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8/3/2019 Picard vs Katz Deposition of Noreen Harrington
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Case 1:11-cv-03605-JSR Document 127 Filed 02/1 0/1 2 Page 2 of 3
I, REGINA GRIFFIN, declare pursuant to 28 U.S.C. g 1746, that the following is true:
1. I am an at torney with the firm of Baker & Hostetler LLP, counsel to Irving H.
Picard, Esq., Trustee (" Trustee" ) for the substantively consolidated liquidation of Bernard L.
Madoff Investment Securities LLC and Bernard L. Madoff ("Madoff ') . I submit this declaration
in Support of the Opposition to the Defendants' Motion for Summary Judgment pursuant to
Federal Rule of Civil Procedure 56. I am personally familiar with the facts set forth herein.
2. In m y role as counsel to the Trustee, I was involved in the Trustee's discovery
efforts pursuant to Rules 26, 30 and 45 of the Federal Rules of Civil Procedure.
3. On De cember 30, 2011, Noreen Harrington, former Chief Investment Officer of
Sterling Stamos, testified that in 2003, she and her colleague Ashok Chachra performed due
diligence analyses into Merkin's and Madoff's funds. Attached asExhibit A is a true and
correct copy of excerpts from the Deposition Transcript of Ms. Harrington, dated December 30,
2011.
4. The T rustee noticed the deposition of a Sterling Stamos corporate representative,
pursuant to Fed. R. Civ. P. 30(b)(6), to determine, among other things, the location, retention
and/or destruction of Ms. Harrington's files, including the due diligence files on Merkin and
Madoff referenced in Ms. Harrington's testimony. Attached asExhibit B is a true and correct
copy of the Rule 30(b)(6) Subpoena and Notice of Rule 30(b)(6) Deposition to Sterling Stamos,
dated January 2, 2012.
5. On J a nuary 12, 2012, the Trustee deposed Sterling Stamos' designated corporate
witness, Chief Financial Officer Kevin Barcelona. Mr. Barcelona testified that Sterling Stamos
kept "records literally going back to day one on all of our funds." Attached as Exhibit C is a
true and correct copy of excerpts from the Deposition Transcript of Kevin Barcelona, dated
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Case 1:11-cv-03605-JSR Document 127 Filed 02/1 0/1 2 Page 3 of 3
January 12, 2012.
6. Despi te our repeated demands for the production of Sterling Stamos'
Merkin/Madoff f iles, and the analyses that both Ms. Harrington and Mr. Chachra described in
their testimony, these documents have not been produced and appear to be missing. Attached as
Exhibit D is a true and correct copy of a letter from Fernando A. Bohorquez, Jr. to Sterling
Stamos' counsel Tammy Bieber, dated January 23, 2012, again requesting the Merkin/Madoff
due diligence files. See also Exhibit C at 189- 97.
7. A tta ch ed asExhibit E is a response letter from Ms. Bieber, dated January 25,
2012.
Dated: New York, New YorkFebruary 9, 2012
Regina Gr in
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Case 1:11-cv-03605-JSR Document 127-1 F i led 02/1 0/1 2 Page 2 of 17
Page 1
C 0 N F I D E N T I A L
UNITED STAT ES D ISTR ICT CO UR T
SOUTHERN DI ST RI CT OF NE W YO RK
11 — CV —03605(JSR)(HBP)
IRVING H. PI CA RD , Tr uste e for
the Liquidation of Bernard L.
Madoff Investment Securities LLC, V i d e o t a p e d
Deposition of:
Plaintiff,
NOREEN HARRINGTON
SAUL B . KAT Z , et a l . ,
Defenda nt s .
TRANSCRIPT of testimony as taken by and befo re
NANCY C . BE ND ISH , Ce rt if ied Co urt Re po rt er, RMR , CRR
and Notary Public of the St ates of New York and New
Jersey, at the offices of Baker & Hostetler, 45
Rockefeller Plaza, New York, New York on Friday,
December 30, 2011, commencing at 9:34 a.m.
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PICARD v. KATZ, et al. CONFIDENTIAL NOREEN HARRINGTON 1 2/30/11
75
have to tal k in ge ne ral te rms be ca use I do no t
remember the ex act ba ck- and -forth que sti ons . It ' s
easier for me to de sc rib e wha t I th ou ght I ha d
ascertained in that meeting. So let me just finish
what I thou ght I as ce rta ined in the me et ing , bec aus e
it's just easier for me
Q . Su r e .
on that fro nt .
So, I wal ked out of th e me et in g . I
10 said to As ho k, tha t di dn 't go we ll an d it' s no t
going to go we ll . And I m ean t at SP Ca pi tal , thi s
12 isn't going to go well.
13 Peter and Sau l wan t to mak e th is
investment and my im me di ate rea ction to the me et in g
15 is, we cannot go for wa rd . A nd th e r ea son we can no t
go forward is we have an obligation to our investors
17 to do the wo rk . A s we ' ve talked ab out ear li er, we
18 charge a pretty hefty fee to our investors to do
19 work for them . W e tel l th em tha t our in ve stm ent s
20 are transparent to the in ve stm ent team and tha t
21 we' r e ea r n i ng ou r f ee by do i ng wo r k .
22 So, given Mer kin 's comm ent s, it
23 looked like a non — starter to me , an d I mean that
unless things were to rev ers e the mse lves f rom th e
25 way this mee ting we nt, it wo uld be v ery di ff icul t to
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make this in ve st ment .
So, I did te ll Ash ok we' re going to
have to do so me wo rk , you kn ow , to so rt of jus ti fy a
negative r ecom men dat ion . And so I w a lk ed out of th e
meeting with a co upl e of ot her th ing s. I w a lke d ou t
of the mee tin g kn ow ing the y we nt to ca sh at th e en d
o f a q u a r t e r .
" They " b e i n g ?
You know, my re col lec tion is th er e
10 was -- one of th e th in gs we lo ok ed at be fo re me et in g
was to -- you k no w, we l oo ked if we c ou ld gar ner an y
12 information on th e fu nd , and I'm not to ta ll y -- I
13 think we as ked a 13 D qu es tio n to hi m, be ca us e th e
answer -- I kn ow th e an sw er , I kno w th e an sw er wa s
15 w e go to cas h at th e en d of th e qu ar te r . Do I
16 remember specifically asking that question? I
17 b elieve I did . That 's my be st re co lle cti on. But I
18 definitely re me mbe r an an sw er tha t we go to ca sh at
t he e nd o f a q u a r t e r .
20 Q " We " be i ng?
21 A. M e rkin o r Mad o ff , and I ha ve to te ll
22 you, they were joined at the hip in this
23 c onve r s a t i o n .
The quest ion -- the ot he r th in g I
25 walked out of the of fi ce re me mb er ing is I ha d tr ie d
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S P Capital. I 'm s or r y .
And was it your und er sta ndin g tha t
that's what Pe ter Stamo s and Sau l Ka tz wa nt ed ?
That was my und ers tan din g.
Q. After this meeting, did you do any
additional wor k in co nn ect ion with th is to jus ti fy
your negative recommendation?
A . Ye s .
Q. What did you do ?
10 A. You kn ow , a ga in , I ca n on ly ta lk in
general terms , be ca use I do n't remem ber exac tly wha t
12 I did, but I w il l te ll you I th ou ght a g r ea t de al
13 about it, and I al so -- an d I di d so me wo rk . Th e re
14 was a li ttle bi t -- we ll , I' ll put it in t hese
15 terms, not ver y pr of ess ional, but ther e was a li tt le
16 bit of stin k ar ound Nerki n in a man na med Vic to r
17 Teichers (phonetic) or -- I'm slaughtering his last
18 name, but th er e we re a co up le of th in gs we co ul d
19 find that we re a li tt le bit ne ga tiv e or - - ab ou t a
20 p erson who wo rk ed wit h or fo r him th at ha d a bi t o f
21 a checkered past, might be a way to put it.
22 You know, one o f th e th ing s th at I' ve
23 relied on in my p a st , in my c a re er , is nu mb er s do n' t
24 often lie, peo ple can . And so I' m ge ne ra lly mo re
25 comfortable w ith ma th an yw ay . So t he on e t h in g I
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PICARD v. KATZ, et al. CONFIDENTIAL NOREEN HARRINGTON 12/30/11
would say to yo u is I th in k I lo ok ed at -- a ga in ,
this is in ge ne ral te rms , but I th in k I lo ok ed at
options at the en d of a mo nt h, see if th er e wa s an y
increased vol ume . I thi nk -- I th ou ght a lot ab ou t
the issue of wh y wo ul d so me bod y go to c as h to av oi d
r egulatory aut hor itie s at the end of a qu ar te r,
Q A re you refer r ing to Me rk in or ar e
you referring to Ma dof f when you loo ked int o th is ?
A. I lo o ked in t o -- at t hi s po in t, no w
10 I'm trying to educate myself on both people.
Q. A nd was it you r un de rst anding that
12 M adoff went to ca sh at th e en d of th e mo nt h ?
13 A . Th at wa s m y un de rsta nding. I knew
there was some exp lan ation I had ga rn ere d abo ut ca sh
15 at the end of a qua rt er . So , no t on re gu la tor y
16 filings, and it is my re co ll ec tion tha t th at fe ll
17 out of the me et ing , alt hough I do n't reme mbe r al l
18 the specific ver bia ge aro und it . But I d o rem em be r
specifically asking myself why somebody would, you
20 know, do tha t . I m e a n, I ca n gi ve you a r ea so n .
21 You could sa y, you kno w, tha t th ey wa nt ed to f ly
22 below the ra da r . Y ou kn ow , th ey do n' t wa nt to
23 r eally have re gu lat ors know who they are .
Q Wh en you say a r ea so n, a r e you
25 talking about going to cash
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Yeah.
Q. a t the end o f t he qua rt er ?
So that your nam e mi ght not fa ll ou t
on a regulat ory rep ort , like a 13D, as to a ho ld in g
i n a s t oc k .
Could you explain what you mean by a
13D?
Well, it's just a regulatory filing
if you own mo re th an a ce rt ain pe rc ent of an y
10 outstanding com pa ny 's st ock tha t you fil e as a
significant investor in that company. And, you
12 know, there were thi ngs aro und thi s inv es tmen t th at
13 didn't add up in my own mind , an d I kno w I tr ie d to
do research at the ti me . I don 't re me mbe r ex ac tly
15 w hat I lo oke d at .
16 We did prepare notes for this
17 investment me et ing . I f I could ha ve th em, it wo ul d
18 be really he lpf ul .
19 Q. Wh en you say "we" did prepare notes
20 for this m ee ti ng, c oul d you te ll me wh o th at wo ul d
21 be?
22 That would be As ho k and my se lf . I
23 don' t, I don't thi nk we wa lk ed int o any in ve st me nt
meeting on a he dg e fun d in my en ti re ti me th er e th at
25 didn't have pa pe rwor k att ached to it .
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So, in othe r wo rd s, th ere wo ul d be
these cha rts , I re co mm en ded how it wo ul d loo k in ou r
fund, Sharp e Ra ti os . You know , th er e wa s al wa ys a
lot of data tha t we wo uld dis cuss in th ese me et ing s.
So, there -- if I co ul d se e th at , it mi gh t he lp my
recollection. But w ith out it, it 's di ff icul t eig ht
years late r to te ll you wh at
Q* W ould it h a ve re si ded on yo ur
computer or did you have hard copy files of this?
10 A. Th e answer to th at que stio n wou ld
have been SP Ca pi tal was st ill in it s in fa ncy and we
12 did have a lot of paper. So I'm fully going to say
13 there was a lo t of pa pe r . Bu t w e wer e c r ea ti ng
files for he dge f und ma na ge rs . O ka y , so we ' re
15 c reating a fi le .
So you'd have a portfolio file on the
17 computer and the n you co ul d ha ve th e dr op -d own s to
18 the individual inv est men ts. It w oul d in cl ude th ing s
19 like notes from me et ings , it wou ld inc lude th ei r
20 letters to inv est ors, thei r ret urn s. Y ou kn ow , it
21 would have -- in my op in io n, thi s fi le wa s me an t to
22 be justificat ion to our in ve stor s as to th e du e
23 diligence we di d to ma ke a re co mm en da tio n for th at
investment.
25 This wo ul d ha v e - - you sa i d you had a
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lot of paper. That was a paper file. Did you keep
i t ?
A. W e , in the m e eti ng , in the in ve stm ent
meeting we wo uld hav e had , th ere wo uld have be en
handouts normally or paper in those meetings. Ashok
Chachra would hav e dr iven the cha rts and the da ta .
I would hav e re vi ewed it be for e the me et in g .
S o, again , I'm no t su re I can
differentiate exa ctly how muc h of that wo uld ha ve
10 been computerized at that point, but there is no way
we walked into this meet ing with not hin g in ou r
12 h ands. No , no way .
13 Q. Did you com mu nicate frequently with
14 people at SP Capital by email?
15 A. It 's, aga in, it 's a sma ll
16 o rganization and it 's rea lly me and As ho k . I f w e
17 were tal kin g to El le n, it mo st li ke ly was em ai l or a
18 phone cal l . I f w e w e r e -- if it we re As ho k an d I ,
19 no, I am no t a -- I am not a p e r son wh o wr it es yo u
20 if you' re next do or . I 'm s or t of ol de r th an th at ,
21 maybe, one way to put it . I don 't tw eet or -- bu t
22 the thing is , I wo ul d no rm al ly not be th e pe rs on
23 sending Ash ok em ai l if he wa s ac ro ss the ha ll fro m
me . I w oul d h av e ju st got up an d we nt to ta lk to
25 him personally.
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that every quarter somebody owns Coca-Cola stock and
they liquidate it before the end of the quarter
because they want to avoid a regulatory report, you
know, the vo lum e at th e end of th e qu ar te r pr ob ab ly
would have gone up if they had, you know, if they
were a reasonably sized player in the market.
So, I was just trying to see if any
of the thi ngs Ezra Mer kin had sa id du ri ng th e
meeting -- again, I rather like numbers, so if there
10 was any way that I co uld may be s ee nu mb ers show ing
me that. To no ava il .
12 So, t h e s e w e r e ex e r c i s e s - - y o u s a i d
13 was I doing anything after the meeting. I was
trying to think about this investment and trying to
15 see if there was any way that I could see somebody
16 doing -- liquidating at the end of a quarter.
17 Q When you say to no avail, what do you
18 m ean by tha t? Firs t of al l, let me ask you th is :
Did you see a fo ot pr int in the ma rk et pl ace of an y
20 surge in volume options?
21 No .
22 Did you look at anything else after
23 this meeting with Me rk in?
A. Th e an sw er t o t ha t is ye s, I th in k we
25 l ooked at -- we lo ok ed mo re cl os ely at 13 Ds .
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Q. Wh en you sa y " we " ?
A. You kn ow , I 'm no t su re who di d it ,
whether it wa s As ho k or me . A nd I kn ow I di d m or e
than this, but I ac tu ally don 't reme mber all the
t hings I di d . So , I - - I 'm so rr y .
That's all rig ht .
Did you try at al l to re ve rs e
engineer Merkin's strategy?
No. I tho ug ht a lo t ab out th is
10 strategy. I h ad a sked -- I be li eve , my re co lle ctio n
is I aske d As ho k, who was my a na ly st , to se e if th is
12 made sens e to hi m . Bu t I h a v e to t el l yo u
13 When you say "t hi s" ma de se nse to
h im?
15 The r e t u r n s .
16 The r e t u r n s . Wh o s e r e t u r n s ?
17 I believe we lo ok ed at bo th Me rk in
18 and Madoff the n.
19 But I defin itely -- my re co ll ect ion
20 is -- I hav e one st rong rec oll ect ion, wh ich I
21 mentioned in the me et ing, that the numb ers wer e too
22 good.
23 The n u m b er s me a n i n g ?
The returns wer e too fl at -- we ll ,
25 going back to vo la til ity, not very vol at ile , and
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That ' s c o r r e c t .
Q Did you ever look into the growth of
Merkin's organization?
A. It w ould h av e be en on -- mo st li ke ly
i t would hav e be en on a pi tc h bo ok t ha t I ha d se en ,
b ut I don' t rem emb er what th at gr owth wa s .
Q. Did you e ver look at the growth of
Madoff's organization?
A. I don 't recol le ct .
10 Q. A fter your m eet ing with Me rk in, did
you have the se ns e of wh et her or no t he g av e mo ne y
to any other th ird par ties bes ides Mad of f?
13 A. I recol lect th at he ha d th e ab il ity
14 to do it . I do n ' t recollec t — — I actual ly — — I
15 don't recoll ect any oth er name s me nt ion ed .
16 Q And wh en you me a n - - wh en yo u say
17 names, do you mean any other -- well, what do you
18 mean?
A . We l l , Me r k i n d i d n ' t g i v e me t h e n ame
o f another en tity that he was gi vin g mo ney to . I
understood that to be your qu es tio n.
Rig h t .
Was t h e r e - - o k a y .
Other than M ad of f?
Other than M ad of f.
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0 D id you look i nt o th e in ve stm ent
history of Ma dof f at tha t tim e, af ter the me et in g
with Merkin ?
A. A gain , w ithou t the do cu me nts , I don ' t
remember e ve ry th ing tha t we lo ok ed at . Bu t I
definitely, I definitely looked at something or
to have the opi nion that the inv es tme nts wer e not
volatile and po si tiv ely skew ed .
And when you say inv est men ts, who
10 Madof f .
Madof f .
12 Madoff investments.
13 Did you do a correlation analysis at
the time into Me r kin ' s fund?
15 You know, my re co lle ction wou ld be
16 t ha t we d i d .
17 Q. D o you reca ll wh at the re su lts of
18 that corre lation ana lyses wer e?
19 A. You know , my recollection probably is
20 that it was go od , bu t I ha ve ab so lu tel y no - - I
21 haven't loo ked at an yt hin g for ei ght ye ar s, so my
22 recollection is that it was probably good, but it
23 was -- it's not a nu mbe r I re me mb er .
0 And when yo u sa y i t ' s pr ob ab l y good ,
25 could you ex pl ain wha t you me an by th at ?
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A . Th at it -- s im i la r to wh at I sa id
earlier, that the Sh arpe Ratio s wou ld be hi gh an d
the volatil ity woul d be low and th er ef ore th e
portfolio, addin g it to the po rt fo lio wou ld be mo re
positive than negative.
And when yo u' re refer rin g to th e
Sharpe Ratio s woul d be hig h and the vo la ti lity wou ld
be low, whic h inve stm ent are you ref er ring to ?
E i t h e r p er s on .
10 E it h e r
Either Mer kin or Ma do ff at th at
12 p oin t .
13 Did you do a liquidity analysis of
Merk i n ' s f u nd s ?
15 A. A gain , it 's -- yo u kn ow, I do n' t ha ve
16 the data. If I had the se do cum en ts, it wo uld be
17 much easie r for me to re co lle ct, but wi th out the
18 document s, the on ly th ing I ca n tel l yo u is it ' s
something tha t we al wa ys lo ok ed at . So I w ou ld
20 it would be, you know, my normal process, so I would
21 h ave -- I be li eve I wo uld hav e don e it .
22 Q T he files fo r th e di li ge nce tha t you
23 conducted, do you rec all who ma in ta ined them ?
A . Th e - - A s h o k wo u l d h a v e h a d t h e d a t a
25 coming to him , mor e tha n me . A ltho ug h -- th ey wo ul d
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PICARD v. KATZ, et al. CONFIDENTIAL NOREEN HARRINGTON 1 2/30/11
105
come to him di re ctl y and he wo ul d co ll ate them , bu t
T believe T wo uld ha ve mo st of tha t da ta se co nd han d
f ro m h i m .
Would you kee p th is da ta , th es e
files -- wo uld SP Ca pi tal kee p th es e fi les wi th th e
results of your diligence, while you were there?
W ould we keep th em ? Yes .
Q A n d d o y o u k n o w wh e r e t h e y w ou l d b e
k e pt , wh e n y o u we r e t h e r e ?
10 A. W ould h ave ha d a d ra wer wi th fi les in
it. The re wo uld hav e bee n fi les on the he dge fun ds
12 and they wou ld have been als o on the c om pu te r.
13 Q And when you say on the computer, do
you mean you r c o mpu te r?
A. Zt wou ld ha ve be en on my co mpu ter ,
16 Ashok's computer. Again, the organization was in
17 its infancy and we were working out exactly how we
18 were going to keep these files, but it is my
recollection that we had cre ated th ese files alre ady
20 for the he dge fund ma na ge rs, tha t we co ul d dr aw do wn
21 the infor mat ion on any on e of th e in ve st me nts we ha d
22 in the portfolio.
23 Q • What kind of files would you keep on
y ou r c om p u t e r ?
D ocuments from our ow n fu nd ,
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PICARD v. KATZ, et al. CONFIDENTIAL NOREEN HARRINGTON 12/30/11
106
documents from the he dge fu nds , ag ain , alt hou gh
Ashok would hav e all of th at . I m igh t no t ha ve al l
of the indi vid ual docu men ts, but we wo uld keep
letters that the he dge fun d se nt us on a m o nt hl y
b asis, retu rns, we wo uld hav e re tu rns . W e wou ld
keep document s on our own cl ie nts . W e w oul d po st
notes. I m e an, th ere wo uld be
When you say po st no te s, wh at do yo u
mean?
10 Our cliff no tes fro m me et in gs or if
we, if we -- ev en if you ha d a p h on e co nv er sa ti on
12 with an in ve sto r and he sa id , th is is wh y ou r
13 performanc e was X at th e en d of th e mo n th , th er e
w ould eit her be s ome rec ord to a fi le or i f I ha d
15 the conversa tion, I pr oba bly wo uld hav e po sted Ash ok
and he may hav e po sted a fi le . B ut w e wou ld ha ve ,
17 if we had at tr ibut ion or co nv er sat ions with hedg e
18 funds, we wo uld nor ma lly kee p th at , some of th at
information.
20 Q When you say you would post them, how
21 would that ph ys ica lly wor k?
22 A. A gain , you can , yo u can wr ite the m
23 down on a piece of paper and put them in paper file.
Or, as I be li eve we we re in the st ag es of ma ki ng al l
25 this ele ctr onic whe n I wa s th er e, so we co ul d ju st
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PICARD v. KATZ, et al. CONFIDENTIAL NOREEN HARRINGTON 12/30/11
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pull down a file on a hedge fund and make some
notes. B ut th at wa s so rt of a wo rk in pr og re ss at
the time, and I'm more of a paper person, so most
likely I wo uld hav e — — I proba bly wo uld h ave h an d
written. T h e id ea wa s th at th is wa s su pp os ed to be
all automated at some point.
Q. W as — — w hen yo u w er e at SP Ca pi ta l,
were the comp uter s on a ne tw or k?
Now you' re getting really, really
10 over me. 2 n etwo rk , you mea n lik e Mi cr oso ft?
Q. W ere you conne ct ed to one an ot he r,
12 could you em ail one an ot he r?
13 Oh, yeah, we co uld em a il , we al l ha d
email addre sses at SP Ca pi ta l.
15 Q. C ou ld you acce ss do cu me nts tha t As ho k
16 was working on on his computer from your computer?
Yes. W e ha d -- th at wa s wh at we we re
18 w orking on, sh ared fil es and th ing s lik e th at . S o
19 t ha t wa s a wo r k i n p r o g r e s s .
20 Q. The w o rk tha t yo u di d af ter th e
21 meeting with Merk in, and tho se do cum ents that yo u
22 keep referring to that you'd like to see, where
23 would they hav e be en lo ca ted at th e ti me th at yo u
worked at SP Ca pi ta l?
25 We would have had the pi tch bo ok s,
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OAO 88 lRev. I/94) Subpoena in a Civil Case
Issued by the
UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF NEW YORK
In re: Adv. Pro. No. 08-01789 (BRL)
BERNARD L. MADOFF INVESTMENT SECURITIES SIPA LIQUIDATIONLLC, (Substantively Consolidated)
Debtor,
IRVING H. PICARD, Trustee for the Liquidation of Bernard L.Madoff Investment Securities LLC, SUBPOENA IN A CIVIL CASE
Plaintiff,
Case NumberAdv. Pro. No. 10-5287(BRL)11-CV-03605 (JSR) (HBP)
SAUL B. KATZ, et al.,Defendants.
TO: Sterling Stamos Capital Management, L.P. andSterling Stamos Associates G.P.Attn:
Tammy BeiberTannenbaum Helpern Syracuse k, Hirschtritt, LLP900 Third Avenue
New York, New York 10022
YOU ARE COMMAN DE D to appear in the United States District court at the place, date, and time specified below totestify in the above case,
PLACE OF TESTIMONY COURTROOM
DATE AND TIME
H YOU ARE COMMANDED to appear at the place, date, and time specified below to testify at the taking of a depositionin the above case on the topics identified in the attached Notice of Deposition under Fed. R. Civ. P. 30(b)(6)
PLACE OF DEPOSITION DATE AND TIME
Baker & Hostetler, LLP, 45 Rockefeller Plaza, New York, New York 10111 01/12/2012 at 9:30 am
YOU ARE COMMANDED to produce and permit inspection and copying of the following documents or objects at theplace, date, and time specified below (list documents or objects):
PLACE DATE AND TIME
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Rule 45, Federal Rules of Civil Procedure, Parts C k, D;
(c) PROTECTION OF PERSONS SUBJECT TO SUBPOENAS.
(I) A party or an attorney responsible for the issuance and service of a subpoenashall take reasonable steps to avoid imposing undue burden or expense on a person trial be commanded to travel from any such place within the state in which the
subject to that subpoena. The court on behalf of which the subpoena was issued trial is held, or
shall enforce this duty and impose upon the party or attorney in breach of this dutyan appropriate sanction which may include, but is not limited to, lost earnings and (iii) requires disclosure of privileged or other protected matter and
reasonable attorney's fee. no exception or waiver applies, or(iv) subjects a person to undue burden.(2) (A) A person commanded to produce and permit inspection and copying ol
designated books, papers, documents or tangible things, or inspection of premises (B) If a subpoenaneed not appear in person at the place of production or inspection unlesscommanded to appear for deposition, hearing or trial. (i) requires disclosure of a trade secret or other confidential research,
development, or commercial information, or
(B) Subject to paragraph (d) (2) of this rule, a person commanded to (ii) requires disclosure of an unretained expert's opinion orproduce and permit inspection and copying may, within 14 days after service of information not describing specific events or occurrences in dispute and resulting
subpoena or before the time specified for compliance if such time is less than 14 from the expert's study made not at the request of any party, or
days atter service, serve upon the party or attorney designated in the subpoena (iii) requires a person who is not a party or an officer of a party towritten objection to inspection or copying of any or all of the designated materials incur substantial expense to travel more than 100 miles to attend trial, the court
or of the premises, If objection is made, the party serving the subpoena shall not be may, to protect a person subject to or affected by the subpoena, quash or modify
entitled to inspect and copy materials or inspect the premises except pursuant to an the subpoena, or, if the party in who behalf the subpoena is issued shows a
order of the court by which the subpoena was issued. If object ion has been made, substantial need for the testimony or material that cannot be otherwise met
the party serving the subpoena may, upon notice to the person commanded to without undue hardship and assures that the person to whom the subpoena is
produce, move at any time for an order to compel the production. Such an order to addressed will be reasonably compensated, the court may order appearance or
comply production shall protect any person who is not a party or an officer of aproduction only upon specified conditions.
party Irom significant expense resulting Irom the inspection and copyingcommanded. (d) DUTIES IN RESPONDING TO SUBPOENA.
(3) (A) On timely motion, the court by which a subpoena was issued shall quash (I) A person responding to a subpoena to produce documents shall produceor modify the subpoena if it them as they are kept in the usual course of business or shall organize and label
them to correspond with the categories in the demand.
(i) fails to allow reasonable time for compliance,(ii) requires a person who is not a party or an officer of a party to travel (2) When information subject to a subpoena is withheld on a claim that it is
to a place more than 100 miles from the place where that person resides, is privileged or subject to protection as trial preparation materials, the claim shall
employed or regularly t ransacts business in person, except that, subject to the be made expressly and shall be supported by a description of the nature of theprovisions of clause (c) (3) (B) (iii ) of this rule, such a person may in order to attend documents, communications, or things not produced that is sufficient to enable
the demanding party to contest the claim.
300192572.1
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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
In re: SIPA LIQUIDATION
BERNARD L. MADOFF, Adv. Pro, No. 08-01789 (BRL)
Debtor. Adv. Pro, No. 10-05287 (BRL)
IRVING H. PICARD, Trustee for the Liquidation Case No, 11-cv-03605 (JSR)
of Bernard L. Madof f Investment Securities LLC,ECF Case
Plaintiff,
SAUL B. KATZ, et al.,
Defendants.
To: Tammy Bieber
Tannenbaum Helpern Syracuse & Hirschtritt, LLP900 Third AvenueNew York, New York 10022
Attorney for Sterling Stamos
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NOTICE OF RULE 30 b 6 DEPOSITION TO STERLING STAMOS
PLEASE TAKE NOTICE that, pursuant to Fed. R. Civ. P. 30(b)(6), Plaintiff, Irving H.
Picard, by and through his counsel Baker k Hostetler LLP, will take the deposition(s) upon oral
examination, before a notary public or other person authorized to administer oaths at the offices
of Baker k Hostetler LLP, 45 Rockefeller Plaza, New York, NY 10111, about information
known or reasonably available to Sterling Stamos regarding the topics in attached Exhibit A.
Rule 30(b)(6) requires Sterling Stamos to designate one or more officers, directors, or managing
agents, or designate other persons who consent to testify on its behalf, regarding these topics.
Said deposition wil l be taken by stenographic and videographic means by a certified court
reporter and videographer, The deposition(s) will commence at 9:30 a.m. January 12, 2012. If
necessary, each deposition will be adjourned until completed.
Date: January 2, 2012 BAKER A HOSTETLER LLP
New York, New YorkBy: /s/' Fernando A. Bohor uez JrDavid J. SheehanE-mai I: [email protected] A. Bohorquez, Jr.E-mail:[email protected]
Attorneys for Irving H, Picard, Trustee
for the Substantively Consolidated SIPA
Liquidationof Bernard L. Madoff Investment
Securities LLC and Bernard L, Madoff
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EXHIBIT A
1. For t h e period between 2002 and 2008, the system(s) used to create, transmit,
store, retrieve, and delete e-mail including, but not limited to, name and version, installation
dates, number of users, and location of users' mail f iles.
2. For t h e pe riod between 2002 and 2008, how electronic documents are maintained,
archived, indexed, including descriptions of hardware and software used, and where this is
physically located.
3. For t h e pe riod between 2002 and 2008, how hard-copy documents are maintained,
archived, indexed,
4, For t h e pe riod between 2002 and 2008, corporate policies regarding the retention
and destruction of documents.
5. T he s epa ration of Sterling Stamos' IT inf rastructure from Sterling Equities
infrastructure in 2004, including which Sterling Stamos data, if any, was transferred to a new
server and/or remains available on back up tapes.
6. The c o l lec tion of documents responsive to the Trustee's Fed. R, Civ. P. 45
subpoena dated October 11, 2011.
7. The c o l lec tion of documents responsive to the Trustee's Bankruptcy Rule 2004
subpoena dated May 18, 2010,
8. The r e ten tion and/or destruction of Ms. Noreen Harrington's electronic and/or
hard copy files.
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PICARD v. KATZ, et al. CONFIDENTIAL KEV IN B A RCELONA 1/12/
Page 1
C 0 N F I D E N T I A L
UNITED STATES DISTR ICT COU RT
SOUTHERN DIS TR IC T O F NEW YO RK
11 — CU —03605(JSR)(HBP)
IRVING H. PIC ARD, Tru stee for
the Liquid ation of Bernard L.
Madoff Investment Securities LLC, V i d e o t a p e dDeposition of:
Plaintiff,
KEVIN BARCELONA
SAUL B. KATZ , e t a l . ,
Defenda nt s .
TRANSCRIPT of testi mony as ta ken by and be fo re
MONIQUE UOUTHO URIS, Cert ified Court Repo rter, RPR ,
CRR ans1 Notary Public of the Stat es of New York and
New Jersey, at the offices of Baker & Ho stetler, 45
Rockefeller Pla za, New York, New Yo rk, on Th ur sday,
January 12, 2012, comm encing at 9 :51 a. m.
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PICARD v. KAT Z, et al . CON FIDENT IA L KEV IN BA RCEL ON A 1/ 12 /1 2
Page 143
0 1 :3 6 : 4 8 1 do c ume nt s ?
01 : 36 : 48 2 No , I ' m n o t
0 1:3 6: 5 0 3 Q- Do you know j us t as a pr actical matt er
01:36:53 4 wh ether ha rd copy docume nts have been dest royed?
0 1:3 6: 5 5 5 A. No , I 'm n o t awa re and I do n't believe
Q1:36:58 6 that we w o ul d hav e. We h av e re cord s liter ally going
Q1:37:01 7 b ac k to d a y on e on all of our funds , even though our
01:37:0 5 8 p olicy s ays we do n't have to ret ain them for tha t
01: 37 : 0 7 9 I ong .01 :37 :15 10 And with respect to the hard copy
01:37:16 1 1 docum e nt s that you ref erred to as being in an
Q1:37:1 9 12 ind iv i dua l emplo yee's office, what woul d happen to
01:37:23 1 3 th ose f i le s sho uld that employee leave Sterlin g
0 1 : 37 : 2 7 1 4 St amo s ?
01 : 37 : 27 15 Well, if for whatever reason if an
01 : 37 : 32 16 employee had, you know, working files, business files
01 : 37 : 34 17 in their office, you know, perh aps they were -- they
01 : 37 : 40 18 were working on, you know, diligence on a manager and
01 : 37 : 44 19 those files were still the re, we wo uld -- their
01 : 37 : 46 20 office would be reviewed for any materials and then
01:37:48 2 1 they w oul d be bro ught back to their approp riate
01:37:51 2 2 fil in g pl ac e.
01 37 : 5 2 2 3 And who would review those documents?
01 : 37 : 54 24 I t depended on the ind ividual . If i t
01:37:56 2 5 w as a por t fo lio team membe r that was no longer with
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PICARD v. KA TZ , et al . CONF IDEN TIA L KEV IN BA RCEL ONA 1/12 /1 2
Page 189
02: 4 6: 45 1 re cord , th e time is 2: 46.
0 2: 46:5 1 2 (Recess. )
03 : 44 : 02 3 THE VIDEOGRAPHER: W e ar e ba ck on the
03:44 :07 4 r ecord . The t im e is 3: 44. Th i s is dis k number 4.
03 : 44 : 12 5 MS. FEIN: Welc ome back , Mr .
03:44 :14 6 B arcelon a . I wa nt to than k you for your time today .
Q3:44:1 7 7 Th e 30 ( b ) (6) deposition will remain open , but you' re
03:44 :20 8 ex cused fo r tod ay. So t ha nk you very much .
0 3:4 4 : 2 3 9I have a few matters that I'm going
Q3: 44; 26 10 t o p ut on th e re cord with counsel pre sent, but,
03: 44: 29 11 p leas e , you can either go bac k to 1148 or wait in
03: 44: 34 12 th e lobb y, wh atever you prefer .
03 : 44 : 36 13 THE WITNESS: I w ill ex cus e mys elf
03:4 4: 3 7 14 and go .
15 MS. FEIN : Th an k y ou .
16 (The witness leaves the de position
0 3: 44: 47 1 7 r oom. )
03 : 44 : 47 18 (Comments off the record.)
03 : 44 : 51 19 THE VIDEOGRAPHER: Goi ng off the vid eo
03:44 :53 2 0 record, the time is 3:4 4.
21 (The following takes place off the
0 3 : 4 4 : 5 7 2 2 v i d e o r e c o r d . )
03:44 :57 23 MS. FEIN: S o, ju st to sum marize what
Q3:44 :59 2 4 w e discu ssed off the reco rd, the 30 (b) (6) witness you
Q3:45 :Q4 2 5 p rovid ed to day was unable to speak on behalf of the
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P IC AR D v . KA T Z , e t a l . CONFIDENTIA L KEVI N BARC EL ONA. 1/ 1 2 / 1 2
Page 190
03:45 :07 1 corporat ion wit h respect to thre e issues we
03:45:1 0 2 iden tif ie d to you : T he re te ntion of Nor een
03:45:13 3 H arringt on 's file data and the data coll ection and
03:45:1 5 4 p reservat ion that took place pre-2 004 before his
Q3:45 :1 9 5 arrival , as we ll as the document col lect ion process
Q3:45 :22 6 w ith re sp ec t to either the 2004 subpoena or the Rul e
0 3: 4 5 : 2 6 7 4 5 s u bp o en a .
03:4 5: 2 9 8 Just to summarize what we di scussed
Q3:45 :31 9 off the re cor d, we tal ked about ways that we cou ld
03:45 :34 1 Q contin ue to work out these issues with you sinc e they
03: 45: 37 11 w ere n o t clea red up during this 30 (b) (6) deposition.
Q3:45:4Q 1 2 Y ou in fo rm ed us that you recently disc overed that two
Q3:45:4 3 1 3 b oxes o f du e di lige nce materials relating to Ezra
03:45:46 1 4 M er kin 's Asc ot and Gabriel Funds were removed from
Q3:45:5Q 15 Iron M ounta in sto rage by Jennifer O' Neill, a Sterling
03:45:5 4 16 Stam o s an al yst, on December 22nd, 200 8.
03:45:57 17 You also informed us that these boxes
Q3:46:Q Q 18 have n o t be en loc ated since that time . You in fo rmed
03:4 6:03 1 9 us that yo u have looked for the boxes and tha t at
03:46:0 7 2 0 thi s p oin t they have not been loca ted .
03 : 46 : 10 21 You h a v e a l s o a g r e e d t o p r ov i d e u s
03: 46: 11 22 with a lo g of ha rd cop y documents tha t tracks a
Q3: 46: 15 23 desc ri pti on of thes e documents that are maintained at
Q3: 46: 17 24 Iron M o u nta in, as well as a log that re flects when
Q3: 46: 22 25 cert a in bo xes were removed . So w h eth er boxes wer e
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PICARD v. KATZ , et al . CON FIDENT IA L KE V IN BARC ELON A 1/ 12/1 2
Page 191
03: 46: 25 1 chec ke d ou t or ho wever that process exists, you
03:46:2 9 2 agreed t o pro vid e that to us .
03 : 46 : 32 3 We would like to kno w at whos e
Q3:46:35 4 dire ct ion Ms . O' Neill removed these boxes , and in
Q3:4 6:4Q 5 acco rd a nc e wit h tod ay's 30(b) (6) testimony and its
Q3:4 6:45 6 de ficie ncie s, we' ve agreed that -- tha t you wil l look
03:4 6:4 8 7 for th e se it ems for us .
0 3:4 6: 5 2 8 We also are curious to know in
03:4 6:54 9 add iti o n to at wh ose direction Ms. O' Neill removed
03:4 6:58 1 0 the box es, who you spoke to to inform you rself about
03:47:01 1 1 the se i s su es, where the documents were looked for,
03:47:04 1 2 wh at d ocu me nts were looked for and any disc ussions
03:47:07 1 3 you h ad w it h Ste rling Equities on these issue s.
03 : 47 : 11 14 Based on the deficiencies today, we
03: 47: 13 15 reser ve al l ri ghts to continue the 30 (b) (6)
03: 47: 16 16 d ep osi ti on at a later time . T hank yo u .
03 : 47 : 21 17 MR. GOUDISS: W e r es pe ctf ully
03:47:23 1 8 d isagree . W e t h in k that the witn ess was more than
Q3:47:2 6 19 adequa te for pur poses of the 30 (b)(6) and addresse d
03:47:2 9 2 0 all o f th e ar eas cove red by the 30 (b)(6) notice,
03:47:3 2 2 1 in cluding the three areas just identi fied. W e, to o,
03:47:3 5 2 2 reserv e all of our righ ts.
03:47 :37 23 With respect to the 20 02- 2004 perio d
03:47:40 2 4 in p artic ul ar, we think in cont ext, particul arly
03:47 :43 2 5 given t ha t this was a small family off ice as the
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P IC AR D v . KA T Z , e t a l . CON F I DENT I A L K E V I N BA RCE L O N A 1 / 1 2 / 1 2
Page 192
03: 47: 46 1 w itn ess te st ifi ed, a not ter ribly savvy or
03:47 :51 2 soph isti cate d org anization at the time, in its
03:47 :53 3 in fan cy , we be lieve that any pur ported or all eged
03:47 :58 4 g ap s in pr odu ction misstate both the rec ord, the
Q3:48 :02 5 e fforts th at we went to loc ate responsive documents,
Q3:48 :07 6 and the i n her ent limi tations, given the fact tha t
03:48 :10 7 d uring t hat pe riod of time the record well
03:4 8:1 3 8 e stablis he s that the host system was, in fac t,
03:48:1 8 9 S terlin g Eq uit ies' host system, and that the best
Q3:48:2Q 1 Q ev idenc e of that technology and reten tion would be
03:48:2 4 1 1 from Ster lin g Equit ies. A n d we pr esu me, witho ut
03:48 ;27 12 kn ow in g , that that is -- those are mat ters that have
Q3:48 :29 13 b een fully co vered in the exp ans ive discovery in this
0 3: 4 8 : 3 3 1 4 ma t t e r .
03 : 48 : 34 15 Where we do agree is that we wi ll
03:48 :36 1 6 c on tin ue to work with you to try to resolv e any
03:48 :40 17 l egiti mat e dispu tes that we have so that you have all
03:48 :43 1 8 th e info rm at ion that we have in our po sse ssion, or at
Q3:48;4 6 1 9 l east r e as onable and understandable answers as to the
Q3;48:5 1 2 Q e ffor t s we too k to locate documents that no long er
03:48:5 4 2 1 e xist o r ma ybe never existed .
03:48 :56 22 With that, I' ll turn it over to Ms .
Q3:48 :59 2 3 B ieb er , be ca use I think we do hav e an update on the
0 3 : 49 : 0 2 2 4 b o xes .
03 : 49 : 02 25 MS. BIEBER: So d u ring the break we
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PICARD v. KA TZ, et al . CON FIDENT IAL KEV IN BARC ELON A 1/12 /1 2
Page 193
Q3: 49: 04 1 h av e lo c ate d a box tha t has the — — apparently the
Q3: 49: Q9 2 d iligen ce fi les and five notebooks which look like
Q3;4 9;15 3 A sho k 's no tes that are actu ally tagged, so I believe
03:4 9:18 4 th o se w ere the notes that were pre viously prov ided .
Q3:4 9:2Q 5 W e be lie ve that eve rything in that box has pro bably
Q3:4 9:23 6 b een p roduced based on the descr iption, but I will go
Q3;4 9:26 7 ov er th ere th is aft ernoon, or som ebody will go ove r,
Q3:4 9:29 8 an d ch ec k an d ma ke sure that th at's the case, and if
9 so , w e w il l get what was in the bo x.
10 MS. GRIFFIN: A n d jus t to be cl ear
03 : 49 : 33 11 MS. BIEBER: If yo u wa nt to understand
03 : 49 : 34 12 what happened with the box
03 : 49 : 37 13 MS. GRIFFIN : Yo u' re saying one box?
03 : 49 : 39 14 MS. BIE BER: Yeah , one box . One b ox .
03:49 :40 15 It looks like what was in the two b oxes was
03:49 :42 16 consolidated. T h e tw o Iro n Mou ntain boxe s that we
03:49 :46 17 discussed, one had the Ascot files as well as other
Q3: 49: 49 18 m an age rs , the othe r had the Gab riel file, Gabr iel
03:49 :52 19 Ariel, as well as other managers, because they are in
03:4 9:54 2Q alph ab etical order. S o it lo ok s lik e what happene d
0 3: 49:5 7 2 1 was they were all put into one box, as well as with
03:50 :02 22 Ashok's notebooks of his note s from mee tings .
03 : 50 : 07 23 MS. GRIFFIN: A n d wher e was the box
03:50 :08 24 f ound?
03:50 :09 25 MS. BIEBER: T h e bo x wa s found in the
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P IC AR D v . K A T Z , e t a l . CON F I DE NT I A L K EV I N BA RCEL O N A 1 / 1 2 / 1 2
Page 194
Q3:5Q :1Q 1 b asem en t , wh ich we went thr ough the other day when ,
Q3:5Q;1 3 2 as you kn ow, we learned about the off-s ite storage in
Q3: 5Q: 17 3 Ch ris St amos ' dep osition, we pulle d the docum ents .
Q3:5Q:1 9 4 W e then le arned there was bas ement sto rage . I
Q3:5Q:2 3 5 ph ysica ll y went down to the basement with Caroline
Q3:5Q:26 6 Qu irke f ro m St erling Stamos and we wen t through about
7 80 b ox es down the re, in addition to the Iron Mountain
03:50:2 9 8 b oxes , in wh ich we didn' t find anythi ng.
03:5 0: 3 1 9 When this issue came up la ter that
0 3: 5 0 : 3 3 1 0 t h e s e we r e a b s en t , s h e a g r e e d t o g o b a c k d o w n an d
03:50:36 1 1 l ook to m ak e sur e we had n't mis sed anything down
03:50:4 0 12 th ere , th at they weren't mixed in with some othe r
13 file o r th at we missed something in one of tho se
1 4 b ox e s .
15 MR. BOHDRQUEZ: F o r th e re cord, this
Q3:5Q:4 6 16 i s M r . Bo ho rquez . I u n de rs tand that you have a log
03:50:4 7 1 7 and inde x for the Iron Mountain docume nts.
03 : 50 : 52 18 MS. B I E BE R : Y e s .
03 : 50 : 52 19 MR. BOHDRQUEZ: Do you have a log or
03:50:55 2 0 ind ex fo r the docum ents in the base ment?
03 : 50 : 56 21 MS. BIEBER: N o , th er e is no log or
03:50:58 2 2 ind ex fo r th ose documents . The y se em to be mos tly
Q3:5Q:59 2 3 inv oice s and that type of thing . My u n de rst anding is
03:51 :02 2 4 the y a r e do cu ment s that they may nee d more for audi t
03:51:0 5 2 5 wo rk ; i t 's not really investment documents so much .
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PICARD v. KA TZ , et al . CONF IDEN TIAL KEV IN BA RCEL ONA 1/ 12/1 2
Page 195
Q3:51:Q 8 1 There we r e 13 bo xes relating to inv estments, as I
03:51:12 2 recall , bu t we di dn't find anything rel evant to any
03:51:1 4 3 m atter s in th is case in those boxe s.
0 3:5 1: 1 8 4 MR. BOHORQUEZ: A n d wh o wa s the person
03:51:1 9 5 that ident if ied the basement boxe s?
0 3:5 1: 2 2 6 MS. BIEBER: Car ol ine -- Caroline
03:51:2 5 7 Q uirke , she' s the head of the New Yor k office as
03:5 1: 2 7 8 MR. GOUDISS: T h e of fic e mana ger.
MS. BIEBER: Th e o ff ice mana ger.
03:51 :28 10 MR. BOHORQUEZ: A nd yo u sa id the re
Q3:51:29 1 1 w ere 13 bo xe s rel ated to inves tment manag ers?
03:51 :31 12 MS. BIEBER: Gene ra ll y.
03:51 :32 13 MR. BOHORQUEZ: Cou ld you ide ntify for
03:51:33 1 4 u s wh o th os e inv estment managers were?
03 : 51 : 34 15 MS. BIEBER: I don 't remem ber off the
0 3 : 5 1 : 3 6 1 6 t o p o f my h e ad .
17 MR. BOHORQUEZ: If we ask you in a
1 8 l e t t e r
03 : 51 : 37 19 MS. BIEBER: I 'm hap py to give you a
Q3:51:38 2 0 list o f th em , and we can go bac k to the basement and
03:51:40 2 1 p ull the m ag ain . Th ey are unr elated to this case, as
0 3 : 51 : 4 6 2 2 f a r a s I k n ow .
03:51 :46 23 MS. GRIFFIN: Ta m my , wo uld you be
03: 51: 48 24 accept abl e to us coming to see the bo xes right now, I
25 m ean , no t ri ght this seco nd, but see ing it the way it
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P IC AR D v . KA T Z , e t a.l . CON F I DE NT I A L KE V I N B A RCE L O N A 1 / 1 2 / 1 2
Page 196
03: 51: 53 1 exists m ight be ea sier
03:5 1 : 5 3 2 MS. BIEBER: I th in k we nee d to
03: 51: 54 3 di scu s s tha t fi rst, but we' re certainly welcome to
03: 51: 55 4 talk abo ut it .
03 : 51 : 55 5 MS. GRIFFIN: I wo ul d ra the r see the
Q3:51 :56 6 way they wer e kep t in the ordin ary course, but, okay.
0 3:5 2: 0 0 7 MR. GOUDISS: W e ' ll take that under
0 3 :5 2 : 0 1 8 ad v i semen t .
0 3:5 2: 0 2 9MS. BIEBER: A n d in te rms of this one
03:52 :03 10 box we ' re talking about, I don't think we' re talking
0 3:52:06 1 1 ab out ho w it was kept in the ordin ary course . As I
03:52:0 8 12 sa id , it wa s pu lled December 22nd , these two boxes,
03:52 :11 13 and it l o ok s lik e they were kept for the pur pose of
03:52 :14 14 th e M erkin me eting and things relating to Merkin, so
03:52 :16 15 I w on 't wan t tha t deemed the ord inary course .
03 : 52 : 20 16 MS. GRIFFIN: W ell, ho wever they are
Q3:52 :21 1 7 b ein g k ep t in the ordinary course right now, I wou ld
03:52 :24 1 8 l ike to se e the de scription of the log of the two
03:52 :25 1 9 b oxes , an d then I would like to see the boxes that
03:52 :30 2 0 are b ein g kept now . A nd I wou ld lik e to do that
Q3:52:3 1 2 1 m yself , if th at's poss ible, but I under stand you' re
03; 52: 33 22 going to tak e it under advisem ent .
03 : 52 : 35 23 MR. BOHORQUEZ: T h e las t qu estion I
03:52:36 2 4 h ave w i th re spect to the docum ents, the boxes found
Q3:52 :38 2 5 in the b a sem ent , did you ide ntify any boxes that were
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PICARD v. KA TZ , et al . CON FID ENT IAL KEV IN BAR CE LON A. 1/12/12
Page 197
03:52:42 1 rel ate d to Ms . Harrington in those boxes in the
03: 52 : 4 5 2 b a s eme n t ?
03:52 :4 6 3 MS. BIEBER : No , w e did not .
03:5 2: 5 1 4 MS. FEIN: A l l ri ght . Tha nk yo u.
03:52:52 5 W e 're going off the reco rd.
03:52 : 5 5 6 (Endin g t i me : 3 : 52 p . m . )
10
12
13
15
16
17
18
19
20
21
22
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25
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l,.Ãl.I';L i ! ir ';ZrCA.(.
Bakel S.HOStetiei. LLP
45 Rockefeller PlazaNew York, NY 10111
T 212,589.4200F 212.5B9.4201
January 23, 2012 www.bakerlaw.corn
Fernando A, Bohorquezdirect dial: 212.889.4242
VIIA E-IIAIL [email protected]
Tammy BieberTannenbaum Helpern Syracuse 8 Hirschtritt, LLP
900 Third AvenueNew York, New York [email protected]
Re: Pica rd v. Katz et al., 11-CV-03605 (JSR)
Dear Tammy:
I write to memorialize our numerous meet-and-confers regarding Sterling Stamos' duediligence files on Ascot Fund, LP, Gabriel Capital, LP, and other funds managed byEzra Merkin that tnvested all or some portion of their funds in Bernard L. Madoff!nvestment Securities (the "Merkin Funds" ). The Trustee has repeatedly requested theMerkin Funds' due diligence files in this proceeding, first identified in the Trustee's
October 11, 201'I subpoena to Sterling Stamos (the "Subpoena" ), and reiteratedthroughout the meet-and-confer process through numerous teleconferences, in-personmeetings, depositions, letters and e-mails. See, e.g,, Subpoena Request No. 20.
The significance of the documents requested by the Trustee was demonstrated duringthe deposition of Sterling Stamos' former Chief Investment Officer Noreen Harringtonon December 30, 2011. Ms. Harrington, who served as CIO of Sterling Stamos (thenknown as SP Capital) from October 2002 to August 2003, testified that after meetingwith Merkin to conduct ongoing due diligence into his funds — in which Sterling Stamosfirst invested in July 2002 — she advised her Sterling Stamos partners Saul Katz, DavidKatz and Peter Starnos, that Ezra Merkin was feeding investments in his fund toMadoff, and that it was her view that Madoff's investment returns were either theproduct of illegal front-running or were a "fiction." (N. Harrington Tr. at 67-68, 72-73,
78, 111-'l8,)
Ms. Harrington testified that while acting as CIO, she and Ashok Chachra — her thenassociate at Sterling Stamos — conducted due diligence analyses into the Merkin andMadoff funds that led her to the conclusion that Madoff was engaging in illegal activity,Ms. Harrington testified that she and/or Mr. Chachra prepared materials for a meetingwith Sterling Equities partners Saul Katz and David Katz at which she provided hernegative recommendation about investing in the Merkin Funds. (N. Harrington Tr, at
Chicago Cin ci nnati Cle ve land Colu mLios Cost a Mesa
Denver Ho u st on t os An geles Ne w Yort< O r lanclo Vv as htngton, DC
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Tammy BieberJanuary 23, 2012Page 2
86-88, 92-96.) Ms. Harrington further testified that her recollection of the events inquestion would be aided if she were able to review the documents she and Mr.Chachra had prepared in connection with the Merkin and Madoff funds, (N. HarringtonTr. 88:6-89:24; see a/so 1/2/2012 Ltr, from F. Bohorquez to T. Bieber.)
Mr. Chachra also testified that he performed due diligence analyses of the MerkinFunds and provided them to Ms. Harrington, including a review of "the monthlyperformance of the fund, the annualized volatility of the fund, the correlation of the fundto the broader equity markets, looked at the distribution of returns." (A, Chachra Rule2004 Tr. at 32-33). In addition, Peter Stamos testified that as of 2002, Sterling Starnos,and specifically Mr. Chachra, performed many different types of diligence analyses anits investment managers such as Merkin's Ascot and Gabriel funds, includingevaluations of the funds' historical performance, portfolio exposure, volatility analysis,
leverage, diversification and correlation with various market and portfolio factors. (P.Stamos Rule 45 Tr, 148-150).
As of January 2, 2012, despite the Trustee's repeated requests, Sterling Stamos hadnot produced the due diligence materials to which Ms. Harrington and Mr. Chachrareferred in their testimony. We then specifically requested the above-referenceddocuments and issued a subpoena and notice of a Sterling Stamos Fed, R, Civ. P.30(b)(6) deposition to determine, among other things, the location, retention and/ordestruction of Sterling Starnos' diligence files for Merkin's Ascot and Gabriel Funds, aswell as Ms. Harrington's files. See 1/2/2012 Ltr. from F, Bohorquez to T. Bieber. Youand your co-counsel, Alan Goudiss, agreed to provide a Rule 30(b)(6) witness whowould be able to testify as to these topics and assured that any gaps or deficiencies inSterling Stamos' production would be resolved prior to or at the Rule 30(b)(6)
deposition, (See P, Stamos Rule 45 Tr. 312:4-315;15),
Sterling Stamos designated Chief Financial Officer Kevin Barcelona as its Rule 30(b)(6)witness, but Mr. Barcelona was unable to testify concerning the whereabouts of Ms.Harrington's files. In fact, on January 12, 2012, Mr. Barcelona testified that he had noknowledge of what happened to her files and did nothing In advance of the depositionto educate himself on the topics specifically identified in the notice of deposition.(Sterling Stamos Rule 30(b)(6) Tr, 'l52:7-153:21).
During a break in the Rule 30(b)(6) deposition, we explained our position that SterlingStamos had failed to comply with its obligations pursuant to Rule 30(b)(6) because Mr.Barcelona had no knowledge about many topics identified in the notice, and admittedlyhad not educated himself on those topics in accordance with the requirements of aRule 30(b)(6) witness. (Sterling Stamos Rule 30(b)(6) Tr. 189:23-191:16). We thenquestionedyou about what you and your co-counsel, Alan Goudiss, knew aboutSterling Stamos' due diligence files and noted that it appeared that Sterling Starnos hadessentially produced no diligence materials at all for the Merkin Funds which pre-dated2005. /d, It was only then that you informed us that you had learned that two boxes ofhard copy materials relating to Merkin's Ascot and Gabriel Funds had essentially gonemissing three years ago on December 22, 2008- just a little more than one week afterthe revelation of Madoff's fraud, and at a time when Sterling Stamos was contemplating
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litigation arising out of the Merkin Funds which had invested in Madoff. Id. You stated
that Sterling Stamos had been unable to locate these boxes in the three years since(the "Missing Boxes" ). /d.Just minutes after you informed us that Ascot and Gabriel documents had gone missingfor nearly three years, you then informed us that Sterling Stamos believed it may havelocated materials from the Missing Boxes in Sterling Stamos' New York officebasement. Without having reviewed these materials yourself, you then suggested thatthe two Missing Boxes of Merkin Fund materials may have been consolidated into theone box you identified (the "Discovered Box"). (Sterling Stamos Rule 30(b)(6) Tr.192;25-194:14).
The next day, January 13, 2012, Regina Griffin and Stacey Bell of our offices inspectedthe Discovered Box. The Discovered Box contained two file folders for Ascot andGabriel entitled "Diligence," but they did not contain the due diligence analysesreferenced by Ms. Harrington or Mr. Chachra in their testimony. Indeed, theDiscovered Box did not contain any Sterling Stamos due diligence materials for theAscot and Gabriel funds which pre-dated late 2004,
You represented to us that in the days following the Rule 30(b)(6) deposition, youspoke to many Sterling Stamos former and current employees — Peter Stamos, SpiroStamos, Ashok Chachra, and Kevin Okirnoto, former consultant Tim Dick, and counselfor Sterling partner David Katz — but you indicated that none of them knew anythingabout the retention of Ms. Harrington's files, nor about the due diligence analyses shereferenced in her testimony. See 1/18/2012 E-mail from T. Bieber to K, Jenson.
During Mr. Barcelona's 30(b)(6) deposition, he testified to a September 2008 office
wide scanning project in which all hard copy documents in Sterling Starnos' New Yorkoffice were scanned to the firm's electronic database, (Sterling Stamos Rule 30(b)(6)Tr. 30:17-31:11). Based on this representation, we requested a copy of the September2008 scanned documents contained in the Missing Boxes (the "September 2008Scan" ). You represented that you searched for a September 2008 Scan and did notlocate it, During your search, however, you located and produced on January 13,2012, aDecember 2008 scanned copy of the Discovered Box."
On January 18, 2012 you advised that you had located an electronic directorycontaining the Sterling Stamos Investment Team's hard copy working files scannedstarting as of 2005, which you believed contained Merkin Funds' due diligencedocuments, The parties held a meet-and-confer conference on Jan, 19, 2012 duringwhich you agreed to produce the recently located additional scanned copies of Merkin
Fund documents. Our review of those files has uncovered no documents from prior to
" While we appreciate your production of the December 2008 Scan, you have represented thatthis file was created after the Missing Boxes were removed from Sterling Starnos' off-sitestorage,
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VIIA E-MAllL
Tammy BieberJanuary 23, 2012Page 4
late 2004 resembling the due diiigence analyses referred to by Ms, Harrington or Mr.Chachra in their testimony.'
Nlith your production to us on January 19, 2012 of those scanned materials, yourepresented that you have now produced all hard copy and electronic copies ofdocuments pertaining to Merkin Funds which invested in Madoff, However, despite thetestimony of two former Sterling Stamos' employees concerning the existence of 20022003 Merkin Fund due diligence materials, we cannot find among the documentsproduced any such due diligence materials from prior to late 2004. This is also despitethe fact that Mr. Barcelona testified that Sterling Stamos has "records literally goingback to day one on all of our funds, even though our policy says we don't have to retainthem for that long," (Sterling Stamos Rule 30(b)(6) Tr. 142:24-143:9).'
Please confirm that you have already checked for all of the foregoing documentsdemanded by the Trustee with the law firms that have represented Sterling Stamosdirectly or indirectly since 2003, including Shearman Sterling and Davis Polk 8Wardwell, as well as any other agents of Sterling Stamos.
Finally, if you believe that l have misstated any of the foregoing, please advise, Thankyou,
Sincerely,
Fernando A. Bohorquez
cc: Da na Seshens, Esq.
' In fact, in the thousands of documents produced by Sterling Starnos, only a single one-pagedocument resembles the due diiigence described by Ms. Harrington and Mr. Chachra. SeeSSKVV00007066 "Ascot Partners, L.P."
Mr. Barcelona also testified that in "very early January" 2009, following Bernie Madoff's arrest,then-Sterling Stamos General Counsel Jared Kanover issued a written litigation hold to allemployees of Sterling Stamos that explicitly instructed all employees to preserve all recordsrelating to the Merkin Funds, (Sterling Starnos Rule 30(b)(6) Tr. 145.'17-146'.2),
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TANNENBAUM HELPERN SYRACUSE & HIRSCHTRITT LLP900 THIRD AVENUE
NEW YORK, NEW YORK 10022-4775(2121 508-6700
FACSIMILE: (212) 371-1084
Writer's Direct Dial: (212) 508-6716E-mail: bieber®thsh.corn
January 25, 2012
VIA K-MAIL
Fernando A. Bohorquez, Jr., Esq.
Baker 4 Hostetler, LLP45 RockefellerPlaza,
New York, New York 10111
Re; Pic ard v, Katz, et al. 11 Civ 3605 (JSR)
Dear Fernando:
I write on behalf of Sterling Stamos Capital Management, L.P. (" Sterling Stamos") inresponse to your letter dated January 23, 2012, As a preliminary matter, we note that the Trustee'simplication that Sterling Stamos has been withholding, or continues to withhold documents relatingto any due diligence performed from 2002 through 2004 on the Ascot Partners, L.P, (" Ascot" ),Gabriel Capital L.P. (" Gabriel" ), and Ariel Fund Limited (" Ariel" ) managed by Ezra Merkin'sGabriel Capital Corporation (the "Merkin Fund documents"), is a gross mischaracterization of therecord and Sterling Stamos' good faith efforts to comply with the Rule 45 subpoena. Indeed, yourletter flatly ignores that Sterling Stamos, a third-party to this action, has produced over 2,38 millionpages of documents to date, which include hundreds, if not thousands, of pages relating to theMerkin Fund documents.
Your continued insistence on the existence of documents that, if created at all, were createdover nine years ago at the infancy of the firm when diligence procedures were informal and largelyhard copy,' no document retention policy existed, no archival system was in place, and the
' As Ms. Harrington explained when asked whether documents would have resided on her computer or in hardcopy files: "The answer to that question would have beenSP Capital was still in its infancy and we did have a lot ofpaper. But we were creating files for hedge fund inanagers," Harrington Tr. at 89. See also r'd, at 90 (" So, again, I'mnot sure I can differentiate exactly how much of that would have been computerized at that point...,"); id. at 104(" Again, the organization was in its infancy and we were working out exactly how we were going to keep thesefiles„ „" )„ 'id. at 107 (" [electronic meeting notes were] sort of a work in progress at the time, and I'm more of a paperperson, so most likeIy I would have — I probably would have handwritten, The idea was that this was supposed to be allautomated at some point,"),
[954334-4]
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Fernando A, Bohorquez, Jr., Esq,January 25, 2012Page 2
computer server used by Sterling Stamos was not its own, ignores the realities of a small butgrowing business. That your doggedness is grounded solely in the wholly speculative testimony of
Noreen Harrington as to what she believed "would" have been created for an introductory meetin~with a fund manager in whose funds Sterling Stamos had already invested (Harrington Tr. at 89),approaches the bounds of responsible advocacy. Insinuating that there must be some nefariousreason for the absence of those documents years later is well beyond those bounds. Quite simply,there is no institutional memory as to what would have been in the files about which Ms. Harringtontesfified including, whether such files existed, where those files would have been located at thetime, and what might have happened to them in the years since her departure,
In response to the Trustee's Rule 45 subpoena, we have met and conferred with the Trusteein good faith on numerous occasions for several months now. Whenever you have sought tofollow-up as to the existence of certain documents, no matter how tangential to this litigation„wehave gone back and ascertained whether the requested documents exist and whether they have been
To the extent you are relying on Mr. Chachra's testimony, his recollection went generally to the type ofanalyses he would have conducted on the Merkin funds at the time. Like Ms, Harrington, he had no recollection ofspecific documents that might have existed or been prepared for the meeting with Merkin to which Ms, Harringtontestified. Chachra Tr, at 33;11-17. Nor did he testify as to the existence of any specific documents or their continuedexistence.
' Ms. Harrington's testimony outlines her usual practices for speaking with managers but provides no specificrecollection as to what documents, if any, she had prepared for her meeting with Merkin or for the subsequent internal
meeting, See Harrington Tr. at 88 (" I don' t, I don't think we walked into any investment meeting on a hedge fund inmy entire time there that didn't have paperwork attached to it,");id. at 90 (" [I]n the investment meeting we would havehad, there would have been handouts normally or paper in those meetings); id. at 104 ("[a liquidity analysis] would be,you know, my normal process, so I would have — I believe I would have done it"); id, at 107-08 (" We would have hadthe pitch books [for Gabriel and Ascot], and they would have — most of the time you have pitch books that are electronic,and we would have had hard copies as well.'*). The speculative nature of Ms. Harrington's testimony is best illustratedby the following exchange:
Q. Did you take any notes at that meeting, Ms. Harrington?A, You know, I most likely did.
Q And do you recall taking notes at that meeting?A. I don' t. I don't recall specifically.
Q And do you know whether Mr. Chachra took notes at that meeting?A. He generally took notes.
Q And do you remember him doing so at that particular ineeting?A, It was his — generally speaking, Ashok took notes. I really — I mean, do Iremember a notebook that he had? You know, I really don't remember.It's eight years ago. But it would be out of character if Ashok didn't takesome notes f'rom a meeting,
Harrington at 187-88, As you are aware, we have produced Mr. Chachra's notes from the meetings with Merkin duringthat time period.
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produced. When necessary,we have made additional productions. Your repeated requests for the
Merkin Fund documents are no exception.
Iron Mountain Files
Contrary to your int imations, we have fully explained the issue with the Iron Mountainboxes to you and your colleagues on several occasions, Your selective recitation of those events,however, necessitates that I once again set forth the circumstances surrounding those fi les.
On Wednesday, January 4, 2012, we learned during Chris Stamos' deposition in Californiaof a possible off-site storage at "Blue Mountain." Consistent with Sterling Stamos' good faithefforts to comply with the Rule 45 subpoena, we followed-up and inquired into whether SterlingStamos had a "Blue Mountain" storage facility and, if so, whether those files had been searched forresponsive documents, We learned of the existence of storage at an "Iron" Mountain facility as well
as in the basement of 450 Park Avenue, Sterling Stamos' office, and understood that most of thecontents of those facilities had been scanned onto the computer system. Nevertheless, the NYoffice manager reviewed the basement storage and pulled several boxes for us to review upon ourreturn from the depositions in California. On Monday, January 9, I reviewed those boxes and didnot find any Merkin Fund documents, The NY Office manager and I went to the basement andagain looked through the storage area, unsuccessfully.
On January 10, we received and reviewed the boxes from Iron Mountain. Again, we did notlocate any Merkin Fund documents, We noted, however, that the Iron Mountain directory listedtwo boxes of fund manager files that the index suggested should contain files for Ariel, Gabriel andAscot, Those boxeshad been checked out on December 22, 2008 (the "Iron Mountain Merkin
files" ), We immediately undertook to locate those boxes and were able to locate the box that waslisted as containing Gabriel/Ariel files, which had been one of the boxes pulled from the basementfor review, On closer examination, the only files in that box were for funds that were alphabeticalneighbors to Gabriel, The search of Sterling Stamos' office continued,
During a break in the 30(b)(6) testimony on Thursday, January 12, I reached out to the clientto ensure that the California office was being searched. I was told that having conducted a thirdsearch of the basement that morning, they had located a box containing the Ascot, Gabriel, and
" Indeed, on January 2, 2012, the Trustee sought Noreen Harrington's personnel file for the first time,Notwithstanding that we believe such documents to be completely irrelevant to the present action, we conducted athorough search of Sterling Stamos' files and produced the requested documents on January 12, 2012. Moreover, asearly as November 10, 2011, the Trustee knew that Sterling Equities had back-up tapes Rom the time that Sterling
Stamos' files resided on Sterling Equities' computer systems, Nevertheless, the Trustee waited until two days beforethe discovery cutoff to ask that Ms. Harrmgton's e-mail be uploaded and reviewed for production, In response to theTrustee's last minute request, Sterling Stamos reviewed Ms, Harrington's electronic files and produced an additional2,000 documents by January 17, 2012. Th e record is abundantly clear that in compliance with Sterling Stamos'obligations pursuant to the Rule 45 subpoena, we have supplemented our production on multiple occasions uponlocating the requested documents, which has come at a great expense to our client.
' As we previously informed you, our review of the files and documents at Sterling Stamos' office revealedthat the Merkin Funds files that were retrieved from Iron Mountain in December 2008 had been consolidated in onebox,
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demanded those scans of the Iron Mountain Merkin files, In searching for documents scanned preDecember 11, 2008, we learned that the early investment management files were scanned into an
"Existing Manager" directory when Sterling Stamos moved offices in late-2005/early 2006. ThatExisting Manager directory, which was subdivided by fund name and then by types of documents,was the working directory for each fund and therefore contained documents created after theoriginal scans, We produced the contents of that directory as well.
As we explained to you, there is no single file that contains a scan of the Iron MountainMerkin files. Rather, scanned files were done document-by-document and each document was thenfiled in an appropriate directory. Thus, for example, a subscription agreement would be filed undera Legal Documents folder in a particular manager's directory under the Existing Manager directory.We have not identified a 2008 scan of the Iron Mountain Merkin file, but it seems likely such a scanwould have been redundant of the scanning that took place in the wake of the office move.
You now tell us that "while we appreciate your production of the December 2008 Scan, youhave represented that this file was created after the Missing Boxes were removed from SterlingStamos's off-site storage." Trustee's 1.23,12 letter n,1. Putting aside that you knew the timing ofthe scan when you insisted on having those documents, there is absolutely no basis on this record tosuggest the Sterling Stamos has intentionally withheld a single document or that that scan varies inany way from the original files.
Moreover, despite your characterization that Sterling Stamos only just recently produceddocuments relating to the Merkin Fund documents, most, if not all, of the documents referenced inyour letter that were inspected by your colleagues on January 13, 2012 or were subsequentlyproduced by Sterling Stamos in the past two weeks, are not new documents; these documents aresimply a reproduction of documents already produced by Sterling Stamos since 2010 albeit in a
different format. Therefore, your suggestion that we have failed to t imely produce responsivedocuments or have just recently produced documents related to the M erkin Funds is bothinappropriate and unfounded. That those files do not contain the documents you believe might haveexisted in 2003 does not lay the groundwork for baseless insinuations and accusations,
Con chision
To the extent that you have not been able to locate the Merkin Fund documents, we reiteratethat we have conducted a good faith search and have produced everything that we are aware of in
Sterling Stamos' possession, custody and control relating to the Merkin Funds. As you areundoubtedly aware by now, the firm was in its infancy stages during the short period of time Ms.Harrington was employed by Sterling Stamos between October 2002 and August 2003, and sharedits off ice space and its computer servers with Sterling Equities, We also note for the record thatdespite having been notified by the Defendants by at least November 10, 2011 that Sterling Equitiesmaintained back-up tapes containing Sterling Stamos' ESI prior to 2005, the Trustee failed toexplore during the discovery timeframe whether those back-up tapes contained any other diligence
' I have also represented that we are not aware of any Merkin Fund documents having been intentionallydestroyed,That representation you have apparently chosen to ignore,
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