 million more of 01:31:40 redemptions in June of 2007 would not have been a 21 material change to the fund? A. Not in the context of a fund that was a 22 nearly $2 billion NAV at that point in time. Q. And then to have 116 million in 23 September of additional redemptions also wouldn't be material if you added those up? 24 A. Where you're referring to 116, you're referring to both funds. In that case then you're 25 referring to over $5 billion of AUM. So no, it 01:32:13 would not be material. EFTA01165479 74 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 Q. Can I ask why was this exercise being done in early March since Mr. Epstein's request 3 had been sent in mid-February, February 14th? A. During that time frame, the first 4 quarter of 2007, we were dealing with thousands of critical issues, including an SEC investigation 5 that was quite active internally, dealing with 01:32:54 auditors, dealing with investors, employees. 6 Epstein was nowhere near at the top of our list of priorities at that point in time. 7 (Exhibit 78, DESCRIPTION, marked for identification.) 8 Q. Let me show you Exhibit 78. MR. ARFFA: Sorry, what number? 9 MR. SUSMAN: Seventy-eight. Q. This is a series of e-mail chains, and 10 you started off with an e-mail to Gordon 01:33:52 Goldenstein; and subject: Rudman called today, 11 what is agenda. And he responds Epstein and WR back channel to George Mitchell to preempt a 12 blowup. Do you remember what you were referring 13 to -- I'm sorry, that he was referring to? A. I think there was a belief that Jeffrey 14 had a close relationship with George Mitchell and Senator Warren Rudman, who was on our advisory 15 board, also had a close relationship with George 01:34:35 Mitchell. And we were trying to see if there was 16 a possibility to create a dialogue by utilizing Mr. Mitchell. 17 Q. To preempt a blowup, a blowup of what? A. I think it's -- there was a presumption 18 that -- not a presumption, excuse me. We did not want public litigation at a time where the firm 19 and the fund was vulnerable. And we felt that Jeffrey was the type of person that could blow up 20 and launch litigation, making spurious 01:35:21 allegations. And given his issues and constant 21 press attention for his felonious acts that that was not the kind of press coverage we wanted to 22 have. Q. This says, Epstein and WR back channel 23 to George Mitchell to preempt a blowup, and you're saying that was to preempt a blowup but -- Epstein 24 and Warren Rudman would back channel to George Mitchell to preempt a blowup of Epstein. 25 MR. ARFFA: Objection. 01:35:56 MR. O'BRIEN: Objection. EFTA01165480 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 75 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 Q. Am I misreading what was meant there? MR. ARFFA: Asked and answered. 3 MR. SIFFERT: It's not what he said. A. I already answered your question. My 4 inference and recollection of this e-mail and conversation was George Mitchell, who is a 5 well-known political figure and diplomate, through 01:36:17 relationship that he had with Epstein and Senator 6 Rudman, could possibly create a bridge to communication. 7 Q. To Jeffrey? A. Yes. 8 Q. To prevent him from suing you? A. Yes. 9 Q. And then you respond, By the way, the Highbridge guys told me there is tons of details 10 on J Epstein's pick dill low in the public 01:36:42 deposition files. Can Alex get those? Why did you want to get details about Jeffrey Epstein's peccadillos? A. Because I thought it would be entering and entertaining to read. Q. Again, just out of curiosity's sake? A. Yes. Q. And what Highbridge guys told you that there was tons of details on Mr. Epstein's peccadillos? 01:37:08 A. Bob Caruso and possibly others. I don't recall who the others would be. Q. Was Glenn Dubin one of them? A. Not that I recall. Q. Did you ever talk to a Brenda Ames at Highbridge about the situation with Mr. Epstein? A. I don't recall speaking to Brenda specifically about Mr. Epstein, but I just don't recall. Q. Did you ever tell her that 01:38:07 Mr. Epstein's facts supporting his redemption demands weren't particularly good facts and the fund should agree to resolve things with him as a result? A. I don't recall. Q. Do you deny that you ever said that to her? A. All I say is I don't recall. (Exhibit 79, DESCRIPTION, marked for identification.) Q. I show you Exhibit 79. 01:38:48 EFTA01165481 17 18 19 Mr. 20 Mr. 21 22 23 24 76 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 By the way, before I talk about Exhibit 79, Mr. Lee, you -- I think you've mentioned more 3 than once the notion that the fund was concerned about Mr. Epstein making a public fight with the 4 fund because of his -- in particular because of his bad publicity that he had. Do you recall? 5 A. Yes. 01:39:33 Q. Was that a concern that was shared by 6 Dan Zwirn, as far as you know? A. I believe so. 7 Q. Did y'all discuss that we really don't want Jeffrey to make a big stink? 8 A. I believe so. Q. And was the concern that you didn't 9 want people to associate Jeffrey Epstein with the fund -- 10 MR. O'BRIEN: Objection to form. 01:39:58 Q. -- because of who Jeffrey was? 11 A. That was one of the reasons. Q. So you wanted to do what you could to 12 keep any dispute with Mr. Epstein out of the public eye, or any sort of public association of 13 him with the fund; right? A. Ask the question again. 14 Q. Yeah. Actually, that's okay. Let's look at Exhibit 79. Who is Eric 15 Dillon? 01:40:27 A. He is the managing partner of the 16 Silver Creek Capital, which was the fund that had the largest investment in the onshore fund. MR. ARFFA: We ask for confidential treatment as to the names of the other and identities of the other investors. Q. Did you tell Mr. Dillon that Epstein was a crazy man? A. I don't recall specifically telling Dillon that Epstein was a crazy man. 01:41:10 Q. Mr. Dillon wrote in an e-mail where he says, You told me he was a crazy man and threatening to sue. Do you have some reason to dispute Mr. Dillon's accounting -- attributing to you having called Mr. Epstein a crazy man? A. I generally was very deferential to Mr. Dillon, and so I don't recall why I would take umbrage with his statement and try to have a fight over it. 25 Q. So are you saying you didn't call 01:41:48 Mr. Epstein a crazy man but you just didn't want EFTA01165482 77 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 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL to fight with Mr. Dillon about it? A. I said I don't really recall telling Mr. Dillon Mr. Epstein was a crazy man. Q. Do you recall telling other people that he was a crazy man? A. I don't know whether I used the word "crazy," but -- so I can't recall if I told other people I thought he was crazy. (Exhibit 80, DESCRIPTION, marked for identification.) Q. I show you Exhibit 80. Who is Travis Metz from Monitor.com -- I'm sorry, from Monitor? A. Monitor is a private equity fund based in Boston affiliated with the Monitor Consulting Company. Q. Why were you discussing with Mr. Metz in the summer of 2007 various issues relating to the management company? A. We were seeking a potential minority investment in the management company from Monitor. Q. How much money were you seeking as an investment? A. I can't recall specifically, but I think we were seeking to raise somewhere around 30 to 100 million dollars. Q. Why did you need the capital infusion? A. Because of all the expenses associated with the internal investigation. There were remediations to the fund, the payment of interest on behalf of the onshore fund that was made on the $108 million loan to the offshore fund, and the nonreceipt yet of the 32 million estimated 2006 incentive fee from the Highbridge managed account. Q. Did you contact anyone else besides Monitor about making an investment in the management company during the 2007 time period? A. We spoke to a large list of people. Q. And who was Berenson? A. Berenson is an investment banking firm that was advising us. Q. Did Mr. Dubin have any participation in these efforts to raise money for the management company? A. Q. thousand too. No. At some point -- strike that. At some point in time in time in two 01:42:10 01:43:00 01:43:38 01:44:17 -- strike that 01:44:39 EFTA01165483 78 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 By the time -- when you became CFO, what was Mr. Dubin's role in this operations of 3 the management company that you could perceive? MR. O'BRIEN: Just so we're clear, 4 you're talking about early October '06? MR. SUSMAN: Yeah. 5 MR. O'BRIEN: He was acting CFO at that 01:44:54 time. 6 MR. SUSMAN: Okay. Fair enough. A. My understanding was that Dubin Swieca 7 Asset Management, of which Glenn was partners with Henry Swieca, had a profit participation in the 8 management company and its affiliated entities equal to 31 percent. 9 Q. But on a day-to-day basis, what did you see Mr. Dubin do in terms of running or 10 participating in the running of the management 01:45:36 company? 11 A. What I saw as of October I think going forward was very little involvement other than 12 dealing with Mr. Epstein and occasionally some of the other investors to which he had personal 13 relations. Q. Before October of '06 when you were a 14 managing director of the fund, or even in your days at LLJ, did you see Mr. Dubin acting to help 15 run the management company in any capacity? 01:46:14 A. On a firsthand basis, no, I had never 16 seen or met Mr. Dubin. Q. That's prior to October of 2006? 17 A. Correct. Q. What about for Henry Swieca, did you 18 ever see him or meet him? A. I have to date never met him. 19 Q. Did you have any understanding that -- from Mr. Zwirn or anyone that Mr. Dubin's level of 20 activity with the management company underwent any 01:46:40 change as of October 2006 versus what it had been 21 before that time period? A. Ask the question again. 22 Q. Yeah. I think -- you observed Mr. Dubin's role in the management company after 23 October 2006 when you were CFO. A. Right. 24 Q. And I think you said it was limited; fair? 25 A. Yes. 01:47:12 Q. Did anybody tell you that he had been EFTA01165484 79 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 more active in the recent past? A. Define "recent." 3 Q. Last year or two. A. My understanding was that he had a 4 fairly active participation in the management company, especially with regard to procurement of 5 investors through -- less and less active, but 01:47:32 from '03/'04 it was very active, '05 a little less 6 active, and '06 much less active is my understanding from conversations and other 7 anecdotes. Q. After October 2006, did you witness any 8 change in Mr. Dubin's role in the management company? 9 A. I noticed a dramatic change after we received the letters in January 2007. 10 Q. Those are the letters from Highbridge? 01:48:10 A. Yes. 11 Q. And what was the nature of the change after you got the letters from Highbridge in 12 January of 2007? A. A role of trying to be supportive to 13 one of being in opposition to each other. Q. Did you and Mr. Zwirn ever discuss what 14 caused Mr. Dubin's attitude to change in January of '07? 15 A. We had many conversations that were 01:48:44 based on speculations. 16 Q. And what were the situations? A. One of the primary speculations was 17 that Highbridge was undergoing a routine SEC examination at the time of our disclosures in late 18 October 2006 and our self-reporting in turn caused their examination to be extended and for them to 19 receive some type of letter or reprimand from the SEC. 20 Q. Did you ever have any knowledge of what 01:49:23 exactly the SEC's investigation of Highbridge 21 entailed? A. I do not believe it was an 22 investigation; I believe it was a routine examination. My only reference point as to what 23 actually occurred was contained in a lawsuit from Highbridge's former general counsel that was filed 24 in New York State court. Q. That's the Carol Rubin file? 25 A. Yes. 01:49:50 Q. But you haven't seen the letter that EFTA01165485 80 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 Highbridge received from the SEC regarding its subadvisory role with Zwirn? 3 A. No, I never saw such a letter. Q. By the way, one of the things that 4 Mr. Metz mentions -- and it's covered in the third star from the bottom, right above a star that 5 says, What is JCK? Do you see that that star that 01:50:20 says, Can you explain the various liquidity 6 redemption options that investors have in different funds, including key dates? 7 A. Okay. Q. It says, What I want to focus on is how 8 much do you know about what people are going to do on September 1st. Remind us again why September 9 1st matters so much. Do you know what he's referring to? 10 MR. O'BRIEN: There's another sentence. 01:50:52 MR. SUSMAN: I don't want to ask about 11 that. A. A majority of the investors were in a 12 redemption option called one year plus liquidity, which was the same option that Travis Metz 13 personally was in as an investor in the onshore fund. The notice requirement for redemption at 14 the end of the year was 120 days. Therefore September 1st was an important date to know how 15 many people and dollar amounts were going to 01:51:24 redeem under that option. 16 MR. ARFFA: I hadn't realized until now he was an investor. So again we'd ask for 17 confidential treatment of that. (Exhibit 81, DESCRIPTION, marked for 18 identification.) Q. I show you Exhibit 81. Did you 19 participate in the negotiation of this agreement between DSAM and the D.B. Zwirn entities? 20 A. Yes, I did. 01:52:04 Q. Why is it that Mr. Zwirn -- I'm sorry, 21 Mr. Dubin and Mr. Swieca were being bought out of the management company? 22 A. It was a demand being made in conjunction with the payment of the incentive fee 23 that was owed by Highbridge to D.B. Zwirn & Co. Q. In other words, in order for Highbridge 24 there was -- strike that. There was an incentive fee or 25 management fee that was owed to the management 01:52:44 company from the Highbridge managed account; is EFTA01165486 81 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 that right? A. Yes. 3 Q. I understand you're saying Mr. Dubin said in order for you to get paid that fee from 4 Highbridge you have to buy me out of the management company? 5 A. That's not how he phrased it. 01:53:01 Q. How did he phrase it? 6 A. Meeting in Glenn's conference room sometime in June of 2007, Glenn had a prepared 7 script which he seemed to be reading or paraphrasing from where he said that he would 8 agree to have Highbridge pay their incentive fees -- and I can't remember exactly what the 9 conditions were for that -- and in addition you will buy me out of my interest in D.B. Zwirn for 10 $30 million. And if you don't agree to my 01:53:36 conditions, I will sue you. 11 Q. Did he say what he would sue you for? A. No. 12 Q. Well, was one of the conditions for payment of the fee from Highbridge that you let 13 Highbridge's assets go, in effect? MR. O'BRIEN: Objection to form. 14 A. I think the agreement is self-evident in terms of how the managed account would be 15 managed. So we weren't letting them go; we were 01:54:07 still managing the assets, but subject to their 16 direction. Q. You entered into -- at the same time 17 you entered into Exhibit 81, right, you entered into Exhibit -- what I'll mark as Exhibit 82. 18 (Exhibit 82, DESCRIPTION, marked for identification.) 19 Q. You were involved in negotiating Exhibit 82? 20 A. Yes. 01:54:52 Q. And Exhibit 82 is the settlement 21 agreement in effect between Highbridge -- the entity that owned the Highbridge managed account 22 and D.B. Zwirn; right? A. Correct. 23 MR. ARFFA: Objection to form. Q. And that agreement calls for a 24 liquidation of the Highbridge managed account and payment, and as well there's a provision that 25 talks about Highbridge will in turn pay the 01:55:15 management company the incentive fees and EFTA01165487 82 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 management fees that are owed. A. Yes. 3 Q. Right? It doesn't tie -- Exhibit 82 does not 4 tie payment of the management fees or incentive fees to buying Mr. Dubin out of the management 5 company; correct? 01:55:36 A. Correct. 6 Q. But you're saying in a meeting Mr. Dubin effectively tied the two together? 7 A. I believe he did. Q. Did Mr. Dubin explain why he thought he 8 was entitled to be bought out of the management company? 9 A. No. Q. He just demanded it and said, If you 10 don't do it, I'm not going to -- or implied if you 01:56:05 don't do it you won't get paid your fees from 11 Highbridge? MR. ARFFA: Objection to form. 12 A. My inference was yes. Q. Well, did you have any discussion with 13 Mr. Dubin about why he felt entitled to be bought out of the management company? 14 A. With Mr. Dubin? No. Q. Did in fact the management company use 15 the management fees or incentive fees that 01:56:32 Highbridge paid it to fund the payments to 16 Mr. Dubin? A. In part. Money's fungible. 17 Q. In fairness, who did the -- you negotiated Exhibit 81; right? Strike that. 18 Was there any effort to conceal the existence of Exhibit 81 from Highbridge, to your 19 knowledge? Exhibit 81 is the agreement with Mr. Dubin. 20 A. To conceal? 01:57:04 Q. Yeah. 21 A. No. Q. Highbridge knew that both agreements 22 were being entered into at the same time; correct? A. Well, Bob Caruso was the CFO of 23 Highbridge. Bob Caruso was the counterparty from the business side with whom I negotiated. 24 Q. Both agreements? A. Yes. 25 Q. Did Mr. Caruso ever link the payment of 01:57:27 the Highbridge management fees to Mr. -- to the EFTA01165488 83 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 buyout of Mr. Dubin from the management company? A. Not explicitly. 3 Q. Under Exhibit 81 Mr. Dubin -- not Mr. Dubin, Mr. Dubin Swieca asked that management 4 is supposed to be paid $30 million in a series of payments. 5 A. Correct. 01:58:01 Q. Were those payments all made? 6 A. No. Q. How much of it was paid? 7 A. Let me look at the payment schedule. Q. It's probably in paragraph 2(b), the 8 first page, the very bottom. A. The 3.12 million was paid. The 17 -- 9 the 9.5 was paid. The 17.5 was not paid. Q. Was it ever paid? It wasn't paid on 10 time, but was it paid at all? 01:58:42 A. No. 11 Q. Has there been any sort of resolution of that outstanding payment? 12 A. Yes. It's my understanding that as of I believe May 1, 2009, DSAM relinquished all 13 claims to any future payments with regard to this agreement. 14 Q. Was there an agreement that memorialized that? 15 A. There was a letter, I believe. 01:59:08 Q. And what was the background that led to 16 DSAM agreeing in May of 2009 to any of these future payments? 17 MR. O'BRIEN: I just caution you not to -- 18 Q. Strike that. Sorry. Was the May 1, 2009, agreement 19 connected to the acquisition or takeover by Fortress? 20 MR. ARFFA: Objection to form. 01:59:32 A. I don't know if it was connected, but 21 it did occur coincidently at the same time. Q. Is it your understanding it was 22 designed to facilitate Fortress taking over management of the funds? 23 A. Without their relinquishment, I don't believe the transactions could have occurred. 24 Q. By the way, there is on Exhibit 81 the necked "whereas" clause. It says, whereas DSAM 25 does not receive through its interest any fees 02:00:03 accruing from DBZ L.P.'s management of HCN/Z EFTA01165489 84 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 Special Opportunities LLC. Was that an accurate recitation? 3 A. I believe so. Q. Well, except I think -- didn't you just 4 tell me in some of the money from Highbridge deal was used to pay for the interests? 5 A. Once again, money is fungible. Their 02:00:35 capital accounts had a special allocation to 6 exclude amounts earned from the Highbridge managed account. 7 Q. In Exhibit 81 there's provisions about DSAM releasing all of its interests in any DBZ 8 entity. Did that include Mr. Dubin's personal interest in the fund, do you know one way or the 9 other? Is that what the intent was? A. No. His personal interest in the 10 onshore fund and I believe in the tax-exempt fund 02:01:15 were completely segregated from this agreement. 11 Q. Now, let's talk briefly about Exhibit 82, the Highbridge agreement. 12 A. Okay. Q. I'll tell you what, to give you a 13 little background, let's just go through this real fast. 14 (Exhibit 83, DESCRIPTION, marked for identification.) 15 Q. I show you Exhibit 83. Exhibit 83 is 02:01:55 the letter that you referred to that you received 16 in late January '07 from Highbridge, or series of letters? 17 A. Yes. Q. So from this -- from the time after you 18 received this letter, was the relationship with Highbridge adversarial? 19 A. In terms of actual day-to-day interactions, they were quite cordial. But the 20 presumption was that we were adversaries. 02:02:29 (Exhibit 84, DESCRIPTION, marked for 21 identification.) Q. Exhibit 84. Do you recall receiving or 22 seeing a copy of Exhibit 84 an April 11, 2007, letter to Larry Cutler? 23 A. Yes. Q. In the letter Highbridge specifically 24 accuses you of having promised to transfer the shares of GAGFAH on February 15th and then 25 essentially reneging on that promise; right. The 02:03:15 first paragraph, if you're confused, says, David EFTA01165490 85 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 Lee assured us at that meeting that the improper activities were under investigation and that Zwirn 3 would immediately begin to transfer assets to us, such as the GAGFAH shares, which were reason ply 4 liquid. Further, since February 15th meeting David Lee has advised us that Zwirn would transfer 5 the GAGFAH shares to us provided we put the 02:03:44 request in writing. We cannot tolerate you taking 6 positions in writing that are in conflict with reassurances made to us verbally. 7 Right? A. I remember this very well. 8 Q. Their position was you told them that you'd give them the shares if they put it in 9 writing. They did. The fund responded by saying they're not going to do it. And they wrote this 10 letter to you. Right? 02:04:09 A. My recollection -- this is pretty 11 vivid -- is I felt it was bald-faced lying and I had other witnesses in that meeting that 12 corroborated I never made such assurances. (Exhibit 85, DESCRIPTION, marked for 13 identification.) Q. Look at Exhibit -- I show you Exhibit 14 85. This was a letter that you were sent in connection with the audit of Highbridge from 15 August 10th, 2007, and what it says is that the 02:04:48 NAV of the Highbridge managed account was $580 16 million as of December 31, 2006. Do you see that? A. Yes. 17 Q. This one -- did you send back anything to confirm whether this was correct or not? 18 A. I believe we had discussions with Highbridge and with PwC to help assist in the 19 completion of their audit. I don't recall us sending a letter that addressed this letter 20 specifically but that it was more of a process. 02:05:44 Q. All right. So let's just -- I want to 21 walk through some of the numbers, Exhibit 85. It says there's an NAV of 580 million. But then 22 there's a paragraph below it that says subsequent to year end we received redemption proceeds of 146 23 million, roughly, which are not included in the NAV as detailed below -- above. 24 A. Okay. Q. Does that mean that the NAV of the 25 Highbridge managed account was roughly $720 02:06:14 million as of December 31, '06? EFTA01165491 86 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 A. I don't know because the ownership in CG Holdings was a liquid stock that had 3 significant volatility. So that value could have been materially lower or materially higher. 4 Q. CG Holdings is what held the GAGFAH shares? 5 A. The GAGFAH shares. 02:06:53 Q. Does the number of 700 million sound 6 about right as of December 31, '06? A. I don't recall. 7 Q. You don't. Okay. Suffice it to say sometime after December 31 Highbridge got $146 8 million out of the managed account; right? A. Yes. 9 Q. If we could, let's look at Exhibit 82. A. Okay. 10 Q. Do you know as of the time you quit 02:07:33 working at DBZ whether there was still any money 11 in the Highbridge managed account or had it all been distributed? 12 A. My recollection was that there were still assets in the Highbridge managed account as 13 of May 31, 2010. Q. How significant in size? 14 A. I don't know. Q. Now, if you turn to page 2 -- 15 MR. O'BRIEN: We're on Exhibit 82? 02:08:10 Q. -- of Exhibit 82, there's paragraph D, 16 additional payments. A. Okay. 17 Q. It says essentially it calls for the repayment of the loan from the onshore -- to the 18 onshore account; correct? A. Yes. 19 Q. Did that loan get repaid? A. There are essentially two loans. The 20 50 million loan from October of '06 that was 02:08:39 documented was repaid. This is referring to the 21 amount of intercompany or interfund payables to the Highbridge account that we did not have a 22 definitive answer to because it was pending the completion of the 2006 audits. 23 Q. So by the time of the agreement of Exhibit 82, had the Highbridge -- the $50 million 24 Highbridge loan been repaid in full? A. The loan that was referred to and 25 documented in October '06 had been repaid. 02:09:21 Q. Okay. And then this -- the interfund EFTA01165492 87 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 balances that were not reconciled, I guess, as of the time of this agreement, were they ultimately 3 reconciled and repaid to Highbridge by the end of 2007? 4 A. There was a reconciliation. I can't remember when it was paid down. 5 Q. And do you know how much money, 02:09:52 roughly, was paid out to Highbridge from the 6 managed account from the time of Exhibit 82 until you stopped working at DBZ & Co.? 7 A. I don't know offhand. Q. Do you know if it was hundreds of 8 millions of dollars? Any idea? MR. ARFFA: Objection to form. 9 A. I don't recall. Q. Do you have any ballpark of what 10 percentage of the Highbridge account was actually 02:10:26 liquidated and paid out to Highbridge? 11 A. No. MR. SUSMAN: Let's take a quick break. 12 THE VIDEOGRAPHER: We're off the record. The time is 2:10. 13 (Recess taken from 2:10 to 2:19.) THE VIDEOGRAPHER: We're back on the 14 record. The time is 2:19. This is the beginning of Tape 5. 15 Q. Whether did you first hear that this 02:20:01 dispute with Mr. Epstein actually had erupted into 16 litigation? Do you remember who you heard that from? 17 A. I don't remember specifically who I heard it from. 18 Q. Have you heard that -- or have you seen an affidavit that Mr. Dubin has signed in 19 connection with this dispute? A. I recall reading an affidavit. 20 Q. Have you and Dan talked about that 02:20:41 affidavit? 21 A. Yes. Q. And what have you and Dan talked about 22 regarding that affidavit? A. That Dan has no recollection and does 23 not believe that it's conceivable that he ever would have made such a promise to Jeffrey. 24 Q. Anything else? A. Speculation as to why Glenn would put 25 himself in such a position in support of Jeffrey. 02:21:14 Q. And what was that speculation? EFTA01165493 88 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 A. We have no idea what relationships exist beyond business relationships between 3 Jeffrey and Glenn. Q. Mr. Zwirn had an interest in something 4 called Corbin Capital Partners, I believe. Were you aware of that? 5 A. I don't know the full name of the 02:21:53 entity, but yes, I was aware that Dan had an 6 interest in an entity called Corbin. Q. Did you know what Corbin did? 7 A. I believe them to be a fund-to-fund manager. 8 Q. Did they ever invest in D.B. Zwirn? A. I don't believe they did. 9 Q. Do you know how Dan came to have that interest in Corbin? 10 A. My understanding is that when Glenn was 02:22:20 setting up Corbin he asked Dan for various advice 11 and analyses and that he received some type of interest as payment for such advice and that Dan 12 also purchased an interest in that entity by writing a check. 13 Q. Do you know that Mr. Zwirn and Mr. Dubin had some dispute over the Corbin 14 interest? A. Yes. 15 Q. That resulted in litigation? 02:23:07 A. Yes. 16 Q. Did you testify at all in that litigation? 17 A. No. Q. Are you aware of how that litigation -- 18 what the outcome is? A. Not really. 19 Q. I think you said you never gave testimony to the SEC. Did I hear that right? 20 A. That's correct. 02:23:28 Q. Were you interviewed by them in any 21 capacity? A. No, I was not. 22 Q. Have you spoken to investors in the onshore fund about the dispute with Mr. Epstein? 23 A. I believe I mentioned or had some discussions with various investors about the 24 Epstein settlement agreement that was entered into. I don't recall specifically any other 25 conversations with Epstein -- about Epstein to 02:24:08 investors. EFTA01165494 89 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 Q. We saw earlier I think it was Silver Creek, for example. That was one of the 3 conversations that you had about the Epstein settlement? 4 A. Yes. Q. And what was the reason you told them 5 the fund had entered into this agreement with 02:24:26 Mr. Epstein? 6 MR. ARFFA: Objection to form. A. I don't really recall telling them the 7 reason other than that I read in the e-mail you just gave me. 8 Q. Well, in the e-mail you said, Call me up, and it's a short e-mail exchange. So do you 9 recall what you actually told people when they asked you why the fund gave a $45 million priority 10 payment to Mr. Epstein? 02:24:56 MR. O'BRIEN: Objection to form. 11 A. Other than pursuant to a settlement agreement, I don't recall having conversations 12 specifically as to why. Q. Did you ever talk to Chris Swan about 13 this dispute with Mr. Epstein? A. Which dispute with Mr. Epstein? 14 Q. Over his redemption requests. A. Which one? 15 Q. All of them. 02:25:39 A. I don't recall any specific 16 conversations with Chris about Epstein. I do believe that he was in the room when we had group 17 discussions about Epstein, which most likely included legal counsel when we had those 18 discussions. Q. By the way, you've -- other than 19 talking to investors and to the lawyers for the various parties in this case, who have you 20 discussed this dispute with Mr. Epstein with? 02:26:30 A. Once again, which dispute are you 21 referring to? Q. Well, let's talk about the dispute 22 since February of 2007. A. February 2007. 23 A. We had -- I'm trying to think of discussions that weren't with counsel. The only 24 think I can really think of was discussions with potential parties during our strategic process 25 when we were seeking a change in control, 02:27:24 including Fortress and others that were in that EFTA01165495 90 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 process, as part of their diligence efforts. Q. And did the Fortress people ask, as 3 part of the diligence, inquire into this dispute with Mr. Epstein what was the issue? 4 A. I believe so, but I really am having difficulty remembering details about those kind of 5 discussions. There were lots of items going on at 02:27:49 that time. 6 Q. Do you remember who you had the discussions with at Fortress, about the Epstein 7 issue? A. It would have been with a large 8 collection of their transaction team that was conducting the transaction with us. 9 Q. By the way, when I was asking you, you know, about these -- the Chris Swan discussions 10 and you said that you had had -- there were a lot 02:28:24 of group discussions about dealing with Jeffrey 11 Epstein's redemption requests and Chris may have been in those or not and lawyers may have been 12 present, do you recall whether was Glenn Dubin ever present in any of those discussions? 13 A. I do not believe he was. Q. So whatever discussions were had with 14 Mr. Dubin were between Mr. Zwirn and Mr. Dubin off in private, in effect, other than what you 15 listened to over the phone? 02:28:53 A. Yes, I believe so. 16 Q. By the way, on the managed account, the accounting for the managed account, was it handled 17 separately from the accounting for the onshore and offshore funds? 18 MR. O'BRIEN: Objection to form. A. What do you mean, "handled separately"? 19 Q. Were there a different group of accountants who dealt with the managed account's 20 books and records than, say, for the onshore fund 02:29:23 or was it the same accounting staff that dealt 21 with everything? A. The same accounting staff dealt with 22 everything, but at some point after the settlement agreement with Highbridge I did assign a couple of 23 people to specifically keep track of Highbridge's assets. 24 Q. To your knowledge did -- oh, I know you said you were an investor in the onshore fund. 25 Was Dan Zwirn an investor in the onshore fund? 02:29:59 A. I believe he was. EFTA01165496 91 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 Q. Was he an investor in the offshore fund? 3 A. He was an investor by virtue of an offshore deferral. 4 Q. In other words, the incentive fee was deferred and rolled into an investment in the 5 offshore fund itself, in effect? 02:30:18 A. Yes. 6 Q. Other than as a -- by virtue of his deferral arrangement, was he an investor in the 7 onshore fund -- offshore fund? A. I do not believe he was. 8 Q. Who was the -- by the way, you mentioned you assigned a specific accountant to 9 deal with the Highbridge managed account post the settlement agreement? 10 MR. ARFFA: Objection to form. I don't 02:30:45 think that's what he said. 11 Q. A particular accounting person? A. I assigned a couple of -- if I said 12 accounting, I meant operations. Q. Okay. Those people were in charge of 13 running off the assets, in effect, liquidating them? 14 A. No. The assets were not segregated from the other assets of the funds, so their 15 assets -- other than the GAGFAH shares, were not 02:31:07 liquidated in any priority fashion over any other 16 fund assets. Q. Even post the settlement agreement? 17 A. Yes. Q. So just as whatever asset could be 18 sold, if the Highbridge managed account happened to own some of it, then it would become liquid for 19 the Highbridge managed account? A. Yes. So, for example, if the onshore 20 fund owned half of this water bottle and 02:31:36 Highbridge owned the other half and I sold it for 21 $10, $5 would go to the onshore fund and $5 would go to Highbridge. 22 The onshore fund had leverage, so that money would get used to repay debt; and Highbridge 23 didn't have leverage, so that money would go back to Highbridge. 24 (Mr. Schwartz leaves proceedings.) Q. Since you left Fortress a year ago -- 25 I'm sorry, since you left D.B. Zwirn & Co., have 02:32:09 you had continuing contact with either D.B. Zwirn EFTA01165497 92 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 or Fortress? A. Define D.B. Zwirn. 3 Q. The entities that were the management company and the general partner. 4 A. The former management company entities I believe do not have any employees, so it would 5 be difficult to have contact with them other than 02:32:36 through things like this. 6 Q. And what is the status of the entities that were called DBZ & Co., L.P., and the various 7 Zwirn entities that Mr. O'Brien represents? MR. O'BRIEN: You may want to break 8 that down specifically. The answer may be different, and it may be hard to answer in a 9 global way. I don't know. I'm just saying. Q. Do you know what the status is of 10 D.B. Zwirn & Co., L.P.? 02:33:20 A. I believe the name was legally changed 11 to something else called Irvington, but I don't know the full name. 12 Q. Yep. A. And I don't know what's left anymore. 13 Q. Where did the name Irvington come from? A. Don't know. I assume it came from Dan. 14 Q. What assets did it have when you last worked for D.B. Zwirn & Co.? 15 A. I don't believe it had any assets of 02:33:52 any materiality, nor do I believe it had any 16 liabilities of any materiality at that point. Q. How about D.B. Zwirn Partners LLC, do 17 you know what's happened to it? A. I don't believe it exists. I believe 18 that entity is, if not dissolved, has no reason to exist. 19 Q. And how about Zwirn Holdings? A. Don't know, don't have the foggiest 20 idea. 02:34:33 Q. And when you were last working for -- 21 so the entity you last worked for would have been D.B. Zwirn & Co.? 22 A. L.P.. Q. L.P.? 23 A. Correct. Q. You last worked for it as of the summer 24 of 2010; right? A. Correct. 25 Q. And how much was your salary in that 02:34:49 last year? EFTA01165498 93 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 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL A. My base salary was at the rate of 1 million per year. Q. Was there a bonus function to it? A. Yes. Q. And how long had your base salary been at a million a year? A. Since 2007. Q. With a bonus component? A. My bonuses were approximately 2.5 million per year. Q. 2.5 million per year for 2007, 2008, 2009? A. Yes. Q. And 2010? 02:35:08 A. No. 2010 was at a lower rate and prorated for the five months. Q. And how was the bonus calculated? Was 02:35:31 there a formula? It was an agreed number. It was an agreed number? Between who A. 4. and who? A. 4. metric? A. Q. money to A. fees and Q. • Q. the funds onshore and offshore funds -- A. Yes. Q. -- they in 2008 ceased taking new investments; correct? A. They actually ceased taking new investments far earlier than that. I believe we stopped taking new investments as early as late '06. Q. From late '06? A. Yes. Q. So from late '06 on there were no new investments in the offshore fund? A. I do not believe there were. Q. But DBZ D.B. Zwirn & Co. L.P. continued to receive these management fees up Between Dan and myself. Was it based on some performance No. Where did D.B. Zwirn & Co. get the pay you this salary? D.B. Zwirn & Co. received management incentive fees. Even once the gates went up in 2008? The gates never went up. Well, the fund went into -- I'm sorry, that D.B. Zwirn & Co. and managed, the 02:35:54 02:36:27 02:36:49 EFTA01165499 94 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 until Fortress took over? A. Yes. 3 Q. And that was the source of cash flow that it had was the management fees? 4 A. And incentive fees prior to 2009. Q. Got you. 5 And why did you quit working for 02:37:16 D.B. Zwirn & Co. in the summer of last year? 6 MR. O'BRIEN: Objection to form. A. In conjunction with the transaction 7 with Fortress, I had an employment agreement that lasted through 12/31/09. I was asked by 8 representatives of Fortress to stay through May 31 of 2010 in conjunction with the transaction. 9 Q. Do you have any continuing -- or did you, after May 31, 2010, have any continuing 10 contractual arrangement with Fortress? 02:37:52 A. I have certain confidentiality and 11 nonsolicit arrangements that were in conjunction with my employment there. 12 Q. Any compensation paid to you post May 2010? 13 A. Not a penny. Q. And do you -- and D.B. -- were you 14 working for D.B. Zwirn & Co., L.P., when its name was changed? 15 A. I don't recall if the name change 02:38:25 occurred prior to May 31, 2010, or after. 16 Q. Was it formally wound down in some -- "it" being D.B. Zwirn & Co. -- in some fashion? 17 A. I do not believe it was formally liquidated under Delaware law. 18 Q. Did you ever have any position with Zwirn Holdings or was that simply Dan Zwirn's 19 entity? MR. ARFFA: Objection to form. 20 A. Zwirn Holdings I believe it was an 02:38:59 intermediate holding company for Dan's interest in 21 the Dan Zwirn affiliates, so no. (Pause.) 22 Q. Did you participate in -- as I understand it, the onshore fund would make 23 investments in certain -- would originate loans, let them season, and then transfer them to the 24 offshore fund after a period of time? MR. ARFFA: Objection to form. 25 A. The onshore fund engaged in a lot of 02:40:03 activities, and yes, loan origination was one of EFTA01165500 95 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 them. And on occasion the onshore fund, either directly or through its CLO, wholly owned CLO, 3 would syndicate or participate in portions of loans to the offshore funds to its managed 4 accounts and to third parties. Q. And the reason the onshore fund -- with 5 the onshore fund they would have to let the loan 02:40:34 season before it could give it -- before the 6 offshore fund could invest because the offshore fund could not be originating loans in the United 7 States; is that right? MR. O'BRIEN: Objection to form. And 8 to the extent that your answer has anything to do with legal advice that you might have 9 received or been aware of, I direct you not to reveal that information. 10 A. It's contained in the audit. The 02:40:57 offshore fund as a general matter should not be 11 engaged in a U.S. active trader business, which would include loan origination as a matter of 12 business practice. Q. One of the reasons why you were 13 concerned about the loans from the offshore fund to the onshore fund is they might be perceived to 14 be loan origination in the U.S.; is that right? MR. ARFFA: Objection to form. 15 A. The concern was not a single loan from 02:41:31 the onshore fund or even two or three loans; the 16 concern was an offshore entity providing capital for purposes of having another entity originate 17 loans for its benefit, as a matter of practice. Q. It could be a problem for the tax 18 status of the offshore fund? A. It could be a potential risk in 19 jeopardizing the tax status of the offshore fund. MR. SUSMAN: I have no further 20 questions. 02:42:03 THE VIDEOGRAPHER: This is the end of 21 today's deposition. The time is 2:42. We're off the record. 22 (Time noted: 2:42 p.m.) 23 24 25 EFTA01165501