2011-12-15 Rothstein Scott AM

2931b73d-6819-44d5-a58a-692a89b4049b

(954) 525- 2221United Reporting, Inc.

IN THE CIRCUIT COURT OF THE 17TH JUDICIAL CIRCUIT IN AND FOR BROWARD COUNTY, FLORIDA

Case No. 09-062943 (07)

_____________________________________________________

RAZORBACK FUNDING, LLC, et al.,

Plaintiffs,

vs.

SCOTT W. ROTHSTEIN, et al.,

Defendants.

____________________________________________________

DAY 4 - MORNING SESSION

DEPOSITION OF SCOTT W. ROTHSTEIN

DATE TAKEN: December 15, 2011 TIME: 8:42 a.m. - 12:09 p.m. PLACE: James Lawrence King Federal Justice Building 99 N.E. Fourth Street Courtroom 11-3 Miami, Florida 33128

Examination of the witness taken before: Michele L. Savoy, Registered Professional Reporter United Reporting, Inc. 1218 S.E. Third Avenue Fort Lauderdale, Florida 33316 (954) 525-2221

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1 IN THE CIRCUIT COURT OF THE 17TH JUDICIAL CIRCUIT IN AND FOR

2 BROWARD COUNTY, FLORIDA

3 ____________________________________________________

4 Case No. 10-24110 CACE (19)

5 EDWARD J. MORSE and CAROL A. MORSE,and MORSE OPERATIONS, INC.

6 Plaintiffs,

7vs.

8

9 SCOTT W. ROTHSTEIN, et al.,

10 Defendants.

11 _____________________________________________________

12 Case No. 11-CV-61688-JIC/LSS

13 AMY ADAMS, et. al,

14 Plaintiffs,

15 vs.

16 SCOTT W. ROTHSTEIN, TD BANK, N.A. and GIBRALTARPRIVATE BANK AND TRUST COMPANY,

17 Defendants.

18 _____________________________________________________

19 10-03767-RBR Stettin v. Gibraltar Private Bank & Trust Co.

2011-03802-RBR Stettin v. Fidelity Gift Fund

2111-02368-RBR Stettin v. TD Bank, N.A.

22

23

24

25

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1 APPEARANCE FOR SCOTT ROTHSTEIN:

2 LAW OFFICE OF MARC S. NURIK 1 East Broward Boulevard

3 Suite 700 Fort Lauderdale, Florida 33301

4 BY: MARC S. NURIK, ESQUIRE

5 APPEARANCE FOR THE TRUSTEE:

6 BERGER SINGERMAN 350 East Las Olas Boulevard

7 Suite 1000 Fort Lauderdale, Florida 33301

8 BY: CHARLES H. LICHTMAN, ESQUIRE

9 APPEARANCES FOR THE TRUSTEE:

10 GENOVESE, JOBLOVE & BATTISTA, P.A. 100 S.E. 2nd Street

11 Suite 4400 Miami, Florida 33131

12 By: JOHN. H. GENOVESE, ESQUIRE DAVID C. CIMO, ESQUIRE

13 THERESA M.B. VAN VLIET, ESQUIRE

14 APPEARANCES FOR RAZORBACK:

15 CONRAD & SCHERER, LLP 633 South Federal Highway

16 Eighth Floor Fort Lauderdale, Florida 33302

17 By: WILLIAM R. SCHERER, ESQUIRE REID A. COCALIS, ESQUIRE

18 IVAN J. KOPAS, ESQUIRE

19 KOZYAK, TROPIN & THROCKMORTON, P.A. 2525 Ponce de Leon Boulevard

20 Ninth Floor Coral Gables, Florida 33134

21 By: ADAM MOSKOWITZ, ESQUIRE

22

23

24

25

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1 APPEARANCE FOR PLATINUM PARTNERS VALUE ARBITRAGE CENTURION STRUCTURED GROWTH, LLC:

2 GOLDSTEIN, TANEN & TRENCH, P.A.

3 One Biscayne Tower, Suite 3700 Two South Biscayne Boulevard

4 Miami, Florida 33131 By: SUSAN E. TRENCH, ESQUIRE

5

6 APPEARANCE FOR LEVINSON'S JEWELERS:

7 KOPELOWITZ OSTROW FERGUSON WEISELBERG KEECHL 200 SW 1st Ave

8 Suite 1200 Fort Lauderdale, Florida 33301-2073

9 BY: JAN ATLAS, ESQUIRE

10 APPEARANCE FOR THE COMMITTEE OF UNSECURED:

11 AKERMAN, SENTERFITT One Southeast Third Avenue

12 25th Floor Miami, Florida 33131-1704

13 By: MICHAEL GOLDBERG, ESQUIRE

14 APPEARANCE FOR T.D. BANK:

15 GREENBERG TRAURIG, P.A. 401 E Las Olas Blvd Ste 2000

16 Fort Lauderdale, Florida 33301 By: DONNA M. EVANS, ESQUIRE

17APPEARANCE FOR RLI ZURICH INSURANCE COMPANY,

18 COLUMBIA INC. & ZURICH INSURANCE:

19 CLAUSIN MILLER One Chase Manhattan Plaza

20 39th Floor New York, New York 10005

21 BY: SCOTT L. SCHMOOKLER, ESQUIRE

22 APPEARANCE FOR FEDERAL INSURANCE COMPANY:

23 Alex Hofrichter, P.A 1430 South Dixie Highway

24 Suite 204 Coral Gables, Florida 33146-3127

25 By: ALEX HOFRICHTER, ESQUIRE

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1 APPEARANCES FOR MORSE:

2 TRIPP SCOTT, P.A. 110 S.E. Sixth Street,15th Floor

3 Fort Lauderdale, Florida 33301 By: GEORGE WALKER, ESQUIRE

4 JOHN M. MULLIN, ESQUIRE

5 APPEARANCE FOR EMESS CAPITAL, LLC:

6 Kluger Kaplan Silverman Katzen & Levine PL

7 201 S Biscayne Blvd Fl 17 Miami, Florida 33131

8 BY: CASEY CUSICK, ESQUIRE

9 APPEARANCE FOR ST. PAUL FIRE & MARINE:

10 Mills Paskert Divers P A 100 N Tampa St Ste 2010

11 Tampa, Florida 33602-5145 JOHN A. BLACK, JR., ESQUIRE

12

13 APPEARANCE FOR ROSEANNE CARETSKY:

14 Billing Cochran Lyles 515 E Las Olas Blvd

15 Floor Six Fort Lauderdale, Florida 33301-2296

16 By: W. TUCKER CRAIG, ESQUIRE

17

18

19

20

21

22

23

24

25

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1 INDEX

2 CONTINUED DEPOSITION OF SCOTT W. ROTHSTEIN

3 DIRECT

4 Mr. Cimo 776

5 CERTIFICATE OF OATH 945CETIFICATE OF REPORTER 946

6

7 TRUSTEE'S EXHIBITS INDEX

8 NO. DESCRIPTION PAGE NO123 Credit Agreement - Banyon 777

9 Investing124 Credit Agreement - Banyon 777

10 Investments125 Credit Agreement - Banyon 777

11 Resources126 Platinum v. Kroll 793

12 127 Platinum v. Kroll Order 827128 "Good Fellows" Email 852

13 129 Radinsky Email 858130 ROTHSTEINS 000940-957 861

14 131 SW13-00735 - 805 868132 PCL56665 - 56666 873

15 133 PCL56811 - 56815 878134 Dec. 25, 2008, Email 897

16 135 Hertzberg Declaration 901136 Email Chain 913

17 137 PCL59074 916138 April 4, 2009, Email 916

18 139 April 8, 2009, Email 921140 April 14, 2009, Email 921

19 141 April 17, 2009, Email 921142 E027088 921

20 143 PCL59319 921144 PCL59402 - 403 921

21 145 Email Chain 921146 May 6, 2009, Email 921

22 147 PLATCENT 0021184 927148 ROTHSTEINS 000931 - 932 931

23 149 PCL 0484 - 0489 932

24

25

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1 Whereupon,

2 SCOTT W. ROTHSTEIN,

3 acknowledged having been duly sworn to tell the truth

4 and testified upon his oath as follows:

5 THE WITNESS: I do.

6 DIRECT EXAMINATION

7 BY MR. CIMO:

8 Q Good morning, Mr. Rothstein, how are you?

9 A Good. Good morning to you.

10 Q David Cimo. I did the 2004 of you with

11 Mr. Lichtman, earlier, in the sessions that we have been

12 doing. As you know, I represent the Trustee Herb

13 Stettin, and I'll be talking to you about the hedge

14 funds that you have previously spoken about but we are

15 going to cover some different areas.

16 First of all, do you know we have a lawsuit

17 pending against the hedge funds on behalf of the

18 estate --

19 COURT REPORTER: Excuse me, can you slow

20 down a little bit?

21 Q -- to recover certain transfers as fraudulent

22 transfers?

23 A Do I know that, yes.

24 BY MR. CIMO:

25 Q How did you come to learn about that?

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1 A Somewhere, someone along the line, in the

2 8 million sheets of paper that I looked at, told me that

3 was filed; and I may have actually seen the lawsuit. I

4 don't recall, specifically.

5 Q Do you recall the entities that were involved,

6 the actual names of the entities that were involved

7 regarding Centurion, Platinum, Level 3? Do you remember

8 their specific names?

9 A No, I don't.

10 Q I'm going to show you Exhibits 123, 124, and

11 125 to refresh your memory.

12 (Thereupon, documents was marked as Trustee's

13 Exhibits No. 123, 124 and 125, respectively for

14 identification.)

15 A Thank you.

16 Q I'll represent to you that Exhibit 123 is the

17 Centurion Structured Growth, LLC, credit agreement with

18 Banyon Funding, LLC; have you seen this agreement before

19 today?

20 A No.

21 Q Did you know that there was an agreement

22 between Centurion Structured Growth, LLC, and an entity

23 known as Banyon Funding?

24 A An agreement, yes; a credit agreement, I can't

25 tell you whether I knew one way or another. It was

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1 inconsequential to me.

2 Q Thank you.

3 And for purposes of this deposition, I'm going

4 to refer to Centurion Structured Growth, LLC as

5 Centurion. Is that okay with you?

6 A Yes, sir.

7 Q I'm also going to refer to Banyon Funding LLC

8 as Banyon Funding. Is that acceptable?

9 A Yes, sir.

10 Q I would like you to look at Exhibit 124.

11 A I've got it.

12 Q This is a credit agreement dated June 26,

13 2008. Have you seen this before today?

14 A I have not.

15 Q Did you know that there was some agreement

16 between an entity known as Banyon Investments, LLC, and

17 an entity known as Platinum Partners Value Arbitrage

18 Fund, LP?

19 A Yes.

20 Q How did you come to learn about that?

21 A I discussed it at some point in time with

22 Mr. Preve.

23 Q For purposes of this deposition, I'm going to

24 refer to Banyon Investments as BIF. Is that acceptable

25 to you?

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1 A Yes, sir.

2 Q I'm going to refer to Platinum Partners Value

3 Arbitrage Fund, LP, as Platinum. Is that acceptable to

4 you?

5 A Yes, it is.

6 Q Okay.

7 Oh, I apologize, I'm going to call that Banyon

8 Investments.

9 A That's fine.

10 Q Thank you.

11 And the last exhibit of the three I'm showing

12 you is an Exhibit No. 125, and it's a credit agreement

13 dated September 3rd, 2008, between Banyon Resources,

14 LLC, and an entity known as Level 3 Capital Fund, LP.

15 Do you recall such an agreement existing near

16 or about that date?

17 A I have never seen this document, I don't

18 believe, but I remember there being an agreement of some

19 sort between Banyon and Level 3.

20 Q Okay. And far purposes of this deposition

21 today, I'm going to refer to Banyon Resources, LLC, as

22 Banyon Resources. Is that acceptable?

23 A Yes, sir.

24 Q I'm going to refer to Level 3 Capital Fund,

25 LP, as Level 3. Is that acceptable?

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1 A Yes, sir.

2 Q I'm also going to refer to all three of the

3 entities that I just mentioned on the hedge fund level.

4 That would be Platinum, Centurion, and Level 3, as the

5 hedge funds, is that acceptable?

6 A Yes, sir.

7 Q And I'm going to refer to the Banyon entities

8 that we went through, for purposes of this deposition,

9 unless I say otherwise, as the Banyon entities. Is that

10 acceptable?

11 A Yes, sir.

12 Q When did you first learn about the existence

13 of any one of the hedge funds?

14 A My recollection, it would have been late 2007,

15 sometime in 2008 when Mr. Preve and Mr. Levin told me

16 that they were looking to go for hedge fund dollars, but

17 I don't recall the specific time period.

18 Q Before that time, had there been any

19 discussion with Mr. Preve about any other hedge funds

20 playing some type of role in the investments that you

21 were offering?

22 A There was always talk between me and Mr. Preve

23 about alternative funding sources, other than Mr.

24 Levin's various personal entities. I don't recall

25 whether specifically hedge funds were discussed.

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1 Q Before the hedge funds that we have defined

2 for purposes of this deposition were discussed, that

3 period that you referenced, had any hedge funds been

4 investors in any of the settlements that you were

5 purporting to offer?

6 A And here's the issue with that question.

7 I was under the belief, at the time prior to

8 the hedge funds being involved, that all the money being

9 invested was Mr. Levin's personal funds. I later came

10 to know that at some point in time, he was soliciting

11 other investors, so I can't tell you one way or other

12 whether Mr. Levin took money from a hedge fund

13 unbeknownst to me.

14 But to my knowledge, Centurion, Platinum,

15 Level 3 were the first hedge funds that I had knowledge

16 of investing in the Ponzi scheme.

17 Q When you say Mr. Levin, the Banyon entities

18 that we defined for purposes of this deposition, were

19 those entities that you understood were controlled

20 and/or owned by Mr. Levin?

21 A Yes, as far as I was concerned, they were

22 interchangeable.

23 Q Is it to your testimony that, as to the three

24 Banyon entities that we have defined for purposes of

25 this deposition, that to your knowledge, up until these

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1 hedge funds came along -- Platinum, Centurion and Level

2 3 -- prior to that period, it's your testimony that you

3 don't know whether other hedge funds may have invested

4 through Banyon -- other Banyon entities?

5 A I have no idea who Mr. Levin took money from.

6 Q So, the hedge funds -- Platinum, Centurion and

7 Level 3 -- that did, ultimately, get involved, to your

8 knowledge, those were the first and only hedge funds

9 that you knew were either direct or indirect investors

10 in the structured -- supposed structured settlements?

11 A Up until -- they were never supposed

12 structured settlement, but up until that point in time,

13 they were the first hedge funds to invest in the Ponzi

14 scheme, yes.

15 Q What was the importance, if any, to obtaining

16 hedge-fund money?

17 A For me, it was just another source of money.

18 For Mr. Levin, it was another source of money. For

19 Mr. Preve, it was another source of money. I don't

20 think any of the three of us cared with where it came

21 from, as long as we were getting it.

22 Q And you also testified, I believe, that Mr.

23 Szafranski had certain entities that he had set up that

24 were to also soliciting investors that you did know

25 about, correct?

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1 A Yes. That occurred after the hedge funds,

2 basically, cut us off.

3 Q So this period of time that you mentioned,

4 this 2007, 2008 time period, in what context did you

5 come to learn that there were hedge fund -- that these

6 particular hedge funds had an interest in becoming

7 involved in settlements?

8 A Either Mr. Preve, Mr. Levin, or likely both of

9 them, told me that they were going after some hedge

10 funds to become feeders into our settlement business and

11 that eventually we would likely have to go meet with

12 him.

13 Q And, ultimately, did you come to contact any

14 of them or meet with any of them directly, before any

15 investments were made?

16 A Before any investments were made, I believe

17 that is when it was, I actually flew to New York with

18 Mr. Preve -- I don't believe Mr. Levin was on that

19 trip -- to meet with the various hedge fund folks.

20 Q I want to go back to Exhibit 123, which is the

21 April 3rd, 2008, credit agreement; and to your

22 recollection, was Centurion the first of the hedge fund

23 to become an investor?

24 A To my recollection, it was -- yes. Centurion

25 was the very first.

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1 Q And then I would like you to look at Exhibit

2 No. 124, which is the June 26th, 2008, credit agreement.

3 Does this refresh your memory as to whether Platinum was

4 the second hedge fund to invest?

5 A Yeah, I -- for some reason, in my mind,

6 Centurion and Platinum were basically the -- for lack of

7 a better term, pitched together, and Level 3 came along

8 later in time.

9 But, yes, it seems to me Centurion was

10 primary; Platinum, second in line; and Level 3, third.

11 Q And, indeed, Exhibit No. 125, the credit

12 agreement November 3rd, 2008, between Banyan Resources

13 and Level 3 is, in fact, the latest of the three?

14 A That's correct.

15 Q Now, in terms of this meeting that you said

16 was arranged, that meeting did occur in New York?

17 A It did.

18 Q And do you know whether it occurred before or

19 after April 3rd of 2008, which is the date of Exhibit

20 123?

21 A I have no specific recollection.

22 Q And who was in attendance at that meeting?

23 A Well, let me tell you to the best of my

24 recollection: I was there. Mr. Preve was there; Mayer

25 Nordlicht, Mark Nordlicht, was in and out of meeting.

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1 If I recall correctly, Ari Glass I believe was in and

2 out of meeting; Gillad Kalter, same thing, in and out of

3 the meeting; Jack Simony.

4 There were some other folks that I met that

5 were wandering in and out of meeting. It was -- it was

6 a very informal meeting. There was no formal structure

7 to it. People were kind of wandering in and out of

8 conference room. We were shaking hands, answering

9 questions.

10 Q Before this meeting, had you ever heard of

11 Mr. Mark Nordlicht?

12 A I may have heard the name from Mr. Preve in

13 preparing me for the meeting, but I didn't know who he

14 was, no.

15 Q Did Mr. Preve or anyone provide you any

16 information about Mr. Mark Nordlicht before this

17 meeting?

18 A The only information that I was provided by

19 Mr. Preve about any of these guys is that they were good

20 guys and he thought we would get along well with them,

21 but that was basically the extent of it.

22 Q And you conducted no independent due diligence

23 in regard to any of these individuals before the meeting

24 in New York?

25 A No, sir.

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1 Q Did Mr. Nordlicht go by another first name, in

2 addition to Mark?

3 A Yeah. His real first name, Mayer.

4 Q M-A-Y-E-R, Mayer?

5 A Yeah, I believe it was M-A-Y-E-R. Yes.

6 Q And you also mentioned at that meeting, in

7 addition to Mr. Nordlicht, you mentioned a Mr. Glass;

8 that would be Ari Glass, correct?

9 A Yes.

10 Q And who did Mr. Glass represent to you he was

11 with or what entity he was with when you met him?

12 A I have no recollection. I ultimately learned

13 that he was part and parcel of Platinum and, then, Level

14 3. I don't recall whether he had direct, let's say,

15 formal business with Centurion.

16 But you need to know, as you're asking this,

17 and to make your questions easier, that as far as I was

18 told, and as far as we were concerned, all the guys all

19 worked together; and it was a matter of the type of

20 product and the type of money they were getting that

21 determined who was the actual hedge fund investing, as

22 opposed to who the person was. I could speak to Ari

23 about Platinum business, Nordlicht about Ari's business,

24 et cetera; and, ultimately, all the decisions were being

25 made by Mr. Huberfeld anyway. So...

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1 (Mr. Nurik enters the deposition in progress.)

2 MR. CIMO: And for the record Mr. Nurik

3 has arrived, and Mr. Rothstein was kind enough

4 to let us start.

5 MR. NURIK: That's fine. I apologize. I

6 had a matter this morning in the office and

7 the extra 20 minutes made all the difference

8 from the traffic. So, if that should happen

9 again, you all have my permission, with my

10 client's permission, of course, to begin

11 early.

12 MR. CIMO: Thank you so much. He did say

13 he was comfortable to proceed with the

14 Trustee's counsel asking questions.

15 BY MR. CIMO:

16 Q As a follow-up, Mr. Rothstein, Mr. Nordlicht,

17 then, also didn't make any representations to you as to

18 which entity or entities he was there on behalf of?

19 ALL PRESENT: Objection to the form.

20 A No, I don't have any specific recollection as

21 to that.

22 BY MR. CIMO:

23 Q I'll rephrase.

24 Based upon your testimony that you didn't make

25 any distinction between and among the entities I was

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1 just asking you about, what representations, if any,

2 Mr. Nordlicht made to you regarding which entities he

3 was there on behalf of?

4 A None that I recall.

5 Q Now, you mentioned Mr. Nordlicht, Mr. Glass,

6 Mr. Kalter, and Mr. Simony, and then you just mentioned

7 another gentlemen named Mr. Huberfeld. You didn't

8 mention him as being a person at this meeting in New

9 York. Was he in there?

10 A No.

11 Q Who is Mr. Huberfeld?

12 A To my knowledge, because I never met the man,

13 nor have I ever spoken to him, he is the most senior

14 person over all three of the entities we're discussing:

15 Platinum, Level 3, and Centurion. He was the one with

16 the final say as to all their business.

17 Q How did you come to learn that?

18 A I was told that by Ari Glass, by Mark

19 Nordlicht, by Jack Simony and by Gil Kalter, all at

20 different times -- also told that by Mr. Preve and Mr.

21 Levin.

22 Q Let's go now to Mr. Kalter. You said he was

23 as the meeting, and what representations, if any, did he

24 make to you about who he was there on behalf of?

25 A My recollection, and I -- the problem is I

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Page 789

1 don't know whether it came from that meeting or not; but

2 the only recollection I have as to who Gil was working

3 for, was Centurion. He seemed to be one of the very few

4 people that was directly isolated to a company, and I

5 believe it was Centurion.

6 Q And other than that, again, let's try to stick

7 with just this initial meeting with Mr. Kalter, did you

8 come to learn anything more about Mr. Kalter or his

9 background at that initial meeting?

10 A I think someone told me he was a lawyer, at

11 some point in time; but other than that, no.

12 Q Now let's talk about Mr. Simony. What did you

13 come to learn, if anything, about his background at this

14 meeting?

15 A About Mr. Simony, nothing, just that they

16 worked for all the funds.

17 Q Now, you said Mr. Nordlicht was in and out of

18 the meeting?

19 A As -- to the best of my recollection, they

20 were all in and out. It was a very informal meeting.

21 Everyone was kind of wandering in and out, getting

22 coffee, getting water, shaking hands, very informal.

23 Q Where was the meeting conducted?

24 A In the conference room of what I believe, at

25 that time, was the offices of all three hedge funds, in

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1 the -- I believe it was the Carnegie building.

2 Q And how long did the meeting last?

3 A I don't have an independent recollection.

4 Q And other than yourself, Mr. Preve, you said

5 Mr. Levin was there, too?

6 A No, I don't think Mr. Levin went with us.

7 Q So, you -- it was you, Mr. Preve,

8 Mr. Nordlicht, Mr. Glass, Mr. Kalter, Mr. Simony, anyone

9 else?

10 A There definitely were other people that came

11 in and out; I have no independent recollection at this

12 moment who they were.

13 Q I'm trying to understand. I have shown you

14 Exhibits 123, 124, and 125. They are agreements between

15 the hedge funds and Banyon entities. Why isn't there a

16 Banyon representative at that meeting -- I'm talking an

17 officer or director of Banyon -- if you know?

18 A I don't have a clue. I always assumed

19 Mr. Preve was Banyon's representative.

20 Q Oh, did you understand Mr. Preve to be an

21 officer or director or some control person of Banyon, if

22 you know?

23 A Those are two completely different questions.

24 Was he an officer and director, not to my knowledge.

25 Was he a control person, he seemed to act the full

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Page 791

1 authority of Mr. Levin at all times.

2 Q Understood.

3 And was there ever discussion on Mr. Levin

4 being at that meeting?

5 A There may have been, but George rarely

6 attended any of our meetings, and he -- it was more

7 one-on-one stuff with him. Occasionally he would drop

8 in. Even later on, when we were doing due diligence,

9 George did not attend very much.

10 Q When you say "George," you mean George Levin?

11 A I do.

12 Q And Mr. Levin, how long had you known him

13 before this meeting happened with the hedge funds?

14 A I don't remember when I met him. I know the

15 event that I -- that was our first real sit-down talk.

16 I had met him through a friend, client of mine, Howard

17 Gruverman.

18 Q And did you develop a friendship with

19 Mr. Levin?

20 A Yes, very close.

21 Q And up to this point where you met with the

22 hedge funds, how long, approximately, had you known Mr.

23 Levin?

24 A I don't know. It was months.

25 Q Oh, just months?

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1 A I think it was just months. I really don't

2 have an independent recollection.

3 Q And before this meeting with the hedge funds,

4 had any other Banyon entity provided any financing or

5 funds to any of your investments?

6 A I don't recall whether it was a Banyon entity

7 or whether it was Mr. Levin, personally, or one -- one

8 of the other entities.

9 Mr. Preve and I never really -- in our

10 conversations, we didn't concern ourselves with where

11 the money was coming from, just that the money was

12 coming.

13 Q So, is it your recollection that there had

14 been some deals with Mr. Levin, or Levin-related

15 entities, before this hedge fund meeting?

16 A Before the hedge fund -- yes, there were. You

17 can -- notwithstanding my lack of knowledge as to

18 timing, my remembering the exact timing, you can figure

19 out when I met Mr. Levin, which was one of your

20 questions, by saying it was a very short period of time,

21 meaning a few months, prior to his very first investment

22 with me. So the very first time he sent me money, I

23 would have met him very shortly before that; and it

24 would have been directly after -- his first deal with us

25 would have been directly after a trip he took with me to

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1 Cape Coral.

2 Q Would it be fair to say that Preve and

3 Mr. Levin were the ones that had made this introduction

4 by you to these hedge funds for this meeting in New

5 York?

6 A Absolutely.

7 Q And without them, you would not have known

8 about the hedge funds?

9 A That's correct.

10 Q Okay. So, after that initial meeting, what

11 happened next, in terms of moving forward?

12 A To the best of my recollection, we -- they did

13 some due diligence. They asked for information. I

14 provided whatever information Mr. Preve was asking me

15 for, for them; and they started funding deals.

16 Q I'm going to show you now what is going to be

17 marked as Exhibit 126 -- I'm sorry, 127. No, 126.

18 (Thereupon, the document was marked as

19 Trustee's Exhibit No. 126 for Identification.)

20 BY MR. CIMO:

21 Q I'll represent to you, Mr. Rothstein, that

22 this is a lawsuit that was filed by Platinum Partners

23 Value Arbitrage Fund against Kroll Associates, Inc., and

24 Kroll, Inc. --

25 A Okay.

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Page 794

1 Q -- in the Supreme Court of New York?

2 Were you aware at some point, after you were

3 incarcerated, that a lawsuit had been filed by Platinum

4 against Kroll?

5 A Yes.

6 Q How did you come to learn about it?

7 A During one of my many meetings over the last

8 two years, someone brought it up.

9 Q You mentioned that the fund -- the hedge

10 funds, quote, did due diligence; do you recall that?

11 A Sure. Yes.

12 Q Now, let's talk about the due diligence that

13 you were aware of first, before we get to Exhibit No.

14 126.

15 What due diligence did you come to learn of,

16 not after the fact, but that you came to learn of in or

17 about April, May, June of 2008?

18 A Just them asking questions of Mr. Preve and I

19 about our business model.

20 Q Was there any documentation or records

21 provided?

22 A Did we provide records?

23 Q Yes.

24 A We may have provided deal packets. I don't

25 know what status our deal packets were even at at that

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Page 795

1 point in time. I don't know whether Frank and I had

2 created the purchase of transfer agreements, the

3 assignment documents. I don't recall, document-wise,

4 what documents were even available at that time; but

5 whatever we had, I'm certain that, we did provide.

6 Q And I'm trying to understand who, to your

7 recollection, was doing the due diligence? Was it the

8 Banyon entities, or was it the hedge funds or both?

9 A No. To my knowledge, it was someone at the

10 hedge funds. It was -- it wasn't like Platinum was

11 doing due diligence and Centurion was doing due

12 diligence or Level 3 was doing due diligence. It was --

13 as far as I was concerned, and from my conversations

14 with Mr. Preve, it appeared that the hedge funds were

15 doing due diligence; but it was -- it appeared to me to

16 be very limited.

17 Q And why do you say that?

18 A I have done due diligence before for clients,

19 and usually outside forensics people are hired, that

20 type of thing; books and records are examined,

21 accountants involved. There was none of that. It was

22 the hedge funds looking at our stuff.

23 What they were doing behind closed doors,

24 don't get me wrong, I don't know what they were doing.

25 Q Were they invited to your offices in Fort

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Page 796

1 Lauderdale?

2 A I believe they were.

3 Q And did you show them around?

4 A Can you give me a time frame?

5 Q This would be April 2008 through June of 2008?

6 A Okay. Was it before their first investment?

7 Q Their first investment appears to be in April

8 of 2008, based upon Exhibit 123.

9 A I don't recall, other than answering a lot of

10 questions -- they did ask a lot of questions. Other

11 than answering a lot of their questions, I don't recall

12 any other kind of due diligence going on. I have no

13 specific recollection of it.

14 Q When you say "they," who was the "they" that

15 was asking you questions?

16 A It would have been Jack Simony, Gil Kalter,

17 Mr. Nordlicht, to a much more limited extent, and I

18 don't remember whether --

19 Oh, you know what? At that meeting I met

20 Brian Jedwab, also. I believe it was that meeting. It

21 might have been a second meeting.

22 Q So at an initial meeting -- it may not have

23 been the first meeting -- in addition to the four

24 gentlemen you mentioned earlier from the hedge funds,

25 you think you also may have met Brian Jedwab?

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Page 797

1 A Yes. I definitely met him sometime early on,

2 and he was also doing, as best as I can recall, due

3 diligence.

4 You have to understand, I don't mean to seem

5 like I don't have specific memory of it, but it was a

6 very -- again, it was a very informal process:

7 Different people calling, different people asking

8 questions. I'm giving documents to Mr. Preve who was,

9 to the best of my knowledge, sending the documents off

10 to them. Mr. Preve and I were discussing issues that

11 they had and coming up with responses.

12 That's the process. It wasn't like we were

13 filling out forms and responding to forensics people.

14 Q And Mr. Jedwab, did he ever represent to you

15 or did you ever come to learn which hedge fund entity he

16 was related to?

17 A I think that someone told me that his main

18 association was Centurion. I do remember me thinking at

19 some point in time his main association was Platinum. I

20 remember him coming to Fort Lauderdale with Ari Glass on

21 behalf of Level 3. So I have nothing but complete

22 confusion as to who, exactly, Mr. Jedwab worked for.

23 Q Other than yourself and direct conversations

24 that were had with you -- and was there anyone else at

25 the Rothstein firm or affiliated with you, that was

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Page 798

1 assisting in the due diligence?

2 A Debra Villegas.

3 Q What did she do?

4 A Helped us with documents, helped us with

5 files, anything I needed her to do. Other than

6 meet-and-greets, no. When they came to the office to

7 meet people, no, no one else was assisting in the due

8 diligence. I don't think I introduced them to any of

9 our bankers at that point in time.

10 Q Now, at this point, the Ponzi scheme is in

11 full swing, isn't it, April 2008?

12 ALL PRESENT: Object to the form.

13 BY MR. CIMO:

14 Q Let me rephrase.

15 What was the status of your Ponzi scheme that

16 you have pled guilty to, as of April of 2008?

17 A How many deals has George invested in by this

18 date; do you know?

19 Q I can't tell you.

20 A You know, "full swing" is such a vague term.

21 Q I'll rephrase it. I'm going to retract "full

22 swing."

23 A Okay.

24 Q Was there any component of your Ponzi scheme

25 in effect when you had your initial meeting in New York?

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Page 799

1 A Yes.

2 Q What was going on at this point?

3 A I was doing deals with Mr. Levin. There were

4 deals with the Morses.

5 Q Phony deals?

6 A All -- any time I say "deals," unless I'm

7 talking about purchasing of the businesses that we were

8 laundering money through, I'm talking about phony deals.

9 The settlement deals were all phony.

10 Q And did you have an intention to do phony

11 deals in relation to these hedge funds?

12 A Yes, sir.

13 Q It was not your intention to do any legitimate

14 deals?

15 A No, sir.

16 Q So, in regard to this due diligence that's

17 being done -- and you used the term "limited." You said

18 it was limited due diligence, correct?

19 A By my definition, it was extremely limited.

20 Q And you did not receive any phone call from

21 any outside accounting firm?

22 A Not to my knowledge, no.

23 Q And other than the individuals that you

24 mentioned, Mr. Jedwab and the others from Platinum,

25 Centurion or Level, 3 were there any other people that

2931b73d-6819-44d5-a58a-692a89b4049b


Page 800

1 visited your offices at RRA, "RRA" meaning the Rothstein

2 firm?

3 A From the hedge funds, not that I recall.

4 Q Now, let's go to Exhibit No. 126.

5 And I would like to turn your attention to one

6 of the attachments to this lawsuit, which is Exhibit A.

7 It's about 20, 30 pages in. It's page 20, actually; and

8 you'll see it's a letter dated May 14th, 2008, in which

9 Kroll is being retained jointly by the Troutman Sanders

10 Law Firm and by Platinum Partners Value Arbitrage Fund,

11 LP.

12 Have you seen this document before today?

13 A Hold on. I have to see it first before I tell

14 you whether I've seen it before.

15 Q It's --

16 MR. NURIK: What is the page number

17 again?

18 MR. CIMO: Just go to page 20 of the

19 complaint, Mr. Nurik, and then Exhibit A.

20 MR. NURIK: Okay. There it is.

21 BY MR. CIMO:

22 Q Have you seen this retention letter, three

23 pages, before today?

24 A No, sir.

25 Q Okay. Did you ever come to learn at any point

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Page 801

1 while this due diligence was being conducted that one of

2 the hedge funds had hired Kroll?

3 A I have no specific recollection of that.

4 Q And did you come to learn at any point after

5 you were incarcerated that Kroll had been retained?

6 A Yes.

7 Q And how did you come to learn that?

8 A Again, in one of my many meetings it came up.

9 I don't know.

10 Q Now, there's a law firm mentioned, Troutman

11 and Sanders. Had you ever heard of that law firm before

12 today?

13 A Before today, sure.

14 Q And did you know about them before you were

15 incarcerated?

16 A I did.

17 Q And how did you come to learn about that firm?

18 A I had had contact with this -- I don't know

19 how to say his last name. Bourguigon. Bourguigon.

20 Whatever his name is. Robert, from Troutman Sanders. I

21 had contact with him.

22 Q This is before you met any of the hedge fund

23 people?

24 A I thought you said before I was incarcerated.

25 Q Yes. But -- before this initial meeting in

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Page 802

1 New York.

2 A No, no, no --

3 Q With the hedge funds.

4 A Timing-wise, after the initial meeting, before

5 the Ponzi exploded, earlier on I had conversations with

6 Mr. Robert Bourguigon of Troutman Sanders.

7 Q What did you discuss with him?

8 A I don't have a specific recollection but it

9 was deal-related questions. My understanding from

10 Mr. Preve and from Mr. Bourguigon was that he was the

11 hedge fund's attorney and that he was doing -- helping

12 prepare documents and the like.

13 I also recall that at some point in time we

14 had back and forth between Mr. Preve and him and then me

15 and Mr. Preve and him on coming up with language for

16 certain documents.

17 Q Did anyone from that firm contact you as part

18 of any due diligence being conducted by the hedge funds?

19 A I don't have specific recollection of that,

20 no.

21 Q I'd like you to now turn to Exhibit B.

22 And would it be fair to say you didn't see

23 this report of investigation until after you were

24 incarcerated?

25 A Actually --

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Page 803

1 MR. SCHERER: Objection to form.

2 A -- I don't think I've seen it until today.

3 BY MR. CIMO:

4 Q Oh, good. Okay. So you -- do you know there

5 was some report done by Kroll but you didn't see it

6 until before today?

7 A I actually thought that there were multiple

8 reports done by Kroll but I haven't seen them.

9 Q All right. Let's look at Exhibit --

10 A I didn't see anything that's dated this early

11 until today.

12 Q All right. Let's go to Exhibit D. Here. I

13 would like you to turn to go past the table of contents.

14 A Okay.

15 Q And it says "Kroll was retained." After the

16 table of contents, it says "scope of investigation." It

17 says "Kroll was retained by Troutman Sanders, LLP, to

18 conduct an investigation of Scott Rothstein."

19 And it's your testimony that you didn't know

20 that anyone was hired to conduct an investigation of

21 you --


23 Q -- before you were incarcerated?

24 A I don't have an independent recollection of

25 that, no.

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Page 804

1 Q And you also didn't come to learn that also

2 members of your law firm were going to be investigated,

3 too?

4 A No, sir.

5 Q And you also didn't know about the fact that

6 George Levin, Gayla Levin, Frank Preve were also going

7 to be investigated?


9 A I have don't have any independent recollection

10 of anyone telling me that they were doing that, no.

11 BY MR. CIMO:

12 Q And, again, this is all before October of

13 2009.

14 A Yes.

15 Q And it also is your testimony you weren't

16 aware of any investigation by Kroll or any other entity

17 doing due diligence for the hedge funds, that Banyon

18 Funding, LLC, and Banyon 1030-32 also would be

19 investigated?

20 ALL PRESENT: Object to form.

21 A I don't have a specific memory of that, no,

22 sir.

23 BY MR. CIMO:

24 Q Now, had Kroll contacted your law firm, would

25 you have known that?

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Page 805

1 A If an investigative agency contacted my law

2 firm, I can assure you I would have known about it.

3 Q And you don't have any recollection of any

4 contact by Kroll?

5 A I have no specific recollection of it, no.

6 Q Then there's the executive summary on page 2,

7 and it says, "Chief among the objectives of the

8 assignment were: Determine whether Rothstein Rosenfeldt

9 Adler was legal counsel in lawsuits, which in number and

10 cause amounted to the actual or potential award of

11 settlement of at least tens of millions of dollars."

12 Were there ever any lawsuits that you settled

13 in the tens of millions of dollars in your entire legal

14 career?

15 A No, sir.

16 Q Did the public records of any county anywhere

17 in the country reflect that you had any lawsuits that

18 had settled for tens of millions of dollars?

19 A You know, I -- I don't think tens of millions,

20 no, sir.

21 Q While you were a lawyer, before you were

22 disbarred, had your firm ever filed any lawsuit

23 regarding employment discrimination or similar claim in

24 which the demand was in the tens of millions of dollars?

25 A Actually, in the written document?

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Page 806

1 Q Yes.

2 A No, sir.

3 Q Filed at the court?

4 A I don't believe so, sir, no.

5 Q Go now to the portion where it says "pending

6 or recently settled Rothstein Rosenfeldt & Adler

7 lawsuits." And I'd ask you now to read underneath that

8 and tell me whether -- what you just testified about is

9 consistent with Kroll's findings underneath that

10 subsection.

11 A All right. Just give me one second.

12 That appears to be consistent, yes.

13 Q And I'm going to read one portion of it, where

14 it says, quote, The large majority of these suits, which

15 was the ones that Kroll found, were automobile injury or

16 other negligence cases."

17 Is that the kind of work your firm was doing?

18 A In 2007, 2008, there was a lot of automobile

19 work, and my recollection -- I don't know if they were

20 in suit or not. My recollection is we had a fair amount

21 of employment-related lawsuits going on as well. I

22 don't recall filed, not filed, where filed.

23 Q And then it says, "Which by their content did

24 not appear to warrant settlements amounting to total

25 awards of $100 million."

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Page 807

1 A That would be accurate.

2 Q It says, "Additionally, Kroll did not identify

3 any wrongful death or massive tort claims leading to a

4 possible large settlement."

5 Was that consistent with what your law firm

6 was doing?

7 A Yeah. The only large awards that the firm

8 ever got during its existence were ones that were not

9 collectible.

10 Q Let's go now to the next paragraph. It says,

11 "Kroll's review of media involving Rothstein Rosenfeldt

12 & Adler only identified two published articles reporting

13 that the law firm settled cases for amounts in excess of

14 a million dollars."

15 Then if you go to the next page, it defines

16 the Thigpin lawsuit and it identifies the United

17 Healthcare lawsuit.

18 Those are not tens of millions of dollars

19 lawsuits, though?

20 ALL PRESENT: Objection to form.

21 A No, sir.

22 BY MR. CIMO:

23 Q I'm sorry? Your answer is yes -- let me

24 rephrase.

25 Did those lawsuits involve tens of millions of

2931b73d-6819-44d5-a58a-692a89b4049b


Page 808

1 dollars of awards for settlements?

2 A They did not.

3 Q Did anyone ever ask you -- irrespective of

4 this Kroll report making these findings, did anyone at

5 the hedge funds ever ask you why there appeared to be a

6 dearth of, at least, filed cases, regarding your law

7 firm's efforts?

8 A At some point in time, somebody, I don't

9 remember whether it was Mr. Preve or someone from the

10 hedge funds, inquired about filed cases and I simply

11 said, That's the whole point: These are not filed

12 cases.

13 Q Meaning that the way you get them settled is

14 by basically saying you're going to file it but the

15 defendant then does a confidential settlement that

16 prevents it from being filed?


18 A The pitch was --

19 BY MR. CIMO:

20 Q Let me rephrase my question. What was the

21 pitch? What was the pitch?

22 A The pitch was, we approached the defendant,

23 the potential defendant, to settle the case before we

24 filed, to avoid negative publicity. So by its very

25 nature, they appeared to be looking for the wrong thing.

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Page 809

1 Q Given the fact there was no filed cases, was

2 there any solution that anyone recommended or suggested

3 to verify the existence of these settlements?

4 A Not that I recall, sir.

5 Q Was there a Michael Szafranski that was

6 ultimately -- that ultimately became involved to

7 purportedly verify the existence of any settlements?


9 BY MR. CIMO:

10 Q What role, if any, did Michael Szafranski play

11 in regard to the settlements?

12 A He was hired, to my understanding, by the

13 hedge funds to be what we called a third-party verifier.

14 Q And whose idea was it to hire Mr. Szafranski;

15 if you know?

16 A The hedge funds and specifically Gillad

17 Kalter.

18 Q And what relationship, if any, did Mr. Kalter

19 have to Michael Szafranski?

20 A My understanding was that they were childhood

21 friends.

22 Q So it's your testimony that Mr. Szafranski was

23 suggested by the funds to become an independent verifier

24 by one of the childhood friends of one of the hedge

25 funds?

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Page 810

1 A Correct.

2 Q And was the term "independent verifier"

3 actually used? "Independent verifier"?

4 A Yes.

5 Q Did you believe that Mr. Szafranski was an

6 independent verifier?

7 A He didn't appear to me to be independent.

8 But --

9 Q You didn't care?

10 A No. He's --


12 A He's who they gave us and that's who we

13 ultimately accepted.

14 BY MR. CIMO:

15 Q Let's rephrase the question to get around the

16 objection to form.

17 What conclusion did you reach, if any, as to

18 whether Mr. Szafranski was a truly independent verifier?

19 A That he wasn't independent.

20 Q Why not?

21 A Because of his relationship with Mr. Kalter,

22 and ultimately his relationship with me.

23 Q And what relationship did Mr. Szafranski have

24 with you?

25 A He ultimately became part of the Ponzi scheme.

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Page 811

1 Q And you were a lawyer for many years. Did you

2 ever hire anybody to independently audit or review any

3 of your firms' business functions or financial

4 statements?

5 A That's -- you used the word "independent."

6 Q Independent.

7 A I hired accountants, like Tracy Weintraub from

8 Berenfeld Spritzer. But during the point that we were

9 conducting criminal activity, I never hired anyone who

10 would fall within the heading of truly independent.

11 Q Yes.

12 And was it important -- what -- how important

13 was it to you, if at all, that Michael Szafranski not be

14 independent?

15 A It was important --


17 A It was important to me that he be malleable.

18 BY MR. CIMO:

19 Q Did you need him to be a player?


21 A I was hoping that he would be. Did I need him

22 to be? I needed him to be capable of -- initially

23 capable of being fooled.

24 Ultimately, it turned out -- I wasn't counting

25 on it -- but ultimately it turned out that he was not

2931b73d-6819-44d5-a58a-692a89b4049b


Page 812

1 only extremely malleable but was extremely greedy, as

2 were the rest of the people involved in the Ponzi

3 scheme.

4 BY MR. CIMO:

5 Q What was your reaction, if any, when Michael

6 Szafranski, a childhood friend of Mr. Kolter, gets

7 proposed by these supposed sophisticated hedge funds, to

8 be the independent verifier for the settlements?


10 A I have to give you --

11 BY MR. CIMO:

12 Q Wait. Stop.

13 MR. CIMO: What's wrong with the

14 question, Counsel?

15 ALL PRESENT: Supposed sophisticated

16 investors." There's no predicate for him to

17 know that.

18 BY MR. CIMO:

19 Q Let's rephrase the question and let's go back

20 a little bit, Mr. Rothstein.

21 A Okay.

22 Q These hedge funds, tell me what you learned

23 about them while you were transacting with them -- doing

24 transactions with them through Banyon entities?

25 A That's a very broad question, Mr. Cimo.

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Page 813

1 Q What did you learn?

2 A I learned that they were good guys. I learned

3 that a lot of them were players. I learned that -- I

4 mean, you're asking such a poor question. I learned

5 they had nice families. They liked to go out and drink

6 with me. They liked to go to strip clubs.

7 There's a whole myriad of things and there

8 were different personalities for each of the players.

9 Q Let's talk about the funds themselves. What

10 did you learn about these hedge funds and what they were

11 doing with the money that they were taking from

12 investors?


14 BY MR. CIMO:

15 Q Let me rephrase the question. What did you

16 learn the function was of these hedge funds, if

17 anything?

18 A To make money.

19 Q And is that what you thought hedge funds do?

20 A Yes.

21 Q Okay. So did you believe that these were

22 legitimate hedge funds making money?

23 A When I first started doing business with them,

24 yes.

25 Q Did you come to think later -- changing that

2931b73d-6819-44d5-a58a-692a89b4049b


Page 814

1 opinion?

2 A I later believed that they were part

3 legitimate, part -- let's say not so legitimate.

4 Q And what conclusions did you reach, if any, as

5 to what part was not legitimate?

6 A As I was discussing yesterday during

7 testimony, there are certain people within the hedge

8 funds that I believed, based upon my knowledge, were

9 legitimate. Straight. There were other people who were

10 less than legitimate. There were people who I believe

11 had knowledge of the Ponzi that we were involved in.

12 There were people that I believed had no knowledge or --

13 let me restate that. There were people I believed

14 figured out that we were involved in some type of fraud

15 that ultimately decided to just let it go. There were

16 other people who were pushing to get rid of us.

17 Q We'll talk about that later but for now I'll

18 give you an example. Did you come to learn whether

19 Platinum, for example, or any affiliates of Platinum was

20 part of the group that was touted as being one of the

21 most successful hedge funds in the country --


23 BY MR. CIMO:

24 Q -- at any time?

25 A I did.

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Page 815


2 A Mark Nordlicht told me and so did Mr. Preve.

3 Q And did you come to learn that when Centurion

4 and Level 3 were acting as hedge funds, that they were

5 supposedly acting as legitimate hedge funds?


7 A Yes.

8 BY MR. CIMO:

9 Q And did you know whether or not there was

10 actually reports in the media about what these hedge

11 funds were doing?

12 A I later came to learn that there was -- doing

13 my own research, actually, after having a conversation

14 with Mr. Nordlicht, that some of the people involved in

15 the hedge funds had been involved in fraudulent activity

16 or allegedly fraudulent activity.


18 A Doing my own research.

19 Q And --

20 A And also speaking to Mr. Nordlicht and

21 Mr. Preve.

22 Q Who did you come to learn was involved in

23 fraudulent activity?

24 A Mr. Huberfeld and Mr. Nordlicht.

25 Q And what did you learn specifically about

2931b73d-6819-44d5-a58a-692a89b4049b


Page 816

1 those individuals?

2 A I learned that Mr. Huberfeld had been involved

3 in some type of fraud. He was involved in being in --

4 one of the things was being involved in some government

5 tests with some fake IDs.

6 There was something else involving the SEC

7 where he was banned from doing something and I don't

8 remember the technical language that was used.

9 I learned that Mr. Nordlicht and some of his

10 partners were involved in a large piece of litigation

11 called the "Optionable Litigation," involving all kinds

12 of allegations of fraud.

13 Q And when did you learn this before October of

14 2009, if at all?

15 A It was different points in time. I learned

16 about the Huberfeld fraud fairly early on, because when

17 I was trying to understand why Murray was -- Murray

18 Huberfeld was calling the shots but never seemed to be

19 available to us. We used to joke around and call -- say

20 he was the Wizard of Oz; he was the man behind the

21 curtain. He was pulling all the strings but no one ever

22 got to see him.

23 Q And you felt there was a nexus between that

24 activity and him not being one of the people that you

25 would meet with?

2931b73d-6819-44d5-a58a-692a89b4049b


Page 817


2 A Mr. Preve and I discussed that. There was,

3 much later on, a private meeting that we discussed

4 yesterday, briefly, between Mr. Nordlicht and I when

5 everything was exploding where it became much clearer to

6 me Mr. Nordlicht's familiarity with fraud.

7 BY MR. CIMO:

8 Q Had another verifier been appointed instead of

9 Michael Szafranski, for example, a partner, at a big

10 four or big six accounting firm. What effect, if any,

11 would that have had on your decision to do any type of

12 transactions with the hedge funds?


14 A I would have objected profusely to doing

15 business with him.

16 BY MR. CIMO:

17 Q Why?

18 A Because I did not believe that our fraud was

19 sophisticated enough to get past a big-four type

20 accounting person who didn't want to be gotten past.

21 It's not to take away from any intelligence of anyone

22 who was looking at it but the people grouped.

23 Q And apart from the activities that you came to

24 learn, that you described as fraudulent regarding the

25 individuals associated with the funds, did you always

2931b73d-6819-44d5-a58a-692a89b4049b


Page 818

1 believe throughout the entire time you dealt with the

2 hedge funds that these were actual legitimate hedge

3 funds with investors that were investing in these

4 enterprises?

5 A Yes.

6 Q You never understood those hedge funds to be

7 operating any separate Ponzi scheme?

8 A No, sir.

9 Q Okay. So when I asked you that question, I

10 wanted to ask you what your reaction was when the friend

11 of Mr. Kolter was appointed as the independent verifier.

12 A The first conversation that I recollect having

13 about that, was with Mr. Preve. And he was asking me

14 what I thought. And I said, "We're good to go. He's

15 milk toast. And the name stuck, actually. You can

16 probably see it in the few dozen e-mails where we're

17 referring to "what is milk toast doing." It wasn't

18 meant to be derogatory, it was just -- well, I guess it

19 was really derogatory, but it was meant in a -- it was

20 meant the way I would be as a, quote/unquote, wise ass,

21 that he was milk toast. He was just not going to be a

22 problem for us.

23 Q Okay. And when you use the term "milk toast,"

24 if you could describe to the fact finder, whether it be

25 a judge or a jury, what you meant by that term.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 819

1 A Yes. Milk toast means like vanilla. He

2 doesn't ask a lot of questions. He was -- it wasn't

3 that he was not emotional. He got emotional when he got

4 upset about something going wrong or someone was

5 aggravating him. But he was -- he just kind of accepted

6 things the way they were. Very vanilla.

7 "Mike, this is the balance."

8 "Okay, this is the balance."

9 "Mike, these are the wires."

10 "Okay, these are the wires."

11 "Mike, these plaintiffs signed these

12 documents."

13 "Okay, the plaintiffs signed the documents."

14 Q Milk toast?

15 A Yes. I don't know any other way to describe

16 it.

17 He wasn't very inquisitive.

18 Q At some point did you also consider him to be

19 a mushroom?


21 THE WITNESS: A mushroom?

22 BY MR. CIMO:

23 Q Did you ever refer --

24 A I don't think I called him a mushroom. I

25 think Frank may have called him a mushroom.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 820

1 Q Really?

2 A Just because -- yeah.

3 Q Why did Frank refer to him as a mushroom?

4 A Whoever referred to him as a mushroom, it was

5 that we're just going to leave him in the dark and dump

6 shit on him, excuse my language.

7 MR. LICHTMAN: Does that mean he is

8 kosher?

9 THE WITNESS: Actually, he was kosher.

10 Yes.

11 MR. SCHERER: That was Lichtman making

12 that response.

13 BY MR. CIMO:

14 Q But it's your testimony, at some point the

15 mushroom -- the person who is a vanilla, milk toast,

16 who's also a mushroom, turns into a co-conspirator in

17 your Ponzi scheme.

18 Is that your testimony, sir?

19 A Yes.

20 Q Let's go back to the Exhibit No. 126.

21 They then do an analysis regarding your

22 individual property ownership and they identify multiple

23 high-end real estate purchases by you, but they point

24 out that -- that you're holding mortgages in excess of

25 $10 million. I'm on page 3, by the way, of the Kroll

2931b73d-6819-44d5-a58a-692a89b4049b


Page 821

1 report.

2 Do you see that?

3 A Yes.

4 Q Did you, in fact, own these properties in this

5 report?

6 A Yes.

7 Q And why were they burdened with over

8 $10 million in mortgages if you were doing so well in

9 your practice?

10 A Free up cash.

11 Q And what did you need cash for?

12 A Ponzi scheme and my lifestyle and the

13 lifestyle of my partners.

14 Q I want you now to go to the bottom part where

15 it talks about the real estate and it says, quote --

16 these are the last two lines -- "While actual mortgage

17 balances are not in the public record, this analysis

18 would suggest that Rothstein's mortgage burden is

19 significant."

20 Do you agree with that?

21 A I do.

22 Q It then goes on to state, quote, Even if

23 Rothstein is leasing all of his properties, rental

24 income would unlikely cover all associated ownership

25 costs, e.g., annual property tax, property insurance,

2931b73d-6819-44d5-a58a-692a89b4049b


Page 822

1 maintenance, and management fees, monthly mortgage

2 payments, etc.

3 Is that a true statement? They were leased?

4 A I never gave a thought one way or the other.

5 I don't remember which properties I had leased or not

6 leased. Again, because of the nature of what was going

7 on, it was a nonevent for me.

8 Q It says, "Furthermore, mortgage rates for

9 Rothstein properties are generally considered slightly

10 high, even for jumbo loans."

11 Did you care what interest rate you got on

12 these loans?

13 A No, sir.

14 Q Why not?

15 A Because of the other activity we were involved

16 in with the Ponzi scheme.

17 Q It then talks about Rothstein's watch

18 collection.

19 If you can go down to that bullet point.

20 A Yes.

21 Q But it says they were all subject to liens

22 filed by Mayor's. Do you see that?

23 A That's not true.

24 Q Okay. Did certain of them have liens that

25 they were purchased through financing?

2931b73d-6819-44d5-a58a-692a89b4049b


Page 823

1 A For a very short period of time. I had heard

2 that before.

3 What happens is when you purchase something

4 from Mayor's on their line of credit -- you know, they

5 have a Mayor's credit card -- they file liens.

6 We generally paid that down right rapidly.

7 The bulk of my watches weren't purchased at

8 Mayor's. So...

9 Q I wanted to ask you, did the hedge funds and

10 anyone at the hedge funds ever ask you about the Mayor's

11 liens?

12 A I don't recall one way or the other.

13 Q Did anyone at the hedge funds ever ask you

14 about the 10 million plus in mortgages on your

15 properties?

16 A I have no specific recollection of that, no.

17 Q Did anyone at the hedge funds ask you about

18 the fact that you were sued for $36,000-plus regarding

19 the security service firm?

20 A No, sir.

21 Q Did anyone at the hedge funds ask you about

22 your dissolution of marriage to your first wife and your

23 assets that were supposedly split, which is disclosed on

24 page 5, and how the numbers are only six figures, low

25 six figures, in terms of assets?

2931b73d-6819-44d5-a58a-692a89b4049b


Page 824

1 A I don't recall ever having that conversation,

2 no, sir.

3 Q Did anyone at the hedge funds ever ask you

4 about your partners and what they were doing or what

5 their expertise was, getting these wonderful

6 settlements, mentioned in bold point on pages 5 and 6?

7 A That's two different questions. We did

8 discuss my partners as relates to, for example, the

9 power of the business, the image that I was attempting

10 to create.

11 They never asked me about the things you're

12 showing me here on pages 5 and 6.

13 Q Okay. So was Russell Adler touted as one of

14 your top litigators?

15 A Yes.

16 Q Was he touted as one of the people that was

17 getting these multi-million-dollar settlements pre-suit?

18 A Yes.

19 Q Okay. And did anyone at the hedge funds ever

20 discuss with you the fact that American Express -- his

21 wife, was sued for $24,000 for credit card debt?

22 A No.

23 I actually didn't even know that until I just

24 looked at this.

25 Q Anyone at the hedge funds talk to you about

2931b73d-6819-44d5-a58a-692a89b4049b


Page 825

1 the fact that Adler and his wife were listed as debtors

2 for $125,000 IRS claim for unpaid income taxes?

3 A Anyone from the hedge funds?

4 Q Yes.

5 A No, sir.

6 Q Did anyone from the hedge funds ever discuss

7 with you Mr. Cusick?

8 A No, sir.

9 Q And that being the case, there was nothing

10 discussed about Mr. Cusick's personal finances in the

11 public record?

12 A No, sir.

13 Q And did anyone at the hedge funds discuss with

14 you Dennis Kleinfeld?

15 A No, sir.

16 Q Or anything about Mr. Kleinfeld's financial

17 dealings outside the firm?

18 A No, sir.

19 Q And the investigation regarding the British

20 Virgin Islands, did you know about that?

21 A I knew about it, yes, but no one ever asked me

22 about it from the hedge funds.

23 Q And let's talk about the political donations.

24 Did anyone at the hedge funds talk to you about the

25 public records regarding political donations?

2931b73d-6819-44d5-a58a-692a89b4049b


Page 826

1 A Hold on a second, please.

2 Q Bless you.

3 A Excuse me.

4 Did anyone ask me what, sir?

5 Q On page 6, bullet point 1, start up at the

6 top. Did anyone ask you about political donations?

7 A I am certain that during the course of my

8 conversations with the hedge funds, we brought up our

9 involvement in politics because that was part of

10 painting the image of the firm and myself and the

11 partners.

12 Q I would like you now to turn to pages 7 and 8,

13 "Litigation review." And I'm not going to read this. I

14 just would like you to read page 3 -- I mean section 3,

15 page 7, and let me know whether the findings of Kroll

16 are consistent with what your understanding of the types

17 of matters your firm was involved in.

18 A It's accurate.

19 Q Thank you.

20 And just to summarize, what, if anything, does

21 this report on this page 7 reflect about whether any

22 settlements existed in the tens of millions of dollars?

23 A That they did not.

24 Q And so the conclusions in this report are

25 accurate?

2931b73d-6819-44d5-a58a-692a89b4049b


Page 827

1 A Yes, sir.

2 Q And now I would like you to look at the

3 next-numbered exhibit, which would be Exhibit No. 127.

4 A Do I have that one already?

5 Q We're giving it to you right now.



8 THE WITNESS: Okay.

9 BY MR. CIMO:

10 Q For the record, this is the order entered in

11 the lawsuit that was filed against Kroll by Platinum.

12 It is dated October 5th, 2011. Have you seen

13 this order before today?

14 Have you seen this before today?

15 A Just give me one second.

16 Q Oh, yes. I'm sorry.

17 A I have.

18 Q In what context did you see this?

19 A I saw it a week or two ago. I was on the

20 Lexis. I have access to Lexis where I live, and I read

21 it online.

22 Q And just give me one moment, please.

23 Okay. Mr. Rothstein, I'm sorry, please go to

24 page 6 of 14.

25 A Yes, sir.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 828

1 Q I would like to refer your attention to the

2 second full paragraph that starts with "Kroll has not

3 yet answered the complaint."

4 A Yes, sir.

5 Q You see that?

6 A Yes, sir.

7 Q And the Court says the following: It says,

8 quote, In this pre-answer motion to dismiss all three

9 causes of action, Kroll takes the position that the

10 present lawsuit is merely an attempt to hold it

11 responsible for Platinum's own poor decision to invest

12 in a Ponzi scheme."

13 Do you believe -- do you agree that Kroll made

14 a poor decision to invest in your Ponzi scheme?

15 ALL PRESENT: Objection.

16 THE WITNESS: Kroll did not invest in the

17 Ponzi scheme.

18 MR. CIMO: I'm sorry. Platinum.

19 I withdraw and rephrase the question.

20 BY MR. CIMO:

21 Q Do you agree with the Court's conclusion that

22 the hedge funds made a poor decision to invest in the

23 Ponzi scheme?


25 A I think your question is -- has gone sideways.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 829

1 BY MR. CIMO:

2 Q Go ahead.

3 A You just asked me if I agreed with the Court's

4 conclusion that it was a poor decision.

5 Q Well, let me rephrase it.

6 Do you agree with Kroll's -- do you agree with

7 Kroll's assertion that there was a -- it was a poor

8 decision for Platinum to invest in the Ponzi scheme?

9 A Listen, I think it's --


11 A -- a poor decision by anyone that invests in

12 the Ponzi scheme but that's not to say that I didn't get

13 over on certain of these people.

14 Again, certain of these people -- just so

15 we're clear, certain of these people, I believe, tried

16 to do the right thing; others did not.

17 BY MR. CIMO:

18 Q Go to the next sentence, "Kroll claims that's

19 an explicitly warned Platinum that the contemplated

20 loans transaction bore the hallmarks of a Ponzi scheme."

21 Do you agree with that?

22 A I do believe that it bore the trademarks of a

23 Ponzi scheme.


25

2931b73d-6819-44d5-a58a-692a89b4049b


Page 830

1 BY MR. CIMO:

2 Q Tell me specifically what you felt was

3 disclosed to the funds before they started to invest

4 that bore the hallmarks of a Ponzi scheme?

5 A No, it wasn't what was disclosed --

6 Q What was disclosed?

7 A -- it was what was not disclosed.

8 Q Please go ahead.

9 A It was our refusal to give them any

10 information about who the parties were. It was the way

11 we were keeping our trust accounts, how we demanded our

12 control over them. There's a whole myriad of things.

13 You would have to give me all the papers, to look at it,

14 but it was -- you know, hindsight is 20/20, so it's very

15 hard for me to do this this way. But there were certain

16 things that I believed that they could have done better

17 in their due diligence that they did not do.

18 But yes, there were certain hallmarks -- not

19 the least of which was "too good to be true" thing. The

20 sheer level of interest that we were paying, and then

21 ultimately the sheer number of cases, because physically

22 it would have been impossible for me to handle that many

23 cases alone.

24 Q Ultimately, how did the hedge funds invest,

25 did they do it directly or did they do it through the

2931b73d-6819-44d5-a58a-692a89b4049b


Page 831

1 Banyon entities?

2 A No, no, it was through Banyon.

3 Q Were there any payments ever directly made by

4 RRA to any of the hedge funds?

5 A You know, I'm not sure how that actually

6 worked because we were always directed to send the money

7 to these collection accounts. So, as I sit here today,

8 I can't tell you whether I was sending the money to

9 Banyon and then it went to them or whether I was sending

10 it into an account over which they exercised some level

11 of control.

12 Q And, if you know, why was the decision made to

13 invest through the Banyon entities instead of the hedge

14 funds investing directly?

15 A Because of Mr. Levin's reported wealth.

16 Q And what was the purported wealth of

17 Mr. Levin?

18 A At different points in time it was different.

19 Q Was it over 100 million, to your knowledge?

20 A Always well over 100 million, yes, sir.

21 Q And why was it that his wealth was important

22 in terms of the hedge funds, if you know, investing --


24 A Because they were getting -- to my knowledge,

25 from speaking to the people at the hedge funds, they

2931b73d-6819-44d5-a58a-692a89b4049b


Page 832

1 were giving a level of security because they felt that

2 Mr. Levin's personal guarantees were collectible.

3 BY MR. CIMO:

4 Q If you know, why was the level of security

5 important if the way these deals are structured there

6 was no risk?


8 A I have no idea.

9 BY MR. CIMO:

10 Q No, I'm just asking. I -- I thought the way

11 you described the way these investments went down, is

12 your firm is holding the money in escrow.


14 Q It's sitting there.


16 Q And did you tout these as no-risk investments?


18 A No-risk -- low-risk to no-risk, yes. We tried

19 not to say "no risk" because that's another red flag, so

20 we said low-risk to no-risk. But we said money is

21 in-house.

22 BY MR. CIMO:

23 Q The money is supposed to be at your law firm?

24 A Locked in a trust account, yes, sir.

25 Q So was there any -- was there any discussions

2931b73d-6819-44d5-a58a-692a89b4049b


Page 833

1 about the hedge funds ever investing directly and

2 bypassing the Banyon entities?

3 A Not to my knowledge, no.

4 Q So right from the start, from the get-go with

5 that initial meeting, it was always understood by you

6 that the Banyon entities would be the vehicle by which

7 the hedge funds would provide funds?

8 A Yes.

9 Q And did you play any role in the structure of

10 that or was that something that was done by somebody

11 else?

12 A Mr. Preve and Mr. Levin may have asked me a

13 question or two but I played no real role in that at

14 all. That was between Banyon and the hedge funds.

15 MR. CIMO: We're going to take a break at

16 this time, if that's okay.

17 (Whereupon, a recess was had.)

18 BY MR. CIMO:

19 Q I just have a few follow-up questions,

20 Mr. Rothstein, before we move on to another area.

21 I want to ask you, in terms of the hedge

22 funds, what belief did you end up obtaining, if any,

23 regarding their level of sophistication?

24 A I thought that certain members were

25 sophisticated and some members were a combination of

2931b73d-6819-44d5-a58a-692a89b4049b


Page 834

1 either less sophisticated or less interested.

2 Q Who were the more sophisticated individuals?

3 A Brian Jedwab was more sophisticated.

4 Jack Simony was sophisticated but less

5 interested and -- how do I say this? He was less

6 interested in what was really going on.

7 Ari Glass was sophisticated, but at times he

8 seemed concerned about what was going on and at other

9 times, he would just go with the flow.

10 Gil Kalter seemed sophisticated and, for the

11 most part, very concerned about issues that were coming

12 up.

13 Mark Nordlicht, to me, seemed sophisticated

14 but really didn't care one way or the other as to how he

15 made his money, so long as he was getting his money.

16 Q Now, let's talk about the funds as entities.

17 Did you -- what opinion did you or belief did you hold,

18 if any, regarding the entities' sophistication?

19 A I thought -- I thought that overall it was a

20 decent enterprise. I didn't think that there was

21 anything unsophisticated about them.

22 Q Okay.

23 A They certainly seemed to have their stuff

24 together as far as being able to bring investors in,

25 being able to fund things.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 835

1 Q In terms of a sliding scale, would you --

2 where would you have placed the hedge funds in terms of

3 low sophistication, medium or high sophistication?


5 BY MR. CIMO:

6 Q I'll give you an example. Let me rephrase the

7 question.

8 A Sure.

9 Q Well, a woman that invests her $100 IRA in

10 your Ponzi scheme that never made an investment in her

11 life, would that be a low-sophisticated person?

12 ALL PRESENT: Objection, form.

13 You can answer.

14 A If I have such a person invest, yes, that

15 would be low sophistication person.

16 BY MR. CIMO:

17 Q Did RRA ever have any type of investment like

18 that where directly there was investment made in RRA

19 settlements?

20 A Not through me, no.

21 Q Not through you directly?

22 A No. That would have had to have been Levin's

23 side of things that he was doing to raise money.

24 Q So, again, I understand that the hedge funds

25 did not directly invest through RRA.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 836

1 A Yes.

2 Q In terms of sophistication level, in regard to

3 the ones that were directly invested with RRA, where did

4 you place them in terms of sophistication?


6 A I thought they were a part of our

7 more-sophisticated group of investors -- laid back and

8 informal but more sophisticated.

9 BY MR. CIMO:

10 Q And what other --

11 A A bright group of guys.

12 Q What other individuals or entities would you

13 put in that same category?

14 A I put the Levins in that category. I put the

15 Von Allmens in that category. I put Barry Bekkedam -- I

16 don't know, Bekkedam was more like a salesman, don't put

17 him in that category.

18 Q Ira Sochet?

19 A Ira Sochet, definitely sophisticated. Ira

20 Sochet was as sophisticated as the guys at the hedge

21 fund. They were -- he was a very sharp man; Barry

22 Damson, also; Mel Klein, very sophisticated.

23 Q Of the entities and the people you just

24 mentioned, were any of them, in your opinion, more

25 sophisticated than the hedge funds?

2931b73d-6819-44d5-a58a-692a89b4049b


Page 837


2 THE WITNESS: More sophisticated?

3 BY MR. CIMO:

4 Q Yes.

5 A I think that probably Ira Sochet and Barry

6 Damson had an overall -- they were more professional

7 businessmen, but not necessarily more-sophisticated

8 businessmen.

9 Q Had you dealt with any hedge funds in any of

10 your business transactions before these hedge funds in

11 New York got involved?

12 A I had met with people from hedge funds, yes.

13 Q And did you learn anything about how hedge

14 funds work or how -- whether they're regulated, anything

15 at all about how hedge funds operate?


17 A Yes. There were very low levels of

18 regulation.

19 BY MR. CIMO:

20 Q And do you know whether hedge funds had

21 investors --

22 A Compared to other investment houses.

23 Q And do you know whether hedge funds, in fact,

24 take investments from individuals or entities; did you

25 come to learn that?

2931b73d-6819-44d5-a58a-692a89b4049b


Page 838

1 A Yes, I did.

2 Q Do you know that while were you meeting with

3 Platinum, Centurion and Level 3 up in New York?

4 A I did.

5 Q So, that being the case, understanding that

6 these hedge funds had their own investors that they have

7 to answer to, did you reach any conclusions or have any

8 beliefs about their levels of sophistication, compared

9 to other investors?


11 A I believed that they were good at what they

12 did and that they were sophisticated enough to be able

13 to generate, from what I understood, what was in excess

14 of a billion dollars in investments.

15 BY MR. CIMO:

16 Q And did you ever get any financial data from

17 the hedge funds of a nature that would be submitted to

18 an investor regarding your performance results?

19 A I saw some of it from time to time from Mr.

20 Preve, but I don't have a recollection of it.

21 Q Did you understand that these hedge funds

22 were, in fact, earning high rates of return with their

23 investments?

24 A That's what I was told. I didn't learn it one

25 way or the other.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 839

1 Q Did you ever come to learn what percentage of

2 these hedge funds investments were tied to settlements

3 of this nature? I'm talking about real settlements

4 where -- real structured settlements, real plaintiffs

5 and defendants.


7 A I didn't think any of it was.

8 BY MR. CIMO:

9 Q Oh, really? So you didn't know what

10 percentage, if any, these hedge funds were investing in

11 these types of investments versus others?

12 A My understanding was the closest that they

13 ever came to any product like the one we were pitching

14 was their involvement, to whatever extent it was, was

15 with Whitehaven. Other than that, this was a new

16 product for them, as far as I was told.

17 Q Thank you.

18 And what did you learn about Whitehaven?

19 A I learned that Whitehaven was a company that

20 Jack Simony was affiliated with, that other people from

21 the hedge fund may from time to time have been

22 affiliated with through investing or otherwise, and that

23 they were in the business of investing in lawsuits

24 during the course of, prior to the conclusion of,

25 litigation.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 840

1 Q Now, the one person that we did not discuss

2 that was at that initial meeting in New York was Jack

3 Simony. What did you come to learn about -- anything

4 about his relationship to the hedge funds?

5 A My understanding was that Jack Simony was like

6 the hedge fund's, for lack of a better word, salesman,

7 that they -- it was like a product -- project manager,

8 that he went out and found investors and also found

9 things to invest in; and that when he brought in an

10 investor or found a project to invest in, that it was

11 his job to oversee that project and handle the

12 participants, smooth over rough bump in the road, you

13 know, overall hand-holding of the -- of whatever project

14 it might have been.

15 Q And would it be fair to say that you had

16 constant interaction with him at some point?

17 A I had more interaction with him than anyone

18 else at the hedge funds.

19 Q We'll get to the emails in a moment. I want

20 to go back to Kroll very quickly.

21 You had testified that you did not know before

22 October of 2009 that Kroll had been retained by the

23 hedge funds, correct?

24 A Yeah, I have no independent recollection of

25 that.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 841

1 Q Had you learned, at any point during the Ponzi

2 scheme, that Kroll had been retained by the hedge funds,

3 what reaction would you have had, if any?

4 A I would have been concerned.

5 Q Why?

6 A Because when you are running a Ponzi scheme,

7 you want as few people as possible, and definitely as

8 few sophisticated people as possible poking around in

9 your business.

10 Q What do you know, if anything, about Kroll

11 that had any impact on that reaction?

12 A I knew that Kroll was an international

13 investigative company, that, to my knowledge, was

14 extremely sophisticated.

15 Q And had you -- your law firm ever used Kroll

16 in any of its investigations?

17 A I don't think so. To my knowledge, we didn't;

18 but it's certainly possible that one of the attorneys

19 that we ultimately had working for us did.

20 Q Would you have any -- would you have any

21 different reaction had it been ABC investigative agency

22 out of Hialeah in terms of the level of scrutiny that

23 you thought would have been conducted?

24 I have don't mean that to be funny. I'm just

25 using an example.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 842

1 MR. SCHERER: Why did you choose Hialeah?

2 MR. CIMO: Totally random, a random city.

3 MR. SCHERER: Right.

4 MR. CIMO: Let the record reflect that

5 Mr. Rothstein is smiling.

6 BY MR. CIMO:

7 Q Had a less-sophisticated investigative firm

8 been retained that you had never heard of, would that

9 have made any difference in your reaction to an

10 investigative firm being retained?


12 A Depending on who was involved in the

13 investigative firm, it would have made a difference in

14 my reaction.

15 BY MR. CIMO:

16 Q Okay. So, would you say Kroll, in terms of

17 investigative firms, is either the top of the food

18 chain, middle, low? I mean --


20 BY MR. CIMO:

21 Q -- where did you place it in terms of

22 sophistication?

23 A To my knowledge of everything, based upon what

24 I know, they were one of the more sophisticated

25 investment companies.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 843

1 Q Okay.

2 A Excuse me, investigative companies.

3 Q Now, and had you learned that Kroll had, in

4 fact, been retained, what reaction would you have had,

5 if any, regarding its potential impact on your Ponzi

6 scheme?


8 A I would have been concerned about possibly

9 being discovered or having-- problems with law

10 enforcement because I knew that they had -- they hired,

11 frequently, retired law enforcement, so it would have

12 been of concern to me.

13 BY MR. CIMO:

14 Q Now, in addition to possibly learning that a

15 high-level-sophisticated firm, like Kroll, had been

16 retained but also had been requested to do due diligence

17 at RRA's offices, what reaction would you have had, if

18 any, with regard to that -- learning that information?

19 ALL PRESENT: Same objection.

20 A I probably would have told Preve to cut off

21 negotiations with the hedge funds and let's go look for

22 money elsewhere.

23 BY MR. CIMO:

24 Q Why?

25 A Because when you're running a Ponzi, you don't

2931b73d-6819-44d5-a58a-692a89b4049b


Page 844

1 want sophisticated investigators poking around in your

2 business.

3 Q You stated earlier that you believed certain

4 of these hedge-fund individuals were sophisticated, but

5 you said they were doing due diligence at RRA offices?

6 A Yes.

7 Q Why didn't that concern you about it being

8 discovered, meaning the Ponzi scheme?

9 A You have to differentiate between

10 sophisticated, and then you couple with sophistication,

11 are they straight and narrow, or are they heading

12 towards the direction of being a player, as I described

13 over the last several of days.

14 So you could have someone who is

15 sophisticated -- Mr. Preve was extremely sophisticated

16 in banking. Mr. Preve was also an extremely high-level

17 player.

18 Doug Von Allmen was any extremely

19 sophisticated investor, not a player, if that helps you

20 with your understanding.

21 Q At any point did you reach the conclusion,

22 before October of 2009, that any of the individuals that

23 you dealt with at the hedge funds met the definition of

24 player that you previously testified about?

25 A Yes.

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Page 845

1 Q Who?

2 A Mark Nordlicht, Jack Simony -- and Ari Glass

3 kept jumping over the line from one side to the other

4 depending upon his mood.

5 Q You mentioned earlier certain of these

6 gentlemen and I -- you didn't identify who, engaged in

7 what I would call extra-curricular activities with you,

8 in regard to, for example, going out and having fun with

9 the guys.

10 MR. SCHERER: Objection to the form.

11 BY MR. CIMO:

12 Q Did you say that?

13 A You're not saying that makes him a bad person,

14 are you?

15 Q No, no. I'm am just -- I'm just following up

16 on -- I think you gave --

17 A A lot of people that go out and have a good

18 time with extra curricular activities, and it doesn't

19 necessarily make them criminals.

20 Q I understand completely, but what I'm asking

21 about is just trying to get the scope of the

22 relationship on the gentlemen you described as players.

23 A You have a lot of people in here panicking

24 right now, by the way, just -- just so you understand.

25 Q Did any of the players you mentioned --

2931b73d-6819-44d5-a58a-692a89b4049b


Page 846

1 Mr. Nordlicht, Mr. Simony or Mr. Glass -- ever go out

2 with you after hours for nonbusiness-related activities?

3 A Mr. Simony did and Mr. Glass did.

4 Q And what was the general nature of those after

5 hour activities?

6 A Mr. Simony attended gentlemen's clubs with me

7 and was at my home when I had several escorts there.

8 And Mr. Glass went to gentlemen's clubs with

9 me.

10 Q Okay. Were there any escorts at the

11 gentlemen's clubs?


13 THE WITNESS: Have you ever been to a

14 gentlemen's club?

15 MR. CIMO: I'm not going to answer that.

16 I don't mean to be facetious.

17 A Yes.

18 BY MR. CIMO:

19 Q What I'm asking is, did you actually observe

20 Mr. Simony and Mr. Glass engage in activities that would

21 be normal activities at a gentlemen's club?

22 A Yes. I paid for their activities at the

23 gentlemen's club.

24 Q Okay. Let's go back now to how you concluded

25 that the three gentlemen you mentioned were, in fact,

2931b73d-6819-44d5-a58a-692a89b4049b


Page 847

1 players? What was it about Mr. Nordlicht that led you

2 to conclude today that he was a player?

3 UNKNOWN SPEAKER: Just clarification, you

4 said today?

5 MR. CIMO: Yeah, his testimony is today,

6 he concluded that Mr. Nordlicht meets his

7 definition of player.

8 A It was a number of factors, not the least of

9 which was that one-on-one conversation I had with him in

10 my office when this was blowing up.

11 At that meeting, I was explaining to him, what

12 I explained the other day, what DOMAD was, the doctrine

13 of mutually assured destruction: He fires, we fire,

14 everyone blows up.

15 He was explaining to me that he was very

16 familiar with the whole process, that if I knew his

17 history, he started talking to me about the problems

18 that his father, Julius, had had with the government and

19 he had done time. He explained to me about the

20 optionable litigation. He didn't say he was a player.

21 People don't say that.

22 He said, you know, I have been through all

23 this. I got it. I just want to get us to a place, I

24 want to do whatever I can do to help you get everything

25 back on track and make sure everyone get's their money.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 848

1 He said, you're not going to -- he kept saying to me,

2 you're not going to tell me anything I haven't heard

3 before, you know. That was the mantra of that meeting.

4 Q What event -- what transpired before that

5 meeting that precipitated this meeting or that

6 conversation with Mr. Nordlicht?

7 A Them cutting us off and us cuttings them off.

8 Q Whenever you say "cutting off," can you

9 describe what you mean by that?

10 A Yes. They cut us off from funding, and we cut

11 them off from funding.

12 Q Well, when you say "we," who are you referring

13 to?

14 A "They" would be the hedge funds, and "we"

15 would be me, Levin and Preve.

16 Q Okay. But, again, there's no direct funding

17 coming from the hedge funds to RRA; it's all going

18 through these three Banyon entities, correct?

19 A Right, but I controlled the purse strings.

20 Q Okay. Other than what you described already,

21 is there any other things that happened with Mr.

22 Nordlicht -- by the way, would this have been April of

23 2009 --


25

2931b73d-6819-44d5-a58a-692a89b4049b


Page 849

1 BY MR. CIMO:

2 Q -- when you had this conversation with

3 Mr. Nordlicht?

4 A I would be guessing. I don't remember when it

5 was, but it was immediately after we stopped paying

6 them. We stopped paying them on April 13th, 2009, so it

7 would have been around that time.

8 Q Thank you.

9 And let me -- I have to -- there was an

10 objection to the form, so I have to just ask you the

11 question as an open-ended question.

12 A Okay.

13 Q What event, if anything, had transpired that

14 would refresh your memory as to the approximate month

15 and year that this meeting had occurred with Mr.

16 Nordlicht?

17 A We stopped sending payments to the hedge funds

18 on April -- on April 13th, 2009, which sent the hedge

19 funds into a wild panic.

20 Q And the meeting occurred shortly after that?

21 A It did, to my recollection.

22 Q What was it about Mr. Simony that lead you to

23 conclude that he was a player?

24 A Mr. Simony and I spent a lot of time together.

25 You have to understand, it wasn't one thing that he did;

2931b73d-6819-44d5-a58a-692a89b4049b


Page 850

1 it was the way he conducted business.

2 He was doing side deals with Frank Preve that

3 he wasn't telling people about. He was trying to bring

4 in investors from the side. He was engaged in a side

5 deal with Murray that people supposedly didn't know

6 about.

7 He conducted business in a far more shady

8 manner, just his overall manner of doing business.

9 You know, there are people -- the best thing

10 to do is line them all up with Brian Jedwab. Brian

11 Jedwab was straight. There was -- there was no two ways

12 about him. If he had figured out what we were doing or

13 if there was any fraud, he would have run for the hills,

14 calling the police as he was running. Okay?

15 Jack, no. That's just -- you spend a lot of

16 time with someone, you get a feel as to what they are

17 susceptible to, how malleable they are. Jack was within

18 that category of "player," as was Mr. Nordlicht.

19 Mr. Glass, as I said earlier, he jumped back

20 and forth. There were times when Ari Glass was berserk.

21 I mean, I thought he was in the middle of calling the

22 SCC; although, I'm now learning that may have been a

23 whole shtick he was pulling with me.

24 But when I went to the Bahamas with him and we

25 were drinking and running around and I realized he was

2931b73d-6819-44d5-a58a-692a89b4049b


Page 851

1 engaged in this tax-fraud thing where he was supposed to

2 be doing things in the Bahamas, but, really, what we

3 were doing was drinking and sending on emails saying the

4 deals are approved, you start to feel like that person

5 is more of a player.

6 I hope that's helpful.

7 Q Thank you so much.

8 And going back, before we move on, to Kroll,

9 or any other independent, sophisticated firm that may

10 have been requested to do due diligence, had -- had an

11 independent firm -- truly independent firm, of the

12 stature of Kroll, actually come in and examined books

13 and records of RRA, including those supposed settlements

14 that were being done, what, if anything, would have

15 happened?


17 A I have no way of knowing one way or the other.

18 Obviously, if someone is extremely

19 sophisticated that asks all the right questions, if I'm

20 not capable of getting over on them, they are going to

21 figure out that it's a fraud.

22 BY MR. CIMO:

23 Q Assume, for purposes of my question, that the

24 right questions get answered and there is true

25 independence and there is a true effort to determine the

2931b73d-6819-44d5-a58a-692a89b4049b


Page 852

1 veracity of these settlements, what, if anything, would

2 have happened?


4 A It is my opinion that, ultimately, someone who

5 was sophisticated, that wanted to figure out that there

6 was a fraud, had they asked the right questions, would

7 have figured it out.

8 That's my opinion.

9 MR. CIMO: I am showing you, now, Exhibit

10 128.

11 (Thereupon, a document was marked as Trustee's

12 Exhibit No. 128 for Identification.)

13 MR. CIMO: And for the record, this is an

14 email dated July 24, 2008, 3:57 p.m., from

15 Frank Preve to Scott Rothstein, Bates stamped

16 FP, and I'll just give you the last digits,

17 2616/1.

18 BY MR. CIMO:

19 Q Have you seen this before today?

20 A I have.

21 Q Who are the "good fellas" that you reference?

22 A I didn't.

23 Q Let me rephrase my question. I'm sorry.

24 When Mr. Preve uses the term "good fellows" in

25 the subject, what, if anything, do you know about that

2931b73d-6819-44d5-a58a-692a89b4049b


Page 853

1 use of that phrase at that time?

2 A That was his -- he says "good fellows" where I

3 say "good fellas." That's all.

4 We used -- just so you understand, we used to

5 refer to the hedge funds as, you know, our associates.

6 They were in business with us.

7 Frank would be more proper. He would say the

8 "good fellows," and I would say, "you mean the good

9 fellas, right?"

10 Q And "good fellas" is what? Is that a

11 reference to a movie or -- I mean or a pop culture term?

12 A Yes. It is a reference to organized crime.

13 Q Organized crime.

14 Was there a movie by that title?

15 A There was.


17 BY MR. CIMO:

18 Q Did you see that movie?

19 A I did.

20 Q And when you refer to the term "good fellas"

21 as the hedge funds, did you think about that movie?


23 A I think about the -- I thought about people

24 that I did business with. I mean, it was just -- this

25 is -- it's "good fellas". That's just the way you

2931b73d-6819-44d5-a58a-692a89b4049b


Page 854

1 describe it. He was trying to be tongue-in-cheek about

2 our little group of -- merry band of -- it's Robin Hood

3 and his band of merry men.

4 BY MR. CIMO:

5 Q Did you ever actually tell any of hedge fund

6 personnel that you were dealing with that they were your

7 "good fellas"?

8 A Did I say that to them, no; but I mean --

9 listen, even in the short period of time, you know me,

10 you know me well enough to know that I am a wise ass.

11 So, yes, we had a lot of banter of that type. It's just

12 my general nature. I try to be fun loving.

13 Q Okay. But, therefore, the reference to it

14 wasn't in regard to anything related to organized crime?

15 A Was I saying that there --

16 Q Yes.

17 A No, no, I wasn't saying it.

18 Q Okay. It makes reference to Ari, Gil and

19 Mayer, who -- if you know, who is being referred to

20 there?

21 A Ari Glass, Gil Kalter, and Mark Nordlicht,

22 Mayer.

23 Q And it talks about, "we'll all be there around

24 4:15 to 4:30"; do you recall where "there" was in or

25 about July of 2008?

2931b73d-6819-44d5-a58a-692a89b4049b


Page 855

1 A I don't recall specifically, but it appears to

2 be to my law firm.

3 Q And how often did any one of these gentlemen,

4 or any other gentlemen from the hedge fund, visit your

5 office?

6 A Infrequently.

7 Q And why was it necessary for -- if you know,

8 for these gentlemen to visit your office, when they're

9 basically providing funding, loan -- whatever the term

10 is, to the Banyon entities, but they have no direct

11 agreement with RRA, if you know?

12 A I don't know one way or the other. Sometimes

13 it was due diligence, and sometimes it was just coming

14 over to visit.

15 Q All right. And did anyone at Banyon have a

16 problem that their lender was meeting with -- lender

17 representatives were meeting with you at your law firm

18 without --

19 A No. Now you're getting it now as far as what

20 good fellas is a reference to. It's one -- it's one for

21 all and all for one. We're all in this to make money.

22 Now you are catching on as to what we are

23 talking about.

24 Q Was Preve intended to attend this meeting, as

25 well?

2931b73d-6819-44d5-a58a-692a89b4049b


Page 856

1 A Yes.

2 Q And was there a reason why the meeting is at

3 your office, instead of Banyon's offices, if you know?

4 Why was your law office picked as the location for this

5 particular meeting?

6 A I have no independent recollection of why.

7 Q Did you ever meet at Banyon offices with the

8 hedge-fund personnel?

9 A I recall a meeting over there where maybe Jack

10 was there; but most of the time, the meeting took place

11 in my offices.

12 Q Mr. Preve then talks about a forecast?

13 A Yes.

14 Q What forecast is he referring to, if you know?

15 A Funding forecast.

16 Q Funding means deals that are going to be

17 offered?

18 A Meaning the amount of money we are going to

19 need and the amount of money we can expect coming in.

20 Q If you know, why didn't you just convey that

21 information to Mr. Preve, and then he can convey that

22 information to his lender, instead of you all being

23 together in the same room doing it, if you know?

24 A In reading this, he says he's either going to

25 come over before or after, which means, to me, in

2931b73d-6819-44d5-a58a-692a89b4049b


Page 857

1 reading this now, that he was coming over to meet with

2 me, privately; not necessarily while they were there.

3 Q Okay. Next question is: During 2008, do you

4 have a recollection of actual deals being done with the

5 Banyon entities, if you know, and where the hedge funds

6 were providing the money for the deals?

7 A Time frame, again? I'm sorry.

8 Q During 2008, from and after July of 2008

9 through November of 2008, deals were already happening

10 at this point?

11 A Sure.

12 Q And you have a recollection of the amount of

13 funds at this point through November of 2008?

14 A I don't.

15 Q In terms --

16 A It was a lot of money, but I don't recall the

17 amount.

18 Q In terms of volume, do you have a recollection

19 whether the Banyon entities were providing most of the

20 volume for purposes of the settlements?

21 A From July 2008 to November 2008, the bulk of

22 the Ponzi business went through Banyon.

23 Q And Mr. Von Allmen and these other investors

24 you mentioned before, Mr. Sochet, are these gentlemen

25 that came in 2009, as opposed to 2008?

2931b73d-6819-44d5-a58a-692a89b4049b


Page 858

1 A Sorry. Can you repeat the question?

2 Q Yeah. Mr. Von Allmen, Mr. Sochet, these other

3 investors that you mentioned that had high

4 sophistication levels similar to the funds, equal to or

5 similar to the funds, are these people that came in 2008

6 or 2009?


8 A My recollection is it was sometime in 2009.

9 BY MR. CIMO:

10 Q Okay. Other than these Banyon entity

11 investments, were there any other large players -- not

12 player, I should say large investors -- apart from the

13 Banyon entities funding them?


15 THE WITNESS: Of the same size as them?

16 BY MR. CIMO:

17 Q Yes.

18 A No. I consider the Morses to be fairly large.

19 On number of deals, Barry Lipsitz and Domenick

20 Tonacchio both were doing a bunch of business with us;

21 but nobody else that I can recall at this time.

22 MR. CIMO: I will show you, now, Exhibit

23 129.


25 Exhibit No. 129 for Identification.)

2931b73d-6819-44d5-a58a-692a89b4049b


Page 859

1 BY MR. CIMO:

2 Q Mr. Rothstein, I'm showing you Exhibit 129.

3 It starts with an email from Brian Jedwab to a -- Ben

4 Radinsky.

5 Do you know who Ben Radinsky.

6 A My recollection is he's someone that worked in

7 the back office at one of the hedge funds, but I don't

8 even remember if I -- I think I met him once or twice,

9 but I have no independent recollection.

10 Q And then it has an address and a title for

11 Mr. Jedwab, managing director, Centurion Credit

12 Management. Do you recall seeing that?

13 A Mhm-mhm.

14 Q Do you recall seeing that title and that

15 entity before?

16 A Sure. I've seen that before.

17 Q And that address, 152 West 57th Street, is

18 that the address in New York that you had the initial

19 meeting at?

20 A Yeah. That's the Carnegie building.

21 Q And I notice this is not the same Centurion,

22 by the way, that I showed you in the initial exhibits at

23 the beginning of the deposition that's under that credit

24 agreement.

25 A Yeah.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 860

1 Q Did you know that there were other Centurion

2 entities besides the one that did --

3 A I remember seeing a whole host of -- a variety

4 of different Centurion names, Platinum names; but I

5 don't know if I stopped to think about who they were or

6 what they were doing.

7 Q You see in his email it says

8 [email protected]?

9 A I do.

10 Q Do you recall ever getting any other emails

11 from Mr. Jedwab that had any other prefix in it, besides

12 Centurion?

13 A I don't recall one way or the other. I didn't

14 study his email address.

15 Q Jack Simony, which is in the middle --

16 A Simony.

17 Q Simony, I'm sorry.

18 A That's okay.

19 Q -- this Whitehaven Group, LLC, is that the

20 same Whitehaven that you mentioned before that was doing

21 structured settlements?

22 A Yes, sir.

23 Q And did you know that Whitehaven Group was an

24 entity that Mr. Simony was affiliated with?

25 A Yes.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 861


2 A Jack told me and Mr. Preve told me.

3 Q Okay. I notice the address for Mr. Simony at

4 Whitehaven Group is 350 5th Avenue.

5 Did you ever go to that location?

6 A I went to that location. It's the Empire

7 State Building, but not to his offices.

8 Q And do you know whether Mr. Simony had an

9 office, as well, at 152 West 57th Street?

10 A To my knowledge he did, but I was never in it.

11 Q The document talks about an RRA AGMT; do you

12 know what that is referring to?

13 A RRA agreement.

14 Q Do you know what agreement is being referenced

15 that may have involved Whitehaven Group?

16 A I have no idea.

17 Q Let's now go to Exhibit 129 -- I'm sorry, 130.

18 UNKNOWN SPEAKER: What's the date of that

19 last one, please?

20 MR. CIMO: I'm sorry. This document is

21 dated November 20th, 2008, and it also has a

22 separate email dated October 27, 2008.

23 UNKNOWN SPEAKER: Thank you.

24 MR. CIMO: I'm now going to show you

25 Exhibit No. 130, which is an email dated

2931b73d-6819-44d5-a58a-692a89b4049b


Page 862

1 December 3rd, 2008, Bates stamped Rothstein's

2 940 through 957.

3 (Thereupon, the documents were marked as

4 Trustee's Exhibit No. 130 for identification.)

5 BY MR. CIMO:

6 Q All right. Did you laugh when you saw this

7 document?

8 A I did.

9 Q Why?

10 A Because it has Mr. Preve's alias on it.

11 Q And what is his alias?

12 A G. Steinbeck.

13 Q And do you know why that -- why that was used,

14 that particular alias?

15 A He had told me at one point in time, but I

16 don't remember why; but when he was doing his private

17 funding deals away from Mr. Levin, he used this email

18 address.

19 Q And you see that the suffix of the email

20 address is SFS Funding?

21 A Yes.

22 Q Did you come to learn whether SFS Funding was

23 involved in a deal, a side deal involving Regent?

24 A It was.

25 Q And did you come to learn that Mr. Preve, in

2931b73d-6819-44d5-a58a-692a89b4049b


Page 863

1 fact, was a control person and/or owner of SFS Funding?

2 A It -- to my knowledge, it was Mr. Preve, Mr.

3 Nordlicht and Mr. Huberfeld.

4 Q SFS Funding?

5 A That was my understanding, yes.

6 Q And did you know this before --

7 A Who did I give you, Mr. Preve,

8 Mr. Nordlicht -- Mr. Simony, and Mr. Huberfeld, all in

9 different pieces. That was my understanding, but I

10 would be completely wrong.


12 A From conversations I had with Mr. Preve, Mr.

13 Nordlicht, Mr. Simony.

14 Q Before October of 2009?

15 A Yes, I haven't spoke to any of those people

16 since October of 2009.

17 Q Okay. Now, this -- I asked you earlier

18 what -- what the RRA AGMT meant. This one is entitled

19 "Jack AGMT," and it says, "here is the Whitehaven

20 agreement."

21 A Yes.

22 Q I'm okay with it. We need some clarification

23 on timing issues.

24 Why is Mr. Preve on this alias email sending

25 to you a document regarding Whitehaven Group?

2931b73d-6819-44d5-a58a-692a89b4049b


Page 864


2 A To the best --

3 BY MR. CIMO:

4 Q Go ahead.

5 A To the best of my recollection, we were going

6 to do funding through this SFS deal and Whitehaven was

7 involved in it.

8 Q I am going to rephrase the question regarding

9 the objection.

10 Do you have a recollection, sitting here

11 today, why this document was transmitted to you by Mr.

12 Preve?

13 A Yes.

14 Q And why is that?

15 A Whenever Mr. Preve was doing side deals, he

16 liked me to look at the paperwork, which I did for him.

17 Q And did you know that at that time that that

18 was sent, that Mr. Preve was, in fact, doing side deals

19 without the knowledge of Mr. Levin?

20 A Sure I did.

21 Q You did.

22 And did you also know before this date whether

23 any of the hedge-fund personnel that you testified about

24 were doing side deals, as well, with any other entities?


2931b73d-6819-44d5-a58a-692a89b4049b


Page 865

1 A My recollection is that they were. I'm just a

2 little unsure as to the -- as to the dates, whether it

3 was before or after this date.

4 BY MR. CIMO:

5 Q That's fine.

6 What is your definition of a side deal for the

7 purpose of these questions?

8 A A side deal is what we refer to as a

9 "one-off," and that would be where members of -- members

10 of other entities that were funding to us, that had --

11 where all the members were supposed to be looking out

12 for the interests of each other, where one of those

13 members would drop off; cherry pick a solid, good,

14 high-interest-rate deal and fund it separate and apart,

15 confidentially, from the members of the other

16 organization.

17 Q And how did you know that it was confidential

18 from the members of the other organization? What made

19 you believe that?

20 A Everyone kept telling me not to tell the other

21 person what they were doing.

22 Q So let's talk about, for example, SFS Funding

23 that you say, sitting here today, that Mr. Preve was in

24 with Mr. Nordlicht, Mr. Simony and Mr. Huberfeld.

25 Is it your testimony, sir, that Mr. Nordlicht,

2931b73d-6819-44d5-a58a-692a89b4049b


Page 866

1 Mr. Simony and Mr. Huberfeld told you that you were not

2 to let the hedge funds know about whatever side deal SFS

3 Funding may have been involved in?


5 A I have to break that down because you have all

6 these people grouped in there.

7 Let's start with Preve.

8 BY MR. CIMO:

9 Q Let's take it back based upon the form

10 objection.

11 I'm just -- I'm not really concerned about

12 Preve; I just want to know, did Mr. Nordlicht ever tell

13 you that he wanted to do something defined as one of

14 your side deals, where his hedge funds would not know

15 about it?

16 A No. Mr. Simony told me, don't discuss this

17 with any anybody.

18 Q Not Mr. Huberfeld?

19 A Mr. Simony told me.

20 Q And not Mr. Huberfeld? You never spoke to Mr.

21 Huberfeld?

22 A I never spoke to Mr. Huberfeld. Mr. Simony

23 told me never discuss this with anyone other than me or

24 Frank.

25 Q And which specific deals do you recollect that

2931b73d-6819-44d5-a58a-692a89b4049b


Page 867

1 Mr. Simony told you not to talk about?

2 A It would have been the SFS/Regent deal. I

3 don't remember other ones there may have been.

4 Actually, I -- I think there were. I don't have a

5 specific recollection.

6 Q And this agreement that's part of Exhibit

7 No. 130, which is an attachment, do you recall seeing

8 this at or about the time this email was transmitted to

9 you?

10 A You know, I don't have a specific recollection

11 of receiving this, as I sit here today; but, again,

12 remember, I've overlooked hundreds of thousands of

13 pages. It says it came to me, so I'm sure it did; and

14 it certainly fits Mr. Preve's model of when he was doing

15 the side deals, sending the documents over to me under

16 this hidden email address for me to take a look at on

17 his behalf.

18 Q And do you know what revisions were to be made

19 to this document, such as that it would be consistent

20 with the subject called "Jack AGMT"?

21 A No, I don't know one way or the other.

22 Q Do you know who was going to be the

23 participant under this loan and optionable litigation

24 agreement?

25 A I can only tell by looking at it but I don't

2931b73d-6819-44d5-a58a-692a89b4049b


Page 868

1 know who actually was putting up the money.

2 Q Understood.

3 Do you recall -- do you recollect -- do you

4 recognize the handwritten comments on the document as

5 being yours or anyone else's?

6 A No, no, those are Frank's.

7 Q And now I'm going to show you Exhibit No. 131.

8 A Sure.



11 MR. CIMO: And for the record, this is

12 defined as RRA Deal G, as "girl," dash 350.

13 It is Bates stamped number SW 13000735, and

14 it's a composite document.

15 For purposes of my questions now, we're

16 just going to cover the first page, and the

17 last page on the composite is SW1300805.

18 BY MR. CIMO:

19 Q You mentioned earlier the Regent side deal,

20 and I ask you if you recognize these to be the deal

21 documents for the Regent side deal?

22 A I do.

23 Q And do you know whether this deal was actually

24 funded?

25 A It was.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 869

1 Q And I want you to look at the bottom portion

2 where it has dates and numbers. Do you know whether

3 those payments were actually made, and if not, which

4 ones were and which ones weren't.

5 A To my recollection, the bulk of them were

6 made. I don't know if we ever finished paying it. I

7 believe part of it may have been delayed. Ultimately, I

8 think we paid the entire thing off.

9 Q And, if you know, sitting here today, did you

10 ever come to learn or understand who the owners and/or

11 control persons were at Regent Capital Partners, LLC?

12 A I ultimately learned that Mr. Huberfeld and

13 Mr. Nordlicht were -- I first learned that Mr. Huberfeld

14 was absolutely involved in it; and then I learned that

15 Mr. Nordlicht either knew about it or was involved in

16 it --

17 Q Thank you.

18 A -- and as I said earlier, Mr. Preve and

19 Mr. Simony.

20 Q Thank you.

21 And is -- am I correct in looking at the first

22 page and then comparing it to the third page, which is a

23 letter, dated December 2nd, 2008, that it was an

24 $11 million investment that would return 22 million?

25 A That's correct. That's what I was talking

2931b73d-6819-44d5-a58a-692a89b4049b


Page 870

1 about in these one-off cherry-pick deals, yes.

2 Q And this is a deal that had a six-month timing

3 period; is that correct, according to page one?

4 A Yes.

5 Q So, is it your testimony, then, that between

6 the first page of this exhibit and page three, which is

7 this letter you sent, that there was going to be an

8 $11-million return on an $11 million investment in six

9 months?


11 Q And this is one of the side deals that a hedge

12 fund -- two of the hedge funds principals did that you

13 were personally involved with?


15 BY MR. CIMO:

16 Q Let me rephrase the question.

17 Did you have personal involvement in this side

18 deal?

19 A I was the person who provided the deal.

20 Q And Banyon entities were not involved in this

21 deal?

22 A Banyon itself, no, just Mr. Preve from Banyon,

23 but in his personal capacity as Mr. Steinbeck.

24 Q As opposed to his individual capacity as Mr.

25 Preve?

2931b73d-6819-44d5-a58a-692a89b4049b


Page 871

1 A Yes.

2 Q We're going to ask you more questions about

3 this later. Then we're going to move on now.

4 Now I'm going to show you Exhibit 132 --

5 A Mr. Cimo, just one thing, I want to make sure

6 that I have clarified and made my answer complete as to

7 side deals.

8 In the same vein as the other side deals,

9 there was a whole series of side deals being done by Ari

10 Glass unbeknownst to his partners with a childhood

11 friend of his Bo Rosenblat.

12 Q And what are the names of entities, if you

13 know, involved in those side deals?

14 A I think it was enter -- Intercoastal or

15 Intracoastal or something of that nature.

16 Q Intracoastal Group?

17 A Yes.

18 (Thereupon, a discussion was held off the

19 record.)

20 BY MR. CIMO:


22 And do you recall the approximate amount of

23 funding in regard to that particular transaction or

24 transactions?

25 A No, I don't remember off the top of my head.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 872


2 BY MR. CIMO:

3 Q Do you know whether there was more than one

4 transaction involving Mr. Glass and this Intracoastal

5 Entity?


7 A There was.

8 BY MR. CIMO:

9 Q Do you recall how many? Was it more than six?

10 A I don't recall. You should have the record

11 someplace. I don't remember the number of deals.

12 Q And do you know whether any of them had double

13 your money in six months, like the Regent transaction?


15 A I think the finest cherry-pick deal I ever

16 offered to them was the Regent deal.

17 BY MR. CIMO:

18 Q When you say "them," who are you referring to?

19 A Well, the -- the way it would work was, Mr.

20 Preve, I suspect, would, behind the scenes, decide with

21 someone he was going to do a deal, apart from Mr. Levin,

22 with somebody. And would ask me directly: I need a

23 cherry deal, a really good deal.

24 And so I would put together a really good

25 deal, because you want to -- when you're running a Ponzi

2931b73d-6819-44d5-a58a-692a89b4049b


Page 873

1 of this magnitude, you want to reward the people that

2 are taking care of you and helping you sustain the Ponzi

3 scheme.

4 Q Thank you.

5 I'm going to show you now Exhibit No. 132, an

6 email dated December 14th, 2008, Bates stamped BLC 56665

7 through 66.



10 BY MR. CIMO:

11 Q What I want to refer your attention to is

12 certain statements made in these emails regarding

13 insurance, and if you could just take a moment and just

14 read the email chain, I would appreciate it.

15 And then I want to direct your attention to

16 the last page where there's an email from you to

17 Mr. Simony.

18 A All right. I'm ready to go.


20 Let's start with the second page, first off,

21 an email dated December 11th, 2008, from you to

22 Mr. Simony.

23 Do you recall sending this at or about that

24 time?

25 A I do.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 874

1 Q And what are these sample policies that are

2 referenced in your email?

3 A The sample crime fraud policies.

4 Q And why are sample crime fraud policies being

5 mentioned on or about December of 2008, which is several

6 months after the hedge fund started investing?

7 A Hedge funds had told us that if they don't get

8 crime fraud policies, that they were going to not be

9 able to do any further funding with us at all.

10 Q Was there any discussion about whether crime

11 fraud policies were, in fact, express conditions of

12 their agreements with the Banyon entities?

13 A It wasn't discussed with me, no.

14 Q Was there any question by you or questions by

15 you why this was being asked for now in December of

16 2008?


18 A Mr. Preve and I discussed it, yes.

19 BY MR. CIMO:

20 Q What did you discuss with Mr. Preve about

21 that?

22 A We discussed the fact that they were obviously

23 getting hinked up with the entire transaction because

24 they had already slowed down massive amounts of funding

25 and now were asking for a crime fraud policy, and

2931b73d-6819-44d5-a58a-692a89b4049b


Page 875

1 ultimately it was decided I would just make an attempt

2 to get it. And Mr. Preve was, supposedly, with Mr.

3 Levin, going to try to get one, also.

4 Q When you say "they," are you talking about the

5 hedge funds?

6 A I am.

7 Q Did you or Mr. Preve ever ask the hedge funds

8 what was causing them to -- what was the word you used,

9 "hinked"?

10 A Hinked up.

11 Q Hinked up.

12 Did you or Mr. Preve ever ask them,

13 specifically, what was causing them to being hinked up?

14 A No.

15 Q Was there anything --

16 A I didn't. I don't know what Mr. Preve did.

17 Q Was there anything going on at this time, if

18 you recall, regarding Mr. Madoff or other Ponzi

19 schemes --


21 BY MR. CIMO:

22 Q -- if you know, any recollection on what's

23 going on at that time in the media?

24 A I recall that the entire insurance thing

25 started to come up. When Madoff had hit the scene,

2931b73d-6819-44d5-a58a-692a89b4049b


Page 876

1 Dreier had hit the seen, Petters had hit the scene,

2 there was all kinds of Ponzi stuff going on, and people

3 were getting, to use my phrase, hinked up, nervous,

4 edgy.

5 Q Before this insurance issue came to light in

6 December of 2008 --


8 MR. CIMO: What's wrong with that?

9 UNKNOWN SPEAKER: Saying that before it

10 came to light, there is no predicate that that

11 is when it first came to light, in December

12 2008.

13 BY MR. CIMO:

14 Q When did the first issue, to your

15 recollection, first come to light?

16 A My recollection is that they asked me sometime

17 before these emails to get this policy --

18 Q Yes?

19 A -- but I didn't.

20 Q Oh, okay.

21 Do you recall how much before they asked you,

22 before December 11th of 2008?

23 A It wouldn't have been much before. I really

24 have no specific recollection.

25 Q Let me ask you: Did they mention it at that

2931b73d-6819-44d5-a58a-692a89b4049b


Page 877

1 meeting that you had with them, the first initial

2 meeting? Did they mention it back then?

3 A No, sir.

4 Q Did they mention it in June of 2008, to your

5 recollection?

6 A To my recollection, no, sir.

7 Q Did they mention it in July of 2008 to, your

8 recollection?


10 A I don't have an independent recollection;

11 towards the latter half of the year, sometime around

12 when all of the things started hitting the media about

13 people losing money to Ponzi schemes, my best

14 recollection is that's when they started talking about

15 it.

16 BY MR. CIMO:

17 Q Now, what reaction did you have, if any, when

18 this insurance issue came up, and what impact did it

19 have on your ongoing Ponzi scheme, where the word crime

20 insurance is mentioned?

21 A I had a discussion with Mr. Preve about

22 whether or not he thought we could actually qualify for

23 this type of insurance.

24 The concern that I express -- the concern that

25 I expressed to Mr. Preve was the level of diligence that

2931b73d-6819-44d5-a58a-692a89b4049b


Page 878

1 an insurance company might require in order to attempt

2 to get this type of insurance.

3 We didn't think it was going to be

4 problematic. We also really didn't think that I

5 qualified for it, not the levels of insurance that they

6 wanted.

7 So what I did was I called my insurance agency

8 and got some sample policies. I sent the samples over.

9 I, ultimately, of course, never got crime

10 fraud insurance.

11 Q When you say "I," you mean the Rothstein firm?

12 A Yeah, the Rothstein firm.

13 I don't even think we actually did a

14 full-blown, formal application for crime fraud

15 insurance. I think that was all done by Banyon for

16 themselves.

17 Q Thank you.

18 I now want to show you Exhibit No. 133.



21 MR. CIMO: PCL 56811 through 56851 email

22 chain, December 23rd, 2008.

23 BY MR. CIMO:

24 Q I would like to start off with the email from

25 Mr. Scott Rothstein on the second page to Mr. Simony,

2931b73d-6819-44d5-a58a-692a89b4049b


Page 879

1 with a copy to Mr. Preve -- Simony, I'm sorry, I don't

2 mean to say Simony. It has a different context.

3 UNKNOWN SPEAKER: In the record it's the

4 same. So...

5 BY MR. CIMO:

6 Q Mr. Rothstein, do you recall this email to

7 Mr. Simony?

8 A Just give me one second.

9 I do.

10 Q Okay. Why did you send this email to

11 Mr. Simony in or about December of 2008?

12 A Brian Jedwab was conducting enhanced due

13 diligence on behalf of the hedge funds.

14 Q How did you find out that there was enhanced

15 due diligence being conducted?

16 A Jack Simony told me.

17 Q And what relationship, if any, did it have to

18 the insurance policy request?

19 A I don't recall.

20 Q What relationship did it have, if any, to the

21 Dreier and these other things hitting the media in or

22 about this time?


24 BY MR. CIMO:

25 Q If you know?

2931b73d-6819-44d5-a58a-692a89b4049b


Page 880

1 A It's not that I don't know. I would be

2 assuming to tell you that. I don't know what was in

3 their heads.

4 I can assume --

5 Q No, no. Don't assume. No.

6 A I mean, I don't know. I don't know. I know

7 that they were doing enhanced due diligence.

8 In a time-line fashion I can tell you it was

9 subsequent to all of these various Madoff, Dreier,

10 Petters hitting the newspaper.

11 Q What was wrong with the initial due diligence

12 that it was done?


14 A You would have to ask them.

15 BY MR. CIMO:

16 Q What did you learn, if anything, about what

17 was missed with the initial due diligence that was

18 done --


20 BY MR. CIMO:

21 Q -- in or about the spring of 2008?


23 A Again, that's -- you're asking me a very broad

24 question.

25

2931b73d-6819-44d5-a58a-692a89b4049b


Page 881

1 BY MR. CIMO:

2 Q I am just asking you what you know. What did

3 you learn, if anything?


5 A Again, here's the problem with the question:

6 You're asking me what they missed. Obviously, they

7 missed a Ponzi scheme.

8 BY MR. CIMO:

9 Q No. Please understand, my question is focused

10 on what were you told or what did you learn that was

11 being done as part of the enhanced due diligence?

12 A I have that question.

13 Q Thank you.

14 A They wanted to be able to substantiate deal

15 flow.

16 Q Did anyone explain to you why it was important

17 to substantiate deal flow in December 2008, as opposed

18 to any other month?

19 A Yes. Mr. Preve told me that Mr. Jedwab had

20 told him and Mr. Simony had told him that Brian and Gil

21 Kalter had significant concerns about the shear

22 magnitude of the number of cases that we could possibly

23 be bringing into our law firm and ultimately handle

24 them, that it seemed -- the word they used was "absurd."

25 Q And then why do you have this paragraph one in

2931b73d-6819-44d5-a58a-692a89b4049b


Page 882

1 here which explains, apparently, your understanding of

2 Florida law regarding settlement amounts being entered

3 into trust? Why is that in this first paragraph of your

4 email to Mr. Simony?

5 A Just give me a minute to read it again.

6 In -- in examining the records, the financial

7 records and the timing of when we got our money, we were

8 requesting deals to be funded before we had paperwork to

9 send them.

10 We would from time to time say we already had

11 the money in house. They then asked at some point in

12 time --

13 Q "They" being who?

14 A The hedge funds. I'm sorry.

15 The hedge funds would then ask how the heck do

16 you have the money in house; there is no paperwork yet?

17 I came up with this explanation, you know, in

18 talking to Mr. Preve, that the way we had money in house

19 ahead is that just our agreement at mediation settlement

20 conference was enough to enforce it and they wanted to

21 pay the money as quickly as possible to be able to say

22 they had an enforceable settlement agreement.

23 Q But you're saying in your email that Florida

24 law provides this, right? You're saying this is under

25 Florida law?

2931b73d-6819-44d5-a58a-692a89b4049b


Page 883

1 A Yes.

2 Q Okay. If you know, what was discussed, or, if

3 you recall -- with them as to why they're asking you

4 what Florida law provides?



7 BY MR. CIMO:

8 Q Did they think you had some special gift about

9 what Florida law provided?


11 BY MR. CIMO:

12 Q I'm am just asking.

13 Was it discussed why they were asking you?

14 A It was not discussed why they were asking me,

15 except that they asked, how are we possibly getting

16 these millions of dollars ahead of time, why would the

17 defendants send me all that money without having any

18 paper?

19 Q Is your explanation of Florida law accurate?

20 A I don't know one way or the other. I made up

21 the paragraph. I did no research; I just started

22 writing.

23 Q So did Mr. Simony ever contact you, or anyone

24 from the hedge funds contact you, and say, hey, you

25 know, that December 22nd, 2008, email didn't accurately

2931b73d-6819-44d5-a58a-692a89b4049b


Page 884

1 set forth Florida law?


3 A No.

4 BY MR. CIMO:

5 Q Did anybody ever follow up with you from the

6 hedge funds, at all, about what Florida law provided?

7 A Not to my recollection.

8 Q Did anyone ever say to you, at all, at any

9 time during the Ponzi scheme, from the hedge funds, that

10 any aspect of it related to Florida law was not

11 consistent with their understanding of Florida law?


13 A No.

14 BY MR. CIMO:

15 Q Okay. Let me just ask another question.

16 What discussions were there, if any, about

17 Florida law with the hedge funds where they told you

18 what they thought Florida law provided?

19 ALL PRESENT: Objection to the firm.

20 A From time to time they would tell me --

21 especially Jim Kalter and Brian Jedwab, because they --

22 my recollection is they were lawyers, they would tell me

23 what their understanding of the law was; and if it

24 matched what I wanted the law to be, I would say they

25 were correct.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 885

1 And if it conflicted with what I wanted and

2 needed the law to be for the purpose of the Ponzi

3 scheme, I would simply tell them they were wrong. The

4 conversations ended at that point in time.

5 BY MR. CIMO:

6 Q Did the hedge funds ever hire the RRA firm as

7 its counsel?

8 A No.

9 Q And with that -- with those responses that you

10 would give where you would disagree or agree, did anyone

11 ever come back to you from the hedge funds and correct

12 you on Florida law?


14 A I have no recollection of them correcting me.

15 I have recollection of one or two occasions where they

16 questioned me a second time, where I then made it

17 abundantly clear that this is what the law was and they

18 left us alone. "They" meaning the hedge funds.

19 BY MR. CIMO:

20 Q Did you ever receive a phone call or an email

21 or any communication from a Florida lawyer of high

22 stature, asking you -- having a discussion with you

23 about Florida law?


25 A I don't --

2931b73d-6819-44d5-a58a-692a89b4049b


Page 886

1 BY MR. CIMO:

2 Q I'll --

3 A I don't recall them hiring a Florida lawyer to

4 talk to me, no, sir.

5 Q Do you recall any law firm, any law firm

6 located anywhere in the world, ever contacting you on

7 behalf of the hedge funds, before October of 2009, that

8 had any discussion with you about any law?


10 A Troutman and Sanders may have. They may have;

11 but, again, understand, for whatever reason, any time I

12 explained what Florida law was, other than a couple of

13 follow-up questions, that was it. It was a --

14 BY MR. CIMO:

15 Q Okay.

16 A -- the gospel according to Scott.

17 Q Thank you.

18 Let's go now to the next page of your email,

19 which we'll call paragraph two; and you say, "firms that

20 refer us employment cases," and you list Joseph Slama,

21 S-L-A-M-A -- is that the correct pronunciation?

22 A Yes.

23 Q -- from Krupnick Campbell?

24 A Yes.

25 Q Is that a well-respected firm?

2931b73d-6819-44d5-a58a-692a89b4049b


Page 887

1 A Very.


3 BY MR. CIMO:

4 Q What opinion do you have, if any, about the

5 respectability of the Krupnick Campbell firm?


7 A I thought they were an excellent and

8 professional personal injury law firm.

9 BY MR. CIMO:

10 Q Not -- not a firm that sticks their name on a

11 park bench or a bench by the side of the road?


13 BY MR. CIMO:

14 Q Let me rephrase the question.

15 Have you ever seen in South Florida the

16 Krupnick Campbell firm advertise on a bench?

17 A No.

18 Q Oh, really.

19 Okay. And what did Mr. Simony tell you about

20 what his discussion was with Mr. Slama?


22 A I -- I don't believe Mr. Simony ever spoke to

23 Mr. Slama. I don't recall anyone ever speaking to

24 Mr. Slama?


2931b73d-6819-44d5-a58a-692a89b4049b


Page 888

1 BY MR. CIMO:

2 Q Do you know why not?

3 A Yes.

4 Q Why? Why not?

5 A Because what had ultimately happened was when

6 they were doing their enhanced due diligence -- I think

7 I described this yesterday, but let me go through it to

8 make sure we're clear.

9 When they were doing their enhanced due

10 diligence regarding deal flow, I immediately sent out an

11 email to my entire firm saying, I need to, you know, get

12 people who are going to say nice things about us in our

13 employment business, anybody that you have that will say

14 good things about us, about referring us cases and that

15 the results are favorable, let me know.

16 We went back and forth a little bit.

17 Originally it was going to be a set group of

18 questions I was going to ask. A couple of the lawyers

19 responded. I can see here from Slama and Bob Kelley and

20 Schlesinger that it looks like they called --

21 Q Shelly Schlesinger?

22 A Shelly Schlesinger.

23 Q Is that a respectable firm to your knowledge?


25 A Yes.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 889

1 That those three came from Mr. Adler because

2 he was very close to all those people.

3 But, in any event --

4 BY MR. CIMO:

5 Q Go ahead.

6 A -- Mr. Jedwab then decided that he's not going

7 to ask just my questions, that he wanted to ask a

8 broader base. He wanted to be able to have a

9 conversation with them.

10 Obviously, Mr. Preve and I could not have that

11 happen. No one involved in the Ponzi scheme could have

12 that happen, because that could create a real problem

13 for us with these people, since they did not -- they

14 would not be able to substantiate the deal flow that we

15 had.

16 So we went into phase two of the response to

17 their enhanced due diligence, which was this. I went to

18 Russ Adler, who had been screaming to become involved

19 deeper in what we were doing; and I told him he was

20 going to have his chance.

21 I said, this is -- I explained to him what was

22 going on, and I told him that I needed several firms

23 that would lie for us, specifically, about referring us

24 a substantial amount of cases that were worth tens of

25 millions of dollars and that we were paying these firms

2931b73d-6819-44d5-a58a-692a89b4049b


Page 890

1 significant amounts in the millions of dollars of

2 referral fees.

3 Q For the purposes of this deposition, can we

4 refer to those firms as the park-bench firms?


6 BY MR. CIMO:

7 Q I know, for the record, you're smiling. Why

8 are you smiling?

9 A Because the way you're saying that is funny,

10 especially because Steve Rossi had a park-bench ad.

11 Q Okay. Who was -- what's Steve Rossi's

12 relationship to this scam that you did with Mr. Adler

13 about these other three lawyers?


15 BY MR. CIMO:

16 Q Mr. Rothstein, do you agree this was a scam to

17 have three lawyers that were supposedly going to say

18 that they were giving large amounts of business to your

19 firm?

20 A Yes.

21 Q Okay. Am I wrong in characterizing it as a

22 scam?


24 A No. We were asking them to lie for us.

25

2931b73d-6819-44d5-a58a-692a89b4049b


Page 891

1 BY MR. CIMO:

2 Q Okay. So, Rossi did advertise on a park

3 bench, and he's one of the three lawyers that Mr. Adler

4 was going to get to talk about how great your firm is,

5 right?

6 A Yes.

7 Q Correct.

8 Okay. Did the other two get put on park

9 benches, too, or just Mr. Rossi?


11 BY MR. CIMO:

12 Q If you know?

13 A I don't recall seeing Mr. Herskowitz's name --

14 Q Okay.

15 A -- I'm sorry, on a park bench or the Koppel

16 Bates.

17 Q We will call them the one-third park bench.


19 Mischaracterization.

20 BY MR. CIMO:

21 Q I tell you what. In order to get past the

22 objection, I'll call them the other firms; is that okay,

23 Mr. Rothstein?

24 A Yes.

25 And we need to clarify, just the nature of

2931b73d-6819-44d5-a58a-692a89b4049b


Page 892

1 this is, to make sure this is good, Mr. Nurik has

2 clarified that these are bus benches.

3 Q Park benches, I'm so sorry.

4 MR. CIMO: Let the record reflect they

5 should be bus benches.

6 BY MR. CIMO:

7 Q What I'm going to do is, to avoid any

8 argumentative nature, I'm going to refer to them as

9 other firms. Okay?

10 A I'm sorry. I'm not hearing anything you're

11 saying right now. Just give me one second. This is

12 disrupting my train of thought.

13 Q I'm going to refer to these as the other

14 firms.

15 A You know this is such a sensitive topic with

16 lawyers, those benches, so let's just refer to them as

17 the firms given to me by Adler, and then I'll know what

18 you are talking about.

19 Q I'll call them the Adler firms; is that

20 acceptable?

21 A Yes. The Adler firms were the Rossi Firm,

22 Steve Rossi's firm, and the Herskowitz Firm.

23 And the Koppel Bates firm -- the Koppel Bates

24 firm was a firm that I brought in to help us with the

25 scam.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 893

1 Q Thank you.

2 But if you can just explain to me how these

3 Adler firms, I'm going to say the one that you referred

4 to as part of the Adler firms, how did the Adler firms

5 compare to the other three firms of Krupnick and

6 Campbell; Robert Kelley from Shelly Schlesinger's firm;

7 and Fisher and Phillips, in terms of stature and

8 reputation?


10 A There is no comparison. You're talking about

11 the Krupnick Campbell firm; the Schlesinger firm; Bob

12 Kelley's firm. Bob used to be with Shelly Schlesinger.

13 You're talking about the cream of the crop of personal

14 injury law firms.

15 BY MR. CIMO:

16 Q But you did send an email, dated

17 December 22nd, 2008, you did send this email, to

18 Mr. Simony?

19 A Yes.

20 Q You sent it to him, and do you know if he got

21 it?


23 A Yes, he got it.

24 BY MR. CIMO:

25 Q He got it, and the email expressly says,

2931b73d-6819-44d5-a58a-692a89b4049b


Page 894

1 quote, you are hereby authorized to contact the

2 following individuals at the following firms and inquire

3 as to the following," and then it has A and B. And it

4 lists Krupnick Campbell, Robert Kelley, Shelly

5 Schlesinger's firm and then Fisher and Phillips.

6 Is it your testimony that you understand

7 Mr. Simony or no one from the funds ever spoke to these

8 three firms?

9 ALL PRESENT: Objection to form and

10 mischaracterization.

11 A No, they did not speak to them because they

12 wanted to do a different level of due diligence, and we

13 could not have them asking these people the type of

14 questions that they were going to ask. We needed to

15 have them go to people who were in our pocket.

16 BY MR. CIMO:

17 Q I understand that's your answer; but what I'm

18 trying to understand is, even though you gave them the

19 names of three other firms, the Adler firms, you had

20 given them authority in this email to talk to these

21 other three firms, correct?

22 A I did.

23 Q Okay. And what I just want to find out is,

24 not what you decided or what you thought was

25 appropriate, I just want to know, did you ever come to

2931b73d-6819-44d5-a58a-692a89b4049b


Page 895

1 learn at any time that there was any attempt to talk to

2 the Schlesinger firm or the other two firms that were

3 mentioned in your December 2008 email?

4 ALL PRESENT: Objection to form,

5 misleading.

6 A To my knowledge, no.

7 BY MR. CIMO:

8 Q Am I misleading you by asking this question?

9 Am I mischaracterizing your testimony in any way?

10 A You're not misleading me, no.

11 Q Okay. And how do you know that these three

12 firms were not contacted by the hedge funds?

13 A I don't know for certain that they weren't

14 contacted.

15 Q Okay.

16 A To my knowledge, they were not contacted.

17 Q And how do you know that the Adler firms that

18 were recommended were contacted or not?

19 A I was with them.

20 Q You were with them, meaning the hedge fund

21 representatives, when you visited the other Adler firms?

22 A I brought the hedge fund representatives,

23 Mr. Jedwab and Mr. Glass, to the other firms, the two

24 that Mr. Adler set up and the one that I set up with

25 Mr. Adler's assistance.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 896

1 Q Did Mr. Simony ever ask you why you referred

2 these three firms, initially, in December 22, 2008, and

3 then crossed them off the list and then referred three

4 other firms?

5 A Did Mr. Simony ask me that?

6 Q Yes.

7 A No, Mr. Simony couldn't have cared less.

8 Q Why not?

9 A Because Mr. Simony just wanted to get back to

10 business as usual. That's what made Jack, Jack.

11 Q And what role did the Adler firm

12 recommendations play in allowing, quote, business to go

13 back to usual, if any?

14 A I don't think business ever went completely

15 back to usual with the hedge funds. We never did real

16 significant business with them afterwards.

17 But it satisfied the people -- I know it

18 provided Ari Glass with a significant level of comfort

19 after he got to speak to those people. He had told me

20 that it made things much more comfortable for him.

21 Q Do you know whether Ari Glass was ever

22 apprised of the fact that three other law firms had been

23 proposed to Mr. Simony, other than the Adler firms?

24 A I have no way of knowing one way or the other.

25 Q Let me show you Exhibit No. 134.

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Page 897



3 THE WITNESS: Do you want me to read the

4 entire email?

5 BY MR. CIMO:

6 Q Please just refresh your recollection very

7 quickly.

8 First of all, this email is dated December 25,

9 correct, Christmas day, 2008, from you to Mr. Jedwab, to

10 Mr. Simony with a copy to Mr. Preve and Mr. Levin --

11 A For my comfort level, let me read the entire

12 email, because it's rather long and detailed.

13 Q Okay.

14 A Okay.

15 Q Do you recall this email?

16 A I do.

17 Q Why did you send it?

18 A I was making a very strong attempt to push the

19 hedge funds back.

20 Q Back to where?

21 A Out of my way.

22 Q When you say out of your way, what did you

23 mean?

24 A The continued requests by Mr. Jedwab, with

25 regard to enhanced due diligence, I mean, were creating

2931b73d-6819-44d5-a58a-692a89b4049b


Page 898

1 a problem for myself, Ms. Villegas, Mr. Rosenfeldt. We

2 were talking about it. They were digging their noses in

3 too deep as far as we were concerned. They kept asking

4 for new things.

5 And what I had learned over the term of this

6 Ponzi scheme was, the best way to get people in line, to

7 go the direction you want them to go, is to push back

8 and -- just to push back on what they're doing,

9 utilizing the things that, to the best of your ability,

10 make sense to them as to what they were attempting to

11 do.

12 But we were pushing back at them to try to get

13 them to come to some lower level of due diligence.

14 Ultimately, I was simply trying to get them to fund

15 again.

16 Q And how long had it been since they had

17 stopped funding?


19 A I don't recall.

20 BY MR. CIMO:

21 Q Did there come a point where they either

22 stopped or slowed down funding?

23 A This was around the time when it was stopping,

24 and by reading this email, I recall that they were

25 telling us they weren't going to fund anything in

2931b73d-6819-44d5-a58a-692a89b4049b


Page 899

1 December.

2 Q Do you have a recollection whether the

3 decision to either slow down or stop funding was around

4 the same time that this Regent side deal that you

5 testified about was being done?

6 A Yeah, it was around that time.

7 Q Did you ever have a discussion with anyone

8 from the hedge funds about why -- the ones involved in

9 Regent, as to why their hedge funds didn't want to fund

10 anymore, but they were glad to do a side deal with you

11 where they doubled the money in six months?


13 A Yes.

14 BY MR. CIMO:

15 Q And what did you discuss?

16 A There had actually been discussions all along

17 our relationship once we became friendly, and that was

18 there were really two different factions involved.

19 There actually should be an email some place

20 from Mr. Preve where we are discussing the factions,

21 that I think Simony was involved in those conversations,

22 also.

23 What I came to learn, actually through

24 Mr. Simony and Mr. Nordlicht, was that we had the Brian

25 faction, with Gil, Ari, who wanted to do, for example, a

2931b73d-6819-44d5-a58a-692a89b4049b


Page 900

1 $50-million line first and then ease into everything.

2 And then we had the Nordlicht, Huberfeld,

3 Glass -- I mean, Nordlicht, Huberfeld, Simony faction

4 that wanted to go to $150 million and beyond right away.

5 It was full steam ahead.

6 That is the way it pretty much was the entire

7 time we did business. It's actually what gave Mr. Preve

8 and I some peace of mind, even during the enhanced due

9 diligence, because, obviously, we were involved in a

10 massive crime. When people are trying to stick their

11 noses into your business, that will, to use my term, get

12 you hinked up. Mr. Preve and I were both concerned

13 about that, as was Mr. Rosenfeldt.

14 What ultimately happened was when we learned

15 that other people, people in control of the hedge funds,

16 still wanted to do business with us on the side, we

17 realized that it was more just trying to pacify the

18 Jedwab, Kalter, group from the hedge fund.

19 Q Let me show you --

20 A Still needed to pacify them, but it was --

21 there were clearly two different groups of people in

22 there: people that were very concerned and people that

23 were not.

24 Q Thank you.

25 Let me show you Exhibit 135.

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Page 901



3 MR. CIMO: It's a declaration of

4 Mr. Gabriel Hertzberg, court document number

5 144, case number 10-3802-RBR.

6 BY MR. CIMO:

7 Q I'm going to turn your attention to the

8 exhibits, in particular, exhibit B, as in "boy," and

9 I'll represent to you that in this declaration,

10 Mr. Hertzberg --

11 MR. NURIK: Could you give him a minute

12 to read the document?

13 MR. CIMO: Yes. I am just saying it for

14 the record. Please read it.

15 Under penalty of perjury, he states

16 Exhibit B is a true and correct copy of a due

17 diligence memoranda, prepared by Brian Jedwab

18 in 2009.

19 BY MR. CIMO:

20 Q And I don't want you to spend a lot of time

21 reading it; it's very detailed. I just wanted to see if

22 you saw the three-page memo before today?

23 A The three-page memo, that's --

24 MR. NURIK: You are talking about which

25 exhibit?

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Page 902

1 MR. CIMO: Exhibit B, as in "boy."

2 BY MR. CIMO:

3 Q My first question is, have you seen this

4 exhibit before today, before you read it?

5 A I have.

6 Q Had you seen this exhibit before October of

7 2009, before you went to be incarcerated?

8 A There was -- this doesn't have a date on it of

9 when it was prepared, but there was a due diligence

10 report.

11 Q Separate from this?

12 A See, I don't know whether it was this one or

13 not. Let me just -- let me tell you what I recall.

14 There was a due diligence report that was

15 internal, a copy of which was provided to Mr. Preve,

16 which he provided to me.

17 It looks like this. This looks like the one;

18 but without a date on it, seeing what date it was

19 prepared, it's very difficult for me to recall at this

20 time.

21 But I have definitely seen this before. I

22 recall reading it.

23 Q Does this --

24 A I just can't tell you whether I read it during

25 the process of my cooperation or whether I -- this is

2931b73d-6819-44d5-a58a-692a89b4049b


Page 903

1 actually the privileged internal document that Simony

2 snuck to Preve, which he then gave to me.

3 Q Does this memo accurately describe that there

4 was a visit by Mr. Jedwab to see you, from December 28

5 through December 31st of 2008?

6 A Yes.

7 Q At -- during those days, did you make the

8 visit to those Adler law firms that we spoke about

9 earlier that were the three other law firms that were

10 provided as alternatives to the initial three law firms

11 that were provided?

12 A I did make the visits that day to those three

13 law firms with those gentlemen, yes.

14 Q And under the volume of cases, those meetings

15 with those lawyers, including Mr. Rossi, that you said,

16 you know, sometimes advertises on bus benches, does this

17 accurately describe the fact that there were meetings

18 with you and Mr. Jedwab with these three lawyers, just

19 the paragraph under volume of cases?

20 A Yes.

21 Q Okay. And the next paragraph where it talks

22 about Phillips and -- Fisher and Phillips, was that firm

23 visited, too?

24 A I'm sorry, what about Fisher and Phillips?

25 Q Was Fisher and Phillips, mentioned in the next

2931b73d-6819-44d5-a58a-692a89b4049b


Page 904

1 paragraph, were they also visited?

2 A They were not visited, no.

3 Q They were not.

4 So which law terms were visited?

5 A I took Mr. Jedwab, and I think Mr. Glass was

6 with us for all three, I took them to see Steve Rossi,

7 Mr. Herskowitz and to the Koppel and Bates firm.

8 Q Okay. And why wasn't Fisher and Phillips

9 visited?

10 A Because there's no way that I would have been

11 able to get -- or with Mr. Adler or Mr. -- even,

12 Rosenfeldt, have been able to get Charley Caulkins to

13 lie for us the way we would required.

14 Q As part of that visit from the 28th through

15 the 31st, were there any gentlemen's clubs visited?

16 A I don't recall one way or the other. It's

17 possible, but I have no independent recollection of it.

18 Q And other than those meetings at the law firms

19 and then a reference to a paralegal, Adelita Cabello,

20 C-A-B-E-L-L-O, being met with, do you know whether there

21 was anyone else at the law firm for Rothstein,

22 Rosenfeldt & Adler that was spoken to by Mr. Glass or

23 Mr. Jedwab?

24 A Spoken to, yes. There were meet-and-greets.

25 Due-diligence-wise, I have no recollection of that.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 905

1 Q Now, what was your opinion of this due

2 diligence that's now being done in December, which you

3 have characterized, as -- you said, enhanced diligence?

4 Was that you called this, enhanced due diligence?

5 A Okay. What was the question? I was reading.

6 Q My question was, this enhanced due diligence

7 that is happening in or about December of 2008, what

8 opinion or what conclusion did you reach, if any, as to

9 the adequacy of this enhanced due diligence?


11 A Okay. I'm sorry. Now repeat the question.

12 BY MR. CIMO:

13 Q No, gladly.

14 What opinion did you reach, if any, in regard

15 to the adequacy of the enhanced due diligence that it

16 was now being conducted?

17 A I thought the due diligence, from my

18 standpoint, from a Ponzi standpoint, went well for us;

19 but it was not as enhanced as I was afraid it was going

20 to be. So it went well for us and --

21 Q Okay. What did you specifically observe that

22 you felt led you to the conclusion that it wasn't as

23 enhanced as you thought it was going to be or detailed?

24 A When we were at Mr. Rossi's firm,

25 Mr. Herskowitz's firm, and Koppel and Bates firm, there

2931b73d-6819-44d5-a58a-692a89b4049b


Page 906

1 were things that I was concerned that Mr. Jedwab and/or

2 Mr. Glass might do during the course of this that could

3 have put both myself and my co-conspirators that were

4 assisting as the referring lawyers, in a very difficult

5 position, and none of these those things were done.

6 Q Did you ever use the term "going through the

7 motions"?

8 A I probably did. That's -- to ask me if I ever

9 used that phrase "going through the motions," yeah, I

10 probably did.

11 Q Was there anything that you observed when the

12 lawyers were met with that just made you believe one way

13 or the other, if at all, that the due diligence was more

14 of a necessity that had to be gone through, as opposed

15 to something that was really trying to delve into the

16 true relationship between these three law firms and the

17 Rothstein Rosenfeldt & Adler firm?


19 A Yes.

20 BY MR. CIMO:

21 Q What's that?

22 A Okay. While we were there, before we went,

23 okay, you have to understand my frame of mind, when

24 we're going there, obviously I'm somewhat panic-stricken

25 because this is a major undertaking. We've got, one,

2931b73d-6819-44d5-a58a-692a89b4049b


Page 907

1 two, three -- three or four other lawyers at different

2 firms all having to basically stick to the exact same

3 false script while being questioned by people who, I

4 believed at that time, based upon my conversations with

5 Mr. Jedwab, Mr. Glass, Mr. Simony and Mr. Preve, were

6 going to ask some difficult questions during the course

7 of these meetings.

8 Fortunately for the Ponzi scheme,

9 unfortunately for the hedge funds, they did not go down

10 that road. They confined their questions to how many

11 cases do you accept, what are the size of the cases,

12 what's the frequency, what kind of cases, what kind of

13 practice do you have and the dollar amounts that they

14 received -- how long they knew me, my reputation, that

15 type of thing.

16 They did not appear, to me, to be nearly as

17 attentive as I thought they were going to be; and one of

18 the big tells was, when we went to go see, for example,

19 Mr. Herskowitz -- I had never met Mr. Herskowitz before.

20 If I had, it was in passing. When we walked in his

21 office, I was going in and Mr. Glass and Jedwab were

22 with me, I believe, at least one of them was with me,

23 and we were walking in and Mr. Herskowitz comes up to me

24 and says, it's nice to finally meet you, at which time I

25 almost had a coronary. Because here is a guy who is

2931b73d-6819-44d5-a58a-692a89b4049b


Page 908

1 supposed to be sending me millions of dollars worth of

2 cases.

3 Q Millions or tens of millions?

4 A Tens of millions, yes, a lot of cases, and he

5 says, nice to finally meet you, and I was like -- and I

6 said, good to see you again, you know.

7 I tried to recover.

8 Now, had they been paying attention, that

9 could have caused a problem.

10 In the Rossi office, they started to ask him

11 questions about, you know, the type of practice, and the

12 fact that he was a criminal defense lawyer, primarily,

13 and where, these other cases, would he come up with.

14 And they never followed up on it.

15 There were a lot of things that I had expected

16 them to do that they never done -- they never did.

17 For example, asking to see -- without looking

18 at the names, can you just show us a case list of all

19 the cases. I expected them to say something like that.

20 They never did.

21 Unfortunately for me, I only expected them say

22 it as I was driving there. I actually started to panic

23 about them asking for some kind of documentation.

24 But they never did. So...

25 Q Had you already reached the conclusion that

2931b73d-6819-44d5-a58a-692a89b4049b


Page 909

1 Mr. Glass was a player -- an in-and-out player when this

2 happened?


4 A I did. I -- I more came to that conclusion

5 with Mr. Glass when he had his whole one-off side-deal

6 thing going on with Bo Rosenblat. Because here he is

7 bringing a doctor in who's -- who has no knowledge of

8 what we do, knows nothing about investing, and he's

9 going to be the front man for this Intercoastal --

10 whatever the heck the name of it was, his private

11 investment company; and he was going to continue to do

12 these deals with us.

13 So, when someone is willing to go to that

14 level to deceive their partners, you have a player in

15 the works or a player in full bloom. It just depends on

16 who they are.

17 Q Now, the next page of this exhibit talks about

18 follow-up and this is PCL 61985.

19 A Okay.

20 Q It says that Mr. Jedwab visited you on

21 March 4th and 5th, 2009.

22 Do you know whether that, in fact, happened?

23 A I remember him being there; I don't remember

24 the dates.

25 Q You recall discussing Thigpen versus UPS with

2931b73d-6819-44d5-a58a-692a89b4049b


Page 910

1 him?

2 A Yes.

3 Q Was that at a 10 -- 10 -- multi-million --

4 tens-of-millions-of-dollars lawsuit?

5 A I don't remember what it was. It was several

6 million dollars.

7 Q Did it result in a public record that resulted

8 in a judgment or some other verdict?

9 A It did.

10 Q And -- but is that the only case that you

11 showed Mr. Jedwab at that time?

12 A The actual case -- I gave him access --

13 according to this, I gave him access to Fortis, and he

14 looked at Thigpen, and then I showed him the fake

15 videotapes, and I showed him a letter to the Spanish

16 broadcasting company making a claim. But other than

17 that, that would have been it, according to the letter.

18 Q That was the extent of what you had him review

19 during that March 4th/March 5th visit, to your

20 recollection?

21 A Yeah. He was fine with looking at that. So I

22 wasn't offering if he wasn't asking.

23 Q Then it says, "During my discussions with

24 Mr. Michael Szafranski" -- that's the same one as

25 Mr. Kalter's childhood friend?

2931b73d-6819-44d5-a58a-692a89b4049b


Page 911

1 A Yes, sir.

2 Q "I have asked him to look into the parties, to

3 the cases we are funding, to establish their ability to

4 pay, as well as their connection."

5 Did you know that that had happened?

6 A I did.

7 Q Okay. And what did you learn? How did you

8 learn about that?

9 A Mike told me. Michael Szafranski told me.

10 Q And then there's a March 26, 2009, follow-up.

11 Did you play any role in regard to learning

12 about this follow-up where Szafranski verified cases at

13 RRA and you negotiated a purported settlement of them?

14 A No. Mike and I made that up. That never

15 happened.

16 Q But, again, this was something between you and

17 Michael Szafranski. You did not pay any role in giving

18 this information to Mr. Jedwab; it appears Michael

19 Szafranski provided it.

20 A I don't remember whether or not Mr. Jedwab

21 asked me about it subsequently, but it was Mike's job to

22 relay the information, initially, to Mr. Jedwab.

23 Q How did you compared this enhanced due

24 diligence in December 2008 to the initial due diligence

25 that was done at the start of the relationship.

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Page 912

1 ALL PRESENT: Objection. Form.

2 BY MR. CIMO:

3 Q You used the word "limited," I think, at the

4 front end.


6 A It was somewhat enhanced but also it remained

7 limited. It wasn't nearly what Mr. Preve and I thought

8 it was going to be.

9 BY MR. CIMO:

10 Q And that, therefore, enabled you to continue

11 with your Ponzi scheme?


13 Q And had the due diligence been more probative

14 and had it been -- had due diligence, for example, been

15 done on the three law firms that Mr. Adler had referred

16 you to to see the volume of their cases, do you believe

17 it could have been discovered that those firms, in fact,

18 had not provided such --


20 Speculation.

21 A My belief is, yes, it could have been

22 discovered, but I don't know how that would have

23 ultimately affected people at the hedge funds.

24 BY MR. CIMO:

25 Q Let me ask you to follow up on that: What did

2931b73d-6819-44d5-a58a-692a89b4049b


Page 913

1 you learn, if anything, as to what due diligence was

2 done by the hedge funds regarding Mr. Rossi and the

3 other two firms after the meeting happened in December

4 of 2008 -- the meetings happened?

5 A I was never advised one way or the other.

6 Q And did you hear anything at all from the

7 hedge funds, other than doing these meetings with the

8 lawyers, any further questions of your firm about the

9 relationship between your firm and those Adler-related

10 law firms after those meetings in December of 2008.

11 Any follow-up? Anything?

12 A To my recollection, no.

13 MR. CIMO: Let's take a break at this

14 time because I think we're going to streamline

15 our remaining questions.

16 (Thereupon, a recess was taken.)

17 MR. CIMO: Let's go back on.


19 Exhibit 136 for identification.)

20 BY MR. CIMO:

21 Q Mr. Rothstein, take a look at 136, please.

22 Mr. Rothstein, I'm showing you Exhibit 136.

23 Who is the center of the "from 19546072333," if you

24 know.

25 A That's me.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 914

1 Q Okay. Is that a text message, instead of an

2 email?

3 A It is.

4 Q Why did you send this email to Mr. Jedwab in

5 or about March 19th of 2009?

6 A I was trying to push him to give us some

7 money.

8 Q And you talk about "inability to fund old

9 deals has resulted in my receiving a Bar grievance."

10 A Yes.

11 Q What is that about?

12 A That's a lie I created.

13 Q And is this the same -- was the enhanced due

14 diligence already over at this point?

15 A Yes.

16 Q Okay. If the enhanced due diligence was over,

17 do you know why you were having difficulty getting the

18 hedge funds to provide more money?

19 A I don't know why, no.

20 Q Did the hedge funds ever follow up with you in

21 regard to requesting documents after they had completed

22 their enhanced due diligence in December of 2008?

23 A I have no recollection.

24 If they did, it was of no significance. It

25 doesn't stick out in my mind.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 915

1 Q Do you recall Mr. Jedwab taking any notes or

2 Mr. Glass taking any notes while they met with the three

3 attorneys in December 2008, with you?


5 Q Do you know whether there was a request to see

6 any traffic reports regarding hits?

7 A I -- I have no recollection of that.

8 Q Do you know if the hedge funds ever asked you

9 to see the amount of referral fees in the Rothstein

10 firm's records paid to those law firms?

11 A They never asked me that, no.

12 Q Were you asked for any financial data

13 regarding the tens of millions of dollars in cases that

14 were supposedly being given to you by these three law

15 firms?

16 A No, sir.

17 Q And the Bar grievance that you made up, what

18 was the story that you made up regarding the Bar

19 grievance?

20 A It was an ongoing story that we were using to

21 explain why payments were not being made and also to try

22 to get people to fund deals that were involved.

23 We tried to make the hedge funds feel as if

24 they had created a Bar problem for us so that they would

25 pay us.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 916

1 Q Do you know whether the hedge funds were

2 current with the Banyon entities at this time period?


4 A I don't know. I don't think they were, but I

5 don't know.

6 MR. CIMO: Exhibit 137.


8 Trustee's Exhibit 137 for Identification.)

9 BY MR. CIMO:

10 Q Have you seen this before today?

11 A I don't recall seeing this, no.

12 Q Do you recall a meeting in or about April 8th

13 to meet with George to discuss impact of nonfunding on

14 the operations of RRA?

15 A I don't recall this. No.

16 Q Do you recall any meetings about alternatives

17 to dealing with Scott and Centurion?

18 A I -- I don't recall it. No.

19 Q And then, finally, do you recall any meetings

20 to discuss Brian Jedwab or Regent?

21 A I don't.

22 MR. CIMO: Show you now Exhibit 138.



25

2931b73d-6819-44d5-a58a-692a89b4049b


Page 917

1 BY MR. CIMO:

2 Q Mr. Preve makes mention to doing the exact

3 same default letter to Platinum.

4 Do you know what default letter is being

5 referred to in April of 2000 -- April 8th of 2009?

6 A Yes, I do.

7 Q And what letter is that?

8 A We were attempting to get the hedge funds to

9 continue to fund us money. We were also looking for a

10 methodology to avoid paying them everything that we owed

11 them in the amounts and the timing that needed to be --

12 that were required to be paid. So we came up with the

13 idea of saying that they were in default for not

14 funding.

15 Q They were in default, but they didn't have a

16 direct relationship with RRA.

17 A I understand that, but I was dealing with

18 them, anyway, through Mr. Preve.

19 Q Understood.

20 A But we did not have a direct relationship.

21 The only relationship I had with the hedge

22 fund was to try to convince them that these were real,

23 and they were not.

24 Q I understand.

25 So it was really the Banyon entities that were

2931b73d-6819-44d5-a58a-692a89b4049b


Page 918

1 going to claim that the hedge funds were in default?

2 A Correct.

3 Q Then the next sentence says, quote, They are

4 really the same company and we must treat them as such.

5 Do you know what he's referring to?

6 A That's just me outlining what I consider to be

7 a pressure point to try to squeeze the hedge funds.

8 Q And what is the pressure point?

9 A That they're supposed to be separate entities,

10 but to my knowledge, they were really not; they all

11 interacted.

12 Q How did that work to your advantage as part of

13 the Ponzi scheme?

14 A I wanted to try to put them in a position

15 where they would believe that they had something to lose

16 in the course of cutting us off.

17 You have to remember something, that

18 throughout this entire thing, you're still dealing with

19 a hedge fund that is investing in a Ponzi scheme; and to

20 my knowledge, the entity itself doesn't know it's a

21 Ponzi scheme. Okay?

22 So I've got to put pressure on them to try to

23 get them to, for whatever reason, go ahead and fund.

24 You have to always separate out the difference

25 between the entities and what they knew as a whole and

2931b73d-6819-44d5-a58a-692a89b4049b


Page 919

1 what they were intending on doing or not doing or how

2 they would have proceeded or not proceeded based upon

3 their knowledge; and the acts of people associated with

4 but doing things on the side.

5 Q Understood.

6 A Two completely different things.

7 Q And then the reference to "Murray legally

8 cannot be involved in both," do you know what Mr. Preve

9 is referring to there?

10 A No, no. That's me. I'm writing that.

11 Q Okay. I'm sorry.

12 You're reference to Murray being legally

13 involved. I apologize.

14 What's that in reference to?

15 A Okay. To my knowledge, Murray Huberfeld had

16 had significant SCC problems and criminal problems.

17 This is based on conversations with Mr. Nordlicht, Mr.

18 Preve, and Mr. Simony.

19 I was looking for a methodology to pressure --

20 remember: We're very short on money at this point in

21 time for the Ponzi scheme. I am looking for a

22 methodology to squeeze the hedge fund entities into

23 investing.

24 When you are attempting to do that in a

25 criminal enterprise, you do it by finding a pressure

2931b73d-6819-44d5-a58a-692a89b4049b


Page 920

1 point that you believe will put the players who are

2 pushing back, like Mr. Jedwab and them -- what I hoped

3 was, Mr. Huberfeld would find out we were doing this,

4 Mr. Nordlicht, and would tell the others, okay,

5 controlling the entity, that we should do this for these

6 reasons.

7 Okay. You're trying to act on the internal

8 conflicts that are going on. Okay?

9 The legitimate players and the -- what I'll

10 just call the not-so-legitimate players, you're looking

11 for a business pressure point. That's all it is. You

12 just have to separate out who is who in the scheme of

13 things. That's probably the most important thing

14 relative to trying to understand why I came up with the

15 Bar grievance thing. Okay.

16 The Bar grievance thing wasn't for

17 illegitimate players. The Bar grievance thing was for

18 the legitimate players, the people that, had they known

19 it was a Ponzi scheme, would have stopped. You don't

20 need to apply pressure to people who are criminals.

21 Those are people easy to apply pressure to.

22 It's the legitimate side of the hedge funds,

23 the people that were controlling the money flow to me,

24 to us, that were problematic.

25 MR. CIMO: Exhibit Number 139 through

2931b73d-6819-44d5-a58a-692a89b4049b


Page 921

1 146, as a composite.

2 (Thereupon, the documents were marked as

3 Trustee's Exhibit 139-146 for Identification.)

4 BY MR. CIMO:

5 Q Okay. I want you to look at the email that

6 you wrote where you say, "Scott a/k/a Killem hood."

7 You see that?

8 Who is triple ggg?

9 UNKNOWN SPEAKER: Can you put some dates

10 on in these, please?

11 MR. CIMO: Dated April 8th, 2009.

12 A Triple ggg is Frank Preve; that's Guido,

13 Guido, Guido.

14 BY MR. CIMO:

15 Q Let me just get the copy.

16 And what I wanted to ask you specifically

17 about this email is the reference to Murray -- Mayer

18 knowing about the secret deal with Murray, what secret

19 deal is that?

20 A That's the Regent deal.

21 Q Thank you.

22 Look at Exhibit 140.

23 Why did you send this email to Mr. Preve?

24 A Hang on a second.

25 This is Preve to me, actually.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 922

1 Q I'm sorry. Why did Preve send this to you?

2 First of all, do you recall receiving this?

3 A Yes.

4 Just give me one second, please.

5 Okay. This is a perfect example of the

6 dichotomy between the entities and the players.

7 Q And how is that?

8 A Because, to my belief, in all the business

9 dealings I'm dealing with Centurion, Platinum, and Level

10 3, they appear to me to be legitimate and sophisticated

11 hedge funds. They don't appear to me to be involved in

12 any criminal enterprise.

13 Certain people that worked there, to me, had

14 the propensity to do things opposite of -- Ari, for

15 example, he's writing here where he says to me: Ari is

16 a by-the-book kind of guy. He hasn't been through this

17 kind of explosive thing before.

18 And you got to remember, the hedge funds all

19 together, they don't act by one man. They act by, you

20 know, a group decision, at least that's certainly the

21 way it appeared to me. Even though Huberfeld was

22 ultimately calling the shots, I suspect he had all these

23 people, based upon what I had been told, as advisers.

24 So, you have to differentiate between the fact

25 that I consider Jack Simony to be a player and Mark

2931b73d-6819-44d5-a58a-692a89b4049b


Page 923

1 Nordlicht to be a player, from the entity itself. It's

2 not the same thing, and that is what's being set forth.

3 In this, Frank is trying to explain to me,

4 with a copy to George, that, look, you're getting upset

5 with these guys, but you have to remember that the hedge

6 fund is a legitimate business, and just because we have

7 good -- what's called a subterranean relationship with

8 some of the guys, doesn't mean the hedge fund is going

9 to intentionally do anything wrong.

10 Q Look at exhibit --

11 A That's what he's trying to tell me.

12 Q Thank you.

13 Look at Exhibit 141, an email dated -- emails

14 dated April 16th and 17th, 2009.

15 I want you to look at the one from Mr. Levin

16 to Ari Glass.

17 Did you know about this email before seeing it

18 today?

19 A I remember seeing it. I don't remember if I

20 saw it before he sent it.

21 Q And then it talks about a meeting in or about

22 April 16th in the evening.

23 Did you attend this particular meeting? Did

24 it happen?


2931b73d-6819-44d5-a58a-692a89b4049b


Page 924

1 Q There's discussion in here about funding of

2 new cases; did that happen?

3 A I don't believe it -- this looks like just one

4 of George's doing the same thing that I was trying to

5 do, trying to pressure the entity into funding.

6 Q Exhibit 142, email from Mr. Levin to Preve.

7 Have you seen this before today?

8 A Yes.

9 Q Have you ever heard of Mr. -- well, do you

10 know who is referred to as the crazy man?

11 A Yes. It's Ari.

12 Q Ari Glass?

13 A Yes.

14 Q And were there discussions between Mr. Levin

15 and Mr. Preve and yourself about Mr. Glass being the

16 crazy man?

17 A Yes.

18 Q Why?

19 A Because Ari, when he was dealing with the

20 business for the hedge funds, not for the Rosenblatt

21 thing, but for the -- in the Level 3, Centurion,

22 Platinum deals, he was a more by-the-book kind of guy

23 and very explosive emotionally when things did not go by

24 the book.

25 Q Look at Exhibit 143.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 925

1 Mr. Preve emails Mr. Glass about Florida Bar

2 questions.

3 Do you know about this email -- when it was

4 sent in or about April 22nd, 2009?

5 A I don't actually have any independent

6 recollection of seeing this.

7 Q Go to Exhibit 144.

8 I would like you to look at the email from

9 Preve to you dated 4/27/2009, subject: Suggestion.

10 Do you recall this email, and if so, do you

11 recall what was done in regard to it?

12 A I recall the email. I don't recall anything

13 actually being done.

14 Q Go to Exhibit 145.

15 This email from Preve to Mr. Nordlicht talks

16 about restructuring a debt.

17 Do you recall this going on in or about April

18 28th of 2009?

19 A I remember there being conversations between

20 myself and Mr. Preve and Mr. Levin, that they were

21 trying to work out their business relationship with the

22 hedge funds.

23 What was actually done, I don't know one way

24 or the other.

25 Q It talks about $15 million.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 926

1 Do you recall $15 million ever being discussed

2 with you as an amount that the funds wanted -- the hedge

3 funds wanted?

4 A I do. I actually think I received an email

5 from Mr. Nordlicht in that regard or Mr. Simony or both.

6 Q Take a look at Exhibit No. 146.

7 Is this the email you're referring to?

8 It's an email to you to Mr. Nordlicht talking

9 about 15 million.

10 A Well, this is the one that I sent to them, but

11 I believe there's other emails where they were

12 discussing it with me or maybe they sent it to Mr. Preve

13 and I got copied on it.

14 Q Okay. Well, this email -- this is an email

15 you wrote in or about May 6th of 2009?

16 A It is.

17 Q And it talks about the total wire to you

18 against the 15 million owed under the agreement with

19 Banyon to 8.5 million.


21 Q That's how much had actually been wired to

22 that point?

23 A I assume that's correct. I don't know.

24 Q And then it talks about the -- I expect to

25 wire the remainder in the next few days.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 927

1 Do you know whether that occurred?


3 Q You then say, "Given these and all other

4 pendent circumstances, Banyon and my firm expect that

5 you will not issue a default against Banyon."

6 Was a default ultimately issued?

7 A I later came to learn that an internal default

8 had been declared as early as April, but as far as

9 saying we were in default, there were certain people

10 there who constantly say on the phone -- for example,

11 Ari Glass, Brian Jedwab would say, you -- Banyon's in

12 default. You guys are in default. We are going to sue.

13 I mean, I heard they were going to sue a 100

14 times from Ari glass.

15 But as far as actually declaring us in

16 default, no.

17 Q Exhibit --

18 A Not to my knowledge.

19 Q Thank you.



22 BY MR. CIMO:

23 Q Exhibit Number 147, an email from you dated

24 April 29th to Jack Simony.

25 And you say, quote, I have borrowed the

2931b73d-6819-44d5-a58a-692a89b4049b


Page 928

1 15 million do play Platinum this week, end quote.

2 A Yes.

3 Q Did you send this email to Mr. Simony?

4 A I did.

5 Q And why are you telling Mr. Simony that you

6 had borrowed 15 million to pay his hedge fund?

7 A Because I didn't want him to think I was

8 taking the money from any of the internal accounts

9 because I had them under the belief that all the money

10 was locked up by the Florida Bar.

11 Q Did Mr. Simony ask you who you borrowed the

12 money from?

13 A No, sir.

14 Q Did he inquire about what you had to provide

15 in terms of collateral to borrow such money?

16 A No, sir.

17 Q Did you have any discussion at all about where

18 you would come to possess $15 million to give to

19 Platinum?

20 A No, sir.

21 Q Did you have any impression as to whether he

22 cared or not where you got the money from?

23 UNKNOWN SPEAKER: Objection.

24 THE WITNESS: Jack himself?

25

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Page 929

1 BY MR. CIMO:

2 Q Yes.

3 A I think he was concerned.

4 You know what? I'm really guessing as to what

5 he thinks.

6 Q No. Don't guess.

7 A Yeah. I don't know what he thought.

8 Q I am asking you, did you form an opinion or a

9 belief in or about April 29th of 2009, as to whether you

10 thought he cared where you got the 15 million from?


12 THE WITNESS: In his role as a member of

13 the hedge fund or as Jack himself?

14 BY MR. CIMO:

15 Q You can split that answer into the two phases?

16 A I think that the hedge fund itself would have

17 been concerned about where the money came from. I think

18 that Jack just wanted to make sure the hedge fund got

19 money.

20 Q But RRA didn't owe Platinum the money. The

21 Banyon entities owed the money, correct?

22 UNKNOWN SPEAKER: Object. Is there a

23 question?

24 BY MR. CIMO:

25 Q Let me rephrase.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 930

1 Who owed the $15 million to Platinum?


3 BY MR. CIMO:

4 Q If you know.

5 A Technically, Banyon.

6 Q Yes.

7 But why is it your problem to borrow

8 15 million to pay Banyon entities' obligation?

9 A Because I'm controlling the funds.

10 Q When you say "the funds," what funds are you

11 talking about?

12 A The funds that aren't really there.

13 Q The funds that are part of the Ponzi scheme?

14 A Yes.

15 Q Okay. And as a person, do you think that

16 Mr. Simony cared where the 15 million came from?

17 UNKNOWN SPEAKER: Objection. It's been

18 asked twice.

19 BY MR. CIMO:

20 Q As an individual?

21 A As an individual.

22 Q Who you defined as a player.


24 THE WITNESS: I don't -- can I answer?

25

2931b73d-6819-44d5-a58a-692a89b4049b


Page 931

1 BY MR. CIMO:

2 Q Yes.

3 A Jack --

4 MR. SCHERER: Overruled.

5 THE WITNESS: Thank you.

6 A Jack, individually, no. I don't think he

7 cared.

8 I believe the hedge fund itself would have

9 cared, but not Jack particularly.

10 MR. CIMO: Let me show you now Exhibit

11 Number 147 (sic).



14 BY MR. CIMO:

15 Q This is an email dated April 28th, 2009, from

16 you to Scott Preve and it's called Platinum --

17 A Frank Preve.

18 Q From Frank Preve to Scott Rothstein regarding

19 Platinum.

20 And then underneath it, it has Mr. Nordlicht

21 to Preve. No subject.

22 Did you see the one from Mr. Nordlicht to

23 Preve before today?

24 A I have.

25 Q Did you know that 15 million was expected by

2931b73d-6819-44d5-a58a-692a89b4049b


Page 932

1 April 29th?

2 A I did.

3 Q And was that amount paid?

4 A It was not.

5 MR. CIMO: I apologize. This was 148,

6 for the record.

7 Let me show you now Exhibit 149.



10 BY MR. CIMO:

11 Q It's an agreement dated April 30th, 2009.

12 Just going to ask you if you recall seeing

13 this before today?

14 A I do.

15 Q In what context did you see this email?

16 This document. I'm sorry.

17 A I'm sorry?

18 Q In what context did you see this document?

19 A Frank and George had sent it over to me for my

20 input.

21 Q I note that you're not --

22 A It actually has my handwriting on it.

23 Q Oh. That's your handwriting on it.

24 But you did not sign this document nor were

25 you requested to sign it, correct?

2931b73d-6819-44d5-a58a-692a89b4049b


Page 933

1 A No, sir.

2 MR. CIMO: Just give me one moment,

3 please.

4 THE WITNESS: Sure.

5 MR. CIMO: To wrap up.

6 BY MR. CIMO:

7 Q From and after this time period, May 2009,

8 were there any other deals that you know, personal

9 knowledge, sitting here today, that were funded by the

10 three hedge funds?

11 A I don't have any independent recollection of

12 any, no.

13 Q Do you have any recollection whether the hedge

14 funds continued to receive payments either directly

15 through RRA or any of the Banyon entities, despite the

16 fact that there were no further settlements being

17 funded?


19 A My recollection is that we continued to pay

20 them money on a weekly basis, sometimes a couple times a

21 week, to try to pay down the debt. Yes.

22 BY MR. CIMO:

23 Q And at any point before October of 2009, did

24 any of those payments stop, to your knowledge, to the

25 hedge funds?

2931b73d-6819-44d5-a58a-692a89b4049b


Page 934

1 A I don't know what you mean did they stop?

2 Q Meaning that you said weekly.

3 Was there any week that was missed?

4 A There may have been. I mean, when we had

5 funds available to send to them, and when they were --

6 you know, pushing us to send money, we did our best to

7 send it.

8 Q And before October of 2009 when the Ponzi

9 scheme was uncovered, was it your testimony that those

10 payments continued as best they could up until the point

11 that the Ponzi scheme was disclosed?

12 A Yes, they did.

13 Q And that those payments that occurred during

14 that time period were in the multi millions of dollars?


16 A Yes. Yes.

17 BY MR. CIMO:

18 Q They weren't a few hundred thousand, they, in

19 the aggregate, total millions and millions of dollars.


21 A Yes.

22 BY MR. CIMO:

23 Q They were not insubstantial.


25 A They were --

2931b73d-6819-44d5-a58a-692a89b4049b


Page 935

1 BY MR. CIMO:

2 Q They were substantial payments?


4 A Depending on who's looking at is substantial

5 or insubstantial.

6 They were millions of dollars of payments.

7 Q And whose money was used in order to make

8 those payments to the hedge funds between May of 2009

9 and October 2009?

10 A It was likely a combination of Mr. Von

11 Allmen's money; Mr. Sochet's money; Mely Lifshitz's

12 money; Clockwork money; Discala money.

13 The combination of those people.

14 Q These are all other investors in the Ponzi

15 scheme that came about from and after May of 2009?

16 A Yes.

17 Q And were there any monies used from legitimate

18 RRA operations to pay for the hedge funds?


20 A Throughout the Ponzi scheme, to whatever

21 limited extent there were legitimate funds coming into

22 the law firm, those funds were thrown into the same

23 account.

24 So it is possible that some legitimate funds

25 ended up in someone's hands. But you need to

2931b73d-6819-44d5-a58a-692a89b4049b


Page 936

1 understand, if you look at our books and records, I

2 mean, I think we only did 8- or $9 million in that year,

3 total revenues.

4 So it's just by straight math, it's an

5 accounting impossibility for very much of it to have

6 gone to pay these other tens of millions of dollars in

7 moneys being paid out.

8 Q The lawsuit that I filed alleges that the

9 transfers that were made by your law firm to the hedge

10 funds were made with actual intent to hinder, delay or

11 defraud creditors.

12 Did you have any familiarity with the Florida

13 statute on fraudulent transfers while you were a lawyer?

14 A I did.

15 Q Okay. Were the transfers made to the hedge

16 funds, at any time in your -- in your belief, part of a

17 Ponzi scheme intended to hinder creditors?


19 THE WITNESS: To hinder creditors?

20 BY MR. CIMO:

21 Q Yes. Hinder them.

22 A No. The money was paid to pay creditors.

23 Q No. I'm talking about when you're making --

24 when you're taking other people's money as part of the

25 Ponzi scheme and then you're transferring it to the

2931b73d-6819-44d5-a58a-692a89b4049b


Page 937

1 hedge funds, would you say that those payments were made

2 as part of your Ponzi scheme to hinder creditors?


4 A You're asking -- that question seems to be, to

5 me, to be so many questions boiled into one.

6 Let me break it down for you and then you can

7 ask me a follow up.

8 Let me see it can I respond.

9 BY MR. CIMO:

10 Q Go ahead.

11 A In the Ponzi scheme with the hedge funds,

12 Level 3, Centurion, Platinum, we were making payments to

13 those hedge funds for fear that the legitimate portion

14 of those hedge funds, the victim portion of the hedge

15 funds, okay, would not go to the authorities in any

16 form. Okay?

17 It wasn't that we were sitting here going,

18 let's hinder our creditors.

19 We were paying Ponzi first, because at the end

20 of the day, you got all these legitimate investors in

21 the hedge funds who are victims.

22 Those people, not getting money, any one of

23 them could have picked up the phone, including the

24 straight guys -- I'll call them the straight guys at the

25 hedge funds, guys like Jedwab and Kalter and Glass from

2931b73d-6819-44d5-a58a-692a89b4049b


Page 938

1 time to time -- could have picked up the phone and

2 called the SCC, the FBI, any law enforcement agency or

3 filed a lawsuit against us.

4 So I think in answering your question, we're

5 sending the money to them with disregard to our

6 creditors.

7 Q Yes.

8 A Does that help you?

9 Q Well, it does because I'm going to talk about

10 Mr. Von Allmen, for example, represented by Mr. Scherer.

11 You said part of his money was used to pay the

12 hedge funds, correct?

13 A I believe it was. Sure. That's where it was

14 coming from.

15 Q So would you say that Mr. Von Allmen was being

16 hindered by virtue of you taking his money to pay the

17 hedge funds so the Ponzi scheme would not be revealed?


19 A Yes.

20 BY MR. CIMO:

21 Q Would you also say Mr. Sochet was being

22 hindered by taking his money and giving it to the hedge

23 funds under your Ponzi scheme?

24 A Yes.

25 Q Would you say that any of the people that

2931b73d-6819-44d5-a58a-692a89b4049b


Page 939

1 invested after May of 2009 were being hindered as a

2 result of you taking their money and paying it to the

3 hedge funds?

4 A I absolutely would.

5 Q That's the question.

6 There's a concept called delaying. Hinder,

7 delay or defraud.

8 Do you believe that the payments that you were

9 making to the hedge funds acted to delay Mr. Sochet and

10 Mr. Van Allmen and these other people invested after May

11 of 2009 from getting paid back their money?

12 A Yes.


14 BY MR. CIMO:

15 Q Do you believe that that intention to delay

16 was something that you did in order to allow the Ponzi

17 scheme to continue?


19 A Yes.

20 BY MR. CIMO:

21 Q Do you believe that had you not made these

22 payments to the hedge funds to delay Mr. Von Allmen and

23 all these other people invested after 2009, that the

24 Ponzi scheme would have been discovered, because the

25 hedge funds would have demanded payment and declared

2931b73d-6819-44d5-a58a-692a89b4049b


Page 940

1 default?


3 A I do.

4 BY MR. CIMO:

5 Q Now, let's talk about defraud.

6 Do you believe the payments that you made to

7 the hedge funds at any time were intended to defraud

8 creditors that were not getting repaid at the same time?


10 THE WITNESS: Were they intended to

11 defraud?

12 I think it's the way you're asking me.

13 BY MR. CIMO:

14 Q I'll rephrase it for you.

15 The payments that are made to anyone under a

16 Ponzi scheme, where the person whose money you're taking

17 to pay the later investor, would you agree that those

18 payments are paid to defraud those creditors that are

19 not being repaid?


21 BY MR. CIMO:

22 Q Isn't that what a Ponzi scheme is?

23 A Hang on a second.

24 MR. CIMO: Just keep making your

25 objections, Counselor.

2931b73d-6819-44d5-a58a-692a89b4049b


Page 941

1 THE WITNESS: All right. Now, go ahead.

2 Just go --

3 UNKNOWN SPEAKER: Let the record at least

4 reflect that while the question was pending,

5 the witness was talking to his counsel.

6 BY MR. CIMO:

7 Q I'm going to rephrase the question for you.

8 Would you -- would you have an opinion sitting

9 here today that payments made to the hedge funds, at any

10 time while your Ponzi scheme was being engaged in, while

11 other investors are not being paid and their money is

12 being used to pay the hedge funds, do you have an

13 opinion whether those payments were being made with an

14 intention to defraud those creditors that were not being

15 paid?


17 A Yes. That is what we were doing by the nature

18 of the Ponzi scheme.

19 BY MR. CIMO:

20 Q And you actually pled guilty to running a

21 conspiracy that engaged in activities that acted as a

22 Ponzi scheme?


24 Q Now, the most extreme thing about this thing

25 we spoke about is, you had an intention to defraud

2931b73d-6819-44d5-a58a-692a89b4049b


Page 942

1 people, didn't you?

2 A That's a better question.

3 Yes.

4 Q But that's a --

5 A Yes, I did.

6 Q But a little bit less than defrauding is

7 hindering; wouldn't you agree?

8 MR. SCHERER: Objection to form.

9 THE WITNESS: To me?

10 BY MR. CIMO:

11 Q Yes.

12 A I was -- me, my law firm, and my

13 co-conspirators were defrauding a ton of people that we

14 legitimately owed money to in order to pay off, in this

15 case, the hedge funds, to stop them from reporting us to

16 the authorities --

17 Q And as part --

18 A -- and declaring a default.

19 Q As part of the Ponzi scheme the law firm

20 actually signed guarantees or promissory notes to

21 people, didn't it?

22 A Through me, yes.

23 Q Yes.

24 And, therefore, the firm became obligated to

25 the Ponzi victims as part of the scheme?

2931b73d-6819-44d5-a58a-692a89b4049b


Page 943


2 BY MR. CIMO:

3 Q In other words, there are promissory notes

4 signed to certain investors, correct?

5 A Yeah. To a lot of them. Sure.

6 Q Mr. Sochet got several promissory notes,

7 didn't he?

8 A He did.

9 Q And when the firm then became obligated, those

10 people became creditors of the law firm under the

11 promissory notes?

12 A I viewed them, promissory notes or not, me and

13 my co-conspirators, we always viewed the legitimate

14 people we were taking money from as legitimate

15 creditors.

16 Q As legitimate creditors?

17 A We viewed the hedge funds as legitimate

18 creditors.

19 Q In regard to a liquidation of the Rothstein

20 firm, would their be sufficient money to pay all of

21 those quote, unquote, creditors in full?

22 A If there were, I wouldn't be here.

23 No, there was not.

24 Q So throughout --

25 A That's the very -- that's the very nature of a

2931b73d-6819-44d5-a58a-692a89b4049b


Page 944

1 Ponzi scheme. There was not sufficient money to pay all

2 our creditors.

3 Q So throughout the time that the Ponzi scheme

4 was being engaged in, it's your testimony that the

5 legitimate business operations of the Rothstein firm and

6 the assets were not sufficient to pay all creditors in

7 full, however you characterize them?

8 A That's absolutely true.

9 MR. CIMO: I have no further questions.

10 (Thereupon, a recess was taken.)

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Page 945

1 C E R T I F I C A T E

2

3 THE STATE OF FLORIDA, ) COUNTY OF BROWARD. )

4

5 I, Michele L. Savoy, Shorthand Reporter do

6 hereby certify that I was authorized to and did

7 report the foregoing proceedings and that the

8 transcript is a true record.

9 Dated this 15th day of December, 2011.

10

11 ______________________________

12 Michele L. Savoy, RPR Notary Public - State of Florida

13 My Commission No. EE 113173 Expires August 6, 2015

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Page 946

1 C E R T I F I C A T E

2 THE STATE OF FLORIDA, ) COUNTY OF BROWARD. )

3

4 I, Michele L. Savoy, Shorthand Reporter,

5 do hereby certify that I was authorized to and did

6 report said deposition in stenotype; and that the

7 foregoing pages, numbered from 770 to 946,

8 inclusive, are a true and correct transcription of

9 my shorthand notes of said deposition.

10 I further certify that I am not an

11 attorney or counsel of any of the parties, nor am I

12 a relative or employee of any attorney or counsel or

13 party connected with the action, nor am I

14 financially interested in the action.

15 The foregoing certification of this

16 transcript does not apply to any reproduction of the

17 same by any means unless under the direct control

18 and/or direction of the certifying reporter.

19 Dated this 15th day of December, 2011.

20

21 ___________________________________

22 Michele L. Savoy, RPR Notary Public - State of Florida

23 My Commission No. EE 113173 Expires August 6, 2015

24

25



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787:5 793:9797:12 799:16803:10,22 808:11810:12 811:5812:25 822:23824:7 829:12,18832:13,15,19833:16 838:24850:15 851:6852:8 853:3,25859:20,23 860:18865:5 867:6869:25,25 870:10877:14 880:23894:17 896:10901:23 905:2906:8 910:24912:12 913:25914:12 918:6919:10 920:11,13921:12,20 922:20923:11 926:20,21926:23 932:23938:13 939:5941:23 942:2,4943:25,25 944:8

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things 813:7 816:4819:6 824:11830:12,16 834:25835:23 840:9848:21 851:2877:12 879:21888:12,14 896:20898:4,9 906:1,5908:15 919:4,6920:13 922:14924:23

think 782:20789:10 790:6792:1 796:25797:17 798:8803:2 805:19813:25 819:24,25828:25 829:9834:20 837:5839:7 841:17845:16 853:21,23859:8 860:5 867:4869:8 871:14872:15 878:3,4,13878:15 883:8888:6 896:14899:21 904:5912:3 913:14916:4 926:4 928:7929:3,16,17930:15 931:6936:2 938:4940:12

thinking 797:18thinks 929:5third 770:23

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thousand 934:18thousands 867:12three 779:11 780:2

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timeline 880:8times 788:20 791:1

834:7,9 850:20927:14 933:20

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today 777:19778:13 779:21800:12,23 801:12801:13 803:2,6,11827:13,14 831:7847:2,4,5 852:19864:11 865:23867:11 869:9901:22 902:4916:10 923:18924:7 931:23932:13 933:9941:9

told 777:2 780:15783:9 786:18788:18,20 789:10

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ton 942:13tonacchio 858:20tongueincheek

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934:19 936:3totally 842:2tout 832:16touted 814:20

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871:23 872:4,13874:23

transactions812:24 817:12837:10 871:24

transcript 945:8946:16

transcription 946:8transfer 795:2transferring

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936:9,13,15transmitted 864:11

867:8


Page 971

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type 780:20 786:19786:20 795:20814:14 816:3817:11,19 835:17854:11 877:23878:2 894:13907:15 908:11

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undertaking906:25

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united 770:23807:16

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warned 829:19warrant 806:24wasnt 795:10

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Page 972

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Page 973

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2011-12-15 Rothstein Scott AM