2011-12-20 rothstein scott am

(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 7 - MORNING SESSION

DEPOSITION OF SCOTT W. ROTHSTEIN

DATE TAKEN: December 20, 2011 TIME: 8:36 a.m. - 12:05 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


Page 1724

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

2 BROWARD COUNTY, FLORIDA

3 ____________________________________________________ Case No. 10-24110 CACE(19)

4EDWARD J. MORSE and CAROL A. MORSE,

5 and MORSE OPERATIONS, INC.

6 Plaintiffs,

7 vs.

8 SCOTT W. ROTHSTEIN, et al.,

9 Defendants._____________________________________________________

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

11 AMY ADAMS, et. al,

12 Plaintiffs,vs.

13SCOTT W. ROTHSTEIN, TD BANK, N.A. and GIBRALTAR

14 PRIVATE BANK AND TRUST COMPANY,

15 Defendants.

16 _____________________________________________________

17 10-03767-RBR Stettin v. Gibraltar Private Bank & Trust Co.

1810-03802-RBR Stettin v. Centurion Structured

19 Growth, LLC, et al

20 11-02368-RBR Stettin v. TD Bank, N.A.

21 11-02288-RBR Stettin v. Fidelity Charitable Gift Fund

22 11-02473-RBR Stettin v. Regent Capital Partners, LLC, et al

2311-02604-RBR Stettin v. Maple Leaf Drilling

24 Partners, et al

25 11-02605-RBR Stettin v. Don King Productions, Inc.


Page 1725

1 APPEARANCES 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 APPEARANCES FOR THE CHAPTER 11 TRUSTEE, HERBERT STETTIN:

6 BERGER SINGERMAN

7 350 East Las Olas Boulevard Suite 1000

8 Fort Lauderdale, Florida 33301 BY: CHARLES H. LICHTMAN,, ESQUIRE

9 and GENOVESE, JOBLOVE & BATTISTA, P.A.

10 100 S.E. 2nd Street Suite 4400

11 Miami, Florida 33131 By: JOHN. H. GENOVESE, ESQUIRE

12 DAVID C. CIMO, ESQUIRE THERESA M.B. VAN VLIET, ESQUIRE

13 JESUS SUAREZ, 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 ERIC RAYMAN, ESQUIRE

18 IVAN J. KOPAS, ESQUIRE and

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

20 Ninth Floor Coral Gables, Florida 33134

21 By: HARLEY S. TROPIN, ESQUIRE

22 APPEARANCES FOR PLATINUM PARTNERS VALUE ARBITRAGE CENTURION STRUCTURED GROWTH, LLC:

23 GOLDSTEIN, TANEN & TRENCH, P.A.

24 One Biscayne Tower, Suite 3700 Two South Biscayne Boulevard

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


Page 1726

1 APPEARANCES FOR LEVINSON'S JEWELERS:

2 KOPELOWITZ OSTROW FERGUSON WEISELBERG KEECHL 200 SW 1st Ave

3 Suite 1200 Fort Lauderdale, Florida 333012073

4 BY: JAN ATLAS, ESQUIRE

5 APPEARANCES FOR THE COMMITTEE OF UNSECURED CREDITORS:

6 AKERMAN, SENTERFITT

7 One Southeast Third Avenue 25th Floor

8 Miami, Florida 33131-1704 By: MICHAEL GOLDBERG, ESQUIRE

9APPEARANCES FOR TD BANK:

10 GREENBERG TRAURIG, P.A.

11 401 E Las Olas Blvd Ste 2000 Fort Lauderdale, Florida 33301

12 By: HOLLY SKOLNICK, ESQUIRE DONNA EVANS, ESQUIRE

13 MARK SCHNAPP, ESQUIREAPPEARANCES FOR RLI ZURICH INSURANCE COMPANY,

14 COLUMBIA INC. & ZURICH INSURANCE:

15 CLAUSIN MILLER One Chase Manhattan Plaza

16 39th Floor New York, New York 10005

17 BY: SCOTT L. SCHMOOKLER, ESQUIRE

18 APPEARANCES FOR FEDERAL INSURANCE COMPANY:

19 ALEX HOFRICHTER, P.A 1430 South Dixie Highway

20 Suite 204 Coral Gables, Florida 331463127

21 By: ALEX HOFRICHTER, ESQUIRE

22 APPEARANCES FOR MORSE: TRIPP SCOTT, P.A.

23 110 S.E. Sixth Street,15th Floor Fort Lauderdale, Florida 33301

24 By: GEORGE WALKER, ESQUIRE JOHN M. MULLIN, ESQUIRE

25


Page 1727

1 APPEARANCES FOR CAROL MORSE, TED MORSE & MORSE OPERATIONS:

2 LAW OFFICES OF ROBERTA DEUTSCH

3 2499 Glades Road Suite 110

4 Boca Raton, Floridan 33431 By: ROBERTA M. DEUTSCH, ESQUIRE

5APPEARANCES FOR EMESS CAPITAL, LLC:

6 KLUGER KAPLAN SILVERMAN, KATZEN & LEVINE, PL 201 S Biscayne Blvd Fl 17

7 Miami, Florida 331314 BY: CASEY H. CUSICK, ESQUIRE

8APPEARANCES FOR ST. PAUL FIRE & MARINE:

9 MILLS PASKERT DIVERS P.A.

10 100 N Tampa St Ste 2010 Tampa, Florida 336025145

11 BY: JOHN A. BLACK, JR., ESQUIRE

12 APPEARANCES FOR ROSANNE CARETSKY:

13 Billing Cochran Lyles 515 E Las Olas Blvd

14 Floor Six Fort Lauderdale, Florida 333012296

15 By: DAN GELBER, ESQUIREAPPEARANCES FOR PLATINUM & CENTURION:

16 HARVEY WERBLOWSKY, ESQUIRE and

17 CURTIS, MALLET-PREVOST, COLT & MOSLE, LLP 101 Park Avenue

18 New York, NY 10178-0061 By: GABRIEL HERTZBERG, ESQUIRE

19 ELIOT LAUER, ESQUIRE

20 APPEARANCES FOR FEPICT, MS GROUP: NYSTROM, BECKMAN & PARIS

21 One Marina Park Dr., 15th Flr. Boston, MA 02210

22 By: JACK SEIGAL, ESQUIRE

23

24

25


Page 1728

1 APPEARANCES FOR MICHAEL SZAFRANKSI: LYDECKER, DIAZ

2 1221 Brickell Avenue Floor 19

3 Miami, Florida 33131 BY: CHRISTOPHER G. BERGA, ESQUIRE

4 MIGUEL J. CHAMORRO, ESQUIRE

5 APPEARANCES FOR GIBRALTAR: STEARNS WEAVER MILLER, et al.

6 150 W Flagler St Ste 2200 Miami, Florida 331301545

7 BY: MARY BARZEE-FLORES, ESQ. MATTHEW DATES, ESQUIRE

8 APPEARANCES FOR FRANK PREVE: PODHURST ORSEK

9 25 W Flagler St Ste 800 Miami, Florida 331301720

10 BY: RAMON A. RASCO, ESQUIRE

11 APPEARANCES FOR LEVINSON PEARSON & ASSOCIATES, WATCH U-WANT, INC.:

12 KOPELOWITZ OSTROW

13 200 SW 1st Ave Ste 1200 Fort Lauderdale, Florida 33301

14 By: BART A. HOUSTON, ESQUIRE

15 APPEARANCES FOR THE US GOVERNMENT:

16 99 N.E. 4th Street Miami, Florida 33132

17 BY: LAWRENCE LAVECCHIO, ESQUIRE

18 APPEARANCES FOR FRANK SPINOSA: SCHLESINGER AND COTZEN, P.L.

19 799 Brickell Plz Ste 700 Miami, Florida 33131

20 BY: MICHAEL J. SCHLESINGER, ESQUIRE and MICHAEL COTZEN, ESQUIRE

21 and SAMUEL J. RABIN, ESQUIRE

22 799 Brickell Plaza Suite 606

23 Miami, Florida 33131

24

25


Page 1729

1 INDEX

2 CONTINUED DEPOSITION OF SCOTT W. ROTHSTEIN

3 DIRECT FURTHER DIRECT

4 Mr. Craig 1730Mr. Lauer 1734

5 Mr. Schnapp 1829

6 CERTIFICATE OF OATHCETIFICATE OF REPORTER

7

8 CARETSKY'S EXHIBIT INDEX

9 NO. DESCRIPTION PAGE NO223 Email of April 22, 2009 1731

10 PLATINUM and CENTURION'S EXHIBIT INDEX

11 NO. DESCRIPTION PAGE NO

12 224 Adversary Complaint 1784225 Adversary Complaint 1790

13 226 Email String 1802

14 TD BANK'S EXHIBIT INDEXNO. DESCRIPTION PAGE NO

15 227 Email of October 8, 2009 1861228 Sentencing Statements 1865

16 229 June 4, 2010, Letter 1866

17

18

19

20

21

22

23

24

25


Page 1730

1 Thereupon, the following proceedings were had:

2 MR. LAUER: Good morning.

3 Before we go, I guess Tucker has a few

4 questions.

5 FURTHER DIRECT EXAMINATION

6 BY MR. CRAIG:

7 Q Good morning, Mr. Rothstein.

8 A Good morning, Mr. Craig.

9 Q Uncle Bill didn't need to do any trickery or

10 perform any slight of hand to substitute the fake

11 account balance statements into the envelopes because he

12 had Ms. Caretsky to do it, correct?

13 A I wasn't there. I would be guessing.

14 MR. CRAIG: Could you place the witness

15 under oath.

16 Whereupon,

17 SCOTT W. ROTHSTEIN,

18 acknowledged having been duly sworn to tell the truth

19 and testified upon his oath as follows:

20 THE WITNESS: I do.

21 BY MR. CRAIG:

22 Q Let me reask the question: Uncle Bill didn't

23 need to do any tricks or perform any slight of hand to

24 substitute fake account balances into the show

25 envelopes, because he had Ms. Caretsky to do it,


Page 1731

1 correct?

2 A I do not know what he did. I was not there

3 with him. I would be guessing.

4 Q And he didn't have to perform any tricks to

5 get Ms. Caretsky to hand the envelopes to you in front

6 of the investor, did he?

7 A Can you say that again, please?

8 Q He didn't have to perform any tricks to get

9 Ms. Caretsky to hand the envelopes to you in front of

10 the investors, did he?

11 A He was not involved in having her hand the

12 envelope to me. She always handed the envelope to me in

13 front of the investor or to the investor.

14 MR. CRAIG: Let me show you what's been

15 marked as Defendant's 223 for Identification.

16 THE WITNESS: Sure.

17 MR. CRAIG: I only have one.

18 (Thereupon, the document was marked as

19 Caretsky's Exhibit 223 for Identification.)

20 THE WITNESS: It's okay.

21 BY MR. CRAIG:

22 Q Could you please tell me whether you recognize

23 that exhibit?

24 A I do not.

25 Q Do you have any reason to doubt its


Page 1732

1 authenticity?

2 A I do not.

3 Q Wouldn't you agree that your testimony is

4 totally inconsistent with this email where you tell Bill

5 Brock he needs to use his magic to get the phony

6 balances into the envelopes and get them to hand it to

7 you?

8 A No, sir.

9 Q What magic needed to be worked by Mr. Brock?

10 A I don't recall what was going on at this time.

11 I don't recall if we were having a problem with somebody

12 or if it was prior to her being fully on board. I just

13 don't recall.

14 Q Could you read that email from you to

15 Mr. Brock dated April 22nd at 10:36, 2-0-9, out loud?

16 A What time do they open?

17 You are going to have to work magic to get our

18 state cents (phonetic) in the envelope and get her to

19 hand it to me.

20 Q You have no recollection of that email

21 whatsoever?

22 A I don't have specific recollection of it.

23 Q Why would -- why would you have to tell

24 Mr. Brock that he had to work magic to get those

25 statements into the envelope when you had Ms. Caretsky


Page 1733

1 on board, so to speak?

2 A There were certain periods of time during our

3 banking relationship that I was unsure what was actually

4 going on at the bank. Okay. Telling Bill to work his

5 magic does not mean that he had to pull the wool over

6 Ms. Caretsky's eyes. It just meant that they had to be

7 careful.

8 But I don't know. So what you're asking me to

9 do is guess, and I don't want to guess.

10 Q That email is very specific. That email from

11 you to Mr. Brock, it says, you are going to have to work

12 magic to get our statements in the envelope.

13 A And I don't know what was going on at the

14 time.

15 Q Why -- I -- let me ask a question.

16 Why would he have to work magic to get those

17 phony account balances into the envelope if Ms. Caretsky

18 was on board at the time?

19 A Here's the problem with your question: I

20 don't -- without the emails on either side of this, I

21 don't know what was going on at the bank at the time.

22 It's possible that there were going to be

23 problems at the bank. It was possible this was a

24 last-minute show that we were doing, and everything that

25 I'm doing here is speculating. You're asking me to


Page 1734

1 guess. I understand the point you're trying to make,

2 but I don't want to guess as to what was going on. I

3 can't tell you one way or the other.

4 Q That email is dated April 22nd, 2009, correct?

5 A That's correct.

6 Q Was Ms. Caretsky on board at that time, so to

7 speak?

8 A I told you yesterday, 15 times, I don't

9 remember what date she was on board.

10 Q Was there a period of time before she came on

11 board that Mr. Brock needed to work magic, so to speak,

12 and use slight of hand to get the phony balances into

13 the envelopes?

14 A There may have been. I don't recall

15 specifically.

16 MR. CRAIG: Thank you. I have nothing

17 further.

18 DIRECT EXAMINATION

19 BY MR. LAUER:

20 Q Good morning, Mr. Rothstein. I'm Eliot Lauer.

21 We have never met, have we?

22 A No, sir.

23 Q Okay. I represent the Centurion, Platinum,

24 Level 3 hedge funds.

25 The RRA law firm is in bankruptcy; you're


Page 1735

1 aware of that?

2 A I am sir.

3 Q You are not in bankruptcy; you're aware of

4 that, as well, right?

5 A Technically, I have not filed bankruptcy; but,

6 for all intents and purposes, I'm bankrupt.

7 Q You may have no assets, but you have not filed

8 for bankruptcy, and no one has filed on an involuntary

9 basis to have you placed in bankruptcy?

10 A To my knowledge, no, sir.

11 Q Mr. Herbert Stettin is the Trustee in the

12 bankruptcy for the RRA Law Firm, correct?

13 A Yes.

14 Q He's not your -- he's not your trustee?

15 A No, sir.

16 Q Okay. Are you familiar with the concept of in

17 pari delicto?

18 A No, sir.

19 I've heard the phrase before, but I don't

20 recall; I haven't practiced law in a little bit.

21 Q You may recall that it's a concept that, in

22 effect, says the trustee in bankruptcy stands in the

23 shoes of the debtor.

24 Are you familiar with that concept?

25 A Yes.


Page 1736

1 Q All right. So, Mr. Stettin, as Trustee,

2 stands in the shoes of the law firm, but he does not

3 stand in your shoes, does he?

4 A I think you're asking me for a legal opinion.

5 To my knowledge, based upon what you just told me, sir,

6 no, he does not.

7 Q Now, you pleaded guilty and you admit to

8 having engaged in or orchestrated a massive Ponzi fraud

9 along with other criminal activities, correct?

10 A That's correct.

11 Q Has anyone discussed with you why no

12 bankruptcy proceeding has been filed against you,

13 personally?

14 A No, sir.

15 Q Now, the three hedge funds that I represent

16 over the course of the year, between April '08 and April

17 '09, advanced, approximately, 444 -- $440 million in the

18 aggregate to the various Banyan entities that were owned

19 by George and Gayla Levin.

20 You're familiar with that?

21 A I am.

22 Q And over the course of their relationship with

23 the Banyan entities, which, in turn, had invested in

24 your fictitious client settlements, the funds received

25 back approximately $420 million, correct?


Page 1737

1 A That's what I have been told. I don't know

2 for certain. I haven't seen the accounting.

3 Q But you know that, approximately, the three

4 hedge funds ended up losing about $20-odd million?

5 A I thought it was closer to 18 million, but in

6 either direction, yes, that would be close to correct.

7 Q All right. So on the net cash-in/cash-out

8 basis, the funds are victims of the scam that you

9 perpetrated?

10 ALL PRESENT: Objection to form.

11 BY MR. LAUER:

12 Q They lost --

13 A They lost money.

14 Q Okay. That's an answer.

15 A Yeah, they lost money. Absolutely they did.

16 Q Now, we've never met; but on Friday

17 December 16th, you testified at page 1138 that you have

18 known some of the other lawyers in this case, correct?

19 A I -- I have known -- yes, I do know some of

20 the lawyers in this case from prior to my coming back

21 from Morocco, yes, sir.

22 Q All right. You were an active, prominent

23 lawyer and businessman in the Fort Lauderdale, South

24 Florida area, correct?

25 A Well, pseudo-prominent, but yes.


Page 1738

1 Q You were well known?

2 A I was.

3 Q Did have you a lot of publicity?

4 A I did.

5 Q You were seen about town?

6 A Yes, sir.

7 Q You owned fancy restaurants?

8 A Yes, sir.

9 Q All right. And you said that, in fact, you

10 knew some of these lawyers for two decades.

11 Did you know Mr. Scherer?

12 A I knew of Mr. Scherer for two decades. I knew

13 him probably for a good ten years, plus.

14 Q Okay. And tell us what interaction you had

15 with him or his law firm prior to you going to Morocco

16 in October 2009.

17 A Working backwards, I believe someone reminded

18 me during my testimony that our law firm had actually

19 represented him or his law firm at one point in time in

20 an action.

21 I don't remember, specifically, who at the

22 firm handled the case but someone did.

23 Prior to that, I used to see Mr. Scherer

24 hanging out with his group of friends at a restaurant

25 called Jackson's 450. It was owned by a mutual friend


39

1 of ours, Jack Jackson.

2 From time to time we would sit, we'd would

3 talk politics, talk cars, share a cocktail, nothing more

4 than that. Then I would see him at a lot of political

5 functions.

6 Q Okay. And am I correct that, again, being

7 prior to you going to Morocco, Mr. Scherer was quoted in

8 the media as saying positive things about you and your

9 rise and the growth of your law firm?

10 A Prior to it exploding?

11 Q Yes.

12 A I believe that's correct. I don't recall

13 specifically, but I believe you're correct.

14 Q Right, that he said positive things about you?

15 A I believe you're correct.

16 Q Okay. And since he knew you and he was

17 practicing law in South Florida, as were you, you would

18 have expected that he would know about your law firm and

19 the success that your law firm was achieving in a few

20 short years?

21 A I think that Mr. Scherer had at least, to my

22 knowledge, the same perception that I put out there for

23 everyone, that we were extremely successful and very

24 successful in a very short period of time, yes.

25 Q What was the nature of your law firm's


Page 1740

1 representation of his firm?

2 A I don't recall.

3 Q Did it involve an ethical violation of one of

4 his partners?

5 A That doesn't ring a bell, no, sir.

6 Q Did it involve potential financing of

7 litigation?

8 A I -- I don't know what you mean, sir.

9 Q Are you ever asked to -- or was your firm ever

10 asked to provide financing, either before you went to

11 Morocco -- before you went to Morocco, were you ever

12 asked, or was your firm ever asked, to finance

13 litigation that Mr. Scherer's firm had?

14 A I do not recall that, sir.

15 Q All right. Do you recall the Chiquito

16 litigation?

17 A Yes.

18 Q Okay. What do you recall about it?

19 A I recall the Cheetoh -- Cheetah -- Chiquito

20 was being sued for providing money that went to pay for

21 arms that ended up killing a lot of innocent people.

22 Q Okay. And were you asked to finance that?

23 A I don't recall that at all, sir, no.

24 Q The Wikipedia entry for you states that your

25 local mentors were wealthy attorneys, Donald McClosky


Page 1741

1 and Bill Scherer; are you familiar with that?

2 A That my Wikipedia? I have never seen my

3 Wikipedia entry. I've seen a lot of media about me, but

4 I never seen the Wikipedia entry.

5 Q Is it accurate to say that your local mentors

6 included Mr. Scherer that is the lawyer for the

7 plaintiffs in the Razorback action?

8 A I didn't consider him a mentor, no, sir.

9 Q Did you consider him a political mentor?

10 A He definitely piqued my curiosity and my

11 interest in politics, him and a significant number of

12 his friends, yes.

13 Q Okay. You were active in politics?

14 A I was.

15 Q You were a prominent contributor mostly to

16 Republican candidates?

17 A With other people's money, sir, yes.

18 Q But the public did not know it was with other

19 people's money?

20 A Certain of the public knew it was other

21 people's money; certain did not.

22 Q When you say "certain of the public," you mean

23 certain of your insiders knew?

24 A They were part of the public, yes, sir.

25 Q Is that how you define "public"?


Page 1742

1 A I define "public" as everybody. We are all

2 public, everyone. "Public" is a very, very, general

3 term.

4 Q It's --

5 A If you want to differentiate for me between

6 insiders and outsiders, it may clarify the question.

7 Q How about Herb Stettin, did you have any

8 interaction with Stettin before you went to Morocco?

9 A To my recollection, I didn't even know who he

10 was, except to hear his name.

11 Q And did you have any interaction with the law

12 firms or lawyers that are representing Mr. Stettin, the

13 Singerman Law Firm, Mr. Lichtman?

14 A I knew the Singerman Law Firm; I did not know

15 Mr. Lichtman, except to know who he was.

16 Q Do you know Mr. Singerman?

17 A I don't remember Mr. Singerman. I remember

18 meeting the Bergers.

19 Q Did you know that several of the members of

20 the Singerman firm were equity owners in Gibraltar Bank?

21 A I did know that, sir, yes.

22 Q And you became an equity owner of the

23 Gibraltar Bank?

24 A I did.

25 Q Did you ever have shareholder meetings?


Page 1743

1 A No, sir.

2 Q Okay. Now, you spent several -- you testified

3 that you spent several days with your counsel,

4 Mr. Nurik, preparing for the interview by Mr. Lichtman

5 and his team back in the summer.

6 Do you recall that?

7 A Yes. Two days.

8 Q Okay. And did you actually meet with

9 Mr. Lichtman?

10 MR. LICHTMAN: Objection to form.

11 A Those two days?

12 BY MR. LAUER:

13 Q Well, first you prepared with Mr. Nurik,

14 right?

15 A Yes. I just want to make sure I'm -- your

16 timing is correct.

17 I met two days with Mr. Nurik; the government

18 was present; and I met three days with Mr. Lichtman and

19 a bunch of other lawyers that were with him.

20 Q Okay. Did Mr. Lichtman, or anyone else, tell

21 you that in April 2009, after the -- the missed payments

22 on or about April 13, that his law firm had been

23 retained by my clients to advise them with respect to

24 how to deal with the missed payments and Mr. Levin?

25 MR. LICHTMAN: Objection.


Page 1744

1 A Okay. That April 13th, 2009, his law firm

2 was retained? I didn't know that until you just said

3 that.

4 BY MR. LAUER:

5 Q Okay. And did Mr. Lichtman or anyone tell you

6 that his law firm was representing the hedge funds in

7 November 2009, at the time that you went to Morocco or

8 after the time you went to Morocco but prior to --

9 withdrawn.


11 MR. LAUER: Sorry, what?


13 MR. LAUER: I withdraw the question.

14 BY MR. LAUER:

15 Q Did anyone tell you that Mr. Lichtman's law

16 firm was representing the funds in early November at the

17 time that you had returned from Morocco?


19 A I don't recall that, no, sir.

20 BY MR. LAUER:

21 Q Do you know that?

22 A To the best of my recollection, I'm hearing it

23 for the first time right now.

24 Q Okay. Did you -- when you met with

25 Mr. Lichtman, did you discuss the hedge funds with him?


Page 1745

1 MR. LICHTMAN: Objection to form.

2 A My recollection is that the hedge funds came

3 up, but I don't recall them being a focal point.

4 BY MR. LAUER:

5 Q Did you discuss the hedge funds during the

6 three days that you were with Mr. Lichtman?


8 MR. LAUER: What is the objection to

9 form?

10 MR. LICHTMAN: It's work product.

11 MR. LAUER: That's not a form objection.

12 BY MR. LAUER:

13 Q You may answer.

14 MR. LICHTMAN: Let me put a standing

15 objection on the record as to every question

16 that pertains to the injunction as to work

17 product. So that should be in the record. We

18 don't waive that.

19 THE WITNESS: Okay. Can you ask the

20 question again, sir? I'm sorry. I got caught

21 up in the lawyer stuff.

22 MR. LAUER: I would ask the court

23 reporter to ask the question again.

24 (Whereupon, the question was read back by the

25 court reporter as recorded above.)


Page 1746

1 A I'm certain that they came up. I don't recall

2 what we discussed.

3 BY MR. LAUER:

4 Q Okay. Now, you may recall that when Mr.

5 Scherer began examining you in this process last week,

6 that when objections were made to the leading nature of

7 some of his questions, Mr. Scherer said that he was

8 adverse to you because he was suing you for

9 $180 million.

10 Do you remember that?

11 A I do.

12 Q Okay. Now, do you also recall from your days

13 as an active lawyer, that, again, generally, when a

14 witness is being examined by an adverse counsel, that's

15 considered cross-examination?

16 A I recall that, yes, sir.

17 Q And, generally, during cross-examination, a

18 witness should not be communicating with anyone,

19 including his own counsel, about the subject matter of

20 the examination.

21 Are you familiar with that rule?

22 A In the middle of the examination, you are

23 talking about?

24 MR. SCHERER: Excuse me.

25 Objection to the form of that question.


Page 1747

1 MR. LAUER: Okay.

2 MR. SCHERER: Misstates the law.

3 THE WITNESS: All right. Are you asking

4 me --

5 BY MR. LAUER:

6 Q Are you familiar with the general rule that

7 during the period of cross-examination, including

8 breaks, including the evenings, including mornings and

9 breakfast meetings, that while the witness is in the

10 process of being cross-examined, he should not be

11 talking about the substance of his examination with

12 anyone, including his own counsel?

13 MR. SCHERER: Object to form.

14 A The substance, yes, that's my understanding.

15 BY MR. LAUER:

16 Q Okay. Now, since Mr. Scherer began

17 questioning you on Monday, December 12 --

18 A Yes, sir.

19 Q -- have you had any discussions with your

20 lawyer about the subject matter of your testimony?

21 MR. MR. NURIK: Objection. Instruct the

22 witness not to answer. Privileged.

23 MR. LAUER: It's not privileged.

24 MR. MR. NURIK: That's my response,

25 counsel.


Page 1748

1 MR. LAUER: I'm not asking what you

2 discussed. I'm asking you whether you had any

3 discussions.

4 MR. MR. NURIK: No. Your question

5 contained content. If you want to rephrase

6 the question, then we'll entertain it.

7 BY MR. LAUER:

8 Q Did you have discussions with Mr. Nurik at any

9 time after Mr. Scherer began examining you on

10 December 12th?

11 A I had discussions with him --

12 MR. MR. NURIK: That's it.

13 BY MR. LAUER:

14 Q Was the subject matter of the discussions, in

15 whole or in part, your -- the subject matter of your

16 testimony or proposed testimony?

17 MR. MR. NURIK: Objection. Privileged.

18 Instruct the witness not to answer, proposed.

19 BY MR. LAUER:

20 Q You're going to follow your counsel's

21 instruction?

22 A I am.

23 Q Now, at the same time, Mr. Scherer has taken

24 the position that he's not really adverse to you but

25 rather he has a common interest with you.


Page 1749

1 Are you familiar with that position?

2 A No, sir.

3 Q Do you know that some months ago, on behalf of

4 the funds, we subpoenaed information from your counsel,

5 Mr. Nurik, particularly in connection with

6 communications he had with Mr. Scherer?

7 A In order to answer that question, I would need

8 to discuss conversations I had with Mr. Nurik; and I'm

9 going to invoke the attorney-client privilege. I'm not

10 going to discuss conversations that I had with Mr. Nurik

11 or the substance of those conversations.

12 Q I am not asking whether you solicited advice

13 or whether he gave you advice. I'm asking factually,

14 are you aware of the fact that we subpoenaed Mr. Nurik

15 with respect to documents or information concerning his

16 communications with Mr. Scherer?

17 A My recollection is, is that there was some

18 subpoena issued. I don't know who issued it.

19 Q Okay. And do you recall that your response,

20 the counsel for the plaintiffs and your counsel took the

21 position that you were not adverse to the Razorback

22 plaintiffs but rather you had a common interest in this

23 case vis-a-vis the hedge funds?

24 A No, sir. I was not involved in that.

25 Q Are you aware that they have taken the


Page 1750

1 position that you have a common interest?

2 A No, sir.

3 Q Okay. This the first you're hearing about it?

4 A I don't know what the response was. I recall

5 speaking to Mr. Nurik about -- just about a subpoena,

6 but I don't recall ever discussing what the response

7 was.

8 Q I am no longer asking what you discussed; I'm

9 asking you if you now are aware of the fact that the

10 Razorback plaintiffs' counsel and your counsel take the

11 position that you have a common interest in this case

12 vis-a-vis the New York hedge funds?

13 A Until you just said that to me, I did not know

14 that was the position they took.

15 Q Do you agree with that?

16 A I think that I have a common interest with

17 anyone who is attempting to get money back from

18 innocent -- for innocent investors. Anyone that is

19 trying to get money for innocent investors, I believe I

20 have a common interest with them.

21 How far that common interest goes, I don't

22 know.

23 Q That's very noble.

24 A I'm not being rude to you. There is no reason

25 to be rude to me.


Page 1751

1 ALL PRESENT: Objection.

2 MR. LAUER: I wasn't being rude to you.

3 MR. SCHERER: I think the record reflects

4 that you were. Move to strike that snide

5 comment, frankly. It don't think we need to

6 do that. We haven't been doing that for a

7 week and a half.

8 BY MR. LAUER:

9 Q Now, are you aware that plaintiffs' counsel in

10 the Razorback case has filed a motion to expedite the

11 distribution of these transcripts to the media?

12 A I just heard that the other day, that someone

13 wanted to distribute it; I didn't hear who.

14 Q And as an active and indispensable participant

15 in this process, you are aware that during the course of

16 your testimony, you have actually had to cover, or did

17 cover, some indelicate matters concerning various

18 individuals, including testimony on allegedly indelicate

19 matters concerning some of my clients, right?

20 A Unfortunately, yes, sir, that is true.

21 Q Okay. So I would like to -- I would like to

22 try to delicately revisit these indelicate matters to

23 make sure that your recollection on these matters is --

24 is what you want it to be.

25 At page 310 of the transcript, you testified


Page 1752

1 that you and Ari Glass went to the Bahamas; do you

2 recall that?

3 A Yes.

4 Q And then you said at line 21, I'm reading part

5 of your answer: And I'll a range, quote, unquote,

6 entertainment for us for the trip.

7 Do you recall giving that testimony?

8 A Yes, sir.

9 Q Okay. And by your use of the entertainment in

10 quotes, I take it you were suggesting that the

11 entertainment was female?

12 A Yes, sir.

13 Q And then you went on to say: When we arrived

14 in the Bahamas, we checked into a hotel. We got two

15 rooms. We had a guest with us.

16 Do you recall that testimony?

17 A Yes, sir.

18 Q Again, is it fair for -- to take away from

19 your reference to the guest, that the suggestion here

20 was the guest was female?

21 A The guest was female, yes.

22 Q Now, am I correct that this particular female

23 guest was your female friend?

24 A She was.

25 Q All right. And, in fact, her name is Ali


Page 1753

1 Hecht (phonetic)?

2 A Correct.

3 Q And you brought her with you to the Bahamas

4 with Mr. Glass, correct?

5 A I did.

6 Q And at that -- on that occasion, if anyone

7 spent time with that female guest, it was you?

8 A With that female guest, I am the one who spent

9 time with her, yes.

10 Q Correct. And if we ask Ms. Hecht whether

11 anyone else spent time with Mr. Glass, would she say

12 that Mr. Glass engaged in these delicate activities

13 while he was in the Bahamas?

14 A She would have no way of knowing.

15 Q Now, you also said at page 851, while you were

16 in the Bahamas, you used a pretty strong word, you

17 mentioned "tax fraud"; do you remember that?

18 A Yes.

19 Q And were you commenting on what Mr. Glass --

20 the purpose of Mr. Glass's trip to the Bahamas in

21 connection with one of the funds being a so-called

22 off-shore hedge fund; do you remember that?

23 A I was commenting about what I was told the

24 purpose was and then what actually happened, yes, sir.

25 Q All right. You were told the purpose was he


Page 1754

1 had to authorize a transaction from the Bahamas, right?

2 A I was told that we were supposed to review

3 deals. Not we; he. Because they were my deals being

4 sent, that he was supposed to reviewed deals in the

5 Bahamas, make a determination whether or not they were

6 accepted, and then transmit his -- the result of his

7 decision.

8 Q All right. And do you have any personal

9 knowledge of whether Mr. Glass did or did not transmit a

10 formal authorization for the transaction from his hotel

11 room in the Bahamas?

12 A I was standing next to him when he transmitted

13 something to them. I assume that was the authorization

14 because the money appeared shortly thereafter.

15 Q Okay. And are you familiar with the technical

16 aspects that would or would not satisfy the IRS

17 requirements for off-shore trading in connection with

18 the hedge fund investment?

19 A No, sir.

20 Q So is it fair to say that perhaps your use of

21 the words "tax fraud" might have been a bit strong?


23 A In the way -- in my mind, it was a description

24 of what occurred, only because I expected him to be

25 doing this review. I'm just telling you what I am


Page 1755

1 thinking. Okay. So, in my mind, it appeared to be tax

2 fraud.

3 BY MR. LAUER:

4 Q But you don't know?

5 A I don't know the IRS code, no, sir.

6 Q Exactly. So for all you know, that was

7 compliant with the technical requirements for offshore

8 trading?


10 A That's totally possible.

11 BY MR. LAUER:

12 Q During the course of your testimony over these

13 several days, you have used expressions. Sometimes,

14 informally, you've talked about people being "players,"

15 or some people being "players, in part" and "sometime

16 players."

17 Do you recall, generally, that you have used

18 those expressions?

19 A Yes, sir.

20 Q All right. And I think as the deposition

21 progressed, would it be fair to say that you -- I think

22 you have clarified, and I just want to clarify again,

23 that the fact that you considered someone a player does

24 not necessarily mean that that person was engaged in

25 illegal or criminal activity?


Page 1756

1 A That's correct.

2 Q You also said at a different point in time in

3 your testimony that Ari Glass went to a strip club with

4 you, and I'm quoting you, I think, and he was serviced

5 there.


7 A Yes, sir.

8 Q All right. Now, Mr. Glass denies ever going

9 to a strip club with you, Mr. Rothstein; and is it

10 possible that you are mistaken as to whether you

11 personally went to a strip club with Mr. Glass?


13 A I'm not mistaken, no, sir.

14 BY MR. LAUER:

15 Q Okay. Did any third person accompany you and

16 Mr. Glass on this -- to a strip club in -- I'll leave it

17 there.

18 A I believe there were people there that I knew

19 when we got there, but I don't recall anyone actually

20 going with us, because I believe we were driving in a

21 two-seater car.

22 Q All right. Can you identify the name of any

23 individual who could testify that they were with you and

24 Mr. Glass at a strip club?

25 A Yeah. Ovadia Levy was there. He had some


Page 1757

1 other people with him. I think he was there almost

2 every night, so that would not have been unusual.

3 Jeff Schulman was there. He was waiting

4 tables the evening that we were there, I believe. If

5 I'm not mistaken, there may have been other people

6 there.

7 Q And what would Mr. Levy or Mr. Schulman

8 testify to, if they were called to testify about what

9 you say they observed in that strip club?

10 A I don't think they would say they observed

11 anything. Mr. Schulman was waiting tables up in a

12 restaurant section of Solid Gold, and Mr. Levy was

13 otherwise occupied. I'm being delicate.

14 Q I appreciate that or, at least, Mr. Levy

15 appreciates it.

16 Now --

17 A And just so you know, because I can't tell

18 you, and I want to make sure this is clear, I --

19 Q Go ahead.

20 A -- the way it works in that particular

21 establishment is you pay the girl and then they take you

22 into a back area that's curtained off.

23 I did not go in there with Mr. Glass to see

24 him get serviced, so I can only assume, based upon the

25 money that I gave and the fact that he did go with the


Page 1758

1 girl. So I can't tell you for certain what happened

2 back in there.

3 Q Nor are you able to identify anyone, other

4 than yourself, that can testify to that?

5 A Generally, when you're in a strip club, you're

6 not looking for witnesses, so no. Your focal point is

7 elsewhere.

8 Q Are you sure --

9 A I'm being delicate.

10 Q All right. You also testified about an escort

11 with Mr. Simony; do you recall that?

12 A I do.

13 Q Now, is this in connection with an occasion

14 when Mr. Simony slept over your house?

15 A Correct.

16 Q And do you recall that that was in the fall of

17 2009?

18 A I don't recall the time frame, but I do recall

19 him being at my home in the fall of 2009. That sounds

20 approximately correct.

21 Q And do you recall that you and Mr. Simony went

22 to a football game?

23 A I don't have a specific recollection, but

24 that's certainly possible.

25 Q Therefore, it would have been in the fall of


Page 1759

1 2009?

2 A I'm not doubting that was in the fall of 2009.

3 Q Do you recall that after the football game,

4 you went to your home?

5 A Excuse me. I do recall that. Yes, sir.

6 Q And when the two of you arrived, am I correct

7 that there were two women in your house waiting for you?

8 A No. There were no women there waiting for me.

9 I actually called them and had them meet us there.

10 Q Okay. And one of the two women who came was

11 your friend Ali Hecht?

12 A Correct.

13 Q And she had a friend?

14 A Correct.

15 Q And am I correct that you and -- you drank --

16 the four of you drank and talked for a while?

17 A Yes.

18 Q All right. And then you and Ms. Hecht went

19 into a hot tub in your house?

20 A No. We went swimming.

21 Q Okay. And that Jack and Ms. Hecht's

22 accompaniment did not go swimming?


24 Q And that you and Ms. Hecht came back shortly

25 afterwards, and that shortly after the two of you came


Page 1760

1 back from swimming, the two women left the home.

2 Do you recall that?

3 A No. What happened was we were all sitting

4 outside. Ms. Hecht and I went swimming. Jack stayed

5 there, talking to that female; and eventually they left.

6 That was not the female I was talking about Jack being

7 with.

8 Q Okay. You did not personally see Mr. Simony

9 have an indelicate relationship with that female, did

10 you?

11 A With that female, no; but I heard him having

12 an indelicate relationship with another woman that I

13 sent to his room.

14 Q When was that?

15 A After the two women left.

16 He was trying to make headway, to put it

17 delicately, with Ms. Hecht's friend; he was

18 unsuccessful. He went upstairs to my guest room. I

19 called an escort for him and sent her there, and then I

20 heard them having an indelicate visit, delicately.

21 Q Okay. And who would testify to that besides

22 you?

23 A Is it okay for me to say the name of the place

24 I called?

25 Q You don't have to say the place. I'm asking


Page 1761

1 you the name of the human being that you say would

2 testify to what you have just said, other than yourself.

3 A There may actually -- you have to check the

4 video records from my home, but there may be actually a

5 record -- I don't know if they still exist -- of the

6 female entering my home and then leaving my home.

7 Q No one has shown you those video records, have

8 they?

9 A Not to my knowledge, no, sir.

10 Q So you have no reason to believe that, in

11 fact, there are such video records?

12 A I don't know whether they exist one way or the

13 other.

14 MR. LAUER: Exactly. Exactly.

15 We need to take a two-minute break so we

16 can get one of our colleagues in.

17 (Whereupon, a recess was had.)

18 BY MR. LAUER:

19 Q Mr. Rothstein, you were asked about a June 2,

20 2010, letter that you wrote the sentencing judge.


22 A Yes, sir.

23 Q All right. And in that letter, you referred

24 to so-called false exculpatory emails that you had sent

25 your closest co-conspirators.


Page 1762

1 A To some of them, yes, sir.

2 Q And am I correct that you did not send any

3 false exculpatory emails to any of my clients?

4 A I did not consider your clients to be

5 co-conspirators.

6 Q Okay. And in fact, in connection with the

7 forfeiture and restitution process, to victims of your

8 activities, my clients are listed as victims worthy of

9 receiving their proportion and share of the assets that

10 are recovered by the amounts that's governed.

11 Are you familiar with --

12 MR. CIMO: Object to form.

13 A I recall seeing their name on a restitution

14 list.

15 BY MR. LAUER:

16 Q And by the time that they were put on that

17 list as victims entitled to participate in the

18 restitution, you had already been in a cooperating mode

19 with the U.S. Government, right?


21 BY MR. LAUER:

22 Q I'm not asking you for what you said; I'm just

23 asking you time-wise you had already been cooperating

24 with the government?

25 A Correct.


Page 1763

1 Q And you were debriefed by the government?

2 A Correct.

3 Q All right. And it was following that, your

4 cooperation and your debriefing, that the government

5 prepared and approved the final report as to restitution

6 listing the victims?

7 MR. CIMO: Objection to form.

8 A I would be guessing. I have no idea when or

9 how they prepared that.

10 BY MR. LAUER:

11 Q Okay. Now, you became somewhat of an expert,

12 if you will, in the operation of a Ponzi scheme. Is

13 that fair to say?

14 A Can you ask that again?

15 Q You became -- you --

16 A I'm sorry. For some reason I didn't hear what

17 you said.

18 Q You developed an expertise in implementing,

19 managing, and understanding the psyche of players and

20 individuals involved in your Ponzi scheme?

21 A Unfortunately, yes, sir.

22 Q All right. And, in fact, you implemented what

23 some would describe as a brilliant series of maneuvers

24 in order to carry out your scheme for so long involving

25 so many people.


Page 1764

1 A Criminally sophisticated, yes. Morally,

2 abhorrent.

3 Q Because, in fact, the money was not there,

4 right? Was not in the accounts?

5 A No, sir. It was a fraud.

6 Q And the clients weren't there, right?

7 A That's right.

8 Q And the settlements that were being sold at a

9 discount did not exist?

10 A They were all phony, sir.

11 Q And would you agree with me, therefore, that

12 no -- no intelligent adult would knowingly invest in

13 such a scheme?

14 A I would not agree with that, sir.

15 Q If you had told Mr. Von Allmen that he was

16 investing in a Ponzi scheme and that the settlements do

17 not exist, would you have expected him to invest with

18 you?

19 A Mr. Von Allmen specifically, absolutely not.

20 Q And if you had told Mr. Discala that the

21 settlements do not exist, the money is not in the

22 account, I am lying to you, but you should still invest

23 with me, would he invest with you?

24 A No, sir, not to my belief.

25 Q And do you believe that any intelligent adult


Page 1765

1 would invest with you knowing that the settlements do

2 not exist and the accounts do not exist and that you

3 have essentially bribed bankers and lawyers to create

4 fraudulent documents?


6 A Yes, sir.

7 UNKNOWN SPEAKER: Join.

8 BY MR. LAUER:

9 Q You believe there are?

10 A They did. So, yes, sir. That is the

11 unfortunate truth.

12 Q Now, you've testified about your opinion as to

13 what different individuals might do under different

14 circumstances if they knew -- if they had known that you

15 were engaged in fraudulent activity. Do you remember

16 that?

17 A I do, sir.

18 Q And then later on in your testimony I think

19 you clarified for the record that you wanted to make a

20 distinction between your opinion of people's character,

21 what they might do on the one hand, and your actual

22 knowledge of what people in fact knew on the other.


24 A Correct.

25 Q In December of 2008, do you recall that the


Page 1766

1 Madoff Ponzi scheme was disclosed?

2 A Yes, sir.

3 Q All right. And Bernie Madoff was an icon on

4 Wall Street. He had been head of NASDAQ. And the news

5 that he had been running what was reported at the time

6 to be a $60 billion Ponzi scheme was startling, was it

7 not?

8 A Yes, sir.

9 Q And that revelation was coming after the

10 revelation that Marc Dreier, a prominent lawyer, had

11 defrauded clients and investors.


13 A I don't remember which came first, but I

14 remember them both being in the news, yes.

15 Q And December 2008 was finishing up a horrific

16 year on Wall Street, which saw the collapse of Bear

17 Stearns and Lehman Brothers.


19 A Yes, sir.

20 Q There were massive hedge funds redemptions?

21 A I recall discussing that with Mr. Preve but I

22 don't recall following the hedge funds specifically.

23 Q There was massive confusion and uncertainty on

24 Wall Street.

25 A That I recall.


Page 1767

1 Q And particularly in the wake of those

2 spectacular revelations about Dreier and Madoff,

3 investors and businessmen alike engaged in additional

4 due diligence concerning their various business

5 operations, did they not?


7 A I have no idea what anyone was doing, except

8 the people that I was doing business with.

9 BY MR. LAUER:

10 Q And my clients were people that were doing

11 business with Banyan and relying on your settlements as

12 collateral; were they not?


14 A They were.

15 BY MR. LAUER:

16 Q And they approached you in December to do

17 additional due diligence?

18 MR. CIMO: Objection. Form.

19 A That's the time frame, yes, sir.

20 BY MR. LAUER:

21 Q And including in that additional due diligence

22 was a site visit to one of the banks that you were

23 using, right?

24 A Yes, sir.

25 Q All right. And in addition, the visit by


Page 1768

1 Mr. Jedwab and Mr. Glass to speak live and

2 extemporaneously with some of the lawyers that you had

3 represented were referring cases to your law firm,

4 right?

5 A Correct.

6 Q And will you agree that the fact that an

7 investor or lender does a due diligence does not mean

8 the lender or investor knows that the subject of the due

9 diligence is committing fraud?


11 A I wouldn't be able to tell you what they were

12 thinking one way or the other.

13 BY MR. LAUER:

14 Q I'm asking you generally.


16 A Just because they are doing due diligence

17 doesn't mean they believe there's fraud, no, sir.

18 BY MR. LAUER:

19 Q Correct. In fact, the purpose of due

20 diligence is to eliminate what auditors call fraud risk?



23 MR. LAUER: What's the objection?

24 MR. CIMO: Objection is asking him to

25 speculate. No foundation for his testimony.


Page 1769

1 He's not an auditor. He's not an accountant.

2 MR. LAUER: Anything else?

3 MR. CIMO: That's it.

4 BY MR. LAUER:

5 Q Many of the investors in this case, including

6 the individuals and entities that are suing my clients,

7 claim to have performed due diligence, correct?

8 A Yes, sir.

9 Q All right. And my clients performed due

10 diligence, correct?


12 A Yes.

13 MR. LAUER: Now, with Mr. Scherer's

14 stipulation, I would like to have incorporated

15 in the transcript, so we don't have to redo --

16 ask you question and answer, page -- the

17 testimony that you gave during the 2004

18 examination, starting at page 151, line 17,

19 when you said -- when you were asked, "What

20 was Mr. Adler's' role," through page 158,

21 line 10, when you were asked, "And Russ was

22 responsible for delivering the cash?

23 "Answer: Yes."

24 Does everybody agree to that?

25 MR. SCHERER: I agree on behalf of my


Page 1770

1 clients to that stipulation.

2 And I would like to use this opportunity

3 to clean up what I asked for the stipulation,

4 that the qualification questions at the

5 beginning of the 2004 exam concerning why

6 Mr. Rothstein came back and those questions

7 also be put into this transcript, and I reread

8 the transcript and understand that the court

9 reporter has appended to the back of this

10 transcript, or intends to, those what I call

11 qualifying questions.

12 So I agree to what you want to do, and I

13 would like to make sure that no one objects to

14 what I suggested at the beginning of my

15 examination, which would have been Monday

16 afternoon, concerning those initial questions

17 that Mr. Lichtman asked.

18 MR. LICHTMAN: I think that counsel for

19 the Trustee, that we had already reached that

20 stipulation, because when that was proffered

21 for the record, nobody from the gallery said

22 anything to the contrary when asked -- I think

23 it was twice.

24 But notwithstanding Trustee, as to his

25 Rule 2004 Exam, has no objection to the


Page 1771

1 stipulation that you offered, Mr. Lauer.

2 MR. LAUER: Okay.

3 MR. CIMO: And the Trustee has no

4 objection with regard to the litigation

5 pending in the adversary case.

6 MR. LAUER: Okay.

7 BY MR. LAUER:

8 Q Now, at the time that they came down to meet

9 with these referring lawyers, the funds had about 175 to

10 $180 million invested through Banyan in what has been

11 revealed as your scheme, correct?

12 A Correct.

13 Q And do you know that a significant portion of

14 that money was actually the personal money of the fund

15 managers?

16 MR. CIMO: Object to the form.

17 A I did not know that.

18 BY MR. LAUER:

19 Q Do you know that now?

20 A Now that you just told me, assuming that

21 you're telling me the truth, which I am --


23 A Yes.

24 BY MR. LAUER:

25 Q You can assume -- you can assume that.


Page 1772

1 Haven't you read the -- haven't you read the

2 papers in the Razorback case? Have you read --

3 A What do you mean "the papers"?

4 Q Have you read the depositions of the fund

5 managers?

6 A I don't recall reading those specific

7 depositions. I may have read some pages from them.

8 But --

9 Q Did you know at the time that you were

10 interacting with the hedge funds that the fund managers

11 had their personal funds in the hedge fund?


13 A I don't recall knowing that one way or the

14 other.

15 BY MR. LAUER:

16 Q Did you do due diligence about the hedge

17 funds?

18 A Did I, no, sir.

19 Q Did you look up their publicly-filed

20 documents?

21 A No, sir.

22 Q Did you look up the PPM's which describe the

23 general partners' role in the hedge funds?

24 A No, sir.



Page 1773

1 MR. LAUER: What's the objection?

2 MR. CIMO: Assumes facts not in evidence.

3 It assumes the PPM is public record. It

4 assumes he's ever heard of PPM. It assumes he

5 knows what a PPM is. Lack of foundation.

6 Speculation.

7 BY MR. LAUER:

8 Q Now, when Brian and Ari met with these three

9 law firms, they did not choose those lawyers, did they?

10 A No, sir.

11 Q You chose them, right?

12 A Along with my partners, yes, sir.

13 Q Okay. And you did not tell them that these

14 were the only three lawyers referring cases to your law

15 firm, right?

16 A That's correct, sir.

17 Q All right. These were examples of lawyers who

18 were referring cases to your law firm?

19 A Correct, sir.

20 Q You testified that when you went to some of

21 these offices you thought they were a bit modest, so to

22 speak. Do you remember that testimony?

23 A They were, sir, yes. And I do recall the

24 testimony.

25 Q Did you tell Mr. Adler after you attended


Page 1774

1 these visits that you thought he needed to get you one

2 or more additional lawyers who had more impressive

3 offices?

4 A I don't recall doing that. I may have.

5 Q Do you recall doing it?

6 A I don't recall doing it, no, sir.

7 Q Okay. You thought in the end that

8 notwithstanding the modest nature of their offices that

9 the presentations were credible, correct?

10 A I wasn't thrilled with the presentations but I

11 thought that they went well. More from the standpoint

12 of the lack of questions that were being asked. I

13 thought that my guys, meaning the lawyers, did a

14 credible job. And I was extremely pleased that

15 questions that I was afraid were going to be asked,

16 weren't asked.

17 So that's where my mindset is as those

18 complete...

19 Q And these lawyers were telling Brian and Ari

20 to their faces that they referred cases to your law

21 firm. They were members of the Bar, correct?

22 A They were, sir.

23 Q All right. And they were, to your knowledge,

24 being bribed to misrepresent material facts to

25 individuals doing due diligence, correct?


Page 1775

1 A To my knowledge, yes, sir.

2 Q Okay. So in effect, these members of the Bar

3 were actively engaged in felonious activity, correct?

4 A To my understanding, yes, sir.

5 Q And as an expert in felonious activity, do you

6 think it reasonable for someone to -- someone to assume

7 that when he or she talks to a member of a Bar in his

8 office about referring cases to a prominent law firm

9 that the member of the Bar is engaged in a felony?


11 A In this day and age, I think the whole reason

12 that you go talk to them and meet face to face is to

13 make sure they're not engaged in a felony.

14 I, unfortunately, was not the first lawyer to

15 engage in a felony and likely, unfortunately, I won't be

16 the last.

17 BY MR. LAUER:

18 Q You were convinced that Brian, who you've

19 described several times as a straight-shooter, was

20 convinced that in fact these lawyers were referring

21 multi-cases to your law firm?


23 BY MR. LAUER:

24 Q Correct?

25 A When we left those meetings, I was convinced


Page 1776

1 that they believed what those lawyers told them, yes,

2 sir.

3 Q These meetings occurred at the very end of

4 December, 2008, right?

5 A To the best of my recollection.

6 Q And about ten days before the enhanced due

7 diligence trip by Ari and Brian to meet with the

8 referring lawyers, you had accompanied Jack Simony on a

9 due diligence trip to TD Bank.


11 A Which visit was that? Was that the one where

12 we went to Deerfield or --

13 Q Correct.

14 A I recall that, yes, sir.

15 Q And that was about December 17th, 2008?

16 A I don't remember the date.

17 Q And do you recall that that was shortly after

18 the Madoff and Dreier matters were disclosed?

19 A Yes, sir.

20 Q All right. And then Jack -- Jack had arranged

21 to trace the steps of -- prior to Jack going with you to

22 the Deerfield branch, had Mike Szafranski been reviewing

23 screen shots or what he thought was an active screen

24 account of your escrow accounts at TD Bank?

25 A Sometimes yes. Sometimes no.


Page 1777

1 Q All right. And to your knowledge, was

2 Szafranski representing to the funds and to the fund

3 managers that he was observing wires coming into the

4 accounts from the settling defendants, correct?

5 A To my knowledge, yes, sir.

6 Q And he was observing the funds sitting in the

7 accounts waiting to be disbursed at the appropriate time

8 in accordance with the settlement agreements, correct?

9 A To my knowledge, that's correct, sir.

10 Q And now Simony was coming down to do a

11 double-check to visit the actual branch of TD Bank to

12 see the accounts, correct?


14 A I would be assuming it was a double-check. He

15 came down and we did go to the bank.

16 BY MR. LAUER:

17 Q All right. And why did you go to the -- why

18 did he want to go to the bank?

19 A I would be assuming. You want me to assume?

20 MR. CIMO: Objection.

21 A I mean, there's a purpose behind it but I'm

22 guessing as to what his purpose is. He may have had all

23 kinds of purposes.

24 BY MR. LAUER:

25 Q Did he --


Page 1778

1 A My purpose was to get him there to show him

2 the fake balances.

3 Q Correct.

4 And originally, you were planning to visit the

5 Weston branch?

6 A That's the branch we always visited, yes, sir.

7 Q And --

8 A Almost always.

9 Q And shortly before making arrangements to

10 visit that branch, Mr. Simony was instructed by his

11 colleagues in New York to have you take -- have you take

12 him to a different branch.



15 A I don't recall why we changed direction, but I

16 remember distinctly changing plans.

17 BY MR. LAUER:

18 Q All right. And did you have at the time any

19 relationship with individuals within the Deerfield

20 branch?

21 A No, sir.

22 Q Did you make arrangements to visit the

23 Deerfield branch with Mr. Simony?

24 A I did.

25 Q All right. And could you describe what


Page 1779

1 happened at the Deerfield branch?

2 A My memory is not clear as to whether or not we

3 utilized someone at the branch or whether or not we had

4 Mr. Caputi playing that banker. So I can't be specific.

5 I know that he was shown phony balances. I remember him

6 attempting to engage in a longer conversation with

7 whoever it was we were meeting with and me attempting to

8 cut him off. And I also remember us having to rush to

9 get him to the airport because he was leaving right

10 after that.

11 But my memory is not clear and I do not want

12 to mislead you at all. So I can't tell you who it was

13 that he met with at that bank. I don't have a specific

14 recollection as I sit here today.

15 Q But "he" is Mr. Simony?

16 A Yes, sir.

17 Q And Mr. Simony at the Deerfield branch was

18 given phony account balances?

19 A Yes, sir.

20 Q And those balances, albeit phony, showed

21 significant funds on account in various accounts that

22 you controlled?

23 A Correct, sir.

24 Q Do you have the exhibits before you?

25 A I don't -- no. I don't have the exhibits.


Page 1780

1 I'm sorry.

2 Q While we're waiting for the exhibits, we'll

3 just use the time because time is short.

4 A Sure.

5 Q You testified at page 909 that you thought Ari

6 Glass was prepared to deceive his partners with respect

7 to side deals. Do you remember that?

8 A That was my belief, yes, sir.

9 Q Now, the only side deal, so-called side deal

10 that Ari Glass did, was one with Dr. Rosenblat the

11 Intracoastal.


13 A That's the one I recall, yes, sir.

14 Q All right. And in fact, Intracoastal only did

15 one settlement for about 950 -- they invested $950,000.


17 A I do not. I do not remember how many they

18 did.

19 Q Okay. I'm showing you exhibit -- we'll come

20 back to Intracoastal.

21 A Okay.

22 Q I'm showing you Exhibit 133.

23 There's a series of emails concerning the

24 enhanced due diligence trip of Brian and Ari.

25 Do you remember seeing this?


Page 1781

1 A All these emails between the internal guys at

2 the three funds I saw subsequent to my return from

3 Morocco.

4 The email at the end, which is the one I wrote

5 to Jack Simony with a copy to Mr. Preve, I recall

6 drafting.

7 Q Okay. And what you originally wanted them to

8 do was basically ask very structured questions to law

9 firms that you were giving them, correct?

10 A Yes, sir.

11 Q And, in fact, they would ask the law firms

12 whether they referred cases to your law firm, right?

13 A Yes. I wanted them to say that they referred

14 cases to our law firm and they were happy with our

15 representation.

16 Q But that very structured, written

17 communication would not enable the fund executives to

18 probe as to the nature of the cases, right?

19 A It would enable them to probe as much as I

20 wanted them to probe at that time.

21 Q Okay. And they --

22 A They were not happy with that, apparently.

23 Q They wanted to probe more?

24 A Brian certainly did, yes.

25 Q Well, and he was the one in charge of the due


Page 1782

1 diligence, right?

2 A I don't know exactly who was in charge. He

3 certainly seemed to be taking the lead but what was

4 going on behind the scenes, I don't know.

5 Q At any point in time did anyone, to your

6 knowledge, limit or try to limit Brian's due diligence

7 activities?

8 A That's an interesting question.

9 Q Just answer it.

10 A I'm going to.

11 The conversations that I was having with

12 Mr. Simony and Mr. Nordlicht, led me to believe that

13 they were trying to appease him. But what was going on

14 behind the scenes, that I can't tell you. For all I

15 know, they were trying to play me, as we learned later

16 on Ari was not really as angry as he was -- at least

17 from what I'm hearing here today as he appeared to be to

18 me. So I can't tell you behind-the-scenes what was

19 going on.

20 The appearance to me was Jack was trying to

21 just get past it, just get past. Mr. Nordlicht, these

22 people are crazy. Just deal with them and we'll get

23 past this.

24 Q But Brian was not limited. No one shut Brian

25 down in your presence to prevent him from asking


Page 1783

1 whatever questions he wanted to ask?

2 A In my presence, no, sir.

3 Q All right. And no one told you that they had

4 shut him down outside of your presence?

5 A Well, Jack used to tell me all the time that

6 he's got Brian under control. He told me don't worry

7 about it, we've got him under control. Whether he

8 actually did or not, I have no idea.

9 Q Well, he certainly was not able, under your

10 view of life, to prevent Brian from coming down and

11 doing the freestyle due diligence, was he?

12 A He wasn't in a position to do that?

13 Q He didn't, right? Brian came down, correct?

14 A Brian did come down. I have no idea what Jack

15 told him one way or the other.

16 Q Right. You don't?

17 A I do not. I can only tell you what Jack told

18 me.

19 Q You'll acknowledge that there was a lot of

20 good cop, bad cop going on?


22 A I don't know whether it was or not.

23 Now, it certainly appears that there was, but,

24 again, I would be guessing and I do not want to guess.

25


Page 1784

1 BY MR. LAUER:

2 Q And is it fair to say that just as not

3 everything you told the funds was 100 percent, you now

4 know that not everything they told you about what their

5 intentions were was 100 percent?

6 A It certainly appears that way, sir.

7 Q Okay.


9 Platinum and Centurion's Exhibit 224 for

10 Identification.)

11 BY MR. LAUER:

12 Q I'm handing you Exhibit 224, which is the

13 Trustees' Complaint against Intracoastal.

14 Have you seen this before?

15 A No, sir.

16 Q Okay. Take a look at the chart.

17 A Okay.

18 Q See the chart?

19 MR. MR. NURIK: Which page are you

20 talking about now?

21 THE WITNESS: Page 5?

22 BY MR. LAUER:

23 Q Page 5.

24 A Yes, sir.

25 Q And that lists one transaction, does it not?


Page 1785

1 That was a payout of about $1,299,000?

2 A That's what that chart represents, yes, sir.

3 Q All right. And the payout ran from March to

4 May, 2009?

5 A It says here March to June.

6 Q March to June 2009?

7 A Yes.

8 Q And that represented a transaction in which

9 $950,000 was invested in or about January of 2009.


11 A I don't remember the specific transaction.

12 There were too many to remember individual ones unless

13 it really sticks out in my head, like the $11 million

14 Regent transaction.

15 Q When you look at this transaction, does

16 this -- when you look at this document, 223, does that

17 refresh your recollection that there was a single

18 transaction in Intracoastal and no other?

19 A It does not.

20 Q Is it fair to assume that if there had been

21 other transactions, the Trustee would have included such

22 transactions in its adversary complaint?


24 A I don't know what they would have done.

25


Page 1786

1 BY MR. LAUER:

2 Q Can you -- as you sit here now, are you able

3 to testify definitively that in fact there was an

4 additional transaction or there were additional

5 transactions --

6 A No, sir.

7 Q -- with Intracoastal?

8 A Can not say one way or the other.

9 Q Now, do you know that, in fact, Intracoastal

10 was intended to be done for the benefit of Mr. Glass's

11 partners?


13 A I didn't know that one way or the other.

14 BY MR. LAUER:

15 Q Do you now know it?


17 A No. I was -- the way Ari had described it to

18 me, it always seemed to me like it needed to be kept

19 quite, that it was -- that that was the whole reason he

20 had Dr. Rosenblat involved, that it was going to be done

21 this way and it was going to be Rosenblat's to run with

22 and he was going to help him get geared up and he would

23 benefit from it and Rosenblat would benefit and

24 ultimately I would benefit.

25 We did a whole lot of dog and pony shows, I


Page 1787

1 don't remember specifically what became of them. So

2 that was not my understanding.

3 BY MR. LAUER:

4 Q Have you come to learn that Intracoastal was,

5 in fact, intended for the benefit not only of Mr. Glass

6 but also Nordlicht, Bodner and Huberfeld?


8 A No. I never knew that.

9 BY MR. LAUER:

10 Q Now, you mentioned the Regent transaction, the

11 $11 million funding by Regent?

12 A Yes.

13 Q And that occurred in the first of January in

14 2009, right?

15 A I don't recall the specific date but the

16 papers would say specifically -- exactly when it

17 occurred, as would the emails.

18 Q And, in fact, Regent occurred less than a week

19 after Brian and Ari completed their enhanced due

20 diligence visits to the referring lawyers?


22 BY MR. LAUER:

23 Q Do you remember that?

24 A I don't have a specific recollection of it,

25 no, but, again, all this would be established by emails


Page 1788

1 and paperwork.

2 Q All right. Do you now know who were the

3 participants in the Regent transaction?

4 A I can only tell you what my understanding was

5 of who it was.

6 Q You can tell me your understanding at the

7 time, right?

8 A Yes.

9 Q What was your understanding at the time?

10 A That Murray was involved in it. Jack Simony.

11 Frank Preve. That was initially.

12 Later on, as is evidenced by email traffic, I

13 learned that Mr. Nordlicht knew about it. I don't

14 recall anything further at this moment.

15 Q Do you now know that the participants in

16 Regent in addition to Mr. Preve through his company SFS,

17 were Mr. and Mrs. Nordlicht, Mr. and Mrs. Bodner, and

18 Mr. and Mrs. Huberfeld?


20 A I seem to recall seeing some documents that

21 indicated that but I don't have a recollection one way

22 or the other.

23 BY MR. LAUER:

24 Q And in the documents that you have seen, did

25 you come to learn that Mr. Simony was not a participant


Page 1789

1 financially that was in the Regent transaction?


3 A No. I never knew that. It was always my

4 understanding from Frank that Jack was participating in

5 some way.

6 BY MR. LAUER:

7 Q Take a look at Exhibit 46. Do you have it?

8 A I -- not unless you just gave it to me.

9 Q No.

10 A I don't have any exhibits with me.

11 THE WITNESS: Excuse me, sir. It's

12 10:00. Can we take a quick break so I can use

13 the rest room?

14 MR. LAUER: Whatever.

15 THE WITNESS: It's your show.

16 MR. LAUER: No, it's your show, but we

17 can take a break.

18 (Thereupon, a recess was taken.)

19 BY MR. LAUER:

20 Q Showing you Exhibit 46, Mr. Rothstein, you

21 were shown this on your direct examination. This is an

22 email dated December 1, 2008, from Preve to you.

23 Do you see it?

24 A Just give me one second.

25 Okay.


Page 1790

1 Q You see the reference to the $3 million

2 licensing fees; Jack and the 11 million pending

3 transaction.

4 Do you see that?

5 A I do.

6 Q And this is on December 1, 2008?

7 A Correct.

8 Q And to best of your recollection, is the

9 $11 million pending transaction the transaction that

10 later became known as Regent?

11 A Yes.

12 Q So now I'm showing you Exhibit 225, which is

13 the Trustee's complaint against Regent Capital Partners.

14 Do you see that?



17 Identification.)

18 A I do.

19 Q And Regent Capital Partners is the entity that

20 did that $11 million transaction, correct?

21 A Yes, sir.

22 Q Now, if you would turn to the first page of

23 225; do you have that?

24 A The first page.

25 Q The top page, you see who is sued?


Page 1791

1 A I do.

2 Q The Trustee sued Regent Capital Partners,

3 that's the entity that invested the 11 million, right?

4 A Yes.

5 Q And it also sued Mr. and Ms. Huberfeld,

6 Mr. and Ms. Bodner -- I'm sorry, the Bodner Family

7 Foundation and Mr. and Ms. Nordlicht.

8 Do you see that?

9 A Yes.

10 Q And it sued SFS Capital, which is Mr. Preve's

11 company, right?

12 A Correct.

13 Q And the Trustee has brought this lawsuit in

14 order to recover payments that were made to Regent and

15 to the individuals and SFS Capital.

16 Do you see that?

17 A That's what it appears to be, yes, sir.

18 Q The Trustee has not named or sought to recover

19 funds from Mr. Simony with respect to Regent Capital.

20 Do you see that?

21 A I do.

22 Q Regent Capital, are you aware of any

23 proceeding by the Trustee to recover funds from

24 Mr. Simony concerning Regent Capital?

25 A Not to my knowledge. I don't know one way or


Page 1792

1 the other.

2 Q And is it fair to conclude that you have no

3 personal knowledge that Mr. Simony ever received any

4 money from Regent Capital?

5 A I don't know one way or the other.

6 Q By the way, if you look at the chart in

7 Exhibit A, which is attached to the adversary complaint,

8 Exhibit 225 --

9 A Okay.

10 Q -- you'll see that there is a list of six

11 payments to Regent Capital Partners, the first being

12 January 7, 2009, right?

13 A Correct.

14 Q And the second on January 8, 2009?

15 A Correct. Yes, sir.

16 Q The third, February 9, 2009?

17 A Yes, sir.

18 Q All right. Now, if you add up the first three

19 payments, it's over $7 million, right?

20 A Yes, sir.

21 Q And the 11 million was invested in the

22 beginning of January 2009.


24 A I don't remember the specific date, but the

25 paperwork would show that clearly.


Page 1793

1 Q So, in fact, I'm correct that the 11 million

2 was invested in the beginning of January, 2009; within a

3 month, 7 million of the 11 million had been returned to

4 the investors, correct?

5 A That's correct.

6 Q And, in fact, within 60 days, almost the

7 entire 11 million had been returned?

8 A That's what this chart shows, yes, sir.

9 Q Do you have any reason to challenge the chart?

10 A No, sir.

11 Q Okay. And, in fact, what this chart shows is

12 that the very last payment to Regent was made May 7,

13 2009.

14 Do you see that?

15 A I do, sir.

16 Q No further payments to Regent after May of

17 2009, right?

18 A That's what this chart shows, yes, sir.

19 Q Now, at Page 1189 of the transcript of your

20 deposition, you were asked the following question by

21 Mr. Scherer at line seven:

22 Question: Well, let me ask you this. Who, in

23 doing due diligence, would ever invest without the

24 positive reference of a fund that was primarily funding

25 the investment for 18 months? Wouldn't that be


Page 1794

1 absolutely critical to any kind of diligence?

2 And there was an objection to form.

3 And then you gave this answer.

4 Answer: Yes. Based on my experience in

5 running a Ponzi scheme for four or five years, the only

6 people that ever invested without doing that type of

7 diligence -- meaning talking to the fund -- were people

8 who were in the know about the fact that we were

9 committing a fraud.

10 "People that were in the know about the fact

11 that we were in the act of committing a fraud," did you

12 give that answer in response to be given that question

13 the other day at page 1189 of the transcript?

14 A I did.

15 Q Now, would you apply that to -- do you know

16 that Mr. Von Allmen invested $47 million of his and his

17 own family's money in May and June of 2009?

18 A I don't know the dates. I know they invested,

19 in total, over -- I believe over $100 million.

20 Q Do you know that the first bulk of the -- the

21 bulk of the investment was made through the introduction

22 of Barry Bekkedam through the Banyon income fund?

23 A To my knowledge, there was always a lot of

24 dispute who was actually responsible for getting that.

25 So you're asking me to guess as to what really went on;


Page 1795

1 I can only tell you what my understanding was.

2 Q Well, putting aside whether Bekkedam deserved

3 the credit, was Bekkedam involved, or claiming to be

4 involved, in making the introduction between Von Allmen

5 and Preve and Levin in connection with the initial

6 investments?

7 A At some level, yes.

8 Q These were the initial investments, as

9 distinct from the so-called Clockwork, Discala,

10 Razorback and D3 Capital investments in October?

11 A Yes, that's correct.

12 Q So with respect to the earlier investments,

13 the investments that were made in the Banyan income

14 fund, am I correct that approximately $47 million was

15 invested by Von Allmen and his family in or about May or

16 June of 2009?

17 A I don't know the dates. They did invest

18 through various sources. I can't tell you for certain

19 without seeing all the financial charts.

20 Q Do you know that Mr. Von Allmen made those

21 investments, that is the $47 million, and he did not

22 have any contact with the funds?

23 MR. SCHERER: Object to form of the

24 question.

25 A No. He was being told by Mr. Preve and Mr.


Page 1796

1 Levin that everything was current, and he was being told

2 by me.

3 So I can only surmise that they took our word

4 for it and checked up on it later, but we did tell him

5 we were current because we understood the funds were

6 going to tell him we were current.

7 BY MR. LAUER:

8 Q But he did not have any contact with the

9 funds; do you know that?

10 A I have no way of knowing one way or the other.

11 MR. SCHERER: Objection to form.

12 BY MR. LAUER:

13 Q Do you know that he has testified in this case

14 that he did not have any contact with the funds?

15 A I never read his testimony.


17 BY MR. LAUER:

18 Q And do you know that Mr. Bekkedam had no

19 contact with the funds?


21 A I don't think Mr. Bekkedam would have given a

22 hoot one way or other.

23 BY MR. LAUER:

24 Q Is that an agreement, that you know that

25 Bekkedam did not contact the funds?


Page 1797

1 A I don't think Mr. Bekkedam could have cared

2 less if I was printing the cash in my garage and handing

3 it out. So long as he got his money from Nova Bank and

4 his loans from for Mr. Levin, I don't think they gave a

5 hoot, could care less about his clients.

6 That is my impression. It was my impression

7 then, and it remains my impression today.

8 Q In fact, your testimony or your -- at page

9 1189, the only type of people who would invest without

10 contacting the funds -- without the positive reference

11 of the fund, would be people who were in the know about

12 the fact that you were committing a fraud, would that

13 apply to the -- Mr. Szafranski's investors, none of whom

14 ever contacted the funds?

15 A I think it would apply to everybody, but

16 different people were sold different bills of goods.

17 So perhaps when I gave the answer, I

18 overreached; but everyone always asked us -- perhaps a

19 better way to state more clearly what I was trying to

20 get at is, nobody was going to investing -- no

21 legitimate investor, anyway, was going to invest without

22 at least inquiring if we were current, perhaps asking

23 for permission to contact past investors, whatever it

24 would be.

25 Mr. Szafranski's investors were being sold a


Page 1798

1 whole other different bill of goods by Mr. Szafranski.

2 Q But it is a fact that not one of

3 Mr. Szafranski's investors ever contacted the funds; do

4 you know that for a fact?

5 A I don't know that one way or the other.

6 Q Has anyone ever told you that -- that any of

7 Mr. Szafranski's investors ever contacted the funds?

8 A I don't recall being told that one way or the

9 other.

10 Q At page 348 of the transcript, you testified

11 that you only became aware that the funds took a

12 write-down of their Rothstein-related investment after

13 the crash.

14 Do you remember that testimony?

15 A I became aware that they took the

16 write-down -- to the best of my recollection, I became

17 aware that it was in April '09 -- write-down -- after I

18 returned from Morocco. That's the best of my

19 recollection.

20 Q Okay. So your best recollection when you gave

21 testimony on direct was that until you came back from

22 Morocco, you had not been informed that, with respect --

23 in April, or shortly after April of '09, the funds took

24 a write-down of their Rothstein-related investment?

25 A No, that's not --


Page 1799

1 Q Is that your testimony?

2 A That is not my testimony.

3 Q No?

4 A My testimony is that that's to the best of my

5 recollection as I sit here today.

6 It's certainly possible that somewhere buried

7 in the hundreds of thousands of emails that I was

8 advised something contrary to that. I don't have an

9 independent recollection of it. I don't recall hearing

10 it.

11 I recall a lot of threats about defaulting us,

12 but I don't recall anyone specifically saying that they

13 took a write-down. You'd have to check the email

14 traffic to be certain one way or the other.

15 Q Well, in fact, on or about June 30th, 2009,

16 Mr. Levin sent you an email entitled, in bold letters,

17 "the story is now out of the bag"?

18 A I'd have to see the email.

19 Q You don't remember that?

20 A I do not.

21 Q And in that email, Mr. Levin informed you that

22 Platinum is in the process of writing down their

23 investment in Banyan.


25 A I'd have to see the email.


Page 1800

1 Q Now, you've testified that the fund managers

2 told you in --

3 A Does it say anywhere in the email that they

4 actually did write it down? I'm curious because you're

5 not showing me the email.

6 Q You have testified -- you testified that you

7 had conversations with the fund managers after the

8 payment was missed in mid-April where you say the fund

9 manager said they would give you a credit rating with

10 future investors.

11 Do you remember that testimony?

12 A That is correct.

13 Q All right. And, in fact, shortly after you

14 claimed you were told that, you were informed by Mr.

15 Levin that, in fact, at least one of your perspective

16 investors, Mr. Bekkedam and his group, were now aware of

17 the fact that the fund was writing down the investment.


19 A There's a lot to your question.

20 First of all, you say I claim this.

21 If you look at the email traffic between me

22 and Mr. Preve, you'll clearly see that we were going

23 back and forth making certain that the funds were going

24 to give us a positive credit rating.

25 Q And that was --


Page 1801

1 A That's clear --

2 Q That was important to you?

3 A Hang on. Let me finish.

4 That was clear from the emails.

5 Additionally, you're not showing me the email,

6 for whatever reason, Levin saying to me -- they're on

7 the cusp of doing something and doing it -- let me

8 finish, please -- are two completely different things.

9 Number three, Levin telling me that something

10 is going on and then Mr. Preve contradicting it, another

11 completely different factor. I don't know if it

12 happened or not. You have to show me the email string.

13 And as far as Bekkedam goes, if you want to

14 get into a whole conversation about what Bekkedam knew

15 and didn't know and what I think he was doing and his

16 purposes, we can certainly do that. But Barry -- Barry

17 couldn't have cared less one way or the other.

18 Q I'm going to show you the emails, but this is

19 about your sworn testimony and your honest recollection;

20 it's not about the emails. We can all read the emails.

21 So before we get to the emails, all right, am

22 I correct that you believed that it was important to you

23 that with respect to future investors, that if the fund

24 were contacted by them, that they would get a positive

25 credit rating?


Page 1802

1 A Correct.

2 Q All right. And do you recall being informed

3 by Mr. Levin, in or about June of 2009, which is shortly

4 after you had your meetings with the fund managers,

5 that, in fact, the funds were now known to be writing

6 down their investment?

7 A I recall --

8 MR. SCHERER: Objection.

9 A I recall being told that they were threatening

10 to write down the investment. I recall being told that

11 Mr. Glass was on the cusp of calling the SCC. I recall

12 being told a lot of things that made us extremely

13 concerned about our relationship with the funds.

14 I also recall being told by Mr. Simony and

15 Mr. Nordlicht that they were going to give us a positive

16 credit reference, and that it was in no one's interest

17 to have this all blow up.

18 BY MR. LAUER:

19 Q I'll show you what we'll -- what is marked as

20 Exhibit 226, which is a composite of four pieces of

21 paper, many several emails.



24 Identification.)

25 MR. LAUER: Mr. Hertzberg corrects me:


Page 1803

1 It's one string of emails.

2 BY MR. LAUER:

3 Q You see the top document, it's dated June 30,

4 2009, from Preve to you?

5 A I do.

6 Q Go to the second page.

7 Do you see that's an email from George Levin

8 to you dated June 11, 2009?

9 A Yes.

10 Give me a chance to read it.

11 Q I would ask that there be no discussion.

12 A I'm sorry? I'm just reading.

13 Q Go ahead.

14 A Okay.

15 Q Do you see that Mr. Levin, in bold, has said:

16 The story is now out of the bag. Do you see that?

17 A I do. That's why it's not in reference to

18 what you're saying it's in reference to.

19 Q Do you see that? Do you see that is the

20 question?

21 A I see the words "the story is now out of bag."

22 Q And did you get this email from Mr. Levin on

23 or about June 30th, 2009?

24 A I did.

25 Q All right. And he goes on to say, this is


Page 1804

1 what Frank and I have been concerned about.

2 Do you see that?

3 A I see that.

4 Q And Frank is Mr. Preve, right?

5 A Yes.

6 Q And the next sentence, the good news is

7 Platinum -- and that's referring to my client, the

8 Platinum fund, correct?

9 A The good news is Platinum has or is in the

10 process of writing down their investment in Banyan.

11 Q Did you read that? You read that, right?

12 A It's sitting right in front of me. I just

13 read it.

14 Q And Platinum is my client, the hedge fund?

15 A Yes.

16 Q And you know when you write down an

17 investment, you are writing it down because it's

18 impaired. Do you know what that means?

19 A No. Actually, I'm really confused now because

20 George is saying this is good news.

21 Q Do you know --

22 MR. SCHERER: Objection.

23 BY MR. LAUER:

24 Q The question, Mr. Rothstein --

25 MR. SCHERER: Let him answer.


Page 1805

1 BY MR. LAUER:

2 Q The question is, do you know.

3 MR. SCHERER: Let him answer. Objection.

4 BY MR. LAUER:

5 Q The question is: Do you know what it means --

6 MR. SCHERER: Let him finish his answer.

7 MR. MR. NURIK: If you want to finish

8 your answer, finish your answer.

9 THE WITNESS: I'm so confused by what's

10 going on right now; everyone is yelling. If

11 you guys could calm down.

12 BY MR. LAUER:

13 Q We are calm.

14 Do you know -- the question is: Do you know

15 what it means when a write-down takes place?

16 MR. SCHERER: Objection, form.

17 BY MR. LAUER:

18 Q Did you know that the asset is impaired?


20 A I don't know what you mean "asset is

21 impaired."

22 Okay. They weren't -- hang on.

23 BY MR. LAUER:

24 Q The funds lent money --

25 A Why don't you let me finish my answer?


Page 1806

1 Q Because you're not being responsive.

2 A Because you don't like my answer.

3 Q I have no problem with your -- with your

4 testimony, when it's responsive.

5 A You mean when it fits your needs.

6 Q When it's responsive.

7 We can take --

8 A Just let me answer the question.

9 Q I'm not -- I'm not here for your speech. I'm

10 here for you to answer our questions.

11 My question is: Do you understand that when

12 an investment is impaired, it calls for a write-down?

13 A I understand --

14 MR. SCHERER: Object to the form.

15 A I understand that when an investment is

16 impaired, one of the things that can occur is a

17 write-down.

18 I also understand, now, in reading this, that

19 you're trying to twist what it says because it says, has

20 or in the process of it; and it's my knowledge, to the

21 best of my knowledge, that we later took the position,

22 based upon having people call the hedge funds, that they

23 had not written it down; or if they had written it down,

24 sir, that they were going to lie for us. Which I

25 believe they did.


Page 1807

1 MR. CRAIG: Objection. Move to strike,

2 non-responsive.

3 MR. LAUER: Totally non-responsive.

4 BY MR. LAUER:

5 Q Well, do you know --

6 UNKNOWN SPEAKER: Move to strike on the

7 basis that it's not helpful.

8 MR. LAUER: It's non-responsive.

9 THE WITNESS: It's exactly responsive.

10 If you want the jury to know the truth about

11 what was occurring, as opposed to just

12 twisting the words.

13 Ask me a question, I'll give you an

14 answer.

15 I have been nothing but a gentleman with

16 you here today, and for some reason, you keep

17 wanting to go cut me off. Please don't.

18 BY MR. LAUER:

19 Q Do you know that, in fact, the Platinum fund

20 had written down the investment as of the end of

21 April 30, 2009?


23 A I know that now.

24 BY MR. LAUER:

25 Q All right.


Page 1808

1 A Back then, I either knew that they were

2 thinking about it, okay, or weren't going to do it. I

3 don't know.

4 My only concern was that the investor --

5 excuse me, that the hedge funds, Mr. Nordlicht,

6 specifically, and/or Mr. Simony, as evidenced by email

7 traffic back and forth between us, between Mr. Preve and

8 I, were going to lie for us and say that we were a good

9 investment. And I believe the email traffic further

10 goes on to state that they did, in fact, do that.

11 Q And not withstanding your non-responsive

12 testimony, the fact is that Mr. Bekkedam wrote Mr. Levin

13 earlier in this email string.

14 A Yes.

15 Q George, below is an email for a guy who works

16 for me that I received today. Quote, Platinum is the

17 group that I heard earlier in the day had -- and these

18 are within his quotes -- written down.

19 It's in the past tense; is that right?

20 -- written down their fund for losses or

21 anticipated losses through Rothstein, close quote.

22 Have I read that quickly?

23 A That -- you have, but you need to understand

24 what was going on --

25 Q Have I read that --


Page 1809

1 A -- at that moment, please.

2 Q The question is, have I read that correctly?

3 MR. NURIK: Excuse me, counsel.


5 MR. MR. NURIK: Counsel, please.

6 MR. LAUER: The question is, have I read

7 that --

8 MR. SCHERER: We are going to get Judge

9 Streitfeld --

10 MR. NURIK: Allow him to finish --

11 MR. SCHERER: -- on the phone in just a

12 second.

13 MR. NURIK: Allow him to finish the

14 question.

15 Hold on, Bill.

16 You can put on the record whatever you

17 want. Don't interrupt me. Let me speak.

18 Allow him to finish the answer.

19 If you want to move to strike it, you

20 want to say whatever you want to say so you

21 have the record, you can do that; but don't

22 interrupt the witness.

23 MR. LAUER: Mr. Nurik --

24 MR. NURIK: You just interrupted me, sir.

25 MR. LAUER: We can continue this in


Page 1810

1 court, right?

2 You were five minutes late. We're are

3 under time constraints. There is no

4 opportunity for filibuster.

5 BY MR. LAUER:

6 Q Mr. Rothstein --

7 MR. NURIK: This is not filibustering.

8 Do not interrupt me.

9 Q -- have I read it correctly that, in fact, Mr.

10 Bekkedam -- that, in fact, Mr. Bekkedam states in the

11 past tense, that Platinum, quote, has written down their

12 fund for losses or anticipated losses through Rothstein?


14 A Mr. Bekkedam did not want anyone having

15 anything to do with the hedge funds. He was always

16 trying to make himself look like the white knight and

17 everybody else to look like evil incarnate. That was

18 the way he sold his products. That was the way he

19 pitched himself.

20 It's all part and parcel of all the various

21 lies that he was telling during the course of this whole

22 scam to try to get money out of George, both for his

23 bank and for his own personal pockets.

24 You need to understand what was going on with

25 him and his fake lawyer due diligence guy, Mr. Rovin,


Page 1811

1 both of whom allowed $25 million in paper -- in their

2 clients' money to be paid into this Ponzi scheme without

3 a shred of paper or even a as tiny little bit of an

4 audit.

5 So taking what he said, that he is writing to

6 George: I heard that the -- earlier today that Platinum

7 has written down their fund, means absolutely nothing.

8 He would have said the sky is falling and that

9 Humpty-Dumpty can't be put back together if it was going

10 to benefit his pocket. That's my answer.

11 BY MR. LAUER:

12 Q Have I read correctly, Mr. Rothstein, that in

13 this email from Bekkedam to Mr. Levin, he says in the

14 past tense, that Platinum has written down their fund

15 for losses or anticipated losses from Rothstein?

16 A That's what I --


18 BY MR. LAUER:

19 Q All right. And, in fact, Mr. Levin then took

20 that and wrote to you, the story is now out of the bag,

21 right?

22 A I can't tell you what anyone was thinking.

23 And in reading this, that is certainly what he

24 wrote; and it's become even more of a mystery to me when

25 I am sitting here, reading it again, because then he


Page 1812

1 starts saying, the good news is Platinum has or is in

2 the process of writing down their investment with

3 Banyan; which, to me, is totally contrary to the spin

4 they're trying to put on it.

5 So now I'm even more confused.

6 MR. CRAIG: Objection. Move to strike.

7 Non-responsive.

8 BY MR. LAUER:

9 Q And when you got the email from Mr. Levin

10 saying that the story is now out of the bag, that, in

11 fact, Platinum was writing down their Rothstein-related

12 investment, did you email Mr. Nordlicht, or anyone else

13 at the fund, to say, what is going on here?

14 A I have no idea. You'd have to show me the

15 emails. I don't recall specifically.

16 My only concern was that, at the end of the

17 day, they would lie for us. That was my concern.

18 They didn't want this to blow. I didn't want

19 it to blow up. I had been assured by Mr. Simony and

20 Mr. Nordlicht that they would not let it blow up.

21 Q And yet -- and yet, Mr. Bekkedam, whose

22 talents for due diligence are not praised by you,

23 somehow found out that the Platinum fund was actually

24 writing down their investment.

25 A That's what it appears in here.


Page 1813

1 What his purpose is and whether it actually

2 occurred, I have no idea. There is so many rumors on

3 the street all the time -- you remember that there were

4 rumors about me going years back that I was running a

5 Ponzi scheme. People kept investing.

6 Q And when you got this story out of the bag

7 from Levin, did you email Mr. Levin or Preve asking them

8 to check with the funds to find out what was going on

9 with this write-down or proposed write-down?

10 A There are close to a million emails involved

11 in this case. You would have to show me the email

12 traffic. I don't have a specific recollection one way

13 or the other.

14 I may have written to them. I may have

15 called. I may have made one of my infamous calls where

16 I got on the phone screaming at somebody. I don't

17 recall, specifically, one way or the other.

18 Again, the end result was the end result:

19 They gave us a positive reference and people invested.

20 Q Other than Mr. Discala, not a single person

21 connected with any of these investors had any contact

22 with the fund --

23 A That's your statement.

24 Q -- prior to the investment?

25 A That's your statement. I don't know that to


Page 1814

1 be true.

2 And it's directly contrary to what your client

3 has told me.

4 Q Now, did you learn that the funds, in fact, in

5 their April 30 letter, had taken the 20-percent

6 write-down?

7 A Say this again.

8 Q Did you learn that the fund had taken a

9 20-percent write-down in their April 2009 letter?

10 A Could you provide a time frame for me, and

11 what letter are you talking about?

12 Q A letter to their investors.

13 A I don't recall ever seeing the letter to their

14 investors.

15 Q You've never seen the letter to investors?

16 A I didn't say I never saw it. Please don't

17 twist my words.

18 I said I don't recall seeing the letter.

19 Q Okay. When you got the Levin email forwarding

20 Bekkedam's information, did you speak with Mr. Von

21 Allmen about checking this out?

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

23 corresponding, in brief, with Mr. Allmen -- by Mr. Von

24 Allmen by email. I had a conversations with Mr. Von

25 Allmen, but I don't specifically recollect one way or


Page 1815

1 the other whether I did or didn't.

2 I had a primary concern, and that was my

3 focus. All of this other thing was -- it was extraneous

4 to me, as opposed to the main goal of what we were doing

5 was to get money into a floundering Ponzi scheme.

6 Q When Mr. Discala came on the scene and began

7 to speak with you in September and October about the

8 so-called Razorback and D3 Capital deals, did you

9 discuss with him the fact that the funds had taken a

10 write-down or were reported to have a taken a write-down

11 of their investment?

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

13 Q Did you ever hear the name Clay Daniels?

14 A I may have. I don't recall one way or the

15 other.

16 Q Clay McDaniels?

17 A I may have. I don't recall one way or the

18 other. It's certainly possible.

19 Q When you talked to Von Allmen, did he tell you

20 that he had some indirect connection with the funds

21 through earlier investments?

22 A I don't recall one way or the other. It's

23 certainly possible.

24 Q In all of the two years that you have had to

25 review files and emails, are you able to identify a


Page 1816

1 single email in which, following Mr. Levin's email of

2 June 30th, "the story is now out of the bag," where you

3 emailed anyone asking for follow-up information about

4 what Bekkedam had said to Levin?

5 A I don't recall.

6 The only thing I really recall is some

7 telephone calls, but I don't recall sending an email.

8 I may have.

9 Q Now you recall telephone calls?

10 A No, it's not that now I recall telephone

11 calls. I recall speaking to Mr. Preve -- it may have

12 been before this; it may have been after this -- about

13 making sure that we were getting a positive reference.

14 Whether it was related to this email, I can't tell you

15 one way or the other.

16 Q Did you speak with Preve about the fact that

17 now you were told by Levin that the cat -- the story is

18 now out of the bag?

19 A It would have been in my nature to have that

20 conversation, but I can't tell you one way or the other.

21 I don't have a specific recollection, sir.

22 Q Do you know how many investors Platinum has?

23 A I have no idea.

24 Q Do you know how many people were informed by

25 Platinum of the write-down?


Page 1817

1 A I have no idea.

2 Q Did Mr. Discala, when he was doing what you

3 claim to be due diligence, did he tell you that he had

4 spoken to any of the investors in the funds?

5 A To the investors, I don't recall that. He may

6 have.

7 Q Do you have any specific recollection of

8 Discala telling you that he spoke to anyone who was an

9 investor in one or more of the hedge funds?

10 A I don't have any specific recollection, but

11 I've got to tell you, sitting here now, with you telling

12 me that all these people knew that all this money that

13 was supposed to be in trust accounts had been written

14 down, I'm shocked no one called the police.

15 This money is supposed to be locked up in

16 trust accounts, so I'm kind of shocked -- actually, more

17 than kind of shocked.

18 Q Okay. I would like to show you Exhibit 62, if

19 I can find it.

20 Showing you Exhibit 62, you were shown this on

21 direct examination, as an email from you to Mr. Preve,

22 October 15, 2009.

23 A Just give me one second to read it.

24 Q Sure.

25 A Okay.


Page 1818

1 Q Now, October 15 is about the time that you're

2 talking with Mr. Discala about what became the D3

3 Capital deal?

4 A I don't recall the time frame of discussing

5 D3, but I was engaged in conversation with Mr. Discala

6 and various other people associated with his funds.

7 Q Okay. You see number two, "need to send

8 something so I can send something to Jack"?

9 A I see that.

10 Q He's a key figure now, acting as a go-between

11 for the new hedge fund investors and Centurion Platinum?

12 A I see that.

13 Q All right. Now, this is October 15, 2009,

14 right?

15 A Yes.

16 Q And you had given testimony on direct that you

17 thought that if Jack had received payment, he had been

18 paid in the SFS deal, which is the Regent deal, right?

19 A That's to the best of my recollection, yes,

20 sir.

21 Q All right. And now I've shown you, a few

22 moments ago, that the Regent deal, the last payment from

23 the Regent deal was in the spring of 2009.




Page 1819

1 Q Okay. So that was a number of months before

2 October 15th, 2009?

3 A That's what this says, yes, sir.

4 Q So is it possible that you thought he might

5 have been paid, but, in fact, he was never paid?

6 A That's certainly possible. I don't recall

7 whether he was paid or not. It's very possible that I

8 thought that he was and he wasn't.

9 I really -- as I sit here today, I still

10 believe the hedge fund was paid something because he

11 did, in fact, to my knowledge, lie for us. So he either

12 did it without any compensation, after having received

13 compensation or because he expected compensation in the

14 future -- or he was trying to cover himself. I don't

15 know which it is.

16 Q But you don't know?

17 A I do not know.

18 Q All right. And you only know what you were

19 told?

20 A As far as everything in the world or as far as

21 this specific conversation?

22 Q This --

23 A That's kind of a broad question.

24 Q This email from Preve to you, this is

25 October 15, right?


Page 1820

1 A Yes.

2 Q And he goes on to say in paragraph two, they

3 are deeply suspicious.

4 I assume he is referring to new investors?

5 A That's what I assumed when I read this, that

6 that's what Mr. Preve was saying.

7 Q The new investors are deeply suspicious that

8 no one from Plat is calling them back.

9 And "Plat" is Platinum?

10 A Yes, sir.

11 Q All right. And he is saying here that as of

12 October 15, 2009, no one from Platinum is calling back

13 the new investors?

14 Have I read -- have I discerned that

15 correctly?

16 A You have read this correctly.

17 I don't know what -- you're discerning from

18 it? Are you asking me to discern what I thought this

19 meant?

20 Q No. I'm asking you of I'm reading it

21 correctly but "Plat" is Platinum, so it's not an exact

22 reading.

23 Is the gist of what Preve telling you is as of

24 October 15, 2009, the new investors, that is Discala's

25 group of people, are deeply suspicious that no one from


Page 1821

1 Platinum is calling them back?

2 A The gist of what this is, to me, and what it

3 was to me, was this is Frank trying to make sure that I

4 pay Jack, and this is the best way to do it.

5 Q Okay. Whether -- whether you --

6 A Whether or not they're actually calling him

7 back, I don't know.

8 Unfortunately, or fortunately, every one was

9 manipulating everybody by this point this time. And to

10 me, I read this, you have got to pay Jack because Jack

11 is going to be the one that is going to lie for us, so

12 pay him.

13 Q Let's focus on the second part, okay, which is

14 Preve is telling you that Discala's group of

15 investors -- this is October 15th, 2009 -- are deeply

16 suspicious that no one from Platinum is calling them

17 back.

18 Do you see that?

19 A I do.

20 Q And you were having direct communication with

21 Discala at that time, correct?

22 A I was.

23 Q All right. And did you say to Discala, Preve

24 tells me that you guys are suspicious or you guys are

25 peeved that no one from Platinum is calling you back, I


Page 1822

1 will take care of it, or something to that effect?

2 A I may have. I don't recollect one way or the

3 other.

4 I don't recall AJ being deeply suspicious.

5 That's not my recollection of how I got along with AJ,

6 and I think my emails would -- my email traffic with him

7 bears that out, that we were -- we had a good working

8 relationship and he was trying to get the deals funded.

9 Q Did AJ tell you that he had only a single

10 25-minute meeting with anyone from the funds prior to

11 you going to Morocco?

12 A He didn't tell me the length of time of the

13 meeting, no, sir.

14 Q But you know that he had only one meeting with

15 Mr. Simony?

16 A I don't know how many meetings he had. I know

17 he met with people from the funds or spoke to people

18 from the funds.

19 Q "People" is plural; Mr. Discala has testified

20 under oath that he spoke and met with only one

21 individual prior to you going to Morocco, and that is

22 Mr. Simony.

23 A To my understanding.

24 MR. SCHERER: Object to form of the

25 question.


Page 1823

1 BY MR. LAUER:

2 Q Did he -- did he tell you that he spoke to

3 someone other than Mr. Simony prior to you going to

4 Morocco?

5 A I don't have a recollection to that one way or

6 the other.

7 Q And other than his conversation with

8 Mr. Simony, did he tell you that he spoke with anyone

9 other than Simony?

10 A I don't recall him saying that.

11 Q And when you got this email from Preve, did

12 you have any email communication with Preve concerning

13 getting the Platinum people to call AJ's investors back?

14 A I may have; I may not have. I may have

15 called; I may not have. I don't have a specific

16 recollection.

17 Q In all of the emails that you have reviewed --

18 you want to put that on the record?

19 A I'm sorry?

20 Q In all of the emails that you have reviewed,

21 have you seen any email from you to Preve or from Preve

22 to you on or about October 15, until the time you went

23 to Morocco, concerning the fact that he was telling you

24 that the Platinum people were not calling the new

25 investors back?


Page 1824

1 A I don't recall.

2 Q When you got Preve's email saying that the new

3 investors were deeply suspicious that Platinum was not

4 calling them back, did you forward the email to anyone

5 at the funds demanding that they clarify this and

6 demanding that they speak to the new investors?

7 A I don't recall.

8 Q And yet, after October 15, you continued to

9 release funds to the Banyon collection accounts which,

10 in turn, continued to release money in repayment to the

11 funds?

12 A That sounds correct.

13 Q All right. In fact, the funds were repaid on

14 October 20, October 22, October 26?

15 A The records would bear that out one way or the

16 other.

17 Q You testified that Frank Preve -- this is your

18 testimony -- that Mr. Preve knew that you were engaged

19 in fraudulent activity, correct?

20 A Yes, sir.

21 Q And you have also testified that, as you sit

22 here today, it's not clear to you whether Mr. Levin was

23 personally aware of the fraudulent activity?

24 A Correct.

25 Q And then you testified that Preve personally


Page 1825

1 made a fair amount of money through his dealings with

2 you?

3 A Correct.

4 Q Now, Levin, independent of whatever dealings

5 he had with you, was a wealthy man, right?

6 A Yes.

7 Q And he had significant real estate assets, as

8 well as other assets?

9 A Yes.

10 Q He might have had a net worth in excess of

11 $100 million or more?

12 A He might have, yes.

13 Q And Preve, acted purportedly on behalf of Mr.

14 Levin -- Levin's funds in your scheme, correct?

15 A That doesn't sound correct to me, no.

16 Q Did Preve invest funds of Mr. Levin in

17 purchasing settlements purportedly from your clients?

18 A I can only tell you what my impression was. I

19 can't tell you what was going on behind the scenes, so I

20 can't answer that question with any accuracy.

21 Q Was it your impression that Levin's money was

22 being used to buy investments?

23 A Yes.

24 Q And was it your impression that Mr. Levin,

25 with respect to some investors or lenders, such as the


Page 1826

1 hedge funds, had personally guaranteed his assets -- had

2 guaranteed loans that were being made by his Banyan

3 entities?

4 A I did learn that at some point in time, yes,

5 sir.

6 Q And you testified that you believed that you

7 had one or more deals with Preve where he was getting

8 money that was not, in fact, going to Levin?

9 A That's my understanding, sir.

10 Q Is it fair to say, then, that in substance, in

11 your view, Mr. Preve, having put Mr. Levin's net worth

12 at risk through these guarantees and investing Mr.

13 Levin's funds in these fictitious investments, was

14 acting for himself and not for Levin's ultimate benefit?

15 A There are a couple of issues with your

16 question.

17 You say Mr. Preve putting Mr. Levin's assets

18 at risk. I don't know that to be the case. My

19 understanding is that Levin wanted to guarantee what was

20 going on; but, again, I don't know what was going on

21 behind -- behind the scenes, and I don't want to guess.

22 Q So you -- in other words, you don't know

23 whether or not Levin knew or not?

24 A No. I think that's consistent with my

25 testimony. I don't know -- even as I sit here right


Page 1827

1 now, sir, I can't tell you with any certainty one way or

2 the other, exactly how much he knew and at what points

3 in time or what was going on behind the scenes.

4 Q Correct.

5 So if Levin did not now that you were engaged

6 in a fraud but his assets were put at risk by virtue of

7 these guarantees, and Preve, in turn, knew that you were

8 engaged in a fraud, then Preve was not acting for Mr.

9 Levin's benefit?

10 A Given that hypothetical, the answer would be

11 yes.

12 Q All right. In fact, he, then, would have been

13 acting contrary to Mr. Levin's true interest?

14 A Given that hypothetical, the answer would be

15 yes.

16 Q All right. You commented a couple of times on

17 Mr. Von Allmen and you thought he did wonderful due

18 diligence; do you remember that?

19 A I recall something to that effect, yes, sir.

20 Q Okay. So at any point in time --

21 A I thought that his group, as a whole, did

22 better due diligence than most, yes.

23 Q Okay. So at any point in time, did anyone of

24 Mr. Von Allmen's group ask to speak to any attorney who

25 referred you business?


Page 1828

1 A I don't recall.

2 Q All right. Did you arrange at any time, any

3 meeting with anyone of Mr. Von Allmen's group to speak

4 with referring attorneys?

5 A I don't recall.

6 Q Now, Mr. Levin was a local guy, was he not?

7 He lived near you? You testified that you met him

8 outside your house on one occasion?

9 A No. No. You said "Mr. Levin"; you mean

10 Mr. Von Allmen.

11 Q I apologize.

12 A That's okay.

13 Q I apologize. Mr. Von Allmen.

14 A He was my neighbor.

15 Q He was your neighbor.

16 At any point in time when Mr. Von Allmen was

17 considering making these investments and ultimately did

18 investments, did Von Allmen say to you, in words or in

19 substance, so, Scott, which of the local guys are

20 referring you all these cases?

21 A He may have. I don't recall one way or the

22 other.

23 Q And you never introduced him to any referring

24 attorney, did you?

25 A I don't recall -- excuse me.


Page 1829

1 I don't recall introducing him to any

2 referring attorneys, no, sir.

3 Q And you never introduced Discala to any

4 referring attorney, did you?

5 A I don't recall doing that. I may have. I

6 don't recall.

7 Q And they never asked, did they?

8 A I'd have to see all their email due diligence

9 to tell you that one way or the other.

10 I recall getting a lot of questions, detailed

11 questions, from any number of their lawyers at different

12 points in time, so I can't recall specifically what they

13 asked me. They did ask a lot of detailed questions.

14 Q But did you ever introduce any of their

15 lawyers to any referring attorney?

16 A I don't recall doing that, sir, no.

17 MR. LAUER: I have no further questions

18 at this time.

19 THE WITNESS: Can we take a couple of

20 minutes?

21 MR. LAUER: I am adjourning. We have

22 four hours. Don't worry.

23 (Whereupon, a recess was had.)

24 DIRECT EXAMINATION

25 BY MR. SCHNAPP:


Page 1830

1 Q Good morning, Mr. Rothstein. My name is Mark

2 Schnapp, and I am an attorney with Greenberg Traurig

3 representing TD Bank, and with me is Donna Evans, my

4 partner, who is also going to be asking you some

5 questions. Okay?

6 A Good morning to you both.

7 Q You testified that -- quite a bit, and I don't

8 want to you repeat all your testimony; but you did

9 testify about a "rock-star lifestyle"; is that right?

10 A Correct.

11 Q And that rock-star lifestyle was something

12 that you were going to try to achieve as a result of the

13 your fraud; is that right?

14 A It was something that I was achieving, yes.

15 Q Okay. And it was important for you to better

16 your lifestyle; is that fair?

17 A I, unfortunately, had a huge ego, and I

18 couldn't get enough of just about anything. As people

19 said -- I believe I testified yesterday -- I

20 unfortunately spent money like I hated it.

21 Q Right. You testified you had a huge ego; do

22 you not have a huge ego now?

23 A My ego, now, is nearly nonexistent.

24 Q Sir, so, is it fair to say that you chose to

25 do illegal things to improve your lifestyle?


Page 1831

1 A Agreed, yes.

2 Q Okay. And in doing so, you made a number of

3 decisions to lie about various things. For example, you

4 lied to your investors that there were actual

5 settlements available for sale?

6 A To some, yes, sir.

7 Q You gave phony bank statements to some

8 investors?

9 A I did, sir.

10 Q You lied to Debra Villegas when you told her

11 that you were being threatened by the mob and that's why

12 she needed to help you; is that true?

13 A I did, sir.

14 Q And you -- it's fair to say that during the

15 bulk of the time that you were committing this Ponzi,

16 your day involved a lot of lying, isn't that true?

17 A Yes, sir.

18 Q And that's how you got a better lifestyle?

19 A That's one of the ways, sir, yes.

20 Q And, in fact, now you're in jail, right?

21 A I am.

22 Q And you're also trying to improve your

23 lifestyle, correct?

24 A I don't understand your question, sir.

25 Q Are you trying to get out of jail?


Page 1832

1 A Yes, sir.

2 Q And you're using your same techniques, lying

3 to other people, in order to accomplish that; isn't that

4 true?

5 A No, sir.

6 Q When did you stop lying?

7 A The moment I decided to come back from

8 Morocco.

9 Q So you became a truthful person all of a

10 sudden; is that right?

11 A I don't think you become a truthful person all

12 of a sudden. I think you make a conscious decision to

13 change, which is what I did.

14 People do change.

15 Q You made a conscious decision to take activity

16 which could put you in the witness protection so that

17 you would never have to face and deal with many of these

18 people that you lied to?

19 MR. LAVECCHIO: Objection. Do you want

20 to rephrase it?

21 BY MR. SCHNAPP:

22 Q You are in witness protection so you don't

23 have to face a number of the people that you lied to;

24 isn't that true?

25 MR. LAVECCHIO: Objection, privilege.


Page 1833

1 BY MR. SCHNAPP:

2 Q We were just talking about the funds, right,

3 and you lied to the funds; isn't that true?

4 A Yes, sir.

5 Q And you lied to -- you lied to the funds. In

6 fact, you told them that you couldn't make tabs on some

7 of deals that they had financed; isn't that true?

8 A At certain points in time, sir, absolutely.

9 Q And why, if a deal was fully funded by a

10 company, then the proceeds were in your trust account,

11 would there be any problem in you paying those trust

12 account funds to the purchaser of the settlement?

13 A There shouldn't have been. That's why I was

14 surprised nobody called the police.

15 Q So you're saying that, basically, if the hedge

16 funds had called the police, questioning your failure to

17 release, quote, fully-funded settlements, that would

18 have been the end of it?

19 A Correct. That would have been the end of it,

20 if anyone did that.

21 If TD Bank had called the police based upon

22 all those monies moving around --

23 MR. SCHNAPP: Move to strike as not

24 responsive. You're going to answer my

25 questions. Okay?


Page 1834

1 MR. CRAIG: Join.

2 BY MR. SCHNAPP:

3 Q Now, when you told the funds that you had a

4 Bar problem, why would your Bar problem preclude you

5 from paying out money on old settlements?

6 A That's the story I created.

7 Q But why would that even, you know, make sense?

8 Why would your Bar problem preclude you paying out money

9 on a fully-funded settlement where you were holding

10 proceeds that were due to a plaintiff?

11 A That's the story I created.

12 Q I understand that's the story, but why? Why

13 would it even make sense?

14 A I didn't say it made sense. I said that's the

15 story I created.

16 Q Okay. So you created an unbelievable story,

17 and nobody challenged you?

18 A Believability is in the receiver, not with me.

19 I created a story that suited my needs at the time.

20 People choose to believe or not to believe or look the

21 other way.

22 Q And, in fact, as you were seeking to bring in

23 new investors, did you tell those new investors that,

24 hey, I have a Bar problem; I may never be able to pay

25 you?


Page 1835

1 A No, sir.

2 Q Now, the funds, when they were -- you cut

3 deals with the funds, right, to try to get rid of them?

4 A I cut deals with them?

5 Q Did you cut deals with the funds at some point

6 on a pay-out schedule?

7 A I think that would have been Mr. Preve and I

8 talking about the payment schedule back and forth.

9 Ultimately the deal would have been between Mr. Preve

10 and them but, ultimately, payments from me.

11 Q Now, the funds, rather, were lenders to

12 Banyan; is that right?

13 A Correct.

14 Q Why would you be making payments?

15 A I controlled all the money. I made all the

16 payments.

17 Q Did you have any financial obligation to the

18 funds?

19 A I believe I did technically, because I was

20 holding, allegedly trust funds, that ultimately were to

21 be paid to them. So I believe, in the whole mechanism

22 of the transaction, that I did; but I wasn't in privity

23 with them, no. I wasn't the direct borrower.

24 Q And was Mr. Preve concerned that you were

25 not -- you were not paying the funds?


Page 1836

1 A Sure. Yes.

2 Q Did you also tell Mr. Preve that in order to

3 release more money, they would have to inject more money

4 into the Ponzi scheme?

5 A Yes. That's the way a Ponzi scheme works.

6 Q Right. In fact, there are documents that say

7 that if -- if you, the funds, want your money, you have

8 to put back in the 70 percent of what I'm paying you,

9 right?

10 A I recall several people writing emails that

11 said that.

12 Q And you also recall emails where people

13 involved with the funds, where you told them that you

14 had a new investor that is coming in and you will use

15 that new investor's fund to pay them out?

16 A I recall seeing an email from Mr. Preve that

17 says that. I may have written one, as well; I don't

18 specifically recall.

19 Q And isn't it a fact, sir, that those are the

20 classic red flags of a Ponzi scheme, in that, one, you

21 tried to have people roll their money back in the deal;

22 and, two, you were going to tell them that they were

23 going to be paid out with new investor money.

24 Isn't that true?

25 A To me, those -- that appeared to be a red flag


Page 1837

1 of a Ponzi scheme, yes, sir.

2 Q Well, is there any reason in a deal where you

3 sold a structured settlement and had the proceeds of a

4 structured settlement in your trust account, that you

5 would need new people's money to pay out old investors?

6 A To my way of thinking, no, it made no sense in

7 line with the structure that I was selling as a

8 investment. That made no sense to me.

9 Q And didn't anybody ask you, Scott Rothstein,

10 why is it that you're paying me out with new money?

11 What happened to the money that you are holding in your

12 trust account that is already locked?

13 A The only time I was ever asked that, I told

14 them that was being held up by the Bar; but other than

15 that, people didn't really seem interested one way or

16 the other.

17 Q And people were interested, particularly the

18 funds, in getting new investor money to pay them out;

19 isn't that true?

20 A It appeared that way to me, sir, yes.

21 Q And that would be consistent with a Ponzi

22 scheme, new investor money to pay out old investors?

23 A My way of thinking, absolutely so.


25


Page 1838

1 BY MR. SCHNAPP:

2 Q Sir, did any of the funds -- when I say

3 "funds," I mean the individuals involved with the

4 funds -- ever go --

5 A You're talking about -- I'm sorry. Just so

6 I -- you're talking about Centurion Platinum Level 3,

7 right?

8 Q Yes.

9 A Okay.

10 Q Did any of the funds ever offer to go to the

11 Florida Bar?

12 A Offer to go or ask to go, sir?

13 Q Well, let's say -- either way. You pick it.

14 Ask to go?

15 A Only because, to me, offer is like they're

16 doing something to try to help.

17 I recall someone asking to go but I don't know

18 whether that -- as I'm sitting here right now, I think

19 that was emails between Preve and Levin and I. I'm not

20 sure that the hedge funds actually ever asked to go to

21 the Bar. They may have asked to speak to someone from

22 the Bar, but I don't recall.

23 Q And if the hedge funds went to the Bar, they

24 would have learned that your story was all made up?

25 A Yes, sir. If anyone had gone, absolutely,


Page 1839

1 they would have learned it was all made up.

2 Q And you indicated you also had someone named

3 Adria posing as a -- or someone posing as Adria from the

4 Florida Bar.

5 A I had someone in the office pretend to be

6 someone from the Bar on an occasion, yes, sir.

7 Q Okay. So I'm trying to understand why a

8 person who has purchased a fully funded settlement,

9 where those proceeds are in a bank, would it be

10 accepting of an argument that the Florida Bar had frozen

11 those funds. Why in the world would the Florida Bar

12 freeze funds from a fully funded deal?

13 ALL PRESENT: Objection. Form.

14 A I don't know of any reason that they would

15 have. That was the story I came up with, and as I said,

16 people either believed it, chose to believe it, or

17 looked the other way.

18 If you're asking me if I thought it was a

19 believable story, no, I didn't. I believed that there

20 were too many holes in it.

21 BY MR. SCHNAPP:

22 Q And did you feel at this time when you made up

23 this story that the funds were looking the other way?


25 A It's my opinion that certain people at the


Page 1840

1 fund were looking the other way.

2 BY MR. SCHNAPP:

3 Q Which people?


5 A I believe -- it's my opinion -- that Jack

6 Simony was looking the other way, that Mr. Nordlicht was

7 looking the other way, and I'm on the fence still about

8 Mr. Glass.

9 BY MR. SCHNAPP:

10 Q And why would Mr. Nordlicht be looking the

11 other way?


13 A It is my opinion that Mr. Nordlicht simply

14 wanted his money back. He wasn't interested in blowing

15 up whatever this was. He wasn't interested in seeing me

16 go to jail. He was interested in getting the money back

17 for his investors.

18 BY MR. SCHNAPP:

19 Q Did Mr. Nordlicht ever speak to you about

20 going to jail?

21 A Specifically using the word "jail," no, sir.


23 BY MR. SCHNAPP:

24 Q But there were concerns raised that Ari Glass

25 might going to the SCC, correct?


Page 1841

1 A That's what I was told.

2 Q And that was told to you by Mr. Nordlicht?

3 A It was told to me by Mr. Nordlicht, by

4 Mr. Simony and Mr. Preve.

5 Q And they were threatening you with going to

6 public authorities in an effort to try to get money back

7 from you; is that right?

8 A They weren't really threatening me. What they

9 did was, what it appears to me now, is they had Ari

10 acting as the lunatic and he was ranting about going to

11 the authorities to apply pressure to us, yes.

12 Q That's the email we saw or in the posit that

13 Ari Glass is a psychopath; is that correct?

14 A That's one of them, yes.

15 Q So you think Mr. Nordlicht was trying to

16 induce you to pay him with the threat of going -- of Ari

17 going to the SCC?

18 A As I sit here today, yes.

19 Q Were you aware that Mr. Nordlicht testified,

20 in fact, that that was a little fib that he had made up

21 in order to induce you to make a payment?

22 A I was not aware of that.

23 Q Were you aware -- and sir, when you made your

24 payment arrangements with Mr. Nordlicht to pay out his

25 fund, what is the source of money for the payouts to his


Page 1842

1 fund?

2 A Ponzi funds, other Ponzi funds. New

3 investors' money, mostly Mr. Scherer's clients.

4 Q And, in fact, Mr. Nordlicht knew that there

5 were other new investor funds that were being used to

6 pay him out; isn't that true?

7 ALL PRESENT: Object to the form.

8 A To my knowledge, yes.

9 BY MR. SCHNAPP:

10 Q And you --

11 A That's my opinion.

12 Q Go ahead.

13 You mentioned Jack Simony. Is that true for

14 him, too?

15 ALL PRESENT: Object to the form.

16 A It's my opinion that -- yes, that the whole

17 reason that they were giving us a positive credit

18 reference and the like was for the purpose to allow us

19 to get new money in so they could be paid, and I believe

20 that's born out by Mr. Preve's email to me -- excuse me,

21 Mr. Preve's email to Mr. Nordlicht and Mr. Simony, where

22 he specifically says, basically, that we're on the cusp

23 of getting new investors in, that that's who is going to

24 be calling you for the reference, and that you're giving

25 us a positive reference will enable you to get out of


Page 1843

1 the, quote/unquote, investment quickly.

2 BY MR. SCHNAPP:

3 Q Did you discuss the fact that you did not want

4 them to disclose the fact that your trust funds had been

5 frozen?

6 A Yes, I discussed with them the fact that I did

7 not want them to discuss anything about this other than

8 a positive credit reference.

9 Q Okay. And they were prepared to lie to new

10 investors; is that correct?

11 A Yes.

12 Q And that would be Mr. Nordlicht and

13 Mr. Simony?

14 A Yes.

15 Q Anybody else?

16 A Again, I'm on the fence about Mr. Glass.

17 Q What about Mr. Preve?

18 By the way, why did you ever call Mr. Preve

19 "Guido"?

20 A That was a name that I gave him early on. It

21 was shortly after him coming to a dinner with me at

22 Runway 84. And I decided that I was going to give him

23 the name "Guido."

24 Q Runway 84 has some mob clientele there; is

25 that right?


Page 1844

1 A Mob clientele?

2 Q Is that what it's known for?

3 A Actually, I think it's known for its food,

4 but, yes, that's certainly something that's there.

5 Q Right. And so -- and Mr. Preve, you also

6 called him 3Gs, right?

7 A Yes. 3Gs.

8 Q What did that mean?

9 A Guido, Guido, Guido.

10 Q And in your -- when -- and in your

11 communications with Mr. Preve, you called yourself

12 "Hoooooesie"; is that right?

13 A That was actually a name that either Mr. Levin

14 or Mr. Preve -- someone gave me that name early on in

15 this.

16 THE REPORTER: Can you spell the nickname

17 for me, please.

18 MR. SCHNAPP: H-O-O-O-O-O-E-S-I-E.

19 THE WITNESS: I don't think it's ever

20 consistent with the number of O's.

21 BY MR. SCHNAPP:

22 Q Yes. You don't seem to be consistent with the

23 number of O's. I granted you that.

24 A It was originally Robin Hood from the Bronx.

25 The joke between Mr. Preve and I was that I


Page 1845

1 was stealing from the rich to give to the richer.

2 Q And that's the same type of joke you used with

3 Mr. Damson; isn't that right?

4 A I don't recall. You'd have to show me the

5 emails. There was a lot of tongue-in-check with

6 Mr. Damson. He and I joked around frequently, so it's

7 very possible that I did, yes.

8 Q Now, when the funds were having the

9 problems -- the funds I think in December '08 told you

10 that they were going to be pulling out or lowering their

11 commitment; is that right?

12 A I don't know that the funds told me that

13 directly but that was certainly the message I was

14 getting from them and certainly the message I was

15 getting through Mr. Preve.

16 Q But you didn't want the funds to come down to

17 do due diligence, did you?

18 A I didn't want anyone doing due diligence if

19 they didn't have to, no, sir.

20 Q Okay. In fact, you even wrote to -- why were

21 you communicating with Mr. Preve about your concerns

22 about the funds doing due diligence?

23 A Well, Mr. Preve was in on it, to start with.

24 And number two, he was running -- I'll say

25 running interference for me. We were trying to put our


Page 1846

1 heads together as to best handle all of this. It was

2 coming down the pike.

3 Q Well, you told Mr. Preve, for example, on

4 12/26 of '08, that, "Hey, Guido, we should probably

5 speak before we get on the conference call. The idiots

6 at Centurion want me to now allow Brian to come down and

7 do all the same things Mike does and does it -- and the

8 same thing that Jack did. I'm tired of pulling my pants

9 down for these assholes."

10 What were you discussing there?

11 A I was discussing all of the various due

12 diligence that they were trying to do that I didn't want

13 them to do.

14 Q Well, let me ask you a question. The funds --

15 why are the funds doing due diligence now? They had

16 been doing business with you for quite some time at this

17 point; is that true?

18 A I don't know the specific reason. It was

19 allegedly because they were going to reinvest -- invest

20 additional funds with us. But I don't know the

21 specifics.

22 Q And --

23 A I was not privy to that.

24 Q Did Mr. Preve give you guidance as to how to

25 deal with the funds?


Page 1847

1 A Sure. Yes. I remember an email -- you should

2 have it. There's an email in there where he told me,

3 when I was all aggravated about Brian Jedwab, he told me

4 we just need to marginalize him.

5 Q Okay. And what -- how were you going to do

6 that?

7 A He had some suggestions and it was basically

8 to ignore him. Try to answer his questions as best as

9 possible.

10 Q So let me make sure I understand something.

11 That when the fund -- when you -- did cut some sort of

12 deal with the funds -- with the funds not -- or the

13 funds were not going to tell the new people that there

14 was a problem, weren't you committing a fraud on the new

15 investors?

16 A Yes.

17 Q And in committing that fraud on the new

18 investors, there would be a lack of disclosure of the

19 fact that you had this, albeit fictitious, Bar problem

20 but that was not going to be disclosed?

21 A That's correct. We were trying to hide that.

22 Q And were it a real deal, that would be a

23 pretty significant thing to disclose to a new investor;

24 wouldn't it be?

25 A I agree.


Page 1848

1 Q Their funding source supposedly had all his

2 money tied up by the Florida Bar. That would be a

3 fairly significant risk to a new investor; would it not?

4 A Yes. As a matter of fact, I think there's

5 email traffic where we're specifically discussing that

6 fact and that we need to make sure we keep a lid on it.

7 Q Well --

8 A That would be between Mr. Preve and I.

9 Q All right. So just in a small group, we have

10 Mr. Nordlicht, Mr. Simony, Mr. Preve, and Mr. Levin, who

11 were all involved in the Ponzi scheme; is that right?

12 MR. CIMO: Object to form.

13 A No. You threw Mr. Levin in.

14 As I sit here today, as I've testified over

15 and over again, I still just don't know the extent of

16 Mr. Levin's involvement.

17 BY MR. SCHNAPP:

18 Q Well, Mr. Levin had been thrown out of a bank

19 for check kiting. You knew that, right? You were --

20 with your deals?

21 A Mr. Levin had been thrown out of a bank for

22 check kiting?

23 Q Do you recall in the beginning of your deals

24 you were using checks?

25 A In the -- are you saying -- I'm sorry. I


Page 1849

1 think I know what you're talking about. Are you talking

2 about how I was paying Mr. Levin early on?

3 Q Yeah, with checks.

4 A Yes.

5 Q And were you -- did you become aware that

6 Mr. Levin's bank thought he was kiting checks and threw

7 him out?

8 A I don't actually recall ever knowing that, no.

9 Q Did Mr. Levin ever raise with you the fact

10 that a bank had expressed to him concern about check

11 kiting?

12 A He may have but I don't have a specific

13 recollection of it.

14 I hated the words "check kiting" because we

15 were doing it so much and I think it would stick out in

16 my mind if he said it. But it's certainly possible that

17 he did.

18 Q Did you -- what suggestions did Mr. Preve give

19 to you in order to fend off the funds?

20 A At what point in time?

21 Q Well, let's --

22 A Are we talking about the enhanced due

23 diligence times, Mr. Schnapp?

24 Q Let's go from the December time frame on, when

25 the enhanced due diligence was taking place. That's


Page 1850

1 when Mr. Jedwab came down and it was around the same

2 time the Dreier matter broke, if I'm not mistaken.

3 A Yes, Dreier, Madoff, Petters.

4 Q Right. And then, in fact, that's why they

5 came down. They were concerned as to whether or not

6 they might be in a Ponzi scheme as well; isn't that

7 right?

8 MR. SCHLESINGER: Objection to form.

9 A It is my opinion that that is one of the

10 reasons they came down, but I don't know for certain as

11 to what was going on in the back of their minds.

12 BY MR. SCHNAPP:

13 Q Now, let me ask you a question about the deals

14 themselves, okay.

15 You were selling structured settlements; is

16 that what they were called by you?

17 A No.

18 Q Well, because they weren't structured

19 settlements, right?

20 A Correct.

21 Q And you explained to everybody here what the

22 difference between what you were selling and a

23 structured settlement was?

24 A Correct.

25 Q Well, I'm asking you to explain the


Page 1851

1 difference.

2 A Oh. I thought you said "you explained it."

3 Q I misspoke. Could you explain to the people

4 in this room what the difference is between a structured

5 settlement and what it is that you were selling?

6 A A structured settlement is the sale of a

7 interest in future funds, meaning someone has, for

8 example, an annuity, from a personal injury settlement.

9 They're going to be paid out for the next ten years. A

10 structured settlement company, like Peachtree and the

11 like, might buy that settlement, okay, today, at a

12 discounted rate, and they would receive the future

13 payments over time.

14 I was selling an interest in funds already

15 in-house.

16 Q And, therefore, your -- what you were selling

17 really was a fairly low risk investment?

18 A I set it up to give the appearance of

19 nearly -- with no risk.

20 Q No risk.

21 And in fact, it was even a less risky deal

22 than those settlements that we see advertised being

23 purchased by either Wentworth or Peachtree, right?

24 A Yes, to the extent that we had the money

25 allegedly in-house, that's correct.


Page 1852

1 Q There's no disposition risk and there's no

2 funding risk; you have all the money?

3 A That's the way we sold it, yes, sir.

4 Q Okay. Now, you're familiar with the

5 relationship between risk and reward, are you not?

6 A I certainly am.

7 Q Why is there -- if an investment is a no-risk

8 investment, why were the returns so high?

9 MR.CIMO: Object to the form.

10 A Because that's the way I structured it, to

11 appeal to my investor's greed.

12 BY MR. SCHNAPP:

13 Q Well, to appeal to your investor's greed. So,

14 in other words, is it fair to state, Mr. Rothstein, that

15 in your view, that you -- what you were marketing was a

16 no-risk investment with a very high yield?

17 A No to low risk, ridiculously high yield.

18 Q Okay. And so why is it that 100 percent of

19 the settlement, plaintiffs, if they were real, would be

20 selling 100 percent of their settlements? Do you

21 understand my question?

22 ALL PRESENT: Object to form.

23 A I don't think I -- are you saying that if this

24 was real, why would everyone sell?

25


Page 1853

1 BY MR. SCHNAPP:

2 Q Let me try a different way.

3 A Sure.

4 Q The way you set up these settlements -- well,

5 before I ask that, by the way, the structured

6 settlements you're talking about, those are settlements

7 that had to be approved by a court, right?

8 A Correct. And that was one of the major

9 differences.

10 Q And so what you wanted to do was set up a --

11 part of your scheme, you needed something that was an

12 out-of-court settlement that would not have to be

13 approved by a court and, therefore, you would have to be

14 limited in the types of structured settlements you could

15 sell?

16 A In the types of settlements I would sell, yes.

17 Q Okay. And that was because of the concern

18 that other -- that many types of settlements actually do

19 require a court approval, correct?

20 A Yes. I set it up so there would be a

21 limitation on people's ability to discover what we were

22 doing.

23 Q Okay. Now, let's sort of look at the deals

24 themselves. In the deals themselves people were

25 buying -- supposedly, selling settlements that had


Page 1854

1 fairly high monthly payouts, right?

2 A Yes.

3 Q Sometimes a million dollars, sometimes

4 $700,000, but -- right?

5 A Correct.

6 Q Why would all those people sell 100 percent of

7 their settlements?

8 A I actually set up the --

9 ALL PRESENT: Object to form.

10 A I actually set up the structure when I was

11 selling it, when people asked me that question --

12 actually both me and Mr. Preve -- there is email traffic

13 to this effect where we're telling people that not every

14 plaintiff takes it. A lot of them do, but some reject

15 it.

16 BY MR. SCHNAPP:

17 Q But you used to have lists that you would send

18 out, either by you or Mr. Szafranski, listing all these

19 different deals and every one of them had plaintiffs

20 selling 100 percent of their settlements; isn't that

21 true?

22 A Yes.

23 Q And didn't anyone ever --

24 A I'm sorry, I think I misunderstood your

25 question. Are you saying the plaintiffs selling


Page 1855

1 100 percent of their settlement, or 100 percent of the

2 plaintiffs selling their settlements.

3 Q I was actually saying -- well, let me break it

4 down.

5 The deals that I have seen in this case appear

6 that every plaintiff is selling 100 percent of his or

7 her settlement at a discount.

8 A Correct.

9 Q And it appears that there was never anyone who

10 sold, say, 50 percent of their settlement of, you know,

11 like payments due three or four months out.

12 A Correct.

13 Q Right?

14 A Correct.

15 Q Did anyone ever ask you why are all these

16 people selling 100 percent of their settlements?

17 A They may have. I don't have a specific

18 recollection. They asked questions about the

19 settlements, why these people would be selling it.

20 Q You would agree that would be a red flag,

21 wouldn't it?


23 A In my way of thinking, yes.

24 BY MR. SCHNAPP:

25 Q And you would agree that it would be a red


Page 1856

1 flag that some people would be selling payments that

2 were due to them in as little as 30 days? That would be

3 another red flag, wouldn't it?


5 A To my way of thinking, yes.

6 BY MR. SCHNAPP:

7 Q And, by the way, why did you switch from

8 abused women to whistleblowers?

9 A It was more related to the wanting to give the

10 appearance to have more variety of the cases. Also, the

11 size of the potential settlements that we could sell,

12 they seemed to be -- appear more believable on the

13 whistleblower range.

14 The whistleblower -- we were also very low on

15 cash at the time, and using whistleblower-type actions

16 allowed us to have multiple plaintiffs in the same case.

17 Q Now, on some of the transactions, with

18 Coquina, for example, you had included a promissory note

19 from your law firm; isn't that true?

20 A I think on almost every transaction, if I'm

21 not mistaken, we included a promissory note in the

22 package unless someone told us they didn't want it.

23 Q Now, why would you include a promissory note

24 from your law firm on these deals?

25 A We started out these things with promissory


Page 1857

1 notes, and for some reason, that I can't quite figure,

2 they always stuck. Because we were never borrowing

3 money, once these deals were going on. So I'm not

4 really sure. I think people thought it was an added

5 level of protection but I'm not sure.

6 Q How can a law firm enter into a promissory

7 note with a third-party, other than your client?

8 A Well, we could borrow money.

9 Q Were you borrowing money from this -- like

10 Banyan?

11 A Were we, no.

12 Q So why were you giving promissory notes to

13 Banyan?

14 A As I told you, when the deal packets first

15 started with Mr. Preve, they were only promissory

16 notes -- I mean with Mr. Preve and Mr. Levin -- they

17 were only promissory notes.

18 And when it expanded into what I'll call the

19 full deal packet, the promissory notes just stuck.

20 Q What about the defense agreements that you

21 came up with?

22 A Someone asked for that. Someone asked for

23 that somewhere along the line and --

24 Q Well, the Coquina group had settlements that

25 had defense agreements in them; is that right?


Page 1858

1 A Yes. That sounds correct.

2 Q And how were you going to defend Coquina in an

3 action against your client?

4 A I have no idea.

5 Q But you agreed to it?

6 A As you'll see from the development of the

7 packages and all of the things that I provided, I pretty

8 much agreed to anything that would have allowed us to

9 get money into the Ponzi scheme.

10 Q Okay. And none of the lawyers in Coquina

11 asked, hey, how can you -- how can you be defending us

12 in a dispute with your own client, right?

13 A Actually, they're the ones I believe that

14 asked me for that agreement.

15 Q Oh, they asked you for an agreement like that?

16 A Either Coquina or some investor just prior to

17 them asked me for the defense agreement. You can tell

18 just -- you have to look at the packages, Mr. Schnapp,

19 and then see where that defense agreement pops up and

20 then you can figure out which investor first asked for

21 it.

22 Q And you know that such an agreement is

23 unethical, don't you?

24 A It appears unethical to me, yes, sir.

25 Q And the Coquina group, for example, they


Page 1859

1 had -- Mr. Damson was a lawyer.

2 A To my knowledge, yes, that's what I was told.

3 Q Mr. Klein was a lawyer?

4 A That's what I was told, yes, sir.

5 Q And there were other people in their group who

6 were lawyers?

7 A Who were the other people, sir?

8 Q Mr. Wallace.

9 A I don't recall meeting Mr. Wallace.

10 Q But you knew there were at least two lawyers,

11 right?

12 A Yes, sir.

13 Q And they didn't ask a single question about

14 the ethics of you representing them?

15 A Under this defense agreement, I don't recall

16 them asking one way or the other.

17 Q We're going to go through some deal docs

18 later.

19 A Okay.

20 Q You used to call Mr. Damson "Wild Rocky"; is

21 that correct?

22 A I might have said "Wild Rocky" on occasion but

23 I generally called him "Rocky."

24 Q Now, Mr. Damson's full name is Barry Damson,

25 correct?


Page 1860

1 A Yes.

2 Q And you chose to call him Rocky. And that was

3 short for Rockefeller, correct?

4 A Correct.

5 Q And he would call you Rothschild; is that

6 right?

7 A Correct.

8 Q And Mr. Damson's a former governor of the

9 American Stock Exchange; is he not?

10 A Yes, sir.

11 Q Mr. Damson's established himself in the oil

12 business, right?

13 A Yes, sir.

14 Q And Mr. Damson got very close to you, didn't

15 he?

16 A He got as close as I allowed him to.

17 Q Well, he got -- he got as close as suggesting

18 at one point that he would create a fund; is that right?

19 A I don't recall specifically, but it's

20 certainly possible that that's something he suggested.

21 I do recall conversations with somebody from the Coquina

22 group about creating a fund, yes.

23 Q And did you also -- and you wrote to him using

24 the words "Rocky." And he even called you Rothschild,

25 right?


Page 1861

1 A Yes.

2 Q Okay. Why was that done?

3 A On my part?

4 Q Well, on your part; and to the extent you know

5 why he wrote that, tell us that.

6 A On my part, I tried to be as familiar as

7 possible with investors to keep them close to me, let

8 them believe that they had a strong relationship with

9 me. People like to do business with people they

10 consider friends that they like. So whatever I needed

11 to do to continue to lure these people in, that is what

12 I was doing at that time.

13 As far as why he called me Rothschild, he may

14 have been doing the exact same thing to me, because he

15 liked the deals. I can't tell you one way or the other.

16 He may have had a true affection for me. He may have

17 been utilizing the same technique.

18 MR. SCHNAPP: I'm going to mark a

19 document. Give me a moment.

20 (Thereupon, the document was marked as TD

21 Bank's Exhibit 227 for Identification.)

22 BY MR. SCHNAPP:

23 Q Do you have that document in front of you,

24 sir?

25 A Yes. Just give me one moment, I'll read it.


Page 1862

1 Q Is that 227?

2 A Yes, sir.

3 Q All right. So, that's an example of a

4 document where you refer to Mr. Damson as "Wild Rocky";

5 is that right?

6 A It is.

7 Q And what were you communicating to Wild Rocky

8 in that email?

9 A I was just trying to find out if he was going

10 to invest in any of the upcoming deals.

11 Q And he told you that he is considering putting

12 together a fund?

13 A That's what the email says, yes, sir.

14 Q Did Mr. Damson ever create such a fund?

15 A I don't know whether he did or not, sir.

16 Q Now, we talked -- Mr. Damson and you became

17 very close; is that correct?

18 A You are going to have to measure that for me.

19 Did I consider him a friend? Sort of. I mean, I liked

20 him. Okay. But he served a very important purpose to

21 me at that point in time. And I was stealing his money.

22 So...

23 Q What was the very important purpose he was

24 serving?

25 A He was injecting money in that I was going to


Page 1863

1 use to pay back old investors.

2 Q And is it fair to state that Mr. Damson was

3 ignoring the very red flags we've been talking about

4 before?

5 ALL PRESENT: Objection. Form.

6 A I don't know whether he was ignoring them or

7 not. I think that some of -- let me just answer, and

8 then maybe it will help you along.

9 Damson always seemed more -- he always seemed

10 more inquisitive than a lot of our other investors.

11 He asked a lot of questions. He was the one

12 who wanted to see a plaintiff actually go through this.

13 I had to go through a significantly greater effort to

14 fool him than to fool certain other investors.

15 BY MR. SCHNAPP:

16 Q We'll cover that in a little greater length

17 later.

18 A Sure.

19 Q But it's fair to say that Mr. Damson got deals

20 that were always 100 percent funded with no risk?

21 A 100 percent funded?

22 Q In other words, by the defendant was -- the

23 money was always supposed to be in your trust account,

24 100 percent funded?

25 A Every single deal that I sold, to my


Page 1864

1 recollection, was sold that same way. That it was we

2 already had the money in-house. That was the big

3 selling point.

4 Q And there were points, in fact, where

5 Mr. Damson was advised that you would be kicking back

6 money if he took certain deals, right?

7 A Yes. As the Ponzi scheme was getting ready to

8 implode, in the last months, maybe even a little bit

9 longer, in order to lure additional investors in, to

10 pique their curiosity and their interest, we started

11 adding kickers to everything. Yes, sir.

12 Q Why would it be ethical for a lawyer

13 representing a plaintiff to be kicking back some money

14 to somebody who is funding?

15 A I never said it was ethical.

16 Q Oh. So you provided an unethical inducement

17 to Mr. Damson; is that true?


19 A An unethical inducement? I think that what I

20 wanted to do was give the appearance of -- during the

21 course of this entire -- which we now know was an

22 unethical business, I think that giving people what they

23 appeared -- what appeared to them to be kickers and

24 under-the-table payments made them more interested, for

25 whatever reason.


Page 1865

1 BY MR. SCHNAPP:

2 Q And, you're aware, sir, are you not, that

3 Mr. Damson's lawyers filed a pleading at your sentencing

4 that was adverse to you; is that right?

5 A I seem to recall that. It was kind of a blur.

6 Q Well, let me show you 228, okay?

7 A Sure.


9 TD Bank's Exhibit 228 for Identification.)

10 THE WITNESS: Thanks.

11 MR. NURIK: This is the wrong.

12 THE WITNESS: I believe you gave me the

13 wrong pleading.

14 MR. SCHNAPP: Sorry.

15 I did. You're right.

16 So we will give you the other pleading.

17 BY MR. SCHNAPP:

18 Q While I'm looking for that, Mr. Scherer did

19 write you a letter, right, a positive letter?

20 A He wrote me a letter? I don't think he wrote

21 to me, no, sir.

22 Q He wrote you a letter -- to the sentencing

23 judge; did he not?

24 A That's my recollection, yes, sir.

25 Q Okay. And Mr. Scherer wrote that he believed


Page 1866

1 you; is that right?

2 A Could you show me the letter and then I can

3 tell you for certain?

4 Q Sure.

5 THE WITNESS: Go ahead and toss it.

6 Thanks.



9 BY MR. SCHNAPP:

10 Q Is it fair to state, Mr. Rothstein, that

11 you've been cooperating with Mr. Scherer?

12 A I think that's a fair statement. That I've

13 been attempting to help people that I believe were

14 innocent investors, yes. I think that's more than a

15 fair statement.

16 Q Is it also a fair statement that you were not

17 cooperating with Mr. Mandel, the attorney who was

18 representing Coquina at that time?

19 He wrote a negative letter.

20 A I don't recall him actually even asking for my

21 help.

22 Q Well --

23 A I believe I made it clear from the moment I

24 came back that I was willing to help anyone who was an

25 innocent investor or representing an innocent investor.


Page 1867

1 That's still my position right here today.

2 Q Okay. So let me just -- I'm going to remark

3 228, the right document that says, "Sentencing

4 Statements of Victims, Coquina Investments and Emess

5 Capital."



8 MR. SCHNAPP: I asked you not to discuss

9 that with your lawyer while there's a pending

10 question.

11 Do you recognize that?

12 MR. NURIK: For the record, there are

13 attorney-client issues that I'm going to

14 discuss with him.

15 BY MR. SCHNAPP:

16 Q My question is simply, does he recognize that?

17

18 MR. NURIK: Well, in the anticipation of

19 your questions that I expect you'll ask to

20 move this along, I'm going to discuss with him

21 the attorney-client issues.

22 A To answer your question, I actually -- I don't

23 recall seeing this.

24 BY MR. SCHNAPP:

25 Q Mr. Rothstein, you knew that Mr. Mandel,


Page 1868

1 Coquina's lawyers, were telling the judge that you were

2 not being cooperative with them; is that right?

3 A I'm sorry. Say that again. I was reading.

4 Q You knew that Mr. Mandel, Coquina's lawyer,

5 were not -- were telling the judge that you were not

6 being cooperative?

7 A I -- I seem to have a recollection of it but I

8 really don't -- I don't specifically recall that, no.

9 Q And now in order to try to cut your sentence,

10 you're trying to help Mr. Damson; isn't that right?

11 You're afraid of them going back in and

12 challenging anything further; isn't that true?

13 A At this stage, in what I've been through, I

14 really don't have any fear of anyone doing anything at

15 this stage. I'm going to tell the truth about

16 everything I know. I'm going to tell everything I know

17 and hope that the people that have the power to be fair

18 with me are fair with me. That's the best that I can

19 hope for at this moment.

20 Q Did you also write emails to Mr. Damson about

21 what it was like to -- or -- what Mr. Damson was teasing

22 you about, having been from the Bronx?

23 A I recall him teasing me about that, yeah.

24 Q Did you also write emails to Barry Damson

25 calling him King Barry and his wife Queen Joan?


Page 1869

1 A Yes.

2 Q Well, why were you doing that?

3 A They are terms of familiarity that I

4 frequently used with a lot of people. It's the way I

5 spoke.

6 Q I only have a few more questions before the

7 break, but let me ask you, was there a time when

8 Mr. Damson had asked for insurance?

9 A Yeah. I remember specifically him bringing up

10 the issue of insurance, yes, sir.

11 Q And you were never able to provide him with

12 that insurance; isn't that right?

13 A I was never able to, no, sir.

14 Q And he never pressed you on it?

15 A No. He did press me on it.

16 As a matter of fact, I remember a series of

17 emails where he was driving Mike Szafranski crazy to

18 make sure that I sent him a copy of an insurance policy

19 that we were looking at.

20 Q Okay. But you actually never came through

21 with the insurance that Mr. Damson was asking you for?

22 A I never came through with any insurance policy

23 for anybody.

24 MR. SCHNAPP: Okay. Just one moment.

25 Given the timing, I'm going to take a


Page 1870

1 break now.

2 THE WITNESS: Sure.

3 MR. SCHNAPP: Thanks.

4 (Thereupon a recess was had.)

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Page 1871

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 20th 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 1872

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 1723 to 1872,

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 20th 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

2011-12-20 rothstein scott am

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