20-10990-mew Doc 178 Filed 07/13/20 Entered 07/13/20 09:34:15 Main Document Pg 1 of 1 · 20 hours ago · Bryant Avenue, Roslyn, New York 11576. 20-10990-mew Doc 178 Filed 07/13/20

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK --------------------------------------------------------------------X In re: THE NORTHWEST COMPANY, LLC, et al.1, Debtors.

: : : : : : : :

Chapter 11 Case No. 20-10990 (MEW) (Jointly Administered)

--------------------------------------------------------------------X

DECLARATION OF URIEL PINELO, ESQ. I, URIEL PINELO, declare under the penalty of perjury as follows:

1. I am an associate with the law firm of Brown Rudnick LLP (“Brown Rudnick”),

counsel to Extreme Horse Limited. I am duly admitted, in good standing and authorized to

practice before this Court. I submit this declaration (the “Pinelo Declaration”) in connection

with the Reply Of Extreme Horse Limited And Ashford Textiles LLC In Support Of Their Motion

To Appoint An Examiner Or A Chapter 11 Trustee.

2. Attached hereto as Exhibit 1 is a true and correct copy of the transcript of the

deposition of Robert Jolson conducted on June 29, 2020.

3. Attached hereto as Exhibit 2 is a true and correct copy of the transcript of the

deposition of Ross Auerbach conducted on July 1, 2020.

Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the foregoing is true

and correct to the best of my knowledge, information, and belief.

Dated: July 13, 2020 /s/ Uriel Pinelo Uriel Pinelo

1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are: The Northwest Company, LLC (8132) and The Northwest.com LLC (1339). The location of the Debtors’ service address is: 49 Bryant Avenue, Roslyn, New York 11576.

20-10990-mew Doc 178 Filed 07/13/20 Entered 07/13/20 09:34:15 Main Document Pg 1 of 1

Exhibit 1

20-10990-mew Doc 178-1 Filed 07/13/20 Entered 07/13/20 09:34:15 Exhibit 1 -Robert Jolson deposition transcript dated June 29 2020 Pg 1 of 215

Page 1·1· · · · · ·UNITED STATES BANKRUPTCY COURT

·2· · · · · ·SOUTHERN DISTRICT OF NEW YORK

·3· · · · · · ·Case No. 20-10990 (MEW)

·4· ·--------------------------------------

·5· ·In Re

·6· ·NORTHWEST COMPANY LLC, et al.,

·7· · · · · · · ·Debtors.

·8· ·--------------------------------------

·9

10· · · · · ·REMOTE VIDEOTAPED DEPOSITION OF

11· · · · · · · · · ROBERT JOLSON

12

13· · · · · · · ·Monday, June 29, 2020

14· · · · · · · · · · 10:00 a.m.

15

16

17

18

19

20

21

22

23· ·Reported by:

24· ·Debra Stevens, CRR/RPR

25· ·Job No. 181219


Page 2·1· ·REMOTE APPEARANCES:

·2· ·On behalf of Movant and Extreme Horse· · ·Limited:·3· · ·BROWN RUDNICK·4· · · · · ·Times Square Tower· · · · · · ·New York, New York 10036·5· · · BY:· KENNETH AULET, ESQ.

·6

·7

·8· ·On behalf of the Debtors:

·9· ·SILLS CUMMIS & GROSS· · · · · · ·The Legal Center10· · · · · ·One Riverfront Plaza· · · · · · ·Newark, New Jersey 0710211· · · BY:· S. JASON TEELE, ESQ.· · · · · · ·DAVID NEWMAN, ESQ.12

13

14

15· ·On behalf of Ross Auerbach and Northwest· · ·Textile Holdings LLC:16· · ·DUFFY AMEDEO17· · · · · ·275 Seventh Avenue· · · · · · ·New York, New York 1000118· · · BY:· TODD DUFFY, ESQ.

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20

21

22

23

24· · · · · · · · · · · ·(Continued)

25


Page 3·1· ·REMOTE APPEARANCES (Continued):

·2· ·On behalf of Ashford Textile:

·3· ·BUCHALTER LAW FIRM· · · · · · 1000 Wilshire Boulevard·4· · · · · Los Angeles, California 90017· · · · BY: PAUL ARROW, ESQ.·5

·6· · · · · · · - and -·7· · ·KLESTADT WINTERS JURELLER SOUTHARD &·8· ·STEVENS· · · · · · ·200 West 41st Street·9· · · · · ·New York, New York 10036· · · · BY:· TRACY KLESTADT, ESQ.10

11

12

13· ·ALSO PRESENT:

14· · · · · ·JULIE KIMMEL, Videographer

15· · · · · · · · · · · · * * *

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Page 4·1

·2· · · · · E X A M I N A T I O N S

·3· ·WITNESS· · · · · · · · · · · · · · · PAGE

·4· ·ROBERT JOLSON

·5· · ·By Mr. Aulet· · · · · · · · · · · · · 9

·6· · · · · · · · · · E X H I B I T S·7· · ·EXHIBIT· · · DESCRIPTION· · · · · · PAGE·8· · ·Exhibit 1· · Notice of 30(b)(6)· · · · 15·9· · · · · · · · Deposition

10· ·Exhibit 2· · Screenshots of 2017· · · ·45· · · · · · · · · general ledger file11· · · · · · · · entries

12· ·Exhibit 3· · Screenshots of· · · · · · 64· · · · · · · · · general ledger files13· · · · · · · · from 1/1/20 through· · · · · · · · · 2/28/2014· · ·Exhibit 4· · Screenshots from· · · · · 8015· · · · · · · · general ledger files· · · · · · · · · for 202016· · ·Exhibit 5· · Screenshots for· · · · · ·8717· · · · · · · · general ledger· · · · · · · · · entries for October18· · · · · · · · 2017

19· ·Exhibit 6· · Document, "Statement· · · 92· · · · · · · · · of Financial Affairs20· · · · · · · · for Non-Individuals· · · · · · · · · Filing for21· · · · · · · · Bankruptcy" dated· · · · · · · · · 6/1/2022· · ·Exhibit 7· · Bank statement for· · · · 9823· · · · · · · · The Northwest· · · · · · · · · Company, 4/1/2024· · · · · · · · through 4/30/20

25· · · · · · · · · · · · ·(Continued)


Page 5·1

·2· · · · · · · · E X H I B I T S

·3· ·EXHIBIT· · · · ·DESCRIPTION· · · · ·PAGE

·4· ·Exhibit 8· · · Three payments made· · 107· · · · · · · · · · before bankruptcy·5· · ·Exhibit 9· · · Northwest Company· · · 113·6· · · · · · · · · Platinum card· · · · · · · · · · statement ending·7· · · · · · · · · 6/14/19

·8· ·Exhibit 10· · ·Amex Platinum card· · ·115· · · · · · · · · · statement ending·9· · · · · · · · · 1/16/17

10· ·Exhibit 11· · ·Centurian card· · · · ·121· · · · · · · · · · statement, closing11· · · · · · · · · date 9/19/17

12· ·Exhibit 12· · ·Centurian card· · · · ·127· · · · · · · · · · account statement13· · · · · · · · · for July through· · · · · · · · · · December 201914· · ·Exhibit 13· · ·Northwest general· · · 13015· · · · · · · · · ledger, journal· · · · · · · · · · entry from October16· · · · · · · · · 2018

17· ·Exhibit 14· · ·Northeastern· · · · · ·134· · · · · · · · · · Aviation invoices18· · ·Exhibit 15· · ·Emails, beginning· · · 14519· · · · · · · · · 5/18/20

20· ·Exhibit 15(A)· David Harrison· · · · ·150· · · · · · · · · · invoices21· · ·Exhibit 16· · ·Email from Ross· · · · 15722· · · · · · · · · Auerbach to Jay· · · · · · · · · · Silver and Michael23· · · · · · · · · Goldsmith

24· ·Exhibit 17· · ·Spreadsheet· · · · · · 168

25· · · · · · · · · · · · · ·(Continued)


Page 6·1

·2· · · · · · · · · E X H I B I T S·3· · ·EXHIBIT· · · · ·DESCRIPTION· · · · ·PAGE·4· · ·Exhibit 18· ·Email from Ron· · · · · ·170·5· · · · · · · · Andreola to Allen Guo

·6· ·Exhibit 19· ·Emails· · · · · · · · · ·173

·7· ·Exhibit 20· ·Screenshot of March· · · 181· · · · · · · · · 2017 ledgers·8· · ·Exhibit 21· ·Email to Peter Wu· · · · 192·9· · ·Exhibit 22· ·PDF titled "PPP Loan"· · 19910· · ·Exhibit 23· ·May 2017 bank· · · · · · 20711· · · · · · · · statement

12· ·Exhibit 24· ·2017 general ledgers· · ·209

13· ·Exhibit 25· ·Shorter version of· · · ·210· · · · · · · · · Exhibit 2414

15· · · ·INFORMATION/PRODUCTION REQUESTS16· · ·DESCRIPTION· · · · · · · · · · · · · PAGE17· · ·Documents reflecting results of· · · · 7918· ·allocation in Mr. Auerbach's· · ·account19

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21

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Page 7·1

·2· · · · ·THE VIDEOGRAPHER:· Good morning.

·3· ·My name is Julie Kimmel.· I am a

·4· ·certified legal videographer in

·5· ·association with TSG Reporting.· As a

·6· ·result of COVID-19 and the following

·7· ·practice of social distancing, I will

·8· ·not be in the same room with the

·9· ·witness.· Instead, I will record this

10· ·videotaped deposition remotely.· The

11· ·reporter, Deb Stevens, will also not

12· ·be in the same room and will swear the

13· ·witness remotely.· Do all parties

14· ·stipulate to the validity of this

15· ·video recording and remote swearing

16· ·and that it will be admissible in the

17· ·courtroom as if it had been taken

18· ·following Rule 30 of the Federal Rules

19· ·of Civil Procedure and the state's

20· ·rules where this case is pending?

21· · · · ·MR. TEELE:· The Debtors do.

22· · · · ·MR. DUFFY:· Northwest Textiles

23· ·do.

24· · · · ·MR. AULET:· Extreme Horse does.

25· · · · ·THE VIDEOGRAPHER:· Thank you.


Page 8·1

·2· ·This is the start of media labeled

·3· ·number 1 of the video-recorded

·4· ·deposition of Robert Jolson in the

·5· ·matter In Re Northwest Company LLC, et

·6· ·al., Debtors, in the Court of U.S.

·7· ·Bankruptcy for Southern District of

·8· ·New York, No. 20-10990 (MEW).

·9· · · · ·This deposition is being held

10· ·remotely on June 29, 2020, at

11· ·approximately 10:20 a.m.· My name

12· ·again is Julie Kimmel, legal video

13· ·specialist for TSG Reporting

14· ·headquartered at 747 Third Avenue, New

15· ·York New York.· Court reporter is Deb

16· ·Stevens in association with TSG

17· ·Reporting.

18· · · · ·Counsel, please introduce

19· ·yourselves.

20· · · · ·MR. AULET:· This is Ken Aulet,

21· ·of Brown Rudnick, on behalf of the

22· ·Movants and Extreme Horse Limited.

23· · · · ·MR. TEELE:· This is Jason Teele,

24· ·of Sills Cummis & Gross, on behalf of

25· ·the Debtors.


Page 9·1

·2· · · · · · ·MR. DUFFY:· Todd Duffy, Duffy

·3· · · ·Amedeo LLP, on behalf of Ross Auerbach

·4· · · ·and Northwest Textile Holdings LLC.

·5· · · · · · ·MR. NEWMAN:· David Newman, Sills

·6· · · ·Cummis, on behalf of Debtors.

·7· · · · · · ·Whereupon,

·8· · · · · · · · · ·ROBERT JOLSON,

·9· · · having been first duly sworn/affirmed,

10· · · was examined and testified as follows:

11· ·EXAMINATION BY

12· ·MR. AULET:

13· · · ·Q.· · Good morning, Mr. Jolson.· Can

14· ·you state your name and occupation for the

15· ·record, please?

16· · · ·A.· · Robert Jolson, chief financial

17· ·officer for Northwest Company.

18· · · ·Q.· · As you are aware, we are taking

19· ·this deposition under somewhat unusual

20· ·circumstances.· To the extent you have any

21· ·technical issues such as you can't see us,

22· ·you can't hear me or anything of the sort,

23· ·please let us know as quickly as possible

24· ·and we will try and get that resolved.

25· · · · · · ·Is there anyone in the room with


Page 10·1· · · · · · · · · ·R. JOLSON

·2· ·you while you are taking this deposition?

·3· · · ·A.· · Yes.

·4· · · ·Q.· · And who is in the room with you?

·5· · · ·A.· · Jason Teele and --

·6· · · · · · ·THE WITNESS:· I don't remember

·7· · · ·your last name.

·8· · · · · · ·MR. DUFFY:· Duffy.

·9· · · · · · ·THE WITNESS:· Duffy.

10· · · ·Q.· · Is Jason Teele representing you

11· ·in this deposition?

12· · · · · · ·MR. TEELE:· That's correct.

13· · · ·A.· · Yes.

14· · · ·Q.· · Have you ever been deposed

15· ·before?

16· · · ·A.· · Yes.

17· · · ·Q.· · So, you may be familiar with

18· ·this, but I will go over some ground

19· ·rules.· As you know, this deposition is

20· ·being transcribed, so even if you know

21· ·where I am going with a question, please

22· ·wait until I finish so that we have a

23· ·clean record.· And I will attempt to do

24· ·the same for you.· Your counsel from time

25· ·to time may have an objection.· If he


Page 11·1· · · · · · · · · ·R. JOLSON

·2· ·does, please wait for him to finish

·3· ·speaking and then, unless he instructs you

·4· ·not to answer the question, I will expect

·5· ·you to answer the question.

·6· · · · · · ·Are you aware that you are under

·7· ·oath today?

·8· · · ·A.· · Yes.

·9· · · ·Q.· · And is there any reason why you

10· ·cannot testify truthfully and accurately

11· ·today?

12· · · ·A.· · No.

13· · · ·Q.· · You said you have been deposed

14· ·before.· How many times have you been

15· ·deposed?

16· · · · · · ·MR. TEELE:· Objection to the

17· · · ·form of that.· You can answer.

18· · · ·A.· · One time.

19· · · ·Q.· · What was the case in which you

20· ·were deposed?

21· · · ·A.· · It was -- it was the sale of a

22· ·company, so --

23· · · ·Q.· · What company was that?

24· · · ·A.· · It was T, like Tom, Juniors.

25· · · ·Q.· · Did that case have anything to


Page 12·1· · · · · · · · · ·R. JOLSON

·2· ·do with Northwest?

·3· · · ·A.· · No.

·4· · · ·Q.· · And when I say "Northwest," I am

·5· ·going to be referring to the Debtors in

·6· ·this case.· Will you understand what I

·7· ·mean when I say that?

·8· · · ·A.· · I'd like a clarification on

·9· ·that, please.

10· · · ·Q.· · So, when I say "Northwest," I am

11· ·going to be referring to the entity The

12· ·Northwest Company, LLC, as well as, to the

13· ·extent relevant, its wholly owned

14· ·subsidiary, northwest.com.· Unless I

15· ·otherwise specify, when I say "Northwest,"

16· ·I am not referring to Northwest Textiles,

17· ·one of the owners and members of the

18· ·Debtors.

19· · · · · · ·If I use "Northwest" as I just

20· ·described, will you understand what I

21· ·mean?

22· · · ·A.· · Yes.

23· · · ·Q.· · What is the highest level of

24· ·education you have achieved?

25· · · ·A.· · Master's degree.


Page 13·1· · · · · · · · · ·R. JOLSON

·2· · · ·Q.· · And what was that master's

·3· ·degree in?

·4· · · ·A.· · Finance.

·5· · · ·Q.· · Where was it awarded?

·6· · · ·A.· · Adelphi University.

·7· · · ·Q.· · Could you describe your job

·8· ·history since receiving that degree?

·9· · · ·A.· · Yes.· I was, at the time, a vice

10· ·president at Bankers Trust in the

11· ·asset-based lending division, specifically

12· ·factoring.

13· · · ·Q.· · And what job did you move to

14· ·after that position?

15· · · ·A.· · I went to something called T

16· ·Juniors.

17· · · ·Q.· · And what was your role at T

18· ·Juniors?

19· · · ·A.· · Chief financial officer.

20· · · ·Q.· · And approximately when did you

21· ·begin that job?

22· · · ·A.· · 1992.

23· · · ·Q.· · What company did you move to

24· ·after you left T Juniors?

25· · · ·A.· · Signature Apparel.


Page 14·1· · · · · · · · · ·R. JOLSON

·2· · · ·Q.· · And what was your role at

·3· ·Signature Apparel?

·4· · · ·A.· · Chief financial officer.

·5· · · ·Q.· · And when did you join Signature

·6· ·Apparel?

·7· · · ·A.· · 2007.

·8· · · ·Q.· · When did you leave Signature

·9· ·Apparel?

10· · · ·A.· · In the end of 2009.

11· · · ·Q.· · What job did you take after you

12· ·left Signature Apparel?

13· · · ·A.· · Went to work for FAB, Fashion

14· ·Accessory Bazaar.

15· · · ·Q.· · What role did you have at

16· ·Fashion Accessory Bazaar?

17· · · ·A.· · Chief financial officer.

18· · · ·Q.· · When did you leave Fashion

19· ·Accessory Bazaar?

20· · · ·A.· · 2012.

21· · · ·Q.· · What company did you move to

22· ·after FAB in 2012?

23· · · ·A.· · Northwest Company.

24· · · ·Q.· · That is the title you currently

25· ·hold today?


Page 15·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · Yes.

·3· · · ·Q.· · Have you held any other

·4· ·positions at any other companies since

·5· ·joining Northwest?

·6· · · ·A.· · No.

·7· · · ·Q.· · Could you explain your main

·8· ·responsibilities as CFO of Northwest?

·9· · · ·A.· · I am responsible for finance,

10· ·parts of operations.

11· · · ·Q.· · Who do you report to?

12· · · ·A.· · Ross Auerbach.

13· · · · · · ·MR. AULET:· I am going to make a

14· · · ·first stab at submitting an exhibit.

15· · · ·Let's see if this works.

16· · · · · · ·(So marked for identification as

17· · · ·Exhibit 1.)

18· · · ·Q.· · You should be now seeing what I

19· ·have marked as Exhibit 1, which is a

20· ·Notice of 30(b)(6) Deposition.

21· · · · · · ·MR. TEELE:· Ken, one second. I

22· · · ·am trying to show Mr. Jolson the

23· · · ·buttons to make it bigger.

24· · · ·A.· · Okay.

25· · · · · · ·MR. TEELE:· Just a technical


Page 16·1· · · · · · · · · ·R. JOLSON

·2· · · ·instruction there.

·3· · · · · · ·MR. AULET:· Of course.

·4· · · ·Q.· · I am not sure if my moving to

·5· ·page 5 moved you, but if not, please go to

·6· ·page 5 and look at the topics for

·7· ·examination.

·8· · · ·A.· · I am looking at topics for

·9· ·examination.

10· · · ·Q.· · Have you been designated to

11· ·testify on behalf of the Debtors for any

12· ·of these topics of examination?

13· · · · · · ·MR. TEELE:· I will object and

14· · · ·say, Ken, the Debtor has received two

15· · · ·different deposition notices for

16· · · ·today.· One was directed to the

17· · · ·Debtors and called for Mr. Jolson's

18· · · ·testimony specifically.· Several days

19· · · ·to maybe a week later you served on

20· · · ·the Debtors a 30(b)(6) deposition

21· · · ·notice.· So, Mr. Jolson is here in

22· · · ·response to the initial dep notice

23· · · ·directed to the Debtors but calling

24· · · ·for his deposition specifically, as

25· · · ·well as -- and I will let him answer


Page 17·1· · · · · · · · · ·R. JOLSON

·2· · · ·your question -- as well as a 30(b)(6)

·3· · · ·witness for today on those topics.

·4· · · · · · ·I will let him answer the

·5· · · ·question but I wanted to clarify there

·6· · · ·are two different dep notices hanging

·7· · · ·out there.

·8· · · ·Q.· · Mr. Jolson, do you remember what

·9· ·the question was?

10· · · ·A.· · No.

11· · · ·Q.· · Have you been designated to

12· ·testify on behalf of the Debtors for any

13· ·of these five topics of examination and,

14· ·if so, could you identify which ones?

15· · · ·A.· · Yes.

16· · · ·Q.· · And which topics?

17· · · ·A.· · Can I just go one by one?

18· · · ·Q.· · You can just identify by number

19· ·rather than read out off the entire topic

20· ·of examination.

21· · · ·A.· · It would be all of them to the

22· ·extent that I know about certain

23· ·information.

24· · · ·Q.· · And what did you do to prepare

25· ·for this deposition today?


Page 18·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · I just spoke to our attorney.

·3· · · ·Q.· · Did you review documents in

·4· ·preparation for your deposition today?

·5· · · ·A.· · No.

·6· · · ·Q.· · Are you aware that the Debtors

·7· ·have produced a number of documents to

·8· ·Extreme Horse, Ashford, as well as to the

·9· ·committee?

10· · · ·A.· · Yes.

11· · · ·Q.· · Were you involved in collecting

12· ·the documents for production?

13· · · ·A.· · Some of them.

14· · · ·Q.· · And which ones were you involved

15· ·in collecting?

16· · · ·A.· · Items relating to the general

17· ·ledger or bank statement.

18· · · ·Q.· · Do you have any role at

19· ·Northwest Textiles, Mr. Jolson?

20· · · ·A.· · No.

21· · · · · · ·MR. AULET:· For the record, I

22· · · ·will note there are a couple of

23· · · ·document requests still outstanding

24· · · ·that we, as of this morning, do not

25· · · ·believe we have received.· There were


Page 19·1· · · · · · · ·R. JOLSON

·2· ·two general ledger files for 2016 that

·3· ·were actually 2018 general ledger

·4· ·files.· There were the documents

·5· ·related to the Textile's funds.· There

·6· ·was the check register and then there

·7· ·were certain texts from Ross Auerbach

·8· ·that were produced in an unreadable

·9· ·format.· I will note that for the

10· ·record and request that those be

11· ·produced immediately, but we will

12· ·continue with the deposition.

13· · · · ·MR. TEELE:· We responded to

14· ·those requests.· I will follow up

15· ·again following this deposition.

16· · · · ·MR. AULET:· Now we have done a

17· ·good amount of the boilerplate. I

18· ·assume nobody's realtime feed has come

19· ·up again?

20· · · · ·THE VIDEOGRAPHER:· Gentlemen, we

21· ·are having some audio issues on this

22· ·end.· I don't know if you hear it or

23· ·not but there is some feedback.· I am

24· ·almost thinking we should call back in

25· ·to try to get a better and clearer


Page 20·1· · · · · · · ·R. JOLSON

·2· ·line.

·3· · · · ·MR. TEELE:· Can we resolve the

·4· ·live transcript issue at the same

·5· ·time?

·6· · · · ·MR. AULET:· We can go off the

·7· ·record, but I think that the issue is

·8· ·that we have Mr. Teele and Mr. Jolson

·9· ·dial in from the same room and that's

10· ·likely causing feedback.

11· · · · ·MR. DUFFY:· No, there's only one

12· ·phone dialed in from this room.

13· ·Mr. Teele, Mr. Olsen and Mr. Duffy are

14· ·all in the same room on one line.

15· · · · ·MR. AULET:· Mr. Jolson, I will

16· ·also note we can take breaks every so

17· ·often.· If you need a break, let us

18· ·know.· We can take one at a convenient

19· ·time, but I will just ask that you

20· ·answer any questions pending before we

21· ·take a break.

22· · · · ·THE VIDEOGRAPHER:· Now going off

23· ·the record.· The time is 10:37.

24· · · · ·(Recess taken.)

25· · · · ·THE VIDEOGRAPHER:· The time is


Page 21·1· · · · · · · · · ·R. JOLSON

·2· · · ·now 10:46 a.m. and we are back on the

·3· · · ·record.

·4· ·BY MR. AULET:

·5· · · ·Q.· · Mr. Jolson, could you describe

·6· ·generally what the business of Northwest

·7· ·is?

·8· · · ·A.· · We are a licensee of Home

·9· ·Textiles.

10· · · ·Q.· · So, does Northwest manufacture

11· ·the textiles itself?

12· · · ·A.· · We import about 90 percent of

13· ·our product.

14· · · ·Q.· · Do you produce the remaining

15· ·10 percent?

16· · · ·A.· · We produce about 6 percent and a

17· ·small amount is manufactured in the United

18· ·States other than our own production.

19· · · ·Q.· · Okay.· For the textiles that are

20· ·imported, are those produced directly by

21· ·Northwest or are they produced by parties

22· ·that Northwest contracts with?

23· · · ·A.· · Outside factories.

24· · · ·Q.· · So, generally speaking, is the

25· ·business of Northwest that you obtain


Page 22·1· · · · · · · · · ·R. JOLSON

·2· ·these licenses, you have product

·3· ·manufactured using the licenses and then

·4· ·you attempt to sell the products for

·5· ·profit?

·6· · · · · · ·MR. TEELE:· Object to the form

·7· · · ·but Mr. Jolson can answer.

·8· · · ·A.· · Yes.

·9· · · ·Q.· · Is Northwest profitable today?

10· · · · · · ·MR. TEELE:· Object to the form

11· · · ·but you can answer that.

12· · · ·A.· · Can you just clarify that,

13· ·please?

14· · · ·Q.· · In 2019, did Northwest make a

15· ·profit?

16· · · ·A.· · No.

17· · · ·Q.· · What was the last year that

18· ·Northwest made a profit?

19· · · ·A.· · I would have to check. I

20· ·believe, 2017.

21· · · ·Q.· · In your view, what is the main

22· ·factor or factors causing Northwest to be

23· ·uncomfortable?

24· · · · · · ·MR. TEELE:· Object to the form.

25· · · ·A.· · Shortfalls in minimum


Page 23·1· · · · · · · · · ·R. JOLSON

·2· ·guarantees.

·3· · · ·Q.· · Could you describe what the

·4· ·minimum guarantees you referred to are?

·5· · · ·A.· · Sure.· In a contract, for any

·6· ·given year, we are required to pay a

·7· ·certain amount of royalties whether we hit

·8· ·the sales or not.· So, if we don't hit the

·9· ·sales, we are paying royalties against

10· ·sales that never happened.

11· · · ·Q.· · Understood.· Does Northwest also

12· ·have problems with unsold inventory?

13· · · ·A.· · Yes.

14· · · ·Q.· · And has it had a problem with

15· ·unsold inventory for several years?

16· · · ·A.· · Yes.

17· · · ·Q.· · Approximately how many millions

18· ·of dollars of unsold inventory does

19· ·Northwest have today?

20· · · ·A.· · Of unsold?· I am not sure I

21· ·heard you.· Sorry.

22· · · ·Q.· · Yes, of unsold inventory.

23· · · ·A.· · About 15 million.

24· · · ·Q.· · Are you familiar with the

25· ·general ledgers of Northwest?


Page 24·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · Somewhat.

·3· · · ·Q.· · Do you directly interact with

·4· ·the general ledgers?

·5· · · ·A.· · No.

·6· · · ·Q.· · Are you familiar with the

·7· ·general ledger spreadsheets that were

·8· ·produced in this case?

·9· · · ·A.· · I know they were given to you,

10· ·yes.

11· · · ·Q.· · Have you ever reviewed those

12· ·spreadsheets?

13· · · ·A.· · No.


15· ·process that was used to create those

16· ·spreadsheets?

17· · · ·A.· · Yes.

18· · · ·Q.· · How were those spreadsheets

19· ·created?

20· · · ·A.· · They were downloaded from our

21· ·ERP.

22· · · ·Q.· · What is the ERP?

23· · · ·A.· · JD Edwards.

24· · · ·Q.· · Could you describe what the ERP

25· ·is?


Page 25·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · It's our computer system, JD

·3· ·Edwards, which all transactions flow

·4· ·through.

·5· · · ·Q.· · Okay.· Is that system where all

·6· ·of the transactions the company enters

·7· ·into are entered into -- strike that.

·8· ·That was extremely confusing.

·9· · · · · · ·The ERP system is a computer

10· ·program?

11· · · ·A.· · Yes.

12· · · ·Q.· · And when the company enters any

13· ·sort of financial transaction, the details

14· ·of that transaction are put in the ERP

15· ·system?

16· · · ·A.· · Can you repeat that, please?

17· · · ·Q.· · I will strike that and give you

18· ·a new question.

19· · · · · · ·When the company enters into any

20· ·sort of financial transaction, are the

21· ·details of that transaction put in the ERP

22· ·system?

23· · · ·A.· · To the extent the description is

24· ·necessary, yes.

25· · · ·Q.· · Does the company track -- sorry.


Page 26·1· · · · · · · · · ·R. JOLSON

·2· ·I am still having a little feedback issue.

·3· · · · · · ·Does the company track the

·4· ·transactions it enters into in any other

·5· ·system, other than the ERP?

·6· · · ·A.· · No.

·7· · · ·Q.· · Who created the spreadsheets

·8· ·that were produced in this case?

·9· · · ·A.· · Which spreadsheets?

10· · · ·Q.· · The spreadsheets reflecting the

11· ·general ledger.

12· · · ·A.· · I am trying to understand.· Who

13· ·created them?

14· · · ·Q.· · So, as I understand it, these

15· ·spreadsheets that were produced are not

16· ·how the transactions are actually

17· ·recorded; instead, the transactions are

18· ·actually recorded in the ERP system and

19· ·these spreadsheets are essentially a log

20· ·of those transactions that were created

21· ·from the ERP system.· Did I describe that

22· ·accurately?

23· · · ·A.· · The information was downloaded

24· ·from the ERP in the form of a CSV file,

25· ·and the CSV file was then given to whoever


Page 27·1· · · · · · · · · ·R. JOLSON

·2· ·asked for them.

·3· · · ·Q.· · Thank you.· And who downloaded

·4· ·the data from the ERP?

·5· · · ·A.· · My controller.

·6· · · ·Q.· · And who is your controller?

·7· · · ·A.· · Ted Georgis.

·8· · · ·Q.· · Is there any separate system for

·9· ·tracking expenses of the company that are

10· ·entered into on American Express corporate

11· ·credit cards?

12· · · · · · ·MR. TEELE:· Objection.· You can

13· · · ·answer.

14· · · ·A.· · Not that I know of.

15· · · ·Q.· · Could you describe the process

16· ·of determining what expenses on the

17· ·American Express corporate credit cards

18· ·are expenses of the company?

19· · · · · · ·MR. TEELE:· Objection to form.

20· · · ·A.· · Sure.· Ross would download a

21· ·statement and he would give it to somebody

22· ·in our accounting staff for coding into

23· ·the general ledger.

24· · · ·Q.· · In this case, copies of American

25· ·Express statements with handwritten notes


Page 28·1· · · · · · · · · ·R. JOLSON

·2· ·have been produced that indicate

·3· ·individual expenses being allocated to

·4· ·individual expense categories.· Would

·5· ·those have been created by this person on

·6· ·your accounting staff?

·7· · · ·A.· · Well, anybody who has a

·8· ·corporate card would write on the

·9· ·statement what the expense is for.· And

10· ·then, based on that explanation,

11· ·accounting would code the general ledger.

12· · · ·Q.· · Understood.· And is there any

13· ·sort of review process to determine if a

14· ·claimed expense is a legitimate business

15· ·expense?

16· · · ·A.· · No.

17· · · ·Q.· · Is that the same for all

18· ·employees of the companies, that nobody's

19· ·expenses are reviewed to determine if they

20· ·are legitimate?

21· · · ·A.· · For the most part, people submit

22· ·expense reports and they are just coded.

23· · · ·Q.· · You say "for the most part."

24· ·Are there any exceptions that you can

25· ·recall at this time?


Page 29·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · Well, certain -- if there was an

·3· ·expense that I would see on our financial

·4· ·statements, I would ask a question.· But I

·5· ·don't see the American Express.· They are

·6· ·just coded and I don't see them.

·7· · · ·Q.· · Is there anybody who, as part of

·8· ·their job description, would review

·9· ·claimed expenses or expenses that should

10· ·not be paid by the company?

11· · · ·A.· · Yes.

12· · · ·Q.· · And who is that person?

13· · · ·A.· · Somebody in our accounting staff

14· ·is Ron Andreola.· And if he had a question

15· ·about something, he would ask me.

16· · · ·Q.· · About how often does Ron

17· ·Andreola ask you a question about a

18· ·particular expense?

19· · · ·A.· · It could be a few times a year.

20· ·It depends if he had a question.

21· · · ·Q.· · Other than reviewing those

22· ·handwritten notes on American Express

23· ·statements, is there any way I can

24· ·determine how any particular charge on an

25· ·American Express card was expensed in the


Page 30·1· · · · · · · · · ·R. JOLSON

·2· ·general ledger?

·3· · · ·A.· · You could match up the details

·4· ·to an American Express bill.

·5· · · ·Q.· · Are you familiar with how the

·6· ·American Express bills are booked into the

·7· ·ledger?

·8· · · ·A.· · Conceptually.

·9· · · ·Q.· · So, in reviewing the general

10· ·ledgers, we have found that typically the

11· ·American Express payments are entered as a

12· ·single block and they may be allocated to

13· ·different areas as a single block but that

14· ·we cannot trace any particular American

15· ·Express expense from a statement to a

16· ·particular account.

17· · · · · · ·Are you aware of any system that

18· ·would allow us to do that?

19· · · ·A.· · That happens when a payment is

20· ·made and we don't have the bill yet so we

21· ·have to record the payment and we don't

22· ·know how to allocate until we get the

23· ·bill.

24· · · ·Q.· · Well, so you are aware that

25· ·Mr. Auerbach would, on occasion, expense


Page 31·1· · · · · · · · · ·R. JOLSON

·2· ·personal items to his American Express

·3· ·card.· Correct?

·4· · · ·A.· · Yes.

·5· · · ·Q.· · And those items were supposed to

·6· ·be booked in his personal loan account.

·7· ·Correct?

·8· · · ·A.· · Yes.

·9· · · ·Q.· · So, when reviewing the ledger,

10· ·what we would find is that in any

11· ·particular month where something was added

12· ·you would see a block addition to his bill

13· ·that would say something along the lines

14· ·of "March 2018 Amex" for a certain amount,

15· ·say $5,000.· Is there any way that you

16· ·could determine what particular expenses

17· ·were included in that $5,000?

18· · · ·A.· · Yes.· That is the result of --

19· ·to use your example, at that time we did

20· ·not have the American Express bill.· Once

21· ·we get the bill, it would be allocated by

22· ·entry.

23· · · ·Q.· · So we should see individual

24· ·entries from the American Express bill

25· ·allocated specifically to Ross Auerbach's


Page 32·1· · · · · · · · · ·R. JOLSON

·2· ·personal loan account?

·3· · · ·A.· · I am sorry?· I missed that.

·4· · · ·Q.· · If we reviewed the general

·5· ·ledger and we want to see where a specific

·6· ·expense went, say an $11 iTunes expense,

·7· ·we should find that exact iTunes expense

·8· ·in the general ledger?

·9· · · ·A.· · I wouldn't know how it is

10· ·booked, but you could see it on the

11· ·American Express statement.

12· · · ·Q.· · So, what I am trying to get at

13· ·is, when I see a block of $5,000, which is

14· ·a number I picked out of the air, billed

15· ·to Mr. Auerbach's personal loan account

16· ·for a specific American Express bill, are

17· ·you aware of any Northwest system that

18· ·would tell me exactly which expenses from

19· ·that Amex bill were put into Ross's loan

20· ·account if we do not have that handwritten

21· ·American Express statement allocating

22· ·individual expenses?

23· · · ·A.· · A system?· No.

24· · · ·Q.· · You said that when the American

25· ·Express payments are made before you have


Page 33·1· · · · · · · · · ·R. JOLSON

·2· ·the details, those are put on the ledger

·3· ·without being broken out.· Are those put

·4· ·in a so-called suspense account?

·5· · · · · · ·MR. TEELE:· Objection to the

·6· · · ·form.· You can answer, though.

·7· · · ·A.· · Yes.

·8· · · ·Q.· · What is a suspense account?

·9· · · ·A.· · It is a holding place until we

10· ·get further information.

11· · · ·Q.· · How often, generally speaking,

12· ·should an expense remain in the suspense

13· ·account?

14· · · ·A.· · It would have to be cleaned up

15· ·in the current year.

16· · · ·Q.· · And you say "it would have to be

17· ·cleaned up in the current year."· Why

18· ·would it have to be cleaned up?

19· · · ·A.· · Because when we do our year-end

20· ·audit, you can't have a suspense account.

21· ·I shouldn't have a suspense account.

22· · · · · · ·MR. AULET:· So Jason's video

23· · · ·just disappeared.· Jason, are you

24· · · ·having issues?

25· · · · · · ·MR. TEELE:· I am here.· I hit a


Page 34·1· · · · · · · · · ·R. JOLSON

·2· · · ·button by accident.· I should be back.

·3· · · ·Q.· · Are you aware that the company,

·4· ·Northwest, has had millions of dollars in

·5· ·its suspense account for years?

·6· · · · · · ·MR. TEELE:· Objection to form.

·7· · · ·A.· · I am not sure I understand.· At

·8· ·the year end?

·9· · · · · · ·MR. AULET:· I will strike the

10· · · ·question.

11· · · ·Q.· · You say that the suspense

12· ·account needs to be cleaned up at the year

13· ·end.· Does that mean that all of the

14· ·expenses in the suspense account need to

15· ·be properly allocated to whatever other

16· ·category they should be in?


18· · · ·form.· You can answer.

19· · · ·A.· · If we don't have the proper

20· ·information at the end of the year, there

21· ·has been a process that has been here for

22· ·a long time that allocates 40 percent to

23· ·loan account and 60 percent to P&L

24· ·account.

25· · · ·Q.· · Are you sure it is 40 percent to


Page 35·1· · · · · · · · · ·R. JOLSON

·2· ·the loan account and 60 percent to the P&L

·3· ·account and not vice versa?

·4· · · ·A.· · That's what I think it is.

·5· · · ·Q.· · So when the suspense account --

·6· ·at the end of the year, when the suspense

·7· ·account is allocated to the loan account

·8· ·and to the P&L accounts, is it permanently

·9· ·allocated?


11· · · ·form.

12· · · ·A.· · It is allocated until we get the

13· ·American Express statements.

14· · · ·Q.· · Let me make sure I understand

15· ·your answer that it is allocated "until we

16· ·get the American Express statements."

17· ·Let's assume the suspense account has a

18· ·million dollars at the end of the year,

19· ·for easy math.· I understand that

20· ·40 percent of it will go to, I think you

21· ·said, the loan account and 60 percent will

22· ·go to the P&L account.· Will those amounts

23· ·stay in the loan account and the P&L

24· ·account?



Page 36·1· · · · · · · · · ·R. JOLSON

·2· · · ·form.

·3· · · ·A.· · They will stay there until we

·4· ·get a statement.

·5· · · ·Q.· · Are you aware that that has

·6· ·never been the case, Mr. Jolson?


·8· · · ·form.

·9· · · ·Q.· · So, are you aware that -- strike

10· ·that.

11· · · · · · ·Are you aware that Northwest

12· ·makes a practice of allocating the

13· ·suspense account to various accounts on

14· ·December 31st of every year and then

15· ·immediately unallocating it on January 1st

16· ·of the next year?


18· · · ·A.· · No.· I don't know that.

19· · · ·Q.· · You are not aware of that.

20· ·And --

21· · · ·A.· · I --

22· · · ·Q.· · Are you aware that Northwest has

23· ·that same practice at the end of June and

24· ·beginning of July, that expenses are

25· ·allocated at the end of June and


Page 37·1· · · · · · · · · ·R. JOLSON

·2· ·immediately reallocated on July 1st?


·4· · · ·A.· · Those would be journal entries

·5· ·that I am not aware of.

·6· · · ·Q.· · Now, you said that some amount

·7· ·of the --

·8· · · · · · ·(Reporter interruption.)

·9· · · ·Q.· · Mr. Jolson, are you aware that

10· ·Northwest also makes it a practice of

11· ·allocating amounts in the suspense account

12· ·between -- sorry.· Strike the question.

13· ·You already answered that.

14· · · · · · ·You said some amount of the

15· ·suspense account is allocated to a P&L

16· ·account.· Could you explain what you mean

17· ·by P&L account?

18· · · ·A.· · The amount that doesn't go to

19· ·the loan account is put into one account

20· ·on the P&L called foreign travel, so it is

21· ·all sitting in that account waiting for

22· ·proper allocation.

23· · · ·Q.· · And your understanding was that

24· ·those expenses stayed in the foreign

25· ·travel account.· Correct?


Page 38·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · Until we get a bill.

·3· · · ·Q.· · And it would surprise you to see

·4· ·that they are immediately reversed the

·5· ·next day rather than staying in that

·6· ·account.· Correct?


·8· · · ·form.

·9· · · ·A.· · Yes.

10· · · ·Q.· · Now, when an expense is put into

11· ·a profit/loss account, does that affect

12· ·the net income that the company reports

13· ·for that year?

14· · · ·A.· · Yes.

15· · · ·Q.· · So, if an amount is put in a

16· ·profit/loss account at the end of the year

17· ·and then reversed back out for, say, the

18· ·next year, is the net income of the

19· ·company understated?

20· · · ·A.· · What period -- I don't

21· ·understand.

22· · · ·Q.· · Well, if you put a million

23· ·dollars into the profit/loss account, that

24· ·reduces your net income by a million

25· ·dollars.· Correct?


Page 39·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · Correct.

·3· · · ·Q.· · What is the effect of

·4· ·immediately reversing that out the next

·5· ·day?

·6· · · ·A.· · It would put it back on the

·7· ·balance sheet to wait until either the

·8· ·bills come in or the next reporting cycle

·9· ·comes in.

10· · · ·Q.· · What is the last year that the

11· ·debtors filed a tax return with the IRS?

12· · · ·A.· · I am not sure.· I don't handle

13· ·the taxes.

14· · · ·Q.· · We requested tax returns and the

15· ·last return that we received was 2017.

16· ·Was that tax return filed?

17· · · ·A.· · Yes.

18· · · ·Q.· · Who would have signed on behalf

19· ·of the company?

20· · · ·A.· · Ross.

21· · · ·Q.· · Not you?

22· · · ·A.· · No.

23· · · ·Q.· · Why wouldn't you have signed the

24· ·tax returns?

25· · · ·A.· · Because I don't.


Page 40·1· · · · · · · · · ·R. JOLSON

·2· · · ·Q.· · Are you aware of any tax returns

·3· ·that were filed for 2018 or 2019?

·4· · · ·A.· · No.

·5· · · ·Q.· · Why wouldn't tax returns have

·6· ·been filed for 2018 or 2019?

·7· · · ·A.· · I don't know why they weren't.

·8· ·An extension was filed.

·9· · · ·Q.· · And what was the reason for

10· ·filing for an extension?

11· · · ·A.· · We weren't ready.· We have a tax

12· ·accountant that didn't do it.· I don't

13· ·know.

14· · · ·Q.· · Well, it's been a year and a

15· ·half since the 2018-fiscal year ended --

16· ·strike that.

17· · · · · · ·When does Northwest's fiscal

18· ·year end?

19· · · ·A.· · December 31st.

20· · · ·Q.· · And so why has Northwest been

21· ·unable to file a tax return for a year and

22· ·a half for the fiscal year 2018?

23· · · · · · ·MR. TEELE:· Objection.· He's

24· · · ·already answered that question that he

25· · · ·didn't know.· You can still answer.


Page 41·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · I don't know.· I would ask our

·3· ·tax accountant.

·4· · · ·Q.· · Does the issue of filing the

·5· ·company's taxes ever come to your

·6· ·attention, as the CFO of the company?

·7· · · ·A.· · No.· I am not involved in any of

·8· ·the tax returns.

·9· · · ·Q.· · Who is the most senior person at

10· ·Northwest who is involved in filing tax

11· ·returns?

12· · · ·A.· · Ross.

13· · · ·Q.· · If I wanted to know why the

14· ·company has been unable to file a tax

15· ·return for 2018 for a year and a half, is

16· ·there anybody other than Ross at the

17· ·company who would be able to answer that

18· ·question?

19· · · ·A.· · No.

20· · · ·Q.· · Who are the company's auditors?

21· · · ·A.· · Mazars U.S.

22· · · ·Q.· · What was the last year that they

23· ·completed an audit for?

24· · · ·A.· · They completed all the work and

25· ·testing for 2018 and issued a draft.


Page 42·1· · · · · · · · · ·R. JOLSON

·2· · · ·Q.· · You say "they completed all the

·3· ·work and testing for 2018 and issued a

·4· ·draft."· Did they not issue a final audit?

·5· · · ·A.· · They did not.

·6· · · ·Q.· · Why not?


·8· · · ·form.

·9· · · ·A.· · They went on and CIT didn't need

10· ·it.· So when they didn't need it, they

11· ·didn't issue the final.

12· · · ·Q.· · Did Northwest instruct Mazars

13· ·not to issue a final?


15· · · ·A.· · No.

16· · · ·Q.· · Did you provide the draft audit

17· ·to CIT?

18· · · ·A.· · Yes.

19· · · ·Q.· · Why was no audit completed for

20· ·2019?


22· · · ·form.

23· · · ·A.· · At the time, there was a

24· ·question about a going-concern comment

25· ·that never got answered, so they never


Page 43·1· · · · · · · · · ·R. JOLSON

·2· ·issued a final.

·3· · · ·Q.· · And was there a going concern

·4· ·comment in the potential audit for 2019?


·6· · · ·A.· · There is no -- there was no

·7· ·audit for 2019.

·8· · · ·Q.· · So when you say the question

·9· ·about a going-concern comment that never

10· ·got answered, where was that going-concern

11· ·comment?

12· · · ·A.· · I don't understand.

13· · · ·Q.· · Previously, you had answered

14· ·that there was a question about a

15· ·going-concern comment that never got

16· ·answered so they never issued a final.

17· ·Was that going-concern comment in the 2018

18· ·audit?

19· · · ·A.· · That was the question, in the

20· ·2018 audit.· That's why it didn't get

21· ·final.

22· · · ·Q.· · Did the 2018 audit have a

23· ·going-concern statement?

24· · · ·A.· · No.· There was opinion --

25· · · ·Q.· · Strike that.· Sorry.


Page 44·1· · · · · · · · · ·R. JOLSON

·2· · · · · · ·So, Mazars did not issue an

·3· ·opinion in the 2018 audit that the company

·4· ·could continue as a going concern?


·6· · · ·A.· · I lost track.· Can you repeat

·7· ·the question, please.

·8· · · ·Q.· · Did Mazars -- strike the

·9· ·previous question.

10· · · · · · ·Did Mazars indicate any concern

11· ·about the company's ability to continue as

12· ·a going concern in its 2018 draft audit?

13· · · · · · ·MR. TEELE:· Same objection to

14· · · ·form.

15· · · ·A.· · They just wanted to discuss it,

16· ·about a going-concern comment, and the

17· ·discussions never concluded, so -- and at

18· ·the time CIT didn't ask for a final so

19· ·there was no opinion given.

20· · · ·Q.· · When you say "they just wanted

21· ·to discuss it," by "they" did you mean

22· ·Mazars?

23· · · ·A.· · Yes.

24· · · ·Q.· · Why was the discussion never had

25· ·with Mazars about a going-concern comment?


Page 45·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · The discussion happened.· We

·3· ·didn't have a resolution.

·4· · · ·Q.· · Was Mazars concerned about the

·5· ·ability of the company to continue as a

·6· ·going concern?


·8· · · ·A.· · They asked Ross for a letter

·9· ·that would support that -- that he would

10· ·support the company, and that was it.

11· · · ·Q.· · Did Ross ever supply that

12· ·letter?

13· · · ·A.· · I am not sure.

14· · · ·Q.· · Are you aware of any such letter

15· ·that he ever supplied?

16· · · · · · ·MR. TEELE:· Objection.

17· · · ·A.· · I never saw it.

18· · · · · · ·MR. AULET:· So, I am going to

19· · · ·introduce a new exhibit.· As usual,

20· · · ·please bear with me while I confirm

21· · · ·that this actually works.


23· · · ·Exhibit 2.)

24· · · ·Q.· · What you should be seeing is an

25· ·exhibit that we have created of


Page 46·1· · · · · · · · · ·R. JOLSON

·2· ·screenshots of a number of entries from

·3· ·the general ledger files from 2017.· In

·4· ·these files, for the record, are hundreds

·5· ·of thousands to over a million lines long

·6· ·so we are not going to attempt to run

·7· ·those through the system, hence the need

·8· ·for these screenshots.

·9· · · · · · ·MR. TEELE:· I just want to

10· · · ·clarify, Mr. Aulet.· You prepared this

11· · · ·exhibit based on the GL's that were

12· · · ·produced by the Debtors.· Right?

13· · · · · · ·MR. AULET:· That's correct.

14· · · ·They are screenshots from those files.

15· · · ·So, we have left the line numbers so

16· · · ·that if you want, you can go look them

17· · · ·up.

18· · · · · · ·MR. TEELE:· Thank you.

19· · · · · · ·MR. AULET:· You will also see we

20· · · ·have left the header that shows --

21· · · · · · ·MR. TEELE:· Sorry, Ted.· I'm

22· · · ·helping Mr. Jolson zoom in on the

23· · · ·document.

24· · · · · · ·MR. AULET:· For the record,

25· · · ·looking at the first page, you can see


Page 47·1· · · · · · · · · ·R. JOLSON

·2· · · ·the headers that show that this

·3· · · ·particular screenshot is from the

·4· · · ·January 2017 ledger.· What this is

·5· · · ·focusing on is the officer loan entry

·6· · · ·for Ross Auerbach.

·7· · · ·Q.· · Mr. Jolson, please let me know

·8· ·once you are ready to begin discussing

·9· ·this exhibit.

10· · · ·A.· · Okay.· I see one page.

11· · · ·Q.· · On this first page, you can see

12· ·a balance forward that is about

13· ·2.76 million under the officer's loan,

14· ·Ross Auerbach entry.

15· · · ·A.· · Okay.

16· · · ·Q.· · Then there are a number of

17· ·changes to this which appear to be

18· ·allocated to specific American Express

19· ·statements.· Do you see those?

20· · · · · · ·THE VIDEOGRAPHER:· Excuse me. I

21· · · ·need Mr. Jolson back on camera.

22· · · · · · ·THE WITNESS:· Let me see if I

23· · · ·can arrange it so you can see me and I

24· · · ·can look at another computer.· You

25· · · ·will get my profile.· How is that?


Page 48·1· · · · · · · · · ·R. JOLSON

·2· · · · · · ·MR. TEELE:· For the record,

·3· · · ·Mr. Jolson is looking at the exhibit

·4· · · ·on a bigger screen.

·5· · · · · · ·THE VIDEOGRAPHER:· Thank you.

·6· · · ·Q.· · Mr. Jolson, you can see these

·7· ·entries that appear to reference specific

·8· ·American Express statements.· Is that

·9· ·correct?

10· · · ·A.· · I see them.

11· · · ·Q.· · If I wanted to know, for

12· ·example, what was included in the top

13· ·entry, "Jan 16, Amex," you are not aware

14· ·of any system that would let me look up

15· ·what specific expenses are in that?


17· · · ·already answered that question.· You

18· · · ·can answer.

19· · · ·A.· · No, I am not.

20· · · ·Q.· · If you go to the next page, this

21· ·shows the employee receivable for an

22· ·employee named Peter Ochs.· Do you know

23· ·who Peter Ochs is?

24· · · ·A.· · Yes.

25· · · ·Q.· · Who is he?


Page 49·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · Peter -- he is in-house

·3· ·salesperson.

·4· · · · · · ·MR. TEELE:· Is the next page of

·5· · · ·the exhibit on the screen?

·6· · · · · · ·MR. AULET:· I have moved to the

·7· · · ·next page.· I am not sure if yours --

·8· · · · · · ·MR. TEELE:· Apologies.· I see it

·9· · · ·now.

10· · · · · · ·(Reporter interruption.)

11· · · · · · ·MR. AULET:· Now give me a second

12· · · ·while I scroll to the correct page.

13· · · ·Q.· · Now could you turn to page 13?

14· · · · · · ·MR. TEELE:· I don't think we can

15· · · ·flip the pages.

16· · · · · · ·MR. AULET:· I have moved to page

17· · · ·13 on my screen.

18· · · ·Q.· · Has it moved for you to an

19· ·officer's loan Ross Auerbach entry but the

20· ·from and through date is 6/1 to 6/30,

21· ·2017?

22· · · ·A.· · Yes.· I see it.

23· · · ·Q.· · What I am interested in is the

24· ·first line, the line that says "Adjusting

25· ·entries June 2017."· It moves about


Page 50·1· · · · · · · · · ·R. JOLSON

·2· ·900,000 into Ross Auerbach's loan account.

·3· ·Are you aware of what this entry reflects?

·4· · · ·A.· · No.

·5· · · ·Q.· · Now, on the next page there is a

·6· ·similar entry under Peter Ochs's

·7· ·receivable, where it looks like 13,000 is

·8· ·added to his receivable with the same

·9· ·header, "Adjusting entries June 2017."

10· ·Are you aware of why that entry was made?

11· · · ·A.· · No.

12· · · ·Q.· · On the right-hand side is a

13· ·column that says "LT" and then a column

14· ·that says "Batch."· Are you aware of what

15· ·the column that reads "LT" represents?

16· · · ·A.· · No.

17· · · ·Q.· · Are you aware of what the column

18· ·labeled "Batch" represents?

19· · · ·A.· · No.

20· · · ·Q.· · So, I am going to move to the

21· ·next page, which is the suspense account

22· ·for June.· As you will see, the second

23· ·entry here says "Adjusting entries

24· ·June 2017."· You may have to zoom in to

25· ·get the correct number of digits here.· It


Page 51·1· · · · · · · · · ·R. JOLSON

·2· ·appears to be that about 2.25 million is

·3· ·removed from the suspense account.· Do you

·4· ·see that?

·5· · · ·A.· · Yes.

·6· · · ·Q.· · Do you have any understanding of

·7· ·why that transaction would have been made?

·8· · · ·A.· · No.

·9· · · ·Q.· · Now, I have moved to the next

10· ·page.· This is a continuation of the

11· ·suspense account.· At the bottom I see the

12· ·"Account Total" line has both the same

13· ·debit and credit and now has a zero

14· ·balance.· Do you see that?

15· · · ·A.· · Yes.

16· · · ·Q.· · Does that indicate that all

17· ·expenses have been moved out of the

18· ·suspense account?


20· · · ·A.· · I don't really know.

21· · · ·Q.· · Well, if the suspense account is

22· ·zero, does it have any expenses left in

23· ·it?

24· · · ·A.· · No.

25· · · ·Q.· · Would this movement of expenses


Page 52·1· · · · · · · · · ·R. JOLSON

·2· ·out of the suspense account -- let me go

·3· ·back to the previous page.· If you will

·4· ·notice, the "Adjusting entries June 2017"

·5· ·line has a date of 6/30/2017.· Is that

·6· ·consistent with your understanding that

·7· ·entries are moved out of the suspense

·8· ·account and moved into other accounts at

·9· ·the end of a reporting period?


11· · · ·A.· · Yes.

12· · · ·Q.· · And now I have moved to page 17,

13· ·which contains the foreign travel account.

14· ·Here I see adjusting entries June 2017 of

15· ·about 1.34 million that similarly happened

16· ·on June 30, 2017.· Do you see that entry?

17· · · ·A.· · Yes.

18· · · ·Q.· · And is that consistent with your

19· ·understanding that the expenses that are

20· ·moved out of the suspense account are

21· ·partially moved into the foreign travel

22· ·account?

23· · · ·A.· · Yes.

24· · · ·Q.· · Do you have any understanding

25· ·what June 2017 "permanent JE" means, the


Page 53·1· · · · · · · · · ·R. JOLSON

·2· ·entry right below?

·3· · · ·A.· · Not specifically.

·4· · · ·Q.· · Do you have a general

·5· ·understanding of what it means?

·6· · · ·A.· · By theory, yes.

·7· · · ·Q.· · And what is that theory?

·8· · · ·A.· · It would mean to me that it is a

·9· ·permanent journal entry.

10· · · ·Q.· · What does a permanent journal

11· ·entry mean?

12· · · ·A.· · It would mean that it's not an

13· ·accrual.· It would just mean that it's a

14· ·journal entry that would affect our

15· ·records.

16· · · ·Q.· · Why would you have a journal

17· ·entry affecting your records that is not

18· ·an accrual?


20· · · ·A.· · I was just stating a theory

21· ·based on the words I see.

22· · · ·Q.· · Okay.· Let me go to the next

23· ·page.· As you will see, the next page,

24· ·page 18, is the officer's loan Ross

25· ·Auerbach from July 2017.· Now, at the


Page 54·1· · · · · · · · · ·R. JOLSON

·2· ·bottom, you will see a line that says

·3· ·"Adjusting entries June 2017" with the

·4· ·date of July 1, 2017 and a credit of

·5· ·$903,044.· What is your understanding of

·6· ·what that line means?

·7· · · ·A.· · I have no idea.

·8· · · ·Q.· · We can go back and look, but

·9· ·that $903,044 is an exactly offsetting

10· ·transaction for what was put into Ross's

11· ·loan account on June 30, 2017.· Do you

12· ·have any understanding why two offsetting

13· ·transactions like that would have been put

14· ·into the ledgers?

15· · · ·A.· · No.

16· · · ·Q.· · Now, if you look at the batch

17· ·number, the batch number is 195355, and

18· ·that is the exact same batch number for

19· ·every other entry titled "Adjusting

20· ·entries June 2017" that we have seen.· Do

21· ·you have any understanding of why all

22· ·those entries would have the same batch

23· ·number?

24· · · ·A.· · No.

25· · · ·Q.· · Is it possible to put entries


Page 55·1· · · · · · · · · ·R. JOLSON

·2· ·into the ledger that will appear on a

·3· ·different date from the date that they

·4· ·were actually entered into the system?


·6· · · ·form.

·7· · · ·A.· · Can you rephrase that?· I am not

·8· ·sure I understand what you mean.

·9· · · ·Q.· · Can you, for example, if today I

10· ·went to the system, would I be able to

11· ·type in a transaction that had a date of

12· ·yesterday or tomorrow?


14· · · ·A.· · I am not sure.

15· · · ·Q.· · Would I be able to, in a single

16· ·set of transactions, type in a set of

17· ·entries for June 30, 2017 in that exact

18· ·same set of transactions that I am going

19· ·to submit to the system at once put

20· ·offsetting transactions for July 1, 2017?

21· · · · · · ·MR. TEELE:· Objection.· He

22· · · ·already answered that question.· You

23· · · ·can still answer if you have something

24· · · ·to add.

25· · · ·A.· · I don't know.


Page 56·1· · · · · · · · · ·R. JOLSON

·2· · · ·Q.· · Can you think of any legitimate

·3· ·basis to put entries into the system on

·4· ·June 30, 2017, and cancel them out on

·5· ·July 1, 2017 in this manner?

·6· · · ·A.· · If it --


·8· · · ·form.

·9· · · ·A.· · If it was an accrual, in

10· ·accounting accruals are reversed the

11· ·following period.

12· · · ·Q.· · Could you explain what you mean

13· ·by "if it was an accrual"?

14· · · ·A.· · In accounting, if you don't have

15· ·an exact amount, an accrual is an

16· ·estimate.· So, you put a placeholder into

17· ·an account.· And since you don't know, the

18· ·next day it gets reversed.

19· · · ·Q.· · And so you earlier stated that

20· ·you were not aware that the split of the

21· ·suspense account into the Ross loan

22· ·account and into the foreign travel

23· ·account was immediately reversed.


25· · · ·characterization.


Page 57·1· · · · · · · · · ·R. JOLSON

·2· · · ·Q.· · After looking at these general

·3· ·ledger sheets, do you have an

·4· ·understanding now of what happened with

·5· ·that suspense account every six months?

·6· · · · · · ·MR. TEELE:· Same objection.

·7· · · ·A.· · I am just not familiar with

·8· ·this.

·9· · · ·Q.· · Now, what we have been looking

10· ·at is a middle-of-the-year report.· Does

11· ·the company provide any reporting to

12· ·anybody that shows the first six months of

13· ·the year?


15· · · ·form.

16· · · ·A.· · Yes.

17· · · ·Q.· · Who does it provide that

18· ·financial reporting to?

19· · · ·A.· · CIT.

20· · · ·Q.· · Is CIT aware of these offsetting

21· ·entries?


23· · · ·form.

24· · · ·A.· · I don't know.

25· · · ·Q.· · Have you ever brought it to


Page 58·1· · · · · · · · · ·R. JOLSON

·2· ·CIT's attention that the company has

·3· ·millions of dollars in its suspension

·4· ·account?


·6· · · ·characterization.

·7· · · ·A.· · No.· They get the statement.

·8· · · ·Q.· · And the statement shows nothing

·9· ·in the suspense account.· Correct?

10· · · ·A.· · I don't know.· I don't have a

11· ·statement in front of me.

12· · · ·Q.· · We have gone to the next page.

13· ·The entry to the Peter Ochs account is

14· ·also reversed out as you can see.· Why are

15· ·expenses being put into Peter Ochs's

16· ·account and then being taken back out?

17· · · · · · ·MR. TEELE:· Objection. I

18· · · ·thought you already asked that

19· · · ·question and he answered it.

20· · · ·Q.· · You can answer if you know.

21· · · ·A.· · I don't know.

22· · · ·Q.· · Why are expenses put into the

23· ·foreign travel account specifically for

24· ·profit/loss, as the, quote/unquote, P&L

25· ·account got put into?


Page 59·1· · · · · · · · · ·R. JOLSON


·3· · · ·form.

·4· · · ·A.· · When we do not have a statement,

·5· ·the amount of the payment is split

·6· ·40 percent to a loan and 60 percent goes

·7· ·into foreign travel.

·8· · · ·Q.· · So why is the foreign travel

·9· ·account picked for these amounts to be put

10· ·into as opposed to any other profit and

11· ·loss account?

12· · · ·A.· · It's a holding account that was

13· ·titled "foreign travel account" years ago.

14· · · ·Q.· · So it is just a holding account?

15· · · ·A.· · Correct.

16· · · ·Q.· · I have gone to page 29 of this

17· ·exhibit, which is the entry for foreign

18· ·travel for the month of October 2017.· My

19· ·first question -- I apologize that it

20· ·appears that the "Credit" column was a

21· ·little bit narrow when we took the

22· ·screenshot of this so the credit amount

23· ·appears as negative 9E plus 05, which I

24· ·understand is scientific notation.· I will

25· ·represent to you that that amount equals


Page 60·1· · · · · · · · · ·R. JOLSON

·2· ·around negative $900,000 in the credit

·3· ·line, and that is shown as the balance

·4· ·forward.

·5· · · · · · ·Could you explain to me what a

·6· ·negative amount in the credit column, as

·7· ·the balance forward, means?


·9· · · ·form.· We are missing numbers.

10· · · ·A.· · I don't know.

11· · · ·Q.· · You see here about $864,000 of

12· ·expenses are shifted into this account in

13· ·October.· Do you see that in, labeled "BK

14· ·2016 year-end journal perm"?


16· · · ·form.

17· · · ·A.· · I don't see that.

18· · · · · · ·MR. TEELE:· To the left.

19· · · ·Q.· · It is line 381158 and the label

20· ·begins "BK" column?

21· · · ·A.· · I see it.

22· · · ·Q.· · Okay.· So what is your

23· ·understanding of moving -- what is your

24· ·understanding of what this entry

25· ·represents?


Page 61·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · I don't know.


·4· · · ·Q.· · So, you cannot explain to me

·5· ·what a negative number in the "Credit"

·6· ·column represents as a balance forward.

·7· ·Is that correct?


·9· · · ·form of the question.· It is a little

10· · · ·argumentative, Mr. Aulet.

11· · · ·Q.· · You can answer the question.

12· · · ·A.· · I don't know what it means on

13· ·this.

14· · · ·Q.· · Okay.· So now as we have seen,

15· ·the transactions that are entered into

16· ·this account at the beginning and the day

17· ·after -- sorry.· The end of a reporting

18· ·period, June 30th, and then the next day

19· ·are reversed out.· This entry, we can't

20· ·find any reversal for.· What would be the

21· ·effect of permanently moving $864,000 to

22· ·this holding account?


24· · · ·form.

25· · · ·A.· · I would need to know the entry.


Page 62·1· · · · · · · · · ·R. JOLSON

·2· ·Then I could tell you the effect.

·3· · · ·Q.· · What information isn't visible

·4· ·to you that you would need to know?

·5· · · ·A.· · I only see half of a journal

·6· ·entry.· I don't see the other side.

·7· · · ·Q.· · So you would need to know where

·8· ·that $864,000 came from?

·9· · · ·A.· · Or where it went.

10· · · ·Q.· · Now I have moved to page 28,

11· ·which is unfortunately apparently

12· ·suffering from the same issue.· We'll see

13· ·if we can get a revised version of this

14· ·prepared.· But this page, which is the

15· ·suspense account, also has an entry

16· ·labeled "BK 2016 year-end journal perm"

17· ·and there a significant amount in the

18· ·credit is moved out.· I will represent to

19· ·you that that is -- actually, I believe

20· ·that that is around $2 million but I

21· ·believe it may be heavily rounded and I

22· ·think it is more like 1.5.

23· · · · · · ·MR. TEELE:· We object to the

24· · · ·representation in this exhibit.· If

25· · · ·you want to provide an updated one


Page 63·1· · · · · · · · · ·R. JOLSON

·2· · · ·with the actual number Mr. Jolson can

·3· · · ·look at, that is fine.· Based on this

·4· · · ·exhibit, we have never seen this in

·5· · · ·that line or in that cell.

·6· · · · · · ·MR. AULET:· All right.· We'll

·7· · · ·come back to this particular issue.

·8· · · ·Q.· · Do you know if there were any

·9· ·funds in the suspense account as of the

10· ·date that the Debtors filed for

11· ·bankruptcy?

12· · · ·A.· · I don't know.

13· · · ·Q.· · You are aware that the Debtors

14· ·disclosed to this court that Mr. Auerbach

15· ·owes the company approximately

16· ·$3.4 million.· Is that correct?


18· · · ·form.

19· · · ·A.· · Yes.

20· · · · · · ·MR. AULET:· I appreciate

21· · · ·Mr. Teele's objection.· The question

22· · · ·was confusing.

23· · · ·Q.· · Are you aware that the Debtors

24· ·disclosed to the court that Mr. Auerbach

25· ·owes $3.4 million to the company?


Page 64·1· · · · · · · · · ·R. JOLSON

·2· · · · · · ·MR. TEELE:· Same objection.

·3· · · ·A.· · Yes.

·4· · · ·Q.· · To the best of your knowledge,

·5· ·is that figure correct?


·7· · · ·form.

·8· · · ·A.· · I don't know.

·9· · · ·Q.· · Who would know?

10· · · ·A.· · I don't know if anybody would

11· ·know.

12· · · · · · ·MR. AULET:· Let me get another

13· · · ·exhibit up for you.


15· · · ·Exhibit 3.)

16· · · ·Q.· · Mr. Jolson, you should now be

17· ·able to see what I have stamped Exhibit 3,

18· ·I believe.

19· · · ·A.· · Okay.

20· · · ·Q.· · This is a set of screenshots

21· ·from the ledger file that encompasses

22· ·January 1st through February 28, 2020.

23· · · · · · ·MR. TEELE:· One second,

24· · · ·Mr. Aulet.· Rob, can you make sure you

25· · · ·stay on camera?


Page 65·1· · · · · · · · · ·R. JOLSON

·2· · · · · · ·THE WITNESS:· Sorry.· You are

·3· · · ·getting my profile.· Is that okay?

·4· · · · · · ·THE VIDEOGRAPHER:· If you can

·5· · · ·tilt your camera down a little?· I can

·6· · · ·barely see you.

·7· · · · · · ·Thank you.

·8· · · ·Q.· · Can you see the exhibit,

·9· ·Mr. Jolson?

10· · · ·A.· · Yes.

11· · · ·Q.· · Now, this is another set of

12· ·screenshots from the ledger files.· This

13· ·one is titled "Ledger ending 2/28/2020."

14· ·This shows three different accounts.· It

15· ·shows the officer's loan for Ross

16· ·Auerbach, it shows the foreign travel

17· ·account and it shows the suspense account.

18· ·I will note that the suspense account

19· ·continues on to page 2, which I have just

20· ·moved you to.

21· · · · · · ·At the end of 2019, do I

22· ·understand your practice would have been

23· ·to take all the funds in the suspense

24· ·account and transfer them to the foreign

25· ·travel and the Ross loan account?


Page 66·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · The foreign travel is not the

·3· ·same as the Ross loan account.

·4· · · ·Q.· · But the funds from the suspense

·5· ·account, part of them would have been

·6· ·transferred to the Auerbach loan account

·7· ·and part of them would have been

·8· ·transferred to foreign travel.· Is that

·9· ·correct?


11· · · ·A.· · Yes.

12· · · ·Q.· · Now, if you look at the foreign

13· ·travel account here, you see that about

14· ·$2 million is taken out of the account for

15· ·year 2019 entries.· Do you see that?

16· · · ·A.· · Yes.

17· · · ·Q.· · Now, the results of that appears

18· ·to be from the "Account Total" column,

19· ·that the foreign travel account now has a

20· ·negative balance of about $2 million,

21· ·which is composed of that year 2019 entry

22· ·and a small Amex amount that was billed to

23· ·this account.

24· · · · · · ·Do you see that account total?

25· · · ·A.· · I see it.


Page 67·1· · · · · · · · · ·R. JOLSON

·2· · · ·Q.· · What does it mean for this

·3· ·foreign travel account to have a negative

·4· ·balance of $2 million?


·6· · · ·form.

·7· · · ·A.· · Without seeing the other end, I

·8· ·couldn't tell you.

·9· · · ·Q.· · The other end of what?

10· · · ·A.· · There is always two sides to

11· ·every journal entry, so --

12· · · ·Q.· · I am asking about the meaning of

13· ·the account total.· Is that line a journal

14· ·entry?


16· · · ·form.

17· · · ·A.· · Yes.· A journal entry for -- if

18· ·I am reading this right, the journal entry

19· ·equals the account total.

20· · · ·Q.· · So I understand that you need to

21· ·see the other half of the year 2019

22· ·entry's journal entry to know what that

23· ·means.· Is that correct?


25· · · ·form.


Page 68·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · Yes.

·3· · · ·Q.· · But my question is different.

·4· ·The account total for the foreign travel

·5· ·account, which is, as I understand it, a

·6· ·P&L account, is negative $2 million.· What

·7· ·does that mean for the company's balance

·8· ·sheet?


10· · · ·form.

11· · · ·A.· · This is a P&L account.· So,

12· ·without seeing the offset, I don't know

13· ·what it would mean to the balance sheet

14· ·because it is only half an entry.

15· · · ·Q.· · Are P&L accounts set to zero at

16· ·the beginning of each year?


18· · · ·form.

19· · · ·A.· · Yes.

20· · · ·Q.· · So if an amount is put into this

21· ·foreign travel account on December 31st,

22· ·that is incorporated for the year into the

23· ·profit/loss statement.· Correct?


25· · · ·form of the hypothetical.· You can


Page 69·1· · · · · · · · · ·R. JOLSON

·2· · · ·answer if you have an answer.

·3· · · ·A.· · Yes, that account would be set

·4· ·to zero.

·5· · · ·Q.· · And it would be set to zero

·6· ·because what was previously in the account

·7· ·was thus incorporated in the year's

·8· ·profits and losses?

·9· · · · · · ·MR. TEELE:· Objection.· You are

10· · · ·asking him hypothetical questions with

11· · · ·half information.· If you have

12· · · ·something specific and particular that

13· · · ·you want to ask him you should do that

14· · · ·rather than leading him down this path

15· · · ·with various hypotheticals with

16· · · ·different variations.

17· · · · · · ·MR. AULET:· I am asking him how

18· · · ·these account statements work, how

19· · · ·these journal entries work.

20· · · · · · ·MR. TEELE:· In the form of a

21· · · ·hypothetical.· He already answered

22· · · ·your specific question where he said

23· · · ·he needed to see the other half of the

24· · · ·entry.· Now you are asking him to make

25· · · ·a guess based on your hypothetical


Page 70·1· · · · · · · · · ·R. JOLSON

·2· · · ·facts.· If you --

·3· · · · · · ·MR. AULET:· Okay.

·4· · · ·Q.· · Mr. Jolson, as you might expect,

·5· ·the other half of the entry is in the

·6· ·suspense account.· We have amounts that

·7· ·come out of Mr. Auerbach's loan account,

·8· ·and you see that on page 1.· You have

·9· ·amounts that come out of foreign travel,

10· ·and you see that on page 1, and they are

11· ·put that back into the suspense account

12· ·and you see that on page 2 for year 2019

13· ·entries.

14· · · · · · ·Do you see that year 2019

15· ·entries at the end of page 2?

16· · · · · · ·MR. TEELE:· Are you looking at

17· · · ·the top box on page 2 or the bottom

18· · · ·box?

19· · · · · · ·MR. AULET:· The bottom box.

20· · · ·A.· · I see an entry.

21· · · ·Q.· · Now, understanding -- if you

22· ·look closely, the batch number for that

23· ·will also be the same.· But given that

24· ·that is where the offsetting entry is,

25· ·what does it mean if the foreign travel


Page 71·1· · · · · · · · · ·R. JOLSON

·2· ·account has a negative $2 million account

·3· ·balance?

·4· · · · · · ·MR. TEELE:· Objection.· I don't

·5· · · ·know that it is established that that

·6· · · ·is where the offsetting entry is.

·7· · · ·Q.· · Mr. Jolson, if your counsel

·8· ·makes an objection, unless he instructs

·9· ·you not to answer, you can then answer.

10· · · · · · ·MR. TEELE:· He can answer.

11· · · ·A.· · Sorry.· I hate to do this, but I

12· ·don't remember the question.

13· · · ·Q.· · So, this year 2000 entry is the

14· ·offsetting entry for the moving of funds

15· ·out of Mr. Auerbach's loan account on page

16· ·1 and the moving of funds out of the

17· ·foreign travel account on page 1.


19· · · ·Q.· · This year 2019 entry moves money

20· ·out of Ross Auerbach's loan account and

21· ·out of the foreign travel account and puts

22· ·it back into suspense.· This leaves the

23· ·foreign travel account with an account

24· ·total of negative $2 million.· What does

25· ·that negative account total represent?


Page 72·1· · · · · · · · · ·R. JOLSON


·3· · · ·form.

·4· · · ·A.· · It just -- it represents the

·5· ·negative number in that account.

·6· · · ·Q.· · And what does it mean to have a

·7· ·negative number in an expense account?


·9· · · ·form.

10· · · ·A.· · It would mean there is a

11· ·reduction of expenses.

12· · · ·Q.· · Does that indicate that

13· ·$2 million of expenses were taken in

14· ·fiscal year 2019?


16· · · ·form.

17· · · ·A.· · Can you just rephrase that

18· ·question, please?

19· · · ·Q.· · Does the negative approximately

20· ·$2 million in the foreign travel account

21· ·indicate that $2 million of expenses were

22· ·charged against the company's net income

23· ·in the fiscal year 2019?


25· · · ·form.


Page 73·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · I am just not familiar with this

·3· ·journal entry.· I am really not familiar

·4· ·with this journal entry.

·5· · · ·Q.· · Who is responsible for putting

·6· ·in journal entries into the system on a

·7· ·regular basis?

·8· · · ·A.· · I have different accountants

·9· ·responsible for different parts of the

10· ·general ledger.

11· · · ·Q.· · Do you know what accountant

12· ·would be responsible for these year-2019

13· ·entries?

14· · · ·A.· · Yes.

15· · · ·Q.· · And who is that?

16· · · ·A.· · Ron Andreola.

17· · · ·Q.· · So, if you look at page 2, the

18· ·account total for the suspense account is

19· ·about $3.4 million.· How would we

20· ·determine what expenses made up that

21· ·$3.4 million?


23· · · ·already testified that he doesn't --

24· · · ·isn't familiar with the journal

25· · · ·entries.· You can answer if you happen


Page 74·1· · · · · · · · · ·R. JOLSON

·2· · · ·to know.

·3· · · ·A.· · In the suspense account?· You

·4· ·would have to look at the American Express

·5· ·bills.

·6· · · ·Q.· · Okay.· So, does the fact that

·7· ·this $3.4 million remains in the suspense

·8· ·account mean that the company currently

·9· ·does not -- or at the time of this general

10· ·ledger did not know how to allocate that

11· ·$3.4 million of expenses?


13· · · ·form.

14· · · ·A.· · Yes.

15· · · ·Q.· · So, if you go to page 4 and look

16· ·at the bottom, the suspense account, you

17· ·will see that this reflects the last

18· ·general ledger file that was produced to

19· ·us that had the dates of from March 1st

20· ·through April 18, 2020.· And this -- let

21· ·me zoom in on mine.· This has an amount in

22· ·suspense account of about 3.78 million.

23· ·Does that similarly represent

24· ·$3.78 million of expenses that the Debtors

25· ·do not or did not know how to allocate on


Page 75·1· · · · · · · · · ·R. JOLSON

·2· ·that date?


·4· · · ·form.

·5· · · ·A.· · Yes.

·6· · · ·Q.· · Are you aware of any attempt to

·7· ·review those expenses and properly

·8· ·allocate them?

·9· · · · · · ·MR. TEELE:· Objection.

10· · · ·A.· · There were attempts.

11· · · ·Q.· · You say "there were attempts."

12· ·When were those attempts made?

13· · · ·A.· · I don't know.

14· · · ·Q.· · Were they recently?

15· · · · · · ·MR. TEELE:· Objection.· If you

16· · · ·can put a time frame on there.

17· · · ·Q.· · Were they in the last few

18· ·months?

19· · · ·A.· · Yes.

20· · · ·Q.· · And who was making those

21· ·attempts?

22· · · ·A.· · Ron Andreola.

23· · · ·Q.· · Is he -- are those attempts

24· ·ongoing?

25· · · ·A.· · They would be ongoing until we


Page 76·1· · · · · · · · · ·R. JOLSON

·2· ·got all the answers.

·3· · · ·Q.· · Is it fair to assume that they

·4· ·are -- that Mr. Andreola is currently

·5· ·working on that?

·6· · · ·A.· · Yes.

·7· · · ·Q.· · And who is he reporting to in

·8· ·doing this review?

·9· · · ·A.· · I am not sure what you mean.

10· · · ·Q.· · If he decides to allocate -- if

11· ·he looks at a hundred thousand dollars of

12· ·expenses and decides to allocate those to

13· ·Ross Auerbach's personal loan account or

14· ·to allocate it to some business account,

15· ·who is going to review his work on that?


17· · · ·A.· · That would be the controller's

18· ·job.

19· · · ·Q.· · And who is the controller?

20· · · ·A.· · Ted Georgis.

21· · · ·Q.· · Who does Ted Georgis report to?

22· · · ·A.· · To me.

23· · · ·Q.· · And has Ted Georgis or

24· ·Mr. Andreola reported the amount of

25· ·suspense account -- sorry -- the amount of


Page 77·1· · · · · · · · · ·R. JOLSON

·2· ·expenses in the suspense account that they

·3· ·have been able to allocate?


·5· · · ·form.

·6· · · ·A.· · Not to me.

·7· · · ·Q.· · Do you know how much of that

·8· ·3.78 million represents expenses that

·9· ·should have been charged to Mr. Auerbach's

10· ·loan account?

11· · · ·A.· · No.

12· · · ·Q.· · Has anyone given you any

13· ·timeline on when this review will be

14· ·completed?


16· · · ·form.

17· · · ·A.· · Yes.

18· · · ·Q.· · What is that timeline?

19· · · ·A.· · My expectation is this week.

20· · · ·Q.· · Have they produced any interim

21· ·reports?

22· · · ·A.· · No.

23· · · ·Q.· · Have they given you any

24· ·indication of the progress they have made?

25· · · ·A.· · No.


Page 78·1· · · · · · · · · ·R. JOLSON

·2· · · ·Q.· · Have they given you any

·3· ·information at all on the results of their

·4· ·work to date?

·5· · · ·A.· · No.

·6· · · ·Q.· · In what form do you expect them

·7· ·to deliver their results?

·8· · · ·A.· · I expect them to tell me that

·9· ·they are done.

10· · · ·Q.· · When you say that you expect

11· ·them to tell you that they are done, are

12· ·they going to tell you what expenses they

13· ·allocated where?

14· · · ·A.· · No.

15· · · ·Q.· · Are they going to simply

16· ·allocate -- strike that.

17· · · · · · ·Do you expect them to put

18· ·entries in the general ledger allocating

19· ·those expenses?


21· · · ·A.· · Yes.

22· · · ·Q.· · Is anyone going to review the

23· ·work done by the controller?


25· · · ·form.


Page 79·1· · · · · · · ·R. JOLSON

·2· ·A.· · No.

·3· · · · ·MR. AULET:· We will request

·4· ·production of any documents that

·5· ·reflect the results of that allocation

·6· ·as soon as they are produced.

·7· · · · ·MR. TEELE:· If you want to send

·8· ·us a request, we will review it.

·9· · · · ·MR. AULET:· Since we got started

10· ·a little late, this would now normally

11· ·be a good time for a break.· I was

12· ·thinking we would take a five-minute

13· ·break, go a little longer and then

14· ·maybe take lunch at one.· If people

15· ·prefer, we can do lunch now.

16· · · · ·MR. TEELE:· We are good either

17· ·way.

18· · · · ·MR. AULET:· Why don't we take a

19· ·five-minute break.

20· · · · ·MR. TEELE:· We are going to put

21· ·our phone on mute until we come back.

22· · · · ·THE VIDEOGRAPHER:· Going off the

23· ·record.· The time is 12:13 p.m.

24· · · · ·(Recess.)

25· · · · ·THE VIDEOGRAPHER:· The time is


Page 80·1· · · · · · · · · ·R. JOLSON

·2· · · ·now 12:30.· This begins media number 2

·3· · · ·and we are back on the record.



·6· ·the general ledger for February 29, 2020

·7· ·was not originally produced to us?


·9· · · ·form.

10· · · ·A.· · No.

11· · · ·Q.· · Does anyone have the ability to

12· ·alter the balances in, I believe it was,

13· ·the ERT system without putting in an entry

14· ·that will be recorded?

15· · · ·A.· · No.

16· · · ·Q.· · And does the system, to your

17· ·knowledge, record who makes each entry?

18· · · ·A.· · It leaves a footprint of the

19· ·user name.


21· · · ·Exhibit 4.)

22· · · ·Q.· · I am going to show you what we

23· ·are marking Exhibit 4.· This is another

24· ·sheet of screenshots from the general

25· ·ledger files.· These are again the files


Page 81·1· · · · · · · · · ·R. JOLSON

·2· ·from 2020.

·3· · · · · · ·I want to draw your attention to

·4· ·the bottom of the first image, the

·5· ·Auerbach loan in the ledger ending on

·6· ·February 28, 2020.· If you see in the

·7· ·account total it says a little over

·8· ·$2 million.· Do you see that?

·9· · · ·A.· · Not yet.

10· · · ·Q.· · If you go --

11· · · · · · ·MR. TEELE:· Hold on.· He is

12· · · ·still looking for what you are

13· · · ·pointing to.

14· · · ·A.· · Which box is it?

15· · · ·Q.· · The top box?

16· · · ·A.· · Okay.

17· · · ·Q.· · Do you see the account total

18· ·line?

19· · · ·A.· · Yes.

20· · · ·Q.· · Does that represent that this

21· ·account started out at about 3.4 million,

22· ·around 1.36 million was taken out, leaving

23· ·a balance of about $2 million?


25· · · ·form.


Page 82·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · I see that.

·3· · · ·Q.· · And so, does this mean that in

·4· ·the ledger that the Auerbach loan was

·5· ·about a little over $2 million as of

·6· ·February 28, 2020?

·7· · · ·A.· · Yes.

·8· · · ·Q.· · Now, if you look at the second

·9· ·box, this is the entirety of the general

10· ·ledger that was produced for February 29,

11· ·2020 with respect to the Auerbach loan.

12· ·As you will see, there are no transactions

13· ·listed, but the Auerbach loan has somehow

14· ·become a balance of negative 1.357 and

15· ·change.· 1.357 million and change.

16· · · · · · ·So, my question is, why did the

17· ·account total change so dramatically

18· ·without any new entry into the loan

19· ·account?

20· · · · · · ·MR. TEELE:· Objection, to the

21· · · ·extent he's already testified that he

22· · · ·is not responsible for preparing or

23· · · ·entering items into the journal

24· · · ·ledger.· But he can answer if he has

25· · · ·knowledge.


Page 83·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · I don't know.

·3· · · ·Q.· · Are you aware of anyone who

·4· ·would have access to the system that would

·5· ·enable them to change the balance of

·6· ·Mr. Auerbach's loan without leaving a

·7· ·journal entry?


·9· · · ·form.

10· · · ·A.· · No.

11· · · ·Q.· · Do you have any explanation for

12· ·what happened to Mr. Auerbach's loan

13· ·account between the 28th and 29th of

14· ·February?

15· · · · · · ·MR. TEELE:· Objection.· You can

16· · · ·answer.

17· · · ·A.· · No.

18· · · ·Q.· · And if you look at the bottom,

19· ·which represents the loan account as of

20· ·the last general ledger file that we

21· ·received, you will see that it still

22· ·reflects a now slightly larger account

23· ·total for Mr. Auerbach of negative

24· ·1.46 million.· And again, can you provide

25· ·any explanation for what happened to


Page 84·1· · · · · · · · · ·R. JOLSON

·2· ·Mr. Auerbach's loan amounts in the general

·3· ·ledger?

·4· · · · · · ·MR. TEELE:· Same objections as

·5· · · ·before.

·6· · · ·A.· · No.

·7· · · ·Q.· · And if you go to the second

·8· ·page, you will see what appears to be an

·9· ·amount owed by the estate of Shay

10· ·Auerbach.· Do you know who Shay Auerbach

11· ·is?

12· · · ·A.· · Was.

13· · · ·Q.· · Was he Ross Auerbach's father?

14· · · ·A.· · Yes.

15· · · ·Q.· · And you will similarly see that

16· ·the receivable due to the Shay Auerbach --

17· ·the receivable due from the Shay Auerbach

18· ·estate of a little under a quarter of a

19· ·million dollars is present on February 28,

20· ·2020, and disappears on February 29, 2020.


22· · · ·form and characterization.

23· · · ·Q.· · Are you aware of how this could

24· ·have happened?

25· · · ·A.· · No.


Page 85·1· · · · · · · · · ·R. JOLSON

·2· · · ·Q.· · Are you aware of anyone repaying

·3· ·that balance on behalf of the Shay

·4· ·Auerbach estate?

·5· · · ·A.· · No.

·6· · · ·Q.· · And again, do you have any

·7· ·knowledge of how somebody could have

·8· ·erased that receivable without leaving a

·9· ·journal entry?


11· · · ·form and to the characterization of

12· · · ·"erased."

13· · · ·A.· · No.

14· · · ·Q.· · And if you go to page 3, we have

15· ·a section we haven't discussed much

16· ·before, the "Prepaid Other" in the ledger.

17· ·Similarly, you will see a balance of about

18· ·436,000 at the end of February 28th, which

19· ·drops to a balance of about 14,000 with no

20· ·intervening journal entries.· Do you have

21· ·any explanation for what happened here?

22· · · · · · ·MR. TEELE:· Objection.· It

23· · · ·assumes information that hasn't been

24· · · ·introduced.· And to the form.

25· · · ·A.· · I don't know the question.


Page 86·1· · · · · · · · · ·R. JOLSON

·2· · · ·Q.· · Well, here the account total for

·3· ·"Prepaid Other" is about 436,000 on

·4· ·February 28th, but it is 14,000 on

·5· ·February 29th and no journal entries are

·6· ·recorded on the February 29th ledger.· Do

·7· ·you have any explanation as to why that

·8· ·balance dropped?


10· · · ·form.

11· · · ·A.· · No.

12· · · ·Q.· · Did you direct anyone to reduce

13· ·or eliminate Ross Auerbach's loan or to

14· ·eliminate the amount owed by the estate of

15· ·Shay Auerbach?

16· · · ·A.· · No.

17· · · ·Q.· · Are you aware of anyone giving

18· ·that instruction?

19· · · ·A.· · No.


21· · · ·form.

22· · · · · · ·MR. AULET:· Let me put up --

23· · · ·Exhibit 5 is a revised exhibit that we

24· · · ·created for October 2017, where you

25· · · ·should be able to see all the balances


Page 87·1· · · · · · · · · ·R. JOLSON

·2· · · ·correctly.

·3· · · · · · ·(So marked for identification as

·4· · · ·Exhibit 5.)

·5· · · ·Q.· · To refresh your recollection,

·6· ·what we were discussing was the line "BK

·7· ·2016 year-end journal perm."· Page 1 shows

·8· ·that entry on Ross Auerbach's loan adding

·9· ·about $629,000 to it.· Page 2 shows

10· ·$80,000 added to the employee receivable

11· ·of Peter Ochs.· Page 3 reflects -- and I

12· ·believe this is what we couldn't see

13· ·before, and you will need to zoom in to

14· ·see this, but 1.57 million being taken out

15· ·of the suspense account.

16· · · · · · ·Then page 4 reflects $864,605.86

17· ·being put into the foreign travel account.

18· ·Once that is applied against the credit in

19· ·that account, leaving that account with a

20· ·balance of negative 31,539.25.

21· · · · · · ·We are unaware of any

22· ·transaction that reverses that amount out

23· ·of the foreign travel account.· Aside from

24· ·looking in all the general ledger files

25· ·that have been produced to us, is there


Page 88·1· · · · · · · · · ·R. JOLSON

·2· ·any other file that would reflect if this

·3· ·amount was ever taken out of the foreign

·4· ·travel account?

·5· · · · · · ·MR. TEELE:· I will object to

·6· · · ·that question on the grounds that you

·7· · · ·pointed him to multiple pages very

·8· · · ·quickly, referring his attention to

·9· · · ·individual cells of those pages very

10· · · ·quickly and then are asking him a

11· · · ·generic question about this amount.

12· · · ·And objection to form.

13· · · · · · ·MR. AULET:· Let me strike that


15· · · ·Q.· · If you would like to go back and

16· ·look at any of the previous pages, I

17· ·believe that the system requires you to

18· ·look at the page I am currently on -- let

19· ·me know.· But what I am specifically

20· ·interested in is this "BK 2016 year-end

21· ·journal perm" entry into the foreign

22· ·travel account.

23· · · · · · ·Now, I believe you had earlier

24· ·testified that this account is a holding

25· ·account.· Is there any reason that an


Page 89·1· · · · · · · · · ·R. JOLSON

·2· ·expense would be permanently allocated to

·3· ·it?


·5· · · ·form.

·6· · · ·A.· · I don't know.

·7· · · ·Q.· · What would be the effect of

·8· ·permanently allocating expenses to this

·9· ·account?


11· · · ·form of the hypothetical.· You can

12· · · ·answer if there is an answer.

13· · · ·A.· · It would show an expense of the

14· ·company.

15· · · ·Q.· · And it is roughly cancelled out

16· ·by the existing credit in the foreign

17· ·travel account.· How would a credit have

18· ·been created in the foreign travel

19· ·account?


21· · · ·form.

22· · · ·A.· · Via a journal entry.

23· · · ·Q.· · What does it mean that an

24· ·expense account like a foreign travel

25· ·account has a credit?


Page 90·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · It is a negative expense.

·3· · · ·Q.· · If any of these amounts that

·4· ·were permanently allocated to foreign

·5· ·travel were, instead, Ross Auerbach's

·6· ·personal expenses, would that mean that

·7· ·those expenses had been paid by the

·8· ·company?


10· · · ·form.

11· · · ·A.· · I don't even understand the

12· ·question.

13· · · · · · ·MR. TEELE:· Let me finish my

14· · · ·objection.· Objecting to form and to

15· · · ·the assumption of information that has

16· · · ·not yet been introduced or

17· · · ·established.

18· · · · · · ·MR. AULET:· I will strike the


20· · · ·Q.· · How do I find out exactly what

21· ·expenses this $864,605.86 represents?

22· · · ·A.· · You have to look at the American

23· ·Express bills.

24· · · ·Q.· · If I go back to page 3, you will

25· ·see that a large amount is simply taken


Page 91·1· · · · · · · · · ·R. JOLSON

·2· ·out of the suspense account in one lump

·3· ·sum on that day with the same journal

·4· ·entry.· How would I determine what

·5· ·expenses were taken out of the suspense

·6· ·account in that journal entry?

·7· · · ·A.· · I am looking for the journal

·8· ·entry.

·9· · · ·Q.· · It is the top one.

10· · · ·A.· · I am sorry, but what are you

11· ·asking?

12· · · ·Q.· · So, on line 345112, about

13· ·1.57 million of expenses comes out of the

14· ·suspense account in a transaction labeled

15· ·"BK 2016 year-end journal perm."· How

16· ·would I determine what expenses those are?

17· · · ·A.· · I don't know.

18· · · ·Q.· · Did you receive $35,000 from the

19· ·Debtors on April 17, 2020?

20· · · ·A.· · Yes.

21· · · ·Q.· · And that was the day before the

22· ·company filed for bankruptcy.· Correct?

23· · · ·A.· · Yes.

24· · · ·Q.· · What was that $35,000 for?

25· · · ·A.· · 25,000 was for me, for a


Page 92·1· · · · · · · · · ·R. JOLSON

·2· ·retention, and then I gave $10,000 to my

·3· ·controller.

·4· · · ·Q.· · Are you aware that the Debtors

·5· ·filed a statement with the Bankruptcy

·6· ·Court that reflected that payment?

·7· · · ·A.· · I don't know.

·8· · · · · · ·MR. AULET:· I believe we are on

·9· · · ·Exhibit 6.· Is that correct?


11· · · ·Exhibit 6.)

12· · · ·Q.· · Mr. Jolson, I am showing you a

13· ·document called "Statement of Financial

14· ·Affairs for Non-Individuals Filing for

15· ·Bankruptcy" that was filed with the

16· ·Bankruptcy Court as Docket 117 on June 1,

17· ·2020.

18· · · · · · ·MR. TEELE:· Excuse me,

19· · · ·Mr. Aulet.· Is the entire 34-page

20· · · ·document part of this exhibit, or just

21· · · ·this page?· Can you just explain the

22· · · ·exhibit before you move on?

23· · · · · · ·MR. AULET:· It is the entire

24· · · ·submission, all 34 pages is an

25· · · ·exhibit, though I will not be asking


Page 93·1· · · · · · · · · ·R. JOLSON

·2· · · ·about every page.

·3· · · · · · ·MR. TEELE:· Fine.· Thank you.

·4· · · ·Q.· · Mr. Jolson, have you ever seen

·5· ·this document before?

·6· · · ·A.· · No.

·7· · · ·Q.· · Were you aware that such a

·8· ·document was going to be created?

·9· · · ·A.· · No.

10· · · ·Q.· · And you were not involved at all

11· ·in the preparation of this document?

12· · · ·A.· · No.

13· · · ·Q.· · Apologies.· Let me see how to

14· ·quickly flip pages.

15· · · · · · ·While I get to the appropriate

16· ·page, are you aware that the Debtors

17· ·reported that the payment to you was a

18· ·payment for T&E reimbursement?


20· · · ·form.

21· · · ·A.· · No.

22· · · ·Q.· · Was it a payment for travel and

23· ·expense reimbursement or any other kind of

24· ·reimbursement?

25· · · ·A.· · No.


Page 94·1· · · · · · · · · ·R. JOLSON

·2· · · ·Q.· · And are you aware that a payment

·3· ·was made to Mr. Auerbach on the same

·4· ·day -- two payments were made to

·5· ·Mr. Auerbach, one for $100,000 and one for

·6· ·$40,000?

·7· · · ·A.· · Yes.

·8· · · ·Q.· · Here we go.· Was the payment to

·9· ·Mr. Auerbach for $40,000 -- sorry.

10· · · · · · ·What was the payment to

11· ·Mr. Auerbach of $40,000 for?


13· · · ·A.· · I don't know.

14· · · ·Q.· · You don't know?

15· · · ·A.· · No.

16· · · ·Q.· · What was the payment of $100,000

17· ·to Mr. Auerbach for?

18· · · ·A.· · That was for reimbursing him for

19· ·money that he gave to Northwest previously

20· ·to cover some bills.

21· · · ·Q.· · Do you see that on page 27 of

22· ·the exhibit, which is at the top labeled

23· ·page 27 of 34 and at the bottom labeled

24· ·page 2 of 2, there is an entry that says

25· ·"Robert Jolson," reflecting the $35,000


Page 95·1· · · · · · · · · ·R. JOLSON

·2· ·payment, and it says it was made to you

·3· ·and was for T&E reimbursement?

·4· · · ·A.· · I see it.

·5· · · ·Q.· · Do I understand your previous

·6· ·testimony that this was not a payment for

·7· ·any sort of reimbursement?

·8· · · ·A.· · That's correct.

·9· · · ·Q.· · And instead, 25,000 of it was a

10· ·bonus for you and 10,000 of it was a bonus

11· ·for your controller?

12· · · ·A.· · Correct.

13· · · ·Q.· · Was all 35,000 paid directly to

14· ·you?

15· · · ·A.· · Yes.

16· · · ·Q.· · Were any taxes taken out of that

17· ·payment?

18· · · ·A.· · Not yet.

19· · · ·Q.· · Did the company pay any taxes on

20· ·that amount?

21· · · ·A.· · Not yet.

22· · · ·Q.· · Had the payment been

23· ·characterized as a bonus, would taxes have

24· ·been taken out of that amount before it

25· ·was paid to you?


Page 96·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · Only if it went through our

·3· ·payroll system.

·4· · · ·Q.· · Is there any reason why this

·5· ·would not have gone through your payroll

·6· ·system?

·7· · · ·A.· · No.· It will.· It will go

·8· ·through the payroll system.

·9· · · ·Q.· · Do you ordinarily make payments

10· ·to yourself or to any other member or any

11· ·other employee of the company outside of

12· ·the payroll system?


14· · · ·form.

15· · · ·A.· · No.

16· · · ·Q.· · Have you ever made payments of

17· ·bonuses to yourself or anyone else at the

18· ·company outside of the payroll system?

19· · · ·A.· · Yes.

20· · · ·Q.· · When was that?

21· · · ·A.· · I couldn't -- I don't remember

22· ·specifically.

23· · · ·Q.· · Is it a general practice to make

24· ·bonus payments outside of the payroll

25· ·system?


Page 97·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · No.


·4· · · ·form.

·5· · · ·Q.· · And do you have any basis to

·6· ·believe that the $40,000 paid to

·7· ·Mr. Auerbach was actually any sort of

·8· ·reimbursement?


10· · · ·You can answer.

11· · · ·Q.· · Could you answer the question,

12· ·please, Mr. Jolson?

13· · · ·A.· · It was -- my belief was a

14· ·reimbursement.

15· · · ·Q.· · I understand the $100,000 you

16· ·are aware was a reimbursement.· Do you

17· ·know if the $40,000 was a reimbursement?


19· · · ·form.· And he's already answered that,

20· · · ·I believe.

21· · · ·Q.· · You can answer, Mr. Jolson.

22· · · · · · ·MR. DUFFY:· Can you repeat the

23· · · ·question, please.

24· · · ·Q.· · Do you know if the $40,000 paid

25· ·to Ross Auerbach on April 17th was a


Page 98·1· · · · · · · · · ·R. JOLSON

·2· ·reimbursement of any kind?

·3· · · ·A.· · I was told it was.

·4· · · ·Q.· · Who told you that?

·5· · · ·A.· · Ross.

·6· · · ·Q.· · Would it surprise you to know

·7· ·that the bank statements reflect that the

·8· ·payment of both the $35,000 to you and the

·9· ·payment of $40,000 to Ross were labeled

10· ·"Bonus"?


12· · · ·form.

13· · · ·A.· · I wouldn't know the bank

14· ·statements.

15· · · ·Q.· · I will show you the bank

16· ·statements.· Give me one second. I

17· ·apologize.· I am having some technical

18· ·issues here.

19· · · · · · ·(Pause.)


21· · · ·Exhibit 7.)

22· · · ·Q.· · Now, what you should be seeing

23· ·is what is now Exhibit 7, the bank

24· ·statement for The Northwest Company for

25· ·April 1st to April 30, 2020.


Page 99·1· · · · · · · · · ·R. JOLSON

·2· · · · · · ·I am going to go to the page

·3· ·that reflects those bonus payments.· Now

·4· ·we are on page 4.· If you look around the

·5· ·middle of the page you will see two

·6· ·entries for 4/17, one for $40,000 to Ross

·7· ·Auerbach and one to you for $35,000.· Do

·8· ·you see underneath them that it says "Your

·9· ·REF" code?· You see that?

10· · · ·A.· · I do.

11· · · ·Q.· · Who made those payments?


13· · · ·form.

14· · · ·A.· · I don't understand the question.

15· ·Who made -- the company made the payments.

16· · · ·Q.· · Who specifically told the bank

17· ·to transfer $40,000 to Ross and $35,000 to

18· ·you?


20· · · ·form.

21· · · ·A.· · Ross.

22· · · ·Q.· · Would Ross have been the one --

23· ·strike the question.

24· · · · · · ·So, a payment like this, someone

25· ·would have entered it into the bank


Page 100·1· · · · · · · · · ·R. JOLSON

·2· ·systems to have the payment made.

·3· ·Correct?

·4· · · ·A.· · Yes.

·5· · · ·Q.· · Who would have done that?

·6· · · ·A.· · One of our staff accountants.

·7· · · ·Q.· · And you did not direct them to

·8· ·make that payment to Ross?

·9· · · ·A.· · Yes, I directed them.

10· · · ·Q.· · You did direct them to make that

11· ·payment to Ross?

12· · · ·A.· · Yes.

13· · · ·Q.· · Is that correct?

14· · · ·A.· · Yes.

15· · · ·Q.· · And you also directed them to

16· ·make the $100,000 payment to Ross?

17· · · ·A.· · Yes.

18· · · ·Q.· · And I believe you testified

19· ·earlier that Ross told you that the

20· ·$40,000 was an expense reimbursement.· Is

21· ·that correct?

22· · · ·A.· · Yes.

23· · · ·Q.· · Who else did he tell that to, if

24· ·you know?

25· · · ·A.· · I don't know.


Page 101·1· · · · · · · · · ·R. JOLSON

·2· · · ·Q.· · Would it surprise you to learn

·3· ·that both of these payments to you and to

·4· ·Ross were also booked on the general

·5· ·ledgers as travel and entertainment

·6· ·expenses?


·8· · · ·If you have the general ledger and you

·9· · · ·want to ask him about it, show it to

10· · · ·him and ask him a question.

11· · · · · · ·MR. AULET:· The question stands.

12· · · ·Q.· · Would it surprise you to learn

13· ·that both of those payments to Ross were

14· ·booked on the general ledgers as travel

15· ·and entertainment expenses?

16· · · · · · ·MR. TEELE:· Same objection and

17· · · ·we will not accept the representation

18· · · ·that they were reflected that way in

19· · · ·the general ledger.· If you have a

20· · · ·document to show him, show him the


22· · · · · · ·MR. AULET:· Are you directing

23· · · ·him not to answer, Mr. Teele?

24· · · · · · ·MR. TEELE:· I am stating my

25· · · ·objection.


Page 102·1· · · · · · · · · ·R. JOLSON

·2· · · ·Q.· · Please answer, Mr. Jolson.

·3· · · ·A.· · I am not familiar with what

·4· ·would be on the general ledger.

·5· · · ·Q.· · Who would have made the entries

·6· ·in the general ledger that reflect this

·7· ·$40,000 and $35,000 payment?

·8· · · ·A.· · One of the staff accountants.

·9· · · ·Q.· · Do you know which staff

10· ·accountant?

11· · · ·A.· · No.

12· · · ·Q.· · Do you have any idea how it came

13· ·to be that the Bankruptcy Court was told

14· ·that the payment to you and the payment to

15· ·Ross were travel and expense

16· ·reimbursements?


18· · · ·A.· · No.

19· · · ·Q.· · Who was, if you know, involved

20· ·in creating the schedule, the exhibit that

21· ·we previously looked at?· Let me see if I

22· ·can put that back up.

23· · · · · · ·I am not quite sure how to show

24· ·it to you again so I will save that

25· ·question.


Page 103·1· · · · · · · · · ·R. JOLSON

·2· · · · · · ·MR. AULET:· It is 1 o'clock so

·3· · · ·now is a good time for a lunch break

·4· · · ·if that works for everyone else.

·5· · · · · · ·MR. TEELE:· Okay.· How long did

·6· · · ·you say?

·7· · · · · · ·MR. AULET:· I want to do

·8· · · ·30 minutes since we got started a

·9· · · ·little late.· Why don't we come back

10· · · ·at 1:40 if that works for everyone.

11· · · · · · ·MR. TEELE:· Sure.

12· · · · · · ·THE VIDEOGRAPHER:· The time is

13· · · ·now 1:04, and we are now off the

14· · · ·record.

15· · · · · · ·(Recess.)


17· · · ·1:47 and we are back on the record.

18· ·BY MR. AULET:

19· · · ·Q.· · Mr. Jolson, I believe you said

20· ·Peter Ochs was a salesman.· Is that

21· ·correct?

22· · · ·A.· · Yes.

23· · · ·Q.· · Does Northwest -- strike that.

24· · · · · · ·How senior an employee is he?



Page 104·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · He is a director level.

·3· · · ·Q.· · Does Northwest make it a

·4· ·practice to let their employees, other

·5· ·than Ross Auerbach, run up large

·6· ·receivables to the company?

·7· · · · · · ·MR. TEELE:· Object to the

·8· · · ·question and the characterization of

·9· · · ·"large receivables to the company."

10· · · ·A.· · No.

11· · · ·Q.· · Mr. Ochs has had a large

12· ·receivable at various points in time.· Why

13· ·is that?


15· · · ·and the reference to Mr. Ochs's

16· · · ·receivable as a large receivable

17· · · ·without establishing what it is and

18· · · ·what is large.

19· · · · · · ·You can answer the question.

20· · · ·A.· · What he does, he sells and he

21· ·has a base salary and he gets paid a

22· ·commission.· So, what happens is he uses

23· ·the American Express card as a basis for

24· ·his commission.· So, when we get the bill,

25· ·that whole amount is recorded as a


Page 105·1· · · · · · · · · ·R. JOLSON

·2· ·receivable until we get his commission

·3· ·statement.· When we get his commission

·4· ·statement, it would go against his payroll

·5· ·and relieve the receivable.

·6· · · ·Q.· · Okay.· Does anyone else have a

·7· ·similar arrangement?

·8· · · ·A.· · Not that I am aware.

·9· · · ·Q.· · So, Northwest has a large number

10· ·of corporate credit cards.· Is that

11· ·correct?

12· · · · · · ·MR. TEELE:· Object to form.· You

13· · · ·keep using the term "large" without

14· · · ·defining what is big, what is small,

15· · · ·what is large or what is not.

16· · · ·Q.· · Northwest has dozens of

17· ·corporate credit cards.· Is that correct?

18· · · ·A.· · Not dozens.

19· · · ·Q.· · More than a dozen?

20· · · ·A.· · It is around a dozen.· One.

21· · · ·Q.· · And are there both American

22· ·Express Platinum cards and American

23· ·Express Centurian cards?

24· · · ·A.· · No.

25· · · ·Q.· · So, the Debtors have produced


Page 106·1· · · · · · · · · ·R. JOLSON

·2· ·Amex statements for both Platinum cards

·3· ·and Centurian cards.· You are not aware of

·4· ·both of those?

·5· · · ·A.· · Only Ross has a Centurian card.

·6· · · ·Q.· · And is that card his personal

·7· ·card, or is it also a Northwest corporate

·8· ·card?

·9· · · ·A.· · I don't know.· I am not familiar

10· ·with those.

11· · · ·Q.· · Is there a difference between

12· ·what expenses Ross is supposed to charge

13· ·to the different corporate credit cards he

14· ·has been issued?


16· · · ·A.· · Nothing specified.

17· · · ·Q.· · Okay.· Do you know who Vanessa

18· ·Marinho is?

19· · · ·A.· · Yes.

20· · · ·Q.· · Who is she?

21· · · ·A.· · Somebody that periodically does

22· ·some work for Ross and Northwest.

23· · · · · · ·MR. AULET:· Somebody is not on

24· · · ·mute.· Can you go on mute if you are

25· · · ·not one of the people defending the


Page 107·1· · · · · · · · · ·R. JOLSON

·2· · · ·deposition?

·3· · · ·Q.· · And you said that Ross is the

·4· ·only one with a Centurian card but we

·5· ·noticed that in 2018 Vanessa Marinho had a

·6· ·Centurian card.· Do you know why she also

·7· ·had a Centurian card?

·8· · · ·A.· · No.

·9· · · ·Q.· · Are you involved at all in

10· ·reviewing the American Express bills?

11· · · ·A.· · No.


13· · · ·Exhibit 8.)

14· · · ·Q.· · Let's pause on that subject and

15· ·go back to the subject of the payments

16· ·that were made the day before the

17· ·bankruptcy.· We have put together this

18· ·exhibit, which I believe is Exhibit 8,

19· ·showing how all three of the payments, the

20· ·two payments to Ross Auerbach for 100,000,

21· ·the $40,000, and the payment to you of

22· ·$35,000 is booked.· And I believe that I

23· ·said that it was booked as a travel or

24· ·entertainment expense.· That was

25· ·incorrect.· It is booked as a "travel or


Page 108·1· · · · · · · · · ·R. JOLSON

·2· ·other" expense.

·3· · · · · · ·Do you know why who would have

·4· ·booked these expenses?

·5· · · ·A.· · Somebody in the accounting

·6· ·department.· I don't know which one.

·7· · · ·Q.· · And you testified that the

·8· ·$25,000 and the $10,000 that you received

·9· ·that you passed on to the controller were

10· ·a retention bonus?

11· · · ·A.· · Yes.

12· · · ·Q.· · Should a retention bonus have

13· ·been characterized as a "travel or other"

14· ·expense?


16· · · ·form.

17· · · ·A.· · No.

18· · · ·Q.· · In reviewing the American

19· ·Express statements, we saw a number of

20· ·charges for St. Regis Residences for about

21· ·$13,000 every so often.· Do you know what

22· ·the St. Regis Residences are?

23· · · ·A.· · I know what the hotel is. I

24· ·don't know what you are asking.

25· · · ·Q.· · Does Northwest own a condo at


Page 109·1· · · · · · · · · ·R. JOLSON

·2· ·the hotel?

·3· · · ·A.· · Northwest does not.

·4· · · ·Q.· · Does anybody associated with

·5· ·Northwest own a condo at the hotel?

·6· · · ·A.· · Yes.

·7· · · ·Q.· · Who?

·8· · · ·A.· · Ross.

·9· · · ·Q.· · And does Northwest pay the

10· ·maintenance fees for that condo?

11· · · ·A.· · On occasion.

12· · · ·Q.· · Why does Northwest pay those

13· ·fees?

14· · · ·A.· · On occasion, guests of Northwest

15· ·stay at the St. Regis during market week.

16· · · ·Q.· · And Northwest pays the fees for

17· ·the condo based upon guests of Northwest

18· ·staying at St. Regis.· Is that correct?

19· · · ·A.· · Yes.

20· · · ·Q.· · About how often do guests of

21· ·Northwest stay at that condo?

22· · · ·A.· · I wouldn't know every visit.

23· · · ·Q.· · Who would?

24· · · ·A.· · Ross would know when it's used.

25· · · ·Q.· · Who determines if Northwest is


Page 110·1· · · · · · · · · ·R. JOLSON

·2· ·getting a good deal by paying these

·3· ·maintenance fees in exchange for allowing

·4· ·guests of Northwest to stay at the condo?


·6· · · ·form.

·7· · · ·A.· · It's not something that I am

·8· ·aware of that we do.

·9· · · ·Q.· · Who reviews transactions between

10· ·Northwest and Mr. Auerbach for companies

11· ·controlled by Mr. Auerbach?

12· · · ·A.· · Look at it?· I don't know what

13· ·you are asking.

14· · · ·Q.· · Do you?

15· · · ·A.· · Do I what?

16· · · · · · ·MR. TEELE:· He just said he

17· · · ·doesn't understand what you are

18· · · ·asking.

19· · · ·Q.· · Do you review the transactions

20· ·that Northwest enters into between

21· ·Northwest and Mr. Auerbach for companies

22· ·controlled by Mr. Auerbach?

23· · · · · · ·MR. TEELE:· Objection.· Do you

24· · · ·want to define which companies and

25· · · ·which transactions?


Page 111·1· · · · · · · · · ·R. JOLSON

·2· · · ·Q.· · Any companies that you are aware

·3· ·of controlled by Mr. Auerbach.

·4· · · · · · ·MR. TEELE:· Objection.· Which

·5· · · ·companies are you referring to?

·6· · · · · · ·MR. AULET:· I am referring to

·7· · · ·any companies that he is aware of that

·8· · · ·are controlled by Mr. Auerbach.

·9· · · ·A.· · Again, I don't know what you are

10· ·asking.

11· · · ·Q.· · Well, take this transaction

12· ·where Northwest pays the maintenance fee

13· ·for Ross's condo in exchange for allowing

14· ·guests of Northwest to stay at that condo.


16· · · ·Q.· · Does anyone review those

17· ·transactions to determine if they are fair

18· ·for Northwest?· I believe your counsel had

19· ·an objection?

20· · · · · · ·MR. TEELE:· Objection.· Which

21· · · ·transaction?· The question is vague as

22· · · ·to what is fair to Northwest.· I think

23· · · ·you should restate that and perhaps

24· · · ·ask him about a specific transaction

25· · · ·with a document.


Page 112·1· · · · · · · · · ·R. JOLSON


·3· ·Northwest enters into a number of

·4· ·transactions with either Mr. Auerbach

·5· ·personally or companies controlled by

·6· ·Mr. Auerbach?

·7· · · ·A.· · I don't know what transactions

·8· ·you are referring to.

·9· · · ·Q.· · Are you aware of any transaction

10· ·that Northwest enters into with

11· ·Mr. Auerbach personally?

12· · · ·A.· · I am aware of a lease for our

13· ·rent in Roslyn.

14· · · ·Q.· · Who reviewed that lease to

15· ·determine if it was at market terms?

16· · · ·A.· · We comped the lease, I think it

17· ·was about two years ago, to current rates

18· ·in the area.

19· · · ·Q.· · Who did that work?

20· · · ·A.· · We spoke to our -- we have

21· ·another accountant, not Mazars but

22· ·somebody who helps with our accounting,

23· ·and myself and Ross.

24· · · ·Q.· · Who made the ultimate decision

25· ·about what a fair market rate would be?


Page 113·1· · · · · · · · · ·R. JOLSON


·3· · · ·form.

·4· · · ·A.· · Well, the ultimate decision is

·5· ·Ross.

·6· · · ·Q.· · Did you provide any input?

·7· · · ·A.· · Just the comps.

·8· · · ·Q.· · Did anyone ask you to determine

·9· ·if the price that was ultimately reached

10· ·was fair to the company?

11· · · ·A.· · Ken.· Ken Gould.

12· · · ·Q.· · And what was your response?

13· · · ·A.· · My response?

14· · · ·Q.· · Yes.

15· · · ·A.· · To what question?

16· · · ·Q.· · Was the price that was

17· ·ultimately reached fair to the company?

18· · · ·A.· · On the lease, it was.

19· · · · · · ·MR. AULET:· Okay.· I am going to

20· · · ·show you what I have marked Exhibit 9,

21· · · ·which is a Platinum card statement for

22· · · ·Northwest Company for the closing date

23· · · ·of June 14, 2019.· Please turn to page

24· · · ·6.



Page 114·1· · · · · · · · · ·R. JOLSON

·2· · · ·Exhibit 9.)

·3· · · ·Q.· · In the middle you will see a

·4· ·transaction, St. Regis NY maintenance fee

·5· ·for a little over $13,000 with a star,

·6· ·"Northwest paid maintenance fee, no room

·7· ·fee."

·8· · · · · · ·Have you ever reviewed this

·9· ·arrangement where Northwest pays the

10· ·maintenance fees of this condo in exchange

11· ·for not paying room fees to determine if

12· ·Northwest is getting a good deal?

13· · · ·A.· · No, I have not.

14· · · ·Q.· · Are you aware of anyone at

15· ·Northwest doing that?

16· · · ·A.· · No.

17· · · ·Q.· · Given that it is marked

18· ·"Northwest pays maintenance fee, no room

19· ·fee," would you expect that this is billed

20· ·as an expense of the company?

21· · · ·A.· · Yes.

22· · · · · · ·MR. AULET:· Let me pull up

23· · · ·another exhibit.· This exhibit is a

24· · · ·different business Platinum card Amex

25· · · ·statement with closing date


Page 115·1· · · · · · · · · ·R. JOLSON

·2· · · ·January 16, 2017.


·4· · · ·Exhibit 10.)

·5· · · ·Q.· · I am going to turn to -- first,

·6· ·if you go to page 9, at the bottom is

·7· ·labeled -- there is a passenger ticket for

·8· ·Gabrielle Auerbach from Miami to Denver.

·9· ·Who is Gabrielle Auerbach?

10· · · ·A.· · That is Ross's daughter.

11· · · ·Q.· · Is she employed by Northwest?

12· · · ·A.· · When?

13· · · ·Q.· · Was she employed at the time of

14· ·this transaction in January 2017 by

15· ·Northwest?

16· · · ·A.· · No.

17· · · ·Q.· · Would there be any business

18· ·purpose for bringing Ross's daughter on a

19· ·business trip to Denver?

20· · · ·A.· · Not that I know.

21· · · ·Q.· · So there is a notation, 1.1531.

22· ·Do you know what that refers to?

23· · · ·A.· · That is a general ledger code.

24· · · ·Q.· · Do you happen to know what that

25· ·general ledger code refers to?


Page 116·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · No.

·3· · · ·Q.· · But would you expect, if we

·4· ·looked at the general ledger, this

·5· ·particular transaction had been billed to

·6· ·whatever account is represented by 1.1531?

·7· · · ·A.· · Yes.

·8· · · ·Q.· · If we go to the next page, page

·9· ·10, you will see a $38,000 charge for a

10· ·property in Vail that is labeled "Ashford

11· ·Ross NW trip."· Do you see that entry?

12· · · ·A.· · No.

13· · · · · · ·MR. TEELE:· Mr. Aulet, I think

14· · · ·there is a feature of this web portal

15· · · ·where you can actually point to

16· · · ·things.· If that exists and you know

17· · · ·how to use it, it might be beneficial

18· · · ·to use it just to call Mr. Jolson's

19· · · ·attention to things quicker.

20· · · · · · ·MR. AULET:· I will see if I can

21· · · ·do that but I am afraid I just created

22· · · ·a weird-looking mark on this.

23· · · ·Q.· · This appears to be a trip to

24· ·Vail that is labeled "Ashford Ross

25· ·Northwest trip" for about $38,000.· Do you


Page 117·1· · · · · · · · · ·R. JOLSON

·2· ·see that?

·3· · · ·A.· · I do.

·4· · · ·Q.· · Would you or anyone else at

·5· ·Northwest have checked who accompanied

·6· ·Ross on that trip?

·7· · · ·A.· · Not me.· I don't see these

·8· ·bills.

·9· · · ·Q.· · If this was a trip with Ashford,

10· ·would it typically be billed as a business

11· ·expense?

12· · · ·A.· · In whole or part.

13· · · ·Q.· · If nobody from Ashford ever

14· ·attended that trip, would it still be a

15· ·business expense?


17· · · ·A.· · I don't know how to answer.· It

18· ·says "Ashford."

19· · · ·Q.· · If that was false, should this

20· ·have been billed as a business expense?

21· · · · · · ·MR. TEELE:· Objection.· It is a

22· · · ·pure hypothetical.· You are making him

23· · · ·guess.

24· · · ·Q.· · Are you able to answer the

25· ·question?


Page 118·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · I am not going to guess.

·3· · · ·Q.· · So you are not able to tell me

·4· ·if this trip to Vail did not, in fact,

·5· ·include anyone from Ashford, if it would

·6· ·be something that should be billed as a

·7· ·business expense?


·9· · · ·A.· · I still don't know the question.

10· · · ·Q.· · Let's say that Ross just took a

11· ·trip to Vale with himself and with, as you

12· ·saw, his daughter, and billed it as an

13· ·expense to Northwest by claiming that it

14· ·was a trip that included Ashford.· Would

15· ·that be a legitimate business expense to

16· ·bill Northwest for?

17· · · · · · ·MR. TEELE:· I will object again.

18· · · ·It is a pure hypothetical and you are

19· · · ·asking him to guess and make judgments

20· · · ·based on some incomplete hypothetical

21· · · ·situation that has been presented to

22· · · ·him as a fact witness.

23· · · · · · ·MR. AULET:· Are you directing

24· · · ·him not to answer?

25· · · · · · ·MR. TEELE:· I have stated my


Page 119·1· · · · · · · · · ·R. JOLSON

·2· · · ·objection.

·3· · · ·Q.· · Mr. Jolson, please answer the

·4· ·question.

·5· · · ·A.· · I don't know how to answer.· We

·6· ·take it at face value.· If it says Ashford

·7· ·was on it, then Ashford was there.

·8· · · ·Q.· · Have you ever personally been

·9· ·made aware that Ross claimed that an

10· ·employee of Ashford was on a trip when he,

11· ·in fact, was not on that trip?

12· · · ·A.· · No.

13· · · ·Q.· · And were you again reminded of

14· ·that fact -- strike that.

15· · · · · · ·Were you reminded in May of this

16· ·year that such a thing had happened, that

17· ·Ross claimed an employee of Ashford was on

18· ·the trip when in fact that employee was

19· ·not on that trip?

20· · · ·A.· · No.

21· · · ·Q.· · Now, if I were to go through

22· ·these Amex statements, as we see here with

23· ·all the notations, I could verify where

24· ·these were billed by, for example, adding

25· ·up anything titled "Auto" and checking if


Page 120·1· · · · · · · · · ·R. JOLSON

·2· ·an entry to the auto account in that

·3· ·amount was billed.· Correct?

·4· · · · · · ·MR. DUFFY:· Objection.· It's

·5· · · ·hypothetical.

·6· · · ·Q.· · Mr. Jolson, if counsel doesn't

·7· ·direct you not to answer, you can answer

·8· ·after the objection.

·9· · · ·A.· · Sorry.· Can you ask the question

10· ·again, please?

11· · · ·Q.· · For an Amex statement like this

12· ·where I have the handwritten notations

13· ·about what everything was billed to, I

14· ·should be able to, for example, add up all

15· ·the auto charges and compare that to a

16· ·general ledger entry for automobile

17· ·expense.· Correct?

18· · · ·A.· · Correct.

19· · · ·Q.· · Now, if I have an Amex statement

20· ·where there is not a corresponding

21· ·statement indicating exactly which expense

22· ·is billed where, is it correct that I

23· ·can't determine how those Amex statements

24· ·were billed on the general ledger?



Page 121·1· · · · · · · · · ·R. JOLSON

·2· · · ·form.

·3· · · ·A.· · I lost you.· Sorry.· Can you

·4· ·repeat that?

·5· · · ·Q.· · Strike that.· I think we have

·6· ·asked that previously.· I am going to move

·7· ·on to another exhibit.· I believe this is

·8· ·Exhibit 10.· This is a business Centurian

·9· ·card statement, closing date September 19,

10· ·2017, for Ross Auerbach.


12· · · ·Exhibit 11.)

13· · · ·Q.· · I am going to go to an entry on

14· ·9/17.· Do you see this entry for 9/17 for

15· ·Tom Ford that I have highlighted?

16· · · ·A.· · Yes.

17· · · ·Q.· · And that is $53,000 at Tom Ford

18· ·Beverly Hills that has the handwritten

19· ·notation "business clothes."· Is that

20· ·correct?

21· · · ·A.· · Yes.

22· · · ·Q.· · Then there is the notation "off

23· ·SUP."· Would it be reasonable to assume

24· ·that that is office supplies?



Page 122·1· · · · · · · · · ·R. JOLSON

·2· · · ·form.

·3· · · ·A.· · I don't know.· I didn't write

·4· ·it.

·5· · · ·Q.· · Would it be -- if these $53,000

·6· ·of business clothes were billed to

·7· ·Northwest as office supplies, would that

·8· ·be an appropriate business expense?


10· · · ·A.· · I don't know what the clothes

11· ·were.· I don't know what this entry is.

12· ·It is the first time I am seeing it so I

13· ·don't know anything about it.

14· · · ·Q.· · Should someone have raised

15· ·questions about it who did see it?


17· · · ·It is hypothetical.

18· · · ·A.· · Yes, I would expect so.

19· · · ·Q.· · We'll stop that one and let me

20· ·go to another exhibit.

21· · · · · · ·Does Northwest do any business

22· ·in Italy?

23· · · ·A.· · Not that I am aware.

24· · · ·Q.· · Are you aware of any business

25· ·purpose that would be served by a trip to


Page 123·1· · · · · · · · · ·R. JOLSON

·2· ·Italy?

·3· · · · · · ·MR. TEELE:· Objection.· It's

·4· · · ·vague.· I think you need to define

·5· · · ·what you mean by "business purpose."

·6· · · ·I think if you are asking about a

·7· · · ·specific, you should ask him about it.

·8· · · ·Q.· · Would it be -- when I say --

·9· ·strike that.

10· · · · · · ·Are you aware of any purpose

11· ·that would be served by a trip to Italy

12· ·that would justify charging expenses on

13· ·that trip to Italy to the company?

14· · · · · · ·MR. TEELE:· Objection.· It is

15· · · ·purely hypothetical as well.· If there

16· · · ·is a specific expense of a specific

17· · · ·trip, just ask him about it.

18· · · ·Q.· · Can you answer the question,

19· ·Mr. Jolson?

20· · · ·A.· · I don't know what we are talking

21· ·about.

22· · · · · · ·MR. AULET:· Let me go on to a

23· · · ·different exhibit.

24· · · · · · ·The Amex statements for 2018

25· · · ·that were produced to us were produced


Page 124·1· · · · · · · · · ·R. JOLSON

·2· · · ·in a spreadsheet.· What I am going to

·3· · · ·show to you are three entries from the

·4· · · ·two spreadsheets that were produced to

·5· · · ·us rather than the actual Amex

·6· · · ·statements, which weren't provided to

·7· · · ·us.· But I am interested in these

·8· · · ·three entries.

·9· · · ·Q.· · First, is there any reason that

10· ·student tuition should be charged as a

11· ·business expense of Northwest?


13· · · ·form.

14· · · ·A.· · No.

15· · · ·Q.· · Would this be the type of

16· ·expense that should have gone to Ross's

17· ·loan account?

18· · · ·A.· · Yes.

19· · · ·Q.· · If I can't find any entries

20· ·after that day that would appear to be

21· ·moving these entries into Ross's loan

22· ·account, how would I determine how --

23· ·strike that.

24· · · · · · ·If there are no corresponding

25· ·entries that could include these that were


Page 125·1· · · · · · · · · ·R. JOLSON

·2· ·made in Ross's loan account, how would I

·3· ·determine where in the general ledger

·4· ·these expenses currently are?

·5· · · ·A.· · You would have to look at the

·6· ·American Express statement to see the

·7· ·journal entry.

·8· · · ·Q.· · And if those American Express

·9· ·statements weren't produced to us with

10· ·handwritten notes, is there any other way

11· ·we could determine where these expenses

12· ·currently sit on the general ledger?

13· · · ·A.· · I would -- we would need the

14· ·American Express statement.

15· · · ·Q.· · And the Grand Hotel Zermatterhof

16· ·-- I have mangled that pronunciation. I

17· ·have looked it up and that is in

18· ·Switzerland.· Are you aware of any event

19· ·that Northwest held in Switzerland in

20· ·December 2018?


22· · · ·representation that this Grand Hotel

23· · · ·is in Switzerland.· There is no

24· · · ·indication or evidence in the record

25· · · ·that suggests that.


Page 126·1· · · · · · · · · ·R. JOLSON

·2· · · · · · ·But you can answer if you know.

·3· · · ·A.· · What was the question?

·4· · · ·Q.· · Are you aware of any events that

·5· ·Northwest held in Switzerland in December

·6· ·of 2018?

·7· · · ·A.· · No.

·8· · · ·Q.· · Is there any other reason

·9· ·besides an event that spending $43,000 at

10· ·a hotel would be an expense of Northwest?

11· · · ·A.· · I don't know.

12· · · ·Q.· · Again, there is no way that I

13· ·can determine where this particular

14· ·expense wound up on the general ledger if

15· ·I don't have those handwritten American

16· ·Express statements?

17· · · ·A.· · I don't know of any other way.

18· · · · · · ·MR. AULET:· What I have marked

19· · · ·as Exhibit 12 is a file that the

20· · · ·Debtors produced to us that appears to

21· · · ·be scanned copies of hard copies of

22· · · ·the account statement for the business

23· · · ·Centurian card for Ross Auerbach for

24· · · ·the months of July through

25· · · ·December 2019.


Page 127·1· · · · · · · · · ·R. JOLSON


·3· · · ·Exhibit 12.)

·4· · · ·Q.· · First I would like to go to page

·5· ·15.

·6· · · · · · ·Who is Alexander Auerbach?

·7· · · ·A.· · Ross's son.

·8· · · ·Q.· · Is Alexander Auerbach currently

·9· ·employed by Northwest or was he employed

10· ·by Northwest in 2019?

11· · · ·A.· · No.

12· · · ·Q.· · So we would not expect that this

13· ·ticket to what appears to be Athens would

14· ·be an expense of Northwest?

15· · · ·A.· · No.

16· · · ·Q.· · Now, on page 35, the November

17· ·statement, there is a $3,503.17 charge at

18· ·Porsche of Roslyn.· Do you know of any

19· ·reason that this would be a Northwest

20· ·business expense?

21· · · ·A.· · I don't know what that charge

22· ·is.

23· · · ·Q.· · Does Northwest own any Porsches?

24· · · ·A.· · No, Northwest does not own cars.

25· · · ·Q.· · Does Northwest lease any cars


Page 128·1· · · · · · · · · ·R. JOLSON

·2· ·for the benefit of its employees?

·3· · · ·A.· · Yes.

·4· · · ·Q.· · What cars does Northwest lease?

·5· · · ·A.· · Northwest reimburses --

·6· ·Northwest is not the holder of the lease

·7· ·but it is common for employees to have

·8· ·auto allowances.

·9· · · ·Q.· · How high are those allowances

10· ·typically?

11· · · ·A.· · On a monthly -- they're monthly.

12· · · ·Q.· · Does Mr. Auerbach have a car

13· ·that he leases through this program or

14· ·these auto allowances?

15· · · ·A.· · No.

16· · · ·Q.· · What is the Old Westbury Country

17· ·Club?

18· · · ·A.· · A country club.

19· · · ·Q.· · Is anyone -- is Ross Auerbach a

20· ·member of that country club?

21· · · ·A.· · As far as I know, yes.

22· · · ·Q.· · Are you a member of that country

23· ·club?

24· · · ·A.· · No.

25· · · ·Q.· · So there are a number of charges


Page 129·1· · · · · · · · · ·R. JOLSON

·2· ·that appear to be recurring charges for

·3· ·about five and $6,000 from the Old

·4· ·Westbury Country Club that are paid by

·5· ·Northwest.· Are you aware of any

·6· ·arrangement where Northwest pays those

·7· ·fees?

·8· · · · · · ·MR. TEELE:· Objection.· Are

·9· · · ·there any specific transactions that

10· · · ·you wanted to point out?

11· · · ·Q.· · Just in general, does Northwest

12· ·pay for Mr. Auerbach's fees for this

13· ·country club?

14· · · ·A.· · Yes.

15· · · ·Q.· · And why is that?

16· · · ·A.· · We use -- we use their facility

17· ·for off-site meetings.· Once a month we

18· ·use their -- we have meeting rooms and we

19· ·have employees, senior management and

20· ·sometimes middle management comes to

21· ·off-site meetings.

22· · · ·Q.· · Are any other events held at the

23· ·Old Westbury Country Club for Northwest?

24· · · ·A.· · Not that I am aware.

25· · · · · · ·MR. AULET:· This will be another


Page 130·1· · · · · · · · · ·R. JOLSON

·2· · · ·one you will want to be able to zoom

·3· · · ·into.


·5· · · ·Exhibit 13.)

·6· · · · · · ·MR. AULET:· What I have just

·7· · · ·marked as Exhibit 13, unless I have

·8· · · ·lost track, is a journal entry from

·9· · · ·the Northwest general ledger from

10· · · ·October of 2018.· It is for a

11· · · ·$49,594.41 payment to the Old Westbury

12· · · ·Golf and Country Club.

13· · · ·Q.· · Do you know what that payment is

14· ·for, Mr. Jolson?

15· · · ·A.· · I do.

16· · · ·Q.· · And what was that payment for?

17· · · ·A.· · That payment was for my

18· ·daughter's wedding.

19· · · ·Q.· · And did the company pay for your

20· ·daughter's wedding?

21· · · ·A.· · That was a bonus for me.· In

22· ·lieu of a bonus that is what I received

23· ·that year.

24· · · ·Q.· · Was that reflected on your pay

25· ·stubs as a bonus?


Page 131·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · It wasn't on my pay stubs but it

·3· ·is going to be on my W-2.· But it wouldn't

·4· ·be on an individual pay stub.

·5· · · ·Q.· · So if we checked your W-2's, we

·6· ·would find that that payment was included

·7· ·in your taxes?

·8· · · ·A.· · Not in that year.

·9· · · ·Q.· · In what year?

10· · · ·A.· · It would be 2019.· I didn't

11· ·report it in 2018.

12· · · ·Q.· · Did the Northwest Company pay

13· ·taxes on that $49,594?

14· · · ·A.· · Not in '18.

15· · · ·Q.· · Did it pay any taxes on that

16· ·amount in 2019?

17· · · ·A.· · We didn't finish filing all our

18· ·tax returns yet.

19· · · ·Q.· · Was that amount of compensation

20· ·reported on any tax forms that Northwest

21· ·filed the IRS for 2018 that reflected

22· ·compensation that it paid you?

23· · · ·A.· · Not in 2018.

24· · · ·Q.· · Was it done in a subsequent

25· ·year?


Page 132·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · We didn't finish filing all our

·3· ·returns for '19.

·4· · · ·Q.· · I am asking about any tax forms

·5· ·Northwest filed with the IRS that reflect

·6· ·payments it made to its employees for

·7· ·compensation.· Would any of those tax

·8· ·forms include this payment to the Old

·9· ·Westbury Gold and Country Club?

10· · · · · · ·MR. TEELE:· Objection.· Already

11· · · ·asked and answered.· You can answer to

12· · · ·the extent you have any information.

13· · · ·A.· · No.· I have answered it. I

14· ·don't have anything further to add.

15· · · ·Q.· · Was the answer no?

16· · · ·A.· · Not in 2018, no.

17· · · ·Q.· · And Northwest never filed any

18· ·tax forms with the IRS that reflect

19· ·payments to employees at all for the year

20· ·of 2018?· Is that correct?

21· · · ·A.· · I am not familiar with every

22· ·single form that gets filed but we are not

23· ·finished filing for 2019 yet.

24· · · ·Q.· · Did Ross Auerbach make a

25· ·practice of flying on personal jets at any


Page 133·1· · · · · · · · · ·R. JOLSON

·2· ·point in past five years?


·4· · · ·form.

·5· · · ·A.· · I don't know what "a practice"

·6· ·means.· There was use of a private jet,

·7· ·but I don't know that there is a practice.

·8· · · ·Q.· · Was that private jet billed to

·9· ·Northwest?

10· · · ·A.· · The ones I know about, yes.

11· · · ·Q.· · Has Northwest stopped using a

12· ·private jet in the past year or so?

13· · · ·A.· · Yes.

14· · · ·Q.· · When was that decision made?

15· · · ·A.· · I can't recall exactly.

16· · · ·Q.· · Did anyone review the use of the

17· ·private jet and determine if it was

18· ·appropriately used for Northwest business

19· ·purposes?

20· · · · · · ·MR. TEELE:· Objection to form

21· · · ·and vagueness.

22· · · ·A.· · There was no -- not a formal

23· ·review.

24· · · · · · ·MR. AULET:· Now would be a good

25· · · ·time for a five-minute break if that


Page 134·1· · · · · · · · · ·R. JOLSON

·2· · · ·works for everyone.

·3· · · · · · ·THE VIDEOGRAPHER:· The time is

·4· · · ·now 2:34 and we are now off the

·5· · · ·record.

·6· · · · · · ·(Recess.)


·8· · · ·now 2:51 and we are back on the

·9· · · ·record.


11· · · ·Exhibit 14.)


13· · · ·Q.· · Mr. Jolson, you should have in

14· ·front of you what is Exhibit 14, which is

15· ·a file of Northeastern Aviation invoices

16· ·that were provided by the Debtor, and they

17· ·were provided in the form that I marked as

18· ·the exhibit.

19· · · · · · ·I am going to first go to page

20· ·3.· This is -- have you ever seen these

21· ·invoices before?

22· · · ·A.· · I see invoices.· I can't recall

23· ·if I saw this specific one, but I do see

24· ·them.

25· · · ·Q.· · Have you ever seen Northeastern


Page 135·1· · · · · · · · · ·R. JOLSON

·2· ·Aviation's invoices like this one?· Maybe

·3· ·not this specific one.

·4· · · ·A.· · Yes.

·5· · · ·Q.· · If I go to page 4, there is an

·6· ·attached voucher journal report that

·7· ·appears to show that this was billed to

·8· ·air, hotels and travel.· Is that correct?

·9· · · ·A.· · Sorry.· I have to turn my

10· ·computer.

11· · · · · · ·I see that.

12· · · ·Q.· · So, these were produced to us in

13· ·invoice and then -- invoice, as in page 3,

14· ·and then these general ledger sheets, as

15· ·in page 4.· Would it be reasonable for us

16· ·to assume that the general ledger sheets

17· ·immediately after the invoice reflect how

18· ·that invoice was booked?

19· · · ·A.· · Yes.

20· · · ·Q.· · And so, take page 5, which, if

21· ·you look up the airport codes under the

22· ·itinerary, from Farmingdale, New York,

23· ·which appears to be where most of these

24· ·flights originate, to Miami, Florida.· How

25· ·would I go about determining what the


Page 136·1· · · · · · · · · ·R. JOLSON

·2· ·reason for this trip was?

·3· · · ·A.· · I think you'd have to ask Ross.

·4· · · ·Q.· · Would anyone from Northwest have

·5· ·required Ross to explain what the business

·6· ·purpose of this trip was in writing or

·7· ·otherwise?

·8· · · ·A.· · When Ross approves the -- I am

·9· ·looking at this.· Generally speaking, when

10· ·Ross approves an invoice, he generally

11· ·writes what the business purpose was.

12· · · ·Q.· · And so this invoice doesn't have

13· ·a business purpose but it does have the

14· ·notation 600.8440.01.· Would that notation

15· ·indicate that Ross thought it should be

16· ·billed to that general ledger account?


18· · · ·A.· · That would mean that whoever

19· ·coded it had a belief that it should go to

20· ·a business account.

21· · · ·Q.· · Okay.· But short of asking Ross,

22· ·if a business purpose is not written on

23· ·the invoice, there is no other document I

24· ·can refer to to determine what the

25· ·business purpose of this flight was.· Is


Page 137·1· · · · · · · · · ·R. JOLSON

·2· ·that correct?

·3· · · ·A.· · Not that I know of.· Right.

·4· · · ·Q.· · So, on page 5 -- sorry.· Page 9.

·5· ·This appears to be -- someone has

·6· ·helpfully written this out.· A trip that

·7· ·includes Miami and CID airport in Iowa.

·8· ·Do you know why anyone would be flying to

·9· ·Iowa on behalf of Northwest?


11· · · ·form and the inference about the

12· · · ·airport codes.

13· · · ·A.· · No.

14· · · · · · ·THE WITNESS:· My battery is

15· · · ·dead.

16· · · · · · ·MR. TEELE:· Can we take a break

17· · · ·so that Mr. Jolson can retrieve his

18· · · ·laptop plug?

19· · · · · · ·MR. AULET:· Can we make it

20· · · ·quick, though?

21· · · · · · ·MR. TEELE:· Two minutes.

22· · · · · · ·THE VIDEOGRAPHER:· Time is now

23· · · ·2:57 and we are now off record.

24· · · · · · ·(Discussion held off the

25· · · ·record.)


Page 138·1· · · · · · · · · ·R. JOLSON


·3· · · ·now 3 o'clock and we are back on the

·4· · · ·record.


·6· · · ·Q.· · Mr. Jolson, let's direct your

·7· ·attention to page 16, which is what

·8· ·appears to be a day trip to SLK airport,

·9· ·which appears to be an airport in Saranac

10· ·Lake in Upstate New York.· Do you know of

11· ·any business purpose for a day trip to

12· ·Upstate New York on behalf of Northwest?

13· · · ·A.· · No.

14· · · ·Q.· · Again, the only way I would be

15· ·able to determine what the business

16· ·purpose of these trips was would be to ask

17· ·Ross?


19· · · ·Q.· · You can answer.

20· · · ·A.· · Yes.

21· · · ·Q.· · I will also just remind you,

22· ·Mr. Jolson, nodding or shaking your head

23· ·doesn't appear in the transcript.

24· · · ·A.· · I got it.· Sorry about that.

25· · · ·Q.· · Please direct your attention to


Page 139·1· · · · · · · · · ·R. JOLSON

·2· ·page 35, which is a flight from EGE, which

·3· ·is an airport near Vail, to Denver and

·4· ·back to Vail.· Again, do you know of any

·5· ·business purpose that might be served by a

·6· ·trip like this?

·7· · · ·A.· · No.

·8· · · ·Q.· · Page 35.· Again, we can see from

·9· ·the attached general ledger on page 36

10· ·that this appears to have been billed to

11· ·the company as air, hotel and travel

12· ·expense.

13· · · · · · ·MR. TEELE:· Can you show him the

14· · · ·exhibit?

15· · · ·A.· · Okay.

16· · · ·Q.· · So, this is a trip to a number

17· ·of airports, but the first thing I want to

18· ·ask is, this has a notation that says,

19· ·"Please put Allen's fee 50 percent of

20· ·this."· Do you have understanding of what

21· ·that means?


23· · · ·A.· · I never saw this comment to give

24· ·to me.· So, I don't remember it, but if it

25· ·said they gave it to me, I would say they


Page 140·1· · · · · · · · · ·R. JOLSON

·2· ·did.

·3· · · ·Q.· · Okay.· And do you know what was

·4· ·meant by "Please put on Allen's fee

·5· ·50 percent of this"?

·6· · · ·A.· · I don't recall what I would have

·7· ·said at the time, but I know what I -- I

·8· ·don't recall what I would have said at the

·9· ·time.

10· · · ·Q.· · Okay.· Well, it appears from the

11· ·attachment, page 43, that half of this was

12· ·billed to air, hotel, travel and half of

13· ·it was billed to other accounts

14· ·receivable.· Would it make sense that --

15· ·and you can see the parentheses at the end

16· ·of the list of airports, that somebody

17· ·wrote "(Allen)."· Do you see that?

18· · · · · · ·MR. TEELE:· Where are you

19· · · ·looking?

20· · · ·A.· · I see it.

21· · · · · · ·MR. TEELE:· Oh, I see it, Ken.

22· · · ·Q.· · Does this mean that half of this

23· ·flight was billed to Allen Guo and half of

24· ·it was billed to Northwest?

25· · · ·A.· · That is what this journal entry


Page 141·1· · · · · · · · · ·R. JOLSON

·2· ·means.

·3· · · ·Q.· · Why would half of the flight be

·4· ·a personal expense of Allen but the other

·5· ·half of the flight be an expense of

·6· ·Northwest?

·7· · · ·A.· · Can you go back to the bill?

·8· · · ·Q.· · Sure.

·9· · · ·A.· · Because that is the instructions

10· ·that is given to accounting on the

11· ·invoice.

12· · · ·Q.· · So my question is, if this trip

13· ·is something that Allen should pay for

14· ·personally, why isn't the other half

15· ·something that Ross would pay for

16· ·personally?

17· · · ·A.· · I don't know anything about this

18· ·trip.· I don't know.

19· · · ·Q.· · We have gone to page 49 of the

20· ·exhibit.· This is a flight to Iowa and it

21· ·has the handwritten note "Iowa Daniella

22· ·orientation."· Who is Daniella?

23· · · ·A.· · That is Ross's daughter.

24· · · ·Q.· · Did Daniella attend the

25· ·University of Iowa for a year?


Page 142·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · I believe so.

·3· · · ·Q.· · Was that school year the year

·4· ·beginning in the fall of 2017?

·5· · · ·A.· · I am not sure of the year.

·6· · · ·Q.· · If this was a flight, as it

·7· ·indicates, for an orientation for Ross's

·8· ·daughter at the University of Iowa, would

·9· ·that be a legitimate Northwestern business

10· ·expense?


12· · · ·hypothetical.· You can answer if you

13· · · ·know.· It's hypothetical.

14· · · ·A.· · It should have been booked to

15· ·the loan account.

16· · · ·Q.· · Was Daniella an employee of

17· ·Northwest in 2017?

18· · · ·A.· · No.

19· · · ·Q.· · So, the attached page reflects

20· ·that this was, instead, billed to air,

21· ·hotels and travel.· Is that correct?

22· · · ·A.· · I see that.

23· · · ·Q.· · Why wouldn't someone have asked

24· ·questions about this receipt given that

25· ·somebody handwrote on it that it is for


Page 143·1· · · · · · · · · ·R. JOLSON

·2· ·Ross's daughter's orientation?

·3· · · ·A.· · They should have.

·4· · · · · · ·MR. DUFFY:· Objection.

·5· · · ·Speculative.

·6· · · ·Q.· · Page 62 is another receipt that

·7· ·includes a flight to Iowa, and this one is

·8· ·in the fall of 2017.· Is there any

·9· ·business reason that this flight might

10· ·have gone to Iowa on behalf of Northwest?

11· · · ·A.· · Not that I know.

12· · · ·Q.· · If the only reason to visit Iowa

13· ·for either Ross to visit his daughter or

14· ·to bring his daughter to University of

15· ·Iowa, would that be a legitimate business

16· ·expense for Ross to charge Northwest for?

17· · · · · · ·MR. DUFFY:· Objection.

18· · · ·Speculative.

19· · · ·A.· · No.

20· · · ·Q.· · And for any of the flights to

21· ·Iowa, is there any way I could determine

22· ·if there was a legitimate business reason

23· ·for a private jet to Iowa besides asking

24· ·Ross Auerbach?

25· · · ·A.· · No.


Page 144·1· · · · · · · · · ·R. JOLSON

·2· · · ·Q.· · Page 76 is a flight between what

·3· ·I looked up and appears to be an airport

·4· ·in Greece to an airport in Italy.· Is

·5· ·there any business reason that a private

·6· ·jet would have been needed to bring Ross

·7· ·Auerbach from Greece to Italy in the

·8· ·summer of 2018?


10· · · ·A.· · I don't know.

11· · · ·Q.· · So, this flight, HDI is an

12· ·airport in Harbor Island, Bahamas.· Again,

13· ·is there any business reason why a private

14· ·jet would have been needed to go to the

15· ·Bahamas?

16· · · · · · ·MR. TEELE:· Objection.· I am

17· · · ·going to note for the record

18· · · ·continuing objection to the

19· · · ·representation of the airport codes,

20· · · ·and I will object to the form of that

21· · · ·question as well.

22· · · ·A.· · I don't know.

23· · · ·Q.· · Is there any way I can determine

24· ·who was on these private jets?

25· · · · · · ·MR. TEELE:· Objection.· Vague.


Page 145·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · I don't know.


·4· · · ·Exhibit 15.)

·5· · · · · · ·MR. AULET:· Now I am showing you

·6· · · ·an email I have marked Exhibit 15,

·7· · · ·which is a series of emails that

·8· · · ·begins with an email from Ron Andreola

·9· · · ·to Robert Jolson on Monday, May 18,

10· · · ·2020.

11· · · ·Q.· · Mr. Jolson, do you recall we

12· ·asked you a few questions if anyone had

13· ·alerted you that Ross was claiming that

14· ·Allen was on trips where he was not in

15· ·fact on trips?

16· · · ·A.· · Yes.

17· · · ·Q.· · Is this email an email from Ron

18· ·Andreola to you forwarding an email from

19· ·2017 where Allen informed him, cc'ing you,

20· ·that he was not on the trip that Ross had

21· ·represented he was on?

22· · · ·A.· · I am reading it.· First time I

23· ·am seeing it.· Yes.

24· · · ·Q.· · I will just go to page 2 so you

25· ·can read the rest of the email.· Did you


Page 146·1· · · · · · · · · ·R. JOLSON

·2· ·ever investigate why Ross had claimed that

·3· ·Allen was on this trip as a reason to bill

·4· ·it to debtors?

·5· · · ·A.· · No.· May I ask you to go back,

·6· ·please?

·7· · · · · · ·Okay.

·8· · · ·Q.· · In 2017, did you ever conduct an

·9· ·investigation to determine if there were

10· ·any other charges that Ross had billed to

11· ·the company based on reasons that turned

12· ·out not to be true?


14· · · ·form.

15· · · ·A.· · I don't recall.

16· · · ·Q.· · Why was Mr. Andreola looking

17· ·into this issue in May of this year?

18· · · ·A.· · I don't know.

19· · · ·Q.· · Why did he forward this email to

20· ·you?

21· · · ·A.· · I can't answer that.· I don't

22· ·know why he forwarded it to me.

23· · · ·Q.· · What did you do in response to

24· ·receiving this email?

25· · · ·A.· · I don't recall seeing this


Page 147·1· · · · · · · · · ·R. JOLSON

·2· ·email.· I get about a thousand a day. I

·3· ·am sure I miss plenty of them.· Ron sits

·4· ·about three feet from me.· Never told me

·5· ·about it, so it is entirely possible I

·6· ·missed it.

·7· · · ·Q.· · What is David Harrison LLC?

·8· · · ·A.· · It's a consulting company.

·9· · · ·Q.· · And what do they consult on?

10· · · ·A.· · They don't consult with me, so I

11· ·don't know what that is.

12· · · ·Q.· · Who do they consult with?

13· · · ·A.· · I don't know.· I can't answer

14· ·that question.

15· · · ·Q.· · Is there a David Harrison?

16· · · ·A.· · I don't know of a David

17· ·Harrison.

18· · · ·Q.· · Who owns David Harrison LLC?

19· · · ·A.· · I don't know the owners of David

20· ·Harrison LLC.


22· ·that it is Ross Auerbach?


24· · · ·form.



Page 148·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · I don't know.· So, okay.

·3· · · ·Q.· · Who contracted with David

·4· ·Harrison LLC to provide consulting

·5· ·services to Northwest?

·6· · · ·A.· · I don't know.

·7· · · ·Q.· · How long has the consulting

·8· ·arrangement been in place?

·9· · · ·A.· · A few years.

10· · · ·Q.· · Who started -- who first engaged

11· ·David Harrison LLC to provide consulting

12· ·services?

13· · · · · · ·MR. TEELE:· Objection.· It's

14· · · ·already been asked and answered.

15· · · ·A.· · I don't know.

16· · · ·Q.· · How do you know that they

17· ·provide consulting services?

18· · · ·A.· · I only know I get an invoice and

19· ·it's for consulting services.· I don't

20· ·know --

21· · · ·Q.· · So, you have seen the David

22· ·Harrison LLC invoices for consulting?

23· · · ·A.· · Yes.

24· · · ·Q.· · And are each of those invoices

25· ·for $9,700?


Page 149·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · I don't really recall each

·3· ·invoice amount.

·4· · · ·Q.· · So, you simply pay these

·5· ·invoices without knowing what the services

·6· ·provided by David Harrison LLC are?

·7· · · ·A.· · We get a lot of invoices every

·8· ·day.· They go through our payables

·9· ·department.· I don't see every single

10· ·invoice.· So, items get paid.· I don't see

11· ·everything that gets paid.

12· · · ·Q.· · But you see these invoices.

13· ·Correct?

14· · · ·A.· · I saw -- I can't tell you I have

15· ·seen every one.

16· · · ·Q.· · But you earlier testified that

17· ·you had in fact seen David Harrison

18· ·invoices.· Correct?

19· · · ·A.· · Correct.

20· · · ·Q.· · And who directed you to pay

21· ·those invoices?

22· · · ·A.· · Those invoices are approved by

23· ·Ross and they get paid and we account for

24· ·them based on what the invoice says.

25· · · ·Q.· · And so you have never inquired


Page 150·1· · · · · · · · · ·R. JOLSON

·2· ·into why this entity is providing

·3· ·consulting services?

·4· · · ·A.· · No.

·5· · · ·Q.· · Are you aware that Mr. Auerbach

·6· ·claimed to CBIZ that in fact David

·7· ·Harrison leased premises to the Debtors?


·9· · · ·form.

10· · · ·A.· · No.

11· · · · · · ·MR. AULET:· I am going to put in

12· · · ·front of you what I have marked

13· · · ·Exhibit 15, which is a file of David

14· · · ·Harrison invoices.


16· · · ·Exhibit 15A.)

17· · · ·Q.· · The first -- this is the file as

18· ·it was produced to us by the Debtors.

19· · · · · · ·MR. TEELE:· Sorry, Mr. Aulet.

20· · · ·Did this come -- is this an excerpt

21· · · ·from the CBIZ report or did this come

22· · · ·from another page in the Debtors'

23· · · ·production.

24· · · · · · ·MR. AULET:· This was a separate

25· · · ·PDF from the Debtors' production.· We


Page 151·1· · · · · · · · · ·R. JOLSON

·2· · · ·have not modified it aside from my now

·3· · · ·putting this stamp on it.

·4· · · · · · ·MR. TEELE:· If you could, after

·5· · · ·the deposition, indicate where in the

·6· · · ·production you got it from?

·7· · · · · · ·MR. AULET:· It is in the

·8· · · ·June 3rd, either the June 3rd or

·9· · · ·June 8th production and it was

10· · · ·produced as a PDF called simply "David

11· · · ·Harrison invoices.PDF."

12· · · · · · ·MR. TEELE:· Thank you.

13· · · ·Q.· · Mr. Jolson, the first page

14· ·appears to be a list of invoices paid for

15· ·$9,700.· Is that correct?

16· · · ·A.· · That is what it says.

17· · · ·Q.· · And it appears that these

18· ·invoices were issued as recently as

19· ·December 2019?

20· · · ·A.· · Yes.

21· · · ·Q.· · We'll go to page 2, an invoice

22· ·from August 2017.· There is a lot of

23· ·handwriting on this invoice.· First there

24· ·is a handwritten number at the top that

25· ·says "17."· Then to be quite honest, I am


Page 152·1· · · · · · · · · ·R. JOLSON

·2· ·not sure what the next number is.· Do you

·3· ·know what that number refers to?

·4· · · ·A.· · No.

·5· · · ·Q.· · There is an address, 3 Old Farm,

·6· ·Old Westbury, New York 11568.· Do you know

·7· ·what address that is?

·8· · · ·A.· · No.

·9· · · ·Q.· · Do you know who owns the

10· ·property located there?

11· · · ·A.· · I am not familiar with that

12· ·address.

13· · · ·Q.· · Does the Northwest Company ever

14· ·do business at that address, hold events

15· ·at that address or do anything at that

16· ·address that you are aware of?

17· · · ·A.· · I am not aware of that, no.

18· · · ·Q.· · In the middle bottom there is

19· ·what I have just highlighted.· Do you have

20· ·any idea what this marking is?

21· · · ·A.· · Yes.· That is my initial. I

22· ·can't read the document.

23· · · ·Q.· · So you saw this invoice and

24· ·initialed it?

25· · · ·A.· · Yes.


Page 153·1· · · · · · · · · ·R. JOLSON

·2· · · ·Q.· · Then this code 600.84 -- and

·3· ·then I can't make out the rest, would that

·4· ·be a general ledger code?

·5· · · ·A.· · It would be.

·6· · · ·Q.· · I am going to go to the next

·7· ·page.· Would those be your initials on the

·8· ·bottom right-hand corner again?

·9· · · ·A.· · Yes.

10· · · ·Q.· · There is a different set of

11· ·numbers at the top right.· Do you have any

12· ·idea what numbers those are?

13· · · ·A.· · No.

14· · · ·Q.· · I am going to skip ahead to page

15· ·30.· This is an invoice dated December 1,

16· ·2019.· Whose handwriting is that at the

17· ·bottom middle?

18· · · ·A.· · I don't want to guess.· Which

19· ·one?· Can you put that yellow thing on it?

20· · · ·Q.· · There you are.

21· · · ·A.· · I know that initial.

22· · · ·Q.· · What initials are those?

23· · · ·A.· · That's Christina Dovico.

24· · · ·Q.· · Who is Christina Dovico?

25· · · ·A.· · I apologize.· Is there a way for


Page 154·1· · · · · · · · · ·R. JOLSON

·2· ·you to make that bigger?· It may be

·3· ·somebody else.

·4· · · ·Q.· · I believe that you can zoom in

·5· ·on this, and my zooming in doesn't help.

·6· ·If it does, I have just zoomed in.· We

·7· ·have two Christina's.

·8· · · · · · ·Okay.· I am sorry.· That is

·9· ·Christy McClure.

10· · · · · · ·Who is Christy McClure?

11· · · ·A.· · She is manager of events.

12· · · ·Q.· · Manager of events?

13· · · ·A.· · Events.· That is her title.

14· · · ·Q.· · Why would the manager of events

15· ·be approving an invoice for consulting?

16· · · ·A.· · I don't know.

17· · · ·Q.· · So when, about -- if we go back

18· ·to page 20, it looks like she is now still

19· ·signing these invoices.· Again, do you

20· ·have any idea why the manager of events

21· ·would be signing these invoices?

22· · · ·A.· · No.

23· · · ·Q.· · And so if we go to the

24· ·April 2018 invoice, it seems you were

25· ·still signing these invoices.· Is that


Page 155·1· · · · · · · · · ·R. JOLSON

·2· ·correct?

·3· · · ·A.· · That is my initial.

·4· · · ·Q.· · Why would you have stopped

·5· ·signing these invoices?

·6· · · ·A.· · There was a point in time we

·7· ·stopped paying it.

·8· · · ·Q.· · When did you stop paying it?

·9· · · ·A.· · I don't recall the exact date,

10· ·but if you look at the ledger you could

11· ·probably tell.

12· · · ·Q.· · Approximately when do you

13· ·believe that you stopped paying these

14· ·invoices?


16· · · ·Speculative.

17· · · ·A.· · I don't recall when we stopped.

18· ·Months ago.

19· · · ·Q.· · Would it be -- would December of

20· ·2019 be consistent with your recollection?

21· · · · · · ·MR. DUFFY:· Objection.· Asked

22· · · ·and answered.

23· · · ·A.· · I don't recall when we stopped.

24· · · · · · ·MR. TEELE:· Ken, there is a note

25· · · ·from the videographer or court


Page 156·1· · · · · · · · · ·R. JOLSON

·2· · · ·reporter?

·3· · · · · · ·MR. AULET:· I did not see that

·4· · · ·note.

·5· · · · · · ·MR. TEELE:· Apparently we have

·6· · · ·to switch the media.

·7· · · · · · ·MR. AULET:· Let's go off the

·8· · · ·record for five minutes.

·9· · · · · · ·THE VIDEOGRAPHER:· Thank you,

10· · · ·gentlemen.· The time is now 3:27 and

11· · · ·we are off record.· This ends media

12· · · ·number 2.

13· · · · · · ·(Recess.)


15· · · ·now 3:36.· This is the start of media

16· · · ·number 3 and we are back on the

17· · · ·record.


19· · · ·Q.· · I had one question I neglected

20· ·to ask when we were discussing the

21· ·American Express cards.· Why did Allen Guo

22· ·of Ashford have a Northwest American

23· ·Express card?

24· · · ·A.· · I don't know.

25· · · ·Q.· · Who would I ask to find out?


Page 157·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · Ross.

·3· · · · · · ·MR. AULET:· You should be able

·4· · · ·to see now what I have marked as

·5· · · ·Exhibit 16.


·7· · · ·Exhibit 16.)

·8· · · ·Q.· · This is an email from Ross

·9· ·Auerbach to Jay Silver and Michael

10· ·Goldsmith.· First, do you know who Jay

11· ·Silver and Michael Goldsmith are?

12· · · ·A.· · Yes.

13· · · ·Q.· · Who are they?

14· · · ·A.· · Jay Silver is a partner at CBIZ

15· ·and Michael Goldsmith is a lawyer at

16· ·Sills.

17· · · ·Q.· · Now, at the bottom of the first

18· ·page, you see a request that says, "Please

19· ·describe in detail the business of each

20· ·entity below, how they are related to

21· ·Northwest, what services they provide and

22· ·an explanation as to the purpose of the

23· ·amounts disbursed to them during 2018."

24· ·Then in blue text which, per Ross's email

25· ·above, is his response, it says, "All


Page 158·1· · · · · · · · · ·R. JOLSON

·2· ·entities below involve real estate and we

·3· ·can resend leases if needed."

·4· · · · · · ·Then if you go to page 2, you

·5· ·see David Harrison LLC and the notation

·6· ·"Old Farm, NY."· Do you have any

·7· ·understanding of why Mr. Auerbach would

·8· ·represent that David Harrison LLC leases

·9· ·property to Northwest?

10· · · ·A.· · No.

11· · · ·Q.· · Does Northwest have any property

12· ·in Old Farm, New York?

13· · · · · · ·MR. TEELE:· Objection.· It's

14· · · ·asked and answered.· You can answer

15· · · ·again if you know.

16· · · ·A.· · Not that I know, no.

17· · · ·Q.· · Were you aware that David

18· ·Harrison LLC was an entity owned and

19· ·controlled by Ross?

20· · · · · · ·MR. TEELE:· Objection.· It

21· · · ·assumes facts not in evidence.

22· · · ·A.· · I don't know who the owners are

23· ·of David Harrison.

24· · · ·Q.· · We earlier discussed a schedule

25· ·of payments that was with the Bankruptcy


Page 159·1· · · · · · · · · ·R. JOLSON

·2· ·Court that included your $35,000 bonus.

·3· ·Do I recall correctly that you were not

·4· ·involved in preparing that?

·5· · · ·A.· · What does that mean?

·6· · · ·Q.· · Were you involved --

·7· · · · · · ·MR. TEELE:· Objection.· Sorry.

·8· · · ·I am going to object to the extent you

·9· · · ·are characterizing his prior

10· · · ·testimony.

11· · · ·Q.· · If you had been asked to

12· ·identify payments to or for the benefit of

13· ·an insider in the past year, would you

14· ·have identified payments to David Harrison

15· ·LLC?


17· · · ·Speculative.· Are there any payments

18· · · ·that you know where he did do that or

19· · · ·was asked to do that?

20· · · · · · ·MR. AULET:· I am going to stick

21· · · ·with my question.

22· · · · · · ·MR. DUFFY:· And I will stick

23· · · ·with my objection.· If you can

24· · · ·understand the question and have an

25· · · ·answer, then say I don't understand


Page 160·1· · · · · · · · · ·R. JOLSON

·2· · · ·the question or whatever the answer

·3· · · ·is.

·4· · · ·A.· · I don't understand the question.

·5· · · ·Q.· · What has your involvement been

·6· ·in preparing financial statements of

·7· ·Northwest to be filed with the Bankruptcy

·8· ·Court?

·9· · · ·A.· · I don't prepare the financial

10· ·statement.

11· · · ·Q.· · Have you been involved in

12· ·preparing them?

13· · · ·A.· · I am not involved in preparing

14· ·financial statements.· It is not the

15· ·role --

16· · · ·Q.· · Have you been involved in

17· ·collecting the data for those statements?

18· · · ·A.· · No.

19· · · ·Q.· · Who has been?

20· · · ·A.· · A consultant here from Clear

21· ·Thinking, and our controller.

22· · · ·Q.· · Who is the controller again?

23· · · ·A.· · Ted Georgis.

24· · · ·Q.· · And Ted Georgis received a

25· ·$10,000 retention bonus.· Is that correct?


Page 161·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · Yes.

·3· · · ·Q.· · When did you transfer that

·4· ·retention bonus to him?

·5· · · ·A.· · I wrote a personal check the

·6· ·same day I received the money.

·7· · · ·Q.· · Has that check been deposited?

·8· · · ·A.· · Yes.

·9· · · ·Q.· · When was it deposited?


11· · · ·A.· · I don't know when it was -- I

12· ·don't recall.

13· · · ·Q.· · Why was that payment first made

14· ·to you and you wrote him a check rather

15· ·than transferring the money to him

16· ·directly?

17· · · ·A.· · He wasn't here on that day.

18· · · ·Q.· · Why did he need to be there on

19· ·that day to receive the payment?

20· · · ·A.· · Because I didn't know how to get

21· ·him money.· I just wrote him a check.

22· · · ·Q.· · So you characterized it as a

23· ·retention bonus.· Are there any written

24· ·terms for the bonus?



Page 162·1· · · · · · · · · ·R. JOLSON

·2· · · ·form.

·3· · · ·A.· · No.

·4· · · ·Q.· · If he quit tomorrow, is there

·5· ·any document that says he has to return

·6· ·any portion of that $10,000?

·7· · · ·A.· · No.

·8· · · ·Q.· · If you quit tomorrow, is there

·9· ·any document that says that you have to

10· ·return any portion of the $25,000?

11· · · ·A.· · No.

12· · · ·Q.· · Was there a requirement that you

13· ·stay for any length of time to receive

14· ·that bonus?

15· · · ·A.· · No.

16· · · ·Q.· · Who authorized that bonus?

17· · · ·A.· · Ross.

18· · · ·Q.· · And so this controller is now

19· ·the one in charge of collecting the data

20· ·for the filings with the Bankruptcy Court.

21· ·Is that correct?

22· · · ·A.· · Along with Clear Thinking.

23· · · ·Q.· · Is the controller aware that

24· ·Ross personally authorized this bonus?

25· · · ·A.· · Yes.


Page 163·1· · · · · · · · · ·R. JOLSON

·2· · · ·Q.· · Would anyone have made this

·3· ·controller aware of the circumstances of

·4· ·the payments to David Harrison LLC?

·5· · · ·A.· · I don't know.

·6· · · ·Q.· · Are you aware of any documents

·7· ·setting forth the agreement between the

·8· ·Debtors and David Harrison LLC?

·9· · · ·A.· · I am sorry.· Can you repeat

10· ·that, please?

11· · · ·Q.· · Are you aware of any document

12· ·setting forth any agreements between the

13· ·Debtors and David Harrison LLC?

14· · · ·A.· · No.

15· · · ·Q.· · Is there anyone besides Ross

16· ·Auerbach that I could ask to explain to me

17· ·what the consulting services David

18· ·Harrison LLC provides are?


20· · · ·form.

21· · · ·A.· · Not that I am aware of.

22· · · ·Q.· · Has Ross Auerbach ever made any

23· ·payments on his loan from Northwest?


25· · · ·form.


Page 164·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · Yes.

·3· · · ·Q.· · When did -- are you aware of the

·4· ·circumstances of any of those payments?

·5· · · ·A.· · On some.

·6· · · ·Q.· · Are you aware that the general

·7· ·ledgers reflect that Ross Auerbach made a

·8· ·payment of half a million dollars on

·9· ·September 20, 2018?

10· · · ·A.· · I don't recall right now.


12· ·that there is no deposit from Ross

13· ·Auerbach on that date but there is a

14· ·deposit of half a million dollars on that

15· ·date from David Harrison LLC?


17· · · ·form.

18· · · ·A.· · I am not sure I -- if that is a

19· ·question, I don't understand it.


21· ·that David Harrison LLC paid half a

22· ·million dollars to Northwest that was

23· ·booked as a repayment of the Ross Auerbach

24· ·loan?

25· · · · · · ·MR. TEELE:· Objection.· Assumes


Page 165·1· · · · · · · · · ·R. JOLSON

·2· · · ·facts not in evidence and is vague. I

·3· · · ·object to the form as well.

·4· · · ·A.· · I don't even know how to answer

·5· ·that question.

·6· · · ·Q.· · Are payments from Northwest

·7· ·Textile Holdings LLC ever booked as

·8· ·payments by Ross Auerbach?

·9· · · ·A.· · I am not aware of how they

10· ·are -- how they're booked.

11· · · ·Q.· · If a payment came in from

12· ·Northwest Textile Holding LLC, would it be

13· ·appropriate to book that as a payment by

14· ·Ross Auerbach against his loan?


16· · · ·Speculative and already asked and

17· · · ·answered.

18· · · ·A.· · I don't even understand the

19· ·question.

20· · · ·Q.· · Would it be appropriate to book

21· ·a payment made to the Debtors by Northwest

22· ·Textile Holdings LLC as a payment actually

23· ·made by Ross Auerbach against his loan

24· ·account?



Page 166·1· · · · · · · · · ·R. JOLSON


·3· · · ·hypothetical and to the form.

·4· · · ·A.· · I am trying to understand the

·5· ·question.

·6· · · · · · ·MR. TEELE:· If you don't

·7· · · ·understand, you can ask him to

·8· · · ·clarify.

·9· · · ·A.· · Can you clarify?

10· · · ·Q.· · What part of the question do you

11· ·need clarification on?

12· · · · · · ·MR. TEELE:· Well, why don't you

13· · · ·give a specific example instead of

14· · · ·asking a hypothetical and let him

15· · · ·comment on a specific example that you

16· · · ·give him?

17· · · · · · ·MR. AULET:· Well, I would like

18· · · ·an answer to my question first.

19· · · · · · ·MR. DUFFY:· I think there was an

20· · · ·answer.· He said he doesn't understand

21· · · ·the question.

22· · · ·Q.· · Okay.· So, the payment on the

23· ·eve of bankruptcy of $100,000 to Ross

24· ·Auerbach, you stated that was in payment

25· ·of $100,000 that Ross Auerbach paid the


Page 167·1· · · · · · · · · ·R. JOLSON

·2· ·Debtors.· Is that correct?


·4· · · ·characterization of his prior

·5· · · ·testimony.· You can answer, though.

·6· · · ·A.· · Yes.

·7· · · ·Q.· · And if I look at the bank

·8· ·account statements for March of 2020, I

·9· ·see a payment from Northwest Textile

10· ·Holding, not Ross Auerbach.· Should the

11· ·$100,000 be returned to Ross Auerbach

12· ·rather than Northwest Textile Holdings?

13· · · ·A.· · To piece it together, can I see

14· ·both sides so I can answer your question?

15· ·I don't know -- when money comes in, I

16· ·don't see where the money is coming from.

17· · · ·Q.· · While that exhibit is loading

18· ·up, who would be responsible for verifying

19· ·if Ross said he sent $100,000 to Northwest

20· ·and Northwest actually received that

21· ·$100,000?

22· · · ·A.· · One of our staff accountants

23· ·monitors our bank account.

24· · · ·Q.· · And should they have noted if

25· ·the money actually came from a different


Page 168·1· · · · · · · · · ·R. JOLSON

·2· ·entity?

·3· · · ·A.· · They would know.

·4· · · ·Q.· · So, I apologize.· This is taking

·5· ·long enough to load that perhaps we will

·6· ·come back to it later.

·7· · · · · · ·MR. AULET:· We will mark as

·8· · · ·Exhibit 17.


10· · · ·Exhibit 17.)

11· · · ·Q.· · This is a spreadsheet we created

12· ·from a number of entries at the end of

13· ·2018 and beginning of 2019.· We previously

14· ·discussed the movement of funds between

15· ·foreign travel, officer's loan and

16· ·suspense, but there is also what I would

17· ·characterize as wash transactions, where

18· ·transactions put on on December 31st and

19· ·taken off on January 1st for exchange rate

20· ·difference and accounts payable in three

21· ·different instances.

22· · · · · · ·What would be the purpose of

23· ·these transactions?

24· · · ·A.· · These are transactions that

25· ·either production or accounting do to


Page 169·1· · · · · · · · · ·R. JOLSON

·2· ·reflect exchange rates with the factory.

·3· · · ·Q.· · Why do production or accounting

·4· ·do those transactions?

·5· · · ·A.· · Because the foreign currencies

·6· ·differ during the course of the year.· So

·7· ·at the end of the year, we true-up.

·8· · · ·Q.· · You true-up the accounts payable

·9· ·based on fluctuations in the exchange rate

10· ·over that year?· Is that correct?

11· · · ·A.· · Yes.

12· · · ·Q.· · So then why are they immediately

13· ·reversed in January?

14· · · ·A.· · Because they're an accrual,

15· ·as -- what a normal practice be, because

16· ·our books are closed, so we place an

17· ·accrual, we reverse the accrual, do an

18· ·actual spreadsheet and then book it.

19· · · ·Q.· · And when would you do the actual

20· ·spreadsheet and book the actual exchange

21· ·rate differences?

22· · · ·A.· · Well, I can just tell you that

23· ·for 2019 we just did it now.

24· · · ·Q.· · Who would -- these are very

25· ·specific numbers for exchange rate


Page 170·1· · · · · · · · · ·R. JOLSON

·2· ·differences.· Who came up with those

·3· ·numbers?


·5· · · ·form.

·6· · · ·A.· · There was a -- it was

·7· ·established by our old chief operating

·8· ·officer.· We followed that form after he

·9· ·left.

10· · · ·Q.· · So there was a form established

11· ·by the old chief operating officer.· What

12· ·do you mean by "form"?

13· · · ·A.· · A methodology.

14· · · ·Q.· · What was that methodology?

15· · · ·A.· · I don't know.· Ask him.

16· · · ·Q.· · Who was this chief operating

17· ·officer?

18· · · ·A.· · It was Mark Friedman.

19· · · ·Q.· · When did Mark Friedman leave

20· ·Northwest?

21· · · ·A.· · A year and a half ago, about.

22· · · · · · ·MR. AULET:· Okay.· I am going to

23· · · ·show you an email that I have marked

24· · · ·Exhibit 18.



Page 171·1· · · · · · · · · ·R. JOLSON

·2· · · ·Exhibit 18.)

·3· · · ·Q.· · It is an email from Ron Andreola

·4· ·to Allen Guo.· This reflects -- well, I

·5· ·will let you read it.

·6· · · · · · ·Have you seen this email before?

·7· · · ·A.· · I don't recall.

·8· · · · · · ·MR. TEELE:· I will note for the

·9· · · ·record that Mr. Jolson is not copied,

10· · · ·doesn't appear to be copied on this

11· · · ·email.

12· · · ·A.· · I don't know what it is about.

13· · · ·Q.· · Do you see in the middle of the

14· ·page where Mr. Andreola wrote, exclamation

15· ·point, "Group is not real."· I presume

16· ·that he meant first group is not real and

17· ·second group is real.

18· · · · · · ·Do you know what he meant by

19· ·that?

20· · · ·A.· · I have no idea.

21· · · ·Q.· · Are these so called charge-backs

22· ·that are being applied to Ashford

23· ·receivables?

24· · · ·A.· · Sorry?· What was that?

25· · · ·Q.· · Are these charge-backs that are


Page 172·1· · · · · · · · · ·R. JOLSON

·2· ·being applied to Ashford receivables?

·3· · · ·A.· · There is a debit memo.

·4· · · ·Q.· · Well, what is a debit memo?

·5· · · ·A.· · It explains a debit in an

·6· ·account.

·7· · · ·Q.· · Why would you issue a debit memo

·8· ·or why would you debit an account?

·9· · · ·A.· · You debit an account for various

10· ·reasons.· You debit an account for bad

11· ·quality, for a return, for an incorrect

12· ·invoice, an invoice we never received,

13· ·goods we never received.· Could be a lot

14· ·of reasons.

15· · · ·Q.· · And if a debit memo is not real,

16· ·what effect would that have if it was

17· ·entered anyway?



20· · · · · · ·MR. DUFFY:· Objection to the

21· · · ·hypothetical.

22· · · ·A.· · I don't even know what that

23· ·means, real and not real.· I don't deal

24· ·with unreal things.

25· · · ·Q.· · Does Mr. Andreola deal with


Page 173·1· · · · · · · · · ·R. JOLSON

·2· ·unreal things?

·3· · · ·A.· · I have no idea.

·4· · · ·Q.· · Do you ever get involved in

·5· ·directing what debits should or should not

·6· ·be applied?

·7· · · ·A.· · I don't write debit memos.

·8· · · ·Q.· · But do you --


10· · · ·Q.· · Do you ever get involved in

11· ·debit memos?

12· · · ·A.· · I can't remember if I got

13· ·involved in -- the only time I would get

14· ·involved in distribution, if I knew

15· ·something was in error on a bill, I would

16· ·ask somebody to look at it.· But I don't

17· ·instruct anybody.

18· · · · · · ·MR. AULET:· I am going to show

19· · · ·you what I am marking as Exhibit 19.


21· · · ·Exhibit 19.)

22· · · ·Q.· · This is a series of emails that

23· ·involve Allen Guo from Ashford Textiles

24· ·and Ron Andreola.· At the top is an email

25· ·from Ron Andreola to you.· Mr. Andreola


Page 174·1· · · · · · · · · ·R. JOLSON

·2· ·says, "Per your instructions, I have not

·3· ·reversed this debit."

·4· · · · · · ·Why would you have instructed

·5· ·Mr. Andreola not to reverse that debit?

·6· · · ·A.· · You'd have to tell me what the

·7· ·debit is.

·8· · · ·Q.· · Well, you can read the

·9· ·description at the bottom.· If you need to

10· ·go to the second page, let me know and I

11· ·will move the exhibit.

12· · · ·A.· · Can you go to the second page,

13· ·please?

14· · · · · · ·(Pause.)

15· · · · · · ·Okay.

16· · · ·Q.· · Who is Mark Friedman?

17· · · ·A.· · I mentioned him before.· He was,

18· ·at the time, chief operating officer.

19· · · ·Q.· · And would he have the authority

20· ·to reach agreement with Ashford on the

21· ·amount of any debit that should be

22· ·applied?

23· · · ·A.· · At times.

24· · · ·Q.· · What about in March of 2018?

25· · · ·A.· · I wouldn't know on this specific


Page 175·1· · · · · · · · · ·R. JOLSON

·2· ·transaction.

·3· · · ·Q.· · Why would you have instructed

·4· ·Mr. Andreola not to reverse the debit even

·5· ·with this email showing that Mr. Friedman

·6· ·had proposed this specific debit

·7· ·reduction?

·8· · · ·A.· · I don't know.· I'd have to ask

·9· ·Ron.· I just don't know and don't

10· ·remember.

11· · · ·Q.· · And if you kept a debit on

12· ·Ashford's account that you had already

13· ·agreed to take off, would that be

14· ·effectively improving your balance sheet?


16· · · ·form of the question.

17· · · ·A.· · If I didn't take it off.

18· · · ·Q.· · Sorry.· Your answer was

19· ·ambiguous.· It just says "if I didn't take

20· ·it off."· What was your answer to the

21· ·question?

22· · · ·A.· · Well, if we didn't remove it, it

23· ·would improve our balance sheet.

24· · · ·Q.· · And if you had applied non-real

25· ·charge-backs of a little under $2 million


Page 176·1· · · · · · · · · ·R. JOLSON

·2· ·to Ashford's receivables, would that also

·3· ·improve your balance sheet?

·4· · · · · · ·MR. DUFFY:· Objection to the

·5· · · ·form of the question.

·6· · · ·A.· · Yes.

·7· · · ·Q.· · If you had seen the email

·8· ·characterizing about a little under

·9· ·$2 million of debit memos as,

10· ·quote/unquote, not real, would you have

11· ·taken action about it?


13· · · · · · ·MR. DUFFY:· Objection.· Purely

14· · · ·hypothetical.· You may answer.

15· · · ·A.· · Yes.· I would have asked

16· ·questions.

17· · · ·Q.· · Okay.· Are you familiar with the

18· ·various $5 million transactions involving

19· ·Extreme Horse Limited that first happened

20· ·in May 2017?

21· · · ·A.· · I know of one transaction.

22· · · ·Q.· · What is that transaction you

23· ·know of?

24· · · ·A.· · We wired $5 million to Extreme

25· ·Horse for a deposit for goods that we were


Page 177·1· · · · · · · · · ·R. JOLSON

·2· ·supposed to receive the following year.

·3· · · ·Q.· · Where would I find any record of

·4· ·an agreement when you would receive those

·5· ·goods?

·6· · · ·A.· · If we received the goods you'd

·7· ·see a receiving in the general ledger.

·8· · · ·Q.· · I was asking a slightly

·9· ·different question.· Where would I find

10· ·the agreement to provide that $5 million

11· ·of goods next year, which I assume meant

12· ·2018?

13· · · ·A.· · At the year end, Mazars

14· ·confirmed with Extreme Horse that they had

15· ·5 million on deposit, and the confirmation

16· ·was returned to Mazars and that is why it

17· ·was left on the balance sheet.

18· · · ·Q.· · Did anything in that

19· ·confirmation indicate that the goods would

20· ·be provided in 2018?

21· · · ·A.· · I don't remember the exact

22· ·wording of the confirmation.

23· · · ·Q.· · Are you aware of any demand the

24· ·Debtors made on Extreme Horse to provide

25· ·the $5 million of goods?


Page 178·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · A demand?

·3· · · ·Q.· · A demand, a request, anything

·4· ·saying "Please provide us $5 million of

·5· ·goods"?

·6· · · ·A.· · I am not sure I understand.

·7· · · ·Q.· · Well, presumably Northwest

·8· ·wouldn't want $5 million of random goods

·9· ·to arrive at its headquarters at a random

10· ·time; it would have a specific type of

11· ·good that it wanted at a specific time.

12· ·Right?

13· · · ·A.· · Yes.· So, I believe we have

14· ·purchase orders outstanding for that.

15· · · ·Q.· · You believe that you issued

16· ·purchase orders to Extreme Horse Limited

17· ·for $5 million of goods?

18· · · ·A.· · I think so, if I remember right.

19· · · ·Q.· · And if we had requested those,

20· ·anything to do with that request for the

21· ·$5 million and you hadn't received any

22· ·such purchase orders, would that impact

23· ·your belief of if such purchase orders

24· ·existed?

25· · · ·A.· · No.· We are expecting the goods.


Page 179·1· · · · · · · · · ·R. JOLSON

·2· · · ·Q.· · When were those purchase orders

·3· ·issued, to your knowledge?

·4· · · ·A.· · Years ago.· I don't remember the

·5· ·exact date.

·6· · · ·Q.· · At any point this year, did the

·7· ·Debtors demand goods from Extreme Horse?

·8· · · ·A.· · In 2020?· This year?

·9· · · ·Q.· · Yes.

10· · · ·A.· · I don't know.

11· · · ·Q.· · But you are not aware of any

12· ·such request?

13· · · ·A.· · Not this year.

14· · · ·Q.· · Are you aware that the Debtors

15· ·have claimed in a court filing that the

16· ·$5 million was a loan to Extreme Horse?


18· · · ·form.

19· · · ·A.· · I never heard it characterized

20· ·that way.

21· · · ·Q.· · If $5 million had been loaned to

22· ·Extreme Horse, would that have appeared on

23· ·the general ledgers?

24· · · ·A.· · If it was a loan?· It would show

25· ·as a loan.· It would show --


Page 180·1· · · · · · · · · ·R. JOLSON

·2· · · ·Q.· · And if a -- sorry.

·3· · · · · · ·And if the $5 million had first

·4· ·been a loan and then at a later time been

·5· ·converted into prepayment for inventory,

·6· ·should I first see an entry characterizing

·7· ·a $5 million payment of a loan and then at

·8· ·a later date a new entry recharacterizing

·9· ·that as a payment for prepaid inventory?


11· · · ·hypothetical.· I don't think it is

12· · · ·appropriate to ask him to speculate on

13· · · ·such things.

14· · · · · · ·MR. AULET:· It is not a

15· · · ·hypothetical.· You have alleged that

16· · · ·in the Complaint against Extreme

17· · · ·Horse.· I would like to know what the

18· · · ·general ledger should have said if the

19· · · ·Debtors' allegations are correct.

20· · · · · · ·MR. TEELE:· And that is a


22· · · ·A.· · What am I being asked?

23· · · ·Q.· · If the Debtors had loaned

24· ·$5 million to Extreme Horse and then at a

25· ·later date agreed that that $5 million


Page 181·1· · · · · · · · · ·R. JOLSON

·2· ·would be converted, instead, into a

·3· ·prepayment for inventory, should I see two

·4· ·different transactions on the general

·5· ·ledger, first a recording of $5 million

·6· ·payment as a loan and then at a later date

·7· ·a transaction recharacterizing that

·8· ·$5 million payment to something akin to

·9· ·prepaid inventory?

10· · · · · · ·MR. TEELE:· Same objection but

11· · · ·he can answer.

12· · · ·A.· · If we, in accounting, knew it

13· ·was a loan, we would record it as a loan.

14· ·And if we got different instructions after

15· ·that, we would have paid an adjusting

16· ·journal entry.

17· · · · · · ·MR. AULET:· I believe we are on

18· · · ·Exhibit 19.· I am going to mark

19· · · ·something as Exhibit 20.


21· · · ·Exhibit 20.)

22· · · ·Q.· · I apologize for the quality of

23· ·this, but this is a screenshot of the

24· ·March 2017 ledgers, and this is a

25· ·screenshot as the file appears except for


Page 182·1· · · · · · · · · ·R. JOLSON

·2· ·the fact that a certain box is

·3· ·highlighted.· What I mean by that is, when

·4· ·you open up the file "GL detail May 2017,"

·5· ·it opens immediately to this entry on

·6· ·Extreme Horse Limited, and that entry is

·7· ·in red.· I have never seen in any of the

·8· ·other general ledger entries we received

·9· ·any entries in read.

10· · · · · · ·Do you know who would have

11· ·modified the spreadsheet to highlight the

12· ·Extreme Horse transaction?

13· · · · · · ·MR. TEELE:· Are you representing

14· · · ·that there are no other general entry

15· · · ·ledgers in red in the millions of rows

16· · · ·that were produced?

17· · · · · · ·MR. AULET:· No, but I haven't

18· · · ·seen any other ones.

19· · · · · · ·MR. TEELE:· Then I object to the


21· · · · · · ·MR. AULET:· I am asking if

22· · · ·Mr. Jolson knows if somebody could

23· · · ·have modified this sheet before we

24· · · ·received it.

25· · · ·A.· · A.G. Edwards doesn't know


Page 183·1· · · · · · · · · ·R. JOLSON

·2· ·colors.· It only prints in black.· How

·3· ·this could change to red, I couldn't begin

·4· ·to tell you.

·5· · · ·Q.· · So this 5 million to Extreme

·6· ·Horse Limited is characterized as prepaid

·7· ·inventory with a date of 5/8/2017.· Do you

·8· ·see that?

·9· · · ·A.· · I do.

10· · · ·Q.· · Does that indicate that this

11· ·payment was booked as a payment for

12· ·prepaid inventory?

13· · · ·A.· · Yes.

14· · · ·Q.· · Do you know what happened to

15· ·that $5 million after it was wired to

16· ·Extreme Horse?

17· · · ·A.· · No.· They still have it.

18· · · ·Q.· · It's your understanding that

19· ·Extreme Horse still has that $5 million?

20· · · ·A.· · Yes.· I wouldn't know what

21· ·they'd do with it.

22· · · ·Q.· · Are you aware that at Ross

23· ·Auerbach's direction it was wired, shortly

24· ·thereafter, to Northwest Textiles

25· ·Holdings?


Page 184·1· · · · · · · · · ·R. JOLSON


·3· · · ·A.· · I am not familiar and I don't

·4· ·get involved with Northwest Textiles.

·5· · · · · · ·MR. TEELE:· Sorry.· Just for the

·6· · · ·reporter, that was Mr. Duffy who

·7· · · ·stated the last objection.

·8· · · ·Q.· · Were you involved at all with

·9· ·the preparation of the CBIZ report,

10· ·Mr. Jolson?

11· · · ·A.· · I was only involved in supplying

12· ·certain information.

13· · · ·Q.· · What information did you supply?

14· · · ·A.· · Whatever they asked for that was

15· ·available for me to give back.· I never

16· ·saw the -- any of the letters.· I was just

17· ·asked for certain information.

18· · · ·Q.· · Did you ever see a copy of the

19· ·CBIZ report?

20· · · ·A.· · No.

21· · · ·Q.· · And you still have not seen a

22· ·copy of it today?

23· · · ·A.· · I have not seen a copy of this

24· ·report.

25· · · · · · ·MR. AULET:· Okay.· Why don't we


Page 185·1· · · · · · · · · ·R. JOLSON

·2· · · ·take a short break?


·4· · · ·now 4:20.· We are now off the record.

·5· · · · · · ·(Recess.)

·6· · · · · · ·MR. AULET:· We are requesting a

·7· · · ·rough draft and as-quick-as-possible

·8· · · ·final.

·9· · · · · · ·MR. TEELE:· Ditto for Sills.

10· · · · · · ·MR. DUFFY:· Ditto for Duffy

11· · · ·Amedeo.

12· · · · · · ·MR. TEELE:· Ken, I don't know

13· · · ·how much longer you need.· Rob needs a

14· · · ·five-or-ten-minute break to take care

15· · · ·of a business matter.

16· · · · · · ·MR. AULET:· That is fine.

17· · · · · · ·(Recess.)


19· · · ·now 4:42.· We are back on record.


21· · · ·Q.· · Mr. Jolson, who or what is

22· ·Itochu, I-T-O-C-H-U?

23· · · ·A.· · A Japanese trading company.

24· · · ·Q.· · And was Itochu formerly a part

25· ·owner of Northwest?


Page 186·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · Yes.

·3· · · ·Q.· · When did they first acquire

·4· ·their interest in Northwest?

·5· · · ·A.· · I am not sure.· It predates when

·6· ·I started.

·7· · · ·Q.· · How did they cease to have an

·8· ·interest in Northwest?

·9· · · ·A.· · They were bought out.

10· · · ·Q.· · Bought out by whom?

11· · · ·A.· · Northwest Textiles Holding.

12· · · ·Q.· · Were they bought out around

13· ·April 2017?

14· · · ·A.· · I am not sure of the exact date.

15· · · ·Q.· · Sometime in 2017?

16· · · ·A.· · I am sure there is an agreement

17· ·that has the exact date.· I just don't

18· ·have it.

19· · · ·Q.· · Okay.· Were you part of the

20· ·negotiations to buy out Itochu shares in

21· ·the Debtors?

22· · · ·A.· · No.

23· · · ·Q.· · How much did Northwest Textiles

24· ·pay Itochu for its shares of the Debtors,

25· ·if you know?


Page 187·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · I don't know exactly.

·3· · · ·Q.· · Do you have a ballpark?

·4· · · ·A.· · A ballpark.

·5· · · ·Q.· · And what is that ballpark

·6· ·estimate?

·7· · · ·A.· · I guess it would be about $6 and

·8· ·a half million.

·9· · · ·Q.· · And do you have any

10· ·understanding how that amount was agreed

11· ·to?

12· · · ·A.· · No.

13· · · ·Q.· · Do you know how much Itochu paid

14· ·for its shares of Northwest when it first

15· ·acquired its shares of Northwest?

16· · · ·A.· · No.

17· · · ·Q.· · Around May 2017, when the

18· ·Debtors made a $5 million payment to

19· ·Extreme Horse, could the Debtors have

20· ·declared a $5 million dividend and sent

21· ·the money directly to Northwest Textiles

22· ·Holding?

23· · · · · · ·MR. TEELE:· Objection to form

24· · · ·and calls for speculation.

25· · · ·A.· · Can you just repeat that


Page 188·1· · · · · · · · · ·R. JOLSON

·2· ·question, please?

·3· · · ·Q.· · Around May 2017, when the

·4· ·Debtors made a $5 million payment to

·5· ·Extreme Horse, could the Debtors have,

·6· ·instead, declared a $5 million dividend

·7· ·and sent that money to Northwest Textiles?

·8· · · ·A.· · No.

·9· · · ·Q.· · Why not?

10· · · ·A.· · As far as I know, the dividend

11· ·that was agreed at the time between Itochu

12· ·and Northwest Textiles was 60 percent of

13· ·our pretax profits.· So a dividend of

14· ·$5 million would have meant -- do the

15· ·math.· It would have meant a substantial

16· ·income declaration.

17· · · ·Q.· · Do you know, in May 2017, if any

18· ·agreements with CIT would have prevented

19· ·the transfer of $5 million directly to

20· ·Northwest Textiles as a dividend?

21· · · ·A.· · I am not aware of any.

22· · · ·Q.· · Is there any reason that you can

23· ·think of why Ross Auerbach would have

24· ·transferred $5 million to Extreme Horse

25· ·with instructions to transfer it to


Page 189·1· · · · · · · · · ·R. JOLSON

·2· ·Northwest Textiles?


·4· · · ·A.· · The instructions were to send

·5· ·$5 million to Extreme Horse for inventory,

·6· ·prepaid inventory.

·7· · · ·Q.· · But my question is, is there any

·8· ·reason that you can think of why Ross

·9· ·Auerbach would have transferred $5 million

10· ·to Extreme Horse with instructions to

11· ·transfer that 5 million to Northwest

12· ·Textiles?


14· · · ·question.· It is facts not in

15· · · ·evidence, there is no foundation and

16· · · ·it is a hypothetical.

17· · · ·A.· · No idea.· I am not involved with

18· ·Northwest Textiles.

19· · · ·Q.· · If Itochu had previously sold

20· ·its shares to Northwest Textiles such that

21· ·Northwest Textiles was the only owner of

22· ·Northwest at the time in May 2017, is

23· ·there any reason you can think of that

24· ·Northwest would not have been permitted to

25· ·declare a $5 million dividend to Northwest


Page 190·1· · · · · · · · · ·R. JOLSON

·2· ·Textiles?


·4· · · ·Speculation, facts not in evidence,

·5· · · ·form of the question.

·6· · · · · · ·If you can answer, you can

·7· · · ·answer.· Do you understand the

·8· · · ·question?

·9· · · · · · ·THE WITNESS:· Not really.

10· · · ·A.· · We have an availability schedule

11· ·with CIT.· We could draw down to the

12· ·extent of our availability.

13· · · ·Q.· · What do you mean by "an

14· ·availability schedule with CIT"?

15· · · ·A.· · In asset-based lending, we can

16· ·borrow 85 percent of our receivables and

17· ·50 percent of our inventory and that is

18· ·what is meant by available funds.


20· · · · · · ·THE WITNESS:· 85 percent of our

21· · · ·accounts receivable and 50 percent of

22· · · ·our inventory.

23· · · ·Q.· · And would transferring

24· ·$5 million from Northwest to Northwest

25· ·Textiles as a dividend breach -- cause you


Page 191·1· · · · · · · · · ·R. JOLSON

·2· ·to breach -- potentially cause you to

·3· ·breach either of those covenants?

·4· · · ·A.· · To my knowledge, we had no

·5· ·covenants.· But again, we couldn't declare

·6· ·a dividend for $5 million because we

·7· ·didn't earn enough money.· So, there would

·8· ·have to have been consent.

·9· · · ·Q.· · Consent of who?

10· · · ·A.· · The shareholders.

11· · · ·Q.· · And if the shareholders

12· ·consented, would there have been any other

13· ·reason you couldn't declare such a

14· ·dividend?

15· · · ·A.· · If the two shareholders

16· ·consented and there was a resolution for

17· ·it and we had the availability at CIT,

18· ·then we could have done it.

19· · · ·Q.· · So it's the availability at CIT

20· ·that I don't quite understand.· What would

21· ·impact if you had the availability at CIT

22· ·to declare such a dividend?

23· · · ·A.· · I don't understand that.· If we

24· ·had the availability means if C -- if we

25· ·had available funds we could draw down.


Page 192·1· · · · · · · · · ·R. JOLSON

·2· · · ·Q.· · Are you familiar with Powder

·3· ·Stuff?

·4· · · ·A.· · Yes.

·5· · · ·Q.· · What is Powder Stuff?

·6· · · ·A.· · It is a children's wear company.

·7· · · · · · ·MR. TEELE:· Just for the court

·8· · · ·reporter, it is Outerstuff, O-U-T-E-R,

·9· · · ·not Powder.

10· · · ·Q.· · Did the Debtors have some form

11· ·of an agreement with Outerstuff to sell

12· ·all or substantially all of their assets

13· ·to Outerstuff in this bankruptcy

14· ·proceeding?

15· · · ·A.· · I don't know.

16· · · ·Q.· · Were you involved in any way

17· ·with the negotiations with Outerstuff?

18· · · ·A.· · No.

19· · · · · · ·MR. AULET:· I believe we are on

20· · · ·Exhibit 21 now.


22· · · ·Exhibit 21.)

23· · · ·Q.· · Who is Peter Wu at Outerstuff?

24· · · ·A.· · I don't know his position but he

25· ·asked me questions.


Page 193·1· · · · · · · · · ·R. JOLSON

·2· · · · · · ·MR. AULET:· For the record,

·3· · · ·Exhibit 21 is an email first from

·4· · · ·Peter Wu to Robert Jolson with his

·5· · · ·cell phone followed by an email from

·6· · · ·Robert Jolson to Peter Wu.

·7· · · ·Q.· · You sent this initial email to

·8· ·Peter Wu saying you had a quick question.

·9· ·What did you want to discuss with Peter

10· ·Wu?

11· · · ·A.· · Well, it had to do with our --

12· ·the way we pay our sales reps.· So,

13· ·Outerstuff has the same type of situation

14· ·we do, so I was just curious about

15· ·something.

16· · · ·Q.· · What specifically were you

17· ·curious about?

18· · · ·A.· · I wanted to know if they pay

19· ·their sales reps when they get paid, or

20· ·when they invoice it.

21· · · ·Q.· · And was this --

22· · · ·A.· · Sorry?

23· · · ·Q.· · I had cut you off.· Did you have

24· ·anything further to add to your answer?

25· · · ·A.· · I had just wanted to know if


Page 194·1· · · · · · · · · ·R. JOLSON

·2· ·they operate similar to the way we operate

·3· ·in terms of paying commissions.

·4· · · ·Q.· · But you were not involved at all

·5· ·with the negotiations with Outerstuff?

·6· · · ·A.· · No.

·7· · · ·Q.· · Were you generally aware of the

·8· ·status of negotiations?

·9· · · ·A.· · Periodically Ross would tell me

10· ·what's going on.

11· · · ·Q.· · Who was conducting those

12· ·negotiations on behalf of Northwest?

13· · · ·A.· · I am not sure of everybody who

14· ·was involved.

15· · · ·Q.· · Who are the people you know were

16· ·involved?

17· · · ·A.· · I know Ross was involved, I know

18· ·our attorneys were involved at that time.

19· · · ·Q.· · Was anyone else from Northwest

20· ·involved, to your knowledge, besides Ross

21· ·Auerbach?

22· · · ·A.· · Not that I know of.

23· · · ·Q.· · Is there anyone besides Ross

24· ·Auerbach who would be able to answer

25· ·questions -- strike that.


Page 195·1· · · · · · · · · ·R. JOLSON

·2· · · · · · ·Are you aware that Northwest has

·3· ·higher than average travel and

·4· ·entertainment expenses as a percentage of

·5· ·its sales?


·7· · · ·form and the characterization and also

·8· · · ·the representation of "higher than

·9· · · ·average."· Compared to what?

10· · · ·Q.· · Have any of your consultants

11· ·ever told you that your travel and

12· ·entertainment expenses are higher than

13· ·appropriate?

14· · · ·A.· · Yes.

15· · · ·Q.· · And who told you that?

16· · · ·A.· · Clear Thinking.

17· · · ·Q.· · And when did they tell you that?

18· · · ·A.· · In their initial report.

19· · · ·Q.· · And what was done in response to

20· ·Clear Thinking telling you that?

21· · · ·A.· · We started cutting our expenses

22· ·dramatically.

23· · · ·Q.· · What were the type of expenses

24· ·that got cut?

25· · · ·A.· · Well, first, that we had some


Page 196·1· · · · · · · · · ·R. JOLSON

·2· ·coding issues.· In travel and

·3· ·entertainment, it is not all travel and

·4· ·entertainment.· We cut out, as you know,

·5· ·Northeast Airlines was cut.· We cut

·6· ·several trade shows.· We cut people's

·7· ·entertainment.

·8· · · ·Q.· · You mentioned you had some

·9· ·coding issues.· What coding issues did you

10· ·have?

11· · · ·A.· · Well, as we started looking at

12· ·things, certain things that were marketing

13· ·expenses were coded to travel and

14· ·entertainment.

15· · · ·Q.· · Was there any specific type of

16· ·expenses that were frequently

17· ·mischaracterized?

18· · · ·A.· · Well, the big one here is the --

19· ·what is called in our general ledger the

20· ·Super Bowl, where it is really the suite

21· ·for the Jets and Giants.· We are required

22· ·by the NFL to spend four -- I am not sure

23· ·if it is four or $500,000 for marketing in

24· ·must-spend, and that is in travel and

25· ·entertainment and should really be in


Page 197·1· · · · · · · · · ·R. JOLSON

·2· ·marketing.· Things like that.

·3· · · ·Q.· · Just to make sure I understand

·4· ·that, does the NFL require you to spend

·5· ·four to $500,000 as part of your license?

·6· · · ·A.· · Yes.

·7· · · ·Q.· · And that includes things like

·8· ·Super Bowl suites and other spending on

·9· ·NFL products?

10· · · ·A.· · It has to be approved -- any

11· ·spend has to be approved by the NFL.· So,

12· ·they have approved the Jets and Giants

13· ·suite as a must-spend for the NFL.

14· · · ·Q.· · Are the expenses that the NFL

15· ·expects you to incur expenses that would

16· ·be for marketing your licensed products,

17· ·or is it just a general spend of four to

18· ·500,000 on the NFL in certain approved

19· ·ways?

20· · · ·A.· · I am not sure of the exact

21· ·wording in the license.· I just know that

22· ·the NFL has to approve where and how you

23· ·spend the must-spend money.

24· · · ·Q.· · Does Northwest own any season

25· ·tickets for any sports teams?


Page 198·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · Well, for the Jets and the

·3· ·Giants.· It comes with the suite.

·4· · · ·Q.· · What about any other sports

·5· ·teams?

·6· · · ·A.· · For a full season?· No.

·7· · · ·Q.· · Do you have Mets season tickets?

·8· · · ·A.· · We had a Mets suite.· That was

·9· ·for partial.· It wasn't season.· It was --

10· ·if I recall, 20 games.

11· · · ·Q.· · Okay.· Was the Mets suite part

12· ·of any license agreement?

13· · · ·A.· · No.


15· · · ·Q.· · Did Northwest hold marketing

16· ·activities in the Mets team?

17· · · ·A.· · I am not sure who went to all

18· ·the games.

19· · · ·Q.· · How would I find out who went to

20· ·the games?

21· · · ·A.· · Christy McClure would handle it.

22· ·She was the events manager I mentioned

23· ·before.

24· · · ·Q.· · How many of those games did you

25· ·attend?


Page 199·1· · · · · · · · · ·R. JOLSON

·2· · · ·A.· · Five.

·3· · · ·Q.· · Who else was present when you

·4· ·attended?

·5· · · ·A.· · It could have been the NBA.

·6· ·Sometimes I took my son.· The NFL was

·7· ·there.· Mostly the NBA when I was there.

·8· · · ·Q.· · For clarity --

·9· · · ·A.· · NBA, National Basketball League.

10· ·They were then a few people.

11· · · ·Q.· · I assume these were people

12· ·associated with the license department?

13· · · ·A.· · Yes.

14· · · ·Q.· · Are you familiar with what is

15· ·called a PPP loan or the Paycheck

16· ·Protection Program loan?

17· · · ·A.· · Yes.

18· · · ·Q.· · And were you involved in

19· ·obtaining a Paycheck Protection Loan for

20· ·the Debtors?

21· · · ·A.· · Yes.

22· · · ·Q.· · And did you review the loan

23· ·application before it was filed?

24· · · ·A.· · I am sure I did.



Page 200·1· · · · · · · · · ·R. JOLSON

·2· · · ·Exhibit 22.)

·3· · · ·Q.· · You should have in front of you

·4· ·Exhibit 22, which is a PDF that was

·5· ·produced by the Debtors titled "PPP Loan."

·6· ·It appears to be various documents related

·7· ·to the PPP loan.

·8· · · · · · ·Have you seen this document

·9· ·before?

10· · · ·A.· · Yes.

11· · · ·Q.· · Did the Debtors received these

12· ·funds on April 17th?

13· · · ·A.· · I don't know the exact date it

14· ·hit our bank account, but on that Monday

15· ·it was in our bank account.

16· · · ·Q.· · And what are these funds being

17· ·used for currently?

18· · · ·A.· · Payroll.

19· · · ·Q.· · Have they all been used for

20· ·payroll?

21· · · ·A.· · Payroll and payroll taxes.

22· · · ·Q.· · Was CIT the lender under this

23· ·PPP loan?

24· · · ·A.· · Yes.

25· · · ·Q.· · And was CIT aware of the intent


Page 201·1· · · · · · · · · ·R. JOLSON

·2· ·to file bankruptcy in the near term?

·3· · · ·A.· · I don't know.

·4· · · ·Q.· · CIT is your DIP lender in this

·5· ·case, isn't it?

·6· · · ·A.· · Right, yes.

·7· · · ·Q.· · Now we turn to page 13, the

·8· ·borrower application form.· You will

·9· ·notice that under "Applicant Ownership" it

10· ·instructs you to list all owners of

11· ·20 percent or more of the applicant?

12· · · ·A.· · Right.

13· · · ·Q.· · Is this a complete list of all

14· ·20 percent or more owners of the equity of

15· ·the applicant?

16· · · ·A.· · I don't know.· I don't know --

17· · · ·Q.· · How much --

18· · · · · · ·Sorry.· I believe I accidentally

19· ·cut you off.

20· · · ·A.· · Because I don't know the exact

21· ·breakdown of the ownership of Northwest.

22· ·It is really Northwest Textiles that owns

23· ·Northwest.

24· · · ·Q.· · So first, it is not accurate

25· ·that Mr. Auerbach in his personal capacity


Page 202·1· · · · · · · · · ·R. JOLSON

·2· ·owns 80 percent of the Northwest Company

·3· ·LLC.· Correct?

·4· · · ·A.· · Trying to refresh my memory. I

·5· ·did this with CIT.· So, the ownership

·6· ·was --

·7· · · ·Q.· · I will point out, just to not

·8· ·hide the ball, if you look at page 14,

·9· ·Ross Auerbach signed this and initialed

10· ·all the certifications, not you.

11· · · ·A.· · Right.

12· · · ·Q.· · So it is not correct that

13· ·Mr. Auerbach personally, in his individual

14· ·capacity, owns 80 percent of Northwest

15· ·Company LLC.· Correct?

16· · · · · · ·MR. TEELE:· Objection.· Already

17· · · ·asked and answered.

18· · · ·A.· · Yes.· It is Northwest Textiles.

19· · · ·Q.· · And are you aware that Extreme

20· ·Horse Limited also owns 20 percent of the

21· ·equity of Northwest Company LLC?

22· · · ·A.· · Yes.

23· · · ·Q.· · Why wasn't Extreme Horse

24· ·Limited?

25· · · ·A.· · I don't know.


Page 203·1· · · · · · · · · ·R. JOLSON

·2· · · ·Q.· · Do you know of any reason why

·3· ·Mr. Auerbach would not have listed

·4· ·Northwest Textile Holdings rather than his

·5· ·personal name here?

·6· · · ·A.· · No.

·7· · · ·Q.· · Why did Mr. Auerbach complete

·8· ·and sign this form?


10· · · ·form.

11· · · ·A.· · That's what CIT advised me.

12· · · ·Q.· · So I understand, why did

13· ·Mr. Auerbach, instead of you, fill out

14· ·this application form?

15· · · · · · ·MR. DUFFY:· For the record, that

16· · · ·was not Mr. Teele that answered the

17· · · ·question.· It was the witness.

18· · · · · · ·MR. TEELE:· I just stated an

19· · · ·objection to the form.

20· · · ·A.· · That is what I was advised by

21· ·CIT.

22· · · ·Q.· · CIT advised you to have

23· ·Mr. Auerbach fill this application out?




Page 204·1· · · · · · · · · ·R. JOLSON

·2· · · · · · ·Answer the question.

·3· · · ·A.· · Yes.· Yes.· CIT advised.

·4· · · ·Q.· · Was Extreme Horse --

·5· · · · · · ·MR. TEELE:· Ken?· Sorry.

·6· · · ·Mr. Jolson needs five minutes.· He has

·7· · · ·to get a wire done today and he just

·8· · · ·has to sit right here and log in and

·9· · · ·type in a code.· Can we just pause for

10· · · ·two minutes and let him do that?

11· · · · · · ·MR. AULET:· Sure.· That is fine.

12· · · · · · ·(Pause.)

13· · · · · · ·MR. AULET:· We should be off the

14· · · ·record.

15· · · · · · ·(Pause.)


17· · · ·now 5:14 and we are back on the

18· · · ·record.


20· · · ·Q.· · Mr. Jolson, you don't have any

21· ·equity in Northwest.· Is that correct?

22· · · ·A.· · That is correct.

23· · · ·Q.· · Is any component of your pay

24· ·directly tied to the profits of Northwest?

25· · · ·A.· · No.


Page 205·1· · · · · · · · · ·R. JOLSON

·2· · · ·Q.· · And you receive a yearly bonus.

·3· ·Is that correct?

·4· · · ·A.· · Used to, yes.

·5· · · ·Q.· · And how is that bonus

·6· ·determined?

·7· · · ·A.· · We talk to Ross and we agree on

·8· ·a method and a number.

·9· · · ·Q.· · Do you have any investments in

10· ·any enterprises that are owned by Ross

11· ·Auerbach or that Ross Auerbach has any

12· ·involvement in?

13· · · ·A.· · No.

14· · · ·Q.· · Okay.· Are you familiar with

15· ·NYCA China Partners LLC?

16· · · ·A.· · Not really.

17· · · ·Q.· · Do you know of any reason why

18· ·Northwest would be engaging in

19· ·transactions with NYCA China Partners LLC?

20· · · · · · ·MR. TEELE:· Objection.· Which

21· · · ·Northwest entity are you referring to?

22· · · · · · ·MR. AULET:· The Northwest

23· · · ·Company, the debtor entity, not

24· · · ·Northwest Textiles.

25· · · · · · ·MR. TEELE:· Then just objection


Page 206·1· · · · · · · · · ·R. JOLSON

·2· · · ·to form.

·3· · · ·A.· · I don't know much about

·4· ·whatever, China Partners.· No.

·5· · · ·Q.· · Has Northwest ever rented an

·6· ·office from NYCA China Partners in

·7· ·Florida?

·8· · · ·A.· · No idea.

·9· · · ·Q.· · Who would know that?

10· · · ·A.· · I guess Ross.

11· · · ·Q.· · Does the company engage in any

12· ·business transactions with Northwest

13· ·Textile Holdings?

14· · · ·A.· · I don't understand.· I don't

15· ·know what that means.

16· · · ·Q.· · Do you send money to Northwest

17· ·Textile Holdings for goods or services?

18· · · ·A.· · No.

19· · · ·Q.· · Does Northwest Textile Holdings

20· ·send you money for any goods or services?

21· · · ·A.· · No.

22· · · ·Q.· · Does Northwest Textile Holdings

23· ·provide any foods or services to Northwest

24· ·Company in exchange for other goods or

25· ·services?


Page 207·1· · · · · · · · · ·R. JOLSON

·2· · · · · · ·MR. DUFFY:· Objection to form.

·3· · · ·A.· · Not that I know of.

·4· · · · · · ·MR. AULET:· Let me take a

·5· · · ·five-minute break and we may be done

·6· · · ·on my end.

·7· · · · · · ·THE VIDEOGRAPHER:· It is 5:18

·8· · · ·and we are off record.

·9· · · · · · ·(Recess.)


11· · · ·now 5:24 and we are now back on

12· · · ·record.


14· · · ·Exhibit 23.)

15· · · · · · ·MR. AULET:· You should have in

16· · · ·front of you Exhibit 23, which is a

17· · · ·May 2017 bank statement.

18· · · ·Q.· · I am going to first direct your

19· ·attention to a deposit on May 26th of

20· ·$1 million from Northwest Textile Holdings

21· ·LLC.· That is on page 3.· Do you see that?

22· · · ·A.· · I do.

23· · · ·Q.· · Do you know what the reason for

24· ·that payment was?

25· · · ·A.· · Not off the top of my head, no.


Page 208·1· · · · · · · · · ·R. JOLSON

·2· · · ·Q.· · And you see that that money

·3· ·comes from Northwest Textile Holdings LLC?

·4· · · ·A.· · Yes.

·5· · · ·Q.· · Then on page 5, at the bottom,

·6· ·on May 19th, about a week before, do you

·7· ·see this payment of $1 million to Ross?

·8· · · ·A.· · I see it.

·9· · · ·Q.· · Do you have any idea why

10· ·Northwest would be sending a million

11· ·dollars to Ross and being paid a million

12· ·dollars by Northwest Textiles?

13· · · ·A.· · I don't recall.· No, I don't

14· ·know.

15· · · ·Q.· · Would you have been involved in

16· ·approving these transactions?

17· · · ·A.· · I, at the time, would have known

18· ·about it.

19· · · ·Q.· · Would it make sense to you that

20· ·the million dollar payment from Northwest

21· ·Textiles was booked as a payment by Ross

22· ·Auerbach on the general ledgers?



25· · · · · · ·MR. DUFFY:· Do you have copies


Page 209·1· · · · · · · · · ·R. JOLSON

·2· · · ·of those transactions on the GL that

·3· · · ·you can show him.

·4· · · · · · ·MR. AULET:· I would like an

·5· · · ·answer to the question first.

·6· · · · · · ·MR. DUFFY:· Then I will keep my

·7· · · ·objection as it is.

·8· · · ·A.· · Can you ask the question again,

·9· ·please?

10· · · ·Q.· · Would it surprise you that the

11· ·payment of a million dollars by Northwest

12· ·Textiles was recorded as a payment by Ross

13· ·Auerbach of a million dollars on

14· ·Northwest's records?

15· · · · · · ·MR. DUFFY:· Objection to form.

16· · · ·A.· · The entries are done by the

17· ·accounting staff.· To them, it is one and

18· ·the same.

19· · · · · · ·MR. AULET:· We may have already

20· · · ·stamped this but I will mark it

21· · · ·Exhibit 24.


23· · · ·Exhibit 24.)

24· · · · · · ·MR. AULET:· This is a set of the

25· · · ·2017 general ledgers, a specific


Page 210·1· · · · · · · · · ·R. JOLSON

·2· · · ·callout from the 2017 general ledgers.

·3· · · ·My deposition has just disappeared.

·4· · · ·Give me one second to try and reload

·5· · · ·this.

·6· · · · · · ·(Pause.)

·7· · · · · · ·MR. AULET:· I tried to log back

·8· · · ·in and now I am in my own deposition.

·9· · · · · · ·(Discussion held off the

10· · · ·record.)

11· · · · · · ·MR. AULET:· All right.· I'm

12· · · ·back.· The shorter version of this

13· · · ·exhibit has loaded so I will stamp

14· · · ·this Exhibit 25 rather than going back

15· · · ·to the previous exhibit.


17· · · ·Exhibit 25.)

18· · · · · · ·MR. AULET:· While I wait for the

19· · · ·exhibit to continue processing, I

20· · · ·believe you said the accounting staff

21· · · ·considers Ross Auerbach and Northwest

22· · · ·Textiles one and the same.

23· · · ·A.· · I said that, yes.

24· · · ·Q.· · Are there any other entities

25· ·that they know to treat as Ross Auerbach?


Page 211·1· · · · · · · · · ·R. JOLSON



·4· · · ·A.· · No.

·5· · · ·Q.· · Now, I believe you should be

·6· ·able to see this.· Do you see on this

·7· ·excerpt from the May 2017 ledger that

·8· ·there is a debit of a million dollars to

·9· ·Ross Auerbach's loan and repayment of that

10· ·debit on -- the debit is on the 19th and

11· ·the payment is on the 25th?

12· · · ·A.· · Okay.

13· · · ·Q.· · And to your understanding, does

14· ·that reflect that Northwest Company

15· ·considered that $1 million payment by

16· ·Northwest Textiles to be a payment on Ross

17· ·Auerbach's personal loan?

18· · · ·A.· · I don't recall the specifics of

19· ·that particular transaction.

20· · · ·Q.· · Is that transaction recorded as

21· ·a payment of Ross Auerbach's personal loan

22· ·on this exhibit?

23· · · ·A.· · It is an in and an out of a

24· ·million dollars.· Money came in, money

25· ·went out.


Page 212·1· · · · · · · · · ·R. JOLSON

·2· · · · · · ·MR. AULET:· I have no further

·3· · · ·questions.


·5· · · ·now 5:33 and we are now off the

·6· · · ·record.

·7· · · · · · ·[TIME NOTED:· 5:33 p.m.]

·8

·9

10· · · · · ·____________________________

11· · · · · · · · · ·ROBERT JOLSON

12

13

14

15· ·SUBSCRIBED AND SWORN TO

16· ·BEFORE ME THIS______DAY

17· ·OF_______________, 2020.

18

19· ·_______________________

20· · · ·NOTARY PUBLIC

21

22

23

24

25


Page 213·1

·2· · · · · ·C E R T I F I C A T I O N

·3

·4· · · I, DEBRA STEVENS, a Notary Public for

·5· ·and within the State of New York, do

·6· ·hereby certify:

·7· · · That the witness whose testimony as

·8· ·herein set forth, was duly sworn by me;

·9· ·and that the within transcript is a true

10· ·record of the testimony given by said

11· ·witness.

12· · · I further certify that I am not

13· ·related to any of the parties to this

14· ·action by blood or marriage, and that I am

15· ·in no way interested in the outcome of

16· ·this matter.

17· · · IN WITNESS WHEREOF, I have hereunto

18· ·set my hand this 30th day of June, 2020.

19

20

21· · · · · ·_______________________

22· · · · · ·DEBRA STEVENS, RPR-CRR

23

24· · · · · · · ·*· · ·*· · ·*

25


Page 214·1· · · · · · · · · · ERRATA SHEET

·2· Case Name:

·3· Deposition Date:

·4· Deponent:

·5· Pg.· No. Now Reads· · ·Should Read· Reason

·6· ___· ___ __________· · __________· ·____________________

·7· ___· ___ __________· · __________· ·____________________

·8· ___· ___ __________· · __________· ·____________________

·9· ___· ___ __________· · __________· ·____________________

10· ___· ___ __________· · __________· ·____________________

11· ___· ___ __________· · __________· ·____________________

12· ___· ___ __________· · __________· ·____________________

13· ___· ___ __________· · __________· ·____________________

14· ___· ___ __________· · __________· ·____________________

15· ___· ___ __________· · __________· ·____________________

16· ___· ___ __________· · __________· ·____________________

17· ___· ___ __________· · __________· ·____________________

18· ___· ___ __________· · __________· ·____________________

19· ___· ___ __________· · __________· ·____________________

20· · · · · · · · · · · · · · · · · · _____________________21· · · · · · · · · · · · · · · · · Signature of Deponent

22· SUBSCRIBED AND SWORN BEFORE ME

23· THIS ____ DAY OF __________, 2020.

24· ____________________

25· (Notary Public)· ·MY COMMISSION EXPIRES:__________


Exhibit 2

20-10990-mew Doc 178-2 Filed 07/13/20 Entered 07/13/20 09:34:15 Exhibit 2 -Ross Auerbach deposition transcript dated July 1 2020 Pg 1 of 231

Page 1·1· · · · · ·UNITED STATES BANKRUPTCY COURT

·2· · · · · ·SOUTHERN DISTRICT OF NEW YORK

·3· · · · · · ·Case No. 20-10990 (MEW)

·4· ·--------------------------------------

·5· ·In Re

·6· ·NORTHWEST COMPANY LLC, et al.,

·7· · · · · · · ·Debtors.

·8· ·--------------------------------------

·9

10· · · · ·REMOTE VIDEOTAPED DEPOSITION OF

11· · · · · · · · · ROSS AUERBACH

12

13· · · · · · · ·Wednesday, July 1, 2020

14· · · · · · · · · · 10:30 a.m.

15

16

17

18

19

20

21

22

23· ·JOB NO. 181339

24· ·Reported by:

25· ·Debra Stevens, CRR/RPR


Page 2·1· ·REMOTE APPEARANCES:

·2· · ·On behalf of Movant and Extreme Horse·3· ·Limited:

·4· ·BROWN RUDNICK· · · · · · ·Times Square Tower·5· · · · · ·New York, New York 10036

·6· · · BY:· KENNETH AULET, ESQ.

·7· · · · · ·SIGMUND WISSNER-GROSS, ESQ.

·8

·9· ·On behalf of the Debtors:

10· ·SILLS CUMMIS & GROSS· · · · · · ·The Legal Center11· · · · · ·One Riverfront Plaza· · · · · · ·Newark, New Jersey 0710212· · · · BY:· S. JASON TEELE, ESQ.13

14· · ·On behalf of Northwest Textile Holdings15· ·LLC and the Witness:

16· ·DUFFY AMEDEO· · · · · · ·275 Seventh Avenue17· · · · · ·New York, New York 10001

18· · · BY:· TODD DUFFY, ESQ.

19

20· ·On behalf of the Witness:

21· ·KESTENBAUM & MARK· · · · · · ·40 Cuttermill Road22· · · · · ·Great Neck, New York 11021

23· · · BY:· RICHARD KESTENBAUM, ESQ.

24

25· · · · · · · · · · · ·(Continued)


Page 3·1· ·REMOTE APPEARANCES (Continued):

·2· ·On behalf of Creditors Committee:

·3· ·LOWENSTEIN SANDLER· · · · · · ·1251 Avenue of the Americas·4· · · · · · ·New York, New York 10020·5· · · · BY:· MICHAEL KAPLAN, ESQ.·6· · · · · · ·JESSICA TERRY, ESQ.·7

·8· · ·ALSO PRESENT:·9· · · · · · ·MANNY GARCIA, Videographer10

11· · · · · · · · · · · · * * *

12

13

14

15

16

17

18

19

20

21

22

23

24

25


Page 4·1· · · · · E X A M I N A T I O N S

·2· ·Witness· · · · · · · · · · · · · · · Page

·3· ·ROSS AUERBACH· · · ·By Mr. Aulet· · · · · · · · · · · · · 8·4· · · · · · · · E X H I B I T S·5· · ·Exhibit· · ·Description· · · · · · ·Page·6· · ·Exhibit 1· ·Notice of 30(b)(6) to· · · 19·7· · · · · · · ·The Northwest Company· · · · · · · · ·LLC·8· · ·Exhibit 2· ·Statement of Financial· · ·56·9· · · · · · · ·Affairs

10· ·Exhibit 3· ·David Harrison· · · · · · ·62· · · · · · · · ·invoices11· · ·Exhibit 4· ·David Harrison LLC· · · · ·7612· · · · · · · ·exhibit entries since· · · · · · · · ·March 201913· · ·Exhibit 5· ·JPM Bank statement· · · · ·9014· · · · · · · ·from 6/29/19 through· · · · · · · · ·7/31/1915· · ·Exhibit 6· ·American Express· · · · · 10116· · · · · · · ·Business Platinum Card· · · · · · · · ·statement17· · ·Exhibit 7· ·American Express· · · · · 11118· · · · · · · ·Business Centurian· · · · · · · · ·Card statement ending19· · · · · · · ·12/20/17

20· ·Exhibit 8· ·American Express· · · · · 114· · · · · · · · ·entries for 201821· · ·Exhibit 9· ·American Express· · · · · 11422· · · · · · · ·entries for 2018

23· ·Exhibit 10· Northeastern Aviation· · ·122· · · · · · · · ·invoices24· · · · · · · · · · · · (Continued)25


Page 5·1· · · · · · · E X H I B I T S

·2· · ·Exhibit· · ·Description· · · · · · ·Page·3· · ·Exhibit 11· Flight emails· · · · · · ·142·4· · ·Exhibit 12· Missing funds entries· · ·150·5· · · · · · · ·from general ledger

·6· ·Exhibit 13· Key EH email chain· · · · 167

·7· ·Exhibit 14· Extreme Horse Limited· · ·184· · · · · · · · ·entry, May 2017·8· · ·Exhibit 15· Extreme Horse· · · · · · ·190·9· · · · · · · ·Adversary Complaint

10· ·Exhibit 16· Chase bank account· · · · 202· · · · · · · · ·statement dated11· · · · · · · ·5/31/17

12· ·Exhibit 17· PPP loan documents· · · · 215

13· ·Exhibit 18· Auerbach support· · · · · 219· · · · · · · · ·letter14· · ·Exhibit 19· American Express· · · · · 22015· · · · · · · ·Centurian statements· · · · · · · · ·from July through16· · · · · · · ·December 2019

17· ·Exhibit 20· American Express· · · · · 225· · · · · · · · ·Business Platinum Card18· · · · · · · ·statement ending· · · · · · · · ·5/16/1919

20

21· · · INFORMATION/PRODUCTION REQUESTS

22· ·Description· · · · · · · · · · · · · Page

23· ·Separate page explaining the· · · · · 124· · ·purpose of private jet travel24

25


Page 6·1

·2· · · · ·THE VIDEOGRAPHER:· This is

·3· ·Manual Garcia, I'm a certified legal

·4· ·videographer in association with TSG

·5· ·Reporting, Inc.· Due to the severity

·6· ·of COVID-19 and following the practice

·7· ·of social distancing, I will not be in

·8· ·the same room with the witness but

·9· ·will report the videotape deposition

10· ·remotely.· The reporter, Debra

11· ·Stevens, who also will not be in the

12· ·same room and will swear in the

13· ·witness remotely.

14· · · · ·Do all parties stipulate to the

15· ·validity of the video-reporting and

16· ·remote swearing and that it will be

17· ·admissible in the courtroom as if it

18· ·had been taken following Rule 30 and

19· ·other rules of the Federal Rules of

20· ·Civil Procedure?

21· · · · ·MR. AULET:· On behalf of the

22· ·Movants, yes.

23· · · · ·MR. TEELE:· On behalf of the

24· ·Debtors, yes.

25· · · · ·MR. DUFFY:· On behalf of the


Page 7·1

·2· · Witness and Northwest Textiles LLC,

·3· · yes.

·4· · · · · MR. KESTENBAUM:· On behalf of

·5· · Mr. Auerbach, yes.

·6· · · · · MR. KAPLAN:· On behalf of the

·7· · Committee, yes.

·8· · · · · THE VIDEOGRAPHER:· This starts

·9· · media number 1 of the video-recorded

10· · deposition of Ross H. Auerbach in the

11· · matter of In Re Northwest Company LLC,

12· · et al., on July 1, 2020 at

13· · approximately 10:39 a.m.· My name is

14· · Manual Garcia, I'm the certified legal

15· · specialist for TSG Reporting Inc.

16· · Court reporter is Debra Stevens, in

17· · association with TSG Reporting.

18· · · · · Counsels are noted on the

19· · record.

20· · · · · Will the court reporter please

21· · swear in the witness.

22· · · · · Whereupon,

23· · · · · · · ROSS H. AUERBACH,

24· ·having been first duly sworn/affirmed,

25· ·was examined and testified as follows:


Page 8·1· · · · · · · · · R. AUERBACH

·2· ·EXAMINATION BY

·3· ·MR. AULET:

·4· · · ·Q.· · Good morning, Mr. Auerbach.

·5· ·Could you state your occupation for the

·6· ·record?

·7· · · ·A.· · I am the CEO of The Northwest

·8· ·Company.

·9· · · ·Q.· · Do you hold any other positions

10· ·with any other companies?


12· · · · · · ·MR. AULET:· I will strike the

13· · · ·last question.

14· · · ·Q.· · Mr. Auerbach, have you ever been

15· ·deposed before?

16· · · ·A.· · Yes.

17· · · ·Q.· · How many times have you been

18· ·deposed?

19· · · · · · ·THE VIDEOGRAPHER:· Excuse me. I

20· · · ·think we are getting a feedback from

21· · · ·the attorney.

22· · · · · · ·(Brief interruption.)

23· · · ·Q.· · So, I don't think we got an

24· ·answer on the record.· Mr. Auerbach, how

25· ·many times have you been deposed?


Page 9·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · Twice.

·3· · · ·Q.· · What were those depositions --

·4· ·what case were those depositions in?

·5· · · ·A.· · One of them was a lawsuit

·6· ·concerning whether commission was due on a

·7· ·transaction that did not occur.· The other

·8· ·was testimony about a client who had bills

·9· ·due that did not pay.

10· · · ·Q.· · Who were the parties in the

11· ·lawsuit that you described as a commission

12· ·due on a transaction that did not occur?

13· · · ·A.· · I don't remember the name of the

14· ·person.· It was -- I don't remember the

15· ·name of the person.· I have -- I don't

16· ·remember the name of the person.· I am

17· ·sorry.

18· · · ·Q.· · And were you personally a

19· ·defendant in that matter?

20· · · ·A.· · It was The Northwest Company. I

21· ·don't believe that I was.

22· · · ·Q.· · And on the second matter that

23· ·you described, who were the parties to

24· ·that litigation?

25· · · ·A.· · I don't remember the name of the


Page 10·1· · · · · · · · · R. AUERBACH

·2· ·company, but the person who owned the

·3· ·other company's name was Sue Hale. I

·4· ·don't really have a spelling, but Sue

·5· ·Hale.

·6· · · ·Q.· · Are those the only two times you

·7· ·have been deposed?

·8· · · ·A.· · Yes, it is.

·9· · · ·Q.· · So, as you are aware, this

10· ·deposition is being transcribed.· So that

11· ·we have a clean record, please wait for me

12· ·to finish the question, even if you know

13· ·where I am going with that question. I

14· ·will attempt to do the same for you and

15· ·let you finish the answer so that we don't

16· ·talk over each other.· From time to time

17· ·your attorney may object to a question.

18· ·Please let him finish his objection and

19· ·then, unless he instructs you not to

20· ·answer the question, I will expect you to

21· ·answer the question.

22· · · · · · ·We can take breaks.· Just let us

23· ·know when you need a break and we'll find

24· ·a convenient stopping point.· My only

25· ·request is that you answer any question


Page 11·1· · · · · · · · · R. AUERBACH

·2· ·that is pending when you ask for a break.

·3· · · · · · ·Do you understand?

·4· · · ·A.· · Yes, I do.

·5· · · ·Q.· · Now, when I refer to The

·6· ·Northwest --

·7· · · · · · ·THE VIDEOGRAPHER:· This is the

·8· · · ·videographer.· We are getting

·9· · · ·feedback.

10· · · · · · ·(Interruption.)


12· · · ·record.)

13· · · ·Q.· · When I refer to "The Northwest

14· ·Company," what I mean by that is the --

15· ·when I refer to "Northwest" in this

16· ·deposition, what I mean by that is The

17· ·Northwest --


19· · · ·Q.· · For clarity, when I refer to

20· ·"Northwest" during this deposition, I am

21· ·going to mean The Northwest Company and

22· ·its subsidiary northwest.com, but I will

23· ·not, unless I say otherwise, mean

24· ·Northwest Textiles Holding.· Will you

25· ·understand what I mean when I say


Page 12·1· · · · · · · · · R. AUERBACH

·2· ·"Northwest"?

·3· · · ·A.· · Yes.

·4· · · ·Q.· · How long have you been

·5· ·associated with Northwest?

·6· · · ·A.· · Approximately 1987.

·7· · · ·Q.· · And how did you first come to be

·8· ·associated with Northwest?

·9· · · ·A.· · I joined with my father and he

10· ·started this business that you see today

11· ·along with my brother.

12· · · ·Q.· · And in 1987, when you joined the

13· ·business, did you have an ownership

14· ·interest in Northwest at the time?

15· · · ·A.· · I don't remember the year that I

16· ·had an ownership interest.· I don't

17· ·remember the year.

18· · · ·Q.· · Was it in 1987 or was it at some

19· ·point after that?

20· · · · · · ·MR. TEELE:· Objection.· Asked


22· · · ·Q.· · Mr. Auerbach, you can answer the

23· ·question, if you can.

24· · · ·A.· · I don't remember the year that

25· ·the ownership occurred.


Page 13·1· · · · · · · · · R. AUERBACH

·2· · · ·Q.· · You say that you joined with

·3· ·your brother and your father.· Was your

·4· ·brother a part owner of Northwest at that

·5· ·time or any time in the future?

·6· · · ·A.· · Glenn is not an owner.· Again, I

·7· ·am not aware of the time or the date on

·8· ·which we set up the ownership of

·9· ·Northwest.

10· · · ·Q.· · Do you know if he was an owner

11· ·at any point in the past?

12· · · ·A.· · I don't know.

13· · · ·Q.· · Do you have positions in any

14· ·other companies other than Northwest?

15· · · ·A.· · I am a managing member of other

16· ·LLC's.

17· · · ·Q.· · Are you a managing member of

18· ·Northwest Textile Holdings?

19· · · ·A.· · Yes.

20· · · ·Q.· · Who owns Northwest Textile

21· ·Holdings?

22· · · ·A.· · Northwest Textile Holdings would

23· ·be myself, Ross, the estate, Shay

24· ·Auerbach, my father.· I believe that that

25· ·is the only owners.


Page 14·1· · · · · · · · · R. AUERBACH

·2· · · ·Q.· · Are you a managing member of

·3· ·David Harrison LLC?

·4· · · ·A.· · Yes.

·5· · · ·Q.· · Who owns David Harrison LLC?

·6· · · ·A.· · Northwest Textiles Holdings.

·7· · · ·Q.· · Is Northwest Textiles Holdings

·8· ·the only owner of David Harrison LLC?

·9· · · ·A.· · Yes.

10· · · ·Q.· · What is Accessories By Northwest

11· ·LLC?

12· · · ·A.· · I am repeating.· Accessories

13· ·by -- can you say it again, please?

14· · · ·Q.· · What is Accessories By Northwest

15· ·LLC?

16· · · ·A.· · I do not know.

17· · · ·Q.· · You are not familiar with that

18· ·entity?

19· · · ·A.· · No.

20· · · ·Q.· · What is Pegasus Partners LLC?

21· · · ·A.· · Pegasus Partners LLC is an LLC

22· ·that owns real estate.

23· · · ·Q.· · And who owns Pegasus Partners

24· ·LLC?

25· · · ·A.· · Pegasus Partners LLC is owned by


Page 15·1· · · · · · · · · R. AUERBACH

·2· ·myself and an irrevocable trust.

·3· · · ·Q.· · What is that irrevocable trust?

·4· · · ·A.· · It is an irrevocable trust from

·5· ·the estate of Shay Auerbach.

·6· · · ·Q.· · Going back to David Harrison

·7· ·LLC, when did Northwest Textile Holdings

·8· ·LLC acquire its ownership interest in


10· · · ·A.· · When it was created.

11· · · ·Q.· · What are the assets of David

12· ·Harrison LLC?

13· · · ·A.· · David Harrison LLC owns real

14· ·estate.· It owned -- it owned a unit in

15· ·Florida and it owns a unit in Old

16· ·Westbury.

17· · · ·Q.· · What unit does it own in

18· ·Florida?

19· · · ·A.· · It no longer owns that.

20· · · ·Q.· · What happened to that unit?

21· · · ·A.· · They were sold.

22· · · ·Q.· · Approximately when was that?

23· · · ·A.· · Approximately a year ago.

24· · · ·Q.· · Does David Harrison LLC conduct

25· ·any business with either the real estate


Page 16·1· · · · · · · · · R. AUERBACH

·2· ·it currently owns or with the real estate

·3· ·it previously owned?

·4· · · ·A.· · When you say conducts business,

·5· ·could you explain, please?· Thank you.

·6· · · ·Q.· · Does it rent out the properties

·7· ·that it owns?

·8· · · ·A.· · Yes.· At times, yes.

·9· · · ·Q.· · Who does it rent those

10· ·properties to?

11· · · ·A.· · To various individuals.

12· · · ·Q.· · Do you know who any of those

13· ·individuals are?

14· · · ·A.· · Not sitting here at the moment,

15· ·no.

16· · · ·Q.· · When you say "individuals," do

17· ·you mean people rented them in their

18· ·individual capacity rather than some other

19· ·legal entity like an LLC or a business?

20· · · ·A.· · Some were individuals, some

21· ·were, I believe -- I don't know -- I

22· ·believe, business entities.

23· · · ·Q.· · Were any of those business

24· ·entities Northwest?

25· · · ·A.· · Northwest for a period of about


Page 17·1· · · · · · · · · R. AUERBACH

·2· ·nine months did utilize 3 Old Farm, a

·3· ·rental of 3 Old Farm.

·4· · · ·Q.· · What business did Northwest

·5· ·conduct at 3 Old Farm for those nine

·6· ·months?

·7· · · ·A.· · For those nine months it was

·8· ·business that I would conduct from that

·9· ·property.

10· · · ·Q.· · What nine months were those?

11· · · ·A.· · I can't give you the nine

12· ·months.· Probably about -- I don't have

13· ·the nine months in front of me.

14· · · ·Q.· · Do you know what year those nine

15· ·months were in?

16· · · ·A.· · I will guess.· I believe -- I

17· ·believe in '18, I believe.

18· · · ·Q.· · Okay.· You said that you

19· ·conducted business in the Old Farm unit

20· ·for those nine months.· Is that correct?

21· · · ·A.· · Yes.

22· · · ·Q.· · And what business did you

23· ·conduct?

24· · · ·A.· · Business for Northwest.

25· · · ·Q.· · Did you meet any clients of


Page 18·1· · · · · · · · · R. AUERBACH

·2· ·Northwest at the Old Farm unit?

·3· · · ·A.· · I did not meet with clients.

·4· · · ·Q.· · Did you meet with any other

·5· ·Northwest employees at the Old Farm unit?

·6· · · ·A.· · I believe from time to time we

·7· ·get papers dropped off from people at

·8· ·Northwest.

·9· · · ·Q.· · Did you conduct any other

10· ·meetings with Northwest employees other

11· ·than having papers dropped off at the Old

12· ·Farm unit?

13· · · ·A.· · No.

14· · · ·Q.· · Does David Harrison LLC have any

15· ·employees?

16· · · ·A.· · No.

17· · · ·Q.· · Does David Harrison LLC conduct

18· ·any business other than renting real

19· ·estate?

20· · · ·A.· · No.

21· · · ·Q.· · Was there a lease agreement

22· ·between Northwest and David Harrison LLC

23· ·for the nine months that you used it?


25· · · ·Q.· · During those nine months, did


Page 19·1· · · · · · · · · R. AUERBACH

·2· ·you live at that unit?

·3· · · ·A.· · During those nine months, no.

·4· · · ·Q.· · Did anyone live at the unit

·5· ·during those nine months?

·6· · · ·A.· · No.

·7· · · ·Q.· · Mr. Auerbach, are you appearing

·8· ·as a 30(b)(6) witness on behalf of

·9· ·Northwest?

10· · · · · · ·MR. TEELE:· Objection to that


12· · · ·A.· · I don't know what that means.

13· · · · · · ·MR. AULET:· I am going to stamp

14· · · ·an exhibit.


16· · · ·Exhibit 1.)

17· · · ·Q.· · Mr. Auerbach, you should be able

18· ·to see what I have stamped Exhibit 1, a

19· ·notice of 30(b)(6) deposition to The

20· ·Northwest Company LLC.· Have you ever seen

21· ·this notice before?

22· · · ·A.· · Can I enlarge it?

23· · · · · · ·Okay.· I am looking at it now.

24· · · ·Q.· · Have you ever seen this notice

25· ·before?


Page 20·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · Bear with me.· I am just trying

·3· ·to scroll.

·4· · · · · · ·I don't remember.

·5· · · ·Q.· · I am going to go to page 5 of

·6· ·this exhibit, which lists a number of

·7· ·topics.· Are you prepared to testify on

·8· ·behalf of -- strike that.

·9· · · · · · ·Have you been designated to

10· ·testify on behalf of Northwest as to any

11· ·of these topics?


13· · · ·form.

14· · · ·A.· · I am reading the topics right

15· ·now.

16· · · · · · ·(Pause.)

17· · · · · · ·Yes, I am.

18· · · ·Q.· · And which of the five topics

19· ·have you been designated to testify on?

20· · · ·A.· · All of them.

21· · · ·Q.· · Okay.

22· · · · · · ·Going back to Pegasus Partners

23· ·LLC, what properties does Pegasus Partners

24· ·LLC own?

25· · · ·A.· · Pegasus Partners owns two


Page 21·1· · · · · · · · · R. AUERBACH

·2· ·properties.· It owns -- it owns this

·3· ·building that we are speaking from, 49

·4· ·Bryant Avenue.· And it owns a building

·5· ·within walking distance at 66-68 Skillman

·6· ·Avenue.

·7· · · ·Q.· · And does Northwest rent both of

·8· ·those buildings?

·9· · · ·A.· · Yes.

10· · · ·Q.· · What business does Northwest

11· ·conduct at the 66-68 Skillman Avenue

12· ·building?

13· · · ·A.· · Northwest utilizes 66-68

14· ·Skillman Avenue in Roslyn as an art

15· ·studio.

16· · · ·Q.· · Can you explain what Northwest

17· ·uses an art studio for?

18· · · ·A.· · Yes.

19· · · · · · ·We utilize it, Northwest

20· ·utilizes it in that all of our artists are

21· ·located in one building.· That building,

22· ·we called it art studio because the only

23· ·people in that building are people who

24· ·work in the art department.

25· · · ·Q.· · When you say "art," do you mean


Page 22·1· · · · · · · · · R. AUERBACH

·2· ·the designs that Northwest uses to print

·3· ·on various textiles?

·4· · · ·A.· · Yes.

·5· · · ·Q.· · What is Shay Auerbach LLC?

·6· · · ·A.· · Shay Auerbach LLC owns a

·7· ·building that was -- that is -- excuse

·8· ·me -- in -- in, you know, Ash, North

·9· ·Carolina, A-S-H.

10· · · ·Q.· · Does Northwest rent that

11· ·building?

12· · · ·A.· · Yes.

13· · · ·Q.· · What does Northwest -- what

14· ·business does Northwest conduct in that

15· ·building?

16· · · ·A.· · That building is used for

17· ·warehousing, fulfillment, it had been used

18· ·in the past for light manufacturing, but

19· ·that particular product Northwest is not

20· ·participating in any longer.

21· · · ·Q.· · Who owns Shay Auerbach LLC?

22· · · ·A.· · It is the estate of Shay

23· ·Auerbach.

24· · · ·Q.· · Are you a manager of Shay

25· ·Auerbach LLC?


Page 23·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · Yes -- I am sorry.· I believe

·3· ·so.

·4· · · ·Q.· · Was Shay Auerbach your father?

·5· · · ·A.· · Yes.

·6· · · ·Q.· · And he was one of the founders

·7· ·of Northwest?

·8· · · ·A.· · Yes.

·9· · · ·Q.· · Approximately when did he pass

10· ·away?

11· · · ·A.· · Approximately 10 years ago. A

12· ·little bit more than 10 years ago, on

13· ·November 11th.

14· · · ·Q.· · Are you one of the beneficiaries

15· ·of his estate?

16· · · ·A.· · Yes.

17· · · ·Q.· · Is your brother, Glenn Auerbach,

18· ·another beneficiary of the estate?

19· · · ·A.· · Yes.

20· · · ·Q.· · Are any of your other family

21· ·members beneficiaries of the estate?

22· · · ·A.· · No.

23· · · ·Q.· · Who -- strike that.

24· · · ·A.· · Can I have a moment?

25· · · ·Q.· · Sorry.· Were you attempting to


Page 24·1· · · · · · · · · R. AUERBACH

·2· ·say something?

·3· · · ·A.· · Just one moment.· I have a

·4· ·question for counsel.


·6· · · ·record.)

·7· · · · · · ·MR. KESTENBAUM:· Could you

·8· · · ·clarify the last question, as to what

·9· · · ·you mean by "family"?

10· · · ·Q.· · Are any of your children,

11· ·spouses or former spouses beneficiaries of

12· ·the Shay Auerbach estate?

13· · · ·A.· · I apologize.· I know you

14· ·repeated the question.· Can you repeat it

15· ·one more time, the second part?

16· · · ·Q.· · Are any of your children,

17· ·spouses or former spouses beneficiaries of

18· ·the Shay Auerbach estate?

19· · · ·A.· · No.

20· · · ·Q.· · Who conducts business on behalf

21· ·of the Shay Auerbach estate?

22· · · ·A.· · Can you define what you mean by

23· ·"business," please?

24· · · ·Q.· · Does the Shay Auerbach estate

25· ·still own any assets?


Page 25·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · Yes.· The Shay -- the Shay

·3· ·Auerbach estate is still an open estate.

·4· · · ·Q.· · And for assets that the Shay

·5· ·Auerbach estate owns, such as the assets

·6· ·that do business with Northwest, who makes

·7· ·business decisions on behalf of the Shay

·8· ·Auerbach estate?

·9· · · ·A.· · For business between The

10· ·Northwest Company and the Shay Auerbach

11· ·estate, which -- I am sorry.· You mean who

12· ·makes the decisions for the estate?

13· · · ·Q.· · Yes.

14· · · ·A.· · There is only the lease.· So,

15· ·there are no decisions that are being made

16· ·for the estate with The Northwest Company.

17· · · ·Q.· · Who negotiates the leases on

18· ·behalf of Northwest with any of these

19· ·entities that either you own or the Shay

20· ·Auerbach estate owns?

21· · · ·A.· · The leases for the buildings

22· ·that we have spoken about are old leases.

23· ·They go back many, many years.· And when

24· ·they were initially set up or created, my

25· ·father worked with a real estate person


Page 26·1· · · · · · · · · R. AUERBACH

·2· ·and comped the real estate in the area.

·3· ·And the leases were set up and they

·4· ·were -- they were -- they were worked on

·5· ·by the -- they were also worked on by the

·6· ·previous CFO of the company

·7· · · · · · (Reporter interruption.)

·8· · · ·A.· · Going forward, they were also

·9· ·worked on by our former CFO.· But the

10· ·leases are extremely old.

11· · · ·Q.· · Who was your former CFO?

12· · · ·A.· · Michael Beezer(phonetic).

13· · · ·Q.· · Have any of the leases been

14· ·renewed in the past five years?

15· · · ·A.· · They have, and they remained as

16· ·they were with whatever -- whatever was in

17· ·the lease.

18· · · ·Q.· · Did the rent under the lease

19· ·increase in any of those amendments or

20· ·renewals?

21· · · ·A.· · The only increases in rent would

22· ·have been the standard escalation as

23· ·detailed in the lease.

24· · · · · · ·May I clarify one thing?

25· · · ·Q.· · Of course.


Page 27·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · The lease at 66-68 Skillman for

·3· ·the art department was not an old lease,

·4· ·and that lease -- I don't remember, but it

·5· ·is probably -- I don't remember, but it is

·6· ·not as old as the other two leases, and

·7· ·those were comped by this current -- by

·8· ·myself, by our current CFO and by a local

·9· ·real estate agent.

10· · · ·Q.· · Who made the final decision on

11· ·the rent for that 66-68 Skillman lease?

12· · · ·A.· · We took the comps in the area

13· ·and we used that as the rental amount.· In

14· ·other words, no one person made that

15· ·decision.

16· · · ·Q.· · Who produced the comp figures?

17· · · ·A.· · We did it online and we did it

18· ·by consulting a local property owner and

19· ·real estate -- like a real estate agent.

20· · · ·Q.· · What is The Northwest Company

21· ·Florida LLC?

22· · · ·A.· · I don't know.

23· · · ·Q.· · Are you the manager of that

24· ·entity?

25· · · ·A.· · I don't know.


Page 28·1· · · · · · · · · R. AUERBACH

·2· · · ·Q.· · What is The Northwest Company

·3· ·Inc.?

·4· · · ·A.· · I don't know.

·5· · · ·Q.· · What is UMiami Gabrielle, LLC?

·6· · · ·A.· · UMiami LLC is --

·7· · · · · · ·MR. TEELE:· Someone has a

·8· · · ·conversation going on in the

·9· · · ·background.

10· · · ·A.· · UMiami LLC is an LLC -- it is an

11· ·LLC that has an apartment at or near the

12· ·University of Miami.

13· · · ·Q.· · When you say "UMiami LLC," did

14· ·you mean UMiami Gabrielle LLC?

15· · · ·A.· · Yes.· I think that is what it

16· ·says.

17· · · ·Q.· · What is Gabriella Daniella

18· ·Corp.?

19· · · ·A.· · Gabriella Daniella Corp. is a

20· ·Corp. that I set up a long time ago

21· ·because I only had two daughters at the

22· ·time and I thought it would be fun to have

23· ·their names on something.· It doesn't

24· ·actually have a business operation.

25· · · ·Q.· · Does it have any assets?


Page 29·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · No.

·3· · · ·Q.· · What is Greenville Baker Boys?

·4· · · ·A.· · It is the -- it's the -- the

·5· ·Boys and Girls Club of America, and that

·6· ·is that specific location.· Greenville

·7· ·Baker Boys and Girls Club.

·8· · · ·Q.· · What is 501 NYCA China Partners

·9· ·LLC?

10· · · ·A.· · It is an LLC for the unit in

11· ·Miami, Unit 501.

12· · · ·Q.· · And what is 924 NYCA China

13· ·Partners LLC?

14· · · ·A.· · 924 is the same type of entity,

15· ·but the unit is 924.· It is a different

16· ·unit.

17· · · ·Q.· · And who owns those two entities?

18· · · ·A.· · NYCA China Partners LLC.

19· · · ·Q.· · It wholly owns both of those

20· ·entities?


22· · · ·A.· · Yes.

23· · · ·Q.· · And what is NYCA China Partners

24· ·LLC?

25· · · ·A.· · It is an LLC that was set up to


Page 30·1· · · · · · · · · R. AUERBACH

·2· ·buy real estate in Florida.

·3· · · ·Q.· · Who owns NYCA China Partners

·4· ·LLC?

·5· · · ·A.· · Northwest Textile Holdings, and

·6· ·Extreme Horse.

·7· · · ·Q.· · Are there any trusts or

·8· ·irrevocable trusts set up for the benefit

·9· ·of your children?

10· · · ·A.· · Yes.

11· · · ·Q.· · And what are the names of those

12· ·trusts?

13· · · ·A.· · I don't know.

14· · · ·Q.· · Who would know?

15· · · ·A.· · My trust attorney would know.

16· · · ·Q.· · And what assets were owned by

17· ·those trusts?

18· · · ·A.· · I don't know.

19· · · ·Q.· · Do those trusts own an interest

20· ·in Northwest Textile Holdings?

21· · · ·A.· · I don't know.

22· · · ·Q.· · Do they own an interest in David


24· · · ·A.· · David Harrison LLC is owned by

25· ·Northwest Textile Holdings.· I wouldn't


Page 31·1· · · · · · · · · R. AUERBACH

·2· ·know the business name.

·3· · · ·Q.· · Are there any -- are there any

·4· ·assets that those trusts hold that you can

·5· ·identify as you sit here today?

·6· · · · · · ·MR. DUFFY:· Objection.· Asked

·7· · · ·and answered.· You can answer.

·8· · · ·A.· · Sorry.· I was looking at the

·9· ·picture.

10· · · ·Q.· · Are there any assets that the

11· ·trust holds that you can identify as you

12· ·sit here today?

13· · · ·A.· · No.

14· · · ·Q.· · Has Northwest Textile Holdings

15· ·ever transferred assets to those trusts

16· ·that you are aware of?



19· · · ·Q.· · How many children do you have?

20· · · ·A.· · Three.

21· · · ·Q.· · What are the names and ages of

22· ·your children?

23· · · · · · ·MR. TEELE:· I will object to

24· · · ·that question and to what I think is

25· · · ·going to be the line of questioning


Page 32·1· · · · · · · · · R. AUERBACH

·2· · · ·based on your last several questions

·3· · · ·inasmuch as they are not within the

·4· · · ·scope of the topics listed in the

·5· · · ·30(b)(6) notice which you showed the

·6· · · ·witness earlier.

·7· · · · · · ·But you can answer the question.

·8· · · ·A.· · Ages?· Gabriella will be 23 next

·9· ·month -- this month.· Sorry.· Daniella

10· ·just turned 21 last month.· And Alexander

11· ·is 13.

12· · · ·Q.· · Do any of them hold positions

13· ·with Northwest?

14· · · ·A.· · Gabriella Auerbach has a

15· ·position here, yes.

16· · · ·Q.· · And what is that position?

17· · · ·A.· · She is our social media director

18· ·coordinator.· She does all of our social

19· ·media platforms.

20· · · ·Q.· · About how long has she been

21· ·employed in that position?

22· · · ·A.· · She was an intern for a time and

23· ·then she began about a year ago, I

24· ·believe.· About a year ago, after she

25· ·graduated, and that was her major.


Page 33·1· · · · · · · · · R. AUERBACH

·2· · · ·Q.· · Have any of your children ever

·3· ·held a Northwest Company credit card?

·4· · · ·A.· · No.

·5· · · ·Q.· · Are you currently married?

·6· · · ·A.· · Yes.

·7· · · ·Q.· · And who is your spouse?

·8· · · ·A.· · Sophia.

·9· · · ·Q.· · Sophia Auerbach?

10· · · ·A.· · Yes.

11· · · ·Q.· · Does she hold any position at

12· ·Northwest?

13· · · ·A.· · No.

14· · · ·Q.· · Does your brother Glenn Auerbach

15· ·hold any positions at Northwest?

16· · · ·A.· · Yes.

17· · · ·Q.· · What position does he hold at

18· ·Northwest?

19· · · ·A.· · He is a vice president at

20· ·Northwest.

21· · · ·Q.· · Are you aware that the Committee

22· ·has requested a number of documents from

23· ·the Debtors?


25· · · ·form.


Page 34·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · I know that there are document

·3· ·requests.

·4· · · ·Q.· · And were you involved in the

·5· ·collection of documents on behalf of the

·6· ·Debtors?

·7· · · ·A.· · For some of those documents,

·8· ·yes.

·9· · · ·Q.· · And which document collections

10· ·were you involved in?

11· · · ·A.· · I had contacted the financial

12· ·institutions to get copies of bank

13· ·statements, Amex charges, anything that we

14· ·needed documentation on.

15· · · ·Q.· · Are you aware that we have

16· ·requested documents from Northwest Textile

17· ·Holdings?

18· · · ·A.· · Yes, I am.

19· · · ·Q.· · And have you collected the bank

20· ·records of Northwest Textile Holdings?

21· · · ·A.· · I have not collected.· I was

22· ·told that they will be here in electronic

23· ·form today.· And I was told that they

24· ·would be here three days ago, but I

25· ·haven't gotten them yet.


Page 35·1· · · · · · · · · R. AUERBACH

·2· · · ·Q.· · Do you have a country club

·3· ·membership?

·4· · · ·A.· · Yes.

·5· · · ·Q.· · What country club is that?

·6· · · ·A.· · Old Westbury Golf and Country

·7· ·Club.

·8· · · ·Q.· · Does that country club charge

·9· ·you membership fees?

10· · · ·A.· · Yes.· They charge dues.

11· · · ·Q.· · And who pays those dues?

12· · · ·A.· · The Northwest Company pays the

13· ·dues.

14· · · ·Q.· · Does The Northwest Company pay

15· ·all of the membership dues?


17· · · ·form.

18· · · ·A.· · I believe.· I don't know.

19· · · ·Q.· · Why does The Northwest Company

20· ·pay your membership dues at the Old

21· ·Westbury Country Club?


23· · · ·form.

24· · · ·A.· · The Old Westbury Country Club

25· ·dues are paid because we need to entertain


Page 36·1· · · · · · · · · R. AUERBACH

·2· ·business clients.· We also use it for

·3· ·company meetings.· We use it for, you

·4· ·know, off-site meetings within Northwest

·5· ·and -- that is it.· Sorry.

·6· · · ·Q.· · Do you ever use the Old Westbury

·7· ·Country Club personally?

·8· · · ·A.· · Yes.

·9· · · ·Q.· · And when I say "personally," I

10· ·mean for -- not for Northwest business

11· ·purposes.· Do you use it personally in

12· ·that sense?


14· · · ·A.· · Yes.

15· · · ·Q.· · And about how often do you use

16· ·the Old Westbury Country Club in a

17· ·personal capacity?


19· · · ·A.· · On a personal basis, in the last

20· ·number of years, probably a dozen times.

21· · · · · · ·THE WITNESS:· Sorry.· Let me

22· · · ·clarify that last comment that I made.

23· · · ·In the last five years, what I meant

24· · · ·to say was, on a personal basis, maybe

25· · · ·eight to twelve times per year, not


Page 37·1· · · · · · · · · R. AUERBACH

·2· · · ·twelve times in five years.

·3· · · ·Q.· · Do you have any bank records of

·4· ·Northwest Textile Holdings currently?

·5· · · ·A.· · No.

·6· · · ·Q.· · How often in 2020 were Northwest

·7· ·corporate events held at the country club?

·8· · · ·A.· · In 2020, this year, I don't

·9· ·know.

10· · · ·Q.· · Do you have any sort of

11· ·ballpark?· Was it more than ten?

12· · · ·A.· · No.


14· · · ·Q.· · So, my earlier question was a

15· ·compound question.· I am going to reask

16· ·that.· Were more than ten corporate events

17· ·held at the country club in 2020?

18· · · ·A.· · No.

19· · · ·Q.· · How many corporate events were

20· ·held in 2019?


22· · · ·form.· I assume you mean how many

23· · · ·corporate events at the club were held

24· · · ·in 2019?

25· · · · · · ·MR. AULET:· Yes.· I will


Page 38·1· · · · · · · · · R. AUERBACH

·2· · · ·restate.

·3· · · ·Q.· · How many corporate events were

·4· ·held at the Old Westbury Country Club in

·5· ·2019?

·6· · · ·A.· · I can only -- because I don't

·7· ·know -- I don't know the exact number.

·8· · · ·Q.· · Was it more than 10?

·9· · · ·A.· · Yes.

10· · · ·Q.· · Was it more than 20?

11· · · ·A.· · I don't know.

12· · · ·Q.· · Do you own a property at the St.

13· ·Regis Residences?

14· · · ·A.· · Yes.

15· · · ·Q.· · Does Northwest pay the

16· ·maintenance fees for that residence?

17· · · ·A.· · Yes.

18· · · ·Q.· · And why does Northwest pay the

19· ·maintenance fees for that residence?

20· · · ·A.· · We put people up there for

21· ·different events.· I stay there for

22· ·different events in the city.· I, Ashford

23· ·stays there during market week.· Other

24· ·clients stay there.· And there is no --

25· ·there is no room fees charged when clients


Page 39·1· · · · · · · · · R. AUERBACH

·2· ·utilize or if I utilize.· There is no room

·3· ·charge.

·4· · · ·Q.· · How many times a year are those

·5· ·rooms used for Northwest purposes?

·6· · · ·A.· · I don't know exactly.

·7· · · ·Q.· · Is it more than 10?

·8· · · ·A.· · Yes.

·9· · · ·Q.· · Is it more than 20?

10· · · ·A.· · Yes.

11· · · ·Q.· · Is it more than 30?

12· · · ·A.· · I don't know.

13· · · ·Q.· · How much would room fees at the

14· ·St. Regis Residences be if Northwest was

15· ·not paying those maintenance fees?


17· · · ·form and to the hypothetical.· You can

18· · · ·answer.

19· · · · · · ·Hold on one second.· The laptop

20· · · ·Ross Auerbach is using went to sleep.

21· · · ·Can we take a two-second break?

22· · · · · · ·MR. AULET:· Sure.· Why don't we

23· · · ·take a short break.

24· · · · · · ·THE VIDEOGRAPHER:· Time is

25· · · ·11:32.· We are off the record.


Page 40·1· · · · · · · · · R. AUERBACH

·2· · · · · · ·(Recess.)

·3· · · · · · ·THE VIDEOGRAPHER:· Time is

·4· · · ·11:41.· We are back on the record.


·6· · · ·Q.· · Mr. Auerbach, we were just

·7· ·discussing the St. Regis Residences.· Are

·8· ·those residences ever used for

·9· ·non-Northwest purposes?

10· · · ·A.· · Yes.

11· · · ·Q.· · About how often is that?


13· · · ·form.

14· · · ·A.· · Three to five times a year. I

15· ·don't actually know.

16· · · ·Q.· · What clients have stayed at the

17· ·St. Regis Residences in the past

18· ·12 months?

19· · · ·A.· · In the last 12 months, Ashford

20· ·has stayed there.· I believe 12 months. I

21· ·apologize because I can't -- for market

22· ·week, Allen Guo has stayed there.· I don't

23· ·have a list of other clients that have

24· ·stayed there.

25· · · ·Q.· · How would I determine what


Page 41·1· · · · · · · · · R. AUERBACH

·2· ·clients had stayed at the Residences at a

·3· ·particular point in time?

·4· · · ·A.· · I don't know.· I -- I don't

·5· ·know.

·6· · · ·Q.· · Who makes the decision if a

·7· ·Northwest client can use the St. Regis

·8· ·residence?

·9· · · ·A.· · That decision would be made, if

10· ·requested to me, I would make it.· If

11· ·requested to someone else, they would make

12· ·that decision.

13· · · ·Q.· · When you say "if requested to

14· ·someone else, they would make that

15· ·decision," who has the authority to let

16· ·someone use the St. Regis residence other

17· ·than you?

18· · · ·A.· · Anyone who -- well, my

19· ·assistant, Robert.· I guess those people.

20· · · ·Q.· · And are any records kept of who

21· ·stays in the St. Regis residence?

22· · · ·A.· · I don't know.

23· · · ·Q.· · Why hasn't Northwest filed a

24· ·2018 tax return?



Page 42·1· · · · · · · · · R. AUERBACH

·2· · · ·form.

·3· · · ·A.· · Northwest did not complete the

·4· ·2018 tax returns.· Mazars had some

·5· ·adjustment they had to do that they did

·6· ·not finish.· And because of the various

·7· ·issues that were going on, it was delayed.

·8· · · ·Q.· · You say Northwest did not

·9· ·complete the 2018 tax returns.· Did it

10· ·create a draft of the 2018 tax returns?

11· · · ·A.· · No.

12· · · ·Q.· · What were the issues that caused

13· ·Mazars to be unable to finish the 2018 tax

14· ·return?

15· · · ·A.· · Mazars was -- there was more

16· ·than one issue.· Excuse me.· Mazars was

17· ·waiting for a short time on the outcome

18· ·between the negotiations between Ashford

19· ·and Northwest.· They were reconciling

20· ·certain accounts that they needed to make

21· ·adjustments to.

22· · · · · · ·Excuse me.· Sorry.

23· · · · · · ·And they needed a letter from

24· ·myself stating that I would support the

25· ·company and leave my side collateral at


Page 43·1· · · · · · · · · R. AUERBACH

·2· ·CIT.

·3· · · ·Q.· · You say they were reconciling

·4· ·certain accounts that they needed to make

·5· ·adjustments to.· What accounts?

·6· · · ·A.· · I don't know the account. I

·7· ·don't know the specific account.· When I

·8· ·say accounts --

·9· · · ·Q.· · Do you know --

10· · · ·A.· · What is that?

11· · · ·Q.· · I believe you were in the middle

12· ·of saying a sentence that began with "when

13· ·I say accounts."· Did you have anything

14· ·else to add to your answer?

15· · · ·A.· · No.· I meant to say, when I say

16· ·accounts, I mean in general they were

17· ·accounts.· I don't know what specific

18· ·accounts.

19· · · ·Q.· · What did Mazars describe to you

20· ·generally about what they still needed to

21· ·reconcile?

22· · · ·A.· · They needed a letter.· They

23· ·needed to know the position between

24· ·Ashford and Northwest so they could state

25· ·that opinion.· I believe it's an opinion.


Page 44·1· · · · · · · · · R. AUERBACH

·2· ·And they were working with our people, as

·3· ·they do every year, just to conclude '18.

·4· · · ·Q.· · What specifically did they say

·5· ·that they needed to make adjustments to or

·6· ·reconcile regarding Northwest's books?

·7· · · ·A.· · They did not, to my knowledge,

·8· ·say specifically what they were -- what

·9· ·they were reconciling.

10· · · ·Q.· · Was Mr. Jolson involved in this

11· ·process at all?

12· · · ·A.· · I don't know.· I don't know.

13· · · ·Q.· · Did Mazars express any concerns

14· ·about the company's accounting?

15· · · ·A.· · No.

16· · · ·Q.· · Did Mazars have any issues with

17· ·being unable to reconcile the company's

18· ·books and records?

19· · · ·A.· · No.· None expressed.

20· · · ·Q.· · Would they have expressed those

21· ·opinions to anyone else?

22· · · ·A.· · I don't know.

23· · · ·Q.· · Would you expect that if they

24· ·had any issues with the company's

25· ·accounting that it would be brought to


Page 45·1· · · · · · · · · R. AUERBACH

·2· ·your attention?


·4· · · ·form.

·5· · · ·A.· · Yes, I do.

·6· · · ·Q.· · Earlier you said that Mazars had

·7· ·certain accounts that they needed to make

·8· ·adjustments to.· What more can you tell me

·9· ·about that statement?



12· · · ·A.· · I can't.· They had some work to

13· ·complete.· I don't know specifics of the

14· ·work that they were completing.

15· · · ·Q.· · How long did it take for Mazars

16· ·to complete the tax returns for Northwest

17· ·in previous years?

18· · · ·A.· · Again, I don't know.· I can only

19· ·guess, and I don't know.

20· · · ·Q.· · Did it concern you at all that

21· ·Northwest did not file the 2018 tax

22· ·return?

23· · · ·A.· · Yes.· May I have a moment to ask

24· ·a question of my counsel?

25· · · ·Q.· · Yes.


Page 46·1· · · · · · · · · R. AUERBACH


·3· · · ·record.)

·4· · · · · · ·THE WITNESS:· We are back. I

·5· · · ·wanted to clarify something.· The

·6· · · ·questions that previously were asked

·7· · · ·about Mazars and the tax returns, when

·8· · · ·I was answering those questions I was

·9· · · ·thinking in my mind you were talking

10· · · ·really about the financial statement.

11· · · ·Mazars did not do our taxes, our tax

12· · · ·returns.

13· · · ·Q.· · Who does do your tax returns?

14· · · ·A.· · Ken Gould.

15· · · ·Q.· · And why did Ken Gould not

16· ·prepare a 2018 tax return?

17· · · ·A.· · He was waiting for the complete

18· ·2018 statement from Mazars.

19· · · ·Q.· · Are there any other reasons that

20· ·he did not prepare a 2018 tax return?

21· · · ·A.· · No.

22· · · ·Q.· · When do you anticipate that the

23· ·2018 tax return will be filed?

24· · · ·A.· · I do not know the date that they

25· ·will file the return.


Page 47·1· · · · · · · · · R. AUERBACH

·2· · · ·Q.· · Did you receive a $40,000

·3· ·payment from Northwest on April 17, 2020?


·5· · · ·form.

·6· · · ·A.· · Yes, I did.

·7· · · ·Q.· · What was the basis of that

·8· ·payment?

·9· · · ·A.· · It was a reimbursement for a

10· ·retainer that I paid to retain counsel for

11· ·litigation brought by Ashford in

12· ·California.

13· · · ·Q.· · How would I verify that?

14· · · ·A.· · We can verify that by producing

15· ·the payment that I made to the law firm

16· ·and through the attorneys.

17· · · ·Q.· · Why was it listed as a bonus on

18· ·the bank record?

19· · · ·A.· · I don't know.

20· · · ·Q.· · Who did you instruct to make

21· ·that $40,000 payment to yourself?


23· · · ·form.

24· · · ·A.· · I put it in as a reimbursement,

25· ·and it would have gone to -- it would have


Page 48·1· · · · · · · · · R. AUERBACH

·2· ·gone to Robert and through our controller.

·3· · · ·Q.· · When you say you put it in as a

·4· ·reimbursement, please describe what you

·5· ·mean.

·6· · · ·A.· · I explained the purpose of the

·7· ·$40,000, what the $40,000 represented.

·8· · · ·Q.· · And who did you explain that to?

·9· · · ·A.· · I explained it to Robert, who

10· ·would explain it to whoever he explained

11· ·it to.

12· · · ·Q.· · And who did you instruct to make

13· ·that payment?

14· · · ·A.· · Robert.

15· · · ·Q.· · Did you talk to anyone but

16· ·Robert about making that $40,000 payment?

17· · · ·A.· · No.

18· · · ·Q.· · Why did you seek reimbursement

19· ·on April 17, 2020, for this $40,000

20· ·payment?

21· · · ·A.· · Because I realized that I was

22· ·never reimbursed for that.

23· · · ·Q.· · Did you make this reimbursement

24· ·request in writing?

25· · · ·A.· · No, I did not.


Page 49·1· · · · · · · · · R. AUERBACH

·2· · · ·Q.· · Did you provide any

·3· ·documentation to Mr. Jolson that you had

·4· ·made these $40,000 advances?

·5· · · ·A.· · I believe -- I don't remember.

·6· · · ·Q.· · When you made -- so, you say you

·7· ·did not make this reimbursement request in

·8· ·writing.· Did you provide any documents to

·9· ·Mr. Jolson when you made this

10· ·reimbursement request?



13· · · · · · ·MR. TEELE:· And to the

14· · · ·characterization of the testimony.

15· · · ·Q.· · You can answer the question,

16· ·Mr. Auerbach.

17· · · ·A.· · What was the question?· Sorry.

18· · · ·Q.· · Did you provide any documents to

19· ·Mr. Jolson when you made this

20· ·reimbursement request?

21· · · ·A.· · I don't remember.

22· · · ·Q.· · If you did give him any

23· ·documents, would you have handed him

24· ·physical documents?



Page 50·1· · · · · · · · · R. AUERBACH

·2· · · ·hypothetical.· It is a lay witness.

·3· · · · · · ·You can answer it, if you

·4· · · ·understand it.

·5· · · ·A.· · Can you just repeat the

·6· ·question, sir?

·7· · · ·Q.· · You say that you can't recall if

·8· ·you gave Mr. Jolson any documents.· Would

·9· ·you have handed him a physical, printed

10· ·out document?

11· · · ·A.· · No, not a printed document.

12· · · ·Q.· · Would you have e-mailed him any

13· ·document?

14· · · ·A.· · No.

15· · · ·Q.· · How would you have given him a

16· ·document if you gave him any documents to

17· ·support this reimbursement request?


19· · · ·form.· The question has been asked and

20· · · ·answered.· Putting hypotheticals in

21· · · ·front of him is not going to get you

22· · · ·anywhere.


24· · · · · · ·MR. KESTENBAUM:· Do you know

25· · · ·what the question is?


Page 51·1· · · · · · · · · R. AUERBACH

·2· · · · · · ·THE WITNESS:· Can you repeat the

·3· · · ·question again?

·4· · · ·Q.· · If you had given him any

·5· ·documents to support this reimbursement

·6· ·request, how would you have given him

·7· ·those documents?

·8· · · ·A.· · I don't -- I don't know.

·9· · · ·Q.· · Did you authorize a retention

10· ·bonus for Mr. Jolson on April 17, 2020?

11· · · ·A.· · I did.

12· · · ·Q.· · And how much was that bonus?

13· · · ·A.· · $35,000.

14· · · ·Q.· · Did you authorize the retention

15· ·bonus for anyone else on April 17, 2020?

16· · · ·A.· · No, I did not.

17· · · ·Q.· · What were the terms of the

18· ·retention bonus?


20· · · ·form.

21· · · · · · ·MR. KESTENBAUM:· You can answer.

22· · · ·A.· · Robert had been working around

23· ·the clock with Ashford, with the court,

24· ·with everything that was going on.· And he

25· ·was exhausted, and I believe -- and I


Page 52·1· · · · · · · · · R. AUERBACH

·2· ·believe that it was the right thing to do.

·3· ·And I need Robert here to go through this

·4· ·process.· And the amount of stress he was

·5· ·under, I was concerned.

·6· · · ·Q.· · Was there any requirement that

·7· ·Mr. Jolson stay employed by the Debtors

·8· ·for any length of time in order to receive

·9· ·that bonus?

10· · · ·A.· · Robert had previously stated to

11· ·me that he was here for the duration.

12· · · ·Q.· · That doesn't answer my question.

13· ·Was there any requirement that Mr. Jolson

14· ·stay employed by the Debtors for any

15· ·length of time in order to receive a

16· ·bonus?

17· · · · · · ·MR. TEELE:· Objection.· Asked


19· · · ·A.· · I think I answered the question,

20· ·sir.

21· · · ·Q.· · I didn't get an answer.· Was

22· ·there any requirement that Mr. Jolson stay

23· ·employed by the Debtors for any length of

24· ·time in order to receive that bonus?

25· · · · · · ·MR. DUFFY:· Asked and answered.


Page 53·1· · · · · · · · · R. AUERBACH

·2· · · ·Objection.

·3· · · · · · ·MR. AULET:· I have asked it

·4· · · ·several times.· I have not gotten an

·5· · · ·answer to my question.· I would like

·6· · · ·an answer to my question.

·7· · · ·Q.· · Was there any length of time

·8· ·that Mr. Jolson had to stay employed by

·9· ·the Debtors in order to receive that

10· ·bonus?

11· · · · · · ·MR. KESTENBAUM:· I think he has

12· · · ·answered the question by stating that

13· · · ·Mr. Jolson was going to stay, as he

14· · · ·said, for the duration.· I think the

15· · · ·exchange is clear.

16· · · ·Q.· · Mr. Auerbach, please answer the

17· ·question.

18· · · ·A.· · I thought I had answered the

19· ·question.· What I had meant was, just as

20· ·was stated.· He said that he would be

21· ·here, stay here through the duration.· He

22· ·was staying on.

23· · · ·Q.· · Had Mr. Jolson quit the next

24· ·day, would there have been any requirement

25· ·that he return that bonus?


Page 54·1· · · · · · · · · R. AUERBACH


·3· · · ·form, and I object as it is a

·4· · · ·hypothetical.

·5· · · · · · ·You can answer if you know.

·6· · · ·A.· · Knowing Robert Jolson's

·7· ·character, if he were to have left he

·8· ·would have returned the bonus.

·9· · · ·Q.· · But was there any requirement

10· ·that he return the bonus?

11· · · ·A.· · No.· There was no requirement

12· ·that he return the bonus.· And as I

13· ·stated --

14· · · ·Q.· · Who was --

15· · · ·A.· · Go ahead.· Sorry.

16· · · ·Q.· · I thought you were done.· Please

17· ·finish the answer.

18· · · ·A.· · It's fine.· That's it.

19· · · ·Q.· · Who is the controller of

20· ·Northwest?

21· · · ·A.· · Ted.

22· · · ·Q.· · Ted who?

23· · · ·A.· · Hmm?

24· · · · · · ·MR. KESTENBAUM:· His last name.

25· · · ·A.· · I know it, I just can't say it.


Page 55·1· · · · · · · · · R. AUERBACH

·2· ·I am sorry.

·3· · · · · · ·MR. KESTENBAUM:· You don't know

·4· · · ·how to pronounce it?

·5· · · · · · ·THE WITNESS:· "Georgia"

·6· · · ·something.· I never did.· I always

·7· · · ·call him Ted.

·8· · · ·A.· · I can get you the name on a

·9· ·break.· "Georgia" something.

10· · · ·Q.· · The bonus that you authorized

11· ·for Mr. Jolson, that wasn't a

12· ·reimbursement for anything, was it?

13· · · ·A.· · No, it was not.

14· · · ·Q.· · Why was it described as a

15· ·reimbursement in a filing with the

16· ·Bankruptcy Court?


18· · · ·form.· You can answer if you know.

19· · · ·A.· · I don't know why it was. I

20· ·apologize.

21· · · · · · ·(Discussion off the record

22· · · ·conferring with counsel.)

23· · · ·Q.· · Mr. Auerbach, do you review the

24· ·documents that you sign carefully?



Page 56·1· · · · · · · · · R. AUERBACH

·2· · · ·form.

·3· · · ·A.· · I try to, yes.

·4· · · ·Q.· · Are you aware that you signed a

·5· ·number of documents that were filed with

·6· ·the Bankruptcy Court?

·7· · · ·A.· · Yes.

·8· · · ·Q.· · And for those documents, did you

·9· ·review them carefully before signing them?


11· · · ·form.

12· · · ·A.· · I thought I did.

13· · · · · · ·Can I ask a question?

14· · · · · · ·MR. DUFFY:· Hang on.· He has a

15· · · ·question for counsel.


17· · · ·record.)

18· · · · · · ·THE WITNESS:· I am back.

19· · · · · · ·MR. KESTENBAUM:· Thank you.


21· · · ·Exhibit 2.)


23· · · ·you what I have marked Exhibit 2, a

24· · · ·statement of financial affairs for

25· · · ·non-individuals filing for bankruptcy


Page 57·1· · · · · · · · · R. AUERBACH

·2· · · ·that was filed as Docket 1-117.

·3· · · ·Q.· · Mr. Auerbach, have you seen this

·4· ·document before?

·5· · · · · · ·MR. TEELE:· Mr. Aulet, can you

·6· · · ·make a representation as to whether

·7· · · ·the document -- because we can only

·8· · · ·see the one page -- is the entire

·9· · · ·Docket No. 117, the whole 34 pages?

10· · · · · · ·MR. AULET:· Yes.· This is the

11· · · ·entire 34-page statement of financial

12· · · ·affairs that was filed with the

13· · · ·Bankruptcy Court.

14· · · · · · ·MR. KESTENBAUM:· Is there a

15· · · ·specific thing you want to point him

16· · · ·to?

17· · · · · · ·MR. AULET:· I first want to know

18· · · ·if he has seen this document before.

19· · · · · · ·MR. TEELE:· Mr. Aulet, are you

20· · · ·able to release the document so he can

21· · · ·look through it?· All he can see is

22· · · ·the first page of the 34-page


24· · · · · · ·MR. AULET:· I don't know if I am

25· · · ·able to.· I don't see an option to do


Page 58·1· · · · · · · · · R. AUERBACH

·2· · · ·that available easily here.· I have

·3· · · ·just ticked Mr. Auerbach's name.

·4· · · ·Check if he can now scroll through it.

·5· · · · · · ·THE WITNESS:· Thank you.

·6· · · ·Q.· · Turn to page 18.· Is that your

·7· ·signature?

·8· · · ·A.· · Give me a moment.· I will move

·9· ·to page 18.· Thank you.

10· · · · · · ·That's my signature.

11· · · ·Q.· · Did you review this document

12· ·carefully before signing it?

13· · · ·A.· · I did review it, yes.

14· · · ·Q.· · And did you review all of the

15· ·text on this page, including the warning

16· ·and the statement that you declare under

17· ·perjury that the foregoing is true and

18· ·correct?

19· · · ·A.· · Yes.

20· · · ·Q.· · And the statement is that you

21· ·have examined the information and the

22· ·statement of financial affairs and any

23· ·attachment, that you have a reasonable

24· ·belief that the information is true and

25· ·correct?


Page 59·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · Yes, a reasonable belief that it

·3· ·is correct.

·4· · · ·Q.· · Now, if we turn to page 25, this

·5· ·is an exhibit, part 2, question 4,

·6· ·"Payment or other transfers of property

·7· ·made within one year before filing the

·8· ·case that benefited any insider."

·9· · · · · · ·If we go to page 26, the

10· ·schedule starts.· Did you review this

11· ·schedule carefully before filing it with

12· ·the Bankruptcy Court?

13· · · ·A.· · I did look over this schedule,

14· ·yes.· There -- yes.

15· · · ·Q.· · And did you endeavor to make

16· ·sure that it was complete?

17· · · ·A.· · I did.· And I thought at the

18· ·time it was complete.

19· · · ·Q.· · And did you endeavor to make

20· ·sure that it was accurate?

21· · · ·A.· · Yes.· That was my endeavor.

22· · · ·Q.· · And if we go to page 27 for

23· ·Robert Jolson, you will see that $35,000

24· ·is listed as T&E reimbursement.· Was that

25· ·correct?


Page 60·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · No, it is not correct.· And that

·3· ·is something I missed.· The coding is

·4· ·wrong.

·5· · · ·Q.· · And that should have been coded

·6· ·as a bonus.· Is that correct?

·7· · · ·A.· · That is correct.

·8· · · ·Q.· · And this list is not complete,

·9· ·is that correct?· When I say "list," I

10· ·mean the entire schedule of payments.

11· · · ·A.· · I am not aware it is not

12· ·complete.

13· · · ·Q.· · So between pages 26 and 27, is

14· ·this a complete list of payments or

15· ·transfers of property made within one year

16· ·before filing this case that benefited any

17· ·insider?

18· · · ·A.· · I am listening; yes -- sorry.

19· ·You asked me a question?

20· · · · · · ·MR. DUFFY:· Can you repeat the

21· · · ·question, please?

22· · · ·Q.· · Between pages 26 and 27 of this

23· ·exhibit, is this a complete list of

24· ·payments or transfers of property made

25· ·within one year before filing this case


Page 61·1· · · · · · · · · R. AUERBACH

·2· ·that benefited any insider?

·3· · · ·A.· · To the best of my knowledge, it

·4· ·is.

·5· · · ·Q.· · Were payments made to David

·6· ·Harrison LLC within one year of the filing

·7· ·of the bankruptcy?

·8· · · ·A.· · No.

·9· · · ·Q.· · It is your testimony that no

10· ·payments to David Harrison LLC were made

11· ·within one year of the filing of the

12· ·bankruptcy?


14· · · ·and answered.· You can answer.

15· · · ·A.· · It is my belief that none were

16· ·made within the last year.

17· · · ·Q.· · Are you aware that Mr. Jolson

18· ·was not aware that David Harrison LLC was

19· ·an entity that you control?


21· · · ·A.· · I am so sorry.· I got

22· ·distracted.· Can you repeat the question?

23· · · ·Q.· · Was Mr. Jolson aware that you

24· ·controlled David Harrison LLC?



Page 62·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · I don't know.

·3· · · ·Q.· · Did you ever tell him that you

·4· ·controlled David Harrison LLC?

·5· · · ·A.· · I don't remember.

·6· · · ·Q.· · Would you have any reason to

·7· ·doubt that he didn't know who controlled



10· · · ·A.· · I don't know how to answer that

11· ·question.


13· · · ·Exhibit 3.)

14· · · · · · ·MR. AULET:· Mr. Auerbach, I am

15· · · ·showing you what we have designated as

16· · · ·Exhibit 3.· This is a PDF file called

17· · · ·"David Harrison Invoices" that was

18· · · ·produced to us by the Debtors.

19· · · ·Q.· · Page 1, you will see it is what

20· ·looks like a spreadsheet that lists -- you

21· ·know, I will skip trying to characterize

22· ·it.

23· · · · · · ·If we go to page 2, we see an

24· ·invoice from David Harrison LLC.· Have you

25· ·ever seen this invoice or any invoice like


Page 63·1· · · · · · · · · R. AUERBACH

·2· ·it?

·3· · · ·A.· · I haven't seen this invoice, no.

·4· · · ·Q.· · Have you ever seen any invoice

·5· ·like this one?

·6· · · ·A.· · No.· It -- no.

·7· · · ·Q.· · Who issued this invoice?


·9· · · ·A.· · I am not sure.

10· · · ·Q.· · Did you prepare this invoice?



13· · · ·Q.· · Was the answer to the question

14· ·that, no, you did not prepare this

15· ·invoice?

16· · · ·A.· · Yes.· I mean, that is correct.

17· · · ·Q.· · Who directed Robert Jolson to

18· ·pay this invoice?


20· · · ·form.

21· · · ·A.· · I don't know for sure who gave

22· ·Robert the -- I don't know.· I don't know

23· ·who gave Robert this invoice.

24· · · ·Q.· · Did you direct Mr. Jolson to pay

25· ·this invoice?


Page 64·1· · · · · · · · · R. AUERBACH


·3· · · ·A.· · No.

·4· · · · · · ·MR. DUFFY:· You can answer.

·5· · · ·A.· · No, I did not.

·6· · · ·Q.· · Has David Harrison LLC ever

·7· ·provided consulting services?


·9· · · ·form.

10· · · ·A.· · No.· Just the rent that I

11· ·previously mentioned in my testimony.

12· · · ·Q.· · And you previously testified

13· ·that Northwest rented the property for

14· ·about nine months.· Is that correct?

15· · · ·A.· · I believe so.· Nine months,

16· ·approximately.

17· · · ·Q.· · What was the rent for those nine

18· ·months?

19· · · ·A.· · About 9,000.

20· · · ·Q.· · Now, I believe you testified

21· ·earlier that David Harrison LLC has no

22· ·employees.· Is that correct?

23· · · ·A.· · That is correct.

24· · · ·Q.· · And you are the manager of David



Page 65·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · Yes.

·3· · · ·Q.· · Who could have created this

·4· ·invoice on behalf of David Harrison LLC

·5· ·besides you?

·6· · · ·A.· · I am not sure.

·7· · · ·Q.· · Do you believe that this invoice

·8· ·is a fraudulent invoice?


10· · · ·A.· · Fraud is a legal term.

11· · · ·Q.· · Do you believe that somebody

12· ·created this invoice without authorization

13· ·from David Harrison LLC?

14· · · ·A.· · I don't -- I don't know. I

15· ·don't know.

16· · · ·Q.· · Would anyone have been

17· ·authorized to create an invoice like

18· ·this -- strike that.

19· · · · · · ·Who would have been authorized

20· ·to order a creation of an invoice on

21· ·behalf of David Harrison LLC other than

22· ·you?

23· · · ·A.· · The only person that I could

24· ·think of could be my assistant.

25· · · ·Q.· · Did you instruct your assistant


Page 66·1· · · · · · · · · R. AUERBACH

·2· ·to make this invoice or any invoice like

·3· ·it?

·4· · · ·A.· · No.

·5· · · ·Q.· · Would she have been authorized

·6· ·to create an invoice on behalf of David

·7· ·Harrison LLC without being instructed by

·8· ·you to do so?

·9· · · · · · ·MR. TEELE:· Objection.· You can

10· · · ·answer if you understand.

11· · · · · · ·MR. DUFFY:· You can answer if

12· · · ·you understand the question.

13· · · ·A.· · Can you repeat the question

14· ·please, sir?

15· · · ·Q.· · Would your assistant have been

16· ·authorized by David Harrison LLC to create

17· ·this invoice if you had not instructed him

18· ·or her to do so?

19· · · ·A.· · Should not be.· That should not

20· ·be.

21· · · · · · ·MR. DUFFY:· Hang on.· He has a

22· · · ·question for counsel.· He answered the


24· · · · · · ·(Discussion held off the record;

25· · · ·witness confers with counsel.)


Page 67·1· · · · · · · · · R. AUERBACH

·2· · · · · · ·MR. DUFFY:· Okay.· We're back.

·3· · · ·Q.· · Did David Harrison LLC get paid

·4· ·the $9,700 shown on this invoice?

·5· · · ·A.· · David Harrison LLC did receive

·6· ·rent, and -- I am going to make it bigger

·7· ·again.· I am sorry.· I cannot see this

·8· ·thing.

·9· · · · · · ·And that amount is what David

10· ·Harrison LLC received as rent.

11· · · ·Q.· · But it was not for consulting

12· ·services?


14· · · ·A.· · No.· Other than I was working.

15· · · ·Q.· · If you go to page 3, you will

16· ·see another invoice from September 2017.

17· ·Again, this invoice reads "Consulting."

18· ·Is this invoice accurate?


20· · · ·form.

21· · · · · · ·MR. DUFFY:· For the record, this

22· · · ·is October of 2017.· I think, Counsel,

23· · · ·you said September.· If I misheard, I

24· · · ·apologize.

25· · · · · · ·MR. AULET:· It says invoice


Page 68·1· · · · · · · · · R. AUERBACH

·2· · · ·September 1, 2017.· It has a big stamp

·3· · · ·underneath that that says "Received

·4· · · ·October 17th, 2017."· It actually says

·5· · · ·"for August 2017."

·6· · · · · · ·I will simply say "the invoice"

·7· · · ·on page 3, given the lack of clarity

·8· · · ·on what date this invoice is for.

·9· · · · · · ·MR. DUFFY:· Fair enough.

10· · · ·Q.· · Have you ever seen this invoice

11· ·before?

12· · · ·A.· · No.

13· · · ·Q.· · Do you know whose signature that

14· ·is in the bottom right-hand corner?

15· · · ·A.· · Give me a moment, please.

16· · · · · · ·No, I do not.

17· · · ·Q.· · Mr. Jolson testified that that

18· ·is his signature.· Do you have any reason

19· ·to doubt that?

20· · · ·A.· · If Mr. Jolson said that, then I

21· ·have no reason to doubt that.

22· · · ·Q.· · Why did Mr. Jolson believe that

23· ·David Harrison LLC provided consulting

24· ·services?

25· · · · · · ·MR. TEELE:· Objection.· I don't


Page 69·1· · · · · · · · · R. AUERBACH

·2· · · ·know how you expect the witness to be

·3· · · ·inside Mr. Jolson's mind.

·4· · · ·Q.· · As the manager of David Harrison

·5· ·LLC and the manager of Northwest Company,

·6· ·what information did you convey to Robert

·7· ·Jolson regarding the relationship between

·8· ·David Harrison LLC and The Northwest

·9· ·Company?

10· · · ·A.· · A discussion that I would be

11· ·utilizing the property to work out of for

12· ·a period of time.· I had some sensitive

13· ·things to work on outside of the office.

14· · · ·Q.· · What were those sensitive

15· ·things?

16· · · ·A.· · The business issues that we were

17· ·going through, both here, in China, in

18· ·Cambodia.· I would work late at night,

19· ·start early in the morning.· Calls would

20· ·have to be in the middle of the night.

21· ·Things like that.

22· · · ·Q.· · So because those issues were

23· ·sensitive, you needed to discuss them at a

24· ·location other than The Northwest Company

25· ·office?


Page 70·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · Also because they were very late

·3· ·at night or 2 or 3 o'clock in the morning.

·4· · · ·Q.· · Mr. Jolson testified he was

·5· ·unaware of any business that Northwest had

·6· ·ever conducted at 3 Old Farm.· Do you have

·7· ·any explanation why he was unaware of

·8· ·these discussions that you testified you

·9· ·had with him?

10· · · · · · ·MR. TEELE:· Same objection as

11· · · ·previously, to the extent you are

12· · · ·asking him to comment on testimony

13· · · ·that he didn't hear or thoughts in

14· · · ·Mr. Jolson's mind that he doesn't

15· · · ·know.· I don't think that's an

16· · · ·appropriate question.

17· · · · · · ·If you happen to know, you can

18· · · ·answer the question.

19· · · ·A.· · I don't know.· I assume that his

20· ·definition is his definition.

21· · · ·Q.· · But again, it's your testimony

22· ·under oath that you never told Mr. Jolson

23· ·that David Harrison LLC provided

24· ·consulting services?



Page 71·1· · · · · · · · · R. AUERBACH

·2· · · ·characterization of his testimony.

·3· · · ·Let him testify for himself.

·4· · · ·A.· · It is not my belief that we

·5· ·discussed consulting.

·6· · · ·Q.· · What is the property at 3 Old

·7· ·Farm Road like?




11· · · · · · ·MR. AULET:· Will I strike and

12· · · ·reask the question.

13· · · ·Q.· · Is 3 Old Farm Road a residence?

14· · · ·A.· · Yes.

15· · · ·Q.· · In fact, it is a fairly

16· ·expensive house, isn't it?


18· · · ·characterization and assuming

19· · · ·information not in evidence.

20· · · ·Q.· · How much did David Harrison LLC

21· ·pay for 3 Old Farm Road?

22· · · ·A.· · Approximately 4 million.

23· · · ·Q.· · Let's go to page 4.· Again, we

24· ·have another invoice.· This one is dated

25· ·October 1, 2017, instead of September, as


Page 72·1· · · · · · · · · R. AUERBACH

·2· ·previously noted.· It is also received on

·3· ·October 17, 2020[sic], like the previous

·4· ·statement.

·5· · · · · · ·Did you order this invoice to be

·6· ·created?

·7· · · ·A.· · No.

·8· · · ·Q.· · Do you know who created this

·9· ·invoice?

10· · · ·A.· · No.· No.

11· · · ·Q.· · So, I will let you -- I am going

12· ·to give you control over this rather than

13· ·manually flip through each one, but you

14· ·will see that there is a large number of

15· ·invoices here.· If we scroll through them,

16· ·you will see that they go through every

17· ·month from the first month -- now we are

18· ·in 2018.· If we jump ahead to page 15, we

19· ·are at September 2018.

20· · · · · · ·Now I believe we are

21· ·significantly beyond nine months.· Why

22· ·were these invoices being issued in

23· ·September of 2018?

24· · · ·A.· · I don't know why.· They're not

25· ·paid.· I don't know why.


Page 73·1· · · · · · · · · R. AUERBACH

·2· · · ·Q.· · Did I hear you say they are not

·3· ·paid, or did I mishear something?

·4· · · ·A.· · You did, but I shouldn't have

·5· ·said that because I don't actually know

·6· ·the date.· I am trying hard to look at the

·7· ·date, but I don't really know.· I just --

·8· ·I don't know.

·9· · · ·Q.· · Is it your belief that David

10· ·Harrison LLC was only paid for nine months

11· ·of these 9,700 monthly invoices?

12· · · ·A.· · Yes, it is my belief.

13· · · ·Q.· · If we jump ahead to the last

14· ·one, this is December 1, 2019, and it

15· ·bears a note on the bottom "to be entered

16· ·on December 1, 2019."· I believe that

17· ·Mr. Jolson testified that he thought this

18· ·was the signature of something named

19· ·Christine, who was the event manager.

20· · · ·A.· · Yes.

21· · · ·Q.· · First, have you ever seen this

22· ·invoice before?

23· · · ·A.· · No.

24· · · ·Q.· · Do you know whose signature or

25· ·handwriting that is at the bottom?


Page 74·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · I would assume that he is

·3· ·correct.· It does look like a CM.

·4· · · ·Q.· · And who is CM?

·5· · · ·A.· · Christine McClure.

·6· · · ·Q.· · Is Christine McClure an events

·7· ·manager?

·8· · · ·A.· · She is.

·9· · · ·Q.· · Why would she be involved in

10· ·invoices that were for consulting?

11· · · ·A.· · She also has certain capacities

12· ·that she works with me as an assistant.

13· ·But her main function is to handle and

14· ·coordinate trade shows.

15· · · ·Q.· · You earlier mentioned an

16· ·assistant who might have been authorized

17· ·to create invoices on behalf of David

18· ·Harrison LLC.· Is that Christine McClure?

19· · · ·A.· · Yes.

20· · · ·Q.· · Would she have been the one that

21· ·you were thinking may -- strike all that.

22· · · · · · ·Did you ever instruct her to

23· ·create this invoice?

24· · · ·A.· · No.

25· · · ·Q.· · Was there any reason for The


Page 75·1· · · · · · · · · R. AUERBACH

·2· ·Northwest Company to pay this invoice?


·4· · · ·form.

·5· · · ·A.· · Well, 2019, no.· No.

·6· · · ·Q.· · Has David Harrison LLC been

·7· ·receiving monthly payments of 9,700 since

·8· ·2017 from The Northwest Company?

·9· · · ·A.· · As I stated earlier, I believe

10· ·they received nine payments.· And I

11· ·believe that that -- I believe that that

12· ·is the number.· The property was not

13· ·utilized after.

14· · · ·Q.· · Is anyone currently renting the

15· ·property at 3 Old Farm Lane?

16· · · ·A.· · Currently, no.

17· · · ·Q.· · Was anyone renting it in

18· ·December of 2019?

19· · · ·A.· · No.

20· · · ·Q.· · What about at any time in 2019?

21· · · ·A.· · 2019, there was no rentals of

22· ·the unit.

23· · · ·Q.· · Mr. Auerbach, are you familiar

24· ·with the general ledgers of Northwest?



Page 76·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · No.

·3· · · ·Q.· · Do you know what system holds

·4· ·the general ledgers of Northwest?

·5· · · ·A.· · Can you define the question a

·6· ·little bit more for me?

·7· · · ·Q.· · Have you ever heard of an ERP

·8· ·system?

·9· · · ·A.· · Yes.

10· · · ·Q.· · And what is the ERP system?

11· · · ·A.· · The ERP system is the operating

12· ·system of which this company or other

13· ·companies would operate their business

14· ·platforms.

15· · · ·Q.· · Do you have access to the ERP

16· ·system?

17· · · ·A.· · No, I do not.


19· · · ·Exhibit 4.)


21· · · ·you what I have marked as Exhibit 4,

22· · · ·which is a series of screenshots from

23· · · ·individual general ledger files that

24· · · ·were produced to us by the company.

25· · · ·Q.· · If you will take a look, the


Page 77·1· · · · · · · · · R. AUERBACH

·2· ·first is for March 2019.· Near the bottom

·3· ·it shows a consulting fee for David

·4· ·Harrison LLC.

·5· · · ·A.· · Give me a moment.· I did review

·6· ·the document.· I am just trying to read it

·7· ·where I can answer your question.

·8· · · · · · ·This is from the general ledger,

·9· ·you are stating?

10· · · ·Q.· · Yes.

11· · · ·A.· · Go ahead.· I am sorry.· Could

12· ·you state your question, sir?

13· · · ·Q.· · Do you see the line that reads

14· ·"David Harrison LLC, balance forward

15· ·3/4/2019, 9,700"?

16· · · ·A.· · I see the name David Harrison

17· ·LLC.· I am having a little trouble reading

18· ·the numbers, but I will assume you are

19· ·correct.

20· · · ·Q.· · I believe you can zoom in on the

21· ·exhibit on your screen if you would like

22· ·to zoom in to verify.

23· · · ·A.· · I have been zooming in.· The

24· ·problem is every time I zoom in I lose the

25· ·bottom of the piece of paper.· I use an


Page 78·1· · · · · · · · · R. AUERBACH

·2· ·Apple and I think I am somewhat challenged

·3· ·on this system.

·4· · · · · · ·Hold on.· Yes, I see 9,700.

·5· · · ·Q.· · Do you have any reason to doubt

·6· ·that payment was made to David Harrison

·7· ·LLC on the dates shown?

·8· · · ·A.· · I don't know.· If you are

·9· ·stating that this shows it was paid?· Is

10· ·that your question?· Does this show

11· ·that -- I don't really understand what

12· ·this shows.

13· · · ·Q.· · Who reviews the books of David


15· · · ·A.· · Ken Gould.

16· · · ·Q.· · Who would know if it was getting

17· ·paid 9,700 every month?

18· · · ·A.· · Ken Gould and, as stated

19· ·previously, we received rent for

20· ·approximately nine months, and I am aware

21· ·of that.

22· · · ·Q.· · Did Ken Gould create any

23· ·financial statements of David Harrison LLC

24· ·for its activity in 2019?

25· · · ·A.· · I don't believe we published


Page 79·1· · · · · · · · · R. AUERBACH

·2· ·'19, if that is the right word, but that

·3· ·is his function.

·4· · · ·Q.· · Did he give you any sort of

·5· ·statement that would show if David

·6· ·Harrison LLC had been receiving monthly

·7· ·rent on the 3 Old Farm Road property in

·8· ·2019?


10· · · ·If you understand the question, go

11· · · ·ahead and answer.

12· · · ·A.· · Would you ask the question

13· ·again, sir?

14· · · ·Q.· · Did Ken Gould give you any sort

15· ·of financial statement or any other

16· ·document that would have shown you if

17· ·David Harrison LLC had been receiving rent

18· ·on the 3 Old Farm Road property in 2019?

19· · · ·A.· · In 2019, no.

20· · · ·Q.· · Did David Harrison LLC receive

21· ·any income that you are aware of in 2019?

22· · · ·A.· · Not that I am aware of by year.

23· · · ·Q.· · I am not sure what you mean by

24· ·"not that I am aware of by year."· Could

25· ·you explain that answer a little more?


Page 80·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · I stated previously that David

·3· ·Harrison LLC received rent for

·4· ·approximately nine months.· I don't know

·5· ·the period, sitting here, of those

·6· ·payments, so I would be guessing.· I don't

·7· ·know.

·8· · · ·Q.· · But if David Harrison LLC had

·9· ·been receiving payments from 2017 through

10· ·the end of 2019, that is a lot longer than

11· ·nine months, right?


13· · · ·A.· · The duration of time that you

14· ·stated, it would be.· But I have no -- I

15· ·am not aware that David Harrison did at

16· ·all.

17· · · ·Q.· · Do you pay attention to the

18· ·finances of David Harrison LLC?


20· · · ·form.

21· · · ·A.· · I review it at the end of the

22· ·year when Ken produces the statement and

23· ·the taxes.

24· · · ·Q.· · Has he produced those statements

25· ·and taxes for 2019?


Page 81·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · No, sir.

·3· · · ·Q.· · Who pays the expenses on the

·4· ·David Harrison property?

·5· · · ·A.· · Northwest Textiles Holdings or

·6· ·David Harrison.· It is one and the same.

·7· · · ·Q.· · Does David Harrison LLC have its

·8· ·own bank account?

·9· · · ·A.· · Yes, it does.

10· · · ·Q.· · Do you receive bank statements

11· ·for that bank account?

12· · · ·A.· · Personally, no, I do not.

13· · · ·Q.· · Who does?

14· · · ·A.· · Ken Gould.

15· · · ·Q.· · Who is authorized to withdraw

16· ·money from the David Harrison LLC bank

17· ·account?

18· · · ·A.· · Myself.

19· · · ·Q.· · Anyone else?

20· · · ·A.· · No.

21· · · ·Q.· · Have you ever withdrawn money

22· ·from the David Harrison LLC bank accounts

23· ·in the past four years?

24· · · ·A.· · I can't say.

25· · · ·Q.· · Have you ever instructed sums of


Page 82·1· · · · · · · · · R. AUERBACH

·2· ·money to be transferred from the David

·3· ·Harrison LLC bank account to the bank

·4· ·accounts of Northwest?

·5· · · ·A.· · I don't remember.

·6· · · ·Q.· · And so, I have gone to page 10

·7· ·of this exhibit, which shows two payments

·8· ·in December 2019.· Again, it is your

·9· ·testimony that you are unaware of these

10· ·payments to David Harrison LLC?


12· · · ·form.

13· · · ·A.· · I don't believe -- I don't

14· ·believe there were any payments in '19,

15· ·but I don't know.· I don't know.

16· · · ·Q.· · Do you have any explanation for

17· ·why more than two years of invoices were

18· ·created by David Harrison LLC reading

19· ·"Consulting"?


21· · · ·form.

22· · · ·A.· · No, I don't.

23· · · ·Q.· · Does the property at 3 Old Farm

24· ·Lane have a mortgage?

25· · · ·A.· · Yes, it does.


Page 83·1· · · · · · · · · R. AUERBACH

·2· · · ·Q.· · And who is responsible for

·3· ·paying that mortgage?

·4· · · ·A.· · I am.

·5· · · ·Q.· · And do you pay that mortgage

·6· ·every month?

·7· · · ·A.· · Yes, I do.

·8· · · ·Q.· · Approximately what are the

·9· ·mortgage payments?

10· · · ·A.· · I don't know.· It is automatic.

11· · · · · · ·MR. AULET:· Now is probably a

12· · · ·good time for a short lunch break if

13· · · ·that works for everyone.

14· · · · · · ·MR. TEELE:· We'll come back at

15· · · ·1:30 or 1:40.

16· · · · · · ·MR. AULET:· Why don't we do

17· · · ·1:30.

18· · · · · · ·THE VIDEOGRAPHER:· 12:48, off

19· · · ·the record.

20· · · · · · ·(Luncheon Recess.)

21· · · · · · ·THE VIDEOGRAPHER:· Time is 1:31.

22· · · ·We are back on the record.

23· · · · · · ·THE WITNESS:· Mr. Aulet?

24· · · ·Q.· · Yes.

25· · · ·A.· · When I was having lunch, I was


Page 84·1· · · · · · · · · R. AUERBACH

·2· ·sitting in my office and I realized I made

·3· ·a mistake in a comment I made earlier in

·4· ·that I had said that I believed on David

·5· ·Harrison that there were nine payments

·6· ·made.· And what I had meant to say is that

·7· ·there were nine payments that were not

·8· ·made.· So, I misspoke so I wanted to

·9· ·clarify.· I was incorrect in what I said.

10· · · ·Q.· · I am sorry.· I am not sure I

11· ·understand.· You say that there were nine

12· ·payments that were not made.· What do you

13· ·mean by "there were nine payments that

14· ·were not made"?

15· · · ·A.· · That there were nine payments

16· ·that were in the system that -- I am not

17· ·sure why they were in the system but they

18· ·were not paid.· I had made a comment that

19· ·there were nine paid.· I made a mistake.

20· · · ·Q.· · How did you know --

21· · · · · · ·How did you know how many

22· ·invoices were in the system?

23· · · ·A.· · I had asked previously, a while

24· ·ago.· But like I said, I had made a

25· ·mistake.· I flipped the numbers.


Page 85·1· · · · · · · · · R. AUERBACH

·2· · · ·Q.· · So, to know how many invoices

·3· ·were not paid, you would have needed to

·4· ·know how many invoices were issued and how

·5· ·many invoices were paid.· Correct?

·6· · · ·A.· · No.· I had just asked -- no. I

·7· ·just asked a while back what was in the

·8· ·system because I didn't understand it.· It

·9· ·came up a long time ago.· Anyway, as I

10· ·said, I made a mistake.

11· · · ·Q.· · Who did you ask --

12· · · · · · ·MR. TEELE:· Let him answer the


14· · · ·A.· · I had asked Ken, Ken Gould, a

15· ·while back.· I was just talking to him

16· ·about different things.· Anyway, as I

17· ·said, I flipped the numbers.· It was my

18· ·mistake and I wanted to correct it.

19· · · ·Q.· · When did you have this

20· ·conversation with Ken Gould?

21· · · ·A.· · A while ago.· I don't know.· And

22· ·I am trying not to guess since when I

23· ·guess I seem to make mistakes.

24· · · ·Q.· · What do you recall about this

25· ·conversation with Ken Gould?


Page 86·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · I had just asked Ken about the

·3· ·rent received from David Harrison, and Ken

·4· ·had made a comment to me that -- because

·5· ·remember, Ken is with David Harrison and

·6· ·Ken also sees the records here and Ken

·7· ·said to me that he didn't know why there

·8· ·were nine rent payments in the system that

·9· ·were never paid and should not be in the

10· ·system.· And we talked about that.· And

11· ·that was it.· And I said that there were

12· ·nine paid.

13· · · ·Q.· · How long was the Old West -- the

14· ·Old Farm Lane property in use by

15· ·Northwest?

16· · · ·A.· · I believe -- I don't know.

17· · · ·Q.· · Didn't you testify that you were

18· ·the only person who used it on behalf of

19· ·Northwest?

20· · · ·A.· · Yes.

21· · · ·Q.· · How long have you been using it?

22· · · ·A.· · As I said, I was going to say I

23· ·believe -- again, I made a mistake, so I

24· ·don't know the exact length of time. I

25· ·don't know.


Page 87·1· · · · · · · · · R. AUERBACH

·2· · · ·Q.· · What refreshed your recollection

·3· ·as to how much David Harrison had earned

·4· ·from Northwest in rent?

·5· · · ·A.· · Earned?· I was just having

·6· ·lunch.· I was thinking about our

·7· ·conversation, you know, from this morning,

·8· ·and I was going through it in my head.

·9· ·That's it.· I got a sandwich, I sat in my

10· ·office.· I was just thinking.

11· · · ·Q.· · Did you ever make an attempt to

12· ·get those nine payments paid?

13· · · ·A.· · No.

14· · · ·Q.· · Why not?

15· · · ·A.· · I wasn't utilizing it.· In other

16· ·words, I don't even know why they are in

17· ·the system.

18· · · ·Q.· · So, when you were alerted that

19· ·these payments existed, and despite the

20· ·fact you weren't using them, why didn't

21· ·you alert Northwest that these payments

22· ·had stopped being made?


24· · · ·Misleading.· Mischaracterizes the

25· · · ·testimony.· If you understand, you can


Page 88·1· · · · · · · · · R. AUERBACH

·2· · · ·answer.

·3· · · ·A.· · I don't, actually.

·4· · · ·Q.· · Did you ever alert Northwest

·5· ·that it should stop making payments to


·7· · · ·A.· · I have no idea.· I just don't

·8· ·remember.

·9· · · ·Q.· · Was anyone at Northwest besides

10· ·you familiar with your business

11· ·arrangement between Northwest Company and

12· ·David Harrison LLC?

13· · · ·A.· · Can you clarify what that means?

14· ·I am sorry.· When you say any

15· ·relationship?

16· · · ·Q.· · Who knew that you were renting

17· ·this property from David Harrison LLC on

18· ·behalf of Northwest at Northwest?

19· · · ·A.· · My accountant, and I would

20· ·assume the people here who were paying the

21· ·rent.

22· · · ·Q.· · When you say "the people here

23· ·who were paying the rent," who do you

24· ·mean?

25· · · ·A.· · Robert.


Page 89·1· · · · · · · · · R. AUERBACH

·2· · · ·Q.· · Robert testified he didn't know

·3· ·that Northwest was leasing property from

·4· ·David Harrison LLC.


·6· · · ·Mischaracterization.

·7· · · ·Q.· · Why would he have testified that

·8· ·way?

·9· · · · · · ·MR. TEELE:· Objection.· Do you

10· · · ·have the transcript to show him? I

11· · · ·think we should do that.· Otherwise I

12· · · ·don't know and certainly Mr. Auerbach

13· · · ·doesn't know what Mr. Jolson testified

14· · · ·to.

15· · · ·Q.· · Who at Northwest would know if

16· ·you were using or not using the Old Farm

17· ·Road property?

18· · · ·A.· · Myself.

19· · · ·Q.· · And if you didn't tell anyone

20· ·that you were no longer using it the

21· ·payments should be stopped, would anyone

22· ·else know the payments should be stopped?


24· · · ·form.· If you understand it, you can

25· · · ·answer.


Page 90·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · I mean, it was a while ago.· The

·3· ·payments were stopped, so clearly the

·4· ·payments stopped.· I must have -- I must

·5· ·have said it but I don't remember when so

·6· ·I don't want to make it up.


·8· · · ·Exhibit 5.)

·9· · · · · · ·MR. AULET:· So, Mr. Auerbach, I

10· · · ·am going to show you what I have

11· · · ·marked Exhibit 5, which is a bank

12· · · ·statement from June 29, 2019 through

13· · · ·July 31, 2019.

14· · · ·Q.· · I am going to go to page 12 of

15· ·this exhibit.· If you look at the bottom,

16· ·there is a section called "Checks Paid"

17· ·and if you look, the fourth down on the

18· ·leftmost column is check 29080, paid on

19· ·the 11th for $9,700.· Was that check paid

20· ·to David Harrison LLC?

21· · · ·A.· · I have no idea.· I mean, I am

22· ·looking where it says "Checks Paid,"

23· ·and...

24· · · · · · ·I am trying to read it.· I can

25· ·make it larger but things come up and


Page 91·1· · · · · · · · · R. AUERBACH

·2· ·block it.

·3· · · · · · ·(Pause.)

·4· · · · · · ·I do see it.· I just have no

·5· ·idea what it is -- I have no idea.

·6· · · ·Q.· · Are you aware that we have

·7· ·requested a check register from the

·8· ·Debtors that would enable us to see who

·9· ·checks such as this check were paid to?

10· · · ·A.· · Not specifically.· I don't

11· ·specifically remember that but...

12· · · ·Q.· · Do such check registers exist at

13· ·Northwest?

14· · · ·A.· · When you say a check register,

15· ·you'd have to explain to me what that

16· ·means.

17· · · ·Q.· · I would like a document that

18· ·tells me who check 29080 was made out to.

19· ·Does such a document exist at Northwest?


21· · · ·Q.· · Who would?

22· · · ·A.· · I don't know.

23· · · ·Q.· · Now, July 11, 2019 is within a

24· ·year of the Northwest bankruptcy filing.

25· ·Correct?


Page 92·1· · · · · · · · · R. AUERBACH

·2· · · · · · ·MR. TEELE:· Why don't you just

·3· · · ·make a representation, Mr. Aulet, and

·4· · · ·see if he agrees with it?

·5· · · ·Q.· · If I made the representation

·6· ·that July 11, 2019 is within one year of

·7· ·the filing date of Northwest, would you

·8· ·have any reason to disagree with that

·9· ·representation?

10· · · ·A.· · No.· We filed on April 18th, I

11· ·believe, of 2020.

12· · · ·Q.· · And if this check for $9,700 was

13· ·made out to David Harrison LLC and was

14· ·deposited by David Harrison LLC, should it

15· ·have been disclosed?

16· · · · · · ·MR. DUFFY:· Objection.· It

17· · · ·assumes facts that are not in

18· · · ·evidence.· I also object to the


20· · · · · · ·You can answer if you

21· · · ·understand.


23· · · ·Q.· · When you prepared the schedule

24· ·of all payments that were made on

25· ·behalf -- by the Debtors to entities --


Page 93·1· · · · · · · · · R. AUERBACH


·3· · · · · · ·Do you recall the schedule we

·4· ·have looked at of all payments made to or

·5· ·for the benefit of insiders within one

·6· ·year of the petition date?

·7· · · ·A.· · The statement that you showed me

·8· ·earlier, yes.

·9· · · ·Q.· · And you were aware that the

10· ·Debtors had made payments to David

11· ·Harrison LLC in the past.· Correct?

12· · · · · · ·MR. DUFFY:· Objection.· Vague.

13· · · ·What time period are you speaking

14· · · ·about?

15· · · · · · ·MR. AULET:· At any point in the

16· · · ·past.

17· · · · · · ·MR. DUFFY:· If you understand

18· · · ·it, you can answer it.

19· · · ·A.· · I relied upon others when they

20· ·put the schedule together.· It was my

21· ·understanding that no payments were made

22· ·within a year.· That is my understanding.

23· · · ·Q.· · Did you inform those others that

24· ·David Harrison LLC was one of your

25· ·entities?


Page 94·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · I don't remember having any

·3· ·conversation about David Harrison LLC.

·4· · · ·Q.· · When you reviewed the schedules

·5· ·for accuracy, did you consider if David

·6· ·Harrison LLC was an entity that someone

·7· ·should check that payments had been made

·8· ·to?

·9· · · ·A.· · No.· As I said, I relied upon

10· ·others to give me the schedule.· I did not

11· ·believe that there were any payments

12· ·within that time frame.

13· · · ·Q.· · What others did you rely on?

14· · · ·A.· · The people who prepared the

15· ·schedules.

16· · · ·Q.· · And who were those?

17· · · ·A.· · The Clear Thinking Group. I

18· ·would assume -- the Clear Thinking Group.

19· · · ·Q.· · Did you provide Clear Thinking

20· ·Group with a complete list of entities

21· ·that were associated with you?

22· · · ·A.· · I don't remember if he gave us a

23· ·listing of all entities.· Again, I did not

24· ·believe that there were any payments in

25· ·the time frame.· Didn't even occur to me.


Page 95·1· · · · · · · · · R. AUERBACH

·2· · · ·Q.· · You earlier testified that you

·3· ·recalled a conversation with your

·4· ·accountant about nine payments that were

·5· ·made to David Harrison LLC that were not

·6· ·received or not made.· Is that correct?

·7· · · · · · ·MR. DUFFY:

·8· · · ·A.· · Yes.· Not -- not not received,

·9· ·just that there were nine payments that

10· ·appeared on our books that should not be

11· ·booked, that we did not pay nor should we.

12· · · ·Q.· · Appeared on whose books?

13· · · ·A.· · Northwest.

14· · · ·Q.· · And Mr. Gould made you aware

15· ·that there were nine payments from David

16· ·Harrison LLC that appeared on Northwest's

17· ·books "that should not be booked, that we

18· ·did not pay nor should we."· Who did you

19· ·tell those payments should not be made?

20· · · ·A.· · I don't remember.· But as I

21· ·said, no payments that I am aware of were

22· ·made.· So I most likely mentioned it to

23· ·Rob but I don't know.· I just don't

24· ·remember.

25· · · ·Q.· · Mr. Auerbach, do you have


Page 96·1· · · · · · · · · R. AUERBACH

·2· ·Northwest American Express cards in your

·3· ·name?

·4· · · ·A.· · No.

·5· · · ·Q.· · How many -- sorry.· How many did

·6· ·you have at the beginning of April of

·7· ·2020?

·8· · · · · · ·THE WITNESS:· He asked if I had,

·9· · · ·and I do not have.

10· · · · · · ·MR. DUFFY:· You answered

11· · · ·contemporaneously now?

12· · · · · · ·THE WITNESS:· Yes.


14· · · ·question.· It assumes facts not in

15· · · ·evidence.

16· · · ·Q.· · In the past, have you had

17· ·American Express cards issued -- strike

18· ·that.

19· · · · · · ·Have you had Northwest Company

20· ·American Express cards issued in your

21· ·name?

22· · · ·A.· · Yes.

23· · · ·Q.· · Did you generally have an

24· ·American Express Platinum Card?

25· · · ·A.· · Yes.


Page 97·1· · · · · · · · · R. AUERBACH

·2· · · ·Q.· · Did you generally have an

·3· ·American Express Centurian Card in your

·4· ·name?

·5· · · ·A.· · Yes.

·6· · · ·Q.· · Was there any difference in the

·7· ·expenses that were supposed to be put on

·8· ·the Platinum Card versus the Centurian

·9· ·Card?

10· · · ·A.· · No.· There was no defined

11· ·difference.

12· · · ·Q.· · Who is Vanessa Marinho?

13· · · ·A.· · Vanessa Marinho is a person who

14· ·worked with us from time to time.· She

15· ·attends events, goes to factories, meets

16· ·the suppliers.· Basically, just somebody

17· ·who helps me with different things.

18· · · ·Q.· · Why did she have a Northwest

19· ·Centurian Card?

20· · · ·A.· · She didn't have a Centurian

21· ·Card.· She had a supplemental card on the

22· ·Centurian account, but it's not a

23· ·Centurian Card.

24· · · ·Q.· · Why did she have a supplemental

25· ·card on the account?


Page 98·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · To cover either expenses, or she

·3· ·didn't have the income to make all the

·4· ·trips.· It would have been much more

·5· ·difficult for me to have to do that

·6· ·through somebody else.· We gave her a

·7· ·card.

·8· · · ·Q.· · Did she perform any -- did you

·9· ·hire her for any personal services

10· ·unrelated to Northwest?


12· · · ·question.· I think it is outside the

13· · · ·scope of anything the deposition is

14· · · ·noticed for.

15· · · · · · ·MR. AULET:· We noticed

16· · · ·Mr. Auerbach in his personal capacity.

17· · · ·Q.· · Vanessa Marinho, did you hire

18· ·her for any personal services unrelated to

19· ·Northwest?

20· · · · · · ·MR. TEELE:· Same objection.· You

21· · · ·can answer.

22· · · ·A.· · Can you define "personal

23· ·services"?

24· · · ·Q.· · Did you hire her to do anything

25· ·that didn't relate to Northwest?


Page 99·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · She also is a real estate agent

·3· ·and she handles the maintenance of the

·4· ·properties in Miami.

·5· · · ·Q.· · What properties in Miami do you

·6· ·mean?

·7· · · ·A.· · The properties that we discussed

·8· ·earlier that were owned -- the units that

·9· ·are owned in Miami.

10· · · ·Q.· · Do you charge personal expenses

11· ·to your Northwest American Express credit

12· ·card?

13· · · ·A.· · Yes.

14· · · ·Q.· · And have you charged a number of

15· ·personal expenses over a number of years

16· ·to those American Express credit cards?


18· · · ·form.

19· · · ·A.· · There were personal charges.

20· · · ·Q.· · What is the procedure at

21· ·Northwest for determining what charges on

22· ·your American Express cards are your

23· ·personal expenses versus corporate

24· ·expenses?



Page 100·1· · · · · · · · · R. AUERBACH

·2· · · ·form.

·3· · · ·A.· · To my knowledge, it goes to

·4· ·accounting.· They are supposed to be

·5· ·booked either to the appropriate business

·6· ·expense, to my W-2 or to my loan account,

·7· ·depending upon the nature of the charge.

·8· · · ·Q.· · You say your W-2.· What tax

·9· ·forms do you receive from Northwest?

10· · · ·A.· · I really don't know what you

11· ·mean.

12· · · ·Q.· · Do you receive a W-2 tax form

13· ·from Northwest?

14· · · ·A.· · Yes.· And it goes to my

15· ·accountant, but yes.

16· · · ·Q.· · Do you receive a K-1 tax form

17· ·from Northwest?

18· · · ·A.· · I don't know.

19· · · ·Q.· · Does your W-2 form that you

20· ·receive accurately reflect all

21· ·compensation that was provided to you by

22· ·Northwest, both cash and non-cash

23· ·compensation?

24· · · ·A.· · To the best of my knowledge, it

25· ·is -- it does.


Page 101·1· · · · · · · · · R. AUERBACH


·3· · · ·Exhibit 6.)

·4· · · · · · ·MR. AULET:· I will show you what

·5· · · ·I have marked Exhibit 6, American

·6· · · ·Express Business Platinum Card

·7· · · ·statement.

·8· · · ·Q.· · I am going to scroll through

·9· ·this a little bit.· Let me get to the

10· ·debits.· So, we are on page 6.· This is a

11· ·detail of charges for the Ross H. Auerbach

12· ·card ending 4-25001.· Whose handwriting is

13· ·this?

14· · · ·A.· · It's mine -- well, at least

15· ·parts of it are.· I recognize the word

16· ·"auto," but maybe I can look at it on --

17· ·give me a second.

18· · · · · · ·(Pause.)

19· · · · · · ·That's my -- appears to be my

20· ·handwriting.

21· · · · · · ·MR. KESTENBAUM:· Each entry you

22· · · ·see on the page?

23· · · · · · ·THE WITNESS:· It appears to be.

24· · · ·A.· · Yes, it appears to be my

25· ·handwriting.


Page 102·1· · · · · · · · · R. AUERBACH

·2· · · ·Q.· · So, when these account

·3· ·statements are received, are you provided

·4· ·with a copy of them?

·5· · · ·A.· · Yes.· And then -- you mean do I

·6· ·get the statements to make those notes?

·7· · · ·Q.· · Yes.

·8· · · ·A.· · Yes.· Yes.

·9· · · ·Q.· · So, are you responsible for

10· ·indicating which expenses on the card are

11· ·your personal expenses and which expenses

12· ·are expenses of Northwest?


14· · · ·A.· · When I write my description,

15· ·yes.· He knows whatever I write.

16· · · ·Q.· · Is anyone else responsible for

17· ·verifying if an expense that you allocate

18· ·to a Northwest expense account is in fact

19· ·a Northwest expense?

20· · · ·A.· · There are supposed to be checks

21· ·and balances.· So if something is deemed

22· ·maybe not correct or -- there is supposed

23· ·to be checks and balances.

24· · · ·Q.· · You say "there are supposed to

25· ·be checks and balances."· What checks and


Page 103·1· · · · · · · · · R. AUERBACH

·2· ·balances are you personally aware of?

·3· · · ·A.· · I am not aware of the checks and

·4· ·balances that are set up but I know that

·5· ·there are checks and balances.· I have

·6· ·been made aware that there are checks and

·7· ·balances.· More than one person looks

·8· ·through these.· I just don't know who that

·9· ·is.

10· · · ·Q.· · Has anyone ever come back to you

11· ·and challenged one of the expenses that

12· ·you allocated to Northwest?


14· · · ·A.· · Over a period of years there had

15· ·to be -- there were occasions where either

16· ·accounting would come back and ask me if

17· ·something was coded correctly or to

18· ·explain in more detail what something was.

19· ·But, yes, I have been asked before.

20· · · ·Q.· · About how many times can you

21· ·recall?

22· · · ·A.· · I don't know.

23· · · ·Q.· · Are there any specific instances

24· ·that you can recall as you sit here today?

25· · · ·A.· · Specific?· Not as I sit here,


Page 104·1· · · · · · · · · R. AUERBACH

·2· ·but the answer is yes, I have been asked

·3· ·about items that I have entered.

·4· · · ·Q.· · Have you ever been asked to

·5· ·provide additional documentation to

·6· ·support an expense?

·7· · · ·A.· · Yes.· Especially with some of

·8· ·the things that are gifts to retailers or

·9· ·gifts to licensors.· I was asked for like

10· ·the actual receipt so --

11· · · · · · ·Like if it was a gift for a

12· ·retailer or a gift for a licensor,

13· ·sometimes I am asked for more detail on

14· ·that.


16· · · ·Q.· · I have turned to page 9 of this

17· ·exhibit, and I would like to direct your

18· ·attention to the bottom entry, which is a

19· ·ticket from Miami to Denver for Gabrielle

20· ·Auerbach.· That is noted as "Ashford Ross

21· ·trip."· Did you write "Ashford Ross trip"

22· ·there?

23· · · ·A.· · I am looking at the other

24· ·screen.

25· · · · · · ·I did.· That is my handwriting.


Page 105·1· · · · · · · · · R. AUERBACH

·2· · · ·Q.· · And when you wrote "Ashford Ross

·3· ·trip," did you intend that this airline

·4· ·ticket be booked to a Northwest expense

·5· ·account?

·6· · · ·A.· · What year is this statement?

·7· ·May I ask?· I can't see it.

·8· · · ·Q.· · You can see the date right next

·9· ·to the ticket of January 2, 2017.

10· · · ·A.· · Oh, okay.· I don't know -- I

11· ·don't know sitting here why I would have

12· ·"Ashford" on there unless there was a

13· ·reason that -- I don't know the answer.

14· ·It could either -- I don't know the

15· ·answer.· It could be a mistake.· It could

16· ·be something that needed to be done in

17· ·Florida.· I don't know.

18· · · ·Q.· · And the passenger is Gabrielle

19· ·Auerbach that is listed there.· Is there

20· ·any reason why a plane ticket for

21· ·Gabriella Auerbach from Miami to Denver

22· ·would be a Northwest expense?

23· · · ·A.· · Not that I am aware of, no.

24· · · ·Q.· · Should that have been billed to

25· ·a Northwest expense account?


Page 106·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · I am looking here.


·4· · · ·question.· It assumes facts that

·5· · · ·aren't in evidence.

·6· · · ·A.· · I just don't remember the trip.

·7· ·I just don't remember.

·8· · · ·Q.· · I have gone to page 10.· You

·9· ·will notice some other entries, in

10· ·particular a $38,000 charge in Vail,

11· ·Colorado, also labeled "Ashford Ross NW

12· ·trip."· What did you mean -- did you write

13· ·"Ashford Ross NW trip" there?

14· · · ·A.· · I did.· I did.· And I said

15· ·earlier, I shouldn't guess at things. I

16· ·believe that that is a trip that

17· ·Ashford -- when I say "Ashford," I use the

18· ·name Ashford and Allen interchangeably.

19· ·We all do here at the company.· We look at

20· ·Ashford as Allen.· Sometimes I write

21· ·Ashford, sometimes I write Allen.· But I

22· ·believe Allen was going to come on this

23· ·trip with his family but did not.· Now

24· ·that I see that charge, I think that that

25· ·was a mistake because he wanted to come on


Page 107·1· · · · · · · · · R. AUERBACH

·2· ·it but he did not.

·3· · · ·Q.· · Had Allen and his family come on

·4· ·that trip to Vail, would that have been a

·5· ·Northwest business expense or a personal

·6· ·expense?

·7· · · ·A.· · If we were working, most of the

·8· ·trips that we had, no matter where we

·9· ·went, we were always working, Allen and I.

10· ·We used to -- we used to work a lot and

11· ·spend a lot of time together.

12· · · ·Q.· · And if Allen had been on that

13· ·trip and you had been working some amount

14· ·of that time, would the entire expense

15· ·have been properly allocated to Northwest?

16· · · · · · ·MR. DUFFY:· Objection.· I object

17· · · ·to the hypothetical and I object that

18· · · ·he would need to draw a legal

19· · · ·conclusion or an accounting conclusion

20· · · ·or something.· But it is not

21· · · ·appropriate for a lay witness.

22· · · · · · ·If you understand the question,

23· · · ·you can answer.

24· · · ·A.· · No, because I don't know the

25· ·answer.


Page 108·1· · · · · · · · · R. AUERBACH

·2· · · ·Q.· · Did you ever provide Northwest

·3· ·with an allocation of expenses for a trip

·4· ·like this trip to Vail that allocated the

·5· ·expense between personal and business

·6· ·expense?


·8· · · ·form.

·9· · · ·A.· · And the answer is I don't know.

10· · · ·Q.· · And if Allen was not in fact on

11· ·this trip -- strike that.

12· · · · · · ·Mr. Auerbach, I am going to show

13· ·you what I have marked as Exhibit 6, which

14· ·is an American Express Centurian Card

15· ·statement with the closing date of

16· ·September 19, 2017.

17· · · ·Q.· · I have gone to page 7, and I

18· ·would like to direct your attention to the

19· ·top entry, a Tom Ford charge for

20· ·$53,536.95, with the handwritten notation

21· ·"business clothes" next to the amount.

22· · · · · · ·Is that "business clothes" note

23· ·your handwriting?

24· · · ·A.· · It is.

25· · · ·Q.· · Is that handwriting near it to


Page 109·1· · · · · · · · · R. AUERBACH

·2· ·the left that appears to say "off sup," is

·3· ·that your handwriting?

·4· · · ·A.· · No, it is not.

·5· · · · · · ·Go ahead.

·6· · · ·Q.· · When you wrote "business

·7· ·clothes" next to this expense, how did you

·8· ·expect the accounting department to

·9· ·allocate this expense?

10· · · ·A.· · I didn't know whether or not it

11· ·would be considered something that was a

12· ·business deduction since it was

13· ·specifically clothes that I wore for work,

14· ·meaning suits that I wore for work, or if

15· ·it was going to be part of W-2 or if it

16· ·was going to go to the loan account. I

17· ·didn't know, so I just wrote down what it

18· ·was, which was clearly what it was, and I

19· ·gave it to -- and I gave it into

20· ·accounting to book correctly.

21· · · ·Q.· · Would it -- complete what you

22· ·were saying.

23· · · ·A.· · Things I didn't know.· Go ahead.

24· · · ·Q.· · Would it surprise you that this

25· ·was booked as office supplies?


Page 110·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · It would stun me.

·3· · · ·Q.· · Do you shop at Tom Ford often?

·4· · · ·A.· · In breaks of time, yes.· Not

·5· ·every day.· I mean...

·6· · · ·Q.· · I apologize.· I think there is a

·7· ·slight delay in the audio so I keep

·8· ·accidentally talking over you.

·9· · · ·A.· · It's okay.

10· · · ·Q.· · When you shop at Tom Ford, how

11· ·do you typically allocate those expenses

12· ·when you are given one of these printouts

13· ·of an American Express card?


15· · · ·assumes that every time he shops at

16· · · ·Tom Ford he charges it on a Northwest

17· · · ·Company credit card.

18· · · · · · ·THE WITNESS:· Correct.· And I

19· · · ·don't.

20· · · ·Q.· · When you shop at Tom Ford on a

21· ·Northwest Company credit card, how do you

22· ·typically allocate that expense?


24· · · ·assumes that he's done it other than

25· · · ·this one time.


Page 111·1· · · · · · · · · R. AUERBACH

·2· · · ·Q.· · You can answer the question,

·3· ·Mr. Auerbach.

·4· · · ·A.· · Can you state it again?· I am so

·5· ·sorry.

·6· · · ·Q.· · When you shop at Tom Ford on a

·7· ·Northwest Company credit card, how do you

·8· ·typically allocate that expense?

·9· · · ·A.· · If it is business attire, then I

10· ·do as I wrote here.· If it is personal, I

11· ·wouldn't put it in at all and I wouldn't

12· ·shop on this card if it was personal.· So

13· ·that's...

14· · · ·Q.· · When you say that you wouldn't

15· ·put it on this card, you wouldn't shop on

16· ·this card if it was personal, do you mean

17· ·you wouldn't shop on Northwest Company

18· ·cards if it was personal, or you wouldn't

19· ·shop on this particular Centurian Card if

20· ·it was personal?

21· · · ·A.· · Let me say it differently.· If

22· ·it were personal clothing, I would have

23· ·written "personal" and circled it if it

24· ·was purely personal.



Page 112·1· · · · · · · · · R. AUERBACH

·2· · · ·Exhibit 7.)

·3· · · · · · ·MR. AULET:· Mr. Auerbach, I will

·4· · · ·show you what I have marked Exhibit 7,

·5· · · ·which is a Business Centurian Card

·6· · · ·statement with closing date of

·7· · · ·December 20, 2017.· I will turn to the

·8· · · ·charges of this account.

·9· · · ·Q.· · We are on page 4, and there is a

10· ·number of charges for various active --

11· ·various charges in Milano.· There is a

12· ·great deal of your handwriting here.

13· · · · · · ·First, is this your handwriting?

14· · · ·A.· · I believe, yes.

15· · · ·Q.· · And do you recall this trip to

16· ·Italy?

17· · · ·A.· · No.· Only in that I have been --

18· ·I have been to Italy many more times than

19· ·one.· I would have to go back.· If I have

20· ·notes, I'd have to go back just because it

21· ·is back a long way.· I have been to Italy

22· ·with Ashford, Allen.· I have been to Italy

23· ·without Ashford.· I don't know the answer.

24· ·I just don't know.

25· · · ·Q.· · For the things that are listed


Page 113·1· · · · · · · · · R. AUERBACH

·2· ·"Ross personal" or "personal Ross," those

·3· ·should have been charged to your loan

·4· ·account.· Correct?


·6· · · ·Q.· · Is there any reason they would

·7· ·not have been charged to your loan

·8· ·account?

·9· · · ·A.· · None that I would know of.

10· · · ·Q.· · Do you ever receive statements

11· ·of your loan account?

12· · · ·A.· · No, I do not.

13· · · ·Q.· · Is anything ever created to show

14· ·what specific expenses have been put in

15· ·your loan account in any one month?


17· · · ·form.

18· · · ·A.· · No.· I am not -- I am sorry.

19· ·Can you repeat the question for me?

20· · · ·Q.· · Are you aware of any document

21· ·that is created that would show what

22· ·specific expenses are added to your loan

23· ·account each month?

24· · · ·A.· · I don't receive a document such

25· ·as that.


Page 114·1· · · · · · · · · R. AUERBACH

·2· · · ·Q.· · Now, if you look on this

·3· ·exhibit, there is an $11,000 charge that

·4· ·is labeled "Roslyn wine" -- it has a

·5· ·handwritten note "Roslyn Wine and Foods"

·6· ·next to it.

·7· · · ·A.· · Give me another moment.

·8· · · · · · ·(Pause.) Yes.· And give me a

·9· ·moment.· ·(Pause.)

10· · · · · · ·Yes.· Go ahead.

11· · · ·Q.· · What was your -- strike that.

12· · · · · · ·How did you intend that this

13· ·expense would be allocated when you wrote

14· ·"Roslyn Wine and Foods"?

15· · · ·A.· · I am looking at the statement

16· ·from 2017.· I believe that to be wine that

17· ·we gave out to clients.

18· · · ·Q.· · How would I verify that?

19· · · ·A.· · I would have to go back and look

20· ·and give you something.

21· · · ·Q.· · If I wanted to verify that, what

22· ·documents would I go and look at?

23· · · ·A.· · I don't know.· I don't know what

24· ·document you could look at.



Page 115·1· · · · · · · · · R. AUERBACH

·2· · · ·Exhibits 8 and 9.)

·3· · · ·Q.· · I am showing you what I have

·4· ·marked Exhibit 8 -- Exhibit 9.· My

·5· ·apologies.

·6· · · · · · ·I am showing you what I have

·7· ·marked as Exhibit 9.· We did not receive

·8· ·printed copies of an American Express

·9· ·statement for 2018.· Instead, we received

10· ·Excel files.· These are three entries from

11· ·those Excel files.

12· · · ·A.· · Yes.· I am familiar with it.


14· · · · · · ·(Pause.)

15· · · ·Q.· · Mr. Auerbach, are the Excel --

16· ·are the American Express statements with

17· ·handwritten notes the only documents --

18· · · · · · ·MR. TEELE:· Sorry for the

19· · · ·interruption.· Mr. Auerbach's laptop

20· · · ·went to sleep again.· We needed a

21· · · ·moment to get it back up.· I don't

22· · · ·think he heard your question.

23· · · · · · ·THE WITNESS:· I am back.· Go

24· · · ·ahead, sir.

25· · · ·Q.· · First, we have just looked at a


Page 116·1· · · · · · · · · R. AUERBACH

·2· ·number of American Express statements with

·3· ·handwritten notes on them.· If we don't

·4· ·have an American Express statement with

·5· ·handwritten notes indicating how the

·6· ·expenses were allocated, are there any

·7· ·other documents that would show us how

·8· ·those expenses were allocated?

·9· · · ·A.· · There should be.· I will have to

10· ·ask.· I do not know specifically how --

11· ·what document that is.

12· · · ·Q.· · Do you ever provide your

13· ·instructions on how specific entries on

14· ·your American Express statement should be

15· ·allocated other than by handwriting on an

16· ·American Express statement?

17· · · ·A.· · No, I do not.

18· · · ·Q.· · So, the first charge listed here

19· ·is a charge for $43,000 at the Grand Hotel

20· ·Zermatterhof in Zermatt, ZH.· First, what

21· ·is the Grand Hotel Zermatterhof, if I am

22· ·pronouncing that correctly, which I am

23· ·sure I haven't?

24· · · · · · ·MR. TEELE:· I am going to

25· · · ·intercede with an objection here, more


Page 117·1· · · · · · · · · R. AUERBACH

·2· · · ·so to clarify the record with respect

·3· · · ·to the comment that you made a moment

·4· · · ·ago, Mr. Aulet, which is you stated

·5· · · ·that you have received from the

·6· · · ·Debtors in a production only Excel

·7· · · ·files for the 2018 American Express

·8· · · ·statements.· I just wanted to clarify

·9· · · ·for the record that the 2018 Amex

10· · · ·statements were produced in PDF form

11· · · ·from American Express on June 26,

12· · · ·2020, and it is in the production

13· · · ·folder of the dropbox that you have.

14· · · ·I just wanted to clarify that.

15· · · · · · ·MR. AULET:· Okay, but the

16· · · ·Debtors do not believe -- strike that.

17· · · ·Anyway, I will go back to the


19· · · ·Q.· · What is the Grand Hotel

20· ·Zermatterhof?

21· · · ·A.· · It is a hotel in Zermatt,

22· ·Switzerland.

23· · · ·Q.· · What is this charge for $43,000

24· ·for?

25· · · ·A.· · This is a charge, I had booked a


Page 118·1· · · · · · · · · R. AUERBACH

·2· ·hotel reservation for a personal trip in

·3· ·the first quarter of 2018, and at the end

·4· ·of 2018, because of the issues with the

·5· ·business, I didn't feel comfortable going

·6· ·and spending money and doing it so I

·7· ·attempted to cancel the trip.· And I

·8· ·worked with American Express to cancel the

·9· ·trip, and the Zermatterhof did not want to

10· ·return the money.· After a lengthy

11· ·discussion, battle, whatever you want to

12· ·say, the Zermatterhof agreed to allow the

13· ·proceeds, the amount to be used in

14· ·2019/'20.· American Express issued a

15· ·credit for this amount in 2019, and then

16· ·later that credit was reversed, later in

17· ·the year of '19.

18· · · · · · ·There was first received a

19· ·credit because we disputed the charge,

20· ·since it was not needed.· And American

21· ·Express -- I remember this one vividly.

22· ·So American Express posted a credit and

23· ·then they later charged the account for an

24· ·amount similar to this amount but a little

25· ·bit different, maybe by two or three -- I


Page 119·1· · · · · · · · · R. AUERBACH

·2· ·don't remember, but two or $3,000.

·3· · · · · · ·So at the end of 2019 I utilized

·4· ·that credit, and actually Ashford is aware

·5· ·that I did and that I went on this trip.

·6· ·It is a personal trip.· There is no

·7· ·business related to this trip.

·8· · · ·Q.· · So would I find that charge, a

·9· ·similar but slightly reduced charge on a

10· ·subsequent American Express statement?

11· · · ·A.· · Yes.· You will find the credit

12· ·and then -- you will find the credit and

13· ·then an issue of a new charge in '19.

14· · · ·Q.· · And was that new charge booked

15· ·to your loan account?

16· · · ·A.· · On this particular trip, this

17· ·particular trip is supposed to be

18· ·booked -- we haven't finished the audit on

19· ·'19, but this particular trip is supposed

20· ·to go to W-2.· And I have given -- I don't

21· ·have a list.· It is a mental list.· This

22· ·trip is something that I gave to Ken Gould

23· ·to make sure it was included in the W-2

24· ·for 2019 before we file our taxes.

25· · · ·Q.· · When was the last time that you


Page 120·1· · · · · · · · · R. AUERBACH

·2· ·received a W-2 from Northwest?

·3· · · ·A.· · The only W-2's that I get from

·4· ·Northwest comes through Paycom and they go

·5· ·to Ken Gould.· So it would have been after

·6· ·the year, I think.· Paycom sends them

·7· ·automatically so it goes through Paycom.

·8· · · · · · ·MR. AULET:· I note we had issued

·9· · · ·a document request for those W-2's and

10· · · ·didn't receive them for this

11· · · ·deposition.· Jason, were those

12· · · ·uploaded at any point during this

13· · · ·deposition?

14· · · · · · ·MR. TEELE:· Because we received

15· · · ·the request yesterday afternoon they

16· · · ·have not been uploaded yet, but they

17· · · ·are in process.

18· · · ·Q.· · The second entry on this

19· ·exhibit, the UM student tuition, I assume

20· ·that is University of Miami?

21· · · ·A.· · It is but I am just going to

22· ·look at the other computer.· It is much

23· ·easier for me to see.

24· · · · · · ·Yes.· These two -- both -- they

25· ·are registered to both at the same time.


Page 121·1· · · · · · · · · R. AUERBACH

·2· ·Both of these should be in the loan

·3· ·account.

·4· · · ·Q.· · Is there any reason why we would

·5· ·not be able to find these being put in the

·6· ·loan account?

·7· · · ·A.· · No reason I am aware.

·8· · · ·Q.· · Do you recall reviewing an

·9· ·American Express statement and indicating

10· ·that these should be put in your loan

11· ·account?

12· · · ·A.· · I don't recall the actual

13· ·statement, but I am completely aware of

14· ·those charges and I would have coded them

15· ·as personal.

16· · · ·Q.· · Is there any reason why we would

17· ·not be able to find entries in your loan

18· ·account that would potentially include

19· ·these, such as an entry in the loan

20· ·account for expenses in January that are

21· ·larger than that?

22· · · ·A.· · I don't understand the last part

23· ·of what you said.· I understood the first

24· ·part.

25· · · ·Q.· · We haven't been able to find any


Page 122·1· · · · · · · · · R. AUERBACH

·2· ·entries into your loan account that would

·3· ·correspond with these two student tuitions

·4· ·being moved into your loan account.· Do

·5· ·you have any explanation why that would

·6· ·be?

·7· · · ·A.· · No.· No, I do not.


·9· · · ·Exhibit 10.)

10· · · · · · ·MR. AULET:· Mr. Auerbach,

11· · · ·showing you Exhibit 10, PDF file of

12· · · ·Northeastern Aviation invoices.

13· · · ·Q.· · The first page or two is -- I

14· ·have gone to the third page, a

15· ·Northeastern Aviation Corp. invoice.· What

16· ·is Northeastern Aviation Corp.?

17· · · ·A.· · Northeastern is an aviation

18· ·company that has jet service that would

19· ·arrange jet travel, private jet travel.

20· · · ·Q.· · Did you, in 2016, '17, '18

21· ·frequently fly on Northeastern Aviation

22· ·Corp. private jets?

23· · · ·A.· · I know that I flew on them. I

24· ·wouldn't say frequently, but I would say

25· ·that I flew on them.


Page 123·1· · · · · · · · · R. AUERBACH

·2· · · ·Q.· · Looking at this invoice on page

·3· ·3, how would I determine what the business

·4· ·purpose of this flight was?

·5· · · ·A.· · Give me a second.

·6· · · · · · ·At the time it should be

·7· ·noted -- I know the Farmingdale code, and

·8· ·I am sure that you checked that I have

·9· ·not -- I don't know CHO right now.

10· · · ·Q.· · So, CHO is Charlottesville,

11· ·Virginia?


13· · · ·Q.· · OPF is Miami, Florida, according

14· ·to a look-up that I did.


16· · · ·representation.· If he happens to know

17· · · ·what the airport codes are, let him --

18· · · ·A.· · I would have to find -- there

19· ·should have been an original invoice that

20· ·I marked up that would have said

21· ·specifically what the trip was for.

22· · · · · · ·THE WITNESS:· Is there anything

23· · · ·lower on there?

24· · · ·A.· · Again, I would have to go back

25· ·to notes that I -- I can't answer the


Page 124·1· · · · · · · · · R. AUERBACH

·2· ·question with what I have in front of me.

·3· · · ·Q.· · Well, aside from looking up the

·4· ·airports that are listed on the itinerary,

·5· ·what other information would exist on this

·6· ·invoice or anywhere else that would allow

·7· ·me to determine what the business purpose

·8· ·of this flight was?

·9· · · · · · ·MR. DUFFY:· Objection.· The

10· · · ·question is vague.· You can answer if

11· · · ·you understand what he is saying.

12· · · ·A.· · I can't answer it.· I would have

13· ·to -- I would have to go back to see what

14· ·occurred on that date, and then I would --

15· ·because I don't see -- there should be

16· ·another page or something that would say

17· ·what the event was or why but I don't see

18· ·it on here.

19· · · ·Q.· · So, would you have typically

20· ·filled out a separate page explaining what

21· ·the purpose of the private jet travel was?

22· · · ·A.· · Sometimes I did.· Sometimes I

23· ·wrote it just on the face of the invoice.

24· ·This doesn't have --

25· · · · · · ·MR. AULET:· I don't believe any


Page 125·1· · · · · · · · · R. AUERBACH

·2· · · ·separate pages were produced, so to

·3· · · ·the extent that those exist, I call

·4· · · ·for their production.

·5· · · ·Q.· · I will show you page 4, which

·6· ·appears to be how the expense was

·7· ·vouchered as air, hotels, travel.· Were

·8· ·you ever shown these sorts of sheets?

·9· · · ·A.· · No.· I have never seen these

10· ·types of sheets.

11· · · ·Q.· · Is there -- I have gone to page

12· ·5.· Is there any information on this

13· ·invoice that would let me determine what

14· ·the business purpose of this trip was?

15· · · ·A.· · Give me just a moment, please.

16· ·I am sorry.

17· · · · · · ·I don't see anything on this

18· ·one.· And again, I would have to -- I

19· ·would have to check.· I would have to

20· ·check.· There should be -- somewhere there

21· ·should be a Post-it note, something that

22· ·would have gone with it to explain, but I

23· ·don't see it.

24· · · ·Q.· · Again, here is what looks like a

25· ·number of general ledger files.· You have


Page 126·1· · · · · · · · · R. AUERBACH

·2· ·never seen these before?

·3· · · ·A.· · No.· I have never seen general

·4· ·ledger files at all.

·5· · · ·Q.· · Here is another trip that has

·6· ·some handwriting on it.· Would this

·7· ·handwriting allow me to determine what the

·8· ·business purpose of this trip is?

·9· · · ·A.· · Again, there should be a Post-it

10· ·note or something with it.· Again, I would

11· ·look it up.· It looks like -- well, I

12· ·don't want to guess, but it looks like it

13· ·is a business trip.· I just don't know --

14· ·I don't know where the Post-it notes are.

15· · · ·Q.· · Well, there is the text

16· ·"Miami-Ohio-IN-NY" --

17· · · ·A.· · University of Ohio.


19· · · ·Q.· · What business does Northwest do

20· ·in Ohio?

21· · · ·A.· · University of Ohio.· We have an

22· ·exclusive license with University of

23· ·Ohio -- Ohio State.

24· · · ·Q.· · What about IN?· Do you know what

25· ·that means?


Page 127·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · Indiana.· I believe it's

·3· ·Indiana.· University of Indiana.

·4· · · ·Q.· · And does Northwest have a

·5· ·business relationship with University of

·6· ·Indiana?

·7· · · ·A.· · Yes.

·8· · · ·Q.· · Does Northwest have any business

·9· ·relationship with the University of Iowa?

10· · · ·A.· · Yes.

11· · · ·Q.· · And for universities that you

12· ·have an exclusive relationship with, how

13· ·often do you go to those universities?

14· · · ·A.· · There is no specific cadence.

15· ·There is no specific -- I don't have a

16· ·specific answer.

17· · · ·Q.· · Do you visit each university at

18· ·least once a year?



21· · · ·A.· · We do our best to do so.· Most

22· ·of these universities -- many of these

23· ·universities are located in remote places.

24· ·We try to link them together to save money

25· ·for the trip.


Page 128·1· · · · · · · · · R. AUERBACH

·2· · · ·Q.· · Are there universities that you

·3· ·will visit multiple times a year?

·4· · · · · · ·MR. DUFFY:· Objection.· Asked

·5· · · ·and answered.

·6· · · ·A.· · There are, specifically when we

·7· ·are campaigning to get a special license

·8· ·or an exclusive, there are times that we

·9· ·will visit a university more than once a

10· ·year because we are working towards

11· ·something.

12· · · ·Q.· · At any point has the University

13· ·of Iowa been one of those universities

14· ·where you were making an effort to get a

15· ·special license or an exclusive from?

16· · · ·A.· · Yes.· I met with the athletic

17· ·director a couple of times there, and the

18· ·bookstore management there.· We tried to

19· ·get an exclusive, but the university does

20· ·not believe in the theory of exclusivity

21· ·because they think it limits customers'

22· ·ability to choose.· But we created a very

23· ·good relationship and we went from having

24· ·just some throws and blankets in the

25· ·university store to getting -- the


Page 129·1· · · · · · · · · R. AUERBACH

·2· ·following year, to getting a display set

·3· ·up with our bedding, our throws, our

·4· ·pillows, our automotive, our various

·5· ·products.· So, we did a really good job

·6· ·building the business.· Again, the

·7· ·athletic director did not believe in

·8· ·exclusivity.

·9· · · ·Q.· · About how much revenue did you

10· ·get from the University of Iowa?

11· · · ·A.· · I don't know.

12· · · ·Q.· · Did you make multiple private

13· ·jet flights to the University of Iowa?

14· · · ·A.· · Yes, I did.

15· · · ·Q.· · Did you have any other reason to

16· ·make those flights?

17· · · ·A.· · Yes.· My daughter went there for

18· ·one year.

19· · · ·Q.· · And did you take a private jet

20· ·there to visit your daughter?

21· · · ·A.· · No.· I did -- no.· To visit?

22· ·No.


24· · · ·form.

25· · · ·Q.· · I have moved to page 49, which


Page 130·1· · · · · · · · · R. AUERBACH

·2· ·has the handwritten note "Iowa Daniella

·3· ·orientation."

·4· · · ·A.· · Yes.

·5· · · ·Q.· · What is the business purpose of

·6· ·this flight?

·7· · · ·A.· · It had -- the business purpose

·8· ·was I met with the athletic director at

·9· ·the University of Iowa during the period

10· ·in which Daniella went to orientation.

11· · · ·Q.· · So why does it read "Iowa

12· ·Daniella orientation"?

13· · · ·A.· · Because somebody wrote that.

14· ·That is not my handwriting, but I was

15· ·probably asked on this specific one what

16· ·the purpose of the trip was, and I

17· ·probably said that I went down to Iowa for

18· ·Daniella's orientation.· And most likely I

19· ·said, "And I met with the athletic

20· ·director and I met with the bookstore" but

21· ·they didn't write that.· But that is not

22· ·my handwriting.· That would have been

23· ·something verbally that I have said. I

24· ·have never seen that.

25· · · ·Q.· · And so despite the fact that


Page 131·1· · · · · · · · · R. AUERBACH

·2· ·that reads "Daniella Iowa orientation,"

·3· ·there is a voucher journal report attached

·4· ·to this that shows that it was billed to

·5· ·"air, hotels and travel."· Was this one of

·6· ·the -- why was this billed to air, hotels

·7· ·and travel if it reads "Iowa Daniella

·8· ·orientation"?

·9· · · · · · ·MR. DUFFY:· Objection.· That is

10· · · ·a misrepresentation of the facts that

11· · · ·he just stated.

12· · · ·Q.· · Why did the accounting

13· ·department bill this to air, hotels,

14· ·travel if the receipt says on it "Iowa

15· ·Daniella orientation"?

16· · · · · · ·MR. TEELE:· Objection.· If it is

17· · · ·a question for the accounting

18· · · ·department, I think you should ask

19· · · ·them.

20· · · ·Q.· · You can answer the question,

21· ·Mr. Auerbach.

22· · · ·A.· · I thought I did before.· As I

23· ·stated, it is not my handwriting, so I was

24· ·probably asked and I verbally gave an

25· ·answer and they possibly just wrote down


Page 132·1· · · · · · · · · R. AUERBACH

·2· ·the first part and not the second part.

·3· ·But I didn't watch anybody write anything.

·4· · · · · · ·In other words, this is probably

·5· ·one that had no comment, they came into my

·6· ·office, they said "Can you tell us what

·7· ·this is" and I told them what it is. I

·8· ·guess they wrote the first part and not

·9· ·the other part.· But it is conjecture

10· ·because I don't know why they wrote one

11· ·part.

12· · · ·Q.· · Did the accounting department

13· ·come back to you on this invoice and ask

14· ·you to justify it?

15· · · ·A.· · No.· Accounting?· No.

16· ·Somebody -- could have been accounting.

17· ·Somebody came to me and asked me what the

18· ·trip was.· I just don't know what

19· ·department it was or who it was.

20· · · ·Q.· · I am going to go to page 16.

21· ·How would I determine what the business

22· ·purpose of this flight was?

23· · · ·A.· · Bear with me again.

24· · · · · · ·Again, I don't see the Post-it

25· ·notes.· This particular trip is not a


Page 133·1· · · · · · · · · R. AUERBACH

·2· ·business trip so this should have gone --

·3· · · ·Q.· · Where is this a trip to?

·4· · · ·A.· · That is -- what?

·5· · · · · · ·MR. TEELE:· He was answering the

·6· · · ·question when you asked that.

·7· · · ·A.· · To Saranac Lake.

·8· · · ·Q.· · And I think you said -- now I

·9· ·have gone to the next page.· This is

10· ·another voucher journal report.· This

11· ·records this trip as being booked to air,

12· ·hotels, travel.· Do you have any

13· ·explanation why this trip would have been

14· ·booked as a Northwest expense?

15· · · ·A.· · Would you do me a favor?· Would

16· ·you please go back to the invoice?· Could

17· ·you go back one page for me?

18· · · ·Q.· · Sure.

19· · · ·A.· · Thank you.· Just to clarify,

20· ·I -- it's a long time ago, 2016.· I am

21· ·looking at the date and I just noticed

22· ·that that date is Allen Guo's birthday.

23· ·So I don't know if it was a trip that he

24· ·was on or not.· But there is nothing on

25· ·this invoice that would state that.


Page 134·1· · · · · · · · · R. AUERBACH

·2· · · ·Q.· · So, you first testified that

·3· ·this was not a business expense?

·4· · · ·A.· · And it may not be.


·6· · · ·A.· · I just noticed the date, but

·7· ·there is no Post-it note on it and my

·8· ·belief would be that it would be a

·9· ·personal trip.· But when I noticed the

10· ·date, it is just going back to '16, it's

11· ·hard to remember.

12· · · ·Q.· · I have gone to page 22.· This

13· ·appears to be another trip to Saranac Lake

14· ·two days later.

15· · · ·A.· · It would be the return.· It

16· ·costs too much to have it sit there.

17· · · ·Q.· · And so this is also booked to

18· ·air, hotels and travel.

19· · · ·A.· · As I said earlier, I would be --

20· ·go ahead.

21· · · ·Q.· · I apologize.· The delay is

22· ·causing a lot of confusion.· You believed

23· ·that this may have involved Allen Guo on

24· ·this flight?

25· · · ·A.· · No.· I noticed that it was his


Page 135·1· · · · · · · · · R. AUERBACH

·2· ·birthday, so we used to get together for a

·3· ·lot of -- like his birthday and things.

·4· ·So, I don't remember, but it could very

·5· ·easily be a personal trip.· I would have

·6· ·to check.· I would need a day to check and

·7· ·clarify.· I am not confident to sit here

·8· ·and answer.

·9· · · ·Q.· · And would there be any documents

10· ·other than these Post-it notes that you

11· ·have referenced that I should be able to

12· ·go and find to verify what the business

13· ·purpose of each of these trips was?

14· · · ·A.· · Again, on this very last -- on

15· ·these last two, I would have to go back

16· ·and look.· But I am sure that there is

17· ·something that would show.

18· · · ·Q.· · What is this flight on page 35

19· ·of the exhibit?

20· · · ·A.· · Again, I am going to look at the

21· ·other one.· Give me a second.

22· · · · · · ·This was a trip -- I was in

23· ·Colorado on a personal trip, vacation, and

24· ·they had closed the roads in the Colorado

25· ·pass because of weather and I needed to


Page 136·1· · · · · · · · · R. AUERBACH

·2· ·get to Denver.· And I booked this through

·3· ·them, through another company, to get to

·4· ·Denver.· There was no way to get from Vail

·5· ·to Denver.

·6· · · ·Q.· · And then on page 36, this is

·7· ·also booked to air, hotels, travel?

·8· · · ·A.· · Again, I have never seen these,

·9· ·these documents that you show.

10· ·Afterwards, I have never seen.

11· · · ·Q.· · I have gone to page 76.· What is

12· ·the business purpose of this trip?

13· · · ·A.· · Bear with me one second.

14· · · · · · ·(Pause.)

15· · · · · · ·This is not a business trip.

16· ·This is a personal trip.· Yes, this is a

17· ·personal trip.· I am looking at how it is

18· ·booked on what you have shown me, which I

19· ·have never seen before.· But that would be

20· ·booked incorrectly.

21· · · ·Q.· · Okay.· There is a number of

22· ·flights down to Miami.· What would the

23· ·business purpose of flights to Miami be?

24· ·I will show you an example on page 102.

25· · · ·A.· · I would have to go through them,


Page 137·1· · · · · · · · · R. AUERBACH

·2· ·but I would visit University of Miami and

·3· ·sometimes I would visit with Home Shopping

·4· ·in Miami, HSN.· I would have to go back

·5· ·and go through the actual trip.

·6· · · ·Q.· · And is there any document that

·7· ·we should be able to find that would tell

·8· ·us what this trip was for?

·9· · · ·A.· · I would have to go back through

10· ·my notes.· When I say "notes," I would

11· ·have to go back and see what there is.

12· · · ·Q.· · So, I have gone to page 42.

13· ·First, what handwriting on this page is

14· ·yours, if you know, if any?


16· · · ·question, to the form.

17· · · · · · ·MR. AULET:· I will strike it.

18· · · ·Q.· · Is any of this handwriting

19· ·yours?

20· · · ·A.· · Yes.· "Please put on Allen's..."

21· ·sorry.

22· · · ·Q.· · Please identify which

23· ·handwritten notes are yours.

24· · · ·A.· · The one that says "Please put on

25· ·Allen's fee 50 percent of this, give to


Page 138·1· · · · · · · · · R. AUERBACH

·2· ·Rob J," meaning to make sure it is entered

·3· ·properly in the GL.

·4· · · · · · ·Sorry it's taking me so long. I

·5· ·am reading the invoice.

·6· · · · · · ·MR. KESTENBAUM:· Can we just

·7· · · ·check the airport code on...

·8· · · · · · ·MR. TEELE:· I object to

·9· · · ·co-counsel attempting to research an

10· · · ·answer when making the record.

11· · · · · · ·MR. DUFFY:· If you know it, you

12· · · ·know it.· If you don't, you don't.

13· · · ·A.· · The answer is that I wrote that.

14· ·Again, Allen and/or Ashford is

15· ·interchangeable in the way we see it here.

16· ·So I am assuming part of this -- I have to

17· ·look at the airport codes.· I am assuming

18· ·that part of this -- I am sure that this

19· ·is a trip that I took with Allen Guo or

20· ·Ashford of the part of the trip, it says

21· ·Jacksonville.· The Jacksonville, probably,

22· ·Fanatics.· The international part of it

23· ·would be a trip with Ashford, with Allen

24· ·Guo.

25· · · ·Q.· · When you say or wrote "Please


Page 139·1· · · · · · · · · R. AUERBACH

·2· ·put Allen's fee 50 percent of this" what

·3· ·did you mean by that?

·4· · · ·A.· · I meant -- when I say "Allen," I

·5· ·mean Ashford.· That we went on a trip, we

·6· ·worked to discuss business.· And this is a

·7· ·trip where half of that trip would be a

·8· ·Northwest expense, half would be an

·9· ·Ashford expense.· Again, Allen, Ashford, I

10· ·use the words interchangeably.

11· · · ·Q.· · So, if we go to the voucher

12· ·journal report, you see half of this is

13· ·allocated to air, hotels, travel and the

14· ·other half to accounts receivable.· Does

15· ·this reflect your instructions that half

16· ·of it be billed to, as you said, Allen or

17· ·Ashford?

18· · · ·A.· · Sitting here, with no

19· ·documentation to look other than this, I

20· ·would say yes, that that would be correct.

21· ·Again, Ashford, Allen is the same thing to

22· ·me.· We call him uncle Allen.· It is a

23· ·very close relationship.

24· · · ·Q.· · So if I represented to you that

25· ·TJIG is in Puerto Rico, would that refresh


Page 140·1· · · · · · · · · R. AUERBACH

·2· ·your recollection as to the purpose of

·3· ·this trip?

·4· · · · · · ·MR. TEELE:· I will object to

·5· · · ·that because he indicated he didn't

·6· · · ·know what it was based on the airport

·7· · · ·code.

·8· · · ·A.· · Like I said, I would have to

·9· ·look it up.· I really would.

10· · · ·Q.· · And when you say you would look

11· ·it up, where would you look?

12· · · ·A.· · I would go back and see if I

13· ·have anything written down about -- this

14· ·trip goes back to what year?· I can't see

15· ·it on this screen.· Oh, '17.

16· · · ·Q.· · Is there any central location

17· ·that should have the business purpose of

18· ·these trips?

19· · · ·A.· · Central location?· No.· No,

20· ·there is not.

21· · · ·Q.· · What is the business purpose of

22· ·this trip?


24· · · ·of the question.

25· · · · · · ·MR. AULET:· For the record, we


Page 141·1· · · · · · · · · R. AUERBACH

·2· · · ·are looking at page 105.

·3· · · ·A.· · I see CLT, Charlotte.· I don't

·4· ·know HBI off the top of my head.· I have

·5· ·to look at these airport codes because

·6· ·without the sticky-note that would have

·7· ·been on there, it is really impossible for

·8· ·me to really know.

·9· · · ·Q.· · Would there be any business

10· ·purpose for a trip to the Bahamas?

11· · · · · · ·MR. DUFFY:· Object to the


13· · · ·A.· · The only business trip I

14· ·remember to the Bahamas was a trip with

15· ·Allen Guo.· But this is a long time ago.

16· ·Again, without going and trying to rebuild

17· ·it in my mind, you know, it could be one

18· ·trip or another trip.· We took so many

19· ·trips together, it is very hard for me to

20· ·do it this way.

21· · · · · · ·MR. AULET:· Uri, are we on

22· · · ·Exhibit 11?

23· · · · · · ·MR. PINELO:· Yes.· Next is 11.

24· · · ·Q.· · Have you ever billed flights to

25· ·Northwest by saying Allen Guo was on the


Page 142·1· · · · · · · · · R. AUERBACH

·2· ·flight when in fact he is not on the

·3· ·flight?


·5· · · ·form.

·6· · · ·A.· · Nothing that I would do -- no, I

·7· ·would not do that intentionally.· That is

·8· ·why I am saying here, it is too confusing

·9· ·without having the time to go back, to

10· ·know which he was on and which he was not

11· ·on.

12· · · ·Q.· · Are you aware of ever having

13· ·done that unintentionally?

14· · · ·A.· · On a flight?


16· · · ·form.

17· · · ·A.· · I am not aware, no.


19· · · ·Exhibit 11.)


21· · · ·you what I have marked Exhibit 11,

22· · · ·which is a series of emails between

23· · · ·Ron Andreola, Robert Guo and Robert

24· · · ·Jolson.

25· · · ·Q.· · I will go back to page 2.· So


Page 143·1· · · · · · · · · R. AUERBACH

·2· ·that you can read -- actually, I will give

·3· ·you control of this again so you can

·4· ·review the entire email and let me know if

·5· ·you have read it.

·6· · · ·A.· · So, I am reading the first part:

·7· ·I mean, St. Petersburg is HSN.

·8· ·Jacksonville is Fanatic.· Dominican

·9· ·Republic, I really don't remember the

10· ·trip.

11· · · · · · ·Let me scroll down.· I can only

12· ·see -- how do I change the page?

13· · · ·Q.· · I will move it.

14· · · ·A.· · Thank you.

15· · · ·Q.· · As you can see, on October 3,

16· ·2017, Allen is telling Rob Andreola and

17· ·Robert Jolson that he wasn't on a flight

18· ·that you had indicated he was on.· Why is

19· ·that?

20· · · ·A.· · It is possible that I made a

21· ·mistake and that he -- that he, that Allen

22· ·responded because I made a mistake.· That

23· ·is why I said earlier I would need to go

24· ·back and look to make sure that it is

25· ·correct.· But that is what it appears to


Page 144·1· · · · · · · · · R. AUERBACH

·2· ·say.

·3· · · ·Q.· · So now --

·4· · · ·A.· · Looks like he must have --

·5· · · ·Q.· · I apologize.· Please continue.

·6· · · ·A.· · I was just reading the email.

·7· ·It says, "Allen, FYI Ross will call you."

·8· ·He must have called me.· It is just it is

·9· ·so long ago I don't remember.· I am

10· ·reading.

11· · · ·Q.· · As you will notice, most of

12· ·these emails are from October 2017, but

13· ·the top email is an email on May 18th of

14· ·this year.· Do you know why Ron Andreola

15· ·or Robert Jolson would have been looking

16· ·into this issue in May?

17· · · ·A.· · I have no idea.· Absolutely no

18· ·idea.

19· · · ·Q.· · Has anyone been conducting an

20· ·investigation of the expenses you have

21· ·charged the company to determine if they

22· ·were legitimate?

23· · · ·A.· · No.

24· · · ·Q.· · Has anyone in the past few

25· ·months asked you about any previous


Page 145·1· · · · · · · · · R. AUERBACH

·2· ·American Express charges to determine if

·3· ·they were personal or business related?

·4· · · ·A.· · No.· I am thinking.· No.

·5· · · ·Q.· · Has anyone from Northwest asked

·6· ·you to review an American Express

·7· ·statement from before the bankruptcy and

·8· ·indicate what the purpose of the expense

·9· ·was?


11· · · ·form.· It is a horribly compound


13· · · ·A.· · I am sure I was asked about

14· ·something, but I don't remember

15· ·specifically anything I was asked.

16· · · ·Q.· · Are you aware that there are

17· ·millions of dollars of expenses booked

18· ·into Northwest's so-called suspense

19· ·account?


21· · · ·form of the question.· Lack of

22· · · ·foundation, et cetera.


24· · · · · · ·MR. DUFFY:· Can you?· If you

25· · · ·understand it, sure.


Page 146·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · I don't really understand the

·3· ·question.

·4· · · · · · ·MR. DUFFY:· If you don't

·5· · · ·understand, don't answer.

·6· · · ·A.· · It was probably an account that

·7· ·you mentioned but I don't know.· I don't

·8· ·have an answer.

·9· · · ·Q.· · Before the bankruptcy, every

10· ·year did -- strike that.

11· · · · · · ·Are you aware of any policy of

12· ·the company on how to split American

13· ·Express charges that the company has not

14· ·previously allocated at the end of the

15· ·fiscal year?

16· · · ·A.· · The company is supposed to

17· ·allocate at the end of the fiscal year.

18· ·It is my understanding that if something

19· ·was not allocated, they had a percentage

20· ·split that they did between the loan

21· ·account and the business expense.· It was

22· ·supposed to be reconciled, you know, at

23· ·the end of the year.

24· · · ·Q.· · Were you involved at all in

25· ·determining the split between the loan


Page 147·1· · · · · · · · · R. AUERBACH

·2· ·account and the business expense account?

·3· · · ·A.· · No.· Wasn't even aware of it

·4· ·until recently.

·5· · · ·Q.· · Would anyone from Northwest ever

·6· ·come back to you several months later and

·7· ·say, "We don't know how these expenses

·8· ·should have been allocated.· Can you take

·9· ·a look at this, please?"


11· · · ·hypothetical, and it is vague, the


13· · · · · · ·MR. AULET:· I will strike that.

14· · · ·Q.· · How much money do you owe to

15· ·Northwest?


17· · · ·form.

18· · · ·A.· · I don't have an answer for that

19· ·question.

20· · · ·Q.· · Who would?

21· · · ·A.· · Mazars and Ken Gould.

22· · · ·Q.· · And have they provided an answer

23· ·at any point in the past few months?

24· · · · · · ·MR. DUFFY:· Objection.· If he

25· · · ·had an answer he would have given one.


Page 148·1· · · · · · · · · R. AUERBACH

·2· · · ·Asked and answered.

·3· · · ·Q.· · I would like an answer to the

·4· ·question.

·5· · · ·A.· · Have they given an answer yet?

·6· ·No.· No, they have not given an answer

·7· ·yet.

·8· · · ·Q.· · Are you aware that in 2017 a

·9· ·little over $800,000 of expenses were

10· ·moved out of the suspense account and into

11· ·what Mr. Jolson characterized as a holding

12· ·account?

13· · · · · · ·MR. DUFFY:· Objection.· Assumed

14· · · ·facts not in evidence, no foundation.

15· · · ·A.· · No, I am not aware.

16· · · ·Q.· · Who would have had the authority

17· ·to permanently reclassify expenses from a

18· ·suspense account to another expense

19· ·account?

20· · · ·A.· · You would have to ask Robert

21· ·Jolson that.· I have no access to that.

22· · · ·Q.· · Does the estate of Shay Auerbach

23· ·owe any money to Northwest?


25· · · ·Q.· · Did it at any point in the past?


Page 149·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · The only thing I am aware of is

·3· ·that The Northwest Company owes a large

·4· ·amount of money to the estate of Shay

·5· ·Auerbach.· I don't know how much.· Two

·6· ·hundred, $300,000.

·7· · · ·Q.· · Was that amount ever paid?

·8· · · ·A.· · No, not that I am aware of. I

·9· ·mean, the amount that I am speaking of was

10· ·not paid, to clarify.

11· · · · · · ·MR. AULET:· Do we want to take a

12· · · ·five-minute break?

13· · · · · · ·THE WITNESS:· Sure.

14· · · · · · ·THE VIDEOGRAPHER:· Time is 3:15,

15· · · ·going off the record.

16· · · · · · ·(Recess.)

17· · · · · · ·THE VIDEOGRAPHER:· Time is 3:34

18· · · ·and we are back on the record.


20· · · ·Q.· · Mr. Auerbach, I believe that

21· ·before the break you said that Northwest

22· ·owes money to the Shay Auerbach estate.


24· · · ·A.· · Yes, I said that.

25· · · ·Q.· · Did you ever tell anyone --


Page 150·1· · · · · · · · · R. AUERBACH


·3· · · · · · ·Did anyone ever tell you this

·4· ·year that in fact the Shay Auerbach estate

·5· ·owed money to Northwest?

·6· · · ·A.· · No.

·7· · · ·Q.· · Did you issue any instruction

·8· ·that any receivable owed by Shay

·9· ·Auerbach's estate to Northwest be removed

10· ·from the books?

11· · · ·A.· · No.· I don't even know what that

12· ·means, but no.

13· · · ·Q.· · Did you instruct anyone to alter

14· ·the amount of your loan on the company's

15· ·books and records?

16· · · ·A.· · No.


18· · · ·Exhibit 12.)


20· · · ·you what we have marked as Exhibit 12.

21· · · ·Q.· · This is a compilation of certain

22· ·entries from the general ledgers that were

23· ·produced to us this year.· The first page

24· ·is entries that relate to your loan

25· ·account.


Page 151·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · I can see it on the other

·3· ·screen.

·4· · · ·Q.· · Now, as you will see, this is

·5· ·screenshots from three different ledgers.

·6· ·We received three ledgers from the company

·7· ·for this year.· We received one that

·8· ·covers January through February 28th, we

·9· ·received one that covers February 29th,

10· ·and we received one that begins on

11· ·March 1st.· On the ledger that ends on

12· ·February 28, 2020, the account total for

13· ·your officer's loan account is listed as a

14· ·little bit over $2 million.· Yet, when we

15· ·look at the ledger for February 29th,

16· ·there is no transactions.· Yet, that

17· ·account balance has changed from you owing

18· ·the company about 2 million to the company

19· ·owing you about a little over 1.3 million.

20· · · · · · ·Did you instruct anyone to make

21· ·these changes?

22· · · ·A.· · No, absolutely not.

23· · · ·Q.· · Do you have any idea how these

24· ·changes could have occurred?

25· · · ·A.· · No.


Page 152·1· · · · · · · · · R. AUERBACH

·2· · · ·Q.· · Similarly, the records that end

·3· ·on February 28th reflect an amount owed by

·4· ·the estate of Shay Auerbach to Northwest,

·5· ·yet that amount is zeroed out beginning on

·6· ·the February 29, 2020 ledger.· Again,

·7· ·there is no transaction recorded.

·8· · · · · · ·Did you instruct anyone to erase

·9· ·that receivable?

10· · · ·A.· · No.


12· · · ·A.· · No.· I have no idea --

13· · · ·Q.· · Are you aware of anyone who

14· ·instructed any employee of Northwest to

15· ·alter the amount owed by the estate of

16· ·Shay Auerbach?

17· · · ·A.· · Absolutely not.


19· ·Complaint that was filed by Northwest

20· ·against Extreme Horse Limited?

21· · · ·A.· · I believe so.· If you can

22· ·specifically tell me?

23· · · ·Q.· · The Complaint that was filed as

24· ·an adversary proceeding in this bankruptcy

25· ·case alleging that Northwest made a loan


Page 153·1· · · · · · · · · R. AUERBACH

·2· ·to Extreme Horse and/or Extreme Horse

·3· ·agreed to provide $5 million of goods and

·4· ·that Extreme Horse has not honored those

·5· ·alleged commitments.

·6· · · · · · ·Are you aware of that --

·7· · · ·A.· · Yes.

·8· · · ·Q.· · Was there a loan by Northwest to

·9· ·Extreme Horse Limited of $5 million at any

10· ·point?

11· · · ·A.· · Yes.

12· · · ·Q.· · Who arranged that loan?

13· · · ·A.· · When you say arrange, can you,

14· ·please, explain to me what that means?

15· · · ·Q.· · Who negotiated that loan on

16· ·behalf of Northwest?

17· · · ·A.· · I don't know if it was

18· ·negotiated.· I don't know how -- I don't

19· ·know how you mean it could be.· I guess I

20· ·should say I don't really understand the

21· ·question.

22· · · ·Q.· · Who agreed to loan $5 million to

23· ·Extreme Horse Limited on behalf of

24· ·Northwest?

25· · · ·A.· · I guess it was myself and


Page 154·1· · · · · · · · · R. AUERBACH

·2· ·Robert.· I mean...

·3· · · ·Q.· · So, Robert Jolson was involved

·4· ·in these loan negotiations?

·5· · · ·A.· · I don't believe that there were,

·6· ·quote-unquote, negotiations.

·7· · · ·Q.· · How would you describe how the

·8· ·loan came to occur?

·9· · · ·A.· · I think it was just more of a

10· ·mutual agreement.

11· · · ·Q.· · Between who and who?

12· · · ·A.· · Between Northwest and Extreme

13· ·via Allen.

14· · · ·Q.· · And was that loan -- was that

15· ·mutual agreement documented anywhere?

16· · · ·A.· · When you say "documented," could

17· ·you just elaborate on what you mean by

18· ·"documented"?

19· · · ·Q.· · Is there any document that

20· ·exists that reflects a loan of $5 million.

21· · · ·A.· · If you mean in the traditional

22· ·sense of like a note or something like

23· ·that, not that I am aware of.· We did a

24· ·lot of things very casually between Allen

25· ·and myself.· I sent Ashford six hundred or


Page 155·1· · · · · · · · · R. AUERBACH

·2· ·$650,000 one day just to help invest in a

·3· ·machine they bought.· I have no note, I

·4· ·have no agreement with Allen on anything;

·5· ·I just sent the money, and they still have

·6· ·the money.· But we were like a family so a

·7· ·lot of what we did was verbal.· Most of

·8· ·everything was verbal.

·9· · · ·Q.· · So, you sent $5 million to

10· ·Extreme Horse Limited with no written

11· ·agreement of any kind regarding the terms

12· ·of that $5 million loan?

13· · · ·A.· · Not a note.

14· · · ·Q.· · Written in an email?

15· · · ·A.· · Excuse me?

16· · · ·Q.· · Were the terms of that agreement

17· ·written in an email?

18· · · ·A.· · There were some emails back and

19· ·forth, yes.· The terms, I am not sure --

20· · · ·Q.· · The emails back and forth, did

21· ·any of them contain discussion of a loan?

22· · · ·A.· · I have to go back and look at

23· ·the emails.· I don't know.· But in the

24· ·context of the relationship that I and we

25· ·here had with Allen -- and again, I say


Page 156·1· · · · · · · · · R. AUERBACH

·2· ·"Allen" because our relationship really

·3· ·was always with Allen only, although Allen

·4· ·had a partner in Northwest, Ashford was

·5· ·Allen and we all love Allen.

·6· · · · · · ·So, we were very casual with the

·7· ·way that we dealt with Allen and Ashford,

·8· ·and they were casual with the way they

·9· ·dealt with us.· It seems like a difficult

10· ·concept in the scheme of what is going on

11· ·today and in general, but that is how we

12· ·operated for probably a decade and a half

13· ·with Allen.· It was normal for us and me.

14· · · ·Q.· · Are you aware of any emails that

15· ·discuss loaning Extreme Horse Limited

16· ·$5 million?

17· · · ·A.· · I would have to go back and

18· ·look.· The answer is no, I don't know.

19· · · ·Q.· · Are you aware of any text

20· ·messages that would reflect a loan by

21· ·Northwest to Extreme Horse of $5 million?

22· · · ·A.· · Again, I don't know if the word

23· ·"loan" was used.· I don't know.

24· · · ·Q.· · Was any other word that would

25· ·have a similar meaning to the word "loan"


Page 157·1· · · · · · · · · R. AUERBACH

·2· ·used?

·3· · · ·A.· · I am not an accountant.· It is

·4· ·not my skill set and it is not what I do.

·5· ·Extreme was supposed to give Northwest

·6· ·$5 million of product.· If that would

·7· ·constitute the same meaning as when you

·8· ·say "loan," that I am not aware of. I

·9· ·just don't know when you use that word how

10· ·it is meant.· Again, I am not an

11· ·accountant.

12· · · ·Q.· · When you allege that this loan

13· ·agreement was made, was Extreme Horse

14· ·Limited to repay the $5 million in cash or

15· ·in goods?

16· · · ·A.· · They were going to pay in cash

17· ·and then they -- then it changed to being

18· ·goods.

19· · · ·Q.· · Is there any document anywhere

20· ·of any sort that would reflect an

21· ·agreement by Extreme Horse to repay

22· ·$5 million in cash?

23· · · ·A.· · There are emails that point to

24· ·that.· I don't know the exact wording in

25· ·the emails sitting here but there were


Page 158·1· · · · · · · · · R. AUERBACH

·2· ·emails that point to that.· But again, it

·3· ·is the way we did business.

·4· · · ·Q.· · At the time of this loan, did

·5· ·Northwest owe Ashford tens of millions of

·6· ·dollars?

·7· · · · · · ·MR. TEELE:· Object to the form.

·8· · · ·A.· · You mean in accounts payable,

·9· ·correct?

10· · · ·Q.· · Yes, in accounts payable.· At

11· ·the time of this alleged loan did

12· ·Northwest owe Ashford tens of millions of

13· ·dollars?

14· · · ·A.· · Yes, we did.

15· · · ·Q.· · And those tens of millions of

16· ·dollars were generally documented,

17· ·correct, in purchase orders and other

18· ·sorts of invoices?

19· · · ·A.· · They were -- they were for goods

20· ·purchased, so we would have to issue a

21· ·purchase order for the factory, along with

22· ·art files, packaging requirements,

23· ·transport information, EDI information, if

24· ·there is an RFID code.· So, on those

25· ·transactions a lot of documentation exists


Page 159·1· · · · · · · · · R. AUERBACH

·2· ·because you can't manufacture the items

·3· ·and ship it to the retailers without

·4· ·charge-backs unless everything is

·5· ·documented.

·6· · · · · · ·So, the answer is those are

·7· ·invoices so they get a different...

·8· · · ·Q.· · So what kind of transaction

·9· ·involved Ashford supplying millions of

10· ·dollars of goods or cash without extensive

11· ·documentation?

12· · · ·A.· · Well, this was, I believe,

13· ·through Extreme, not Ashford.· And as I --

14· · · ·Q.· · What transaction --

15· · · ·A.· · Sorry.

16· · · · · · ·MR. TEELE:· You have to let the

17· · · ·witness answer.

18· · · ·A.· · As I said, the only example I

19· ·can give you off the top of my head for

20· ·Ashford would be when I sent -- when we

21· ·sent them the 600 -- 620, 630 -- I don't

22· ·remember exactly.· Over $600,000 that we

23· ·sent them, so when they bought their

24· ·Zimmer printer, we -- Allen and I had gone

25· ·to a trade show in Spain.· Give me a


Page 160·1· · · · · · · · · R. AUERBACH

·2· ·moment.· ITMA, International Textile

·3· ·Machinery Show, and decided this would be

·4· ·a great machine for it to have.· And

·5· ·although they would own it, I sent

·6· ·approximately one-third of the value of

·7· ·the machine to them to show that I was

·8· ·supportive.· And then I had met with his

·9· ·brother and his brother was extremely

10· ·happy that we would show support for them

11· ·by basically investing in the machine that

12· ·was in their factory.

13· · · · · · ·But there is no documentation on

14· ·that.· The only thing I could check is a

15· ·wire.

16· · · ·Q.· · When did that happy?

17· · · ·A.· · I don't know.· I would have to

18· ·go back and check.· I believe sometime in

19· ·the past five years.

20· · · ·Q.· · At the time that happened, did

21· ·Northwest owe Ashford millions of dollars?

22· · · ·A.· · Yes.

23· · · ·Q.· · Tens of millions?

24· · · ·A.· · We always -- we always would owe

25· ·Ashford millions of dollars because we


Page 161·1· · · · · · · · · R. AUERBACH

·2· ·gave Ashford at one point 85 percent of

·3· ·our volume.· So, therefore, if every

·4· ·invoice was paid on time, it is

·5· ·conceivable that we would always owe

·6· ·Ashford approximately $25 million no

·7· ·matter what happened, on a revolving

·8· ·basis.

·9· · · ·Q.· · You say that it was typical that

10· ·business was done like this, where you

11· ·would send $5 million with no written

12· ·documentation.· What other transactions of

13· ·similar size happened between either

14· ·Northwest and Extreme, Northwest and

15· ·Ashford, or any other party that you

16· ·believe that was represented by Allen Guo?

17· · · ·A.· · As I said to you, the one that

18· ·comes to mind is the machinery loan. I

19· ·understand six hundred or $650,000 is not

20· ·what you specifically said, 5 million. I

21· ·don't have an example of one that is 5

22· ·million.

23· · · · · · ·As I said, I would think if you

24· ·send six hundred or $650,000 with no --

25· ·there is not even an email on it.· Just


Page 162·1· · · · · · · · · R. AUERBACH

·2· ·got back from a trip and sent the money

·3· ·because I said I would.· And that's it.

·4· · · · · · ·It's a very, very special

·5· ·relationship that we have and it is very,

·6· ·very different from a normally structured

·7· ·business.· As I said, I considered Allen a

·8· ·brother and they were family.· And Allen

·9· ·was very close to my father and Allen and

10· ·I spent 15 years of our lives together.

11· ·So, I know that it is difficult to follow,

12· ·and I may get a little emotional, but that

13· ·is what it was.· We just were one family.

14· ·Now we have a problem.

15· · · ·Q.· · One clarification.· I believe

16· ·you said that you sent 650K and you said

17· ·it was a third of the purchase price.

18· ·Would 650, or 600 to 650K be the amount

19· ·you sent, or was that the total purchase

20· ·price and you sent about a third?

21· · · ·A.· · I sent approximately six hundred

22· ·to $650,000, and that was approximately a

23· ·third of the value of the machine.· So,

24· ·the machine was like a million or a

25· ·million-5, a million-8, a million-9.


Page 163·1· · · · · · · · · R. AUERBACH

·2· ·Again, it is for a Zimmer jet printer that

·3· ·we used for our production and they have

·4· ·used for their production.· It wasn't

·5· ·exclusive to Northwest.

·6· · · ·Q.· · Did you ever talk to anyone

·7· ·other than Allen Guo on behalf of Extreme

·8· ·Horse Limited?

·9· · · ·A.· · Not --

10· · · · · · ·MR. AULET:· Strike that.

11· · · · · · ·MR. TEELE:· He is answering the


13· · · ·A.· · Not really, no.

14· · · ·Q.· · So, my question was, did you

15· ·ever speak to anyone other than Allen Guo

16· ·who spoke on behalf of Extreme Horse

17· ·Limited?· My initial question was somewhat

18· ·unclear.

19· · · ·A.· · The only conversation -- the

20· ·only contact would be some emails.· No

21· ·actual conversations or meetings.

22· · · ·Q.· · And were those emails with Pan

23· ·Dong Mei?

24· · · ·A.· · Yes.· I don't remember the last

25· ·name, I apologize.· But Pan.


Page 164·1· · · · · · · · · R. AUERBACH

·2· · · ·Q.· · What happened to the $5 million

·3· ·after you sent it to Extreme Horse

·4· ·Limited?

·5· · · ·A.· · I don't know exactly where they

·6· ·put it.

·7· · · ·Q.· · Is it your testimony that you do

·8· ·not know what happened to the $5 million

·9· ·you sent to Extreme Horse Limited?

10· · · ·A.· · Once they received it?· I don't

11· ·know what they did with it when they

12· ·received it.· I mean, I wouldn't know what

13· ·they did with it when they got it. I

14· ·don't know their bank account.

15· · · ·Q.· · Do you know where the money went

16· ·within the next few weeks?

17· · · ·A.· · Give me one second.

18· · · · · · ·Sorry.· The laptop I am using,

19· ·something happened.· Give me one moment.

20· · · · · · ·(Pause.)

21· · · · · · ·MR. DUFFY:· Give us a two-minute

22· · · ·break and we'll try and sign back on.

23· · · ·He is having a technical glitch.

24· · · · · · ·MR. AULET:· Fine.· Let's take a

25· · · ·two-minute break.


Page 165·1· · · · · · · · · R. AUERBACH

·2· · · · · · ·THE VIDEOGRAPHER:· It is 3:56.

·3· · · ·We are off the record.

·4· · · · · · ·(Recess.)


·6· · · ·3:59.· We are back on the record.


·8· · · ·Q.· · Before the break, we were

·9· ·discussing the $5 million you sent to

10· ·Extreme Horse Limited.· Where did they

11· ·transfer that money to within the next few

12· ·weeks after you sent it to them?


14· · · ·form.

15· · · · · · ·(Pause.)

16· · · ·A.· · Could you explain exactly in

17· ·detail -- I apologize -- what it is you

18· ·are trying to ask?

19· · · ·Q.· · You sent Extreme Horse Limited

20· ·$5 million in May of 2017.· Correct?

21· · · ·A.· · I don't remember the date but we

22· ·sent $5 million.

23· · · ·Q.· · And where did Extreme Horse

24· ·subsequently transfer that $5 million to?



Page 166·1· · · · · · · · · R. AUERBACH

·2· · · ·characterization "that $5 million."

·3· · · ·If you understand it, you can answer.

·4· · · ·A.· · It's just that -- it's what he

·5· ·had said.· I apologize.· The "that." I

·6· ·don't understand "that."

·7· · · ·Q.· · Did you receive $5 million at

·8· ·Northwest Textiles Holdings shortly after

·9· ·you sent $5 million from Northwest Company

10· ·to Extreme Horse Limited?

11· · · ·A.· · Yes, for their investment in the

12· ·company.· Yes, that is correct.

13· · · ·Q.· · When did Extreme Horse Limited

14· ·sign any documents relating to any

15· ·investment?


17· · · ·form.

18· · · ·A.· · I don't remember the date, but

19· ·the documents have been produced.· I just

20· ·don't know the date that is on the

21· ·document.

22· · · ·Q.· · When did Extreme Horse Limited

23· ·inform you that they would not be making

24· ·an independent -- strike that.

25· · · · · · ·Did Pan Dong Mei ever tell you


Page 167·1· · · · · · · · · R. AUERBACH

·2· ·that Extreme Horse Limited would make a

·3· ·$5 million cash investment?

·4· · · ·A.· · At some time in the process, I

·5· ·believe the answer would be yes.

·6· · · ·Q.· · And you previously testified you

·7· ·only e-mailed with her.· Is that correct?


·9· · · ·Q.· · And so those emails where she

10· ·agreed to make a $5 million cash

11· ·investment would have been produced to us.


13· · · ·A.· · If those were in an email, it

14· ·would be produced.· Anything that we have

15· ·we produced.


17· · · ·Exhibit 13.)

18· · · · · · ·MR. AULET:· I will show you

19· · · ·Exhibit 13.· This is a series of

20· · · ·emails between you and Pan Dong Mei.

21· · · ·I am going to direct your attention to

22· · · ·page 5.

23· · · ·Q.· · First, the date on this is

24· ·2017-6-9.· As you can see, in this email

25· ·Pan informs you that she and Allen "have


Page 168·1· · · · · · · · · R. AUERBACH

·2· ·discussed about this before.· Due to loan

·3· ·pressure we are not able to do an actual

·4· ·investment for now.· Allen told me that

·5· ·you need help on the documents first but

·6· ·not actual investment needed.· That's why

·7· ·you sent me the 5 million last month and I

·8· ·just sent it back to you right away."

·9· · · · · · ·Does this accurately reflect the

10· ·discussion regarding any potential

11· ·investment by Extreme Horse Limited in

12· ·Northwest?

13· · · ·A.· · Not exactly.· There is emails I

14· ·believe where it said Allen will explain

15· ·to you.· But as I said to you...

16· · · · · · ·No.· As I said, it wouldn't make

17· ·any sense.· She may have phrased it that

18· ·way because of English and translation, I

19· ·really don't know, but it was clear based

20· ·on the documents and it was clear that

21· ·they were going to pay, at that point, in

22· ·merchandise.· And they confirmed that to

23· ·both myself and to Robert, "they" being

24· ·Allen.

25· · · ·Q.· · So you say that at that point


Page 169·1· · · · · · · · · R. AUERBACH

·2· ·they confirmed they were going to pay in

·3· ·merchandise.

·4· · · ·A.· · I don't know if I said --


·6· · · ·Mischaracterization.

·7· · · · · · ·MR. AULET:· I hadn't finished my

·8· · · ·question.

·9· · · · · · ·MR. DUFFY:· My apologies.

10· · · ·Q.· · So you said that "it was clear

11· ·based on the documents and it was clear

12· ·that they were going to pay at that point

13· ·in merchandise."· Was it clear that they

14· ·were going to pay in merchandise before

15· ·anyone signed any documents -- sorry.· By

16· ·"anyone," I mean anyone from Extreme

17· ·Horse.

18· · · ·A.· · They were going to pay in cash

19· ·and then it changed.· I don't know the

20· ·date that it changed without going through

21· ·all the emails.· I see the emails you have

22· ·here but I know there is more emails so I

23· ·can't profess to know the date.· I just

24· ·can't.

25· · · ·Q.· · How was it communicated to you


Page 170·1· · · · · · · · · R. AUERBACH

·2· ·that Extreme Horse would not repay an

·3· ·alleged loan in cash?

·4· · · ·A.· · How was it conveyed to me?· It

·5· ·was conveyed to myself and to Robert

·6· ·Jolson by Allen Guo.

·7· · · ·Q.· · And Robert Jolson was aware that

·8· ·this loan existed?

·9· · · ·A.· · I don't want to speak for

10· ·Robert.· I don't think I should.

11· · · ·Q.· · Was Robert Jolson involved in

12· ·the discussion where Allen informed you

13· ·that Extreme Horse would not repay the

14· ·$5 million loan?

15· · · ·A.· · Robert had independent

16· ·conversations with Allen, as I did with

17· ·Allen myself.· You'd have to ask Robert.

18· · · ·Q.· · Was Robert Jolson involved in

19· ·any of the discussions that you had with

20· ·Allen regarding the $5 million loan?

21· · · ·A.· · At the same time?· You mean

22· ·together?

23· · · ·Q.· · Yes.

24· · · ·A.· · I believe it was independent. I

25· ·believe that Allen spoke to Robert and I


Page 171·1· · · · · · · · · R. AUERBACH

·2· ·spoke with Allen.· I don't believe we were

·3· ·on a call together.

·4· · · ·Q.· · Northwest sent $5 million to

·5· ·Extreme Horse Limited, and Extreme Horse

·6· ·Limited immediately sent it back to

·7· ·Northwest Holdings -- strike that.

·8· · · · · · ·Northwest sent $5 million to

·9· ·Extreme Horse Limited, and shortly

10· ·thereafter Extreme Horse Limited sent $5

11· ·million to Northwest Holdings.· Correct?

12· · · · · · ·MR. DUFFY:· Object to the

13· · · ·characterization of "shortly

14· · · ·thereafter" as vague.

15· · · ·Q.· · Within a few weeks.

16· · · ·A.· · I believe that that is correct.

17· ·I mean, I know that they sent 5 million.

18· ·I just don't know the dates.

19· · · ·Q.· · And when in that period did

20· ·Extreme Horse inform you that it would not

21· ·repay any alleged loan in cash?



24· · · ·A.· · I don't know the date.

25· · · · · · ·(Audio interruption.)


Page 172·1· · · · · · · · · R. AUERBACH

·2· · · ·Q.· · Now, you control Northwest

·3· ·Textiles Holdings.· Correct?


·5· · · ·A.· · I am a member, the managing

·6· ·member.

·7· · · ·Q.· · You could have simply returned

·8· ·the $5 million to Northwest Company.

·9· ·Correct?

10· · · · · · ·MR. DUFFY:· Objection.· It is a

11· · · ·hypothetical.· You can answer if you

12· · · ·can understand what he is asking.

13· · · ·A.· · Could you please say it again?

14· ·I heard you but I just didn't understand.

15· · · ·Q.· · You could have returned the $5

16· ·million that was sent to Northwest Textile

17· ·Holdings to Northwest Company; correct?

18· · · ·A.· · I don't -- okay.· I truly don't

19· ·understand the question.

20· · · ·Q.· · It's a very simple question.

21· ·Could you have taken the $5 million that

22· ·was sent to Northwest Textiles Holdings

23· ·and sent it back to Northwest Company?


25· · · · · · ·MR. DUFFY:· Yes, objection to


Page 173·1· · · · · · · · · R. AUERBACH

·2· · · ·form.

·3· · · · · · ·MR. TEELE:· You are asking

·4· · · ·questions as though there was no

·5· · · ·transaction between the parties. I

·6· · · ·think we should get to the end of

·7· · · ·this.

·8· · · · · · ·MR. AULET:· I stand by the

·9· · · ·question.

10· · · ·Q.· · Can you answer the question,

11· ·please?

12· · · · · · ·MR. DUFFY:· If you understand

13· · · ·it, you can answer it.· If you do not

14· · · ·understand it, you need to say you

15· · · ·don't understand it.

16· · · ·A.· · You are asking me if I could

17· ·have physically sent $5 million from

18· ·Northwest Textiles Holdings to The

19· ·Northwest Company?· Is that your question?

20· · · ·Q.· · Yes.

21· · · ·A.· · I don't know how to answer the

22· ·question because I don't know why we would

23· ·do that.· I don't understand in this

24· ·context -- this is the first question you

25· ·have asked me, I have no idea how to


Page 174·1· · · · · · · · · R. AUERBACH

·2· ·answer the question.

·3· · · ·Q.· · It would have been trivial for

·4· ·you to unwind all of the transactions once

·5· ·Extreme Horse Limited said that they could

·6· ·not repay this alleged loan.· Correct?


·8· · · ·characterization as "trivial."

·9· · · ·A.· · That is making an assumption

10· ·that I don't feel you can make.

11· · · ·Q.· · And what assumption is that?

12· · · ·A.· · That it was trivial that I could

13· ·transfer $5 million to another company.

14· ·Everything that you said is an assumption.

15· ·I know you asked me, and that is why I

16· ·said I don't understand because I don't

17· ·find it as easy a question as you have.

18· · · · · · ·And they received equity for

19· ·their investment, so if I was to do what

20· ·you suggested, how could I do that?

21· · · ·Q.· · Let's take a look at the exhibit

22· ·in front of you.· They didn't sign their

23· ·documents to get the equity until June.

24· ·Correct?

25· · · ·A.· · Do we have the document, the


Page 175·1· · · · · · · · · R. AUERBACH

·2· ·actual document?

·3· · · · · · ·MR. DUFFY:· Actually, I object

·4· · · ·to the question.· He has already said

·5· · · ·that he doesn't remember the date that

·6· · · ·the documents were signed.· So,

·7· · · ·answered and asked -- asked and

·8· · · ·answered.· Excuse me.

·9· · · · · · ·MR. AULET:· He has an email

10· · · ·sending the documents to Pan Dong Mei

11· · · ·in front of him.

12· · · · · · ·MR. DUFFY:· That is true, but

13· · · ·you asked him what date the documents

14· · · ·were signed, and he has already said

15· · · ·that he doesn't remember what those

16· · · ·dates are.

17· · · ·Q.· · If the documents had not yet

18· ·been signed, it would have been trivial

19· ·for you to take the $5 million sent to

20· ·Northwest Holdings, return it to

21· ·Northwest, and everything would have been

22· ·unwound.· Correct?


24· · · ·term "trivial" and to the

25· · · ·mischaracterization.· He's already


Page 176·1· · · · · · · · · R. AUERBACH

·2· · · ·answered that question.

·3· · · ·Q.· · I would like an answer to the

·4· ·question.

·5· · · ·A.· · Can you repeat the question,

·6· ·sir?

·7· · · ·Q.· · If the documents had not yet

·8· ·been signed, it would have been trivial

·9· ·for you to take the $5 million sent to

10· ·Northwest Holdings and returned it to

11· ·Northwest to unwind the transaction.

12· ·Correct?

13· · · · · · ·MR. DUFFY:· Same objection.

14· · · · · · ·MR. TEELE:· Same objection.

15· · · · · · ·MR. DUFFY:· Also hypothetical.

16· · · ·A.· · I can't answer the question.

17· · · · · · ·MR. TEELE:· You are trying to

18· · · ·get the witness to say something that

19· · · ·he clearly doesn't think is true or is

20· · · ·responsive.· Why don't you save that

21· · · ·for your argument?

22· · · · · · ·MR. AULET:· Mr. Teele, then the

23· · · ·witness can say he doesn't think it is

24· · · ·true.· I do not need an answer from

25· · · ·you.· I need an answer from the


Page 177·1· · · · · · · · · R. AUERBACH

·2· · · ·witness.

·3· · · · · · ·MR. TEELE:· You have said it

·4· · · ·five times.· You keep pounding on him

·5· · · ·to give you the damn answer that you

·6· · · ·want him to give.

·7· · · ·Q.· · Would it have not been trivial

·8· ·for you to simply return the $5 million

·9· ·from Northwest Holdings to Northwest --

10· · · · · · ·MR. TEELE:· Why don't we take a

11· · · ·break so you can collect your thoughts

12· · · ·and figure out how to ask your

13· · · ·question?

14· · · · · · ·MR. AULET:· Mr. Teele, I intend

15· · · ·to get an answer to the question.

16· · · · · · ·MR. TEELE:· We have been going

17· · · ·since 10:30 this morning.

18· · · · · · ·MR. AULET:· I need you to stop

19· · · ·interfering.· You can make an

20· · · ·objection --

21· · · · · · ·MR. TEELE:· You should ask an

22· · · ·appropriate question.· As long as

23· · · ·you ask inappropriate questions --

24· · · · · · ·MR. AULET:· You can make your

25· · · ·objection for the record and no more.


Page 178·1· · · · · · · · · R. AUERBACH

·2· · · ·I intend to get an answer to this

·3· · · ·question and I am going to keep asking

·4· · · ·it until I get an answer from the

·5· · · ·witness.

·6· · · · · · ·MR. TEELE:· I will direct the

·7· · · ·witness not to answer.· If you keep

·8· · · ·going down this road with this

·9· · · ·question I am going to direct the

10· · · ·witness not to answer because at this

11· · · ·point you are being abusive toward him

12· · · ·asking him the same question over and

13· · · ·over and now trying to ask the same

14· · · ·question in reverse.· Move on.

15· · · · · · ·MR. WISSNER-GROSS:· Jason, it's

16· · · ·Sig Wissner-Gross.· First, dial it

17· · · ·down.· Ken has been very patient with

18· · · ·the witness, who has been very

19· · · ·evasive.· ·Let Ken ask his questions.

20· · · · · · ·This is Sigmund Wissner-Gross.

21· · · ·I'm Kenneth Aulet's partner.· I've

22· · · ·been on all day.

23· · · ·Q.· · I would like a yes or no answer

24· ·to my question.· Would it have been

25· ·trivial for you to unwind the transaction


Page 179·1· · · · · · · · · R. AUERBACH

·2· ·by sending the 5 million back from

·3· ·Northwest Holdings to Northwest when no

·4· ·documents had been signed?· Yes or no?

·5· · · · · · ·MR. KESTENBAUM:· Before the

·6· · · ·witness answers, you are asking him

·7· · · ·essentially could he have changed the

·8· · · ·transaction.· I don't know what you

·9· · · ·mean by the word "trivial" and neither

10· · · ·does the witness.· You are asking him

11· · · ·could he have changed the transaction

12· · · ·to a different transaction.

13· · · · · · ·Are you asking did he have the

14· · · ·legal authority to do that?· Are you

15· · · ·asking would he have?· I am not even

16· · · ·sure what your question is.· You keep

17· · · ·repeating the same words and the

18· · · ·witness is having trouble answering it

19· · · ·because you keep using the word

20· · · ·"trivial."· What does that mean?· What

21· · · ·are you trying to ask?· Could he have

22· · · ·physically taken a pen --

23· · · · · · ·MR. AULET:· I will note that you

24· · · ·can make an objection and that the

25· · · ·speaking objections are improper.· But


Page 180·1· · · · · · · · · R. AUERBACH

·2· · · ·I will ask without the word "trivial."

·3· · · ·Q.· · Could you have sent the money

·4· ·back from Northwest Textiles Holdings to

·5· ·Northwest once you became aware that

·6· ·Extreme Horse Limited would not,

·7· ·quote-unquote, repay the loan in cash

·8· ·before they had signed the document?

·9· · · ·A.· · No.

10· · · ·Q.· · Why not?

11· · · ·A.· · The answer is no.· Also, I do

12· ·not -- I do not have with me any

13· ·documentation on the use of proceeds.· But

14· ·we could not.· The answer is no, we could

15· ·not.· We were involved in a transaction,

16· ·we received the money, we gave the equity

17· ·and that was it.· I just don't understand,

18· ·and I don't think anything is trivial

19· ·about $5 million.

20· · · ·Q.· · You previously testified that

21· ·you sent $5 million from The Northwest

22· ·Company to Extreme Horse Limited with no

23· ·written agreement.· Correct?

24· · · ·A.· · That is correct but I never said

25· ·it was trivial.· I said that is the way we


Page 181·1· · · · · · · · · R. AUERBACH

·2· ·did business since we were like a family.

·3· ·"Trivial" implies to me that there is no

·4· ·consequences involved.

·5· · · ·Q.· · Please direct your attention to

·6· ·page 3, which is an email from you to Pan

·7· ·Dong Mei where you say, "I know you cannot

·8· ·physically send 5 million now.· We

·9· ·understand.· Please just sign the

10· ·documents so we can transfer the stock for

11· ·dividend payments when they are issued.

12· ·The money will come much later, and we

13· ·spoke of taking that in trade, not cash.

14· ·But again, nothing now.· Maybe end year or

15· ·next year."

16· · · · · · ·Does that refresh your

17· ·recollection that the documents had not

18· ·been signed before you were told that

19· ·Extreme Horse Limited could not make their

20· ·own $5 million cash investment?

21· · · ·A.· · I stated earlier or said earlier

22· ·I don't know the date.· I still don't know

23· ·the date.· I do see the email.· I remember

24· ·this email very well.· The answer is I

25· ·still don't know the date that we signed


Page 182·1· · · · · · · · · R. AUERBACH

·2· ·the agreement and I have no idea what that

·3· ·date is.

·4· · · · · · ·I still don't see how -- excuse

·5· ·me.

·6· · · · · · ·I don't see how that matters.

·7· · · ·Q.· · Well, this email is on June 9,

·8· ·2017.· Correct?

·9· · · ·A.· · Yes.

10· · · ·Q.· · And you are requesting that Pan

11· ·sign the documents on that date.· Correct?

12· · · ·A.· · That's what it says.

13· · · ·Q.· · And at the time that you are

14· ·requesting that she sign those documents,

15· ·you are stating that you know that she is

16· ·not going to physically send $5 million

17· ·now.· Correct?

18· · · ·A.· · That's what it says but I don't

19· ·know what I said to Allen at the time.

20· ·But go ahead.

21· · · ·Q.· · How was the transfer of $5

22· ·million to Extreme Horse booked on

23· ·Northwest's records?

24· · · ·A.· · That, you would have to ask

25· ·Robert.


Page 183·1· · · · · · · · · R. AUERBACH

·2· · · ·Q.· · How did you instruct it to be

·3· ·booked?

·4· · · ·A.· · I didn't specifically instruct

·5· ·it to be booked.· In other words, I didn't

·6· ·tell anyone to book anything a certain

·7· ·way.· It was booked in accordance with how

·8· ·it should be booked, but I am not an

·9· ·accountant so I can't speak to that.

10· · · ·Q.· · Was Robert Jolson aware of all

11· ·information that he would need to know how

12· ·the $5 million would be booked?


14· · · ·form.· What do you mean by "all

15· · · ·information"?

16· · · ·Q.· · Was Mr. Jolson aware of what the

17· ·terms of sending the $5 million to Extreme

18· ·Horse Limited were?

19· · · ·A.· · Mr. Jolson had -- excuse me --

20· ·had conversations with Allen, and he got

21· ·back -- I would think that his

22· ·conversations with Allen -- in other

23· ·words, we both had conversations with

24· ·Allen.· But as I stated earlier, I don't

25· ·believe we had them together so I can't


Page 184·1· · · · · · · · · R. AUERBACH

·2· ·say what Robert said and spoke to Allen

·3· ·and heard.


·5· · · ·Exhibit 14.)

·6· · · · · · ·MR. AULET:· I am going to show

·7· · · ·you what I have marked as Exhibit 14,

·8· · · ·which shows how the Extreme Horse

·9· · · ·Limited payments were booked on the

10· · · ·books and records.· These are

11· · · ·screenshots from the May 2017 general

12· · · ·ledger.· I would note that we did not

13· · · ·put that red text in, that the

14· · · ·document had all Extreme Horse Limited

15· · · ·lines in red when we received it.

16· · · ·Q.· · As you can see, Mr. Auerbach, a

17· ·transaction for Extreme Horse Limited for

18· ·$5 million on May 8, 2017 is listed under

19· ·prepaid inventory and there is a

20· ·corresponding cash-in-banks entry

21· ·reflecting $5 million out to Extreme Horse

22· ·Limited.

23· · · · · · ·Do you have any explanation for

24· ·why this payment would have been booked as

25· ·prepaid inventory if it was in fact a


Page 185·1· · · · · · · · · R. AUERBACH

·2· ·loan?


·4· · · ·A.· · I don't even really know how to

·5· ·read it, to be frank with you.· I have

·6· ·never seen this before and I don't see if

·7· ·this is from the general ledger, I don't

·8· ·see "general ledger."· I never see the

·9· ·general ledger.

10· · · ·Q.· · Do you have any explanation for,

11· ·putting the document aside, why the

12· ·payment to Extreme Horse Limited would

13· ·have been booked at the time it was made

14· ·as a prepaid inventory payment?

15· · · ·A.· · As I said earlier, I don't.

16· ·This is something that I just don't get

17· ·involved with.· I don't know.

18· · · ·Q.· · But this is something that

19· ·Robert Jolson should be aware of, correct?


21· · · ·A.· · I would assume, but I don't know

22· ·who made the entry.· I don't know who made

23· ·the entries.· I see what you are giving

24· ·me.· I know nothing else about it.

25· · · ·Q.· · Have you ever made a demand on


Page 186·1· · · · · · · · · R. AUERBACH

·2· ·Extreme Horse Limited to repay the $5

·3· ·million in cash or in goods?

·4· · · ·A.· · When you say "demand," can you

·5· ·explain what you mean by "demand"?

·6· · · ·Q.· · Have you ever, in sum or

·7· ·substance, said "give us $5 million or

·8· ·give us $5 million worth of goods"?

·9· · · ·A.· · We did ask for the goods at a

10· ·later date, towards the Wilderness

11· ·program, but we did not get the goods.

12· ·And it carried forward for another year.

13· · · ·Q.· · And when did you ask for the

14· ·goods?

15· · · ·A.· · I don't know.

16· · · ·Q.· · And in what form did you ask for

17· ·the goods?· Did you write an email?

18· · · ·A.· · No.· And when I say "we," I mean

19· ·the company.· I don't know who asked.· It

20· ·could be -- it could be Robert, it could

21· ·be myself.· It could be almost anybody.

22· ·Well, Robert, myself, one of us asked or

23· ·both of us asked but I don't remember

24· ·when.· It would have been on a call.· Most

25· ·everything we did with Allen was on a


Page 187·1· · · · · · · · · R. AUERBACH

·2· ·call.

·3· · · ·Q.· · Do you recall asking Allen to

·4· ·provide the goods on a call?

·5· · · ·A.· · I don't recall any specific

·6· ·call.· I do know that we asked about it.

·7· ·It, again, got carried over to the

·8· ·following year because they were not able

·9· ·to do it that year.

10· · · ·Q.· · But do you specifically recall

11· ·making that request on the phone call?

12· · · ·A.· · I don't remember the phone call.

13· ·I know it was discussed.

14· · · ·Q.· · Do you know by whom it was

15· ·discussed?

16· · · ·A.· · As I said, I know that I spoke

17· ·to Allen about Wilderness, and I believe

18· ·probably Robert did, too, but I can't

19· ·speak for Robert.

20· · · ·Q.· · When you say you spoke to Allen

21· ·about Wilderness, in that phone call did

22· ·you request that he provide the $5 million

23· ·of goods?

24· · · ·A.· · We chatted about this probably

25· ·on more than one occasion, but there was


Page 188·1· · · · · · · · · R. AUERBACH

·2· ·not one -- I feel as if you are asking if

·3· ·there was one moment in time when we

·4· ·demanded the goods.· The answer is that we

·5· ·spoke about the goods and probably more

·6· ·than once.· Probably much more than once.

·7· · · ·Q.· · Did anyone ever say, "We will

·8· ·not supply the goods"?

·9· · · ·A.· · No, at least not that I am aware

10· ·of.

11· · · ·Q.· · Was any request or demand or

12· ·similar -- sorry.

13· · · · · · ·Was any demand made on Extreme

14· ·Horse in April of this year for either $5

15· ·million cash or $5 million of goods?

16· · · ·A.· · Could you repeat the question,

17· ·specifically the date you referenced?

18· · · ·Q.· · Was any demand made on Extreme

19· ·Horse in April of this year for either $5

20· ·million of cash or $5 million of goods?

21· · · ·A.· · I do not -- I don't have any

22· ·recollection of a date specific of

23· ·anything.· But I -- I don't.· I am not

24· ·sure why April.· I have no idea.

25· · · ·Q.· · At any point since the initial


Page 189·1· · · · · · · · · R. AUERBACH

·2· ·$5 million was made -- strike that.

·3· · · · · · ·What was the $5 million that was

·4· ·sent to Northwest Textiles used for?

·5· · · ·A.· · It was part of the proceeds to

·6· ·purchase the shares owned by Itochu

·7· ·Corporation from Itochu.

·8· · · ·Q.· · When were the shares purchased

·9· ·from Itochu Corporation?

10· · · ·A.· · I do not know the date.· It

11· ·would be somewhere in the range of this

12· ·transaction, but I do not know the date.

13· · · ·Q.· · Was it before or after the 5

14· ·million was sent?

15· · · · · · ·MR. DUFFY:· Objection.· He said

16· · · ·he didn't know the date.· Asked and

17· · · ·answered.

18· · · ·A.· · I just don't know the specific

19· ·dates.

20· · · ·Q.· · How would I determine if it was

21· ·before or after?

22· · · ·A.· · We --


24· · · · · · ·THE WITNESS:· Did you want me to

25· · · ·answer the question?


Page 190·1· · · · · · · · · R. AUERBACH

·2· · · · · · ·MR. DUFFY:· Answer if you can.

·3· · · ·A.· · We would have to -- we'd have to

·4· ·look at the closing documents and the

·5· ·dates.· I just don't know the dates.

·6· · · ·Q.· · Would the bank account

·7· ·statements of Northwest Textiles reflect

·8· ·when money was paid to Itochu?

·9· · · ·A.· · Yes, they would have to.

10· · · ·Q.· · And you are aware that we have

11· ·not received those bank account statements

12· ·despite requesting them.· Correct?

13· · · ·A.· · You made me aware of that

14· ·earlier today.· As I told you, I will

15· ·follow up because we did request those for

16· ·you.


18· · · ·Exhibit 15.)


20· · · ·you what I am marking as Exhibit 15,

21· · · ·which is the Complaint that has been

22· · · ·filed against Extreme Horse Limited.

23· · · ·Q.· · Have you seen this document

24· ·before?

25· · · ·A.· · Without scrolling through it, I


Page 191·1· · · · · · · · · R. AUERBACH

·2· ·am sure I have.· If we created this

·3· ·document, I am sure I saw it.

·4· · · ·Q.· · I am going to direct your

·5· ·attention to page 3, specifically

·6· ·paragraph 12, which states that, "On the

·7· ·same day, May 7, 2017, Extreme Horse

·8· ·executed a capital contribution redemption

·9· ·agreement and invested 5 million in

10· ·Northwest Textiles LLC."

11· · · · · · ·Is that statement true?

12· · · ·A.· · I don't know the dates.· I just

13· ·don't know the dates sitting here. I

14· ·don't know the date.· I would have to look

15· ·it up.· I assume -- again, I shouldn't

16· ·assume.· I don't know without having it in

17· ·front of me.

18· · · ·Q.· · Is there any document that you

19· ·can think of that would be more accurate

20· ·to determine if paragraph 12 is correct

21· ·than looking at an email returning the

22· ·signature pages to you?


24· · · · · · ·If you understand, you can

25· · · ·answer.


Page 192·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · Can you repeat the question?

·3· ·Thank you.

·4· · · ·Q.· · Is there any document you can

·5· ·think of that would be more accurate in

·6· ·determining if the allegations in

·7· ·paragraph 12 are correct about when these

·8· ·agreements were signed than looking at an

·9· ·email returning the signature pages to

10· ·you?

11· · · ·A.· · I am not really sure how to

12· ·answer the question.· It says a capital

13· ·contribution redemption agreement -- I'm

14· ·reading it -- on May 7th.· Again --

15· · · · · · ·MR. KESTENBAUM:· You don't know

16· · · ·whether that is correct?

17· · · ·A.· · I don't have the agreement in

18· ·front of me.

19· · · ·Q.· · Paragraph 13, "At or shortly

20· ·after the transfer was made, Extreme Horse

21· ·informed Northwest it was unable to repay

22· ·the loan in cash as originally agreed."

23· · · · · · ·First, who communicated this on

24· ·behalf of Extreme Horse?

25· · · ·A.· · Well, again, I don't know


Page 193·1· · · · · · · · · R. AUERBACH

·2· ·because -- I don't know.· I don't even

·3· ·know that Allen is part of Extreme Horse.

·4· ·I don't know.

·5· · · ·Q.· · Are you aware of any statements

·6· ·being made that Extreme Horse was unable

·7· ·to repay the loan in cash as originally

·8· ·agreed?

·9· · · ·A.· · To the date, or to the

10· ·statement?

11· · · · · · ·MR. KESTENBAUM:· Do you have a

12· · · ·time frame?

13· · · ·Q.· · Do I understand your previous

14· ·testimony that you are unable to recall a

15· ·specific statement by someone that would

16· ·match the allegation in paragraph 13?

17· · · · · · ·MR. KESTENBAUM:· Objection.

18· · · ·Mischaracterizes the testimony.

19· · · ·A.· · I didn't say that.· I just said

20· ·that without having the documents in front

21· ·of me, I can't really answer the question

22· ·because I don't have anything to look at.

23· · · ·Q.· · Well, for paragraph 13, do you

24· ·believe that that statement was in

25· ·writing?


Page 194·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · I can't answer the question. I

·3· ·don't know.

·4· · · ·Q.· · Can you think of anyone else who

·5· ·I would be able to ask who might know?

·6· · · ·A.· · Again, I just don't know. I

·7· ·don't know because it has to be dates, and

·8· ·I don't know the dates sitting here.

·9· · · ·Q.· · If you ignore the representation

10· ·about when, in this Complaint, about when

11· ·the statements were made, do you recall

12· ·such statements being made?

13· · · ·A.· · I am just asking a question.

14· ·Are you asking me whether or not Extreme

15· ·Horse said that they were going to supply

16· ·merchandise to Northwest?· Is that the

17· ·question?

18· · · ·Q.· · I understand that your response

19· ·was that you cannot say with a sufficient

20· ·degree of certainty when a statement

21· ·matching the one alleged in paragraph 13

22· ·was made.· Is that correct?

23· · · ·A.· · Can you say it again?· I am

24· ·sorry.

25· · · ·Q.· · Well, there is two reasons -- I


Page 195·1· · · · · · · · · R. AUERBACH

·2· ·will rephrase.

·3· · · · · · ·There are two reasons you might

·4· ·be unable to say if paragraph 13 is true

·5· ·or not.· Either the statement was or

·6· ·wasn't made, or you don't know when it was

·7· ·made.

·8· · · · · · ·MR. KESTENBAUM:· Objection.

·9· · · ·Q.· · Do you know if a statement as

10· ·alleged in paragraph 13 was made at any

11· ·point in time?

12· · · ·A.· · I know that Extreme Horse was

13· ·going to supply merchandise to Northwest

14· ·at some point in time in lieu of sending

15· ·cash.· I don't know when that was.· That's

16· ·it.· That's all I've got.

17· · · ·Q.· · Okay.· And paragraph 16,

18· ·"Despite due demand by Northwest, Extreme

19· ·Horse has failed and refused to provide

20· ·the goods to repay the transfer."

21· · · · · · ·When did Extreme Horse refuse to

22· ·provide the goods?

23· · · ·A.· · I don't know the date.· I am

24· ·very sorry but I don't know the date.

25· · · ·Q.· · Is it your testimony that


Page 196·1· · · · · · · · · R. AUERBACH

·2· ·Extreme Horse did refuse to provide the

·3· ·goods at some point in time?

·4· · · ·A.· · Well, we never got them.· We

·5· ·requested it, we never got it.· So, the

·6· ·answer is yes.

·7· · · ·Q.· · Let me try and parse that

·8· ·answer.· You say that you never got them,

·9· ·and you requested it and you never got

10· ·them, so the answer is yes.· But my

11· ·question is, did anyone from Extreme Horse

12· ·say "We will not supply the goods" or

13· ·something to that effect?


15· · · ·and answered.· You can answer.

16· · · ·A.· · Can you say it one more time,

17· ·please?· Sorry.· Thank you.

18· · · ·Q.· · So I understood your previous

19· ·answer to be, in essence, that you

20· ·requested the goods and you haven't gotten

21· ·them, so Extreme Horse has failed to

22· ·provide the goods.· But what I am focusing

23· ·on is the statement that Extreme Horse has

24· ·refused to provide the goods.· Has anyone

25· ·from Extreme Horse explicitly refused to


Page 197·1· · · · · · · · · R. AUERBACH

·2· ·provide the goods?

·3· · · · · · ·MR. DUFFY:· Objection.· It

·4· · · ·mischaracterizes what the document

·5· · · ·says.· It doesn't say "explicitly."

·6· · · ·It just says "refused."

·7· · · ·A.· · We didn't get the goods.· We

·8· ·requested the goods.· And the answer is

·9· ·yes, they did not give us the goods.

10· · · ·Q.· · But did Extreme Horse say

11· ·explicitly "We will not provide the

12· ·goods"?

13· · · ·A.· · I don't mean to be argumentative

14· ·to you in any way, but we asked for the

15· ·goods, they didn't show up.· We asked for

16· ·the goods, we never got the goods. I

17· ·know -- I feel like you want me to answer

18· ·the question in the way in which you are

19· ·asking the question and you want me to

20· ·answer it to suit that purpose.· But I am

21· ·giving you an honest answer.· Anything

22· ·else I do, I am making it up.· I am giving

23· ·an honest answer each time.

24· · · ·Q.· · My concern is that I am drawing

25· ·a distinction between simply failing to


Page 198·1· · · · · · · · · R. AUERBACH

·2· ·provide the goods and refusing to provide

·3· ·the goods.

·4· · · · · · ·MR. DUFFY:· Objection.· This

·5· · · ·witness has stated that he doesn't see

·6· · · ·the distinction.· It is a distinction

·7· · · ·without a difference according to this

·8· · · ·witness.· He's answered the question

·9· · · ·several times that exact same way.

10· · · · · · ·MR. AULET:· There is a

11· · · ·difference between him not seeing a

12· · · ·difference and getting a clear answer

13· · · ·to the question.

14· · · ·Q.· · What I want to know, did anyone

15· ·from Extreme Horse say "We will not

16· ·provide the goods"?

17· · · ·A.· · I don't know if anyone from

18· ·Extreme Horse -- excuse me.

19· · · · · · ·I don't know if anyone from

20· ·Extreme Horse used the verbiage that you

21· ·just used.· I can't remember if they said

22· ·what you said.

23· · · · · · ·MR. TEELE:· Ken, how much longer

24· · · ·do you have?

25· · · · · · ·MR. AULET:· I think we have a


Page 199·1· · · · · · · · · R. AUERBACH

·2· · · ·little while longer to go.

·3· · · ·Q.· · Paragraph 38 --

·4· · · · · · ·MR. TEELE:· You only have

·5· · · ·another hour remaining in your

·6· · · ·seven hours so you can't have that

·7· · · ·much longer.

·8· · · · · · ·MR. AULET:· I have questions and

·9· · · ·I will use the entire time.· I think I

10· · · ·am done with this exhibit.· We can

11· · · ·take about a five-minute break if now

12· · · ·is good.· I think we have been going

13· · · ·about two hours.

14· · · · · · ·THE WITNESS:· Sounds good to me.


16· · · ·4:45.· We are going off the record.

17· · · · · · ·(Recess.)


19· · · ·4:53.· We are back on the record.


21· · · ·Q.· · Mr. Auerbach, is there any

22· ·reason you couldn't have simply sent $5

23· ·million from The Northwest Company to

24· ·Northwest Textiles rather than seeking

25· ·this investment from Extreme Horse?


Page 200·1· · · · · · · · · R. AUERBACH


·3· · · ·form.

·4· · · ·A.· · Would you repeat the question,

·5· ·please?

·6· · · ·Q.· · Was the purpose of obtaining an

·7· ·investment from Extreme Horse to raise

·8· ·funds to purchase Itochu's investment in

·9· ·Northwest?

10· · · ·A.· · No.


12· · · ·A.· · Say it one more time and I will

13· ·repeat my answer as well.

14· · · ·Q.· · I changed the question.· Was the

15· ·purpose of obtaining an investment from

16· ·Extreme Horse to raise funds to purchase

17· ·Itochu's investment in Northwest?

18· · · ·A.· · No.· That was not the -- I may

19· ·not be answering the question correctly,

20· ·but the funds were used for that purpose,

21· ·yes.· Not exactly -- I don't know why I am

22· ·having trouble with your question but...

23· · · ·Q.· · The funds were used for that

24· ·purpose, but you did not seek the

25· ·investment for that purpose?· Is that


Page 201·1· · · · · · · · · R. AUERBACH

·2· ·correct?

·3· · · ·A.· · Okay.· Now I understand.· The

·4· ·answer is yes, we did.· We seeked funds

·5· ·for that investment.· I misunderstood what

·6· ·you said.

·7· · · ·Q.· · Is there any reason that you

·8· ·could not have distributed $5 million as a

·9· ·dividend to Northwest Textiles to get the

10· ·money to Northwest Textiles to purchase

11· ·Itochu shares?

12· · · ·A.· · When we did this transaction, we

13· ·did so with counsel and we did so in a

14· ·manner which was set up in that process.

15· ·The answer to your question is I do not

16· ·know.· I can't answer the question. I

17· ·followed the legal advice that I was --


19· · · · · · ·I followed the legal advice of

20· ·my attorneys.· I am obviously not a lawyer

21· ·or attorney.

22· · · ·Q.· · What was the source of any

23· ·additional funds used to purchase the

24· ·Itochu shares?

25· · · ·A.· · The additional funds came from


Page 202·1· · · · · · · · · R. AUERBACH

·2· ·Northwest Textile Holdings.

·3· · · ·Q.· · Where did Northwest Textile

·4· ·Holdings obtain those funds?

·5· · · ·A.· · Those were funds that Northwest

·6· ·Textiles had.

·7· · · ·Q.· · They were existing funds in its

·8· ·bank account?

·9· · · ·A.· · Yes.

10· · · ·Q.· · At that time, did Northwest

11· ·Textiles have sufficient funds in its bank

12· ·account to purchase the Itochu shares

13· ·without receiving the $5 million that we

14· ·have been discussing?

15· · · ·A.· · Sitting here, I don't know. I

16· ·have no idea.


18· · · ·Exhibit 16.)


20· · · ·you what I have marked as Exhibit 16,

21· · · ·a Chase bank account statement for

22· · · ·May 2017.

23· · · ·Q.· · I am going to direct your

24· ·attention to page 4.· The second

25· ·transaction listed is a wire of $5 million


Page 203·1· · · · · · · · · R. AUERBACH

·2· ·to Extreme Horse Limited.· At the bottom

·3· ·of that transaction it says "Your REF,

·4· ·prepaid inventor" and the "Y" is left off.

·5· · · · · · ·Do you have any explanation as

·6· ·to why this wire was labeled "prepaid

·7· ·inventory" if it was, in fact, a loan?

·8· · · ·A.· · No.· No idea.· I don't do these

·9· ·things.

10· · · ·Q.· · On page 5 at the bottom is a

11· ·wire of $5 million to you personally on

12· ·the 19th.· What was the purpose of this

13· ·wire?

14· · · ·A.· · I don't know.· I don't know.

15· ·I'd have to try to look it back up. I

16· ·don't know.

17· · · ·Q.· · What is Outerstuff?

18· · · ·A.· · Outerstuff is a company that

19· ·manufactures outer stuff.· Youth apparel

20· ·for the sports leagues, NFL, NBA, hockey.

21· ·Similar to our business but in youth

22· ·apparel.

23· · · ·Q.· · And at one point in this

24· ·bankruptcy proceeding, did you have a

25· ·non-binding term sheet for the purchase by


Page 204·1· · · · · · · · · R. AUERBACH

·2· ·Outerstuff of substantially all assets of

·3· ·the Debtors?

·4· · · ·A.· · Yes, we did.

·5· · · ·Q.· · How was that term sheet

·6· ·negotiated?

·7· · · ·A.· · Can you be specific?· I'd be

·8· ·happy to answer.

·9· · · ·Q.· · Who was in charge of negotiating

10· ·that deal on behalf of Northwest?

11· · · ·A.· · The negotiation of that term

12· ·sheet was between the attorneys.

13· · · ·Q.· · Who negotiated the general

14· ·business terms?

15· · · ·A.· · I don't know what the general

16· ·business terms are.· I don't know -- could

17· ·you tell me what they are, and I can

18· ·answer the question, please?

19· · · ·Q.· · For example, the price that

20· ·Outerstuff would pay.· Who negotiated

21· ·that?

22· · · ·A.· · I am not aware of what the

23· ·price -- if there was a price.

24· · · ·Q.· · Did you participate in the

25· ·negotiations?


Page 205·1· · · · · · · · · R. AUERBACH

·2· · · ·A.· · I participated in phone

·3· ·conversation and I had a meeting.· But the

·4· ·negotiation part, no, the attorney did.

·5· · · ·Q.· · I am just a little bit unclear.

·6· ·I think the transcript says you had a

·7· ·meeting, singular.· One meeting, or were

·8· ·there multiple meetings?

·9· · · ·A.· · I have seen -- excuse me. I

10· ·have seen Outerstuff more than once.

11· ·Probably two or three times.· But I

12· ·have --

13· · · ·Q.· · What was the -- sorry.· Please

14· ·finish your answer.

15· · · ·A.· · It's okay.· They are in our

16· ·industry, so I have known them, as I know

17· ·other people, for many, many years.

18· · · ·Q.· · How would you characterize your

19· ·involvement in the negotiations with

20· ·Outerstuff?

21· · · ·A.· · I would say that I spoke to them

22· ·about the opportunity.· Actually, I spoke

23· ·to them and told them what we were doing

24· ·with Ashford in a conversation.· And it

25· ·went further because Ashford dropped out


Page 206·1· · · · · · · · · R. AUERBACH

·2· ·of -- they no longer were interested in

·3· ·going forward.

·4· · · ·Q.· · At one point in the negotiations

·5· ·with Outerstuff, did Outerstuff

·6· ·essentially walk away from the

·7· ·negotiations?

·8· · · ·A.· · I think the answer would be that

·9· ·their attorney did walk away, yes, at one

10· ·point.· Or Outerstuff did I guess, you

11· ·could say that.· Yes.

12· · · ·Q.· · And what did they indicate the

13· ·basis of their walking away was?

14· · · ·A.· · They were concerned -- give me a

15· ·moment.· I want to think it through.

16· · · · · · ·(Pause.)

17· · · · · · ·I may leave something out.· I am

18· ·not really sure.· But I think in general

19· ·they were concerned about completing the

20· ·transaction.· They were having problems --

21· ·excuse me.· They were having problems of

22· ·their own.· They had the exclusive for

23· ·youth apparel for the Olympics.· They had

24· ·about twenty or $25 million in inventory

25· ·that they had to sit on for a year.· That


Page 207·1· · · · · · · · · R. AUERBACH

·2· ·number may be wrong but I am trying to

·3· ·remember.· They had furloughed a lot of

·4· ·their people.· They had no sports team

·5· ·playing, and they basically had enough

·6· ·problems of their own.· And I think it was

·7· ·hard for them to get the attention of

·8· ·their partner to go through with this in

·9· ·the timetable that was required.· And that

10· ·is a summary but that is what I believe it

11· ·to be.

12· · · ·Q.· · Who was the partner you referred

13· ·to?


15· · · ·Q.· · You had referred to a partner

16· ·that there was trouble getting the

17· ·attention of.· Who was the partner?

18· · · ·A.· · Blackstone.

19· · · ·Q.· · What caused Outerstuff to come

20· ·back to the negotiating table?

21· · · ·A.· · I think that -- I believe that

22· ·Outerstuff wanted to be a part of this

23· ·when Ashford dropped out of it.· There

24· ·were conversations.· I don't remember

25· ·exactly what we said.· But the issues -- I


Page 208·1· · · · · · · · · R. AUERBACH

·2· ·don't know if I should say opinions,

·3· ·because it is not a fact.· So, the answer

·4· ·is I don't know.· Anything I say would be

·5· ·an opinion, not a fact.

·6· · · ·Q.· · Were you involved in essentially

·7· ·pitching them to come back to the

·8· ·negotiating table?

·9· · · ·A.· · There were conversations. I

10· ·don't know if I would say I was pitching

11· ·them to come back.· But, yes, I was

12· ·involved in conversations with them.

13· ·Absolutely.

14· · · ·Q.· · And what was the substance of

15· ·those conversations?

16· · · ·A.· · Again, I am summarizing.· The

17· ·proceeding that we were working toward

18· ·with Ashford or down the road, say, with

19· ·Outerstuff or any other interested party

20· ·is one that would have to go through a 363

21· ·sale or a bankruptcy, and they did not

22· ·have a bankruptcy attorney working on the

23· ·term sheet and on the deal.· And the

24· ·attorneys were trying to get them to get

25· ·someone to the table who understood the


Page 209·1· · · · · · · · · R. AUERBACH

·2· ·process.

·3· · · ·Q.· · Has that non-binding term sheet

·4· ·now expired?

·5· · · ·A.· · Mm-hmm.· Sorry.· Yes.

·6· · · ·Q.· · Did any of your discussions with

·7· ·Outerstuff involve any potential future

·8· ·employment by you at Outerstuff?

·9· · · ·A.· · At Outerstuff?· The conversation

10· ·that we had as far as myself goes, we left

11· ·them open.· We did not discuss anything

12· ·specific about me.

13· · · ·Q.· · Did you discuss anything

14· ·generally about you?

15· · · ·A.· · Just that they don't make

16· ·blankets and we do, and we make home

17· ·products and they don't.· And the fact

18· ·that I would be helpful on that side of

19· ·it, and they would have their side of the

20· ·business.· But we didn't go into any

21· ·detail because it was more important --


23· · · · · · ·THE WITNESS:· I said that we

24· · · ·spoke about the different businesses,

25· · · ·the fact that we made Home Textiles


Page 210·1· · · · · · · · · R. AUERBACH

·2· · · ·and they made apparel.· And the idea

·3· · · ·would have been that if we did get

·4· · · ·together, that I would be able to help

·5· · · ·them on the home side and they would,

·6· · · ·obviously, be able to do their side

·7· · · ·and we would be able to reduce our

·8· · · ·overhead by combining similar

·9· · · ·functions.

10· · · ·Q.· · Are you familiar with the CBIZ

11· ·report?

12· · · ·A.· · I never really saw the report.

13· ·I am familiar with CBIZ.· I am familiar

14· ·with the exercise of CBIZ, yes.

15· · · ·Q.· · You said you have never really

16· ·seen the report.· Did you ever see the

17· ·report?

18· · · ·A.· · Sometime recently we were given

19· ·a copy of the report.· We weren't given a

20· ·copy of the report at the time.· Although

21· ·we retained CBIZ, we only retained CBIZ at

22· ·the request of Ashford.· Although we

23· ·retained CBIZ, they really reported to

24· ·Ashford only, not to Northwest.· All of

25· ·their conversations with were Ashford, not


Page 211·1· · · · · · · · · R. AUERBACH

·2· ·with Northwest.

·3· · · · · · ·MR. DUFFY:· For the report.

·4· · · ·Q.· · Is it your testimony that the

·5· ·report that CBIZ created was never

·6· ·provided to Northwest?

·7· · · ·A.· · Not at the time that it was

·8· ·created.· It was given to us sometime

·9· ·recently within the last month.· It could

10· ·have been three weeks.· I don't really

11· ·remember.· A month, maybe six weeks.· But

12· ·no, it was not given to us at the time

13· ·of -- at the time it was created, it was

14· ·not given to us.· But it was never

15· ·intended for us.· It was only intended for

16· ·Ashford.

17· · · ·Q.· · And were you involved in the

18· ·providing of information to CBIZ for its

19· ·report?

20· · · ·A.· · Yes.· I had one meeting with Jay

21· ·Silver.

22· · · ·Q.· · And did you respond to their

23· ·request by email?

24· · · ·A.· · I don't remember.· There must be

25· ·emails, but I just -- I am sure there is


Page 212·1· · · · · · · · · R. AUERBACH

·2· ·an email, yes, to Jay Silver and his

·3· ·associate.

·4· · · ·Q.· · And did you provide an

·5· ·explanation to CBIZ of what the purpose of

·6· ·the transactions between Northwest and

·7· ·David Harrison LLC were?

·8· · · ·A.· · I told them that -- excuse me.

·9· ·I told Jay -- I told Jay that -- you said

10· ·David Harrison?· Sorry.

11· · · ·Q.· · Yes, David Harrison LLC.

12· · · ·A.· · Thank you.

13· · · · · · ·I informed him what David

14· ·Harrison LLC owned and what it related to.

15· · · ·Q.· · Who is Elex Auerbach, E-L-E-X?

16· · · ·A.· · My brother's son, Elex.· It's a

17· ·tough name, I know.

18· · · ·Q.· · Do you recall providing

19· ·information to CBIZ regarding certain

20· ·Christine McClure American Express

21· ·charges?

22· · · ·A.· · I don't know if I provided it or

23· ·if she provided it, but you could ask me a

24· ·question about it.

25· · · ·Q.· · Does Christine McClure ever


Page 213·1· · · · · · · · · R. AUERBACH

·2· ·charge personal items for you on her

·3· ·corporate American Express card?

·4· · · ·A.· · I don't -- I don't know.· I just

·5· ·don't know the answer.· I mean it's

·6· ·possible, but I don't know, sitting here,

·7· ·if there is personal items on that card.

·8· ·But if there were, she would code them as

·9· ·such.

10· · · ·Q.· · Would she be responsible for

11· ·going through her American Express charges

12· ·and coding them?

13· · · ·A.· · Yes.· Each individual with a

14· ·card goes through their charges

15· ·themselves.

16· · · ·Q.· · What is Charmonix,

17· ·C-H-A-R-M-O-N-I-X?

18· · · · · · ·(Pause.)

19· · · ·A.· · I am going to write it down.

20· ·Can you spell that again?

21· · · · · · ·MR. DUFFY:· C-H-A-R-M-O-N-I-X.

22· · · · · · ·MR. AULET:· I apologize.· My

23· · · ·live reporting thing just crashed but

24· · · ·I will be back on shortly.

25· · · · · · ·THE VIDEOGRAPHER:· Off the


Page 214·1· · · · · · · · · R. AUERBACH

·2· · · ·record or staying on?

·3· · · · · · ·MR. AULET:· Let's stay on the

·4· · · ·record.

·5· · · · · · ·(Pause.)

·6· · · ·Q.· · I can still hear, if you can

·7· ·answer the question.

·8· · · ·A.· · I am just trying to think about

·9· ·what it is.· I am having a little trouble

10· ·remembering, which is sad.

11· · · · · · ·MR KESTENBAUM:· If you don't

12· · · ·remember, don't guess.

13· · · · · · ·THE WITNESS:· I looked at the

14· · · ·word.· I just don't remember.

15· · · ·Q.· · Does it have anything to do with

16· ·boats?



19· · · ·A.· · I mean, the answer is I just

20· ·don't remember the name.· But if you have

21· ·a question on a boat, I don't mind

22· ·answering a question on a boat.

23· · · · · · ·MR. AULET:· I apologize.· I was

24· · · ·trying to open the wrong link.

25· · · ·Q.· · Are you familiar with a PPP loan


Page 215·1· · · · · · · · · R. AUERBACH

·2· ·that was filed on behalf of the Debtors?

·3· · · ·A.· · Yes, I am.

·4· · · ·Q.· · Were you involved in preparing

·5· ·that loan?

·6· · · ·A.· · No, I was not.

·7· · · ·Q.· · Did you sign any portions of

·8· ·that loan?

·9· · · ·A.· · I am pretty sure I must have.

10· · · · · · ·MR. KESTENBAUM:· When you say

11· · · ·"that loan," I am assuming you are

12· · · ·referring to an application for a

13· · · ·loan?

14· · · · · · ·MR. AULET:· Yes.· The PPP loan

15· · · ·application.

16· · · ·A.· · I am sure I did.· I think I

17· ·would have to.· But I know what you are

18· ·referring to.

19· · · · · · ·MR. KESTENBAUM:· Let him ask the

20· · · ·questions.· The answers that you know,

21· · · ·you answer.

22· · · · · · ·THE WITNESS:· Okay.


24· · · ·Exhibit 17.)

25· · · · · · ·MR. AULET:· What I have just


Page 216·1· · · · · · · · · R. AUERBACH

·2· · · ·shown you is what I have marked

·3· · · ·Exhibit 17, a PDF that we received

·4· · · ·from the Debtor that a number of

·5· · · ·documents appear to relate to, the PPP

·6· · · ·loan.

·7· · · ·Q.· · Have you seen this document

·8· ·before?

·9· · · ·A.· · This specific document?· I don't

10· ·know.· But I am very much aware of the PPP

11· ·loan.· I just don't know if this is the

12· ·specific document I saw.· But I am aware.

13· · · ·Q.· · Have you seen this portion of

14· ·the exhibit, page 13?

15· · · ·A.· · Again, I don't know, but I have

16· ·to assume that I did.· Sitting here right

17· ·now I don't remember, but I am sure I did.

18· · · ·Q.· · And if you look near the bottom,

19· ·there is two initials, RA.· Would those be

20· ·your initials?

21· · · ·A.· · Give me a moment to get to that

22· ·spot.· Sorry.

23· · · · · · ·Oh, they are typed.· On what I

24· ·am looking at, they are typed.· Right.· So

25· ·I guess it was done on a computer by


Page 217·1· · · · · · · · · R. AUERBACH

·2· ·somebody.

·3· · · ·Q.· · And are those your initials?

·4· · · ·A.· · Well, I don't mean to be

·5· ·difficult.· If you mean is it a physical

·6· ·initial, no.· But I mean, they say RA, so

·7· ·someone typed in RA.· I mean, it's got to

·8· ·be me, Ross Auerbach.· Are you asking if I

·9· ·signed it?· Because it is not a signature.

10· · · ·Q.· · We'll go to the signature page.

11· ·Is that your signature?

12· · · ·A.· · Absolutely.· That is my ugly

13· ·signature.

14· · · ·Q.· · And do you recall -- were you

15· ·the person who initialed each of these

16· ·certifications "RA"?

17· · · ·A.· · No.· They did it on the computer

18· ·and I read it.

19· · · ·Q.· · Did you authorize somebody to

20· ·initial it for you?

21· · · ·A.· · Yes.

22· · · ·Q.· · And would you have reviewed this

23· ·document before you signed it?

24· · · ·A.· · I would have.

25· · · ·Q.· · Why isn't Extreme Horse Limited


Page 218·1· · · · · · · · · R. AUERBACH

·2· ·listed on this document?

·3· · · ·A.· · We were going to list it, and

·4· ·Robert was either told, requested,

·5· ·advised -- I don't know the proper way to

·6· ·say it -- by CIT just to leave it off.· It

·7· ·says "Ross Auerbach 80 percent," and the

·8· ·advice was that that was enough.· But that

·9· ·came from CIT.· That was CIT's advice to

10· ·Robert.· And the only reason I know that

11· ·is because I was standing in Robert's

12· ·office when he was on the phone with Jeff

13· ·Kremburg when Jeff Kremburg was on

14· ·speakerphone and he said he just needs to

15· ·list Ross.· Otherwise, I would not know.

16· · · ·Q.· · And when you filed this loan

17· ·application -- let me go to the second

18· ·page so you can see when it was signed,

19· ·April 6th.· Did you intend to file for

20· ·Chapter 11 at that time?

21· · · ·A.· · I don't know.· In other words, I

22· ·really truly don't know.· It was one of

23· ·the many things -- we were working on so

24· ·many different plans, so many different

25· ·options.· We were trying to do so many


Page 219·1· · · · · · · · · R. AUERBACH

·2· ·different things that I cannot tell you on

·3· ·that date.· I don't know.

·4· · · ·Q.· · While I wait for this to load,

·5· ·did you, on or around November 21, 2019,

·6· ·sign a letter that stated you had both the

·7· ·wherewithal, commitment of Northwest

·8· ·Company by providing adequate financial

·9· ·assistance to enable the company to

10· ·continue its business operations through

11· ·December 31, 2020?


13· · · ·Exhibit 18.)

14· · · · · · ·MR. AULET:· You should now be

15· · · ·able to see this, which I have marked

16· · · ·Exhibit 18.

17· · · ·A.· · Yes, I can see it.· And that is

18· ·something that I did create and I did

19· ·sign.

20· · · ·Q.· · And this references $5 million

21· ·in an account with the company's financial

22· ·institution, CIT, as collateral for the

23· ·outstanding loan.· Does CIT still hold

24· ·those funds?

25· · · ·A.· · Yes, they do.


Page 220·1· · · · · · · · · R. AUERBACH

·2· · · ·Q.· · Why does Allen Guo have a

·3· ·Northwest American Express card?

·4· · · ·A.· · Allen needed a way to charge

·5· ·certain items without his family knowing

·6· ·that he was doing so.

·7· · · ·Q.· · And why was that --

·8· · · ·A.· · What?· Sorry.

·9· · · ·Q.· · I apologize.· Due to the delay

10· ·issue, I cut you off while you were still

11· ·finishing your answer.· Did you have

12· ·anything to add?

13· · · ·A.· · No.· I was just saying it was

14· ·something that he needed for his personal

15· ·life.

16· · · · · · ·MR. AULET:· Okay.· Why don't we

17· · · ·take a five-minute break and then we

18· · · ·should be pretty close to done?

19· · · · · · ·THE VIDEOGRAPHER:· Time is 5:25.

20· · · ·We are going off the record.

21· · · · · · ·(Recess.)


23· · · ·5:35.· We are on the record.


25· · · ·Exhibit 19.)


Page 221·1· · · · · · · · · R. AUERBACH

·2· · · · · · ·MR. AULET:· I have put in front

·3· · · ·of you what I have marked Exhibit 19.

·4· · · ·This is a set of American Express

·5· · · ·Centurian statements that were

·6· · · ·produced to us in a single PDF that

·7· · · ·covered July through December 2019. I

·8· · · ·am going to direct your attention to

·9· · · ·page 51.

10· · · ·Q.· · First, there is a very large

11· ·charge, Americana Concierge for $33,000.

12· ·What is that charge for?

13· · · ·A.· · Those are for holiday gift cards

14· ·to employees.

15· · · ·Q.· · Who handles giving these out?

16· · · ·A.· · There are two or three people

17· ·who work here who give them out at the

18· ·holiday party.

19· · · ·Q.· · And if you look up near the top,

20· ·there is a charge for $1,386.15 at the

21· ·Bryant & Cooper Steakhouse.· Is this a

22· ·business transaction?

23· · · ·A.· · It's a dinner.· Yes.· I would

24· ·go -- I have to go look and I can probably

25· ·find out -- I mean, I would find out who


Page 222·1· · · · · · · · · R. AUERBACH

·2· ·we entertained.· But yes, the answer is

·3· ·yes.

·4· · · ·Q.· · Would anyone simply looking at

·5· ·this account statement be able to tell if

·6· ·that was a business express or one of your

·7· ·personal expenses?

·8· · · ·A.· · The answer is that these -- I

·9· ·can't speak.

10· · · · · · ·These are duplicate copies that

11· ·I asked American Express to send so there

12· ·would be no void of anything missing in

13· ·the discovery requests.· So the answer is

14· ·that the actual statements, which if they

15· ·are not -- if they have not been provided,

16· ·they would have the coding on them.· These

17· ·duplicate statements don't have coding on

18· ·them.

19· · · · · · ·We were concerned that there

20· ·would be missing gaps, and I was told it

21· ·was better to give more than to not

22· ·furnish.

23· · · ·Q.· · But my question is about this

24· ·specific duplicate copy with no

25· ·handwritten notes on it.· Would someone,


Page 223·1· · · · · · · · · R. AUERBACH

·2· ·just with this copy, no handwritten notes,

·3· ·be able to determine which expenses were

·4· ·business expenses?

·5· · · ·A.· · I don't know if I can answer

·6· ·that question.· I mean, when Jay Silver

·7· ·was here, he said that he didn't need

·8· ·anything other than the transactions

·9· ·themselves.· We actually requested them in

10· ·a CSV file and he didn't want the

11· ·statement.· So according to Jay Silver,

12· ·the answer would be yes.· According to

13· ·you, I don't know if you agree.· But that

14· ·is what he called it.

15· · · ·Q.· · Let's use the steakhouse as an

16· ·example.· If we simply hand that

17· ·transaction to an accountant, can they

18· ·determine if it is a business or personal

19· ·expense without additional information?


21· · · ·Objection, hypothetical.· This is a

22· · · ·lay witness and not an accountant.· If

23· · · ·you can answer the question; go to it.

24· · · ·A.· · As I said earlier, the

25· ·original -- when I say "original," this,


Page 224·1· · · · · · · · · R. AUERBACH

·2· ·as you can see, is a duplicate copy.· The

·3· ·original statements would be coded.· You

·4· ·have duplications.· You have original

·5· ·statements that you have been receiving

·6· ·and duplicate copies.· So, you have more

·7· ·than one of many.

·8· · · · · · ·If you look at the original --

·9· ·if you look at the original of this, you

10· ·would be able to see what the business

11· ·purpose was and the transactions.· You

12· ·should have them in the -- I don't know

13· ·what it is called.· In the data room.

14· · · ·Q.· · Would I need that version of

15· ·this statement with notes about how things

16· ·should be coded in order to properly code

17· ·it?

18· · · ·A.· · You would need to know -- I

19· ·guess you would need -- I mean, I know it

20· ·was a business dinner, but I -- the

21· ·answer, I guess, is whatever you want it

22· ·to be.

23· · · · · · ·MR. DUFFY:· I object to the

24· · · ·question for the same reason I

25· · · ·objected to the question before.· He


Page 225·1· · · · · · · · · R. AUERBACH

·2· · · ·is not an accountant.


·4· · · ·Exhibit 20.)

·5· · · · · · ·MR. AULET:· Mr. Auerbach, I am

·6· · · ·putting in front of you what I am

·7· · · ·marking as Exhibit 20, which is a

·8· · · ·Business Platinum Card statement with

·9· · · ·closing date of May 16, 2019.

10· · · ·Q.· · I have gone to page 5.

11· · · · · · ·MR. DUFFY:· For the record, the

12· · · ·exhibit is not up.· I don't see the

13· · · ·exhibit, for the record.

14· · · · · · ·MR. AULET:· Who was speaking?

15· · · · · · ·MR. DUFFY:· This is Todd Duffy.

16· · · · · · ·MR. AULET:· My apologies.

17· · · · · · ·MR. DUFFY:· It is fine. I

18· · · ·wanted to be sure you knew.

19· · · · · · ·MR. AULET:· Can you see it now?

20· · · · · · ·MR. DUFFY:· I can.· Thank you.

21· · · ·Q.· · So now you should be able to see

22· ·the exhibit which I previously identified.

23· ·I will it turn to page 5.· Who is Michael

24· ·Robert Howley, the passenger on the first

25· ·Delta Airlines ticket?


Page 226·1· · · · · · · · · R. AUERBACH

·2· · · · · · ·MR. DUFFY:· Sorry.· There is

·3· · · ·something here.· Go ahead.

·4· · · ·Q.· · Do you see the two Delta

·5· ·Airlines tickets dated 5/3/19 in the

·6· ·middle of the page?

·7· · · ·A.· · Yes.· I apologize.· Someone is

·8· ·sneezing.

·9· · · · · · ·Michael Howley.· Yes.· He works

10· ·here.· And he -- the answer is he is an

11· ·employee here.· He works here.

12· · · ·Q.· · And the second person, Cassandra

13· ·Marinescu?

14· · · ·A.· · Cassandra works here as well.

15· ·Cassandra works in -- those are trips to

16· ·the factory in Mexico.

17· · · · · · ·MR. AULET:· Last name

18· · · ·M-A-R-I-N-E-S-C-U.

19· · · ·Q.· · Then above those tickets, what

20· ·is Strivectin?

21· · · ·A.· · That is personal.· This

22· ·statement -- I didn't mean to interrupt

23· ·anybody.· This statement is relatively

24· ·recent.· This statement I know.· This is

25· ·just from -- this is very recent.· So,


Page 227·1· · · · · · · · · R. AUERBACH

·2· ·this statement is coded.· It should be in

·3· ·the data room.· The one you mentioned,

·4· ·S-T-R-I, is personal.· The Delta Airlines

·5· ·is a visit to Providencia.· This statement

·6· ·I recognize for the most part.· Very

·7· ·recent.

·8· · · ·Q.· · You recall coding one of these

·9· ·statements?

10· · · ·A.· · Yes.· This is a duplicate.· But

11· ·yes.

12· · · · · · ·MR. AULET:· I have no further

13· · · ·questions right now.· However, I would

14· · · ·note that I am going to hold the

15· · · ·deposition open due to the lack of the

16· · · ·Northwest Textiles documents.· We

17· · · ·reserve our right to recall

18· · · ·Mr. Auerbach if and when we actually

19· · · ·receive those documents.

20· · · · · · ·MR. DUFFY:· For the record, we

21· · · ·will note there is approximately one

22· · · ·hour left under Federal Rules of Civil

23· · · ·Procedure for questioning.


25· · · ·5:46, the conclusion of today's


Page 228·1· · · · · · · · · R. AUERBACH

·2· · · ·deposition on July 1, 2020.

·3· · · · · · ·MR. TEELE:· Debtors would like a

·4· · · ·rough draft tonight and final copy as

·5· · · ·soon as possible, including copies of

·6· · · ·all exhibits.

·7· · · · · · ·MR. DUFFY:· Duffy Amedeo would

·8· · · ·like the same.

·9· · · · · · ·MR. AULET:· Brown Rudnick would

10· · · ·like the same.

11· · · · · · ·MR. KAPLAN:· The same for the

12· · · ·Committee.· Thank you.

13

14· · · · · · ·[TIME NOTED:· 5:47 p.m.]

15

16

17· · · · · ·____________________________

18· · · · · · · · · ·ROSS AUERBACH

19

20· ·SUBSCRIBED AND SWORN TO

21· ·BEFORE ME THIS______DAY

22· ·OF_______________, 2020.

23

24· ·_______________________

25· · · ·NOTARY PUBLIC


Page 229·1

·2· · · · · ·C E R T I F I C A T I O N

·3

·4· · · I, DEBRA STEVENS, a Notary Public for

·5· ·and within the State of New York, do

·6· ·hereby certify:

·7· · · That the witness whose testimony as

·8· ·herein set forth, was duly sworn by me;

·9· ·and that the within transcript is a true

10· ·record of the testimony given by said

11· ·witness.

12· · · I further certify that I am not

13· ·related to any of the parties to this

14· ·action by blood or marriage, and that I am

15· ·in no way interested in the outcome of

16· ·this matter.

17· · · IN WITNESS WHEREOF, I have hereunto

18· ·set my hand this 2nd day of July, 2020.

19

20

21· · · · · ·_______________________

22· · · · · ·DEBRA STEVENS, RPR-CRR

23

24· · · · · · · ·*· · ·*· · ·*

25


Page 230·1

·2· · · · · · · WITNESS ERRATA SHEET

·3· · ·CASE NAME: In re Northwest Company LLC·4· ·DATE OF DEPOSITION:· July 1, 2020· · ·WITNESS NAME:· ROSS AUERBACH·5· · ·PAGE/LINE(S)/· · CHANGE· · · · · REASON·6· ·____/_______/_________________/________· · ·____/_______/_________________/________·7· ·____/_______/_________________/________· · ·____/_______/_________________/________·8· ·____/_______/_________________/________· · ·____/_______/_________________/________·9· ·____/_______/_________________/________· · ·____/_______/_________________/________10· ·____/_______/_________________/________· · ·____/_______/_________________/________11· ·____/_______/_________________/________· · ·____/_______/_________________/________12· ·____/_______/_________________/________· · ·____/_______/_________________/________13· ·____/_______/_________________/________· · ·____/_______/_________________/________14· ·____/_______/_________________/________· · ·____/_______/_________________/________15· ·____/_______/_________________/________· · ·____/_______/_________________/________16· ·____/_______/_________________/________· · ·____/_______/_________________/________17· ·____/_______/_________________/________· · ·____/_______/_________________/________18· ·____/_______/_________________/________· · ·____/_______/_________________/________19· ·____/_______/_________________/________

20· · · · · · ·_______________________21· · · · · · · ·ROSS AUERBACH

22· ·SUBSCRIBED AND SWORN TO· · ·BEFORE ME THIS______DAY23· ·OF_______________, 2020.

24· ·_______________________· · · · ·NOTARY PUBLIC25· · ·MY COMMISSION EXPIRES__________________
